<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 Or 15(D) Of The Securities Act Of 1934
For the quarterly period ended September 30, 2000
Commission file number: 000-31205
COLLEGE SOFTWARE, INC.
(Exact name of small business issuer as specified in its charter)
Florida 65-0853816
(State or other jurisdiction of (IRS Employee Identification No.)
incorporation or organization)
309 - 837 West Hastings Street, Vancouver, B.C., V6C 3N6
(Address of principal executive offices)
(604) 605-0507
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-------------- --------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $0.0001 par value 1,185,400
(Class) (Outstanding as of October 18, 2000)
<PAGE>
COLLEGE SOFTWARE, INC.
FORM 10-QSB
INDEX
Page
----
Part I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Independent Auditors Report....................................................3
Assets.........................................................................4
Liabilities and Stockholder's Equity...........................................5
Statement of Operations........................................................6
Statement of Stockholder's Equity..............................................7
Statement of Cash Flows........................................................8
Notes of Financial Statements.............................................. ...9
Item 2 Management's Discussion and Analysis or Plan of Operation............14
Part II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K.....................................21
Signatures....................................................................21
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors October 17, 2000
COLLEGE SOFTWARE, INC.
Vancouver, BC, Canada
I have audited the accompanying Balance Sheets of COLLEGE SOFTWARE,
INC., as of September 30, 2000, December 31, 1999, and December 31, 1998, and
the related statements of operations, stockholders' equity and cash flows for
the period January 1, 2000, to September 30, 2000, the year ended December 31,
1999, and the period June 29, 1998, (inception), to December 31, 1998. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of COLLEGE SOFTWARE,
INC., as of September 30, 2000, December 31, 1999, and December 31, 1998, and
the related stations of operations, stockholders' equity and cash flows for the
period January 1, 2000, to September 30, 2000, the year ended December 31, 1999,
and the period June 29, 1998, (inception) to December 31, 1998, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #3 to the
financial statements, the Company has had no operations and has no established
source of revenue. This raises substantial doubt about its ability to continue
as a going concern. Management's plan in regard to these matters, are also
described in Note #3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Barry L. Friedman
------------------------------------
Barry L. Friedman
Certified Public Accountant
1582 Tulita Drive
Las Vegas, NV 89123
(702) 361-8414
<PAGE>
<TABLE>
COLLEGE SOFTWARE, INC.
(A Development Stage Company)
BALANCE SHEET
ASSETS
<CAPTION>
Sep. December December
30, 2000 31, 1999 31, 1998
-------- -------- ----------
<S> <C> <C> <C>
CURRENT ASSETS $ 0 $ 0 $ 0
---------------- --------------- ----------------
TOTAL CURRENT ASSETS $ 0 $ 0 $ 0
---------------- --------------- ----------------
OTHER ASSETS $ 0 $ 0 $ 0
---------------- --------------- ----------------
TOTAL OTHER ASSETS $ 0 $ 0 $ 0
---------------- --------------- ----------------
TOTAL ASSETS $ 0 $ 0 $ 0
---------------- --------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
<TABLE>
COLLEGE SOFTWARE, INC.
(A Development Stage Company)
BALANCE SHEET
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<CAPTION>
Sep. December December
30, 2000 31, 1999 31, 1998
------------ ------------ ------------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 50 $ 0 $ 0
Officers Advances (Note #8) 3,078 650 559
------------- ------------ ------------
TOTAL CURRENT LIABILITIES $ 3,128 $ 650 $ 559
------------- ------------ ------------
STOCKHOLDERS' EQUITY (Note #4)
Preferred stock, par value $0.001
Authorized 10,000,000 shares
Issued and outstanding at
June 30,2000 - None $ 0
Common stock, par value $0.001
Authorized 100,000,000 shares
Issued and outstanding at
December 31, 1998 -
1,000,000 shares $ 1,000
December 31, 1999 -
1,035,400 shares $ 1,035
September 30, 2000 -
1,185,400 shares $ 1,185
Additional Paid-In Capital 24,169 9,319 9,000
Deficit accumulated during
the development stage -28,482 -11,004 -10,559
------------- ------------ ------------
TOTAL STOCKHOLDERS' EQUITY $ -3,128 $ -650 $ -559
------------- ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 0 $ 0 $ 0
------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
<TABLE>
COLLEGE SOFTWARE, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<CAPTION>
January 1, Year Jun.29, Jun.29,1998
2000, to Ended 1998, to (Inception)
Sep. 30, Dec. 31, Dec. 31, to Sep. 30,
2000 1999 1998 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Revenue $ 0 $ 0 $ 0 $ 0
--------------- ---------------- --------------- ----------------
EXPENSES
General, Selling
and Administrative $ 17,478 $ 445 $ 10,559 $ 28,482
--------------- ---------------- --------------- ----------------
TOTAL EXPENSES $ 17,478 $ 445 $ 10,559 $ 28,482
--------------- ---------------- --------------- ----------------
NET PROFIT/LOSS (-) $ -17,478 $ -445 $ -10,559 $ -28,482
--------------- ---------------- --------------- ----------------
Net loss per share -
Basic and diluted
(Note #2) $ -.1608 $ -.0004 $ -.1032 $ -.2717
--------------- ---------------- --------------- ----------------
Weighted average
Number of common
Shares outstanding 1,086,860 1,031,521 1,022,778 1,048,113
--------------- ---------------- --------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE>
<TABLE>
COLLEGE SOFTWARE, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Additional Accumu-
Common Stock paid-in lated
Shares Amount Capital Deficit
------ ------ ------- -------
<S> <C> <C> <C> <C>
Balance,
July 5, 1998
Issued for services 950,000 $ 950 $ 8,550 $ 0
October 31, 1998
Issued for cash 50,000 50 450
Net loss
June 29,1998
December 31, 1998 -10,559
--------------- ---------------- --------------- ----------------
Balance,
December 31, 1998 1,000,000 $ 1,000 $ 9,000 $ -10,559
July 10, 1999
Issued for cash 35,400 35 319
Net loss year ended
December 31, 1999 -445
--------------- ---------------- --------------- ----------------
Balance,
December 31, 1999 1,035,400 $ 1,035 $ 9,319 $ -11,004
June 29, 2000
Issued for services 150,000 150 14,850
Net loss
January 1, 2000 to
September 30, 2000 -17,478
--------------- ---------------- --------------- ----------------
Balance,
September 30, 2000 1,185,400 $ 1,185 $ 24,169 $ -28,482
--------------- ---------------- --------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements
7
<PAGE>
<TABLE>
COLLEGE SOFTWARE, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<CAPTION>
January 1, Year Jun.29, Jun.29,1998
2000, to Ended 1998, to (Inception)
Sep. 30, Dec. 31, Dec. 31, to Sep. 30,
2000 1999 1998 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash Flows from
Operating Activities
Net Loss (-), Gain (+) $ -17,478 $ -445 $ -10,559 $ -28,482
Changes in assets and
Liabilities
Issued for services +15,000 0 +9,500 +24,500
Accounts Payable +50 0 0 +50
Officers Advances +2,428 +91 +559 +3,078
--------------- ---------------- --------------- ----------------
Net cash used in
Operating activities $ 0 $ -354 $ -500 $ -854
Cash Flows from
Investing Activities 0 0 0 0
Cash Flows from
Financing Activities
Issue common
stock for cash 0 +354 +500 +854
--------------- ---------------- --------------- ----------------
Net Increase (decrease)
In cash $ 0 $ 0 $ 0 0
Cash,
Beginning of period 0 0 0 0
--------------- ---------------- --------------- ----------------
Cash, End of Period $ 0 $ 0 $ 0 $ 0
--------------- ---------------- --------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements
8
<PAGE>
COLLEGE SOFTWARE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
September 30, 2000, December 31, 1999, and December 31, 1998
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized June 29, 1998, under the laws of the State of
Florida, as COLLEGE SOFTWARE, INC. The Company currently has no
operations and in accordance with SFAS #7, is considered a development
company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
-----------------
The Company records income and expenses on the accrual method.
Estimates
---------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.
Cash and equivalents
--------------------
The Company maintains a cash balance in a non-interest-bearing
bank that currently does not exceed federally insured limits.
For the purpose of the statements of cash flows, all highly
liquid investments with the maturity of three months or less
are considered to be cash equivalents.
9
<PAGE>
COLLEGE SOFTWARE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-----------------------------------------
September 30, 2000, December 31, 1999, and December 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
------------
Income taxes are provided for using the liability method of
accounting in accordance with Statement of Financial
Accounting Standards No. 109 (SFAS #109) "Accounting for
Income Taxes". A deferred tax asset or liability is recorded
for all temporary difference between financial and tax
reporting. Deferred tax expense (benefit) results from the net
change during the year of deferred tax assets and liabilities.
Reporting on Costs of Start-Up Activities
-----------------------------------------
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the
Costs of Start-Up Activities" which provides guidance on the
financial reporting of start-up costs and organization costs.
It requires most costs of start-up activities and organization
costs to be expensed as incurred. SOP 98-5 is effective for
fiscal years beginning after December 15, 1998. With the
adoption of SOP 98-5, there has been little or no effect on
the company's financial statements.
Loss Per Share
--------------
Net loss per share is provided in accordance with Statement of
Financial Accounting Standards No. 128 (SFAS #128) "Earnings
Per Share". Basic loss per share is computed by dividing
losses available to common stockholders by the weighted
average number of common shares outstanding during the period.
Diluted loss per share reflects per share amounts that would
have resulted if dilative common stock equivalents had been
converted to common stock. As of September 30, 2000, the
Company had no dilutive common stock equivalents such as stock
options.
10
<PAGE>
COLLEGE SOFTWARE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-----------------------------------------
September 30, 2000, December 31, 1999, and December 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Year End
--------
The Company has selected December 31st, as its year-end.
Year 2000 Disclosure
--------------------
The Y2K issue had no effect on this Company.
NOTE 3 - INCOME TAXES
There is no provision for income taxes for the period ended September
30, 2000. The Company's total deferred tax asset as of December 31,
1999, is as follows:
Net operation loss carry forward $ 11,004
Valuation allowance $ 11,004
Net deferred tax asset $ 0
The federal net operating loss carry forward will expire by 2019.
This carry forward may be limited upon the consummation of a business
combination under IRC Section 381.
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock
------------
The authorized common stock of the corporation consists of 100,000,000
shares with a par value $0.001 per share.
11
<PAGE>
COLLEGE SOFTWARE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-----------------------------------------
September 30, 2000, December 31, 1999, and December 31, 1998
NOTE 4 - STOCKHOLDERS' EQUITY (CONTINUED)
Preferred Stock
---------------
The authorized preferred stock of the Corporation consists of
10,000,000 shares with a par value of $0.001 per share.
On July 5, 1998, the Company issued 950,000 shares of its $0.001 par
value common stock for services of $9,500 to its director.
On October 31, 1998, the Company issued 50,000 common shares for $0.01
each, for a total of $500 cash, pursuant to Regulation D, Rule 504.
On February 10, 1999, the Company issued 35,400 common shares for $0.01
each, for a total of $354 cash, pursuant to Regulation D, Rule 504.
On June 29, 2000, the Company issued 150,000 shares of its $0.001 par
value common stock for services valued at $0.10 per share for a total
of $15,000, pursuant to Regulation D, Rule 701.
NOTE 5 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company does not have
significant cash or other material assets, nor does it have an
established source of revenues sufficient to cover its operating costs
and to allow it to continue as a going concern.
12
<PAGE>
COLLEGE SOFTWARE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-----------------------------------------
September 30, 2000, December 31, 1999, and December 31, 1998
NOTE 6 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common or preferred stock.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. An
officer of the corporation provides office services without charge.
Such costs are immaterial to the financial statements and accordingly,
have not been reflected therein. The officers and directors of the
Company are involved in other business activities and may in the
future, become involved in other business opportunities. If a specific
business opportunity becomes available, such persons may face a
conflict in selecting between the Company and their other business
interests. The Company has not formulated a policy for the resolution
of such conflicts.
NOTE 8 - OFFICERS ADVANCES
While the Company is seeking additional capital through a merger with
an existing company, an officer of the Company has advanced funds on
behalf of the Company to pay for any costs incurred by it. These funds
are interest free.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion contains forward-looking statements that are subject to
significant risks and uncertainties. There are several important factors that
could cause actual results to differ materially from historical results and
percentages and results anticipated by the forward-looking statements. The
Company has sought to identify the most significant risks to its business, but
cannot predict whether or to what extent any of such risks may be realized nor
can there be any assurance that the Company has identified all possible risks
that might arise. Investors should carefully consider all of such risks before
making an investment decision with respect to the Company's stock. In
particular, investors should refer to the section entitled, "Factors that May
Affect Future Results and Market Price of Stock".
Plan of Operation
-----------------
During the next twelve months, the Company plans to concentrate its efforts on
developing its products and identifying markets for these products. The Company
intends to rely on the experience and expertise of its management to study the
market demand for E-Learning products and services over the Internet.
Because the Company remains essentially a start-up development company with
limited capital resources, it may be necessary for the President to either
advance funds to the Company, or to accrue expenses until such time as an
additional financing can be made. Management intends to hold expenses to a
minimum and to obtain services on a contingency basis when possible until the
Company's product development and marketing reaches a point when additional
financing will be possible. Further, the Company's President and sole Director
will defer any cash compensation until such time as the Company begins to earn
revenues from operations.
It is clear to the Company that present funding is not sufficient for the launch
of its operations, and that it must interest investors in one or more secondary
capital formation programs before it can launch.
Management is now engaged in evaluating the feasibility of further limited
offerings or private placements, whether to develop a program for investors
involving royalties or profit participation in actual product sales, with
investments tied to specific products, or whether to attempt to register
securities for sale, pursuant to Section 5 of the Securities Act of 1933. It is
the conclusion of management that significant additional capital formation is
necessary to launch operations successfully.
The Company does not intend to use any employees, with the possible exception of
part-time clerical assistance on an as-needed basis, until the Company begins to
earn revenues from operations. Outside advisors or consultants will be used only
if they can be obtained for a minimal cost or on a deferred payment basis.
Management is confident that it will be able to operate in this manner as it
continues to develop its product during the next twelve months.
14
<PAGE>
Cash requirements and need for additional funds
-----------------------------------------------
The Company anticipates no substantial cash requirements for the next twelve
months, to remain in its present pre-operating condition. It is the opinion of
management that $100,000 would be required to launch operations in the next
twelve months.
To sustain the Company in a pre-operating mode, the Company has indicated
substantial self-sufficiency, for this reason, management anticipates no
activity during that period, other than compliance with reporting requirements.
Required management, legal and professional services during that period are
believed capable of being secured for deferred payment or payment in new
investment shares of common stock. The exception to the previous statement is
that the Company's Auditor cannot lawfully or properly be compensated otherwise
than by payment for services in cash as billed by such independent auditor. This
cash requirement is foreseen to be not less than $4,000.00 nor more than
$10,000.00 during the next twelve months. This minimal funding will be obtained
by borrowing, possibly with a guarantee from its officers, directors or
principal shareholder. There is no assurance possible that even these minimal
requirements for cash can be met. The failure to maintain current auditing of
the corporate affairs would result in the failure to meet the Company's
intention to file periodic reports, voluntarily or otherwise, at the close of
its next fiscal year. The expenses of its audit, legal and professional
requirements, may be advanced by management. No significant cash or funds are
required for Management to evaluate possible transactions. No such activity is
expected for at least the next six months.
In the more important and desirable event that operations are to be launched
during the next twelve months, as intended, it will be necessary for the Company
to obtain sufficient working capital to insure that its operations could
continue for long enough to achieve profitability.
While the Company has disclosed the results of such a contingency, it does not
anticipate any such contingency upon which the Company would voluntarily cease
filing reports with the SEC, even though it might cease to be required to do so
under current rules. It is in the Company's compelling interest to be a
reporting company and to report its affairs quarterly, annually and currently,
as the case may be, generally to provide accessible public information to
interested parties, and also specifically to maintain its qualification for the
OTCBB, if and when the Registrant's intended application for submission be
effective. Capital formation programs cannot be approached responsibly without
maintenance of the Company's reporting status.
Discussion and Analysis of Financial Condition and Results of Operations
------------------------------------------------------------------------
OPERATIONS AND RESULTS FOR THE PAST QUARTER ENDED SEPTEMBER 30, 2000: Activity
during the past quarter has been confined to the identification of markets and
development of products.
15
<PAGE>
FUTURE PROSPECTS: The Company is unable to predict when it may launch intended
operations, or failing to do so, when and if it may elect to participate in a
business acquisition opportunity. The reason for this uncertainty arises from
its limited resources, and competitive disadvantage to other public or
semi-public issuers, and new uncertainties about compliance with NASD
requirements for trading on the OTCBB. Notwithstanding the conditions, the
Company expects to develop a capital formation strategy and launch operations
during the next twelve to eighteen months, if the Company can effect quotation
of its common stock on the OTCBB.
REVERSE ACQUISITION CANDIDATE: The Company is not currently searching for a
profitable business opportunity. This contingency is disclosed for the
possibility that the Company's intended business might fail. The Company is not
presently a reverse acquisition candidate. Should the Company's business fail,
management does not believe the Company would be able to effectively, under
current laws and regulations, attract capital, and would be required to seek
such an acquisition to achieve profitability for shareholders.
Risk Factors that may affect future results and market price of stock
---------------------------------------------------------------------
The business of the Company involves a number of risks and uncertainties that
could cause actual results to differ materially from results projected in any
forward-looking statement, or statements, made in this report. These risks and
uncertainties include, but are not necessarily limited to the risks set forth
below. The Company's securities are speculative and investment in the Company's
securities involves a high degree of risk and the possibility that the investor
will suffer the loss of the entire amount invested.
LIMITED OPERATING HISTORY; ANTICIPATED LOSSES; UNCERTAINLY OF FUTURE RESULTS
The Company was organized in 1998, and has no operating history upon which an
evaluation of its business and prospects can be based. The Company's prospects
must be evaluated with a view to the risks encountered by a company in an early
stage of development, particularly in light of the uncertainties relating the
acceptance of the Company's business model.The Company will be incurring costs
to develop, introduce and enhance its courseware program, to establish marketing
relationships, and to build an administrative organization. There can be no
assurance that the Company will be profitable on a quarterly or annual basis. In
addition, as the Company expands its business network and marketing operations
it will likely need to increase its operating expenses, broaden its customer
support capabilities, and increase its administrative resources. To the extent
that such expenses are not subsequently followed by commensurate revenues, the
Company's business, results of operations and financial condition will be
materially adversely affected.
POSSIBLE NEED FOR ADDITIONAL FINANCING
It is possible that revenues from the Company's operations may not be sufficient
to finance its initial operating cost to reach breakeven. If this were to occur,
the Company would need to raise or find additional capital. While the Company
expects to be able to meet its financial obligations for approximately the next
twelve months, there is no assurance that, after such period, the Company will
be operating profitably. If they are not, there can be no assurance that any
required capital will be obtained on terms favorable to the Company. Failure to
obtain adequate additional capital on favorable terms could result in
significant delays in the expansion of new services and market share and could
even result in the substantial curtailment of existing operations and services
to clients.
16
<PAGE>
UNPREDICTABILITY OF FUTURE REVENUES; POTENTIAL FLUCTUATIONS IN QUARTERLY
RESULTS.
As a result of the Company's lack of operating history and the emerging nature
of the market in which it competes, the Company is unable to forecast its
revenues accurately. The Company's current and future expense levels are based
largely on its investment/operating plans and estimates of future revenue and
are to a large extent based on the Company's own estimates. Sales and operating
results generally depend on the volume of, timing of, and ability to obtain
customers, orders for services received, and revenues therefrom generated. These
are, by their nature, difficult at best to forecast.
The Company may be unable to adjust spending in a timely manner to compensate
for any unexpected revenue shortfall or delay. Accordingly, any significant
shortfall or delay in revenue in relation to the Company's planned expenditures
would have an immediate adverse affect on the Company's business, financial
condition, and results of operations. Further, in response to changes in the
competitive environment, the Company may from time to time make certain pricing,
service, or marketing decisions that could have a material adverse effect on the
Company's business, financial condition, operating results, and cash flows.
DEVELOPING MARKET; ACCEPTANCE OF THE INTERNET AS A MEDIUM FOR COMMERCE JUST NOW
BEING PROVEN.
The Company's long-term viability is substantially dependent upon the continued
widespread acceptance and use of the Internet as a medium for business commerce,
in terms of the sales of both products and services to businesses and
individuals. The use of the Internet as a means of business sales and commerce
is has only recently reached a point where many companies are making reasonable
profits from their endeavors therein, and there can be no assurance that this
trend will continue.
The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and amount of traffic. There can be no
assurance that the Internet infrastructure will continue to be able to support
the demands placed on it by this continued growth. In addition, delays in the
development or adoption of new standards and protocols to handle increased
levels of Internet activity or increased governmental regulation could slow or
stop the growth of the Internet as a viable medium for business commerce.
Moreover, critical issues concerning the commercial use of the Internet
(including security, reliability, accessibility and quality of service) remain
unresolved and may adversely affect the growth of Internet use or the
attractiveness of its use for business commerce.
The failure of the necessary infrastructure to further develop in a timely
manner, or the failure of the Internet to continue to develop rapidly as a valid
medium for business would have a material adverse effect on the Company's
business, financial condition, operating results, and cash flows.
17
<PAGE>
UNPROVEN ACCEPTANCE OF THE COMPANY'S SERVICES AND/OR PRODUCTS
The Company is still in its development stage. As a result, it does not know
with any certainty whether its services and/or products will be accepted within
the business marketplace. If the Company's services and/or products prove to be
unsuccessful within the marketplace, or if the Company fails to attain market
acceptance, it could materially adversely affect the Company's financial
condition, operating results, and cash flows.DEPENDENCE ON KEY PERSONNEL
The Company's performance and operating results are substantially dependent on
the continued service and performance of its officer and directors. The Company
intends to hire additional technical, sales, and other personnel as they move
forward with their business model. Competition for such personnel is intense,
and there can be no assurance that the Company can retain its key technical
employees, or that it will be able to attract or retain highly qualified
technical and managerial personnel in the future. The loss of the services of
any of the Company's key employees or the inability to attract and retain the
necessary technical, sales, and other personnel could have a material adverse
effect upon the Company's business, financial condition, operating results, and
cash flows. The Company does not currently maintain "key man" insurance for any
of its key employees.
DEPENDENCE ON CONTINUED GROWTH IN USE OF THE INTERNET
The success of the Company's business depends, in part, on continued acceptance
and growth in the use of the Internet for business commerce and would suffer if
Internet usage does not continue to grow. Internet usage may be inhibited for a
number of reasons, such as:
o Inadequate network infrastructure.
o Security concerns.
o Inconsistent quality of service.
o Lack of available cost-effective, high-speed service.
o The adoption of new standards or protocols for the Internet.
o Changes or increases in government regulation.
Online companies have experienced interruptions in their services as a result of
outages and other delays occurring due to problems with the Internet network
infrastructure, disruptions in Internet access provided by third-party providers
or failure of third party providers to handle higher volumes of user traffic. If
Internet usage grows, the Internet infrastructure or third-party service
providers may be unable to support the increased demands which may result in a
decline of performance, reliability or ability to access the Internet. If
outages or delays frequently occur in the future, Internet usage, as well as
usage of the Company's Internet Web-sites, could grow more slowly or decline.
COMPETITION
The E-commerce training market in which the Company will operate is very
competitive. Many competitors have substantially greater, financial, technical,
marketing, and distribution resources than the Company.
18
<PAGE>
In the all its markets, the Company competes against a large number of companies
of varying sizes and resources. There are an increasing number of competitive
services and products offered by a growing number of companies. Increased
competition in any service or product area may result in a loss of a client,
reduction in sales revenue, or additional price competition, any of which could
have a material adverse effect on the Company's operating results. In addition,
existing competitors may continue to broaden their service and/or product lines
and other potential competitors may enter or increase their presence in the
E-commerce, resulting in greater competition for the Company.
Most of the Company's current and potential competitors have substantially
longer operating histories, larger customer bases, greater name and service
recognition, and significantly greater financial, marketing, and other resources
than the Company. In addition, competitors may be acquired by, receive
investments from or enter into other commercial relationships with larger,
well-established and well-financed companies as the use of the Internet and
other online services increases. Many of the Company's competitors may be able
to respond more quickly to changes in customer preferences/needs, devote greater
resources to marketing and promotional campaigns, adopt more aggressive pricing
policies and devote substantially more resources to Internet site and systems
development than the Company.
It is possible that new competitors or alliances among competitors may emerge
and rapidly acquire market share. Increased competition may result in reduced
operating margins and/or loss of market share, either of which could materially
adversely affect the Company's business, results of operations and financial
condition. There can be no assurance that the Company will be able to compete
successfully against current or future competitors or alliances of such
competitors, or that competitive pressures faced by the Company will not
materially adversely affect its business, financial condition, operating results
and cash flows.
RISKS OF POTENTIAL GOVERNMENT REGULATION AND OTHER LEGAL UNCERTAINTIES RELATING
TO THE INTERNET
The Company is not currently subject to direct federal, state, or local
regulation in the United States and Canada other than regulations applicable to
businesses generally or directly applicable to electronic commerce. However,
because the Internet is becoming increasingly popular, it is possible that a
number of laws and regulations may be adopted with respect to the Internet.
These laws may cover issues such as user privacy, freedom of expression,
pricing, content, and quality of products and services, taxation, advertising,
intellectual property rights and information security. Furthermore, the growth
of electronic commerce may prompt calls for more stringent consumer protection
laws. The adoption of such consumer protection laws could create uncertainty in
Internet usage and reduce the demand for all products and services.
In addition, the Company is not certain how its business may be affected by the
application of existing laws governing issues such as property ownership,
copyrights, encryption, and other intellectual property issues, taxation, libel,
obscenity, and export or import matters. It is possible that future applications
of these laws to the Company's business could reduce demand for its products and
services or increase the cost of doing business as a result of litigation costs
or increased service delivery costs.
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Because the Company's services will likely be available over the Internet in
multiple states, and possibly foreign countries, other jurisdictions may claim
that the Company is required to qualify to do business and pay taxes in each
state or foreign country. The Company's failure to qualify in other
jurisdictions when it is required to do so could subject the Company to
penalties and could restrict the Company's ability to enforce contracts in those
jurisdictions. The application of laws or regulations from jurisdictions whose
laws do not currently apply to the Company's business may have a material
adverse affect on its business, results of operations and financial condition.
INTELLECTUAL PROPERTY RIGHTS
As part of its confidentiality procedures, the Company expects to enter into
nondisclosure and confidentiality agreements with its key employees, and any
consultants and/or business partners and will limit access to and distribution
of its technology, documentation, and other proprietary information.
Despite the Company's efforts to protect any intellectual property rights it may
have, unauthorized third parties, including competitors, may from time to time
copy or reverse-engineer certain portions of the Company's technology and use
such information to create competitive services and/or products.
It is possible that the scope, validity, and/or enforceability of the Company's
intellectual property rights could be challenged by other parties, including
competitors. The results of such challenges before administrative bodies or
courts depend on many factors which cannot be accurately assessed at this time.
Unfavorable decisions by such administrative bodies or courts could have a
negative impact on the Company's intellectual property rights. Any such
challenges, whether with or without merit, could be time consuming, result in
costly litigation and diversion of resources, and cause service or product
delays. If such events should occur, the Company's business, operating results
and financial condition could be materially adversely affected.
RISKS OF TECHNOLOGY TRENDS AND EVOLVING INDUSTRY STANDARDS
The Company's success will depend on its ability to develop a computer
courseware program that will meet customers' changing requirements. The
microcomputer industry is characterized by rapidly changing technology, evolving
industry standards, and changes in customer need and frequent new service and
product introductions. The Company's future success will depend, in part, on its
ability to effectively use leading edge technologies, to continue to develop its
technological expertise, to enhance its current service, to develop new products
that meet changing customer preferences and to influence and respond to merging
industry standards and other technological changes on a timely and
cost-effective basis.
DEPENDENCE OF LICENSED TECHNOLOGY
The Company may rely on certain technology licensed from third parties, and
there can be no assurance that these third party technology licenses will be
available to the Company on acceptable commercial terms or at all.
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PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Registrant*
3.2 By-laws of the Registrant*
23 Consent of Barry L. Friedman, independent certified public
accountant
27 Financial Data Schedule (electronic filing only)
----------------
* Previously filed as an exhibit to the Company's Form 10-QSB dated
July 21, 2000
(b) Reports on Form 8-K filed during the three months ended September 30,
2000.
No Current Reports on Form 8-K were filed during the three months ended
September 30, 2000
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: October 18, 2000 College Software, Inc.
/s/ Peter Braun
---------------------------------
Dr. Peter Braun
President
21
