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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required). For the fiscal year ended JUNE 30, 1999
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required).
For the transition period from ________________ to ________________
CYTATION.COM INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
NEW YORK
(State or Other Jurisdiction of Incorporation)
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05388 16-0961436
(Commission File Number) (I.R.S. Employer
Identification Number)
809 Aquidneck Avenue, Middletown, RI 02842
(Address of Principal Executive Offices) (Zip Code)
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(800) 275-5895
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common stock,
$.001 par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Registrant's common stock, par value $.001 per
share, held by non-affiliates of the Registrant, based upon the closing Price of
$6.375 on August 31, 1999, as reported on the Over The Counter Bulletin Board,
was approximately $31,952,947. For purposes of this disclosure, shares of Common
stock held by persons who hold more than 5% of the outstanding shares of common
stock and shares held by officers and directors of the Registrant have been
excluded because such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily conclusive for other purposes.
The number of shares of Registrant's common stock, par value $.001 per share,
outstanding at August 31, 1999 was 9,846,340.
Documents Incorporated By Reference
8K/A of April 2, 1999
8K of April 27, 1999
8K of August 25, 1999
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CYTATION.COM INCORPORATED
FORM 10-KSB
FISCAL YEAR ENDED JUNE 30, 1999
This Annual Report on Form 10-KSB contains forward-looking statements with
respect to Cytation.com Incorporated ("Cytation.com" or the "Company") which
involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward-looking statements due to a
number of factors, including those described herein and the documents
incorporated herein by reference, and those factors described in Part II, Item 7
under "Factors that May Affect Future Results of Operations."
PART I
Item 1. Business
THE COMPANY
Cytation.com offers three proprietary Internet services: RollCall(TM), an online
enterprise learning solution designed to capture, deploy and manage knowledge
more effectively; LearningEvent.net(TM), a dedicated Internet portal for on-line
learning events; and CollegeLink.com, an Internet "Hub of Necessity" for
college-bound students which provides an online software-based college
application service. Cytation.com Incorporated completed the acquisition and
merger of ECI, Inc., the developer of CollegeLink, on August 10, 1999.
ROLLCALL. RollCall is a proprietary online, browser-based, enterprise-wide
training management operating system that enables students to enroll and take,
training managers to administer, and instructors to teach - courses over the
Internet or on intranets, anywhere, anytime and at any pace. "Students" includes
employees, vendors and customers. RollCall is compatible with all principal
course-authoring tools, and Cytation.com offers Web enabling of courses and
authoring as part of its turnkey service approach to the market. Potential and
existing customers for the RollCall include corporations with distributed
workforces, government agencies, colleges and universities and professional
trainers.
The Company offers RollCall as a turnkey service - hosting and administering it
on its own servers - rather than as a product. The Company believes this
strategy offers it certain competitive advantages. As a delivery service,
RollCall enables organizations to deploy and manage online learning solutions
faster and with greater ease relative to client server, client-administered
installations.
RollCall is being used by corporations in the New England area. The Company is
ramping up its sales and marketing staffs and expects sales to increase in 1999.
LEARNINGEVENT.NET. As the first portal dedicated exclusively to on-line learning
events, LearningEvent.net plans to provide a low-cost, convenient way to create
an on-line learning event, invite participants, present material, and learn
about the audience. Unlike other training websites that simply aggregate content
and have a pay-per-view business model, LearningEvent.net is based on the idea
of creating temporary access to content with pre-paid keys and reporting on the
usage of the keys and the profile of participants after the event.
LearningEvent.net is currently undergoing beta evaluation.
COLLEGELINK.COM has entered into written agreements and has developed
relationships with nearly 1,000 colleges and universities. CollegeLink has
developed market awareness and acceptance of its CollegeLink admission
application method. CollegeLink.com intends to leverage these assets into a
three-component business:
CollegeLink e-commerce transactions will be conducted directly through
the website "collegelink.com" for the college admissions lifecycle:
student-entered multiple-college applications, payment of college
application fees, financial aid applications, applications for and
payment of loan placement fees, and sophisticated college searches and
virtual campus tours.
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CollegeLink plans to use its database of information on college-bound
students, their backgrounds and their preferences, consistent with
privacy concerns, for a variety of college marketing programs and
student market sponsorship opportunities.
CollegeLink's Internet Hub is expected to become a primary website for
college-bound students, attracting Internet commerce to the site and
generating additional revenues from a broad variety of advertising
arrangements, company affiliations and syndication programs.
Cytation's executive office is at 809 Aquidneck Avenue, Middletown, Rhode
Island, 02842, tel (401) 845-8800; fax 401-845-8816; WWW.CYTATION.COM;
WWW.COLLEGELINK.COM.
INDUSTRY BACKGROUND
The market for Internet-related products and services is growing more rapidly
than the early emerging markets for print publishing, telephony, film, radio,
recorded music, television, and personal computers. Few if any industries have
ever had the potential reach of this one or offered new entrants such an
extensive and achievable range of opportunities as the digital revolution
continues to permeate society and the ways in which it communicates and
transacts business.
Size of Market.
RollCall and LearningEvent.net: The overall training market in the United States
was more than $85 billion in 1997, with the corporate market accounting for
nearly $59 billion, or 70 percent. Industry experts forecast that the U.S.
market for Web-based training will grow from $197 million in revenue in 1997 to
more than $10 billion in the year 2002. Web-based delivery products and services
are forecast to account for approximately 30 percent of this overall market.
CollegeLink: In the United States alone, there are on the order of 8,200,000
college applications annually. Assuming an 80% market conversion to digital
applications, the potential annual market for Internet applications is
approximately $65 million. Approximately 50% of the 2,000,000 students who enter
colleges in the United States each year submit financial aid applications.
Approximately 1,000,000 of the newly enrolled students obtain loans averaging
$2,500, and 200,000 parents obtain loans averaging $7,500 - a total of $4
billion in loans. Most of these loans are guaranteed by the Federal government,
which creates a loan pool for private banks and provides CollegeLink an online
forum to receive a placement fee for each loan directed to a lending institution
from its website
MARKETING, SALES AND CUSTOMER SUPPORT
RollCall Marketing. The cornerstone of the Company's marketing strategy is to
position RollCall as a turnkey service - hosting and administering it on its own
servers - rather than as a product purchased, installed and maintained by
customers. Unlike many Web-based training software products which sell for as
much as $200,000, RollCall is priced on a per student license or, for customers
with several thousand students, an enterprise license basis with modest set-up
fees. Upgrades are automatic and free.
The Company is focusing also on "channel" or customer training sales with a view
to generating revenue from marketing as well as training budgets. One customer,
for example, uses RollCall to certify the resellers of one of its highly
technical products. Another customer utilizes RollCall on a pay-per-view basis
to educate resellers on its products. Pricing for customer and channel usage of
RollCall is on a negotiated basis.
Another element of the Company's marketing strategy is to use instructional
design firms as resellers to drive RollCall into the trainer market and leverage
hundreds of established third-party customer accounts. Instructional design is a
highly fragmented industry in which the participants are trainers, not
specialists in the Internet and supporting technologies.
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Cytation.com also offers hosting and other Internet-related services; provides
training and technical support; and provides or arranges for course development
and authoring, all in support of RollCall sales.
The Company plans to leverage the extensive network of colleges and universities
established by CollegeLink over the years to cross-sell RollCall, both for
university-wide programs such as online course scheduling and enrollment but
also for third party pay-per-view distance learning curricula via the Internet
currently under consideration by academia.
Cytation.com also believes it will benefit from its relationship with EER
Systems Inc ("EER"), a Washington, DC based aerospace firm which is a principal
shareholder of the Company. EER, founded in 1979, offers a broad range of
systems design, development and integration capabilities, specializing in
aerospace flight, information and training systems. Two of EER's principals are
members of Cytation.com Incorporated Board of Directors. In particular, the
Company expects to receive subcontract revenue through EER in its role as one of
eight prime contractors for a General Services Administration (GSA) $9 billion,
9-year funding vehicle ("SEAT Contract") for integrating desktop computing as an
information utility, including local and wide area network capabilities, help
desk services, maintenance and training. Cytation.com has formally been
designated a SEAT Contract subcontractor.
RollCall Sales. The Company plans to sell all RollCall and related services
directly and through its strategic instructional design partners. The Company
currently has four full-time salaried sales personnel dedicated to RollCall
sales, all of whom were hired after January 1999.
CollegeLink Marketing. CollegeLink's marketing plan is to leverage its
relationships with nearly 1,000 colleges and universities to develop the premier
Internet Hub for college-bound students. CollegeLink is a company built on
relationships requiring years to develop through one-on-one sales presentations
- - not a technology company in search of relationships. As such, the Company
believes CollegeLink is positioned to capitalize on the benefits of the Internet
in very real and immediate ways.
For the first time in its history, CollegeLink will aggressively market the
range of CollegeLink services to students, parents, and guidance personnel at
high schools and college admissions officers. Also, for the first time, the
service will be available directly via the Internet for both obtaining the
software as well as submitting the completed applications. The goal is to
overcome two points of resistance: credibility (who is CollegeLink?) and "equal
consideration" issues, i.e., the idea that applications submitted online may be
treated differently by colleges and universities than hand-prepared
applications. The marketing plan includes promotions such as scholarships,
traditional and online advertising, collection of the entire college application
fee, endorsements from colleges and universities, and readily available disks
and CDs loaded with the CollegeLink software.
CollegeLink Sales. CollegeLink plans to continue to add colleges and
universities to its roster the way it has since 1993: on campus sales calls by
sales personnel. It is expected that "sales" to students, their parents and
guidance personnel of the range of CollegeLink services will be through direct
mailings (for example, to students who have signed up for the PSATs and SATs),
targeted periodical advertising (such as Newsweek's college-bound student issue)
and various promotional campaigns.
COMPETITION
RollCall Competition. None of the Company's principal competitors has achieved
dominant market share. The Company believes that the overall competitive
environment will allow multiple competitors to develop market share followed by
a period of consolidation beginning after the year 2000.
The Company has positioned RollCall as a turnkey service - hosting and
administering it on its own servers rather than as a product. The Company
believes that Cytation.com's RollCall is the only training management system
offered as a service rather than software or bundled product sold for
installation and management by the customer. This strategy will enable the
Company to capitalize on the distinct trend by corporations to outsource
training requirements; to offer vendor-based and customer (and therefore not
simply employee) training networks; to minimize and often eliminate the
involvement of information technology departments in the sales cycle; to form
strategic relationships with instructional design firms; to customize the
training website so that it has the customer's
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"look and feel"; and to offer customers automatic, free upgrades. The RollCall
delivery service is expected to enable organizations to deploy and manage online
learning solutions significantly faster and with greater ease relative to client
server, client-administered installations.
CollegeLink Competition. CollegeLink believes it is the industry leader because
of its relationships with nearly 1,000 colleges and universities established
over the last six years. The three principal competitors identified by the
Company are Apply, CollegeEdge and CollegeNet. The Company also believes its
software offers several competitive advantages.
EMPLOYEES. As of August 31, 1999, the Company employed 36 persons full-time.
None of the Company's employees is represented by a union and the Company has
never experienced a work stoppage. Management considers its relations with its
employees to be good.
Item 2. Properties
The Company's headquarters is located in Middletown, Rhode Island, where the
Company occupies 3200 square feet of space pursuant to a lease which expires in
September 2001. The Company's CollegeLink operations are conducted in Clinton,
Massachusetts where the Company occupies space as a tenant at will. On September
22, 1999 the Company signed a lease for 11,500 square feet which will house all
of the Company's operations including CollegeLink.com Incorporated. The Company
believes that these existing facilities are adequate to meet its current
foreseeable requirements or that suitable additional or substitute space will be
available on commercially reasonable terms. The Company plans to vacate its
Clinton, Massachusetts property and to consolidate its operations in Middletown,
RI. By November 1, 1999.
Item 3. Legal Proceedings
There are no pending claims against the Company regarding infringement of any
patents or other intellectual property rights of others. The Company is not a
party to any material pending legal proceedings, other than ordinary routine
litigation incidental to the business.
Item 4. Submission of matters to a vote of security holders
None.
PART II
Item 5. Market for the registrant's common equity and related shareholder
matters
(a) The Company's common stock has been publicly traded on the Over The Counter
Bulletin Board under the symbol "CYTA" since March 18, 1999. The following
table sets forth, for the periods indicated, the high and low sale prices
for the common stock.
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Fiscal 1999: High Low
Third quarter ended March 31, 1999 7.50 4.00
(Starting March 18, 1999)
Fourth quarter ended June 30, 1999 9.91 5.75
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At August 31, 1999, the Company had 1,385 holders of record of its common stock.
Some shares are held by various investment and other firms in street name. The
Company estimates the number of beneficial owners of the Company's common stock
at August 31, 1999 to be 1,475.
The market price of the Company's common stock has been volatile. For a
discussion of the factors affecting the Company's stock price, see "Factors that
may affect future results of operations -- possible volatility of stock price."
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The Company has not paid cash dividends on its common shares or other
securities. The Company currently anticipates that it will retain all of its
future earnings for use in the expansion and operation of its business and does
not anticipate paying any cash dividends on its common shares in the foreseeable
future.
Item 6. Management's Discussion and Analysis or Plan of Operation
The following information should be read in conjunction with the historical
financial information and the notes thereto included in Items 6 and 8 of this
10-KSB.
This Management's Discussion and Analysis section and other parts of this Annual
Report on Form 10-KSB contain forward-looking statements within the meaning of
the Securities Act of 1933, as amended and the Securities Exchange Act of 1934,
as amended that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed below and in "Business." The forward-looking
statements contained herein are made as of the date hereof, and the Company
assumes no obligation to update such forward-looking statements or to update
reasons actual results could differ materially from those anticipated in such
forward-looking statements.
RESULTS OF OPERATIONS
YEAR ENDED JUNE 30,
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1999 1998
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Net revenue
Development of proprietary technology - 500,000
Online training service revenues 162,884 -
Website hosting 235,522 210,700
Other revenues 163,515 533,183
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561,921 1,243,883
Operating expenses:
Payroll, payroll taxes and related benefits 1,173,439 1,018,786
Investor relations 376,824 -
Depreciation and amortization 131,545 93,554
Advertising 49,428 13,268
Other expense 1,417,110 748,607
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(3,148,346) (1,874,215)
Net income (loss) (2,586,425) (630,332)
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FISCAL YEAR ENDED JUNE 30, 1999 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1998
NET REVENUE. Net revenue shows the significance of the shift in business focus
of the Company over the past year. In the first part of 1998 and in prior years
the principal business of the Company was the development and sales of other
services related to the hosting of Web content, which accounted for
approximately $743,883 of the Company's revenue. During the latter half of
fiscal year 1998, the Company began development of RollCall. The $500,000 of
income for development of proprietary technology was the result of a joint
venture with EER. This joint venture ultimately resulted in EER acquiring in
excess of 10% of the Company's shares. While the Company maintains Web hosting
services for certain clients, the Company no longer provides website development
services. A significant portion of the fiscal year 1999 income has been from the
online training services provided principally through RollCall.
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The Company expects that a substantially greater portion of its future revenue
will be from online training services as its product matures and its marketing
efforts intensify.
Most of the online training revenue has come from RollCall Version 1, which was
introduced for beta testing in the fourth quarter of 1998 and commercially in
early 1999. RollCall Version 2 is under active development, with design input
from the Company's existing customers.
In addition to future revenues from RollCall, the Company expects a substantial
portion of future revenue will derive from the operations of ECI, Inc. and the
continued development of the CollegeLink Internet-based college application
service and related e-commerce revenue.
OPERATING EXPENSES. Operating expenditures for the year ended June 30, 1999 were
68% higher than the previous year. This increase is attributable to the fact
that the Company changed its principal business during the year. In addition, a
significant amount of increased cost was related to software development of the
new RollCall product. A sustained development level is expected to continue as
the Company implements RollCall Version 2 and LearningEvent.net. Another reason
for the increase in operating expenses was the merger completed March 5, 1999
with Cytation Corporation (formerly Web Services International, Inc.). A major
portion of the increase in operating expenses resulted from increased legal and
professional services required to complete the merger. A third increase is in
the area of Investor relations, which is associated with the Company stock
commencing sales under the symbol "CYTA" on March 18, 1999. Operating expenses
are expected to increase substantially in the future as the Company increases
marketing efforts, and as sales increase as the Company believes will occur.
INVESTOR RELATIONS. The Company hired several investor relations firms in
conjunction with the commencement of sales of the Company stock on March 18,
1999. There was no comparable expense in prior years.
CERTAIN OPERATIONS. In April 1997 the Company sold the assets related to its
Internet service provider ("ISP") business. Final revenue from that sale was
received in November 1998. In early 1998, the Company discontinued its website
development business. During the quarter recently completed, the Company did not
receive any revenue from website development or operations as an ISP, nor did
the Company have any expenses associated with those former components of its
business. No future operations as an ISP or website developer are contemplated.
LIQUIDITY AND CAPITAL RESOURCES
Although Cytation.com Incorporated (formerly Stylex Homes, Inc.) is the
surviving entity from the merger of March 5, 1999, in accordance with SEC
applicable accounting requirements, the Company is successor to Cytation
Corporation (formerly Web Services International, Inc.) which was the
disappearing entity from in the March 5, 1999 merger. Since inception, the
Company and its accounting predecessor (Cytation Corporation, formerly Web
Services International, Inc.) have funded operations primarily through cash from
operations and equity and debt investment.
On February 2, 1999 the Board of Directors of Stylex Homes, Inc. voted to change
the name of the corporation to Cytation.com Incorporated. The Board also voted
to effectuate a one for two reverse stock split which became effective on
February 25, 1999. The amendments were filed with the Department of State of the
State of New York on February 8, 1999. The number of shares outstanding after
the effective date of the stock split was 1,204,076, of which 1,004,076 were
outstanding on December 31, 1998.
On February 8, 1999 the directors of the Company voted to merge with Cytation
Corporation, a Rhode Island corporation. The effective date of the merger was
March 5, 1999. Cytation.com Incorporated continues as the legal surviving
corporation.
In accordance with the merger agreement, the shareholders of common stock of
Cytation Corporation received 5.765 shares of the common stock of the Company
for each share of common stock of Cytation Corporation. Accordingly, 7,081,028
shares of the Company's common stock were issued as a result of this merger.
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PREFERRED STOCK. The Company received $3,100,000 through a private placement of
preferred stock to The Provident Life and Accident Insurance Company and one
other investor. The Purchase Agreement with The Provident Life and Accident
Insurance Company was signed April 2, 1999, and the transaction closed shortly
thereafter. A description of this transaction is incorporated herein by
reference and set forth in Item 5, Other Information, of Form 8-K, filed on
April 27, 1999 with the Securities and Exchange Commission ("SEC"). After the
end of the fiscal year, the Company received $485,000 through the private
placement of additional shares of preferred stock. The Company is considering
the private placement of additional preferred shares.
COMMON STOCK. The Company received $195,000 in January 1999 from the sale of
common shares.
DEBT FINANCING. The Company received $370,000 from debt instrument financing
during the quarter ended March 31, 1999. This debt financing was repaid with the
proceeds of the sale of preferred stock described above.
ADDITIONAL FINANCINGS. The Company is planning and expects to consummate
additional equity financing in connection with a secondary offering prior to the
end of 1999. No assurance can be provided that any such offering will be
successful.
SUFFICIENCY OF CASH FLOWS. The Company believes that current cash balances and
any cash generated from operations and from available debt or equity financing
will be sufficient to meet its cash needs for working capital and capital
expenditures for at least the next twelve months. Thereafter, if cash generated
from operations is insufficient to satisfy the Company's liquidity requirements,
management may seek to sell additional equity or obtain credit facilities. The
sale of additional equity could result in additional dilution to the Company's
shareholders (See "Risk factors"). A portion of the Company's cash may be used
to acquire or invest in complementary businesses or products or to obtain the
right to use complementary technologies. From time to time, in the ordinary
course of business, the Company evaluates potential acquisitions of such
businesses, products or technologies.
Net cash used in operating activities was $2,110,144 for the fiscal year ended
June 30, 1999 and $277,177 for the fiscal year ended June 30, 1998. Net cash
used in investing activities $9,534 and $78,551 for the fiscal year ended June
30, 1999 and June 30, 1998, respectively. Financing activities provided
$3,434,416 for the year ending June 30, 1999 compared to $399,662 for the year
ending June 30, 1998. As of June 30, 1999 the Company had working capital of
$1,371,100 compared to $46,362 as of June 30, 1998.
RECENT ACCOUNTING PRONOUNCEMENTS
In March, 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use." This statement is effective for
financial statements for years beginning after December 15, 1998. This statement
provides guidance over accounting for computer software developed or obtained
for internal use, including the requirement to capitalize specified costs and
the amortization of such costs. The Company adopted this standard and its
adoption had no material effect on its results of operations, financial position
or cash flows.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities." This statement, which is effective for fiscal
years beginning after December 15, 1998, provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. The
adoption of this standard had no effect on the Company's results of operations
financial position or cash flows.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities," which establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts, and
for hedging activities. This statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The Company does not expect the
adoption of this statement to have an impact on its results of operations,
financial position or cash flows.
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FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
This report on Form 10-KSB contains forward-looking statements within the
meaning of the Securities Act of 1933, as amended and the Securities Exchange
Act of 1934, as amended. The Company's future results of operations could Vary
significantly from the results anticipated by such forward-looking statements as
a result of various factors, including those set forth as follows and elsewhere
in this annual report on Form 10-KSB.
FLUCTUATIONS IN OPERATING RESULTS. The Company has experienced and expects to
continue to experience fluctuations in its quarterly and annual operating
results.
RECENT OPERATING LOSSES. The Company incurred an operating loss of $2,588,761 in
fiscal 1999. The Company also incurred an operating loss of $630,332 in fiscal
1998. The Company expects to record a net loss in the first quarter of fiscal
2000. There can be no assurance that the Company will be profitable.
DEPENDENCE ON MARKET ACCEPTANCE OF INTERNET-BASED COLLEGE APPLICATIONS. A
principal element of the Company's strategy is to capture an increasing share of
the Internet-based college application market. The failure to achieve market
acceptance would have a material adverse effect on the Company's business,
financial condition and operating results.
INTENSE COMPETITION. In each of the markets it serves, the Company may face
competition from established competitors and potential new entrants. The Company
expects its competitors to continue to improve the performance of their current
products and services and to introduce new products and services with improved
price and performance characteristics.
YEAR 2000. The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. The Company has
recognized the Year 2000 problem and has taken steps to mitigate the situation.
The Company's in-house information technology system consists primarily of
hardware and software purchased from outside parties, and software developed
in-house using third party development languages and platforms. The Company has
completed vendor-provided upgrades of vendor-developed software. Although the
upgrades are claimed by the vendors to be Year 2000 compliant, the Company is
testing the hardware and software for Year 2000 compliance and will install
vendor-provided software patches if necessary. The Company is also testing the
internally developed software which is included in the services sold to
customers. The Company expects such assessments and modifications to existing
software and conversion to new software will be completed by October 31, 1999.
If, however, such modifications and conversions are not made, or are not
completed timely, the Year 2000 issue could have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company expects that costs to address the Year 2000 issue, directly or
indirectly, will total approximately $15,000, the majority of which was spent in
fiscal 1998 and 1999, with the remainder being spent during fiscal 2000. Costs
include salary and related expenses, hardware and software costs, and
miscellaneous expenses. To date, the company has incurred expenses of
approximately $12,000 related to the assessment of and preliminary efforts in
dealing with the Year 2000 issue.
The costs of the planned Year 2000 modifications, and the dates by which the
Company expects to complete them, are based on management's best estimates,
which were derived from numerous assumptions of future events. There can be,
however, no assurance that these estimates will be achieved and actual results
could differ materially from those plans. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer codes, and similar uncertainties.
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POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Company's common
stock has been, and may continue to be, volatile. The Company believes that
factors such as announcements of developments related to the Company's business,
fluctuations in the Company's operating results, failure to meet securities
analysts' expectations, general conditions in the marketplace, announcement of
technological innovations, new systems or product enhancements by the Company or
its competitors, fluctuations in the level of development funding, acquisitions,
changes in governmental regulations, developments in patents or other
intellectual property rights and changes in the Company's relationships with
customers could cause the price of the Company's common stock to fluctuate
substantially. In addition, in recent years the stock market in general, and the
market for small capitalization and high technology stocks in particular, has
experienced extreme price fluctuations which have often been unrelated to the
operating performance of affected companies. Such fluctuations could adversely
affect the market price of the Company's common stock.
MANAGEMENT OF CHANGING BUSINESS. If the Company is to be successful, it must
expand its operations. Such expansion will place a significant strain on the
Company's administrative, operational and financial resources. Such expansion
will result in a continuing increase in the responsibility placed upon
management personnel and will require development or enhancement of operational,
managerial and financial systems and controls. If the Company is unable to
manage the expansion of its operations effectively, the Company's business,
financial condition and operating results will be materially and adversely
affected.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a significant
extent upon the continued service of key executive officers and key employees.
The Company maintains key person life insurance covering the Company's president
for its benefit. None of the Company's employees is subject to a noncompetition
agreement with the Company. The loss of the services of any of its executive
officers or a group of key employees could have a material adverse effect on the
Company's business, financial condition and operating results. The Company's
future success will depend in significant part upon its ability to attract and
retain highly skilled technical, management, sales and marketing personnel.
There is a limited number of personnel with the requisite skills to serve in
these positions, and it has become increasingly difficult for the Company to
hire such personnel. Competition for such personnel in the internet industry is
intense, and there can be no assurance that the Company will be successful in
attracting or retaining such personnel. The Company's inability to attract and
retain the executive management and other key personnel it requires could have a
material adverse effect on the Company's business, financial condition and
operating results.
INTELLECTUAL PROPERTY PROTECTION AND INFRINGEMENT. The Company's ability to
compete successfully is dependent in part upon its ability to protect its
proprietary technology and information. Although the Company attempts to protect
its proprietary technology through copyrights, trade secrets and other measures,
there can be no assurance that these measures will be adequate or that
competitors will not be able to develop similar technology independently.
Litigation may be necessary to enforce or determine the validity and scope of
the Company's proprietary rights, and there can be no assurance that the
Company's intellectual property rights, if challenged, will be upheld as valid.
Such litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, financial
condition and operating results, regardless of the outcome of the litigation.
There are no pending claims against the Company regarding infringement of any
intellectual property rights of others. However, the Company may receive, in the
future, communications from third parties asserting intellectual property claims
against the Company. Such claims could include assertions that the Company's
products infringe, or may infringe, the proprietary rights of third parties,
requests for indemnification against such infringement or suggestions that the
Company may be interested in acquiring a license from such third parties. There
can be no assurance that any such claim made in the future will not result in
litigation, which could involve significant expense to the Company, and, if the
Company is required or deems it appropriate to obtain a license relating to one
or more products or technologies, there can be no assurance that the Company
would be able to do so on commercially reasonable terms, or at all.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company considered the provisions of Financial Reporting Release No. 48
"Disclosures of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosures of Quantitative and
<PAGE> 11
Qualitative Information about Market Risk Inherent in Derivative Commodity
Instruments." The Company has no holdings of derivative financial or commodity
instruments at May 31, 1999.
The Company is exposed to financial market risks, including changes in interest
rates. To somewhat reduce these risks, the Company invests excess cash in a
managed portfolio of corporate and government bond instruments with maturities
of 18 months or less. The Company does not use any financial instruments for
speculative or trading purposes.
Item 7. Financial Statements and Supplementary Data
CYTATION. COM INCORPORATED
INDEX TO FINANCIAL STATEMENTS
CYTATION.COM INCORPORATED
Report of Independent Auditor
Balance Sheets as of June 30, 1999, and June 30,1998
Statements of Operations for the years ended June 30, 1999 and 1998
Statement of Changes in Shareholders' Equity (Deficit)
Statements of Cash Flows for the years ended June 30, 1999 and 1998
Notes to Financial Statements
CYTATION.COM INCORPORATED AND SUBSIDIARY PRO-FORMA
Pro-Forma Balance Sheet as of June 30, 1999 (unaudited)
Pro-Forma Statement of Operations for the year ended June 30, 1999 (unaudited)
Notes to the Pro-Forma Financial Statements
ECI, INC.
Report of Independent Auditor
Balance Sheets as of December 31, 1998, 1997 and 1996
Statements of Operations for the years ended December 31, 1998, 1997 and 1996
Statement of Changes in Sharesholders' Deficit
Statements of Cash Flows for the years ended December 31,1998, 1997 and 1996
Notes to Financial Statements
<PAGE> 12
INDEPENDENT AUDITOR'S REPORT
Shareholders and Directors
Cytation.com Incorporated
Middletown, Rhode Island 02842
We have audited the accompanying balance sheets of Cytation.com
Incorporated as of June 30, 1999 and 1998, and the related statements of
operations, sharesholders' equity (deficit) and cash flows for each of the two
years ended June 30, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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 Cytation.com
Incorporated as of June 30, 1999 and 1998, and the results of its operations and
its cash flows for each of the two years ended June 30, 1999 and 1998 in
conformity with generally accepted accounting principles.
Radin, Glass & Co., LLP
Certified Public Accountants
New York, New York
September 3, 1999
<PAGE> 13
CYTATION.COM INCORPORATED
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,371,100 $ 46,362
Accounts receivable, net of allowance for doubtful
accounts of $10,000 and $4,200 100,163 72,113
Prepaid expenses and other assets 85,249 12,877
----------- -----------
TOTAL CURRENT ASSETS 1,556,512 131,352
FURNITURE AND EQUIPMENT, net of accumulated depreciation 250,484 190,553
SOFTWARE DEVELOPMENT, net of accumulated amortization of
$36,287 -- 36,283
----------- -----------
$ 1,806,996 $ 358,189
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 278,372 $ 35,988
Accrued payroll 84,725 216,709
Accrued expenses 32,247 48,567
Unearned revenue 35,000 57,126
Note payable shareholder -- 45,000
Shareholder advance payable -- 13,071
Current portion of capital lease obligation -- 1,469
----------- -----------
TOTAL CURRENT LIABILITIES 430,344 417,930
CAPITAL LEASE OBLIGATION -- 9,580
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY:
Preferred shares, $1,000 stated value, $.001 par value, authorized
1,000 shares, issued and outstanding 543 shares outstanding -- 542,500
Series A Convertible Preferred Stock, $4.00 stated value, $.001 par
value, authorized 2,500,000 shares, issued and outstanding 775,000
shares 3,100,000 --
Common shares, $.001 par value, authorized 100,000,000 and 5,765,000
shares, issued and outstanding 9,152,211 and 3,482,556 shares 9,152 604
Additional paid-in capital 2,459,718 993,368
Accumulated deficit (4,192,218) (1,605,793)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,376,652 (69,321)
----------- -----------
$ 1,806,996 $ 358,189
=========== ===========
</TABLE>
See notes to financial statements
<PAGE> 14
CYTATION.COM INCORPORATED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
NET REVENUES:
Development of proprietary technology $ -- $ 500,000
Online training service revenues 162,884 --
Website hosting 235,522 210,700
Other revenues 163,515 533,183
----------- -----------
561,921 1,243,883
----------- -----------
EXPENSES:
Payroll, payroll taxes and related benefits 1,173,439 1,018,786
Investor relations 376,824 --
Depreciation and amortization 131,545 93,554
Advertising 49,428 13,268
Other expenses 1,417,110 748,607
----------- -----------
3,148,346 1,874,215
----------- -----------
NET LOSS $(2,586,425) $ (630,332)
=========== ===========
NET LOSS PER SHARE $ (0.40) $ (0.18)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION 6,531,153 3,499,857
=========== ===========
</TABLE>
See notes to financial statements
<PAGE> 15
CYTATION.COM INCORPORATED
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Total
Preferred Shares Common Shares Additional Sharesholders
-------------------- --------------------- Paid-In Equity
Shares Amount Shares Amount Capital (Deficit) (Deficit)
------- --------- --------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - June 30, 1997 105 105,000 3,482,556 3,483 938,310 (975,461) 71,332
Preferred issued 438 437,500 -- -- -- -- 437,500
Issuance of options
for services -- -- -- 52,180 -- 52,180
Net loss for the period -- -- -- -- -- (630,332) (630,332)
------- --------- --------- -------- --------- ----------- -----------
Balance - June 30, 1998 543 542,500 3,482,556 3,483 990,490 (1,605,793) (69,320)
Preferred conversion (543) (542,500) 453,976 454 542,046 -- --
Issuance of shares for
assets -- 1,345,350 1,345 145,954 -- 147,299
Issuance of shares for
compensation -- 1,372,070 1,372 1,008 -- 2,380
Issuance of shares for
services -- 559,438 559 376,391 -- 376,950
Sale of common shares,
less expenses -- 374,725 375 194,625 -- 195,000
Effect of merger transaction -- 1,204,096 1,204 1,029 -- 2,233
Issuance of shares with debt -- 360,000 360 250,660 -- 251,020
Preferred issued -
Series A 775,000 3,100,000 -- -- -- -- 3,100,000
Dividends -- -- -- -- (42,485) -- (42,485)
Net loss for the period -- -- -- -- -- (2,586,425) (2,586,425)
------- --------- --------- -------- ---------- ----------- -----------
Balance - June 30, 1999 775,000 3,100,000 9,152,211 $ 9,152 $2,459,718 $(4,192,218) $ 1,376,652
======= ========= ========= ======== ========== =========== ===========
</TABLE>
See notes to financial statements
<PAGE> 16
CYTATION.COM INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------
1999 1998
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,588,761) $(630,332)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 131,545 93,554
Write off of accounts receivables 89,800 --
Net loss on equipment disposal 1,231 8,061
Issuance of shares, options and warrants as 384,308 52,180
compensation
Increase (decrease) to cash attributable to
changes in assets and liabilities:
Accounts receivable (117,850) (34,121)
Due from sale of "dial-up" access service -- 69,810
Prepaid expenses and other assets (72,372) (6,190)
Accounts payable 242,385 (15,874)
Accrued expenses (16,320) 23,615
Accrued payroll (131,984) 131,941
Unearned revenues (22,126) 30,180
----------- ---------
NET CASH USED IN OPERATING ACTIVITIES (2,100,144) (277,177)
----------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (24,184) (80,216)
Proceeds from equipment disposals 9,600 1,665
Proceeds from rent deposit
5,050 --
----------- ---------
NET CASH USED IN INVESTING ACTIVITIES (9,534) (78,551)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred shares 3,100,000 437,500
Proceeds from issuance of debt 670,000 --
Payments of debt (603,979) --
Proceeds from issuance of common shares 195,000 --
Issuance of common stock with debt 185,000 --
Payments of dividends (42,485) --
Note payable to shareholder (45,000) --
Shareholder advances payable (13,071) (34,973)
Principal payments on capital lease obligations (11,049) (2,865)
----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,434,416 399,662
----------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,324,738 43,935
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 46,362 2,428
----------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,371,100 $ 46,362
=========== =========
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 32,979 $ 7,579
=========== =========
Taxes $ 996 $ --
=========== =========
Noncash
Issuance of stock for debt $ 66,021 $ --
=========== =========
Issuance of common stock for assets $ 2,299 $ --
=========== =========
Preferred stock conversion to common stock $ 542,500 $ --
=========== =========
Stock issued for services $ 384,308 $ --
=========== =========
Stock issued for assets $ 147,299 $ --
=========== =========
</TABLE>
See notes to financial statements
<PAGE> 18
CYTATION.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999 AND 1998
1. BUSINESS
Cytation.com Incorporated, a New York corporation
("Cytation.com"), is the surviving corporation in a merger with
Cytation Corporation, a Rhode Island corporation which was previously
known as Web Services International, Inc. (Cytation Corporation,
together with Web Services International, Inc. are herein collectively
referred to as "WSI"). The merger occurred on March 5, 1999 (Note 7).
Cytation.com was previously known as Stylex Homes, Inc. ("Stylex").
Although Stylex was incorporated in 1969, it did not conduct any
business after 1992.
Cytation.com is a reporting company under the Securities
Exchange Act of 1934.
WSI was incorporated under the laws of the State of Rhode
Island in January 1996 to market and host various forms of content on
the World Wide Web and to provide dial-up access to the Internet.
Through the end of 1997, WSI marketed the design, origination and
hosting of websites and Web content to small and medium size
businesses. WSI also provided various consulting services to customers
in connection with the development and sale of Web content. In
December 1997, WSI entered into a joint venture and related contract
for the development of online training systems. In July 1998, WSI
discontinued its Web content sale and development business (except for
work in process and Web hosting) and focused its operations
exclusively on the development of its browser-based online training
system.
Cytation.com, as the successor to WSI, now actively markets
RollCall, a proprietary online, browser-based, enterprise-wide training
management operating system. Cytation.com also is in the preliminary
marketing phase for "LearningEvent.net", a portal for low-cost on-line
learning events facilitated through the creation of temporary access to
content with pre-paid keys. As a result of the acquisition of ECI, Inc.
in August 1999, Cytation.com, through its CollegeLink.com Incorporated
subsidiary, is also engaged in providing online college application and
related services to high school students and their parents (Note 12).
Cytation.com, together with WSI, is hereinafter referred to as
the "Company". All references to share issuances are after the
recapitalization transaction in which each share of WSI was converted
into 5.765 shares of Cytation.com (Note 7).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation - The preparation of financial
statements in accordance with generally accepted accounting
principles requires management to make significant estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
.
b. Furniture and Equipment - Furniture and equipment are stated
at cost and depreciated using the straight-line method over
the estimated useful lives of the assets ranging from three to
seven years for equipment, auto and furniture.
Leasehold improvements are amortized over the term of the
lease or the estimated life of the improvement, whichever is
shorter. Whenever assets are sold or retired, their cost and
related
<PAGE> 19
accumulated depreciation are removed from the appropriate
accounts. Any gains and losses on dispositions are recorded
in current operations.
c. Software Development Costs - The Company capitalizes software
development costs in accordance with SFAS 86. The Company did
not capitalize any software development costs during the years
ended June 30, 1999 and 1998, respectively. Software
development costs were fully amortized at June 30, 1999.
d. Fair Value of Financial Instruments - The carrying amounts
reported in the balance sheet for cash, trade receivables,
accounts payable and accrued expenses approximate fair value
based on the short-term maturity of these instruments.
e. Income Taxes - The Company utilizes the liability method of
accounting for income taxes as set forth in SFAS 109,
"Accounting for Income Taxes." Under the liability method,
deferred taxes are determined based on the difference between
the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse.
f. Revenue Recognition - Revenues from RollCall and Web design
services are recognized as such services are performed.
Revenues from website hosting are recognized on a monthly
basis. No revenue from Web design services was recorded for
the year ended June 30, 1999.
g. Employee Stock Options and Shares Issued for Services - The
Company accounts for employee stock transactions in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to
Employees." The Company has adopted the proforma disclosure
requirements of SFAS 123, "Accounting for Stock-Based
Compensation." Accordingly, any excess of fair market value of
stock issued to employees over exercise prices has been
recorded as compensation expense and additional paid in
capital.
Shares issued for services of non-employees are recorded at
estimated fair value.
h. Loss Per Share - The Company has adopted SFAS 128, "Earnings
per Share." Earnings per common share are computed by dividing
income available to common shareholders by the weighted
average number of common shares outstanding during the period.
The computation of earnings per common share, assuming
dilution, gives effect to all dilutive potential common shares
during the period. The computation assumes that the
outstanding stock options and warrants were exercised and that
the proceeds were used to purchase common shares of the
Company. Earnings per share computations for each of the two
years ended June 30, 1999 have been restated to reflect this
new standard.
i. Accounting for Long-Lived Assets - The Company reviews
long-lived assets, certain identifiable assets and any
goodwill related to those assets for impairment whenever
circumstances and situations change such that there is an
indication that the carrying amounts may not be recoverable.
At June 30, 1999 and 1998 respectively, the Company believes
that there has been no impairment of long-lived assets.
j. Advertising Costs - Advertising costs are expensed as incurred
except for direct response advertising, the costs of which are
deferred and amortized over the period the related sales are
recorded. There was no deferral or amortization for direct
response advertising costs for each of the two years ended
June 30, 1999 and 1998, respectively.
3. CASH AND CASH EQUIVALENTS
<PAGE> 20
The Company classifies as cash and cash equivalents highly
liquid investments with maturities of less than ninety days at June 30,
1999. The Company did not have cash equivalents at June 30, 1998.
4. JOINT VENTURE AGREEMENT
In December 1997, the Company entered into a joint venture
agreement with EER Systems Inc. ("EER"), a supplier of systems design,
development and integration capabilities specializing in flight,
information and training systems. Cytation Corporation ("Cytation
Delaware"), a Delaware corporation, was incorporated pursuant to the
joint venture agreement. Simultaneously, the Company entered into a
development agreement with Cytation Delaware, receiving $500,000 to
develop certain software.
In July 1998, EER loaned the Company $300,000. This loan was
repaid in 1999. In addition, the Company issued to EER 175,000 common
shares in settlement of a potential claim by EER that it was entitled
to convert the loan into a significantly greater number of common
shares.
In July 1998 the Company purchased the assets of Cytation
Delaware, of which it was a fifty percent owner, in exchange for
equity. (Note 7).
5. FURNITURE AND EQUIPMENT
Furniture and equipment consist of the following at June 30:
<TABLE>
<CAPTION>
Estimated
useful lives 1999 1998
------------- -------- --------
<S> <C> <C> <C>
Computer and office equipment 3 $340,798 $177,072
Furniture and fixtures 7 68,542 68,542
Leasehold improvements 5 42,566 42,566
Auto under capital lease obligation 5 -- 18,055
-------- --------
451,906 306,235
Less accumulated depreciation 201,422 115,682
-------- --------
$250,484 $190,553
======== ========
</TABLE>
6. SHORT-TERM BORROWINGS
The Company issued a note payable of $300,000 in July 1998 to
a related party. The Company repaid the note in May 1999.
The Company received $370,000 from the issuance of six-month
12% debentures in January and February 1999. This debt financing was
repaid with the proceeds of the sale of preferred stock in April 1999
(Note 7). The Company also issued 185,000 shares of its common stock in
connection with the repayment of the debentures.
<PAGE> 21
The Company had two short-term debt instruments outstanding at
June 30, 1998 payable to shareholders totaling approximately $58,000.
Both debt instruments were non-interest bearing and were repaid during
the year ended June 30, 1999.
7. EQUITY AND OTHER FINANCING
a. During July through November 1997, the Company issued
approximately $438,000 of debt units consisting of promissory
notes and stock purchase warrants ("Units"). The promissory notes
were automatically convertible into shares of Series A 10%
convertible preferred shares, $.001 par value with a stated value
of $1,000 ("CPS"). Each share of CPS was automatically converted
into the Company's common shares on September 1, 1998. In
addition, each preferred shareholder received one stock purchase
warrant for each share of common stock received upon conversion of
the CPS. Each warrant entitled the holder to purchase one share of
common stock at a purchase price per share of $1.30 per share.
b. In October 1997, the Company amended its Articles of Incorporation
to change the aggregate number of shares the Company has authority
to issue from 1,000,000 to 1,001,000, consisting of 1,000,000
shares of common stock, $.001 par value per share, and 1,000
shares of preferred stock. Thereafter, the board of directors of
the Company authorized the issuance of the CPS, which was issued
to the holders of the Units in cancellation of their promissory
notes. In year ended June 30, 1999, the Company cancelled the
authorization of the 1000 shares of .001 par value preferred stock
c. In July 1998, the Company issued approximately 1,325,000 of its
common shares to acquire the assets of Cytation Delaware (Note 4).
The assets have been recorded at $2,299, which approximates the
fair market value of the shares at the time of the transaction.
d. In July 1998, the Company issued a warrant for services to
purchase 5,000 shares of the Company's common stock at an exercise
price of $.01 per share, which approximates fair value at time of
issuance.
e. In July 1998, when management believed the fair market value of
its common shares was $0.002 per share, management reduced the
exercise price of previously outstanding employee stock options to
$0.002 and all employees exercised such shares. The exercise price
was paid by the Company and treated as compensation. Such
compensation was recorded at $0.002 per share for 1,372,000
shares.
f. In December 1998, the Company issued approximately 29,000
warrants, expiring in August 2001, exercisable at $0.52, in
connection with a sale of stock in prior years.
g. In January 1999, the Company received $195,000 from the issuance
in a private placement of approximately 375,000 shares of its
common stock.
h. On March 5, 1999 Cytation.com was acquired by Cytation Corporation
through a "reverse merger" transaction, whereby each outstanding
share of Cytation Corporation (formerly Web Services) was
converted into 5.765 shares of Cytation.com Incorporated. The
merger has been accounted for as a "Recapitalization" as if
Cytation.com Incorporated issued additional shares for the $233 of
assets of Stylex Homes, Inc. The number of common share
information herein has been adjusted to reflect the effects of the
merger agreement.
For tax and state merger statutes, this recapitalization was
treated as a merger of Cytation Corporation into Cytation.com
Incorporated.
i. In April 1999, the Company received $3,100,000 in exchange for
775,000 shares of 6% cumulative preferred stock designated as
"Series A Convertible Preferred Stock" ("Preferred A") from two
investors. "Preferred A" has a stated value of $4.00 per share, a
par value of $.01 per share and dividends payable quarterly. Any
holder of Preferred A may at any time convert it into the common
<PAGE> 22
shares of the Company at a ratio of one common share for each
Preferred A share. The Company may require conversion on or after
the first anniversary of the initial purchase of the preferred A
if the closing bid price for its common shares exceeds $6.00 for
twenty consecutive trading days.
In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of the affairs of the Company, the
holders of the Preferred A are entitled to receive $4.00 for each
share of Preferred A, before any distribution of the assets of the
Company may be made to the holders of any other shares of capital
stock.
j. In March 1999, the Company amended its Articles of Incorporation
to change the aggregate number of shares it has authority to issue
to 110,000,000 shares, consisting of 100,000,000 common shares,
par value $.001 per share, and 10,000,000 preferred shares, par
value $.01 per share.
k. During the year the Company agreed to issue 504,000 shares to
unrelated parties for financial services, which shares were
recorded at fair market value at the time of the agreement of
$0.002 per share. In April and May 1999, the Company issued 55,000
shares to unrelated parties for financial services, which shares
were recorded at fair market values from $6.50 per share to $7.50
per share.
l. In June 1999, the Company issued 20,000 shares of its common stock
for the purchase of computer equipment expected to be utilized to
develop an expanded application for RollCall. This equipment was
valued at $145,000.
m. In May 1999, the Company agreed to issue to its outside directors
who are not principals of shareholders which own more than 10% of
the Company options to purchase 10,000 shares of the Company's
common stock annually, the first grant effective May 7, 1999 and
the second and all subsequent grants to be effective on the day of
the Company's annual meeting. As of June 30, 1999 the Company had
20,000 options outstanding, exercisable at $6.00 per option.
n. For disclosure purposes in accordance with SFAS No. 123, the fair
value of each stock option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for stock options granted during
the year ended June 30, 1999 and 1998, respectively: annual
dividends of $0.00, expected volatility of 65% at June 30, 1999
and 20.0% at June 30, 1998, risk-free interest rate of 5.7% and
expected life of five years for all grants. The weighted-average
fair value of the stock options granted during the years ended
June 30, 1999 and 1998 was $1.48 and $0.77, respectively.
If the Company recognized compensation cost for the employee stock
option plan in accordance with SFAS No. 123, the Company's pro
forma net loss and loss per share would have been approximately,
$2,913,000 and $672,000, $0.45 and $0.19 in years ended June 30
1999 and 1998, respectively.
The following table summarizes the changes in options
outstanding and the related price ranges for shares of the
Company's common stock:
<TABLE>
<CAPTION>
Weighted
Average
Shares Exercise Price
--------- --------------
<S> <C> <C>
Outstanding at June 30, 1997 101,000 2.50
Granted 122,500 2.50
Exercised -- --
Expired or cancelled (2,000) 2.50
---------
Outstanding at June 30, 1998 250,500 2.50
Granted 1,441,186 4.32
Exercised 250,500 .01
Expired or cancelled -- --
---------
Outstanding at June 30, 1999 1,441,186 4.32
=========
</TABLE>
<PAGE> 23
Exercise prices for options outstanding at June 30,
1999 range from $2.00 to $7.00 and the weighted average
remaining contractual life is approximately five years. The
number of options exercisable and weighted average exercise
price for options exercisable at June 30, 1999 was 69,430 and
$2.83, respectively.
8. COMMITMENTS AND CONTINGENCIES
a. In December 1996, the Company issued to a founder of the
Company 422,684 shares of stock and a note for $45,000 for the
receipt of certain assets. The assets received have been
recorded at fair value; the excess of the note issued over the
assets received has been recorded as a distribution. The note
was paid in April 1999.
b. Rent expense under all operating leases was approximately
$42,000 and $43,000 for the years ended June 30, 1999 and
1998, respectively. The future minimum rental payments to be
made under noncancellable operating leases as of June 30, 1999
are as follows:
1999-2000 $40,560
2000-2001 12,510
2001-2002 690
2002-2004 --
The Company entered into a month to month basis lease
agreement commencing May 1, 1999, for two additional offices
at its present location, at a rate of $450 per month.
c. The Company entered into an agreement on April 19, 1999 with
an investor relations consultant ("the Consultant") in an
effort to expand the investor base and the number of market
professionals who are aware of the Company's activities. The
Company paid the consultant $7,500 per month for three months.
d. Effective February 1999, the Company entered into three-year
employment agreements with two officers who are principal
shareholders of the Company.
e. The Company has an agreement with an agency for marketing and
public relations services commencing April 1, 1999 with no
expiration date. Either party may terminate agreement by
notifying the other party within sixty days prior to the date
of termination. The Company has agreed to pay the agency a
monthly rate of $7,000 to compensate the agency for services
in the following areas: strategic counseling, in-house
research, advertising and public relations.
9. DISCONTINUED OPERATIONS
In April 1997, the Company sold its business of providing
"dial-up" access service to Internet users. The sales price was $30,000
plus fixed and contingent future revenues based on the number of the
Company's former "dial-up" customers who continue to utilize the
service. The Company also received radio advertising credits provided
by the buyer. In May 1998, the Company began receiving the contingent
monthly revenue payments and received the final payment in November
1998.
In July 1998, the Company ceased its business of website
development. Revenue from website
<PAGE> 24
development earned in year ended June 30, 1999 was approximately
$53,000 and was derived from contracts billed in the year ended
June 30, 1998.
10. OPERATIONS
The Company adopted SFAS No, 131, "Disclosure about Segments
of an Enterprise and Related Information". SFAS establishes annual and
interim reporting standards for an enterprise's operating segments and
related disclosures about its products, services, geographic areas and
major customers. Under SFAS No. 131, the Company's operations are
treated as one operating segment as it only reports profit and loss
information on an aggregate basis to the chief operating decision maker
of the Company. Information about the Company's product sales and major
customers are as follows at June 30:
<TABLE>
<CAPTION>
1999 1998
-------- ----------
<S> <C> <C>
Product Sales
Development of proprietary technology $ -- $ 500,000
Online training service revenues 162,884 --
Website hosting 235,521 210,700
Website design and origination 52,718 416,574
Subscriber access 95,923 53,853
Other 14,875 52,756
-------- ----------
Total Sales $561,921 $1,243,883
======== ==========
</TABLE>
No customer accounted for more than ten percent of the
revenues, other than for RollCall development (Note 4), of the Company
in each of the two years ended June 30, 1999 and 1998, respectively.
11. INCOME TAXES
The Company accounts for income taxes under SFAS 109,
"Accounting for Income Taxes" which requires the recognition of
deferred tax assets and liabilities for both the expected impact of
differences between the financial statements and tax basis of assets
and liabilities, and for the expected future tax benefit to be derived
from tax loss and tax credit carryforwards. At June 30, 1999, the
Company had net operating loss carryforward of approximately
$3,800,000, expiring in 2013 and 2014. SFAS 109 additionally requires
the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. At June 30, 1999 and 1998, a
valuation allowance was provided against the tax asset.
The components of the net deferred tax asset consist of the
following:
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
Net operating loss carryforward $ 1,330,000 $ 420,000
Temporary differences 4,000 1,000
Valuation allowance (1,334,000) (421,000)
----------- ---------
$ -- $ --
=========== =========
</TABLE>
The provision for income taxes differs from the amount
computed applying the statutory federal income tax rate to income
before income taxes as follows at June 30:
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
<S> <C> <C>
Income tax benefit computed at
statutory rate $ (905,000) $(221,000)
Tax benefit not recognized 905,000 221,000
----------- ---------
Provision for income taxes $ -- $ --
=========== =========
</TABLE>
12. SUBSEQUENT EVENTS
On August 10, 1999, the Company acquired ECI, Inc. through a merger
transaction. ECI is an innovator of electronic college applications and
a supplier of products and services to college-bound students, their
parents and colleges.
The acquisition was structured as a merger of ECI with and into the
Company's wholly-owned subsidiary, College.Link.com Incorporated
("CollegeLink"). As consideration for the merger, the Company issued
550,809 of its common shares, 234,771 of its Series B Stock and paid
$489 in cash. CollegeLink also assumed approximately $778,000 of ECI
liabilities in connection with the merger and settled a claim against
ECI in exchange for 108,196 shares of the Company's common stock and
45,000 share of the Company's preferred Series B stock (see Proforma in
10-KSB).
The Company adopted a 401K plan commencing in July 1999.
The Company entered into a five-year lease agreement expiring November
30, 2004. Rental expense for the entire five-year period totals
approximately $641,000.
The Company entered into agreements for directors and officers
liability insurance.
<PAGE> 26
PRO-FORMA FINANCIAL INFORMATION (UNAUDITED)
CYTATION.COM INCORPORATED AND
SUBSIDIARY PRO-FORMA BALANCE SHEET
(Unaudited)
The following pro-forma balance sheet of Cytation and ECI at
June 30, 1999 is based upon historical financial data of Cytation
and ECI giving effect to the proposed transaction.
<TABLE>
<CAPTION>
Cytation
Cytation ECI Pro-Forma
June 30, June 30, June 30,
1999 1999 Debit Credit 1999
----------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents 1,371,100 $ 2,258 $ 489(A) $ 1,372,869
Accounts receivable, net of allowance
for doubtful accounts 100,163 -- 100,163
Prepaid expenses and other assets 85,249 3,213 53,500(C) 34,962
----------- ----------- -----------
TOTAL CURRENT ASSETS 1,556,512 5,471 1,507,994
GOODWILL -- -- $9,016,871(A) 9,066,871
50,000(B)
FURNITURE AND EQUIPMENT, net of
accumulated depreciation 250,484 56,876 307,360
SOFTWARE DEVELOPMENT, net of accumulated
amortization -- 101,750 101,750
----------- ----------- -----------
1,806,996 $ 164,098 $10,983,975
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities 395,344 $ 926,952 53,500(C) 50,000(B) $ 86,181
1,232,615(E)
Unearned revenue 35,000 -- 35,000
Loan and notes payable -- 1,002,578 1,002,578
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 430,344 1,929,530 1,123,759
LONG-TERM DEBT -- 912,188 912,188
COMMITMENTS AND CONTINGENCIES -- -- --
SHAREHOLDERS' EQUITY :
Preferred shares 3,100,000 -- 3,500,000(A) 7,275,000
675,000(E)
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Common shares 9,152 1,255 1,225(A) 2,839(A) 12,579
558(E)
Additional paid-in capital 2,459,718 995,542 995,542(A) 2,835,893(A) 5,852,668
557,057(E)
Accumulated deficit (4,192,218) (3,674,417) 3,674,417(A) (4,192,218)
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,376,652 (2,677,620) 8,948,029
----------- ----------- -----------
1,806,996 $ 164,098 $10,983,975
=========== =========== ===========
</TABLE>
See "Cytation.com Incorporated and Subsidiary Notes to Pro-Forma
Financial Statements assuming the purchase of ECI, Inc.
<PAGE> 28
CYTATION.COM INCORPORATED AND SUBSIDIARY
PRO-FORMA STATEMENT OF OPERATIONS
(Unaudited)
The following pro-forma statement of operations
for the year ended June 30, 1999 of Cytation and ECI
is based on historical financial data of Cytation
and ECI giving effect to the proposed transaction
<TABLE>
<CAPTION>
Cytation ECI Cytation
Year Ended Year Ended Year Ended
June 30, 1999 June 30, 1999 Adjustments June 30, 1999
------------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
NET REVENUES $ 561,921 $ 104,073 $ 665,994
EXPENSES:
Payroll, payroll taxes and related benefits 1,173,439 400,248 1,573,687
Investor relations 376,824 5,398 382,222
Depreciation and amortization 131,545 30,842 162,387
Advertising 49,428 50,236 99,664
Other expenses 1,417,109 574,768 1,991,877
Amortization of goodwill -- -- $906,687(D) 906,687
----------- ---------- -----------
3,148,346 1,061,492 5,116,525
----------- ---------- -----------
NET LOSS $(2,586,425) $ (957,419) $(4,450,531)
=========== ========== ===========
NET LOSS PER SHARE $ (0.65)
===========
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION 6,874,120
===========
</TABLE>
See "Cytation.com Incorporated and Subsidiary Notes to Pro-Forma
Financial Statements assuming the purchase of ECI, Inc."
<PAGE> 29
CYTATION.COM INCORPORATED AND SUBSIDIARY
NOTES TO PRO-FORMA FINANCIAL STATEMENTS ASSUMING
THE PURCHASE OF ECI, INC.
(Unaudited)
1. BUSINESS TRANSACTION
The pro forma financial statements give effect to the issuance
of 550,809 shares of Cytation.com Incorporated ("Cytation") Common
Stock and 234,771 shares of its Series B Stock pursuant to the merger
of ECI with and into Cytation's wholly-owned subsidiary CollegeLink.com
Incorporated. As consideration for the acquisition, each of the issued
and outstanding shares of the capital stock of ECI will be exchanged
for 1.2453 shares of Cytation Common Stock and .5308 shares of
Cytation's Series B Convertible Preferred Stock ("Series B"). In
addition ECI shareholders received cash from Cytation for any fraction
of a share remaining after the conversion which totaled $488.56.
2. ACCOUNTING POLICY
The merger is being accounted for as a purchase. The shares to
be issued are recorded at the average fair market value on August 10,
1999, the date in which the merger transaction was consummated. The
total dollar basis of the Common Stock and Series B recorded in the
pro-forma financial statements at June 30, 1999 was $2,838,732 and
$3,500,000.
3. GOODWILL
The Merger has occurred on August 10, 1999. The financial
statements of Cytation will include the operations of ECI from the date
of its actual acquisition. Based upon a preliminary evaluation, all of
the excess of the purchase price over previously recorded amounts of
ECI has been allocated to goodwill and will be amortized over ten
years. Such amortization has been included in the pro-forma financial
statements.
4. SETTLEMENT OF CLAIMS
Cytation also assumed approximately $778,000 of ECI's
liabilities in connection with the merger and settled a claim against
ECI in exchange for 108,196 shares of Cytation Common Stock and 45,000
shares of Series B. The shares have been recorded in the pro-forma
financial statements at their average fair market value as of August
10, 1999.
5. ADJUSTMENTS TO PRO-FORMA
Adjustments to the pro forma financial statements are as
follows:
A. Issuance of shares of Cytation to former ECI shareholders
recorded as indicated in 2 above.
B. Estimated expenses of the transaction
C. The elimination of intercompany receivables and payables
D. Amortization of goodwill as indicated in Note 3 above.
<PAGE> 30
E. Issuance of shares for settlement of claim against ECI as
indicated in Note 4 above.
6. FINANCIAL STATEMENT INFORMATION
These financial statements should be read in conjunction with
the historical financial statements and notes thereto of Cytation and
ECI included elsewhere herein.
The financial position and results may not be indicative of
future activities of Cytation and ECI nor the results of future
operations.
Loss per share is based upon the average shares outstanding
for Cytation during the period and the equivalent shares of Cytation
issued for the ECI shares outstanding.
The financial statements of ECI have been restated to a
June 30 year end.
<PAGE> 31
INDEPENDENT AUDITOR'S REPORT
Board of Directors
ECI, Inc.
Clinton, Massachusetts
We have audited the accompanying balance sheets of ECI, INC., as of December 31,
1998, 1997 and 1996, and the related statements of operations, changes in
sharesholders' deficit, and cash flows for the years 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ECI, Inc. as of December 31,
1998, 1997 and 1996, and the results of its operations, changes in
sharesholders' deficit, and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in Note 14, the company has incurred recurring losses and
accumulated deficit of $3,352,932. Liabilities exceed assets by $2,557,135.
These conditions indicate that unless the Company obtains substantial additional
financing resources, the Company may not be able to continue operations. The
accompanying financial statements do not include any adjustments to the
financial statements that might be necessary should the Company be unable to
continue as a going concern.
Paolilli & Jarek, LLC
Certified Public Accountants
<PAGE> 32
ECI, INC.
- --------------------------------------------------------------------------------
BALANCE SHEETS
- --------------------------------------------------------------------------------
As at December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,439 $ 6,311 $ 3,270
Deferred charges 101,750 0 1,058
----------- ----------- -----------
Total current assets 105,189 6,311 4,328
Fixed assets, net 54,384 49,314 54,085
Other assets 2,313 2,313 2,313
----------- ----------- -----------
$ 161,886 $ 57,938 $ 60,726
=========== =========== ===========
LIABILITIES AND SHARESHOLDERS' (DEFICIT)
Current Liabilities:
Capital Lease Obligation - current maturities $ 63,320 $ 34,540 $ 15,453
Note payable - Credit Line 125,000 0 0
Notes payable - Investors 477,000 95,000 0
Notes payable - Officer 479,500 410,000 0
Accounts payable 337,208 259,181 36,419
Accrued interest 126,033 13,142 0
Accrued expenses 167,946 75,000 27,928
----------- ----------- -----------
Total current liabilities 1,776,007 886,863 79,800
----------- ----------- -----------
Long-term Debt:
Notes payable 742,878 742,878 700,000
Accrued interest 167,054 92,959 22,222
Capital lease obligation - net of current portion 33,082 31,844 39,696
----------- ----------- -----------
943,014 867,681 761,918
----------- ----------- -----------
SHARESHOLDERS' (DEFICIT):
Common stock, $.01 par value; 200,000 authorized
125,483 shares issued and outstanding 1,255 1,255 1,255
Additional paid in capital 794,542 794,542 794,542
Accumulated deficit (3,352,932) (2,492,403) (1,576,789)
----------- ----------- -----------
(2,557,135) (1,696,606) (780,992)
----------- ----------- -----------
$ 161,886 $ 57,938 $ 60,726
=========== =========== ===========
</TABLE>
<PAGE> 33
ECI, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
REVENUES $ 101,949 $ 115,270 $ 88,488
---------- --------- ---------
COSTS AND EXPENSES:
Payroll and related costs 449,210 440,854 408,038
Software development 51,812 56,000 7,206
Promotional materials 49,686 21,659 105,124
Depreciation and amortization 30,842 23,221 13,136
Rent 30,042 30,483 20,085
Telephone 28,324 36,246 25,327
Postage and shipping 27,598 42,407 45,302
Packaging materials 16,080 55,474 78,852
Maintenance 13,063 14,250 12,370
Professional fees 11,032 13,337 47,028
Consulting fees 10,164 67,017 11,930
Travel 7,872 6,088 7,009
Office expense 5,520 5,815 4,586
Public relations 5,433 45,699 33,358
Supplies 5,222 4,706 16,706
Other expenses 18,657 3,660 3,805
Outside services 3,449 55,540 12,371
Insurance 2,664 3,807 1,921
Utilities 2,161 2,786 2,655
---------- --------- ---------
Total costs and expenses 768,831 929,049 856,809
---------- --------- ---------
(LOSS) FROM OPERATIONS (666,882) (813,779) (768,321)
INTEREST EXPENSE 193,647 101,835 25,247
--------- --------- ---------
NET LOSS $(860,529) $(915,614) $(793,568)
========= ========= =========
</TABLE>
<PAGE> 34
ECI, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN SHARESHOLDERS' DEFICIT
- --------------------------------------------------------------------------------
For Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Common Shares
------------------------ Additional Total
Number of Par paid-in Accumulated Sharesholders
Shares Value Capital Deficit Deficit
---------- ------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 125,483 $1,255 $819,638 $ (783,221) $ 37,672
Shareholder distributions (25,096) (25,096)
Net Loss (793,568) (793,568)
------- ------ -------- ----------- -----------
Balance, December 31, 1996 125,483 1,255 794,542 (1,576,789) (780,992)
Net Loss (915,614) (915,614)
------- ------ -------- ----------- -----------
Balance, December 31, 1997 125,483 1,255 794,542 (2,492,403) (1,696,606)
Net Loss (860,529) (860,529)
------- ------ -------- ----------- -----------
Balance, December 31, 1998 125,483 $1,255 $794,542 $(3,352,932) $(2,557,135)
======= ====== ======== =========== ===========
</TABLE>
<PAGE> 35
ECI, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
For Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Cash received from customers $ 101,949 $ 96,820 $ 88,488
Cash paid to suppliers and employees (668,766) (634,936) (782,697)
Interest received 0 0 2,609
Interest paid (6,661) (17,956) (3,025)
--------- --------- ---------
(573,478) (556,072) (694,625)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment received on contingent
installment agreement 0 0 14,800
Acquisition of property and equipment (1,583) (2,642) (3,570)
--------- --------- ---------
(1,583) (2,642) 11,230
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of computer equipment 0 18,450 0
Proceeds of debt financing 576,500 547,878 700,000
Payments on capital lease obligation (4,311) (4,573) (8,175)
Distributions to shareholders 0 0 (25,096)
--------- --------- ---------
572,189 561,755 666,729
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH (2,872) 3,041 (16,666)
CASH AND CASH EQUIVALENTS - BEGINNING, 6,311 3,270 19,936
--------- --------- ---------
CASH AND CASH EQUIVALENTS - ENDING, $ 3,439 $ 6,311 $ 3,270
========= ========= =========
FIXED ASSETS ACQUIRED USING FINANCING LEASE $ 34,329 $ 15,808 $ 63,324
========= ========= =========
</TABLE>
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
ECI, INC. (the "Company") was founded in 1991. The Company's primary
product is CollegeLink, a software system which enables students to
apply to their college choices, and enables the college to receive that
application information electronically. In October 1993, the Company
sold essentially all of its assets to Enrollment Technologies, Inc.
In May 1996, the Company bought the business back through an
arrangement wherein Enrollment Technologies, Inc. retained an interest
for future considerations as part of the purchase agreement. Since
reacquiring the business, the Company has encountered difficulty in
achieving user acceptance of its products. On August 10, 1999,
Cytation.com Incorporated acquired the Company. Substantially all the
outstanding share of ECI, Inc. were exchanged for preferred and common
shares of Cytation.com Incorporated.
Prior to being acquired by Cytation.com Incorporated, all notes payable
to investors and an officer were exchanged for common shares of ECI,
Inc. Also, all outstanding stock purchase warrants and vested stock
options were exchanged for common shares of ECI, Inc. at a price of
$.01 per share.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
INCOME TAXES
The Company, with the consent of its shareholders, has elected under
the Internal Revenue Code to be an S corporation. In lieu of
corporation income taxes, the shareholders of an S corporation are
taxed on their proportionate share of the Company's taxable income.
Therefore, no provision or liability for federal income taxes has been
included in these financial statements.
DEPRECIATION
Depreciation is provided for on a straight-line basis using the
estimated useful lives of the related assets. The Company's fixed
assets are comprised of office and computer equipment with estimated
useful lives of three years (See Note 2).
ESTIMATES
The preparation of 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.
ADVERTISING COSTS
The Company expenses advertising costs as incurred. Expenses for
advertising production costs are expensed at the beginning of each
year's college application season which generally begins in the fall
months.
REVENUE RECOGNITION
Service revenues are recognized when the students' college application
is processed. The Company requires payment at the time the application
is processed.
<PAGE> 37
SOFTWARE COSTS
The Company defers charging software development costs to expense
during the college application season when the software is utilized.
During 1998, the Company incurred $152,750 for software used during the
1998 - 1999 college application season. $51,000 was charged to expense
during 1998, and $101,750 of software development costs will be charged
to expense during the latter half of the college application season
(January - April 1999).
NOTE 2. FIXED ASSETS
The Company's fixed assets consisted of:
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- --------
<S> <C> <C> <C>
Capitalized leases of office and
computer equipment $117,686 $81,774 $63,324
Computer equipment 3,570 3,570 3,570
-------- ------- -------
121,256 85,344 66,894
Less accumulated depreciation 66,872 36,030 12,809
-------- ------- ------
Fixed assets, net $ 54,384 $49,314 $54,085
======== ======= =======
</TABLE>
NOTE 3. CAPITAL LEASE OBLIGATIONS
The Company is leasing office and computer equipment with lease terms
through June 2003. The capital lease obligations have been recorded in
the accompanying financial statements at the present value of future
minimum lease payments, discounted at annual interest rates ranging
from 10.25% to 67.6%. The capital leases are secured by the related
office and computer equipment, with original costs totaling $117,686,
and net book values of $53,690, $47,430, and $51,011 at December 31,
1998, 1997 and 1996, respectively.
Future minimum lease payments under this capital lease, as of
December 31, 1998, are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31,
--------------------------------
<S> <C>
1999 $ 62,788
2000 15,898
2001 9,498
2002 9,498
2003 4,479
--------
102,161
Less amount representing interest (5,759)
--------
Present value of minimum lease payments $ 96,402
========
</TABLE>
NOTE 4. NOTE PAYABLE - CREDIT LINE
<PAGE> 38
This $125,000 note from Fleet National Bank accrues interest, and is
payable monthly, at the Bank's Floating Prime Rate of Interest, which
was 7.75% at December 31, 1998. This note matured on July 2, 1999, and
is collateralized by the personal guarantee and assets of Theodore G.
Johnson, a director of the Company.
NOTE 5. NOTES PAYABLE - INVESTORS
These investor notes accrued interest at a 12% annual rate. As
discussed in Note 1, these notes were exchanged for common stock of the
Company. These notes included $215,000 in debt obligations due Theodore
G. Johnson, a director of the Company.
NOTE 6. NOTES PAYABLE - OFFICER
These 17 notes from Gerald A. Paxton, totaling $479,500,
accrue interest at a 12% annual rate.
NOTE 7. NOTES PAYABLE
On May 16, 1996, the Company entered into a line of credit financing
arrangement provided by USA Group. The credit facility is comprised of
two notes totaling $742,878 as follows:
CREDIT NOTE I
This note bears interest at the Base Rate of NBD Bank, N.A.,
Indianapolis, Indiana, plus 100 Basis Points. Principal and accrued
interest is payable monthly over a fifteen-year amortization period
beginning January 1, 2001. At December 31, 1998, this note accrued
interest at an annual rate of 8.75%.
CREDIT NOTE II
This note bears interest at the Base Rate of NDB Bank, N.A.,
Indianapolis, Indiana, plus 200 Basis Points. Accrued interest is
payable monthly during the term of this note and the balance. Both
principal and accrued interest is due on December 31, 2000. At December
31, 1998, this note accrued interest at an annual rate of 9.75%.
These notes are secured by intellectual properties acquired from
Enrollment Technologies, Inc. on May 16, 1996.
Maturities of principal amounts due on these notes are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31,
--------------------------------
<S> <C>
1999 $ -0-
2000 142,878
2001 40,000
2002 40,000
2003 40,000
Thereafter 480,000
---------
$ 742,878
=========
</TABLE>
NOTE 8. LEASE COMMITMENT
The Company leases an office suite at 55 Green Street, Clinton,
Massachusetts. The lease currently provides for monthly rentals of
$2,313, and may be terminated with 30 days notice. Rent expense for the
years ended December 31, 1998, 1997 and 1996, was $27,800, $27,800, and
$20,085, respectively.
<PAGE> 39
NOTE 9. STOCK OPTION PLAN
The Company established the 1992 Stock Plan (the "Plan") which provides
for the granting of incentive and non-qualified stock options to
employees and other individuals performing services for the Company.
The Board of Directors (the "Board") is responsible for the
administration of the Plan. The Board determines the term of each
option, option price, number of shares for which each option is
granted, whether restrictions will be imposed on the shares subject to
options, and the rate at which each option is exercisable. The exercise
price for incentive stock options granted may not be less than 100% of
the fair market value per share of the underlying common stock on the
date granted (110% for options granted to holders of more than 10% of
the voting stock of the Company). The Board shall determine the
exercise price for non-qualified options.
The terms of non-qualified stock options granted under the Plan
generally cannot exceed ten years. The term of incentive stock options
granted cannot exceed ten years (five years for options granted to
holders of more than 10% of the voting stock of the Company).
The Plan allows for issuance of up to 35,000 shares of common stock. At
December 31, 1998, 4,778 shares were available for future grant.
A summary of the option activity under the Plan is as follows:
<TABLE>
<CAPTION>
Number of
shares
---------
<S> <C>
Outstanding at December 31, 1995 -0-
Granted during 1996 3,910
------
Granted during 1997 15,250
------
Lapsed during 1997 - 660
------
Outstanding at December 31, 1997 18,500
Granted during 1998 11,022
------
Outstanding at December 31, 1998 29,522
======
</TABLE>
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-based Compensation", requires the disclosure of pro forma
information on the fair value of options to purchase stock, and the
impact on earnings of any compensatory value associated with the
difference in option grant prices and the fair value of the optioned
stock shares. Management believes that it is virtually impossible to
reasonably estimate the fair values of outstanding options to purchase
common shares at December 31, 1998, and therefore has not disclosed
information about such values, which would otherwise be required by
SFAS No. 123.
NOTE 10. STOCK PURCHASE WARRANTS
The Company granted stock purchase warrants to investors who provided debt
financing described in Note 5. In aggregate, warrants for the purchase of
63,278 shares of the Company's $.01 par value common stock were granted.
611 warrants were granted for a share price of $20.45. 36,200 warrants were
granted for a share price defined as "50% of the per share price paid by a
major investor at the next equity financing". The remaining 26,467 warrants
were granted for a share price equal to "100% of the per share price paid
by a major investor at the next equity financing".
NOTE 11. LICENSE AGREEMENT
<PAGE> 40
The Company entered into a license agreement effective May 16, 1996,
for an exclusive, royalty bearing, nontransferable license for certain
software, know-how, and trademarks for CollegeLink and IntroApp
intellectual properties. The initial license term expires on December
31, 2000, and the license agreement automatically renews for successive
one-year terms thereafter.
A license fee is payable as follows:
a. For years ending through December 31, 2000, the license fee shall
be equal to the lessor of (i) 9% of the net revenues earned by the
Company, or (ii) the Company's net income for the year.
b. For the years ending December 31, 2001 and thereafter, the
license fee shall be the lessor of the Company's net income,
or the applicable percentage of net revenues as shown in the
following table:
<TABLE>
<CAPTION>
YEAR ENDING APPLICABLE
DECEMBER 31, PERCENTAGE
------------ ----------
<S> <C>
2001 12%
2002 11%
2003 10%
2004 9%
2005 and thereafter 8%
</TABLE>
NOTE 12. RETIREMENT PLAN
On July 12, 1996, the Company established a profit sharing plan and trust in
accordance with Section 401(K) of the Internal Revenue Code. Company matching
and non-matching contributions are determined annually by the Company's Board of
Directors. The Company has not elected to make any matching or non-matching
contributions to the plan.
NOTE 13. RELATED PARTY TRANSACTIONS
As discussed in Notes 5 and 6, the Company has debt obligations from two related
parties. Interest charges on those debt instruments totaled $ 74,261 and $
26,980 for the years ended December 31, 1998 and 1997, respectively.
NOTE 14. GOING CONCERN
The Company has incurred recurring operating losses since inception and has an
accumulated deficit at December 31, 1998 of $3,352,932. Liabilities exceed
assets by $2,557,135. These conditions indicate that unless the Company obtains
substantial additional financing resources, the Company may not be able to
continue operations. The accompanying financial statements do not include any
adjustments to the financial statements that might be necessary should the
Company be unable to continue as a going concern.
<PAGE> 41
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors and Executive Officers of the Registrant
The directors of the Company are elected annually. The executive officers of the
Company serve with no specific term of office. The directors are elected to
serve until the next annual meeting of the Company or until their successors
have been elected. The executive officers and directors of the Company are as
follow:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Richard A. Fisher 53 Chairman of the Board and General Counsel
Kevin J. High 34 President and Director
Edward F. Hayes 52 Chief Financial Officer
William Fink 42 Vice President - Network Operations
Michael Hren 38 Senior Vice President and President, Cytation Corporation
Thomas Burgess 34 Senior Vice President and President, CollegeLink.com Incorporated
Anne Marie Gleason 43 Vice President and Vice President - Business Development, CollegeLink.com
Incorporated
Robert A. Goldschneider 51 Vice President and Vice President - Sales, Cytation Corporation
Jai N. Gupta, Ph.D. 52 Director
Michael W. Bryant 54 Director
Mark Rogers 39 Director
</TABLE>
(1) Mr. Fisher is also Chairman of the Board of Directors of Cytation
Corporation and CollegeLink.com Incorporated.
(2) Mr. High is also a director of Cytation Corporation and CollegeLink.com
Incorporated.
(3) Mr. Hayes is also Treasurer of Cytation Corporation and CollegeLink.com
Incorporated.
(4) Mr. Fink is also Vice President - Network Operations of Cytation
Corporation and CollegeLink.com Incorporated.
Management consists of the following personnel:
Richard A. Fisher, Chairman of the Board of Directors. Mr. Fisher, 53, chairman
of the board and general counsel of the Company. Mr. Fisher has been a director
and chairman of the board since March 5, 1999, and was a co-founder of the
Company's predecessor. From 1987 through 1994, Mr. Fisher was chairman, chief
executive officer and general counsel of Quadrax Corporation, which he
co-founded to engage in the manufacture and sale of advanced composite
materials. Mr. Fisher also has been a tax and corporate partner in the Boston,
Massachusetts law firm of Foley, Hoag and Eliot, which is legal counsel to the
Company, and Assistant to the Chief Counsel of the Internal Revenue Service in
Washington, DC. Mr. Fisher holds a BA in Economics from Northwestern University
(1968) and a Juris Doctor from the University of Virginia School of Law (1971).
Kevin J. High, Director. Mr. High, 34, is president of Cytation.com and has been
a director of the Company since March 5, 1999. Mr. High is a co-founder of the
Company's predecessor. Previously, Mr. High was a vice president of Shearson
Lehman Brothers, a national brokerage firm as well as branch manager of the
Middletown, Rhode Island office of the Corporate Securities Group, Inc.
Edward F. Hayes, Chief Financial Officer. Mr. Hayes, 52, is chief financial
officer of the Company. Prior to joining the Company, he served as chief
financial officer and engineering group manager for Northeast Engineers &
Consultants, Inc., a civil engineering firm. Before that, Mr. Hayes was
president and co-founder of Advantage Business Computers, Inc., which provided
computer programming and consulting services, network installation, and training
for commercial and individual clients. Mr. Hayes is a retired U.S. Navy
commander with 22 years experience in fiscal and inventory management and
submarine and industrial support positions. Mr. Hayes holds a BA in Mathematics
from Holy Cross College (1968), an MS in Computer Systems Management from George
Washington University (1974), an MBA from Rensselaer Polytechnic Institute
(1975), and an MA in National Defense Studies from the US Naval War College
(1985).
<PAGE> 42
William Fink, Vice President - Network Operations. Mr. Fink, 42, is Vice
President - Network Operations of the Company. He is a co-founder of the
Company's predecessor. Mr. Fink was in the United States Navy between 1976 and
1996. During his last five years in the Navy, Mr. Fink was the network
administrator responsible for the system design, installations, administration
and technical support of a multi-location, 250 user, wide area/local area Novell
Network. Mr. Fink holds an AS in General Studies from City University, Seattle,
Washington (1992). Mr. Fink is a college instructor of PC networking (PCLAN),
advanced MS-DOS, MS Windows and Windows 95 operating system platforms. Mr. Fink
also teaches "Connecting Businesses to the Internet" for Learning Tree
International, Inc. Mr. Fink is responsible for all technical aspects of the
Company.
Jai Gupta, Ph.D., Director. Dr. Gupta, 52, has been a director of the Company
since March 5, 1999. Dr. Gupta is the founder and president of EER Systems
Incorporated, a Washington, DC based aerospace firm which is a principal
shareholder of the Company. EER Systems, founded in 1979, offers a broad range
of systems design, development and integration capabilities, specializing in
aerospace flight, information and training systems. EER Systems has extensive
experience in providing training system support to the U.S. military. Dr. Gupta
holds a BS in Electrical Engineering from the Indian Institute of Technology,
New Delhi, India; an MS in Electrical Engineering from the Queen's University,
Ontario, Canada (1970); a Ph.D. degree in Electrical Engineering from Purdue
University (1974); and a Masters of Science in Administration degree from George
Washington University (1978).
Michael J. Bryant, Director. Mr. Bryant, 54, has been a director of the Company
since March 5, 1999. Mr. Bryant is the Director of Corporate Affairs for EER
Systems Incorporated. He has over twenty-five years of experience in personnel
and training systems. Mr. Bryant also leads the EER consulting team supporting
the White House and Department of Defense Advanced Distributive Learning
Initiative. Prior to joining EER Systems in 1986, he served in key personnel and
training policy positions in the Office of the Secretary of Defense. He also
served as a director of the Defense Training and Performance Data Center and is
the founder and chairman of the Defense Manpower Roundtable, a seminar group of
current and former senior administration and "think-tank" officials from the
personnel policy arena. Mr. Bryant holds BS in Mathematics from Sienna College
(1965) and an MBA in Operations Research from Tulane University (1972).
Mark Rogers, Director. Mr. Rogers, 39, has been a director of the Company since
March 5, 1999. Since 1989, Mr. Rogers has been a principal in NFT Ventures,
including acting as interim CEO and CFO as well as managing the venture capital
fund. Mr. Rogers serves as an advisor to several computer software companies in
California, Utah and Texas and is a director of both private and public
companies. Mr. Rogers specializes in strategic planning, mergers, acquisitions
and initial public offerings and has been responsible for the sale of businesses
ranging from $1 to $400 million. Prior to joining NFT Ventures, Mr. Rogers was
employed by an investment banking firm specializing in turn-around situations
and by a big five accounting firm where he concentrated on mergers and
acquisitions.
Item 10. Executive Compensation
The following table sets forth the total compensation paid or accrued through
Fiscal 1999 for the Company's Chief Executive Officer and the four other most
highly compensated executive officers who were employed by the Company at June
30, 1999 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION YEAR SALARY
--------------------------- ---- ------
<S> <C> <C>
Richard A. Fisher 1998 66,436
Chairman 1997 54,808
1996 --
Kevin J. High 1998 108,330
President 1997 73,421
1996 18,207
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
<PAGE> 43
<TABLE>
<CAPTION>
Number of Shares Percentage of Common Stock
Name of Beneficial Owner Beneficially Owned Outstanding
- ------------------------ ------------------ --------------------------
<S> <C> <C>
Kevin J. High 1,249,330 12.69%
Richard A. Fisher 812,243 8.25%
Ann Marie Gleason 319,958 3.25%
Jai N. Gupta 43,238 0.44%
Michael Bryant 43,238 0.44%
Mark Rogers 144,125 1.46%
William Fink 721,636 7.33%
All Directors and Officers as a Group 3,333,768 33.86%
EER Systems, Inc. 1,500,345 15.24%
</TABLE>
Item 12. Certain Relationships and Related Transactions
In December 1996, the Company issued to a founder of the Company 422,684 shares
of stock and a note for $45,000 for the receipt of certain assets. The assets
received have been recorded at fair value; the excess of the note issued over
the assets received has been recorded as a distribution. The note was paid in
April 1999
In December 1997, the Company entered into a joint venture agreement with EER
Systems Inc. ("EER"), a supplier of systems design, development and integration
capabilities specializing in flight, information and training systems. Cytation
Corporation ("Cytation Delaware"), a Delaware corporation, was incorporated
pursuant to the joint venture agreement. Simultaneously, the Company entered
into a development agreement with Cytation Delaware, receiving $500,000 to
develop certain software.
In July 1998, EER loaned the Company $300,000. This loan was repaid in 1999. In
addition, the Company issued to EER 175,000 common shares in settlement of a
potential claim by EER that it was entitled to convert the loan into a
significantly greater number of common shares.
In July 1998 the Company purchased the assets of Cytation Delaware, of which it
was a fifty percent owner, in exchange for equity. (Note 7).
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements (see index to financial statements)
2. Financial Statement Schedule - None
(b) Reports on Form 8-K.
Form 8-K, Current Report, filed March 18,1999 and later amended April 2, 1999
Form 8-K, Current report, filed April 27, 1999
3. Exhibits
The following exhibits are filed as part of or incorporated by reference into
this Report:
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION
- ---------- -----------
<S> <C>
#2.1 Articles of Merger between the Company and Cytation Corporation, dated February 11, 1999;
#2.2 Plan of Merger of the Company and Cytation Corporation dated February 11, 1999;
**2.3 Articles of Merger between CollegeLink.com Incorporated and ECI, Inc., dated August 10, 1999;
**2.4 Certificate of Merger of CollegeLink.com Incorporated and ECI, Inc. dated August 10, 1999;
**2.5 Agreement and Plan of Merger of the Company and ECI, Inc., dated August 10, 1999;
*3.1 Articles of Incorporation of the Company;
##3.2 Designation of Rights and Preferences for the Company's Series A Convertible Preferred Stock;
**3.3 Certificate of Amendment of Cytation.Com Incorporated;
*3.4 Bylaws of the Company;
x4.2 Please see Exhibits 3.1 through 3.4 for provisions of the articles of incorporation and bylaws
of the Company defining the rights of holders of the common stock of the company;
##10.1 Series A Convertible Stock Purchase Agreement, dated April 2, 1999, between the Company and
Provident Life and Accident Insurance Company;
**10.2 Escrow Agreement by and among the Company, Gerald A. Paxton, Thomas J. Burgess and Eastern Bank
and Trust Company dated as of August 10, 1999
**10.3 Registration Agreement by and among the Company, Gerald A. Paxton, Thomas J. Burgess and ECI,
Inc. dated as of August 10, 1999
**10.4 Consulting Agreement by and among the Company, Gerald A. Paxton and CollegeLink.com
Incorporated dated as of August 10, 1999
**10.5 Letter Agreement by and among the Company, ECI, Inc. and USA Group Noel-Levitz, Inc. dated as
of July 28, 1999
**10.6 Registration Rights Agreement by and among the Company and USA Group Noel-Levitz, Inc. dated as
of July 28, 1999
**10.7 Lease by and between Victoria S. Tarsagian and Web Services International, Inc. dated as of
July 29, 1996
**21.1 List of Subsidiaries of the Company
x27.1 Financial Data Schedule
</TABLE>
- -----------------
x Filed herewith.
* Incorporated by reference from the Registrant's Annual Report on Form 10KSB
(S.E.C. File No. 0-5388) filed December 31, 1998.
# Incorporated by reference from the Registrant's Form 8-K, Current Report,
filed March 18, 1999, and later amended on April 2, 1999.
<PAGE> 45
## Incorporated by reference from the Registrant's Form 8-K, Current Report,
filed April 27, 1999.
** Incorporated by reference from the Registrant's Form 8-K, Current Report,
filed August 25, 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report on Form 10-KSB to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: September 27, 1999
CYTATION.COM INCORPORATED
By: /s/ KEVIN J. HIGH
----------------------------------------------
Kevin J. High
PRESIDENT
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capasities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/Richard A. Fisher Chairman of the Board and General September 28,1999
- -------------------- Counsel (Principle Executive Officer)
Richard A. Fisher
/s/Kevin J. High President and Director September 28,1999
- --------------------
Kevin J. High
/s/Edward F. Hayes Chief Financial Officer (Principle September 28,1999
- -------------------- Financial and Accounting Officer)
Edward F. Hayes
/s/Mark Rogers Director September 28,1999
- --------------------
Mark Rogers
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS INCLUDED IN THE COMPANY'S FORM 10-K FOR THE
YEAR ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> JUN-30-1999
<CASH> 1,387,100
<SECURITIES> 0
<RECEIVABLES> 100,163
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,556,512
<PP&E> 250,484
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,806,996
<CURRENT-LIABILITIES> 430,344
<BONDS> 0
0
3,100,000
<COMMON> 9,152
<OTHER-SE> 2,459,718
<TOTAL-LIABILITY-AND-EQUITY> 1,806,996
<SALES> 561,921
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 3,148,346
<OTHER-EXPENSES> 1,417,110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,586,425)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,586,425)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
