SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
EduLink Inc.
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(Exact name of the registrant as specified in its charter)
Nevada 95-4562316
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(State or other jurisdiction of (I.R.S. employer
Incorporation or Organization) Identification no.)
450 North Beverly Drive
Suite 602
Beverly Hills, California 90210
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(Address of principal executive offices) (Zip code)
Registrant's Telephone number, including area code (310) 247-7800
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Names of each exchange on which
to be so registered Each class is to be registered
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None N/A
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
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(Title of Class)
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ITEM 1: BUSINESS
(a) General Development of Business.
The registrant, Edulink, Inc., ("Edulink") originally incorporated in
January 1994 in Nevada under the name URREA Enterprises, Inc. ("URREA"). URREA
was a development stage company that attempted to engage in the business of
extracting minerals. URREA's developmental operations did not generate revenues.
URREA had no assets or liabilities and therefore it had a net asset value of $0.
URREA was a public company listed on the Over the Counter Bulletin Board.
In October, 1999, URREA agreed to acquire the issued and outstanding
common stock shares of EduLink in exchange for 7,776,000 shares of URREA's
common stock. EduLink entered into the merger in order to achieve the value of
being a publicly trading company, including obtaining liquidity for its
shareholders. Edulink is not in any manner conducting the mineral extraction
business that URREA attempted to engage in prior to the merger.
Prior to the acquisition of EduLink URREA effected a forward stock split
of its issued and outstanding shares on a 50:1 basis, which increased its
outstanding shares of common stock from 5,180,450 to 259,022,500, as well as the
number of shares of common stock to be issued and delivered in exchange for the
shares of EduLink. At the closing on October 27, 1999, EduLink merged with and
into URREA in exchange for 388,800,000 shares of URREA common stock and URREA
changed its name to EduLink Inc.
EduLink Inc. is engaged in the design and development of an Internet
educational service program, called the "EduLink Global Smart Schoolhouse(sm)",
which will offer and market to schools and homes: (i) a comprehensive school
information management and communications system; and (ii) an individualized
standards based and nationally recognized 3rd through 12th grade curriculum with
the appropriate instructional strategies and student assessment (the
"Schoolhouse System"). It is intended that this service will be utilized by four
separate categories of end users: students, parents, teachers, and school
administrators. The total service, inclusive of the Premium Service described
below, will be provided to schools, without charge over the internet. The
service provided to schools, other than the Premium Service (meaning the 3D
Virtual World Smart Lab and Tutorial Services) will also be provided to the
homes without charge, but Edulink will charge nominal fees for its Premium
Services.
From July, 1996, through approximately April, 1998, EduLink developed
an initial business plan for the Schoolhouse System, built a prototype Website,
produced a limited number of educational content lesson plans and developed an
initial template to construct educational content. From April 1998 to date,
EduLink re-defined the business plan for the Schoolhouse System, redeveloped the
structure and methodology for building interdisciplinary and interactive lessons
as well as "Virtual Labs" utilizing inquiry based instruction and re-developed
the architectural concepts for the Schoolhouse System. During this
re-development stage from April 1998 to date, EduLink maintained the basic
architectural format of the Schoolhouse System developed from July 1996 through
April 1998.
The architectural concept for the Schoolhouse System is to offer over
the internet: (1) a comprehensive school information management and
communications system, and (2) an individualized standards based and nationally
recognized third through twelfth grade curriculum with the appropriate
instructional strategies and student assessment. It is intended that the
Schoolhouse System will be utilized by four separate categories of end user;
students, parents, teachers, and school administrators. The elements that relate
to the schoolhouse architecture system include a teacher desk, a student desk, a
parent desk, and a school desk. For illustrative purposes, the student desk will
include: (i) personal schedule information; (ii) information regarding the
student's school including events, holidays, sports and clubs; (iii) information
regarding the core curriculum including art, language, math, science and social
studies; (iv) information regarding extra curriculum activities including
guidance counselor, career center, community service and student psychological
services; (v) an assignment list generated by student's teachers; and (vi) a
personal locker including a private password. All elements of the schoolhouse
system will be offered to schools and homes over the Internet to personal
computers.
Inquiry based instruction is a learning strategy that requires students
to solve a problem by planning, carrying out and reporting the results of their
investigation. The Virtual World Smart Labs allow the student to acquire a deep
and personal understanding of how learning works by participating in the conduct
of investigations and solving a problem in a three dimensional electronic world.
The three dimensional world will have characteristics that are simulated to
represent a real world environment, i.e., a virtual world. Problems that require
inquiry or investigative steps will be revealed to students in the 3D virtual
world and will emphasize that students must plan, carryout and report on the
results of their investigation. The inquiry steps will place emphasis on student
laboratory and field investigation plus case studies. The student will be asked
to solve real world problems (design based) using the inquiry-based method. To
date, a written description of the inquiry and design problems for the first
unit of the 7th and 8th grade interdisciplinary curriculum has been finished. A
web-based format has been produced to standardize electronic icons, schoolhouse
structure, and units lesson and activities, i.e., how, when, and where they
appear on the web-based screens. No Virtual World Smart Labs have been created
and or tested.
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EduLink plans to rollout its service in stages by initially developing
and producing the Schoolhouse System for the 7th and 8th grades, by conducting
alpha tests during portions of the development and production process period
from June 2000 through December 2000, by conducting a six week beta test in
January 2001 and by launching the service for the 7th and 8th grades following
the completion of the beta test and resultant modifications to the system, if
any. Thereafter, EduLink intends to beta test and launch the service for two
additional grades (e.g. 9th-10th, 5th-6th and 3rd-4th) each succeeding twelve
month period.
To date EduLink has not produced material aspects of the Schoolhouse
System. EduLink estimates that approximately $8.5 million will be needed to
complete the production, alpha and beta test and launch of the system for the
7th and 8th grades and to pay sums currently owed by EduLink to third parties.
To accommodate this need, EduLink offered through a private placement 380 units
consisting of 500,000 shares of its common stock for $25,000 per unit. To date,
EduLink has raised approximately $5.0 million from this offering. These funds
are sufficient to complete the material aspects of the Schoolhouse System for
the 7th and 8th grades and to alpha test these material aspects. However,
without the additional $3.5 million necessary to meet the estimated necessary
funds of $8.5 million, EduLink will not have the financial resources to beta
test, launch and market the Schoolhouse System for the 7th and 8th grades and to
continue its overall operations. There can be no assurance that EduLink will be
able to raise these additional monies either in the form of revenue from
operations or proceeds from the offering of its securities. There also can be no
assurance that EduLink will be able to penetrate the school and home markets if
it should be able to launch its 7th and 8th grade Schoolhouse System.
Moreover, additional funds beyond the estimated $8.5 million will be
necessary to continue operations after the launch of the service for the 7th and
8th grade and to produce the content, beta test and launch the Schoolhouse
System for additional grade levels. EduLink estimates that following the launch
of the service for the 7th and 8th grades, approximately $3.5 million will be
necessary during each of four succeeding 12 month periods to continue
operations, produce content, beta test and launch the Schoolhouse System for two
additional grade levels per each of the four 12 month periods. EduLink intends
to obtain such additional funds from operating revenue and/or from the sale of
its securities, but there can be no assurance that there will be operating
revenue or that funds can be secured on terms acceptable to EduLink.
EduLink's corporate offices are located at:
450 North Beverly Drive 5743 Corsa Avenue
Suite 602 and Suite 207
Beverly Hills, California 90210 Westlake Village, California 91362
Telephone (310) 247 7800 Telephone (818) 874-1273
(b) Financial Information about Segments.
EduLink operates in one business segment, the design, development and
sale of educational products.
(c) Narrative Description of Business.
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GENERAL
Generally it is expected that the Schoolhouse System will provide:
* a comprehensive information management and communication
service with programs uniquely tailored to school, student and
parent needs, such as an electronic filtered 24 hour daily
news feed, an EDU-chat room, free EDU-mail, tutorial services,
school stores, and student schedules. Our content and database
engineers are writing design specifications and have begun the
initial web based engineering build out for this service. The
targeted users for this service are students, parents and
teachers.
* interdisciplinary curriculum content, such as developing
units, lessons, and activities by drawing from two or more
forms of content disciplines (for example, combining language
arts, math and science within the context of history) and
cross age curriculum content, that is combining the curriculum
content to fit the needs of the two grades, such as 7th grade
13 years old students with 8th grade 14 years old students.
Our content engineers have written a complete description of
the first unit, including lessons, activities and the 3D
problem solving questions. Our graphical design engineers and
database engineers have standardized the icons and information
flows inside the user screens. The targeted users for this
service are students, parents and teachers.
* the integration of quality multi-media educational content,
educational assessment, and teacher instructional strategies
in a web based environment. All resources that relate to
multi-media educational content for the first unit have been
identified, collected and all licenses to use the information
on the web have been obtained. The targeted users for this
service are students, parents and teachers.
* educational curriculum content and student skill proficiencies
based upon national standards. Our content engineers have
finished the alignment of curriculum content and student skill
proficiencies with National Content Standards for the first
unit. The targeted users for this service are students,
parents and teachers.
* a 3rd through 12th U.S.A. public and private school
curriculum, including units, lesson and activities. Our
content engineers have identified the 10 units for the 7th and
8th grade curriculum that are appropriate for a private and
public school curriculum and have completed a written
description of the 1st unit of the 10 units of the
7th and 8th grade including the lessons and activities that
are appropriate for a private and public school curriculum.
The targeted users for this service are schools, teachers,
students and parents.
* a Global Smart Schoolhouse that can be adapted to a worldwide
educational audience and made specific to a country's national
education agenda. The schoolhouse architecture is adaptable to
a world wide educational audience because its elements, i.e.,
students, parents, teachers, and schools, have universal
educational characteristics. We have developed a unit, lesson,
and activity structure that can be made specific to a
country's national educational agenda. The targeted users for
this service are schools, teachers, students and parents.
* two minute video teasers and/or simulated games as
introductions to the curriculum units. Our content engineers
have written descriptions of the video teaser segments and/or
simulated games as introductions to the first 2 units of the
7th and 8th grade curriculum. The targeted users for this
service are teachers, students and parents.
* a means to fully use the Internet so as to enhance student
collaboration. Our data based engineers are designing software
intended to accommodate web-based collaboration. The targeted
user for this service is the student.
* a 3D Virtual World Smart Lab with emphasis on inquiry and
design based learning. Our content engineers have written a
description of the inquiry and design problems for the first
unit of the 7th and 8th grade interdisciplinary curriculum. A
web-based format has been produced to standardize electronic
icons, schoolhouse structure and units, lessons and
activities. No virtual labs have been created or tested. The
targeted users for this service are teachers and students.
* an electronic essay grader and a student essay tutorial
program. Our content engineers have finished a written
description of an electronic grading system for student work
product that will be electronically graded. Our database
engineers have developed initial algorithms for the web based
electronic essay grader. The targeted users for this service
are students.
* teacher, student, and parent tools to enhance learning, such
as thesaurus, dictionary, encyclopedia, atlas, word processor,
calculator, cognitive mapping, inquiry steps and intelligent
student coaching. Existing web-based tools have been
identified and located and the content engineers have
developed a written description of web-based tools that are to
be developed. Our database engineers are designing the
database in order to integrate the tools into the database.
The targeted users for this service are teachers, students and
parents.
* archived audio, video, still pictures and data from nationally
recognized content organizations housed inside the EduLink
teacher curriculum center. We have had initial discussions
with National Geographic, The Associated Press, CNN and
Reuters. The targeted users for this service are parents,
teachers and students; and
* a teacher authoring tool kit to publish teacher created
lessons inside the Global Smart Schoolhouse. Our database
engineers have developed the algorithms for the teacher
authoring tool; it is currently in an alpha testing format.
The targeted users for this service are teachers.
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EduLink plans to market the Schoolhouse System to public and private
schools throughout the United States, to homes of school aged children
(inclusive of homeschoolers) and to homes of grandparents and relatives of
school aged children.
The total services, inclusive of the premium service described below,
will be provided to schools without charge over the internet. The service
provided to schools, other than the premium service, will also be provided to
homes without charge, but EduLink will charge nominal fees for its premium
services, meaning the 3D Virtual World Smart Lab and Tutorial Services. EduLink
intends to reach schools and homes by several methods, including direct sales
and telemarketing; alliances with companies that have substantial regional and
national presence in school and/or home markets, such as local telephone
companies, cable companies, computer companies, internet service providers,
cross promotion with companies attempting to reach demographics similar to those
of the Company; and public relations activities which illustrate the academic
value of the Company's content. The type of alliances Edulink envisions include
co-branding agreements with well known portals, such as Yahoo; bundling
agreements with computer companies like Dell, telcos like GTE; copromotional
agreements with sponsors and advertisers which provide promotional material
about Edulink through the distribution of their own products or within their own
environment, such as PepsiCola and Wal-Mart. Edulink has not entered into or
commenced discussions relating to any such marketing alliances. Edulink's
marketing activities to date have been limited to discussions with various
schools relating to their potential participation in the alpha tests for the 7th
and 8th grade Schoolhouse System. EduLink believes it will generate revenue from
the following sources:
* home subscriptions for premium services;
* transactional revenue from the school store and links to
other websites;
* corporate sponsorship in the 3D Virtual World Smart lab
design based problems;
* traditional corporate advertising and sponsorships within the
commercial zones;
* corporate underwriting in various forms;
* international franchises; and
* federal grants.
The Schoolhouse System concept was developed by Dr. Ronald R. Rescigno,
a co-founder, co-Chairman and President of EduLink. Dr. Rescigno was formerly
the Superintendent of a California public school district and was responsible
for that district's award winning interactive and computer-oriented learning
programs.
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THE SAATCHI AGREEMENT
From approximately February 1997 through April 1998, Saatchi provided
production and consulting services in connection with the Schoolhouse System. In
January 1998, Saatchi and EduLink Inc. executed an agreement, effective as of
July 1997, pursuant to which Saatchi agreed to provide various services,
including but not limited to designing and establishing a website for the
Schoolhouse System (the "Saatchi Agreement"). Pursuant to the terms of the
Saatchi Agreement, EduLink executed and delivered an $850,000 note to Saatchi
relating to fees owed for past services through December 1997. In addition,
pursuant to the Saatchi Agreement, Saatchi claimed additional fees of $548,000
as of June 10, 1998, which charges were disputed by EduLink.
Pursuant to the provisions of the Saatchi Agreement, EduLink's
ownership of the intellectual property Saatchi developed pursuant to the Saatchi
Agreement was subject to it making all required payments to Saatchi under the
Saatchi Agreement and Saatchi Note. The rights at issue are the GUI, or
graphical user interface, developed for the three existing prototype websites
and for the six prototype web based lesson plan Internet prototypes.
From April 1998, the date Saatchi discontinued services, the
Schoolhouse System concept went through substantial modifications, rendering the
intellectual property developed by Saatchi with respect to educational lesson
plans and templates antiquated for EduLink's purposes.
On January 5, 2000, Saatchi and EduLink entered into an agreement to
settle their differences under the following terms:
* EduLink's total obligation to Saatchi, inclusive of sums due
under the Saatchi Note, was reduced to $1,000,000 payable out
of 15% of the net proceeds, obtained by EduLink from its
financing activities;
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* interest at prime plus one percent (1%) will accrue on the
$1,000,000 debt, commencing as of January 1, 2000, if, but
only if the debt is not paid by December 31, 2000;
* in lieu of 31,000,000 shares and 14,000,000 warrants that were
to be issued to Saatchi under the Saatchi Agreement, Saatchi
will receive 11,435,000 shares of EduLink's common stock;
* EduLink agreed that it would pay Saatchi by January 15, 2000,
the difference between $100,000 and the sums theretofore paid
to Saatchi under the settlement agreement; by April 30, 2000,
the difference between $400,000 and the sums theretofore paid
to Saatchi under the settlement agreement; and by December 31,
2000, the difference between $600,000 and the sums theretofore
paid to Saatchi under the settlement agreement. EduLink paid
Saatchi $100,000 on January 5, 2000.
* the Company will assign the Schoolhouse program's intellectual
property rights to Saatchi if the $1,000,000 obligation is not
paid by December 31, 2001.
SCHOOLS, TEACHERS, STUDENTS AND PARENTS
EduLink intends that the Schoolhouse System will be developed for and
used by the four essential categories of end users in the educational process;
school administrators, teachers, students and parents. There is no use
requirement for schools to use EduLink. Schools voluntarily may adapt to the
system because it is a free service. As a free service, they can utilize it when
and how they please.
SCHOOL ADMINISTRATORS. The portion of the Schoolhouse System designed
for school administrators will serve as the administrative arm of the
Schoolhouse System in a particular school and is intended to, among other
things, detail school district resources and Internet technology capabilities.
If EduLink is able to raise sufficient funds on terms acceptable to it, EduLink
intends to provide a full array of services to school administrators including
but not limited to providing: (i) a web-based home page to the school with
active links to additional web pages about the school, its community, faculty
and staff home pages, and school information; (ii) comprehensive calendar and
scheduling capabilities which will automatically be propagated to teacher,
student, and parent desktops; (iii) school-wide and staff-only announcement
capabilities which will also be propagated to the affected schedules; (iv)
collaboration capabilities both within the school and with outside educators
using EduLink; (v) home pages for administrative staff, with information (such
as education and areas of interest) for use in establishing collaborative
connections with outside educators; and (vi) site administrators associated with
the school, to permit them to register themselves and their classes with the
EduLink system. It is planned that all information to support these basic
functions will reside on EduLink host computers. Administrators will have the
same basic abilities as teachers to examine the curriculum (units, lessons, and
activities) offered by EduLink. Administrators will also have access to the
common set of office tools: word processor, dictionary and thesaurus. EduLink
also plans to furnish news feeds to administrators.
EduLink believes that administrators will want this information because
it is essential to their daily operations, housed in one place and will be
easily accessible.
TEACHERS. It is planned that teachers will have access to all
Schoolhouse System curriculum units, lessons, news feeds, video teasers, the
virtual lab and the inquiry and designed base problems and tools. Teachers will
be able to use the Schoolhouse System to enhance their existing programs and to
allow them more time to individualize instruction. By using the time saving
tools, such as the electronic essay grader and the inquiry based tool kit,
teachers will become facilitators of the student's learning experiences rather
than dispensers of knowledge. Teachers will be able to guide students into
inquiry and design based learning while coaching them to interact and
collaborate with students in other geographical areas of the world. Teachers
will be able to use the system to assess student performance, to collaborate
with students on writing exercises to solve academic and real time problems, to
create lessons from the news feeds and from the banks of archived resources
using the EduLink electronic authoring tools, to exchange information
instantaneously with other educators, and to communicate quickly and directly to
parents. It is anticipated that a teacher, parent, student and administrator
will be able to access the system with his or her own personal account. The
assessment relates to the student's progress through the units. Each unit will
include a number of lessons that will have activities associated with them for
the student to accomplish.
EduLink plans that the teacher, individual student and/or parent will
be able to access student assessments. It is anticipated that a teacher/student
collaboration will include but not be limited to e-mails, individual chat
sessions, group chat sessions and other interactive collaboration with the 3-D
virtual world environment.
The archived resources will be developed from strategic alliances that
EduLink plans to make with national and regional organizations to license their
electronic educational media resources. It is anticipated that the image and
informational banks of archived resources will be integrated into the EduLink
database. If adequate funding is raised, the Schoolhouse will provide a
repository for teaching and learning practices as well as a distribution outlet
for teachers around the world to publish and license their lessons. EduLink
intends to build and integrate into the database a web-based teacher-authoring
tool including a web-based lesson design template. This tool and template will
be used by students to enhance a project based learning program and by parents
who wish to understand lesson-designed student learning. Examples of
organizations that EduLink will seek to approach in order to license their
video, picture, sound and text resources are: National Geographic, Time Warner,
Newsweek, Discovery Magazine, History Channel and NASA.
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STUDENTS. Students will be able to access the Schoolhouse System at
home if they have a computer at home. This will allow them to supplement and
enhance their learning. Students will be able to review their course work,
obtain materials and interactive resources related to their course work and, if
necessary, receive direct tutorial aid. EduLink expects that the interactive
resources will include videos, audios and still pictures which will have the
capacity to be stopped and played back within the EduLink system making each
resource interactive. EduLink expects to offer direct tutorial aide through its
e-mail program and the Edu-Chat program as well as by telephone connection. If
adequate funding is raised, the tutors will be employed by EduLink and will
consist of working and/or retired teachers.
The portion of the Schoolhouse System designed for students is intended
to have, among other things, the applicable educational information for the
grade of the particular student courses, daily lessons and related materials, as
well as a school information guide to help organize a student's schedule,
events, sports activities and clubs. Students will be able to access via the
internet student-run web pages, current news events, updated bus schedules and a
daily read out on their teachers, classes and activities. Students will also
have their assignment lists and personal "lockers" with their own private
passwords to record their outside activities, appointments and errands.
PARENTS. Through the use of the Schoolhouse System, parents will have
the ability to interact directly with a variety of persons involved in their
child's education including teachers, guidance counselors and career counselors.
For college-bound students, all of the pertinent information relating to
prospective colleges, scholarships, financial aid and sample SAT and ACT tests
will be available to parents. Parents will be able to maintain direct contact
with teachers, school administrators, coaches and other parents through a
special PTA menu. They will be able to schedule"chat" sessions on a regular
basis and at their own convenience. "Chat" sessions and bulletin board postings
will allow parents to participate by sharing experiences with parents of same
age students around the city, state, nation, and world. Parents will be able to
enter the virtual school storefront and shop for educational merchandise at
discounted rates. The majority of the virtual school storefront merchandise will
be rated and endorsed by EduLink.
DELIVERY OF AND ACCESS TO THE SCHOOLHOUSE SYSTEM
EduLink has developed a demonstrable prototype Internet Website for the
Schoolhouse System. It is intended that school administrators, teachers,
students and parents, free of charge, will access the Website through desktop
computers. The Website currently is in its' embryonic stage and only has
minimal, basic available information regarding the Schoolhouse System. Within
each end user group, a member of a particular group will only have access to
certain information and services. For example, students will receive access
codes allowing them access to the curriculum services, but not to the grades or
records of other students. Only a student's teacher and school administrator
will have such access. Each end user will have a personal identification code,
which will allow them access to their private information.
EduLink plans to host the system for Internet use. The computers
hosting the system will be provided by EduLink. Through the Internet the users
(administrators, teachers, parents, and students) will be able to access and use
the system. The content and services provided by the system will be delivered
via the web to the users.
It is expected that the school, not EduLink, will operate as the system
administrator. When the school registers itself with EduLink, a site
administrator (such as the principal or an assistant principal) will be selected
by the registering school. The site administrator will be furnished with a
special access code which will permit the site administrator to provide and
manage access privileges for the administrators, teachers, students and parents
associated with that school.
EduLink anticipates that schools (administrators), teachers, students,
and parents, will each furnish persistent data that will be maintained on the
EduLink computers. It is expected that this will include general contact
information, and also (for all except the parents) the additional profile
information necessary to maintain such user's calendar, activities and
interests, progress on assignments, class schedules, coursework and other
EduLink preferences. The school, teacher, parent and student information will be
gathered by using electronic templates that identify specific fields of
information. The data content from these templates will be stored on the EduLink
host computers.
EduLink believes that parents will want access to the Schoolhouse system
not only to provide their children with access to the Schoolhouse system at
home, but also to allow the parents to become more involved in their child's
educational experiences. The parents of homeschoolers will be able to access all
the course requirements in the form of units, lessons, and activities, which
will be designed to satisfy the legal requirements of home schooling. EduLink
believes there is a significant opportunity in the homeschooler market and plans
to focus on trying to gain penetration into this market. Parents using their own
personal access code will be able to interact with their child's school program
from any computer with access to the Internet.
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POTENTIAL SOURCES OF REVENUE
As indicated elsewhere herein, since the Schoolhouse System is in the
embryonic development stage, as of the date hereof EduLink has not generated any
revenues and none can be expected to be generated until the Schoolhouse System
is fully developed and marketed to, among others, the school districts and the
homes of the school age children.
EduLink if it is able to fully develop and market the Schoolhouse
System, expects to derive revenue primarily from the following sources:
* home subscriptions for premium services;
* transactional revenue from the school store and links to
other websites;
* corporate investment in the 3D Virtual World Smart lab
design based problems;
* traditional corporate advertising and sponsorships within
the commercial zones;
* corporate underwriting in various forms;
* international franchises; and
* federal grants.
COMPETITION
Although, to EduLink's knowledge, there are no other companies engaged
in the identical type of business to be conducted by EduLink the market for
companies with similar ideas and educational related materials is highly and
intensely competitive. EduLink will be in direct competition with companies with
significantly longer operating histories, significantly greater financial,
technical, product development and marketing resources, greater name recognition
and larger customer bases than that of EduLink. Competitors of EduLink include
education curriculum software companies such as Edscape Corporation, Lightspan
Networks, Inc., Softkey International, Inc., National Education Corporation,
Davidson and Associates, Inc., Scholastic Corporation, Broderbund Software,
Inc., Knowledge Adventure, Inc., Jostens LLC, CNN Newsroom, PBS Mathline, CTB
McGraw Hill, Net School/ACTV Inc., e School and CCC Inc. a subsidiary of Simon
and Schuster now owned by Peason Pic. Moreover, other entities not currently in
this industry may in the future attempt to launch a business identical to
EduLink. EduLink's competitors may develop products comparable or superior to
those developed by EduLink adapt more quickly than EduLink to new technologies,
evolving industry trends or customer requirements, or devote greater resources
to the development, promotion and license of their products than EduLink.
Accordingly, there can be no assurance that competition will not intensify or
that EduLink will be able to compete effectively in its proposed market.
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MANUFACTURING, DISTRIBUTION
EduLink will not manufacture or distribute software, but intends to
contract with third parties for the manufacturing, packaging, marketing and
distribution functions with regards to any software. The software architecture
is in the design stage. It is anticipated that it will include software already
developed by SAIC, commercially available software and software to be
specifically developed for EduLink by SAIC.
EMPLOYEES-ALLIANCES:
EduLink currently has three employees, namely, Michael Rosenfeld, Dr.
Ronald Rescigno and Ian Rescigno. In addition, EduLink has entered into
agreements with the following individuals and entities:
* For content development, research grants, and online educational
tutorial experts -McGuire and Associates, headed by Kathleen McGuire,
Ph.D., director of UCLA Extension's Distance Learning Programs; Los
Angeles, California;
* For content oversight, including units, lessons, activities and the
design and inquiry based problems within the 3D virtual world and
endorsement - Professor Gary B. Nash, Ph.D., Project Co-Director for
the National Standards for History, National Center for History in the
Schools, University of California, Los Angeles, UCLA;
* For data base engineering, front end graphic design services, 3D
Virtual World Design, and the Graphic User Interface (GUI) for design
and inquiry based problems - Science Applications International
Corporation (SAIC), Center for Advanced Information Technology,
Annapolis, Maryland;
* For teacher, parent and student filtering and curriculum development
tool and the teacher curriculum center - SAIC, Center for Advanced
Information Technology, Annapolis, Maryland;
* For the inquiry based software and tool kit - SAIC, Center for Advanced
Information Technology, Annapolis, Maryland;
* For research and educational marketing - McGuire and Associates, headed
by Kathleen McGuire, Ph.D., director of UCLA Extension's Distance
Learning Programs; Los Angeles, California.
The three employment agreements were all entered into on September 1,
1999 and provide as follows:
Ronald Rescigno has been employed as President of EduLink from
September 1, 1999 through December 31, 20004. Compensation equals $150,000 per
year (the monthly pro-rata compensation from September 1 - December 31, 1999 was
waived), plus a bonus equal to the greater of 10% of the Net Pre-Tax Profits or
10% of the Net Cash Flow of EduLink computed annually, but not to exceed an
amount equal to $300,000 for each calendar years 2000 and 2001 and $450,00 for
each of calendar years 2002, 2003 and 2004; in addition, the employee is
entitled to four weeks vacation, annually, and fifteen paid sick days annually,
and insurance benefits. Warrants to purchase 5,717,650 shares of EduLink's
common stock at $.0022 per share shall be issued to Dr. Rescigno upon completion
of each of the Design Phase, the Build-Out Elements, the Beta Test and the
National launch of the Schoolhouse service for the 7th and 8th grades.
Employee is exclusive to EduLink, Inc. for the term.
Michael Rosenfeld has been employed as Chief Executive Officer of
EduLink from September 1, 1999 through December 31, 20004. Compensation equals
$150,000 per year (the monthly pro-rata compensation from September 1 - December
31, 1999 was waived), plus a bonus equal to the greater of 10% of the Net
Pre-Tax Profits or 10% of the Net Cash Flow of EduLink computed annually, but
not to exceed an amount equal to $300,000 for each calendar years 2000 and 2001
and $450,000 for each of calendar years 2002, 2003, and 2004; in addition, the
employee is entitled to four weeks vacation, annually, and fifteen paid sick
days, annually, and insurance benefits. Warrants to purchase 5,717,650 shares of
EduLink's common stock at $.0022 per share shall be issued to Mr. Rosenfeld upon
completion of each of the Design Phase, the Build-Out Elements, the Beta Test
and the National launch of the Schoolhouse service for the 7th and 8th grades.
It is anticipated that Mr. Rosenfeld will be replaced as CEO but will continue
to render services of Executive Vice President - Business Development. Mr.
Rosenfeld may render outside services so long as it does not interfere with his
obligation to EduLink.
Ian Rescigno has been employed as Senior Vice President of Operations
for EduLink from September 1, 1999 through December 31, 2004. Compensation
equals $90,000 per year (the monthly pro-rata compensation from September 1 -
December 31, 1999 was wived), plus a bonus equal to the greater of 10% of the
Net Pre-Tax Profits or 10% of the Net Cash Flow of EduLink computed annually,
but not to exceed an amount equal to $180,000 for each calendar years 2000 and
2001 and $270,000 for each of calendar years 2002, 2003, and 2004; in addition,
the employee is entitled t four weeks vacation, annually, and fifteen paid sick
days, annually, and insurance benefits. Warrants to purchase 5,717,650 shares of
EduLink's common stock at $.0022 per share shall be issued to Mr. Rescigno upon
completion of each of the Design Phase, the Build-(Out Elements, the Beta Test
and the National launch of the Schoolhouse service for the 7th and 8th grades.
In addition, Mr. Rescigno was issued Warrants to purchase 34,305,000 shares of
common stock at an exercise price of $.0022 per share. Employee is exclusive to
EduLink, Inc. for the term.
10
<PAGE>
The agreement between EduLink and Professor Gary B. Nash was entered
into as of February 1, 2000 and provides that Professor Nash will supervise the
individuals engaged by us to design the content of an interdisciplinary,
cross-age inquiry based 7th and 8th grade curriculum which satisfies core
curriculum standards, consisting of 10 units with approximately 70 lessons and
560 activities, plus 40 inquiry and design based questions for a contemplated
3-D virtual world. Professor Nash is non-exclusive and all of the results and
proceeds of his services are assigned to EduLink and are for that purpose deemed
a work for hire, from inception. Professor Nash is to be paid $3,000 per month
until the 10 units are delivered, not to exceed 12 months. The $3,000 is an
advance against fees of $100 per hour, but he must obtain pre-approval for hours
to be incurred in excess of 40 hours in a month. He also is to receive a bonus
of 7.5% of any license fees paid to UCLA by EduLink pursuant to any license
agreement between EduLink and UCLA which may in the future be consummated with
respect to intellectual property relating to history curriculum of the 7th and
8th grades. He also is to receive warrants to purchase 100,000 shares of
EduLink's common stock at $.10 per share upon delivery of each unit, to a
maximum of warrants to purchase 1,000,000 shares. He also is engaged to serve on
EduLink's to be formed Quality Control curriculum Committee and will be entitled
to receive warrants to purchase 500,000 shares of stock at $.20 per share; and
as he secures three pre-approved individuals to serve on the Committee, he will
be entitled to receive an additional 1,000,000 warrants, one-third of which vest
as each of such individuals agrees to serve on the Committee.
The agreement between EduLink and Ms. McGuire was entered into as of
February 1, 2000 and provides that Ms. McGuire is to provide content development
of an interdisciplinary, cross age, inquiry based 7th and 8th grade curriculum.
Content development includes responsibility to core curriculum standards,
integration of educational software applications, presentation and final editing
of content, recruitment and training of on-line tutors. The deliverable schedule
is to be mutually determined. EduLink's payment obligation is $148,000, payable
as deliverables are completed and accepted in accordance with the mutually
approved schedule. The payments include all sums otherwise payable to the
specialists supplied by McGuire and the results and proceeds of all work
product, including the copyrights therein, is to be owned by EduLink and is to
be considered a work for hire, from inception. In addition, Ms. McGuire is to
manage the specialists, liaison between the specialists and EduLink's other
technology providers and content supervisors, analyze student assessment of the
curriculum, assist in obtaining federal grants, identify possible schools to
participate in the contemplated beta test, and assist in planning the rollouts
of additional grade level curriculum. For such additional services, Ms. McGuire
is to receive the sum of $3,000 per month for 12 months (commencing February,
2000), unless the agreement is terminated earlier based upon a failure to
deliver on a timely basis.
The agreement between EduLink and SAIC was entered into as of October
1, 1999 and provides that SAIC will render services relating to the development
and construction of EduLink Schoolhouse, such services and the actual
deliverables to be fully described by Individual Task Order Statements of Work
and Schedule, such work to be performed on a Time and Material basis. The hourly
fees per category are established for the one year term of the agreement (e.g.
Program Manager at $200 per hour; Jr. technical staff at $90 per hour). Each
Task Order may include one or more labor categories. There is no limit as to the
number of Task Orders that may be issued. All materials furnished and services
performed shall be subject to inspection and test. All materials, computer
programs software or other data or information, whether fabricated,
manufactured, purchased or otherwise obtained by SIC for the performance of its
services and charged to EduLink are the property of EduLink.
TRADEMARKS AND COPYRIGHTS
EduLink has obtained a trademark for its corporate logo including the
design plus words and letters. Additionally, EduLink is in the process of
researching and applying for a servicemark for the EduLink Global Smart
Schoolhouse and the History Hopper. EduLink believes that any software it is
able to develop in the future will be proprietary and it will attempt to protect
such software under copyright, trademark and trade secret laws as well as
through contractual restrictions on disclosure, copying and distribution.
Software products are susceptible to unauthorized copying. It may be possible
for unauthorized third parties to copy or to reverse engineer EduLink's
products. As the number of interactive software products in the market increases
and the functionality of these products further overlaps, EduLink believes that
interactive software will increasingly become the subject of claims that such
software infringes on the property of others.
As disclosed above, EduLink may lose those intellectual property rights
derived from services performed by Saatchi under the Saatchi Agreement if
EduLink fails to pay sums due Saatchi by December 31, 2001.
LITIGATION
EduLink is not a party to any legal proceedings and is not aware of any
pending or threatened legal proceedings.
AVAILABLE INFORMATION
EduLink has filed with the Securities and Exchange Commission this
Registration Statement on Form 10 under the Securities Exchange Act of 1934. For
further information with respect to EduLink reference is made to the documents
filed as exhibits to the Form 10. Statements contained in this Form 10 regarding
the contents of any contract or any other document to which reference is made
are not necessarily complete, and, in each instance where a copy of such
contract or other document has been filed as an exhibit to the Form 10
Registration Statement, reference is made to the copy so filed, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement and the exhibits thereto may be inspected without charge
at the offices of the Commission at Judiciary Plaza, 450 Fifth Street,
Washington, D.C. 20549, and copies of all or any part of the Registration
Statement may be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549 upon the payment of the fees prescribed by the
Commission. The Commission maintains a Web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants, such as EduLink that file electronically with the
Commission.
11
<PAGE>
ITEM 2: FINANCIAL INFORMATION.
The following information has been derived from the financial
statements of the Company. Such information should be read in conjunction with
the audited financial statements of the Company for the years ended December 31,
1998 and 1999 appearing elsewhere in this Registration Statement.
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)
AS OF AND FOR THE YEARS ENDED DECEMBER 31
Income statement: 1999 1998 1997 1996
------ ------ ------ ------
(Unaudited) (Unaudited)
Revenue $ -- $ -- $ -- $ --
Software development expenses $ (121) $ 897 $1,840 $ 305
Operating expenses $ 145 $ 143 $ 246 $ 128
Net loss $ 24 $1,040 $2,086 $ 433
Net loss per share $ 0.0 $ 0.0 $ 0.01 $ 0.0
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is provided to afford the reader an
understanding of all the material matters of the Company's financial condition,
results of operation, capital resources and liquidity. It should be read in
conjunction with the financial statements and notes thereto and other
information appearing elsewhere in this Registration Statement.
Overview
EduLink, Inc. is engaged in the design, development and creation of an
internet educational web based software service program to schools and homes. It
is intended that this service will be marketed to and utilized by students,
parents, teachers and school administrators. The service will be delivered over
the internet to personal computer users.
Results of Operations
Year Ended December 31, 1999 as Compared to Year Ended December 31, 1998
Revenue
The Company is a development stage enterprise and has spent most of its
efforts during the past three years in developing the School House System web
based software initially for the 7th & 8th grades, which is intended to be beta
tested in January 2001 and launched following the completion of the beta test
and resultant modifications to the system, if any, in September 2001.
Accordingly, the Company has not generated any revenue to date.
In October of 1999, EduLink merged with and into URREA Enterprises,
Inc. ("URREA") and URREA changed its name to EduLink. This recapitalization of
EduLink had no effect on EduLink's financial condition and results of
operations as URREA was a non operating public shell with no assets or
liabilities.
Software Development Costs
In January 1997, the Company contracted with an outside software
development vendor to provide production and consulting services in connection
with the web based Schoolhouse System.
Software development expenses decreased by 98% to $(121,000) in 1999
from $897,000 in 1998. The credit to software development cost in 1999 arose
from the adjustment of a disputed liability relating to work done in 1997 and
1998 which was recorded in the books in those years. The adjustment was
accounted for as a change in accounting estimate and accordingly resulted in a
net credit to software development cost during 1999. In addition, during 1999,
the Company was conceptualizing its business plan and focusing on how to utilize
the development work completed during 1998.
12
<PAGE>
Software development costs include amounts paid to the software
development vendor and other consultants.
General and Administrative Expenses
General and administrative expenses in 1999 in the aggregate were in
line with 1998. These expenses consisting primarily of rent, salaries and legal
and professional fees amounted to $125,000 in 1999 as compared with $123,000 in
1998.
Year Ended December 31,1998 as Compared with Year Ended December 31, 1997
Software Development Costs
Software development costs decreased by $944,000 or 51% from $897,000
in 1998 as compared with $1,840,000 in 1997. These comprised of expenditures on
School House Software development paid to the vendor amounting to $604,000 in
1998 as compared with $920,000 in 1997 and fees paid to consultants and other
contractors of $161,000 in 1998 as compared with $799,000 in 1997. In general,
software development costs decreased in 1998 as the Company stopped further
production and development of the web based software and focused on developing
its business plan, which included strategic planning and reengineering.
General and Administrative Expenses
General and administrative expenses decreased by $16,000 or 49% to
$123,000 in 1998 as compared with $240,000 in 1997. The decrease was
attributable to decrease in travel, legal and professional and office expenses.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Software development costs increased by $1,535,000 from $306,000 in
1996 to $1,840,000 in 1997. This was primarily due to $920,000 paid to Saatchi &
Saatchi for the development and production of the School house System and
$798,000 paid to consultants, contractors and teachers in connection with the
development of the School House System.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by $107,000 or 80% to
$240,000 in 1997 as compared to $133,000 in 1996. The increase was primarily due
to increase in legal and accounting fee of $80,000 incurred in connection with
general business matters and raising capital, increase in office expenses of
$17,000 and insurance expenses of $21,000.
Liquidity and Capital Resources
Since 1996, we have financed our working capital needs through capital
contributions by owners, private placements and bridge loans. As of December 31,
1999, we had cash in hand of approximately $74,000. Cash used in operations was
$25,000, $203,000 and $1,455,000 in 1999, 1998 and since inception,
respectively. Cash used in operations was primarily for consulting fees
related to the design and development of computer software and general and
administrative expenses. Since 1996 through November 1999, we have raised
$1,375,000 through private placements and seed capital from one of our
executives and approximately $376,000 in bridge loans. $50,000 of the bridge
notes were repaid, and $125,000 worth of the bridge notes were converted into
common stock in 1997.
We estimate that we need approximately $8,500,000 for our ongoing
software content development, content oversight, data base engineering, graphic
design services, graphic user interface, curriculum development tool,
information technology center, inquiry based software and for research and
educational marketing. We estimate that we need approximately $42,000 per
month for working capital purposes, including office expenses, secretarial
services and executive services. This working capital amount is included in the
$8.5 million referenced above.
EduLink will have additional financial needs in the long-term beyond
the $8,500,000 referenced above. EduLink will need additional funds, estimated
to be $3.5 million per year, to continue operations, maintain the system and
produce content, test and launch the system for additional grade levels. EduLink
intends to generate revenue from sponsorships, advertising, subscriptions and
e-commerce and to raise funds in the long-term from sales of its securities.
There can be no assurance that such revenues will be generated or such funds
will be raised.
In December 1999, we offered through a private placement to sell 380
Units consisting of 500,000 shares of our common stock per Unit at a price per
Unit of $25,000 at an offering price of $0.05 per share. The proceeds from this
offering net of placement agent's fees and expenses is expected to be not less
than $8,550,000. As of April 13, 2000, we have received $5,027,500 on which no
fees or commission were due or payable.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable to the Registrant.
13
<PAGE>
ITEM 3: PROPERTIES.
FACILITIES
EduLink is utilizing a portion of the offices used by Michael Rosenfeld
at 450 North Roxbury Drive, Suite 602, Beverly Hills, California 90210 as its
administrative offices. EduLink also has its production offices located at 5743
Corsa Avenue, Suite 207, Westlake Village, California 91362.
ITEM 4: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of EduLink's outstanding common stock by:
* each person who is known by it to be the beneficial owner of
5% or more of its outstanding common stock;
* each director and executive officer individually;
* and all executive officers and directors as a group, as of
the date of this Registration Statement.
EduLink believes that each of the beneficial owners of the common stock
listed in the table, based on information furnished by such owner, has sole
investment and voting power with respect to such shares.
14
<PAGE>
BENEFICIAL OWNERSHIP
NAME & ADDRESS OF BENEFICIAL OWNER NUMBER PERCENTAGE (1)
Michael Rosenfeld (2) 172,101,170 (3) 23.68%
Ronald Rescigno (2) 173,816,469 (3) 23.92%
Ian Rescigno (2) 34,305,000(4) .05%
Kathleen McGuire(2) 5,717,647 (5) .01%
Dorothy Tucker (2) 5,717,647 (5) .01%
All executive officers and directors as a
group ( five persons) 391,642,933 47.20%
- ---------------------------
(1) Calculated on the basis of 669,572,500 shares of common stock issued
and outstanding. For purposes of this table, a person or group of
persons is deemed to have "beneficial ownership" of any shares which
such person has the right to acquire within 60 days after the date of
this registration statement. For purposes of computing the percentage
of outstanding shares held by each person or group of persons named
above on the date of this registration statement, any security which
such person or group of persons has the right to acquire within 60 days
after such date is deemed to be outstanding for the purpose of
computing the percentage ownership for such person or persons, but is
not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.
(2) Address is c/o EduLink, Inc., 450 North Roxbury Drive, Beverly Hills,
CA 90210.
(3) Includes 57,176,470 shares issuable upon exercise of warrants, at an
exercise price of $.0022 per share, which expire on August 14, 2004.
(4) Consists of 34,305,000 shares issuable upon exercise of warrants, at an
exercise price of $.0022 per share, which expire on January 31, 2007.
(5) Consists of 5,717,647 shares issuable upon exercise of warrants, at an
exercise price of $.0022 per share, which expire on September 14, 2003.
ITEM 5: DIRECTORS AND EXECUTIVE OFFICERS.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
EduLink's directors and executive officers are comprised of the
following individuals:
15
<PAGE>
NAME AGE POSITION
Michael Rosenfeld 57 Co-Chairman of the Board of Directors and
Chief Executive Officer
Ronald Rescigno 63 Co-Chairman of the Board of Directors and
President
Ian Rescigno 34 Senior Vice President - Operations
Kathleen McGuire 45 Director
Dorothy Tucker 50 Director
MICHAEL ROSENFELD is Co Chairman and Chief Executive Officer of
EduLink. Mr. Rosenfeld has spent approximately the last thirty years
specializing in entertainment law with an emphasis on the music recording and
publishing industry. Mr. Rosenfeld was of counsel to Rosenfeld, Meyer & Susman,
LP, an entertainment law firm with offices in Beverly Hills, California, from
January 1995 through December 1997 and has been Chief Executive Officer and
Co-Chairman of the Board of Directors of EduLink since January 1998. Mr.
Rosenfeld received his Bachelors of Arts degree from UCLA in 1964, and his
L.L.B. from UCLA 1967, where he was also of the "Order of the Coif' and a member
of the UCLA Law Review.
RONALD R. RESCIGNO, Ed.D., D.H.L., Co-Chairman and President, EduLink
Inc. Effective, January 1997, Dr. Rescigno retired as a public school
superintendent in California. He served in the public schools of the United
States for 39 years, 17 as a school superintendent. Dr. Rescigno was
Superintendent of the Hueneme School district located in Port Hueneme,
California since 1983. Since January 1997 Dr. Rescigno has been President and
Co-Chairman of the Board of Directors of EduLink. Dr. Rescigno holds two
doctorates; the degree of Doctor of Humane Letters (honoris causa) awarded by
Wilkes University, Wilkes-Barre, Pennsylvania, in 1989 for his international
work in student learning and the integration of computer networked technology
and a Doctor of Education degree awarded by the University of North Colorado,
Greeley, Colorado in 1978. Dr. Rescigno received his Bachelor of Science degree
from Wilkes College, Wilkes-Barre, Pennsylvania in 1958 and a Master of Arts
degree from Columbia University, New York, New York, in 1967. He is the author
of the book Smarter Classrooms - Smarter World and produced a video on the same
subject. He is currently working on a sequel to the above book describing his
vision of the cyberspace school-i.e., the Global Smart Schoolhouse.
Dr. Rescigno has been a consultant on educational technology for the
United Nations Industrial Organization (UNIDO) and a keynote speaker at numerous
conferences, including the first United State/USSR Joint Conference on
Computers, Education and Children, the State of Israel's Ministry of Industrial
Seminar "Computerized Integrated Learning System Development and
Implementation," the Digital World Conference in 1993 and the 1996 Harvard
Business School International Conference. In 1990 Dr. Rescigno was appointed by
the Governor of the State of California and served as Vice-Chair of the State
Educational Technology Committee until 1995. He has been frequently asked to
assist the U.S. Department of Education and the Department of Defense in
educational technology issues and projects.
16
<PAGE>
IAN RESCIGNO, Vice President - Operations, has responsibilities which
include video production, content licensing and acquisition, strategic content
partnerships, project management. Mr. Rescigno was the founder and president of
Eco International, Inc. from 1995 through 1996. Mr. Rescigno has been working
for EduLink in varying capacities since January 1997. In 1989, after Mr.
Resicigno graduated from the University of California at Los Angeles with a
degree in History, he founded ECO International, Inc. ECO's primary business
goal revolved around the development of multimedia products. As an infant
industry there was no established standard or models that could be followed. For
electronic content development, ECO developed a synergistic model among content
developers, design specialists, audio/video experts, and computer technologists.
ECO became familiar with "brand indentification" and the creative process that
must take place for a product to represent the look and feel of a quality
multimedia product. ECO was personally involved in the development of a cost
effective business model for multimedia by managing all phases of the
production, marketing, and selling cycles.
Mr. Rescigno was part of the design team that developed SOTA's Multi
Media Curriculum System (MMCS) and implemented two (MMCS) research and
development sites; one with World Ort in London, England and one with the
Bulgarian Academy of Sciences in Sofia, Bulgaria. Mr. Rescigno brokered a
distribution agreement with the Israel Center for Education Technology (CET)
through Dynamind (an Israeli company) for the rights to sell the "Search and
Solve" science software package in the U.S. and Canada. The product was
integrated into SOTA's Multi Media Curriculum System. Prior to the Balkan unrest
Mr. Rescigno worked with the United Nations Industrial Development Organization
(UNIDO) to procure a grant to establish a training site in Belgrade, Yugoslavia
and Sofia, Bulgaria in advanced manufacturing processes for developing nations.
KATHLEEN MCGUIRE, Ph.D., is a Director of the Company. Dr. McGuire has
been Project Director, Distance Learning Program, UCLA Extension, since January
1995. Dr. McGuire received her B.A. and Masters from Cal Poly and her Ph.D. from
UCLA Graduate School of Education and Information Studies.
DOROTHY TUCKER, Ph.D., is a Director of the Company. Dr. Tucker has
been President of Dorothy M. Tucker, Associates, psychological consultants to
corporations and governmental agencies, including the Los Angeles Police
Department and General Electric. Dr. Tucker received her Ph.D. in Psychology
from California School of Professional Psychology and her Ph.D. in Counselor
Education from Ohio State University. She currently serves as a member of the
California State Bar Board of Governors and the President's Task Force on Urban
Initiatives.
17
<PAGE>
ITEM 6: EXECUTIVE COMPENSATION.
Through 1999, the Chief Executive Officer has not received any
compensation. Through 1999 no other executive officer has received compensation
in excess of $100,000.
On September 4, 1999, employment agreements were entered into between
EduLink and each of Dr. Rescigno, Ian Rescigno and Michael Rosenfeld. The terms
of these employment agreements include: an employment term through December 31,
2004; annual base compensation, commencing January 2000 of $150,000 for each of
Dr. Rescigno and Mr. Rosenfeld, and $90,000 for Ian Rescigno, with bonuses based
upon formulae relating to EduLink's revenue. In addition, each of Mr. Rosenfeld,
Dr. Rescigno and Ian Rescigno have the right to receive warrants to purchase
shares of EduLink's common stock as each of four separate deliverables are
completed within specific time limits. Pursuant to the terms of Mr. Rosenfeld's
agreement, he shall receive the sum of $10,000 per month in lieu of $10,000 in
monthly compensation otherwise payable to him until his receipt of sums advanced
to EduLink by Mr. Rosenfeld on an interest free basis during 1999 to lower
overhead. Moreover, pursuant to the terms of Mr. Rosenfeld's agreement, it is
anticipated that EduLink shall replace him as CEO with another individual and in
such event, Mr. Rosenfeld shall remain with EduLink as Executive Vice President
- - Business Development. Mr. Rosenfeld and Dr. Rescigno also had each previously
been granted warrants to purchase 57,176,470 shares of common stock of EduLink.
The following table sets forth the annual compensation paid to
executive officers of the Company for the fiscal years ended December 31, 1997,
1998 and 1999. No executive officer received annual compensation in excess of
$100,000.
<TABLE>
<CAPTION>
Other Annual Restricted Options/ LTIP All Other
Name and Principal Position Year Salary($) Bonus($) Compensation Stock Awards SARs Payouts Compensation
- --------------------------- ---- --------- -------- ------------ ------------ ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr. Ronald Rescigno, 1999 $0 $0 0 0 0 0 0
Co-Chairman and President(1) 1998 $0 $0 0 0 0 0 0
1997 $60,000 $0 0 0 0 0 0
Michael Rosenfeld, 1999 $0 $0 0 0 0 0 0
Chief Executive Officer 1998 $0 $0 0 0 0 0 0
and Co-Chairman(2) 1997 $0 $0 0 0 0 0 0
Ian Rescigno, 1999 $0 $0 0 0 0 0 0
Senior Vice President - 1998 $0 $0 0 0 0 0 0
Operations(3) 1997 $0 $0 0 0 0 0 0
</TABLE>
- --------------
(1) Dr. Rescigno agreed to waive all compensation under the September 4, 1999
employment agreement through 1999.
(2) Mr. Rosenfeld agreed to waive all compensation under the September 4, 1999
employment agreement through 1999.
(3) Mr. Rescigno agreed to waive all compensation under the September 4, 1999
employment agreement through 1999.
(4) Directors of Edulink currently do not receive any compensation for their
services as directors.
STOCK OPTION PLAN
EduLink intends to establish a stock option plan to attract and retain
key employees and directors of EduLink.
ITEM 7: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Mr. Rosenfeld advanced funds to or on behalf of EduLink during 1999
equal to $112,902.42, and EduLink has agreed to repay these funds to Mr.
Rosenfeld on a periodic basis, such payments to be made in lieu of, and shall
serve to reduce, the monthly compensation otherwise payable to him under the
terms of his EduLink employment agreement. In addition, Mr. Rosenfeld has waived
his right to receive reimbursement for $140,403.25 in sums advanced by him to or
on behalf of EduLink during the years 1996, 1997 and 1998. Dr. Rescigno was
reimbursed $22,500 by EduLink for expenses incurred in 1998 and 1999.
EduLink rents a portion of Mr. Rosenfeld's offices. EduLink pays $3,000 per
month to Mr. Rosenfeld for use of these offices.
On February 1, 2000, EduLink entered into an agreement with Ian Rescigno,
Senior Vice President-Operations of EduLink to issue warrants to purchase
34,305,000 shares of common stock at an exercise price of $.0022 per share.
ITEM 8: LEGAL PROCEEDINGS.
None.
18
<PAGE>
ITEM 9: MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
EduLink's common stock is publicly traded on Nasdaq's over-the-counter
Bulletin Board Market under the symbol "MYIQ".
The following table sets forth the range of high and low bid prices for
the EduLink's Common Stock for each quarterly period since its Common Stock
began trading, as reported by brokers and dealers making a market in the capital
stock. Such quotations reflect inter-dealer prices without retail markup,
markdown or commission, and may not necessarily represent actual transactions:
HIGH LOW
Year ended December 31, 2000
January 1 - March 6...................... 1/2 2/11
HIGH LOW
Year ended December 31, 1999 1/4 1/11
Fourth Quarter...........................
HOLDERS
As of the date of this registration statement, there were approximately
110 record holders of EduLink's common stock.
DIVIDENDS
EduLink has not paid any cash or other dividends on its common stock
since its inception and does not anticipate paying any such dividends in the
foreseeable future. EduLink intends to retain any earnings for use in the
Company's operations and to finance the expansion of its business.
ITEM 10: RECENT SALES OF UNREGISTERED SECURITIES.
In October, 1999, URREA Enterprises, Inc. acquired the issued and
outstanding shares of the common stock of EduLink Inc., a California
corporation, through a merger and stock-for- stock exchange exempt from
registration pursuant to Section 3(a)(10) of the Securities Act of 1993. At the
closing, EduLink, Inc. merged with and into URREA in exchange for 388,800,000
shares of URREA common stock and URREA changed its name to EduLink Inc. The
shares of URREA common stock were issued pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
19
<PAGE>
From December 1999 through March 8, 2000, EduLink sold 201.1 Units
consisting of 500,000 shares of its common stock per Unit to 96 accredited
investors and 5 unaccredited investors at a price per Unit of $25,000 for total
proceeds of $1,087,500. The Units were sold pursuant to Rule 506 promulgated
under Regulation D of the Securities Act of 1933. EduLink paid no placement
agent fees in connection with such financing transactions.
ITEM 11: DESCRIPTION OF REGISTRANT'S SECURITIES TO BE
REGISTERED.
EduLink is authorized to issue 1.5 billion shares of common stock,
$.001 par value, per share. As of the date of this Form 10 Registration
Statement, 669, 572,500 shares of common stock were issued and outstanding.
EduLink's shares will be delisted from the Over the Counter Bulletin
Board and its new symbol will be MYIQE if this Form 10 is not declared effective
by the Securities and Exchange Commission on or before May 3, 2000.
Each share of common stock is entitled to one vote per outstanding
share held on each matter submitted to a vote at a meeting of shareholders. Each
shareholder may exercise such vote either in person or by proxy. Shareholders
are not entitled to cumulate their votes for the election of Directors. There
are no preemptive or other preferential rights to purchase additional shares of
common stock. Upon liquidation, dissolution or winding-up of EduLink the holders
of common stock are entitled to receive, pro rata, the assets of EduLink which
are legally available for distribution to shareholders subject to the prior
rights on liquidation of creditors. All of the issued and outstanding shares of
common stock are validly authorized, fully paid and non-assessable.
Dividends
EduLink has not paid any cash dividends on its common stock. The
present policy of the Board of Directors is to retain earnings to finance the
operations and development of EduLink's business. Accordingly, it is anticipated
that no cash dividends will be paid in the foreseeable future.
Transfer Agent
The transfer agent for the common stock is Standard Registrar and
Transfer Company, 12528 South 1840 East, Draper, Utah 84020.
Reports to Stockholders
EduLink by filing this Registration Statement, is registering its
common stock under the provisions of Section 12(g) of the Securities Exchange
Act of 1934, as amended. Such registration requires EduLink to comply with
periodic reporting, proxy solicitation and certain other requirements of the
Securities Exchange Act of 1934, as amended.
20
<PAGE>
ITEM 12: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
EduLink's By-laws provide for indemnification of officers and directors
to the fullest extent permitted by Nevada law. In addition, under EduLink's
By-laws, no director shall be liable personally to EduLink or its stockholders
for monetary damages for breach of fiduciary duty as a director; provided that
the Certificate of Incorporation does not eliminate the liability of directors
for (i) any breach of the director's duty of loyalty to EduLink or its
stockholders; (ii) acts of omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) acts or omissions in
respect of certain unlawful dividend payments or stock redemptions or
repurchases; or (iv) any transaction from which such director derives improper
personal benefit.
ITEM 13: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
EduLink's financial statements are included in a separate Section of
this Report following Item 15.
ITEM 14: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 15: FINANCIAL STATEMENTS AND EXHIBITS.
Index to Financial Statement and Exhibits Page
Report of Independent Certified Public Accountants........... F-1
Financial Statements
Balance Sheets............................................. F-2
Statements of Operations................................... F-3
Statements of Stockholders' Deficit........................ F-4
Statements of Cash Flows................................... F-5
Notes to the Financial Statements.......................... F-7
21
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
EduLink, Inc.
We have audited the accompanying balance sheets of EduLink, Inc. (a development
stage company) as of December 31, 1999 and 1998, and the related statements of
operations, stockholders' deficit, and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The statements of
operations, stockholders' deficit, and cash flows from January 25, 1996
(inception) to December 31, 1997 are unaudited.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EduLink, Inc. as of December
31, 1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. During the years ended December 31,
1999, 1998, and 1997, the Company incurred net losses of $153,956, $1,040,237,
and $2,086,226, respectively. In addition, the Company's net cash used in
operating activities was $25,837, $203,875, and $885,562 for the years ended
December 31, 1999, 1998, and 1997, respectively, and the Company's accumulated
deficit was $3,589,686 and $3,565,730 as of December 31, 1999 and 1998,
respectively. In addition, successful completion of the Company's transition,
ultimately, to the attainment of profitable operations is dependent upon
obtaining adequate financing to fulfill its development activities and achieving
a level of sales adequate to support the Company's cost structure. These
factors, among others, as discussed in Note 2 to the financial statements, raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
March 14, 2000
F-1
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31,
- --------------------------------------------------------------------------------
ASSETS
1999 1998
---------- ----------
CURRENT ASSETS
Cash $ 74,103 $ -
----------- -----------
TOTAL CURRENT ASSETS $ 74,103 $ -
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Book overdraft $ - $ 60
Bridge notes payable 200,000 200,000
Accounts payable 1,284,357 1,970,774
Due to related party 112,902 140,519
----------- -----------
Total current liabilities 1,597,259 2,311,353
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value
1,500,000,000 shares authorized
647,822,500 and 388,800,000 shares
issued and outstanding 647,823 388,800
Shares committed to be issued 671,750 -
Additional paid-in capital 876,957 865,577
Deficit accumulated during the development
stage (3,719,686) (3,565,730)
----------- -----------
Total stockholders' deficit (1,523,156) (2,311,353)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 74,103 $ -
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 AND
FOR THE PERIOD FROM JANUARY 25, 1996 (INCEPTION) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Period from
January 25,
For the Year Ended 1996
December 31, (Inception) to
-------------------------------------------------- December 31,
1999 1998 1997 1999 *
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
INCOME
Interest $ - $ - $ 2,052 $ 6,818
--------------- ---------------- --------------- ----------------
EXPENSES
Software development costs (121,070) 896,836 1,840,421 2,921,814
General and administrative 275,026 143,401 247,857 804,690
--------------- ---------------- --------------- ----------------
Total expenses 153,956 1,040,237 2,088,278 3,726,504
--------------- ---------------- --------------- ----------------
NET LOSS $ (153,956) $ (1,040,237) $ (2,086,226) $ (3,719,686)
=============== ================ =============== ================
BASIC AND DILUTED LOSS PER SHARE $ 0.00 $ 0.00 $ 0.00 $ 0.01
=============== ================ =============== ================
WEIGHTED-AVERAGE SHARES
OUTSTANDING 433,630,817 388,800,000 372,557,966 390,281,195
=============== ================ =============== ================
</TABLE>
* The period from January 25, 1996 (inception) to December 31, 1997 is
unaudited.
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM JANUARY 25, 1996 (INCEPTION) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Shares Accumulated
Common Stock Committed Additional During the
---------------------- to be Paid-In Development
Shares Amount Issued Capital Stage Total
---------- ---------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 25, 1996 (INCEPTION) * - $ - $ - $ - $ - $ -
SALE OF COMMON STOCK * 28,302,353 28,302 594,575 622,877
SHARES ISSUED TO FOUNDERS AND PROFESSIONALS * 276,754,118 276,754 (276,754) -
SHARES ISSUED FOR INVESTMENT BANKING SERVICES * 58,300,000 58,300 (33,300) 25,000
NET LOSS * (439,267) (439,267)
----------- ---------- --------- ----------- ------------ -----------
BALANCE, DECEMBER 31, 1996 * 363,356,471 363,356 - 284,521 (439,267) 208,610
SALE OF COMMON STOCK * 20,531,471 20,532 410,968 431,500
CONVERSION OF BRIDGE NOTES * 2,625,000 2,625 172,375 175,000
SHARES ISSUED TO FOUNDERS AND PROFESSIONALS * 2,287,058 2,287 (2,287) -
NET LOSS * (2,086,226) (2,086,226)
----------- ---------- --------- ----------- ------------ -----------
BALANCE, DECEMBER 31, 1997 388,800,000 388,800 - 865,577 (2,525,493) (1,271,116)
NET LOSS (1,040,237) (1,040,237)
----------- ---------- --------- ----------- ------------ -----------
BALANCE, DECEMBER 31, 1998 388,800,000 388,800 - 865,577 (3,565,730) (2,311,353)
CHANGES DUE TO RECAPITALIZATION 259,022,500 259,023 (259,023) -
LOAN FROM STOCKHOLDER CONTRIBUTED TO CAPITAL 140,403 140,403
COMMON STOCK SUBSCRIPTION RECEIVED 100,000 100,000
COMMON STOCK TO BE ISSUED 571,750 571,750
COMPENSATION WAIVED BY OFFICERS 130,000 130,000
NET LOSS (153,956) (153,956)
----------- ---------- --------- ----------- ------------ -----------
BALANCE, DECEMBER 31, 1999 647,822,500 $ 647,823 $ 671,750 $ 876,957 $ (3,719,686) $(1,523,156)
=========== ========== ========= =========== ============ ===========
</TABLE>
* The period from January 25, 1996 (inception) to December 31, 1997 is
unaudited.
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 AND
FOR THE PERIOD FROM JANUARY 25, 1996 (INCEPTION) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Period from
January 25,
For the Year Ended 1996
December 31, (Inception) to
--------------------------------- December 31,
1999 1998 1997 1999 *
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (153,956) $ (1,040,237) $ (2,086,226) $ (3,719,686)
Adjustments to reconcile net loss to
net cash used in operating activities
Common stock to be issued for
software development costs 571,750 - - 571,750
Common stock issued for
professional services - - - 25,000
Common stock issued for
related party payable 140,403 - - 140,403
Compensation waived by officers 130,000 - - 130,000
Increase (decrease) in
Accounts payable (686,417) 717,845 1,230,662 1,284,357
Due to related party (27,617) 118,517 (29,998) 112,902
--------------- ---------------- --------------- ----------------
Net cash used in operating activities (25,837) (203,875) (885,562) (1,455,274)
--------------- ---------------- --------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock subscription received 100,000 - - 100,000
Proceeds from issuance of bridge
notes - 200,000 - 375,000
Repayment of bridge notes - - - (50,000)
Proceeds from issuance of common
stock - - 500,000 1,375,000
Cost of issuance of common stock - - (68,500) (270,623)
--------------- ---------------- --------------- ----------------
Net cash provided by financing
activities 100,000 200,000 431,500 1,529,377
--------------- ---------------- --------------- ----------------
</TABLE>
* The period from January 25, 1996 (inception) to December 31, 1997 is
unaudited.
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 AND
FOR THE PERIOD FROM JANUARY 25, 1996 (INCEPTION) TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Period from
January 25,
For the Year Ended 1996
December 31, (Inception) to
-------------------------------------------------- December 31,
1999 1998 1997 1999 *
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net increase (decrease) in cash $ 74,163 $ (3,875) $ (454,062) $ 74,103
CASH (BOOK OVERDRAFT), BEGINNING OF
PERIOD (60) 3,815 457,877 -
--------------- ---------------- --------------- ----------------
CASH (BOOK OVERDRAFT), END OF
PERIOD $ 74,103 $ (60) $ 3,815 $ 74,103
=============== ================ =============== ================
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
INTEREST PAID $ - $ - $ - $ 11,521
=============== ================ =============== ================
INCOME TAXES PAID $ - $ - $ 1,600 $ 1,600
=============== ================ =============== ================
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the year ended December 31, 1999, a stockholder contributed $140,403 due
this stockholder as additional paid-in capital.
During the year ended December 31, 1999, the Company recorded $571,750 of
software development costs as additional paid-in capital, which represents the
Company's commitment to issue 11,435,000 shares of common stock to a vendor (see
Note 3).
During the year ended December 31, 1999, the Company's officers contributed
$130,000 in compensation due to them as additional paid-in capital.
During the year ended December 31, 1997, the Company converted $175,000 of
bridge notes into 2,625,000 shares of common stock.
* The period from January 25, 1996 (inception) to December 31, 1997 is
unaudited.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF BUSINESS
URREA Enterprises, Inc. ("URREA"), a Nevada corporation, acquired
EduLink, Inc. ("OLD EduLink"), a California corporation engaged in the
development of educational software, on October 28, 1999. After the
acquisition, URREA changed its name to EduLink, Inc.
URREA issued 388,800,000 shares of common stock to acquire 100% of the
common stock of OLD EduLink. The acquisition was accounted for as an
issuance of stock by OLD EduLink for the net assets of URREA as the
stockholders of OLD EduLink owned 60% of the common stock of URREA
after the acquisition, resulting in a recapitalization of OLD EduLink.
URREA had no significant assets or liabilities at the date of
acquisition and did not have significant operations prior to the
acquisition. Therefore, no pro forma information is presented.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The accompanying financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown
in the financial statements, during the years ended December 31, 1999,
1998, and 1997, the Company incurred losses of $153,956, $1,040,237,
and $2,086,226, respectively. As of December 31, 1999, the Company is
in the development stage and is primarily engaged in research and
development activities. Accordingly, the accompanying statements of
operations should not be regarded as typical for normal periods of
operation. The Company's development stage status, recurring net
losses, and capital deficit raise substantial doubt about its ability
to continue as a going concern. Additional financing will be required
in order for the Company to complete its development stage activities.
Management believes that it will be able to obtain such financing from
new investors.
To meet these objectives, the Company expects to complete an additional
$8,500,000 private placement of equity in early 2000, which management
expects will provide sufficient funding to continue the Company's
present operations and support future marketing and development
activities. Management believes that these plans will enable the
Company to continue as a going concern for at least 12 months from the
balance sheet date. The Company has received a subscription amounting
to $1,187,500 on which no fees or commission were due or payable
through March 8, 2000. In connection with the offering, $100,000 was
received prior to December 31, 1999.
F-7
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Going Concern (Continued)
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
Development Stage Enterprise
The Company is a development stage company as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7, "Accounting and
Reporting by Development Stage Enterprises." The Company is devoting
substantially all of its present efforts to establish a new business,
and its planned principal operations have not yet commenced. All losses
accumulated since inception have been considered as part of the
Company's development stage activities.
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, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Software Development Costs
Development costs incurred in the research and development of new
software products are expensed as incurred until technological
feasibility in the form of a working model has been established. To
date, the Company has not completed its software development to the
point of technological feasibility, and accordingly, no costs have been
capitalized.
Stock Split
In October 1999, the Company's Board of Directors declared a 50-for-1
stock split. All applicable share and per share data have been
retroactively restated for the stock split.
Income Taxes
The Company uses the asset and liability method of accounting for
income taxes. The asset and liability method accounts for deferred
income taxes by applying enacted statutory rates in effect for periods
in which the difference between the book value and the tax bases of
assets and liabilities are scheduled to reverse. The resulting deferred
tax asset or liability is adjusted to reflect changes in tax laws or
rates. Because the Company has incurred losses from operations, no
benefit is realized for the tax effect of the net operating loss
carryforward and software development costs capitalized for tax
purposes due to the uncertainty of its realization.
F-8
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of Long-Lived Assets
The Company reviews long-lived assets to be held and used for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. If the sum of
the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, the Company
would recognize an impairment loss based on the estimated fair value of
the asset.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes
and encourages the use of the fair value based method of accounting for
stock-based compensation arrangements under which compensation cost is
determined using the fair value of stock-based compensation determined
as of the date of grant and is recognized over the periods in which the
related services are rendered. The statement also permits companies to
elect to continue using the current implicit value accounting method
specified in Accounting Principles Bulletin ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," to account for stock-based
compensation issued to employees. The Company has elected to use the
intrinsic value based method and has disclosed the pro forma effect of
using the fair value based method to account for its stock-based
compensation.
Loss per Share
Basic loss per share is computed by dividing loss available to common
stockholders by the weighted-average number of common shares
outstanding. Diluted loss per share is computed similar to basic loss
per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if
the potential common shares had been issued and if the additional
common shares were dilutive. Because the Company has incurred net
losses, basic and diluted loss per share are the same.
Comprehensive Income
The Company utilizes SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting comprehensive income
and its components in a financial statement. Comprehensive income as
defined includes all changes in equity (net assets) during a period
from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include
foreign currency translation adjustments and unrealized gains and
losses on available-for-sale securities. Comprehensive income is not
presented in the Company's financials statements since the Company did
not have any of the items of comprehensive income in any period
presented.
F-9
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 3 - ACCOUNTS PAYABLE
On January 5, 2000, the Company entered into an agreement with its
major vendor and the vendor's affiliates to settle a disputed amount of
a contractual obligation arising from a software development contract.
The Company owed $1,708,000 at December 31, 1999 to this vendor and its
affiliates. The agreement calls for a settlement of the entire
outstanding balance for $1,000,000 within the period specified by the
agreement. The Company has agreed to pay the vendor at specified dates
15% of the net financing proceeds it receives pursuant to its financing
activities. In the event the Company is unable to pay this agreed
amount by December 31, 2000, commencing January 1, 2000, interest shall
accrue on the unpaid balance at the prime rate as determined at the end
of each quarter, plus 1%.
In addition, the agreement states that the Company will assign to the
vendor intellectual property rights of the software developed if the
$1,000,000 obligation is not paid by December 31, 2001.
Further, the Company has agreed to issue approximately 11,435,000
shares of its common stock as part of the settlement agreement within
60 days of the date of this agreement in lieu of shares and warrants
that were agreed upon previously. This commitment to issue common stock
has been recorded as common stock to be issued at $571,750, which
represents the value of the Company's common stock based on a recent
subscription of shares through a private placement memorandum dated
December 19, 1999.
The settlement has been recorded as a change in accounting estimate.
Accordingly, software development costs have been credited for a net
amount of $136,000. The effect of this change in accounting estimate is
to decrease net loss for the year ended December 31, 1999 by $136,000
and to decrease net loss per share by $0.00031.
NOTE 4 - BRIDGE NOTES PAYABLE
Bridge notes represent notes payable at 10% (annual percentage rate
10.47%) per annum and are currently due for payment. The Company issued
20,869,412 and 11,435,294 warrants to purchase shares of common stock
to the 1998 and 1996 lenders, respectively, at an average exercise
price of $0.034 per share. These warrants expire four years from the
date of grant or four years from the date of an initial public
offering.
F-10
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Lease
The Company co-leases its facility under an operating lease agreement
with an unrelated third party. Future minimum lease payments at
December 31, 1999 were as follows:
Year Ending Gross Company's
December 31, Commitment Portion
------------ ---------- ---------
2000 $103,254 $ 36,139
2001 106,673 37,335
2002 106,673 37,335
-------- ---------
TOTAL $316,600 $ 110,809
======== =========
Rent expense was $31,711, $28,648, and $5,124 for the years ended
December 31, 1999, 1998, and 1997, respectively.
Employment Agreement
In September 1999, the Company entered into five-year employment
contracts with its President, Chief Executive Officer, and Senior Vice
President that provide for a minimum annual salary, incentives, and
bonuses, which are based on the Company's attainment of specified
levels of sales and earnings. The annual salaries for the three
officers are $150,000, $150,000, and $90,000, respectively. During the
year ended December 31, 1999, all three officers were not compensated,
and unpaid compensation in the amounts of $50,000, $50,000, and
$30,000, respectively, was waived by the officers.
NOTE 6 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 1999, one of the principal
stockholders of the Company paid $112,902 of the Company's expenses,
which are recorded on the accompanying balance sheet as due to related
party. In addition, this principal stockholder contributed $140,403 due
to this stockholder as additional paid-in capital.
F-11
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 7 - COMMON STOCK AND COMMON STOCK WARRANTS
During the period from January 25, 1996 (inception) to December 31,
1996, the Company issued 28,302,353 shares of common stock in
connection with a private placement for $622,877, net of expenses of
$202,213. In addition, the Company issued 276,754,118 shares of common
stock to its founders and professionals for which no consideration was
received and 58,300,000 shares to the investment bankers in exchange
for services valued at $25,000.
During the year ended December 31, 1997, the Company issued 20,531,471
shares of common stock in connection with a private placement for
$431,500, net of expenses of $68,500. In addition, the Company issued
2,287,058 shares of common stock to its founders and professionals.
The Company issued warrants to purchase 51,458,824 common shares in
connection with a private placement at an average exercise price of
$0.035. In addition, the Company also issued 125,788,235 warrants to
its principal stockholders and directors and 2,287,059 warrants to a
consultant.
A summary of the Company's warrant activity is listed below:
<TABLE>
<CAPTION>
Weighted- Weighted-
Weighted- Average Average
Average Exercise Exercise
Stock Stock Remaining Price of Price of
Exercise Warrants Warrants Contractual Warrants Warrants
Price Outstanding Exercisable Life Outstanding Exercisable
-------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 0.035 84,907,059 84,907,059 2.74 years $ 0.035 $ 0.035
$ 0.0022 125,788,235 125,788,235 4.51 years $ 0.0022 $ 0.0022
$0.000087 1,143,529 1,143,529 4 years $0.000087 $0.000087
----------- -----------
211,838,823 211,838,823
=========== ===========
</TABLE>
The fair value of the warrants was calculated using the Black-Scholes
option valuation model with the following weighted-average assumptions
for the years ended December 31, 1999 and 1998: dividend yields of 0%
and 0%, respectively; risk free interest rates of 7% and 6%,
respectively; expected volatility of 0% and 0%, respectively; and
expected lives of four and four years, respectively.
The weighted-average fair value of the warrants issued during the years
ended December 31, 1999 and 1998 was $0.022 and $0, respectively.
F-12
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 8 - INCOME TAXES
The Company has incurred no income tax expenses since inception. The
actual tax benefit differs from the expected tax benefit computed by
applying the United States federal corporate tax rate of 34% to loss
before income taxes as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- --------------- ----------------
<S> <C> <C> <C>
Expected tax benefit $ (8,000) $ (354,000) $ (709,000)
State income taxes, net of federal
benefit - (10,000) (20,000)
Changes in valuation allowance 8,000 364,000 729,000
---------------- --------------- ----------------
TOTAL $ - $ - $ -
================ =============== ================
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets were as follows: 1999 1998 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------------- --------------- ----------------
<S> <C> <C> <C>
Net operating loss carryforwards $ 317,000 $ 308,000 $ 76,000
Software development costs
capitalized for tax purposes 1,210,000 1,033,000 2,582,000
---------------- --------------- ----------------
1,527,000 1,341,000 2,658,000
Less valuation allowance (1,527,000) (1,341,000) (2,658,000)
---------------- --------------- ----------------
TOTAL $ - $ - $ -
================ =============== ================
</TABLE>
At December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $794,000 and $396,000,
respectively, which begin to expire in 2011 and 2001, respectively.
NOTE 9 - YEAR 2000 ISSUE
The Company has completed a comprehensive review of its computer
systems to identify the systems that could be affected by ongoing Year
2000 problems. Upgrades to systems judged critical to business
operations have been successfully installed. To date, no significant
costs have been incurred in the Company's systems related to the Year
2000.
F-13
<PAGE>
EDULINK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 9 - YEAR 2000 ISSUE (CONTINUED)
Based on the review of the computer systems, management believes all
action necessary to prevent significant additional problems has been
taken. While the Company has taken steps to communicate with outside
suppliers, it cannot guarantee that they have all taken the necessary
steps to prevent any service interruption that may affect the Company.
NOTE 10 - SUBSEQUENT EVENTS
On February 1, 2000, the Company entered into an agreement with an
officer to issue warrants to purchase 34,305,000 shares of common stock
at an exercise price of $0.0022 per share.
As of April 13, 2000, the Company has received cash for shares
subscribed amounting to $5,027,500, including $100,000 received in
December 1999, on which no fees or commission were due or payable in
connection with the December 1999 private placement memorandum
offering.
F-14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
EduLink, Inc.
------------------
Registrant
Date: March 14, 2000 By: /s/ Michael Rosenfeld
----------------------
Title: Chief Executive Officer
22
<PAGE>
Exhibits
2.1 Agreement and Plan of Merger between URREA Enterprises and EduLink Inc.*
3.1 Articles of Incorporation of URREA Enterprises, Inc.+
3.2 Articles of Merger for URREA Enterprises, Inc.*
3.3 By-laws of EduLink Inc.*
4.1 Form of Warrant Agreement with Michael Rosenfeld (Rosenfeld Warrant
Agreement)*
4.2 Amendment to Rosenfeld Warrant Agreement, dated September 15, 1999*
4.3 Form of Warrant Agreement with Ronald C. Rescigno (Rescigno Warrant
Agreement)*
4.4 Amendment to Rescigno Warrant Agreement, dated September 15, 1999*
4.5 Warrant Agreement with Dorothy Tucker, dated September 15, 1999.*
4.6 Warrant Agreement with Kathleen McGuire, dated September 15, 1999*
4.7 Warrant Agreement with Ian Rescigno, dated February 1, 2000*
4.8 Specimen of common stock certificate*
10.1 Agreement with Saatchi & Saatchi North America, Inc. dated January 5,
2000.*
10.2 Employment Agreement between Michael Rosenfeld and EduLink Inc., dated
September 4, 1999 ("Rosenfeld Employment Agreement")*
10.3 Amendment to Rosenfeld Employment Agreement, dated February 1, 2000*
10.4 Employment Agreement between Ronald Rescigno and EduLink Inc., dated
September 4, 1999 ("Dr. Rescigno Employment Agreement")*
10.5 Amendment to Dr. Rescigno Employment Agreement dated February 1, 2000*
10.6 Employment Agreement between Ian Rescigno and EduLink Inc., dated
September 4, 1999 ("Ian Rescigno Employment Agreement")*
23
<PAGE>
10.7 Amendment to Ian Rescigno Employment Agreement, dated February 1, 2000*
10.8 Agreement with Science Applications International Corporation.*
10.9 Agreement with Professor Gary B. Nash, Ph.D.*
10.10 Agreement with McGuire and Associates.*
11.1 Statement of Computation of Per Share Earnings*
21.1 Subsidiaries of the Registrant*
27.1 Financial Data Schedule*
- ---------------------------------
* Previously Filed
+ Filed herewith
24
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Document
- ------- ------------------------------------
2.1 Agreement and Plan of Merger between URREA Enterprises and
EduLink Inc.*
3.1 Articles of Incorporation of URREA Enterprises, Inc.+
3.2 Articles of Merger for URREA Enterprises, Inc.*
3.3 By-laws of EduLink Inc.*
4.1 Form of Warrant Agreement with Michael Rosenfeld (Rosenfeld
Warrant Agreement)*
4.2 Amendment to Rosenfeld Warrant Agreement, dated September 15,
1999*
4.3 Form of Warrant Agreement with Ronald C. Rescigno (Rescigno
Warrant Agreement)*
4.4 Amendment to Rescigno Warrant Agreement, dated September 15,
1999*
4.5 Warrant Agreement with Dorothy Tucker, dated September 15,
1999.*
4.6 Warrant Agreement with Kathleen McGuire, dated September 15,
1999*
4.7 Warrant Agreement with Ian Rescigno, dated February 1, 2000*
4.8 Specimen of common stock certificate*
10.1 Agreement with Saatchi & Saatchi North America, Inc. dated
January 5, 2000.*
10.2 Employment Agreement between Michael Rosenfeld and EduLink
Inc., dated September 4, 1999 ("Rosenfeld Employment
Agreement")*
10.3 Amendment to Rosenfeld Employment Agreement, dated February 1,
2000*
10.4 Employment Agreement between Ronald Rescigno and EduLink Inc.,
dated September 4, 1999 ("Dr. Rescigno Employment Agreement")*
10.5 Amendment to Dr. Rescigno Employment Agreement dated February
1, 2000*
25
<PAGE>
10.6 Employment Agreement between Ian Rescigno and EduLink Inc.,
dated September 4, 1999 ("Ian Rescigno Employment Agreement")*
10.7 Amendment to Ian Rescigno Employment Agreement, dated February
1, 2000*
10.8 Agreement with Science Applications International
Corporation.*
10.9 Agreement with Professor Gary B. Nash, Ph.D.*
10.10 Agreement with McGuire and Associates.*
11.1 Statement of Computation of Per Share Earnings*
21.1 Subsidiaries of the Registrant*
27.1 Financial Data Schedule*
- ------------------------------------
* Previously filed
+ Filed herewith
26
EXHIBIT 3.1
[AS FILED WITH THE SECRETARY OF STATE OF THE STATE OF NEVADA ON JANUARY 5, 1994]
ARTICLES OF INCORPORATION
OF
URREA ENTERPRISES, INC.
We, the undersigned natural persons of the age of eighteen years or more,
acting as incorporators of a corporation under the General Corporation Law of
the State of Nevada, adopt the following Articles of Incorporation for such
corporation.
ARTICLE I
Name
The name of this corporation is URREA Enterprises, Inc.
ARTICLE II
Duration
The duration of this corporation is perpetual.
ARTICLE III
Purpose
The purpose or purposes for which this corporation is organized are:
(a) To engage in any lawful act or activity for which the corporation may
be organized under the general corporation law of Nevada.
(b) To engage in mining and mining development and to do all acts necessary
in connection with said business purpose.
(c) To do each and every thing necessary suitable or proper for the
accomplishment of any of the purposes or the attainment of any one or more of
the subjects herein enumerated or which at any time may appear conductive to or
expedient for the protection
<PAGE>
or benefit of this corporation and to do said acts as fully and to the same
extent as natural persons might or could do in any part of the world; as
principals, agents, partners, trustees or otherwise, either alone or in
conjunction with any other person, association or corporation.
ARTICLE IV
Stock
The Corporation shall have the authority to issue fifty million
(50,000,000) shares of common stock with a par value of $0.001 per share, all
stock of the corporation shall be of the same class common and shall have the
same rights and preferences, fully paid stock of this corporation shall not be
liable to any further call or assessment.
ARTICLE V
Amendment
These Articles of incorporation may be amended by the affirmative vote of a
majority of the shares entitled to vote on each such amendment.
ARTICLE VI
Shareholder Rights
The authorized and treasury stock of this corporation may be issued at such
time, upon such terms and conditions and for such consideration as the Board of
Directors shall determine. Shareholders shall not have pre-emptive rights to
acquire unissued shares of the stock of this corporation and cumulative voting
is denied.
2
<PAGE>
ARTICLE VII
Initial Office and Agent
The address of the initial registered office of the corporation is and the
name of the corporation's initial registered agent at such address is Laughlin
Associates, 2533 North Carson Street, Carson City, Nevada 89706.
ARTICLE VIII
Directors
The number of Directors constituting the initial Board of Directors of this
corporation is three. The name and address of the persons who are to serve as
director until the first annual meeting of stockholders, or until their
successors are elected and qualified are:
Deryl J. Sweat
P.O. Box 1568
Rock Springs, Wyoming 82902
Martin Goicoechea
P.O. Box 6201
Rock Springs, Wyoming 82901
Albert A. Etcheverry
904 Potter Street
Rock Springs, Wyoming 82901
ARTICLE IX
Incorporators
The name and address of each incorporator is:
Deryl J. Sweat
P.O. Box 1568
Rock Springs, Wyoming 82902
Martin Goicoechea
P.O. Box 6201
Rock Springs, Wyoming 82901
3
<PAGE>
Albert A. Etcheverry
904 Potter Street
Rock Springs, Wyoming 82901
ARTICLE X
Common Directors - Transactions Between Corporations
No contract or other transaction between this corporation and one or more
of its directors or any other corporation, firm, association or entity in which
one or more of its directors or officers are financially interested, shall be
either void or voidable because of such relation or interest, or because such
director or directors are present at the meeting of the Board of Directors, or a
committee thereof which authorizes, approves or ratifies such contract or
transaction, or because his or their votes are counted for such purpose if: (a)
the fact of such relationship or interest is disclosed or known to the Board of
Directors or committee which authorizes, approves, or ratifies this contract or
transaction by vote or consent sufficient for the purpose without counting the
votes or consents of such interested directors; or (b) the fact of such
relationship or interest is disclosed or known to the shareholders entitled to
vote and they authorize, approve, or ratify such contract or transaction by vote
or written consent; or (c) the contract or transaction is fair and reasonable to
the corporation.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board or Directors or committee thereof which
authorizes, approves or ratifies such contract or transaction.
4
<PAGE>
ARTICLE XI
LIMITED LIABILITY AND INDEMNIFICATION
OF DIRECTORS AND OFFICERS
No Director of Officer of the corporation shall be personally liable to the
corporation or any of its stockholders for damages for a breach of a fiduciary
duty as a Director or Officer involving any action or omission of any such
Director or Officer; provided, however, that the foregoing provision shall not
eliminate or limit the liability of a Director and Officer of the corporation
for: (a) acts or omission which involve intentional misconduct, fraud or knowing
violation of law or (b) a payment of a dividend in violation of Nevada Revised
Statues Section 78.300.
DATED this 19th day of November, 1993.
/s/ Martin Goicoechea
------------------------------------
/s/ Deryl J. Sweat
------------------------------------
/s/ Albert A. Etcheverry
------------------------------------
STATE OF WYOMING )
) ss
COUNTY OF )
I hereby certify that on the 19th day of November, 1992, Deryl J. Sweat,
Martin Goicoechea, and Albert A. Etcheverry, personally appeared before me who,
being by me first duly sworn, severally declared that they are the incorporators
and that the statements therein contained are true.
DATED this 19th day of November, 1993.
/s/ Steven Slykes
------------------------------------
NOTARY PUBLIC
5
