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Interworld Corp · S-1 · On 2/7/00

Filed On 2/7/00 · SEC File 333-96245 · Accession Number 950123-0-782

  As Of                Filer                Filing    For/On/As Docs:Size              Issuer               Agent

 2/07/00  Interworld Corp                   S-1                    9:123                                    Bowne of NY City...01/FA

Registration Statement (General Form) — Form S-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-1         Interworld Corporation                                85    435K 
 5: EX-10.10    Employment Agreement for Jeremy Davis                  7     35K 
 2: EX-10.3     Form of Indemnificaton Agreement                       6     17K 
 3: EX-10.7     Agreement of Sublease                                 10     37K 
 4: EX-10.9     2000 Equity Incentive Plan                            11     45K 
 6: EX-21.1     List of Subsidiaries                                   1      4K 
 7: EX-23.1     Consent of Pricewaterhousecoopers Llp                  1      5K 
 8: EX-27.1     Financial Data Schedule                                1      6K 
 9: EX-27.2     Financial Data Schedule                                1      6K

S-1 — Interworld Corporation
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Additional Information Agreements with Comdisco and UGO Networks Alan J. Andreini Amy Aguilar-Brown Business Capitalization Certain Transactions Change in Independent Accountants Daniel Turano Description of Capital Stock Dilution Dividend Policy Employee Stock Purchase Plan Exhibits and Financial Statement Schedules Experts Forward-Looking Statements Indemnification of Directors and Officers Index to Consolidated Financial Statements InterWorld Issuances of Capital Stock Issuances of Warrants Jack Slevin Joseph C. Robinson Kenneth G. Langone Kevin Kohn Legal Matters Leon DeMaille Liquidity and Capital Resources Management Management's Discussion and Analysis of Financial Condition and Results of Operations Mark Berlingeri Michael J. Donahue Notes to Consolidated Financial Statements Offering, The Other Expenses of Issuance and Distribution Peter Schwartz Price Range of Common Stock Principal and Selling Stockholders Product licenses Prospectus Summary Recent Sales of Unregistered Securities Registration Rights Report of Independent Accountants Risk Factors Russell West Selected Consolidated Financial Data Services Stephen Law Stock Plans The Offering Total Total revenues, net Undertakings Underwriting Use of proceeds We face intense competition, which could adversely affect our sales and profitability Yves Sisteron
1	1st Page - Filing Submission
"	Michael J. Donahue
6	Prospectus Summary
"	InterWorld
7	The Offering
10	Risk Factors
11	We face intense competition, which could adversely affect our sales and profitability
17	Forward-Looking Statements
18	Use of proceeds
"	Price Range of Common Stock
"	Dividend Policy
19	Capitalization
"	Dilution
20	Selected Consolidated Financial Data
22	Management's Discussion and Analysis of Financial Condition and Results of Operations
24	Total revenues, net
27	Liquidity and Capital Resources
30	Business
35	Services
40	Management
"	Alan J. Andreini
"	Peter Schwartz
"	Daniel Turano
41	Stephen Law
"	Leon DeMaille
"	Kevin Kohn
"	Mark Berlingeri
"	Amy Aguilar-Brown
"	Kenneth G. Langone
"	Joseph C. Robinson
"	Yves Sisteron
"	Jack Slevin
42	Russell West
46	Stock Plans
"	Employee Stock Purchase Plan
48	Certain Transactions
"	Issuances of Capital Stock
"	Issuances of Warrants
49	Agreements with Comdisco and UGO Networks
50	Principal and Selling Stockholders
52	Description of Capital Stock
"	Registration Rights
54	Underwriting
56	Legal Matters
"	Experts
"	Change in Independent Accountants
"	Additional Information
57	Index to Consolidated Financial Statements
58	Report of Independent Accountants
61	Total
63	Notes to Consolidated Financial Statements
65	Product licenses
79	Item 13. Other Expenses of Issuance and Distribution
"	Item 14. Indemnification of Directors and Officers
"	Item 15. Recent Sales of Unregistered Securities
82	Item 16. Exhibits and Financial Statement Schedules
83	Item 17. Undertakings

S-1 1st Page of 85 TOC Top Previous Next Bottom Just 1st

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 7, 2000

REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

INTERWORLD CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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DELAWARE 7372 13-3818716
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)

------------------------

395 HUDSON STREET, 6TH FLOOR
NEW YORK, NEW YORK 10014
(212) 301-2500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

MICHAEL J. DONAHUE
CHAIRMAN
INTERWORLD CORPORATION
395 HUDSON STREET, 6TH FLOOR
NEW YORK, NEW YORK 10014
(212) 301-2500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------

WITH COPIES TO:

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PAUL V. ROGERS, ESQ. ALAN SINGER, ESQ.
SCOTT F. SMITH, ESQ. MORGAN, LEWIS & BOCKIUS LLP
COVINGTON & BURLING 1701 MARKET STREET
1330 AVENUE OF THE AMERICAS PHILADELPHIA, PENNSYLVANIA 19103
NEW YORK, NEW YORK 10019 (215) 963-5000
(212) 841-1000

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: []
---------------

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. []
---------------

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
---------------

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. []
---------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. []
---------------
------------------------

CALCULATION OF REGISTRATION FEE

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--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------------------

Common Stock, $.01 per
share.................. 4,312,500 shares $71.00 $306,187,500 $80,834
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------

(1) Includes 562,500 shares that the Underwriters have the option to purchase
from the Company to cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.

SUBJECT TO COMPLETION, DATED FEBRUARY 7, 2000

3,750,000 Shares

INTERWORLD LOGO

INTERWORLD CORPORATION

Common Stock
------------------

We are selling 1,250,000 shares of common stock and the selling
stockholders are selling 2,500,000 shares of common stock. We will not receive
any of the proceeds from the shares of common stock sold by the selling
stockholders.

The common stock is listed on The Nasdaq Stock Market's National Market
under the symbol "INTW." On February 4, 2000, the last reported sale price for
the common stock on The Nasdaq National Market was $74.50 per share.

The underwriters have an option to purchase a maximum of 562,500 additional
shares from us to cover over-allotments of shares.

INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 5.

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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS INTERWORLD STOCKHOLDERS
------------- ------------- ------------- -------------

Per Share............................ $ $ $ $
Total................................ $ $ $ $

Delivery of the shares of common stock will be made on or about
, 2000.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON INVEMED ASSOCIATES

BANC OF AMERICA SECURITIES LLC BEAR, STEARNS & CO. INC.

The date of this prospectus is , 2000.

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[INSIDE COVER ART]
[NOTE -- THE INSIDE COVER ART WILL INCLUDE "HOW WE SERVE OUR CLIENT" AND A TWO
PAGE PULLOUT OF COMMERCE EXCHANGE.]

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Description of graphic material on inside front and back cover pages of the
prospectus:

Inside front cover (first page of a three page fold-out):

The page depicts in three columns the logos of InterWorld customers and
partners: Cisco Systems, Brooks Brothers, Disney, GATX Logistics, Nike, Net
Perceptions, Ashford.com, Guess?, Lids, Interwoven, Mammoth Golf,
Active Software, Ariba, TAKKT, Lucy.com, Internet Shopping Network, OKI,
MSC Industrial Direct, boo.com, Belkin Components, Sun Microsystems, Clix
n' Mortar (Simon Property), CyberSource and Whittman-Hart.

The text in the upper left hand corner is:

A sampling of the clients and partners who are members of the InterWorld
Enterprise Commerce community.

The caption on the top of the page is:

Clients and Partners

The page also includes InterWorld's logo

Inside two pages of fold-out;

The page depicts a diagram showing a customer of our client interfacing
with our client through the Enterprise Commerce solution surrounded by
figures depicting our customer's entire buying cycle from Sales to Order
Management to Fulfillment to Customer Service, and arrows pointing to
figures depicting our customer's core enterprise systems: Manufacturing
Systems, Distribution/Fulfillment Systems, Financial Systems and Customer
Systems.

The caption at the top of the page is:

Commerce Exchange: Designed to increase revenues, reduce operating expenses
and enhance customer loyalty.

The caption at the bottom of the page is:

We provide Internet commerce software solutions that enable businesses to
sell goods and services over the Internet to other businesses and
consumers.

The text down the left hand margin of the page is:

The InterWorld Advantage

Comprehensive Functionality - Our solution provides a comprehensive set of
applications for efficiently managing selling processes online, including
sales, order management, fulfillment and customer service.

State-of-the-Art Technology Foundation - Our technology supports the
deployment of mission-critical online business applications and can
accommodate a client's increasing business volumes.

Process - Centric(TM) Computing Approach - Our Process-Centric(TM) approach
enables a client to create online processes based on existing and evolving
business practices.

Interoperability - Our products are designed to work with an organization's
existing business operational systems and third-party technologies.

The text down the right hand margin of the page is:

Commerce Exchange:
Mission-Critical Enterprise Commerce
Effective Enterprise Commerce enables companies to build their online
business and integrate them with their existing business practices.

Integration of Business Processes:
We enable a client's online processes to take into account
characteristics of the client's selling environment and its customer's
preferences.

Integration of Enterprise Systems:
Our Business Adapters are designed to facilitate the seamless
integration of external business functions, allowing them to be managed
within the Commerce Exchange process framework.

The page above includes InterWorld's logo.

Inside back cover:

This page depicts a diagram showing our client interfacing with the
Commerce Exchange solution surrounded by figures depicting the programs
and services we or our partners provide to our clients throughout
implementation and ongoing support. Next to each figure is a box
indicating the program and service provided. The text in the boxes next
to the figures is:

Advice on client online strategy and practices
bullet InterWorld one-on-one Workshops

Enterprise Commerce project planning
bullet InterWorld Professional Services
bullet System Integration Partners

Commerce site design
bullet InterWorld Professional Services
bullet Web Design Partners

Site implementation and enterprise systems integration
bullet InterWorld Professional Services
bullet System Integration Partners

Review

bullet InterWorld Professional Services
bullet System Integration Partners

Technical, educational and training services
bullet InterWorld Client Education Programs

Participation in product direction
bullet InterWorld Client Input Sessions

Client care
bullet InterWorld Client Satisfaction Team

Client support

bullet 24x7 Technical Support

The caption on the top of the page is:

How We Serve Our Clients

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------------------
TABLE OF CONTENTS

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PAGE
----

PROSPECTUS SUMMARY.................... 1
RISK FACTORS.......................... 5
FORWARD-LOOKING STATEMENTS............ 12
USE OF PROCEEDS....................... 13
PRICE RANGE OF COMMON STOCK........... 13
DIVIDEND POLICY....................... 13
CAPITALIZATION........................ 14
DILUTION.............................. 14
SELECTED CONSOLIDATED FINANCIAL
DATA................................ 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 17

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PAGE
----

BUSINESS.............................. 25
MANAGEMENT............................ 35
CERTAIN TRANSACTIONS.................. 43
PRINCIPAL AND SELLING STOCKHOLDERS.... 45
DESCRIPTION OF CAPITAL STOCK.......... 47
UNDERWRITING.......................... 49
LEGAL MATTERS......................... 51
EXPERTS............................... 51
CHANGE IN INDEPENDENT ACCOUNTANTS..... 51
ADDITIONAL INFORMATION................ 51
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS.......................... F-1

------------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ANY INFORMATION THAT IS DIFFERENT.
THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE
INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF THIS DOCUMENT.

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PROSPECTUS SUMMARY

This Summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, especially the discussion
regarding the risks of investing in our common stock under "Risk Factors,"
before investing in our common stock.

INTERWORLD

We provide Internet commerce software solutions that enable businesses to
sell goods and services over the Internet to other businesses and consumers. Our
products, which we call enterprise commerce software, enable companies to build
their online businesses and integrate them with their existing business
practices and enterprise systems. Commerce Exchange is our family of enterprise
commerce software, consisting of our Commerce Exchange platform, applications,
tools and business adapters. Commerce Exchange enables manufacturing,
distribution and retail companies to manage their business-to-business, or B2B,
and business-to-consumer, or B2C, selling and support processes, including
sales, order management and fulfillment and customer service.

Commerce conducted over the Internet has grown dramatically in recent
years. According to a report by International Data Corporation, worldwide
Internet commerce spending is expected to grow from $50 billion in 1998 to $1.3
trillion in 2003. Businesses are embracing Internet commerce because it enables
them both to increase revenues and to reduce operating expenses by:

- establishing a new distribution channel for products and services;

- enhancing customer relationships; and

- automating sales, support and customer service processes.

In order to extend their operations to the Internet, businesses must implement
reliable information technology solutions to run important online business
applications. These solutions must meet rigorous performance requirements and
typically operate 24 hours per day, seven days per week. They must be easy to
use, while accessing a wide and complex array of databases and computing
platforms.

Our solution can be expanded to meet the demands of large organizations
with complex selling processes and to manage a large number of simultaneous
users, high transaction volumes and complex databases. The functionality and
ease of implementing, maintaining and upgrading our products address what we
believe is a growing desire by businesses to maximize return on investment by
more efficiently using their existing information systems.

We market our products and services primarily through our direct sales
organization and strategic partners. We have established strategic marketing
relationships with Active Software, Andersen Consulting, Ariba, Arthur Andersen,
Cambridge Technology Partners, Cisco Systems, KPMG Peat Marwick, USWeb/CKS and
Whittman-Hart. Set forth below is a representative list of our current
customers. Each customer listed below accounted for an aggregate of at least
$400,000 of revenues in 1999.

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boo.com Lids
Brooks Brothers MSC Industrial Direct
Buena Vista Internet Group (Disney) NIKE
GATX Logistics Oki Data America
GTE Communications Systems Simon Property Group
Guess? Sony
Internet Shopping Network U.S.A. Floral Products

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THE OFFERING

Common stock offered by
InterWorld.......................... 1,250,000 shares

Common stock offered by the selling
stockholders........................ 2,500,000 shares

Common stock to be outstanding after
this offering....................... 28,606,425 shares

Use of proceeds..................... We expect to use the net proceeds from
the sale of shares offered by us for
working capital and general corporate
purposes. We will not receive any of
the proceeds from the shares of common
stock sold by the selling stockholders.

Dividend Policy..................... We currently intend to retain all
future earnings to fund the development
and growth of our business. Therefore,
we do not currently anticipate paying
cash dividends.

Nasdaq National Market Symbol....... INTW

We are permitted, and in some cases obligated, to issue shares of common
stock in addition to the common stock to be outstanding after this offering. The
following is a summary of these additional shares of common stock:

- 8,571,026 shares of common stock reserved for issuance under our stock
option plans, of which options to purchase 5,846,120 shares of common
stock were outstanding as of December 31, 1999 at a weighted average
exercise price of $19.34 per share. See Note 15 of Notes to Consolidated
Financial Statements;

- 1,000,000 shares of common stock reserved for issuance under our employee
stock purchase plan; and

- 459,070 shares of common stock reserved for issuance at December 31, 1999
under outstanding warrants at a weighted average exercise price of $6.89
per share.

The common stock to be outstanding after this offering reflects 27,234,238
shares outstanding on December 31, 1999 and 122,187 shares issued upon exercise
of stock options from January 1, 2000 to February 4, 2000.
------------------------

We were incorporated in Delaware in 1995. Our principal executive offices
are located at 395 Hudson Street, 6th Floor, New York, New York 10014, (212)
301-2500. Our website is located at www.interworld.com. INFORMATION IN OUR
WEBSITE IS NOT A PART OF THIS PROSPECTUS.

Unless otherwise stated, all information contained in this prospectus
assumes no exercise of the over-allotment option to purchase up to 562,500
shares of common stock granted by us to the underwriters of this offering.

InterWorld(R) is our registered service mark and trademark, and
Process-Centric(R) is our registered trademark. Trademarks of other companies
appearing in this prospectus are the property of their respective holders.

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following table summarizes our financial data. You should read the
following information in conjunction with the financial statements and related
notes appearing elsewhere in this prospectus. You should also see the
information in this prospectus under the captions "Selected Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

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NINE MONTHS
INCEPTION ENDED
(MARCH 28, 1995) YEAR ENDED DECEMBER 31, SEPTEMBER 30,
TO DECEMBER 31, ----------------------------- -------------------
1995 1996 1997 1998 1998 1999
---------------- ------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Revenues, net:
Product licenses..................... $ 25 $ 779 $ 4,883 $ 9,754 $ 5,392 $ 15,691
Services............................. 331 1,241 3,073 4,834 3,177 10,135
Other................................ 3 408 100 2 1 --
------ ------- -------- -------- -------- --------
Total revenues, net........... 359 2,428 8,056 14,590 8,570 25,826
Gross profit........................... 228 289 927 7,867 4,279 11,807
Loss from continuing operations........ (264) (7,197) (21,675) (22,062) (16,597) (25,200)
Basic loss per share and diluted loss
per share from continuing
operations........................... $(0.02) $ (0.53) $ (1.61) $ (1.60) $ (1.21) $ (1.54)
====== ======= ======== ======== ======== ========

Please note that on March 30, 1998, we completed a spin-off distribution of a
subsidiary, UGO Networks, Inc., formerly ActionWorld, Inc., reducing our
majority ownership of UGO Networks to a minority interest of approximately 18%.
Since March 30, 1998, our minority interest in UGO Networks has decreased to
approximately 5.5% due to private equity financings by UGO Networks. UGO
Networks is an online entertainment information and game company that commenced
operations in 1997. The spin-off was made in order to permit UGO Networks to
build a separate management team that would concentrate on creating an online
entertainment information and game company and to position UGO Networks to seek
private equity financing. UGO Networks has been presented as a discontinued
operation in our consolidated statement of operations for the year ended
December 31, 1997. A provision of $0.6 million for estimated operating losses
through the disposal date was recorded at December 31, 1997. See Note 13 of
Notes to Consolidated Financial Statements.

The following table is a summary of our balance sheet at September 30, 1999:

- on an actual basis; and

- on an as adjusted basis to reflect the sale by us of 1,250,000 shares of
common stock in this offering, at an assumed public offering price of
$74.50 per share and after deducting underwriting discounts and
commissions and estimated expenses payable by us.

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SEPTEMBER 30, 1999
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and cash equivalents................................... $43,461 $130,894
Working capital............................................. 36,338 123,771
Total assets................................................ 57,570 145,003
Total stockholders' equity.................................. 43,059 130,492

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RECENT RESULTS

Set forth below is unaudited capsule information for 1999 compared to 1998.

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YEAR ENDED DECEMBER 31,
--------------------------
1998 1999
----------- -----------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)

Revenues, net:
Product licenses.......................................... $ 9,754 $ 23,855
Services.................................................. 4,834 16,692
Other..................................................... 2 --
-------- --------
Total revenues, net.................................... 14,590 40,547
-------- --------
Cost of revenues:
Product licenses.......................................... 671 1,884
Services.................................................. 6,052 18,215
Other..................................................... -- --
-------- --------
Total cost of revenues................................. 6,723 20,099
-------- --------
Gross profit................................................ 7,867 20,448
Operating expenses:
Research and development.................................. 9,558 17,334
Sales and marketing....................................... 11,969 23,086
General and administrative................................ 6,356 6,806
Noncash employee compensation............................. 1,615 3,633
-------- --------
Total operating expenses............................... 29,498 50,859
-------- --------
Loss from operations........................................ $(22,062) $(30,359)
Basic loss per share and diluted loss per share from
operations................................................ $ (1.60) $ (1.59)

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data for the
periods indicated expressed as a percentage of total revenues:

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NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------- --------------------
1996 1997 1998 1998 1999
------ ------ ------ -------- -------

Revenues, net:
Product licenses........................... 32.1% 60.7% 66.9% 62.9% 60.8%
Services................................... 51.1 38.1 33.1 37.1 39.2
Other...................................... 16.8 1.2 -- -- --
------ ------ ------ ------ -----
Total revenues, net..................... 100.0% 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------ -----
Cost of revenues:
Product licenses........................... 3.4 3.5 4.6 3.6 4.2
Services................................... 71.4 83.7 41.5 46.4 50.1
Other...................................... 13.3 1.3 -- -- --
------ ------ ------ ------ -----
Total cost of revenues.................. 88.1 88.5 46.1 50.0 54.3
------ ------ ------ ------ -----
Gross profit................................. 11.9 11.5 53.9 50.0 45.7
------ ------ ------ ------ -----

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NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------- --------------------
1996 1997 1998 1998 1999
------ ------ ------ -------- -------

Operating expenses:
Research and development................... 97.3 85.2 65.5 77.3 47.6
Sales and marketing........................ 100.3 105.4 82.0 91.5 63.0
General and administrative................. 112.4 79.5 43.6 59.5 19.2
Noncash employee compensation.............. 2.9 9.3 11.1 14.5 11.6
------ ------ ------ ------ -----
Total operating expenses................ 312.9 279.4 202.2 242.8 141.4
------ ------ ------ ------ -----
Loss from operations......................... (301.0) (267.9) (148.3) (192.8) (95.7)
Net loss..................................... (296.4)% (293.1)% (151.2)% (193.7)% (97.6)%
====== ====== ====== ====== =====

Years Ended December 31, 1996, 1997 and 1998

Total Revenues, Net. Total revenues, net include fees from product
licenses and services. Our total revenues, net increased from $2.4 million in
1996 to $8.1 million in 1997 and to $14.6 million in 1998. These increases
resulted primarily from increased licenses of our software products at a higher
average fee per client and, to a lesser extent, from the provision of services
to a larger client base.

Cost of Revenues. Cost of product licenses revenues consists of royalties
payable to third parties for software that is embedded in or bundled with our
products, the costs of product media, documentation and manufacturing costs.
Cost of services revenues consists primarily of costs related to employees and
consultants providing services and support. Total cost of revenues decreased
from $7.1 million in 1997 to $6.7 million in 1998. Total cost of revenues
increased from $2.1 million in 1996 to $7.1 million in 1997. In 1997,
particularly during the earlier part of the year, we hired outside consultants
to supplement our professional services organization and to provide services and
support to our expanding client base, and also hired additional employees.
During the course of 1998, we continued to hire additional personnel, which
reduced our reliance on outside consultants, and instituted implementation
methodologies that resulted in shorter implementation cycles. The implementation
methodologies involve providing our customers with a checklist that sets forth
the steps, timing and procedures to enable them to implement more effectively
our Commerce Exchange family of products. These measures, combined with the
introduction of enhanced versions of Commerce Exchange, reduced our cost of
revenues as a percentage of total revenues. As a result, cost of revenues as a
percentage of total revenues decreased from 88.5% for 1997 to 46.1% for 1998.
However, as we increase our use of systems integration companies for
implementation of our products, we expect that the cost of services revenues,
particularly related to training system integration companies, will increase
substantially in future periods.

Research and Development. Research and development expenses consist of
costs related to research and development personnel, including salaries and
related expenses and consulting fees, and costs related to facilities and
equipment used in research and development. Research and development expenses
increased from $6.9 million in 1997 to $9.6 million in 1998. Research and
development expenses increased from $2.4 million in 1996 to $6.9 million in
1997. These increases were principally due to the addition of personnel to
support the design and development of our products. We expect to continue to
incur significant research and development expenses in future periods.

Sales and Marketing. Sales and marketing expenses consist of salaries and
related expenses for sales and marketing personnel, sales commissions and other
incentive compensation, travel and entertainment expenses and the costs of
marketing programs, including trade shows, promotional materials and
advertising. Sales and marketing expenses increased from $8.5 million in 1997 to
$12.0 million in 1998. Sales and marketing expenses increased from $2.4 million
in 1996 to $8.5 million in 1997. These increases were due primarily to the
expansion of our sales and marketing organization and expanded marketing
activities, including advertising designed to increase awareness of our brand.
We expect to continue to incur significant sales and marketing expenses in
future periods.

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General and Administrative. General and administrative expenses consist of
salaries and related expenses for administrative, finance and human resources
personnel and related facilities and equipment costs. General and administrative
expenses increased from $2.7 million in 1996 to $6.4 million in 1997 and 1998.
This increase reflected the additional administrative infrastructure necessary
to manage and support our growth. In addition, general and administrative
expenses for 1998 included approximately $0.5 million relating to an aborted
initial public offering.

Noncash Employee Compensation. Noncash employee compensation consists of
noncash charges for stock options granted to employees at exercise prices deemed
below the fair market value of our common stock at the time of grant. The amount
of the charge is equal to the difference between the exercise price of the stock
option and the deemed fair market value of our common stock multiplied by the
number of options granted. The charge is amortized over the vesting period of
the options (typically, five years). We recorded noncash employee compensation
of $1.6 million in 1998, $0.8 million in 1997 and $0.1 million in 1996.

Total Other Income (Expense). Other income (expense) consists primarily of
interest income earned on cash and cash equivalents, net of cash and noncash
interest expense for leased equipment. Our total other income (expense) was $0.1
million in 1996, $(0.1) million in 1997 and $(0.4) million in 1998.

Income Taxes. We have incurred losses since inception which have generated
net operating loss carryforwards of approximately $39.2 million at December 31,
1998 and $43.7 million at September 30, 1999 for federal and state income tax
purposes. These carryforwards are available to offset future taxable income and
expire in 2011 through 2019 for federal income tax purposes. We also had
research and development tax credit carryforwards in the amount of $1.4 million
at December 31, 1998 and $0.8 million at September 30, 1999 which expire in 2002
through 2019. These losses and credits may be subject to significant limitations
on utilization in future years because of ownership changes that have occurred.
We have historically filed our corporate income tax returns utilizing a fiscal
year end of September 30, which we changed to December 31, effective December
31, 1998. See Note 12 of Notes to Consolidated Financial Statements.

The net operating loss carryforwards and temporary differences between
carrying amounts of assets and liabilities for financial reporting and income
tax purposes result in a net deferred tax benefit of $21.8 million at December
31, 1998 and $29.3 million at September 30, 1999. Our operating plans anticipate
taxable income in future periods; however, such plans make significant
assumptions which cannot be assured, including market acceptance of our products
by clients. Therefore, in consideration of our accumulated losses and the
uncertainty of our ability to utilize this deferred tax benefit in the future,
we have recorded a valuation allowance in the amount of $21.8 million at
December 31, 1998 and $29.3 million at September 30, 1999 to offset the deferred
tax benefit amount.

Nine Months Ended September 30, 1998 and 1999

Total Revenues, Net. Our total revenues increased from $8.6 million for
the nine months ended September 30, 1998 to $25.8 million for the nine months
ended September 30, 1999. This increase was due to an increased number of new
software product licenses at a higher average fee per client, as well as from
the provision of services to a larger client base.

Cost of Revenues. Total cost of revenues increased from $4.3 million for
the nine months ended September 30, 1998 to $14.0 million for the nine months
ended September 30, 1999, principally reflecting an $8.9 million increase in
cost of services revenues. This increase was primarily due to the addition of
professional services personnel and the increased use and training of systems
integration companies, which began in the fourth quarter of 1998. We expect that
our use of systems integration companies will continue and that these expenses
will also increase significantly in future periods.

Research and Development. Research and development expenses increased from
$6.6 million for the nine months ended September 30, 1998 to $12.3 million for
the nine months ended September 30, 1999. This increase was due principally to
the addition of personnel to support the design and development of

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our products. We expect to continue to incur significant research and
development expenses in future periods.

Sales and Marketing. Sales and marketing expenses increased from $7.8
million for the nine months ended September 30, 1998 to $16.3 million for the
nine months ended September 30, 1999. This increase reflects the expansion of
our sales and marketing organization and expanded marketing activities,
including advertising designed to increase awareness of our brand. In addition,
we had an increase in sales commissions and other incentive compensation payable
to the expanded sales force on higher revenues. We expect to continue to incur
significant sales and marketing expenses in future periods.

General and Administrative. General and administrative expenses decreased
slightly from $5.1 million for the nine months ended September 30, 1998 to $5.0
million for the nine months ended September 30, 1999. However, without giving
effect to $0.5 million of costs in the first nine months of 1998 for a withdrawn
initial public offering, general and administrative expense increased due to an
increase in overhead costs to accommodate our expanding organization. We intend
to increase our staffing generally to accommodate future growth.

Noncash Employee Compensation. Noncash employee compensation increased
from $1.2 million for the nine months ended September 30, 1998 to $3.0 million
for the nine months ended September 30, 1999. This increase was due to a below
market option grant in February 1999, as well as $0.4 million of noncash
compensation expense related to stock options granted to two consultants at a
discount to fair market value in the first quarter of 1999. Of this amount,
approximately $0.2 million was reflected in cost of sales and approximately $0.2
million was reflected in general and administrative expense. We will recognize
approximately $0.3 million of additional noncash compensation expense in future
periods related to options granted to the consultant. See Note 15 of Notes to
Consolidated Financial Statements. In addition, during the third quarter of
1999, we recognized $0.2 million of noncash compensation expense related to
stock options granted to a consultant which was reflected in cost of sales.

Total Other Income (Expense). Other income for the nine months ended
September 30, 1999 increased by approximately $0.2 million from the nine months
ended September 30, 1998. This increase was attributable to interest income
earned on higher cash and short-term investment balances from the proceeds of
our initial public offering in August 1999.

Other expense was $0.3 million and $0.9 million in the nine months ended
September 30, 1998 and 1999, respectively. This change was primarily the result
of increased interest expense associated with warrants issued in conjunction
with our secured loan agreement with Comdisco, Inc. See Note 10 of Notes to
Consolidated Financial Statements.

Quarterly Results of Operations

The following table sets forth unaudited quarterly statement of operations
data for each of the seven quarters in the period ended September 30, 1999. The
quarterly data have been prepared on the same basis as the audited financial
statements appearing in this prospectus and, in our opinion, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation. The results of operations for any quarter are not necessarily
indicative of results for any future period.

[Enlarge/Download Table]

QUARTER ENDED
-----------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31 MARCH 31, JUNE 30, SEPT. 30,
1998 1998 1998 1998 1999 1999 1999
--------- -------- --------- ------- --------- -------- ---------
(IN THOUSANDS)

Revenues, net:
Product licenses............ $ 1,546 $ 844 $ 3,002 $ 4,362 $ 4,386 $ 5,652 $ 5,653
Services.................... 866 950 1,361 1,657 2,615 2,614 4,906
Other....................... -- -- 1 1 -- -- --
------- ------- ------- ------- ------- ------- -------
Total revenues, net....... 2,412 1,794 4,364 6,020 7,001 8,266 10,559
------- ------- ------- ------- ------- ------- -------

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[Enlarge/Download Table]

Cost of revenues:
Product licenses............ 72 117 122 360 208 343 537
Services.................... 1,132 1,318 1,530 2,072 2,756 5,071 5,104
Other....................... -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total cost of revenues.... 1,204 1,435 1,652 2,432 2,964 5,414 5,641
------- ------- ------- ------- ------- ------- -------
Gross profit.................. 1,208 359 2,712 3,588 4,037 2,852 4,918
Operating expenses:
Research and development.... 1,964 2,093 2,569 2,932 3,637 4,277 4,390
Sales and marketing......... 2,064 2,582 3,199 4,124 4,968 5,428 5,869
General and
administrative............ 1,425 2,062 1,615 1,254 1,213 1,860 1,880
Noncash employee
compensation.............. 377 488 375 375 1,121 618 1,247
------- ------- ------- ------- ------- ------- -------
Total operating
expenses................ 5,830 7,225 7,758 8,685 10,939 12,183 13,386
------- ------- ------- ------- ------- ------- -------
Loss from operations.......... (4,622) (6,866) (5,046) (5,097) (6,902) (9,331) (8,468)
Other income (expense):
Interest income............. 63 139 48 15 92 38 315
Interest expense............ (85) (130) (98) (383) (296) (293) (310)
------- ------- ------- ------- ------- ------- -------
Total other income
(expense)............... (22) 9 (50) (368) (204) (255) 5
Income taxes................ -- -- -- -- (44) -- (1)
------- ------- ------- ------- ------- ------- -------
Loss from continuing
operations.................. $(4,644) $(6,857) $(5,096) $(5,465) $(7,150) $(9,586) $(8,464)
======= ======= ======= ======= ======= ======= =======

Our quarterly operating results will generally depend on the volume and
timing of sales of our products, which are difficult to predict. We plan to
increase our operating expenses to achieve revenue growth. If our revenues do
not increase as anticipated and our spending levels are not reduced accordingly,
a significant decline in quarterly operating results could occur. We expect to
experience fluctuations in quarterly operating results due to many factors,
including:

- the size and timing of significant client agreements, which typically
occur near the end of our fiscal quarter, but, if delayed, may not occur
until the next quarter;

- the length of the sales cycle for our products;

- fluctuations in demand for our products;

- the introduction of new products by us or by our competitors;

- changes in prices by us or by our competition; and

- the timing and amount of expenditures by us.

In addition, we believe, based on general software industry trends, that
sales of our products will typically be highest in the fourth quarter of the
year and lowest in the first quarter. As a result, period-to-period comparisons
of our results of operations may not be meaningful, and should not be relied on
as an indication of future performance.

LIQUIDITY AND CAPITAL RESOURCES

From inception through our initial public offering in August 1999, we
financed our operations primarily through approximately $64.6 million in private
sales of mandatorily redeemable preferred stock, all of which automatically
converted to common stock upon consummation of our initial public offering on

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August 16, 1999. At September 30, 1999, we had cash and cash equivalents of
$43.5 million and working capital of $36.3 million.

We have had significant negative cash flows from operating activities to
date. Net cash used in operating activities for fiscal years 1997 and 1998 and
for the nine months ended 1999 was $22.3 million, $16.6 million and $12.2
million, respectively. Net cash used in operating activities in each of these
periods was primarily the result of expenditures for product development, sales
and marketing and infrastructure. Our net accounts receivable decreased $0.8
million, from $6.2 million at December 31, 1998 to $5.4 million at September 30,
1999. This decrease was primarily attributable to an increase in customer
collections, partially offset by increased sales. The increase in cash and cash
equivalents and working capital at September 30, 1999 was largely the result of
the receipt of proceeds from our initial public offering in August 1999 in the
amount of $47.1 million.

Net cash used in investing activities consists primarily of capital
expenditures for computer equipment, purchased software, office equipment,
furniture, fixtures and leasehold improvements. Capital expenditures for
property and equipment for the nine months ended September 30, 1999 aggregated
$3.8 million, primarily for computer equipment and leasehold improvements. As of
September 30, 1999, we also had commitments under noncancelable operating leases
of $58.1 million and under noncancelable capital leases of $0.1 million. UGO
Network is obligated to pay to us $23.9 million of our $58.1 million operating
lease obligation pursuant to a sublease agreement. See "Certain
Transactions -- Agreements with Comdisco and UGO Networks."

We believe that our available cash resources will be sufficient to meet our
working capital requirements for at least the next twelve months. However, we
may need additional financing to support more rapid growth or to respond to
competitive pressures or unanticipated requirements. Additional financing, if
needed, may not be available on satisfactory terms or at all.

DISCONTINUED OPERATIONS

On March 30, 1998, we completed a spin-off distribution of our subsidiary,
UGO Networks, reducing our majority ownership of UGO Networks to a minority
interest of approximately 18%. Since March 30, 1998, our minority interest in
UGO Networks has decreased to approximately 5.5% due to private equity
financings by UGO Networks. UGO Networks is an entertainment information and
game company that commenced operations in 1997. We have presented UGO Networks
as a discontinued operation in our consolidated statement of operations for the
year ended December 31, 1997. We have not guaranteed and are not contingently
liable for any obligations of UGO Networks. During 1997, UGO Networks had no
revenues and incurred net losses of $1.3 million. A provision of $0.6 million
for estimated operating losses of UGO Networks through the disposal date was
recorded at December 31, 1997. The basic loss per share and diluted loss per
share for the year ended December 31, 1997 attributable to discontinuance of the
operations of UGO Networks was approximately $0.14 per share. See Note 13 of
Notes to Consolidated Financial Statements.

YEAR 2000 COMPLIANCE

Our business operations were not adversely affected by any year 2000
issues. Prior to the end of 1999, we took action intended to ensure that our
products and critical internal business systems were year 2000 compliant.

Our total cost of effecting year 2000 compliance is not expected to exceed
$0.4 million, of which $0.3 million had been incurred through September 30,
1999. These costs were expensed in the period incurred and were paid out of
working capital. However, we may incur significant costs if unanticipated year
2000 compliance problems arise. These unanticipated costs, or our failure to
correct any unanticipated year 2000 problems in a timely manner, could have a
material adverse effect on our business, financial condition, results of
operations and prospects for growth.

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RECENT ACCOUNTING PRONOUNCEMENTS

In December 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-9, Modification of SOP 97-2, Software
Revenue Recognition With Respect to Certain Transactions. SOP 98-9 generally
requires revenue earned on software arrangements involving multiple elements to
be allocated to each element based on the relative vendor specific objective
evidence of the elements. We adopted SOP 98-9 for software transactions entered
into in 1998. The revenue allocated to licensing of software is generally
recognized when a fixed and determinable fee has been contractually established,
the product has been shipped to the client and when collectibility is probable.
The revenue allocated to the postcontract client support portion of a contract
is consistent with fees charged when client support is sold separately on a
renewal basis, and is recognized ratably over the term of the support. Revenue
from professional services, such as custom development, installation and
integration support, is recognized as the services are rendered. The adoption of
SOP 98-9 did not have a material impact on our results of operations.

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BUSINESS

OVERVIEW

- increase revenues by extending their sales efforts to include an
Internet-based distribution channel;

- reduce operating expenses by streamlining and automating their selling
and support processes;

- enhance customer loyalty by offering a personalized, online buying
experience; and

- create online processes based on existing and evolving business practices
and integrate information from existing systems with their online
systems.

Our solution can be expanded to meet the demand of large organizations with
complex selling processes, and can manage a large number of simultaneous users,
high transaction volumes and complex databases. It can also be fully integrated
into every phase of selling and support processes, from order entry to customer
service. Commerce Exchange enables an organization to integrate its online
business with its existing business systems, including manufacturing, financial,
distribution and customer systems, and business practices. The functionality and
ease of implementing, maintaining and upgrading our products address what we
believe is a growing desire by businesses to maximize return on investment by
more efficiently using their existing information systems.

INDUSTRY BACKGROUND

Commerce conducted over the Internet has grown dramatically in recent
years. According to a report by International Data Corporation, worldwide
Internet commerce spending is expected to increase from $50 billion in 1998 to
$1.3 trillion in 2003. Businesses are embracing Internet commerce because it
enables them to both increase revenues and reduce operating expenses by:

- establishing a new distribution channel for products and services;

- enhancing customer relationships by offering increased convenience and
personalization; and

- automating sales, support and customer service processes.

Because of its convenience and widespread accessibility, the Internet
provides businesses greater access to both new and existing customers. Both
businesses and customers now demand the option of purchasing goods and services
online in addition to traditional means including stores and catalogs. Customer
demand for online services has compelled companies to respond both to
traditional competitors that have extended their sales efforts to the Internet
and to new competitors that only offer products and services online.

However, despite the large market potential for online commerce, nine out
of ten online shoppers experienced problems during the 1999 holiday season,
according to an Andersen Consulting study. Such mishandling of customer issues
can lead to costly customer defections to competitors. Still, 73% of online
shoppers ranked Internet shopping higher than brick and mortar stores and
catalogs in terms of overall satisfaction.

While a number of software products have been introduced to focus on the
purchase and procurement of goods and services within a business, we believe
that many of these solutions fail to address the specific

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needs of suppliers. Buyer-focused approaches improve the efficiency of supplier
management, but typically lack the functionality to enable a supplier to
automatically update prices and check the availability of products or the status
of an order. Consequently, suppliers typically still rely upon costly processes
to interact with their business customers.

In order to extend their operations to the Internet, businesses must
implement reliable information technology solutions to run mission-critical
online business applications without which the enterprise would not be able to
operate an online business. These solutions must meet rigorous performance
requirements and typically operate 24 hours per day, seven days per week. They
must be easy to use, while accessing a wide and complex array of databases and
computing platforms. During the initial years of Internet commerce, businesses
typically addressed these requirements by either building a custom solution or
purchasing a low-end system with only basic Internet commerce functionality.

We believe that few businesses have developed custom Internet commerce
solutions on a timely and cost-effective basis. Internet technology and business
requirements are evolving so rapidly that it is difficult for internal
information technology staffs to keep pace. Custom solutions are very expensive
to develop, install and maintain. Low-end systems, while less expensive, often
cannot support high transaction volumes, address complex and changing business
requirements or operate in conjunction with other systems. For these reasons, we
believe that many of these solutions have failed to deliver the full benefits of
Internet commerce. This shortcoming has led to market demand for enterprise
commerce solutions that provide:

- Complete functionality for automating sales, order management,
fulfillment and customer service;

- Scalability to manage increasing numbers of users, high transaction
volumes and complex databases;

- Flexibility to meet the varying and evolving needs of businesses and to
permit rapid and cost-effective implementation, maintenance and upgrades;
and

- Interoperability to work in conjunction with new Internet technologies
and with an organization's existing business systems.

OUR SOLUTION

Our Commerce Exchange family of products may be configured in a variety of
ways to meet both B2B and B2C specific requirements and to include:

- Process Application Server, which provides an open, flexible foundation
to operate a sophisticated Internet business;

- WebBroker, which enables an enterprise commerce system to support
increasing demand;

- Enterprise Broker, which enables real-time integration with existing
computer systems; and

- Commerce Exchange applications, including Product Merchandising, Order
Management and Account Management.

The Commerce Exchange family of products also includes tools and business
adapters. Our tools include:

- development tools to add functions to the system;

- administration tools to manage the system; and

- reporting tools to measure the results of the system.

Our business adapters enable integration of the Commerce Exchange solution with
existing business systems within the organization, including manufacturing,
financial, distribution and customer systems, or across the Internet with third
parties.

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We provide a range of services to enable clients to implement and use the
Commerce Exchange family of products. Our professional services include project
management, implementation and integration, education and training and client
support services. As of January 1, 2000, we had 60 employees dedicated to
providing professional services as well as training for our customers and
systems integration partners.

STRATEGY

Our objective is to become the leading provider of B2B and B2C Internet
software solutions that enable businesses to sell goods and services over the
Internet. Our strategy is to:

Target Manufacturing, Distribution and Retail Companies. We will continue
to focus on providing Internet software solutions to manufacturing, distribution
and retail companies with an expanding focus on B2B transactions. We believe
that these industries are characterized by the need to provide new methods to
improve sales functionality, product merchandising, order management, payment
processing, fulfillment, account management and customer service. In order to
increase our brand awareness, we intend to expand our marketing initiatives in
our target markets.

Expand Relationships with Implementation Partners. Systems integrators and
consulting firms have a strong influence on their clients' software purchasing
decisions, and we believe that many of these firms are seeking interactive
enterprise commerce solutions that enable them to satisfy their clients' needs
more rapidly than they can through custom development. We plan to expand our
existing relationships and seek new relationships to increase our capacity both
to sell and implement our products. We have developed relationships with large,
international systems integrators and consulting firms, such as Andersen
Consulting, Arthur Andersen, Cambridge Technology Partners, KPMG Peat Marwick,
USWeb/CKS and Whittman-Hart. We believe that expanding on our existing
relationships and creating new relationships with selected partners will enable
us to sell additional products to our existing customer base and gain new
customers more rapidly.

Continue Technology Leadership. We intend to continue to devote
substantial resources to the development of new and innovative products and to
continue to incorporate emerging Web technologies. We believe that the
increasing demands placed on enterprise commerce solutions will require an
application architecture that is adaptable, scalable and interoperable. To meet
these demands, we have developed an enterprise commerce software architecture
that operates on different computing platforms, integrates with a customer's
existing business practices and systems and is adaptable and scalable to meet
evolving business needs. We intend to continue to provide innovative products
based on this architecture.

Leverage and Expand Strategic Alliances. To accelerate the adoption of our
Internet commerce software solution, we intend to continue to develop
cooperative alliances with leading Internet technology vendors and e-commerce
marketplaces. We believe these relationships will provide opportunities to gain
customers in markets where our products and services may be used. Last year we
established a strategic global marketing and technology alliance with Ariba.
Additionally, we have established a strategic alliance with Interwoven to
enhance the content management of our solution, Active Software to facilitate
the integration of our solution with existing systems and Linkshare to improve
our online merchandising tools. We believe that these alliances will enable us
to incorporate additional capabilities into our solution and facilitate more
rapid deployment of our products.

Expand our Suite of Enterprise Commerce Solutions. We plan to expand our
suite of products and services that enables B2B and B2C organizations to market
and sell goods and services over the Internet. Many companies are seeking
comprehensive enterprise commerce solutions that meet a broad range of needs. We
intend to continue to develop additional applications and features based on our
existing Web-based architecture. We recently launched version 3.0 of Commerce
Exchange, which includes new merchandising techniques and faster and more
convenient order management. During the first quarter of 2000, we plan to
release version 3.1 of Commerce Exchange, which will include additional
functionality in the areas of online advanced pricing and promotions, coupons,
gift certificates, address book and customer service, as well as performance
enhancements and support for updated versions of databases. We also believe that
the licensing and the acquisition of technologies from third parties can
increase the speed-to-
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market of enhancements to our product. We intend to seek appropriate
arrangements with third parties to improve our product offering.

COMMERCE EXCHANGE PRODUCTS AND SERVICES

Our Commerce Exchange solution is based on our Process-Centric computing.
The Process-Centric approach enables our clients to create software
functionality modeled on their existing business practices, while providing the
flexibility to implement new Internet business processes. Process-Centric
computing enables a client's online processes to take into account
characteristics of the client's selling environment and its customers'
preferences. This approach provides each user with a personalized buying
experience. By building on process components, Process-Centric computing also
enables businesses to make changes quickly to their systems to adapt to changing
business conditions and to reduce the long-term maintenance costs associated
with supporting highly customized applications.

Our solution is designed to provide businesses with enterprise commerce
application software that is functionally comprehensive, expandable to meet the
requirements of global operations and flexible enough to apply online processes
to existing and evolving business practices. Our solution operates in
conjunction with a wide variety of Internet technologies and existing legacy
systems. The functionality and the ease of implementing, maintaining and
upgrading our products enable businesses to deploy more effectively their
information systems.

Commerce Exchange Platform

Process Application Server. Our Process Application Server is a software
platform upon which clients can build and deploy sophisticated enterprise
commerce solutions. The platform is designed to allow these solutions to
integrate with a wide variety of hardware, operating systems, databases, Web
servers and other business applications. The Process Application Server comes
bundled with our Product Merchandising, Order Management and Account Management
applications.

Developed in the C++ and Java programming languages, the platform provides
open application programming interfaces to enable custom application components
to be developed to extend a client's enterprise commerce system. The platform
supports industry standard Web browsers, including Microsoft Explorer and
Netscape Navigator, and operates on multiple operating systems, including
Microsoft Windows NT, Sun Solaris-Unix and HP-UX. Data access is handled via
native drivers that support industry-standard databases, including Microsoft SQL
Server, Oracle and Sybase. Microsoft IIS, Netscape Enterprise and Apache Web
servers are supported. The architecture is designed to facilitate migration to
other database and server platforms as client demand or market conditions
require.

The Process Application Server incorporates both generally accepted and
advanced Internet security standards, such as Secure Socket Layer and X.509. The
security components enable secure communication across the Internet among
businesses, customers, trading partners and the information systems they use to
manage their businesses. These secure trading environments can be established
without affecting a client's existing security scheme or firewall. Commerce
Exchange supports three main layers of security: object-level, file system and
database security.

WebBroker. Our WebBroker product can be used by clients to manage the
computing workload of their enterprise commerce system by intelligently
distributing Internet requests across multiple application servers. WebBroker
also enables multimedia content to be displayed quickly and efficiently. By
optimizing server utilization and minimizing wait times, WebBroker provides a
lower total cost of ownership and a higher level of client service. WebBroker
also increases fault tolerance and reliability for Internet commerce sites by
eliminating reliance on a single server.

Enterprise Broker. Our Enterprise Broker product enables clients to
synchronize their Internet sales channel with their other business channels and
enterprise systems including stores, customer service representatives and call
centers, inventory, fulfillment and distribution. Enterprise Broker provides a
centralized messaging system enabling clients to send and receive data from
software applications located

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anywhere within their enterprise or across an extranet. Systems integrators and
developers can use pre-built templates included with Enterprise Broker to create
and customize their own business messages, easing the burden of integration.

Commerce Exchange Applications

Our applications work in conjunction with our Process Application Server to
provide functionality for sales, order management, fulfillment and customer
service. Our applications encompass over 300 components that represent business
functions and 50 process templates that represent what we believe are best
practices in the domain of enterprise commerce. The adaptable nature of our
applications enables clients to deploy them in their standard form or to
customize or extend them easily to meet their individual requirements.

Our Commerce Exchange applications include:

- Product Merchandising: Our Product Merchandising application enables a
client to create an interactive catalog that provides an online buying
and selling experience. The application enables personalized product
views, as well as dynamic product pricing, discounting and promotions. It
also supports advanced up-selling, cross-selling, product comparison and
product alternative features. Self-service functions include advanced
search capabilities, resulting in an experience directed at buyers'
specific needs. Selling organizations can personalize their offerings for
different buyers, products and locations. Easy-to-use administrative
interfaces facilitate the management of the addition, modification and
usage of catalog product information.

- Order Management: Our Order Management application is designed to
support the personalized processing of orders within Commerce Exchange,
including order entry and order processing functions. Order entry
involves the capture of information required to place an order. Order
processing involves payment, shipping, inventory and taxation processes
once an order has been entered. The Order Management application supports
multiple payment and shipping methods.

- Account Management: Our Account Management application provides user
management, account tracking and management and online customer
self-service capabilities. The application enables the client to identify
and administer the users of the system and to assign those users to
specific groups. This enables the system functionality to be personalized
to different users and groups. The account tracking and management
functionality enables managers to set credit limits and control and
monitor the status of accounts. The application also provides online
buyers with the ability to manage their customer profile online, as well
as review shipment status and order and payment history. The easy-to-use
graphical interfaces also enable customers to cancel orders as well as
generate returns.

- Customer Service Application: Our Customer Service application enables
Customer Service Representatives (CSRs) to assist customers who call into
a call center. Using the web-based application, a CSR can sign on to a
web site on behalf of a customer, place orders on his/her behalf, process
returns, credit accounts, issue gift certificates and view customer order
history. This application enables our clients to synchronize their web
site business channel with their traditional channels.

Tools

We provide a number of software development, system administration and
reporting tools that enable clients with limited programming experience to
customize and manage our software and monitor and analyze activity on their
enterprise commerce system. In addition, experienced engineers can utilize our
tools to develop advanced, customized applications for enterprise commerce as
well as other markets based on our software.

- Business Station: Our Business Station enables business managers to
administer the deployment of their business strategies across all aspects
of their Enterprise Commerce site. Using Business
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Station, managers can create personalized catalogs, administer products,
pricing and promotions and manage users, groups and accounts. Business
Station gives clients the flexibility to respond to changing customer
demands and market conditions.

- Dev Station: Our Dev Station enables systems integrators and developers
to develop and deploy large-scale Enterprise Commerce sites. Dev
Station's visual process modeling tool enables clients to model online
processes to reflect their own business strategies. Dev Station's
development tools allow clients to rapidly build end-to-end Commerce
Exchange sites with little or no programming. If they choose, clients can
also customize their site using Java, COM or InterWorld's C++ SDK.

- Design Station: Our Design Station enables Web site designers to create
and maintain content-intensive Enterprise Commerce sites using our
repository of templates. Web site designers can also create their own
templates that reflect their own business strategies. Design Station
enables rapid content development, debugging and version control and
supports popular third-party content management and versioning tools.

- Control Station: Our Control Station provides clients with the ability
to view, monitor and manage their Enterprise Commerce environment through
a single "dashboard." Using Control Station, systems administrators can
identify system bottlenecks and rapidly reconfigure system resources.
Control Station provides system administrators with a centralized
environment in which to manage distributed Commerce Exchange sites and
optimize site performance.

- Business Analyzer: Our Business Analyzer enables graphical analysis and
manipulation of large amounts of data, such as products sold, total
sales, shipping analysis, site traffic, purchasing results and order
fulfillment. Clients can customize and easily build a wide variety of
reports to analyze captured data. Additionally, Business Analyzer can be
deployed over a corporate intranet, extranet or the Internet with links
to relational databases and existing data warehouses.

Business Adapters

Our Business Adapters are designed to facilitate the seamless integration
of external business functions, allowing them to be managed within the Commerce
Exchange process framework. This technology allows existing enterprise resource
planning, supply chain management, client asset management and fulfillment
business functions to be extended to the Internet. Our Business Adapters are
available for products in the following areas:

- enterprise resource planning;

- supply chain management;

- customer asset management;

- sales tax calculation;

- shipping and fulfillment;

- payment processing;

- digital product clearinghouse;

- messaging interfaces;

- electronic data interchange, or EDI, translators; and

- zip codes.

Services

Professional services include consulting and system integration services
that are associated with the planning, installation and customization of our
products. We also work closely with third-party systems integrators whom we
train to provide these services. We have developed an implementation methodology

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that is designed to facilitate the rapid and cost-effective implementation of
our products. Our implementation methodology is based on the following phases:

- sales cycle analysis;

- project planning and management;

- technology analysis and preparation;

- business design;

- site design;

- site development;

- site testing;

- conversion; and

- post-implementation review.

Technical education and training services for our clients and certified
systems integration partners are available both on-site and off-site and cover
the implementation, management, utilization and customization of our products.
Product training workshops are designed to give clients, marketing partners and
systems integrators the knowledge that they need to configure, support and
administer their Internet commerce systems. Product training can also be
customized to meet a client's specific business needs.

Our client support is available 24 hours a day, seven days a week.
Technical support services include online support via the Internet, toll-free
telephone technical support and direct support from a client satisfaction team.
We have developed client service programs, including one-on-one workshops and
client satisfaction teams consisting of a sales representative, a technical
account manager and, in many cases, an executive sponsor. Client satisfaction is
tracked on an account-by-account basis and reported to our executive management
team. To maximize client satisfaction, we have created a client support and
satisfaction division. The division's mission is to provide a high level of
client support and service, account management and advisory services.

The InterWorld Advantage

The advantages of our solution are:

- Comprehensive Functionality -- Our solution provides a comprehensive set
of applications for the efficient management of online selling, including
sales, order management, fulfillment and customer service. Consumers and
business buyers are provided with personalized buying experiences.
Selling organizations are provided with a workplace capable of the remote
administration of online storefronts, user accounts, products, prices and
content.

- State-of-the-Art Technology Foundation -- Our technology is specifically
designed to support the deployment of mission-critical online business
applications without which the enterprise would not be able to operate an
online business. Our solution scales to meet the demands of large
organizations that have complex transactions, a large number of
simultaneous users, high transaction volumes and complex databases. The
Commerce Exchange software architecture is designed to operate on many
different computing platforms and to provide a reliable, secure and
flexible environment.

- Process-Centric Computing Approach -- The flexibility of our
Process-Centric computing approach allows the Commerce Exchange solution
to adapt to dynamically changing business and technology conditions. This
approach enables clients to create online processes based on existing and
evolving business practices and to integrate information from existing
systems with their online system. Process-Centric computing facilitates
the deployment of enterprise commerce systems.

- Interoperability -- Our products are designed to work in conjunction with
new Internet technologies and with a client's existing business systems
and third-party technologies. Our component architecture supports a
variety of different programming models including Java, C++, COM and
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others. We provide standard adapters that enable our products to operate with
software systems such as SAP, PeopleSoft and Siebel.

SALES AND MARKETING

We market our products and services primarily through our direct sales
organization and implementation partners. As of February 1, 2000, our sales
force consisted of 50 employees located in 11 domestic locations (Atlanta,
Georgia; Bellevue, Washington; Boston, Massachusetts; Chicago, Illinois; Dallas,
Texas; Los Angeles, California; New York, New York; Phoenix, Arizona; Vienna,
Virginia; San Francisco, California; and Tampa, Florida) and six international
locations (Dusseldorf, London, Melbourne, Paris, Sydney and Tokyo). We intend to
continue to add sales personnel worldwide. We supplement our direct sales
efforts with strategic marketing alliances, including relationships with Active
Software, Agency.com, Ariba, Cambridge Technology Partners, Cisco Systems,
Electronic Data Systems, KPMG, Sun MicroSystems, Net Perceptions, Trans Cosmos
USA, USWeb/CKS and Whittman-Hart, all of which have referred clients to us. The
contractual arrangements provide for the partner to receive training from us and
then market or provide sales leads for our products through their direct sales
force. We also have active technology and distribution partnerships with Cisco
Systems, CyberSource, Federal Express, and Interwoven. The contractual
arrangements provide for the joint development of compatible products or
extensions of our products and for joint marketing and sales effects.

We deploy sales teams consisting of both sales and technical professionals
to create proposals, presentations and demonstrations that address the
requirements of the client. The current sales cycle for our products typically
ranges from two to six months.

Our marketing programs are targeted at sales, marketing and information
technology executives of large, multi-national organizations. Marketing
activities include branding, such as advertising and public relations campaigns;
lead generation and management; direct mail campaigns; field and channel
marketing, including joint marketing with strategic partners; product marketing
and development of technology alliances.

CLIENTS

We believe that those organizations that are most likely to use our
products sell a large number of products through diverse distribution channels
with a large number of trading partners. Accordingly, we market our products and
services to large domestic and international manufacturers, distributors,
retailers and direct marketers. As of January 1, 2000, we had over 80 clients.

Set forth below is a representative list of our current clients. Each
client listed accounted for an aggregate of at least $400,000 of revenues in
1999.

Ashford.com
Belkin Components
Bolt Media
boo.com
Brooks Brothers
Buena Vista Internet Group
(Disney)
EB2B Commerce
GATX Logistics
GTE Communication Systems
Guess?
Insight Enterprises
Internet Shopping Network
Lids
Lucy.com
Mammoth Golf Management
MSC Industrial Direct
NIKE
Oki Data America
Online Retail Partners
Oven Digital
Q Strategies
Shopnow.com
Simon Property Group
Sony
TAKKT
U.S.A. Floral Products

COMPETITION

There is intense competition in the Internet commerce software industry. We
expect competition to intensify in the future. We compete against the in-house
development efforts of companies engaging in Internet commerce, as well as other
software application vendors and developers. Our current competitors include AOL
(Netscape Communications), Art Technology Group, BroadVision, IBM, Intershop
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Communications, Microsoft, Open Market and Oracle. We expect other companies to
enter our market. We compete principally on the basis of product performance,
client service and price. Our market is still evolving, and we may not be able
to compete successfully with current or future competitors, and competitive
pressures faced by us may have a material adverse effect on our business,
financial condition and results of operations. See "Risk Factors -- We face
intense competition, which could adversely affect our sales and profitability."

PRODUCT DEVELOPMENT

As of January 1, 2000, our development organization was comprised of 110
developers, development managers, quality assurance personnel and testing
engineers. Our expenses for research and development were $2.4 million, $6.9
million and $9.6 million in 1996, 1997 and 1998, respectively. Our expenses for
research and development were $6.6 million and $12.3 million for the nine-month
periods ended September 30, 1998 and 1999, respectively.

We employ a collaborative product planning and development process. The
planning process involves gathering product requirements from our sales and
marketing organization, as well as from clients and strategic partners. Clients
and partners have input into future product direction and functionality.

We follow a rigorous quality assurance and testing process. This process is
designed to identify software defects through the entire development cycle.
Several test types are employed, and defect reports and metrics are tracked to
facilitate resolution, including system testing and performance benchmarking.

PROPRIETARY RIGHTS

We rely on intellectual property laws, employee and third-party
non-disclosure agreements and other methods to protect our proprietary rights.
We currently have one U.S. patent granted to us relating to our product
architecture and technology. While we believe that our patent is valid, it may
be challenged, invalidated or circumvented. Moreover, the rights granted under
any patent issued to us or under licensing agreements may not provide
competitive advantages to us. We believe that, due to the rapid pace of
technological innovation for Internet commerce solutions, our ability to
establish and maintain a position of technology leadership in the industry is
dependent more on the skills of our development personnel than upon the legal
protections afforded our existing technology.

Our agreements with employees, consultants and others who participate in
the development of our software may be breached, and we may not have adequate
remedies for any breach. In addition, our trade secrets may otherwise become
known to or independently developed by competitors. Furthermore, our efforts to
protect our proprietary technology may fail to prevent the development and
design by others of products or technology similar to or competitive with those
developed by us.

The computer software market is characterized by frequent and substantial
intellectual property litigation. Intellectual property litigation is complex
and expensive, and the outcome of such litigation is difficult to predict.
BroadVision and Open Market, two of our competitors, have been issued U.S.
patents on some aspects of their electronic commerce products. We received a
letter from counsel to Open Market concerning the potential applicability of the
Open Market patents to our products. The letter stated that Open Market was
prepared to meet with us to resolve issues concerning the applicability of its
patents and to discuss terms of an appropriate license agreement. We responded
to the Open Market inquiry, informing Open Market that based on our review of
the Open Market patents and the analysis and advice of our patent counsel, we
believe that our products do not infringe the patents awarded to Open Market. We
have not received any further inquiries or correspondence from Open Market since
our September 1998 response and have had no inquiries or discussions with
BroadVision with regard to patent matters. We have also received a letter from
TechSearch stating its belief that our Web site induces the infringement by
others of one or more claims of a U.S. patent issued to TechSearch. Our patent
counsel has advised us that this patent is invalid in view of prior art.
Although we do not believe that we are infringing their patent rights, any of
these companies may claim that we are doing so. If a claim of patent
infringement by these or other companies was made against us, we would likely
incur significant expenses in defending
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against the claim, which could adversely affect our financial condition and
results of operations. In addition, if a claim of infringement is made against
us and we are not successful in defending against the claim, we could be liable
for substantial damages and prevented from using any infringing technology. We
may also be required to make royalty payments, which could be substantial, to
the holder of the patent rights. These events could have a material adverse
effect on our business, financial condition, results of operations and prospects
for growth.

Our success will depend in part on our continued ability to obtain and use
licensed technology that is important to the performance of our products. An
inability to continue to procure or use such technology would likely have a
material adverse effect on us. In general, license terms range from 1 to 3 years
and, unless terminated upon notice by one of the parties, generally renew for
additional one year periods.

EMPLOYEES

As of January 1, 2000, we had a total of 280 employees. Of the total
employees, 110 were in development and product management, 50 in sales, 15 in
marketing, 5 in alliances, 60 in worldwide services and 40 in administration.
None of our employees are represented by a labor union. We have not experienced
any work stoppages and consider our relations with our employees to be good.

PROPERTIES

Our principal offices are located in New York, New York and consist of
approximately 98,000 square feet of leased office space. The lease for the New
York offices expires in December 2015. We believe that our existing facilities
are adequate to meet our needs for the foreseeable future. We currently sublease
approximately 43% of our leased space. See "Management -- Certain Transactions."
We intend to continue to sublease this space until we require the space for our
operations. We also rent office space in various cities in the United States and
in other countries for sales and field service and support activities.

LITIGATION

We are not a party to any material legal proceedings.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth information regarding our executive officers
and directors:

[Enlarge/Download Table]

NAME AGE POSITION
---- --- --------

Michael J. Donahue........................ 37 Chairman
Alan J. Andreini.......................... 53 Vice Chairman
Jeremy M. Davis........................... 45 President and Chief Executive Officer
Peter Schwartz............................ 56 Chief Financial Officer
Daniel Turano............................. 51 Senior Vice President, Worldwide Field
Operations
Stephen Law............................... 46 Senior Vice President, Engineering
Leon S. DeMaille.......................... 36 Senior Vice President, Marketing
Kevin Kohn................................ 34 Senior Vice President, Alliances
Mark Berlingeri........................... 43 Senior Vice President, Worldwide Services
Amy Aguilar-Brown......................... 34 Vice President, Legal Affairs and
Corporate Secretary
Kenneth G. Langone........................ 64 Director
Joseph C. Robinson........................ 36 Director
Yves Sisteron............................. 44 Director
Jack Slevin............................... 63 Director
Russell West.............................. 56 Director

Michael J. Donahue. Mr. Donahue co-founded InterWorld in March 1995 and
serves as our Chairman. He served as Co-Chairman and Chief Technology Officer of
InterWorld from April 1997 until June 1998. He also served as President of
InterWorld from March 1995 until April 1997. Prior to founding InterWorld, from
1992 to 1995, Mr. Donahue was the sole proprietor of Donahue & Associates, Inc.,
an information technology consulting firm specializing in strategic planning and
systems reengineering.

Alan J. Andreini. Mr. Andreini joined InterWorld in April 1997 and serves
as our Vice Chairman. He served as President and Chief Executive Officer from
June 1998 to January 2000. He served as President and Chief Operating Officer of
InterWorld from April 1997 to June 1998. Prior to joining InterWorld, Mr.
Andreini was Executive Vice President and a member of the Office of the
President of Comdisco. Mr. Andreini joined Comdisco in 1978, and was named
Senior Vice President in 1986 and Executive Vice President in 1994.

Jeremy M. Davis. Mr. Davis joined InterWorld in January 2000 and serves as
our President and Chief Executive Officer and as a director. Prior to joining
InterWorld, Mr. Davis was President and Chief Executive Officer of InConcert,
Inc. from January 1997 to December 1999. From November 1995 to December 1996, he
served as President and Chief Executive Officer of Business Matters, Inc. From
November 1993 to October 1995, Mr. Davis was President of Sales Technologies,
Inc., a Dun & Bradstreet, Inc. company.

Peter Schwartz. Mr. Schwartz joined InterWorld in October 1998 and serves
as our Chief Financial Officer. Since July 1983 and prior to joining InterWorld,
Mr. Schwartz served in various financial positions with Computer Associates
International, Inc., most recently as Chief Financial Officer from April 1987 to
June 1998. From June 1977 to June 1983, Mr. Schwartz served in various financial
positions with Xerox Corporation. Mr. Schwartz also currently serves as a
director of General Semiconductor, Inc.

Daniel Turano. Mr. Turano joined InterWorld in October 1997 and serves as
our Senior Vice President, Worldwide Field Operations. Prior to joining
InterWorld, Mr. Turano was Vice President, North American Field Operations for
Scopus Technology, Inc. from January 1997 to October 1997. From September 1995
to December 1996, he served as Senior Vice President of Worldwide Field
Operations for

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Siebel Systems, Inc. From September 1991 to September 1995, Mr. Turano served in
various senior sales capacities at Oracle Corporation, including Group Vice
President of Eastern U.S. Sales.

Stephen Law. Mr. Law joined InterWorld in May 1998 and serves as our
Senior Vice President, Engineering. Prior to joining InterWorld, Mr. Law was the
Chief Technology Officer of Global Financial Services at Perot Systems
Corporation from February 1997 to May 1998. Prior to joining Perot Systems, Mr.
Law was the Vice President of Global Derivatives Systems Development at Citibank
Corporation from December 1992 to February 1997.

Leon DeMaille. Mr. DeMaille joined InterWorld in January 2000 and serves
as our Senior Vice President, Marketing. Prior to joining InterWorld, Mr.
DeMaille was Vice President of Marketing for Erisco Managed Care Technologies
from September 1997 to January 2000. From February 1988 to September 1997, he
was the president and Chief Executive Officer of Synergy Marketing Solutions,
that provides start-up consulting services to vertical information technology
companies.

Kevin Kohn. Mr. Kohn joined InterWorld in December 1999 and serves as our
Senior Vice President, Alliances. Prior to joining InterWorld, in November 1999
Mr. Kohn was Vice President and General Manager of the Communications Practice
for TIBCO Software, Inc. From March 1997 to October 1999, he was Vice President,
Marketing and New Business Development for InConcert, which was acquired by
TIBCO in October 1999. From November 1987 to February 1997, Mr. Kohn served in
various sales and marketing capacities for Xerox Corporation.

Mark Berlingeri. Mr. Berlingeri joined InterWorld in October 1998 and
serves as our Senior Vice President, Worldwide Professional Services. Prior to
joining InterWorld, Mr. Berlingeri was a Vice President for FlexiInternational
Software, Inc. from January 1997 to October 1998. From October 1992 to December
1996, he was a Regional Vice President for Sybase, Inc.

Amy Aguilar-Brown. Ms. Aguilar-Brown joined InterWorld in September 1997
as Vice President, Legal Affairs. Ms. Aguilar-Brown was also elected Secretary
of InterWorld in May 1998. Prior to joining InterWorld, Ms. Aguilar-Brown served
as Director of Field Operations and Legal Affairs for Sybase, Inc. from April
1994 to September 1997. From January 1992 to April 1994, she served as Director
of Operations for MicroDecisionware, Inc., which was acquired by Sybase, Inc.

Kenneth G. Langone. Mr. Langone has been a director of InterWorld since
1996. Mr. Langone has been Chairman and President of Invemed Associates LLC,
which he founded, since 1974. He is a director of The Home Depot, Inc., General
Electric Company, Unifi, Inc., DBT Online, Inc. and Tricon Global Restaurants,
Inc.

Joseph C. Robinson. Mr. Robinson has been a director of InterWorld since
1995. Mr. Robinson co-founded InterWorld in March 1995 and served as its
Executive Vice President until May 1998. Since October 1998, Mr. Robinson has
served as the Chairman of UGO Networks. Prior to joining InterWorld, from 1989
to 1995, Mr. Robinson was employed by Douglas, Elliman, Gibbons and Ives, a real
estate brokerage firm.

Yves Sisteron. Mr. Sisteron has been a director of InterWorld since 1996.
Mr. Sisteron has been a Principal of Global Retail Partners, L.P., an investment
fund, since January 1996 and Manager of U.S. Investments at Carrefour S.A. since
1993. Mr. Sisteron serves as a director of P.F. Chang's China Bistro, Inc. and
Zany Brainy, Inc.

Jack Slevin. Mr. Slevin has been a director of InterWorld since 1997. From
June 1995 until his retirement in January 1999, Mr. Slevin was the Chairman and
Chief Executive Officer of Comdisco. From October 1994 to June 1995, Mr. Slevin
was Chief Operating Officer at Comdisco and from January 1993 to October 1994,
he was Executive Vice President of North American Sales at Comdisco. He became a
member of the Office of the President when it was created in 1992 and was a
member of Comdisco's board of directors from 1979 until January 1999. Mr. Slevin
is also currently a director of U.S. West, Inc. and Telehub Network Services
Corporation.

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Russell West. Mr. West has been a director of InterWorld since 1996. Mr.
West has been President of OneNetPlus.com, a provider of Internet technology
solutions, since May 1999. He was an Executive Vice President and Chief
Technology Officer for Comdisco, where he was employed from 1977 to May 1999.

All directors hold office until the next annual meeting of stockholders or
until their successors have been duly elected and qualified.

COMMITTEES OF THE BOARD OF DIRECTORS

The board of directors has established an audit committee and a
compensation committee. The board of directors does not have a nominating
committee. The selection of nominees to the board of directors is made by the
entire board of directors.

The audit committee is comprised of Messrs. Sisteron and Slevin. The audit
committee is responsible for reviewing with management our financial controls
and accounting and reporting activities. The audit committee reviews the
qualifications of our independent auditors, makes recommendations to the board
of directors regarding the selection of independent auditors, reviews the scope,
fees and results of any audit and reviews non-audit services and related fees.

The compensation committee is comprised of Messrs. Sisteron and Slevin. The
compensation committee is responsible for the administration of all salary and
incentive compensation plans for our officers and key employees, including
bonuses. The compensation committee also administers our stock option and
employee stock purchase plans.

DIRECTOR COMPENSATION

Directors do not receive any cash remuneration for serving as directors.
All directors are eligible to participate in our stock option plan. Each of
Messrs. Langone, Sisteron, Slevin and West were granted an option to purchase
40,000 shares of common stock at an exercise price of $2.00 per share upon their
appointment to the board of directors. These options vest 20% on the first
anniversary of the date of grant and 5% on the first day following each
completed quarter thereafter. See "-- Stock Plans."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Slevin, a member of the compensation committee, was Chairman and Chief
Executive Officer of Comdisco until his retirement in January 1999. Comdisco has
in the past provided equity and debt financing to InterWorld. See "Certain
Transactions -- Issuances of Capital Stock," "-- Issuances of Warrants," and
"-- Leases and Licenses with Comdisco; Secured Loan from Comdisco."

EXECUTIVE COMPENSATION

The following table sets forth, in accordance with the rules of the
Securities and Exchange Commission, information concerning the compensation paid
to our Chief Executive Officer and the four other most highly compensated
executive officers during 1999 (collectively, the "Named Executive Officers").

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SUMMARY COMPENSATION TABLE

[Enlarge/Download Table]

LONG-TERM
COMPENSATION
AWARD
ANNUAL COMPENSATION ------------
---------------------------------- SECURITIES
OTHER UNDERLYING ALL
ANNUAL OPTIONS/ OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION SAR(#) COMPENSATION
----------------- ---- -------- -------- ------------ ------------ ------------

Michael J. Donahue.............. 1999 $240,000 -- -- -- $ 29,776(1)
Chairman 1998 240,000 -- -- -- --
1997 240,000 -- -- -- --

Alan J. Andreini(2)............. 1999 $240,000 -- -- -- --
Chief Executive Officer 1998 226,667 -- -- -- --
& President 1997 146,666 -- -- 892,849 $ 28,715(3)

Daniel Turano(4)................ 1999 $150,000 $141,082 -- 30,000 --
Senior Vice President, 1998 150,000 63,723 -- -- --
Worldwide Field Operations 1997 30,000 100,000 -- 195,000 --

Stephen Law(5).................. 1999 $193,333 $ 24,375 -- 35,000 --
Senior Vice President, 1998 98,542 38,819 -- 175,000 --
Engineering 1997 -- -- -- -- --

Amy Aguilar-Brown(6)............ 1999 $150,000 $ 15,000 -- 47,500 --
Vice President, Legal Affairs 1998 145,000 10,000 -- 15,000 --
and Corporate Secretary 1997 39,750 7,500 -- 20,000 --

---------------
(1) Represents forgiveness of a portion of $89,327 of principal and interest on
a loan made by us to Mr. Donahue. The remaining obligation is being forgiven
in equal monthly installments through May 2001.

(2) Mr. Andreini joined InterWorld in April 1997. Effective January 5, 2000, Mr.
Andreini was promoted to Vice Chairman. Mr. Jeremy Davis assumed the
position of Chief Executive Officer and President effective January 5, 2000.

(3) Represents relocation expense reimbursement.

(4) Mr. Turano joined InterWorld in October 1997.

(5) Mr. Law joined InterWorld in May 1998.

(6) Ms. Aguilar-Brown joined InterWorld in September 1997.

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OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth all individual grants of stock options
during the year ended December 31, 1999 to each of the Named Executive Officers:

[Enlarge/Download Table]

INDIVIDUAL GRANTS
----------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR
OPTIONS EMPLOYEES IN BASE GRANT
GRANTED FISCAL PRICE EXPIRATION DATE
NAME (#)(1) YEAR ($/SH) DATE VALUE
---- ---------- ------------ -------- ---------- ------------

Michael J. Donahue.............................. -- -- -- -- --
Alan J. Andreini................................ -- -- -- -- --
Daniel Turano................................... 20,000(2) 0.48% $15.000 6/1/06 $ 243,464(3)
10,000(4) 0.24% $51.125 1/1/07 415,893(5)
Stephen Law..................................... 30,000(6) 0.72% $15.000 1/1/06 365,196(3)
5,000(7) 0.12% $51.125 1/1/07 207,947(5)
Amy Aguilar-Brown............................... 15,000(8) 0.36% $10.000 7/1/05 190,174(9)
7,500(10) 0.18% $10.000 1/1/06 95,087(9)
15,000(11) 0.36% $15.000 6/1/06 182,598(3)
10,000(12) 0.24% $51.125 1/1/07 415,893(5)

---------------
(1) All options were granted pursuant to our stock option plans.

(2) The option granted to Mr. Turano vests 20% on June 1, 2000 and 5% on the
first day following each completed quarter thereafter.

(3) Grant date value was determined on the date of grant using the Black
Scholes Option-Pricing model based on the following assumptions:
volatility -- 110%; expected life -- 5 years; risk-free interest
rate -- 5.8%; and no dividend yield.

(4) The option granted to Mr. Turano vests 8.33% on April 1, 2000 and 8.33% on
the first day following each completed calendar quarter thereafter.

(5) Grant date value was determined on the date of grant using the Black
Scholes Option-Pricing model based on the following assumptions:
volatility -- 110%; expected life -- 5 years; risk-free interest
rate -- 6.19%; and no dividend yield.

(6) The option granted to Mr. Law vests 20% on January 1, 2000 and 5% on the
first day following each completed quarter thereafter.

(7) The option granted to Mr. Law vests 8.33% on April 1, 2000 and 8.33% on the
first day following each completed calendar quarter thereafter.

(8) The option granted to Ms. Aguilar-Brown vests (a) 5,000 shares on July 1,
1998 and (b) as to the remaining 10,000 shares, 20% on July 1, 1999 and 5%
on the first day following each completed quarter thereafter.

(9) Grant date value was determined on the date of grant using the Black
Scholes Option-Pricing model based on the following assumptions:
volatility -- 110%; expected life -- 5 years; risk-free interest
rate -- 4.9%; and no dividend yield.

(10) The option granted to Ms. Aguilar-Brown vests 20% on January 1, 2000 and 5%
on the first day following each completed quarter thereafter.

(11) The option granted to Ms. Aguilar-Brown vests 20% on June 1, 2000 and 5% on
the first day following each completed quarter thereafter.

(12) The option granted to Ms. Aguilar-Brown vests 8.33% on April 1, 2000 and
8.33% on the first day following each completed quarter thereafter.

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On December 1, 1999, we granted an option to purchase 500,000 shares of our
common stock to Jeremy Davis, at an exercise price of $51.125 per share. With
respect to this option, 20% vests on November 19, 2000 and 5% vests on the last
day of each completed quarter thereafter.

On January 4, 2000, we granted an option to purchase 150,000 shares of our
common stock to Stephen Law, at an exercise price of $15 per share. With respect
to this option, 25% vests on the first anniversary of the date of grant and
6.25% vests on the first day following each completed quarter thereafter.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table sets forth information with respect to the number and
value of options exercised during 1999 and of the number and value of
outstanding options held by the Named Executive Officers at December 31, 1999:

[Enlarge/Download Table]

NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES ACQUIRED ON UNDERLYING UNEXERCISED IN-THE-MONEY
EXERCISE VALUE REALIZED OPTIONS AT FISCAL YEAR-END(#): OPTIONS AT FISCAL YEAR-END($):
NAME (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
---- ------------------ -------------- ------------------------------ ------------------------------

Michael J. Donahue... 0/0 0/0
Alan J. Andreini..... 642,849/0 53,597,535/0
Daniel Turano........ 90,000 1,170,000 15,000/120,000 1,250,625/9,253,750
Stephen Law.......... 87,500 1,424,844 0/122,500 0/9,380,938
Amy Aguilar-Brown.... 21,750/60,750 1,741,594/4,236,844

---------------
(1) Values are calculated by subtracting the exercise price from the fair market
value of the common stock as of the exercise date.

(2) Based on the closing stock price on The Nasdaq National Market at December
31, 1999 of $85.375 per share.

EMPLOYMENT AGREEMENT

We have an employment agreement with Jeremy Davis, our President and Chief
Executive Officer, with an initial term of three years. This agreement
establishes a base salary of $400,000, subject to increase by our board of
directors. Mr. Davis is eligible for an annual bonus of up to 40% of his base
salary based on performance. He may also receive incentive payments in excess of
the bonus. We also have agreed to loan $750,000 to Mr. Davis to assist in his
relocation expenses. The loan will bear interest at the prime rate and is due to
be repaid upon the sale of his former principal residence. We granted Mr. Davis
a non-qualified stock option to purchase 500,000 shares of common stock at an
exercise price equal to $51.125. This stock option vests 20% on November 19,
2000 and 5% on the last day of each calendar quarter thereafter. In addition, we
have agreed to issue an aggregate of 50,000 shares of common stock to Mr. Davis
of which 16,667 shares were issued on November 19, 1999; 16,667 shares will be
issued on November 19, 2000; and 16,666 shares will be issued on November 19,
2001. The vesting of the stock option and the issuance of the shares of common
stock will accelerate in full in the event of a change of control of InterWorld.
Mr. Davis has agreed not to compete with us during the term of the agreement and
for a period of one year following the termination of employment. Unless Mr.
Davis is terminated for cause or he voluntarily terminates his employment, we
will pay his base salary and benefits during the one-year non-competition
period. Under the agreement, cause means:

- conviction of Mr. Davis for various crimes;

- performance by Mr. Davis of any act, or failure to perform any act, which
if he were prosecuted and convicted would constitute a crime;

- material breach of the employment agreement by Mr. Davis; or

- failure of Mr. Davis to perform his duties.

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STOCK PLANS

1996 Stock Option Plan. Under the 1996 Stock Option Plan, 6,600,000 shares
of common stock have been reserved for issuance, subject to adjustment for stock
splits, stock dividends, recapitalizations, reclassifications and similar
events. Each director who is not our employee receives a
non-qualified option to purchase 40,000 shares of common stock when such
director is elected to the board.

As of December 31, 1999, options to purchase an aggregate of 4,268,970
shares were outstanding under the 1996 Stock Option Plan at a weighted average
exercise price of $7.60 per share; options to purchase 1,028,974 shares had been
exercised. No additional grants will be made under the 1996 Stock Option Plan
but shares available for grant may be granted under the 2000 Equity Incentive
Plan.

2000 Equity Incentive Plan. We have adopted the 2000 Equity Incentive Plan,
which is administered by our compensation committee. This plan permits the grant
of stock options, restricted stock and other stock-based awards. No award may be
granted under the plan after January 2010.

Under the 2000 Equity Incentive Plan, 3,000,000 shares of common stock
plus, as of December 31, 1999, 1,302,056 shares of common stock that were
available for grant under the 1996 Stock Option Plan were reserved for issuance,
subject to adjustment for stock splits, stock dividends, recapitalizations,
reclassifications and similar events. If an award granted under the 1996 Stock
Option Plan or 2000 Equity Incentive Plan expires unexercised or is terminated
or cancelled for any reason, the shares of common stock previously reserved for
issuance upon exercise of the award will be available for future award under the
2000 Equity Incentive Plan.

As of January 1 of each year that the 2000 Equity Incentive Plan is in
effect, commencing with the year 2001 and ending in 2006, the aggregate number
of shares of common stock available for the granting of awards under the plan
shall automatically increase by a number equal to the lesser of (a) 5% of the
total number of shares of common stock then outstanding or (b) 750,000 shares,
subject to adjustment as provided in the plan.

As of December 31, 1999, options to purchase an aggregate of 1,577,150
shares were outstanding under the 2000 Equity Incentive Plan at an exercise
price of $51.25 per share.

Employee Stock Purchase Plan. We have adopted an employee stock purchase
plan. Under the employee stock purchase plan, eligible employees are provided an
opportunity to purchase shares of common stock generally through regular payroll
deductions. The employee stock purchase plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code.
The total number of shares of common stock that are authorized for issuance
under the employee stock purchase plan is 1,000,000. All of our full-time
employees are eligible to participate in the employee stock purchase plan,
subject to limited exceptions. Employees are given an opportunity to purchase
shares of common stock during consecutive six-month periods, and the right to
purchase shares expires on the last day of the sixth-month period. Employees
electing to participate for any semi-annual period authorize payroll deductions
at a stated whole percentage ranging from 2% to 10% of the employee's
compensation. The purchase price for shares offered under the employee stock
purchase plan for the plan period ending February 29, 2000, equals a percentage
designated by the compensation committee (not less than 85%) of the closing
price of the common stock on February 29, 2000 as quoted on The Nasdaq Stock
Market's National Market. For each subsequent six-month period the purchase
price for shares offered under the employee stock purchase plan equals a
percentage designated by the compensation committee (not less than 85% of the
lower of the fair market value of the common stock at the commencement or
termination of the six-month period. The employee stock purchase plan will
expire in August 2009, unless sooner terminated by the board of directors. Our
board of directors may amend, suspend or terminate the employee stock purchase
plan at any time and from time to time, subject to limitations. The employee
stock purchase plan is administered by the compensation committee.

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401(k) PLAN

We have a defined contribution savings plan, or a 401(k) Plan, which
qualifies under Section 401(k) of the Code. Participants may contribute up to
15% of their gross wages, not to exceed, in any given year, a limitation set by
Internal Revenue Service regulations. Our 401(k) Plan provides for discretionary
contributions to be made by us as determined by our board of directors. We have
not made any discretionary contributions to our 401(k) Plan.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

Our certificate of incorporation and bylaws provide that the liability of
our directors for monetary damages will be limited to the fullest extent
permissible under Delaware law. This limitation of liability does not affect the
availability of injunctive relief or other equitable remedies.

Our bylaws provide that we will indemnify our directors and officers to the
fullest extent permissible under Delaware law. These indemnification provisions
require us to indemnify these persons against liabilities and expenses to which
they may become subject by reason of their service as a director or officer to
us or any of our affiliated enterprises. In addition, we have entered into
indemnification agreements with each of our directors providing indemnification
to the fullest extent permitted by applicable law and also setting forth
procedures, including the advancement of expenses, that apply in the event of a
claim for indemnification.

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CERTAIN TRANSACTIONS

ISSUANCES OF CAPITAL STOCK

In May 1997, in connection with a round of private equity financing, we
issued 33,333 shares of common stock to Alan J. Andreini, our Vice Chairman,
81,500 shares of common stock to Kenneth Langone, one of our directors and
President of Invemed Associates, LLC, 33,333 shares of common stock to Jack
Slevin, one of our directors, 501,333 shares of common stock to George Soros,
one of our principal stockholders, 133,333 shares of common stock to Comdisco, a
company of which Jack Slevin, one of our directors, served as Chairman and Chief
Executive Officer, and an aggregate of 18,500 shares of common stock to
stockholders of the corporate parent of, and officers and employees of, Invemed
Associates LLC, for a purchase price of $7.50 per share.

In November 1997, in connection with a round of private equity financing,
we issued 29,412 shares of common stock to Comdisco and 428,000 shares of common
stock to Mr. Soros for a purchase price of $8.50 per share.

In March 1998, in connection with a round of private equity financing, we
issued 1,000 shares of common stock to Invemed Fund, L.P., a fund affiliated
with Invemed Associates LLC.

INVESTMENT BANKING FEES

In January 1999, in connection with a round of private equity financing of
$16,500,000, Invemed Associates LLC received approximately $405,000 as
compensation for investment banking services provided to us. In August 1999, in
connection with our initial public offering, Invemed received $3,622,500 in
underwriting discounts and commissions.

ISSUANCES OF WARRANTS

In connection with a letter of credit in support of a facility deposit, in
January 1997, we issued warrants to purchase 25,260 shares of common stock at an
exercise price of $6.25 per share to Comdisco.

In February 1997, in connection with an equipment lease financing, we
issued warrants to purchase 39,200 shares of common stock at an exercise price
of $6.25 per share to Comdisco.

In April 1997, we issued warrants to purchase an aggregate of 75,000 shares
of common stock at an exercise price of $7.50 per share, of which warrants to
purchase 73,657 shares were issued to Global Retail Partners, L.P. and its
affiliates as consideration for financial advisory services. Mr. Sisteron, one
of our directors, is a principal of Global Retail Partners, L.P.

In connection with two rounds of private equity financing, in November 1997
and March 1998, we issued warrants to purchase an aggregate of 110,294 and
39,864 shares of common stock, respectively, at an exercise price of $9.775 per
share to stockholders of the corporate parent of, and officers of, Invemed
Associates LLC, including warrants to purchase 103,129 shares of common stock to
Mr. Langone, in consideration for assistance provided by Invemed Associates LLC
in connection with the financings.

In connection with a loan and security agreement effective as of May 1998,
we issued a warrant to purchase up to 103,532 shares of common stock at an
exercise price of $9.775 per share to Comdisco as described below under
"-- Agreements with Comdisco and UGO Networks."

LOANS

In May 1996, we made loans, representing advances against salaries and
wages, to Messrs. Donahue, Robinson and Zangrillo in the principal amounts of
$72,118.66, $22,296.23 and $98,169.64, respectively, bearing interest at a rate
of 6% per annum. The principal and interest on the loans to Messrs. Donahue and
Robinson will be forgiven in equal annual installments starting in 1999, except
that if either of them voluntarily terminates his employment or service as a
director prior to May 2001, his loan, including interest, will become due and
payable in May 2001. In May 1998, Mr. Zangrillo repaid $23,169.64 of the
43

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principal amount of his loan, reducing the principal amount thereof to $75,000.
The balance of Mr. Zangrillo's loan was forgiven and expensed in June 1998.

AGREEMENTS WITH COMDISCO AND UGO NETWORKS

During 1997, we completed a sale-leaseback transaction with Comdisco,
selling computer equipment, office equipment and furniture and fixtures having a
fair market value of approximately $878,000, net of accumulated depreciation,
for approximately $819,000, realizing a loss of approximately $59,000. The lease
has been accounted for as a capital lease. During 1997, we acquired computer
equipment, office equipment and furniture and fixtures pursuant to capital lease
agreements with Comdisco. The leases had an aggregate initial principal amount
of approximately $3,181,000. In connection with the leases, in March 1996 and
February 1997, we issued warrants to purchase 37,500 and 39,200 shares of common
stock at exercise prices of $2.00 and $6.25 per share, respectively, to
Comdisco.

During 1997, we recognized product license and service revenues from
Comdisco of approximately $12,000.

Effective as of May 1998, we entered into a secured loan agreement with
Comdisco under which we were able to borrow up to $11.0 million. The loan
accrued interest, which was payable monthly, at a rate of 10% per annum and was
secured by our accounts receivable. We were able to borrow amounts under the
line for a period of twelve months subsequent to our initial borrowing under the
loan agreement (which occurred in October 1998) or until completion of our
initial public offering. Accordingly, no further amounts may be borrowed under
this loan agreement. The maximum borrowing under this facility was $6.0 million.
Subsequent to our initial public offering all outstanding borrowings were
repaid. In connection with the loan agreement, Comdisco was issued a warrant to
purchase up to 103,532 shares of common stock at an exercise price of $9.775 per
share.

On July 1, 1999, UGO Networks entered into a sublease agreement with us
which expires on December 15, 2015. Joseph C. Robinson, one of our directors,
serves as Chairman of UGO Networks. Under our lease we are not required to pay
rent to our landlord until April 2000. We have passed this benefit on to UGO
Networks. Under the sublease UGO Networks will pay us annual rent for the first
year of the sublease of approximately $1.2 million. The annual rental payment
under the sublease increases to $1.9 million over the next 14 years and
decreases to approximately $1.0 million in the final portion of the last year of
the sublease.

SALES OF SECURITIES BY PRINCIPAL STOCKHOLDERS

In January 1998, Mr. Zangrillo sold an aggregate of 1,000,000 shares of
common stock to 13 of our then existing stockholders for an aggregate purchase
price of $6,000,000, or $6.00 per share, including an aggregate of 921,168
shares sold to George Soros, for himself and for trusts for the benefit of his
children.

In February 1998, Mr. Donahue sold 33,000 shares of common stock to Mr.
Andreini for an aggregate purchase price of $198,000, or $6.00 per share.

In March 1998, Mr. Donahue and Mr. Robinson sold an aggregate of 214,285
shares and 214,286 shares, respectively, of common stock to eight of our then
existing stockholders for an aggregate purchase price to each of them of
$1,500,000, or approximately $7.00 per share, including 78,644 shares to Mr.
Langone, 284,500 shares to Invemed Fund, L.P. and an aggregate of 28,571 shares
to an officer and an employee of Invemed Associates LLC.

In March 1998, Mr. Zangrillo sold 37,500 shares of common stock, Mr.
Donahue sold 175,571 shares of common stock and Mr. Robinson sold 71,429 shares
of common stock for an aggregate purchase price of $1,991,500, or $7.00 per
share, to one of our then existing stockholders.

In March 1998, Mr. Donahue and Mr. Zangrillo each sold 37,294 shares of
common stock for an aggregate purchase price of $633,998, or $8.50 per share, to
one of our then existing stockholders.

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In November 1998, Mr. Donahue sold 56,250 shares of common stock for an
aggregate purchase price of $450,000, or $8.00 per share, to one of our then
existing stockholders.

In November 1998, Mr. Andreini purchased 10,000 shares of common stock for
an aggregate purchase price of $80,000, or $8.00 per share, from one of our
stockholders.

In January 1999, Mr. Zangrillo sold 612,706 shares of common stock for an
aggregate purchase price of $9.2 million, or $15 per share, subject to
adjustment based on the initial public offering price of the common stock, to
one of our then existing stockholders.

In February 1999, Mr. Donahue and Mr. Robinson sold 333,333 shares of
common stock each for an aggregate purchase price of $10.0 million, or $15 per
share, to a total of four of our then existing stockholders.

Each of the persons who purchased shares from our principal stockholders in
the transactions described above was an accredited investor as defined in the
rules and regulations of the Securities and Exchange Commission.

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of our common stock as of December 31, 1999 and as adjusted to reflect
the sale by us and the selling stockholders of shares in this offering with
respect to:

- each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;

- each of the Named Executive Officers;

- each of our directors;

- all executive officers and directors as a group; and

- each selling stockholder.

The ownership percentages set forth in the table are based on 27,234,238
shares of common stock outstanding as of December 31, 1999 and 28,606,425 shares
outstanding upon the consummation of this offering, together with applicable
options and/or warrants for each stockholder. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities where
applicable. Shares of common stock subject to options that are presently
exercisable or exercisable within 60 days of January 1, 2000 are deemed to be
beneficially owned by the person holding these options for the purpose of
computing the percentage of ownership of the person but are not treated as
outstanding for the purpose of computing the percentage of any other person.

Except as otherwise noted, the persons or entities named in the table have
sole voting and investment power with respect to all the shares of common stock
beneficially owned by them, subject to community property laws where applicable.
Except as otherwise indicated, the address of each beneficial owner of more than
5% of our common stock is c/o InterWorld Corporation, 395 Hudson Street, 6th
Floor, New York, New York 10014.

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[Enlarge/Download Table]

BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE THE OFFERING AFTER THE OFFERING
-------------------------- -----------------------
NUMBER OF SHARES BEING NUMBER OF
SHARES PERCENTAGE SOLD IN THE OFFERING SHARES PERCENTAGE
--------- ------------- -------------------- --------- ----------

Michael J. Donahue(1)...... 4,812,767 17.7%
Alan J. Andreini(2)........ 1,009,182 3.6
Jeremy Davis............... -0- * * *
Peter Schwartz(3).......... 127,000 * * *
Daniel Turano(4)........... 164,500 * * *
Stephen Law(5)............. 95,500 * * *
Amy Aguilar-Brown(6)....... 23,667 *
Kevin Kohn................. -0- *
Leon DeMaille.............. -0- *
Mark Berlingeri(7)......... 23,667 *
Robert L. Zangrillo(8)
P.O. Box CC
Aspen, CO 81612.......... 4,270,000 15.7
Kenneth G. Langone(9)...... 771,155 2.8
Joseph C. Robinson(10)..... 1,402,952 5.2
Yves Sisteron(11).......... 539,860 2.0
Jack Slevin(12)............ 55,333 * * *
Russell West(13)........... 30,000 * * *
George Soros(14)
888 Seventh Avenue
Suite 3300
New York, NY 10106....... 2,690,595 9.9
Laurence S. Zimmerman...... 1,198,206 4.4
All executive officers and
directors as a group (15
persons)(15)............. 9,056,416 32.0%

---------------
* Less than one percent.

(1) 20,000 shares owned by Ginny Bond, Mr. Donahue's spouse.

(2) Includes 642,849 shares of common stock issuable upon the exercise of stock
options.

(3) Includes 125,000 shares of common stock issuable upon the exercise of stock
options.

(4) Includes 22,500 shares of common stock issuable upon the exercise of stock
options.

(5) Includes 6,000 shares of common stock issuable upon the exercise of stock
options.

(6) Includes 24,500 shares of common stock issuable upon the exercise of stock
options.

(7) Includes 23,667 shares of common stock issuable upon the exercise of stock
options.

(8) Includes 4,000,000 shares of common stock owned by Strategic Global
Partners; 10,000 shares of common stock owned by Paige Zangrillo; 10,000
shares of common stock held in trust for his child; and 250,000 shares of
common stock owned by Wight Investment Partners.

(9) Includes 285,500 shares of common stock owned by Invemed Fund, L.P.; 26,000
shares of common stock issuable upon the exercise of stock options; and
103,129 shares of common stock issuable upon the exercise of warrants.

(10) Includes 3,000 shares of common stock held in trust for children of William
Robinson and 30,000 shares of common stock held in trust for child.

(11) Includes 502,360 shares of common stock owned by Global Retail Partners and
its affiliates and 30,000 shares of common stock issuable upon the exercise
of stock options.

(12) Includes 22,000 shares of common stock issuable upon the exercise of stock
options.

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(13) Includes 30,000 shares of common stock issuable upon the exercise of stock
options.

(14) Includes 352,330 shares of common stock held in trust for members of
family.

(15) Includes 952,516 shares of common stock issuable upon the exercise of stock
options and 103,129 shares of common stock issuable upon the exercise of
warrants.

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 115,000,000 shares, consisting of
100,000,000 shares of common stock, par value $0.01 per share, and 15,000,000
shares of preferred stock, par value $0.01 per share. As of December 31, 1999,
we had issued and outstanding:

- 27,234,238 shares of common stock,

- options to purchase 5,846,120 shares of common stock at a weighted
average exercise price of $19.34 per share, and

- warrants to purchase 459,070 shares of common stock at a weighted average
exercise price of $6.89 per share.

COMMON STOCK

The holders of common stock are entitled to one vote per share on all
matters to be voted on by stockholders. The holders of common stock are not
entitled to cumulative voting rights. Subject to the rights of any preferred
stock, the holders of the common stock are entitled to receive dividends that
may be declared by the board of directors out of funds legally available for the
payment of dividends. In the event of a voluntary or involuntary liquidation,
dissolution or winding up, the holders of shares of common stock would be
entitled to share ratably in all assets remaining after payment of liabilities,
subject to prior distribution rights and payment of any distributions owing to
holders of shares of preferred stock then outstanding, if any. Holders of the
shares of common stock have no preemptive rights. There are no redemption or
sinking fund provisions applicable to the shares of common stock. The
outstanding shares of common stock are, and the shares of common stock offered
by us in this offering will be, duly authorized, validly issued, fully paid and
nonassessable.

PREFERRED STOCK

Our certificate of incorporation authorizes the issuance of preferred stock
with designations, rights and preferences as may be determined from time to time
by the board of directors. Accordingly, our board of directors is empowered,
without stockholder approval, to issue preferred stock with dividends,
liquidation, voting or other rights that could adversely affect the voting power
or other rights of the holders of common stock. In the event of issuance, the
preferred stock could be used as a method of preventing a change in control.
Following this offering, no shares of preferred stock will be issued or
outstanding and we have no present plans to issue any shares of preferred stock.

REGISTRATION RIGHTS

The holders of shares of common stock outstanding immediately
after this offering are entitled to have their shares registered under the
Securities Act. Under the terms of the agreement between us and the holders of
these shares, if we propose to register any of our securities under the
Securities Act after this offering, either for our own account or for the
account of other security holders exercising registration rights, these holders
are entitled to notice of the registration and are entitled to include shares in
the registration. The stockholders benefiting from these rights may also require
us to file a registration statement under the Securities Act at our expense with
respect to their shares of common stock on up to four occasions after February
6, 2000, and we are required to use our best efforts to effect such
registrations. All of these rights are subject to various conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares included in any registration.

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WARRANTS

We have outstanding warrants to purchase 459,070 shares of common stock at
a weighted average exercise price of $6.89 per share, which are presently
exercisable. See "Certain Transactions." All warrants will expire after a period
of ten years from issuance or five years from the effective date of this
offering, whichever is later.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

Section 203 of the Delaware General Corporation Law prohibits, with several
exceptions, a Delaware corporation from engaging in any of a broad range of
business combinations, such as mergers, consolidations and sales of assets, with
an "interested stockholder" for a period of three years from the date that such
person became an interested stockholder. This makes a takeover of a company more
difficult and may have the effect of diminishing the possibility of certain
types of "front-end loaded" acquisitions of a company or other unsolicited
attempts to acquire a company. This may further have the effect of preventing
changes in the board of directors of a company, and it is possible that these
provisions of Delaware law could make it more difficult to accomplish
transactions which stockholders may otherwise deem to be in their best
interests.

LISTING

The common stock is quoted on the Nasdaq Stock Market's National Market
under the trading symbol "INTW."

TRANSFER AGENT

The transfer agent for our common stock is Chase Mellon Shareholder
Services.

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we and the selling stockholders have agreed to
sell to the underwriters named below, for whom Credit Suisse First Boston
Corporation, Invemed Associates LLC, Banc of America Securities LLC and Bear,
Stearns & Co. Inc. are acting as representatives, the following respective
numbers of shares of common stock:

[Download Table]

Number
Underwriter of Shares
----------- ---------

Credit Suisse First Boston Corporation......................
Invemed Associates LLC......................................
Banc of America Securities LLC..............................
Bear, Stearns & Co. Inc.....................................

---------
Total.................................................. 3,750,000
=========

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitment of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 562,500 additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other brokers/dealers. After the public offering, the price and
concession and discount to broker/dealers may be changed by the representatives.

The following table summarizes the compensation and estimated expenses we
will pay:

[Enlarge/Download Table]

Per Share Total
-------------------------------- --------------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------

Underwriting Discounts and
Commissions paid by us........... $ $ $ $
Expenses payable by us........... $ $ $ $
Underwriting Discounts and
Commissions paid by the selling
stockholders..................... $ $ $ $

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
(the "Securities Act") relating to, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares of our common
stock, or publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of

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Credit Suisse First Boston Corporation for a period of 180 days after the date
of this prospectus except issuances pursuant to the exercise of employee stock
options or other rights outstanding on the date hereof.

Our officers and directors and selling stockholders have agreed that they
will not offer, sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, enter into a
transaction which would have the same effect, or enter into any swap, hedge or
other arrangement that transfers, in whole or in part, any of the economic
consequences of ownership of our common stock, whether any such aforementioned
transaction is to be settled by delivery of our common stock or such other
securities, in cash or otherwise, or publicly disclose the intention to make any
such offer, sale, pledge or disposition, without the prior written consent of
Credit Suisse First Boston Corporation for a period of 180 days after the date
of this prospectus; provided, however, that 50% of the shares subject to the
limitations set forth above held by each such stockholder will be released from
the foregoing restriction following the 90th day after the date of this
prospectus and an additional 25% of such shares will be released following the
135th day after the date of this prospectus.

We and the selling stockholders have agreed to indemnify the underwriters
against liabilities under the Securities Act, or contribute to payments which
the underwriters may be required to make in that respect.

The shares of common stock are listed on The Nasdaq Stock Market's National
Market under the symbol "INTW".

From time to time Credit Suisse First Boston Corporation and Invemed
Associates LLC have provided assistance to us in connection with some of our
private and public equity financings, for which Credit Suisse First Boston
Corporation and Invemed Associates LLC, officers of Invemed Associates LLC and
stockholders of its parent received compensation. In addition, as of January 1,
2000, an officer and a managing director of Credit Suisse First Boston
Corporation owned an aggregate of 41,385 shares of common stock, officers and
employees of Invemed Associates LLC and stockholders of its parent beneficially
owned an aggregate of 453,258 shares of common stock and warrants to purchase an
aggregate of 150,158 shares of common stock and an investment fund related to
Credit Suisse First Boston Corporation and Invemed Associates LLC owned 285,500
shares of common stock. Kenneth G. Langone, a director and stockholder of
InterWorld, is Chairman of the Board, Chief Executive Officer and President of
Invemed Associates LLC and is the principal stockholder of Invemed Associates
LLC's parent. See "Certain Transactions" and "Principal Stockholders."

The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and passive market making in
accordance with Regulation M under the Securities Exchange Act of 1934.

- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.

- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.

- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

- In passive market making, market makers in the common stock who are
underwriters or prospective underwriters may, subject to limitations,
make bids for or purchases of the common stock until the time, if any, at
which a stabilizing bid is made.

These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions. These

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transactions may be effected on The Nasdaq Stock Market's National Market or
otherwise and, if commenced, may be discontinued at any time.

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for us by Covington & Burling, New York, New York. Morgan Lewis & Bockius
LLP, Philadelphia, Pennsylvania, has acted as counsel to the underwriters in
connection with this offering.

EXPERTS

The consolidated financial statements of InterWorld Corporation as of
December 31, 1997 and 1998 and for each of the three years in the period ended
December 31, 1998 included in this prospectus have been so included in reliance
on the report, which contains an explanatory paragraph relating to the ability
of InterWorld Corporation to continue as a going concern as described in Note 2
to the Consolidated Financial Statements, of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

CHANGE IN INDEPENDENT ACCOUNTANTS

In November 1996, we retained KPMG LLP as our independent accountants. In
July 1997, KPMG LLP resigned as our independent accountants because we entered
into a strategic partnership agreement with KPMG LLP. No audits were conducted
by KPMG LLP on our financial statements, and no reports were issued. There were
no disagreements between us and KPMG LLP on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure
during the period from their retention in November 1996 through their
resignation in July 1997.

ADDITIONAL INFORMATION

We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission. This prospectus, which forms a part of the Registration
Statement, does not contain all of the information included in the Registration
Statement. Some information is omitted from this prospectus in accordance with
the rules of the Securities and Exchange Commission and you should refer to the
Registration Statement and its exhibits. We also file annual and quarterly
reports, proxy statements and other information with the Commission. You may
review a copy of the Registration Statement and any other documents filed with
the Securities and Exchange Commission at the Securities and Exchange
Commission's public reference room at 450 Fifth Street, Washington, D.C. 20549,
and at the Securities and Exchange Commission's regional offices in Chicago,
Illinois and New York, New York. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. Our Securities and Exchange Commission filings and the
Registration Statement can also be reviewed by accessing the Securities and
Commission's Internet site at http://www.sec.gov.

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INTERWORLD CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

[Download Table]

PAGE
----

Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1997, 1998
and September 30, 1999 (unaudited)........................ F-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998 and for the nine months
ended September 30, 1998 (unaudited) and 1999
(unaudited)............................................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1997 and 1998 and for the
nine months ended September 30, 1999 (unaudited).......... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998 and for the nine months
ended September 30, 1998 (unaudited) and 1999
(unaudited)............................................... F-6
Notes to Consolidated Financial Statements.................. F-7

F-1

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of InterWorld Corporation

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
InterWorld Corporation and its subsidiaries at December 31, 1997 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1998 in conformity with accounting principles
generally accepted in the United States. 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 of these statements in accordance with auditing standards generally
accepted in the United States, which 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 the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, the Company has incurred substantial
operating losses, expects to incur substantial additional losses and expects
that its cash and working capital requirements will continue to increase as the
Company's operations continue to expand. These and other factors, as discussed
in Note 2, raise substantial doubt about its ability to continue as a going
concern. Management's plans in regards to these matters are also described in
Note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

PricewaterhouseCoopers LLP

New York, New York
March 3, 1999

F-2

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INTERWORLD CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

[Enlarge/Download Table]

DECEMBER 31,
-------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 6,081 $ 858 $ 43,461
Accounts receivable -- net (Note 3)....................... 4,162 6,153 5,384
Prepayments and other current assets...................... 78 497 786
-------- -------- --------
TOTAL CURRENT ASSETS................................... 10,321 7,508 49,631
-------- -------- --------
Property and equipment, net (Note 4)........................ 6,648 6,070 7,450
Other assets (Note 8)....................................... 462 541 489
-------- -------- --------
TOTAL ASSETS........................................... $ 17,431 $ 14,119 $ 57,570
======== ======== ========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses (Note 5)............ $ 3,447 $ 5,791 $ 9,017
Capital lease obligations to related party -- current
(Note 14).............................................. 1,258 1,328 942
Deferred revenue and customer deposits.................... 490 1,024 3,334
Deposits on preferred stock subscriptions................. 225 -- --
Net liabilities of discontinued operations................ 1,099 -- --
-------- -------- --------
TOTAL CURRENT LIABILITIES.............................. 6,519 8,143 13,293
-------- -------- --------
Notes payable to related party (Note 10).................... -- 3,229 --
Capital lease obligations to related party -- long term
(Note 14)................................................. 1,861 599 --
Deferred rent............................................... 527 1,030 1,218
-------- -------- --------
TOTAL LIABILITIES...................................... 8,907 13,001 14,511
-------- -------- --------
COMMITMENTS (NOTE 14)
MANDATORILY REDEEMABLE SERIES A CONVERTIBLE PREFERRED STOCK
($0.01 par value; 8,200,000 shares authorized, 6,351,767
and 7,539,999 issued and outstanding at December 31, 1997
and 1998, respectively, and -0- authorized, issued and
outstanding at September 30, 1999) (Liquidating preference
of $37,997, $48,097 and -0- at December 31, 1997 and 1998
and September 30, 1999) (Note 7).......................... 37,319 47,334 --
STOCKHOLDERS' EQUITY (DEFICIT) (NOTE 9):
COMMON STOCK
($0.01 par value, 100,000,000 shares authorized,
13,505,650, 13,869,786 and 27,045,001 shares issued and
outstanding at December 31, 1997 and 1998 and September
30, 1999, respectively)................................... 135 139 270
ADDITIONAL PAID-IN CAPITAL.................................. 2,203 6,840 121,208
EQUITY ADJUSTMENT........................................... -- -- (24)
ACCUMULATED DEFICIT......................................... (31,133) (53,195) (78,395)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)................... (28,795) (46,216) 43,059
-------- -------- --------
TOTAL LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT).... $ 17,431 $ 14,119 $ 57,570
======== ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.
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INTERWORLD CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

[Enlarge/Download Table]

NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
------- -------- -------- -------- --------
(UNAUDITED)

REVENUES, NET:
Product licenses (Note 8).......... $ 779 $ 4,883 $ 9,754 $ 5,392 $ 15,691
Services (Note 8).................. 1,241 3,073 4,834 3,177 10,135
Other.............................. 408 100 2 1 --
------- -------- -------- -------- --------
TOTAL REVENUES, NET (NOTE 11)... 2,428 8,056 14,590 8,570 25,826
------- -------- -------- -------- --------
COST OF REVENUES:
Product licenses................... 82 278 671 311 1,088
Services........................... 1,735 6,744 6,052 3,980 12,931
Other.............................. 322 107 -- -- --
------- -------- -------- -------- --------
TOTAL COST OF REVENUES.......... 2,139 7,129 6,723 4,291 14,019
------- -------- -------- -------- --------
GROSS PROFIT.................... 289 927 7,867 4,279 11,807
OPERATING EXPENSES:
Research and development........... 2,362 6,863 9,558 6,626 12,304
Sales and marketing................ 2,435 8,487 11,969 7,845 16,265
General and administrative......... 2,730 6,405 6,356 5,102 4,953
Noncash employee compensation...... 71 752 1,615 1,240 2,986
------- -------- -------- -------- --------
TOTAL OPERATING EXPENSES........ 7,598 22,507 29,498 20,813 36,508
------- -------- -------- -------- --------
LOSS FROM OPERATIONS............ (7,309) (21,580) (21,631) (16,534) (24,701)
OTHER INCOME (EXPENSE):
Interest income.................... 112 218 265 250 445
Interest expense................... -- (313) (696) (313) (899)
------- -------- -------- -------- --------
TOTAL OTHER INCOME (EXPENSE).... 112 (95) (431) (63) (454)
------- -------- -------- -------- --------
LOSS BEFORE INCOME TAXES............. (7,197) (21,675) (22,062) (16,597) (25,155)
Income taxes......................... -- -- -- -- (45)
------- -------- -------- -------- --------
LOSS FROM CONTINUING OPERATIONS...... (7,197) (21,675) (22,062) (16,597) (25,200)
------- -------- -------- -------- --------
Discontinued operations (Notes 8 and
13):
Expenses from discontinued
operations of UGO Networks,
Inc............................. -- (1,310) -- -- --
Provision for operating losses to
date of disposition............. -- (627) -- -- --
------- -------- -------- -------- --------
NET LOSS........................ $(7,197) $(23,612) $(22,062) $(16,597) $(25,200)
======= ======== ======== ======== ========
Basic loss per share and diluted loss
per share (Notes 6 and 7).......... $ (0.53) $ (1.75) $ (1.60) $ (1.21) $ (1.54)
======= ======== ======== ======== ========
Basic loss per share and diluted loss
per share from continuing
operations (Notes 6 and 7)......... $ (0.53) $ (1.61) $ (1.60) $ (1.21) $ (1.54)
======= ======== ======== ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.
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INTERWORLD CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

[Enlarge/Download Table]

TOTAL
COMMON STOCK ADDITIONAL EXCHANGE STOCKHOLDERS'
------------------- PAID-IN GAIN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL (LOSS) DEFICIT (DEFICIT)
---------- ------ ---------- -------- ----------- -------------

BALANCE AT DECEMBER 31, 1995.......................... 13,500,000 $135 $ -- $ -- $ (324) $ (189)
Issuance of Series A preferred stock warrants in
connection with sale of Series A convertible
preferred stock..................................... -- -- 135 -- -- 135
Issuance of Series A preferred stock warrants in
connection with equipment leases.................... -- -- 49 -- -- 49
Accretion of mandatorily redeemable convertible
preferred stock to redemption value................. -- -- (16) -- -- (16)
Compensatory stock options issued to employees and
consultants......................................... -- -- 99 -- -- 99
Net loss.............................................. -- -- -- -- (7,197) (7,197)
---------- ---- -------- ---- -------- --------
BALANCE AT DECEMBER 31, 1996.......................... 13,500,000 $135 $ 267 $ -- $ (7,521) $ (7,119)
Issuance of Series A preferred stock warrants in
connection with equipment lease..................... -- -- 161 -- -- 161
Issuance of Series A preferred stock warrants in
connection with security agreement.................. -- -- 104 -- -- 104
Issuance of Series A preferred stock warrants for
consulting services................................. -- -- 371 -- -- 371
Issuance of Series A preferred stock warrants in
connection with sale of Series A preferred stock.... -- -- 587 -- -- 587
Issuance of common stock upon exercise of stock
options............................................. 5,650 -- 7 -- -- 7
Compensatory stock options issued to employees and
consultants......................................... -- -- 788 -- -- 788
Expenses related to issuance of Series A preferred
stock............................................... -- -- (54) -- -- (54)
Accretion of mandatorily redeemable convertible
preferred stock to redemption value................. -- -- (28) -- -- (28)
Net loss.............................................. -- -- -- -- (23,612) (23,612)
---------- ---- -------- ---- -------- --------
BALANCE AT DECEMBER 31, 1997.......................... 13,505,650 $135 $ 2,203 $ -- $(31,133) $(28,795)
Issuance of common stock upon exercise of stock
options............................................. 364,136 4 684 -- -- 688
Compensatory stock options issued to employees and
consultants......................................... -- -- 1,662 -- -- 1,662
Issuance of Series A preferred stock warrants in
connection with sale of Series A preferred stock.... -- -- 252 -- -- 252
Issuance of Series A preferred stock warrants in
connection with loan agreement...................... -- -- 1,023 -- -- 1,023
Expenses related to issuance of Series A preferred
stock............................................... -- -- (20) -- -- (20)
Accretion of mandatorily redeemable convertible
preferred stock to redemption value................. -- -- (167) -- -- (167)
Distribution of net liabilities of UGO
Networks, Inc. ..................................... -- -- 1,203 -- -- 1,203
Net loss.............................................. -- -- -- -- (22,062) (22,062)
---------- ---- -------- ---- -------- --------
BALANCE AT DECEMBER 31, 1998.......................... 13,869,786 $139 $ 6,840 $ -- $(53,195) $(46,216)
Issuance of common stock upon exercise of stock
options............................................. 535,216 5 1,386 -- -- 1,391
Issuance of common stock upon initial public
offering............................................ 3,450,000 34 48,094 -- -- 48,128
Issuance of common stock upon conversion of Series A
and B preferred stock with initial public
offering............................................ 9,189,999 92 64,505 -- -- 64,597
Compensatory stock options issued to employees and
consultants......................................... -- -- 3,516 -- -- 3,516
Accretion of mandatorily redeemable convertible
preferred stock to redemption value................. -- -- (2,121) -- -- (2,121)
Expenses associated with initial public offering...... -- -- (1,012) -- -- (1,012)
Foreign exchange gain/(loss).......................... -- -- -- (24) (24)
Net loss.............................................. -- -- -- -- (25,200) (25,200)
---------- ---- -------- ---- -------- --------
BALANCE AT SEPTEMBER 30, 1999 (UNAUDITED)............. 27,045,001 $270 $121,208 $(24) $(78,395) $ 43,059
========== ==== ======== ==== ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.
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INTERWORLD CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

[Enlarge/Download Table]

NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------- -------------------
1996 1997 1998 1998 1999
------- -------- -------- -------- --------
(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................... $(7,197) $(23,612) $(22,062) $(16,597) $(25,200)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED IN OPERATING ACTIVITIES:
Provision for operating
losses-discontinued operations........ -- 627 -- -- --
Depreciation and amortization........... 282 1,393 2,505 1,760 2,359
Loss on disposal of property and
equipment............................. -- -- -- -- 3
Noncash consulting expense.............. 28 407 47 47 530
Noncash employee compensation........... 71 752 1,615 1,193 2,986
Noncash interest expense................ -- 157 338 92 787
Changes in discontinued operations...... -- (561) (175) (50) --
Changes in assets and liabilities:
Accounts receivable................... (768) (3,394) (1,866) 2 769
Prepaid expenses and other current
assets............................. (298) 249 (419) (483) (260)
Accounts payable and accrued
expenses........................... 1,657 1,790 2,300 1,170 3,262
Deferred revenue and customer
deposits........................... 581 (406) 534 136 2,310
Other assets and liabilities.......... (280) (182) 70 53 52
Deferred rent......................... -- 527 558 431 188
------- -------- -------- -------- --------
NET CASH USED IN OPERATING
ACTIVITIES......................... (5,924) (22,253) (16,555) (12,246) (12,214)
------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures....................... (1,516) (3,530) (1,927) (1,038) (3,771)
Capital expenditures of UGO Networks,
Inc..................................... -- (117) -- (411) --
------- -------- -------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES... (1,516) (3,647) (1,927) (1,449) (3,771)
------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes by UGO
Networks, Inc........................... -- 1,150 -- -- --
Principal payments on capital lease
obligations............................. -- (724) (1,284) (953) (1,037)
Proceeds from sale and leaseback of
equipment to related party.............. -- 819 -- -- --
Net proceeds from issuance of Series A
preferred stock......................... 13,550 24,393 10,080 10,080 --
Proceeds from issuance of Series B
preferred stock......................... -- -- -- -- 15,142
Net proceeds from initial public
offering................................ -- -- -- -- 47,116
Deposits on preferred stock
subscriptions........................... -- 225 (225) (225) --
Proceeds from exercise of common stock
options................................. -- 7 688 635 1,391
Proceeds from notes payable to related
party................................... -- -- 4,000 -- 1,000
Payments of notes payable to related
party................................... -- -- -- -- (5,000)
Notes payable to stockholders.............. (49) -- -- -- --
------- -------- -------- -------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES............................ 13,501 25,870 13,259 9,537 58,612
------- -------- -------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS........................... -- -- -- -- (24)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................ 6,061 (30) (5,223) (4,158) 42,603
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD..................................... 50 6,111 6,081 6,081 858
------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD..... $ 6,111 $ 6,081 $ 858 $ 1,923 $ 43,461
======= ======== ======== ======== ========
CASH PAID FOR:
Interest................................... $ -- $ 154 $ 357 $ 210 $ 111
======= ======== ======== ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.
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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED WITH RESPECT TO SEPTEMBER 30, 1999 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1. ORGANIZATION AND BUSINESS

Organization

InterWorld Corporation ("InterWorld") was incorporated in March 1995 under
the laws of the State of Delaware. The consolidated financial statements of
InterWorld include the accounts of InterWorld and its wholly owned subsidiaries,
InterWorld Technology Ventures Pty, Ltd., an Australian corporation incorporated
in November 1996, InterWorld U.K. Ltd., a United Kingdom corporation
incorporated in May 1998, and InterWorld Corporation Japan K.K., a Japanese
corporation, in July 1998. In April 1997, InterWorld formed UGO Networks, Inc.,
("UGO", formerly ActionWorld, Inc.) under the laws of the State of Delaware.
Until March 30, 1998 InterWorld was the majority owner of UGO and UGO is
included in the consolidated financial statements of InterWorld at December 31,
1997. On March 30, 1998, InterWorld completed a spin-off distribution of UGO
(Note 13).

Business

InterWorld is a provider of Internet commerce software solutions that
enable manufacturers, distributors and retailers to conduct business over the
Internet. InterWorld's products, called "Enterprise Commerce" software, enable
companies to build their online businesses and integrate them with their
existing business practices and enterprise systems. InterWorld derives its
revenues from its family of enterprise commerce software consisting of its
Commerce Exchange platform, applications, tools and business adapters.

2. LIQUIDITY

InterWorld has incurred significant operating losses since inception. At
December 31, 1998 and September 30, 1999, InterWorld had an accumulated deficit
of $53,195 and $78,395, respectively, and working capital (deficit) of ($635)
and $36,338, respectively. Such losses have resulted principally from product
development costs, sales and marketing costs and general and administrative
costs associated with InterWorld developing its products and expanding its level
of operations. In order to fund these efforts, InterWorld completed private
placements of its mandatorily redeemable Series A Convertible Preferred Stock
("Series A Preferred") during 1996, 1997 and 1998 (Note 7). InterWorld utilized
the net proceeds from these issuances to fund operations and for working capital
requirements. The Company also completed a private placement of its mandatorily
redeemable Series B Convertible Preferred Stock ("Series B Preferred") in
January 1999 providing gross proceeds of approximately $16,500 (Note 15).
Effective as of May 1998, InterWorld's secured loan agreement with a holder of
Series A Preferred was amended to increase to $11,000 the maximum borrowings
that could be made by InterWorld to fund its future cash requirements (Note 10).

The accompanying consolidated financial statements have been prepared
assuming InterWorld will continue as a going concern. InterWorld's net losses
and negative cash flows from operations and expected additional losses raise
substantial doubt about its present ability to continue as a going concern.
InterWorld's ability to continue as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations as they come
due.

Management is also actively pursuing other financing options which include
securing additional equity financing through an initial public offering. If for
any reason the initial public offering is delayed or postponed, InterWorld
intends to seek additional private equity financing. Management believes that
sufficient funding will be available to meet its planned business objectives for
a reasonable period of time;

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

however, there can be no assurance that InterWorld will be successful in its
efforts to raise additional capital. The consolidated financial statements do
not include any adjustments relating to the recoverability of the carrying
amount of the recorded assets or the amount of liabilities that might result
from the outcome of these uncertainties.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

The accompanying consolidated financial statements include the accounts of
InterWorld and its wholly owned and majority-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in consolidation.

Assets and liabilities of InterWorld's foreign subsidiaries are translated
to U.S. dollars based on exchange rates at the end of the respective reporting
period. Income and expense items are translated at average exchange rates during
the period. Transaction gains and losses are included in the determination of
operating expenses.

Accounting 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.

Cash equivalents

Cash equivalents, which are stated at cost, consist of short-term, highly
liquid investments, with original maturities of less than three months when
purchased. Interest is accrued as earned.

Accounts receivable -- net

Accounts receivable are stated net of allowance for doubtful accounts of
$622, $1,217 and $1,508 at December 31, 1997, 1998 and September 30, 1999,
respectively.

Equipment

Equipment is stated at cost. Depreciation is provided on a straight-line
basis over the estimated useful lives of the respective assets as follows:

[Download Table]

Computer equipment and software 3 years
Leasehold improvements Shorter of lease term or estimated useful life
Furniture and fixtures 5 years
Office equipment 3 years

Equity adjustment

Equity adjustment includes foreign currency translation adjustments, a
component of comprehensive income amounting to $(24) for the nine months ended
September 30, 1999.

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Revenue recognition

Effective January 1, 1997 InterWorld adopted AICPA Statement of Position
97-2, "Software Revenue Recognition" ("SOP 97-2"). SOP 97-2 provides guidance on
when and in what amounts revenue should be recognized for licensing, selling,
leasing, or otherwise marketing computer software. The adoption of SOP 97-2 did
not have a material impact on InterWorld's results of operations for the year
ended December 31, 1997.

During 1998, InterWorld also adopted SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions" ("SOP
98-9"). SOP 98-9 generally requires revenue earned on software arrangements
involving multiple elements to be allocated to each element based on the
relative vendor specific objective evidence of the elements. The adoption of SOP
98-9 did not have a material impact on InterWorld's results of operations for
the year ended December 31, 1998.

Product licenses

Revenue from the licensing of InterWorld's software products is recognized
upon delivery to the customer, pursuant to an executed software licensing
agreement when no significant vendor obligations exist, the fee is fixed or
determinable and collection is probable. If acceptance by the customer is
required, revenue is recognized upon customer acceptance. Amounts received from
customers in advance of product shipment are classified as deposits from
customers. InterWorld enters into reseller arrangements for its products that
typically provide for license fees payable to InterWorld based on a percentage
of InterWorld's list price. License revenues from InterWorld's reseller
arrangements are recognized when the fee is fixed or determinable upon delivery
by the reseller when collection is probable.

Services revenue

Revenue from professional services, such as custom development,
installation and integration support, is recognized as the services are
rendered. Contracts for professional services requiring significant production,
modification or customization to InterWorld's software products are recognized
on a percentage of completion basis.

Revenue from maintenance and customer support services, such as telephone
support and product enhancements is recognized ratably over the period of the
agreement under which the services are provided, typically one year.

Deferred revenue consists principally of billings in advance for services
not yet provided.

Advertising costs

Advertising costs included in sales and marketing expenses are expensed as
incurred and approximated $204, $455, $470 and $628 for the years ended December
31, 1996, 1997, 1998, and for the nine months ended September 30, 1999,
respectively.

Research and development

InterWorld charges all costs incurred to establish the technological
feasibility of a product or product enhancement to research and development
expense as incurred.

Fair value of financial instruments

The carrying values of accounts receivable, accounts payable, accrued
expenses and notes payable approximates their fair values due to the relatively
short maturity of these instruments.

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Interim financial data

The unaudited financial data at September 30, 1999 and for the nine months
ended September 30, 1998 and 1999 have been prepared by management and include
all adjustments, consisting of normal recurring adjustments, necessary to
present fairly the results of operations and cash flows. The results of
operations for the nine months ended September 30, 1999 are not necessarily
indicative of the operating results to be expected for the entire year ending
December 31, 1999.

Income taxes

Income taxes are accounted for under the asset and liability method.
Deferred income taxes are recorded for temporary differences between financial
statement carrying amounts and the tax basis of assets and liabilities. Deferred
tax assets and liabilities reflect the tax rates expected to be in effect for
the years in which the differences are expected to reverse. A valuation
allowance is provided if it is more likely than not that some or all of the
deferred tax asset will not be realized.

New accounting pronouncements

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. SFAS 133
requires an entity to recognize all derivatives as either assets or liabilities
in the statement of financial position and measure those instruments at fair
value. SFAS 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. At September 30, 1999 InterWorld did not own any derivative
instruments and had not engaged in any hedging activities during the nine months
ended September 30, 1999. InterWorld does not expect to purchase derivative
instruments or enter into hedging activities in the foreseeable future.

4. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following at December 31, 1997,
1998 and September 30, 1999:

[Enlarge/Download Table]

DECEMBER 31,
---------------- SEPTEMBER 30,
1997 1998 1999
------ ------ -------------

Computer equipment and software...................... $4,196 $5,967 $8,142
Office equipment..................................... 1,330 1,447 1,491
Leasehold improvements............................... 1,967 1,974 3,003
Furniture and fixtures............................... 835 867 1,348
------ ------ ------
8,328 10,255 13,984
Less: Accumulated depreciation and amortization...... (1,680) (4,185) (6,534)
------ ------ ------
Property and equipment, net.......................... $6,648 $6,070 $7,450
====== ====== ======

Computer equipment and software, office equipment, and furniture and
fixtures include approximately $2,024, $1,149 and $827, respectively, of fixed
assets acquired under capital leases at December 31, 1997, 1998 and September
30, 1999. Accumulated depreciation related to these assets approximated $1,536,
$2,108 and $3,082 for the years ended December 31, 1997 and 1998 and for the
nine months ended September 30, 1999, respectively.

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses are comprised of the following at
December 31, 1997, 1998 and September 30, 1999:

[Enlarge/Download Table]

DECEMBER 31,
---------------- SEPTEMBER 30,
1997 1998 1999
------ ------ -------------

Trade accounts payable............................... $ 607 $3,047 $3,816
Accrued commissions.................................. 509 264 771
Accrued incentive compensation....................... 856 615 1,884
Accrued professional fees............................ 160 674 393
Accrued financing fees............................... -- -- 517
Other accrued expenses............................... 1,315 1,191 1,636
------ ------ ------
$3,447 $5,791 $9,017
====== ====== ======

6. LOSS PER COMMON SHARE

Effective December 31, 1997, InterWorld adopted SFAS No. 128, "Earnings per
Share" ("SFAS 128") which requires presentation of basic earnings per share
("Basic EPS") and diluted earnings per share ("Diluted EPS") by all entities
that have publicly traded common stock or potential common stock (options,
warrants, convertible securities or contingent stock arrangements). SFAS 128
also requires presentation of earnings per share by an entity that has made a
filing or is in the process of filing with a regulatory agency in preparation
for the sale of those securities in a public market. Basic EPS is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period. The computation
of Diluted EPS does not assume conversion, exercise or contingent exercise of
securities that would have an antidilutive effect on earnings.

All prior periods presented have been restated for the adoption of SFAS
128.

The computations of basic loss per share and diluted loss per share for the
years ended December 31, 1996, 1997 and 1998 and for the nine months ended
September 30, 1998 and 1999 are as follows:

[Enlarge/Download Table]

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------

Net loss.................... $ (7,197) $ (23,612) $ (22,062) $ (16,597) $ (25,200)
----------- ----------- ----------- ----------- -----------
Loss from continuing
operations................ (7,197) (21,675) (22,062) (16,597) (25,200)
----------- ----------- ----------- ----------- -----------
Weighted average shares
outstanding used for basic
loss and diluted loss per
share..................... 13,500,000 13,500,709 13,771,371 13,740,261 16,319,033
Basic loss and diluted loss
per share................. $ (0.53) $ (1.75) $ (1.60) $ (1.21) $ (1.54)
=========== =========== =========== =========== ===========
Basic loss and diluted loss
per share from continuing
operations................ $ (0.53) $ (1.61) $ (1.60) $ (1.21) $ (1.54)
=========== =========== =========== =========== ===========

At December 31, 1998, outstanding options to purchase 3,428,155 shares of
common stock, with exercise prices ranging from $1.25 to $8.50 per share, and at
September 30, 1999 options to purchase

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4,562,196 shares of common stock, with exercise prices ranging from $1.25 to
$15.00, have been excluded from the computation of diluted loss per share as
they are antidilutive. Outstanding warrants to purchase 534,070 shares of common
stock (Note 7) with exercise prices ranging from $2.00 to $9.775 per share were
also antidilutive and excluded from the computation of diluted loss per share at
both December 31, 1998 and September 30, 1999. Common shares issuable upon
conversion of Series A Preferred and Series B Preferred (Note 7) have also been
excluded from the computation of diluted loss per share at December 31, 1998 as
they are antidilutive.

In January, 1999, InterWorld completed the sale and issuance of 1,650,000
shares of Series B Preferred which are convertible into common stock (Note 15).
InterWorld also granted options to purchase 1,604,567 shares of common stock
(Note 15) in February 1999.

7. COMMON STOCK AND CONVERTIBLE PREFERRED STOCK

Common and preferred stock splits

Effective March 5, 1996, InterWorld implemented a 5,400-for-1 stock split,
effected in the form of a stock dividend, applicable to all issued and
outstanding shares of InterWorld's common stock.

On July 12, 1996, InterWorld implemented a 2.5-for-1 stock split applicable
to all issued and outstanding shares of InterWorld's common and preferred stock
(without changing the par value thereof).

All common and preferred shares and related per share data reflected in the
accompanying financial statements and notes thereto, have been presented as if
the stock splits had occurred on January 1, 1996.

Common Stock

In June 1998, the Board of Directors authorized an increase in the number
of authorized shares of InterWorld's common stock from 27,000,000 shares to
35,000,000 shares. The Board of Directors also authorized an increase to
100,000,000 shares of common stock to be effective upon commencement of
InterWorld's initial public offering. In addition, the Board of Directors also
approved the authorization of an additional 15,000,000 shares of preferred
stock, $.01 par value.

Mandatorily redeemable Series A and B Convertible Preferred Stock

At December 31, 1998, InterWorld had authorized the issuance of 8,200,000
shares of preferred stock, $.01 par value. Such preferred shares have been
designated as Series A Preferred. The holders of Series A Preferred are entitled
to (i) share in dividends on a pro-rata basis with common stockholders on an as-
converted basis; (ii) a liquidation preference equal to the sum of the price
paid per share and all declared and unpaid dividends (the "Preference Amount");
(iii) demand redemption of the Preference Amount in the event of a merger where
the shareholders of InterWorld do not control the surviving entity or a sale of
all or substantially all of InterWorld's assets; (iv) mandatory redemption of
the Preference Amount in cash at any date on or after March 2003 by a majority
vote of the Series A preferred holders; (v) vote on all matters on an as
converted basis; and (vi) convert to common stock at the Preference Amount
multiplied by the shares to be converted divided by the conversion price (the
"Conversion Price") per share. The initial Conversion Price is equal to the
issuance price per share of Series A Preferred, and is subject to adjustment in
the event shares of common stock are issued without consideration or for
consideration per share less than the conversion price.

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of December 31, 1998, InterWorld had sold and issued in six private
placements an aggregate of 7,539,999 shares of Series A Preferred. A summary of
the issuances are as follows:

[Enlarge/Download Table]

CARRYING VALUE
ISSUANCE DECEMBER 31,
PRICE GROSS ----------------- REDEMPTION
DATE SHARES PER SHARE PROCEEDS 1997 1998 VALUE
---- --------- --------- -------- ------- ------- ----------

March 1996.............. 1,287,500 $ 2.00 $ 2,575 $ 2,475 $ 2,494 $ 2,575
July 1996............... 1,056,631 4.732 5,000 5,000 5,000 5,000
December 1996........... 956,000 6.25 5,975 5,975 5,975 5,975
January - June 1997..... 164,000 6.25 1,025 1,025 1,025 1,025
August 1997............. 1,122,931 7.50 8,422 8,422 8,422 8,422
September 1997.......... 1,764,705 8.50 15,000 14,422 14,532 15,000
March 1998.............. 1,188,232 8.50 10,100 -- 9,886 10,100
--------- ------- ------- ------- -------
Total......... 7,539,999 $48,097 $37,319 $47,334 $48,097
========= ======= ======= ======= =======

The Series A Preferred shares are subject to automatic conversion upon
consummation of an underwritten public offering of InterWorld's common stock
providing aggregate proceeds, net of underwriting discounts and commissions, of
greater than $10,000.

In connection with the March 1996 Series A Preferred issuance, InterWorld
issued warrants to an investor to purchase 103,420 shares of Series A Preferred,
at an exercise price of $2.00 per share. The fair value of the warrants in the
amount of $135 has been recorded to additional paid-in capital. The warrants may
be exercised at any time and expire ten years from issuance or five years from
the effective date of InterWorld's initial public offering, whichever is later.

In connection with the September 1997 Series A Preferred issuance,
InterWorld issued warrants to purchase an aggregate of 110,294 shares of its
Series A Preferred, at an exercise price of $9.775 per share, as a placement
fee. The fair value of the warrants in the amount of $587 has been recorded to
additional paid-in-capital.

InterWorld incurred cash expenses of $54 and $20 during 1997 and 1998,
respectively, in connection with the Series A Preferred issuances.

In November 1997, InterWorld had authorized the issuance of 1,188,235
shares of Series A Preferred at $8.50 per share. As of December 31, 1997,
InterWorld had received deposits in the amount of $225 for subscriptions to
purchase 26,471 shares.

During 1997, InterWorld issued warrants to purchase 75,000 shares of Series
A Preferred at $7.50 per share to a financial advisor. The fair value of the
warrants in the amount of $371 was expensed during 1997.

In March 1998, in connection with the sale and issuance of Series A
Preferred, InterWorld issued warrants to purchase an aggregate of 39,864 shares
of its Series A Preferred at an exercise price of $9.775 per share as a
placement fee. The fair value of the warrants in the amount of $252 has been
recorded to paid-in-capital.

The excess of the redemption value over the carrying value of Series A
Preferred is being recorded by periodic charges to stockholders' equity through
March 2003, the earliest date at which the Series A Preferred holders may
require redemption of their shares.

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. TRANSACTIONS WITH RELATED PARTIES

During 1996 and 1997, InterWorld recognized product license and service
revenues from sales to a holder of Series A Preferred of $156 and $12,
respectively.

In May 1996, InterWorld made loans in the aggregate amount of $193, bearing
interest at a rate of 6% per annum, to its three co-founders. The principal and
interest on the loans to two of the founders, in the aggregate amount of $114,
will be forgiven in equal installments starting in 1999, except that if either
of them voluntarily terminates his employment or service as a director prior to
May 2001, his loan including interest will become due and payable in May 2001.
In May 1998 the third founder repaid $23 of the principal amount of his loan,
reducing the principal amount of the loan to $75. The balance of such loan was
forgiven and expensed in June 1998. Interest income from such loans amounted to
$7, $12, $9 and $3 for the years ended December 31, 1996, 1997 and 1998, and for
the nine months ended September 30, 1999, respectively. At December 31, 1997 and
1998 and September 30, 1999 other assets included $211, $114 and $71,
respectively, in amounts due from co-founders.

During 1998, InterWorld recognized product licenses and service revenues
from sales to UGO of $474. All sales to UGO were for product licenses and
services provided subsequent to UGO's spin-off on March 30, 1998 (Note 13).

9. STOCK OPTION, DEFINED CONTRIBUTION AND PROFIT SHARING PLANS

Stock option plans

In March 1996, InterWorld implemented its 1996 Stock Option Plan (the
"Plan") whereby incentive and nonqualified options to purchase shares of
InterWorld's stock may be granted to directors and employees of InterWorld and
its subsidiaries. In June 1998, the Board of Directors approved amendments to
the Plan whereby the aggregate number of shares of common stock for which
options may be granted under the Plan was increased to 6,600,000. The exercise
and vesting periods and the exercise price for options granted under the Plan
are determined by the Board of Directors or a Committee of the Board of
Directors. The Plan stipulates that no option may be exercisable after seven
years from the date of grant. The fair market value of InterWorld's common stock
is determined by the Board of Directors. Options granted under the Plan
generally vest over a period of five years, 20% on the first anniversary of the
date of grant and 5% each quarter thereafter.

The following tables summarize activity regarding stock options for the
years ended December 31, 1996, 1997 and 1998:

[Enlarge/Download Table]

1996 1997 1998
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
UNDER EXERCISE UNDER EXERCISE UNDER EXERCISE
OPTION PRICE OPTION PRICE OPTION PRICE
--------- -------- --------- -------- --------- --------

Options outstanding,
beginning of year....... -- 1,269,750 $1.25 2,904,737 $1.71
Options granted........... 1,271,750 $1.25 1,821,749 $2.00 875,068 $4.25
Options granted........... -- -- 291,050 $8.50
Options exercised......... -- (5,650) $1.25 (364,136) $1.89
Options forfeited......... (2,000) $1.25 (181,112) $1.38 (278,564) $2.39
--------- --------- ---------
Options outstanding, end
of year................. 1,269,750 $1.25 2,904,737 $1.71 3,428,155 $2.86

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

[Download Table]

WEIGHTED AVERAGE
OPTIONS OUTSTANDING AT REMAINING
DECEMBER 31, 1998 CONTRACTUAL LIFE
---------------------- ----------------

At $1.25.................................. 902,750 5.0
At $2.00.................................. 1,455,579 5.6
At $4.25.................................. 781,576 6.2
At $8.50.................................. 288,250 6.5

InterWorld applies Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its Plan and other stock-based compensation issued to employees. During the
years ended December 31, 1996, 1997 and 1998, InterWorld has recognized
compensation expense for options granted to employees of $71, $752 and $1,615,
respectively. InterWorld estimates that it will recognize compensation expense
in an aggregate amount of $4,385 in future years as options vest for grants made
during 1996, 1997 and 1998 (see Note 15 for compensation expense for Options
granted in 1999).

During 1996, 1997 and 1998, InterWorld issued 20,000, 15,000 and 8,706
options, respectively, to third party consultants in exchange for services.
InterWorld has recognized non-cash expense of $28 in 1996, $36 in 1997 and $47
in 1998 based on the fair value of such options at the date of grant.

Had compensation cost for options grants to employees been determined based
upon the fair value at the date of grant for awards under the Plan consistent
with the methodology prescribed under SFAS No. 123, "Accounting for Stock Based
Compensation," ("SFAS 123"), InterWorld's net loss and loss per share for the
years ended December 31, 1996, 1997 and 1998 would have increased by
approximately $115, or $0.01 per share, $677 or $0.05 per share, and $1,568 or
$0.11 per share, respectively.

The fair values of options granted to employees during the years ended
December 31, 1996, 1997 and 1998 have been determined on the date of the
respective grant using the Black-Scholes option-pricing model based on the
following weighted average assumptions:

[Download Table]

1996 1997 1998
------- ------- -------

Dividend yield.......................................... None None None
Weighted average risk-free interest rate on date of
grant................................................. 6.21% 5.90% 5.11%
Forfeitures............................................. None None None
Expected life........................................... 5 years 5 years 5 years
Volatility.............................................. 75% 75% 85%

Defined contribution plan

InterWorld has a defined contribution savings plan (the "Plan"), which
qualifies under Section 401(k) of the Internal Revenue Code. Participants may
contribute up to 15% of their gross wages not to exceed, in any given year, a
limitation set by Internal Revenue Service regulations. The Plan provides for
discretionary contributions to be made by InterWorld as determined by its Board
of Directors. InterWorld has not made any contributions to the Plan.

10. SECURED LOAN AGREEMENT

Effective as of May 1998, InterWorld's secured loan agreement with a holder
of common stock was amended under which maximum borrowings by InterWorld were
increased to $11,000. The loan accrues interest, which is payable monthly, at a
rate of 10% per annum and is secured by the accounts receivable of InterWorld.
InterWorld may borrow amounts under the line for a period of twelve months
subsequent to its initial borrowing under the loan agreement or until completion
of an initial public offering by

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

InterWorld. The loan principal is due and payable the later of 15 months from
the initial borrowing or 21 months from the date of the agreement. The initial
borrowing under the loan agreement occurred on October 26, 1998. (Note 15)

At December 31, 1998, InterWorld had $4,000 in outstanding borrowings under
the loan agreement. Interest expense recognized on the loan in 1998 amounted to
$60.

The amount of $3,229 presented as notes payable to stockholders on the
balance sheet at December 31, 1998 is net of unamortized debt discount.

The lender was issued a warrant to purchase 51,766 shares of Series A
Preferred at an exercise price of $9.775 per share upon execution of the loan
agreement. The lender was also issued a warrant to purchase an additional 51,766
shares of Series A Preferred at a price of $9.775 per share upon InterWorld's
initial borrowing under the loan agreement in October, 1998.

The aggregate fair value of the warrants in the amount of $1,023 has been
recorded as debt discount on the loan obligation and is being amortized to
interest expense over a period of twelve months.

11. CONCENTRATIONS OF RISK AND CUSTOMER INFORMATION

Financial instruments which potentially subject InterWorld to
concentrations of credit risk are primarily cash, accounts receivable, accounts
payable, and notes payable. InterWorld generally does not require collateral and
the majority of its trade receivables are unsecured. InterWorld sells its
products to a wide range of commercial enterprises. InterWorld had no
significant foreign revenue in any of the periods presented.

For the year ended December 31, 1996, two customers accounted for 31% and
17% of net revenues. For the year ended December 31, 1997, two different
customers accounted for 11% and 10% of net revenues. For the year ended December
31, 1998, another customer accounted for 14% of net revenues. For the nine
months ended September 30, 1999, no customers accounted for more than 10% of net
revenues.

For the years ended December 31, 1996, 1997 and 1998 and for the nine
months ended September 30, 1999, InterWorld's foreign sales were not material.

12. INCOME TAXES

InterWorld has incurred losses since inception which have generated net
operating loss carryforwards of approximately $39,210 and $43,718 at December
31, 1998 and September 30, 1999, respectively, for federal and state income tax
purposes. These carryforwards are available to offset future taxable income and
expire in 2011 through 2019. At December 31, 1998 and September 30, 1999,
InterWorld also had research and development tax credit carryforwards in the
amount of $1,437 and $790, respectively, which expire in 2002 through 2019.

Section 382 of the Internal Revenue Code of 1986, as amended (the "IRC"),
places a limitation on the utilization of federal net operating loss
carryforwards upon the occurrence of an ownership change. In general, a change
in ownership occurs when a greater than 50 percent change in ownership takes
place over a three year testing period. The annual utilization of net operating
loss carryforwards generated prior to such change is limited, in any one year,
to a percentage of the entity's fair value at the time of the change in
ownership. As a result of certain equity transactions consummated by InterWorld,
a change in ownership, as defined by Section 382 of the IRC, has occurred during
the nine months ended September 30, 1999.

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The net operating loss carryforwards and temporary differences between
carrying amounts of assets and liabilities for financial reporting and income
tax purposes result in a net deferred tax benefit of $21,842 and $29,251 at
December 31, 1998 and September 30, 1999, respectively. InterWorld's operating
plans anticipate taxable income in future periods; however, such plans make
significant assumptions which cannot be reasonably assured, including market
acceptance of InterWorld's products and services by customers. Therefore, in
consideration of InterWorld's accumulated losses and the uncertainty of its
ability to utilize this deferred tax benefit in the future, InterWorld has
recorded a valuation allowance in the amount of $21,842 and $29,251 at December
31, 1998 and September 30, 1999, respectively, to offset the deferred tax
benefit amount.

Significant components of the noncurrent deferred tax asset at December 31,
1997 and 1998 and September 30, 1999 are as follows:

[Enlarge/Download Table]

DECEMBER 31,
------------------ SEPTEMBER 30,
1997 1998 1999
------- ------- -------------

Deferred tax assets:
Net operating loss............................... $10,690 $17,250 $ 19,236
Net operating loss of discontinued operations...... 616 -- --
Provision for losses of discontinued operations
to date of disposition........................ 295 -- --
Foreign operating loss carryforward.............. 792 1,781 3,070
Accruals, reserves and other..................... 1,273 1,061 2,853
Capitalized research and development............. -- -- 2,840
Research and development credits................. 481 1,437 790
Depreciation..................................... -- 101 345
Nonqualified stock options and warrants.......... 204 212 166
------- ------- --------
Total deferred tax assets..................... 14,351 21,842 29,300
------- ------- --------
Deferred tax liabilities:
Depreciation..................................... (77) -- (49)
------- ------- --------
Total deferred tax liabilities................ (77) -- (49)
------- ------- --------
Net deferred tax asset............................. 14,274 21,842 29,251
Less: valuation allowance.......................... (14,274) (21,842) (29,251)
------- ------- --------
Deferred tax asset, net............................ $ -- $ -- $ --
======= ======= ========

The provision (benefit) for income taxes differs from the amount of income
tax determined by applying the applicable U.S. income tax rate to income (loss)
before taxes as follows:

[Enlarge/Download Table]

NINE MONTHS
YEAR ENDED ENDED
-------------------------- SEPTEMBER 30,
1996 1997 1998 1999
---- ---------- ---- -------------

Federal income tax statutory rate............ (35)% (35)% (35)% (35)%
State income taxes, net of federal tax
benefit.................................... (12) (12) (9) (9)
Excess foreign tax benefits.................. -- -- 4 7
Incentive stock options...................... -- 1 3 5
Other nondeductible items.................... -- -- 3 3
Increase in valuation allowance.............. 47 46 34 29
--- --- --- --
Income tax rate as recorded.................. -- -- -- --
=== === === ==

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. DISCONTINUED OPERATIONS

On March 30, 1998, InterWorld completed a spin-off distribution of its
subsidiary UGO, reducing its majority ownership to a minority interest of
approximately 18%. Since March 30, 1998, InterWorld's minority interest in UGO
has decreased to approximately 5.5% as a result of private equity financings by
UGO. Common shares of UGO were distributed to the InterWorld's common and
preferred stockholders of record as of March 30, 1998 on the basis of 0.18 a
common share of UGO for each common and preferred share (on an as converted
basis) of InterWorld. UGO is an online retailer of game and entertainment
software.

InterWorld has presented UGO as a discontinued operation in the
Consolidated Statement of Operations for the year ended December 31, 1997. A
provision of $627 for estimated operating losses through the disposal date was
recorded at December 31, 1997. The cost of disposal was not significant.

A summary of the net liabilities distributed is as follows:

[Download Table]

DECEMBER 31, 1997 MARCH 30, 1998
----------------- --------------

Cash.......................................... $ 596 $ 96
Equipment, net................................ 92 315
Other current assets.......................... 20 53
Notes payable................................. (1,150) (1,400)
Accounts payable and accrued expenses......... (30) (113)
------- -------
$ (472) $(1,049)
======= =======

InterWorld has not guaranteed and is not contingently liable for any
obligations of UGO. InterWorld carries it's investment in UGO at cost and it has
no continuing significant involvement in the operations of UGO.

During 1997, UGO had no revenues and incurred net losses of $1,310. The
basic loss per share and diluted loss per share for the year ended December 31,
1997 attributable to discontinuance of the operations of UGO was approximately
$0.14 per share.

14. COMMITMENTS

Leases

InterWorld has entered into noncancelable operating leases primarily for
office space, furniture and office equipment with initial or remaining terms of
six months or more. Total rent expense amounted to $365, $1,349, and $1,283 for
the years ended December 31, 1996, 1997 and 1998, respectively.

During 1997, InterWorld completed a sale-leaseback transaction with a
holder of Series A Preferred, selling computer equipment, office equipment, and
furniture and fixtures of $878, net of accumulated depreciation, for $819, and
realizing a loss of $59. The lease has been accounted for as a capital lease.
During 1997 InterWorld acquired computer equipment, office equipment, and
furniture and fixtures pursuant to capital lease agreements with the Series A
Preferred holder. The leases had an aggregate initial principal amount of
$3,181. In connection with the leases InterWorld issued the lessor in March 1996
and February 1997 warrants to purchase 37,500, and 39,200 shares of Series A
Preferred, at exercise prices of $2.00 and $6.25 per share, respectively. The
aggregate fair value of the warrants in the amount of $210 has been recorded as
debt discount on the related capital lease obligation and is being amortized to
interest expense over the term of the lease. During 1997 and 1998, InterWorld
recognized interest expense of $52 and $70 related to the warrants.

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments by year under operating and capital leases
with initial or remaining terms of one year or more consisted of the following
at December 31, 1998:

[Download Table]

YEAR OPERATING CAPITAL
---- --------- -------

1999..................................................... $1,006 $1,505
2000..................................................... 1,138 627
2001..................................................... 930 --
2002..................................................... 852 --
2003..................................................... 825 --
2004 and thereafter...................................... 3,836 --
------ ------
Total minimum lease payments........................ $8,587 2,132
------ ------
Less: Amounts representing interest...................... 118
------
Present value of future minimum lease payments........... 2,014
Less: Current maturities................................. 1,398
------
Capital lease obligations-long term................. $ 616
======

In January 1997, a Series A Preferred holder of InterWorld issued an
irrevocable letter of credit with a term of one year, in the amount of $1,579 as
security for performance under an office space lease. As consideration for the
issuance, InterWorld issued the stockholder warrants to purchase 25,260 shares
of Series A Preferred, at an exercise price of $6.25. The fair value of such
warrants in the amount of $104 was recorded as interest expense during 1997.

15. SUBSEQUENT EVENTS (UNAUDITED)

In January 1999, InterWorld completed the sale and issuance of 1,650,000
shares of Series B Preferred at $10.00 per share, providing gross proceeds of
$16,500 and net proceeds, after deducting placement fees and other expenses paid
by InterWorld, of $15,510. Except with respect to potential adjustments to the
conversion price, InterWorld's Series B Preferred shares provide the same rights
and preferences as those of prior Series A Preferred issuances.

In January 1999, InterWorld utilized a portion of the net proceeds from the
issuance of Series B Preferred to repay the $4,000 under its secured loan
agreement (Note 10).

In February 1999, InterWorld granted to employees and consultants options
to purchase 1,604,567 shares of common stock, all at an exercise price of $10.00
per share. InterWorld estimates it will recognize approximately $8,556 of
compensation expense over the vesting period of these options.

In May 1999, the Board of Directors of InterWorld authorized management to
pursue an underwritten sale of shares of InterWorld's common stock in an initial
public offering pursuant to the Securities Act of 1933.

InterWorld adopted an employee stock purchase plan. Under the plan,
eligible employees are provided an opportunity to purchase shares of
InterWorld's common stock through regular payroll deductions. The total number
of shares of common stock that are authorized for issuance under the plan is
1,000,000. Employees are given an opportunity to purchase shares of common stock
during consecutive six-month periods, and the right to purchase shares will
expire on the last day of the six-month period. The purchase price for shares
offered under the plan for the plan period ending February 29, 2000 will be
equal to a percentage designated by the compensation committee of the Board of
Directors (not less than

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

85%) of the closing price of InterWorld's common stock on February 29, 2000 as
reported on The Nasdaq Stock Market's National Market. For each subsequent
six-month period the purchase price for shares offered under the plan will be
equal to a percentage designated by the compensation committee of the Board of
Directors (not less than 85%) of the lower of the fair market value of
InterWorld's common stock at the commencement or termination of the six-month
period. The plan will expire on the tenth anniversary of the effective date of
the plan.

Effective October 1999, InterWorld extended its lease and leased additional
office space at its current location. As a result, annual rental costs will
increase to approximately $3.1 million. This lease expires in December 2015.
InterWorld has subleased a portion of the space for an annual rental of
approximately $1.5 million. The sublease expires December 2015, subject to
InterWorld's right to terminate all or a portion of the subleased space under
specific circumstances.

On August 11, 1999, InterWorld granted to employees and one consultant
options to purchase 866,550 shares of common stock, all at an exercise price of
$15.00 per share. InterWorld recognized approximately $122 in noncash
compensation expense during the nine months ended September 30, 1999 and
estimates that it will recognize no additional compensation expense over the
remaining vesting period of these options.

On August 11, 1999, the Compensation Committee of the Board of Directors of
InterWorld agreed to automatically vest previously unvested options to purchase
an aggregate of 334,818 shares of common stock. InterWorld recognized
approximately $429 of noncash compensation expense upon the vesting of these
options during the nine months ended September 30, 1999.

On August 16, 1999, InterWorld completed an initial public offering in
which InterWorld sold 3,000,000 shares of common stock at a price of $15 per
share. The net proceeds from the sale of shares in the initial public offering
were approximately $40.8 million, after deducting underwriting discounts and
commissions and estimated expenses of $1.0 million payable by InterWorld. On
September 1, 1999, InterWorld received additional net proceeds of approximately
$6.3 million when the underwriter exercised an option granted to it in
connection with the initial public offering to purchase 450,000 additional
shares from InterWorld to cover over-allotments.

Also upon completion of the initial public offering, previously unvested
options to purchase 178,570 shares of common stock automatically vested.
InterWorld recognized approximately $229 of noncash compensation expense upon
the vesting of these options during the nine months ended September 30, 1999.

Upon the completion of the initial public offering, 7,539,999 shares of
Series A Preferred and 1,650,000 shares of Series B Preferred converted into an
aggregate of 9,189,999 shares of common stock. In addition, outstanding warrants
to purchase 534,070 shares of Series A Preferred converted to equivalent
outstanding warrants to purchase 534,070 shares of common stock. These warrants
are excluded from the calculation of basic loss and diluted loss per share, as
they were antidilutive.

During the nine months ended September 30, 1999, InterWorld issued 535,216
shares of common stock from employee exercises of outstanding options.

At September 30, 1999, InterWorld had repaid all outstanding borrowings
under its secured loan agreement, which has been terminated. Interest expense
recognized on the loan in the nine months ended September 30, 1999 amounted to
$16.

On October 12, 1999, InterWorld granted to employees options to purchase
94,600 shares of common stock, all at an exercise price of $30.00 per share.
InterWorld estimates that it will recognize $1,380 in additional non cash
compensation expense over the remaining vesting period of these options.

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INTERWORLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In November 1999, in connection with an employment agreement with
Interworld's Chief Executive Officer, Interworld agreed to loan the officer $750
to assist in his relocation expenses. The loan will bear interest at the prime
rate and is due to be repaid upon the sale of his former principal residence.

On December 1, 1999, InterWorld granted to employees options to purchase
1,577,150 shares of common stock, all at an exercise price of $51.125 per share,
of which 275,094 were subject to stockholder approval of InterWorld Corporation
2000 Equity Incentive Plan that was obtained in January 2000.

In January 2000, the shareholders of InterWorld approved the InterWorld
Corporation 2000 Equity Incentive Plan. The aggregate number of shares of common
stock for which options may be granted under the Plan is 3,000,000 plus any
shares not covered by an option granted under the 1996 Stock Option Plan. The
exercise and vesting periods and the exercise price for options granted under
the Plan are determined by the Board of Directors or a Committee of the Board of
Directors. The fair market value of InterWorld's common stock is determined by
the Board of Directors. Options granted under the Plan generally vest over a
period of four years, 25% on the first anniversary of the date of grant and
6.25% each quarter thereafter.

In January 2000, InterWorld granted to an executive officer options to
purchase 150,000 shares of common stock at an exercise price of $15.00.
InterWorld estimates that it will recognize $8,625 in additional compensation
expense over the remaining vesting period of these options.

In January 2000, InterWorld vested previously unvested options to purchase
25,000 shares of common stock granted to a consultant. InterWorld will recognize
approximately $304 in noncash compensation expense in January 2000.

In January 2000, the Board of Directors of InterWorld authorized management
to pursue an underwritten sale of shares of InterWorld's common stock in a
follow-on public offering pursuant to the Securities Act of 1933.

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[INSIDE BACK COVER ART]

[INTERWORLD LOGO]

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee, the NASD filing
fee and the Nasdaq National Market listing fee.

[Download Table]

Securities and Exchange Commission registration fee......... $ 80,834
National Association of Securities Dealers, Inc. filing
fee....................................................... 31,119
Nasdaq National Market listing fee.......................... 17,500
Accountants' fees and expenses.............................. 100,000
Legal fees and expenses..................................... 100,000
Blue Sky fees and expenses.................................. 7,500
Transfer Agent's fees and expenses.......................... 5,000
Printing and engraving expenses............................. 200,000
Miscellaneous............................................... 28,047
--------
Total expenses.............................................. $570,000
========

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Delaware General Corporation Law and our certificate of incorporation
and bylaws limit the monetary liability of directors to us and to our
stockholders and provide for indemnification of our officers and directors for
liabilities and expenses that they may incur in such capacities. In general,
officers and directors are indemnified with respect to actions taken in good
faith in a manner reasonably believed to be in, or not opposed to, the best
interests of us, and with respect to any criminal action or proceeding, actions
that the indemnitee had no reasonable cause to believe were unlawful. We also
have indemnification agreements with directors and officers that provide for the
maximum indemnification allowed by law. Reference is made to our certificate of
incorporation, bylaws and form of Indemnification Agreement for Officers and
Directors filed as Exhibits 3.1, 3.2 and 10.3 hereto, respectively.

We have an insurance policy which insures our directors and officers
against certain liabilities which might be incurred in connection with the
performance of their duties.

The underwriting agreement filed as Exhibit 1.1 hereto contains certain
provisions pursuant to which certain of our officers, directors and controlling
persons may be entitled to be indemnified by the underwriters named therein.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

During the past three years, we have issued the securities set forth below
which were not registered under the Securities Act of 1933.

1. On April 22, 1997, we issued to certain accredited investors, including
three investment funds of which a director of ours is a principal, four
warrants to purchase an aggregate of 75,000 shares of preferred stock
with an exercise price of $7.50 per share.

2. On July 28, 1997, we granted options to purchase an aggregate of
1,821,749 shares of common stock to certain employees, including three
officers, three former officers and four directors, at an exercise
price of $2.00 per share.

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3. Pursuant to a Subscription Agreement dated August 4, 1997, we sold an
aggregate of 1,122,931 shares of Series A preferred stock to 23
accredited investors, including two directors and one officer, for a
per share purchase price of $7.50 and an aggregate purchase price of
$8,422,000.

4. Pursuant to a Subscription Agreement dated September 19, 1997, we sold
an aggregate of 1,764,705 shares of Series A preferred stock to 24
accredited investors for a per share purchase price of $8.50 and an
aggregate purchase price of $15,000,000.

5. In November 1997, we issued 1,500 shares of common stock to an employee
pursuant to an option exercise for an aggregate purchase price of
$1,875.

6. On November 26, 1997, we issued to accredited investors, including one
director, four warrants to purchase an aggregate of 110,294 shares of
preferred stock with an exercise price of $9.775 per share.

7. In December 1997, we issued an aggregate of 4,150 shares of common
stock to three employees pursuant to option exercises for an aggregate
purchase price of $5,188.

8. In February 1998, we issued an aggregate of 2,250 shares of common
stock to two employees pursuant to option exercises for an aggregate
purchase price of $2,813.

9. On February 20, 1998, we granted options to purchase an aggregate of
875,068 shares of common stock to certain employees, including two
officers, with an exercise price of $4.25 per share.

10. In March 1998, we issued an aggregate of 321,920 shares of common
stock to 31 employees, including one officer and one consultant,
pursuant to option exercises for an aggregate purchase price of
$603,828.

11. Pursuant to a Subscription Agreement dated March 27, 1998, we sold an
aggregate of 1,188,232 shares of Series A preferred stock to 18
accredited investors, including an investment fund in which a director
is a principal, for a per share purchase price of $8.50 and an
aggregate purchase price of $10,100,000.

12. On March 27, 1998, we issued to accredited investors, including one
director, four warrants to purchase an aggregate of 39,864 shares of
preferred stock with an exercise price of $9.775 per share.

13. In April 1998, we issued 1,325 shares of common stock to three
employees pursuant to an option exercise for an aggregate purchase
price of $1,656.

14. In May 1998, we issued an aggregate of 3,425 shares of common stock to
four employees pursuant to option exercises for an aggregate purchase
price of $4,581.

15. In June 1998, we issued 16,716 shares of common stock to five
employees and one consultant pursuant to an option exercise for an
aggregate purchase price of $49,383.

16. On June 12, 1998, we granted options to purchase an aggregate of
291,050 shares of common stock to certain employees, including one
former officer, with an exercise price of $8.50 per share.

17. In July 1998, we issued an aggregate of 1,300 shares of common stock
to three employees pursuant to option exercises for an aggregate
purchase price of $1,850.

18. In August 1998, we issued an aggregate of 1,250 shares of common stock
to two employees pursuant to option exercises for an aggregate
purchase price of $2,313.

19. In September 1998, we issued an aggregate of 8,850 shares of common
stock to four employees pursuant to option exercises for an aggregate
purchase price of $11,063.

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20. In October 1998, we issued 200 shares of common stock to an employee
pursuant to an option exercise for an aggregate purchase price of
$250.

21. On October 7, 1998, we issued to an accredited investor a warrant to
purchase up to 103,532 shares of Series A preferred stock with an
exercise price of $9.775 per share.

22. In November 1998, we issued an aggregate of 2,500 shares of common
stock to four employees pursuant to option exercises for an aggregate
purchase price of $3,613.

23. In December 1998, we issued an aggregate of 4,400 shares of common
stock to three employees pursuant to option exercises for an aggregate
purchase price of $6,438.

24. Pursuant to a Subscription Agreement dated January 12, 1999, we issued
an aggregate of 1,650,000 shares of Series B preferred stock to five
accredited investors for a purchase price of $10.00 per share, or an
aggregate purchase price of $16,500,000. In April 1999, the investors
reaffirmed their investment in these shares.

25. In January 1999, we issued an aggregate of 26,425 shares of common
stock to eight employees pursuant to option exercises for an aggregate
purchase price of $49,831.

26. In February 1999, we issued an aggregate of 28,775 shares of common
stock to seven employees, including one officer, pursuant to option
exercises for an aggregate purchase price of $113,538.

27. On February 2, 1999, we granted options to purchase an aggregate of
1,604,567 shares of common stock to certain employees, including two
officers, with an exercise price of $10.00 per share.

28. In March 1999, we issued an aggregate of 86,900 shares of common stock
to five employees, including one officer and one former officer,
pursuant to option exercises for an aggregate purchase price of
$242,895.

29. In April 1999, we issued an aggregate of 20,790 shares of common stock
to three employees, including one officer, pursuant to option exercises
for an aggregate purchase price of $87,604.

30. In May 1999, we issued an aggregate of 23,561 shares of common stock to
twelve employees, including a former officer, pursuant to option
exercises for an aggregate purchase price of $52,864.

31. In June 1999, we issued an aggregate of 102,246 shares of common stock
to seven employees, including two officers, pursuant to option
exercises for an aggregate purchase price of $242,383.

32. In July 1999, we issued an aggregate of 135,060 shares of common stock
to fifteen employees pursuant to option exercises for an aggregate
purchase price of $215,233.

33. In August 1999, we issued an aggregate of 27,182 shares of common stock
to twenty-one employees pursuant to option exercises for an aggregate
purchase price of $170,017.

34. In September 1999, we issued an aggregate of 84,277 shares of our
common stock to twenty employees pursuant to option exercises for an
aggregate purchase price of $218,521.

35. In October 1999, we issued an aggregate of 50,538 shares of our common
stock to twenty-seven employees pursuant to option exercises for an
aggregate purchase price of $156,149.

36. In November 1999, we issued an aggregate of 44,620 shares of our common
stock to seventeen employees pursuant to option exercises for an
aggregate purchase price of $157,257.

37. In December 1999, we issued an aggregate of 28,814 shares of our common
stock to seventeen employees pursuant to option exercises for an
aggregate purchase price of $129,267.

38. In December 1999, in connection with warrant exercises, we issued an
aggregate of 65,265 shares of our common stock to four investment funds
for $562,500. A director of InterWorld is a principal of three of the
four funds.

39. In January 2000, we issued an aggregate of 109,387 shares of our common
stock to twenty-seven employees pursuant to option exercises for an
aggregate purchase price of $485,291.

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The sales and issuances of the shares of common stock and options and
warrants to purchase common stock discussed above were made by us in reliance
upon the exemptions from registration provided under Section 4(2) of the
Securities Act of 1933 or Section 3(b) and Rule 701 promulgated thereunder. The
offers and sales were made to either accredited investors as defined in Rule
501(a) under the Securities Act or the persons referred to in Rule 701(c) under
the Securities Act pursuant to a written compensatory benefit plan (or a written
compensation contract) established by the Registrant; with respect for offers
and sales pursuant to Section 4(2), no general solicitation was made by either
the Registrant or any person acting in its behalf; the securities sold are
subject to transfer restrictions, and the certificates for the shares contained
an appropriate legend stating such securities have not been registered under the
Securities Act and may not be offered or sold absent registration or pursuant to
an exemption therefrom.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS:

[Download Table]

EXHIBIT
NUMBER DESCRIPTION
------- -----------

1.1 Form of Underwriting Agreement(5)
3.1 Amended and Restated Certificate of Incorporation of the
Registrant(3)
3.2 Bylaws of the Registrant(1)
5.1 Opinion of Covington & Burling, Counsel to the Registrant,
as to the legality of the shares being registered(5)
10.1 Amended and Restated 1996 Stock Option Plan(1)
10.2 Employee Stock Purchase Plan(5)
10.3 Form of Indemnification Agreement between the Registrant and
each of its directors and executive officers(4)
10.4 Lease, dated as of January 12, 1997, between the Registrant
as Tenant and New York City District Council of Carpenters
Pension Fund, as Landlord(1)
10.6 First Amendment to Lease, dated as of July 1, 1999, between
Registrant, as Tenant, and New York City District Council of
Carpenters Pension Fund, as Landlord(2)
10.7 Agreement of Sublease, dated as of October 1, 1999, between
Registrant, as Sublandlord, and UGO Networks, Inc., as
Subtenant(4)
10.8 Registration Rights Agreement, among the Registrant and
Certain Stockholders(2)
10.9 2000 Equity Incentive Plan(4)
10.10 Employment Agreement, dated as of November 19, 1999, by and
between the Registrant and Jeremy Davis(4)
16.1 Letter from KPMG LLP regarding change in accountants(2)
21.1 List of Subsidiaries(4)
23.1 Consent of PricewaterhouseCoopers LLP(4)
23.2 Consent of Covington & Burling (included in Exhibit 5.1)(5)
24.1 Powers of Attorney (included on signature page)(4)
27.1 Financial Data Schedule for the year ended December 31,
1998(4)
27.2 Financial Data Schedule for the nine month period ended
September 30, 1999(4)

---------------
(1) Previously filed on June 3, 1999 with the Company's Registration Statement
on Form S-1 (No. 333-79879).

(2) Previously filed on July 16, 1999 with the Company's Amendment No. 1 to
Registration Statement on Form S-1 (No. 333-79879).

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(3) Previously filed on August 9, 1999 with the Company's Amendment No. 4 to
Registration Statement on Form S-1 (No. 333-79879).

(4) Filed herewith.

(5) To be filed by amendment.

(b) FINANCIAL STATEMENT SCHEDULES:

Schedule II -- Valuation and Qualifying Accounts

INTERWORLD CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

[Enlarge/Download Table]

ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)

Allowance for Doubtful Accounts
Year ended December 31, 1996................ $ -- $ 269 $ -- $ 269
Year ended December 31, 1997................ 269 353 -- -- 622
Year ended December 31, 1998................ 622 1,438 -- (843) 1,217
Nine months ended September 30, 1999........ 1,217 600 (309) 1,508
Valuation Reserve -- Deferred Tax Assets
Year ended December 31, 1996.............. $ 136 $3,365 $ -- $3,501
Year ended December 31, 1997................ 3,501 10,773 -- -- 14,274
Year ended December 31, 1998................ 14,274 7,568 -- -- 21,842
Nine months ended September 30, 1999........ 21,842 7,409 -- -- 29,251

ITEM 17. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(b) The Registrant hereby undertakes that:

(i) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.

(ii) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and this offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on this 7th day of February, 2000.

INTERWORLD CORPORATION

By: /s/ MICHAEL J. DONAHUE
------------------------------------
Michael J. Donahue
Chairman

Each person whose signature appears below hereby constitutes and appoints
Michael J. Donahue and Jeremy M. Davis, his true and lawful attorneys-in-fact
and agents, each acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including, without limitation,
post-effective amendments) to this Registration Statement and any subsequent
registration statement filed by the Registrant pursuant to Rule 462(b) of the
Securities Act of 1933, which relates to this Registration Statement, and to
file the same, with all exhibits thereto, and all documents in connection
herewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents, each acting alone, or his or their substitutes, may lawfully do or cause
to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on this 7th day of February, 2000 by the
persons and in the capacities indicated below.

[Enlarge/Download Table]

SIGNATURE TITLE
--------- -----

/s/ JEREMY M. DAVIS President and Chief Executive Officer
----------------------------------------------------- (principal executive officer) and Director
Jeremy M. Davis

/s/ PETER SCHWARTZ Chief Financial Officer (principal financial
----------------------------------------------------- and accounting officer)
Peter Schwartz

/s/ MICHAEL J. DONAHUE Chairman
-----------------------------------------------------
Michael J. Donahue

/s/ ALAN J. ANDREINI Vice Chairman
-----------------------------------------------------
Alan J. Andreini

/s/ KENNETH G. LANGONE Director
-----------------------------------------------------
Kenneth G. Langone

/s/ JOSEPH C. ROBINSON Director
-----------------------------------------------------
Joseph C. Robinson

/s/ YVES SISTERON Director
-----------------------------------------------------
Yves Sisteron

Director
-----------------------------------------------------
Jack Slevin

/s/ RUSSELL WEST Director
-----------------------------------------------------
Russell West

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EXHIBIT INDEX

[Download Table]

EXHIBIT
NUMBER DESCRIPTION
------- -----------

1.1 Form of Underwriting Agreement(5)
3.1 Amended and Restated Certificate of Incorporation of the
Registrant(3)
3.2 Bylaws of the Registrant(1)
5.1 Opinion of Covington & Burling, Counsel to the Registrant,
as to the legality of the shares being registered(5)
10.1 Amended and Restated 1996 Stock Option Plan(1)
10.2 Employee Stock Purchase Plan(5)
10.3 Form of Indemnification Agreement between the Registrant and
each of its directors and executive officers(4)
10.4 Lease dated as of January 12, 1997 between the Registrant as
Tenant and New York City District Council of Carpenters
Pension Fund, as Landlord(1)
10.6 First Amendment to Lease, dated as of July 1, 1999, between
Registrant, as Tenant, and New York City District Council of
Carpenters Pension Fund, as Landlord(2)
10.7 Agreement of Sublease, dated as of October 1, 1999, between
Registrant, as Sublandlord, and UGO Networks, Inc., as
Subtenant(4)
10.8 Registration Rights Agreement, among the Registrant and
Certain Stockholders(2)
10.9 2000 Equity Incentive Plan(4)
10.10 Employment Agreement, dated as of November 19, 1999, by and
between the Registrant and Jeremy Davis(4)
16.1 Letter from KPMG LLP regarding change in accountants(2)
21.1 List of Subsidiaries(4)
23.1 Consent of PricewaterhouseCoopers LLP(4)
23.2 Consent of Covington & Burling (included in Exhibit 5.1)(5)
24.1 Powers of Attorney (included on signature page)(4)
27.1 Financial Data Schedule for the year ended December 31,
1998(4)
27.2 Financial Data Schedule for the nine month period ended
September 30, 1999(4)

---------------
(1) Previously filed on June 3, 1999 with the Company's Registration Statement
on Form S-1 (No. 333-79879).

(2) Previously filed on July 16, 1999 with the Company's Amendment No. 1 to
Registration Statement on Form S-1 (No. 333-79879).

(3) Previously filed on August 9, 1999 with the Company's Amendment No. 4 to
Registration Statement on Form S-1 (No. 333-79879).

(4) Filed herewith.

(5) To be filed by amendment.

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This S-1 Filing	Date	First	Last	Other Filings

	3/28/95	8	20
	12/31/95	20	61
	1/1/96	68
	3/5/96	68
	7/12/96	68
	12/31/96	20	83
	1/1/97	65
	1/12/97	82	85
	4/22/97	79
	7/28/97	79
	8/4/97	80
	9/19/97	80
	11/26/97	80
	12/31/97	8	83
	2/20/98	80
	3/27/98	80
	3/30/98	8	74
	6/12/98	80
	7/1/98	44
	9/30/98	20	67
	10/1/98	10
	10/7/98	81
	10/26/98	72
	12/31/98	20	85
	1/12/99	81
	2/2/99	81
	3/3/99	58
	6/3/99	82	85	S-1
	6/15/99	66
	7/1/99	44	85
	7/16/99	82	85	S-1/A
	8/9/99	83	85	S-1/A
	8/11/99	18	76	POS AM
	8/16/99	28	76	3
	9/1/99	76
	9/30/99	8	85	10-Q, 10-Q/A
	10/1/99	82	85
	10/12/99	76
	11/19/99	45	85
	12/1/99	45	77
	12/31/99	7	66	10-K
	1/1/00	7	55
	1/4/00	45
	1/5/00	43		3
	1/31/00	18
	2/1/00	37
	2/4/00	2	18	3
	2/6/00	52
Filed On / Filed As Of	2/7/00	1	2
	2/29/00	46	76	3, 4
	4/1/00	44
	6/1/00	44
	11/19/00	45
	11/19/01	45
	12/15/15	49

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Interworld Corp · S-1 · On 2/7/00

Filed On 2/7/00 · SEC File 333-96245 · Accession Number 950123-0-782

﻿Registration Statement (General Form) — Form S-1Filing Table of Contents

﻿S-1 — Interworld CorporationDocument Table of Contents

Dates Referenced Herein and Documents Incorporated By Reference

Registration Statement (General Form) — Form S-1
Filing Table of Contents

S-1 — Interworld Corporation
Document Table of Contents