STUDENT ADVANTAGE INC, 10-Q, 1999-11-15

STUDENT ADVANTAGE INC
10-Q, 1999-11-15
MEMBERSHIP ORGANIZATIONS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _______ to ___________

Commission File No. 0 - 26173

STUDENT ADVANTAGE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 8699 04-3263743
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

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280 SUMMER STREET
BOSTON, MASSACHUSETTS 02210
(Address of Principal Executive Offices) (Zip Code)

(617) 912-2011
(Registrant's telephone number, including area code)

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 35,213,560 shares of common
stock as of November 10, 1999.

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<PAGE> 2

Student Advantage, Inc.
Form 10-Q
For the Quarter ended September 30, 1999

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

INDEX

<TABLE>
<CAPTION>
PAGE (S)
--------
<S> <C>
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 1998 and September 30, 1999 (Unaudited) 3

Consolidated Statement of Operations for the three and nine months ended September 30, 1998 4
and 1999 (Unaudited)

Consolidated Statement of Cash Flows for the nine months ended September 30, 1998 and 1999 5
(Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 6

Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations 10

Risk Factors That May Affect Results of Operations and Financial Condition 18

Item 3. Quantitative and Qualitative Disclosure about Market Risk 25

PART II. OTHER INFORMATION 25

Item 1. Legal Proceedings 25

Item 2. Changes in Securities and Use of Proceeds 25

Item 6. Exhibits and Reports on Form 8-K 25

Signatures 26

Exhibit Index 27
</TABLE>

<PAGE> 3

PART 1. FINANCIAL INFORMATION.

ITEM 1. FINANCIAL STATEMENTS.

STUDENT ADVANTAGE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ................................................ $ 6,884 $ 6,140
Marketable securities .................................................... 35,340 --
Accounts receivable (net of allowance for doubtful
accounts of $200 and $70, at September 30, 1999
and December 31, 1998, respectively) ................................... 6,347 3,209
Prepaid expenses and other current assets ................................ 2,238 352
-------- --------
Total current assets ............................................... 50,809 9,701
Property and equipment, net .............................................. 2,333 1,386
Intangible and other assets, net ......................................... 3,502 617
-------- --------
Total assets ....................................................... $ 56,644 $ 11,704
======== ========

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable ......................................................... $ 2,421 $ 1,985
Accrued compensation ..................................................... 1,001 1,095
Other accrued expenses ................................................... 3,989 1,912
Deferred revenue ......................................................... 8,295 7,064
-------- --------
Total current liabilities .......................................... 15,706 12,056
-------- --------
Notes payable ............................................................ 100 --
-------- --------
Total liabilities .................................................. 15,806 12,056
-------- --------

Series A redeemable convertible preferred stock; $1 par value;
Authorized: 4,000,000 shares; Issued: 0 and 2,952,568 shares at
September 30, 1999 and December 31, 1998, respectively;
Outstanding: 0 and 2,747,036 shares at September 30, 1999 and
December 31, 1998, respectively ........................................ -- 10,196
-------- --------
Stockholders' equity (deficit)
Common stock, $.01 par value; Authorized: 150,000,000 shares;
Issued: 34,804,246 and 20,739,378 at September 30, 1999 and
December 31, 1998, respectively, Outstanding: 34,790,981 and
18,524,313 at September 30, 1999 and December 31, 1998,
respectively ........................................................... 348 207
Additional paid-in capital ............................................... 82,863 19,765
Accumulated deficit ...................................................... (39,504) (26,527)
Treasury stock (at cost) ................................................. (115) (630)
Deferred compensation .................................................... (2,754) (3,363)
-------- --------
Total stockholders' equity (deficit) ............................... 40,838 (10,548)
-------- --------
Total liabilities, redeemable convertible preferred
stock and stockholders' equity (deficit) ......................... $ 56,644 $ 11,704
======== ========
</TABLE>

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

3
<PAGE> 4

STUDENT ADVANTAGE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue
Subscription ........................................ $ 2,160 $ 1,856 $ 6,194 $ 5,868
Other ............................................... 6,463 4,593 12,127 7,842
-------- -------- -------- --------
Total revenue ................................. 8,623 6,449 18,321 13,710
-------- -------- -------- --------
Costs and expenses
Cost of subscription revenue ........................ 1,185 951 1,989 1,666
Cost of other revenue ............................... 4,065 1,767 8,888 4,305
Product development ................................. 3,359 1,228 6,169 3,510
Sales and marketing ................................. 3,109 2,160 8,067 4,948
General and administrative .......................... 1,814 1,408 6,187 3,310
Depreciation and amortization ....................... 392 335 1,126 1,094
Stock-based compensation ............................ 282 -- 836 --
-------- -------- -------- --------
Total costs and expenses ...................... 14,206 7,849 33,262 18,833
-------- -------- -------- --------
Loss from operations .................................. (5,583) (1,400) (14,941) (5,123)
Interest income (expense), net ........................ 637 (10) 760 65
-------- -------- -------- --------
Net loss .............................................. $ (4,946) $ (1,410) $(14,181) $ (5,058)
======== ======== ======== ========

Basic and diluted net loss per share .................. $ (0.14) $ (0.08) $ (0.57) $ (0.29)
======== ======== ======== ========
Shares used in computing basic and diluted
net loss per share ................................. 34,610 17,800 24,776 17,492

Pro forma basic and diluted net loss per share ........ $ (0.14) $ (0.06) $ (0.47) $ (0.23)
======== ======== ======== ========
Shares used in computing pro forma basic and
diluted net loss per share ......................... 34,610 22,093 29,877 21,785
</TABLE>

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

4
<PAGE> 5

STUDENT ADVANTAGE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ....................................................................... $(14,181) $(5,058)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization ................................................ 909 861
Reserve for bad debts ........................................................ 130 --
Compensation expense relating to issuance of equity .......................... 836 --
Issuance of stock in exchange for services ................................... 108 233
Amortization of marketing expense associated with common stock warrant ....... 220 --
Changes in assets and liabilities:
Accounts receivable ........................................................ (3,268) (4,976)
Prepaid expenses, other current assets and other assets .................... (1,886) (501)
Accounts payable ........................................................... 436 1,733
Accrued compensation ....................................................... (94) 607
Accrued expenses ........................................................... 2,077 547
Deferred revenue ........................................................... 1,231 1,221
-------- -------
Net cash used for operating activities ..................................... (13,482) (5,333)
======== =======
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets ...................................................... (1,430) (1,113)
Acquisitions of businesses for cash and common stock ........................... (1,199) (655)
Proceeds from sale of fixed assets ............................................. 16 --
Purchase of marketable securities .............................................. (44,283) --
Proceeds from sale of marketable securities .................................... 8,943 --
-------- -------
Net cash used for investing activities ..................................... (37,953) (1,768)
======== =======
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of preferred stock, net ..................................... -- 2,000
Proceeds from issuance of common stock, net of issuance costs . ................ 49,920 6
Proceeds from borrowings under line of credit .................................. -- 1,262
Proceeds from exercise of stock options ........................................ 300 --
Proceeds from exercise of warrants ............................................. 212 --
Note payable ................................................................... 100 --
Proceeds from short-term debt -- related party ................................. -- 1,450
Repayment of short-term debt -- related party .................................. -- (700)
Distributions to stockholders .................................................. -- (1,043)
-------- -------
Net cash provided by financing activities .................................. 50,532 2,975
-------- -------
Adjustment to conform fiscal period of University Netcasting, Inc. ............... 1,647 --
-------- -------
Net increase (decrease) in cash and cash equivalents ............................. 744 (4,126)
-------- -------
Cash and cash equivalents, beginning of period ................................... 6,140 5,806
-------- -------
Cash and cash equivalents, end of period ......................................... $ 6,884 $ 1,680
======== =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND
NON-CASH INVESTING AND FINANCING ACTIVITIES
Capital stock and warrants issued for business acquisitions ...................... $ 299 $ 225
======== =======
Common stock warrant issued in conjunction with marketing agreement .............. $ 2,221 $ --
======== =======
Capital stock issued for note receivable ......................................... $ -- $ 165
======== =======
</TABLE>

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

5
<PAGE> 6

STUDENT ADVANTAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 - THE COMPANY

BASIS OF PRESENTATION

Student Advantage, Inc. and its subsidiaries ("Student Advantage" or the
"Company") is dedicated to serving the needs of college students through our
leading membership program and Web site. We provide college students with
discounts on a broad range of products and services nationwide through the
Student Advantage membership program, as well as our Web site and magazine. We
also offers marketing services to corporations seeking to communicate
effectively with the college student market. Through our FANSonly Network,
FANSonly.com, we provide sports fans with comprehensive online information and
analysis on college sports. Student Advantage, Inc. was incorporated in the
State of Delaware on October 20, 1998. The Company began operations in 1992 as a
sole proprietorship, converted to a general partnership in 1995, converted to a
limited liability company in 1996 and became a C Corporation in 1998. From
inception through December 1997, our revenue was derived primarily from annual
membership fees. Since that time, we have expanded our product and service
offerings through internal growth as well as acquisitions.

In June 1999 the Company completed an initial public offering ("IPO") of
6,000,000 shares of the Company's common stock resulting in $44.6 million net of
underwriters discounts and commissions. Upon closing of the IPO, each
outstanding share of redeemable convertible preferred stock converted into
shares of common stock at a three to one ratio. On July 21, 1999 an additional
900,000 shares of common stock were issued by the Company as a result of the
full exercise of the underwriters' over-allotment option. The Company received
additional net proceeds of $6.7 million as a result of the exercise.

All amounts for all periods presented have been restated to reflect the
acquisition of University Netcasting, Inc. ("UNI") in June 1999, which was
accounted for as a pooling of interests and, accordingly, the historical
consolidated financial statements of the Company prior to the acquisition have
been restated to include UNI's financial position, results of operations and
cash flows.

These financial statements should be read in conjunction with the
consolidated financial statements and related footnotes included in the
Company's Form S-1 registration statement, as amended, filed with the Securities
and Exchange Commission ("SEC") in connection with the Company's IPO.

UNAUDITED INTERIM FINANCIAL INFORMATION

The unaudited interim consolidated financial statements of the Company for
the three and nine months ended September 30, 1998 and 1999, respectively,
included herein have been prepared in accordance with generally accepted
accounting principals for interim financial information and with the
instructions for Form 10-Q under the Securities Exchange Act of 1934, as
amended, and Article 10 of Regulation S-X under the Securities Act of 1933, as
amended. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and regulations
relating to interim financial statements.

In the opinion of management, the accompanying unaudited interim
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of the Company at September 30, 1999, and the results of its operations and its
cash flows for the three and nine months ended September 30, 1998 and 1999,
respectively. The results for the three and nine months ended September 30, 1999
are not necessarily indicative of the expected results for the full fiscal year
or any future period. Certain prior period balances have been reclassified to
conform to the current period presentation.

NOTE 2 - ACQUISITIONS

THE TRAVEL HOLDING GROUP, LLC AND THE CAMPUS AGENCY, LLC. On April 1, 1999,
Student Advantage completed its acquisitions of substantially all the assets of
The Travel Holding Group, LLC and The Campus Agency, LLC in exchange for a
promissory note in the amount of $330,000. The Campus Agency provides media
planning and strategy consulting services to the U.S. student travel market. The
Travel Holding Group is a reseller of Eurail passes. The acquisitions have been
accounted for under the purchase method of accounting and the results of
operations of each company have been included in Student Advantage's results

<PAGE> 7

beginning on the acquisition date. Goodwill and other intangible assets in the
aggregate amount of $305,000 were recorded in connection with these acquisitions
and are being amortized over 3 years.

MENTOR INTERACTIVE CORP. On May 27, 1999, Student Advantage acquired
substantially all of the assets of Mentor Interactive Corp., a provider of
Internet-based research tools and related materials, in exchange for 18,056
shares of common stock and a warrant to purchase 24,000 shares of common stock
at a purchase price of $11.08 per share with an aggregate estimated fair value
of approximately $300,000. This acquisition has been accounted for under the
purchase method of accounting and the results of Mentor Interactive Corp. have
been included in Student Advantage's results beginning on the acquisition date.
Goodwill and other intangible assets in the aggregate amount of $312,000 were
recorded in connection with the acquisition and are being amortized over a three
year period.

TRANSACTION SERVICE PROVIDERS, INC. On June 11, 1999, Student Advantage
acquired Transaction Service Providers, Inc. ("TSP"), a provider of debit card
services to college students and local merchants, in a transaction accounted for
as a pooling of interests. Because the historical results of operations and
financial position of Transaction Services Providers were immaterial to Student
Advantage, prior period financial statements have not been restated and TSP's
results of operations have been included in Student Advantage's results as of
April 1, 1999. In connection with the acquisition, Student Advantage issued
195,000 shares of common stock to the stockholders of Transaction Service
Providers.

UNIVERSITY NETCASTING, INC. On June 18, 1999, Student Advantage acquired
all of the outstanding capital stock of UNI in exchange for 2,439,680 shares of
Student Advantage common stock and the conversion of all UNI outstanding common
stock options for options to purchase a total of 62,922 shares of Student
Advantage common stock. University Netcasting is a leading operator of official
athletic Web sites for colleges, universities and college sports associations.
Through its FANSonly Network, FANSonly.com, University Netcasting provides
sports fans with comprehensive online information and analysis on college
sports. This acquisition was accounted for using the pooling-of-interests method
and, accordingly, the historic consolidated financial statements of Student
Advantage prior to the acquisition have been restated to reflect the financial
position, results of operations and cash flows of UNI.

Effective, June 18, 1999, UNI's fiscal year end was changed from March 31
to December 31 to conform to Student Advantage's year end. UNI's results of
operations for the three and nine months ended December 31, 1998 have been
included in Student Advantage's three and nine months ended September 30, 1998
results, respectively. Accordingly, UNI's operations for the three months ended
March 31, 1999 will be included in Student Advantage's results for both of the
year ended December 31, 1998 and 1999 (when presented). Revenue and net loss for
UNI for the three months ended March 31, 1999 were $682,000 and $1.6 million,
respectively. This net loss amount has been reported as an adjustment to the
consolidated accumulated deficit.

The following is a reconciliation of revenues and net loss previously
reported by the company for the three and nine month periods ended September 30,
1998 and 1999, with the combined amounts currently presented in the financial
statements for those two periods:

<TABLE>
<CAPTION>
(IN THOUSANDS) FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
-------------------------------------------- ----------------------------------------------
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1998 1999 1999 1999
SA UNI COMBINED SA UNI COMBINED
------------- ------------ -------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 5,682 $ 767 $ 6,449 $ 8,216 $ 407 $ 8,623

Net income (loss) $ (51) $(1,359) $(1,410) $(3,568) $(1,378) $(4,946)
</TABLE>

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS ENDED
----------------------------------------------- -----------------------------------------------
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,

1998 1998 1998 1999 1999 1999
SA UNI COMBINED SA UNI COMBINED
------------- ------------ -------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 12,476 $ 1,234 $ 13,710 $ 16,729 $ 1,592 $ 18,321

Net income (loss) $ (1,284) $(3,774) $ (5,058) $ (8,948) $(5,233) $(14,181)
</TABLE>

<PAGE> 8

NOTE 3 - COMPUTATION OF UNAUDITED NET LOSS PER SHARE AND PRO FORMA NET LOSS PER
SHARE

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
BASIC AND DILUTED NET LOSS PER SHARE: (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)

<S> <C> <C> <C> <C>
Net loss $ (4,946) $ (1,410) $(14,181) $ (5,058)
======== ======== ======== ========

Basic and diluted weighted average common shares outstanding(1)(3) 34,610 17,800 24,776 17,492
======== ======== ======== ========

Basic and diluted net loss per share $ (0.14) $ (0.08) $ (0.57) $ (0.29)
======== ======== ======== ========
PRO FORMA BASIC AND DILUTED NET LOSS PER SHARE:
Net loss $ (4,946) $ (1,410) $(14,181) $ (5,058)
======== ======== ======== ========
Shares attributable to common stock, excluding effects of
preferred stock conversion (1), (3) 26,369 17,800 21,636 17,492
Shares attributable to the assumed conversion of convertible
preferred stock upon closing of the initial public offering 8,241 4,293 8,241 4,293
-------- -------- -------- --------
Pro forma basic and diluted weighted average shares
outstanding 34,610 22,093 29,877 21,785
======== ======== ======== ========

Pro forma basic and diluted net loss per share $ (0.14) $ (0.06) $ (0.47) $ (0.23)
======== ======== ======== ========
</TABLE>

(1) All amounts for all periods presented have been restated to reflect the
acquisition of University Netcasting, Inc. in June 1999, which was
accounted for as a pooling of interests.

(2) Net loss per share is computed under SFAS No. 128, "Earnings Per Share".
Basic net loss per share is computed using the weighted average number of
shares. Diluted loss per share does not differ from basic loss per share
since potential common shares from conversion of preferred stock and
exercise of stock options are anti-dilutive for all periods presented. Pro
forma basic and diluted net loss per share have been calculated assuming
the conversion of all outstanding shares of Series A preferred stock into
common shares, as if the shares had converted immediately upon their
issuance.

(3) Options and warrants to purchase 3,083,328 weighted shares of common stock
outstanding were excluded from the calculation of diluted earnings per
share for the three months ended September 30, 1999 because their inclusion
would be anti-dilutive. Options to purchase 59,681 weighted shares of
common stock outstanding were excluded from the calculation of diluted
earnings per share for the three months ended September 30, 1998 because
the exercise price of those options exceeded the average market price of
common stock for the three-month period ended September 30, 1998. Options
and warrants to purchase 2,515,073 weighted shares of common stock
outstanding were excluded from the calculation of diluted earnings per
share for the nine months ended September 30, 1999 because their inclusion
would be anti-dilutive. Options to purchase 55,576 weighted shares of
common stock outstanding were excluded from the calculation of diluted
earnings per share for the nine months ended September 30, 1998 because the
exercise price of those options exceeded the average market price of common
stock for the nine-month period ended September 30, 1998

NOTE 4 - WARRANT

On July 21, 1999 Student Advantage entered into a marketing agreement with
Lycos, Inc. In connection with the transaction, Lycos was granted a warrant (the
"Lycos warrant") to purchase 550,000 shares of Student Advantage common stock at
a price of $10.875 per share. The Lycos warrant terminates on July 21, 2002 and
is exercisable on or after July 21, 2000. The Company has valued the Lycos
warrant at $2.2 million which will be recognized as a sales and marketing
expense on a straight-line basis over the term of the marketing agreement, which
is thirty months.

<PAGE> 9

NOTE 5 - SUBSEQUENT EVENTS

VOICE FX CORPORATION. On October 7, 1999, Student Advantage acquired Voice
FX Corporation, a leading provider of Internet and Interactive Voice Response
(IVR) services to college and university registrars. In connection with the
acquisition, Student Advantage paid approximately $1.1 million in cash issued
430,082 shares of Student Advantage common stock and agreed to assume all
outstanding options to purchase voice FX common stock through issuing 59,687
options to purchase common stock. The acquisition has been accounted for under
the purchase method of accounting and the results of operations will be included
in Student Advantage's results of operations beginning on the acquisition date.

Goodwill and other intangible assets in the aggregate amount of $6.3
million will be recorded in connection with the acquisition and will be
amortized on a straight-line basis over expected useful lives of between three
and five years.

EDU.COM, INC. On November 12, 1999 Student Advantage made an equity
investment in edu.com, Inc., a privately held internet-commerce company. Student
Advantage paid approximately $4.3 million in exchange for approximately 922,000
shares of Series B preferred stock. Student Advantage is accounting for its
investment in edu.com on the cost basis of accounting. Additionally, Student
Advantage entered into a two year marketing and distribution agreement with
edu.com. The terms of this agreement provide, among other things, that edu.com
will become Student Advantage's exclusive technology e-commerce partner and
rewards program provider, the parties will pursue certain promotional
initiatives on each other's behalf, and edu.com will make certain payments to
Student-Advantage including $2.0 million payable over the term of the agreement.

LITIGATION. On August 3, 1999, Student Advantage, Inc. filed an action in
the United States District Court for the Southern District of New York against
CollegeClub.com, alleging among other things, that CollegeClub.com has committed
false advertising, unfair competition, and tortious interference with contract
in connection with, CollegeClub.com's promotion and marketing of its services,
including but not limited to the Discount Directory in its Web site. Student
Advantage seeks monetary damages and equitable relief, including a preliminary
and permanent injunction. As part of its response, CollegeClub.com has filed
counterclaims against Student Advantage alleging similar conduct on the part of
Student Advantage. CollegeClub.com seeks monetary damages and equitable relief,
including injunctive relief. Student Advantage plans to vigorously oppose the
counterclaims alleged by CollegeClub.com and believes it has meritorious
defenses to each such counterclaim.

<PAGE> 10

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Student Advantage, Inc. has included in this filing certain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 concerning Student Advantage's business,
operations and financial condition. The words or phrases "can be", "expects",
"may affect", "may depend", "believes", "estimate", "project", and similar words
and phrases are intended to identify such forward-looking statements. Such
forward-looking statements are subject to various known and unknown risks and
uncertainties and Student Advantage cautions you that any forward-looking
information provided by or on behalf of Student Advantage is not a guarantee of
future performance. Actual results could differ materially from those
anticipated in such forward-looking statements due to a number of factors, some
of which are beyond Student Advantage's control, in addition to those discussed
in Student Advantage's other public filings, press releases and statements by
Student Advantage's management, including those set forth below under "Risk
Factors That May Affect Future Results". All such forward-looking statements are
current only as of the date on which such statements were made. Student
Advantage does not undertake any obligation to publicly update any
forward-looking statement to reflect events or circumstances after the date on
which any such statement is made or to reflect the occurrence of unanticipated
events.

OVERVIEW

We are dedicated to serving the needs of college students through our
leading membership program and Web site. We provide college students with
discounts on a broad range of products and services nationwide through the
Student Advantage membership program, as well as our Web site and magazine. We
also offers marketing services to corporations seeking to communicate
effectively with the college student market. Through our FANSonly Network,
FANSonly.com, we provide sports fans with comprehensive online information and
analysis on college sports.

We began operations in 1992 as a sole proprietorship, converted to a
general partnership in 1995, converted to a limited liability company in 1996
and became a C Corporation in 1998. From inception through December 1997, our
revenue was derived primarily from annual membership fees. Since that time, we
have expanded our product and service offerings through internal growth as well
as acquisitions.

Our revenue is generated from subscription revenue and other revenue.
Subscription revenue is derived from membership sales. Memberships are sold in
three different ways. Most are sold to AT&T and distributed in conjunction with
an AT&T calling card. The membership cards associated with these membership
sales are co-branded and serve as both the Student Advantage membership
identification card and an AT&T calling card. In certain cases, renewal of a
co-branded membership card is subject to a minimum level of usage of AT&T
services during the prior twelve months. We earn a fee from AT&T for each of
these memberships, with a current minimum commitment by AT&T to purchase at
least 1.25 million memberships per academic year. During 1997 and 1998 and the
three and nine months ended September 30, 1999, AT&T accounted for approximately
77%, 95%, 94% and 94% of subscription revenue, respectively. Memberships are
also sold by Student Advantage to colleges, universities and university
organizations for distribution free of charge to students. In the 1998-1999
academic year, five colleges, universities and university organizations acquired
memberships for distribution free of charge to students. In addition, Student
Advantage sells memberships directly to students for a membership fee that is
currently $20 per year. Subscription revenue is recognized ratably from the date
of subscription to the end of the annual membership period, which ends on August
31 of each year.

Other revenue includes advertising, marketing service and commerce revenue.
Advertising revenue consists primarily of fees for advertisements placed in SAM,
the Student Advantage magazine, sponsorship fees paid by vendors for inclusion
in the member guide, a list of participating merchants, and fees for banner
advertisements and sponsorships on our Web site. Marketing services revenue is
derived primarily from providing tailored marketing services to businesses
seeking to market their products and services to college students. These
services include organizing and executing marketing tours that travel to college
campuses, staffing tables in college locations to solicit potential student
customers on behalf of businesses and providing media planning and placement.
Commerce revenue includes primarily transaction-based fees earned for reselling
products and services on behalf of other businesses. To date, commerce revenue
has included primarily fees that we receive from AT&T for obtaining completed
applications from students for AT&T calling cards and the resale of Eurail
passes. In connection with each application accepted by AT&T, we also earn
membership fees that are included in subscription revenue.

In December 1997, we completed our acquisition of The Main Quad, Inc. which
owned and operated Web sites focused on providing content for students. We
acquired substantially all the assets of The Main Quad for $272,000 and the
issuance of 1,417,720 shares of common stock. In January 1998, we completed our
acquisition of Collegiate Advantage, Inc., a provider of marketing and
promotional services to businesses targeting college students. We acquired
substantially all the assets of Collegiate Advantage for $651,000 and the
assumption of $275,000 in liabilities. We are also required to make payments
totaling $715,000 to Collegiate

<PAGE> 11

Advantage in three installments ending on January 31, 2001. As of September 30,
1999, a $325,000 payment remained outstanding. These acquisitions were accounted
for under the purchase method of accounting, and the results of operations of
each of the acquired companies have been included in our financial statements
since their respective dates of acquisition. Goodwill and other intangible
assets in the aggregate amount of $1.4 million were recorded in connection with
these and other acquisitions and are being amortized over the economic lives of
the related assets, ranging from two to five years.

On April 1, 1999, we completed our acquisitions of The Travel Holding
Group, LLC and The Campus Agency, LLC in exchange for a promissory note in the
amount of $330,000. The Campus Agency provides media planning and strategy
consulting services to the U.S. student travel market. The Travel Holding Group
is a reseller of Eurail passes. The acquisitions have been accounted for under
the purchase method of accounting and the results of operations of each company
have been included in our results beginning on the acquisition date. Goodwill
and other intangible assets in the aggregate amount of $305,000 were recorded in
connection with these acquisitions and are being amortized over three years.

On May 27, 1999, we acquired substantially all of the assets of Mentor
Interactive Corp., a provider of Internet-based research tools and related
materials, in exchange for 18,056 shares of common stock and a warrant to
purchase 24,000 shares of common stock at a purchase price of $11.08 per share
with an aggregate estimated fair value of approximately $300,000. This
acquisition has been accounted for under the purchase method of accounting and
the results of Mentor Interactive Corp. have been included in our results
beginning on the acquisition date. Goodwill and other intangible assets in the
aggregate amount of $312,000 were recorded in connection with the acquisition
and are being amortized over a three year period.

On June 11, 1999, we acquired Transaction Service Providers, Inc., a
provider of debit card services to college students and local merchants, in a
transaction accounted for as a pooling of interests. Because the historical
results of operations and financial position of Transaction Services Providers
were immaterial to Student Advantage, prior period financial statements have not
been restated and TSP's results of operations have been included in our results
as of April 1, 1999. In connection with the acquisition, we issued 195,000
shares of common stock to the stockholders of Transaction Service Providers.

On June 18, 1999, we acquired all of the outstanding capital stock of UNI
in exchange for 2,439,680 shares of our common stock and the conversion of all
UNI outstanding common stock options for options to purchase a total of 62,922
shares of our common stock. University Netcasting is a leading operator of
official athletic Web sites for colleges, universities and college sports
associations. Through its FANSonly Network, FANSonly.com, University Netcasting
provides sports fans with comprehensive online information and analysis on
college sports. This acquisition was accounted for using the
pooling-of-interests method and, accordingly, the historic consolidated
financial statements of Student Advantage prior to the acquisition have been
restated to reflect the financial position, results of operations and cash flows
of UNI.

On June 23, 1999, we completed an initial public offering ("IPO") of
6,000,000 shares of our common stock resulting in net proceeds to us of
approximately $44.6 million. Upon closing of the IPO, each outstanding share of
redeemable convertible preferred stock converted into shares of common stock at
a three to one ratio. On July 21, 1999 an additional 900,000 shares of common
stock were issued by the Company as a result of the full exercise of the
underwriters' over-allotment option. The Company received additional net
proceeds of $6.7 million as a result of the exercise.

In the future we may pursue additional acquisitions to obtain complementary
products, services and technologies. There are no assurances that the
acquisitions we have already completed, or any acquisitions that we may complete
in the future, will produce the anticipated revenue, earnings or business
synergies.

We recorded deferred compensation of $4.2 million in the year ended
December 31, 1998 and $228,000 in the first nine months of 1999, representing
the difference between the exercise price of stock options granted and the fair
market value of the underlying common stock at the date of grant. The difference
is recorded as a reduction of stockholders' equity and is being amortized over
the vesting period of the applicable options, typically four years. Of the total
deferred compensation amount, $808,000 had been amortized as of December 31,
1998 and an additional $836,000 had been amortized in the nine months ended
September 30, 1999. The amortization of deferred compensation is recorded as an
operating expense.

We have experienced substantial net losses since 1996 and, as of September
30, 1999, had an accumulated deficit of $39.5 million. We expect to maintain or
increase our expenditures in all areas in order to execute our business plan. As
a result, we believe that we will continue to incur operating losses and
negative cash flows from operations for the foreseeable future and that the rate
at which such losses will be incurred may increase from current levels.

We do not believe that we have any material market risk exposure with
respect to derivative or other financial instruments.

<PAGE> 12

SUBSEQUENT EVENTS

VOICE FX CORPORATION. On October 7, 1999, Student Advantage acquired Voice
FX Corporation, a leading provider of Internet and Interactive Voice Response
(IVR) services to college and university registrars. In connection with the
acquisition, Student Advantage paid approximately $1.1 million in cash issued
430,082 shares of Student Advantage common stock and agreed to assume all
outstanding options to purchase Voice FX common stock through issuing 59,687
options to purchase common stock. The acquisition has been accounted for under
the purchase method of accounting and the results of operations will be included
in Student Advantage's results of operations beginning on the acquisition date.

EDU.COM, INC. On November 12, 1999 Student Advantage made an equity
investment in edu.com, Inc., a privately held internet-commerce company. Student
Advantage paid approximately $4.3 million in exchange for approximately 922,000
shares of Series B preferred stock. Student Advantage is accounting for its
investment in edu.com on the cost basis of accounting. Additionally, Student
Advantage entered into a two year marketing and distribution agreement with
edu.com. The terms of this agreement provide, among other things, that edu.com
will become Student Advantage's exclusive technology e-commerce partner and
rewards program provider, the parties will pursue certain promotional
initiatives on each other's behalf, and edu.com will make certain payments to
Student Advantage including $2.0 million payable over the term of the agreement.

<PAGE> 13

RESULTS OF OPERATIONS

The following table sets forth results of operations data for Student
Advantage as a percentage of total revenue for the periods presented:

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue
Subscription.................. 25% 29% 34% 43%
Other......................... 75% 71% 66% 57%
---- ---- ---- ----
Total revenue.............. 100% 100% 100% 100%
---- ---- ---- ----

Costs and expenses
Cost of subscription revenue.. 14% 15% 11% 12%
Cost of other revenue......... 47% 27% 49% 31%
Product development........... 39% 19% 34% 26%
Sales and marketing........... 36% 34% 44% 36%
General and administrative.... 21% 22% 34% 24%
Depreciation and
amortization................. 5% 5% 6% 8%
Stock-based compensation...... 3% 0% 5% 0%
---- ---- ---- ----
Total costs and expenses... 165% 122% 183% 137%
---- ---- ---- ----
Loss from operations............ (65%) (22%) (83%) (37%)
Interest income (expense), net.. 7% 0% 4% 0%
---- ---- ---- ----
Net loss........................ (58%) (22%) (79%) (37%)
==== ==== ==== ====
</TABLE>

Our operating results are dependent upon the college student market and we
expect them to vary seasonally based upon the typical school year. We tend to
sell most of our memberships in the beginning of the fall and winter academic
terms. All of these memberships expire on August 31 of each year. Because the
aggregate number of memberships within a school year increases as new members
are added beginning on September 1, and we recognize revenue from memberships
ratably over the period from the time of subscription until the end of our
membership year, our subscription revenue will typically be higher in the first
and second quarters than in the fourth quarter of each fiscal year. It is
difficult to determine how the third quarter will typically compare, since it
includes two calendar months from the end of a membership year and the first
month of the subsequent membership year.

Our limited operating history and rapid growth make it difficult for us to
more fully assess the impact of seasonal factors on our business. Nevertheless,
because our business is dependent upon the student market, we expect that our
other revenue may be subject to seasonal fluctuations associated with the
typical school year. In particular, other revenue can be expected to be higher
during the third and fourth quarters due to increased activity associated with
the commencement of the school year. Conversely, the second quarter may have the
least amount of other revenue since it includes the months at the end of a
school year.

COMPARISON OF QUARTER ENDED SEPTEMBER 30, 1999 WITH QUARTER ENDED SEPTEMBER 30,
1998

Revenue. Total revenues increased to $8.6 million for the third quarter of
1999 from $6.4 million for the third quarter of 1998, primarily due to an
increase in other revenue of $1.9 million. The increase in other revenue was
primarily due to $1.0 million related to a new agreement entered into with AT&T
to provide strategic development, management and execution of AT&T's on-campus
marketing initiatives, which was not in effect in the third quarter of 1998.
Another contributing factor was an increase in other marketing services revenue
of $1.3 million primarily attributable to both the Company's acquisition of the
Travel Holding Group, LLC on April 1, 1999, and the signing of several marketing
services contracts not in effect in the third quarter of 1998.

AT&T accounted for approximately 62% and 73% of total revenue for the third
quarter of 1999 and the third quarter of 1998, respectively. Additionally, AT&T
accounted for approximately 94% and 93% of subscription revenue and 51% and 65%
of other revenue for the third quarter of 1999 and the third quarter of 1998,
respectively. One other customer accounted for approximately 11% and 0% of total
revenue and 15% and 0% of other revenue for the third quarter of 1999 and the
third quarter of 1998, respectively.

Cost of Subscription Revenue. Cost of subscription revenue consists of the
costs associated with the fulfillment of membership subscriptions and customer
service. Cost of subscription revenue increased to $1.2 million in the third
quarter of 1999 from $1.0

<PAGE> 14

million in the third quarter of 1998, due primarily to an increased number of
membership renewals fulfilled for the new academic school year in the third
quarter of 1999 over the renewal base in the third quarter of 1998.

Cost of Other Revenue. Cost of other revenue consists of the cost of
advertising, marketing services and commerce. Advertising costs include
production and mailing costs for the magazine, as well as costs incurred for the
Student Advantage Web site. It also includes royalties paid to organizations,
primarily colleges, universities and athletic associations for the use of
organizational information and indicia (name and logo), and for supplying sports
activity content for the Company to include in the FANSonly.com web sites.
Marketing services costs include the direct and indirect costs associated with
planning and implementing events and promotions, media placement and other
marketing services. Commerce costs include personnel-related costs associated
primarily with acquiring calling card customers for AT&T and costs associated
with the sale of Eurail passes. Cost of other revenue increased to $4.1 million
in the third quarter of 1999 from $1.8 million in the third quarter of 1998.
This increase is due primarily to costs incurred in connection with new
marketing services contracts entered into in 1999. Costs incurred by The Travel
Holding Group and The Campus Agency businesses, which were both acquired by
Student Advantage, Inc. during the second quarter of 1999, also contributed to
the increase. Additionally, costs incurred for an issue of Student Advantage
magazine, which was not launched until the fourth quarter of 1998, contributed
to the increase.

Product Development. Product development expenses consist primarily of
personnel-related and consulting costs associated with the development and
enhancement of membership products, which include the Student Advantage
membership card, the Student Advantage magazine, and the studentadvantage.com
and FANSonly.com Web sites. Product development expenses increased to $3.4
million in the third quarter of 1999 from $1.2 million in the third quarter of
1998. The increase is primarily due to approximately $1.4 million incurred in
connection with the re-launch of studentadvantage.com and with development of
our customer database, as well as additional personnel-related costs.

Sales and Marketing. Sales and marketing expenses consist primarily of
personnel and other costs related to our sales and marketing programs. These
expenses increased to $3.1 million in the third quarter of 1999 from $2.2
million in the third quarter of 1998. The increase in sales and marketing
expenses was due, in large part, to increased expenditures related to building
brand awareness, expanding and servicing the customer base of partners, selling
more online advertising, and supporting the marketing services business. In
connection with the Lycos, Inc. marketing agreement entered into in the third
quarter of 1999, we recorded a warrant valued at $2.2 million. Of this amount,
$220,000 was amortized to sales and marketing expense in the third quarter of
1999. The remainder is being amortized on a straight line basis over the
remaining term of the agreement.

General and Administrative. General and administrative expenses consist
primarily of costs related to general corporate functions, including executive
management, finance, human resources, facilities, accounting and legal. General
and administrative expenses increased to $1.8 million in the third quarter of
1999 from $1.4 million in the third quarter of 1998. The increase in general and
administrative expenses is primarily due to higher facilities, legal, accounting
and personnel related costs.

Depreciation and Amortization. Depreciation and amortization expenses
increased to $392,000 in the third quarter of 1999 from $335,000 in the third
quarter of 1998. Amortization expense decreased as a result of certain
intangible assets becoming completely amortized during the second quarter of
1999. Depreciation expense increased primarily as a result of fixed asset
purchases during 1999.

Stock-Based Compensation. We recorded deferred compensation of $4.2 million
in the year ended December 31, 1998, an additional $228,000 in the first quarter
of 1999, and none in the second and third quarters of 1999 in connection with
the issuance of stock options. Of this amount, $1.7 million has been amortized
to expense to date, of which $282,000 was recorded as an expense in the third
quarter of 1999. The remainder is being amortized over the remaining vesting
period of the individual options.

Interest Income (Expense), Net. Interest income (expense), net includes
interest income from cash balances and interest expense related to Student
Advantage's financing obligations. Interest income (expense), net increased to
income of $637,000 in the third quarter of 1999 from an expense of $10,000 in
the third quarter of 1998. The increase is a result of interest income earned on
higher average cash and cash equivalents balances during the third quarter of
1999 compared to that of the third quarter of 1998. Borrowings under a line of
credit were $0 and $1.3 million at September 30, 1999 and September 30, 1998,
respectively.

<PAGE> 15

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1999 WITH THE NINE MONTHS
ENDED SEPTEMBER 30, 1998

Revenue. Total revenues increased to $18.3 million for the nine months
ended September 30, 1999 from $13.7 million for the nine months ended September
30, 1998. This increase was due primarily to an increase in other revenue to
$12.1 million in the nine months ended September 30, 1999, from $7.8 million for
the nine months ended September 30, 1998. The increase in other revenue was
primarily due to $1.4 million related to a new agreement entered into with AT&T
to provide strategic development, management and execution of AT&T's on-campus
marketing initiatives, which was not in effect in the first nine months of 1998.
Additionally, the AT&T marketing agreement was not in effect until the third
quarter of 1998. Other factors contributing to the increase were web advertising
revenue, advertising revenue from three issues of Student Advantage magazine
which had not yet been published in the first three quarters of 1998, revenue
from the sale of Eurail passes as a result of the Company's acquisition of The
Travel Holding Group business on April 1, 1999 and revenue as a result of the
Company's acquisition of The Campus Agency business on April 1, 1999. Marketing
services revenue increased primarily due to the signing of several contracts not
in effect in the third quarter of 1998 and was offset, in part, by the
expiration of a contract which was in effect during the first quarter of 1998.

AT&T accounted for approximately 60% and 62% of total revenue for the nine
months ended September 30, 1999 and the nine months ended September 30, 1998,
respectively. Additionally, AT&T accounted for approximately 94% and 95% of
subscription revenue and 42% and 38% of other revenue for the nine months ended
September 30, 1999 and the nine months ended September 30, 1998, respectively.
No other single customer accounted for 10% or more of total revenues for the
nine months ended September 30, 1999 or the nine months ended September 30,
1998, respectively.

Cost of Subscription Revenue. Cost of subscription revenue increased to
$2.0 million for the nine months ended September 30, 1999 from $1.7 million for
the nine months ended September 30, 1998, due primarily to an increase in costs
related to the fulfillment of our membership subscriptions.

Cost of Other Revenue. Cost of other revenue increased to $8.9 million for
the nine months ended September 30, 1999 from $4.3 million for the nine months
ended September 30, 1998. This increase is due primarily to an increase of $1.6
million in costs associated with the Student Advantage magazine, of which three
issues were distributed during the nine months ended September 30, 1999 and no
issues were distributed during the same period in 1998. The acquisitions of The
Travel Holding Group and The Campus Agency businesses during the nine months
ended September 30, 1999 contributed $1.4 million in expense. Additionally,
costs associated with providing services relating to an AT&T on-campus marketing
program and the AT&T marketing agreement, the latter of which was first incurred
in the third quarter of 1998, contributed to the increase. Other increases in
marketing services expenses primarily attributable to the signing of several
contracts not in effect in the first nine months of 1998 were offset, in part,
by the expiration of a contract which was in effect during the first quarter of
1998.

Product Development. Product development expenses increased to $6.2 million
for the nine months ended September 30, 1999 from $3.5 million for the nine
months ended September 30, 1998. The increase is primarily due to $1.4 million
incurred in connection with the re-launch of studentadvantage.com and the
development of our customer database, as well as additional personnel related
costs.

Sales and Marketing. Sales and marketing expenses increased to $8.1 million
for the nine months ended September 30, 1999 from $4.9 million for the nine
months ended September 30, 1998. The increase in sales and marketing expenses
was due, in large part, to increased expenditures related to building brand
awareness, expanding and servicing the customer base of partners, selling more
online advertising, and supporting the marketing services business. In addition,
in connection with the Lycos, Inc. marketing agreement entered into in the third
quarter of 1999, we recorded a warrant valued at $2.2 million. Of this amount,
$220,000 was amortized to sales and marketing expense in the nine months ended
September 30, 1999. The remainder is being amortized on a straight line basis
over the remaining term of the agreement.

General and Administrative. General and administrative expenses increased
to $6.2 million for the nine months ended September 30, 1999 from $3.3 million
for the nine months ended September 30, 1998. The increase in general and
administrative expenses is primarily due to acquisition costs of $1.3 million
related to the acquisitions of University Netcasting, Inc. and Transaction
Service Providers, Inc., and increases in facilities, legal, accounting and
personnel related costs.

Depreciation and Amortization. Depreciation and amortization expenses
remained virtually unchanged at $1.1 million for the nine months ended September
30, 1999 and the nine months ended September 30, 1998. Decreases in amortization
expense as a result of

<PAGE> 16

certain intangible assets becoming completely amortized during the first nine
months of 1999, were offset by increases in depreciation expense as a result of
fixed asset purchases during 1999.

Stock-Based Compensation. We recorded deferred compensation of $4.2 million
in the year ended December 31, 1998 and an additional $228,000 for the nine
months ended September 30, 1999. Of this amount, $1.7 million has been amortized
to expense to date, of which $836,000 is being recorded as an expense in the
nine months ended September 30, 1999. The remainder is being amortized over the
remaining vesting period of the individual options.

Interest Income (Expense), Net. Interest income (expense), net increased to
$760,000 for the nine months ended September 30, 1999 from $65,000 for the nine
months ended September 30, 1998. The increase is a result of interest income
earned on higher average cash and cash equivalents balance during the nine
months ended September 30, 1999 compared to that of the nine months ended
September 30, 1998.

LIQUIDITY AND CAPITAL RESOURCES

Student Advantage has financed its operations primarily through the private
and public placement of securities, cash from operations, borrowings under its
credit facilities and loans from LLC members. In October 1998, Student Advantage
completed a private placement of equity securities to new investors and received
$9.9 million in net proceeds. In June 1999 the Company completed its initial
public offering selling 6.0 million shares and raising $44.6 million, net of
offering costs. On July 21, 1999 an additional 900,000 shares were issued by
Student Advantage as a result of the full exercise of the underwriters'
over-allotment option, resulting in additional net proceeds of $6.7 million. As
of September 30, 1999, Student Advantage had $42.2 million in cash and cash
equivalents and marketable securities.

Net cash used for operating activities was $13.3 million for the first nine
months of 1999 and $5.3 million for the first nine months of 1998. The net cash
used in the first nine months of 1999 was primarily a result of a net loss of
$14.2 million, an increase in accounts receivable of $3.3 million, an increase
in prepaid expenses and other current assets of $1.9 million, offset by an
increase in accrued expenses of $2.1 million and an increase in deferred revenue
and advanced payments of $1.2 million. Net cash used for operations for 1998
resulted primarily from a net loss of $5.1 million and an increase in accounts
receivable of $5.0 million in 1998. The increase was partially offset by the
timing of payments of accounts payable and accrued expenses and an increase in
deferred revenue and advanced payments of $1.2 million. Deferred revenue
represents primarily payments for membership fees not yet recognized as revenue
and advance payments for purchases of memberships and other services.

Net cash used for investing activities was $38.0 million in the first nine
months of 1999 and $1.8 million in the first nine months of 1998. The net cash
used for investing activities in the first nine months of 1999 was primarily due
to the purchase of marketable securities of $35.3 million, the acquisitions of
the Travel Holdings Group, The Rail Connection, Mentor Interactive and the
settlement of a purchase contingency related to the acquisition of Collegiate
Advantage. The net cash used for investing activities in 1998 was due primarily
to the purchase of fixed assets and the acquisition of Collegiate Advantage.

Net cash provided by financing activities was $50.5 million in the first
nine months of 1999 and $3.0 million in the first nine months of 1998. The net
cash provided by financing activities in the first nine months of 1999 was
primarily the result of net cash proceeds of $43.3 million from the sale of
shares of Student Advantage common stock related to the initial public offering
and $6.7 million in net proceeds as a result of the exercise of the
underwriters' over allotment option. The increase in 1998 was primarily due to
net cash proceeds of $2.0 million from the sale of shares of Student Advantage
preferred stock, $1.2 million related to borrowings under the Company's line of
credit, $1.5 million related to borrowings from a related party and other equity
transactions related to the acquisition of businesses and the issuance of stock
for services, partially offset by a distribution of $1.0 million to LLC members.

Student Advantage has a $2.75 million bank line of credit and equipment
lease credit facility, which expires on June 30, 2000. The line of credit bears
interest at a rate of LIBOR plus 2% or the bank's base rate. The line of credit
and equipment lease credit facility are secured by all of the assets of Student
Advantage. As of September 30, 1999, no amount was outstanding under the line of
credit, and no amounts were outstanding under the equipment lease credit
facility.

Student Advantage has experienced a substantial increase in its
expenditures consistent with growth in operations and staffing, and anticipates
that this will continue for the foreseeable future. Additionally, Student
Advantage will continue to evaluate possible acquisitions, investments in
businesses, products and technologies, and plans to expand its Web
infrastructure, sales and marketing programs and aggressively promote its brand.
Student Advantage currently anticipates that its available cash resources will
be sufficient to meet its anticipated needs for working capital and capital
expenditures for at least the next 12 months.

16
<PAGE> 17

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.

State of Readiness. Student Advantage does not internally develop a
significant amount of software. Student Advantage has made an assessment of the
Year 2000 readiness of its operating financial and administrative systems,
including the hardware and software that support Student Advantage's systems.
Student Advantage's assessment plan consists of:

* contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related
to the delivery of Student Advantage's services to its users,
* contacting vendors of third-party systems,
* assessing repair or replacement requirements,
* implementing repair or replacement, and
* creating contingency plans in the event of Year 2000 failures.

Student Advantage has completed all phases of the assessment plan. Since
third parties developed and currently support many of the systems that we use, a
significant part of this effort was to ensure that these third-party systems are
Year 2000 compliant. We confirmed this compliance based solely on
representations by these third parties of their products' Year 2000 compliance,
as well as reviews of Year 2000 readiness documentation from our vendors.

Costs. To date, Student Advantage has spent an immaterial amount on Year
2000 compliance issues, and does not expect to incur any additional significant
amounts identifying, evaluating or addressing year 2000 compliance issues. Most
of Student Advantage's expenses have related to, and are expected to continue to
relate to, the operating costs associated with time spent by existing employees
in the evaluation and planning process and Year 2000 compliance matters.

Risks. Student Advantage is not currently aware of any Year 2000 compliance
problems relating to its systems that would have a material adverse effect on
Student Advantage's business, results of operations and financial condition,
without taking into account Student Advantage's efforts to avoid or fix such
problems. We have received certificates or reports from our significant third
party vendors indicating that their systems are Year 2000 compliant or
identifying remaining corrective actions. We cannot be certain that we will
discover all Year 2000 compliance problems in our systems. In addition, we
cannot be certain that none of the third-party software, hardware or services
incorporated into our material systems will need to be revised or replaced,
which could be time-consuming and expensive. The failure of Student Advantage to
fix or replace its internally developed proprietary software or third-party
software, hardware or services on a timely basis could result in lost revenues,
increased operating costs, the loss of customers and other business
interruptions, any of which could have a material adverse effect on Student
Advantage's business, results of operations and financial condition.

Student Advantage is heavily dependent on a significant number of
third-party vendors to provide both network services and equipment. A
significant Year 2000-related disruption of the network, services or equipment
that third-party vendors provide to Student Advantage could cause Student
Advantage's members and visitors to consider seeking alternate sites or cause an
unmanageable burden on its customer service, which in turn could materially and
adversely affect Student Advantage's business, financial condition and results
of operations.

In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside of Student Advantage's control will be Year 2000 compliant. The failure
by such entities to be Year 2000 compliant could result in a systemic failure
beyond the control of Student Advantage, such as a prolonged Internet,
telecommunications or electrical failure, which could also impair Student
Advantage's ability to deliver its services to its customers, decrease the use
of the Internet or prevent users from accessing its Web sites which could have a
material adverse effect on Student Advantage's business, results of operations
and financial condition.

Contingency Plan. As discussed above, Student Advantage is engaged in an
ongoing Year 2000 assessment and has developed contingency plans. The results of
Student Advantage's Year 2000 simulation testing and the responses received from
third-party vendors and service providers has been taken into account in
determining the nature and extent of any contingency plans.

<PAGE> 18

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

WE HAVE EXPERIENCED LOSSES IN THE PAST AND EXPECT FUTURE LOSSES

We have not achieved profitability and expect to continue to incur
operating losses for the foreseeable future. We incurred net losses of $6.8
million in 1997, $10.5 million in 1998 and $14.2 million in the first nine
months of 1999. As of September 30, 1999, our accumulated deficit was $39.5
million. We expect to continue to incur significant operating and capital
expenditures and, as a result, we will need to generate significant revenue to
achieve and maintain profitability.

We cannot assure you that we will achieve sufficient revenue for
profitability. Even if we do achieve profitability, we cannot assure you that we
can sustain or increase profitability on a quarterly or annual basis in the
future. If revenue grows more slowly than we anticipate, or if operating
expenses exceed our expectations or cannot be adjusted accordingly, our
business, results of operations and financial condition will be materially and
adversely affected.

WE ARE DEPENDENT UPON AT&T FOR A LARGE PERCENTAGE OF OUR REVENUE AND A DECLINE
IN REVENUE FROM AT&T WOULD ADVERSELY AFFECT OUR RESULTS

We have an exclusive relationship with AT&T through which AT&T pays us for
a variety of goods and services, including:

* memberships provided free to students with an AT&T calling card,
* marketing services,
* advertising in our media products, such as our Web site and SAM, the
Student Advantage magazine, and
* sponsorship of certain of our products and services, such as the
Virtual Backpack.

In 1997, we derived $2.4 million, or 50%, of our total revenue from AT&T.
In 1998, we derived $11.8 million, or 61%, of our total revenue from AT&T. For
the nine months ended September 30, 1999, we derived $10.9 million, or 60%, of
our total revenue from AT&T. Our relationship with AT&T has accounted for most
of our members to date. We obtain these members as a result of AT&T's
distribution of free Student Advantage memberships to students who enroll for an
AT&T telecommunications service. In addition, most of our commerce revenue is
currently attributable to fees that we earn from AT&T for obtaining completed
calling card applications from students. There can be no assurance that we will
be successful in expanding our membership base independent of our relationship
with AT&T.

The termination dates of our current agreements with AT&T have been
extended until June 2001. However, AT&T may terminate these agreements upon 120
days' prior notice, subject to payment of a termination fee in certain cases. In
addition, AT&T can terminate the current agreements if Raymond V. Sozzi, Jr. is
no longer employed as our president, or if he no longer owns at least five
percent of our capital stock. The termination of our relationship with AT&T
would have a material adverse effect on our business.

WE HAVE A LIMITED OPERATING HISTORY AND MAY FACE DIFFICULTIES ENCOUNTERED BY
EARLY STAGE COMPANIES IMPLEMENTING AN INTERNET STRATEGY

We have a limited operating history on which an investor can evaluate our
business. Our operations began in 1992. An investor in our common stock must
consider the risks and difficulties frequently encountered by early stage
companies implementing an Internet strategy. These risks include our possible
inability to:

* sustain historical revenue growth rates,
* generate sufficient revenue to achieve and maintain profitability,
* implement our business model,
* maintain the satisfaction of our members,
* introduce new and enhanced Web and offline content, products and
services, and
* respond to competitive developments.

If we do not successfully manage these risks, our business, results of
operations and financial condition will be materially adversely affected. We
cannot assure you that we will successfully address these risks or that our
business strategy will be successful.

<PAGE> 19

OUR BUSINESS IS HIGHLY DEPENDENT UPON OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER

We are highly dependent on our president and chief executive officer,
Raymond V. Sozzi, Jr., the loss of whom would adversely affect our future
success. If Mr. Sozzi is no longer employed as our president, AT&T can terminate
its agreements with us.

OUR RELATIONSHIP WITH AT&T COULD HINDER OUR ABILITY TO ATTRACT ADDITIONAL
SPONSORS

Our agreement with AT&T prevents us from providing our goods and services
to other telecommunications companies. Our agreement with AT&T also precludes us
from entering into a relationship with another sponsor that will distribute our
memberships free to students as an incentive or through any promotion. Our
relationship with AT&T could hinder our ability to attract additional national
sponsors, in particular sponsors who may be interested in purchasing memberships
for distribution to students.

WE MAY NOT SUCCESSFULLY IMPLEMENT OUR INTERNET STRATEGY

In order to successfully implement our Internet strategy, we must:

* establish our Web site as the primary vehicle for delivery of our
products and services, including member registration and renewal,
information regarding national and local sponsors, and customer
service,
* expand our Web site to include more content and services for students
and encourage our members to use the site so that it becomes more
attractive for advertisers, and
* establish our Web site as an effective e-commerce platform.

Our failure to successfully implement our Internet strategy could have a
material adverse effect on our business.

OUR ABILITY TO GENERATE SIGNIFICANT REVENUES FROM ONLINE ACTIVITIES AND INTERNET
ADVERTISING IS UNCERTAIN

It is unclear whether companies implementing an Internet community business
model will generate sufficient revenues to achieve and maintain profitability.
Our ability to generate significant revenues from advertisers, sponsors and
other businesses in connection with online activities will depend, in part, on
our ability to generate sufficient user traffic with demographic characteristics
attractive to our advertisers. The intense competition among Web sites that sell
online advertising has led to the creation of a number of pricing alternatives
for online advertising. These alternatives make it difficult for us to project
future levels of advertising and other Internet-related revenue and applicable
gross margins related to our online offerings that can be sustained by us or the
online advertising industry in general. Although we do not currently derive a
substantial portion of our revenue from Internet advertising and other
Internet-related activities, our business model depends in part on increasing
the amount of such revenue.

OUR BUSINESS IS SUBJECT TO SEASONAL FLUCTUATIONS, WHICH MAY AFFECT OUR REVENUES
AND OPERATING RESULTS

OUR QUARTERLY REVENUES AND OPERATING RESULTS ARE NOT INDICATIVE OF FUTURE
PERFORMANCE AND ARE DIFFICULT TO FORECAST

In addition to the seasonal fluctuations described above, our revenues and
operating results may vary from quarter to quarter for a variety of other
reasons, such as the timing of revenues from corporate sponsors or non-recurring
charges incurred in connection with acquisitions.

19
<PAGE> 20

You should not rely on quarter-to-quarter comparisons of our operating
results or our operating results for any particular quarter as indicative of our
future performance. It is possible that in some future periods our operating
results may be below the expectations of public market analysts and investors.
In this event, the price of our common stock might fall.

OUR OPERATING RESULTS DEPEND ON SELLING NEW MEMBERSHIPS EVERY YEAR

A significant portion of our revenue is derived from membership fees.
Members must join our program each year. A significant percentage of our members
graduate each year and, therefore, do not renew their memberships. Our revenue
growth is highly dependent upon our ability to market the value of our
membership to college students and to retain members on a yearly basis. To date,
we have not maintained sufficient data to determine the specific number of
members who renew on a yearly basis. A failure to acquire new members or renew
current members could have a material adverse effect on our business.

OUR OPERATING RESULTS DEPEND ON OUR ABILITY TO MAINTAIN AND INCREASE BUSINESS
ALLIANCES AND UNIVERSITY RELATIONSHIPS

We are dependent upon our sponsors, both national and local, to provide our
members with discounts on their products and services. We are also dependent on
maintaining college and university relationships to market and sell our products
and services. Our ability to maintain these alliances and relationships and to
develop new alliances and relationships is critical to our ability to maintain
our members. A failure to acquire or maintain sponsors and relationships could
have a material adverse effect on our business. In addition, our agreements with
a number of our sponsors preclude us from entering into similar arrangements
with their competitors. This restriction may prevent us in some cases from
offering attractive additional discounts to our members.

COLLEGES AND UNIVERSITIES ARE INCREASINGLY RELUCTANT TO PERMIT BUSINESSES TO
MARKET PRODUCTS AND SERVICES ON CAMPUS

Colleges and universities are becoming increasingly wary of businesses
which market products and services to their students. Many colleges and
universities are seeking to decrease or eliminate such marketing. In particular,
colleges and universities are concerned that many students have incurred
substantial levels of credit card debt. As a result, colleges and universities
often attempt to prevent credit card companies and other companies that offer
credit from marketing to their students. We are sometimes mistaken for a credit
card company because we give students a plastic card and a unique identification
number to represent their membership. This sometimes makes it difficult for us
to gain access to college and university students, and we have been denied
access to certain college and university campuses. To date, we have not
maintained sufficient data to determine the specific number of colleges and
universities which have denied us access to their campuses. Any inability to
directly contact students on campus could have a material adverse effect on our
business.

WE FACE SIGNIFICANT COMPETITION ON THE INTERNET, WHICH COULD ADVERSELY AFFECT
OUR BUSINESS

Many Web sites compete for consumers' and advertisers' attention and
spending. We believe that our ability to compete depends upon many factors,
including the following:

* the market acceptance of our Web site and online services,
* the success of our brand building and sales and marketing efforts,
* the performance, price and reliability of services developed by us or
our competitors,
* the effectiveness of our customer service efforts,
* the ability of our competitors to maintain or establish cooperative
relationships among themselves or with strategically aligned third
parties, and
* the emergence of new competitors.

We compete for members and advertisers online with the following types of
companies:

* online services or Web sites targeted at college students, and
* Web search and retrieval and other online service companies, commonly
referred to as portals, such as Alta Vista, Excite, Infoseek, Lycos
and Yahoo!.

The number of Web sites competing for the attention and spending of
advertisers and consumers, including college students, has increased and we
expect it to continue to increase. This market is rapidly evolving and barriers
to entry are low, enabling newcomers to launch competing sites at relatively low
cost.

<PAGE> 21

OUR MEMBERSHIP PROGRAM EXPERIENCES SIGNIFICANT COMPETITION FROM OTHER MARKETING
ACTIVITIES

We compete for client marketing budget dollars with other marketing
activities and, in particular, other forms of direct marketing activities, such
as direct mail. In recent years, there have been significant advances in new
forms of direct marketing, such as the development of interactive shopping and
data collection through television, the Internet and other media. Many industry
experts predict that electronic interactive commerce, such as shopping and
information exchange via the Internet, will proliferate significantly in the
foreseeable future. To the extent such proliferation occurs, it could have a
material adverse effect on the demand for membership programs.

WE MAY BE UNABLE TO MAKE ATTRACTIVE ACQUISITIONS OR INTEGRATE ACQUIRED COMPANIES

As part of our business strategy, we plan to acquire or make investments in
complementary businesses, products, services or technologies to increase our
online traffic and obtain new technologies. However, we cannot assure you that
we will be able to identify suitable acquisition or investment candidates. Even
if we do identify suitable candidates, we cannot assure you that we will be able
to make such acquisitions or investments on commercially acceptable terms. If we
buy a business, we could have difficulty in assimilating that company's
personnel, operations, products, services or technologies into our operations.
These difficulties could disrupt our ongoing business, distract our management
and employees, increase our expenses and adversely affect our results of
operations. Furthermore, we may incur debt or issue equity securities to pay for
any future acquisitions. The issuance of equity securities could be dilutive to
our existing stockholders.

We recently acquired several businesses, including University Netcasting,
Inc., a leading operator of official athletic Web sites for colleges,
universities and college sports associations and Voice FX Corporation, a leading
provider of Internet and Interactive Voice Response (IVR) services to college
and university registrars. Achieving the anticipated benefits of these
acquisitions will depend in part upon whether the integration of these
businesses is accomplished in an efficient, effective and timely manner. In some
cases, the difficulty associated with integrating these businesses may be
increased by the necessity of coordinating geographically separated
organizations. There can be no assurance that the anticipated benefits of these
acquisitions will be achieved.

WE MAY BE UNABLE TO SUCCESSFULLY MANAGE CHANGES IN OUR BUSINESS

We have experienced a period of significant growth. This growth has placed
significant demands on our management and strains on our resources. Revenue
increased from approximately $1.8 million in 1996 to $19.4 million in 1998 to
$18.3 million in the first nine months of 1999. During that same time period we
increased from fewer than 50 to more than 250 employees.

Our ability to manage changes in our business will depend on our ability to
continue to enhance our operating, financial and management information systems.
We cannot assure you that our personnel, systems and controls will be adequate
to support our growth, if any. If we are unable to manage change effectively,
maintain the quality of our products and services and retain key personnel, our
operating results and financial condition could be significantly affected.

OUR CURRENT FINANCIAL AND MANAGEMENT INFORMATION SYSTEMS MAY BE INADEQUATE TO
SUPPORT FUTURE OPERATIONS

We do not expect our current financial and management information systems
to be adequate to support our operations in the future. We expect to replace our
current accounting system within the next twelve months. If we incur delays or
difficulties in implementing an appropriate accounting system, our business
could be adversely affected.

OUR MANAGEMENT TEAM HAS NO EXPERIENCE IN RUNNING A PUBLIC COMPANY

Our management team has not had any experience in a leadership role in a
public company. We cannot assure you that the management team as currently
configured will be able to successfully transition into the leadership role of a
public company. The failure of the management team to adequately handle this
challenge could have a material adverse effect on our business.

WE MUST ATTRACT AND RETAIN HIGHLY-QUALIFIED PERSONNEL IN A COMPETITIVE LABOR
MARKET

We need to hire additional members of our management team and other key
employees. Competition for such personnel is intense. We have experienced, and
we expect to continue to experience in the future, difficulty in hiring highly
skilled employees with the appropriate qualifications. If we do not succeed in
attracting new personnel or retaining and motivating our current personnel, our
business could be adversely affected.

<PAGE> 22

TO EXPAND OUR BUSINESS, WE MAY NEED ADDITIONAL CAPITAL, AND THE FUTURE FUNDING
OF THESE CAPITAL NEEDS IS UNCERTAIN

We require substantial working capital to fund our business. While we
believe that our initial public offering provided us with sufficient funding for
the next twelve months, if capital requirements vary materially from those
currently planned, we may require additional financing.

Additional funds raised through the issuance of equity securities may have
the following negative effects on the then current common stockholders:

* dilution in percentage of ownership in Student Advantage, and
* the rights, preferences or privileges of the new security holders may
be senior to those of the common stockholders.

Additional financing may not be available when needed on terms favorable to
us or at all. Our failure to raise additional funds, if needed, may result in
our inability to:

* develop or enhance our services,
* take advantage of future opportunities, or
* respond to competitive pressures.

OUR SYSTEMS MAY FAIL OR EXPERIENCE A SLOWDOWN

Substantially all of our communications hardware and certain of our other
computer hardware operations are located at USWeb Corporation's facilities in
New York. Fire, floods, earthquakes, power loss, telecommunications failures,
break-ins and similar events could damage these systems. Computer viruses,
electronic break-ins or other similar disruptive problems could also adversely
affect our Web site. Our business could be adversely affected if our systems
were affected by any of these occurrences. Our insurance policies may not
adequately compensate us for any losses that may occur due to any failures or
interruptions in our systems. We do not presently have any secondary "off-site"
systems or a formal disaster recovery plan.

Our Web site must accommodate a high volume of traffic and deliver
frequently updated information. Our Web site has in the past and may in the
future experience slower response times or decreased traffic for a variety of
reasons. These types of occurrences could cause users to perceive our Web site
as not functioning properly and therefore cause them to use another Web site or
other methods to obtain information.

In addition, our users depend on Internet service providers, online service
providers and other Web site operators for access to our Web site. Many of them
have experienced significant outages in the past, and could experience outages,
delays and other difficulties due to system failures unrelated to our systems.

WE ARE DEPENDENT ON THIRD PARTIES FOR SOFTWARE, SYSTEMS AND RELATED SERVICES

We are dependent on various third parties for software, systems and related
services. For example, a third party provides warehousing, distribution,
fulfillment, mail and data processing services for us. As a result, our ability
to deliver various services to our users may be adversely affected by the
failure of these third parties to provide reliable software, systems and related
services to us.

We have in the past and may in the future experience slower response times
or delays in the processing of applications for students and the delivery of
membership identification cards to our members. Many of these delays have been
caused by third parties upon which we rely for fulfillment services. If we are
unsuccessful in providing our members with membership identification cards or
delivering products and services on a timely basis, our business may be
adversely affected.

WE MAY BE SUED FOR INFORMATION RETRIEVED FROM THE INTERNET

Inappropriate use of our Internet services

We may be subjected to claims for defamation, negligence, copyright or
trademark infringement, personal injury or other legal theories relating to the
information we publish on our Web site or in our magazine. These types of claims
have been brought, sometimes successfully, against online services as well as
other print publications in the past. We could also be subjected to claims based
upon the content that is accessible from our Web site through links to other Web
sites or through content and materials that may

<PAGE> 23

be posted by members in chat rooms or bulletin boards. We also offer e-mail
services, which may subject us to potential risks, such as liabilities or claims
resulting from unsolicited e-mail, lost or misdirected messages, illegal or
fraudulent use of e-mail or interruptions or delays in e-mail service. Our
insurance may not adequately protect us against these types of claims.

Misappropriation of personal information

Any penetration of our network security or other misappropriation of our
members' personal or credit card information could subject us to liability. We
may be liable for claims based on unauthorized purchases with credit card
information, impersonation or other similar fraud claims. Claims could also be
based on other misuses of personal information, such as for unauthorized
marketing purposes. These claims could result in litigation. In addition, the
Federal Trade Commission and several states have investigated the use by certain
Internet companies of personal information. We could incur expenses if new
regulations regarding the use of personal information are introduced or if our
privacy practices were investigated.

WE MAY BE SUBJECT TO LITIGATION WHICH COULD HAVE A MATERIAL ADVERSE EFFECT UPON
OUR BUSINESS

The computer industry has been the subject of substantial amounts of
litigation regarding intellectual property and contractual rights.
Consequently, there can be no assurance that third parties will not allege
claims against the Company with respect to current or future trademarks,
advertising or marketing strategies, business processes or other proprietary
rights, or that the Company will counterclaim against any such parties in such
actions. Any such claims or counterclaims could be time-consuming, result in
costly litigation, diversion of management's attention, require the Company to
redesign its products or advertising/marketing strategies or require the Company
to enter into royalty or licensing agreements, any of which could have a
material adverse effect upon the Company's business, results of operations and
financial condition. Such royalty or licensing agreements, if required, may not
be available on terms acceptable to the Company or at all.

On August 3, 1999, Student Advantage, Inc. filed an action in the United
States District Court for the Southern District of New York against
CollegeClub.com, alleging among other things, that CollegeClub.com has
committed false advertising, unfair competition, and tortious interference with
contract in connection with, CollegeClub.com's promotion and marketing of its
services, including but not limited to the Discount Directory in its Web site.
Student Advantage seeks monetary damages and equitable relief, including a
preliminary and permanent injunction. As part of its response, CollegeClub.com
has filed counterclaims against Student Advantage alleging similar conduct on
the part of Student Advantage. CollegeClub.com seeks monetary damages and
equitable relief, including injunctive relief. Student Advantage plans to
vigorously oppose the counterclaims alleged by CollegeClub.com and believes it
has meritorious defenses to each such counterclaim. However, due to the
inherently uncertain nature of litigation and the fact that discovery has not
yet been completed, we cannot guarantee that we will not suffer an adverse
effect in the context of a trial or as a result of a negotiated settlement.

THE INABILITY TO IDENTIFY OUR WEB SITE VISITORS MAY LIMIT THE EFFECTIVENESS OF
OUR SALES AND MARKETING EFFORTS

Web sites typically place certain "cookies" on a user's hard drive without
the user's knowledge or consent. Cookies are small files of information about an
Internet user's movement through the Internet that are stored on the hard drive
of the user's computer. Student Advantage and other Web sites use cookies for a
variety of reasons, including the collection of data derived from the user's
Internet activity. Most currently available Web browsers allow users to remove
cookies at any time or to prevent cookies from being stored on their hard drive.
In addition, some commentators, privacy advocates and governmental bodies have
suggested limiting or eliminating the use of cookies. Any reduction or
limitation in the use of cookies could limit the effectiveness of our sales and
marketing efforts. In addition, the European Union recently adopted a directive
addressing data privacy that may limit the collection and use of certain
information regarding Internet users. This directive may limit our ability to
target advertising or collect and use information in certain European countries.

WE MAY BE UNABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE IN OUR INDUSTRY

Our market is characterized by rapidly changing technologies, frequent new
product and service introductions and evolving industry standards. The recent
growth of the Internet and intense competition in our industry exacerbates these
market characteristics. To achieve our goals, we need to effectively integrate
the various software programs and tools required to enhance and improve our
product offerings and manage our business. Our future success will depend on our
ability to adapt to rapidly changing technologies by continually improving the
performance features and reliability of our services. We may experience
difficulties that could delay or prevent the successful development,
introduction or marketing of new products and services. In addition, our new
enhancements must meet the requirements of our current and prospective members
and must achieve significant market acceptance. We could also incur substantial
costs if we need to modify our service or infrastructures to adapt to these
changes.

OUR INTELLECTUAL PROPERTY RIGHTS MAY BE VIOLATED OR SUBJECT TO LITIGATION AND WE
MAY INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS

We believe that protection of our copyrights, service marks, trademarks,
trade secrets, proprietary technology and similar intellectual property is
critical to our success. We rely on the following mechanisms to protect such
intellectual property:

* trademark and copyright law,
* trade secret protection, and
* confidentiality agreements with employees, customers, independent
contractors, sponsors and others.

Despite our best efforts, we cannot assure you that our intellectual
property rights will not be infringed, violated or legally imitated. Failure to
protect our intellectual property could have a material adverse effect on our
business.

We may be sued or named as a defendant in the future for infringement of
the trademark and other intellectual property rights of third parties. Any such
proceedings or claims could have a material adverse effect on our business,
financial condition and results of operations.

THE FAILURE OF COMPUTER SYSTEMS AND SOFTWARE PROGRAMS TO BE YEAR 2000 COMPLIANT
COULD NEGATIVELY IMPACT OUR BUSINESS

Many currently installed computer systems and software products only accept
two digits to identify the year in any date. Thus, the year 2000 will appear as
"00", which the system might consider to be the year 1900 rather than the year
2000. This could result in

<PAGE> 24

system failures, delays or miscalculations causing disruptions to our
operations.

We are currently conducting an inventory of, and developing testing
procedures for, all software and other systems that we believe might be affected
by Year 2000 issues. Since third parties developed and currently support many of
the systems that we use, a significant part of this effort will be to ensure
that these third-party systems are Year 2000 compliant. We plan to confirm this
compliance through a combination of the representation by these third parties of
their products' Year 2000 compliance, as well as specific testing of these
systems. The failure of systems maintained by third parties to be Year 2000
compliant could cause us to incur significant expense to remedy any problems,
reduce our revenues from such third parties or otherwise seriously damage our
business. A significant Year 2000-related disruption of the network services or
equipment that third-party vendors provide to us could also cause our members or
other users to consider seeking alternate providers or cause an unmanageable
burden on our customer service and technical support.

Our failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, some of our normal business activities or
operations.

THE STOCK PRICE OF TECHNOLOGY COMPANIES, PARTICULARLY INTERNET-RELATED
COMPANIES, COULD BE EXTREMELY VOLATILE AND MAY RESULT IN LITIGATION AGAINST US

The stock market has experienced significant price and volume fluctuations,
and the market prices of technology companies, particularly Internet-related
companies, have been highly volatile. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted. Litigation could result in
substantial costs and a diversion of management's attention and resources.

24
<PAGE> 25

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company does not believe that it has any material market risk
exposure with respect to derivatives or other financial instruments.

PART II. OTHER INFORMATION.

ITEM 1. LEGAL PROCEEDINGS.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

The effective date of the Company's first registration statement, filed on
Form S-1 under the Securities Act of 1933 (File No. 333-75807) relating to
Company's initial public offering of its Common Stock, was June 17, 1999. A
total of 6,000,000 shares of the Company's Common Stock were sold to an
underwriting syndicate. The managing underwriters were BancBoston Robertson
Stevens, Prudential Securities, Volpe Brown Whelan & Company and Wit Capital
Corporation. The offering commenced and completed on June 17, 1999, at an
initial public offering price of $8.00 per share. The initial public offering
resulted in gross proceeds of $48.0 million, $3.4 million of which was applied
to the underwriting discount and $1.4 million of which was applied to related
expenses. As a result, net proceeds of the offering to the Company were
approximately $43.0 million. From the date of receipt through September 30,
1999, approximately $2.5 million of the net proceeds of the Company's initial
public offering was used to pay off our line of credit, $1.3 million was used to
pay acquisition expenses related to the University Netcasting acquisition and
other expenses related to the offering and $342,000 million was used to purchase
fixed assets. None of the net proceeds of the offering were paid by the Company,
directly or indirectly, to any director, officer or general partner of the
Company or any of their associates, or to any persons owning ten percent or more
of any class of the Company's equity securities, or any affiliates of the
Company.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

27 Financial Data Schedule

(b) The Company filed a Current Report on Form 8-K on July 1, 1999.

<PAGE> 26

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

Student Advantage, Inc.

(Registrant)

Dated: November 15, 1999 By: /s/ Christopher B. Andrews
------------------------------------------------
Christopher B. Andrews, Vice President, Finance
and Administration and Chief Financial
Officer
(Principal Financial and Accounting Officer)

26
<PAGE> 27

EXHIBIT INDEX

Exhibits
--------

27 Financial Data Schedule

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS (IN THOUSANDS,
EXCEPT PER SHARE DATA)
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 6,884
<SECURITIES> 35,340
<RECEIVABLES> 6,547
<ALLOWANCES> 200
<INVENTORY> 0
<CURRENT-ASSETS> 50,809
<PP&E> 3,219
<DEPRECIATION> (886)
<TOTAL-ASSETS> 56,644
<CURRENT-LIABILITIES> 15,706
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,838
<TOTAL-LIABILITY-AND-EQUITY> 56,644
<SALES> 18,321
<TOTAL-REVENUES> 18,321
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 33,262
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 760
<INCOME-PRETAX> (14,181)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,181)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,181)
<EPS-BASIC> (0.57)
<EPS-DILUTED> (0.57)

</TABLE>