<PAGE>
As filed with the Securities and Exchange Commission on June 30, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM SB-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
Yorktownuniversity.com, Inc.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
Virginia 8221 54-1948373
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or organization) Classification Code No.) Identification No.)
</TABLE>
P.O. Box 653
Yorktown, Virginia 23690
757.873.1100
(Address and telephone number of principal executive offices)
P.O. Box 653
Yorktown, Virginia 23690
(Address of principal place of business or intended principal place of business)
Richard J. Bishirjian, Ph.D.
P.O. Box 653
Yorktown, Virginia 23690
757.873.1100
(Name, address and telephone number of agent for service)
Copies of all communications to:
David G. Edwards
Doepken Keevican & Weiss
58th Floor, USX Tower
600 Grant Street
Pittsburgh, Pennsylvania 15219
412.355.2743
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please 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. [_]
CALCULATION OF REGISTRATION FEE
Proposed
Title of each class of maximum aggregate Amount of
securities to be registered offering price (1) registration fee
--------------------------- ------------------ ----------------
Common Stock................. $4,500,000 $1,188
--------------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
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, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to such Section
8(a), may determine.
<PAGE>
We will amend and complete the information in this prospectus. Although we are
permitted by US federal securities law to offer these securities using this
prospectus, we may not sell them or accept your offer to buy them until the
documentation filed with the SEC relating to these securities has been declared
effective by the SEC. This prospectus is not an offer to sell these securities
or our solicitation of your offer to buy these securities in any jurisdiction
where that would not be permitted or legal.
SUBJECT TO COMPLETION--June 30, 2000
Prospectus
, 2000
Yorktownuniversity.com, Inc.
450,000 Shares of Common Stock
<TABLE>
<S> <C>
. Yorktownuniversity.com is a recently formed . This is our initial public offering, and no
for-profit university which proposes to offer public market currently exists for our shares.
through the Internet for-credit college level
and continuing education courses in the . We plan to use the proceeds from this
humanities and social sciences that reflect offering to develop, promote and begin
conservative thinking and philosophies. operating our online university, including,
potentially, by acquiring other courses or
. Yorktownuniversity.com Inc. educational products that are compatible with
P.O. Box 653 our objectives and philosophy, and for other
Yorktown, Virginia 23690 working capital purposes.
757.873.1100
E-mail address: [email protected] . We are selling our stock on a best efforts
basis. This is not an underwritten offering.
. Web sites: The offering will continue until January 31,
www.yorktownuniversity.com 2001, unless all of the shares are earlier
sold or we elect in our sole discretion to
The Offering: earlier terminate or extend the offering.
. We are offering 450,000 shares at $10 per . All subscription funds received will be
share, with a minimum subscription amount of held in escrow and not released to us for our
$1,000 for 100 shares. No existing shareholders use unless and until at least 125,000 shares
are selling shares in the offering. The shares ($1,250,000) are sold prior to the termination
are being offered directly by of the offering. If this minimum offering
Yorktownuniversity.com, principally through the amount is not achieved, all subscription funds
Internet. will be returned to the subscribers, without
interest.
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Per Share (1) Minimum Offering (1) Maximum Offering (1)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proceeds to Yorktownuniversity.com: $10 $1,250,000 $4,500,000
----------------------------------------------------------------------------------------------------
</TABLE>
__________________
(1) Excluding estimated expenses of the offering of $75,000, all of which will
be borne by Yorktownuniversity.com. See "Use of Proceeds."
Yorktownuniversity.com does not intend to pay any selling compensation or
finders' fees in connection with the offering. See "Plan of Distribution."
This investment involves risks. See "Risk Factors" beginning on page 5.
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Prospectus Summary...................................................... 3
The Offering............................................................ 4
Risk Factors............................................................ 5
Use of Proceeds......................................................... 11
Dividend Policy......................................................... 12
Capitalization.......................................................... 12
Dilution................................................................ 13
Determination of Offering Price......................................... 14
Management's Discussion and Analysis of Certain Relevant Factors........ 14
Business................................................................ 14
Management.............................................................. 30
Principal Stockholders.................................................. 33
Description of Capital Stock............................................ 34
Certain Transactions.................................................... 36
Shares Eligible for Future Sale......................................... 37
Plan of Distribution.................................................... 38
Experts................................................................. 39
Legal Matters........................................................... 39
Additional Information.................................................. 39
Index to Financial Statements........................................... F-1
Annex A - Form of Subscription Agreement................................ A-1
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read this entire prospectus carefully. This prospectus contains
forward-looking statements, which involve risks and uncertainties.
Yorktownuniversity.com's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this prospectus.
Yorktownuniversity.com Inc.
Yorktownuniversity.com proposes to establish and operate an online
university offering courses in government, business, economics, philosophy and
other humanities disciplines taught by leading conservative scholars.
Yorktownuniversity.com proposes to offer courses that examine contemporary
problems of government, of American society and national security from a deeper,
philosophical, and historical tradition than is commonly found in American
education. Yorktownuniversity.com proposes to offer college level degree
courses and continuing education courses targeted to the following persons:
. High school and home school students who desire to take college level
courses for credit.
. Adult, working students, ages 24 to 45, seeking the BA degree.
. Officers and enlisted military personnel taking courses relative to their
employment as military professionals.
. Adults, over the age of 45, seeking intellectual enrichment or engaged in
a personal spiritual quest.
. Traditional college age students enrolled in other four year
undergraduate programs taking courses for transfer credit or looking for
conservative faculty to guide them in their field of interest.
Yorktownuniversity.com does not intend to offer courses in all subject
areas necessary to earn a college degree, but, rather, to focus on courses in
the disciplines catering to the political, economic and social interests of our
conservative students. Students entering Yorktownuniversity.com's degree
programs must have earned a minimum of 30 academic credits. See "Business -
B.A. Programs." Yorktownuniversity.com will seek accreditation for its degree
programs from the Department of Education's designated accrediting body for
distance education providers, which it anticipates will occur not earlier than
three years after beginning operations and will seek accrediting from a regional
accrediting body, which it anticipates will occur not earlier than five years
after beginning operations.
We believe that many working adults are seeking degree programs that
provide flexibility to accommodate the fixed schedules and time commitments
associated with their professional and personal obligations. The Internet
provides a platform that enables working adult students to attend classes and
complete coursework on a more convenient schedule. In addition to offering
broader access, we believe that online learning degree programs, such as those
proposed to be offered by Yorktownuniversity.com, provide course content and
faculty instruction that compare favorably to a traditional campus-based
education.
3
<PAGE>
Yorktownuniversity.com is named for Yorktown, the port city that was the
site of the concluding battle of America's War of Independence. There, American
and French forces, at land and sea, defeated the British forces under the
command of Lord Cornwallis.
The Offering
Common stock offered 450,000 shares
Offering price $10.00 per share
Minimum subscription amount $1,000 (100 shares)
Subscription Subscribers must complete and return the
subscription agreement attached as Annex
A.
Minimum offering 125,000 shares
Escrow Agent Firstar Bank, N.A.
Common stock to be outstanding
after this offering if all shares
sold 928,166 shares
Use of proceeds We plan to use the proceeds from this
offering to develop, promote and begin
operating our on-line university,
including, potentially, by acquiring
other courses or educational products
that are compatible with our objectives
and philosophy, and for other working
capital and general corporate purposes.
The share information above is based upon shares outstanding as of the
date of this prospectus and excludes shares that may be issued upon the exercise
of options. Unless otherwise indicated, all information contained in this
prospectus reflects the conversion of our outstanding convertible preferred
stock into our common stock.
4
<PAGE>
RISK FACTORS
An investment in Yorktownuniversity.com common stock involves a high degree
of risk. You should consider carefully the following information about these
risks, together with the other information contained in this prospectus, before
you decide to buy Yorktownuniversity.com common stock. Our business, financial
condition, or results of operations could be adversely affected by any of these
risks. The trading price of Yorktownuniversity.com common stock could decline
due to any of these risks, and you may lose part or all of your investment.
Risks Related to Our Business
We expect to generate operating losses and negative cash flow for the
foreseeable future.
We expect to generate operating losses and negative cash flow for the
foreseeable future as we intend to invest heavily to attract more students. We
will incur additional expenses for hiring new faculty and counselors, expanding
our product offering, and increasing our brand awareness. Accordingly we will
need to generate significant revenues to achieve profitability.
We may not be able to attract the number of students needed to generate
sufficient revenues to sustain our online university.
The concept of an online university designed to advance conservative
thinking is unique and has not been attempted by any other operator. In
particular, we may have difficulty promoting our university to prospective
students unless and until it receives accreditation. Consequently, we do not
know if our concept will find acceptance. We may be unable to attract the
number of students we need to sustain our online university.
We have no operating history by which you can assess our likely performance.
The Company is newly organized and has no operating history with which to
evaluate its likely performance. An investment in the Company involves certain
and significant risk factors that prospective investors should consider before
subscribing to purchase shares in the Company. Some of these risks relate to
our ability to:
. recruit faculty
. maintain Internet operations
. enroll students in degree programs before accreditation
. attract, motivate and retain qualified employees
. build a management system to manage growth
. build and upgrade essential technologies
. train staff in complex software systems
. train faculty to convert from the classroom to the Internet
. program, produce, and launch courses in a timely fashion
. attract advertisers to our web site and course templates
. manage bookstore operations
. process student financial assistance and loans
We may not be successful in addressing these risks, and the failure to do
so would have a material
5
<PAGE>
adverse effect on our business and financial results.
We cannot adjust expenses for any particular quarter in response to revenue
shortfalls.
Most of our expenses do not vary directly with revenue and are difficult to
adjust in the short term. As a result, if revenue for a particular quarter is
below our expectations, we could not proportionately reduce operating expenses
for that quarter. Any revenue shortfall would therefore have a disproportionate
effect on our expected operating results for that quarter.
Our success depends in part on our ability to develop programs in a cost-
effective manner and on a timely basis.
Our success depends in part on our ability to develop programs in a cost-
effective manner, and meet our students' needs in a timely manner. The
development of our programs may not be accepted by our students or the online
education market. Even if we are able to develop acceptable programs, we may not
be able to introduce these programs as quickly as our students require or as
quickly as our competitors.
Capacity constraints or system disruptions to our computer networks could
damage our reputation and limit our ability to attract and retain students.
The performance and reliability of our program infrastructure is critical
to our reputation and ability to attract and retain students. Any system error
or failure may result in the unavailability of our computer networks.
Individual, sustained, or repeated occurrences could significantly damage our
reputation and result in a loss of potential or existing students. We cannot
assure you that we will be able to expand our program infrastructure on a timely
basis sufficient to meet demand for our programs.
Our computer systems and operations are vulnerable to interruption or
malfunction due to events beyond our control, including natural disasters and
telecommunications failures. Although we have contracted for redundant server
support, our formal disaster recovery plan has never been tested, and business
interruption insurance we purchase, if any, may not be sufficient to compensate
for losses that may occur. Any interruption to our web host's computer systems
or operations could have a material adverse effect on our ability to attract and
retain students.
Our computer networks may be vulnerable to security risks that could disrupt our
operations and require us to expend significant resources.
Our computer networks may be vulnerable to unauthorized access, computer
hackers, computer viruses, and other security problems. A user who circumvents
security measures could misappropriate proprietary information or cause
interruptions or malfunctions in our operations. Due to the sensitive nature of
the information contained on our networks, such as students' grades, our
networks may be targeted by hackers. As a result, we may be required to expend
significant resources to protect against the threat of these security breaches
or to alleviate problems caused by these breaches. Although we intend to
continue to implement industry-standard security measures, these measures may be
inadequate.
We may incur liability for the unauthorized duplication or distribution of class
materials posted online for class discussions.
In some instances, our instructors may post various articles or other
third-party content on the class
6
<PAGE>
discussion board. We may incur liability for the unauthorized duplication or
distribution of this material posted online for class discussions. We cannot
assure you that a third party will not raise a claim against us for the
unauthorized duplication of this material. Any of these claims could subject us
to costly litigation and impose a significant strain on our financial resources
and management personnel regardless of whether the claims have merit. General
liability insurance we purchase, if any, may not cover or be adequate for
potential claims of this type and we may be required to alter the content of our
classes or pay financial damages.
Our management has never operated a university.
Although the members of our board and management include seasoned
businesspersons and academicians, none of these individuals has experience
operating a university. We intend to use a portion of the proceeds of the
offering to recruit individuals with such experience. However, we may not be
able to attract suitable candidates. If our management team is inadequate, we
will likely be unable to effectively and efficiently operate an online
university.
We cannot predict our future capital needs, and we may not be able to secure
additional financing.
We may need to raise additional funds in the future to fund our operations,
to expand our markets and product offerings, or to respond to competitive
pressures or perceived opportunities. We cannot assure you that additional
financing will be available on terms favorable to us, or at all. If adequate
funds are not available when required or on acceptable terms, we may be forced
to cease our operations, and even if we are able to continue our operations, our
ability to increase our students and revenues may be adversely affected.
We depend on licensed technology from third parties and our failure to maintain
these arrangements could disrupt our operations.
We rely on technology licensed from third parties for use in operating and
managing our computer networks. We cannot assure you that these technology
licenses will continue to be available on commercially reasonable terms, that
the technology will operate as intended, or that the technology or appropriate
licenses will be available at all. Our failure to maintain relationships with
these third-party license providers could disrupt our operations.
Our future growth depends on the continued growth of the Internet.
Our business relies on the Internet for its success. If the Internet does
not develop as an effective online educational delivery system, we may not grow
as planned.
A number of factors could inhibit the growth and acceptance of the
Internet, including:
. inadequate Internet infrastructure;
. security and privacy concerns;
. the lack of compelling content; and
. the unavailability of cost-effective, high-speed service.
We intend to generate additional revenue by selling advertisements on our Web
site and due to our lack of experience in generating advertising revenue and
lack of advertising sales personnel this business plan may not be successful.
7
<PAGE>
To date, we have derived no revenue from advertising. We do not have
experience in generating advertising revenue and we do not currently have an
advertising sales force. Our ability to successfully generate revenue through
advertising may require us to locate third-party experts or specialists who
would develop or assist us in developing our advertising business plan. If we
are unable to locate these experts or specialists, we may fail to develop an
advertising business plan, which could constrain our revenue growth.
If our agreements with various portals and e-commerce Web sites do not perform
as expected, it could affect our ability to increase or maintain our
enrollments.
We may rely on agreements with various portals and e-commerce Web sites to
attract potential students to our Web site. These relationships may include
arrangements relating to the positioning of our brand name on Web browsers and
agreements with Internet service providers and portals. We may also rely on
other Web site operators that provide links to our Web site. We cannot assure
you that the services of those companies that provide access or links to our Web
site will achieve market acceptance or commercial success. Accordingly, there
can be no assurance that our existing, or future, relationships will result in
sustained business relationships, new enrollments, or increased revenues. We
believe that our relationships with portals and e-commerce Web sites are
important to our ability to attract potential students and advertisers. The
failure of one or more of these relationships could significantly reduce leads
to our Web site, reduce our enrollments, and limit our revenues.
Our failure to maintain our domain name could negatively impact our business.
We currently hold Internet domain names. Third parties may acquire
substantially similar or conceptually similar domain names that decrease the
value of our domain name and trademarks and other proprietary rights which may
hurt our business. Internet regulatory bodies generally regulate domain names.
The regulation of domain names in the United States and in foreign countries is
subject to change. Regulatory bodies could establish additional top-level
domains, appoint additional domain name registrars or modify the requirements
for holding domain names. The relationship between regulations governing domain
names and laws protecting trademarks and similar proprietary rights is unclear.
As a result, we may not acquire or maintain exclusive rights to our domain name
in the United States or in other countries in which we conduct business.
We may be unable to raise needed additional funds in the future.
We may need to raise additional funds in the future to fund our operations,
to finance substantial investments in equipment and management infrastructure we
will need for our planned growth and expansion, to respond to competitive
pressures and/or perceived opportunities. Additional financing may not be
available on terms favorable to us, or at all. If adequate funds are not
available when required or on acceptable terms, our business and financial
results could suffer.
Risks Related to Our Industry
The market for online learning is in an early stage and may not continue to
develop.
The market for online learning is in an early stage of development and it
currently represents only a small percentage of the overall higher education and
training market. The use of online education and training may not increase as we
anticipate and our programs may not be accepted by students. Also, some
educators are
8
<PAGE>
opposed to online education and have the capacity to negatively influence the
market for our programs. Some critics have also expressed concerns regarding the
perceived loss of control over the educational process that can result from the
outsourcing of online campuses and courses. We may be unable to continue to
increase our number of students and revenues if the higher education and
training market does not more generally accept online learning.
We operate in a highly competitive market with rapid technology changes and we
may not have the resources needed to compete successfully.
Online education is a highly fragmented and competitive market that is
subject to rapid technological change. Competitors vary in size and organization
from traditional colleges and universities, many of which have some form of
online education programs, to for-profit schools, corporate universities, and
software companies providing online education and training software. We expect
the online education and training market to be subject to rapid changes in
technologies. Our success will depend on our ability to adapt to these changing
technologies. We may not have the resources necessary to compete with the
rapidly changing technologies being developed by our competitors.
Changes in the extensive regulations to which we are subject could increase our
cost of doing business or affect our ability to grow.
We are subject to extensive federal and state regulation governing
education. New or revised interpretations of the regulations by any of the
regulatory entities that determine accreditation or state licensing, could
increase our cost of doing business or affect our ability to continue increasing
our number of students and revenue.
We are not accredited and our inability to obtain accreditation would
significantly reduce demand for our programs.
The state of Virginia, in which we operate, maintains significant licensing
standards and requirements including the requirement of waiting periods before
conferring degrees, and scrutiny by the state's Higher Education Council.
Moreover, accreditation of educational organizations in the United States is
governed by accrediting organizations certified by the Department of Education.
Before we may apply for accreditation, we must meet certain accrediting
standards which may include having graduated our first degree candidate.
Thereafter there are significant reviews and standards that must be met touching
on every aspect of the Company's operations. There is no guarantee that the
state of Virginia, nor any regional accrediting body, will grant necessary
licenses, certification or accreditation.
Unless and until we are accredited, we will be unable to participate in
federal financial aid programs. Department of Defense tuition assistance
programs for members of the U.S. military require accreditation by the Distance
Education Training Council. The Higher Education Act of 1965 and the related
regulations adopted by the U.S. Department of Education impose numerous
requirements with which institutions participating in the Title IV programs must
comply. Many of the regulations do not explicitly address or account for online
education programs and it is not always clear how to apply the regulations to
online programs. Moreover, we cannot predict what future regulations the U.S.
Department of Education might promulgate that would directly or indirectly
affect online education programs.
9
<PAGE>
State regulations for distance education are currently uncertain and may require
us to expend significant resources and significantly limit our ability to expand
our business.
Some state regulations for distance education providers are uncertain. We
may have to devote significant time and financial resources in order to comply
with various state laws and regulations, if states determine to regulate online
education or are permitted to tax it. We may not have sufficient resources to
comply with any new laws and regulations that may be enacted, which could
preclude us from operating in one or more states and could significantly limit
our ability to expand our business.
Government regulations relating to the Internet could increase our cost of doing
business or affect our ability to grow.
The increasing popularity and use of the Internet and other online services
for the delivery of education may lead to the adoption of new laws and
regulations in the U.S. or elsewhere. These new laws could relate to issues such
as online privacy, copyright and trademark, sales taxes, and fair business
practices or the requirement that online education institutions qualify to do
business as a foreign corporation or be licensed as a school in one or more
jurisdictions. Any new laws or regulations related to doing business over the
Internet could increase our cost of doing business or affect our ability to
increase our number of students and revenue.
Risks Related to this Offering
We will not have an underwriter to conduct an independent review of this
offering.
The proposed direct public offering will be conducted without an
underwriter. Underwriters customarily take appropriate steps to ensure that the
information contained in the prospectus is accurate and complete. The
underwriter typically participates in the preparation of the prospectus, is
independent of the issues and is represented by separate legal counsel. Since
there will be no underwriter in this offering, investors will not have the
benefit of an independent review and investigation of the prospectus.
There is no market for our shares and you may not be able to sell shares you
hold for what you believe is a fair price.
It is likely that there will be no liquid market for our shares following
this offering, and a market for our shares may never develop. We may not have a
market maker for our shares, in which case any trading of our shares may prove
extremely difficult. Although we intend to explore the possibility of seeking
to have our shares included on the OTC Bulletin Board or listed with alternative
trading systems, even if we are successful in doing so, there can be no
assurance that the volume of trades will be significant. In any of these
events, shareholders may not be able to sell their shares when desired, if at
all, or may not be able realize what they perceive is fair value for their
shares.
The market price of our common stock could fluctuate significantly, subjecting
us to securities class action litigation.
The stock market has experienced extreme price and volume fluctuations and
the market prices of securities of Internet-related companies have been
particularly volatile. In the past, companies that have experienced such
volatility have sometimes been the object of securities class action litigation.
Securities class action litigation may result in substantial costs and a
diversion of our management's attention and resources.
10
<PAGE>
The market price of our common stock may decline due to shares of our common
stock eligible for future sale.
Upon completion of this offering, existing shareholders will have 928,398
shares of our common stock
We cannot predict the effect, if any, that sales of our common stock, or
the availability of shares for sale, will have on the market price prevailing
from time to time. Nevertheless, sales of significant amounts of our common
stock in the public market, or the perception that those sales may occur, could
adversely affect the prevailing market price.
You will suffer immediate and substantial dilution by investing in our shares.
As a result of this offering there will be a substantial and immediate
dilution to the subscribers in the shares offered hereby since the net tangible
book value will be reduced proportionately per share. Purchasers of our shares
in this offering will incur immediate and substantial dilution from the offering
price of $10 per share.
USE OF PROCEEDS
The net proceeds we will receive from the sale of a minimum of 125,000
shares is estimated to be $1,175,000 after deducting estimated offering expenses
of not more than $75,000. Certain offering expenses will be paid with the
proceeds from existing funds. The net proceeds we will receive from the sale of
a maximum of 450,000 shares is estimated to be $4,425,000 after deducting
estimated offering expenses of $75,000.
We intend to use the net proceeds from this offering for general corporate
purposes, including to pay marketing expenses and costs necessary to begin
operations of the online university and for working capital. The costs to be
incurred to enable us to market our online university and to begin operations
include the costs of developing our web site, recruiting faculty, administrative
and management personnel, paying salaries of faculty and administrative
personnel, programming course offerings, paying administrative and officer
salaries, leasing administrative offices, purchasing or leasing office
furniture, computer equipment and software, direct mail and electronic media
marketing and radio and print advertising. If we sell more than the minimum
number of shares offered, we expect to be able to be able to program more
courses and to more aggressively recruit faculty, including internationally. In
addition, we may acquire existing courses or educational products that are
compatible with our objectives and philosophy. However, we expect to have
sufficient funds to operate for in excess of 12 months even if only the minimum
number of shares is sold. Pending the specified use of funds, we intend to
invest the net proceeds from this offering in investment grade, interest-bearing
securities.
Following is our estimated use of proceeds in tabular form:
Minimum Maximum
Offering Offering
---------- ----------
Offering expenses $ 75,000 $ 75,000
Web site development 70,000 225,000
Recruitment 5,000 100,000
Programming course offerings 300,000 1,000,000
11
<PAGE>
Furniture and equipment 35,000 50,000
Salaries 265,000 1,000,000
Acquisition of existing courses 0 500,000
Marketing 400,000 1,300,000
Working capital 100,000 250,000
---------- ----------
TOTAL $1,250,000 $4,500,000
DIVIDEND POLICY
We have never paid dividends and have no expectation of doing so for the
foreseeable future.
CAPITALIZATION
The following table presents the capitalization of the Company as of May
31, 2000, and as adjusted to give effect to the conversion of our convertible
preferred stock and the sale of the minimum and maximum number of shares in the
offering, less estimated offering expenses.
<TABLE>
<CAPTION>
As adjusted
for
conversion of As adjusted As adjusted
convertible for sale of for sale of
preferred minimum shares maximum shares
Actual stock (1) (1) (1)
<S> <C> <C> <C> <C>
Stockholder's Equity:
Common Stock, par value $.001 per
share, 3,000,000 shares
authorized; 351,645 shares
issued and outstanding (actual);
471,240 shares issued and
outstanding (as adjusted for
conversion of convertible
preferred); 596,240 shares
issued and outstanding (as
adjusted for sale of minimum
shares); 921,240 shares issued
and outstanding (as adjusted for
sale of maximum shares) $ 31,500 $214,166 $1,414,166 $4,664,166
Preferred Stock, par value $.001
per share, 10,000 shares
authorized; 172.7 shares issued
and outstanding (actual); no
shares issued and outstanding
(as adjusted for conversion of
convertible preferred) 172,666 ----- ----- -----
Additional paid-in capital 95,400 95,400 95,400 95,400
Deficit accumulated during
development stage (120,213) (120,213) (120,213) (120,213)
Total stockholders' equity $179,353 $189,353 $1,389,353 $4,639,353
</TABLE>
______________________
(1) Includes an additional 10 shares of convertible preferred stock sold for
$1,000 per share in June 2000 that are convertible into 6,926 shares of
common stock.
12
<PAGE>
DILUTION
Our pro forma net tangible book value as of May 31, 2000 was $144,218 or
$.31 per share. Our pro forma net tangible book value per share is determined
by subtracting the total amount of our liabilities from the total amount of our
tangible assets and dividing the remainder by the number of shares of our common
stock outstanding after giving effect to the conversion of preferred stock into
119,595 shares of common stock. The pro forma net tangible book value per share
after this offering will be $4.96, less than the price per share to the public
in this offering, based on an initial public offering price of $10 per share.
Therefore, purchasers of shares of common stock in this offering will realize
immediate dilution of $5.04 per share. The following table illustrates this
dilution.
<TABLE>
<S> <C>
Initial public offering price per share.............................................. $10.00
Pro forma net tangible book value per share as of May 31, 2000.................. .31
Increase in net tangible book value per share attributable to new investors..... 4.65
Pro forma net tangible book value per share after this offering...................... 4.96
Dilution per share purchased in this offering........................................ 5.04
</TABLE>
The following table presents, on a pro forma basis, as described above, as
of May 31, 2000 and based on an initial public offering price of $10 per share,
for our existing shareholders and our new investors:
. the number of shares of our common stock purchased from us;
. the total cash consideration paid;
. the average price per share paid before deducting estimated underwriting
discounts and commissions and our estimated offering expenses; and
. the average price per share paid by the existing holders of common stock
including the holders of common stock after giving effect to the
conversion of preferred stock into 119,595 shares of common stock.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------------- -------------------------- Price
Number Percent Number Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders........... 471,240 51.15% $ 204,166 4.34% $ .43
New investors................... 450,000 48.85% $4,500,000 95.66% $10.00
------- ----- ---------- ----- ------
Total...................... 921,240 100% $4,704,166 100% $ 5.11
======= ===== ========== ====== ======
</TABLE>
The above tables exclude all outstanding options. See "Management--Stock
and Option Awards" and notes to our consolidated financial statements.
13
<PAGE>
DETERMINATION OF OFFERING PRICE
In determining the per share offering price, we took into account our
expectations for future revenue and our belief as to what per share price would
be acceptable to prospective investors. This price should be considered to have
been set arbitrarily. It is not based upon any established criteria of value
and no underwriter participated in establishing this price.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CERTAIN RELEVANT FACTORS
The following commentary should be read in conjunction with the Financial
Statements and notes contained elsewhere in this prospectus.
Overview
From our inception through the date of this prospectus, our operating
activities related primarily to developing a web site, recruiting faculty
members, developing a curriculum, meeting state licensing requirements to offer
courses for degree credit, recruiting management, and selection of a host for
our web site. Since our online university is not expected to commence course
offerings until completion of this offering, we have generated no revenues to
date. Since inception we have incurred significant expenditures without
compensating income, and, as of May 31, 2000, cash on hand had been reduced to
$160,363.
We intend to generate revenues through tuition paid by our students,
through sales of books and course materials through our online bookstore, and
from Internet advertising on our web site. Particularly in the early years of
operations, we expect to incur significant marketing expenses to attract
students. By advertising in conservative magazines, on conservative radio
programs and web sites, campus conservative newspapers and military newspapers
and through development of relationships with conservative home school and
politically and educationally active Christian organizations, we expect our
advertising to be more cost effective than online universities seeking to appeal
to a broader population base. However, due to these and other operating costs,
we do not expect Yorktownuniversity.com to become profitable at least through
the first three years of operations.
Liquidity and Capital Resources
Since inception, we have financed our operations and capital expenditures
primarily through the sale of convertible preferred stock. We have no lines of
credit or other sources of cash except the net proceeds, if any, of this
offering.
BUSINESS
Overview
Yorktownuniversity.com proposes to establish and operate an online college
level courses offering for degree credit in government, business and economics,
and the humanities disciplines taught by leading conservative scholars.
Yorktownuniversity.com proposes to offer college level degree courses and
continuing education courses targeted to the following persons:
. High school and home school students who desire to take college level
courses for advanced placement.
14
<PAGE>
. Adult, working students, ages 24 to 45, seeking the BA degree.
. Officers and enlisted military personnel taking courses relative their
employment as military professionals.
. Adults, over the age of 45, seeking intellectual enrichment or engaged in a
personal spiritual quest.
. Traditional college age students enrolled in other four year undergraduate
programs taking courses for transfer credit or looking for conservative
faculty to guide them in their field of interest.
The Opportunity for Online Education
The NCES estimates that in 2001, the number of students enrolled in
distance education programs will increase to more than 3,500,000 students.
According to NCES, individuals with a college degree, moreover, earn 50% more
than those with only a high school diploma. The adult education market is a
significant component of the post-secondary education market. The U.S.
Department of Education estimated that, for 1996, adults over the age of 24
comprised approximately 6.1 million, or 43%, of the students enrolled in higher
education programs. The U.S. Census Bureau estimates that approximately 75% of
students over the age of 24 work while attending school. We believe that the
market for adult education will continue to prosper as working adults seek
additional education and training to update and improve their skills, to enhance
their earnings potential, and to keep pace with the rapidly expanding knowledge-
based economy. According to a leading analyst in the field, enrollments in web
based higher education is growing at an annual rate of 30%. We are in the early
stage of development of this aspect of the education marketplace, and early
entrants into the marketplace with brand identification and competitive prices
will best be able to take advantage of opportunities to grow.
Many working adults are seeking degree programs that provide flexibility to
accommodate the fixed schedules and time commitments associated with their
professional and personal obligations. The Internet provides a platform that
enables working adult students to attend classes and complete coursework on a
more convenient schedule.
According to Nielsen Media Research and NetRatings, there were over 98
million people (35 million U.S. households) with Internet access at the end of
1999, or 43% of all U.S. households over the 24 million households with net
access in the first quarter of 1998. U.S. online use has reached a level
unanticipated five years previous. According to published industry analysis, in
April 2000, 78 million people went online.
The largest university in the United States, the for-profit, publicly
traded, University of Phoenix, has 12,000 students online in a student body of
more than 90,000. The University of Maryland's Internet course offerings
attract 37,000 students annually. American Military University, which began in
1992 with 18 students and 23 course offerings, now has more than 1,500 students
enrolled in its course on military subjects. Jones International University, a
for-profit closely held Company, founded in 1993, was the first entirely
Internet university to receive U.S. regional accreditation in 1999. In this
competitive marketplace, we believe that Yorktownuniversity.com can distinguish
itself by courses that are taught by some of the leading conservative scholars
in America.
15
<PAGE>
Competition
Competition for online university education and training will become
intense, with, for profit, accredited universities taking the lead, initially,
over traditional educational organizations. The University of Phoenix, a for-
profit, publicly traded university has more than 90,000 students, of which
12,000 are reported to be enrolled in online degree programs. During its
initial development of its online course offerings, University of Phoenix'
online enrollment doubled annually. Last year it experienced 60% growth in
online enrollments. American Military University, accredited by the Distance
Education Training Council, and which, thereby, may process Department of
Defense tuition assistance for members of the Armed Services of the United
States, has grown from eighteen students in 1992 to more than 1,500 in 1999.
Capella University, which recently announced significant financing from the New
York investment firm of Forstmann Little, and Jones International University,
are also for profit, accredited providers of online college level courses.
Tuition costs at Jones International of $600 per undergraduate course are price
competitive with all but a few state subsidized colleges and universities. The
University of Maryland's online division has close to 32,000 students taking
courses online. The state of Michigan recently created an Internet university,
and other states are examining this opportunity.
These online degree programs are designed for increasing numbers of
students between the ages of 23 and 45 who seek undergraduate and postgraduate
degrees. Working and parenting adults seeking a college education, or advanced
training for job advancement are increasingly turning to the Internet to fulfill
their educational needs. Providers of online education programs, therefore,
must carefully gauge the educational marketplace and design educational programs
to fulfill market demands. Efficiencies of the Internet enable online providers
to offer narrow, and job specific, education and training at costs substantially
lower than traditional education providers. Jones International's emphasis is
on communication. Phoenix focuses on business. American Military University
offers defense studies. We expect that institutions providing narrow and
focused online degree programs will become prominent in higher education in the
United States and abroad and will aggressively compete with one another as well
as with traditional colleges and universities.
Certificate Programs
Yorktownuniversity.com will offer individual courses for students seeking
degree credits, and courses that are "packaged" in Certificate Programs in
Government, Business, Economics, and the Humanities. We believe that elected
officials, particularly in state government, state and federal legislators, may
require their political appointees to complete one or more of our Certificate
Programs, and owners of closely held companies will find our Certificate
Programs a valuable means to assure knowledge of the principles of our
capitalist system among middle and senior management. Our Certificate Programs
are described below:
<TABLE>
<CAPTION>
Certificate Programs
Faculty Government - The American Order Affiliation
<S> <C> <C>
James McClellan The American Founding Independent Scholar
William B. Allen The Federalists Michigan State Univ.
David Fitzsimons Liberty & Power: US History to 1865 University of Rhode Island
H. Lee Cheek, Jr. American Political Thought Lee University
Thomas F. Payne Church-State Relations since the Founding Yorktown University
William B. Allen Dateline 1787 Michigan State Univ.
Richard Zeller Political Correctness Independent Scholar
Linda Raeder J. S. Mill and Origins of Secular Humanism Center for U.S. Studies (Wittenberg)
R. J. Bishirjian/H.L. History of Political Theory Yorktown University/Lee University
Cheek
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Certificate Programs
Faculty Government - The American Order Affiliation
<S> <C> <C>
Gleaves Whitney Roots of American Order Office of Gov. Engler (R-MI)
Marshall De Rosa Political & Legal Dynamics of the American Civil War Independent Scholar
Faculty Government - How Conflicts are Resolved Affiliation
Atilla Yayla Democracy in Islamic Countries Hacettepe University (Turkey)
Donald Devine Public Administration Independent Scholar
Kenneth Holland Presidents & Supreme Court Justices Univ. of Memphis
J. Edgens Environmental Policy University of Kentucky
Joseph P. Martino Just War Doctrines Independent Scholar
Angelo Codevilla History of Ballistic Missile Defense: JFK to Clinton Boston University
David Bobb Rights in Conflict Boston College
Faculty Economics and Business Affiliation
Gerald Dwyer Principles of the Stock Market Independent Scholar
Svetozar Pejovich Comparative Economic Systems Texas A & M
Gary Wolfram Introduction to Political Economy Hillsdale College
Douglas K. Adie Money, Financial Institutions & Markets Ohio University
Gordon Diem Fundraising for the Independent Sector North Carolina Central University
Eugene Heath Virtue and Business SUNY-New Paltz
Marlo Lewis Adam Smith and His World Independent Scholar
William Luckey History of Economic Thought Christendom College
Edmund Shanahan Valuation of Assets Independent Scholar
William Sloane Communication/Media Law Counsel, PA House of Delegates
George Trivoli Principles of Portfolio Management Independent Scholar
Faculty Humanities - Arts & Literature Affiliation
Roger W. Cole History of The English Language Univ. of South Florida
Mitchell Kalpakgian Classics of Children's Literature Simpson College
David Mulroy Classical Mythology University of Wisconsin-Milwaukee
Thomas Landess Art of the Ghostwriter Independent Scholar
Arthur Pontynen History of Art University of Wisconsin-OshKosh
Dominic A. Aquila Introduction to the Fine Arts Ave Maria University
Mark Malvasi American History through Literature Randolph Macon College
Edward Levinson History of Architecture Miami/Dade Community College
Larry Schweikart Western Civilization: 1715 to 2000 University of Dayton
James Gaston Western Civilization: 410 AD to 1492 Franciscan University of Steubenville
Faculty Humanities - Philosophy/Religious Studies Affiliation
John Lachs Personal Ethics: In Love with Life Vanderbilt University
H. T. Edmonson The Ethics of Flannery O'Connor Georgia College and State University
James W. Gustafson Introduction to Philosophy: The Quest for Truth Northern Essex Comm. College
Bishirjian/Pontynen The Christian Calendar Yorktown/University of WI-Oshkosh
Randall Balmer Religion in American History Barnard College, Columbia University
</TABLE>
B.A. Programs
We intend also to enroll students in our B.A. degree programs who have
completed successfully a
17
<PAGE>
minimum of 10-three credit courses. These B.A. programs are the B.A. in
Government and the B.A. in Managerial Economics. Students admitted to these B.A.
degree programs will be required to have completed 30 credits in core general
education subject areas at accredited educational institutions in the following
general education subjects:
English Composition (3)
English Literature or Poetry (3)
Communication Arts (3)
Principles of Mathematics (3)
Laboratory or non-laboratory sciences, including computer science (6)
Social Sciences (3)
Humanities or Fine Arts (6)
Behavioral Sciences, including sociology and psychology (3)
Yorktownuniversity.com will not offer courses in subjects outside its field
of primary interest, and students will be encouraged to take courses outside of
the liberal arts and social sciences fields at community colleges and
universities near their locale. A minimum of 120 credits for a B.A. degree from
Yorktownuniversity.com is required for graduation, of which 60 credits must be
earned at Yorktownuniversity.com.
Required Courses for the B.A. in Government:
Government Courses
American Founding
Federalist
American Diplomatic History
American Political Thought
Political Correctness
History of Political Theory
Church-State Relations since the Founding
Environmental Policy
Economics Courses
Intro. to Political Economy
American Economic History
Principles of the Stock Market
Humanities Courses
American History Through Literature
History of the English Language
Religion in American History
18
<PAGE>
Humanities Courses
American History Through Literature
History of the English Language
History of Art
Required Courses for the B.A. in Managerial Economics:
Managerial Economics Courses
Introduction to Political Economy
Introduction to Accounting
Business History
American Economic History
Monetary & Fiscal Policy
Money, Financial Institutions & Markets
Business Finance
Introduction to the Stock Market
Government Courses
American Political Thought
Dateline 1787
Environmental Policy
Tuition
Pricing our courses at levels high enough to maintain course quality and
low enough to attract significant numbers of students is essential to the
successful management of Yorktownuniversity.com. At tuition cost of $299 per
course, we expect to capture the interest of the discerning educational
consumer, and capture a core customer base of students interested in low cost,
quality higher education. We intend to offer tuition costs at levels below
those offered at other private colleges or universities and are competitive with
all educational products in the Internet marketplace. If we become accredited
by the Department of Education accrediting agency, the Distance Education and
Training Council, which is not expected to occur until the end of the third year
of our operations, we intend to raise our tuition fees to $450 per course. See
"Business Accreditation."
Tuition at private colleges and universities can range between $20,000 and
$30,000 per year for tuition alone. The cost of attending state colleges and
universities, which includes tuition and living expenses, approaches $7,000 to
$10,000 annually for all expenses--including a multitude of student fees. We
expect to offer annual tuition costs of less than $3,000 for full-time degree
candidates.
The following table shows comparative undergraduate tuition costs:
University of Phoenix Online $1,125 per course
$11,250 annual tuition
$216 per week
American Military University $750 course
19
<PAGE>
$7,500 annual tuition
$144 per week
Jones International University $600 per course
$6,000 annual tuition
$115 per week
Yorktownuniversity.com $299 per course
$2,990 annual tuition
$58 per week
Philosophical Background
The National Association of Scholars estimates that, nationwide, only 5% of
faculty on America's campuses are political conservatives. Although many
Protestant and some Catholic academic institutions require that their faculty be
Christian or Catholic, many Christian and Catholic scholars share the socialist
economic and antipathetic views towards the American political tradition of the
their liberal colleagues at sectarian institutions.
As Americans have become more conscious of this leftward drift among
educators at all levels of the education industry--especially in the last 10 to
15 years--some students and parents have retreated to sectarian colleges and
universities, to sectarian secondary schools and to home school programs. A
university education in the 19th century, and the 20th century has often meant
subjection to the secularization of traditional mores or to competing ideologies
promoted by intellectuals; whether it be ethical relativism, atheism, Socialism,
Marxism, Communism, feminism, radical egalitarianism, multiculturalism or
liberalism. The orientation and culture of contemporary academia often places
education second to modern secular religions. We believe that a university
education should engage students in a quest for truth, and that this quest
should be pursued not only by means of the physical sciences, but by the
disciplines of philosophy and theology. Yorktownuniversity.com aspires to
reaffirm the beliefs, shared by America's founding generation, and the many
modern conservative intellectuals of post-World War II America, that an enduring
Constitution of the United States, and the body of knowledge underlying it, is
intrinsic to freedom and justice.
Faculty
Yorktownuniversity.com has recruited leading conservative scholars to serve
on its faculty. This group of academicians includes professionals who are
currently part of the traditional academic communities, as well as those who
have been, but are not currently, associated with other academic institutions.
In all cases, they are professional scholars who are pursuing their scholarly
interests through their professional writings and research. In many cases, they
are providing academic service as members of faculties of other universities and
are seeking to reach a broader audience by means of the Internet. Following is
a list of those individuals who have agreed to become full-time or part-time
members of the Yorktownuniversity.com faculty. Listing the academic
affiliations of our faculty does not mean that their respective universities
endorse the mission of Yorktownuniversity.com.
Government
Thomas F. Payne, Ph.D., Government, Claremont University; J.D. Vanderbilt
University, Chair,
20
<PAGE>
Department of Government, Yorktownuniversity.com.
Marshall De Rosa, Ph.D., Political Science, University of Houston.
Linda C. Raeder, Ph.D., Politics, Catholic University; Center for U.S.
Studies, Political Science, University of Wittenberg, Germany.
David J. Bobb, B.A., Political Science, Hillsdale College; Ph.D. Candidate
in Political Science, Boston College.
William B. Allen, Ph.D. Government, Claremont Graduate School; Department
of Political Science, Michigan State University.
Angelo Codevilla, Ph.D., Government. Claremont Graduate School; Department
of International Studies, Boston University.
Kenneth Holland, Ph.D., University of Chicago; Department of Political
Science, University of Memphis.
Atilla Yayla, Ph.D., Ankara University, President, Association for Liberal
Thinking, Ankara, Turkey.
H. Lee Cheek, Jr., Ph.D., Politics. Catholic University; Department of
Political Science, Lee University.
Marlo Lewis, Ph.D., Government, Harvard University.
Joseph P. Martino, Ph.D., Mathematics, Miami University; Associate Editor,
Technological Forecasting & Social Change.
James McClellan, Ph.D., Government; J.D., Law, University of Virginia;
Independent Scholar and former staff director, Separation of Powers
Subcommittee, U. S. Senate.
Donald J. Devine, Ph.D., Political Science, Syracuse University;
Independent Scholar and former Director, U.S. Office of Personnel
Management.
H. T. Edmonson III, Ph.D., Political Science, University of Georgia;
Department of Political Science and Public Administration, Georgia College
and State University.
Jefferson G. Edgens, Ph.D., Environmental and Natural Resources, Michigan
State University; Department of Forestry, University of Kentucky.
Gordon N. Diem, D.A., Government, Idaho State University; Department of
Political Science, North Carolina Central University.
History
David Fitzsimons, Ph.D.; Department of History, University of Rhode Island.
21
<PAGE>
Mark G. Malvasi, Ph.D., History, University of Rochester; Department of
History, Randolph-Macon College.
Larry Schweikart, Ph.D., Political Science, Arizona State University;
Department of History, University of Dayton.
Dominic A. Aquila, Ph.D., History, University of Rochester. Provost, Ave
Maria University.
James R. Gaston, B.A. SUNY-Oswego, M.A., History, SUNY-Cortland, Ph.D.
Candidate SUNY-Buffalo; Department of History, Franciscan University of
Steubenville.
Religious Studies
Randall Balmer, Ph.D., Religion, Princeton University; Ann Whitney Olin
Professor of American Religion, Barnard College, Columbia University.
Law
William M. Sloane, B.A. York College, M.A., Religion, Liberty University,
J.D. Widener University; LL.M. (Labor) Temple University; Ph.D.,
(Religion) American Bible College and Seminary; Legal Counsel, Pennsylvania
House of Representatives.
English
Mitchell Kalpakgian, Ph.D., English, University of Iowa; Department of
English, Simpson College.
Thomas Landess, Ph.D., English, University of South Carolina; Office of the
Attorney General, South Carolina.
Languages
Roger W. Cole, Ph.D., Linguistics and English, Auburn University; Division
of Languages & Linguistics, University of South Florida.
David D. Mulroy, Ph.D., Classics, Stanford University; Department of
Languages & Linguistics, University of Wisconsin-Milwaukee.
Economics
Douglas K. Adie, Ph.D., Economics, University of Chicago;
Yorktownuniversity.com.
Gerald P. Dwyer, Jr., Ph.D., Economics, University of Chicago.
Gary Wolfram, Ph.D., Economics, University of California-Berkeley; George
Munson Professor of Political Economy, Hillsdale College.
22
<PAGE>
Svetozar Pejovich, Ph.D., Economics, Georgetown University; Department of
Economics,
Texas A & M University.
William Luckey, Ph.D., Economics, Fordham University; Department of
Economics, Christendom College.
Edmund Shanahan, M.Sc., Finance, University of London, M.B.A., Henley
Management College.
George Trivoli, Ph.D., Economics, University of Virginia.
Philosophy
James W. Gustafson, Ph.D., Philosophy, Boston University; Northern Essex
Community College.
F. Eugene Heath, Ph.D., Philosophy, Yale; Department of Philosophy, SUNY-
New Paltz.
John Lachs, Ph.D., Philosophy, Yale University; Department of Philosophy,
Vanderbilt University.
Architecture
Edward Levinson, AIA, B.A. University of Pennsylvania, M.A., Architecture,
University of Pennsylvania.
Art
Arthur Pontynen, Ph.D., Art History, University of Iowa; Department of Art,
University of Wisconsin-Oshkosh.
Sociology
Richard A. Zeller, Ph.D., Sociology, University of Wisconsin; Independent
Scholar.
Two faculty members, Dr. Thomas F. Payne and Dr. Douglas K. Adie, have
agreed to serve on a full time basis. Because of the nature of the
instructional activity at Yorktownuniversity.com, the distinctions between, and
classifications of full-time and part-time faculty are less meaningful than at
traditional institutions. The extent of a faculty member's teaching activity
will always depend on the student demand, implemented schedules and faculty
availability for a particular course or term of instruction. While there will
be both full and part-time employees of yorktownuniversity.com, our principal
administrators and the academic leadership of the university are full-time.
Full-time faculty administrators will head two academic degree programs of the
university. As demand warrants, other full-time faculty and staff will be added
to support the core academic and administrative activities of the university;
however, at its earliest stages of development, full-time faculty leadership,
supplemented by a small number of adjunct instructors, will provide instruction.
Yorktownuniversity.com believes that it has an abundance of highly qualified,
experienced faculty upon which to draw for academic service.
Marketing of Yorktown University Courses
23
<PAGE>
Our potential students fall into several categories that cross many age
groups. See "Business--Overview". Each of the categories of students
identified by Yorktownuniversity.com requires a targeted marketing effort
involving direct mail and direct e-mail marketing, advertisements in print and
electronic media and web advertising.
Direct marketing aimed at privately-held or family-owned companies that may
want management level employees to take academic courses in free market
economics is the preferred method for reaching these companies.
Marketing to reach individual students may focus on advertisements in the
following print and web publications:
. National business publications
. Newsletters and publications of national conservative student
organizations
. Conservative scholarly journals
. Publications of conservative "think tanks"
. Internet booksellers
. Military, history and conservative book clubs
. Military newspapers and publications
. Home school publications and mail lists
. Publications of more than 100 state-based conservative public policy
organizations
. Publications of privately held companies
. Internet search engines
. Privacy and personal defense publications and organizations, including
the National Rifle Association
. Quality of life publications that reach older subscribers
. Publications at sectarian schools
. Conservative campus newspapers
How Students Take Yorktownuniversity.com Courses
Students interested in taking yorktownuniversity.com courses go to the
university's web site, www.yorktownuniversity.com. There they click on
"Courses" and survey our course offerings. A syllabus for each course, with
course requirements for those taking the course for degree credit, are listed.
By clicking on"Faculty," they may access a biographical sketch of faculty
teaching the selected course, along with a color photograph of the faculty
member.
When a student decides to enroll in a course, the student goes to "Enroll,"
where the student may pay tuition of $299 per course by credit card, or by
arranging with our customer service associates to pay by check or bank transfer.
When the transaction is completed, students are given an access code that
enables them to enter our course management system. There the student gains
access to faculty's recorded lectures, a transcript of those lectures that may
be downloaded onto the student's computer and printed, or read live online.
A library fee of $25 per course enables students to access a database of
research resources that may include secondary readings required by faculty
teaching the course, or links to other library resources which the student may
access during the 10 week period of enrollment.
Though students progress at their own pace, and on their own time-schedule,
students taking a course
24
<PAGE>
for degree credit must complete a course within 10 weeks. We recommend that
students taking courses for degree credit take no more than two courses at a
time.
Courses identified as "Online Courses" allow students to enroll in a course
at any time, proceed at the student's pace, and fulfill course requirements at
the expiration of 10 weeks from the day of enrolling. Courses specifically
designated as "Directed Readings" operate only on a schedule of five terms a
year that follow the calendar year.
Our faculty will direct our students' readings, assign topics for
discussion, monitor discussion groups, oversee the answers to frequently asked
questions, participate in interactive class discussions, read term papers and
hold office hours during which students enrolled for credit may speak to
faculty.
Many of their courses may be upper level courses for advanced students.
Their courses will be challenging and intended to develop the curiosity,
intelligence and scholarly skills of their students. Many lectures are based
upon the lecturer's original published works and emphasis is given to student's
essays, rather than examinations. When examinations are given for students
enrolled for degree credit, they are expected to be proctored by independent
proctors in the student's locale.
How the University Manages its Courses on the Web
Yorktownuniversity.com is in the final process of selecting a course
management system to service university courses, manage our interactive
discussion groups and oversee library functions.
All systems in the final review provide similar operational features that
enable students to benefit from web-based learning opportunities. These
features include:
. Control of course materials by faculty and staff enabling faculty to
release class materials according to criteria established by faculty.
. Communication between faculty and students by e-mail and interactive
discussions are to be facilitated by bulletin boards, chatrooms, and
other means of web communication without the cost of long distance
telephone service.
. Student progress will be measured not only by examination, but through
our management system's ability to monitor class attendance, attendance
at interactive discussions, the time a student spends at our web site or
on a webpage. The virtual classrooms of the Internet enable university
personnel to calculate the actual time a student spends in class, in the
library and in communication with faculty and other students. Frequency
of time spent on course sites by students can be monitored and essays and
term papers may be screened for plagiarism. Quiz and examination
questions may be drawn by random selection so that no examination is the
same.
. Interactive discussions between students and students, and faculty and
students will occur on prearranged schedules, with bulletin boards, and
other means of communication, accessible online for student use.
Asynchronous bulletin and conference boards will allow students to submit
postings. They then are to enter a searchable archive of questions by
students and
25
<PAGE>
answers by faculty.
. Access to central library resources are to be facilitated by the course
management system so as to enable students to survey research and other
library resources from their home computers.
. Cross discipline instructional forums may be designed to enable faculty
from different disciplines to contribute to student and faculty
discussions. Live chat rooms can be assigned by faculty. Course and
campus chat rooms will enable students in a course to converse with other
students enrolled in the same course as well as others across
disciplines.
. Training modules for faculty and students are to be available to enable
students to quickly develop Internet skills necessary to fully utilize
our library, course offerings and other features. These training programs
will include instruction in the efficient use of Internet search engines,
how to open file attachments, downloading free software to hear faculty
recorded lectures, and other web systems including video streaming.
All course management systems now under final review provide scaleable
technical architecture that can support thousands of students online.
Faculty and students can access the university's courses by using the
Netscape or Internet Explorer browsers. Other than an Internet browser, there
is no special software that students or faculty must install. Both browsers are
free to download and upgrade. A computer that has a modem and an Internet
service provider is all that is required to teach or take a
Yorktownuniversity.com course. Faculty members may use their home computers to
create or edit courses, grade students' work, read notes, hold office hours and
communicate with other faculty members, students and administrative personnel.
Students may use their home computers to take courses, create and send in term
papers, take examinations and communicate with other students, faculty and
administrative personnel.
Yorktownuniversity.com's Internet Host
During the early months of operation and at least through the completion of
this offering, Yorktownuniversity.com's web site will be co-located on the
servers of LMKI, a California-based company with servers located in Virginia.
Thereafter, we intend to co-locate our web site on servers maintained by the
course management system that is in process of being selected. All three
finalists provide 24 hour a day maintenance, and backup assistance, with servers
that are scaleable to projected enrollments and capable of servicing 10 courses
or 10,000 courses.
Rollout of University Courses
Yorktownuniversity.com offerings are expected to be introduced on the
following schedule:
Year 1 50
Year 2 90
Year 3 105
26
<PAGE>
Year 4 115
Year 5 130
We may expand our course offerings as demand for new courses dictate and as
new faculty members are recruited.
Title IV Eligibility
U. S. Title IV financial assistance is available through the Higher
Education Assistance Act of 1965 for students at "accredited" institutions.
Educational institutions that seek to process Title IV financial assistance must
meet the standards of accrediting organizations chartered by the U.S. Department
of Education. These accrediting organizations are organized by discipline,
region and on a national basis. Examples of these accrediting organizations
include the American Bar Association, a disciplinary organization, the North
Cenral Association, Commission on Institutions of Higher Education, a regional
organization, and the American Association for Liberal Education, a national
association.
Furthermore, U.S. Department of Education regulations specify that an
institution is not eligible to participate in the Title IV Programs if 50% or
more of its courses are correspondence courses, or if 50% or more of its regular
students are enrolled in the institution's correspondence courses. These
regulations currently consider most distance education courses to be
correspondence courses if the number of distance education courses exceeds 50%
of the courses offered. Yorktownuniversity.com has no current plans to
participate in Title IV programs under current regulations. However, should the
guidelines change, Yorktownuniversity.com intends to apply for participation in
appropriate federal financial aid programs.
Higher Education Regulatory Environment
Most institutions of higher education must satisfactorily comply with a
variety of regulatory standards as established by the states, accrediting
agencies and the Department of Education. In order to operate within any state,
the institution must obtain approval from the appropriate regulatory authority.
Once approved for operation by a particular state, institutions generally move
to apply for one of several types of accreditation. Upon receiving
accreditation, usually of the regional variety, institutions typically seek
approval from the U.S. Department of Education to participate in the Title IV
federal financial aid program. Since these processes may take several years to
fully satisfy, Yorktownuniversity.com, as a new institution of higher education,
must position itself to initially operate without accreditation or
certification. The processes that Yorktownuniversity.com anticipates completing
are described below. There are four steps or levels of academic certification
or accreditation. U.S. Department of Education regional accreditation requires
long delay. Yorktownuniversity.com will pursue academic certification or
accreditation in all four.
1. State Approvals
Every state regulates the courses that private institutions may offer for
degree credit to citizens. Illinois and Virginia have a regulatory process that
can lead to approval to offer courses for degree credit in less than a year.
The requirements for achieving operational or degree granting privileges within
the various states vary from state to state. Some states take a more consumer
protection position, while others impose academic review requirements that
resemble those of the accreditation agencies.
27
<PAGE>
Yorktownuniversity.com applied for approval to offer individual courses for
degree credit, to offer courses for degree credit in Certificate Programs and to
offer two B.A. degree programs, the B.A. in Government and the B.A. in
Managerial Economics, in Virginia in April 2000. In June 2000, Virginia's
Higher Education Council granted those approvals. Yorktownuniversity.com will
apply for operating authority in the state of Illinois as well.
Our intention is to operate in that state that best positions our
university to meet regional accreditation requirements. Virginia is located in
the region where the Southern Association has regional accreditation
jurisdiction. To date, this association has not accredited an exclusively
online institution, even though the agency has indicated a willingness to do so
when presented with an appropriate application. In contrast, Illinois is
located in North Central Association's region. That agency has already
accredited an online institution and appears to be more open in its
accreditation approach to Internet education providers. Yorktownuniversity.com
has obtained approval from Virginia's Higher Education Council to offer credit
courses for degree and certificate programmatic purposes, as well as to enroll
students in two baccalaureate degree programs. Similar authority will be sought
from the state of Illinois to better position the institution to seek the
regional accreditation deemed most desirable for its goals.
2. Certification--ACE
A distance learning provider such as Yorktownuniversity.com may seek to
certify its courses in the American Council on Education's Credit Recommendation
Service.
By submitting detailed information about university courses, instructional
design, methods of evaluation and qualifications of faculty to ACE, students
completing work in ACE-certified courses receive a detailed evaluative
transcript. This detailed course transcript describes the course, the number of
hours the student devoted to the course and the means by which the student was
evaluated.
A student earning credits in ACE-certified courses may request transfer of
credits earned at Yorktownuniversity.com to the college or university where he
or she is enrolled. In many cases, ACE certification will improve the chances
for transfer credit being awarded for courses taken at an institution that has
not yet matured to the point of accreditation eligibility.
However, there are no guarantees that all for credit courses submitted
through ACE's credit recommendation system will be accepted automatically by the
colleges and universities where our students are enrolled as full time students.
To assist students to obtain credit for courses taken at Yorktownuniversity.com,
the university's registrar will instruct students to take information about our
course offerings to their college registrars and the chairs of their major
departments before enrolling in our courses.
Because registrars at colleges and universities have a great deal of
discretion in accepting or rejecting requests for transfer of credits, ACE
credit recommendation, at best, is an interim solution until regional
accreditation can be obtained. No assurances can be given that we will ever
obtain regional accreditation.
3. Accreditation--DETC
For distance learning providers and correspondence schools, the Department
of Education's chartered distance learning accrediting agency is the Distance
Education and Training Council. This accrediting agency
28
<PAGE>
was founded in 1926, long before the rise of the Internet, to provide
certification for correspondence schools. Accreditation by this organization
will offer some assurance of credit transferability, and will enable
Yorktownuniversity.com to advertise its educational products as an accredited
educational institution.
After two years of operation, the Company may apply for certification by
the Distance Education and Training Council. DETC certification enables
participating educational organizations to process Department of Defense tuition
assistance to students who are members of the U.S. military. Any enlisted
person or officer in the U.S. military may receive assistance equal to the 75%
of tuition in courses certified DETC.
The DETC accreditation process occurs over the course of one or more years,
and applications may be submitted in January and June of each year.
We intend to submit application for accreditation by DETC as soon as we are
eligible and expect to be accredited by DETC by the end of our third year of
operations.
4. Accreditation - Regional Associations
Regional accreditation by agencies in which Yorktownuniversity.com desires
membership is an extended and involved process. As a general rule, such
complete membership processes are usually three years in duration, at best, and
can frequently last as long as five years. In addition to the time required to
complete the process, there are a series of eligibility conditions that must be
met, such as the graduation of students completing a degree cycle.
Consequently, Yorktownuniversity.com does not anticipate obtaining regional
accreditation for several years.
The Southern Association of Colleges and Schools is in process of changing
the threshold requirements for candidacy, modifying its criteria for
accreditations, and developing pilot programs.
The North Central Association is in the process of expanding the scope of
its accreditation activity to consider for membership institutions that would be
chartered, physically located or engaged in significant educational activities
in states within its service regions. If these changes are adopted,
Yorktownuniversity.com could potentially become eligible for membership
consideration by the North Central Association, even though it operates from
Virginia. Implementation of these changes could result in regional
accreditation becoming more competitive than has traditionally been the case.
Yorktownuniversity.com's course and programs are designed to compete for
several years in the Internet distance learning marketplace without regional
accreditation. We believe that we can effectively compete with other online
universities because of the quality of our professors, the subjects they teach
and the maintenance of low tuition costs. We intend to pursue regional
accreditation vigorously, and, if necessary, will move our operations to a state
located within the jurisdiction of the regional accreditation association deemed
most favorable to our programs.
Facilities
Facilities for Yorktownuniversity.com constitute administrative offices
that represent the functionality and efficiency of the Internet.
Yorktownuniversity.com has no physical classrooms or learning centers where
students attend traditional classes.
29
<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
The following table sets forth information regarding the directors,
executive officers and other key employees of Yorktownuniversity.com as of May
31, 2000:
<TABLE>
<CAPTION>
Name Age Position
---- --- -------------------------------------------
<S> <C> <C>
Richard J. Bishirjian.. 58 President, Chief Executive Officer and
Director
Paul Weyrich........... 57 Chairman of the Board
Thomas F. Payne........ 53 Acting Chief Operating Officer, Provost
and Chair of Department of Government
Douglas K. Adie........ 60 Chair of Department of Managerial Economics
Gilbert K. Davis....... 57 Director
Robert Bradley......... 55 Director
Robert Callahan........ 35 Secretary and Treasurer
</TABLE>
Richard J. Bishirjian, Ph.D., President and CEO, is a businessman and
conservative educator. He earned a B.A. from the University of Pittsburgh
(1964), and a Ph.D. in Government and International Studies from the University
of Notre Dame (1972) under the direction of Gerhart Niemyer. He did advanced
study with Michael Oakeshott at the London School of Economics (1968/69) and
studied Sanskrit at the Southern Asia Institute, Columbia University (1978).
Dr. Bishirjian taught at universities and colleges in Indiana, Texas and New
York from 1968 to 1981. He is the author of a history of political theory and
editor of A Public Philosophy Reader that was cited by the Intercollegiate
Studies Institute as one of the best studies of conservatism. Dr. Bishirjian is
the author of more than thirty professional essays and reviews. Appointed to
the Office of the President-Elect in 1980, he served as a Team Leader with
responsibility for the National Endowment for the Humanities, and was appointed
by President Reagan as Acting Associate Director of the United States
International Communication Agency, now USIA. He served on the staff of the
United States Senate. He was president and founder of World News Institute, and
Associate Director of Boston University, College of Communication. Beginning
with the fall of the Berlin wall, he worked in Eastern and Central Europe as a
privatization consultant and/or partner with major corporations. In 1996 he
served as privatization consultant to the County of Allegheny, Pittsburgh,
Pennsylvania. His previous experience in distance learning includes management
of Boston University College of Communication's continuing education seminars to
government and business executives in the Washington, DC area. In 1999 he
launched American Academy of Privatization <www.mrprivat.com> an Internet-based
distance learning program of lectures on privatization topics that is offered
free of charge to public executives in state and municipal governments. Dr.
Bishirjian has been a member of the Philadelphia Society since 1975 and serves
as an Editorial Advisor to the quarterly journal, Modern Age.
30
<PAGE>
Paul Weyrich, Chairman of the Board, is an education industry innovator,
intellectual entrepreneur, and conservative proponent of democratic government
who founded, and is president of, the Free Congress Research and Education
Foundation. Among his many accomplishments, Mr. Weyrich is the creator of
National Empowerment Television, founder of the American Legislative Exchange
Council, founding president of The Heritage Foundation, and national chairman of
Coalitions for America. Mr. Weyrich is a member of the Amtrak Reform Council,
appointed to a five-year term by the Majority Leader of the United States Senate
in February 1998, and was member of the Board of Directors of AMTRAK from 1989-
93. In 1973 he was co-founder of the Republican Study Committee of the U.S.
House of Representatives. In 1990, Mr. Weyrich was ordained a deacon of the
Melkite Greek Eparchy of Newton.
Thomas F. Payne, Ph.D., J.D, Professor of Government, earned an A.B. degree
in History at the University of Notre Dame, a Ph.D. in Government from Claremont
Graduate School, and a J.D. at Vanderbilt University School of Law. From 1983-
87 Dr. Payne was an Associate Professor of Political Science at Hillsdale
College. He left college teaching to earn a J.D. degree from Vanderbilt, and
served as clerk to Justice Danny J. Boggs at the U.S. Court of Appeals for the
Sixth Circuit. He was an associate with Cravath, Swaine & Moore from 1991-93,
and with Fellheimer, Eichen & Braverman from 1993-94. He is licensed to
practice in New York and Ohio and has been admitted to the bar of the United
States Court of Appeals for the Sixth Circuit. He has been a trial attorney in
Cincinnati, Ohio since 1995.
Douglas K. Adie, Ph.D., Professor of Economics, has taught Economics at
Ohio University since 1968. He earned a B.A. (Honors) from McMaster University
in Economics and Mathematics (1963) and a Ph.D. in Economics from the University
of Chicago (1968). He was supervised in his dissertation by three Nobel prize
winners in Economics: Milton Friedman (1976), George Stigler (1982), and Robert
Mundell (1999). He has published numerous books and articles in professional
journals on postal economics, minimum wages, privatization and monetary history.
He has testified before Congressional Committees on the unemployment effects of
minimum wages and the advisability of privatizing the US Postal Service. He has
taught in MBA programs in Malaysia, Borneo, Hong Kong and India. From 1983-85
he was the Visiting George F. Bennett Chair in Economics at Wheaton College. He
has been a member of the Mt. Pelerin Society since 1976 and has been listed by
the Heritage Foundation as a policy expert since 1984.
Gilbert K. Davis is partner with the law firm of Davis & Stanley, Fairfax,
Virginia. Mr. Davis earned a B.A. from Cornell College in 1964 and a J.D. from
the University of Virginia School of Law in 1969. He directed two state
agencies in Iowa following graduation from college. Before entering law school,
he was a teacher of American history in the public schools of Iowa City, Iowa
and he is currently president of the Fairfax, Virginia based Para-Legal
Institute. Mr. Davis was Assistant United States Attorney for the Eastern
District of Virginia from 1969 to 1973 and is admitted to practice before the
Supreme Court of the United States, the District of Columbia Superior Court, the
Supreme Court of Virginia and many other federal district and circuit courts.
Mr. Davis has tried cases in 20 states and the District of Columbia. He was
Associate Editor of the 1969 revision of the Virginia Lawyer Handbook and
authored the Criminal Trial Manual for the United States Attorney's office in
the Eastern District of Virginia. Mr. Davis was chairman of the Young
Republican Federation of Virginia in 1973-74, and served as Parliamentarian for
the White House Conference on Small Business in 1986. He has instructed trial
lawyers in various aspects of litigation at numerous seminars, and is in demand
as a public speaker. Mr. Davis also served as an MSNBC TV news analyst. He is
a member of the Virginia State Bar and the American Trial Lawyers Association.
During a distinguished legal career, Mr. Davis brought the first prosecution
under the Clean Air Act and the first prosecution of an aircraft hijacker. Mr.
Davis obtained for a client the largest judgment in Kentucky history. He also
prosecuted the first Nixon administration official - the Director of the United
States Marshall Service -- to go to prison, and brought the first civil case
against a sitting President of the United States (Jones v. Clinton). He
successfully argued before the United States Supreme Court, which unanimously
held that a sitting President is not immune from prosecution for personal
misconduct.
31
<PAGE>
Robert Bradley has served as the president and chief executive officer of
Bradley, Foster & Sargent, Inc., an investment management firm, since 1994. He
is also a founder, principal and portfolio manager of the firm. He is a member
of the firm's Investment Committee and serves on the Board of Directors.
Bradley, Foster & Sargent, Inc. provides professional, high quality,
individually-tailored investment management services to individuals, families,
firms and smaller institutions. The firm has approximately $485 million in
assets under management with offices in Hartford, Connecticut and Wellesley,
Massachusetts. Prior thereto, from 1993 to 1994, Mr. Bradley served as a vice
president of Conning and Company, from which he was responsible for spinning off
its investment management group to form Bradley, Foster & Sargent, Inc. In
1985, Mr. Bradley helped to found Boston Private Bank & Trust Company and served
as its first president and chief executive officer from 1986 through 1992.
Prior thereto, Mr. Bradley spent 14 years with Citicorp, including assignments
in the Middle East, Africa, and Germany. During his last five years at
Citicorp, he served as vice president in the Investment Management Group in New
York and London. He graduated from Williams College in 1966 and served as an
officer in the U.S. Navy including a tour in Vietnam in 1969 and 1970. In 1971,
he received his Masters in international economics from Fletcher School of Law
and Diplomacy at Tufts University. Mr. Bradley serves as chairman of the board
of Directors of Massachusetts Family Institute and Massachusetts Foundation for
the Family. He is also a Trustee on the Board of Gordon College and serves as
treasurer of the Board of Missions at Park Street Church, Boston.
Robert Callahan has served as the vice president of finance and
administration of the Free Congress Research and Education Foundation in
Washington, DC since October 1998, having previously served as its controller
from January 1998 to September 1998. Prior to joining Free Congress, Mr.
Callahan served as accounting manager for the National Association of Home
Builders from 1995 to 1997. From 1991 to 1995, he served as assistant
controller of the National Governors' Association. Prior thereto, from 1988 to
1991, Mr. Callahan was associated with the accounting firm of Thomas Havey & Co.
in Washington, DC. He has served in leadership positions with various
organizations outside his career and job over the years, including the Institute
of Management Accountants Suburban Maryland Chapter, the Prince George's County
Civic Federation, and the Knights of Columbus. Mr. Callahan was elected to the
Prince George's County Board of Education in 1998, where he serves as an
advocate for conservative views in public education. He lives in Bowie,
Maryland. He is a graduate of the University of Maryland and a native
Washingtonian. Mr. Callahan is a certified public accountant.
Board Committees
The audit committee is primarily responsible for reviewing audited
financial statements and accounting practices of Yorktownuniversity.com and for
considering and recommending the employment of, and approving the fee
arrangements with, independent accountants for both audit functions and for
advisory and other consulting services. The audit committee is chaired by Robert
Bradley. Mr. Davis also serves on this committee. The compensation committee
is primarily responsible for reviewing and approving the compensation and
benefits for our key executive officers, administering our employee benefit
plans and making recommendations to the board regarding such matters. The
compensation committee is chaired by Gilbert Davis. Mr. Bradley also serves on
this committee.
Director Compensation
Directors are entitled to reimbursement of all reasonable out-of-pocket
expenses incurred in connection with their attendance at board and board
committee meetings. No fees are paid to Directors.
Compensation Committee Interlocks and Insider Participation
Messrs. Davis and Bradley serve on the compensation committee. No
interlocking relationship exists between the board or compensation committee and
the board of directors or compensation committee of any other company, nor has
any such interlocking relationship existed in the past. The compensation
committee
32
<PAGE>
reviews and approves the compensation and benefits for our key executive
officers, administers our employee benefit plans and makes recommendations to
the board regarding such matters.
Employment Agreement
In June 2000, Yorktownuniversity.com entered into an employment agreement
with Richard J. Bishirjian, Ph.D., its president and chief executive officer,
for a three year term, contingent upon the successful conclusion of the
Company's stock offering, and subject to automatic renewal unless terminated by
either party. The agreement provides for the payment to him of annual
compensation of up to $100,000 plus employee health insurance and other benefits
valued at $25,000 and bonuses to be based upon mutually agreed upon revenue
goals of up to 100% of his base annual salary. If the agreement is terminated
other than for "just cause," Dr. Bishirjian is entitled to a severance payment
equal to the greater of twice his total annual compensation as of the date of
termination or $250,000. The agreement also contains customary non-competition
and non-solicitation provisions.
Stock and Option Awards
From inception through the date of this prospectus, we issued a total of
9,340 shares of its common stock and options to purchase an additional 4,700
shares at our exercise price of $10.00 per share, to its advisors, consultants,
and each of its faculty members, generally in units of 100 shares with options
to purchase an additional 100 shares, as inducement for joining the faculty or
for other service.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock by:
. our chief executive officer, other executive officers and directors;
. all directors and executive officers as a group; and
. each person known to us to own beneficially more than 5% of our
outstanding shares.
A person has beneficial ownership of shares if he has the power to vote or
dispose of the shares. This power can be exclusive or shared, direct or
indirect. In addition, a person is considered by SEC rules to beneficially own
shares underlying options that are presently exercisable or will become
exercisable within 60 days. The shares listed in this table below under "Number
of Shares Underlying Options" include shares issuable upon the exercise of
options that are presently exercisable or will become exercisable within 60
days.
As of the date of this prospectus, there were 478,166 shares of our common
stock outstanding, after giving effect to the conversion of all shares of
preferred stock into common stock. To calculate a stockholder's percentage of
beneficial ownership, we must include in the numerator and denominator those
shares underlying options that the stockholder is considered to beneficially
own. Shares underlying options held by other stockholders, however, are
disregarded in this calculation. Therefore, the denominator used in calculating
beneficial ownership among our stockholders may differ.
33
<PAGE>
<TABLE>
<CAPTION>
Percent as Percent Percent
Number of of the assuming assuming
outstanding date of minimum maximum
Name of Beneficial Owner Shares this prospectus offering offering
------------------------ ----------- --------------- -------- --------
<S> <C> <C> <C> <C>
Richard J. Bishirjian, 179,285 37.5% 29.7% 19.3%
Ph.D.
Free Congress Research
and Education 131,851 27.6% 21.9% 14.2%
Foundation (1)
The Leadership 34,632 7.2% 5.7% 3.7%
Institute
Paul Weyrich 3,463 0.7% 0.6% 0.4%
Thomas F. Payne 850 0.2% 0.1% 0.1%
Douglas K. Adie 850 0.2% 0.1% 0.1%
Gilbert K. Davis 27,706 5.8% 4.6% 3.0%
Robert Bradley 3,463 0.7% 0.6% 0.4%
Robert Callahan 0 - - -
All directors and
executive officers
as a group 215,617 45.1% 35.7% 23.2%
</TABLE>
_____________________
(1) Free Congress Research and Education Foundation's president is Paul
Weyrich, a member of our board of directors.
DESCRIPTION OF CAPITAL STOCK
General
Yorktownuniversity.com is authorized by its Articles of Incorporation to
issue an aggregate of 3,000,000 shares of common stock, $.001 par value per
share, and 10,000 shares, $.001 par value per share, of preferred stock.
Common Stock
As of the date of this prospectus, our outstanding common stock consisted
of 478,398 shares of common stock, after giving effect to the conversion of all
shares of preferred stock into common stock upon the closing of this offering,
held by stockholders of record. Holders of common stock are entitled to one
vote for each share held of record on all matters on which stockholders may
vote, and do not have cumulative voting rights in the election of directors.
Holders of common stock are entitled to receive, as, when and if declared by the
board of directors from time to time, such dividends and other distributions in
cash, stock or
34
<PAGE>
property from our assets or funds legally available for such purposes subject to
any dividend preferences that may be attributable to our outstanding preferred
stock.
No preemptive, conversion, redemption or sinking fund provisions apply to
the common stock. All outstanding shares of common stock are fully paid and
non-assessable. In the event of our liquidation, dissolution or winding up,
holders of common stock are entitled to share ratably in the assets available
for distribution.
Preferred Stock
Upon the commencement of this offering, we will have no outstanding shares
of preferred stock. Our board of directors, without further action by the
stockholders, is authorized to issue an aggregate of 10,000 shares of preferred
stock. We have no plans to issue a new series of preferred stock. Our board of
directors may issue preferred stock with dividend rates, redemption prices,
preferences on liquidation or dissolution, conversion rights, voting rights and
any other preferences, which rights and preferences could adversely affect the
voting power of the holders of common stock. Issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions or
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or could discourage or delay a third party from
acquiring control.
Indemnification of Directors and Officers
Our articles of incorporation provide that our directors and officers shall
be, and at the discretion of the board of directors non-officer employees and
agents may be, indemnified by us to the fullest extent authorized by Virginia
law, against all expenses and liabilities actually and reasonably incurred in
connection with service for or on behalf of Yorktownuniversity.com, and further
permit the advancing of expenses incurred in defense of claims.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Yorktownuniversity.com pursuant to the foregoing provisions, or otherwise,
Yorktownuniversity.com has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Yorktownuniversity.com of expenses incurred or paid by a director, officer or
controlling person of Yorktownuniversity.com of expenses incurred or paid by a
director, officer or controlling person of Yorktownuniversity.com 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, Yorktownuniversity.com 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 Act and will be governed by the final
adjudication of such issue.
Limitation of Liability
Under the Virginia Stock Corporation Act, the liability of an officer or
director for a single transaction in a proceeding brought by or in the right of
a corporation or on behalf of shareholders is limited to damages not exceeding
the lesser of (1) the monetary amount, including the elimination of liability,
specified in the articles of incorporation or, if approved by the shareholders,
in the bylaws, as a limitation on or elimination of the liability of the officer
or director; or (2) the greater of $100,000 or the amount of cash compensation
received by the officer or director from the corporation during the 12 months
immediately preceding the act or
35
<PAGE>
omission for which liability was imposed. The liability of an officer or
director may not be so limited if the officer or director engaged in willful
misconduct or a knowing violation of the criminal law or of any federal or state
securities law, including, without limitation, any claim of federal or state
securities law, including, without limitation, any claim of unlawful insider
trading or manipulation of the market for any security.
Our Articles of Incorporation include a provision eliminating, to the
fullest extent permitted by law, the personal liability of directors.
Anti-Takeover Provisions
Under the Virginia Control Share Acquisition statute, a person who makes a
bona fide offer to acquire, or acquires, shares of stock of a Virginia
corporation that when combined with shares already owned, would increase the
acquirer's ownership to at least 20%, 33 1/3%, or a majority of the voting stock
of the corporation, must obtain the approval of a majority in interest of the
shares held by all shareholders (except the acquirer and officers and inside
directors of the corporation) in order to vote the shares acquired. The statute
does not apply to mergers pursuant to a merger or plan of share exchange
effected in compliance with the relevant provision of the Virginia Act. The
Control Share Acquisition statute permits a Virginia corporation to elect not to
be governed by these provisions by including such an election in its articles of
incorporation or bylaws, and does not apply to companies with less than 300
shareholders. We have decided not to be governed by the Control Share
Acquisition statute in its Articles of Incorporation since
Yorktownuniversity.com, Inc. does not believe such provisions are in keeping
with our commitment to free trade, and the efficient operation of markets.
Virginia's Affiliated Transactions statute provides that if a person
acquires 10% or more of the stock of a Virginia corporation without the approval
of its board of directors (an "interested shareholder"), such person may not
engage in certain transactions with the corporation, including a merger and
purchase or sale of greater than 5% of the corporation's assets or voting stock,
for a period of three years, and then only with the specified supermajority
shareholder vote, disinterested director approval or fair price and procedural
protections. Virginia's statute includes certain exceptions to this prohibition.
For example, if a majority of disinterested directors approves the acquisition
of stock or the transaction prior to the time that the person became an
interested shareholder, or if the transaction is approved by the board of
directors and by the affirmative vote of two-thirds of the outstanding voting
stock which is not owned by the interested shareholder, the prohibition does not
apply.
Transfer Agent
The transfer agent for our common stock is Firstar Bank, N.A.
CERTAIN TRANSACTIONS
Management Fees
As of May 31, 2000, management fees totaling $4,700 have been paid to CMP
International Consulting, Inc., whose President is also our Chief Executive
Officer, for services rendered in organizing Yorktownuniversity.com, securing
Internet domain registrations, recruiting Faculty, making applications for state
licenses, and administering our offering of shares to the public. In June 2000,
the Board approved
36
<PAGE>
payment of management fees of $20,300 for an eight month period during which CMP
International Consulting will manage university affairs.
Sales of Stock to Insiders
On July 19, 1999, we issued for cash and contributed services the following
shares of common stock at a price of $.089 per share to Yorktownuniversity.com's
founders:
Purchaser Number of Shares
Richard J. Bishirjian, Ph.D. 175,822
Free Congress Research and Education Foundation (1) 131,851
The Leadership Institute 34,632
________________________
(1) Free Congress Research and Education Foundation's president is Paul
Weyrich, a member of our board of directors.
In May and June 2000, we sold 183 shares of our convertible preferred stock
at a price of $1,000 per share ($182,666 in total). These shares will be
converted into 126,521 shares of common stock effective upon completion of the
offering. The following table shows the beneficial ownership of these shares by
our executive officers and directors and each person who beneficially owns 5% or
more of these shares. See also the table under "Principal Stockholders," which
shows the ownership of our common stock by our executive officer, directors and
5% stockholders upon the conversion of these shares into common stock.
Percentage
Number of Shares Of Outstanding
Of Convertible Convertible
Name Preferred Preferred
----------------------------------------------------------------------
Gilbert K. Davis 40 21.9%
Chad Long 10 5.5%
John Engelhart 20 10.9%
Wilhelm Maier 10 5.5%
William Dahling 30 16.4%
Tony Barr 10 5.5%
----------------------------------------------------------------------
Other Agreements with Insiders
We have entered into indemnification agreements with each of our
directors and officers. These indemnification agreements require
Yorktownuniversity.com to indemnify such individuals to the fullest extent
permitted by Virginia law.
SHARES ELIGIBLE FOR FUTURE SALE
All of the 478,166 shares of common stock currently outstanding or issuable
through the conversion of currently outstanding preferred stock upon completion
of the offering are "restricted securities" under the Securities Act and may be
sold in the public market upon the expiration of certain holding periods under
Rule 144, subject to the volume, manner of sale and other limitations of Rule
144. Subject to certain restrictions
37
<PAGE>
applicable to affiliates, upon the lapse of these restrictions, these shares
will become freely tradable. Sales of substantial amounts of these or other
shares of common stock in the public market following the offering could
adversely affect the market price of the common stock and adversely affect our
ability to raise capital at a time and on terms favorable to us.
In addition, as of the date of this prospectus, there were outstanding
options to purchase 4,900 shares of common stock. We may register the shares of
common stock issued, issuable or reserved for issuance under our option plans as
soon as practicable following the date of this prospectus.
PLAN OF DISTRIBUTION
Best Efforts Offering
We will offer the shares on a best efforts basis. We intend to offer and
sell shares directly thorough our web site. None of our directors, officers or
employees who assist us in this process will receive any additional compensation
for their efforts. We expect to promote the offering through word of mouth to
leaders of various conservative organizations, conservative religious
organizations and home school associations, direct mailings to targeted members
of such organizations or associations and the placement of advertisements with
periodicals targeted to such audiences. We have no intention of entering into
agreements with selling agents to offer and sell our shares.
How to Subscribe
You may subscribe to purchase shares by completing and signing the
subscription agreement which accompanies this prospectus and mailing or
delivering it to the escrow agent or, if you have subscribed for shares through
the selling agent, as the selling agent directs, together with payment in full
for all shares subscribed for. To be accepted, your subscription must be
forwarded to the escrow agent or the selling agent before the expiration of the
offering. You must pay the full subscription price when you return the
subscription agreement. In the event that payment is less than that required to
purchase the number of shares subscribed for, we will issue only the number of
shares for which payment is received.
You should make your check payable and return your subscription agreement to:
Firstar Bank, N.A., escrow agent
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Brian George
If you have any questions about this offering, please call (757) 873-1100
or visit our web site and register your name, telephone number and the best time
to call. Our representative will return your call within one business day.
Delivery of Share Certificates
As soon as practicable following our acceptance of your subscription, we
will mail you a certificate evidencing the shares you have purchased.
38
<PAGE>
Escrow of Funds and Acceptance of Subscriptions
All subscription funds received in the offering will be deposited in a non-
interest bearing escrow account with Firstar Bank, N.A., as escrow agent. These
funds will be held in the escrow account until released to us upon our
acceptance of subscriptions, which is expected to occur initially upon the sale
of the minimum number of shares and thereafter not more often than weekly. We
may elect to accept or reject any or all of the subscriptions in the offering
for any reason. If the minimum number of shares is not sold or we decline to
accept subscriptions, the escrow agent will promptly return the escrowed funds
directly to the subscribers.
EXPERTS
Our financial statements as of May 31, 2000, and for the period then ended,
included in this prospectus, have been audited by Goodman & Company, L.L.P.,
independent auditors as stated in their reports appearing herein and elsewhere
in the Registration Statement, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by counsel to Yorktownuniversity.com, Doepken Keevican & Weiss Professional
Corporation, 58th Floor, USX Tower, 600 Grant Street, Pittsburgh, Pennsylvania
15219.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form SB-1 under the
Securities Act of 1933 with respect to the common stock offered in this
prospectus. This prospectus omits certain information set forth in the
registration statement and the exhibits and schedules thereto. For further
information with respect to Yorktownuniversity.com and the common stock offered
in this prospectus, reference is made to such registration statement, exhibits
and schedules. Statements contained in this prospectus as to the contents of
any contract or other document referred to are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
The registration statement, including the exhibits and schedules filed
therewith, may be inspected free of charge at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at its regional offices located at 7 World Trade
Center, New York, New York 10048 and Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the SEC, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates and
from the SEC's Internet site at http://www.sec.gov. Information on the
operation of the Public Reference Room may be obtained by calling the SEC at 1-
800-SEC-0330.
39
<PAGE>
Yorktownuniversity.com, Inc.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Accountants F-2
Financial Statements:
Balance Sheet as of May 31, 2000 F-3
Statement of Operations for the Period Ended May 31, 2000 F-4
Statement of Changes in Stockholders' Equity for the
Period Ended May 31, 2000 F-5
Statement of Cash Flows for the Period Ended May 31, 2000 F-6
Notes to Financial Statements F-7
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Directors and Stockholders
Yorktownuniversity.com, Inc.
(A Development Stage Enterprise)
Norfolk, Virginia
We have audited the accompanying balance sheet of Yorktownuniversity.com,
Inc. (A Development Stage Enterprise) as of May 31, 2000, and the related
statement of operations, stockholders' equity and cash flows from inception,
July 19, 1999, to the period 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 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 Yorktownuniversity.com, Inc.
(A Development Stage Enterprise) as of May 31, 2000, and the results of its
operations and cash flows from inception, July 19, 1999, to the period then
ended in conformity with generally accepted accounting principles.
/s/ Goodman & Company, L.L.P.
Norfolk, Virginia
June 14, 2000
F-2
<PAGE>
YORKTOWNUNIVERSITY.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
May 31, 2000
ASSETS
Cash $160,363
Travel advances - related party 835
--------
161,198
--------
Property and equipment
Office equipment 1,498
Less accumulated depreciation (250)
--------
1,248
--------
Deferred offering costs $ 35,135
--------
$197,581
--------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 9,950
Due to related party 8,278
--------
18,228
--------
Stockholders' equity
Common stock, $.001 par value, 3,000,000
shares authorized, 351,645 shares
outstanding 352
Series A convertible preferred stock, $.001
par value, 10,000 shares authorized, 172.66
shares outstanding -
Additional paid-in capital 299,214
Deficit accumulated during development stage (120,213)
--------
179,353
--------
$197,581
========
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE>
YORKTOWNUNIVERSITY.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
Period Ended May 31, 2000
Revenues
Interest income $ 526
---------
Operating expenses
Contributed services 95,400
Organization costs 14,300
Administrative fee 7,150
Supplies and equipment 1,217
Legal expenses 980
Office supplies 721
Other 685
Depreciation and amortization 250
Telephone 36
---------
120,739
---------
Net loss before income taxes (120,213)
Income tax expenses -
---------
Net loss (120,213)
---------
Weighted average common shares outstanding 351,645
---------
Net loss per share - basic and diluted $ (0.34)
=========
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE>
YORKTOWNUNIVERSITY.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Period Ended May 31, 2000
<TABLE>
<CAPTION>
Deficit
Accumulated
Series A Series A Additional During
Common Common Preferred Preferred Paid-In Development
Shares Stock Shares Stock Capital Stage Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Inception, July 19, 1999 $351,645 $352 - $- $ 31,148 $ - $ 31,500
Proceeds from issuance
of Series A Convertible
Preferred Stock - - 172.66 - 172,666 - 172,666
Net loss - - - - - (120,213) (120,213)
Contributed services - - - - 95,400 - 95,400
-------- ---- ------ -- -------- --------- ---------
351,645 $352 172.66 $- $299,214 $(120,213) $ 179,353
======== ==== ====== == ======== ========= =========
</TABLE>
F-5
<PAGE>
YORKTOWNUNIVERSITY.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
Period Ended May 31, 2000
<TABLE>
<S> <C>
Cash flows from operating activities
Net loss $(120,213)
Adjustments to reconcile to net cash used
by operating activities:
Depreciation and amortization 250
Contributed services 101,900
Changes in:
Travel advances (835)
Accounts payable 9,950
Due to related party 8,278
----------
Net cash used by operating activities (670)
----------
Cash flows from investing activities
Purchase of property and equipment (1,498)
----------
Cash flows from financing activities
Proceeds from issuance of common stock 25,000
Proceeds from issuance of Series A Convertible Preferred stock 172,666
Deferred offering costs (35,135)
----------
Net cash provided by financing activities 162,531
----------
Net increase in cash 160,363
Cash at beginning of period -
----------
Cash at end of period $ 160,353
==========
Supplemental disclosure of non-cash investing
and financing activities
At inception, July 19, 1999, $6,500 of common stock was issued
to a related party in exchange for services rendered related to
the organization of the Company.
During the period ended May 31, 2000, $95,400 of common stock
was issued for contributed services.
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE>
YORKTOWNUNIVERSITY.COM, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000
NOTE 1 - BUSINESS ORGANIZATION
Yorktownuniversity.com, Inc. (the "Company"), was formed in July, 1999 in
Virginia. The Company intends to establish and operate an online university
offering courses in the humanities and social sciences disciplines. During the
development stage, the Company has undertaken efforts to complete its
organization and raise capital, recruit faculty and develop curriculum for its
course offerings, obtain accreditation and eligibility from appropriate state
and federal agencies, develop its internet-delivery system, and initiate its
marketing plans.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting and Basis of Presentation
The accounting and reporting policies of the Company conform to generally
accepted accounting principles.
Cash and Cash Equivalents
For the purpose of reporting cash flows, the Company considers all highly
liquid investments purchased with a maturity of three months or less to be cash
equivalents.
Estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and disclosure of contingent assets and
liabilities for the reported periods. Actual results could differ from those
estimates and assumptions.
Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consists principally of cash. The Company
mitigates this risk by placing its cash with high credit quality financial
institutions. The Company has, at times, deposits at financial institutions in
excess of FDIC insurance limits.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the basis in organization costs and
start-up costs for financial and income tax reporting. The deferred tax asset
represents the future tax return consequences of those differences which will be
deductible when the differences are settled.
(Notes continued on next page)
F-7
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advertising
Advertising costs are expensed as incurred.
Organization and Start-up Costs
Organization and start-up costs are expensed as incurred.
Property and Equipment
Property and equipment are stated at cost and depreciated using straight-
line and accelerated methods over the following estimated useful lives:
Assets Lives
------ -----
Office equipment 5 years
NOTE 3 - DEFERRED OFFERING COSTS
Deferred offering costs include printing, communication, travel and legal
costs associated with the planned offering of common stock. If the offering is
successful, the costs will be netted against the offering proceeds in
stockholders' equity. If not, they will be expensed in the period the offering
is aborted.
NOTE 4 - INCOME TAXES
The deferred tax assets include the following:
Deferred tax assets:
Organization and start-up costs $ 40,966
Less valuation allowance (40,966)
--------
$ -
========
Net operating losses for income tax return purposes have not yet been
incurred, as the Company's operations have not yet commenced.
(Notes continued on next page)
F-8
<PAGE>
NOTE 5 - OTHER COMMITMENTS AND CONTINGENCIES
In June 2000, the Company entered into an employment agreement with its
president and chief executive officer, for a three year term, contingent upon
the successful conclusion of the Company's stock offering and subject to
automatic renewal unless terminated by either party. The agreement provides for
the payment of annual compensation (base salary of $100,000 plus employee health
insurance and other benefits valued at $25,000) and bonuses to be based upon
mutually agreed upon revenue goals of up to 100% of base annual salary. If the
agreement is terminated other than for "just cause," he shall be entitled to a
severance payment equal to the greater of twice his total annual compensation as
of the date of termination or $250,000.
From inception through May 31, 2000, the Company issued a total of 9,540
shares of common stock and options to purchase an additional 4,700 shares at an
exercise price of $10.00 per share, to advisors, consultants and faculty
members, generally in units of 100 shares with options to purchase an additional
100 shares, as inducement for joining the faculty or for other services.
The Company applies Accounting Principles Board Opinion No. 25 (APB 25),
Accounting for Stock Issued to Employees, and related interpretations in
accounting for its stock options. Accordingly, no compensation cost has been
recognized for these stock options against earnings. For those companies
applying APB 25, FASB Statement No. 123, Accounting for Stock-Based
Compensation, requires certain pro-forma disclosures of net income and earnings
per share. Net loss and loss per share computed under FASB Statement No. 123 do
not materially differ from the amounts reported.
All options have five-year terms and vest immediately. Pursuant to terms
of the options, the option exercise price equals or exceeds the market price of
the stock as of the date the option is granted. The following is a summary of
the Company's stock option activity, and related information:
Weighted -
Average
Exercise
Options Price
------- ----------
Outstanding - inception - $ -
Granted 4,700 10.00
Exercised - -
Forfeited - -
------ ------
Outstanding - end of year 4,700 $10.00
====== ======
Exercisable - end of year,
December 31, 1999 4,700 $10.00
====== ======
* * * * *
F-9
<PAGE>
Annex A
SUBSCRIPTION AGREEMENT
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Brian George
Ladies and Gentlemen:
The undersigned hereby subscribes for and agrees to purchase the number of
shares of common stock, par value $0.001 (the "Shares"), of
Yorktownuniversity.com, Inc., a Virginia corporation ("Yorktownuniversity.com"),
indicated below. The undersigned has executed and delivered this Subscription
Agreement in connection with Yorktownuniversity.com's offering of Shares
described in the Prospectus dated [ ], 2000, as may be supplemented
from time to time ("Supplements"), which Prospectus and Supplements, if any,
accompany this Subscription Agreement.
The undersigned agrees to purchase the Shares subscribed for herein for the
purchase price of $10.00 per share and has delivered to our escrow agent,
Firstar Bank, N.A., with this Subscription Agreement a check made payable to
"Firstar Bank, N.A., escrow agent."
The undersigned acknowledges receipt of a copy of our Prospectus, as
supplemented by any Supplements.
The undersigned acknowledges that we may accept or decline the
undersigned's subscription for any reason whatsoever.
<TABLE>
<S> <C>
_______________________________________
______________ Shares ($_______________) Please print name(s) of subscriber(s)
subscribed for (minimum of 100 Shares and
total subscription price of $1,000 _______________________________________
Signature of subscriber
______________________________________ _______________________________________
How Shares are to be held if this is a Signature of co-subscriber
co-investment, e.g., as joint tenants
(with right of survivorship) or _______________________________________
tenants-in-common
______________________________________
Address
_______________________________________ ______________________________________
Social Security or Tax I.D. number(s) Date
</TABLE>
A-1
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 1. Indemnification of Directors and Officers.
Section 13.1-697 of the Virginia Stock Corporation Act (the "Virginia Act")
provides as follows:
A. Except as provided in subsection D of this section, a corporation may
indemnify an individual made a party to a proceeding because he is or
was a director against liability incurred in the proceeding if:
1. He conducted himself in good faith; and
2. He believed:
a. In the case of conduct in his official capacity with the
corporation, that his conduct was in its best interests; and
b. In all other cases, that his conduct was at least not opposed
to its best interests; and
3. In the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful.
B. A director's conduct with respect to an employee benefit plan for a
purpose he believed to be in the interests of the participants in and
beneficiaries of the plan is conduct that satisfies the requirement of
paragraph 2b of subsection A of this section.
C. The termination of a proceeding by judgment, order, settlement or
conviction is not, of itself, determinative that the director did not
meet the standard of conduct described in this section.
D. A corporation may not indemnify a director under this section:
1. In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
2. In connection with any other proceeding charging improper
personal benefit to him, whether or not involving action in his
official capacity, in which he was adjudged liable on the basis
that personal benefit was improperly received by him.
E. Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with the proceeding.
Section 13.1-698 of the Virginia Act provides as follows:
Unless limited by its articles of incorporation, a corporation shall
indemnify a director who entirely prevails in the defense of any
proceeding to which he was a party because he is or was a director of
the corporation against reasonable expenses incurred by him in
connection with the proceeding.
Under Section 13.1-702 of the Virginia Act, unless limited by a company's
articles of incorporation, an officer is entitled to mandatory indemnification
on the same basis as a director. The Virginia Act further makes provisions for
the advancement of expenses of officers and directors, and for any such
individual to
II-1
<PAGE>
make application to the court for advances, reimbursement or indemnification.
The Company's Articles of Incorporation provide that any person who is made
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he or she, or a person of whom he or she is or was a
director or officer of the Company shall be indemnified and held harmless by the
Company to the fullest extent authorized by the Virginia Act against all
expense, liability and loss (including attorneys' fees, judgments, fines, excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith. This right of
indemnification includes the right to be paid by the Company the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided that if the Virginia Act require, the payment of such expenses incurred
by a director or officer in his or her capacity as a director or officer in
advance of the final disposition of a proceeding shall be made only upon
delivery to the Company of an undertaking, by or on behalf of such director or
officer, to repay all amounts so advanced if it shall ultimately be determined
that such director or officer is not entitled to be indemnified. The Company, by
action of its Board of Directors, may but is not be obligated, to provide
indemnification to employees and agents of the Company with the same scope and
effect as the foregoing indemnification of directors and officers.
It is a defense to any such action (other than an action brought to enforce
a claim for expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any is required, has been
tendered to the Company) that the claimant has not met the standards of conduct
which make it permissible under the Virginia Act for the Company to indemnify
the claimant for the amount claimed, but the burden of proving such defense
shall be on the Company.
The Company may maintain insurance, at its expense, to protect itself and
any director, officer, employee or agent of the Company or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Company would have the power to indemnify
such person against such expense, liability or loss under the Virginia Act.
Item 2. Other Expenses of Issuance and Distribution.
SEC filing fee................. $ 1,188
Printing and Mailing expenses.. $20,000 *
Legal fees and expenses........ $25,000 *
Accounting fees and expenses... $ 7,500 *
Blue Sky fees and expenses..... $12,000 *
Miscellaneous.................. $ 9,312 *
Total.......................... $75,000 *
----------------
*Estimate
Item 3. Undertakings.
The Company hereby undertakes to:
II-2
<PAGE>
1. File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
2. For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the
initial bona fide offering.
3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Item 4. Unregistered Securities Issued or Sold within One Year.
In July 1999, the Company issued for cash and contributed services 351,645
shares to its founders in reliance upon the exemption provided by Section 4 (2)
of the Securities Act of 1933, as follows:
Number of Purchase
Purchaser Shares Price
--------- --------- --------
Richard J. Bishirjian, Ph.D. 175,822 $ 3,605
Free Congress Research and Education Foundation 131,851 $ 2,895
The Leadership Institute 34,632 $25,000
In May and June 2000, the Company sold for cash 183 shares of its Series A
convertible preferred stock at a price of $1,000 per share ($183,000 in the
aggregate) to the following accredited investors in reliance upon the exemption
provided by Rule 506 of Regulation D:
Gilbert Davis Cowles M. Spencer II
Richard J. Bishirjian Lincoln Warrell
Chad Long Paul Garman
Steve Bouknight James Hinish
John Engelhart Robert Bradley
Tom Cantrell Nancy Anthony
Paul Weyrich Walter Weld
Wilhelm Maier J. Edward Pawlick
William Dahling William Russell
Tony Barr George Trivoli
Lorenz Hart
II-3
<PAGE>
In June 2000, the Company issued 9,340 shares of its common stock and
options to purchase an additional 4,500 shares at an exercise price of $10.00
per share to each of its faculty members and certain other persons, generally in
units of 100 shares and options to purchase an additional 100 shares, as
inducement for joining the faculty or providing other assistance. In the
aggregate, the Company issued 9,340 shares and options to purchase an additional
4,500 shares. These securities were issued in reliance on the exemption
provided by Rule 701 under the Securities Act of 1933. The following pesons
received securities:
Carole Scott John Sites John Cobb
Mason Conner Theophilos Mantzanas Linda Raeder
Thomas F. Payne Steve Pejovic Gleaves Whitney
Talmadge Watson Atilla Yayla Marshall De Rosa
Thomas Landress Dominic Acquila David Bobb
Angelo Codevilla Gerald Dwyer David Mulroy
James Gaston Jefferson Edgens Donald Devine
Henry Edmondson William Luckey Marlo Lewis
Joseph P. Martino Gary Wolfram Gordon Diem
Richard Zeller Mark Malvasi David Fitzsimons
Mitchell Kalpakgian H. Lee Cheek John Lachs
Kenneth Holland Gerald Gunderson Roger W. Cole
Larry Schweikart Thomas F. Payne Randall Balmer
Edmund Shanahan James Gustafson William Sloane
Douglas Adie Arthur Pontynen George Trivoli
Edward Levinson James McClellan
William B. Allen Eugene Heath
Item 6. Description of Exhibits.
1.1 Amended and Restated Articles of Incorporation
2.1 By-laws
4.1 Form of Subscription Agreement (included as Annex A to the Prospectus)
9.1 Form of Escrow Agreement between the Company and Firstar Bank, N. A.
10.1 Consent of Goodman & Company, L.L.P., certified public accountants
11.1 Opinion of Doepken Keevican & Weiss Professional Corporation*
12.1 Yorktownuniversity.com, Inc. 2000 Stock Option Plan
___________________________
* To be filed by amendment.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of he Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-1 and authorized this registration
statement to be signed on its behalf by the undersigned, in the County of York,
Commonwealth of Virginia on June 29, 2000.
Yorktownuniversity.com, Inc.
By /s/ Richard J. Bishirjian
-------------------------------------
Richard J. Bishirjian, Ph.D.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Richard J Bishirjian and Robert Callahan and each of
them, with full power to act without the other, his true and lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities to sign any or all
amendments to this Registration Statement, including post-effective amendments,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents of any of them, or any substitute or substitutes, lawfully do or
cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
Name and Signature Position Date
-------------------------- ------------------------------ -------------
/s/Paul Weyrich Chairman of the Board and June 29, 2000
-------------------------- Director
Paul Weyrich
/s/Richard J. Bishirjian President, Chief Executive June 28, 2000
-------------------------- Officer and Director
Richard J. Bishirjian (principal executive officer)
/s/Robert Callahan Treasurer and Secretary June 29, 2000
-------------------------- (principal financial and
Robert Callahan accounting officer)
/s/Gilbert K. Davis Director June 29, 2000
--------------------------
Gilbert K. Davis
/s/Robert Bradley Director June 29, 2000
--------------------------
Robert Bradley
II-5
