<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 30, 1997
---------------
UOL PUBLISHING, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
<TABLE>
<S> <C>
0-21421 54-1290319
- ------------------------- -------------------------
(Commission file Number) (IRS Employer ID Number)
</TABLE>
8251 Greensboro Drive, Suite 500, McLean, Virginia 22102
--------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (703)893-7800
-------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired. As required by
Item 7 of Form 8-K promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Exchange
Act of 1934, as amended (the "Act"), the following financial
statements of the business acquired are filed with this
report:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Report of Independent Auditors .....................F-1
Cooper & Associates, Inc. Balance Sheet
as of December 31, 1996.............................F-2
Cooper & Associates, Inc. Statement of
Income for the Year Ended
December 31, 1996...................................F-3
Cooper & Associates, Inc. Statement of
Stockholders' Equity for the Year Ended
December 31, 1996 .................................F-4
Cooper & Associates, Inc. Statement of
Cash Flows for the Year Ended
December 31, 1996...................................F-5
Notes to Financial Statements .....................F-6
</TABLE>
(b) Pro Forma Financial Information. As required by Item 7 of
Form 8-K promulgated by the Commission under the Act, the
following pro forma financial information is filed with this
report:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Unaudited Pro Forma Combined
Balance Sheet as of March 31, 1997 .................F-11
Unaudited Combined Pro Forma
Statements of Operations for the Year
Ended December 31, 1996 and
the Three Month Period Ended March 31, 1997 .......F-12
</TABLE>
<PAGE> 3
(c) Exhibit.
2.3* Stock Purchase Agreement dated as of April 30, 1997, by and
among the Registrant, C&A and shareholders of C&A.
- -------------------
*Previously filed.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UOL PUBLISHING, INC.
Date: July 14, 1997 /s/ Narasimhan P. Kannan
-------------------------
Narasimhan P. Kannan
Chief Executive Officer
(Principal Executive Officer)
<PAGE> 5
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Cooper & Associates, Inc.
We have audited the accompanying balance sheet of Cooper & Associates, Inc.
(d/b/a Teletutor) as of December 31, 1996 and the related statements of income,
stockholders' equity and cash flows for the year ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cooper & Associates, Inc.
(d/b/a Teletutor) at December 31, 1996, and the results of its operations and
its cash flows for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Vienna, Virginia
May 15, 1997
F-1
<PAGE> 6
COOPER & ASSOCIATES, INC.
(D/B/A TELETUTOR)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Assets
Current assets
Cash and cash equivalents $ 152,031
Marketable securities 4,269
Accounts receivable, less allowance of $41,000 538,019
Prepaid expenses 24,403
----------
Total current assets 718,722
Property and equipment, net 152,554
Capitalized product development costs, net 455,218
Other assets 32,318
----------
Total assets $1,358,812
==========
Liabilities and stockholders' equity
Current liabilities
Accounts payable and accrued expenses $ 429,701
Note payable to stockholder 24,108
Deferred income taxes 334,600
Current portion of long-term debt 33,062
----------
Total current liabilities 821,471
Long-term debt, net of current portion 23,657
Commitments --
Stockholders' equity:
Class A Common Stock; $0.01 par value; 194,000 shares
authorized, 182,000 shares issued and outstanding 1,820
Class B Non-Voting Common Stock; $0.01 par value; 21,500
shares authorized, 1,000 shares issued and outstanding 10
Additional paid-in capital 17,187
Retained earnings 493,197
Unrealized gain on marketable securities 1,470
----------
Total stockholders' equity 513,684
----------
Total liabilities and stockholders' equity $1,358,812
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE> 7
COOPER & ASSOCIATES, INC.
(D/B/A TELETUTOR)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Net revenues $2,917,808
Costs and expenses:
Cost of revenues 681,678
Sales and marketing 578,852
Product development 911,090
General and administrative 240,558
Depreciation and amortization 29,003
----------
Total costs and expenses 2,441,181
Income from operations 476,627
Other income:
Other income 27,957
Interest income 717
----------
Net income before provision for income taxes 505,301
Provision for income taxes 279,400
----------
Net income $ 225,901
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 8
COOPER & ASSOCIATES, INC.
(D/B/A TELETUTOR, INC.)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK ADDITIONAL
------------------ ------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
-------- -------- -------- ------ ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 1,940 $ 1,940 -- $ -- $ 1,610
Recapitalization:
Retirement of $1 par value
outstanding Common Stock (1,820) (1,820) -- -- --
Retirement of treasury
shares (120) (120) -- -- --
Reissuance of Common Stock 182,000 1,820 -- -- --
Issuance of Common Stock 1,000 10 15,577
Increase in unrealized gain -- -- -- -- --
Net income -- -- -- -- --
--------- --------- --------- --------- ---------
Balance at December 31, 1996 182,000 $ 1,820 1,000 $ 10 $ 17,187
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
TOTAL
TREASURY RETAINED UNREALIZED STOCKHOLDERS'
STOCK EARNINGS GAIN EQUITY
---------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 $ (1,500) $ 268,676 $ 829 $ 271,555
Recapitalization:
Retirement of $1 par value
outstanding Common Stock -- -- -- (1,820)
Retirement of treasury
shares 1,500 (1,380) -- --
Reissuance of Common Stock -- -- 1,820
Issuance of Common Stock -- -- -- 15,587
Increase in unrealized gain -- -- 641 641
Net income -- 225,901 -- 225,901
--------- --------- --------- ---------
Balance at December 31, 1996 $ -- $ 493,197 $ 1,470 $ 513,684
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 9
COOPER & ASSOCIATES, INC.
(D/B/A TELETUTOR)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-------------------
<S> <C>
OPERATING ACTIVITIES
Net income $ 225,901
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property and equipment 29,003
Amortization of capitalized product development costs 40,740
Provision for doubtful accounts 40,060
Expense associated with common stock issued 15,587
Changes in operating assets and liabilities:
Accounts receivable (277,344)
Prepaid expenses 20,339
Other assets (28,738)
Accounts payable and accrued expenses 316,505
Deferred income taxes 188,523
---------
Net cash provided by operating activities 570,576
INVESTING ACTIVITIES
Purchases of property and equipment (146,005)
Capitalized product development costs (362,784)
---------
Net cash used in investing activities (508,789)
FINANCING ACTIVITIES
Proceeds from notes payable and bank line-of-credit 157,250
Repayments of notes payable and bank line-of-credit (170,922)
---------
Net cash used in financing activities (13,672)
Net increase in cash and cash equivalents 48,115
Cash and cash equivalents at the beginning of the year 103,916
---------
Cash and cash equivalents at the end of the year $ 152,031
=========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 6,668
=========
Income taxes paid $ 94,300
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 10
COOPER & ASSOCIATES, INC.
(D/B/A TELETUTOR)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS
Cooper & Associates, Inc., d/b/a Teletutor (the "Company"), was incorporated in
Illinois on November 15, 1985, for the purpose of developing, marketing and
consulting with regard to computer based instruction.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
Cash equivalents, which are stated at cost, consist of highly liquid
investments with original maturities of three months or less.
REVENUE RECOGNITION
The Company derives substantially all its revenues from sales of computer
software licenses, and pay-per-use fees. Maintenance and telephone support
services are generally bundled in the sales price.
License Revenues
Revenues from the sale of software licenses or pay-per-use licenses are
recognized after shipment of the products and fulfillment of any acceptance
terms. The Company accrues the estimated liability for costs to be incurred for
future maintenance and telephone support related to the revenue recognized. The
cost of providing product enhancements based on historical information and
future management intentions are considered immaterial.
During the year ended December 31, 1996, two customers individually represented
23% and 13% of net revenues, respectively.
ROYALTIES
The Company pays royalties to several unrelated parties based on revenues
earned from instructional courses licensed to the Company by the unrelated
parties and developed for sale by the Company. Royalties under these agreements
range from 5% to 20% of related revenues. Royalty expense for 1996 amounted to
$36,569.
ADVERTISING COSTS
Advertising costs are expensed when incurred. Advertising expenses for the year
ended December 31, 1996 amounted to $20,471.
INCOME TAXES
The Company provides for income taxes in accordance with the liability method.
F-6
<PAGE> 11
COOPER & ASSOCIATES, INC.
(D/B/A TELETUTOR)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
calculated using the straight-line method over the estimated useful lives
ranging from five to seven years. Property and equipment consisted of the
following:
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
Equipment $185,317
Furniture and fixtures 55,697
---------
241,014
Less accumulated depreciation and
amortization 88,460
---------
$152,554
=========
</TABLE>
4. CAPITALIZED PRODUCT DEVELOPMENT COSTS
Product development costs for computer software that is to be used as
an integral part of a product or process is charged to expense until both (a)
technical feasability has been established for the product and (b) all research
and development activities for the other components of the product or process
have been completed. Once both conditions have been achieved, direct labor
costs to develop, code and test the product masters are
capitalized.Capitalization of product development costs is discontinued when
the product becomes available for general release to customers. The amount of
product development costs capitalized for the year ended December 31, 1996 was
$362,784.
Amortization of such costs is based generally on the straight-line method over
the remaining estimated economic life of the product, typically five years.
Amortization begins when the product becomes available for general release to
customers. Management periodically reviews the capitalized product development
costs for each product to ensure that the amount is carried on the balance
sheet at the lower of unamortized capitalized costs or net realizable value.
The recoverability of capitalized product development costs requires
considerable judgment from management related to the estimated useful lives and
anticipated future sales of products. It is possible that those estimates of
future gross revenues, the remaining estimated economic life of the product, or
both may be reduced significantly in the near term as a result of future
events. Amortization of product development costs for the year ended December
31, 1996 amounted to $40,740 and is included as a component of the cost of
revenues in the statement of income.
F-7
<PAGE> 12
COOPER & ASSOCIATES, INC.
(D/B/A TELETUTOR)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT
Long-term debt at December 31, 1996 consists of the following:
<TABLE>
<S> <C>
Note payable to venture capitalist; interest charged at an
annual rate of 4%; payable on demand $ 20,000
Note payable to a bank; interest charged at an annual rate of
10.5%; payable in monthly installments of principal and
interest of $1,357 through August 1999; secured by all
business assets 36,719
--------
56,719
Less current portion (33,062)
--------
$ 23,657
========
</TABLE>
Repayments of long-term debt are scheduled as follows:
<TABLE>
<S> <C>
Year ended December 31, 1997 $ 33,062
1998 14,484
1999 9,173
---------
$ 56,719
=========
</TABLE>
During 1996, the Company and a bank entered into a secured line-of-credit
facility Agreement which provided the Company the ability to borrow up to
$150,000. Amounts borrowed under this arrangement bear interest at the bank's
prime rate plus 2% and are collateralized by all business assets. The
line-of-credit facility requires monthly interest payments. As of December 31,
1996, there was no balance outstanding under the line-of-credit facility.
6. NOTE PAYABLE TO STOCKHOLDER
Prior to 1996, a stockholder of the Company loaned the Company $38,387. During
1996, the Company repaid $14,279. The interest is payable monthly at an annual
rate of 12%. There are no specific principal repayment terms and therefore the
balance of the note of $24,108 has been classified as short-term.
7. COMMITMENTS
LEASES
The Company leases office space under a noncancellable operating lease
agreement. Future minimum lease payments may be periodically adjusted based
on changes in the lessors' operating charges and various renewal terms exist.
Rent expense for the year ended December 31, 1996 was $50,137.
As of December 31, 1996, payments due under noncancellable operating leases
were as follows:
<TABLE>
<S> <C>
1997 $ 57,083
1998 62,084
1999 66,042
2000 68,542
2001 40,833
--------
$294,583
========
</TABLE>
F-8
<PAGE> 13
COOPER & ASSOCIATES, INC.
(D/B/A TELETUTOR)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Accounts payable $ 85,022
Accrued expenses 299,895
Accrued royalties and commissions 44,784
--------
$429,701
========
</TABLE>
9. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Components of the Company's net deferred tax liability balance are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Deferred tax assets:
Accrual to cash adjustments $ 89,100
---------
Total deferred assets 89,100
Deferred tax credit:
Accrual to cash adjustments (413,700)
Depreciation (10,000)
=========
Net deferred tax credit $(423,700)
=========
Total deferred tax credit $(334,600)
=========
</TABLE>
The components of the provision for income taxes for the year ended December
31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Current tax expense:
Federal $ 72,500
State 17,200
--------
89,700
Deferred tax expense:
Federal 157,600
State 32,100
--------
189,700
========
Total provision for income taxes $279,400
========
</TABLE>
F-9
<PAGE> 14
COOPER & ASSOCIATES, INC.
(D/B/A TELETUTOR)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10 STOCKHOLDERS' EQUITY
On April 1, 1996, the Board of Directors amended the Articles of Incorporation
to authorize two classes of Common Stock, Class A and Non-Voting Class B with a
par value of $0.01 per share. In connection with this amendment, the existing
stockholders retired their outstanding $1 par value common stock and were
issued an aggregate of 182,000 shares of Class A Common Stock. Additionally,
the Company retired the outstanding treasury stock.
On December 1, 1996, the Company issued 1,000 shares of Non-Voting Class B
Common Stock for services performed. The Company recorded $15,547 as
compensation expense based on the difference between the estimated fair market
value of its common stock and the purchase price on the date of issuance.
12. RETIREMENT PLAN
During 1996, the Company adopted a 401(k) Retirement Savings Plan (the "Plan")
covering all employees who meet defined eligibility requirements. Employee
contributions to the Plan are made at predetermined rates elected by the
employees. Additionally, the employer may elect to match a portion of the
employee contributions and may also make a discretionary contribution to the
Plan. The Company did not make discretionary contributions in 1996.
13. SUBSEQUENT EVENTS
In April 1997, the note payable to the stockholder was converted into
additional paid-in capital.
In April 1997, the Company entered into a lease of additional office space, with
payments due as follows: $37,500 in 1997 and $12,500 in 1998.
In May 1997, the Company repaid the bank note payable in full.
On April 30, 1997, all of the Company's outstanding Common Stock was
purchased by UOL Publishing, Inc. for $4,798,622, consisting of cash and three
annual installment payments of principal and interest of $666,667.
F-10
<PAGE> 15
UNAUDITED PRO FORMA COMBINED BALANCE SHEET AND STATEMENTS OF OPERATIONS
The unaudited pro forma combined balance sheet gives effect to the acquisition
of Cooper & Associates, Inc. (d/b/a Teletutor) completed by the Company on
April 30, 1997, as if it occurred on March 31, 1997.
The unaudited pro forma combined statement of operations for the year ended
December 31, 1996 gives effect to the acquisition of Cooper & Associates, Inc.
as if it had occurred on January 1, 1996. The unaudited pro forma combined
statement of operations for the three month period ended March 31, 1997
gives effect to the acquisition of Cooper & Associates, Inc. as if it had
occurred on January 1, 1996.
The unaudited pro forma combined statements of operations are based on
available information and on certain assumptions and adjustments described in
the accompanying notes which the Company believes are reasonable. The unaudited
pro forma combined statements of operations are provided for informational
purposes only and does not purport to present the results of operations of the
Company had the transactions assumed therein occurred on or as of the dates
indicated, nor are they necessarily indicative of the results of operations
which may be achieved in the future. The unaudited pro forma combined
statements of operations should be read in conjunction with the financial
statements of the Company, including the notes thereto and the financial
statements of Cooper & Associates, Inc.
Pro Forma Balance Sheet
As of March 31, 1997
<TABLE>
<CAPTION>
Historical
Cooper &
Historical Associates, Inc. Acquisition Pro Forma
UOL (a) (a) Adjustments (b) Combined
--------------- ---------------- ------------------ -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,667,140 $ 195,502 $ (3,000,000)(c) $ 9,862,642
Marketable securities -- 4,269 4,269
Accounts receivable 837,532 440,879 1,278,411
Loans receivable from related parties 102,200 -- 102,200
Prepaid expenses and other current assets 406,972 13,728 420,700
------------- ------------ ---------------- -------------
Total current assets 14,013,844 654,378 (3,000,000) 11,668,222
Property and equipment, net 837,487 173,253 1,010,740
Capitalized product development costs, net -- 490,931 490,931
Other assets 75,820 11,925 87,745
Goodwill and other intangibles, net 1,016,370 -- 1,833,124(d) 2,849,494
------------- ------------ ---------------- -------------
Total assets $ 15,943,521 $ 1,330,487 $ (1,166,876) $ 16,107,132
============= ============ ================ =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 822,976 $ 476,221 $ 200,000(e) $ 1,499,197
Note payable to stockholder -- 24,108 (24,108)(f) --
Current portion of long-term debt -- 33,276 567,742(g) 601,018
Deferred revenues 5,000 -- 5,000
Deferred income taxes -- 335,195 335,195
------------- ------------ ---------------- -------------
Total current liabilities 827,976 868,800 743,634 2,440,410
Notes payable -- 20,297 1,230,880(g) 1,251,177
Stockholders' equity (deficit):
Common Stock 31,861 1,830 (1,830)(h) 31,861
Additional paid-in capital 27,562,717 17,187 (17,187)(h) 27,562,717
Unrealized gain on marketable securities -- 1,470 (1,470)(h) --
Retained earnings (deficit) (12,479,033) 420,903 (3,120,903)(h) (15,179,033)
------------- ------------ ---------------- -------------
Total stockholders' equity (deficit) 15,115,545 441,390 (3,141,390) 12,415,545
------------- ------------ ---------------- -------------
Total liabilities and stockholders' equity (deficit) $ 15,943,521 $ 1,330,487 $ (1,166,876) $ 16,107,132
============= ============ ================ =============
</TABLE>
F-11
<PAGE> 16
PRO FORMA STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Historical
Historical Cooper & Associates, Acquisition Pro Forma
UOL (i) Inc. (i) Adjustments (b) Combined
------------ -------------------- ----------------- ------------
<S> <C> <C> <C> <C>
Net revenues $ 942,426 $ 2,917,808 $ -- $ 3,860,234
Costs and expenses
Cost of revenues 194,730 681,678 -- 876,408
Sales and marketing 1,592,668 578,852 -- 2,171,520
General and administrative 2,477,144 240,558 -- 2,717,702
Product development 1,482,179 911,090 -- 2,393,269
Acquired in-process research, development
and content -- -- 2,700,000(j) 2,700,000
Depreciation and amortization 144,284 29,003 227,100(k) 400,387
------------ ----------- ------------- ------------
Income (loss) from operations (4,948,579) 476,627 (2,927,100) (7,399,052)
Other income (expense)
Other income 303,983 27,957 -- 331,940
Interest income (expense) 3,893 717 (98,924)(l) (94,314)
-------------------------------------------------------------------------
Income (loss) before income taxes (4,640,703) 505,301 (3,026,024) (7,161,426)
Income tax expense -- 279,400 -- 279,400
-------------------------------------------------------------------------
Net income (loss) (4,640,703) 225,901 (3,026,024) (7,440,826)
Accrued dividends to preferred stockholders (330,706) -- -- (330,706)
-------------------------------------------------------------------------
Net income (loss) available to common stockholders $(4,971,409) $ 225,901 $ (3,026,024) $(7,771,532)
============ =========== ============= ============
Net loss per share (p) $ (3.88) $ (6.06)
============ ============
Weighted average shares outstanding (p) 1,282,964 1,282,964
============ ============
</TABLE>
F-12
<PAGE> 17
THREE MONTH PERIOD ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Historical
Historical Coopers & Associates, Acquisition Pro Forma
UOL (m) Inc. (m) Adjustments Combined
------------- --------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Net revenues $ 1,201,040 $ 626,639 $ -- $ 1,827,679
Costs and expenses
Cost of revenues 119,375 103,458 -- 222,833
Sales and marketing 707,814 179,092 -- 886,906
General and administrative 382,280 164,622 -- 546,902
Product development 1,182,724 239,040 -- 1,421,764
Depreciation and amortization 91,106 11,061 56,775(n) 158,942
------------- ------------ ------------ --------------
Loss from operations (1,282,259) (70,634) (56,775) (1,409,668)
Other income (expense):
Interest income (expense) 186,228 (1,660) (16,925)(o) 167,643
--------------------------------------------------------------------------
Net loss $ (1,096,031) $ (72,294) $ (73,700) $ (1,242,025)
============= ============ ============ ==============
Net loss per share(p) $ (0.34) $ (0.39)
============= ==============
Weighted average shares outstanding(p) 3,186,167 3,186,167
============= ==============
</TABLE>
F-13
<PAGE> 18
(a) Balance Sheet as of March 31, 1997.
(b) Represents adjustments for the Cooper & Associates, Inc. ("CAI")
acquisition based on a purchase price of approximately $4,800,000. The CAI
acquistion has been accounted for using the purchase method. The purchase
price has been allocated on a preliminary basis to the assets and
liabilities acquired based on estimated fair value of such assets and
liabilities.
(c) Represents the cash paid to the stockholders of CAI for their shares in
CAI.
(d) Represents certain intangible assets identified by the Company. The
amounts allocated to intangible assets were as follows: $753,926 to
developed content, $249,392 to work force, $414,903 to customer base and
$414,903 to trademarks and names. The intangible assets will be amortized
on a straight-line basis over the following lives: developed content will
be amortized over eight years, work force will be amortized over five
years, trademarks and names will be amortized over ten years and customer
base will be amortized over ten years.
(e) Represents $200,000 in estimated investment banking, legal, accounting and
printing expenses related to the acquisition.
(f) Represents $24,108 of the principal balance due to a shareholder of CAI
which was converted into contributed capital as a part of the acquisition.
(g) Represents the remaining amount due to the shareholders of CAI. The
Company owes the shareholders of CAI $2,000,000, due in equal installment
of $666,667 over the next three years. This amount has been discounted to
reflect imputed interest expense.
(h) The retained earnings includes $2,700,000 related to the acquired
in-process research, development and content.
(i) Statement of operations for the year ended December 31, 1996.
(j) Represents the amount allocated to the acquired in-process research,
development and content.
(k) Represents the amortization expense for the year related to the intangible
assets acquired.
(l) Represents interest expense associated with the installment payments of
$1,798,622.
(m) Statement of operations for the three months ended March 31, 1997.
(n) Represents the amortization expense for the three months ended March 31,
1997, related to the intangible assets acquired.
(o) Represents interest expense associated with the installment payments of
$1,798,622.
(p) The Company's net loss per share calculations are based upon the weighted
average number of shares of Common Stock outstanding. Pursuant to the
requirements of the Securities and Exchange Commission Staff Accounting
Bulletin No. 83, convertible Preferred Stock, Common Stock, debt
convertible into shares of Common Stock, Common Stock purchase warrants
and options to purchase Common Stock issued at prices below the estimated
initial public offering ("IPO") price during the 12 months immediately
preceding the initial filing of the registration statement relating to the
IPO, (collectively the "cheap stock") have been included in the
computation of net loss per share as if they were outstanding for all
periods presented (using the treasury method assuming repurchase of Common
Stock at the estimated IPO price). For the year ended December 31, 1996,
the cheap stock is weighted for the period outstanding through the
effective date of the IPO. Other shares issuable upon the exercise of
stock options and warrants, conversion of debt into shares of Common Stock
and conversion of Preferred Stock have been excluded from the computation
because the effect of their inclusion would be antidilutive due to the
Company's net losses. Subsequent to the Company's IPO, convertible
Preferred Stock, Common Stock purchase warrants, options to purchase
Common Stock and debt convertible into shares of Common Stock under the
treasury stock method will be included to the extent they are dilutive.
F-14
