ARISTOTLE INTERNATIONAL INC, S-1/A, 2000-09-01

ARISTOTLE INTERNATIONAL INC
S-1/A, 2000-09-01
BUSINESS SERVICES, NEC

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<PAGE>

As filed with the Securities and Exchange Commission on September 1, 2000
Registration No. 333-37098

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AMENDMENT NO. 4
TO FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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ARISTOTLE INTERNATIONAL, INC.
(Exact name of registrant as specified in charter)

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<TABLE>
<CAPTION>
Delaware 7372 061022613
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification No.)
</TABLE>

50 E Street, S.E., Suite 300
Washington, DC 20003
(202) 543-8345
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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John A. Phillips
Chief Executive Officer
2266 Union Street
San Francisco, California 94123
(415) 440-1102
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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

Copies to:
David R. Snyder, Esq. Kristian E. Wiggert, Esq.
Christopher M. Forrester, Esq. Melissa L. Mong, Esq.
Jeffrey W. Lobb, Esq. Craig M. Glantz, Esq.
Pillsbury Madison & Sutro LLP Morrison & Foerster LLP
11975 El Camino Real, Suite 200 425 Market Street
San Diego, California 92120 San Francisco, California 94105
Phone: (858) 509-4052 Phone: (415) 268-7000
Fax: (858) 509-4010 Fax: (415) 268-7522
Counsel to the Registrant Counsel to the Underwriter

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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.

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

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

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

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

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

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

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+ not sell these securities until the registration statement filed with the +
+ Securities and Exchange Commission is effective. This prospectus is not an +
+ offer to sell these securities and it is not soliciting offers to buy these +
+ securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED SEPTEMBER 1, 2000

Aristotle
International, Inc.

2,000,000 Shares
of Common Stock
[LOGO OF ARISTOTLE]

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

This is our initial public offering and no public market currently exists for
our shares. We expect that the public offering price will be between $10.00
and $14.00 per share.

THE OFFERING PER SHARE TOTAL
--------------------------------------------------------------
<S> <C> <C>
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to Aristotle International, Inc. $ $
</TABLE>

We have granted the underwriters the right to purchase up to 300,000
additional shares within 30 days to cover any over-allotments. The
underwriters expect to deliver the shares of common stock to purchasers on
, 2000.

We have applied to have our common stock listed on the Nasdaq National Market
under the symbol VOTE.

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The method of distribution being used by the underwriters in this offering
differs somewhat from that traditionally employed in firm commitment
underwritten public offerings. The public offering price and allocation of
shares will be determined primarily by an auction process conducted by the
underwriters and other securities dealers participating in this offering. A
more detailed description of this process, known as OpenIPO, is included in
Plan of Distribution.

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

This offering involves a high degree of risk. You should purchase shares
only if you can afford a complete loss of your investment.
See Risk Factors beginning on page 6.

Following the completion of this offering, our directors and officers,
affiliates and other substantial stockholders will together control
approximately 75% of our common stock.

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

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

[LOGO OF WR HAMBRECHT + CO]

DLJdirect Inc.

The date of this prospectus is , 2000
<PAGE>

[INSIDE FRONT COVER]

DESCRIPTION OF GRAPHICS:

The text "Democracy . Advertising . Authentication" is written along the top of
the page, in approximately 1/4 inch font. Below that, in the middle of the
page, there is a picture of a mouse on an Aristotle mouse pad.

On the lower portion of the page, the following text appears, in approximately
14 point font:

"Products and Services
Political Management Software
Voter Lists

Newly Introduced Products and Services
Targeted Internet Advertising
Internet Fundraising
Internet Authentication Services"

The text "Products and Services" and "New Products and Services" are in bold
font.

Centered at the bottom of the page is the text "www. aristotle.com," in
approximately 1/2 inch, bold font.

Gatefold:

Across the top of the entire gatefold there is the following text, in
approximately 14 point font, with the background dark and the letters white
"Aristotle databases contain approximately 150 million United States voter
records and it keeps growing..."

The background of the rest of the page is the scene of a crowd, showing
approximately 200 people looking towards the sky.

Over this background, there are five separate sections, as follows:

Upper left hand side of left page:

The text "Voter Lists" is written in approximately 3/4 inch font. Below that,
the text "VoterListsOnline.com is an enhanced, online database of approximately
150 million United States registered voters." is written in approximately 14
point font. VotersListsOnline.com is in bold. Below that, there is a picture of
the webpage for www.VoterListsOnline.com, which shows the text "Aristotle voter
lists online" across the top of the webpage and some unreadable text and drop
boxes below that.

Middle of the gatefold:

The text "Internet Authentication Services" is written in approximately 3/4
inch font. Below that, the text "Internet Authentication Services enable
government agencies and commercial entities to verify an individual's age and
identity using our voter records. Industries such as tobacco, gaming and adult
entertainment can restrict website access to minors." is written in
approximately 14 point font. Internet Authentication Services is in bold. Below
that to the left, there is a picture of a male child looking at a computer.

<PAGE>

Upper right hand side of right page:

The text "Targeted Internet Advertising" is written in approximately 3/4 inch
font. Below that, the text "AristotleBannerAds.com enables political, advocacy
and commercial users to reach individuals online based on geographic,
demographic or political criteria." is written in approximately 14 point font.
AristotleBannerAds.com is in bold. Below that, a picture of a Bush for
President, Inc. webpage appears, with the following text:

"How much will the BUSH TAX CUT...?
Calculate your TAX CUT under the BUSH Plan by using the tax calculator below:
Marital status: (click one) 'Single' 'Married' [with Single selected]
No. of Children: (click one) '0' '1' '2' '3' '4' [with 0 selected]
Income: (drag slider) [graph depicting up to $100,000, with $100,000 selected ]
% income from second earner: (click one--if both spouses work, please select
percent of income earned by lower earning spouse) '0%' '25%' '50%' [with 0%
selected]
Your current income tax liability: $23593
Your tax under the Bush Plan: $20362
Percent reduction in income taxes: 13.7%
Your Bush Plan TAX CUT: $3231
(Assumes standard deduction)"

To the left of this text a picture of a dollar bill being cut by scissors is
depicted, with a box underneath with the text "Click here to visit
www.georgebush.com." Under that, there is a box with the text "Close." Under
that, the text "Paid for by Bush for President, Inc." is written.

To the left of the picture of the webpage are two Internet banner ads. The
first has a picture of John McCain on the left, then a picture of the American
flag, then the text "McCain 2000," "Help" and "Paid by McCain 2000, Inc."

Below that, a banner ad with a picture of a bearded man appears.

Lower left hand side of left page:

The text "Internet Fundraising" is written in approximately 3/4 inch font.
Below that, the text "CampaignContribution.com enables campaigns and advocacy
organizations to accept, process, authenticate, analyze and disclose
contributions received via the Internet." is written in approximately 14 point
font. CampaignContribution.com is in bold. Below that, a picture of a School
Vouchers 2000 webpage appears, which shows the text "School Vouchers 2000,"
"Giving parents a choice. Giving kids a choice." across the top of the webpage
and some unreadable text and drop boxes below that.

Lower right hand side of right page:

The text "Political Management Software" is written in approximately 3/4 inch
font. Below that, the text "Campaign Manager, PAC Manager and Constituent
Services are database management programs designed to help candidates, elected
officials and PACs build, maintain and analyze their databases." is written in
approximately 14 point font. Campaign Manager, PAC Manager and Constituent
Service is in bold. Below that, a picture of three overlapping CDs appears. The
top disc has the text "ARISTOTLE" "CM4.1" and some unreadable text written on
it. There is also a picture on the disc, with a woman and a building. The
middle disk has the text "...STOTLE" "PM4.1" and unreadable text written on it.
The bottom disc has the text "...ISTOTLE" "CS4.1" and some unreadable text
written on it.
<PAGE>

You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of our common stock only in jurisdictions where offers and sales
are permitted. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1

The Offering............................................................. 4

Summary Financial Data................................................... 5

Risk Factors............................................................. 6

Cautionary Note on Forward-Looking Statements............................ 22

Use of Proceeds.......................................................... 23

Dividend Policy.......................................................... 23

Capitalization........................................................... 24

Dilution................................................................. 25

Selected Financial Data.................................................. 26

Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 28

Business................................................................. 37

Management............................................................... 52

Related-Party Transactions............................................... 61

Principal Stockholders................................................... 63

Description of Capital Stock............................................. 65

Shares Eligible for Future Sale.......................................... 68

Plan of Distribution..................................................... 69

Legal Matters............................................................ 75

Experts.................................................................. 75

Change of Auditors....................................................... 75

Where You Can Find More Information...................................... 75

Index to Financial Statements............................................ F-1
</TABLE>

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We have one registered trademark application pending for the name Aristotle
and no registered trademarks. Further, we have no registered or pending
copyright or patent applications. We rely principally on common law for
protection of our tradenames and proprietary rights. All service marks,
trademarks or tradenames used in this prospectus are the property of the
respective owners.

i
<PAGE>

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information about us, our common stock being sold in this offering and our
financial statements and notes appearing elsewhere in this prospectus before
making a decision to invest in our common stock.

Aristotle

We use our database to facilitate campaign management, Internet fundraising,
targeted Internet advertising and Internet authentication services. Given the
extensive content of our databases and the breadth of our client base, as
described below, we believe that we are an industry leader in providing
campaign management products and services and that we have developed
significant knowledge and expertise in this field.

Our goal is to become a leading provider of Internet authentication services
and targeted Internet advertising services, including targeted banner
advertisements and e-mails, and to strengthen our position within the campaign
and advocacy industries. In fall 1999, we began shifting the emphasis of our
product and service offerings into targeted Internet advertising, which is a
highly competitive market. In June 2000, we introduced our Internet
authentication services. We have a limited operating history in the Internet
advertising market and no operating history in the Internet authentication
market. Key elements of our strategy are to:

. continue to enhance the size and quality of our databases;

. increase applications for our databases;

. expand the scope of our comprehensive fundraising applications;

. extend international databases; and

. broaden our sales and marketing efforts.

Our products and services are designed to service the following three broad
markets:

. political campaigns or parties on the federal, state and local level;

. advocacy organizations, including political action committees, non-
profit organizations and issue-oriented organizations; and

. commercial enterprises.

As of June 30, 2000, our clients included 45 Senators, over 200 members of
the U.S. House of Representatives, approximately 46 Democratic and Republican
state parties and numerous national advocacy groups and consulting firms.
Collectively, these entities represented 31% of our revenue for the year ended
December 31, 1999 and 21% of our revenue for the six-month period ended June
30, 2000. Furthermore, of the top 50 fundraisers for the Senate and top 50
fundraisers for the House of Representatives during the 1999-2000 election
cycle, as determined by a March 2000 review of the contribution reports filed
with the Federal Election

1
<PAGE>

Commission, 72% of these Senate candidates and 66% of these House candidates
use at least one of our products or services. We are non-partisan and are not a
political consultant. We sell our products and services to any candidate
running for office and our client base includes new candidates and incumbents.

Our products and services can be categorized as follows:

. Political management software allows political campaigns and advocacy
organizations to manage the information necessary to run their
organization and comply with state and federal election reporting
requirements. Our services related to political management software
include 24-hour customer support and customization of software to meet
the specific needs of our clients, implementation of our software on our
clients' systems and specialized training for our software and hardware
to meet our clients' upgrading needs. For the years ended December 31,
1997, 1998 and 1999, and for the six-month period ended June 30, 2000,
we derived revenue of approximately 59%, 59%, 50% and 49% from sales of
these products and related services.

. Voter lists allow political campaigns and advocacy organizations to
obtain enhanced registered voter data, including mailing lists,
telephone sheets, walk lists and polling samples in a file format usable
with many popular software programs. For the years ended December 31,
1997, 1998 and 1999 and for the six-month period ended June 30, 2000, we
derived 41%, 39%, 48% and 39% from sales of these products and related
services.

. Internet fundraising allows political campaigns and advocacy
organizations to accept, process, authenticate, analyze and disclose
contributions made directly on an organization's website. For the year
ended December 31, 1999 and for the six-month period ended June 30,
2000, we derived revenue of approximately 2% and 4% from the sales of
our Internet fundraising service.

. Targeted Internet advertising assists political campaigns, advocacy
organizations and commercial enterprises in using Internet banner ads
and e-mails to target their online marketing efforts toward specific
groups based on desired geographic, demographic and political attributes
contained in our databases. For the six-month period ended June 30,
2000, we derived approximately 7% of our revenue from Internet
advertising and have not received any other revenue from sales of these
services. We have recently signed a contract with MatchLogic, Inc., a
subsidiary of Excite@Home, under which we have agreed to purchase from
MatchLogic $3.5 million in targeted banner ads and e-mail addresses
during the three-month period ending September 30, 2000 and an
additional $2.0 million in targeted advertising services over a 24-month
period. Additionally, MatchLogic has agreed to share in any revenue it
receives from sales of targeted advertising services utilizing
information contained in our database for targeting.

. Internet authentication services allows commercial enterprises to verify
an individual's age and identity. To date, we have not received any
revenue from sales of these services. However, we have recently signed a
contract with VeriSign, Inc. under which we will begin to provide these
services.

We had a net loss of $2.8 million for the six-month period ended June 30,
2000, $1.9 million for the year ended December 31, 1999, $81,000 for the year
ended December 31, 1998, $249,000 for the year ended December 31, 1997 and
$401,000 for the year ended December 31, 1996. We expect to continue incurring
operating losses and negative cash flows from operations. We will depend on the
proceeds of this offering to continue our future operations at our current
levels of expenditures.

Our independent auditors' opinion contains an explanatory paragraph that
states that we have suffered recurring losses, have an accumulated deficit and
negative working capital and are dependent upon the proceeds from this offering
or other additional financing, which raise substantial doubt about our ability
to continue as a going concern.

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On July 6, 2000 we filed an amendment to our certificate of incorporation
effecting a common stock split so that in exchange for each share of our common
stock, our common stockholders would receive 1.368 shares

2
<PAGE>

of our common stock. All references to the number of common shares and per
share amounts included in this prospectus and in the financial statements
included herein, have been restated to reflect the stock split for the periods
presented.

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Our principal executive offices are located at 50 E Street, S.E., Suite 300,
Washington, D.C. 20003. We also have a regional office in San Francisco, a
sales office in Atlanta and sales representatives in Chicago, Dallas,
Nashville, Seattle and London, England. Our phone number is (202) 543-8345. Our
principal website is www.aristotle.com. The information on our website does not
constitute part of this prospectus.

Our business was originally founded in 1983 by John A. Phillips and Dean A.
Phillips under the laws of the State of Connecticut. In 1987, we incorporated
under the laws of the District of Columbia under the name Aristotle Industries,
Inc. In 1995, we changed our name to Aristotle Publishing, Inc. In March 1999,
Aristotle Publishing, Inc. merged into its wholly-owned subsidiary, Aristotle
Publishing, Inc., a corporation incorporated under the laws of the State of
Delaware, with the Delaware corporation being the surviving corporation. On May
15, 2000, Aristotle Publishing, Inc. filed an amendment to its certificate of
incorporation to change its name to Aristotle International, Inc. On March 21,
2000, we formed AristotleOnline.com Limited, our wholly-owned subsidiary, under
the laws of England and Wales.

3
<PAGE>

THE OFFERING

<TABLE>
<C> <S>
Common stock offered................. 2,000,000 shares

Common stock to be outstanding after
this offering....................... 8,000,000 shares

We expect to use the net proceeds
Use of proceeds...................... from this offering for:
. $2.0 million to acquire U.S. voter
records;
. $2.0 million on product development
efforts;
. $3.5 million to acquire e-mail
addresses and Internet ad space;
. $6.0 million on sales and marketing
efforts; and
. $7.0 million for working capital
and general corporate purposes.

Proposed Nasdaq National Market VOTE
symbol..............................
</TABLE>

The common stock to be outstanding after this offering is based on 6,000,000
shares outstanding as of June 30, 2000, after giving effect to:

. the conversion of our outstanding shares of Series A Preferred Stock into
1,741,562 shares of common stock; and

. the issuance of 153,326 shares of common stock from the conversion of our
Notes payable-related parties into 112,050 shares of Series A Preferred
Stock, which will convert into common stock upon the closing of this
offering.

The common stock to be outstanding after this offering excludes 787,659
shares of common stock issuable as of June 30, 2000 upon the exercise of
outstanding stock options issued under our 1999 Stock Option Plan at a weighted
average price of $1.76 per share.

This offering will be made through the OpenIPO process, in which the
allocation of shares and the public offering price are based primarily on an
auction in which prospective purchasers are required to bid for the shares.
This process is described in the Plan of Distribution. Except as otherwise
indicated, the information in this prospectus assumes no exercise of the
underwriters' over-allotment option.

4
<PAGE>

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------------------------------- --------------------
1997 1998 1999 1999 2000
--------- --------- --------- --------- ---------
(In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $ 1,718 $ 2,528 $ 3,913 $ 1,877 $ 2,808
Gross profit............ 1,327 1,849 2,662 1,280 2,057
Loss from operations.... (464) (692) (2,023) (522) (2,812)
Net loss................ (249) (81) (1,915) (469) (2,787)
========= ========= ========= ========= =========
Basic and diluted loss
per common share....... $ (0.06) $ (0.02) $ (0.47) $ (0.11) $ (0.68)
========= ========= ========= ========= =========
Shares used to compute
basic and diluted net
loss per common share.. 4,105,112 4,105,112 4,105,112 4,105,112 4,105,112
========= ========= ========= ========= =========
Pro forma unaudited
basic and diluted net
loss per common share.. $ (0.41) $ (0.11) $ (0.46)
========= ========= =========
Shares used to compute
pro forma unaudited
basic and diluted net
loss per common share.. 4,657,788 4,105,112 6,000,000
========= ========= =========
</TABLE>

The shares used to compute the pro forma unaudited basic and diluted net loss
per common share include the issuance of the common stock upon the conversion
of the Series A Preferred Stock and Notes payable-related party based upon the
actual days that the related securities were outstanding. These securities
represent 552,676, 0 and 1,894,888 shares upon conversion for the year ended
December 31, 1999 and for the six-month periods ended June 30, 1999 and June
30, 2000.

The following table sets forth a summary of our balance sheet as of June 30,
2000:

. on an actual basis;

. on an as adjusted basis giving effect to:

. issuance of 1,741,562 shares of common stock upon conversion of all
of our preferred stock outstanding as of June 30, 2000 into common
stock at the closing of this offering;

. issuance of 153,326 shares of common stock from the conversion of our
Notes payable--related parties into 112,050 shares of Series A
Preferred Stock, which will convert into common stock upon the
closing of this offering; and

. sale of 2,000,000 shares of our common stock in this offering,
assuming an offering price of $12.00 per share after deducting
underwriting discounts and commissions and our estimated offering
expenses of $3.5 million.

<TABLE>
<CAPTION>
As of June 30, 2000
--------------------
Actual As Adjusted
------- -----------
(In thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................................. $ 450 $20,950
Working capital (deficit).................................. (1,853) 18,955
Total assets............................................... 2,908 23,408
Total liabilities.......................................... 4,098 3,790
Deferred revenue........................................... 1,255 1,255
Convertible preferred stock................................ 3,500 --
Stockholders' equity (deficit)............................. (4,689) 19,619
</TABLE>

5
<PAGE>

RISK FACTORS

You should carefully consider the following risks and all other information
contained in this prospectus before you decide to buy our common stock. If any
of the following risks occur, our business, financial condition or operating
results could suffer. If this occurs, the trading price of our common stock
could decline, and you could lose all or part of your investment.

Risks Relating to our Business

We will rely on the proceeds from this offering or additional fundings to
remain a going concern.

Our independent public accountants noted in their opinion that as a result
of our recurring losses, negative working capital and accumulated deficit as
well as our dependence upon additional financing that there was substantial
doubt about our ability to continue as a going concern. Therefore, we will
depend on the proceeds of this offering to continue as a going concern. If we
are unable to obtain proceeds from this offering, we will be required to
obtain financing from other sources. In addition, we may have to reduce our
current expenditures to improve our net cash flow.

We have a history of losses and expect to incur substantial losses in the
future.

We incurred net losses of approximately $401,000 for the year ended December
31, 1996, $249,000 for the year ended December 31, 1997, $81,000 for the year
ended December 31, 1998, $1.9 million for the year ended December 31, 1999 and
$2.8 million for the six-month period ended June 30, 2000. These losses, as a
percentage of revenue, comprised 16% in 1996, 14% in 1997, 3% in 1998, 49% in
1999 and 99% for the six-month period ended June 30, 2000. At the six-month
period ended June 30, 2000, we had accumulated deficit of $5.2 million. We
have incurred significant expenses since September 1999, and during the year
ended December 31, 2000 we expect to expend approximately $1.2 million on
developing and enhancing our products and services, $5.1 million on expanding
our sales and marketing operations and $293,000 on customer support
organizations and infrastructure. During the year ending December 31, 2000, we
expect that our operating expenses will increase by approximately $8.1 million
over the prior year and may increase as a percentage of revenue. We will
depend on the proceeds of this offering to continue our future operations at
our current levels of expenditures. If our revenue does not increase to keep
pace with our current and expected expenses, or is insufficient to achieve
profitability, our business and operating results will be harmed. Further,
even if our revenue does increase, failure to become profitable within a
reasonable time frame will likely cause our stock price to decline.

Our entrance into new lines of business makes financial forecasting and
evaluation of our business difficult.

Although we have been offering our political management software and voter
records since 1983, we began shifting the emphasis of our product and service
offerings towards Internet fundraising, targeted Internet advertising and
Internet authentication services in fall 1999 and spring 2000. During the year
ended December 31, 1999 and for the six-month period ended June 30, 2000, we
derived 2% and 4% of our revenue from the sale of our Internet fundraising
service. During the year ended December 31, 1999, we did not derive any
material revenue from the sale of our targeted Internet advertising services.
During the six-month period ended June 30, 2000, we derived 7% of our revenue
from sales of our targeted Internet advertising services. We have received no
revenue to-date from the sale of our Internet authentication services. Our
year-end operating results presented in this prospectus reflect only our
historical business model, under which we derived the majority of our revenue
from the sale of our political management software and voter lists. Our
revenue and income potential under this new business model is unproven and,
therefore, it is difficult to evaluate our business and prospects. Further,
because we have no material operating results for our new Internet
fundraising, targeted Internet advertising or Internet authentication
services, we must forecast a portion of our expenses based on projected future
activity.

6
<PAGE>

The growth of our business substantially depends on managing and increasing
revenue from our Internet authentication services.

On June 29, 2000 we signed a contract with VeriSign, Inc., under which we
will provide access to our database to allow VeriSign and its customers to
authenticate the age or identity of their website users and customers. This
contract represents our first sale of our Internet authentication services. We
expect to depend substantially on sales of our authentication services to grow
our business. We may encounter problems providing our services to VeriSign or
any future authentication services client we may obtain, for example, our
database may not be able to provide the necessary information to our client in
a timely and accurate manner. Further, the use of databases to authenticate age
or identity is relatively new. We have no reliable method of estimating the
volume of traffic we may experience, and therefore, the capacity of servers we
will need to maintain in order to handle peak demands and provide uninterrupted
service. As a result, it is difficult to predict the amount of revenue that we
may receive from our Internet authentication services. If we do not receive
significant revenue from this contract and from future sales of our Internet
authentication business, we will be unable to grow our business.

We rely on access to targeted Internet advertising space from third parties to
sell our targeted banner advertisements.

Our targeted advertising business involves the sale, and in some instances,
the creation of targeted banner ads, which requires us to purchase advertising
space from third-party websites. Using our database, we can customize the
delivery of the advertisements to selected Internet users based on specified
criteria, for example, all persons living within a defined geographic area, in
order to reach our clients' intended audience. As we increase our efforts to
build our targeted advertising business, we expect to rely on contracts with
third-party ad servers to provide us with advertising space for our targeted
banner advertisements. On July 21, 2000, we amended our contract with
MatchLogic, Inc., a subsidiary of Excite@Home. Under the terms of this amended
contract, we have agreed to purchase $5.5 million of MatchLogic's Internet
advertising products and services over a 24-month period, including $3.5
million of these products and services in the three-month period ended
September 30, 2000. Although in general the contract is designed to ensure that
we have sufficient Internet advertising space to meet our clients' needs,
MatchLogic may refuse to serve an advertisement we request if the content of
the advertisement is inconsistent with its advertising policies. If MatchLogic
were to refuse to serve our advertisements and if we were unable to place
advertisements with other entities that sell Internet advertising space, we
would be unable to deliver our targeted banner advertisements, which would harm
our ability to generate revenue through our Internet advertising services.

Our Internet advertising operations will depend on the continued development of
targeted Internet advertising.

We have received revenue of approximately $193,000, or 7% of our total
revenue for the six-month period ended June 30, 2000, from sales of targeted
Internet advertising and related services. We intend to increase our targeted
Internet advertising efforts substantially in the next 12 months. The Internet
advertising market is new and rapidly evolving, and the effectiveness of
Internet advertising has not been fully determined. As a result, demand for and
market acceptance of targeted Internet advertising services are not definite.
Potential clients may find Internet advertising to be less effective in
promoting products and services than traditional advertising media. If the
market for Internet advertising does not grow or grows more slowly than we
expect, we may be unable to meet our forecasted revenue.

If we do not sell a sufficient volume of targeted banner advertisements to meet
our September 30, 2000 purchase commitment under our agreement with MatchLogic,
we will be required to purchase e-mail addresses to meet this commitment, which
may not be as valuable to our targeted advertising business.

Under the terms of our agreement with MatchLogic we are required to purchase
$3.5 million in advertising inventory from MatchLogic by September 30, 2000.
This inventory could consist of either banner ad space or e-mail addresses. We
use banner ad space to sell our targeted banner ads and use e-mail addresses

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to sell our targeted e-mail products. If we do not sell a sufficient number of
targeted banner ads to meet our $3.5 million obligation we would be required to
purchase e-mail addresses to fill the balance of the $3.5 million obligation.
Although we believe that we can use these e-mail addresses in our targeted
advertising operations, we believe that targeted e-mails are not as useful as
targeted banner ads; the e-mail addresses we purchase may become outdated
quickly and as a result could rapidly decrease in value, or prove to be of
little use.

We may need additional financing.

We may need to raise additional funds to develop or enhance our databases and
our software and services, to fund our continued operations or to respond to
competitive pressures. We may need to raise additional funds through the public
or private sale of debt or equity securities or by borrowing funds from an
institution. We may not be able to borrow money on commercially reasonable
terms, or at all, and any sale of our equity securities will result in dilution
to our stockholders.

Our revenue and operating results fluctuate from period to period, primarily in
connection with federal election cycles. This fluctuation may impact the price
of our common stock.

Although we have experienced yearly fluctuations on our revenue and operating
results, we are unsure as to the degree of quarterly fluctuations we have had
in the past because prior to 1999, we did not formally monitor our quarterly
operating results. Our past yearly fluctuations have been primarily connected
to the two-year federal election cycle, the last of which occurred during 1998,
and the four-year presidential cycle, the last of which occurred during 1996.
Our revenue increased 51% from $1.7 million during the year ended December 31,
1995 to $2.5 million during the year ended December 31, 1996, and decreased 32%
from $2.5 million during the year ended December 31, 1996 to $1.7 million
during the year ended December 31, 1997. In addition, we are entering into a
new business model with unproven sales and expense projections. As a result of
these uncertainties and business cycles, our quarter-to-quarter or year-to-year
operating results may not be a good indication of our future performance. In
addition to other factors discussed in these Risk Factors, specific factors
that may cause fluctuations in our revenue or operating results include:

. timing and release of new products and services by us or our
competitors, in particular, the timing and release of new commercial
applications;

. increased sales of campaign products and services during federal
election years;

. seasonality of advertising products, including our new targeted banner
advertising products;

. discretionary nature of our clients' purchasing and budgetary cycles;

. changes in our pricing policies or those of our competitors;

. changes in advertising rates;

. timing or execution of large contracts that materially affect our
operating results;

. mixture of our domestic and international sales;

. delayed receipt of accounts receivable from clients relying on federal
matching funds; and

. our ability to expand our operations and the amount and timing of
expenditures related to this expansion.

We depend significantly on sales of our political management software and U.S.
voter records.

For the years ended December 31, 1997, 1998 and 1999, and for the six-month
period ended June 30, 2000, we derived revenue of approximately 59%, 59%, 50%
and 49% from the sale of our political management software and related
services, including Campaign Manager, PAC Manager and Constituent Service and
related customer support services, and approximately 41%, 39%, 48% and 39% from
the sale of our U.S. voter records. We anticipate that revenue related to these
products and services will continue to constitute a substantial portion of our
revenue. Further, we have recently made significant investments in

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marketing and infrastructure to increase sales of our political management
software and U.S. voter records. Our results from operations would be adversely
affected if we were unable to sell or increase sales of our political
management software or U.S. voter records.

Our Internet fundraising service is subject to increasingly complex regulations
that could inhibit our ability to market the service.

We have recently developed our Internet fundraising service
CampaignContribution.com. Internet fundraising is a new and evolving field and
collection and processing of campaign contributions through the Internet is
subject to state and federal laws, including the Federal Matching Act and the
Federal Election Campaign Act, and subject to regulation by government
agencies, including the Federal Election Commission, or FEC. We could be
subject to liability under FEC regulations if we were found to have made an
impermissible corporate contribution, which could occur if we charged a
candidate less than fair market value for our products and services. The
penalties for impermissible campaign contributions vary widely, depending on
the severity and scope of the violation. Any liability could:

. cause us to incur losses as a result of fines or civil liabilities;

. increase governmental scrutiny of our products and services;

. decrease the use of the Internet for campaign or fundraising efforts;
and

. decrease the demand for our products and services.

Use of CampaignContribution.com for non-profit fundraising online is also
subject to complex federal and state regulations. We are currently in the
process of becoming registered to conduct online fundraising activities in
states that require registration for these activities. Further, additional
states may begin to regulate non-profit fundraising online, which may increase
our compliance expense and decrease the desirability of our services.

As a result of the expense of complying with the numerous federal, state and
local laws and the resulting impact on demand for our services, we may
ultimately determine that offering our contribution services is not practical
in all jurisdictions, in which case we may elect to discontinue these services.

We may face increased governmental regulation on our collection and use of
personal information from commercial and public records.

Our collection and use of the information in our databases are governed by
federal, state, local and foreign regulations. Currently, we believe that we
comply with these regulations. However, future regulations that further
preclude access to, resale of or use of the information obtained from the
commercial or public records in our databases, would limit our ability to
market and sell our products and services. For example, a change in regulations
may prohibit use of voter information for Internet advertising, affect
requirements regarding notices to be given to individuals about information
contained in our database or limit the availability of currently public
information, any one of which could negatively affect us. Similarly, if we
change our business plan we may need to conduct activities that are more
heavily restricted than our current activities.

A failure to manage our growth could lead to inefficiencies in conducting our
business and subject us to increased expenses.

From December 31, 1999 to June 30, 2000, we expanded our operations from 68
to 93 employees. This growth has placed a significant strain on our management,
financial and personnel resources. Our technical, data acquisition, sales,
marketing and customer support organizations may be unable to effectively
compete with larger and more established organizations because of their limited
experience working together. We expect to hire an additional 50 employees over
the next 12-month period and any additional growth will further strain our
management, financial, personnel, internal training and other resources. To
manage any additional growth effectively, we must improve our financial and
accounting systems, controls, reporting systems and procedures, integrate new
personnel and manage expanded operations. Our failure to manage our growth
could adversely affect the quality of our products and services, our ability to
respond to clients and our ability to retain key personnel.

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We derived 21% of our revenue from a single client for the year ended December
31, 1999 and 12% of our revenue from a single client for the six-month period
ended June 30, 2000.

For the year ended December 31, 1999, we derived approximately 21% of our
revenue from a contract with the National Rifle Association. We have completed
this contract with the NRA and, although we have entered into a new contract
with the NRA, we do not expect to derive substantial revenue from this client
in the current fiscal year or under the terms of the new contract.

For the six-month period ended June 30, 2000, we derived approximately 12% of
our revenue from a contract with MatchLogic. We recognized $350,000 from this
contract in the three-month period ended June 30, 2000 and will recognize the
remaining $100,000 of services over the next 24 months.

We rely on a third-party database program to store our voter and departments of
motor vehicle records, and our ability to deliver our products would be
impaired if we were unable to use that database program or replace this program
in a timely manner.

Our voter records and departments of motor vehicle records are stored on a
standard, commercially available database program that we license from
Microsoft Corporation. If we were to lose access to this database for any
reason, including our breach of the license agreement with Microsoft, we would
be required to transition our database to an alternate commercially available
database program, which could cause delays in our ability to offer our products
and services associated with the voter records and departments of motor vehicle
records. This delay could lead to dissatisfied clients, potential liability to
clients, damage to our reputation and loss of any competitive advantage we
enjoy.

Our reputation and results of operations may be harmed if information contained
in our databases is incorrect, out of date or incomplete.

We regard our databases as our most significant assets. Several of our
software products and services are built on providing information about
individuals to our clients. The data for our databases is collected from
registered voter records throughout the United States and the United Kingdom,
from departments of motor vehicle records throughout the United States and from
FEC contributor lists. We enhance this data by contracting with third-party
data collection services, which provide additional information about the
individuals in our database. We rely on federal, state and local government
agencies to provide this data, and on our relationships with third-party data
collection services. If these relationships were to deteriorate, our ability to
maintain and update our databases on a timely basis could be harmed. The
information in our databases will become stale if we are unable to update it.
Further, our license to use the United Kingdom voter record expires in 2003 and
is also terminable by the licensor if there is any change in circumstances that
the licensor reasonably believes makes the license no longer commercially
viable for the licensor. In addition, we have no method of determining whether
the information that we obtain from voter records, departments of motor vehicle
records or our third-party data collection services may be inaccurate or
incomplete. If this information were inaccurate or incomplete our clients'
advertising campaigns could be rendered ineffective. As a result, our clients
may no longer be willing to pay us for access to and use of the information,
and we may be unable to attract or retain clients.

Our business could be harmed by temporary Internet access delays as a result of
technical problems with our computer and communications systems.

Our clients rely on the Internet to use features in many of our products and
services. Although we host our own servers, we rely on PSINet Inc. as our
primary ISP, and WorldCom Communications, Inc., for redundant ISP services.
During the 12-month period ended June 30, 2000, our records reflect that
clients have experienced technical problems communicating with our website on
approximately 18 occasions for an average of 20 minutes per occurrence. We do
not believe that any of these problems have materially affected our business.
These technical difficulties have resulted from failures in our servers and
computer systems and in the servers and computer systems of our ISP. We believe
these interruptions will continue to occur from time to time.

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Substantially all of our computer and communications systems are located in our
offices in Washington, D.C., and substantially all of the systems of PSINet and
WorldCom upon which we rely are located in Northern Virginia. These systems and
operations are vulnerable to damage or interruption from human error, natural
disasters, telecommunications failures, break-ins, sabotage, computer viruses,
intentional acts of vandalism and similar adverse events. Given our reliance on
our servers and computer systems and those of PSINet and WorldCom, delivery of
our products and services to our clients could be delayed if:

. our servers and computer systems were to experience significant and
continuing technical problems; or

. PSINet and WorldCom were unable to continue to provide us with
uninterrupted access to the Internet for any of the reasons described
above, and we were unable to secure a replacement ISP in a timely and
cost-effective manner.

We have a limited disaster recovery plan, and in the event of damage or
interruption our insurance policies may not adequately compensate us for any
loss that we may incur. Any system failure could harm our relationships with
our clients and result in reduced revenue.

Over the next 12 months, we may expand our operations into international
markets, which could subject us to foreign regulations and litigation regarding
collection and use of personal information.

We have licensed the voter records of the United Kingdom, and although we
have made only one sale in the amount of approximately $10,000 through June 30,
2000, we may collect voter data and expand our sales efforts in the United
Kingdom and other countries, if appropriate opportunities arise. Use of our
products and services in foreign jurisdictions may be heavily regulated. For
example, in order to collect campaign contributions online in the United
Kingdom, a website operator may have to comply with the legislative
requirements contained in the Political Parties, Elections and Referendums
Bill, which has not yet been finally approved by the British Parliament. We
believe that this legislation could place restrictions on access to and use of
information about registered voters in the United Kingdom. However, we cannot
foresee the scope or nature of these restrictions or their ultimate impact on
our operations, if any, because the legislation has not yet become law or been
made publicly available.

Further, the terms of our contract for our license of the United Kingdom
voter records provide that the licensor can terminate our license if the
licensor reasonably determines that the contract is no longer commercially
viable, as a result of a change in circumstances. If our collection and use of
voter records were ultimately too heavily restricted to make our products
commercially viable, or if our license to use the United Kingdom voter records
were terminated, we would lose our investment in acquiring the license to this
data. Similarly, other countries into which we intend to expand may enact their
own privacy regulations that may limit the collection and use of voter
information, which, if applied to the sale of our products or services, could
negatively impact our results of operations. Given the early stage of our
discussions, we have not yet engaged legal counsel to research the existence or
extent of any foreign restrictions that may be applicable to our operations.

Expanding our operations into international markets will increase our
exposure to risks of foreign litigation. If we do not comply with foreign laws
and regulations, which are often complex and subject to variation and
unexpected changes, we could incur unexpected costs and potential litigation.
The governments of foreign countries might also attempt to levy sales or other
taxes relating to our activities. In addition, foreign countries may impose
tariffs, duties, price controls or other restrictions on foreign currencies or
trade barriers, any of which could make it more difficult to conduct our
business.

We have limited experience in marketing, selling and supporting our products
internationally.

Our experience in marketing, selling and supporting our products and services
abroad is limited to the United Kingdom, where we began providing these
products and services only in the first quarter of 2000. As a consequence, we
may face difficulties in accomplishing our expansion plans, including funding,
adequate staffing and management resources for our international operations. We
have no experience in developing

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customized versions of our software for international markets and in marketing
our software internationally. Customizing our software for international
markets may take longer than we anticipate due to difficulties in translation
and possible delays in recruiting and training international staff. In
addition, to successfully expand our operations into international markets, we
will need to, among other things:

. establish and expand international voter data acquisition channels,
sales channels and management and support organizations; and

. develop relationships with international service providers and
additional distributors and systems integrators.

Our investment in acquiring records of voters and residents of, and
establishing operations in, other countries may not become profitable. Even if
we do establish and expand our international operations successfully, we may
not be able to maintain or increase international market sales of our products
and services.

We rely on limited common law rights to protect our intellectual property.

Our success and ability to compete depend, in part, upon the protection of
our proprietary rights. We rely on a combination of common law rights and
contractual restrictions, including confidentiality agreements and licenses, to
establish and protect these rights. We currently have one registered trademark
application pending for use of the name Aristotle, which we believe is
important to our business because it is our principal brand and we have spent
several years developing it. We have no registered trademarks. We have not
applied for any international trademark protection and have not conducted any
research to determine the extent, if any, of the trademark protection available
in foreign countries into which we may expand our operations. Further, we have
no copyrights or patents and no copyright or patent applications pending.
Despite any precautions that we may take to protect our proprietary rights:

. laws and contractual restrictions may not be sufficient to prevent
inappropriate use of our technology or deter others from developing
similar technologies;

. current federal laws that prohibit software copying provide only limited
protection from software infringement, and effective trademark,
copyright and trade secret protection may be unavailable or limited in
foreign countries;

. other companies may claim common law trademark rights based upon state
or foreign laws that precede our claim to our marks; and

. policing unauthorized use of our products and trademarks is difficult,
expensive and time-consuming, and we may be unable to determine the
extent of the unauthorized use.

Also, the laws of other countries in which we market our products may offer
little or no effective protection of our technology. Reverse engineering,
unauthorized copying or misappropriation of our technology could enable third
parties to benefit from our technology without paying us for it, which would
significantly harm our business.

We may not be able to use the Aristotle brand name as a result of an alleged
trademark infringement.

We have received letters dated February 29, 2000 through June 22, 2000 from
Beacon Street, Inc., a provider of Internet access, website design and hosting,
requesting that we cease using its registered trademark Aristotle in connection
with our website design, Web hosting services and our domain name, and that we
make disclaimers of affiliation with Beacon Street on our website and
promotional material. As of August 28, 2000, we have negotiated an agreement in
principal with Beacon Street to resolve this dispute. Under the terms of the
proposed agreement, we will be able to continue to use our Aristotle mark on or
in connection with our website design and hosting services, our Internet
advertising services and our domain name provided that we employ disclaimers
and use our full name to prevent any confusion between our services and those
of Beacon Street. Although the final agreement has not been executed, we are
optimistic that it will be executed in the next

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several weeks. Nevertheless, there is a risk that the final agreement is not
executed, or that relations between us and Beacon Street deteriorate, which may
ultimately result in litigation and loss of our ability to use the Aristotle
name. If we are unable to use the name Aristotle for these products and
services, or as part of our domain name we would be required to develop a new
brand name, which could negatively impact our sales and marketing activities.

We may become subject to expensive and time-consuming litigation over
proprietary rights.

There is substantial litigation regarding intellectual property rights in our
industry. We expect that software in our industry will be subject to more
third-party infringement claims as the number of competitors grows and the
functionality of products in different industry segments overlaps. Our products
and services or other technology we use could infringe on patents currently
held by, or which may be issued to, third parties. Any of these third parties
might make a claim of infringement against us. Many of our customer agreements
require that we indemnify our clients for any claim or finding of intellectual
property infringement. Any litigation, brought by us or others, could result in
the expenditure of significant financial resources and the diversion of our
management's time and efforts. In addition, any litigation in which we could be
accused of infringement might delay our delivery of our products and services,
require us to develop non-infringing technology or require us to enter into
royalty or license agreements, which might not be available on acceptable
terms, or at all. Our business would be harmed if a successful claim of
infringement were made against us and we could not develop non-infringing
technology or license the infringed or similar technology on a timely and cost-
effective basis.

We may be subject to privacy claims if our security system is breached.

Our databases contain sensitive information about individuals, for example,
their age or estimated income level, that we make available to our clients,
including information we make available through our websites. A fundamental
requirement for online communications and transactions is the secure
transmission of confidential information over public networks. Although we have
implemented network security measures, our servers are vulnerable to computer
viruses, physical and electronic break-ins and similar disruptions, which could
lead to theft or misuse of the information contained in our databases.
Individuals about whom our databases contain information or entities from which
we collect information could assert claims of invasion of privacy,
inappropriate disclosure or use or loss of information against us or our
clients. We may be liable to these individuals or entities or to our clients
for any release of confidential information, whether as a result of a breach of
our security or by accident. Third parties may attempt to breach our security
or that of our clients. In particular, a substantial amount of the information
contained on our database can only be released to authorized individuals. We
may be subject to federal, state and local fines, or to civil and criminal
liability and potentially have operations enjoined if we were to inadvertently
release this information for unauthorized use as a result of:

. errors in our software;

. unforeseen Internet transmission errors;

. human errors; or

. fraud or deception by the person seeking the information that he or she
is an authorized user of the information.

Any civil or criminal fine or liability may adversely affect our results of
operation and our reputation and may cause us to lose clients.

Further, although we have not incurred substantial expenditures for
encryption technology, we may be required to expend significant additional
capital and other resources to license this technology and additional
technologies to protect against security breaches or to alleviate problems
caused by any breach we may experience.

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Difficulties in implementing our PAC Manager software may prevent us from
meeting our revenue projections.

Although we derived only $81,000 from sales of our PAC Manager software and
related services in the year ended December 31, 1999 and $211,000 for the six-
month period ended June 30, 2000, we expect to derive a substantial portion of
our revenue in the year ending December 31, 2000 from the sales and
implementation of our PAC Manager software as a result of increased marketing
efforts of this product. This implementation process involves sophisticated
software, computing and communications systems. If we are required to devote
significant customer support, engineering and other resources to a particular
project, we may experience difficulties with implementation of our PAC Manager
software for other clients. In this case, our relationships with our clients
may be harmed, which could adversely affect our sales efforts. Further, if our
new or existing clients have difficulty deploying our PAC Manager software or
require significant amounts of our professional services support or customized
features, our ability to complete the implementation and fully recognize
revenue could be delayed and our costs could increase.

We may face liability claims that could result in unexpected costs and damage
to our reputation.

Provisions in our software license agreements are designed to limit potential
product and service liability claims against us by our clients, including
provisions that disclaim liability for lost profits and consequential damages.
Despite these precautions, we may be subject to liability as a result of errors
in our products and services, including liability for damages to our clients'
internal computer systems. Any product or service liability claim, whether or
not successful, could harm our business by increasing our costs, damaging our
reputation and distracting our management. We may also be subject to claims for
indemnity to the extent that our clients are sued for errors in our products or
services.

Our software products and services have long sales cycles that make it
difficult to plan our expenses and forecast our revenue.

The sales cycle of our political management software averages one to six
months to complete, but can take significantly longer in the case of customers
with challenging installations, for example as a result of antiquated computer
systems or extensive hardware needs. It is therefore difficult to predict the
quarter in which a particular sale will occur and to plan our expenses
accordingly. The period between our initial contact with potential clients and
their purchases of our products and services is relatively long due to the
following factors:

. implementation periods for our campaign products and services, in
particular, our PAC Manager software;

. clients' budgetary cycles might affect the timing of their purchasing
decisions;

. clients may require competitive evaluations and internal approval before
purchasing our software;

. delays in our development and release of new software; and

. announcements or planned introductions of new software by us or our
competitors.

The delay or failure to complete a sale in a particular quarter could reduce
our revenue in that quarter, as well as subsequent quarters over which revenue
for the sale would likely be recognized. If our sales cycle unexpectedly
lengthens in general or for one or more large orders, it would adversely affect
the timing of our revenue and harm our ability to meet forecasts for a given
quarter.

We may lose sales and revenue if our products and services do not remain
compatible with widely-used software programs.

Our software is designed to assist our clients in collecting and analyzing
data about their constituents and supporters, assist them in customizing their
advertising efforts and receiving donations through the Internet. Accordingly,
our software is designed to interact with software used by our clients on their
existing systems, including Microsoft Windows, Windows NT and DOS. Further, in
order to access our databases through the

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Internet, our clients must use a standard browser, for example Microsoft
Internet Explorer or Netscape Navigator. We may lose clients if we do not
update our products to remain compatible with newer versions of these programs
or other programs that become more popular in the future. This may result, for
example, from our failure to obtain developer versions of these software
programs as they are upgraded. Our results of operations will be adversely
affected if we lose clients as a result of our failure to keep our products
compatible with the most recent versions of widely-used software programs.

We rely on third parties to provide us with information necessary to enhance
our databases.

As we continue to enhance the information in our databases, we expect to rely
on contracts with third-party data collection services. While we currently
obtain substantially all of our enhanced information from four sources, we rely
most heavily upon Central Address Systems, Inc., or CAS. If we are unable to
continue to obtain enhanced data from CAS or unable to obtain similar
information from an alternative source, a portion of our databases would become
stale, which may render our products and services obsolete.

Our sales and reputation may be harmed by delays in the development or
enhancements of, or by errors in, our products and services.

We must develop and introduce new products and services and enhance our
existing products and services on a timely basis to remain competitive in our
industry. Our clients rely on our software to comply with federal, state and
local campaign contribution reporting laws, and to help manage their databases.
If we experience delays in the introduction or enhancements of our products and
services or if our software contains undetected errors, we could experience:

. loss of or delay in revenue and an immediate and significant loss of
market share;

. loss of existing and future clients;

. failure to achieve market acceptance;

. diversion of development resources;

. damage to our reputation;

. increased service and warranty costs;

. legal actions by our clients against us; and

. increased insurance costs.

Our efforts to remain competitive in product development and enhancements and
to avoid product and service delays may not be successful, and we may lose
clients as a result. Delays in bringing to market new products or services or
in enhancing our existing products and services, or the existence of defects in
new products or our existing products, could be exploited by our competitors.
Our operating results could be harmed if we were to lose market share as a
result of lapses in our product and service management.

We may engage in future acquisitions that could require additional funding,
which would dilute our existing stockholders, cause us to incur significant
expenses or harm our business.

We may review acquisition or investment prospects that would complement our
current business or enhance our technological capabilities. To date, we have
not acquired any significant business, technology or product from a third-
party. Our management team does not have experience in acquiring and
integrating a new business, technology or product, which may substantially harm
our ability to successfully complete an acquisition. Further, integrating any
newly acquired business, technology or product may be expensive and time-
consuming. To finance these acquisitions, developments and enhancements, we may
need to raise additional funds through the public or private sale of our debt
or equity securities or by borrowing funds from an institution. We may not be
able to borrow money on commercially reasonable terms, or at all, and any sale
of our equity securities will result in dilution to our stockholders. Further,
the rights, preferences and privileges

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of any securities we may sell may be senior to those of our current
stockholders. In addition, our business will be harmed if we are unable to
integrate effectively and efficiently any acquired business, technology or
product into our business or to operate any acquired business profitability.
Future acquisitions by us could also result in large and immediate write-offs,
incurrence of debt and contingent liabilities, or amortization of expenses
related to goodwill and other intangibles, any of which could adversely affect
our operating results.

We are recording stock compensation expense relating to recent stock option
grants. The amortization of this compensation expense will result in a charge
to our earnings over the next five years.

Stock compensation represents an expense associated with the recognition of
the difference between the fair market value of common stock at the time of an
option grant and the option exercise price. Stock compensation is amortized
over the vesting period of the options, generally five years. In addition, we
expect to record an additional deferred compensation charge relating to option
grants made after December 31, 1999, but prior to the completion of the
offering. We estimate the charge relating to these additional grants for the
years ending December 31, 2000, 2001, 2002, 2003, 2004 and 2005 will be
approximately $180,000, $140,000, $130,000, $130,000, $110,000 and $30,000
based upon an assumed offering price of $12.00 per share.

Loss of our Chief Executive Officer, President or any other member of our
senior management team could harm our business.

We depend substantially on the skills, experience and efforts of our senior
management for our success. In particular, we rely on the continued services of
John A. Phillips, our Chief Executive Officer, and Dean A. Phillips, our
President. The loss of service from any of these individuals could seriously
harm our business.

A failure to hire additional personnel could limit our ability to grow our
business.

Our success depends on our ability to hire and retain qualified personnel,
particularly in sales, data acquisition, customer service, marketing, product
development and support. We anticipate that we may hire up to an additional 50
employees over the next 12 months. Competition for qualified personnel in the
technology industry is intense. If we are unable to successfully hire or retain
qualified personnel, we may not be able to effectively grow our business.

We have adopted anti-takeover defenses that could delay or prevent an
acquisition of our company.

Our certificate of incorporation and bylaws contain provisions that could
delay or prevent a change in control of our company. These provisions could
limit the price that investors might be willing to pay in the future for shares
of our common stock. These provisions include:

. authorizing the issuance of preferred stock with rights senior to the
common stock that can be created and issued by our board of directors
without prior stockholder approval, commonly referred to as blank check
preferred stock;

. prohibiting stockholder action by written consent;

. the calling of special meetings of our stockholders may only be done by
the chairman of our board, our Chief Executive Officer or our board of
directors; and

. staggering terms for our board of directors so that not all of our
directors can be elected at any single annual meeting.

These provisions are intended to protect us from a hostile takeover by
allowing our board more control over matters related to a change of control,
for example, when to call a stockholder meeting to vote on a merger or
acquisition.

16
<PAGE>

Our executive officers and directors will exercise control over stockholder
voting matters.

After this offering, our executive officers and directors, affiliates and
other substantial stockholders will together control approximately 75% of our
outstanding common stock. As a result, these stockholders may collectively be
able to control all matters requiring approval of a majority of our
stockholders, including the election of directors and significant corporate
transactions. This concentration of ownership:

. could delay, prevent or deter a change in control;

. could deprive our stockholders of an opportunity to receive a premium
for their common stock as part of a sale of our company or our assets;
and

. might affect the prevailing market price of our common stock.

Risks Relating to our Industries

We face competition across three industries.

We face competition from a number of companies across three major industries:
companies providing campaign and advocacy products and services, companies
providing advertising services and companies providing Internet authentication
services. Many of our competitors:

. offer lower prices, especially in the campaign and advocacy industry
where state or local jurisdictions and political parties often have
easier or lower cost access to registered voter data;

. have closer or longer-standing relationships with potential clients;

. have longer operating histories in the advertising industry and Internet
authentication industry;

. offer more diversified lines of products and services, especially in the
Internet authentication industry; and

. have greater financial, marketing and other resources, especially in the
advertising and Internet authentication industries.

We may also face increased competition if a competitor or another entity
creates a similar or more expansive database than our database.

Many of our competitors may enter into strategic or commercial relationships
with larger, more established and better-financed companies. These competitors
may be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and make more attractive offerings to clients to
induce them to use their products and services.

In the campaign and advocacy industries, we believe that the principal
competitive factors include:

. quality and size of database;

. functionality of software and contribution processing services;

. availability of technical support; and

. effectiveness of sales force.

In the Internet advertising and Internet authentication industries, we
believe that the principal competitive factors include:

. size and reliability of database;

. the timing and market acceptance of new products and services and
enhancements to existing products and services developed either by us or
our competitors;

. the ability to adapt to the rapidly changing trends of the Internet;

17
<PAGE>

. customer service and support efforts;

. sales and marketing efforts;

. ability to adapt and scale our technology as customer needs change and
grow; and

. ease of use, performance, price and reliability of products and services
developed either by us or our competitors.

Our recent entrance into the Internet advertising and Internet authentication
industries makes it difficult to ascertain our competitive position within
these industries.

As we expand the scope of our Internet services, we may also face greater
competition from a number of websites and other media companies across a wide
range of different Internet services. We may also face competition from
providers of inventory and data management products and services that may enter
into the targeted advertising business. In addition, we may face competition
from a number of large Web publishers and portals, which have large databases
of information about their users, from providers of traditional advertising
mediums, for example, television, radio and print and from companies with more
established Internet authentication products and services. Some of the major
competitors in the Internet advertising industry include 24/7 Media, Inc.,
DoubleClick, Inc., Flycast Communications Corporation, L90, Inc.,
AmericaOnline, Inc., Excite@Home and Yahoo! Inc. Our major competitors in the
Internet authentication industry are Equifax, Inc. and ChoicePoint, Inc. In the
campaign and advocacy industry, we do not believe there is a dominant market
competitor; however, we face competition from several companies offering one or
more services in this area.

Our ability to maintain and use information in our databases for targeted
banner advertisements and our Internet authentication services may be
challenged in the future.

We collect and compile information in our databases that we use in connection
with our campaign products and services, and for our targeted advertising
products and our age and identity authentication services. Although we collect
a significant portion of this information from public records, we also rely on
commercial data collection efforts to enhance our records. Individuals have
alleged, and may allege in the future, that collection of this information is
illegal or infringes on their personal rights for example, their civil rights
or their constitutional rights to privacy. Although we believe that we can use
and compile the information in these databases, our ability to do so may not
remain lawful. Moreover, there may be no trade secret, copyright or other
intellectual property protection that is or becomes available for databases
that protects our rights. There is also a substantial risk that public
perception of the use of information acquired through the Internet to engage in
targeted advertising and other commercial purposes may deteriorate.

We will only be able to execute our business plan if Internet usage continues
to grow.

The continued growth of the Internet may be limited by various factors
outside of our control. These factors include:

. the inability of Internet infrastructure to support the demands placed
on it;

. a decline in the performance and reliability of the Internet as usage
grows;

. security and authentication concerns with respect to transmission over
the Internet of confidential information, such as credit card numbers,
and attempts by unauthorized computer users, so-called hackers, to
penetrate online security systems;

. privacy concerns, including those related to the ability of websites to
gather information; and

. the imposition of taxes on transactions conducted on the Internet that
may discourage purchases through the Internet.

Our business would be harmed if efficient transmission of data over the
Internet is interrupted or does not continue to grow at the pace at which it
has grown recently.

18
<PAGE>

We may become subject to litigation over privacy concerns.

There are several lawsuits pending against our competitors alleging, among
other things, that our competitors have unlawfully obtained and sold Internet
users' personal information. These lawsuits and other government regulations
applicable to our business are described under the section entitled Government
Regulation and Privacy concerns in the Business section of this prospectus.
Legislation pending in Congress and state legislatures may furnish grounds for
additional litigation and enforcement actions involving privacy claims.

If we become involved in litigation over privacy concerns, or if we become
subject to a governmental investigation arising out of our method of collecting
or using information, our management and financial resources would be diverted
from our daily operations. Additionally, if a court were to find that we failed
to exercise reasonable care in collecting, using or disseminating information,
we could be held liable for any damages resulting from our failure to exercise
reasonable care, including in connection with our client's unlawful use of the
information. Any order or judgment that might be rendered against us could
significantly harm our ability to pursue our business strategies and may
deplete our resources. There is also a substantial risk that public perception
regarding the use of information acquired through the Internet to engage in
commercial purposes, including targeted advertising, may deteriorate, which may
result in popular pressure not to use this information for commercial purposes.

We may also face liability for defamation, negligence and copyright, patent
or trademark infringement as a result of targeted banner advertisements we
design or display for our clients.

Our clients could make unlawful use of the voter or motor vehicle information
we provide and we may become liable for this unlawful use.

We attempt to prevent unlawful use of the voter and motor vehicle information
contained in our database by providing notice of the legal restrictions on use
of the information and requiring our clients to represent and warrant that they
will comply with the legal restrictions on use of the information.
Additionally, the contractual restrictions we impose on our clients' use of the
information are more stringent than the legal restrictions, by preventing them
from reselling the information to a third party. In states that have enacted
laws restricting access to this information we do not make the information
available until we take steps to ensure that the client is qualified to use it.
We also employ on-screen reminders to help ensure our clients' continued lawful
use of information, and in states that have enacted laws restricting use of
information, we do not make the information available until we ensure that the
client is qualified to use it.

We do not conduct any follow-up investigation into whether our clients make
unlawful use of voter or motor vehicle information obtained from our database.
We have voluntarily agreed, however, to allow one state reasonable access to
audit client usage in order to attempt to discover and deter misuse. If our
clients do make improper use of information, we may become subject to civil
liability for their violations of the law if we were negligent or reckless in
providing the information to the client. If we were to willfully or recklessly
make unlawful disclosure of voter or motor vehicle information, we would be
subject to criminal liability for that disclosure.

Risks Related to Our Offering

We have broad discretion to use the proceeds from this offering and our use of
these proceeds may not yield a favorable return on your investment.

The net proceeds of this offering are not allocated for specific uses other
than:

. acquisition of U.S. voter records;

. increasing our sales and marketing efforts;

. acquisition of e-mail addresses and Internet ad space;

19
<PAGE>

. continuing our product development efforts; and

. working capital and general corporate purposes.

Thus, our management has broad discretion over how these proceeds will be
used and could spend the proceeds in a manner with which you may not agree. The
proceeds may not be invested in a manner that yields a favorable, or any,
return on your investment.

Our stock price may be volatile and you may not be able to sell your shares at
or above the price you paid for our common stock.

Our common stock has not been publicly traded, and an active trading market
may not develop or be sustained after this offering. The novel nature of the
plan of distribution of this offering may create additional price and volume
volatility that might not otherwise occur in a conventional underwriting,
including the lack of an active trading market developing. The lack of a
trading market could result in the loss of market makers or the loss of media
coverage. You may not be able to sell your shares at or above the price you
paid for our common stock. The price at which our common stock will trade after
this offering is likely to be highly volatile and may fluctuate substantially
due to, among other things, one or more of the following factors:

. actual or anticipated fluctuations in our operating results;

. changes in or our failure to meet expectations;

. announcements of technological innovations;

. introduction of new products and services by us or our competitors;

. developments with respect to intellectual property rights;

. conditions and trends in the Internet and technology industries; and

. general market conditions.

A sustained decline in the price of our common stock could negatively impact
our ability to make acquisitions, to raise money in the public markets or to
attract and retain employees.

There is a possibility that our stock price will decline not only in the
short term but also for an extended period of time. A sustained decline in the
price of our common stock would lessen our ability to use our stock in
connection with any acquisition or to raise cash from the public market in the
future by requiring that we sell a larger percentage of our company. A
sustained decline would also make it more difficult for us to attract and
retain quality employees because the value of options for our stock would
decrease.

Our common stock price may drop below $5 per share, which could adversely
affect the price of, and market for, our common stock.

Our common stock price may drop below $5 per share, which would subject our
common stock to additional federal and state regulatory requirements. If the
market price drops below $5 per share, our common stock cannot be used as
collateral for margin loans. Additionally, the common stock price could fall
below $1 per share, which would cause our common stock to be delisted from the
Nasdaq National Market. A delisting would adversely affect our stockholders by
limiting the availability of current market price information for the common
stock and limiting our news coverage. A delisting by Nasdaq may also result in
a decrease in investment interest in our common stock and may adversely affect
the trading market, prices of the common stock and our ability to issue
additional securities to secure additional financing and thereby increase the
volatility of our common stock.

If the price of our common stock drops below $5 per share, our common stock
may be declared penny stock under federal securities laws, thereby subjecting
it to greater regulatory restrictions. Dealers would be required to disclose,
before selling our common stock to a potential investor, that purchasing our
common stock

20
<PAGE>

is very risky, provide written warning of the risk and obtain a manually signed
and dated written acknowledgment of the risk.

Future sales of our common stock may depress our stock price.

Sales of a substantial number of shares of our common stock in the public
market after this offering or after the expiration of contractually or legally
required holding periods could cause the market price of our common stock to
decline. After this offering, we will have approximately 8,000,000 shares of
common stock outstanding. All of the shares sold in this offering will be
freely tradable. The remaining 6,000,000 shares of common stock outstanding
after this offering are subject to contractual lock-up agreements that prohibit
the sale of shares for 180 days after the date of this prospectus. Immediately
after the expiration of the 180-day period, these shares will become available
for sale subject to volume restrictions under Rule 144. However, it is possible
that the underwriters could waive the 180-day lock-up period, if, for example,
the underwriters determined that the market price of our common stock had
reached a sufficiently stable point that it could bear the sale of the shares
subject to the lock-ups. In this case up to 6,000,000 shares of common stock
could be sold as described above. Additionally, the underwriters could agree to
register these or additional shares of common stock, which would result in
these shares being subject to sale in the public market at earlier times than
would otherwise be permissible under the one-year holding period. The sales of
these shares could result in downward price pressure on our share price because
of the supply of shares sought to be sold in the market exceeding the demand
for our shares.

Purchasers of our common stock will suffer immediate and substantial dilution.

As of June 30, 2000, we had an adjusted negative book value of ($0.15) per
share. This amount gives effect to the conversion of our notes payable--related
party and convertible preferred stock into common stock. Purchasers of our
common stock in this offering will suffer immediate dilution of $9.55 per share
in the pro forma net tangible book value per share of common stock, based on an
initial public offering price of $12.00 per share. Purchasers will also
experience additional dilution upon the exercise of outstanding stock options.
The initial public offering price is expected to be substantially higher than
the book value per share of our common stock. Some elements of our market value
do not originate from measurable transactions. Therefore, there is not a
corresponding rise in book or historical accounting value for our rise in
market value, if any. Examples of these elements include:

. the perceived value associated with our strategic relationships;

. the perceived growth prospects of our markets; and

. our perceived competitive position within the market.

We do not intend to pay dividends.

We have never declared or paid any cash dividend on our capital stock, and we
do not intend to pay dividends in the foreseeable future. We intend to invest
our future earnings, if any, to fund our growth. Therefore, you will not
receive any funds without selling your shares. You may not receive a return on
your investment when and if you sell your shares and you may lose all or a
substantial portion of your investment upon sale of your shares.

21
<PAGE>

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

Some of the matters discussed under the captions Prospectus Summary, Risk
Factors, Management's Discussion and Analysis of Financial Condition and
Results of Operations, Business and elsewhere in this prospectus include
forward-looking statements. We have based these forward-looking statements on
our current expectations and projections about future events, including, among
other things:

. implementing our business strategy;

. attracting and retaining clients;

. obtaining and expanding market acceptance of the products and services
we offer;

. forecasts of Internet usage and the size and growth of relevant markets;
and

. competition in our market.

In some cases, you can identify forward-looking statements by terminology
such as may, will, should, could, predicts, potential, continue, expects,
anticipates, future, intends, plans, believes, estimates and similar
expressions. These statements are based on our current beliefs, expectations
and assumptions and are subject to a number of risks and uncertainties. Actual
results, levels of activity, performance, achievements and events may vary
significantly from those implied by the forward-looking statements. A
description of risks that could cause our results to vary appears under the
caption Risk Factors and elsewhere in this prospectus. These forward-looking
statements are made as of the date of this prospectus, and except as required
under applicable securities law, we assume no obligation to update them or to
explain the reasons why actual results may differ.

22
<PAGE>

USE OF PROCEEDS

The net proceeds we will receive from the sale of the shares of common stock
offered by us are estimated to be between $16.5 million and $24.5 million or
$19.5 million and $28.7 million if the underwriters' over-allotment option is
exercised in full. This assumes the deduction of the underwriting discounts and
commissions and the estimated offering expenses payable by us based on the
initial public offering price of between $10 and $14 per share.

We intend to use the net proceeds for:

. $2.0 million to acquire U.S. voter records;

. $2.0 million on product development efforts;

. $3.5 million to acquire e-mail addresses and Internet ad space;

. $6.0 million on sales and marketing efforts; and

. $7.0 million for working capital and general corporate purposes.

The actual amounts and timing of these expenditures may vary significantly
depending on a number of factors, including the amount of cash used in or
generated by our operations and the market response to the introduction of any
new product or service offerings. In addition, we may use a portion of the net
proceeds of this offering to acquire or invest in businesses, products,
services or technologies complementary to our current businesses, through
mergers, acquisitions or joint ventures. However, we have no specific
agreements or commitments and are not currently engaged in any negotiations
with respect to such transactions. Accordingly, our management will retain
broad discretion as to the allocation of the net proceeds of this offering. We
intend to invest the net proceeds of this offering in short-term, interest-
bearing investment grade securities until they are used.

DIVIDEND POLICY

We have never declared or paid dividends on shares of our capital stock and
do not anticipate paying any dividend in the foreseeable future. We currently
intend to retain our earnings, if any, for the development of our business.

23
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2000:

. on an actual basis;

. on an as adjusted basis giving effect to:

. conversion of all shares of our Series A Preferred Stock outstanding
as of June 30, 2000 into 1,741,562 shares of common stock, which
will occur upon the closing of this offering;

. the issuance of 153,326 shares of common stock from the conversion
of our Notes payable--related parties into 112,050 shares of our
Series A Preferred Stock, which will convert into common stock upon
the closing of this offering; and

. sale of 2,000,000 shares of our common stock in this offering,
assuming an offering price of $12.00 per share, after deducting
underwriting discounts and commissions and our estimated offering
expenses of $3.5 million, collectively.

The presentation below does not include 787,659 shares of common stock
issuable upon exercise of stock options outstanding as of June 30, 2000. You
should read this information together with our financial statements and related
notes appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
As of June 30, 2000
--------------------
Actual As Adjusted
------- -----------
(In thousands,
except share and
per share data)
<S> <C> <C>
Convertible preferred stock:
Series A Preferred Stock, $0.001 par value, 1,400,000
shares authorized, 1,272,727 shares issued and
outstanding, actual; no shares authorized, issued and
outstanding, as adjusted............................... $ 3,500 $ --
------- -------
Stockholders' equity:
Common stock, $0.001 par value, 10,000,000 shares
authorized;
4,105,112 shares issued and outstanding, actual;
8,000,000 shares issued and outstanding, as adjusted... 4 8
Additional paid-in capital............................... 523 24,827
Accumulated deficit...................................... (5,216) (5,216)
------- -------
Total stockholders' equity (deficit)..................... (4,689) 19,619
------- -------
Total capitalization..................................... $(1,189) $19,619
======= =======
</TABLE>

24
<PAGE>

DILUTION

Our adjusted negative net tangible book value as of June 30, 2000 was
approximately $(881,000), or $(0.15) per share of common stock. We have
determined adjusted net tangible book value per share by dividing adjusted
stockholder's equity (deficit) by 6,000,000 shares of common stock outstanding
as of June 30, 2000. The preceding information gives effect to the conversion
of all shares of convertible preferred stock outstanding as of the date of this
prospectus into 1,741,562 shares of common stock, and the issuance of 153,326
shares of common stock from the conversion of Notes payable-related parties
into 112,050 shares of Series A Preferred Stock, which will convert into common
stock upon the closing of this offering.

If we sell 2,000,000 shares of our common stock in this offering at an
initial public offering price of $12.00 per share and assume our receipt of the
estimated net proceeds therefrom, our adjusted net tangible book value as of
June 30, 2000 would have been approximately $19.6 million, or $2.45 per share.
These numbers represent an immediate increase in such net tangible book value
of $2.60 per share to existing stockholders and an immediate dilution of $9.55
per share to new investors. The following table illustrates this per share
dilution.

<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $12.00
Adjusted negative net tangible book value as of June 30,
2000....................................................... $(0.15)
Increase per share of common stock attributable to the
offering(1)................................................ 2.60
------
Adjusted net tangible book value after the offering(1)...... 2.45
------
Net tangible book value dilution to new investors(1)........ $ 9.55
======
</TABLE>
--------
(1) Does not include options to purchase our common stock outstanding as of
June 30, 2000. As of June 30, 2000, there were options outstanding to
purchase a total of 787,659 shares of common stock with a weighted average
per share exercise price of $1.76 per share. To the extent that any of the
options are exercised, there would be further dilution to new investors.

The following table summarizes on a pro forma basis as of June 30, 2000, the
total number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid by existing
stockholders and by new investors, at an assumed initial offering price of
$12.00 per share and without giving effect to the underwriting discount and
commission and estimated offering expenses.

<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
----------------- ------------------- Price
Number Percent Amount Percent Per Share
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 6,000,000 75% $ 3,965,122 14% $ 0.66
New investors................ 2,000,000 25 24,000,000 86 12.00
--------- --- ----------- ---
Total...................... 8,000,000 100% $27,965,122 100% $ 3.50
========= === =========== ===
</TABLE>

25
<PAGE>

SELECTED FINANCIAL DATA

The selected data presented below under the captions Selected Statement of
Operations Data and Selected Balance Sheet Data for, and as of the end of, each
of the years in the five-year period ended December 31, 1999, are derived from
our financial statements. Our financial statements as of December 31, 1997 and
1998 and for each of the years then ended have been audited by Keller Bruner &
Company, LLP, independent certified public accountants. Our financial
statements as of December 31, 1999 and for the year then ended have been
audited by KMPG LLP, independent certified public accountants. KPMG LLP's
report contains an explanatory paragraph stating that we have suffered
recurring losses, have an accumulated deficit and negative working capital and
are dependent upon additional financing, and that these factors raise
substantial doubt about our ability to continue as a going concern. The
selected financial data do not include any adjustments that might result from
the outcome of that uncertainty. The financial statements as of December 31,
1998 and 1999, and for each of the years in the three-year period ended
December 31, 1999, and the reports thereon, are included elsewhere in this
prospectus. The selected data presented below for the six-month periods ended,
and as of, June 30, 1999 and 2000, are derived from our unaudited financial
statements, included elsewhere in this prospectus.

<TABLE>
<CAPTION>
Six Months Ended June
Year Ended December 31, 30,
------------------------------------------------------------ -----------------------
1995 1996 1997 1998 1999 1999 2000
----------- ---------- ---------- ---------- ----------- ---------- -----------
(Unaudited) (Unaudited)
----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue:
Products............... $ 1,397,821 $2,175,317 $1,187,812 $1,715,426 $ 2,815,431 $1,397,471 $ 1,993,231
Services............... 277,545 358,054 530,476 812,914 1,097,132 479,543 814,362
----------- ---------- ---------- ---------- ----------- ---------- -----------
Total revenue.......... 1,675,366 2,533,371 1,718,288 2,528,340 3,912,563 1,877,014 2,807,593
----------- ---------- ---------- ---------- ----------- ---------- -----------
Cost of revenue:
Products............... 518,019 590,876 290,966 555,410 987,220 479,784 510,422
Services............... 126,536 162,848 100,420 123,564 262,844 117,580 240,484
----------- ---------- ---------- ---------- ----------- ---------- -----------
Total cost of revenue.. 644,555 753,724 391,386 678,974 1,250,064 597,364 750,906
----------- ---------- ---------- ---------- ----------- ---------- -----------
Gross profit............ 1,030,811 1,779,647 1,326,902 1,849,366 2,662,499 1,279,650 2,056,687
----------- ---------- ---------- ---------- ----------- ---------- -----------
Operating expenses:
General and
administrative........ 1,976,250 1,469,097 856,905 1,253,200 2,654,033 984,556 2,202,692
Sales and marketing.... 527,013 757,633 817,697 1,195,237 1,633,054 634,096 2,081,189
Product development.... 210,839 243,412 116,313 93,143 398,097 183,419 584,755
----------- ---------- ---------- ---------- ----------- ---------- -----------
Total operating
expenses.............. 2,714,102 2,470,142 1,790,915 2,541,580 4,685,184 1,802,071 4,868,636
----------- ---------- ---------- ---------- ----------- ---------- -----------
Loss from operations.... (1,683,291) (690,495) (464,013) (692,214) (2,022,685) (522,421) (2,811,949)
Other income (expense),
net.................... 2,039,569 71,076 65,496 634,544 75,178 59,939 --
Interest income......... 12,403 21,426 19 -- 40,199 -- 25,967
Interest expense........ (9,957) (13,137) (24,506) (23,698) (7,263) (6,652) (1,129)
----------- ---------- ---------- ---------- ----------- ---------- -----------
Loss before income
taxes.................. 358,724 (611,130) (423,004) (81,368) (1,914,571) (469,134) (2,787,111)
Provision for (benefit
from) income taxes..... 39,310 (209,767) (173,909) -- -- -- --
----------- ---------- ---------- ---------- ----------- ---------- -----------
Net income (loss)....... $ 319,414 $ (401,363) $ (249,095) $ (81,368) $(1,914,571) $ (469,134) $(2,787,111)
=========== ========== ========== ========== =========== ========== ===========
Basic and diluted net
income (loss) per
common share........... $ 0.08 $ (0.10) $ (0.06) $ (0.02) $ (0.47) $ (0.11) $ (0.68)
=========== ========== ========== ========== =========== ========== ===========
Shares used to compute
basic and diluted net
loss per common share.. 4,105,112 4,105,112 4,105,112 4,105,112 4,105,112 4,105,112 4,105,112
=========== ========== ========== ========== =========== ========== ===========
Pro forma unaudited
basic and diluted net
loss per common share.. $ (0.41) $ (0.46)
=========== ===========
Shares used to compute
pro forma unaudited
basic and diluted net
loss per common share.. 4,657,778 6,000,000
=========== ===========
</TABLE>

26
<PAGE>

<TABLE>
<CAPTION>
As of December 31,
-------------------------------------------------------- As of June 30,
1995 1996 1997 1998 1999 2000
---------- --------- --------- ---------- ----------- --------------
(Unaudited) (Unaudited)
-------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ -- $ -- $ 24,444 $ 44,399 $ 2,404,956 $ 450,241
Working capital
(deficit).............. 188,535 (246,272) (438,385) (530,018) 1,296,416 (1,853,256)
Total assets............ 1,564,824 554,210 532,358 561,665 3,801,617 2,908,412
Deferred revenue........ 79,301 118,596 194,591 342,648 771,505 1,255,067
Total liabilities....... 1,256,124 662,799 890,042 1,000,717 2,317,650 4,097,876
Convertible preferred
stock.................. -- -- -- -- 3,500,000 3,500,000
Stockholders' equity
(deficit).............. 308,700 (108,589) (357,684) (439,052) (2,016,033) (4,689,464)
</TABLE>

27
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with our
financial statements and related notes included elsewhere in this prospectus.
The discussion in this prospectus contains forward-looking statements that
involve risks and uncertainties.

Overview

We are a technology company that provides information, products and services
to political campaigns, advocacy organizations and for-profit commercial
enterprises. Over the past ten years, we have compiled a large database,
containing information concerning approximately 150 million registered voters
in the United States. While other companies may offer larger databases, we
believe that because the age, identity, address and party affiliation
information contained in our database is derived from registered voter records,
rather than from commercial sources, we enjoy a competitive advantage over
companies offering databases containing information derived solely from
commercial sources. Further, we believe, based on our research, that because we
have the largest registered voter record database in the country, we enjoy a
competitive advantage over other companies offering registered voter record
databases. We use this database to provide campaign management, targeted
Internet advertising, Internet authentication services and to facilitate
Internet fundraising. Given the extensive content of our database and the
breadth of our client base, we believe that we are an industry leader in
providing campaign management products and services and that we have developed
significant knowledge and expertise in this field.

During the year ended December 31, 1999, we recognized 50% of our revenue
from political management software and related services, 48% from sales of our
U.S. voter records and 2% from our Internet fundraising service. During the
six-month period ended June 30, 2000, we recognized 49% of our revenue from
political management software and related services, 39% from sales of our U.S.
voter records, 4% from our Internet fundraising service, 7% from our targeted
Internet advertising and 1% from other revenue. We have received no revenue
from sales of our Internet authentication services to date.

Our political management software is designed to help campaigns and PACs
manage their constituent and contributor lists and comply with reporting
requirements imposed by the Federal Election Commission, or FEC, or state
reporting agencies. For clients not requiring customized software, we deliver
our software products on a CD, and recognize revenue upon delivery. For clients
requiring customized software, we recognize revenue based on a percentage of
completion. The customization of software involves enhancements made to our
base software. We also provide software maintenance services, which entitle our
clients to software updates and 24-hour telephone customer support services
related to the software. Our customer support contracts typically have a one-
year term and revenue is recognized ratably over the term of the contract.

With our voter database we can provide voter lists, which allow our clients
to obtain enhanced registered voter data, including mailing lists, telephone
sheets, walk lists and polling samples. We provide this information through one
of three means, by accessing information on our website,
www.voterlistsonline.com, by modem download through a file transfer protocol,
or by delivery of a CD. We recognize revenue at the time of delivery.

During 1999, we developed and introduced two new services that use our voter
database, Internet fundraising and targeted Internet advertising. Our Internet
fundraising permits campaign and advocacy organizations to process
contributions online. The products provide for acceptance, processing,
authentication, analysis and disclosure of contributions made online. We
process the contribution on behalf of the donee and remit the contribution, net
of our fees, to the donee. For each contribution, we charge a fee equal to a
percentage of the transaction, plus a set cost per transaction. We recognize
revenue based on only the fees charged to the donee. Our targeted Internet
advertising services permit our clients to target potential constituents, based
on demographic, geographic and political data. Our clients typically sign
contracts where the fee is calculated based upon the number of impressions
delivered. We recognize revenue based on delivery of impressions. In June 2000,
we launched our Internet authentication services and signed our first client

28
<PAGE>

contract for these services. Our Internet authentication services enable
government agencies and commercial entities to verify our individual's age and
identity using our voter records and department of motor vehicle records. We
anticipate devoting substantial resources to increase sales for each of these
services.

We have incurred net losses for each of the past three years and for the six-
month period ended June 30, 2000. As of June 30, 2000, we had an accumulated
deficit of $5.2 million. We incurred a net loss of $249,000 for the year ended
December 31, 1997 primarily attributable to increased operating expenses
without a correlating revenue increase. We incurred a net loss of $81,000 for
the year ended December 31, 1998 primarily attributable to increases in our
cost of product revenue due to the acquisition of more U.S. voter records. We
incurred a net loss of $1.9 million for the year ended December 31, 1999. This
loss was attributable primarily to an increase in general and administrative
expense from $1.3 million during the year ended December 31, 1998 to $2.7
million during the year ended December 31, 1999 and an increase in sales and
marketing expense from $1.2 million in the year ended December 31, 1998 to $1.6
million in the year ended December 31, 1999. We incurred a net loss of $2.8
million for the six-month period ended June 30, 2000. This loss was
attributable primarily to an increase in general and administrative expense
from $985,000 during the six-month period ended June 30, 1999 to $2.2 million
during the six-month period ended June 30, 2000, an increase in sales and
marketing expense from $634,000 during the six-month period ended June 30,
1999, to $2.1 million during the six-month period ended June 30, 2000, and an
increase in research and development expense from $183,000 during the six-month
period ended June 30, 1999 to $585,000 during the six-month period ending June
30, 2000. These increased expenses were for increased marketing efforts and
increased infrastructure development to support our planned growth. We intend
to continue to invest in our technology and infrastructure, including making
significant additions to our databases.

We also intend to increase our expenditures relating to sales and marketing
and product development activities. As a result, we believe we will continue to
incur operating losses and negative cash flows from operations and the rate at
which these losses will be incurred may increase from the current level.

Results of Operations

The following table sets forth statement of operations data as a percentage
of total revenue for the periods indicated. The historical results are not
necessarily indicative of results to be expected for any future period:

<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
-------------------------------- --------------------------
1997 1998 1999 1999 2000
--------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenue:
Products.............. 69% 68% 72% 74% 71%
Services.............. 31% 32% 28% 26% 29%
--------- -------- ----------- ----------- -------------
Total revenue....... 100% 100% 100% 100% 100%
Cost of revenue:
Products.............. 17% 22% 25% 26% 18%
Services.............. 6% 5% 7% 6% 9%
--------- -------- ----------- ----------- -------------
Total cost of
revenue............ 23% 27% 32% 32% 27%
Gross margin:
Products.............. 52% 46% 47% 48% 53%
Services.............. 25% 27% 21% 20% 20%
--------- -------- ----------- ----------- -------------
Total gross margin.. 77% 73% 68% 68% 73%
Operating expenses:
General and
administrative....... 50% 50% 68% 52% 78%
Selling and
marketing............ 48% 47% 42% 34% 74%
Research and
development.......... 7% 4% 10% 10% 21%
--------- -------- ----------- ----------- -------------
Total operating
expenses........... 105% 101% 120% 96% 173%
========= ======== =========== =========== =============
Net loss................ $(249,095) $(81,368) $(1,914,571) $ (469,134) $ (2,787,111)
</TABLE>

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<PAGE>

Six-Month Period Ended June 30, 1999 and 2000

Revenue. Total revenue increased 50% from $1.9 million for the six-month
period ended June 30, 1999 to $2.8 million for the six-month period ended June
30, 2000.

Products revenue increased 43% from $1.4 million for the six-month period
ended June 30, 1999 to $2.0 million for the six-month period ended June 30,
2000. This increase was attributable primarily to increased sales of our
political management software of $620,000 following the release of Campaign
Manager 4 and PAC Manager 4 and an increase in the sale of voter records of
$328,000, related to a sale in the amount of $350,000 involving matching our
database against the user list for MatchLogic. These increases in revenue were
partially offset by a resale of network servers and third-party software to the
California state legislature in the amount of $325,000 in the six-month period
ended June 30, 1999, which did not recur in the six-month period ended June 30,
2000. This hardware and software was purchased as part of a total system
implementation. Although we do not generally resell hardware to our clients,
from time to time we resell network servers and third-party software to clients
as a part of a total system implementation in connection with the sale of our
software.

Services revenue increased 70% from $480,000 for the six-month period ended
June 30, 1999 to $814,000 for the six-month period ended June 30, 2000. This
increase was attributable primarily to revenue recognized from two new
services, targeted Internet advertising, which resulted in $193,000 in revenue,
and Internet fundraising, which resulted in $100,000 in revenue.

Cost of revenue. Cost of revenue consists of cost of products revenue and
cost of services revenue. Cost of products revenue consists primarily of
compensation and external costs associated with acquisition, enhancements,
updates and maintenance of voter records. Cost of services revenue consists
primarily of personnel costs associated with our customer support department
and fees paid to ad servers for targeted advertising. Total cost of revenue
increased 26% from $597,000 for the six-month period ended June 30, 1999 to
$751,000 for the six-month period ended June 30, 2000.

Cost of products revenue increased 6% from $480,000 for the six-month period
ended June 30, 1999 to $510,000 for the six-month period ended June 30, 2000.
This increase was attributable to an increase in data acquisition expense of
$81,000 associated with our decision to more frequently update our voter
records and an increase in compensation expense of $26,000 associated with our
hiring of four employees for data acquisition. These increases were partially
offset by a decrease in the resale of network servers and third-party software
primarily related to the costs of $102,000 for the sale to the state
legislature described above. We expect total cost of products revenue to
increase in absolute dollars related to our expected expenditures for
acquisition and enhancement of voter records.

Cost of services revenue increased 105% from $118,000 for the six-month
period ended June 30, 1999 to $240,000 for the six-month period ended June 30,
2000. This increase was attributable primarily to an increase of $97,000 in
compensation expense related to the addition of five customer service
employees. These employees were hired to improve customer service, including
shortening customer response times. Additional increases resulted from our
purchase of $32,000 in targeted banner ad space to acquire the inventory
necessary to fill our client's orders for our Internet advertising services. We
began providing this service in fall 1999. We expect that costs associated with
our customer support department and targeted Internet advertising service will
continue to increase in absolute dollars as we expand our customer service
capabilities and targeted Internet advertising services.

Gross margin. Total gross margin percentage increased from 68% for the six-
month period ended June 30, 1999 to 73% for the six-month period ended June 30,
2000.

Products gross margin percentage increased from 66% for the six-month period
ended June 30, 1999 to 74% for the six-month period ended June 30, 2000. This
increase was attributable primarily to an increase in sales of our political
management software and voter records associated with the sale to MatchLogic,
which did not require any significant expenditures.

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<PAGE>

Services gross margin percentage decreased from 75% for the six-month period
ended June 30, 1999 to 70% for the six-month period ended June 30, 2000. This
decrease was attributable primarily to an increase in our compensation expenses
in our customer support department which did not result in an immediate
corresponding increase in our services revenue. The decrease was partially
offset by an increase in our higher margin service revenue related to our
targeted Internet advertising and Internet fundraising.

General and administrative expense. General and administrative expense
consists primarily of management and support personnel expenses as well as
facilities and professional fees.

General and administrative expense increased 124% from $985,000 for the six-
month period ended June 30, 1999 to $2.2 million for the six-month period ended
June 30, 2000. This increase was attributable primarily to changes in our
corporate infrastructure, including an increase in compensation expenses of
$473,000 related in part to an increase of 11 employees, including six in
finance and accounting to increase our accounting and finance infrastructure,
and five new office personnel in connection with expanded facilities, facility
expenses of $261,000, including rent, office expenses, postage, computer
supplies, depreciation, and telephone and non-capitalizable assets and
professional fees of $178,000. We expect general and administrative expense to
continue to increase as we continue to build our corporate infrastructure.

Selling and marketing expense. Selling and marketing expense consists
primarily of compensation costs associated with our sales and marketing
personnel and associated benefits. Additional expenses include sales
commissions and bonuses and advertising and promotions expense.

Selling and marketing expense increased 228% from $634,000 for the six-month
period ended June 30, 1999 to $2.1 million for the six-month period ended June
30, 2000. The increase was attributable primarily to an increase of 15
employees in our sales and marketing department and related compensation
expense of $801,000 in order to drastically reduce the geographic area required
to be covered by each sales representative and to expand our marketing for new
client bases and our new products and services, and increases in commissions
associated with higher sales. Additional expenses include advertising
expenditures of $398,000, including television and print advertising. We expect
sales and marketing expense to continue to increase in absolute dollars.

Research and development expense. Research and development expense consists
primarily of employee compensation costs and related benefits associated with
the development of our new products.

Research and development expense increased 219% from $183,000 for the six-
month period ended June 30, 1999 to $585,000 for the six-month period ended
June 30, 2000. This increase was attributable primarily to an increase of 13
employees in our research and development department and related compensation
expense of $356,000 to develop www.VoterListsOnline.com,
www.GovernmentRecords.com, Campaign Manager 4.5 and 5, PAC Manager 4.5 and 5
and WebWizard. We believe that significant research and development is required
to remain competitive, and expect that the dollar amount of these expenses will
continue to increase.

Years Ended December 31, 1998 and 1999

Revenue. Total revenue, which consists of products revenue and services
revenue, increased 55% from $2.5 million for the year ended December 31, 1998
to $3.9 million for the year ended December 31, 1999.

Products revenue increased 64%, from $1.7 million for the year ended December
31, 1998 to $2.8 million for the year ended December 31, 1999. This increase
was attributable primarily to purchases by the NRA of voter data in the amount
of $807,000. Although we have entered into a new contract with the NRA, we do
not expect to derive significant revenue from sales to the NRA in the current
year or from the new contract. Additional increases were attributable to the
resale of network servers and third-party software by a state legislature in
the amount of $325,000 which was purchased as part of a total system
implementation. These increases were partially offset by a decrease in the sale
of Campaign Manager 3 software in the amount of

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<PAGE>

$380,000. This decrease was attributable to reduced sales of this product in
anticipation of our release of Campaign Manager 4.

Services revenue increased 35% from $813,000 for the year ended December 31,
1998 to $1.1 million for the year ended December 31, 1999. This increase was
attributable primarily to an increase in revenue recognized on software support
in the amount of $201,000 and an increase in our software customizations,
installations and training in the amount of $166,000.

Cost of revenue. Cost of revenue consists of cost of products revenue and
cost of services revenue. Cost of products revenue consists primarily of
external costs associated with acquisition, enhancements, updates and
maintenance of voter records, as well as personnel costs associated with
programming and customization of our software. Cost of services revenue
consists primarily of personnel costs associated with our customer support
department.

Total cost of revenue increased 84% from $679,000 for the year ended December
31, 1998 to $1.3 million for the year ended December 31, 1999.

Cost of products revenue increased 78% from $555,000 for the year ended
December 31, 1998 to $987,000 for the year ended December 31, 1999. This
increase was attributable to an increase of $207,000 in our data acquisition
costs, resulting in more current voter records in our database and an increase
of $102,000 relating to the resale of network servers and third-party software
to a state legislature as part of a total system implementation.

Cost of services revenue increased 113% from $124,000 for the year ended
December 31, 1998 to $263,000 for the year ended December 31, 1999. This
increase was attributable primarily to increases in personnel costs of $137,000
expended to significantly improve the capabilities of our customer support
department, resulting in an increase of four employees, and to provide
sufficient time to train our support personnel on our software products in
advance of increased customer support demand expected in connection with our
transition to our new targeted Internet services and Internet fundraising
services.

Gross margin. Total gross margin percentage decreased from 73% for the year
ended December 31, 1998 to 68% for the year ended December 31, 1999. Products
gross margin percentage decreased from 68% for the year ended December 31, 1998
to 65% for the year ended December 31, 1999. This decrease was attributable
primarily to increases in our data acquisition costs. Services gross margin
percentage decreased from 85% for the year ended December 31, 1998 to 76% for
the year ended December 31, 1999. This decrease was attributable to an increase
in our customer support department personnel expenses without an immediate
corresponding percentage increase in our service revenue.

General and administrative expense increased 112% from $1.3 million for the
year ended December 31, 1998 to $2.7 million for the year ended December 31,
1999. This increase was attributable primarily to changes in corporate
infrastructure, including an increase in compensation expense of $631,000
resulting in an increase of 11 employees who were added in the second half of
1999, to increase our accounting and finance infrastructure and provide
administrative support at our offices and facilities expense of $429,000,
including rent, office expense and non-capitalizable assets.

Selling and marketing expense increased 37% from $1.2 million for the year
ended December 31, 1998 to $1.6 million, for the year ended December 31, 1999.
This increase was attributable primarily to an increase of $308,000 in expenses
associated with advertising campaigns, including television advertising, print
ads and marketing materials, including new product literature and company
brochures associated with our new targeted Internet advertising and Internet
fundraising services.

Research and development expense increased 327% from $93,000 for the year
ended December 31, 1998 to $398,000 for the year ended December 31, 1999. This
increase was attributable primarily to an increase of five employees and
compensation expense of $246,000 related to the development of our recently
released

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<PAGE>

products and services, including our targeted Internet advertising services,
WebWizard, www.VoterListsOnline.com, www.GovernmentRecords.com, Campaign
Manager 4 and 5 and PAC Manager 4 and 5.

Equity-based compensation expense. We recorded equity-based compensation
expense of $256,000 associated with options granted during 1999. We did not
incur similar expense in 1998. We expect to incur equity-based compensation
expense associated with the issuance of options with an exercise price less
than market value in the years 2000 to 2005. This expense is allocated among
the various components of cost of revenue and operating expenses.

Other income. During the year ended December 31, 1998, we received a cash
payment from a legal settlement in the amount of $650,000 which we used to
supplement our cash flow from operations.

Interest income and interest expense. Net interest changed $57,000 from
$24,000 in net interest expense for the year ended December 31, 1998 to $33,000
in net interest income for the year ended December 31, 1999. This change was a
result of increases in cash available for short-term investments, which
resulted principally from the sale of our Series A Preferred Stock in September
1999. Interest expense includes interest costs incurred on personal loans made
by our stockholders.

Income taxes. We did not pay income taxes during the years ended December 31,
1998 and 1999. As of December 31, 1999, we had a net operating loss
carryforwards of approximately $1.9 million that expire through 2019.

Years Ended December 31, 1997 and 1998

Revenue. Total revenue increased 47% from $1.7 million for the year ended
December 31, 1997 to $2.5 million for the year ended December 31, 1998.

Products revenue increased 44% from $1.2 million for the year ended December
31, 1997 to $1.7 million for the year ended December 31, 1998. This increase
was attributable primarily to an increase in revenue of $160,000 related to a
phase-out of our non-Windows based products, which necessitated that clients
adopt updated versions of our Campaign Manager and PAC Manager software, and an
increase in revenue of $100,000 due to an increase in the number of
jurisdictions for which we offered voter file data.

Services revenue increased 53% from $530,000 for the year ended December 31,
1997 to $813,000 for the year ended December 31, 1998. This increase was
attributable to an increase in the number of software contracts.

Cost of revenue. Total cost of revenue increased 73% from $391,000 for the
year ended December 31, 1997 to $679,000 for the year ended December 31, 1998.

Cost of products revenue increased 91% from $291,000 for the year ended
December 31, 1997 to $555,000 for the year ended December 31, 1998. This
increase was attributable primarily to significant increases in the number of
voter records in our database.

Cost of services revenue increased 23% from $100,000 for the year ended
December 31, 1997 to $124,000 for the year ended December 31, 1998. This
increase was attributable primarily to increases in personnel costs.

Gross margin. Total gross margin percentage decreased from 77% for the year
ended December 31, 1997 to 73% for the year ended December 31, 1998. Products
gross margin percentage decreased from 76% for the year ended December 31, 1997
to 68% for the year ended December 31, 1998. This decrease was attributable
primarily to increases in our data acquisition costs for increasing the number
of registered voter records in our database, without a corresponding increase
in our products revenue. Services gross margin percentage increased from 81%
for the year ended December 31, 1997 to 85% for the year ended December 31,
1998. This increase was attributable to increases in the number of support
contracts.

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<PAGE>

General and administrative expense. General and administrative expense
increased 46% from $857,000 for the year ended December 31, 1997 to $1.3
million for the year ended December 31, 1998. This increase was attributable
primarily to changes in our corporate infrastructure including increasing
personnel and expenses related to our facilities.

Selling and marketing expense. Selling and marketing expense increased 46%
from $818,000 for the year ended December 31, 1997 to $1.2 million for the year
ended December 31, 1998. The increase was attributable primarily to an increase
in our compensation expense, including higher commissions as a result of higher
sales.

Research and development expense. Research and development expense decreased
20% from $116,000 for the year ended December 31, 1997 to $93,000 for the year
ended December 31, 1998. This decrease was attributable primarily to a decline
in the average headcount in this department during the year.

Interest income and expense. Net interest expense decreased 3% from $25,000
for the year ended December 31, 1997 to $24,000 for the year ended December 31,
1998.

Income taxes. We did not pay income taxes during the years ended December 31,
1997 and 1998. As of December 31, 1998, we had a net operating loss
carryforwards of approximately $44,000 that will expire in 2018.

Quarterly Results of Operations

The following table presents unaudited consolidated statement of operations
data for each of the six quarters ended June 30, 2000, as well as such data
expressed as a percentage of net sales. The operating results of any quarter
are not necessarily indicative of the results of any subsequent quarter.

<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------
June 30, September 30, December 31, March 31, June 30,
1999 1999 1999 2000 2000
--------- ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue:
Products............... $ 555,565 $ 755,411 $ 662,549 $ 717,811 $ 1,275,420
Services............... 250,795 243,860 373,729 476,924 337,438
--------- ---------- ----------- ----------- -----------
Total revenue......... 806,360 999,271 1,036,278 1,194,735 1,612,858
Cost of revenue:
Products............... 141,008 149,938 357,498 262,520 247,902
Services............... 59,813 12,035 133,229 120,742 119,742
--------- ---------- ----------- ----------- -----------
Total cost of
revenue.............. 200,821 161,973 490,727 383,262 367,644
--------- ---------- ----------- ----------- -----------
Gross Profit............ 605,539 837,298 545,551 811,473 1,245,214
--------- ---------- ----------- ----------- -----------
Operating expenses:
General and
administrative........ 467,123 667,004 1,002,473 1,214,904 987,788
Sales and marketing.... 322,920 247,699 751,259 1,135,462 945,727
Research and
development........... 82,103 108,613 106,065 238,220 346,535
--------- ---------- ----------- ----------- -----------
Total operating
expenses............. 872,146 1,023,316 1,859,797 2,588,586 2,280,050
--------- ---------- ----------- ----------- -----------
Loss from operations.... (266,607) (186,018) (1,314,246) (1,777,113) (1,034,836)
Other income (expense).. 17,325 7,540 7,699 -- --
Interest income......... -- -- 40,199 9,240 16,727
Interest expense........ -- (161) (450) -- (1,129)
--------- ---------- ----------- ----------- -----------
Net loss............... $(249,282) $ (178,639) $(1,266,798) $(1,767,873) $(1,019,238)
========= ========== =========== =========== ===========
</TABLE>

Liquidity and Capital Resources

We had a negative working capital of $1.9 million as of June 30, 2000. As of
June 30, 2000, we had $450,000 in cash and cash equivalents consisting of bank
deposits and money market funds. Our continuing

34
<PAGE>

losses, accumulated deficit, negative working capital and dependence upon
additional financing raise substantial doubt about our ability to continue as a
going concern. We believe that we will obtain the necessary financing through
the proposed initial public offering or other funding. However, there can be no
guarantee that we will be successful in obtaining such financing.

Historically, our cash requirements have been financed through a combination
of cash flow from operations, $3.5 million received upon the sale of Series A
Preferred Stock in September 1999 and loans from our principal stockholders.
Additionally, we have supplemented our cash from operations by receipt of two
legal settlements of approximately $2.0 million in 1995 and $650,000 in 1998.

On July 21, 2000, we amended our June 30, 2000 contract with MatchLogic. The
amended agreement obligates us to buy $5.5 million of Internet advertising
products and services over a period of 24 months, including $3.5 million of
these products in the three-month period ending September 30, 2000. If we do
not complete an initial public offering by October 31, 2000, we will be
required to purchase $550,000 of Internet advertising services and products by
September 30, 2000.

As of June 30, 2000, we had accounts receivable of $1.6 million. Our
receivables are attributable primarily to sales of our campaign products and
services to candidates, including candidates for the 1999-2000 presidential
elections. Some of these candidates rely on matching funds from the federal
government in order to pay the expenses of their campaigns. We expect to
collect all or substantially all of these accounts receivable in 2000; however,
the terms of the collection of these accounts may adversely affect our cash
flow.

The Series A Preferred Stock will automatically convert to 1,741,562 shares
of common stock upon the closing of an initial public offering that raises at
least $15.0 million in aggregate proceeds.

In September 1999, our principal stockholders, John Phillips and Dean
Phillips, converted working capital advances made to fund operations into a
convertible promissory note in the amount of $308,000. Concurrent with the
closing of this offering, this note will be converted into 153,326 shares of
common stock, with an aggregate value of $1,839,912 based upon a $12.00 initial
public offering price.

For the year ended December 31, 1997, cash used by operations was $7,000,
primarily attributable to net losses from operations of $249,000 and an
increase in accounts receivable of $164,000, partially offset by a decrease in
income tax refund receivable of $153,000 and an increase in accrued expenses of
$103,000. For the year ended December 31, 1998, cash provided by operations was
$116,000, primarily attributable to an increase in deferred revenue of $148,000
and a decrease in income tax receivable of $95,000, partially offset by an
increase in prepaid expense and other current assets of $101,000, a decrease in
accounts payable of $96,000 and a net loss of $81,000. For the year ended
December 31, 1999, cash used by operations was $1.1 million, primarily
attributable to a net loss from operations of $1.9 million and an increase in
accounts receivable of $900,000, partially offset by increases in accounts
payable of $590,000, deferred revenue of $429,000 and accrued expense of
$301,000. For the six-month period ended June 30, 2000, cash used by operations
was $1.4 million, primarily attributable to a net loss from operations of $2.8
million, an increase in accounts receivable of $693,000, partially offset by an
increase in accounts payable of $857,000, accrued expense of $441,000 and
deferred revenue of $484,000. Our loss of $2.8 million was attributable
primarily to an increase in our general and administrative, sales and marketing
and research and development expenses necessary to build our infrastructure,
increase our exposure in our industry, and bring new products and services to
market in anticipation of increased growth.

Our investing expenditures for our business include capital expenditures
totaling $12,000 for the year ended December 31, 1997, $115,000 for the year
ended December 31, 1998, $149,000 for the year ended December 31, 1999 and
$59,000 for the six-month period ended June 30, 2000. These capital
expenditures were incurred primarily to acquire computer hardware and software
for our operations and internal use, as well as to expand our existing and
newly leased space to accommodate increases in our employee headcount. We
expect that as our client base and employee base grow, we will require
additional computer hardware and software and we will incur additional expenses
in leasehold improvements to accommodate existing and future leased spaces.

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<PAGE>

For the year ended December 31, 1997, cash provided by financing activities
was $43,000, attributable primarily to proceeds from loans from stockholders,
partially offset by repayments on loans from stockholders. For the year ended
December 31, 1998, cash provided by financing activities was $18,000,
attributable primarily to proceeds from loans from stockholders, partially
offset by repayments on loans from stockholders. For the year ended December
31, 1999, cash provided by financing activities was $3.6 million, attributable
primarily to proceeds from the issuance of Series A Preferred Stock of $3.5
million and proceeds from loans from stockholders of $196,000, partially offset
by repayments on loans from stockholders of $129,000. For the six-month period
ended June 30, 2000, net cash used in financing operations was $465,000. This
was attributable primarily to fees associated with this offering, which will be
offset to equity upon the closing of this offering.

We intend to invest the net proceeds of this offering in short-term,
investment grade securities. We believe that the net proceeds from this
offering, together with cash on hand, cash equivalents and borrowings, will be
sufficient to meet our operating and capital requirements for at least the next
18 months. However, we are dependent on the proceeds of this offering to
continue our operations at the present level of expenditures. If we do not
close this offering we will need to reduce our operating expenses. Further,
even if we do close this offering, we will need to seek additional financing if
we are unable to build our Internet authentication and targeted Internet
advertising operations. If our plans change due to changes in market
conditions, competitive factors or new opportunities that may become available,
our assumptions change or prove to be inaccurate, or the net proceeds of this
offering or our cash flows prove to be insufficient to finance our growth
strategy, we may be required to seek additional financing. Furthermore, we may
need to seek additional financing to expand our future operations.

We have not entered into any financial derivative investments that expose us
to material market risk.

Year 2000 Issues

We currently are not aware of any year 2000 problem in any of our critical
systems and products. However, the success to date of our year 2000 efforts
cannot guarantee that a year 2000 problem affecting third parties upon which we
rely will not become apparent in the future and interfere with our operations
or otherwise harm our business.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The new standard establishes accounting and reporting
standards for derivative instruments embedded in other contracts and for
hedging activities. This statement, as amended, is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. We do not expect
SFAS No. 133 to have a material effect on our financial position or results of
operations.

In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, or FIN 44, Accounting for Certain Transactions Involving
Stock Compensation. FIN 44 further defines the accounting consequence of
various modifications to the terms of a previously fixed stock option or award
under APB Opinion No. 25. FIN 44 becomes effective on July 1, 2000, but certain
conclusions in FIN 44 cover specific events that occur after December 15, 1998
or January 12, 2000. We have not completed our evaluation of the impact of FIN
44 on our financial position or results of operations.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements. This
SAB expresses the SEC's views in applying generally accepted accounting
principles to revenue recognition in financial statements. Registrants can
apply the accounting and disclosure requirements of this SAB retrospectively,
or may report a change in an accounting principle no later than the first
fiscal quarter of the fiscal year beginning after December 15, 1999. We do not
expect the application of this SAB to have a material impact on our financial
statements.

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BUSINESS

Overview

We use this database to provide targeted Internet advertising and Internet
authentication services and to facilitate campaign management and Internet
fundraising. Given the extensive content of our database and the breadth of our
client base, we believe that we are an industry leader in providing campaign
management products and services and that we have developed significant
knowledge and expertise in this field.

As of June 30, 2000, our clients included 45 U.S. Senators, over 200 members
of the U.S. House of Representatives, approximately 46 Democratic and
Republican state parties and numerous national advocacy groups and consulting
firms. Furthermore, of the top 50 fundraisers for the Senate and top 50
fundraisers for the House of Representatives during the 1999-2000 election
cycle, as determined by a March 2000 review of the contribution reports filed
with the Federal Election Committee, 72% of these Senate candidates and 66% of
these House candidates used at least one of our products or services. We are
non-partisan and are not a political consultant. We sell products and services
to any candidate running for office and our client base includes new candidates
and incumbents.

Our campaign and advocacy clients use our software products to maintain lists
of voters, contributors, prospective contributors, volunteers, members of the
press and community organizers, and to comply with the reporting regulations of
the Federal Election Committee, or FEC, and state government agencies. Our
targeted advertising clients use our products and services to target specific
groups based on demographic, geographic or political criteria and to reach
potential constituents and supporters, generate campaign awareness and solicit
contributions through the Internet, telephone, mail or door-to-door efforts.
Our Internet authentication service allows clients to verify, over the
Internet, the age and identity of an individual.

Industry Background

The importance of sophisticated databases to facilitate communication through
the Internet. The Internet has rapidly emerged as an important medium for
facilitating communication, conducting commerce and gathering and disseminating
information. As Internet usage has grown, the need for sophisticated databases
to manage vast quantities of mission-critical information has significantly
increased. These databases are used for various purposes, including:

. targeted Internet and direct advertising;

. authenticating age and identity for e-commerce transactions; and

. obtaining prospect lists online.

A major challenge for organizations building databases is the gathering and
maintaining of sufficient, valuable and accurate information. Building and
maintaining comprehensive and accurate databases often requires a significant
investment of resources and may require many years to complete. Organizations
spend millions of dollars each year to acquire and maintain data on residents
of the United States and other countries from the Internet and traditional
sources, including direct mail responses, telephone surveys, warranty cards and
product

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information cards. For example, many organizations incur substantial
advertising costs to attract visitors to their websites in order to build and
enhance their database of user profiles. The information gathered through
traditional means or through the Internet may be incomplete or inaccurate.
Further, many organizations may only be able to obtain information for limited
demographic segments or geographic regions. Organizations also incur costs
compiling this data into usable formats and developing or configuring
sophisticated software to manage their data.

Ability of technology to facilitate management of campaign and advocacy
organizations. Campaign and advocacy organizations are increasingly adopting
new technologies to organize and communicate with constituents and supporters.
The operation of campaign and advocacy organizations involves both
professionals and volunteers who use large quantities of data. As the cost of
communicating with constituents and supporters increases, these campaign and
advocacy organizations are under increasing pressure to use information
management tools and accurate databases to affect the outcome of elections or
influence legislation. Comprehensive and accurate databases enable campaign and
advocacy organizations to concentrate their communication efforts on those
constituents able, and most likely, to support their efforts.

With the increasing cost of campaigns and the proliferation of issues, many
organizations now conduct fundraising efforts and operate on a year-round
basis. These organizations raise funds for a variety of purposes, including:

. media relations;

. lobbying activities;

. targeted constituent outreach programs; and

. additional fundraising.

Many of these organizations are seeking more efficient means of attracting
and identifying potential supporters, soliciting funds and reporting
information about their contributors to federal, state and local governments.
At the federal and state levels, these organizations are increasingly regulated
and are required by law in most jurisdictions to disclose the amount of
receipts and disbursements, the amount and source of loans and the amount,
source, employer and occupation of contributors.

Advantages of targeted Internet advertising. In addition to campaign and
advocacy organizations, commercial entities are also seeking new technologies
to reduce advertising costs and increase advertising effectiveness. To do this,
many of these entities are increasingly using the Internet as a more effective
and lower cost alternative to traditional media and for providing targeted
advertising to potential clients. Further, targeted Internet advertising
enables entities to more easily generate public awareness of products, services
or particular issues within specific demographic, geographic or political
segments. We believe that targeted Internet advertising has the potential to be
more cost-effective, as well as easier to develop and implement, than
traditional direct advertising campaigns.

The need for online age and identity authentication. As Internet usage
continues to grow, more and more websites are developing a need to regulate
access to their sites, confirm the identity or age of a user to complete a
purchase, or require parental consent to grant access to websites or market or
sell products to minors. For example, many wineries now sell their products
over the Internet, but are required by state laws to ensure that their
purchasers are at least 21 years of age. Similarly, many websites restrict
access to users that are age 18 or over. To complete these transactions, these
entities need a reliable method of verifying age and identity over the
Internet. In order to accomplish this verification, these entities must secure
access to a reliable source of age and identity data.

Our Solution

Our products and services can be used as tools for targeted Internet
advertising, Internet fundraising and e-commerce transactions. Our software is
designed to extract and analyze information from our databases about

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specific population demographics. Clients using these products and services
include major political candidates, as well as advocacy groups, non-profit
organizations and direct marketing firms. In addition, our Internet
authentication services allow companies conducting commerce over the Internet
to verify the identity and age of an individual seeking access to, or making a
purchase through, their website.

Our databases. Our databases, which we regard as our key assets, have been
built and maintained over the past ten years and contain approximately 150
million U.S. voter records and an aggregate of approximately 50 million
departments of motor vehicle records in the United States. In first quarter
2000, we also licensed a database that contains approximately 41 million voter
records from the United Kingdom. The registered voter records typically contain
information provided by the voter at the time of registration. In many
jurisdictions, this information may include:

. date of birth;

. date of registration;

. residence address;

. gender;

. political jurisdiction; and

. party affiliation.

Information we obtain from the departments of motor vehicle records in the
United States often includes:

. date of birth;

. address;

. gender; and

. make or model of registered automobile.

Where available, we have enhanced the records in our databases through third
parties to include demographics not contained in the voter records. Examples of
these enhancements include:

. listed telephone number;

. estimated income level;

. ethnic surname; and

. homeowner or renter status.

Clients use our databases and software to target potential constituents and
supporters, generate campaign awareness and solicit contributions through the
Internet, or by telephone, mail or door-to-door efforts. We provide campaign
and advocacy organizations with cost-effective tools to facilitate Internet
fundraising. Political campaigns and advocacy organizations that wish to
increase traffic to their websites, or to the website of a legislator they wish
to influence, may purchase banner advertisements directed to constituents
nationally or in a particular state, congressional district or town.

We believe that the size of our registered voter database provides us with an
advantage over competitors offering smaller databases containing data derived
from registered voter records. Further, because the information on age and
identity of the individuals listed in our database is derived from registered
voter records, which are traditionally gathered under oath, it is highly
reliable. As a result, we believe that this fact provides us with a competitive
advantage over companies that may have larger databases but which contain
information derived from less reliable sources, for example, questionnaires,
warranty cards or other voluntary disclosure methods.

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We believe that any competitor that does not already have a comprehensive
database would have difficulty replicating our U.S. databases for several
reasons, including the fact that many voter jurisdictions have restrictions on
acquiring and disclosing voter records. For example, some U.S. jurisdictions
require that in order to access their voter records, a company must have a
client willing to certify that the information sought will be used for a
purpose allowed under that jurisdiction's laws. Therefore, companies beginning
to gather and build their databases without the necessary client certification
are precluded from collecting voter information from these jurisdictions, which
in turn limits their ability to advertise that they have or can provide clients
with an extensive database. Many jurisdictions also limit use of voter
information provided by the jurisdiction. Further, many of the smaller
jurisdictions are difficult to contact because they may be obscure or their
employees only work part-time. As a result, identifying and contacting these
jurisdictions may be complicated and time-consuming.

The information contained in our database is derived from public records.
Some states permit confidential voter registration, which enables voters to
keep information private, for instance, home addresses. In these cases, our
database contains only the information that is available publicly.

All of these limitations make building and maintaining a U.S. voter database
time-consuming and expensive, which is why we believe it would be difficult for
our competitors or companies which desire to enter the industry to replicate
our registered voter database. In fact, we have worked for over ten years to
build our database in part because of these difficulties, and we have invested
substantial financial and personnel resources to develop, maintain and update
these databases and to keep our competitive advantage.

Political management software. Our campaign and advocacy clients use our
software to manage their organizations by maintaining their lists of voters,
contributors, prospective contributors, volunteers, members of the press and
community organizers in one database. Our clients also use our software to
comply with FEC and state disclosure requirements. In addition, we provide
technical support at our website or through a toll-free call 24 hours-a-day,
seven days-a-week.

Targeted Internet advertising. We are using our databases as targeted
Internet advertising tools to allow our clients to reach their audience based
on desired demographic, geographic or political criteria. We believe that our
targeted advertising will increase clients' awareness and traffic flow to their
websites in a more cost-effective manner than alternative online advertising or
traditional media, such as mass mailings.

Internet fundraising. We have developed an Internet fundraising tool that
provides campaigns and advocacy organizations with the ability for acceptance,
processing, authentication, analysis and disclosure of contribution of
contributions made at their website.

Internet authentication services. Our databases can be used by a company
conducting commerce on the Internet to verify the age or authenticate the
identity of an individual seeking to gain access to, or make a purchase
through, a website. The company may collect information provided by the user
and compare it against information collected under oath that is contained in
our databases. We believe that our age and identity authentication services
will enable our clients to more easily conduct commerce over the Internet where
the age or identity of the purchaser must be verified online.

Strategy

Our goal is to become a leader in the targeted Internet advertising industry
and Internet authentication industry and to expand our position within the
campaign and advocacy industries. We intend to pursue our goal through the
following strategies:

Continue to enhance size and quality of our databases. Based upon our
research, discussions with our customers regarding their experiences and our
own experience surveying the market over a ten-year period, we believe that we
have established one of the most comprehensive databases of U.S. voter records.
We intend to

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continue to enhance the size and quality of our databases by continuing to
access U.S. voter records, departments of motor vehicle records and other
records. We intend to continue to maintain already established relationships
and develop new relationships with various state and local agencies. We believe
that these relationships will continue to increase our efficiency in collecting
and updating our voter records because we are able to build personal contacts
in these jurisdictions and continue to learn more about their voter data
collection and dissemination systems. By combining our frequently updated
database with new database technologies and demographic targeting techniques,
we believe that we will be able to offer our clients increasingly effective and
comprehensive methods for targeting their intended audiences.

Grow our Internet advertising business and our Internet authentication
services. Our clients can use our products and services to increase the
efficiency of their advertising and fundraising efforts. We recently launched
our Internet authentication services and signed our first contract in June
2000. We intend to focus our efforts on expanding our sales and marketing of
this business and enhancing our services.

Increase applications for our databases. We believe that there are other
attractive potential uses for the information contained in our database. These
opportunities include, for example, providing access to voter records online
and providing an online directory assistance or reference services.

Broaden our sales and marketing efforts. To broaden our market coverage and
expand our service offerings, we intend to continue to grow our sales and
marketing organization to target new industries, which we expect will include
assisting merchants seeking to obtain parental consent in order to comply with
the Child Online Privacy Protection Act, age authentification and digital
signatures, in the United States and internationally. We intend to complement
our current staff of trained professionals with additional qualified personnel,
including category sales and international specialists. We intend to focus on
expanding our current sales and marketing reach, cross-selling our software and
Internet applications and developing our sales and marketing efforts for new
products and services.

Expand the scope of our comprehensive fundraising products and services. We
intend to continue to provide our clients with an effective means of campaign
and advocacy fundraising by expanding the functionality of our campaign
management software. Specifically, we intend to provide our clients with
products that more efficiently:

. target prospective contributors;

. accept, process, authenticate, analyze and disclose contributions
received through Internet, direct and telephone marketing efforts as
well as special events and PACs;

. manage their contributor and constituent response efforts;

. recruit volunteers and community members; and

. enhance their press and public relations activities.

Extend international databases. We intend to use our database technology and
expertise to offer our products and services on an international scale, as
appropriate opportunities arise. We recently licensed the voter records, or
Electoral Roll, of the United Kingdom, which consists of approximately 41
million voter records. We intend to build our international database by
enhancing our United Kingdom records and acquiring voter records from other
countries. We have had preliminary discussions with political consultants,
party officials or government agencies that might supply us with voter records
in the following countries:

<TABLE>
<S> <C> <C>
. Australia . Ireland . South Africa
. Canada . Italy . South Korea
</TABLE>

We also plan to enter into discussions with parties in other countries
throughout Africa, Asia, Europe and South America in order to expand our
databases. Our collection and use of information on voters in these
jurisdictions may be regulated. Given the early stages of our discussions, we
have not engaged legal counsel to analyze these issues.

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Products and Services

We intend to continue to use our databases and installed client base to
expand the use of multiple products among our existing clients and to increase
the number of new clients using one or more of our integrated suites of
products. Our products and services, which are listed by revenue produced
during the year ending December 31, 1999, are described below:

Political management software. We are a leading provider of political
management software to campaigns, PACs and elected officials. Our Campaign
Manager software is a database management program that enables a campaign to
input the name and other relevant information of its contributors, supporters,
constituents, volunteers, press contacts and organizers and also to download
information from our voter records into the same database. This database can
then be manipulated and analyzed by the campaign in various manners, including
to create volunteer and contributor lists and mailing lists for direct mail
pieces. In addition, this program maintains the information necessary to submit
disclosure reports that comply with the reporting requirements of federal and
state agencies, including the FEC. Our programs are continuously upgraded to
provide an interface between a campaign's database and popular word processing
and e-mail programs, and to keep abreast of changing campaign disclosure
regulations.

Our PAC Manager software is used to maintain supporter lists and comply with
disclosure requirements imposed by federal and state disclosure agencies. The
program is used by more than 50 PACs to file federal or state reports.

Our Constituent Service Software allows elected officials to deliver and
manage correspondence to their constituents. Our software tracks requests for
information or assistance, responds to such appeals and speeds the process of
persuading government agencies to take action. Our program accepts constituent
e-mail, mail, telephone, and walk-in inquiries while registering requests or
opinions received at their website or from an old-fashion town meeting.

For the years ended December 31, 1997, 1998 and 1999 and the six-month period
ended June 30, 2000, we derived revenue of approximately 59%, 59%, 50% and 49%
from the sale of our political management software and related services.

Voter lists. We provide our clients with enhanced lists of registered voters,
in many formats, as requested. Clients may order, pay for and obtain a list of
constituents at our website, www.voterlistsonline.com. Clients may also input
specific criteria related to the list of voters they wish to obtain directly at
our website and after performing a search and viewing the results, a client can
download onto their own computers the requested information formatted as
mailing labels, telephone sheets, walk lists, a polling sample or a file
suitable for import into many popular software programs. The agreements with
our clients contain provisions restricting their use of the voter list
information to comply with government regulations and requirements and
restricting the information to the client's own use. We do not follow up on
whether our clients make improper use of disclosure of such information,
although we have agreed voluntarily to allow one jurisdiction to audit usage of
this information to detect and deter misuse.

We collect data to enhance our database from several sources, including
Central Address Systems, Inc., or CAS. CAS provides us with data enhancements,
including:

. phone number verification;

. inferred income;

. presence of children; and

. homeowner or renter status.

This contract automatically renews annually unless notice of termination is
provided by either party. Our failure to continue to obtain data from this
source, if we cannot obtain it from an alternative source, may limit our
ability to continue to enhance our database.

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Pursuant to a contract dated February 21, 2000, we licensed a database from
National Homemovers Database Limited that contains records of approximately 41
million voters in the United Kingdom. This license grants to us the right to
sub-license the United Kingdom voter records to our clients for political
purposes. The contract terminates in 2003. Further, National Homemovers has the
right to terminate the contract, upon 30 days notice, upon a change in
circumstances that National Homemovers reasonably determines makes the contract
no longer commercially viable. We are required to give National Homemovers 50%
of any revenue we generate through sales of data contained in this database.

For the years ended December 31, 1997, 1998 and 1999 and the six-month period
ended June 30, 2000, we derived revenue of approximately 41%, 39%, 48% and 39%
from the sale of our U.S. voter records.

Internet fundraising. CampaignContribution.com facilitates Internet-based
contributions to campaign and advocacy organizations. CampaignContribution.com
provides for the acceptance, processing, authentication, analysis and
disclosure of contributions made at organizations' websites.

CampaignContribution.com is an Internet credit card processing service for
political campaigns, political action committees, advocacy groups and
nonprofits worldwide. Our services include processing campaign donations,
memberships, convention registrations, event registrations, merchandise sales
and online raffles. Currently, we accept eChecks and all major credit cards
both in the United States and the United Kingdom and have over 400 clients in
the United States. Our system is located in-house and utilizes industry
standard international security protocols and procedures.
CampaignContribution.com provides for acceptance, processing and authentication
of credit card transactions. Value added services include a report generator,
voter data analysis and seamless interaction with our software products. For
the year ended December 31, 1999 and for the six-month period ended June 30,
2000, we derived revenue of approximately 2% and 4% from the sales of our
Internet fundraising service.

Targeted Internet advertising. Using our database to customize their
advertising efforts, our clients can reach up to 150 million individuals
nationwide, representing an estimated 75% of the citizens of the United States
age 18 or older as of April 11, 2000. Our clients can use the information
described under the caption Our databases, including geographic, demographic
and political attributes, to direct online advertising to specific groups of
Internet users. For example, a client that wants to advertise to all Republican
voters within a specified voting jurisdiction can rely on the information in
our database to send Internet banner advertisements only to registered
Republicans within that jurisdiction. In this way, our clients can maximize
their advertising efforts by only sending advertisements to people who may be
receptive to the ads. We place our targeted banner advertisements through Web
portals and third-party ad-servers. To date, we have not received any material
revenue from sales of our targeted advertising efforts.

On June 30, 2000, we signed a 30-month contract with MatchLogic, Inc., a
subsidiary of Excite@Home which we amended on July 21, 2000, as described
below. Under the terms of the original contract, we were obligated to purchase
$9.4 million of targeted advertising space on websites, of which commitment we
were required to pay $4.5 million during the three-month period ended September
30, 2000. We plan on reselling the advertising products and services we
purchase from MatchLogic to our clients for their banner advertisements and
online advertising needs. In connection with this contract, we performed
database matching services for MatchLogic for which we received a payment of
$350,000. In addition, we will receive a license fee consisting of a $100,000
fixed payment and a percentage of amounts received for sales to third parties.
The contract may be terminated by either party upon 60 days notice if the other
party materially breaches the terms of the contract. Further, under terms of
the contract, MatchLogic can refuse to serve any ads we may sell. A secondary
component of the contract permits MatchLogic to sell targeted advertisements on
our behalf and to split any revenue from these sales with us. On July 21, 2000,
we entered into a first amendment to the MatchLogic contract under which the
total obligation to MatchLogic was reduced from $9.4 million to $5.5 million,
the term was reduced from 30 months to 24 months and the commitment we are
obligated to pay in the three-month period ended September 30, 2000 was reduced
from $4.5 million to $3.5 million. Additionally, the termination fee was
modified to a minimum purchase of services in the amount of $550,000.

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Internet authentication services. We have developed technology that allows
our databases to be used for online age and identity authentication required by
governmental agencies or sought by commercial entities wishing to regulate
access to their website. For example, the age authentication tool could be used
by a website to protect children from products or communications intended for
adults. On June 29, 2000, we signed a three-year contract with VeriSign, which
is our first and currently only customer contract for Internet authentication
services. Under the contract, we agreed to provide VeriSign with software and
access to our database to verify the age and identity of its customers or its
website users. VeriSign will pay us for each verification made under this
contract. The contract is terminable upon bankruptcy, a material breach by
either party or upon the mutual agreement of the parties. VeriSign does not
have a minimum purchase obligation under the contract, but if VeriSign has not
spent the specified dollar amount under the contract after an introductory
period, we may increase the price we charge VeriSign for each verification.

Other products. Our www.GovernmentRecords.com reference service facilitates
access by clients to our U.S. voter record information provided by state and
local boards of elections and departments of motor vehicles. Our website acts
as a search engine to locate individuals or groups of records based on criteria
specified by the client. The information available to the client includes the
information obtained by us from the government agencies, which typically
includes at least the date of birth, address and political jurisdiction. Our
primary marketing efforts for this service are aimed at government agencies,
litigation support services, law firms and insurance companies.

Our WebWizard tool facilitates the creation of websites. The tool is designed
to meet the needs of smaller campaign and advocacy organizations that wish to
establish a Web presence without retaining a professional Web design firm.

Emerging and Prospective Products and Services

In an effort to expand our business, we are developing new products and
services, including:

International campaign services. We have licensed a database consisting of
voter records of the United Kingdom, and intend to create additional databases
to include voter records of other countries. We believe that there is an
opportunity to use these international databases in established and emerging
democracies where candidates and organizations are looking to implement U.S.-
style campaigns.

Internet voting services. Although in its earliest stages, we are exploring
the possibility of providing new products and services to registrars and
secretaries of state to register and authenticate votes cast on the Internet.

Sales and Marketing

We sell our products and services in the United States and the United Kingdom
through our sales and marketing team. As of June 30, 2000, our sales and
marketing team consisted of 31 employees. Our sales and marketing team is
organized by industry and geographic region. We believe that our sales and
marketing staff is well trained and experienced in its industries, and is able
to provide our clients with the best software, targeted advertising products
and services and Internet authentication services. We have developed an
internal, custom-made training program for all new sales representatives to
ensure that they are trained on our products and services and in their
industries.

Our sales and marketing personnel use a variety of marketing programs to
generate demand for our products and services, build market awareness, develop
customer leads and establish business relationships. Our marketing activities
include television ads, public relations and print advertisements. Our direct
marketing activities include seminars, trade shows, special events,
sponsorships and ongoing client communications programs. We also have consulted
with advertising experts to assist us in learning more about our clients,
through the use of focus groups within our clients' industries. Based on the
information gathered through these efforts, we tailor marketing programs to
address our clients' specific concerns and needs.

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Clients

Our current principal client list consists of campaigns, advocacy and
commercial clients. As of June 30, 2000, our clients included 45 Senators, over
200 members of the U.S. House of Representatives, approximately 46 Democratic
and Republican state parties and numerous national advocacy groups and
consulting firms. Collectively, these entities represented 31% of our revenue
for the year ended December 31, 1999 and 21% of our revenue for the six-month
period ending June 30, 2000. Furthermore, of the top 50 fundraisers for the
Senate and top 50 fundraisers for the House of Representatives during the 1999-
2000 election cycle, as determined by a March 2000 review of the contribution
reports filed with the FEC, 72% of these Senate candidates and 66% of these
House candidates used at least one of our products or services.

For the year ended December 31, 1999, the NRA accounted for approximately
$807,000, or 21%, of our revenue. For the six-month period ended June 30, 2000,
MatchLogic accounted for approximately $350,000, or 12% of our revenue. Other
than described in the preceding sentence, we have not derived 10% or more of
our revenue from any single client in any fiscal year from 1997 to 1999, nor
did we derive 10% or more of our revenue from a single client in the six-month
period ended June 30, 2000.

Customer Service

Our software clients receive software maintenance and telephone support at no
additional charge for 90 days from the date of delivery of the software.
Thereafter, clients may choose to discontinue maintenance and telephone
support, purchase maintenance only, or purchase maintenance and telephone
support for a 12- or 24-month period.

Maintenance support consists of providing all updates to the software,
including changes that keep the software in compliance with federal and state
disclosure requirements. Telephone support allows the client to call an
800 number and request assistance 24 hours a day, seven days a week.

We currently have more than 350 clients under maintenance and telephone
support, including federal and state candidates, PACs and associations, and
national, state or local political parties. Our clients can also access our
customer service department through our website, www.aristotle.com, and can e-
mail support questions to [email protected].

As of June 30, 2000, we employed nine customer support representatives. These
representatives are trained in both the technical aspects of software, data and
networking and the political or organizational imperatives of our clients.
Representatives handle client telephone calls in a help-desk role and are
responsible for proactive customer service. They are also assigned a list of
PAC or state party clients or clients in a specific geographic region for whom
they serve as a primary contact, consultant and project manager. Clients call
the help-desk for assistance with day-to-day questions or problems. If a
problem or concern escalates, it is transferred to the representative
responsible for that client.

Research and Development

Based upon client feedback, competition and market analysis, our Internet
services product group determines functions and specifications for future
Internet-based services and enhancements to our current services. Our research
and development group then develops these new services and enhances existing
services.

We have developed a managed release process for our Internet and software
products to assist clients in the adoption of new product releases. This
process includes testing and evaluating revisions, updating online and paper
documentation to include new features, training customer support personnel and
notifying and training customers.

Our product development department updates our software continuously. The
software changes include updates to incorporate new FEC and state reporting
requirements and enhancements to product features and

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<PAGE>

performance. As of June 30, 2000, our product development group consisted of 22
full time employees. For the years ended December 31, 1997, 1998, and 1999 and
for the six-month period ended June 30, 2000, we spent approximately $116,000,
$93,000, $398,000 and $585,000 on research and development activities.

Government Regulation and Privacy Concerns

We are subject to extensive government regulation, including:

Federal regulation of databases. Our publication of departments of motor
vehicle records is regulated by the Drivers Privacy Protection Act of 1994, or
DPPA. The DPPA restricts use of this data to specific uses, including
government use, use in the normal course of business by a legitimate business
to verify the accuracy of personal information submitted to the business or to
prevent fraud. These uses constitute our principal intended uses of this data.
In order to comply with these restrictions, we contractually limit our clients'
use of the information to permissible purposes. The DPPA also requires us to
maintain records of our sale of this data. The Federal Election Campaign Act of
1974, or FECA, and FEC regulations prohibit the use of data regarding federal
contributions that we publish for solicitation of contributions or other
business purposes.

State regulation of databases. Our publication of voter lists is regulated by
the laws of the jurisdictions from which these records are obtained. While
jurisdictions in which approximately one-half of the registered voters in the
United States reside do not limit the use of voter records, the remaining
jurisdictions generally limit the use to government and political purposes.
Further, access to the voter lists is restricted in a small number of
jurisdictions. Presently, the use of registered voter information does not
require the consent of the individual voter, so long as the use is allowed by
the laws of the jurisdiction that collects, and from which we obtain, the data.
In these cases, the right to use the data for these lawful purposes derives
from the data's status as a public record and from the specific laws or
regulations allowing this use.

Our publication of departments of motor vehicle records is subject to the
laws of the states from which the records are obtained. Many of these state
laws restrict the uses to which the data may be used by our clients, and
require us to meet record-keeping standards for any sales of the data. The
restrictions placed on the use of this data by the states is generally similar
to the restrictions of the DPPA.

Our products are designed to require our clients to certify to us that their
intended use of information, where restricted by applicable law, is lawful and
to notify them of these restrictions.

Precedent for use of our databases for Internet authentication services. We
are not aware of any government regulation requiring an individual's consent
for the use of our databases to authenticate an individual's age or identity
through voter or departments of motor vehicle records. However, age and
identity verification through use of voter or departments of motor vehicle
records contained electronically in a database is a new and emerging field, and
government regulations may be adopted to limit these activities. We believe our
department of motor vehicle data may be used in our authentication services
under the provisions allowing for government use and use in the normal course
of business by a legitimate business to verify the accuracy of personal
information submitted by the individual to the business or to prevent fraud.
For voter data that may be used for commercial use, we believe that such data
may be used for all of our authentication purposes. For voter data whose use is
restricted to government or political purposes, we believe our right to use
such data for authentication of the age of the individual derives from that
person's consent to check such record at the time the authentication is sought,
where the person's identity has otherwise been established. However, our
rationale for age authentication usage has not yet been formally ruled on or
ratified by the jurisdictions whose voter data is restricted to government or
political uses. In order to use such restricted data for identity verification,
we believe it is likely that some changes or exemptions in the applicable laws
may be required. For Arizona voter data, which may not under Arizona law be
used through the Internet, we do not sell the data through the Internet, and we
may not be able to use it for our authentication services. We also anticipate
some further contractual limitations or requirements governing our ability to
sell voter data from Maricopa County, Arizona.

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<PAGE>

International regulation. Currently, there are almost no government
regulations on the collection and use of our data about registered voters in
the United Kingdom. However, the United Kingdom is currently implementing
regulations that would limit access to and use of the complete Electoral Roll.
As we expand our international products and services, we may also face
government restrictions on our collection and use of data from other foreign
jurisdictions.

Privacy concerns. We collect and compile information in our databases that we
use in connection with our campaign products and services and for our
authentication services. Although we collect a significant portion of this
information from public records, we also rely on commercial data collection
efforts to enhance our records. Although we believe that we have the right to
use and compile the information in these databases, our ability to do so may
not remain lawful and there may be no trade secret, copyright or intellectual
property protection that is available or becomes available for databases that
enhances our rights. With respect to the data we obtain as enhancements from
commercial database vendors, we believe we have the right to use this data in
all of our marketing services. In accordance with standard direct marketing and
reference service industry ethics standards, we take steps to insure that our
reference services do not use any enhancement data from commercial database
vendors that does not come from public records or listed telephone company
white pages information. There is also a substantial risk that public
perception regarding the use of information acquired through the Internet to
engage in commercial purposes, including targeted advertising, may deteriorate,
which could lead to popular pressure not to use this information for commercial
purposes.

There are several lawsuits pending against our competitions alleging, among
other things, that our competitors have unlawfully obtained and sold Internet
users' personal information. These lawsuits include claims against DoubleClick,
Inc., an Internet advertising firm, RealNetworks, Inc. a provider of online
music, and Yahoo!, Inc. a Web portal. A series of suits against DoubleClick
allege that DoubleClick has violated the privacy of Internet users by applying
Web browser cookie technology to acquire personal information about the Web use
behavior of individuals without their knowledge or consent, and by subsequently
linking such information to a direct marketing database. The suit against
RealNetworks alleges that RealNetworks has violated a federal anti-hacking
statute by using its software to access Internet users' computers without
authorization. The suit alleges that this unauthorized access occurred when
RealNetworks obtained and saved information on users' music choices without
their consent or knowledge and in violation of user privacy. A suit against
Yahoo! alleges that Yahoo!'s use of cookie technology constitutes surveillance
without consent, and is therefore the equivalent of stalking, which is
prohibited in numerous states.

We believe that each of these suits presents factual situations which are
distinguishable from our own collection and use of information. Specifically,
we do not use cookies or similar Web use tracking systems to collect Web
behavior information on any of our clients. Additionally, because we collect
our database information solely from public records and standard commercially
available demographic information providers, we do not sell or otherwise
provide to our clients or anyone else the type of private information which is
involved in the lawsuits described above. While we do not believe that any of
these lawsuits directly impacts our ability to continue to maintain our
database, there is nonetheless a risk that privacy concerns could lead to
claims against us.

Public concern over targeted advertising techniques. The practice of matching
offline marketing databases, particularly personal medical or financial
information, to website visitation patterns, or click-stream behavior, is
highly controversial. This controversy has resulted in scrutiny of all targeted
marketing where offline personally identifiable information is matched to
anonymous individual website visitation patterns, and where the informed
consent of the individual has not first been obtained. In July 2000, the
Federal Trade Commission, or FTC, and advertising industry participants agreed
to self-regulatory principles governing Internet advertising that targets
consumers based on their preferences and behavior. Under these principles,
which are enforceable under existing FTC authority, Internet advertisers are
prohibited from using sensitive personal or financial information for targeted
Internet advertising unless they comply with conditions agreed upon with the
FTC to protect the privacy of Internet users. Internet advertisers also must
require their

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<PAGE>

customers to provide consumers with notice of their use of targeted Internet
advertising and the opportunity to opt out of targeted Internet advertising.

Our agreement with MatchLogic is the only instance in which we match our
database to online registered user information. This match allows MatchLogic to
serve targeted ads for lawful users of the data. This matched data and the
impression data derived from this matched data is limited by contract to use
only for lawful purposes. MatchLogic also has contractually represented to us
that it will conduct its business to avoid deceptive, misleading, or unethical
practices that might be detrimental to us or to our products or to the public,
and that it will comply with all aspects of its publicly posted privacy policy.
MatchLogic is a party to the online advertising industry's agreement with the
FTC on self-regulatory online advertising principles.

We also serve our client's targeted banner advertisements directly. This
targeting does not involve matching of our database information to online
registered user information, or to clickstream information or other Internet
user tracking or profiling systems.

We use a public record database that contains publicly available information.
Although we enhance our database with information gathered by third parties,
this information consists of standard, commercially available demographic
information similar to that collected and utilized in the traditional direct-
marketing industry. Our database does not include the information obtained
through click-stream records or other Internet user tracking or profiling
systems.

Technology

We use high performance SQL servers running Microsoft Windows NT to maintain
our databases. Our systems employ commercially available technology and
commercial payment processing services, including CyberCash, Signio/Telecheck
and VeriSign. Our systems can be scaled to meet increased requirements for
security, reliability, performance, expandability and affordability. Although
we currently rely on employees and consultants to service our systems, if our
network system demands increase, we may elect to out-source our network
services to third-party providers. For the period of April 24, 2000 to June 21,
2000, which is the most recent test period by PSINet, our average utilization
was approximately 10%. Our utilization remains below industry guidance of 75%.
Our current capacity is 1,536 megabytes per second.

Our technology is designed to provide a high level of data security. Our
operating system tracks all login attempts to prevent unauthorized usage. We
also employ password and firewall protection to control access to sensitive
information contained in our system.

Our clients rely on the Internet to use features in many of our products and
services. We rely on PSINet Inc. and WorldCom Communications, Inc. to provide
ISP services to us. We have an agreement with PSINet Inc. that provides that
for a period of two years PSINet will provide Internet access services to us
for a monthly charge of approximately $3,000. The agreement is terminable on 30
days notice by either party at any time.

We entered into a 12-month renewable agreement with WorldCom, in which
WorldCom agreed to provide us with Internet access services for a monthly fee
of up to $1,000. We can terminate the agreement at any time, provided that we
pay a termination fee of up to $1,000 per month for the remainder of the 12-
month term. We may not assign the agreement or resell Internet access services
without WorldCom's written consent.

We license our database software from Microsoft Corporation pursuant to a
standard shrink-wrap license agreement under which we have agreed not to
install the software in more than one computer or transfer the software to
another computer more than once. Microsoft may terminate our license agreement
if we fail to comply with its terms.

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Competition

We believe that we face competition in three major industries, including:

Providers of campaign and advocacy products and services. We face competition
in various forms from within the campaign and advocacy industries. Within these
industries, our competitors can be categorized into the following areas:

. software--Gnossos, Hannibal, NetFile, state and federal agencies that
distribute compliance software at little or no cost to registered
political committees and internally developed software;

. voter records--Labels and Lists, Voter Contact Services, Blaemire
Associates, Republican National Committee, state parties, local, county
and state clerks and elections administrators and numerous smaller data
providers; and

. campaign contributions--Votenet, a subsidiary of Medinex Systems,
Campaign Solutions, Politicsonline and e-Contributor.com.

We may also face competition from consultants to campaign and advocacy
organizations.

Although we do not believe that there is a dominant market competitor in this
industry or that any of our competitors enjoy an overall competitive advantage
over us, some of our competitors may offer lower prices, have closer or longer-
standing relationships with potential clients, have greater financial
resources, or, in the case of state or local jurisdictions, have easier or less
expensive access to the registered voter data. We believe that the principal
competitive factors in these markets include quality and size of database,
functionality of software and contribution processing services, availability of
technical support and the effectiveness of a sales force.

Advertisers. The Internet advertising market is extremely competitive. We
believe our ability to compete depends upon many factors, both within and
beyond our control, including the following:

. timing and market acceptance of new and upgraded products and services
developed either by us or our competitors;

. continued and increasing acceptance by advertisers of targeted Internet
advertising as an effective and cost-efficient means of advertising;

. ability to adapt to the rapidly changing trends of the Internet;

. our customer service and support efforts;

. our sales and marketing efforts;

. our ability to adapt and scale our technology as client needs change and
grow; and

. ease of use, performance, price and reliability of solutions developed
either by us or our competitors.

Internet authentication services providers. The Internet authentication
market is relatively new and we do not know whether this industry will continue
to expand as Internet usage grows. We believe our ability to compete in this
market will be affected by several factors, including:

. the size and reliability of the database;

. the timing and market acceptance of new products and services;

. the acceptance by the public of authentication services as a manner to
ensure reliable verification of an individual's age and identity;

. the ability to adapt to changing trends in Internet usage;

. sales and marketing efforts; and

. functionality, ease of use, performance, price and reliability of
authentication services.

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<PAGE>

As we expand the scope of our Web services, we may face greater competition
from a number of Internet companies and other media companies across a wide
range of different Web services. Many of our competitors may have advantages
over us in expertise, brand recognition, size, financial and personnel
resources and other factors. Several companies offer competitive products or
services through Web advertising networks, including 24/7 Media, Inc.,
DoubleClick, Inc., Flycast Communications Corporation and L90, Inc. In the
Internet authentication services industry, our principal competitors are
Equifax, Inc. and ChoicePoint Inc. Our Internet advertising business may also
encounter competition from providers of advertising inventory, database
management products and related services, including AdForce, Inc., DoubleClick,
Inc. and Engage Technologies, Inc. In addition, we may face potential
competition from a number of large Web publishers, search engines and ISPs,
including America Online, Inc., Excite, Inc., Infoseek Corporation, Juno Online
Services, Inc. and Yahoo! Inc. Competition may also materialize from political
or public policy websites, including Grassroots.com, Politics.com,
SpeakOut.com, Vote.com, Votenet.com and Voter.com. Moreover, we compete with
television, radio and print media companies for a share of companies' overall
advertising budgets.

We believe that the principal competitive advantage we enjoy in all of these
industries is the size of our database and the reliability of the age and
identity information contained in our database that is derived from registered
voter records. Specifically, our database contains information on over 150
million registered voters and 50 million drivers in the United States. We
believe that our nearest competitor has a registered voter record database
containing only 125 million voter records. We believe that our competitors that
have larger commercial databases generally contain less reliable information
because it is not provided under oath but rather is obtained from commercial
sources. However, we believe that in each of these industries many of our
competitors have greater financial resources, offer lower prices and have
closer or longer-standing relationships with clients. These advantages are
particularly true in the case of the advertising and Internet authentication
markets, which we have only recently entered.

Employees

As of June 30, 2000, we employed a total of 93 employees, 31 of whom were in
sales and marketing, 22 in product development, 22 in finance and
administration and 18 in customer support and data acquisition. From time to
time we also employ independent contractors. Our employees are not represented
by a labor union, and we have never experienced a work stoppage. We believe our
employee relations are good.

Facilities

Our principal executive offices and our product development facilities are
located in Washington, D.C. We lease approximately 2,300 square feet for our
corporate headquarters under a lease expiring January 15, 2001, for which we
have monthly rental obligations of approximately $5,750, and commercial office
space for our product development facility under a lease expiring May 31, 2001,
for which we have monthly rental obligations of approximately $3,500. Our
product development facility provides us with a secure area to store and
operate our computer systems and capacity for communications links and Internet
connectivity systems. We also lease space in San Francisco, California for
sales and marketing under a lease expiring on November 30, 2002, for which we
have monthly rental obligations of approximately $5,500. In addition, we have a
sales and marketing office in Atlanta and we employ sales representatives in
Chicago, Dallas, Nashville, Seattle and London, England. While we are
continually evaluating our facility requirements, we believe our facilities are
adequate to meet our current and anticipated needs.

Legal Proceedings

From time to time, we may be involved in litigation incidental to the conduct
of our business. Except as described below, we are not currently party to any
legal proceeding that we believe is material to our business or results of
operations.

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We have received letters dated February 29, 2000 through June 22, 2000 from
Beacon Street, Inc., which offers Internet access and website design and Web
hosting services under the name Aristotle, requesting that we cease using the
name Aristotle in connection with website design and hosting and as part of
domain names which we have registered, aristotleonline.com and
aristotlebannerads.com. Beacon Street has a registered trademark for the use of
the name Aristotle in connection with Internet access and website design and
hosting. As of August 28, 2000, we have negotiated an agreement in principle
with Beacon Street to resolve this dispute. Under the terms of the proposed
agreement, we will be able to continue to use our Aristotle mark on or in
connection with our website design and hosting services, our Internet
advertising services and our domain name provided that we employ disclaimers
and use our full name to prevent any confusion between our services and those
of Beacon Street. Although the final agreement has not been executed, we are
optimistic that it will be executed in the next several weeks. Nevertheless,
there is a risk that the final agreement is not executed, or that relations
between us and Beacon Street deteriorate, which may ultimately result in
litigation and loss of our ability to use the Aristotle name. If we are unable
to use our brand name for these activities we would be required to develop a
new brand name for these activities, which could impact our sales and marketing
activities, and therefore our ability to generate revenue from our website
design product and services.

In November 1998 we entered into a License, Development and Support Agreement
with the State of California Legislative Counsel Bureau. The terms of this
agreement required us to develop a customized software and hardware system for
the CLCB at a price of $703,000 plus additional amounts for support,
maintenance and additional custom programming. CLCB accepted delivery of the
hardware and third-party software in the three-month period ended March 31,
1999 and we recognized revenue of $325,000 associated with this hardware and
software. However, CLCB has claimed that the customized software does not meet
the specifications contained in the agreement; has failed to make payments as
required by the agreement; and has asserted that it has exercised its right to
terminate the agreement. We have been negotiating with CLCB to settle the
disputed payment. Although CLCB claims that it has the right to terminate the
agreement based upon our alleged failure to comply with software specifications
contained in the agreement, we do not believe we have materially breached the
agreement, and thus we believe we have the right to collect our fees under the
agreement. Should negotiations fail to result in a satisfactory settlement, we
intend to institute legal proceedings against CLCB in an effort to collect the
payment. Any litigation we would initiate could result in our incurrence of
substantial legal fees and expenses. Further, CLCB could also assert a
counterclaim against us alleging that we have breached the agreement. Under the
agreement, we could be liable to CLCB for actual and consequential damages, as
well as attorneys' fees, if a court were to find that we breached the
agreement. We have not recognized any revenue related to the customized
software and related services pending resolution of the dispute.

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MANAGEMENT

Director, Executive Officers and Key Employees

Our directors, executive officers and key employees and their positions and
ages, as of June 30, 2000, are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
John A. Phillips........... 44 Chairman of the Board and Chief Executive Officer
Dean A. Phillips........... 42 President and Director
T. Robert Christ........... 31 Chief Financial Officer
J. Blair Richardson, Jr. .. 43 General Counsel
Gordon N. Stoll............ 34 Executive Vice President of Sales
Nicholas Donatiello, Jr. .. 40 Director
Esther Dyson............... 48 Director
William R. Hambrecht....... 64 Director*
John Despres............... 57 Director Nominee*
</TABLE>
--------

* Following the closing of this offering, Mr. Hambrecht will resign his
position as a director and Mr. Despres will commence serving as our class II
director.

John Aristotle Phillips co-founded us in 1983 and has since served as
Chairman of our board of directors. From September 1999 to date, Mr. Phillips
has served as our Chief Executive Officer, and from January 1983 to September
1999, Mr. Phillips served as our President. Mr. Phillips graduated from
Princeton University in 1978 with a bachelor of science in aerospace
engineering. While at Princeton, Mr. Phillips received international
recognition for his design, from publicly available documents, of an atomic
bomb. He is the co-author of Mushroom: the Story of the A-Bomb Kid, which was
sold to a television network for a made for television movie. John Phillips is
the brother of Dean Phillips, our President.

Dean Aristotle Phillips co-founded us in 1983 and has since served as a
director. Since September 1999, Mr. Phillips has served as our President. From
1994 to 1999, Mr. Phillips served as our Chief Executive Officer and from
January 1983 to December 1994, Mr. Phillips served as our Vice President. Mr.
Phillips graduated from MIT in 1980 with a bachelor of science from the
Department of Engineering and Computer Science with a concentration in
microcomputer design. Dean Phillips is the brother of John Phillips, our Chief
Executive Officer.

T. Robert Christ has served as our Chief Financial Officer since November of
1999. From August 1999 to October 1999 and following the acquisition of Pulsar
Data Systems by Litronic, Inc., a publicly traded data security products
company, Mr. Christ served as vice president of finance for Litronic. Prior to
that acquisition, from August 1998 to June 1999, Mr. Christ served as the chief
financial officer of Pulsar Data Systems, a systems integrator and reseller.
From December 1994 to July 1998, Mr. Christ served as director of finance for
The Centech Group, an information technology provider, and from August 1991 to
October 1994, Mr. Christ worked as a senior accountant at Rubino and McGeehin,
a Washington, D.C. accounting firm. Mr. Christ received a CPA certificate in
May 1991. Mr. Christ obtained a bachelor of business administration in
Accounting from James Madison University in 1991.

John Despres has agreed to serve as our director upon the closing of this
offering and will replace Mr. Hambrecht as our class II director. Since his
retirement from the U.S. government in 1997, Mr. Despres has worked as a
consultant on international financial and strategic affairs. From May 1999 to
March 2000, Mr. Despres assisted Bill Bradley in developing foreign, defense
and international economic policies for his presidential campaign. From 1993 to
1997, Mr. Despres served as Assistant Secretary of Commerce for Export
Enforcement under President Clinton. From 1985 to 1993, Mr. Despres served as
Senator Bill Bradley's principal staff advisor on national security policy and
served as his designated assistant on the staff of the Senate Select Committee
on Intelligence. In President Reagan's administration, from 1982 to 1985,
Mr. Despres served as the

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<PAGE>

founding Director of the Institute for National Strategic Studies at the
National Defense University, and as Assistant to the Undersecretary of State
for Economic Affairs in 1981. From 1977 to 1979, Mr. Despres served in
President Carter's administration as Director of Strategic Assessments at the
Department of Energy and as National Intelligence Officer for Nuclear
Proliferation. Mr. Despres graduated magna cum laude from Harvard College in
1963.

J. Blair Richardson, Jr. has served as our General Counsel since November
1999. Prior to joining us, he served as our outside counsel from March 1992 to
September 1999, providing legal advice on matters relating to data acquisition,
regulatory compliance and privacy. From January 1984 to February 1992, Mr.
Richardson worked as an attorney with Winston and Strawn, Washington, D.C.,
specializing in litigation. He received his juris doctorate from the Fordham
University School of Law in 1982 and graduated from Princeton University in
1979 with a bachelor of arts from the Department of English.

Gordon N. Stoll has served as our Executive Vice President of Sales since
February 2000. Since 1991, Mr. Stoll has worked for us in the following
capacities: Vice President of Sales & National Territory Sales Manager from
January 1999 to February 2000, Vice President of Sales and Sales Manager for
the Southeast Region from February 1993 to December 1998, Director of Southeast
sales from June 1992 to January 1993 and Director of Government Accounts from
March 1991 to June 1992. Prior to joining us in 1991, he served as Capitol Hill
sales director for Cali Communications from December 1989 to February 1991. He
received his bachelor of arts in 1989 from University of Georgia.

Nicholas Donatiello, Jr. has served as a director since September 1999. Since
1993, Mr. Donatiello has served as president and chief executive officer of
Odyssey Ventures, Inc., which is the general partner of Odyssey, L.P. Mr.
Donatiello also served as campaign manager from July 1989 to March 1991 and the
press secretary from July 1987 to June 1989 for U.S. Senator Bill Bradley,
where he undertook a major study of the changing role of cable television,
including work with market research companies, cable television providers,
media buying firms and heads of major advertising agencies. Mr. Donatiello
currently serves as a director of TV Guide, Inc. He earned his bachelor of
science in engineering at Princeton in 1982 and received his master of business
administration from Stanford University.

Esther Dyson has served as a director since March 2000. Since 1983, Ms. Dyson
has served as chairman of EDventure Holdings, a company focused on emerging
information technologies worldwide and specifically on the emerging computer
markets of central and Eastern Europe. Ms. Dyson currently serves on the board
of directors of the following companies: Languageware.net,
MedicaLogic/Medscape, Scala Business Solutions, Thinking Tools, Uproar.com and
WPP Group.

William R. Hambrecht has served as a director since September 1999. Mr.
Hambrecht is the founder and chairman of WR Hambrecht + Co, a position he has
held since January 1998. Prior to founding WR Hambrecht + Co, Mr. Hambrecht co-
founded Hambrecht & Quist, LLC in 1968, an investment banking firm specializing
in emerging high growth technology companies. Mr. Hambrecht began his career in
the securities business in 1958. Mr. Hambrecht currently serves on the board of
directors of GetThere.com. Mr. Hambrecht graduated with a bachelor of arts in
1957 from Princeton University.

Concurrently with the closing of this offering, Mr. Hambrecht will resign his
directorship, but will continue to act as an advisor to us. In this capacity he
will not have any voting power on the board but will be available to provide
general business advice to the board. Mr. Hambrecht's replacement, Mr. Despres,
will serve as a Class II director, and will serve as an independent director on
each of the audit and compensation committees.

Board of Directors and Committees

Following this offering, our board of directors will consist of between five
and seven directors divided into three classes, with each class serving for a
term of three years. At each annual meeting of stockholders,

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<PAGE>

directors will be elected for a three-year term to succeed the directors whose
terms are expiring. Effective as of this offering, one of our Class I director
seats will be vacant and the other seat will be occupied by Esther Dyson. The
terms for the Class I directors will expire in 2000. Dean A. Phillips and Mr.
Hambrecht's replacement as of the closing of this offering, John Despres, will
be the Class II directors whose terms will expire in 2001. John A. Phillips and
Nicholas Donatiello, Jr. will be the Class III directors whose terms will
expire in 2002.

Our board of directors has a compensation committee and an audit committee,
each of which is governed by a charter. We did not have a compensation or audit
committee in 1999. The compensation committee is responsible for making
recommendations to our board of directors regarding salaries, incentives and
other forms of compensation for our directors, officers and other employees.
Effective as of the closing of this offering, Messrs. Donatiello and Despres
and Ms. Dyson will serve as the members of the compensation committee.

The audit committee reviews our annual audit and meets with our independent
auditors to review our internal controls and financial management practices.
Effective as of the closing of this offering, Messrs. Donatiello and Despres
and Ms. Dyson will serve as the members of the audit committee.

Our board of directors may establish, from time-to-time, other committees to
facilitate the management of our business.

Director Compensation

Our directors do not receive compensation for attendance at board meetings.
However, under the 2000 Omnibus Equity Incentive Plan, we have adopted a policy
regarding the granting of options to directors that provides that upon
election, new outside directors will receive an option to purchase 20,000
shares and upon re-election, each outside director will receive an additional
grant of 10,000 shares. All options granted under this policy will be at the
then-current fair market value. Our directors are also reimbursed for all
reasonable out-of-pocket expenses incurred in connection with their attendance
at board meetings. In March 2000, we granted Ms. Dyson an option to purchase
71,356 shares of our common stock, at an exercise price of $2.01 per share.
This grant will result in compensation expense of approximately $230,000 being
recognized over the next five years based on the fair value of the stock at the
time of the grant.

Compensation Committee Interlocks and Insider Participation

Prior to May 14, 2000, our board of directors did not have a compensation
committee and all compensation decisions were made by the full board of
directors. The members of our compensation committee are currently Messrs.
Donatiello and Hambrecht and Ms. Dyson. No interlocking relationship exists, or
has existed in the past, between our board of directors or compensation
committee and the board of directors or compensation committee of any other
company.

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<PAGE>

Executive Compensation

The following table provides summary information concerning compensation
earned by or paid to our chief executive officer and to each of our other
executive officers whose total annual salary and bonus exceeded $100,000, for
services rendered in all capacities to us during the fiscal year ended December
31, 1999. These individuals are referred to as the named executive officers.

Summary Compensation Table

<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
----------------------------- ------------
Securities
Other Annual Underlying
Name and Principal Position Year Salary Bonus Compensation Options (#)
--------------------------- ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John A. Phillips.............. 1999 $232,083 $ -- $-- --
Chairman and Chief Executive
Officer

Dean A. Phillips.............. 1999 232,083 -- -- --
President

T. Robert Christ(1)........... 1999 11,704 10,000 -- 71,356
Chief Financial Officer

J. Blair Richardson, Jr.(2)... 1999 16,250 -- -- 32,978
General Counsel

Gordon N. Stoll............... 1999 134,513 -- -- 53,504
Executive Vice President of
Sales
</TABLE>
--------
(1) Mr. Christ joined us in November 1999. Under the terms of his employment
offer letter, Mr. Christ is entitled to an annual salary of $110,000.

(2) Mr. Richardson joined us in November 1999. Under the terms of his
employment offer letter, Mr. Richardson is entitled to an annual salary of
$130,000. In addition to the salary earned by Mr. Richardson in 1999, he
received $90,000 and options to purchase 20,526 shares at an exercise price
of $1.10 per share from us as outside counsel for the year ended December
31, 1999.

55
<PAGE>

Stock Options

The following tables summarize option grants and exercises during fiscal 1999
to or by our Chief Executive Officer and the named executive officers, and the
value of the options held by such persons at the end of fiscal 1999. We have
not granted any stock appreciation rights.

Option Grants in Fiscal 1999

<TABLE>
<CAPTION>
Potential Realizable
Value
% of Total at Assumed Annual Rates
Number of Options of Stock Price
Securities Granted to Exercise Appreciation
Underlying Employees or Base for Option Term(3)
Options in Fiscal Price Expiration ------------------------
Name Granted(#)(1) Year(2) ($/Sh) Date 0% 5% 10%
---- ------------- ---------- -------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
John A. Phillips............. -- -- -- -- -- -- --
Dean A. Phillips............. -- -- -- -- -- -- --
T. Robert Christ............. 71,356 11.90% $2.01 9/30/09 -- $90,653 $229,733
J. Blair Richardson, Jr.(4).. 32,978 5.50 2.01 10/31/09 -- 41,680 105,625
Gordon N. Stoll.............. 20,526 3.42 1.10 3/31/09 $18,750 44,692 84,492
Gordon N. Stoll.............. 32,978 5.50 2.01 10/31/09 -- 41,680 105,625
</TABLE>
--------
(1) The exercise price may be paid in cash or in shares of our common stock
valued at fair market value on the exercise date. We may also finance the
option exercise by lending the optionee funds to pay the exercise price
for the purchased shares. These options vest over five years at the rate
of 25% of the shares subject to the option on the first anniversary of the
vesting start date specified in the stock option agreement and 1.5625%
every month after that date. Upon specified changes in control, all shares
that are then unvested will become vested. Options expire ten years from
the date of grant.

(2) We granted to employees options to acquire 599,411 shares of our common
stock in 1999.

(3) The potential realizable value of each grant of options has been
calculated, pursuant to the regulations promulgated by the Securities and
Exchange Commission, assuming that the market price of our common stock
appreciates in value from the date of grant to the end of the option term
at the annualized rates of 0%, 5% and 10%. The market price of the common
stock was determined to be $2.01 per share. The fair market value was
determined in good faith by our Board of Directors based upon the selling
price of the Series A Preferred Stock to third parties in September 1999
because the Series A Preferred Stock is convertible, on a share for share
basis, prior to the effect of the common stock split, into common stock.
These values do not represent our estimate or projection of future value
of our common stock. There can be no assurance that any of the value
reflected in the table will be achieved. If the offering price of $12.00
per share was used to calculate the value of the options, the above
mentioned options would yield an estimated realizable value of $712,846
for Mr. Christ, $329,450 for Mr. Richardson and $553,184 for Mr. Stoll.

(4) Excludes 20,526 options granted to Mr. Richardson for services he provided
prior to becoming an employee. These options have an exercise price of
$1.10 and expire March 31, 2009.

56
<PAGE>

Aggregated Option Exercises in Fiscal 1999 and Value of Options
At End of Fiscal 1999

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
at End of Fiscal 1999 at End of Fiscal 1999(1)
------------------------------- -------------------------------
Name Exercisable(#) Unexercisable(#) Exercisable($) Unexercisable($)
---- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
John A. Phillips.......... -- -- $ -- $ --
Dean A. Phillips.......... -- -- -- --
T. Robert Christ.......... -- 71,356 -- 712,846
J. Blair Richardson, Jr... 20,526 32,978 223,733 329,450
Gordon N. Stoll........... 20,526 32,978 223,733 329,450
</TABLE>
--------
(1) Value is based on the difference between the option exercise price and
$12.00, the estimated initial public offering price of our common stock,
multiplied by the number of shares of our common stock underlying the
option. No market existed for our common stock prior to this offering.

1999 Stock Option Plan

In March 1999, our board of directors adopted, subject to the approval of our
stockholders, the 1999 Stock Option Plan. Stockholder approval was obtained on
March 16, 1999. The 1999 plan allows options to be granted either as incentive
stock options or as non-qualified stock options. The aggregate number of shares
authorized for issuance under the 1999 plan is 1,135,748. As of June 30, 2000:

. options to purchase 787,659 shares were outstanding;

. options to purchase 242,894 shares were vested; and

. 0 options had been exercised.

Following the closing of this offering, no additional options will be granted
under the 1999 plan. Options granted under the 1999 plan are subject to the
following terms:

. options are exercisable within the times or upon the events as
determined by the compensation committee and described in each grant.
Each option must become exercisable at a rate of at least 20% per year
over five years from the date the option is granted, and no incentive
stock option granted to a 10% or greater stockholder shall be
exercisable after the expiration of five years from the date the option
was granted;

. the exercise price of any non-qualifying option shall not be less than
85% of the fair market value of the share on the date the option is
granted, and the exercise price of an incentive stock option shall not
be less than 100% of the fair market value on the date the option is
granted;

. unless the stock option grant states differently, options granted under
the plan terminate and may not be exercised if the optionee ceases to be
employed by us or our affiliates;

. options under the plan are not transferable or assignable; and

. the plan provides that upon the occurrence of a change of control event,
the surviving entity must either assume or substitute the options
granted under the plan, or in the alternative, the options become fully
exercisable.

57
<PAGE>

2000 Omnibus Equity Incentive Plan

We expect to adopt our 2000 Omnibus Equity Incentive Plan before the closing
of this offering. We expect that the 2000 plan will provide for a total of
560,000 shares of our common stock to initially be reserved for issuance. The
2000 plan is designed to assist us in recruiting, retaining and motivating our
employees, outside directors and independent contractors. Under the 2000 plan
we can grant:

. restricted shares, which are shares of our common stock granted to an
individual that vest over a period of time and may also be restricted as
to sale, assignment or other transfer;

. stock units, which are unfunded contractual rights to receive an amount
based on the value of our common shares;

. incentive stock options, which are options to purchase shares of our
common stock that are designed to receive favorable tax treatment under
the Internal Revenue Code of 1986, or the Code;

. nonstatutory stock options, which are options to purchase shares of our
common stock that are not designed to receive favorable tax treatment
under the Code; and

. stock appreciation rights, which are rights to receive the appreciation,
if any, in value of a share of our common stock between the date of
grant and the date of exercise.

Our compensation committee will administer the 2000 plan and has the
authority to determine to whom options will be granted and shares will be sold,
the number of shares and the exercise and vesting terms.

Options granted under the 2000 plan will be subject to the following terms:

. options are exercisable within the times or upon the events as
determined by the compensation committee and described in each grant;
each option must become exercisable within 10 years from the date of
grant, and no incentive stock option granted to a 10% or greater
stockholder shall be exercisable after the expiration of five years from
the date the option was granted;

. the exercise price of any non-qualifying option shall not be less than
85% of the fair market value of the share on the date the option is
granted, or less than 100% for outside directors, and the exercise price
of an incentive stock option shall not be less than 100% of the fair
market value on the date the option is granted or less than 110% for ten
percent shareholders;

. unless the stock option grant states differently, options granted under
the plan terminate and may not be exercised if the optionee ceases to be
employed by us or our affiliates;

. options under the plan are not transferable or assignable; and

. upon the occurrence of a change of control event, the surviving entity
must either assume or substitute the options granted under the plan, pay
cash or cash equivalents in settlement of the full value of outstanding
options, or in the alternative, the options become fully exercisable.

2000 Employee Stock Purchase Plan

We expect to adopt our 2000 Employee Stock Purchase Plan, or ESPP, before the
closing of this offering. The purpose of the ESPP is to give eligible employees
an opportunity to purchase shares of our common stock at a price below their
market value and to pay for the purchases through payroll deductions. We expect
that there will be 400,000 shares of our common stock reserved for issuance
under the ESPP.

The ESPP will be administered by our compensation committee. The committee
has the authority to construe, interpret and apply the terms of the ESPP, to
determine eligibility, to establish the limitations and procedures it
determines are consistent with the ESPP and to adjudicate any disputed claims
under the ESPP.

Each of our regular full-time and part-time employees who customarily works
at least 20 hours per week and more than five months in any calendar year is
eligible to participate in the ESPP after six consecutive

58
<PAGE>

months of employment. However, no employee is eligible to participate in the
ESPP if, immediately after electing to participate, the employee would own
stock of our company (including stock the employee may purchase under
outstanding options) representing five percent or more of the total combined
voting power or value of all classes of stock of our company. In addition, no
employee is permitted to participate if, under the ESPP and all of our similar
purchase plans, the rights would accrue at a rate which exceeds $25,000 of the
fair market value of the stock (determined at the time the right is granted)
for each calendar year.

401(k) Plan

We sponsor a defined contribution plan intended to qualify under Section 401
of the Internal Revenue Code. All employees who are 21 years old and have one
year of service are eligible to participate and may enter the 401(k) plan as of
the first day of each plan year and the date six months later. Participants may
make pre-tax contributions to the 401(k) plan of up to 15% of their eligible
earnings, subject to a statutorily prescribed annual limit. We may make
matching contributions, of up to five percent, to the 401(k) plan. Each
participant is fully vested in his or her contributions, and will vest in any
matching contributions we make over a six-year vesting schedule. Contributions
by us or the participants to the 401(k) plan, and the income earned on these
contributions, are generally not taxable to the participants until withdrawn.
Contributions made by us, if any, will generally be deductible by us when made.
Contributions made by the participants and us are held in trust as required by
law.

Employment Agreements and Change of Control Arrangements

John A. Phillips and Dean A. Phillips

On September 17, 1999, we entered into a two-year employment agreement with
each of John A. Phillips, our Chief Executive Officer, and Dean A. Phillips,
our President. The annual salary under each of these agreements was initially
$220,000, but has been raised to $232,083. Under both agreements, we have the
right to terminate the agreement on 30 days notice to the employee. However, if
we terminate employment, we may become liable for a severance payment, as
described below. In addition, under each agreement the employee may terminate
his employment upon 30 days' notice if we breach the contract. Both agreements
provide a non-compete restriction on the employee that has a duration of one
year from the termination of the employment relationship. These non-compete
agreements become void against the employee if the employee is terminated
without cause or constructively terminated.

Upon the occurrence of either an involuntary termination without cause or a
constructive termination, including a constructive termination following a
change in control, the company must make payments to the terminated employee,
over the following four months, which in the aggregate equal 100% of the
employee's annual base salary, plus any other incentive compensation payable to
the employee. In addition, upon the occurrence of either of these events, any
stock options granted to the employee shall become immediately vested and
exercisable for each employee and our repurchase rights over 2,052,556 shares
owned by each employee will lapse.

T. Robert Christ

Under the terms of Mr. Christ's employment offer letter, dated October 10,
1999, he is entitled to an annual salary of $110,000. In addition, Mr. Christ
is entitled to a bonus of $15,000 upon the consummation of this offering. Under
this agreement, if Mr. Christ is terminated by us without cause during the
first 12 months of his employment, he is entitled to severance equal to the
amount of his salary that he would have earned during the remaining initial 12-
month period. In addition, 25% of the shares covered by Mr. Christ's initial
option grant, or 17,839 shares of common stock, vest immediately in the event
he is terminated without cause during the first 12 months of his employment
with us. Mr. Christ is subject to a non-competition agreement for a period of
one year from the termination of his employment.

59
<PAGE>

J. Blair Richardson, Jr.

Under the terms of Mr. Richardson's employment offer letter, dated November
2, 1999, he is entitled to an annual salary of $130,000 and a bonus of up to
$15,000. Either party must give the other two weeks' notice in order to
terminate the employment relationship. Mr. Richardson is subject to a non-
competition agreement for a period of one year from the termination of his
employment, which prevents him from soliciting any of our clients and from
misusing any proprietary information.

Gordon N. Stoll

Under the terms of Mr. Stoll's employment arrangements, he is entitled to an
annual salary of $30,000, plus commission. In 1998 and 1999, Mr. Stoll was paid
commissions of approximately $70,000 and $105,000. Mr. Stoll is also entitled
to a bonus if periodic sales targets are met. Either party must give the other
two weeks' notice in order to terminate the employment, except that we may
terminate Mr. Stoll's employment without notice if he breaches his employment
terms or habitually neglects his duties.

Limitation of Liability and Indemnification Matters

Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:

. any breach of their duty of loyalty to the corporation or its
stockholders;

. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

. unlawful payments of dividends or unlawful stock repurchases or
redemption; or

. any transaction from which the director derived an improper personal
benefit.

This limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.

Our certificate of incorporation and bylaws provide that we will indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. Our
certificate of incorporation and bylaws also permit us to secure insurance on
behalf of any officer, director, employee or other agent for any liability
arising out of his or her actions in such capacity, regardless of whether the
bylaws would permit indemnification.

We intend to enter into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our certificate of
incorporation and bylaws. We believe that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.

60
<PAGE>

RELATED-PARTY TRANSACTIONS

Since the beginning of our last fiscal year, there has not been any
transaction or series of transactions to which we were or are a party in which
the amount involved exceeded or exceeds $60,000 and in which any director,
executive officer, holder of more than 5% of any class of our voting securities
or any member of the immediate family of any of the foregoing persons had or
will have a direct or indirect material interest, other than the transactions
described below.

In September 1999, we sold and issued 1,272,727 shares of our Series A
Preferred Stock with an initial conversion rate of $2.01 per share, post split,
for an aggregate consideration of $3,500,000, to raise capital to finance our
operations. Upon completion of this offering, each share of Series A Preferred
Stock will convert into one share of common stock.

The following table summarizes purchases, valued in excess of $60,000, of
shares of our Series A Preferred Stock by our directors, executive officers and
5% stockholders, including the number of shares of Series A Preferred Stock
bought, the aggregate consideration paid for the shares and the aggregate value
of the shares, assuming conversion of the shares into our common stock and an
assumed offering price of $12.00 per share:

<TABLE>
<CAPTION>
Number of Shares Pro Forma
of Series A Aggregate Aggregate
Stockholder Preferred Stock Price Paid Value
----------- ---------------- ---------- -----------
<S> <C> <C> <C>
W.R. Hambrecht/Aristotle, LLC.......... 727,273 $2,000,001 $11,942,148
ePartners.............................. 363,636 $ 999,999 $ 5,971,068
</TABLE>

These affiliates purchased the securities described above at the same price
and on the same terms and conditions as the unaffiliated investors in the
private financing. W. R. Hambrecht/Aristotle, LLC and Odyssey Capital II, LLC
are limited liability companies and ePartners is a company organized under the
laws of the United Kingdom. All of these entities were formed for investment
purposes and we believe that all of the investors in these entities are
accredited investors. Messrs. Hambrecht and Donatiello either control or are
affiliated with W.R. Hambrecht/Aristotle, LLC and Odyssey Capital II, LLC.
ePartners is a limited partnership formed for investment purposes, all of the
investors of which we believe are accredited investors. Mr. Donatiello is a
managing partner of this entity, and also serves as a director of WR Hambrecht
+ Co.

Prior to December 31, 1995, John A. Phillips advanced to us $14,417 pursuant
to oral lending agreements with us, which advances were payable on demand. The
annual rate of interest on the advances was 9%. Prior to December 31, 1995,
Dean A. Phillips advanced to us $13,102 pursuant to oral lending agreements
with us. At December 31, 1995, aggregate outstanding balances under these loans
were $27,519.

During the year ending December 31, 1996, John A. Phillips advanced to us
$72,334 pursuant to oral lending agreements with us, and Dean A. Phillips
advanced to us $75,343 pursuant to oral lending agreements with us, which
advances were payable on demand. The annual rate of interest on the advances
was 9%. During the year ended December 31, 1996, we repaid $8,360 of
outstanding advances to John A. Phillips. At year-end, the outstanding balance
to John A. Phillips was $78,391 and the outstanding balance to Dean A. Phillips
was $88,445.

During the year ending December 31, 1997, John A. Phillips advanced to us
$21,975 pursuant to oral lending agreements with us and Dean A. Phillips
advanced to us $130,719 pursuant to oral lending agreements with us, which
advances were payable on demand. The annual rate of interest on the advances
was 9%. During the year ended December 31, 1997, we repaid outstanding advances
to John A. Phillips of $9,016 and outstanding advances to Dean A. Phillips of
$87,800. At year-end, the outstanding balance to John A. Phillips was $91,350
and the outstanding balance to Dean A. Phillips was $131,364.

61
<PAGE>

During the year ending December 31, 1998, John A. Phillips advanced to us
$679 pursuant to a oral lending agreement with us and Dean A. Phillips advanced
to us $347,003 pursuant to oral lending agreements with us, which advances were
payable on demand. The annual rate of interest on the advances was 9%. During
the year ended December 31, 1997, we repaid outstanding advances to John A.
Phillips of $52,897 and outstanding advances to Dean A. Phillips of $276,363.
At year-end, the outstanding balance to John A. Phillips was $39,132 and the
outstanding balance to Dean A. Phillips was $202,004.

During the period from January 1, 1999 through September 16, 1999, additional
advances were made by Dean A. Phillips to us in the amount of $196,000 and
repayments were made by us to John A. Phillips of $128,997. As of September 16,
1999, the total aggregate advances equalled $308,139. This advance did not bear
interest and was payable on demand. In connection with the sale of our Series A
Preferred Stock, John A. Phillips and Dean A. Phillips converted these
outstanding advances of $308,139 into a promissory note payable to John A.
Phillips and Dean A. Phillips and waived accrued interest. This promissory note
is convertible into Series A Preferred Stock and is due and payable upon the
initial public offering of our common stock or upon a change of control. In
connection with this conversion, all outstanding interest on the advances was
waived by John A. Phillips and Dean A. Phillips. Immediately prior to the
effectiveness of this offering, John A. Phillips and Dean A. Phillips have
agreed to convert the promissory note into shares of Series A Preferred Stock,
which will in turn convert into 153,326 shares of common stock at the closing
of this offering.

Prior to being hired as our General Counsel in November 1999, we paid Blair
Richardson an aggregate of $90,000 and granted him options to purchase 20,526
shares of common stock at an exercise price of $1.10 per share for his services
to us as outside legal counsel.

Two of our directors, William Hambrecht and Nicholas Donatiello, Jr., are
beneficial owners of W.R. Hambrecht/Aristotle LLC, a limited liability company
that owns 727,273 shares of our Series A Preferred Stock. Additionally, Mr.
Donatiello is a beneficial owner of Odyssey Capital II, LLC and ePartners.

Our Chief Executive Officer, John A. Phillips, and our President, Dean A.
Phillips, are brothers.

We paid accrued deferred compensation charges of approximately $55,000 to our
President in 2000.

In June 1999, we entered into an agreement with Aristotle Ventures, LLC, an
entity beneficially owned by our Chief Executive Officer, John A. Phillips, and
our President, Dean A. Phillips, to lease our office building located at 2237
Union Street in San Francisco, California. Under the terms of the agreement, we
paid monthly rent of $3,300. The lease was terminated in late 1999.

62
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership of
common stock as of June 30, 2000, as adjusted to reflect the sale of 2,000,000
shares of common stock in this offering, by:

. each person or entity known to us to own beneficially more than 5% of our
common stock;

. each of our directors;

. each of the named executive officers; and

. all of our executive officers and directors as a group.

In addition, Mr. John Despres, who will serve as a Class II director upon
closing of this offering, will receive options to purchase 20,000 shares of our
common stock upon the closing of this offering.

Except as otherwise indicated and subject to applicable community property
laws, each person has sole investment and voting power with respect to the
shares shown. Ownership information is based upon information furnished by the
respective individuals or entities, as the case may be.

The following table assumes no exercise of the underwriters' over-allotment
option. Applicable percentage ownership is based on 6,000,000 shares of common
stock outstanding as of June 30, 2000, which assumes conversion of all Series A
Preferred Stock, and 8,000,000 shares outstanding immediately after completion
of this offering.

Unless otherwise indicated, the address for the following stockholders is
Aristotle International, Inc., 50 E Street, S.E., Suite 300, Washington, D.C.
20003.

<TABLE>
<CAPTION>
Percent of Shares
Outstanding
Shares -----------------
Beneficially Before After
Name and Address of Beneficial Owner Owned Offering Offering
------------------------------------ ------------ -------- --------
<S> <C> <C> <C>
John A. Phillips(1)........................... 2,055,137 34% 26%
Dean A. Phillips(2)........................... 2,203,301 37 28
T. Robert Christ.............................. 0 * *
J. Blair Richardson, Jr.(3)................... 20,526 * *
Gordon N. Stoll(4)............................ 20,526 * *
Nicholas Donatiello, Jr.(5)................... 1,741,562 29 22
Esther Dyson ................................. 0 * *
William Hambrecht(6).......................... 995,179 17 12

WR Hambrecht + Co
539 Bryant Street, Suite 100
San Francisco, CA 94107

W.R. Hambrecht/Aristotle, LLC................. 995,179 17 12
WR Hambrecht + Co
539 Bryant Street, Suite 100
San Francisco, CA 94107

ePartners..................................... 497,589 8 6
1211 Avenue of the Americas
New York, NY 10036

All directors and executive officers as a
group (8 persons)(7)......................... 6,000,000 100% 75%
</TABLE>
--------
* Less than 1%

(1) Includes 2,581 shares that will be issued pursuant to a convertible note as
of the closing of this offering.

(2) Includes 150,745 shares that will be issued pursuant to a convertible note
as of the closing of this offering.

(3) Includes 20,526 shares that are issuable upon exercise of an option that is
exercisable within 60 days of September 1, 2000.

63
<PAGE>

(4) Includes 20,526 shares that are issuable upon exercise of an option that is
exercisable within 60 days of September 1, 2000.

(5) Includes 248,794 shares owned by Odyssey Capital II, LLC, 497,589 shares
owned by ePartners, and 995,179 shares owned by W.R. Hambrecht/Aristotle,
LLC. Mr. Donatiello is a managing member of each of these entities.
Mr. Donatiello disclaims beneficial ownership of these shares except to the
extent of his ownership interests in each of the entities.

(6) Includes 995,179 shares held by W.R. Hambrecht/Aristotle, LLC. Mr.
Hambrecht either controls or is affiliated with this entity.

(7) Includes shares listed in footnotes (1), (2), (3), (4), (5) and (6) above.

In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock subject to options
held by that person that are currently exercisable or exercisable within
60 days of June 30, 2000 are deemed outstanding. These shares, however, are not
deemed outstanding for the purposes of computing the percentage ownership of
any other person.

64
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon completion of this offering, and after giving effect to the conversion
of all outstanding preferred stock into common stock and the amendment of our
certificate of incorporation, our authorized capital stock will consist of
30,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of
preferred stock, $0.001 par value.

Common Stock

Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of common stock are entitled to the
following:

Dividends. Holders of common stock are entitled to receive dividends out of
assets legally available for the payment of dividends at the times and in the
amounts as the board of directors from time to time may determine.

Voting. Holders of common stock are entitled to one vote for each share held
on all matters submitted to a vote of stockholders, including the election of
directors, and will not have cumulative voting rights unless we are subject to
Section 2115 of the California Corporations Code. Cumulative voting for the
election of directors is not authorized by our certificate of incorporation,
which means that the holders of a majority of the shares voted can elect all of
the directors then standing for election.

Preemptive rights, conversion and redemption. Holders of the common stock are
not entitled to preemptive rights and shares of common stock are not subject to
conversion or redemption.

Liquidation, dissolution and winding-up. Upon liquidation, dissolution or
winding-up of us, the holders of common stock are entitled to share in all
assets remaining after payment of liabilities and the liquidation of any
preferred stock.

Each outstanding share of common stock is, and all shares of common stock to
be outstanding upon completion of this offering will be, upon payment
therefore, duly and validly issued, fully paid and nonassessable.

Preferred Stock and Bylaw Provisions

Our board of directors is authorized, without action by the stockholders, to
designate and issue up to 5,000,000 shares of preferred stock in one or more
series. Our board of directors can also fix the rights, preferences and
privileges of the shares of each series and any qualifications, limitations or
restrictions on these shares. Examples of these rights include liquidation
preferences, enhanced dividend rights and voting preferences.

Our board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of common stock. The issuance of preferred stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, may:

. delay, defer or prevent a change in control;

. discourage bids for the common stock at a premium over the market price
of our common stock;

. adversely affect the voting and other rights of the holders of our
common stock; or

. discourage acquisition proposals or tender offers for our shares and, as
a consequence, inhibit fluctuations in the market price of our shares
that could result from actual or rumored takeover attempts.

We have no current plans to issue any shares of preferred stock.

65
<PAGE>

Our bylaws provide that:

. all stockholder action be taken at a stockholders' meeting;

. special meetings of stockholders may only be called by the chairman of
the board, the chief executive officer or the board of directors; and

. our board of directors is divided into three classes, with each class
serving a staggered three-year term.

The provisions described above, together with the ability of our board of
directors to issue preferred stock, may have the effect of deterring a hostile
takeover or delaying a change in our control or management.

Registration Rights

Upon completion of this offering, the holders of 1,741,562 shares of common
stock issuable upon conversion of the Series A Preferred Stock have the right
to cause us to register these shares under the Securities Act as follows:

. Demand registration rights. Six months after the closing of this
offering, the holders of 25% or more of our common stock issuable or
issued upon conversion of the Series A Preferred Stock may request that
we register their shares with respect to all or part of their
registrable securities having aggregate proceeds of at least $5,000,000.

. Piggyback registration rights. The holders of registrable securities may
request to have their shares registered any time we file a registration
statement to register any of our securities for our own account or for
the account of others.

. S-3 registration rights. The holders of registrable securities have the
right to request registrations on Form S-3 if we are eligible to use
Form S-3, have not already effected one S-3 registration within the past
12 months, and if the aggregate proceeds from the registration will be
more than $5,000,000.

Messrs. John and Dean Phillips, who hold an aggregate of 4,105,112 shares of
our common stock, also have piggyback registration rights. Registration of
shares of common stock pursuant to the exercise of demand registration rights,
piggyback registration rights or S-3 registration rights under the Securities
Act would result in these shares becoming freely tradable without restriction
under the Securities Act immediately upon the effectiveness of such
registration.

We will pay all registration expenses, other than underwriting discounts and
commissions, in connection with any demand or piggyback registration. We are
not obligated to pay any expenses of registration in the case of a demand or S-
3 registration that is subsequently withdrawn at the request of the
stockholders. The registration rights terminate five years following the
closing of this offering, or, with respect to each holder of registrable
securities, when the holder can sell all of the holder's shares in any three-
month period under Rule 144 under the Securities Act.

Delaware Anti-Takeover Law

Delaware takeover statute. We are subject to Section 203 of the Delaware
General Corporation Law, which prohibits a Delaware corporation from engaging
in any business combination with any interested stockholder for a period of
three years following the date that the stockholder became an interested
stockholder, unless:

. prior to this date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;

. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (a) by persons who are
directors and also officers and (b) by

66
<PAGE>

employee stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer; or

. on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.

In general, Section 203 defines an interested stockholder as any entity or
person who, together with his or her affiliates and associates owns, or within
three years, beneficially owned, 15% or more of the outstanding voting stock of
the corporation. The term business combination includes mergers, asset sales
and other similar transactions resulting in a financial benefit to an
interested stockholder.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Registrar & Transfer
Company.

Listing

We have applied to have our common stock quoted on the Nasdaq National Market
under the symbol VOTE.

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<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering there has been no public market for our common stock,
and we cannot predict the effect, if any, that market sales of shares or the
availability of shares for sale will have on the market price prevailing from
time to time. As described below, only a limited number of shares will be
available for sale shortly after this offering due to contractual and legal
restrictions on resale. Nevertheless, sales of substantial amounts of our
common stock in the public market after the restrictions lapse could cause the
market price of our common stock to decline.

When this offering is completed, we will have a total of 8,000,000 shares of
common stock outstanding, assuming no exercise of outstanding options. All of
our officers, directors and stockholders have agreed not to transfer or dispose
of, directly or indirectly, any of their shares of our common stock, or any
securities convertible into, or exchangeable or exercisable for shares of our
common stock, for a period of 180 days from the date of this prospectus. Of our
8,000,000 shares of outstanding common stock:

. 2,000,000 will be freely tradable unless they are purchased by our
affiliates, as defined in Rule 144 under the Securities Act; and

. 6,000,000 will not be available for sale until 180 days after the date of
this prospectus; however, they are restricted shares, which means they
were originally sold in offerings that were not subject to a registration
statement filed with the Securities and Exchange Commission and,
therefore, may be resold only through registration under the Securities
Act or under an available exemption from registration, such as provided
through Rule 144.

Rule 144

In general, under Rule 144, a person, or persons whose shares are aggregated,
who has beneficially owned restricted securities for at least one year,
including the holding period of any holder who is not an affiliate, is entitled
to sell within any three-month period a number of our shares of common stock
that does not exceed the greater of:

. 1% of the then outstanding shares of our common stock, which will equal
approximately 200,000 shares upon completion of this offering; or

. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the date on
which notice of sale is filed with the Securities and Exchange
Commission.

Sales under Rule 144 are subject to restrictions relating to manner of sale,
notice and the availability of current public information about us.

Rule 144(k)

A person who is not deemed an affiliate of ours at any time during the 90
days preceding a sale and who has beneficially owned shares for at least two
years, including the holding period of any prior owner who is not an affiliate,
would be entitled to sell shares following this offering under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, public
information or notice requirements of Rule 144.

Rule 701

In general, under Rule 701 of the Securities Act as currently in effect, any
of our employees, consultants or advisors who purchases securities, including
options, from us before the date of this prospectus through our stock option
plans or through some other written agreement is eligible to resell those
shares, including shares issued upon the exercise of options, 90 days after the
effective date of this offering in reliance on Rule 144, but without compliance
with the holding period, information and volume restrictions contained in Rule
144.

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<PAGE>

PLAN OF DISTRIBUTION

In accordance with the terms of an underwriting agreement among us, W.R.
Hambrecht + Co., LLC and DLJdirect Inc., as representative(s) of the
underwriters, the underwriters will purchase from us the following respective
number of shares of common stock at the public offering price less the
underwriting discounts and commissions described on the cover page of this
prospectus.

<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
W.R. Hambrecht + Co., LLC..........................................
DLJdirect Inc. ....................................................
---------
Total............................................................ 2,000,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the underwriters
are subject to conditions, including the absence of any material adverse change
in our business, and the receipt of certificates, opinions and letters from us
and our counsel and independent accountants. Subject to those conditions, the
underwriters are committed to purchase all shares of our common stock offered
if any of the shares are purchased.

The underwriters propose to offer the shares of our common stock directly to
the public at the offering price set forth on the cover page of this
prospectus, as this price is determined by the OpenIPO process described below,
and subject to possible adjustments also described below and to dealers at this
price less a concession not in excess of $ per share. Any dealers that
participate in the distribution of our common stock may be deemed to be
underwriters within the meaning of the Securities Act, and any discounts,
commissions or concessions received by them and any provided by the sale of the
shares by them might be deemed to be underwriting discounts and commissions
under the Securities Act. After completion of the initial public offering of
the shares, if all the shares are not sold at the initial public offering
price, the public offering price and other selling terms may be changed by the
underwriters. The underwriters have informed us that they do not intend
discretionary sales to exceed 10% of the shares of the common stock offered by
this prospectus.

The following table shows the per share and total compensation and estimated
expenses to be paid to the underwriters by us in connection with this offering.
The underwriting discount will be determined through negotiations between us
and the representatives of the underwriters, and will be calculated as a
percentage of the offering price not to exceed 5.75% of the offering price.
These amounts are shown assuming both no exercise and full exercise of the
over-allotment option.

<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and
Commissions paid by
us..................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>

The expenses of the offering, exclusive of the underwriting discounts, will
be approximately $ million. These fees and expenses are payable entirely by
us. These fees include, among other things, our legal and accounting fees, our
printing expenses, our expenses incurred in connection with meetings with
potential investors, the filing fees of the Securities and Exchange Commission
and the listing fees of the Nasdaq National Market.

An electronic prospectus is available on the website maintained by WR
Hambrecht + Co and DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette
Securities Corporation, each of which is a representative of the underwriters.
Other than the prospectus in electronic format, the information on these
websites relating to the offering is not part of this prospectus and has not
been approved or endorsed by us and should not be relied on by prospective
investors.

69
<PAGE>

W.R. Hambrecht/Aristotle, LLC is an affiliate of WR Hambrecht + Co, one of
the underwriters in this offering. As described in Principal Stockholders, W.R.
Hambrecht/Aristotle, LLC owns an aggregate of 995,179 shares of common stock,
which represent more than 10% of our outstanding common stock. As a result,
under Rule 2720 of the Conduct Rules of the National Association of Securities
Dealers, Inc., which provides that the public offering price of an equity
security be no higher than that recommended by a qualified independent
underwriter, DLJdirect Inc. has assumed the responsibilities of acting as the
qualified independent underwriter for this offering, without receiving
additional compensation for these responsibilities, and will recommend a price
in compliance with the requirements of Rule 2720. In connection with this
offering, DLJdirect Inc. is performing due diligence investigations and
reviewing and participating in the preparation of this prospectus and the
registration statement of which this prospectus forms a part.

The Auction Process

The method of distribution being used by the underwriters in this offering is
known as the OpenIPO process. It differs from that traditionally employed in
underwritten public offerings. In particular, the public offering price will be
based primarily on an auction conducted by the underwriters. The allocation of
shares of our common stock will be determined entirely by the auction process,
and WR Hambrecht + Co reserves the right to round all allocations to eliminate
odd-lots. The following describes how WR Hambrecht + Co, other underwriters and
selected dealers will conduct the auction process and confirm bids from
prospective investors:

. Before the registration statement relating to this offering becomes
effective, the underwriters and participating dealers will solicit bids
from prospective investors through the Internet, telephone and
facsimile. The bids will specify the number of shares of our common
stock the potential investor proposes to purchase and the price the
potential investor is willing to pay for the shares. These bids may be
above or below the range set forth on the cover page of this prospectus.
The minimum size of any bid is 100 shares.

. The shares offered by this prospectus may not be sold nor may offers to
buy be accepted prior to the time that the registration statement filed
with the Securities and Exchange Commission becomes effective. A bid
received by WR Hambrecht + Co involves no obligation or commitment of
any kind prior to the closing of the auction. Bids can be modified or
revoked at any time prior to the closing of the auction.

. Approximately two business days prior to the registration statement
being declared effective, prospective investors will receive, by e-mail,
telephone or facsimile, a notice indicating the proposed effective date.
On or after that time, WR Hambrecht + Co may post on its website an
estimate of the clearing price if the clearing price is within the range
presented on the cover page of this prospectus.

. After the registration statement relating to this offering becomes
effective, potential investors who have submitted bids to WR Hambrecht +
Co will be contacted by e-mail, telephone or facsimile. Potential
investors will be advised that the registration statement has been
declared effective and will be requested to confirm their bids.

. The auction will close after the registration statement becomes
effective at a time agreed to by us and WR Hambrecht + Co. The actual
time at which the auction closes will be determined by us and
WR Hambrecht + Co based on general market conditions during the period
after the registration statement becomes effective. After the
registration statement has been declared effective, the public offering
price of our common stock may be set at a price that is outside of the
range set forth on the cover of this prospectus.

. All bids that are not confirmed before the time specified by the
underwriters, or if the time is not specified, by the close of the
auction, will be deemed withdrawn.

. Once a potential investor affirmatively confirms its previous bid, the
confirmation will remain valid unless subsequently withdrawn by the
potential investor. Potential investors will be able to withdraw their
bids at any time before the close of the auction by notifying WR
Hambrecht + Co or a participating dealer.

. If the public offering price range is changed before or after a
potential investor affirmatively confirms a bid, or if the public
offering price is outside the public offering range previously provided
to the

70
<PAGE>

potential investor in the prospectus, the underwriters and participating
dealers will notify potential investors of the change and that offers will
not be accepted until the potential investor has again reconfirmed its bid
regardless of whether the potential investor's initial bid was above,
below or at the public offering price.

. Following the closing of the auction, WR Hambrecht + Co will determine
the highest price at which all of the shares offered, including shares
that may be purchased by the underwriters to cover any over-allotments,
may be sold to potential investors. This price, which is called the
clearing price, will be determined based on the results of all valid
bids at the time the auction is closed. The clearing price will not
necessarily be the public offering price, which will be set as described
in Determination of Public Offering Price below. The public offering
price will determine the allocation of shares to potential investors,
with all bids submitted at or above the public offering price receiving
a pro rata portion of the shares bid for.

. Once the auction closes and a clearing price is set as described below,
WR Hambrecht + Co will accept the bids within a very short period of
time from those bidders whose bid is at or above the public offering
price but may allocate to a prospective investor fewer shares than the
number included in the investor's bid.

. WR Hambrecht + Co or a participating dealer will notify successful
bidders by e-mail, telephone or facsimile that the auction has closed
and that their confirmed bids have been accepted. Other bidders will be
notified that their bids have not been accepted.

. Potential investors may at any time expressly request that all, or any
specific, communications between them and the underwriters and
participating dealers be made by specific means of communication,
including telephone and facsimile.

Some underwriters and selected dealers that participate in this offering may
request prospective investors to confirm their bids prior to the effective date
of the registration statement, if that practice is used by these institutions
in connection with initial public offerings that are not conducted using the
OpenIPO process.

Determination of Public Offering Price

The public offering price for this offering will ultimately be determined by
negotiation between the underwriters and us after the auction closes and will
not necessarily bear any direct relationship to our assets, current earnings or
book value or to any other established criteria of value, although these
factors were considered in establishing the initial public offering price
range. Prior to the offering, there has been no public market for our common
stock. The principal factor in establishing the public offering price will be
the clearing price resulting from the auction.

The clearing price is the highest price at which all of the shares offered,
including the shares that may be purchased by the underwriters to cover any
over-allotments, may be sold to potential investors, based on the valid bids at
the time the auction is run.

Factors considered in determining the initial public offering price range
included an assessment of our management, operating results, capital structure
and business potential and the demand for similar securities of comparable
companies. Changes, if any, in the public offering price range will be based
primarily on the bids received.

The public offering price may be lower, but will not be higher, than the
clearing price based on negotiations between the underwriters and us. The
public offering price will always determine the allocation of shares to
potential investors. Therefore, if the public offering price is below the
clearing price, all bids that are at or above the public offering price will
receive a pro rata portion of the shares bid for. If sufficient bids are not
received, or if we do not consider the clearing price to be adequate, or if we
and the underwriters are not able to reach agreement on the public offering
price, then we and the underwriters will either postpone or cancel this

71
<PAGE>

offering. Alternatively, we may file a post-effective amendment to the
registration statement in order to conduct a new auction.

The following simplified example illustrates how the public offering price
will be determined through the auction process: Company X offers to sell
100,000 shares in its public offering through the auction process.

WR Hambrecht + Co, on behalf of Company X, receives five bids to purchase,
all of which are kept confidential until the auction closes.

The first bid is to pay $10 per share for 20,000 shares. The second bid is to
pay $9 per share for 30,000 shares. The third bid is to pay $8 per share for
60,000 shares. The fourth bid is to pay $7 per share for 40,000 shares. The
fifth bid is to pay $6 per share for 80,000 shares.

Assuming that all of these bids are confirmed and not withdrawn or modified
before the auction closes, and assuming that no additional bids are received,
the clearing price used to determine the public offering price would be $8 per
share, which is the highest price at which all 100,000 shares offered may be
sold to potential investors who have submitted valid bids. However, the shares
may be sold at a price below $8 per share based on negotiations between the
underwriters and Company X.

If the public offering price is the same as the $8 per share clearing price,
the underwriters will confirm bids at or above $8 per share. Because 110,000
shares were bid for at or above the clearing price, each of the three potential
investors who bid $8 per share or more would receive approximately 90% of the
shares for which bids were made. The two potential investors whose bids were
below $8 per share would not receive any shares in this example.

If the public offering price is $7 per share, the underwriters will confirm
bids that were made at or above $7 per share. No bids made at a price of less
than $7 per share will be accepted. The four potential investors with the
highest bids would receive a pro rata portion of the 100,000 shares offered,
based on the 150,000 shares they requested, or two-thirds of the shares for
which bids were made.

The potential investor with the lowest bid would not receive any shares in
this example. The following table illustrates the example described above,
assuming that the initial public offering price is set at $8.00 per share. The
table also assumes that these bids are the final bids, and that they reflect
any modifications that have been made to reflect any prior changes to the
offering range, and to avoid the issuance of fractional shares.

Initial Public Offering of Company X

<TABLE>
<CAPTION>
Bid Information Auction Results
------------------------------ ---------------------------------------
Approximate
Cumulative Allocated
Shares Shares Shares Requested Clearing Amount
Requested Requested Bid Price Allocated Shares Price Raised
--------- ---------- --------- --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
20,000 20,000 $10.00 18,000 90% $8.00 $144,000
30,000 50,000 9.00 27,000 90 8.00 216,000
Clearing
Price (right
arrow) 60,000 110,000 8.00 55,000 90 8.00 440,000
40,000 150,000 7.00 0 0
80,000 230,000 6.00 0 0
------- --------
Total: 100,000 $800,000
======= ========
</TABLE>

Requirements for Valid Bids

Valid bids are those that meet the requirements, including eligibility,
account status and size, established by the underwriters or participating
dealers. In order to open a brokerage account with WR Hambrecht + Co,

72
<PAGE>

potential investors must deposit at least $2,000 in their account. This
brokerage account will be a general account subject to WR Hambrecht + Co's
customary rules, and will not be limited to this offering. In addition, once
the registration statement becomes effective and the auction closes, a
prospective investor submitting a bid through a WR Hambrecht + Co brokerage
account must have an account balance equal to or in excess of the amount of its
bid or its bid will not be accepted by WR Hambrecht + Co. However, other than
the $2,000 described above, prospective investors will not be required to
deposit any money into their accounts until after the registration statement
becomes effective. No funds will be transferred to the underwriters, and any
amounts in excess of $2,000 may be withdrawn, at any time until the acceptance
of the bid and the subsequent closing of this offering. Conditions for valid
bids, including eligibility standards and account funding requirements of other
underwriters or participating dealers other than WR Hambrecht + Co, may vary.

The Closing of the Auction and Allocation of Shares

The auction will close on the date and at the approximate time estimated and
publicly disclosed in advance by the underwriters on the website of WR
Hambrecht + Co at www.wrhambrecht.com or www.openipo.com. The 2,000,000 shares
offered hereby, or 2,300,000 shares if the underwriters' overallotment option
is exercised in full, will be purchased from us by the underwriters and sold
through the underwriters and participating dealers to investors who have
submitted bids at or higher than the public offering price. These investors
will be notified by e-mail, telephone or facsimile as soon as practicable
following the closing of the auction that their bids have been accepted.

Each participating dealer has agreed with the underwriters to sell the shares
it purchases from the underwriters in accordance with the auction process
described above, unless the underwriters otherwise consent. The underwriters
reserve the right to reject bids that they deem manipulative or disruptive in
order to facilitate the orderly completion of this offering, and they reserve
the right, in exceptional circumstances, to alter this method of allocation as
they deem necessary to ensure a fair and orderly distribution of the shares of
our common stock. For example, large orders may be reduced to ensure a public
distribution and bids may be rejected or reduced by the underwriters or
participating dealers based on eligibility or creditworthiness criteria. In
addition, the underwriters or the participating dealers may reject or reduce a
bid by a prospective investor who has engaged in practices that could have a
manipulative, disruptive or otherwise adverse effect upon the offering.

Price and volume volatility in the market for our common stock may result
from the somewhat unique nature of the proposed plan of distribution. Price and
volume volatility in the market for our common stock after the completion of
this offering may adversely affect the market price of our common stock.

We have granted to the underwriters an option, exercisable no later than 30
days after the date of this prospectus, to purchase up to an aggregate of
300,000 additional shares of our common stock at the offering price, less the
underwriting discount, set forth on the cover page of this prospectus. To the
extent that the underwriters exercise this option, the underwriters will have a
firm commitment to purchase the additional shares, and we will be obligated to
sell the additional shares to the underwriters. The underwriters may exercise
the option only to cover over-allotments made in connection with the sale of
shares offered. The underwriting agreement provides that we will indemnify the
underwriters against specified liabilities, including liabilities under the
Securities Act, or contribute to payments that the underwriters may be required
to make.

We have agreed not to offer, sell, contract to sell, or otherwise dispose of
any shares of common stock, or any options or warrants to purchase common stock
other than the shares of common stock or options to acquire common stock issued
under our stock option plans and stock purchase plan, for a period of 180 days
after the date of this prospectus, except with the prior written consent of WR
Hambrecht + Co. Each of our directors, executive officers and all of our
stockholders and optionees have agreed to restrictions on his or her ability to
sell, offer, contract or grant any option to sell, pledge, transfer or
otherwise dispose of shares of our common stock for a period of 180 days after
the date of this prospectus, without the prior written consent of WR Hambrecht
+ Co.

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<PAGE>

In connection with the offering, persons participating in the offering may
purchase and sell shares of common stock on the open market. These transactions
may include short sales, stabilizing transactions in accordance with Rule 104
of Regulation M under the Securities Exchange Act of 1934, as amended, and
purchases to cover positions created by short sales. Short sales involve the
sale by the underwriters of a greater number of shares than they are required
to purchase in the offering which creates a syndicate short position.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock. The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representative has repurchased shares sold
by or for the account of that underwriter in stabilizing or short covering
transactions. These activities by the underwriters may stabilize, maintain or
otherwise affect the market price of our common stock. As a result, the price
of our common stock may be higher than the price that otherwise might exist in
the open market. If these activities are commenced, they may be discontinued by
the underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.

WR Hambrecht + Co currently intends to act as a market maker for our common
stock following this offering. However, WR Hambrecht + Co is not obligated to
do so and may discontinue any market making at any time.

WR Hambrecht + Co is an investment banking firm formed in February 1998. In
addition to this offering, WR Hambrecht + Co has engaged in the business of
public and private equity investing and financial advisory services since its
inception. The manager of WR Hambrecht + Co, William R. Hambrecht, has 40 years
of experience in the securities industry.

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<PAGE>

LEGAL MATTERS

Selected legal matters with respect to the validity of the common stock
offered by this prospectus are being passed upon for Aristotle by Pillsbury
Madison & Sutro LLP, San Diego, California. Legal matters in connection with
this offering will be passed upon for the underwriters by Morrison & Foerster
LLP, San Francisco, California.

EXPERTS

Our financial statements and schedule as of December 31, 1999, and for the
year then ended, have been included herein and in the registration statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing. The report of KPMG LLP contains an explanatory
paragraph that states that we have suffered recurring losses, have an
accumulated deficit and negative working capital and are dependent upon
additional financing, which raise substantial doubt about our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of that uncertainty.

Our financial statements and schedule as of December 31, 1998, and for each
of the years in the two-year period ended December 31, 1998, have been included
in this prospectus and in the registration statement in reliance upon the
report of Keller Bruner & Company, LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.

CHANGE OF AUDITORS

On February 22, 2000, we retained KPMG LLP to act as our independent public
accountants and informed our prior auditors, Keller Bruner & Company, LLP, who
had been our independent accountants since September 1999, of our decision. In
connection with Keller Bruner & Company, LLP's audit of the financial
statements for the years ended December 31, 1997 and 1998 and through February
22, 2000, there were no disagreements with Keller Bruner & Company, LLP on any
matters of accounting principles or practices, financial statement disclosures
or auditing scope or procedures. The decision to change auditors was approved
by our board of directors. We have provided Keller Bruner & Company, LLP with a
copy of the disclosure contained in this section of the prospectus.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules which are part of the registration statement. For
further information with respect to Aristotle and the common stock offered by
this prospectus, we refer you to the registration statement and the exhibits
and schedules filed as part of the registration statement. You may read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC's website at http://www.sec.gov. Upon
completion of this offering, we will become subject to the information and
periodic reporting requirements of the Securities and Exchange Act, as amended,
and, in accordance therewith, will file periodic reports, proxy statements and
other information with the SEC. These periodic reports, proxy statements and
other information will be available for inspection and copying at the SEC's
public reference rooms and the website of the SEC referred to above.

75
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Reports.............................................. F-2

Balance Sheets............................................................. F-4

Statements of Operations................................................... F-5

Statements of Stockholders' Equity (Deficit)............................... F-6

Statements of Cash Flows................................................... F-7

Notes to Financial Statements.............................................. F-8

Unaudited Condensed Balance Sheets......................................... F-20

Unaudited Condensed Statements of Operations............................... F-21

Unaudited Condensed Statements of Cash Flows............................... F-22

Notes to Unaudited Condensed Financial Statements.......................... F-23
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Aristotle International, Inc.:

We have audited the accompanying balance sheet of Aristotle International,
Inc. as of December 31, 1999, and the related statements of operations,
stockholders' equity (deficit) and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aristotle International, Inc.
as of December 31, 1999 and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 16 to the financial
statements, the Company has suffered recurring losses, has an accumulated
deficit and negative working capital and is dependent upon additional
financing, which raise substantial doubt about its ability to continue as a
going concern. Management's plan in regard to these matters is also described
in Note 16. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/ KPMG LLP

McLean, Virginia

May 12, 2000, except for
Note 15 which is as of
July 6, 2000 and Note 16
which is as of
September 1, 2000

F-2
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Aristotle International, Inc.:

We have audited the accompanying balance sheet of Aristotle International,
Inc. as of December 31, 1998, and the related statements of operations,
stockholders' equity (deficit) and cash flows for the years ended December 31,
1997 and 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aristotle International, Inc.
as of December 31, 1998 and the results of its operations and its cash flows
for the years ended December 31, 1997 and 1998 in conformity with generally
accepted accounting principles.

/s/ Keller Bruner & Company, LLP

Bethesda, Maryland
October 29, 1999

F-3
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
---------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents........................... $ 44,399 $ 2,404,956
Accounts receivable, net............................ 178,725 1,003,727
Income tax receivable............................... 117,718 80,898
Other receivables................................... 27,386 13,067
Prepaid expenses and other current assets........... 102,471 100,000
---------- -----------
Total current assets.............................. 470,699 3,602,648
Property and equipment, net......................... 89,014 175,921
Other assets........................................ 1,952 23,048
---------- -----------
$ 561,665 $ 3,801,617
========== ===========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current installments of obligations under capital
lease.............................................. $ -- $ 3,665
Accounts payable.................................... 137,737 727,754
Accrued expenses.................................... 279,196 495,169
Deferred revenue.................................... 342,648 771,505
Notes payable--related parties...................... 241,136 308,139
---------- -----------
Total current liabilities......................... 1,000,717 2,306,232
Obligations under capital lease, excluding current
portion.............................................. -- 11,418
---------- -----------
Total liabilities................................. 1,000,717 2,317,650
---------- -----------
Convertible preferred stock........................... -- 3,500,000
---------- -----------
Commitments and contingencies

Stockholders' equity (deficit):
Common stock, $0.001 par value; 10,000,000 shares
authorized; 4,105,112 shares issued and
outstanding........................................ 4,105 4,105
Additional paid-in capital.......................... 71,395 408,985
Accumulated deficit................................. (514,552) (2,429,123)
---------- -----------
(439,052) (2,016,033)
---------- -----------
$ 561,665 $ 3,801,617
========== ===========
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Revenue:
Products................................ $1,187,812 $1,715,426 $ 2,815,431
Services................................ 530,476 812,914 1,097,132
---------- ---------- -----------
Total revenue......................... 1,718,288 2,528,340 3,912,563
---------- ---------- -----------
Cost of revenue:
Products................................ 290,966 555,410 987,220
Services................................ 100,420 123,564 262,844
---------- ---------- -----------
Total cost of revenue................. 391,386 678,974 1,250,064
---------- ---------- -----------
Gross profit.............................. 1,326,902 1,849,366 2,662,499
---------- ---------- -----------

Operating expenses:
General and administrative.............. 856,905 1,253,200 2,654,033
Sales and marketing..................... 817,697 1,195,237 1,633,054
Research and development................ 116,313 93,143 398,097
---------- ---------- -----------
Total operating expenses.............. 1,790,915 2,541,580 4,685,184
---------- ---------- -----------
Loss from operations...................... (464,013) (692,214) (2,022,685)
Other income (expense), net............... 65,496 634,544 75,178
Interest income........................... 19 -- 40,199
Interest expense.......................... (24,506) (23,698) (7,263)
---------- ---------- -----------
Loss before income taxes.................. (423,004) (81,368) (1,914,571)
Benefit from income taxes................. (173,909) -- --
---------- ---------- -----------
Net loss.................................. $ (249,095) $ (81,368) $(1,914,571)
========== ========== ===========
Basic and diluted net loss per share
applicable to common stockholders........ $ (0.06) $ (0.02) $ (0.47)
========== ========== ===========
Shares used to compute basic and diluted
net loss per share applicable to common
stockholders............................. 4,105,112 4,105,112 4,105,112
========== ========== ===========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
Total
Common Stock Additional Stockholders'
---------------- Paid-In Accumulated Equity
Shares Amount Capital Deficit (Deficit)
--------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1996................... 3,000,000 $3,000 $ 72,500 $ (184,089) $ (108,589)
Net loss................ -- -- -- (249,095) (249,095)
--------- ------ -------- ----------- -----------
Balance, December 31,
1997................... 3,000,000 3,000 72,500 (433,184) (357,684)
Net loss................ -- -- -- (81,368) (81,368)
--------- ------ -------- ----------- -----------
Balance, December 31,
1998................... 3,000,000 3,000 72,500 (514,552) (439,052)
Forgiveness of interest
on amounts due to
stockholders........... -- -- 81,483 -- 81,483
Equity-based
compensation........... -- -- 256,107 -- 256,107
Stock Split (Note 15)... 1,105,112 1,105 (1,105) -- --
Net loss................ -- -- -- (1,914,571) (1,914,571)
--------- ------ -------- ----------- -----------
Balance, December 31,
1999................... 4,105,112 $4,105 $408,985 $(2,429,123) $(2,016,033)
========= ====== ======== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1997 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
Reconciliation of net loss to net cash
provided by (used in) operating activities:
Net loss................................... $(249,095) $ (81,368) $(1,914,571)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization............. 46,770 71,399 71,368
Provision for bad debts................... -- 7,000 67,580
Loss on disposal of property and
equipment................................ 21,410 30,546 4,242
Equity-based compensation expense......... -- -- 256,107
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable..................... (164,370) 702 (900,987)
Income tax receivable................... 153,304 94,626 36,820
Prepaid expenses and other current
assets................................. 380 (101,415) 25,195
Other assets............................ 399 2,500 (21,096)
Increase (decrease) in:
Accounts payable........................ 5,497 (95,654) 590,017
Accrued expenses........................ 102,890 39,850 301,456
Deferred revenue........................ 75,995 148,057 428,857
--------- --------- -----------
Net cash provided by (used in)
operating activities.................. (6,820) 116,243 (1,055,012)
--------- --------- -----------
Cash flows used in investing activities:
Purchase of property and equipment......... (11,597) (114,710) (149,263)
--------- --------- -----------
Net cash used in investing activities.. (11,597) (114,710) (149,263)
--------- --------- -----------
Cash flows from financing activities:
Decrease in disbursements in excess of
available cash............................ (13,017) -- --
Proceeds from issuance of Series A
Preferred Stock........................... -- -- 3,500,000
Principal payments on obligations under
capital lease............................. -- -- (2,171)
Proceeds from loans from stockholders...... 152,694 347,682 196,000
Repayments on loans from stockholders...... (96,816) (329,260) (128,997)
--------- --------- -----------
Net cash provided by financing
activities............................ 42,861 18,422 3,564,832
--------- --------- -----------
Net increase in cash................... 24,444 19,955 2,360,557
Cash and cash equivalents:
Beginning of year.......................... -- 24,444 44,399
--------- --------- -----------
End of year................................ $ 24,444 $ 44,399 $ 2,404,956
========= ========= ===========
Supplemental disclosure of cash flow
information:
Cash paid during the year for interest..... $ 1,515 $ 40 $ 7,263
Cash received from income tax refunds...... $ 326,408 $ 95,023 $ 36,820

Supplemental disclosure of noncash investing
and financing activities:
The Company incurred additional capital
lease obligations of approximately $16,643
during 1999 for new property and
equipment.
</TABLE>

See accompanying notes to financial statements.

F-7
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS

(1) Nature of Business and Significant Accounting Policies

(a) Nature of Business and Basis of Presentation

Aristotle International, Inc. (formerly Aristotle Publishing, Inc.)
("Aristotle" or the "Company") is a technology company that provides
information, products and services to political campaigns, advocacy
organizations and commercial enterprises. Over the past ten years, Aristotle
has compiled a large database of registered voters in the United States, which
is the Company's core strategic asset. The Company uses its database to provide
campaign management, Internet marketing and online fundraising.

(b) Revenue Recognition

Revenue is generated from licensing software products and providing
services, including maintenance and technical support, training and consulting.

In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 97-2, Software Revenue
Recognition. Subsequently, in March 1998 and December 1998, the AICPA issued
SOP 98-4 and SOP 98-9, respectively, which defer until the Company's fiscal
year beginning January 1, 2000, the application of several paragraphs and
examples in SOP 97-2 that limit the definition of vendor specific objective
evidence ("VSOE") for determining fair value of various elements in a multiple
element arrangement. The provisions of SOP 97-2 have been applied to
transactions entered into beginning January 1, 1998. Prior to 1998, the
Company's revenue recognition policy was in accordance with the preceding
authoritative guidance provided by SOP No. 91-1, Software Revenue Recognition.
The adoption of SOP 97-2 did not have a material impact on the Company's
financial statements. Further, management of the Company does not believe that
the adoption of the remaining portions of SOP 97-2, which were deferred by SOP
98-4 and SOP 98-9, will have a material impact on the Company's financial
statements.

The Company licenses its software to its customers through perpetual
licenses. Software license revenue is recognized when there is an executed
license agreement, the software has been delivered, collectibility from the
customer is probable and there are no significant remaining obligations to the
customer. Some of the Company's clients require customized software. In those
instances where there is a significant service component to the customized
software, the Company recognizes revenue based upon a percentage of completion
in accordance with SOP No. 81-1, Accounting for Performance of Construction-
Type and Certain Production-Type Contracts.

The Company utilizes the percentage-of-completion method measured by labor
hours incurred compared to total estimated hours required. Estimates of costs
to complete are reviewed periodically and revised as required. Provisions are
made for the full amount of anticipated losses, if any, on all contracts in the
period in which the losses are first determinable. Changes in estimates are
also reflected in the period they become known.

The Company also provides Internet-based fundraising, in which the Company
hosts the website, which may be accessed directly or through the customers'
websites, and processes the contributions. Contributions are generally made via
credit card. Revenue is recognized when the contributions are collected, and
are based upon negotiated transaction fee, which may contain fixed charges as
well as a percent of the contribution collected.

The Company also has entered into contracts with various electronic commerce
intermediaries to deliver targeted banner advertising to its customer base. The
Company will contract with its client for the delivery of a specified number of
impressions to its defined target market through the third-party websites.
Revenue is recognized as the impressions are delivered. To the extent that the
agreements require the delivery of a

F-8
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

minimum number of impressions, revenue related to the under-delivered
impressions is deferred until the guaranteed impression levels are met. Revenue
from this activity was not significant during 1997, 1998 or 1999.

The Company has entered into representation agreements with other Web
portals. Under the terms of these agreements, Aristotle earns a fee for banner
advertising sold on the third-party portals. Revenue is recognized on a pro
rata basis over the term of the advertising agreements, or as impressions are
delivered based upon whether the contracts with the advertisers are for a
specified period of time or a determined number of impressions. The Company
records this revenue on a net commission basis. To the extent that the
agreements require the delivery of a minimum number of impressions, commission
revenue related to the under-delivered impressions is deferred until the
guaranteed impression levels are met. No revenue was recognized under these
agreements during 1997, 1998 or 1999.

Services revenue consists of maintenance and technical support, training and
consulting. Revenue from maintenance and technical support, which consists of
unspecified when and if available product updates and customer telephone
support services, are recognized ratably over the term of the service period.
Other services revenue is recognized as the related services are provided.

The Company is entitled to receive royalties for the sale of voter data by a
third party (see Note 9). Under the terms of the agreement, the Company
received an advance against future revenues upon the signing of the contract.
Royalties are recognized as they are reported by the third party.

Deferred revenue represents billings or collections on contracts in advance
of performance of services and specifically includes the unamortized portion of
maintenance agreements, revenue related to training which has not yet been
performed and revenue arising from contracts which include a significant
service component which has not yet been earned.

(d) Cost of Revenue

Cost of product revenue consists primarily of external costs associated with
acquisition, enhancements, updates and maintenance of voter records, as well as
personnel costs associated with programming and customization of the Company's
software. Cost of service revenue consists primarily of personnel costs
associated with our customer support department.

(e) Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets. The
estimated useful lives used in determining depreciation are between three and
five years for office and computer equipment and five years for automobiles.
Leasehold improvements are amortized over the shorter of the useful life of the
asset, generally five years, or the lease term.

(f) Software Development Costs

Software development costs are accounted for in accordance with SFAS No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed. Under the standard, capitalization of software development costs
begins upon the establishment of technological feasibility, subject to net
realizable value considerations. To date, the period between the establishment
of technological feasibility and the general availability of such software has
been short; therefore, software development costs qualifying for capitalization
have been immaterial. Accordingly, the Company has not capitalized any software
development costs and has charged all such costs to research and development
expense. Research and development costs are expensed as incurred.

F-9
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(g) Web Site Development Costs

Effective January 1, 1999 the Company adopted SOP No. 98-1, Accounting for
Costs of Computer Software for Internal Use. The amount of web site development
cost which would have been capitalized under SOP 98-1 through December 31, 1999
was not material and therefore was expensed as incurred. Effective July 1,
2000, the Company will apply the standards of EITF No. 00-2 (see Note 1n),
which requires capitalization of certain web site development costs. The
Company is currently evaluating the effects of EITF No. 00-2 on its financial
results.

(h) Income Taxes

Deferred income taxes are provided on a liability method, whereby deferred
tax assets are recognized for deductible temporary differences and operating
loss and tax credit carryforwards and deferred tax liabilities are recognized
for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of
enactment.

(i) Financial Credit Risk

The Company maintains its cash in bank deposit accounts, that, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit risk on
cash.

Financial instruments that potentially expose the Company to concentration
of credit risk consist primarily of trade receivables. Substantially all of the
Company's trade receivables are due from U.S. political candidates, their
campaign organizations and political organizations or businesses engaged in
lobbying activities. The trade receivables may age significantly prior to
collection, which is frequently funded with Federal matching funds received
several months after each campaign concludes. Changes to the Federal campaign
regulations or lobbying regulations could have an adverse impact on the
Company's ability to collect its receivables.

(j) Estimates

The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates.

(k) Stock Split

On March 24, 1999, the Board of Directors of the Company approved a 6,000-
for-1 split of the Company's common stock. Additionally, as discussed in Note
15, on July 6, 2000, the Company effected a 1.368-for-1 stock split on the
Company's common stock. All share, per share and conversion amounts relating to
common stock and stock options included in the accompanying financial
statements, and accompanying notes, have been retroactively adjusted to reflect
these stock splits.

F-10
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(l) Loss Per Share

The Company computes net loss per share in accordance with the provisions of
SFAS No. 128, Earnings per Share, and SEC Staff Accounting Bulletin ("SAB") No.
98. Under the provisions of SFAS 128 and SAB 98, basic and diluted net loss per
share applicable to common stockholders is computed by dividing the net loss
applicable to common stockholders for the period by the weighted average number
of common shares outstanding for the period. For the years ended December 31,
1997, 1998 and 1999, there were no adjustments between the net loss and the net
loss applicable to common stockholders.

The calculation of diluted net loss per share excludes shares of common stock
issuable upon the conversion of convertible preferred stock (see Note 11e),
exercise of employee stock options (see Note 12b), and the conversion of Note
payable-related parties (see Note 6) as the effect of such exercises would be
antidilutive.

(m) Stock-Based Compensation

The Company accounts for equity-based compensation arrangements in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations,
and complies with the disclosure provisions of SFAS No. 123, Accounting for
Stock-Based Compensation. Under APB 25, compensation expense is based upon the
difference, if any, on the date of grant, between the fair value of the
Company's stock and the exercise price. All equity-based awards to non-
employees are accounted for at their fair value in accordance with SFAS 123.

(n) Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and Notes payable--related parties approximate the fair values
due to the short-term nature of these instruments. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.

(o) Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities. The new standard establishes
accounting and reporting standards for derivative instruments embedded in other
contracts and for hedging activities. This statement, as amended, is effective
for all fiscal quarters of all fiscal years beginning after June 15, 2000. The
Company does not expect SFAS 133 to have a material affect on its financial
position or results of operations.

In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation (FIN) No. 44, Accounting for Certain Transactions Involving
Stock Compensation. FIN 44 further defines the accounting consequence of
various modifications to the terms of a previously fixed stock option or award
under APB 25. FIN 44 becomes effective on July 1, 2000, but certain conclusions
in FIN 44 cover specific events that occur after December 15, 1998 or January
12, 2000. The Company has not completed its evaluation of the impact of FIN 44
on its financial position or results of operations.

In May 2000, the Emerging Issues Task Force ("EITF") released issue No. 00-2,
Accounting for Web Site Development Costs, EITF 00-2 establishes standards for
determining the capitalization or expensing of incurred costs relating to the
development of Internet web sites based upon the respective stage of
development. The Issue is effective for fiscal quarters beginning after June
30, 2000 (including costs incurred for projects in process at the beginning of
the quarter of adoption). The Company is currently evaluating the effect of
EITF 00-2 on its financial results.

F-11
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

In December 1999, the Securities and Exchange Commission ("SEC") issued SAB
No. 101, Revenue Recognition in Financial Statements. This SAB expresses the
SEC's views in applying generally accepted accounting principles to revenue
recognition in financial statements. Registrants can apply the accounting and
disclosure requirements of this SAB retrospectively, or may report a change in
accounting principle no later than the fourth fiscal quarter of the fiscal year
beginning after December 15, 1999. The Company does not expect the application
of this SAB to have a material impact on the Company's financial statements.

(p) Segment Information

The Company operates under one business segment providing voter database
related products and services. During the year ended December 31, 1999, the
Company derived revenue from three significant customers. The revenues derived
from these customers amounted to $815,000, $312,000 and $215,000. No customer
represented more than ten percent of the Company's revenue for the years ended
December 31, 1997 or 1998.

(2) Accounts Receivable

Accounts receivable consists of the following as of December 31, 1998 and
1999:

<TABLE>
<CAPTION>
1998 1999
-------- ----------
<S> <C> <C>
Accounts receivable.................................... $190,725 $1,078,557
Less allowance for doubtful accounts................... (12,000) (74,830)
-------- ----------
$178,725 $1,003,727
======== ==========
</TABLE>

(3) Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets at December 31, 1998 consists
primarily of equipment acquired for customer contracts that had not been
installed as of the end of the year. As of December 31, 1999, prepaid expenses
and other current assets is solely comprised of a prepaid contract fee with
MatchLogic for future services.

(4) Property and Equipment

Property and equipment consists of the following as of December 31, 1998 and
1999:

<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
Office and computer equipment.......................... $ 126,638 $ 167,550
Automobiles............................................ 45,779 65,422
Leasehold improvements................................. 29,806 111,828
--------- ---------
202,223 344,800
Less-accumulated depreciation and amortization......... (113,209) (168,879)
--------- ---------
$ 89,014 $ 175,921
========= =========
</TABLE>

(5) Accrued Expenses

Accrued expenses consists of the following as of December 31, 1998 and 1999:

<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Accrued salaries and commissions.......................... $134,053 $425,784
Accrued vacation.......................................... 20,138 49,116
Accrued interest--related party........................... 81,483 --
Other accrued expenses.................................... 43,522 20,269
-------- --------
$279,196 $495,169
======== ========
</TABLE>

F-12
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(6) Notes Payable--Related Parties

Notes payable-related parties are notes held by stockholders of the Company.
As of December 31, 1998, notes payable in the amount of $241,136 were
unsecured, bore interest at nine percent per annum, and were due upon demand.
Accrued interest related to these notes totaled $43,929 as of December 31,
1998. During 1999, the Company converted the Notes payable-related parties
aggregating $308,139 from interest-bearing to non-interest-bearing convertible
notes, and the stockholders forgave the associated accrued interest. The
forgiveness of the interest was treated as a capital contribution. Interest
expense related to these notes amounted to $25,255, $43,929 and $0 for the
years ended December 31, 1997, 1998 and 1999, respectively. These notes are
convertible at the option of the holder into Series A Preferred Stock at a
conversion rate of $2.75 per share, subject to certain adjustments. The notes
are payable upon an initial public offering.

(7) Accrued Compensation--Stockholder

As of December 31, 1998 and 1999, the Company owed a stockholder/officer of
the Company $55,381 in deferred salaries. The amount is attributed to unpaid
salaries for the period from 1988 to 1994. The deferred salaries and interest
are payable upon demand. The Company has accrued interest related to the
liability at the rate of nine percent per annum through 1998 at which point
further interest was waived. Accrued interest amounted to $37,554 and $0 as of
December 31, 1998 and 1999, respectively. The amounts were paid during 2000.

(8) Income Taxes

Net deferred tax amounts consist of the following components as of December
31, 1998 and 1999:

<TABLE>
<CAPTION>
1998 1999
-------- ---------
<S> <C> <C>
Deferred tax liabilities--property and equipment........... $ 3,059 $ --
-------- ---------
Deferred tax assets:
Property and equipment................................... -- 22,311
Accrued salaries......................................... 22,974 22,974
Allowance for doubtful accounts.......................... 4,978 29,393
Accrued vacation......................................... 8,354 19,493
Equity based compensation................................ -- 100,599
Net operating loss carryforward.......................... 18,246 622,938
-------- ---------
54,552 817,708
-------- ---------
51,493 817,708
Less valuation allowance................................. (51,493) (817,708)
-------- ---------
$ -- $ --
======== =========
</TABLE>

Income tax expense charged to operations for the years ended December 31,
1997, 1998 and 1999, consists of the following:

<TABLE>
<CAPTION>
1997 1998 1999
--------- ----- -----
<S> <C> <C> <C>
Current tax (benefit):
Federal................................................ $(119,716) $ -- $ --
State.................................................. (54,193) $ -- $ --
--------- ----- -----
$(173,909) $ -- $ --
========= ===== =====
</TABLE>

F-13
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

The income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate to pretax income for the years ended
December 31, 1997, 1998 and 1999 due to the following:

<TABLE>
<CAPTION>
1997 1998 1999
--------- -------- ---------
<S> <C> <C> <C>
Computed "expected" tax benefit............ $(143,821) $(27,665) $(650,954)
Increase (decrease) in income taxes
resulting from:
Other nondeductible expense.............. 10,492 5,437 5,027
State income taxes, net of federal tax
benefit................................. (42,216) (8,120) (120,298)
Other.................................... (35,554) 16,045 --
Increase in valuation allowance.......... 37,190 14,303 766,225
--------- -------- ---------
Total.................................. $(173,909) $ -- $ --
========= ======== =========
</TABLE>

There was no income tax expense (benefit) for the years ended December 31,
1998 or 1999. Net operating loss carryforwards (NOLs) as of December 31, 1998
and 1999 are approximately $43,900 and $1,874,850, respectively, which will
expire, if unused, through 2019.

The realization of the benefits of the NOLs is dependent on sufficient
taxable income in future years. Lack of future earnings, a change in the
ownership of the Company, or the application of the alternative minimum rules
could adversely affect the Company's ability to utilize NOLs. Deferred income
taxes reflect the net tax effects of temporary differences between the carrying
amount of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will be realized. The ultimate realization of the deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which the temporary differences become deductible. Management considers taxes
paid during the previous three years, scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies that
can be implemented by the Company in making this assessment. Management has
established a valuation for the full amount of the net deferred tax assets at
December 31, 1998 and 1999. The net change in the valuation allowance during
the years ended December 31, 1998 and 1999 was an increase of $14,303 and
$766,225, respectively.

(9) Royalty Agreement

In 1997, the Company renewed a Data License agreement with Survey Sampling,
Inc. to receive royalties on Survey Sampling's sale of voter data. The
agreement allowed for the Company to receive cash advances against future
royalties earned, with additional royalties being paid on each six-month
anniversary of the agreement for royalties due less the applicable cash
advances paid against the royalties. The amount of royalty income receivable
included as a component of other receivables was $19,811 and $8,405 as of
December 31, 1998 and 1999, respectively. Royalty income included as a
component of other income was $8,456, $46,267 and $23,558 for the years ended
December 31, 1997, 1998 and 1999, respectively.

(10) Stockholders' Equity

The Company's Certificate of Incorporation, as amended, authorizes the
Company to issue 10,000,000 shares of Common Stock and 1,400,000 shares of
Series A Preferred Stock.

F-14
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

As of December 31, 1999, the Company had reserved shares of common stock for
future issuance as follows:

<TABLE>
<S> <C>
Conversion of Series A Preferred Stock.......................... 1,741,562
Exercise of stock options....................................... 1,135,748
---------
2,877,310
=========
</TABLE>

(11) Convertible Preferred Stock

The Convertible Preferred Stock, as of December 31, 1999, consisted of
1,272,727 shares of Series A Preferred Stock (the "Series A"), par value $.001
per share and an original cost of $2.75 per share. The holders of the Series A
have the following rights and preferences:

(a) Voting Rights and Protective Provisions

The holders of Series A may vote with the common stockholders as a single
class on all actions taken by the stockholders on an as-if converted basis. The
holders of Series A are also entitled to separately elect two members of the
Board of Directors. The holders also have a right of first refusal to match the
purchase price for any issuance of stock to retain their voting interest in the
Company. Furthermore, consent of the holders of at least a majority of the
Series A is necessary for (i) liquidation, sale or disposal of 50% of the
voting power of the Company, (ii) modification of the rights, preferences or
privileges of the Series A shares, (iii) issuance of any stock with a
liquidation preference to the Series A shares, or (iv) a change in the number
of the authorized Series A.

(b) Dividends

The Series A is entitled to dividends at a rate of $0.22 per year upon the
declaration of a dividend by the Company. The dividends are not cumulative. No
dividends have been declared or paid for any period presented.

The Series A is senior to all common stock and has a liquidation preference
of $2.75 per share, plus any declared and unpaid dividends. After the
preference has been paid, Series A stockholders share on an equal basis with
the common stockholders until total payments to the Series A stockholders have
received 300% of the original cost of $2.75, including preference payments.

(d) Redemption

The stock is not redeemable; however, a change of control of the Company
represents a liquidation as defined by the Certificate of Incorporation. As the
redemption upon the change of control of the Company is outside of the
Company's control, the Series A Convertible Preferred Stock is presented
separately from stockholders' equity (deficit).

(e) Conversion

The Series A is immediately convertible into common stock at the option of
the holder at a rate of $2.01 per share. Additionally, the stock will
automatically convert upon the closing of an initial public offering with
proceeds of at least $15 million or upon the consent of two-thirds of the
Series A stockholders.

(f) Dilution Provisions

The Series A includes provisions adjust the conversion price should any
stock be sold at a price below the $2.75 per share (pre split) paid by the
Series A stockholders.

F-15
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(12) Employee Benefit Plans

(a) 401(k) Plan

The Company established a defined contribution profit sharing plan for those
resident employees who have completed one year of service or 1,000 hours and
have reached 21 years of age. Annual contributions to the plan are composed of
discretionary amounts. Discretionary contributions are based on an integrated
formula. The Company did not make matching contributions for the years ended
December 31, 1997 and 1998. For 1999, the Company made a matching contribution
of $45,000. After six years of service, a participant shall be 100 percent
vested. The Company can terminate the plan at any time.

(b) Stock Option Plan

In March 1999, the Company's Board of Directors authorized the adoption of a
stock option plan. The Company has reserved up to 1,135,748 shares for issuance
under the stock option plan. All of the Company's employees, officers,
directors, consultants and advisors are eligible to be granted options under
the stock option plan. The exercise price and duration of the options are
determined by the Board at the date of grant. Vesting of these options is
generally 25 percent upon the first anniversary of the date of grant with the
remaining amount vesting ratably over a period of four years. The options
generally expire in ten years.

The following table summarizes outstanding and exercisable options for the
year ended December 31, 1999:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ----------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 12/31/99 Contractual Life Exercise Price at 12/31/99 Exercise Price
--------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$1.10 277,095 9.3 years $0.53 147,159 $1.10
1.71 30,788 9.7 years 0.09 -- --
2.01 271,002 9.8 years 0.93 -- --
------- -------
578,885 9.6 years 1.55 147,159 1.10
======= =======
</TABLE>

The per share weighted average fair value of the options granted during 1999
was $0.85. The fair value of each option grant is estimated on the date of
grant, using the Black-Scholes options-pricing model with the following
weighted-average assumptions as of December 31, 1999:

<TABLE>
<S> <C>
Average dividend yield................................................. --
Expected life in years................................................. 5.0
Risk-free interest rate................................................ 5.38%
Expected volatility.................................................... --
</TABLE>

During 1999, the Company issued options to purchase 34,256 common shares to
nonemployee consultants. As a result, the Company recorded equity-based expense
of approximately $52,000 in 1999. As of December 31, 1999, the weighted-average
exercise price of these options was $1.37.

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock options. As a result, the Company recorded equity-
based compensation expense of approximately $170,000 relating to options to
purchase 307,883 shares granted in 1999 equal to the difference between the
fair market value of the Company's common stock on the grant date and the
exercise price of the options.

SFAS No. 123 requires pro forma net income (loss) disclosures as if the
Company had accounted for its stock options granted under the fair value method
prescribed by that statement. Had the Company used the fair

F-16
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

value methodology for determining compensation expense, the following table
presents the pro forma net loss that would have been recorded by the Company
for options granted during 1999:

<TABLE>
<S> <C>
Net loss:
As reported.................................................. $(1,914,571)
Pro forma.................................................... (2,028,509)
Net loss per share--basic and diluted:
As reported.................................................. (0.47)
Pro forma.................................................... (0.50)
</TABLE>

(13) Legal Settlement

During the year ended December 31, 1998, the Company reached a settlement
with a vendor regarding breach of contract. The vendor agreed to pay the
Company $650,000 in consideration of the mutual release of all parties. The
Company recognized other income of $650,000 in the year ended December 31,
1998.

(14) Commitments and Contingencies

(a) Capital and Operating Leases

The Company leases its office space under various noncancelable agreements
expiring through November 2002 and accounted for as operating leases. The
basic rentals are subject to increases each year for operating expenses and
real estate taxes. During 1999, the Company entered into a leasing agreement
to finance the purchase of an automobile.

Aggregate minimum rental payments under noncancelable leases as of December
31, 1999, are as follows:

<TABLE>
<CAPTION>
Operating Capital
--------- -------
<S> <C> <C>
2000.................................................... $193,000 $ 5,211
2001.................................................... 86,000 5,211
2002.................................................... 61,000 5,210
2003.................................................... -- 2,795
-------- -------
Total future minimum payments......................... $340,000 18,427
========
Less amount representing interest....................... (3,344)
-------
Present value future minimum lease payments........... 15,083
Less current maturities of obligations under capital
lease.................................................. (3,665)
-------
Obligations under capital lease, net of current
maturities........................................... $11,418
=======
</TABLE>

The Company has entered into an agreement to sublease a portion of the
leased office space that expires in August 1999. The sublease income was $0,
$22,194 and $19,728 for the years ended December 31, 1997, 1998 and 1999,
respectively.

Total rental expense net of sublease receipts charged to operations for the
years ended December 31, 1997, 1998 and 1999 amounted to $82,511, $72,517 and
$117,406, respectively.

(b) Commitments

The Company entered into an agreement in March 1998 with the United States
Postal Service ("USPS") for use of USPS "Fastforward technology" whereby the
Company shall make a yearly payment to the USPS in the amount of $10,000 for
the right to use the technology. The license is contingent upon the Company
making payment to the USPS no less than sixty days prior to the end of a
particular term. The maximum number of terms that the license may be renewed
is ten.

F-17
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

In September 1999, the Company entered into an Employment and Stock
Repurchase Agreement with the Company's founders. The Agreement provides for
annual compensation, severance and relocation packages, and provides for the
Company to repurchase the Company's stock at the Founder's cost upon
termination.

The Company also has employment agreements with other key executives.

(d) Contingencies

The Company is engaged in various litigation in the ordinary course of
business. Management believes that there will be no material adverse effect on
its financial position or results of operations as a result of these matters.

In November 1998 the Company entered into a License, Development and Support
Agreement with a State Legislature. The terms of this agreement required the
Company to develop a customized software and hardware system for the purchaser
at a price of $703,000 plus additional amounts for support, maintenance and
additional custom programming. The purchaser accepted delivery of the hardware
and third-party software in the three-month period ended March 31, 1999 and the
Company recognized revenue of $325,000 associated with this hardware and
software. However, the purchaser has claimed that the customized software does
not meet the specifications contained in the agreement, has failed to make
payments as required by the agreement and has asserted that it has exercised
its right to terminate the agreement. The Company has been negotiating with the
purchaser to settle the disputed payment. Although the purchaser claims that it
has the right to terminate the agreement based upon the Company's alleged
failure to comply with software specifications contained in the agreement, the
Company does not believe it has materially breached the agreement, and thus the
Company believes it has the right to collect the fees under the agreement. The
Company may institute legal proceedings against the purchaser in an effort to
collect the payment. The purchaser could also assert a counterclaim against the
Company alleging that the Company has breached the agreement. Under the
agreement, the Company could be liable to the purchaser for actual and
consequential damages, as well as attorneys' fees, if a court were to find that
the Company breached the agreement. The Company has not recognized any revenue
related to the customized software and related services pending resolution of
the dispute.

The Company has received a letter from a third party engaged in website
design and Web hosting requesting that the Company cease and desist from using
the name Aristotle in connection with its online activities. Although the third
party has a registered trademark for the use of the name Aristotle in
connection with Internet access and website design and hosting, the Company
believes that it has rights to use the name Aristotle in connection with its
political, campaign and advocacy operations. The Company also believes it may
have legal rights to use the name Aristotle in connection with its commercial
and nonprofit activities, however, there is a risk that the Company may not be
able to use the name Aristotle for these activities on the Internet. If the
Company is unable to use its brand name for these activities it would be
required to develop a new brand name for these activities, which could impact
its sales and marketing activities, and therefore its ability to generate
revenue.

(15) Stock Split

On July 6, 2000, the Company filed an amendment to its certificate of
incorporation effecting a common stock split providing 1.368 shares of stock
for each share owned. All share, per share and conversion amounts relating to
common stock and stock options included in the accompanying financial
statements, and accompanying notes, have been retroactively adjusted to reflect
the stock split.

F-18
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

(16) Accumulated Deficit

The Company has suffered recurring losses, has an accumulated deficit and
negative working capital and is dependent upon additional financing which raise
substantial doubt about its ability to continue as a going concern.
Additionally, the Company may not be able to execute its business plan without
additional financing. The Company believes it will obtain the necessary
financing through the proposed initial public offering or other funding.
However, there can be no guarantee that it will be successful in obtaining such
financing. The financial statements do not include any adjustments that might
result from the outcome of that uncertainty.

The Company delayed its initial public offering. However, the Company
continued to execute on its business plan based upon the expected receipt of
the proceeds from this offering. Execution on its business plan has resulted in
increased losses for the company and significant negative cash flows.
Furthermore, the delays in the initial public offering have significantly
increased the Company's professional fees associated with this offering.

F-19
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

UNAUDITED CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
June 30,
2000
-----------
<S> <C>
Assets
Current assets:
Cash............................................................. $ 450,241
Accounts receivable, net......................................... 1,633,991
Income tax receivable............................................ 80,898
Other receivables................................................ 1,785
Prepaid expenses and other current assets........................ 68,283
-----------
Total current assets............................................ 2,235,198
Property and equipment, net...................................... 188,160
Other assets..................................................... 485,054
-----------
$ 2,908,412
===========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current installments of obligations under capital leases......... $ 4,185
Accounts payable................................................. 1,585,179
Accrued expenses................................................. 935,884
Deferred revenue................................................. 1,255,067
Notes payable - related parties.................................. 308,139
-----------
Total current liabilities....................................... 4,088,454
Obligations under capital lease, excluding current portion....... 9,422
-----------
Total liabilities............................................... 4,097,876
-----------
Convertible preferred stock....................................... 3,500,000
-----------
Commitments and contingencies.....................................
Stockholders' equity (deficit):
Common stock, $0.001 par value; 10,000,000 shares authorized;
4,105,112 shares issued and outstanding......................... 4,105
Additional paid-in capital....................................... 522,669
Accumulated deficit.............................................. (5,216,238)
-----------
(4,689,464)
-----------
$ 2,908,412
===========
</TABLE>

F-20
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1999 2000
---------- -----------
<S> <C> <C>
Revenue:
Products............................................ $1,397,471 $ 1,993,231
Services............................................ 479,543 814,362
---------- -----------
Total revenue...................................... 1,877,014 2,807,593
---------- -----------
Cost of revenue:
Products............................................ 479,784 510,422
Services............................................ 117,580 240,484
---------- -----------
Total cost of revenue.............................. 597,364 750,906
---------- -----------
Gross profit......................................... 1,279,650 2,056,687
---------- -----------
Operating expenses:
General and administrative.......................... 984,556 2,202,692
Sales and marketing................................. 634,096 2,081,189
Research and development............................ 183,419 584,755
---------- -----------
Total operating expenses........................... 1,802,071 4,868,636
---------- -----------
Loss from operations................................. (522,421) (2,811,949)
Other income (expense)............................... 59,939 --
Interest income...................................... -- 25,967
Interest expense..................................... (6,652) (1,129)
---------- -----------
Loss before income taxes............................. (469,134) (2,787,111)
Benefit from income taxes............................ -- --
---------- -----------
Net loss............................................. $ (469,134) $(2,787,111)
========== ===========
Basic and diluted net loss per share applicable to
common stockholders................................. $ (0.11) $ (0.68)
========== ===========
Shares used to compute basic and diluted net loss per
share applicable to common stockholders............. 4,105,112 4,105,112
========== ===========
</TABLE>

F-21
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1999 2000
--------- -----------
<S> <C> <C>
Reconciliation of net loss to net cash used in
operating activities:
Net loss.............................................. $(469,134) $(2,787,111)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization......................... 21,358 48,332
Provision for bad debts............................... 39,065 63,200
Loss on disposal of property and equipment............ 8,282 --
Equity-based compensation expense..................... 213,357 113,680
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable.................................. (359,450) (693,464)
Prepaid expenses and other current assets............ 129,857 42,999
Increase (decrease) in:
Accounts payable..................................... 57,847 857,425
Accrued expenses..................................... 14,834 440,715
Deferred revenue..................................... 248,436 483,562
--------- -----------
Net cash used in operating activities............... (95,548) (1,430,662)
--------- -----------
Cash flows used in investing activities:
Purchase of property and equipment.................... (2,495) (60,571)
(Increase) decrease in security deposits.............. (2,848) 1,500
--------- -----------
Net cash used in investing activities............... (5,343) (59,071)
--------- -----------
Cash flows provided by (used in) financing activities:
Principal payments on obligations under capital
lease................................................ -- (1,476)
Proceeds from loans from stockholders................. 161,000 --
Repayments on loans from stockholders................. (128,997) --
Costs incurred for initial public offering............ -- (463,506)
--------- -----------
Net cash provided by (used in) financing
activities......................................... 32,003 (464,982)
--------- -----------
Net decrease in cash................................ (68,888) (1,954,715)
Cash and cash equivalents:
Beginning of year..................................... 44,399 2,404,956
--------- -----------
End of six month period............................... $ (24,489) $ 450,241
========= ===========
Supplemental disclosure of cash flow information:
Cash paid during the six-month period for interest.... $ 6,652 $ 1,129
</TABLE>

F-22
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

(1) Basis of Presentation

In the opinion of management, the accompanying unaudited condensed financial
statements reflect all adjustments, consisting of only normal recurring
accruals, necessary for a fair presentation of the financial position of
Aristotle International, Inc. (the "Company") as of June 30, 2000, and the
results of operations and cash flows for the six months ended June 30, 1999 and
2000. The results of operations for the six months ended June 30, 1999 and 2000
are not necessarily indicative of the results that may be expected for the full
year. These condensed financial statements are unaudited, and do not include
all related footnote disclosures.

The interim unaudited condensed financial statements should be read in
conjunction with the audited financial statements of the Company.

(2) Stock Option Plan

Transactions relating to the stock option plan for the six months ended June
30, 2000 are summarized below:

<TABLE>
<CAPTION>
Outstanding options Outstanding options to
to employees consultants
------------------------ ------------------------
Weighted Weighted
Number Average Number Average
of Shares Exercise Price of Shares Exercise Price
--------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Balance, January 1, 2000..... 578,885 $1.55 34,256 $1.37
Options granted............ 186,148 2.36 6,840 5.48
Options canceled........... (18,470) 2.27 -- --
Options exercised.......... -- -- -- --
------- ------
Balance, June 30, 2000....... 746,563 1.74 41,096 2.06
======= ======
</TABLE>

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock options. As a result, the Company recorded equity-
based compensation expense of approximately $114,000 during the six-month
period ended June 30, 2000 relating to options issued with an exercise price
below the fair value of the underlying stock at the date of grant.

(3) License of United Kingdom Voter Records

On February 21, 2000 the Company entered into an agreement with a third party
to license voter records in the United Kingdom. For the use of these records,
the Company will pay 50% of its after tax revenues generated from the use of
the licensed data. The contract also provides for minimum per record royalties
based upon the total number of records licensed to third parties. The Company
made a non-refundable deposit of approximately $15,000 which will be used to
offset the initial royalties. The agreement expires in 2003 with the right to
use the voter records expiring one year later.

(4) Contingencies

The Company has received letters dated February 29, 2000 through June 22,
2000 from an entity which offers Internet access and website design and Web
hosting services under the name Aristotle requesting that the Company cease
using the name Aristotle in connection with website design and hosting
services, the Company's domain name and provide disclaimers of affiliation. The
entity has a registered trademark for the use of the name Aristotle in
connection with Internet access, website design and hosting services and domain
name.

F-23
<PAGE>

ARISTOTLE INTERNATIONAL, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS--(Continued)

(5) Formation of Subsidiary

On March 21, 2000 the Company formed a wholly owned subsidiary,
AristotleOnline.com Limited. This subsidiary had insignificant activity through
July 7, 2000.

(6) Notes Payable--Related Parties

Effective May 1, 2000 the Company was notified by the holders of the notes
payable-related parties of their intent to convert the notes to Series A
Preferred Stock upon an effective initial public offering, which will also
result in a conversion of the Series A Preferred Stock issued into 153,326
shares of common stock.

(7) Joint Marketing and Development Agreement

On June 29, 2000, the Company entered into a Joint Marketing and Development
Agreement with an Internet security company. This three year agreement enables
the Internet security company to access the Company's database of registered
voters via the Internet to assist with authentication of personal information
or credentials of its or its clients' prospects or customers. In exchange for
this access, the Internet security company agrees to pay the Company a
contractual rate per "authentication."

(8) Subsequent Events

On July 21, 2000 the Company amended its agreement with a Web portal company.
Under the terms of the amended agreement the Company committed to purchasing
$5.5 million of services over a term of 24 months, principally targeted
advertisement management and the purchase of e-mail addresses, $3.5 million of
which must be purchased prior to September 30, 2000. Concurrently the counter
party purchased $350,000 in matching services and licensed data for a period of
thirty months. The license fee includes a $100,000 fixed payment and a
percentage of amounts received for sales to third parties. On June 30, 2000,
the Company delivered its data lists to the counterparty and recognized the
associated revenue during the six-month period ended June 30, 2000. The
$100,000 fixed license fee will be recognized on a straight line basis over the
contract term. Amounts due from the revenue sharing will be recognized on a net
basis when reported by the counterparty. Because the Company takes the risks
and rewards of ownership for the advertising space acquired pursuant to this
Agreement, revenue from the targeted advertisements sold will be recognized as
gross revenue net of agency commissions.

On July 6, 2000, the Company effected a 1.368-for-1 common stock split. The
effects of the stock split have been retroactively reflected in the unaudited
condensed financial statements for all periods presented. All references to the
number of common shares or per share amounts have been restated.

F-24
<PAGE>

[INSIDE BACK COVER]

<PAGE>

Description of Graphics: Approximately one-third of the way down the page,
the text "ARISTOTLE(TM)" is centered across the page in approximately 1 inch
font. Immediately below that, the text "www.aristotle.com" is centered in
bold, approximately 14 point font.

Until , 2000, 25 days after the date of this offering, all dealers
that effect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the dealer's obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the sale of common stock being registered. All amounts are estimates,
except the registration fee and the NASD filing fee.

<TABLE>
<CAPTION>
Amount
to be Paid
----------
<S> <C>
SEC Registration Fee.............................................. $8,501
NASD Filing Fee................................................... 3,500
Nasdaq National Market Listing Fee................................ *
Printing and Engraving............................................ *
Legal Fees and Expenses........................................... *
Accounting Fees and Expenses...................................... *
Blue Sky Fees and Expenses........................................ *
Transfer Agent Fees............................................... *
Director & Officer Liability Insurance (1933 Act Premiums)........ *
Miscellaneous..................................................... *
------
Total........................................................... $ *
======
</TABLE>
--------
* To be completed on amendment.

Item 14. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act").

As permitted by Delaware General Corporation Law, the registrant's
certificate of incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty as
a director, except to the extent that exculpation from liability is not
permitted under the Delaware General Corporation Law as in effect at the time
such liability is determined.

As permitted by the Delaware General Corporation Law, the bylaws of the
registrant provide for indemnification of the registrant's directors, officers,
employees and other agents to the extent and under the circumstances permitted
by the Delaware General Corporation Law.

The registrant intends to enter prior to the closing of this offering into
agreements with its directors and executive officers that will require the
registrant, among other things, to indemnify them for certain liabilities that
may arise by reason of their status or service as directors or executive
officers to the fullest extent not prohibited by law.

The registrant intends to purchase directors and officers liability insurance
prior to the closing of this offering.

Reference is also made to the Underwriting Agreement, which provides for the
indemnification of officers, directors and controlling persons of the
registrant against certain liabilities.

II-1
<PAGE>

Item 15. Recent Sales of Unregistered Securities

During the past three years, the following securities were sold or issued by
the registrant without registration under the Securities Act:

(a) Issuances of capital stock:

In September 1999, the registrant issued and sold 1,272,727 shares of
Series A Preferred Stock to three investors for an aggregate purchase price
of $3,500,000, as follows:

. W.R. Hambrecht/Aristotle, LLC--727,273 shares;

. ePartners--363,636 shares; and

. Odyssey Capital II, LLC--181,818 shares.

Messrs. Donatiello and Hambrecht, directors of our company, either control or
are affiliated with W.R. Hambrecht/Aristotle, LLC and Mr. Donatiello is a
managing member of ePartners and Odyssey Capital II, LLC. These sales were
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act, or Regulation D promulgated thereunder.

(b) Grants of stock options:

The registrant's 1999 Stock Option Plan was adopted by the board of
directors in 1999 and provides for stock option grants to employees,
directors and consultants. The registrant has granted at various times
since March 31, 1999 options for 806,129 shares of common stock at a
purchase price of between $1.10 per share and $5.48 per share. The grant of
these options were deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section
3(b) of the Securities Act, as transactions by an issuer not involving a
public offering or transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under Rule 701.

In September 1999, the registrant issued a convertible promissory note in
the amount of $308,139, without interest, in satisfaction of certain
payments made to it by John A. Phillips and Dean A. Phillips. The note is
convertible upon demand of the holders into Series A Preferred Stock, which
is in turn convertible into 153,326 shares of common stock at the closing
of this offering. By the Agreement and Notice of Conversion effective May
1, 2000, the holders notified the Company of their demand to convert the
note into Series A Preferred Stock, and subsequently into common stock, at
the closing of this offering. The number of shares subject to the
conversion is determined by dividing the then outstanding principal amount
of the Note by the original Series A issue price of $2.75, as established
in the registrant's Restated Certificate of Incorporation, and making
certain adjustments to account for the Company's July 6, 2000 stock split
as described in Article IV(B)(4)(d) therein. These sales were deemed to be
exempt from registration under the Securities Act in reliance on Section
4(2) of the Securities Act, or Regulation D promulgated thereunder.

The recipients of securities in each of the above transactions represented
their intention to acquire the securities for investment only and not with view
to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates and instruments issued in such
transactions. All recipients had adequate access, through their relationship
with the Registrant, to information about the Registrant.

II-2
<PAGE>

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
+1.1 Form of Underwriting Agreement.

+3.1 Form of Amended and Restated Certificate of Incorporation of Aristotle
International, Inc.

+3.2 Form of Amended and Restated Bylaws of Aristotle International, Inc.

+4.1 Form of Stock Certificate.

+4.2 Aristotle Publishing, Inc., Investors' Rights Agreement, dated as of
September 17, 1999, by and among the registrant and the parties who
are signatories thereto.

+4.3 Agreement and Notice of Conversion.

*5.1 Opinion of Pillsbury Madison & Sutro LLP.

+10.1 Registrant's 1999 Stock Option Plan.

+10.2 Form of Registrant's 2000 Omnibus Equity Incentive Plan.
+10.3 Employment and Stock Repurchase Agreement, dated as of September 17,
1999, by and between the registrant and John A. Phillips.

+10.4 Employment and Stock Repurchase Agreement, dated as of September 17,
1999, by and between the registrant and Dean A. Phillips.

+10.5 Letter Agreement, dated as of October 6, 1999, by and between the
registrant and Rob Christ.

+10.6 Letter Agreement, dated as of November 2, 1999, by and between the
registrant and Blair Richardson.

+10.7 Letter Agreement, dated as of May 25, 1995 by and between the
registrant and Gordon N. Nahlik [Stoll].

+10.8 Form of Directors and Officers' Indemnification Agreement.
+10.9 Agreement, dated as of February 9, 1998, between the registrant and
Central Address Systems, Inc.

+10.10 Lease Agreement, dated as of September 28, 1999, between the
registrant and Colleen Brent, Leland Dobbs and Barrett G. Levine.

+10.11 Office Lease Agreement, dated as of January 15, 2000, between the
registrant and Council on American-Islamic Relations.

+10.12 Lease Agreement, dated September 30, 1996, between the registrant and
Sidney S. Zlotnick and Renee Z. Kraft.

+10.13 Form of Proprietary Information and Inventions Agreement.

+10.14 Form of Registrant's 2000 Employee Stock Purchase Plan.

+10.15 Form of Charter of the Aristotle International, Inc. Audit Committee.

+10.16 Form of Charter of the Aristotle International, Inc. Compensation
Committee.

+10.17 License Agreement, dated February 2, 2000, between the registrant and
National Homemovers Database Limited.

+10.18 Joint Marketing and Development Agreement, dated June 29, 2000,
between the registrant and VeriSign, Inc.

+10.19 MatchLogic Master Services Agreement, dated June 30, 2000, between the
registrant and MatchLogic, Inc.

+10.20 Amendment to MatchLogic Master Services Agreement, dated July 21,
2000, between the registrant and MatchLogic, Inc.

+10.21 End-User License Agreement between the registrant and Microsoft
Corporation.

+16.1 Accountant's Letter

16.2 Accountant's Letter

23.1 Consent of KPMG LLP, Independent Auditors.
</TABLE>

II-3
<PAGE>

<TABLE>
<C> <S>
23.2 Consent of Keller Bruner & Company, LLP.

*23.3 Consent of Pillsbury Madison & Sutro LLP (contained in their opinion
filed as Exhibit 5.1).

23.4 Consent of John Despres.

+24.1 Power of attorney (reference is made to Page II-4).

+27.1 Financial Data Schedule for Aristotle International, Inc.
</TABLE>
--------
* To be filed by amendment
+ Previously filed

(b) Financial Statement Schedules

See Schedule II previously filed.

Item 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

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

The undersigned registrant hereby undertakes that:

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

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

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 4 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California, on the 1st day of September, 2000.

ARISTOTLE INTERNATIONAL, INC.

/s/ John A. Phillips
By: _________________________________
John A. Phillips
Chief Executive Officer and
Director

<TABLE>
<CAPTION>
Name Title Date
---- ----- ----

<S> <C> <C>
/s/ John A. Phillips Chief Executive Officer and September 1, 2000
______________________________________ Director (Principal Executive
John A. Phillips Officer)

/s/ T. Robert Christ Chief Financial Officer September 1, 2000
______________________________________ (Principal financial Officer
T. Robert Christ and Principal Accounting
Officer)

Dean A. Phillips* President and Director September 1, 2000
______________________________________
Dean A. Phillips

Nicholas Donatiello, Jr.* Director September 1, 2000
______________________________________
Nicholas Donatiello, Jr.

Esther Dyson* Director September 1, 2000
______________________________________
Esther Dyson

William R. Hambrecht* Director September 1, 2000
______________________________________
William R. Hambrecht

*By: /s/ John A. Phillips
______________________________________
John A. Phillips
Attorney-in-Fact
</TABLE>

II-5
<PAGE>

EXHIBIT INDEX