STUDENT ADVANTAGE INC, 10-Q, 2000-11-14

STUDENT ADVANTAGE INC
10-Q, 2000-11-14
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, 2000

[ ] 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)

DELAWARE 04-3263743
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

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

(617) 912-2000
(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: 39,529,243 shares of common
stock as of October 31, 2000.

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STUDENT ADVANTAGE, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
---------------

INDEX

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

ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at September 30, 2000 and
December 31, 1999 (Unaudited) 3

Consolidated Statement of Operations for the three and
nine months ended September 30, 2000 and 1999 (Unaudited) 4

Consolidated Statement of Cash Flows for the nine months
ended September 30, 2000 and 1999 (Unaudited) 5

Notes to Consolidated Financial Statements (Unaudited) 6

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 11

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 25

PART II. OTHER INFORMATION 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>

2
<PAGE> 3

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS:

Student Advantage, Inc.
Consolidated Balance Sheet
(in thousands, except share data)

<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ............................................ $ 19,418 $ 15,370
Marketable securities ................................................ -- 20,546
Accounts receivable (net of reserves of $519 and $328 at September 30,
2000, and December 31, 1999, respectively) ......................... 6,052 4,527
Prepaid expenses and other current assets ............................ 2,388 2,698
-------- --------
Total current assets ............................................ 27,858 43,141
Property and equipment, net .......................................... 5,330 4,038
Investment ........................................................... 5,627 4,262
Intangible and other assets, net ..................................... 10,386 9,355
-------- --------
Total assets ..................................................... $ 49,201 $ 60,796
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ...................................................... 4,723 3,329
Accrued compensation .................................................. 1,541 1,523
Other accrued expenses ................................................ 6,881 4,574
Deferred revenue ...................................................... 7,918 9,576
-------- --------
Total current liabilities ....................................... 21,063 19,002
-------- --------
Notes payable ........................................................... -- 100
-------- --------
Total liabilities ............................................... 21,063 19,102
-------- --------
Stockholders' equity
Preferred stock, $0.01 par value, 5,000,000 shares authorized,
0 shares issued and outstanding

Common stock, $0.01 par value; Authorized: 150,000,000 shares;
Issued and Outstanding: 36,190,607 and 35,435,398 at September 30,
2000 and December 31, 1999, respectively ............................. 361 354
Additional paid-in capital .......................................... 89,244 87,690
Accumulated deficit ................................................. (60,298) (44,058)
Notes receivable from stockholders .................................. (50) (79)
Deferred compensation ............................................... (1,119) (2,213)
-------- --------
Total stockholders' equity ...................................... 28,138 41,694
-------- --------
Total liabilities and stockholders' equity ...................... $ 49,201 $ 60,796
======== ========
</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,
2000 1999 2000 1999
-------- -------- -------- --------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue
Student Services ....................................................... $ 7,070 $ 5,459 $ 21,424 $ 13,737
Corporate and University Solutions ..................................... 5,573 3,164 13,924 4,584
-------- -------- -------- --------

Total revenue .......................................................... 12,643 8,623 35,348 18,321

Cost and expenses
Cost of student services revenue (excluding stock-based
compensation of $9 and $14 for the three months ended
September 30, 2000 and 1999, respectively, and $28 and
$43 for the nine months ended September 30, 2000 and 1999,
respectively.) ...................................................... 2,119 3,548 7,705 7,940
Cost of corporate and university solutions revenue (excluding
stock-based compensation of $6 and $8 for the three months
ended September 30, 2000 and 1999, respectively, and $20
and $25 for the nine months ended September 30, 2000 and
1999, respectively.) ................................................ 3,219 1,702 7,612 2,937
Product development (excluding stock-based compensation of $33
and $81 for the three months ended September 30, 2000 and
1999, respectively, and $140 and $239 for the nine months
ended September 30, 2000 and 1999, respectively.) ................... 4,592 3,359 12,315 6,169
Sales and marketing (excluding stock-based compensation of $105
and $139 for the three months ended September 30, 2000 and
1999, respectively, and $322 and $409 for the nine months
ended September 30, 2000 and 1999, respectively.) ................... 4,219 3,109 13,316 8,067
General and administrative (excluding stock-based compensation
of $33 and $40 for the three months ended September 30, 2000
and 1999, respectively, and $106 and $120 for the nine months
ended September 30, 2000 and 1999, respectively.) ................... 2,405 1,857 7,320 6,359
Depreciation and amortization .......................................... 1,504 349 3,946 954
Stock-based compensation ............................................... 186 282 616 836
-------- -------- -------- --------

Total costs and expenses ....................................... 18,244 14,206 52,830 33,262
-------- -------- -------- --------

Loss from operations ........................................................ (5,601) (5,583) (17,482) (14,941)

Interest income (expense), net ......................................... 374 637 1,242 760
-------- -------- -------- --------

Net loss .................................................................... $ (5,227) $ (4,946) $(16,240) $(14,181)
======== ======== ======== ========

Basic and diluted net loss per share ........................................ $ (0.14) $ (0.14) $ (0.45) $ (0.57)
======== ======== ======== ========
Shares used in computing basic and diluted net loss per share ............... 36,170 34,610 35,915 24,776
======== ======== ======== ========

Unaudited pro forma basic and diluted net loss per share .................... $ (0.14) $ (0.14) $ (0.45) $ (0.47)
======== ======== ======== ========
Shares used in computing unaudited pro forma basic and diluted net
loss per share ......................................................... 36,170 34,610 35,915 29,877
======== ======== ======== ========
</TABLE>

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

4
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Student Advantage, Inc.
Consolidated Statement of Cash Flows
(in thousands)

<TABLE>
<CAPTION>
For The Nine Months Ended
September 30,
2000 1999
-------- --------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss...................................................................... $(16,240) $(14,181)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation.................................................................. 1,689 471
Amortization.................................................................. 2,257 446
Reserve for allowances and bad debts.......................................... 171 130
Compensation expense relating to issuance of equity........................... 616 836
Issuance of stock in exchange for services.................................... -- 108
Amortization of marketing expense associated with common stock warrant........ 666 220
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable........................................................... (1,659) (3,268)
Prepaid expenses, other current assets and other assets....................... 326 (1,886)
Accounts payable.............................................................. 1,287 436
Accrued compensation.......................................................... 18 (94)
Accrued expenses.............................................................. 1,971 2,077
Deferred revenue.............................................................. (1,906) 1,231
-------- --------
Net cash used for operating activities........................................... (10,804) (13,474)
-------- --------

Cash flows from investing activities:
Purchases of fixed assets..................................................... (2,618) (1,438)
Acquisitions of businesses for cash, net of cash acquired..................... (2,065) (1,199)
Purchases of marketable securities............................................ (8,813) (44,283)
Proceeds from sale of marketable securities................................... 29,359 8,943
Purchase of investment........................................................ (1,365) --
Proceeds from sale of fixed assets............................................ -- 16
-------- --------
Net cash provided by (used for) investing activities............................. 14,498 (37,961)
-------- --------

Cash flows from financing activities:
Repayment of note from stockholder............................................ 29 --
Proceeds from issuance of common stock, net of issuance costs................. -- 49,920
Proceeds from exercise of common stock options, warrants and employee stock
purchase plan............................................................... 325 512
Note Payable.................................................................. -- 100
-------- --------
Net cash provided by financing activities........................................ 354 50,532
-------- --------

Adjustment to conform fiscal period of University Netcasting, Inc................ -- 1,647
-------- --------

Net increase in cash and cash equivalents........................................ 4,048 744
Cash and cash equivalents, beginning of year..................................... 15,370 6,140
Cash and cash equivalents, end of year........................................... $ 19,418 $ 6,884
======== ========
</TABLE>

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

5
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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") are dedicated to serving the needs of college students and the
businesses and universities that serve them, primarily through its leading
membership program and network of web sites. 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 network of web sites
(Student Advantage Network) and magazine. Through our FANSonly Network,
FANSonly.com, we provide sports fans with comprehensive on-line information and
analysis on college sports. We also offer marketing services to businesses
seeking to communicate effectively with the college student market. Student
Advantage, Inc. was incorporated in the State of Delaware on October 20, 1998.
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.

In June 1999, we completed an initial public offering ("IPO") of 6,000,000
shares of 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, we issued an additional 900,000 shares of common
stock as a result of the full exercise of the underwriters' over-allotment
option. We received additional net proceeds of $6.7 million as a result of the
exercise.

The financial statements for the three and nine months ended September 30,
2000, reflect a change in the classification of revenue categories and the
associated cost of sales. The classifications have been changed from
"Subscription" and "Other" to "Student Services" and "Corporate and University
Solutions." Student services revenue is attributable to the parts of our
business that are focused primarily on providing goods and services to students.
Corporate and university solutions revenue includes those revenues that are
attributable to the parts of our business that are focused primarily on
providing goods and services to corporations and universities. As we continue to
expand the products and services that we offer, the change in reporting
categories better represents the types of products and services and their
associated costs. Certain prior period amounts have been reclassified to conform
to the current period presentation. We continue to operate as a single segment
since the financial information reviewed by the chief decision maker reflects
one segment.

These financial statements should be read in conjunction with the
consolidated financial statements and related footnotes included in our Annual
Report on Form 10-K for the year ended December 31, 1999.

UNAUDITED INTERIM FINANCIAL INFORMATION

The unaudited interim consolidated financial statements of Student
Advantage for the three and nine months ended September 30, 2000 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 Student Advantage at September 30, 2000, and the results of its operations
and its cash flows for the three and nine months ended September 30, 2000 and
1999, respectively. The results for the three and nine months ended September
30, 2000 are not necessarily indicative of the expected results for the full
fiscal year or any future period. Certain prior period amounts have been
reclassified to conform to the current period presentation.

6
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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, which has been paid in full. The
Campus Agency provides media planning and strategy consulting services to the
U.S. student travel market and 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 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.

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. The warrant expired in May of 2000. 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.
Due to a change in estimated useful life, the remaining balance of approximately
$226,000 was amortized to expense during the quarter ended June 30, 2000.

TRANSACTION SERVICE PROVIDERS, INC. On June 11, 1999, Student Advantage
acquired Transaction Service Providers, Inc. ("TSP"), a provider of stored value
card services to universities, students and local merchants, in a transaction
accounted for as a pooling of interests. Because the historical results of
operations and financial position of TSP 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 TSP.

UNIVERSITY NETCASTING, INC. On June 18, 1999, Student Advantage acquired
all of the outstanding capital stock of University Netcasting, Inc. ("UNI"), a
provider of on-line information and analysis of college sports, in exchange for
2,425,610 shares of Student Advantage common stock and the assumption of all UNI
outstanding common stock options, which were converted into options to purchase
a total of 66,634 shares of our common stock. 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.

VOICE FX CORPORATION. On October 7, 1999, Student Advantage acquired Voice
FX Corporation ("Voice FX"), a 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 common stock and assumed all of Voice FX's outstanding
common stock options, which were converted into options to purchase a total of
59,687 shares of our common stock. The acquisition was accounted for under the
purchase method of accounting and the results of operations have been 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
were recorded in connection with the acquisition and are being amortized on a
straight-line basis over expected useful lives of between three and five years.

COLLEGE411.COM, INC. On May 17, 2000, Student Advantage acquired
College411.com, Inc. ("College411"), a provider of web-based college and
university student-focused content. In connection with the acquisition, Student
Advantage issued 193,837 shares of common stock, assumed all of College411's
outstanding common stock options, which were converted into options to purchase
a total of 36,162 shares of our common stock, and forgave a loan of
approximately $250,000. The acquisition has been accounted for under the
purchase method of accounting and the results of operations have been included
in Student Advantage's results of operations beginning on the acquisition date.
Goodwill and other intangible assets in the aggregate amount of $1.4 million
have been recorded in connection with the acquisition and are being amortized on
a straight-line basis over two years.

SCHOLARAID.COM, INC. On May 18, 2000, Student Advantage acquired
ScholarAid.com, Inc. ("ScholarAid"), a provider of web-based scholarship and
educational research tools. In connection with the acquisition, Student
Advantage issued 131,638 shares of common stock, assumed all of ScholarAid's
outstanding common stock options, which were converted into options to purchase
a total of 21,302 shares of our common stock, and forgave a loan of
approximately $493,000. The acquisition has been accounted for under the
purchase method of accounting and the results of operations have been included
in Student Advantage's results of operations beginning on the acquisition date.
Goodwill and other intangible assets in the aggregate amount of $1.4 million
have been recorded in connection with the acquisition and are being amortized on
a straight-line basis over three years.

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eSTUDENTLOAN, LLC. On July 28, 2000, Student Advantage acquired from
CollegeClub.com, Inc., certain assets of its subsidiary, eStudentLoan, LLC,
relating to its student loan search engine business, in exchange for
approximately $910,000 in cash. The acquisition has been accounted for under the
purchase method of accounting and the results of operations of the acquired
business have been included in Student Advantage's results beginning on the
acquisition date. Goodwill and other intangible assets in the approximate amount
of $1.1 million have been recorded in connection with this acquisition and are
being amortized over expected useful lives of three years.

NOTE 3 - COMPUTATION OF UNAUDITED NET LOSS PER SHARE AND PRO FORMA NET LOSS PER
SHARE (1)

(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------- -------- ---------- --------
BASIC AND DILUTED NET LOSS PER SHARE: (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net loss $(5,227) $ (4,946) $ (16,240) $(14,181)
======= ======== ========== ========

Basic and diluted weighted average common shares outstanding (2) 36,170 34,610 35,915 24,776
======= ======== ========== ========

Basic and diluted net loss per share $ (.14) $ (0.14) $ (0.45) $ (0.57)
======= ======== ========== ========

PRO FORMA BASIC AND DILUTED NET LOSS PER SHARE:
Net loss $(5,227) $ (4,946) $ (16,240) $(14,181)
======= ======== ========== ========

Shares attributable to common stock, excluding effects of
preferred stock conversion (2) 26,369 21,636
Shares attributable to the conversion of convertible
preferred stock upon closing of the initial public
offering 8,241 8,241
-------- --------

Pro forma basic and diluted weighted average shares outstanding 36,170 34,610 35,915 29,877
======= ======== ========== ========

Pro forma basic and diluted net loss per share $ (0.14) $ (0.14) $ (0.45) $ (0.47)
======= ======== ========== ========
</TABLE>

(1) 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.

(2) All outstanding options and warrants to purchase common stock (totaling
5,263,952 and 4,209,366 at September 30, 2000 and 1999, respectively) were
excluded from the calculation of diluted earnings per share for all periods
presented because their inclusion would have been anti-dilutive.

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. We valued the Lycos warrant at $2.2
million, which is being recognized as a sales and marketing expense on a
straight-line basis over the term of the marketing agreement, which is thirty
months.

NOTE 5 - EQUITY INVESTMENTS

EDU.COM, INC. On November 12, 1999, Student Advantage made an investment in
edu.com, a privately held e-commerce company. Student Advantage paid
approximately $4.3 million in exchange for approximately 922,000 shares of
Series B preferred stock of edu.com. In January 2000, Student Advantage invested
an additional $1.0 million in exchange for approximately 217,000 shares of
Series B preferred stock. This investment is being recorded at the lower of cost
or market.

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<PAGE> 9
ALUMNIPRIDE.COM, INC. On July 12, 2000, Student Advantage made an
investment in alumnipride.com, Inc., a privately held company providing
customized web sites to national alumni associations. Student Advantage paid
approximately $350,000 in exchange for approximately 97,000 shares of Series B
preferred stock of alumnipride.com, Inc. This investment is being recorded at
the lower of cost or market.

NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities" ("SFAS No. 133"). The new
standard establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. On July 7,
1999, the FASB issued SFAS 137, "Accounting for Derivative Instruments and
Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133
-- an amendment to FASB Statement No. 133." SFAS 133, as amended, by SFAS 137,
is effective for Student Advantage's fiscal year ending December 31, 2001. On
June 19, 2000, certain provisions of SFAS 133 were amended by SFAS 138,
"Accounting for Certain Derivative Instruments - an amendment to FASB Statement
No. 133." We do not expect the adoption of SFAS No. 133 to have a material
effect on our financial position or results of operations.

In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements." This
bulletin summarizes certain views of the staff on applying generally accepted
accounting principles to revenue recognition in financial statements. The staff
believes that revenue is realized or realizable and earned when all of the
following criteria are met: persuasive evidence of an arrangement exists;
delivery has occurred or services have been rendered; the seller's price to the
buyer is fixed or determinable; and collectibility is reasonably assured. We are
required to adopt SAB 101 in the fourth quarter of 2000. We do not expect the
application of this bulletin to have a material impact on our financial
positions or results of operation.

In October 2000, the Emerging Issues Task Force (EITF) issued No. 00-14,
"Accounting for Certain Sales Incentives." This Issue addresses the recognition,
measurement, and income statement classification for sales incentives offered
voluntarily by a vendor without charge to customers that can be used in, or that
are exercisable by a customer as a result of, a single exchange transaction. The
EITF also issued No. 99-19, "Reporting Gross as a Principal versus Net as an
Agent." The issue addresses whether a company should report revenue based on (a)
the gross amount billed to a customer because it has earned revenue from the
sale of the goods or services or (b) the net amount retained (that is, the
amount billed to the customer less the amount paid to a supplier) because it has
earned a commission or fee. Both are effective in connection with the
implementation of Staff Accounting Bulletin 101.

NOTE 7 - RELATED PARTY TRANSACTIONS

Effective May 15, 2000, we entered into an Affiliate and E-Commerce
Agreement with The Princeton Review LLC, an affiliate of Princeton Review
Publishing LLC. Princeton Review Publishing LLC is a stockholder of Student
Advantage, and one of its officers and equity holders is a member of our Board
of Directors. Under the agreement, The Princeton Review will pay us a fee to
participate in the Student Advantage Network by placing the Student Advantage
logo and content on The Princeton Review's review.com web site. In addition,
under the agreement, The Princeton Review will provide discounts as part of the
Student Advantage Membership Program, and market the discount to high school,
college and university students. Additionally, under the agreement we will pay
The Princeton Review a fee in exchange for exclusive advertising sales
responsibilities for the review.com web site. The agreement expires on June 15,
2002. We recorded revenue of $249,000 and $295,000, and expense of $228,000 and
$359,000, related to this agreement during the three and nine months ended
September 30, 2000, respectively.

9
<PAGE> 10

NOTE 8 - SUBSEQUENT EVENTS

On October 27, 2000, we issued 800,000 shares of common stock to At Home
Corporation ("Excite@Home"), a provider of broadband services, and 1,200,000
shares of common stock to John Hancock Small Cap Value Fund, for an aggregate
purchase price of $10 million. We also issued to these investors warrants to
purchase a total of 1,000,000 shares of common stock, half of which were issued
at a purchase price of $5 per share and half of which were issued at a purchase
price of $6 per share. In connection with the financing, we entered into an
alliance agreement with Excite@Home to jointly market Excite@Home's broadband
service and Student Advantage Network content to student and university
customers.

On October 31, 2000, we acquired substantially all of the assets of
CollegeClub.com, Inc. ("CollegeClub"), an integrated communications and media
internet company for college students, and certain affiliates that had filed for
protection under Chapter 11 of the federal Bankruptcy Code, in exchange for
approximately $6.6 million in cash and 1,324,761 shares of Student Advantage
common stock and the assumption of certain liabilities. Up to an additional $5.0
million in cash will be paid to CollegeClub if certain web site revenue
performance goals are met during 2001. The sale was approved by the federal
Bankruptcy Court in Southern California. The acquisition will be accounted for
under the purchase method of accounting and the results of the acquired business
will be included in Student Advantage's results beginning on the acquisition
date.

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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

Student Advantage is dedicated to serving the needs of college students and
the businesses and universities that serve them, primarily through our leading
membership program and network of web sites. We report our revenue in two
categories: student services revenue and corporate and university solutions
revenue.

Student services revenue is attributable to the parts of Student
Advantage's business which are focused primarily on providing goods and services
to students. Student services revenue includes subscription, commerce and
advertising revenue. Subscription revenue is derived from membership sales.
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.
Memberships are sold in several different ways. To date, almost all have been
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 a Student Advantage membership identification card and an AT&T calling
card. We earn a fee from AT&T for these memberships, with a current commitment
by AT&T to purchase 900,000 memberships for the 2000-2001 academic year. During
1998, 1999, and the nine months ended September 30, 2000, AT&T accounted for
approximately 95%, 94%, and 89% of subscription revenue, respectively. In June
2000, we restructured our agreements with AT&T (See: Risk Factors that May
Affect Future Results - "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".) Also, during the 1999-2000 academic year, we sold memberships to
Capital One for distribution to their existing and prospective student customer
base. We also sell memberships to certain of our corporate partners for resale
to students at their retail locations. In addition, Student Advantage sells
memberships directly to students for a membership fee that is currently $20 per
year. Commerce revenue includes primarily transaction-based fees earned for
reselling products and services and acquiring student customers on behalf of
other businesses. To date, commerce revenue has included primarily fees that we
receive from AT&T for obtaining completed calling card applications on their
behalf, and from the resale of Eurail passes. Advertising revenue consists
primarily of fees for banner advertisements and sponsorships on our network of
web sites, and advertisements placed in SAM, Student Advantage Magazine.

Corporate and university solutions revenue is attributable to the parts of
Student Advantage's business which are focused primarily on providing goods and
services to corporations and universities. It includes commerce and marketing
services revenue. Commerce revenue includes primarily transaction-based fees
earned in connection with acquiring customers on behalf of our corporate
clients. 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 on
behalf of businesses, and providing media planning and placement.

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.

On May 17, 2000, Student Advantage acquired College411.com, Inc.
("College411"), a provider of web-based college and university student-focused
content. In connection with the acquisition, Student Advantage issued 193,837
shares of common stock, assumed all of College411's outstanding common stock
options, which were converted into options to purchase a total of 36,162 shares
of our common stock, and forgave a loan of approximately $250,000. The
acquisition has been accounted for under the

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purchase method of accounting and the results of operations have been included
in Student Advantage's results of operations beginning on the acquisition date.
Goodwill and other intangible assets in the aggregate amount of $1.4 million
have been recorded in connection with the acquisition and are being amortized on
a straight-line basis over two years.

On May 18, 2000, Student Advantage acquired ScholarAid.com, Inc.
("ScholarAid"), a provider of web-based scholarship and educational research
tools. In connection with the acquisition, Student Advantage issued 131,638
shares of common stock, assumed all of ScholarAid's outstanding common stock
options, which were converted into options to purchase a total of 21,302 shares
of our common stock, and forgave a loan of approximately $493,000. The
acquisition has been accounted for under the purchase method of accounting and
the results of operations have been included in Student Advantage's results of
operations beginning on the acquisition date. Goodwill and other intangible
assets in the aggregate amount of $1.4 million have been recorded in connection
with the acquisition and are being amortized on a straight-line basis over three
years.

On July 28, 2000, Student Advantage acquired from CollegeClub.com, Inc.,
certain assets of its subsidiary eStudentLoan, LLC, relating to its student loan
search engine business, in exchange for approximately $910,000 in cash. The
acquisition has been accounted for under the purchase method of accounting and
the results of operations of the acquired business have been included in Student
Advantage's results beginning on the acquisition date. Goodwill and other
intangible assets in the approximate amount of $1.1 million have been recorded
in connection with this acquisition and are being amortized over expected useful
lives of three years.

We recorded deferred compensation of $4.2 million in the year ended
December 31, 1998 and $228,000 in the first quarter 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 stock options, typically four years. Of the
total deferred compensation amount, $808,000 and $1.1 million had been amortized
during 1998 and 1999, respectively, and an additional $186,000 and $616,000 has
been amortized during the three and nine months ended September 30, 2000,
respectively. During 1999 and the nine month period ended September 30, 2000, we
reduced the amount of deferred compensation by approximately $259,000 and
$479,000 respectively as a result of cancellation of certain stock options due
to the termination of the employment with Student Advantage of certain
employees. The amortization of deferred compensation is recorded as an operating
expense. We currently expect to amortize the following remaining amounts of
deferred compensation as of September 30, 2000 in the periods indicated:

October 1, 2000 -- December 31, 2000.............................. $ 187,000
January 1, 2001 -- December 31, 2001.............................. 689,000
January 1, 2002 -- December 31, 2002.............................. 239,000
January 1, 2003 -- December 31, 2003.............................. 4,000

Student Advantage has experienced substantial net losses since its
inception and as of December 31, 1999 and September 30, 2000, Student Advantage
had an accumulated deficit of $44.1 million and $60.3 million, respectively.
Student Advantage expects to increase its expenditures in all areas in order to
execute its business plan. As a result, Student Advantage believes that it 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.

RESULTS OF OPERATIONS

COMPARISON OF QUARTER ENDED SEPTEMBER 30, 2000 WITH QUARTER ENDED SEPTEMBER 30,
1999

Revenue. Total revenues increased to $12.6 million for the third quarter of
2000 from $8.6 million for the third quarter of 1999, due both to an increase in
corporate and university solutions revenue of $2.4 million, and an increase in
student services revenue of $1.6 million. The increase in corporate and
university solutions revenue was primarily due to an increase in commerce
revenue related to our acquisition of Voice FX in the fourth quarter of 1999,
and an increase in event staffing, management and execution provided under the
restructured AT&T agreement. The increase in student services revenue was
primarily due to increases in both on-line advertising on our network of web
sites and subscription revenue, offset by a slight decrease in commerce revenue.
Subscription revenue increased due to an increase in the number of card members
to 2.1 million at the conclusion of the membership year (1999-2000 school year)
which ended August 31, 2000 from 1.3 million at the conclusion of the membership
year (1998-1999 school year) which ended August 31, 1999. Increases in commerce
revenue due to increases in transaction based fees and the acquisition of
eStudentLoan during the quarter, were more than offset by a significant decrease
in fees from AT&T for acquisitions of calling card customers as a result of the
restructuring of the AT&T agreement on June 8, 2000. While we do not expect to
earn any fees for the acquisition of AT&T calling card customers in future
quarters, the restructured agreement allows us to earn fees for acquiring
customers for certain other AT&T products.

AT&T accounted for approximately 45% and 62% of total revenue in the third
quarter of 2000 and the third quarter of 1999, respectively. Additionally, AT&T
accounted for approximately 60% and 79% of student services revenue and 26% and
33% of

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corporate and university solutions revenue in the third quarter of 2000 and the
third quarter of 1999, respectively. One other customer, Capital One, accounted
for approximately 14% of total revenue (2% of student services revenue and 30%
of corporate and university solutions revenue) in the third quarter of 2000.
While revenue from AT&T in the third quarter of 2000 increased on an absolute
dollar value basis over revenue in the third quarter of 1999, the percentage of
revenue in those periods derived from AT&T decreased. We expect that revenue
from AT&T will decline in both absolute terms and as a percentage of revenue in
future quarters.

Cost of Student Services Revenue. Cost of student services revenue consists
of the costs associated with subscriptions, commerce and advertising revenue.
Cost of subscription revenue consists of the costs associated with the
fulfillment of membership subscriptions and customer service. Commerce costs
include fees owed to third parties in connection with selling their products,
and personnel-related costs associated with acquiring customers for AT&T.
Advertising costs consist primarily of production and mailing costs for SAM,
Student Advantage Magazine, royalties paid to colleges for the use of
organizational names and logos and for supplying sports activity content for our
network of web sites, and fees paid to partners in exchange for the right to
place media inventory on such partners' web sites. Cost of student services
revenue decreased to $2.1 million in the third quarter of 2000 from $3.5 million
in the third quarter of 1999. This decrease was primarily due to a significant
decrease in costs consistent with the decrease in commerce revenue related to
the restructuring of the AT&T agreement on June 8, 2000. This decrease was
partially offset by an increase in fees owed to third-parties in connection with
selling their products.

Cost of Corporate and University Solutions Revenue. Cost of corporate and
university solutions revenue consists of the costs of commerce and marketing
services. Commerce costs include costs incurred primarily in connection with
acquiring customers on behalf of our corporate clients. Marketing services costs
include the direct and indirect costs associated with planning and implementing
events and promotions, media placement and other marketing services. Cost of
corporate and university solutions revenue increased to $3.2 million in the
third quarter of 2000 from $1.7 million in the third quarter of 1999. This
increase was due in large part to the acquisition in the fourth quarter of 1999
of Voice FX, which incurred $900,000 in cost of corporate and university
solutions revenue in the third quarter of 2000. Costs related to event staffing,
management and execution under the restructured AT&T agreement also contributed
to the increase.

Product Development. Product development expenses consist primarily of
personnel-related and consulting costs associated with the development and
enhancement of our suite of products, which includes the Student Advantage
membership program, SAM, Student Advantage Magazine, the SA Cash program, and
our network of web sites. Product development expenses increased to $4.6 million
in the third quarter of 2000 from $3.4 million in the third quarter of 1999. The
increase is primarily due to costs incurred in connection with the enhancement
of our network of web sites, the development of new product offerings such as SA
Cash and our Academic Research Engine, the purchases of ScholarAid and
College411 during the second quarter of 2000, and the purchase of eStudentLoan
during the third quarter of 2000.

Sales and Marketing. Sales and marketing expenses consist primarily of
personnel and other costs related to our sales and marketing programs. Sales and
marketing expenses increased to $4.2 million in the third quarter of 2000 from
$3.1 million in the third quarter of 1999. The increase in sales and marketing
expenses was due, in large part to the expansion of our sales force, expanding
and servicing our corporate and university base of partners, the continued
enhancement of brand awareness through the distribution of our memberships at no
cost to certain qualified students and through self promotion in SAM, Student
Advantage Magazine, 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,
$1.1 million has been amortized to sales and marketing expense as of September
30, 2000, of which $222,000 was recorded as an expense in each of the third
quarter of 2000 and 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 $2.4 million in the third quarter of
2000 from $1.9 million in the third quarter of 1999. Increases in general and
administrative expenses were primarily due to higher facilities, legal,
accounting and personnel related costs associated with our continued growth, as
well as our acquisitions of businesses over the past year.

Depreciation and Amortization. Depreciation expense increased to $643,000
in the third quarter of 2000 from $216,000 in the third quarter of 1999
primarily as a result of fixed asset purchases during the latter part of 1999
and the first nine months of 2000. Amortization expense increased to $861,000 in
the third quarter of 2000 from $133,000 in the third quarter of 1999, primarily
as a result of the acquisition of Voice FX in the fourth quarter of 1999, and to
a lesser extent, the acquisitions of ScholarAid and College411 during the second
quarter of 2000, and eStudentLoan during the third quarter of 2000.

Stock-Based Compensation. We recorded deferred compensation of $4.2 million
in 1998 and an additional $228,000 in 1999, which were offset by reductions of
$259,000 and $479,000 due to stock option cancellations as a result of employee
terminations during 1999 and the nine month period ended September 30, 2000,
respectively. Of this amount, $2.6 million has been amortized to

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expense as of September 30, 2000, of which $186,000 was recorded as an expense
in the third quarter of 2000. The remainder is being amortized over the
remaining vesting period of the individual stock options. We currently expect to
amortize the following remaining amounts of deferred compensation as of
September 30, 2000 in the periods indicated:

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, decreased to
$374,000 in the third quarter of 2000 from $637,000 in the third quarter of
1999. The decrease is a result of interest income earned on lower average cash
and cash equivalents balances during the third quarter of 2000 compared to that
of the third quarter of 1999.

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 WITH NINE MONTHS ENDED
SEPTEMBER 30, 1999

Revenue. Total revenues increased to $35.3 million for the first nine
months of 2000 from $18.3 million for the first nine months of 1999, due both to
an increase in corporate and university solutions revenue of $9.3 million, and
an increase in student services revenue of $7.7 million. The increase in
corporate and university solutions revenue was primarily due to increases in
commerce revenue related to our acquisition of Voice FX in the fourth quarter of
1999, marketing services revenues related to several contracts not in effect in
the first nine months of 1999, and to a lesser extent, event staffing,
management and execution under the restructured AT&T agreement. The increase in
student services revenue was primarily due to (1) an increase in
transaction-based commerce fees, (2) increases in subscription revenue due to an
increase in the number of card members to 2.1 million at the conclusion of the
membership year (1999-2000 school year) which ended on August 31, 2000, from 1.3
million at the conclusion of the membership year (1998-1999 school year) which
ended on August 31, 1999, and (3) increases in on-line advertising on our
network of web sites.

AT&T accounted for approximately 39% and 60% of total revenue in the first
nine months of 2000 and the first nine months of 1999, respectively.
Additionally, AT&T accounted for approximately 54% and 69% of student services
revenue and 14% and 31% of corporate and university solutions revenue in the
third quarter of 2000 and the third quarter of 1999, respectively. One other
customer, Capital One, accounted for approximately 18% of total revenue (3% of
student services revenue and 41% of corporate and university solutions revenue)
in the first nine months of 2000. We expect that revenue from AT&T will decline
in both absolute terms and as a percentage of revenue in future quarters.

Cost of Student Services Revenue. Cost of student services revenue
decreased to $7.7 million in the first nine months of 2000 from $7.9 million in
the first nine months of 1999. This decrease was due primarily to lower costs
related to the production of revenues related to the AT&T marketing agreement in
effect prior to June 8, 2000, the date the AT&T agreements were restructured,
offset in large part by increases in fees owed to third parties in connection
with selling their products, and royalties and costs associated with on-line
advertising.

Cost of Corporate and University Solutions Revenue. Cost of corporate and
university solutions revenue increased to $7.6 million in the first nine months
of 2000 from $2.9 million in the first nine months of 1999. This increase is
primarily due to the acquisition of Voice FX, which was acquired in the fourth
quarter of 1999, and incurred $2.8 million in cost in the first nine months of
2000. Costs related to event staffing, management and execution for AT&T, and an
increase in marketing services costs consistent with increases in revenue, also
contributed to the increase.

Product Development. Product development expenses increased to $12.3
million in the first nine months of 2000 from $6.2 million in the first nine
months of 1999. The increase is primarily due to costs incurred in connection
with the enhancement of our network of web sites, the relaunch of the
studentadvantage.com web site during the third quarter 2000, the development of
new product offerings such as SA Cash and our Academic Research Engine, and the
purchases of ScholarAid and College411 during the second quarter of 2000 and
eStudentLoan in the third quarter of 2000. These increases were offset in part
by non-recurring costs related to the development of our customer database which
were incurred in the first nine months of 1999, but not during 2000.

Sales and Marketing. Sales and marketing expenses increased to $13.3
million in the first nine months of 2000 from $8.1 million in the first nine
months of 1999. The increase in sales and marketing expenses was due, in large
part, to increased expenditures related to the launching of affiliate programs,
which contributed $1.9 million in cost, the expansion of our sales force,
expanding and servicing our corporate and university base of partners, the
continued enhancement of brand awareness through the distribution of our
memberships at no cost to certain qualified students and through self promotion
in SAM, Student Advantage Magazine, 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

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valued at $2.2 million. Of this amount, $1.1 million has been amortized to sales
and marketing expense as of September 30, 2000, of which $666,000 was recorded
as an expense in the first nine months of 2000 and $222,000 was recorded as an
expense in the first nine months 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 increased
to $7.3 million in the first nine months of 2000 from $6.4 million in the first
nine months of 1999. Increases in general and administrative expenses, primarily
due to higher facilities, legal, accounting and personnel related costs
associated with both our continued growth, as well as our acquisitions of
businesses over the past year, were offset in part by savings of non-recurring
acquisition costs of $1.3 million related to the acquisitions of University
Netcasting and Transaction Service Providers, which were incurred in the first
nine months of 1999.

Depreciation and Amortization. Depreciation expense increased to $1.7
million in the first nine months of 2000 from $508,000 in the first nine months
of 1999 primarily as a result of fixed asset purchases during the latter part of
1999 and the first nine months of 2000. Amortization expense increased to $2.3
million in the first nine months of 2000 from $446,000 in the first nine months
of 1999, primarily as a result of the acquisition of Voice FX in the fourth
quarter of 1999, the write-off of the remainder of Mentor Interactive's goodwill
in the second quarter of 2000, and, to a lesser extent, the acquisitions of
ScholarAid, College411 and eStudentLoan during the first nine months of 2000.

Stock-Based Compensation. We recorded deferred compensation of $4.2 million
in 1998, and an additional $228,000 in 1999, offset by reductions of $259,000
and $479,000 due to stock option cancellations as a result of employee
terminations during 1999 and the nine month period ended September 30, 2000,
respectively. Of this amount, $2.6 million has been amortized to expense to
date, of which $616,000 was recorded as an expense in the first nine months of
2000. The remainder is being amortized over the remaining vesting period of the
individual stock options.

Interest Income (Expense), Net. Interest income (expense), net, increased
to $1.2 million in the first nine months of 2000 from $760,000 in the first nine
months of 1999. The increase is a result of interest income earned on higher
average cash and cash equivalents balances during the first nine months of 2000
compared to that of the first nine months of 1999.

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 equity holders. 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, we completed an 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, 2000, Student Advantage had $19.4 million in cash and cash
equivalents. In October 2000, Student Advantage completed a private placement of
equity securities to investors and received $10.0 million in proceeds. Also in
October, 2000, we completed our acquisition of substantially all the assets of
CollegeClub and certain of its affiliates, and paid $6.6 million in cash,
assumed certain liabilities and issued approximately 1.3 million shares of our
common stock in connection with the acquisition.

Net cash used for operating activities was $10.8 million for the first nine
months of 2000 and $13.5 million for the first nine months of 1999. The net cash
used in the first nine months of 2000 was primarily a result of a net loss of
$16.2 million, an increase in accounts receivable of $1.7 million, and a
decrease in deferred revenue and advanced payments of $1.9 million, offset by
increases in accounts payable and accrued expenses of $3.3 million. Net cash
used for operations in 1999 resulted primarily from a net loss of $14.1 million,
an increase in accounts receivable of $3.3 million and an increase in prepaid
expenses of $1.9 million partially offset by a increases in accounts payable and
accrued expenses of $2.4 million 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 provided by investing activities was $14.5 million in the first
nine months of 2000 and net cash used in investing activities was $38 million in
the first nine months of 1999. The cash provided by investing activities was due
to the sale of marketable securities of $29.4 million. The increase was
partially offset by cash used for investing activities related to the purchase
of marketable securities of $8.8 million, the purchase of fixed assets of $2.6
million, an additional investment in edu.com of $1.0 million, an investment in
alumnipride.com of $350,000, and the purchases of ScholarAid, College411 and
eStudentLoan during the first nine months of 2000. Net cash used for investing
activities during the first nine months of 1999 was primarily due to the
purchase of marketable securities of $44.3 million, the acquisitions of The
Travel Holdings Group, The Campus Agency, and Mentor Interactive, and the
settlement of a purchase contingency related to the acquisition of Collegiate
Advantage, which was partially offset by $8.9 million received in proceeds from
the sale of marketable securities.

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Net cash provided by financing activities was $354,000 in the first nine
months of 2000 and $50.5 million in the first nine months of 1999. The net cash
provided by financing activities in the first nine months of 2000 was primarily
the result of proceeds from the exercise of common stock options, warrants and
employee stock purchase plan. The increase in 1999 was primarily the result of
net cash proceeds of $49.9 million from the sale of shares of Student Advantage
common stock related to the initial public offering.

Student Advantage's $2.75 million bank line of credit and equipment lease
credit facility expired according to its term on August 31, 2000. In addition,
subsequent to the $10 million private placement to equity investors on October
27, 2000, the Fleet National Bank financing commitment for a $10 million credit
facility obtained on August 18, 2000 for the CollegeClub acquisition, was
allowed to expire in accordance with its terms.

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.

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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 $10.5
million in 1998, $19.6 million in 1999, and $16.2 million in the first nine
months of 2000. As of September 30, 2000, our accumulated deficit was $60.3
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 HAVE A LIMITED OPERATING HISTORY AND MAY FACE DIFFICULTIES ENCOUNTERED BY
EARLY STAGE COMPANIES IMPLEMENTING AN ON-LINE AND OFF-LINE 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 on-line and off-line strategy. These risks include,
without limitation, 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 and users, and our university
and corporate partners,

- introduce new and enhanced web and off-line 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.

OUR ABILITY TO GENERATE SIGNIFICANT REVENUES AND PROFITS FROM CERTAIN
ESTABLISHED AND NEW PRODUCTS AND SERVICES IS UNCERTAIN

Our business model depends in part on increasing the amount of revenues and
profits derived from certain established and new products and services. Our
ability to generate significant revenues and profits from these products and
services will depend, in part, on our ability to achieve a significant presence
in university and college communities, and to generate sufficient user traffic
and transactional volume from students with demographic characteristics
attractive to our business partners. There is intense competition among offerors
of alternative payment methods, including stored-value cards, debit card and
credit cards, and among web sites that sell on-line advertising. It is difficult
for us to project future levels of transation-related and advertising revenues
and profits.

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WE MAY NOT SUCCESSFULLY IMPLEMENT OUR INTERNET STRATEGY

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

- establish our network of web sites as the primary vehicle for delivery
of our internet products and services, including member registration
and renewal, information regarding national and local sponsors, and
customer service,

- expand our network of web sites to include more content and services
for students and encourage our members to use the sites so that they
become more attractive for advertisers, and

- establish our network of web sites as an effective e-commerce
platform.

In addition, with respect to collegeclub.com, we rely mostly on our users
to generate content that is attractive and pertinent to develop and maintain the
web site. A decline in engaging member-generated content could make
collegeclub.com and our other web sites less attractive. We cannot guarantee
that internet users will maintain interest in our network of web sites. A
decline in membership or usage of our network of web sites would decrease
revenue. Our failure to successfully implement our internet strategy could have
a material adverse effect on our business.

WE ARE DEPENDENT UPON AT&T FOR A LARGE PERCENTAGE OF OUR REVENUE AND WE EXPECT
THAT REVENUE TO DECLINE

Since February 1, 1997, we have had a relationship with AT&T through which
AT&T has paid us for a variety of goods and services, including memberships
provided free to students with an AT&T calling card and marketing services. In
June of 2000, we restructured the agreements with AT&T, through which AT&T will
pay us for a variety of goods and services, including those under the old
agreements, as well as on-line and off-line media placements and new marketing
services.

In 1998, we derived $11.8 million, or 61%, of our total revenue from AT&T.
In 1999, we derived $15.2 million, or 55%, of our total revenue from AT&T. In
the first nine months of 2000, we derived $13.6 million, or 39%, of our total
revenue from AT&T. During both the 1998-1999 academic year and the 1999-2000
academic year, almost all of our members received their Student Advantage
memberships at no charge from AT&T by either electing to apply for an AT&T
calling card in connection with their Student Advantage membership or by
receiving a free Student Advantage membership from AT&T. We obtained these
members as a result of AT&T's distribution of free Student Advantage memberships
to students who enrolled for an AT&T telecommunications service. Under the
restructured agreement, AT&T has a commitment to purchase 900,000 memberships
for the 2000-2001 academic year, of which approximately 206,000 had been
purchased as of September 30, 2000. AT&T is not required to purchase a minimum
number of memberships under the restructured agreement after the 2000-2001
academic year. In addition, to date a significant portion of our commerce
revenue has been attributable to fees that we earned from AT&T for obtaining
completed calling card applications from students. While we do not expect to
earn any fees for the acquisition of AT&T calling card customers in future
quarters, the restructured agreement allows us to earn fees for acquiring
customers for certain other AT&T products. Under the restructured AT&T
agreement, there can be no assurance that we will be successful in maintaining
or expanding our membership base and/or the level of our commerce revenue, and
we expect that revenue from AT&T will decline in both absolute terms and as a
percentage of revenue in future quarters.

Our new agreement with AT&T is due to expire in June 2003; however, AT&T
may terminate the agreement effective June 1, 2001. There are no guaranteed
revenues or membership commitments after September 30, 2001. The termination or
restructuring of our relationship with AT&T could have a material adverse effect
on our business.

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

Our agreement with AT&T prevents us from including companies that promote
goods and services competitive to AT&T in our AT&T/Student Advantage Membership
Program. Our agreement with AT&T also provides that AT&T will be the sole
provider of free Student Advantage Program memberships to college students in
connection with the promotion of a telecommunications product competitive with
AT&T. Our relationship with AT&T could hinder our ability to attract additional
national sponsors for the card program, particularly sponsors who distribute or
promote telecommunications products.

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

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.

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. We may require
additional financing if capital requirements vary materially from those
currently planned.

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 $2.75 million bank line of credit and equipment lease credit
facility expired according to its term on August 31, 2000, and the financing
commitment obtained from Fleet National Bank on August 18, 2000 for a $10
million credit facility expired in accordance with its terms. We are currently
in negotiation for a new credit facility. Our failure to raise additional funds,
if needed, or secure a new credit facility may result in our inability to:

- develop or enhance our services,

- take advantage of future opportunities, or

- respond to competitive pressures.

A LIMITED NUMBER OF CUSTOMERS REPRESENT A SIGNIFICANT PERCENTAGE OF OUR REVENUE

A limited number of customers currently account for a significant
percentage of our total revenues. In the first nine months of 2000, two
customers accounted for 56% of total revenues. We expect a limited number of
customers to continue to account for a significant percentage of total revenues
in the future and we believe that we must continue to acquire additional
customers to be successful. The loss of any one of these customers could have a
material adverse effect on our business.

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While we anticipate that revenues from these limited number of customers
will decline as a percentage of total revenues, we expect that a limited number
of customers will continue to represent a significant percentage of our total
revenues.

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 revenues or charges.

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 ENROLLING NEW MEMBERS EVERY YEAR

A significant portion of our revenue is derived from our membership
program. 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 alliances and relationships with
colleges and universities 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 AND MAY ATTEMPT TO RESTRICT ACCESS TO OUR
NETWORK OF WEB SITES

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, and because we participate in the issuance
by universities of a stored-value card used in conjunction with student ID cards
(SA Cash). 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.

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

The market for online users and advertisers on the internet is rapidly
evolving. Competition for members, visitors, sponsors, and merchants is intense
and is expected to increase over time. Barriers to entry are relatively low,
enabling newcomers to launch competing sites at relatively low cost. We compete
for visitors, traffic, sponsors and online merchants with web directories,
search engines, content sites, online service providers, and traditional media
companies. We also face competition from other companies maintaining web sites
dedicated to college students as well as high-traffic web sites sponsored by
companies such as AOL, CBS, Disney, Excite, Lycos, Microsoft, MTV, Time Warner
and Yahoo!

We also compete with other companies targeting the student population, such
as:

- publishers and distributors of traditional offline media, particularly
those targetting college students, such as campus newspapers, other
print media, television and radio; and

- vendors of college student information, merchandise, products and
services distributed through online and offline means, including
retail stores, mail and schools.

Increased competition from these and other sources could require us to
respond to competitive pressures by establishing pricing, marketing and other
programs or seeking out additional strategic alliances or acquisitions that may
be less favorable to us than we could otherwise establish or obtain.

Many of our competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than we do. In addition, substantially all of
our current advertising customers have established collaborative relationships
with other high-traffic web sites. Our advertising customers might conclude that
other internet businesses, such as search engines, commercial online services
and sites that offer professional editorial content are more effective sites for
advertising than we are. Moreover, we may be unable to maintain either the level
of traffic on our web sites or a stable membership base, which would make our
sites less attractive than those of our competitors.

We believe that our ability to compete depends upon many factors, including
the following:

- the market acceptance of our web sites and on-line 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,

- user affinity and loyalty,

- demographic focus,

- critical mass of users,

- 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 believe that the principal competitive factors in attracting and
retaining sponsors and advertisers are:

- the amount of traffic on a web site,

- brand recognition,

- the demographics of a site's users,

- the ability to offer targeted audiences,

- the average duration of user visits, and

- cost-effectiveness.

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 through 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 continue to acquire or make
investments in complementary businesses, products, services or technologies to
increase our on-line 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.

We have acquired several businesses, most recently we acquired
substantially all the assets of CollegeClub and certain of its affiliates.
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

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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 $27.6 million in 1999, and
to $35.3 million in the first nine months of 2000, as compared 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 425 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 MANAGEMENT TEAM HAS LIMITED EXPERIENCE IN RUNNING A PUBLIC COMPANY

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

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

Our success depends largely upon the continued service of our executive
officers, including Raymond V. Sozzi, our president and chief executive officer,
and other key management and technical personnel, and our ability to continue to
attract, retain, and motivate other qualified personnel. 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.

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 third party locations such as Exodus
Communications, Inc. in Waltham, Massachusetts. 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,
however we are developing a formal disaster recovery program.

Our network of web sites must accommodate a high volume of traffic and
deliver frequently updated information. Our web sites have in the past and may
in the future experience slower response times or decreased traffic for a
variety of reasons. These types of

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occurrences could cause users to perceive our web sites 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, on-line
service providers and other web site operators for access to our network of web
sites. 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.

OUR NETWORKS MAY BE VULNERABLE TO UNAUTHORIZED ACCESS, COMPUTER VIRUSES AND
OTHER DISRUPTIVE PROBLEMS

A party who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in our operations.
Internet and online service providers have in the past experienced, and may in
the future experience, interruptions in service as a result of the accidental or
intentional actions of internet users, current and former employees or others.
Moreover, any well-publicized compromise of security could deter people from
using the internet or from using it to conduct transactions that involve
transmitting confidential information. We may be required to expend significant
capital or other resources to protect against the threat of security breaches or
to alleviate problems caused by such breaches. Although we intend to continue to
implement industry-standard security measures, there can be no assurance that
the measures we implement will not be circumvented in the future. Eliminating
computer viruses and alleviating other security problems may require
interruptions, delays or cessation of service to users accessing web pages that
deliver our content and services, any of which could harm our business, our
financial condition and the results of our operations.

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

We may be subjected to claims for defamation, invasion of privacy,
negligence, copyright or trademark infringement, personal injury or other legal
theories relating to the information we publish on our network of web sites or
in our publications or the use of our academic search engine in the form of web
crawling or framing. These types of claims have been brought, sometimes
successfully, against on-line 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 network of web sites through links to other web sites or
through content and materials that may be posted by members in chat rooms or
bulletin boards including those located on the collegeclub.com web site acquired
through our recent acquisition. Our insurance may not adequately protect us
against these types of claims.

WE MAY LOSE MEMBERS AND OUR REPUTATION MAY SUFFER BECAUSE OF UNSOLICITED BULK
E-MAIL OR SPAM

Unsolicited bulk e-mail, or spam, and our attempts and others' attempts to
control spam could harm our business and our reputation. To the extent our
spam-blocking efforts are not effective, our systems may become unavailable or
may suffer from reduced performance. Spam-blocking efforts by others may also
result in others blocking our members' legitimate messages. Additionally, our
reputation may be harmed if e-mail addresses with our domain names are used in
this manner. Any of these events may cause members to become dissatisfied and
discontinue their use of our network of web sites including collegeclub.com.

CONSUMER PROTECTION PRIVACY CONCERNS AND REGULATIONS COULD IMPAIR OUR ABILITY TO
OBTAIN AND USE INFORMATION ABOUT OUR USERS AND MAY SUBJECT US TO LITIGATION.

Our network of web sites captures information regarding our members and
users in order to provide information to them, enable them to access the
services offered on our web sites, tailor content to them or assist advertisers
in targeting their advertising campaigns to particular demographic groups.
However, privacy concerns may cause users to resist providing the personal data
necessary to support this tailoring capability. Even the perception of security
and privacy concerns, whether or not valid, may indirectly inhibit market
acceptance of our network of web sites.

Our network of web sites currently uses cookies to track demographic
information and user preferences. A cookie is information keyed to a specific
server, file pathway or directory location that is stored on a user's hard
drive, possibly without the user's knowledge, but is generally removable by the
user. Germany has imposed laws limiting the use of cookies, and a number of
internet commentators, advocates and governmental bodies in the United States
and other countries have urged the passage of laws limiting or abolishing the
use of cookies. If these laws are passed, our business, financial condition and
results of operations could be materially harmed.

Legislative or regulatory requirements may heighten privacy concerns if
businesses must notify internet users that the data may be used by marketing
entities to direct product promotion and advertising to the user. The Federal
Trade Commission and state agencies have been investigating various internet
companies regarding their use of personal information. In 1998, the United
States Congress enacted the Children's On-line Privacy Protection Act of 1998.
We depend upon collecting personal information from our customers and the
regulations promulgated under this act have made it more difficult for us to
collect personal information from some of our customers. If third parties are
able to penetrate our network security or otherwise misappropriate our users'
personal information, we could be subject to liability. We could also be liable
for claims based on unauthorized purchases with credit card information,
impersonation or other similar fraud claims. We could also be held responsible
for disclosing personal information or images, such as our disclosing such
information for unauthorized marketing purposes or for including it in our photo
gallery and web cam section on collegeclub.com. These claims could result in
litigation. In addition, we could incur additional expenses if new regulations
regarding the use of personal information are introduced or if our privacy
practices are investigated. Other countries and political entities, such as the
European Economic Community, have adopted such legislation or regulatory
requirements. If consumer privacy concerns are not adequately addressed, our
business, financial condition and results of operations could be materially
harmed. We may also be subject to additional state and Federal banking
regulations (Federal Reserve) in connection with the introduction of some of our
new products such as SA Cash, eStudentLoan, and ScholarAid.

Although we carry general liability insurance, this insurance may not be
available to cover a particular claim or may be insufficient. Additionally, our
user community on collegeclub.com exists in part because of our members'
willingness to provide information about themselves. If claims, litigation,
regulation or the acts of third parties reduce our members' willingness to share
this information or our ability to use it, the attractiveness of the web site
will decline, which would reduce our ability to generate revenue through the
affected web site.

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

Our 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 us with
respect to current or future trademarks, advertising or marketing strategies,
business processes or other proprietary rights, or that we 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 us to redesign our products or advertising/marketing
strategies or require us to enter into royalty or licensing agreements, any of
which could have a material adverse effect upon our business, results of
operations and financial condition. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to us or at all.

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 integrate effectively
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 products and 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 or comply with new regulations.

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 patent, copyrights, service marks,
trademarks, trade secrets, proprietary technology and similar intellectual
property is important to the success of some of our services. We rely on the
following mechanisms to protect such intellectual property:

- patent, 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 have been, and 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.

CERTAIN CURRENT STOCKHOLDERS OWN A LARGE PERCENTAGE OF OUR VOTING STOCK

As of October 31, 2000, our executive officers, directors and affiliated
entities, together beneficially own approximately 55% of our outstanding common
stock. Therefore, these stockholders are able to control all matters requiring
stockholder approval and, thereby, our management and affairs. Matters that
typically require stockholder approval include:

- election of directors,

- merger or consolidation, and

- sale of substantially all of our assets.

This concentration of ownership may delay, deter or prevent acts that would
result in a change of control, which in turn could reduce the market price of
our common stock.

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OUR STOCK PRICE COULD BE EXTREMELY VOLATILE AND MAY RESULT IN LITIGATION AGAINST
US

The stock market has experienced significant price and volume fluctuations,
and our market price has been in the past and could continue to be 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.

OUR CHARTER DOCUMENTS MAY INHIBIT A TAKEOVER

Provisions in our charter and bylaws may have the effect of delaying or
preventing a change of control or changes in our management that a stockholder
might consider favorable. These provisions include, among others:

- the division of the Board of Directors into three separate classes,

- the right of the Board to elect a director to fill a vacancy created
by the expansion of the Board, and

- the requirement that a special meeting of stockholders be called by
the Chairman of the Board, President or Board of Directors.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Student Advantage does not believe that it has any material market risk exposure
with respect to derivative or other financial instruments.

PART II. OTHER INFORMATION.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

The effective date of our first registration statement, filed on Form S-1
under the Securities Act of 1933 (File No. 333-75807) relating to the initial
public offering of our Common Stock, was June 17, 1999. A total of 6,000,000
shares of our Common Stock were sold to an underwriting syndicate. The managing
underwriters were BancBoston Robertson Stephens, 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 us were approximately $43.0 million. From the date of receipt
through September 30, 2000, approximately $5.2 million of the net proceeds of
the initial public offering was used to make an investment in edu.com, $4.7
million was used to purchase fixed assets, $2.5 million was used to pay off our
line of credit, $1.3 million was used to pay acquisition expenses related to the
acquisition of University Netcasting, Inc., $1.3 million was used as partial
consideration and professional fees for the acquisition of Voice FX Corporation
in October 1999, $2.0 million was used as partial consideration for the
acquisitions of ScholarAid and College 411 in May 2000, and eStudentLoan in July
2000, and to pay other expenses related to our public offering. None of the net
proceeds of the offering were paid by us, directly or indirectly, to any
director, officer or general partner of Student Advantage 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

10.24 Securities Purchase Agreement, dated as of October 27, 2000,
between Student Advantage, Inc. and At Home Corporation

10.25 Registration Rights Agreement, dated as of October 27, 2000,
between Student Advantage, Inc. and At Home Corporation

10.26 Common Stock Purchase Warrant, Number 6, dated October 27, 2000,
issued to At Home Corporation

10.27 Common Stock Purchase Warrant, Number 7, dated October 27, 2000,
issued to At Home Corporation

10.28 Securities Purchase Agreement, dated as of October 27, 2000,
between Student Advantage, Inc. and Hare & Co. f/b/o John Hancock
Small Cap Value Fund

10.29 Registration Rights Agreement, dated as of October 27, 2000,
between Student Advantage, Inc. and Hare & Co. f/b/o John Hancock
Small Cap Value Fund

10.30 Common Stock Purchase Warrant, Number 8, dated October 27, 2000,
issued to Hare & Co. f/b/o John Hancock Small Cap Value Fund

10.31 Common Stock Purchase Warrant, Number 9, dated October 27, 2000,
issued to Hare & Co. f/b/o John Hancock Small Cap Value Fund

27.1 Financial Data Schedule

SIGNATURES

25
<PAGE> 26

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 14, 2000 By: /s/ Kenneth S. Goldman
---------------------------------------------
Kenneth S. Goldman, Executive Vice President
and Chief Financial Officer (Principal
Financial and Accounting Officer)

26
<PAGE> 27

EXHIBIT INDEX

EXHIBITS