UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1999
Commission file Number 0 5388
CYTATION.COM INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
NEW YORK
(State or Other Jurisdiction of Incorporation)
0 5388 16-0961436
(Commission File Number) (I.R.S. Employer Identification Number)
809 Aquidneck Avenue, Middletown, RI 02842
(Address of Principal Executive Offices) (Zip Code)
(401) 845-8800
(Registrant's Telephone Number, Including Area Code)
<PAGE> 1
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
Common Stock, $.001 Par Value - 8,085,099 shares as of
March 31, 1999.
FORWARD-LOOKING INFORMATION
THIS FORM 10QSB AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY
CYTATION.COM INCORPORATED OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES
ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. FIFTEEN U.S.C.A. SECTIONS 77Z-2 AND
78U-5 (SUPP. 1996). THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT,
BELIEF OR CURRENT EXPECTATIONS OF CYTATION.COM INCORPORATED AND MEMBERS OF ITS
MANAGEMENT TEAM AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS
ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES,
AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN
FORWARD-LOOKING STATEMENTS ARE SET FORTH IN THE SAFE HARBOR COMPLIANCE
STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1 TO THIS FORM
10QSB AND ARE HEREBY INCORPORATED HEREIN BY REFERENCE. THE COMPANY UNDERTAKES
NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO REFLECT
CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES TO
FUTURE OPERATING RESULTS OVER TIME.
<PAGE> 2
RISK FACTORS
In addition to the other information contained in this report,
individuals should carefully consider the following risk factors:
1. The Company believes that its assumptions are based upon reasonable
data derived from and known about its business and operations. No assurances
are made that actual results of operations or the results of the Company's
future activities will not differ materially from its assumptions;
2. Additional risks factors such as the uncertainty of the Company's research
and development activities, marketing activities, and the results of bringing
additional acquisitions and affiliations into a smooth operation with Company
are unknown;
3. Additional concerns regarding the year 2000 compliance standards as
they effect the Company's operating technology as well as the technologies of
the industry which effect the Company's operations;
4. Additional uncertainties regarding the ability for operating cash to
meet the current and projected cash flow needs of the organization;
5. Readers are cautioned not to place undue reliance on these forward-looking
statements, as they attempt to speak only of activities known or anticipated
as of this date.
YEAR 2000 COMPLIANCE
The Company continues to review its technology systems to attempt to discover
what effects year 2000 issues may have on its operations. Many of the earlier
systems, found not to be compliant, have been replaced while others are being
modified to comply. The Company is working with its known suppliers of
technology or services controlled by technology that might be effected by the
year 2000 events and are seeking written assurances from those determined to
have a potential effect upon Company's operations. However, there can be no
assurance that the Company will identify all of its data handling problems in
its business systems or those of its suppliers or clients in advance of any
effect upon Company's operations. The Company, therefore, bears some
unlimited and unknown risks to the year 2000 issue and could also be adversely
affected if other entities do not adequately or timely resolve their payment
mechanisms as they relate to the Company's ongoing operations for its
clients.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CYTATION.COM INCORPORATED
(FORMERLY STYLEX HOMES, INC.)
BALANCE SHEET
MARCH 31, 1999
ASSETS
Current assets:
Cash $ 40,670
Accounts receivable, net 107,217
Employee advances 11,826
Prepaid expenses 6,373
Total current assets 166,086
Property and equipment 303,101
Less: accumulated depreciation (168,463)
Total property and equipment 134,638
Other assets:
Software development, net 220,442
Investment at equity 233
Total other assets 220,675
TOTAL ASSETS $ 521,399
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 300,000
Accrued payroll 118,896
Accounts payable 70,953
Notes payable-other 370,000
Notes payable-Shareholders 55,000
Accrued expenses 5,695
Total current liabilities 920,544
<PAGE> 4
Shareholders' deficit:
Common stock, $.001 par value,
authorized 100,000,000 shares,
issued and outstanding 8,085,099 shares 8,085
Additional paid-in capital 1,807,501
Treasury stock, 15,800 shares at cost (79,075)
Accumulated deficit (2,135,656)
Total shareholders' deficit (399,145)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 521,399
SEE NOTES TO FINANCIAL STATEMENTS.
CYTATION.COM INCORPORATED
(FORMERLY STYLEX HOMES, INC.)
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
Net revenues:
Web site hosting $ 63,177
Subscriber access 15,800
Web site origination 2,300
Online training services 69,710
Other revenue 783
Sales return and allowances (12,249)
Total net revenues 139,521
Expenses:
Salaries 211,646
Utilities 28,554
Depreciation and amortization 25,168
Travel and entertainment 3,210
Legal and professional fees 83,927
Rent 9,740
Payroll taxes and employee benefits 25,618
Equipment rental 6,121
Interest expense 1,127
Commissions 4,101
Seminars and related product supplies 3,655
Other expenses 2,055
<PAGE> 5
Office supplies and services 3,519
Printing and reproduction 8,132
Postage and delivery 3,057
Insurance 5,194
Domain registration 2,055
Hardware 18,858
Advertising 24,458
Software 2,169
Taxes 607
Total expenses 472,971
Net loss for the period $ (333,450)
Net loss per share $ (.041)
Weighted average number of shares used in computation 8,085,099
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 6
CYTATION.COM INCORPORATED
(FORMERLY STYLEX HOMES, INC.)
STATEMENT OF CHANGES IN DEFICIT
THREE MONTHS ENDED MARCH 31, 1999
Accumulated Deficit at December 31, 1998 $ (1,802,206)
Net loss for the three month period ended March 31, 1999 (333,450)
Accumulated Deficit at March 31, 1999 $ (2,135,656)
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 7
CYTATION.COM INCORPORATED
(FORMERLY STYLEX HOMES, INC.)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
MARCH 31, 1999
<TABLE>
<CAPTION>
Total
Additional Shareholders'
Treasury Stock Common Shares Paid-in Equity
Shares Amount Shares Amount (Capital) (Deficit) (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 31,600 $ (79,075) 2,008,151 $ 2,008 $ 77,300 $ 0* $ 233
One for two reverse stock
split effective
February 15, 1999 (15,800) (1,004,076) (1,004) 1,004
Issuance of stock as a result
of reverse Merger transaction
accounted for as a Purchase 7,081,023 7,081 1,729,197 1,736,278
Accumulated deficit recorded as a
result Of the reverse merger
transaction (1,802,206) (1,802,206)
Net loss for the period (333,450) (333,450)
Balance at March 31, 1999 15,800 $ (79,075) 8,085,098 $ 8,085 $ 1,807,501 $(2,135,656) $ (399,145)
</TABLE>
* Reflects a quasi-reorganization effective December 31, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 8
CYTATION.COM INCORPORATED
(FORMERLY STYLEX HOMES, INC.)
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999
Cash flows from operating activities:
Net loss for the period $ (333,450)
Adjustments to reconcile loss to net cash provided by
operating activities:
Depreciation and amortization 25,168
Loss on sale of fixed asset 1,231
(Increase) decrease in:
Accounts receivable (34,396)
Employee advances (11,826)
Prepaid expenses (289)
Increase (decrease) in:
Accounts payable (48,945)
Accrued payroll (31,478)
Accrued expenses (46,610)
Net cash used by operating activities (480,595)
Cash flows from investing activities:
Proceeds from sale of fixed asset 9,600
Capital expenditures (10,003)
Net cash used by investing activities (403)
Cash flows from financing activities:
Proceeds from notes payable 370,000
Net decrease in notes payable - shareholders (40,000)
Net decrease in long-term debt (9,250)
Net cash provided by financing activities 320,750
Net decrease in cash (160,248)
Cash at beginning of period 200,918
Cash at end of period $ 40,670
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 9
CYTATION.COM INCORPORATED
(FORMERLY STYLEX HOMES, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Cytation.com Incorporated (the "Company") was formed as a result of the
merger of Stylex Homes, Inc. and Cytation Corporation on March 5, 1999. The
Company's principal service is RollCall(tm), which is a proprietary Web-based
training and delivery system which enables users to take, and administrators
to administer, courses over the Internet or on an intranet. Potential
customers for the Company's services include corporations with distributed
workforces, government agencies, colleges and universities, and professional
trainers.
The Company's books are maintained on the accrual basis of accounting in
accordance with Generally Accepted Accounting Principles.
The Company extends credit to customers in the normal course of
business. Bad debts are provided on the allowance method based on historical
experience and management's evaluation of outstanding accounts receivable.
Property and equipment are recorded at cost, except that property under
capital leases is recorded at the lower of the present value of future minimum
lease payments or the fair value of the property at the beginning of the lease
term. The cost and accumulated depreciation of assets sold or retired are
removed from the respective accounts and any gain or loss is recorded in
earnings. Maintenance and repairs are charged to expense when incurred.
Property and equipment is depreciated under the straight-line method over the
estimated useful lives of assets as follows:
Assets Life
Vehicles 5 years
Machinery and equipment 3 - 7 years
Furniture and fixtures 3 - 7 years
The Company currently accounts for its stock-based compensation plans
using the accounting prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. Since the Company is not required
to adopt the fair value based recognition provisions prescribed under
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, it has elected only to comply with the disclosure
requirements set forth in the Statement, which include disclosing pro forma
net income as if the fair value based method of accounting had been applied.
<PAGE> 10
In accordance with Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed, initial costs are charged to operations as research prior to the
development of a detailed program design or a working model. Thereafter, the
Company capitalizes the direct costs and allocated overhead associated with
the development of software products. Costs incurred subsequent to the
product release, and research and development performed under contract are
charged to operations.
Capitalized costs are amortized over the estimated product life on the
straight-line basis. Unamortized costs are carried at the lower of book value
or net realizable value.
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.
(CONTINUED)
<PAGE> 11
CYTATION.COM INCORPORATED
(FORMERLY STYLEX HOMES, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
2. CASH
The Company has cash deposits at one financial institution which has a
federally insured limit of $100,000. The cash balance in this institution may
exceed the federally insured limit at various times throughout the year.
3. ACCOUNTS RECEIVABLE
Accounts receivable at March 31, 1999 consisted of the following:
Accounts Receivables $ 117,217
Less allowance for doubtful accounts 10,000
Net receivables $ 107,217
4. PROPERTY AND EQUIPMENT
Property and equipment and accumulated depreciation at March 31, 1999
consisted of the following:
Cost:
Machinery and equipment $ 191,993
Furniture and fixtures 68,542
Leasehold improvement 42,566
Total property and equipment 303,101
Accumulated depreciation:
Machinery and equipment 127,537
Furniture and fixtures 21,771
Leasehold equipment 19,155
Total accumulated depreciation 168,463
Net property and equipment $ 134,638
<PAGE> 12
5. INTANGIBLE ASSETS
Software development costs have been capitalized and are being amortized
in accordance with Statement of Financial Accounting Standards No. 86. The
costs are being amortized on a straight-line basis over three years. The cost
basis and accumulated amortization as of March 31, 1999 are as follows:
Software development $ 274,869
Accumulated amortization 54,427
Net intangible assets $ 220,442
(CONTINUED)
<PAGE> 13
CYTATION.COM INCORPORATED
(FORMERLY STYLEX HOMES, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
6. ACCRUED PAYROLL
Accrued payroll at March 31, 1999 includes approximately $112,000 of
payroll which has been deferred by employee shareholders.
7. NOTES PAYABLE - SHAREHOLDERS
Notes payable - shareholders at March 31, 1999 consist of the following
obligations which are due on demand:
Note payable dated December 18, 1996 payable to a shareholder
without interest $ 45,000
Promissory note dated July 25, 1996 payable to a shareholder
without interest $ 10,000
Total $ 55,000
8. NOTES PAYABLE - OTHERS
Notes payable at March 31, 1999 consisted of the following obligations which
are due on demand.
Twelve promissory notes payable to individuals with interest at 12% $ 370,000
LONG-TERM DEBT
Long-term debt at March 31, 1999 consisted of the following:
Note payable to shareholder (EER Systems, Inc.) unsecured, due
August 1, 1999 including interest at 6% $ 300,000
Less, amount due within one year (300,000)
<PAGE> 14
Long-term debt, net $ -0-
Maturities of long-term debt in each of the years succeeding March 31, 1999 is
as follows:
2000 $300,000
(CONTINUED)
<PAGE> 15
CYTATION.COM INCORPORATED
(FORMERLY STYLEX HOMES, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
10. OPERATING LEASES
On October 1, 1996, the Company entered into a five-year lease agreement
for office space that expires September 30, 2001. The terms of the agreement
are such that the lease has been classified as an operating lease. In
addition to the monthly rental change, the Company must also pay 25% of the
operating expenses of the common areas. Lease expenses for the three months
ended March 31, 1999 was $9,740.
The following is a schedule, by years, of future minimum lease payments
to be made under the lease agreement for the years ending March 31:
2000 $25,660
2001 29,250
11. CAPITAL TRANSACTIONS
On February 2, 1999 the Board of Directors voted to change the name of
the Company from Stylex Homes, Inc. 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 were 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 Cytati
on Corporation, a Rhode Island corporation, under Section 904 of the New York
Business Corporation Law. The effective date of the merger was March 5,
1999. Cytation.com Incorporated will continue as the surviving corporation.
In accordance with the merger agreement, the shareholders of common stock
of Cytation Corporation, a Rhode Island Corporation, received 5.765 shares of
the common stock of Cytation.com Incorporated. Accordingly, 7,081,028 shares
of Cytation.com Incorporated's common stock was issued as a result of this
merger.
<PAGE> 16
During 1998, the Company issued stock options to employees which had not
been exercised as of March 31, 1999. The total number of shares of common
stock subject to employee options outstanding at March 31, 1999 was 216,188
shares. The Company records stock options in accordance with APB Opinion No.
25 and, accordingly, no amounts have been recorded in the financial
statements. If the Company had used the fair value based method of accounting
for the options, as prescribed by Statement of Financial Accounting Standards
No. 123, compensation expense would have been recorded for approximately
$972,846. Accordingly, the Company's pro forma net loss and loss per share
would have been approximately $1,306,296 and $.19 for the three months ended
March 31, 1999.
12. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS #109,
"Accounting for Income Taxes." In accordance with SFAS #109, income taxes are
provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes. Deferred
taxes are recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes. The differences
relate primarily to depreciable assets (use of different depreciation methods
and lives for financial statement and income tax purposes), and allowance for
doubtful receivables (deductible for financial statement purposes but not for
income tax purposes). The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
deductible or taxable when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses and tax
credits that are available to offset future taxable income.
(CONTINUED)
<PAGE> 17
CYTATION.COM INCORPORATED
(FORMERLY STYLEX HOMES, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
12. INCOME TAXES (Continued)
The Company's deferred tax assets consisted of the following at March 31,
1999:
Deferred tax assets $ 1,635,500
Deferred tax liabilities (21,500)
Net deferred tax assets 1,614,000
Valuation allowance (1,614,000)
Net deferred tax assets recognized on the accompanying
balance sheet $ -0-
The deferred tax assets noted above includes a net operating loss
carryforward from 1998 of approximately $1,202,000.
The estimated net operating loss available for 1999 is approximately
$1,500,000.
The current income tax provision for the three months ended March 31,
1999 has been estimated at $0 due to the loss for the period then ended.
13. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest for the three months ended March 31, 1999 was
$1,127.
14. RELATED PARTIES
At March 31, 1999, the Company owned 100% of the shares of Cytation
Corporation, a Delaware corporation. The Delaware corporation incorporated in
December 1997 as a joint venture between Web Services International, Inc. (a
predecessor of the Company) and EER Systems, Inc. The primary activity of
Cytation Corporation (Delaware) was the development of the Company's
proprietary online, browser-based enterprise-wide training management
operating system.
<PAGE> 18
15. SUBSEQUENT EVENTS
In April, the Company received a $3,100,000 equity investment from two
investors in exchange for 775,000 shares of Series A Convertible Preferred
Stock.
The Company used $370,000 of the proceeds of the equity investment to
repay the Notes Payable-Other.
The Company used $55,000 of the proceeds of the equity investment to
repay the Notes Payable-Shareholders.
The Company used approximately $112,000 of the proceeds of the equity
investment to pay the Accrued Payroll.
(CONCLUDED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
CYTATION.COM INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 1999
=====================================
THREE MONTHS ENDING MARCH 31, 1999
=====================================
The following information should be read in conjunction with the historical
financial information and the notes thereto included in Item 1 of this
Quarterly Report.
Except for historical information, the discussion in this Form 10-Q contains
forward-looking statements that involve risks and uncertainties. These
statements may refer to the Company's future plans, objectives, expectations
and intentions. These statements may be identified by the use of words such as
"expect", "anticipate", "believe", "intend", "plan" and similar expressions.
The Company's actual results could differ materially from those anticipated in
such forward-looking statements. Factors that could contribute to these
differences include, but are not limited to, the risks discussed in the
section titled "Market Risks and other Business Factors" later in this Form
10-Q.
<PAGE> 19
OVERVIEW
This overview describes the overall operational plan for Cytation.com
Incorporated (together with its predecessor corporations, "Cytation.com" or
the "Company") with respect to the marketing of the Company's proprietary
Internet-delivered services.
Company Description
Cytation.com is leveraging its roots of its predecessors as a provider of
Internet services and Web content to offer as services proprietary online
enterprise learning solutions designed to capture, deploy and manage knowledge
more effectively.
Cytation.com is a provider of Internet training and related services and
competes principally in the $85 billion a year United States training market.
The Company's principal service is RollCall(tm), 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. RollCall is compatible with principal
course-authoring tools, and Cytation.com offers course Web-enabling and
authoring services as part of its turnkey service approach to the market.
Potential customers for the Company's services include corporations with
distributed workforces, government agencies, colleges and universities and
professional trainers. 80% of the Fortune 1000 companies are currently
investigating Web-based course delivery strategies. Web-based delivery
products and services are forecast to grow at an annual compound rate of
approximately 94 percent.
The Company's has positioned RollCall as a turnkey service - hosting and
administering it on its owns servers - rather than as a product. This strategy
enables the Company to seek to capitalize on the distinct trend by
corporations to outsource training requirements; to minimize and often
eliminate the involvement of information technology departments in the sales
cycle; to seek to form strategic relationships with instructional design
firms; to customize the training Web site so that it has the customer's "look
and feel"; and to offer customers automatic, free upgrades. The Company
believes that RollCall will enable organizations to deploy and manage online
learning solutions faster and with greater ease relative to client server,
client-administered installations.
RollCall is functional and is being used by corporations in the New England
area. The Company is ramping up its sales and marketing staff and expects
sales to increase substantially in 1999.
The principal shareholders of Cytation.com are the founders and officers of
Web Services International, Inc. (the name of which was subsequently changed
to Cytation Corporation), a corporation which supplied Internet services and
technologies before its merger into the Company, and EER Systems Inc., a
supplier of a broad range of systems design, development and integration
capabilities specializing in aerospace flight, information and training systems
<PAGE> 20
with annual revenues in excess of $100 million ("EER"). EER is an
acknowledged participant in the DoD and civilian U.S. government training
market. The Company is the successor to Stylex Homes, Inc. and was the
surviving corporation in a merger with Cytation Corporation. Stylex Homes,
Inc. did not actively conduct any business since 1982.
The Company and its predecessors have raised more than $4.8 million of equity
capital since 1996 and have expended more than $1,000,000 on proprietary
database development and marketing initiatives directly related to the
Company's business.
The Company has filed applications with U.S. Patent and Trademark Office for
"Cytation" and "RollCall" and has received preliminary trademark approval for
"Real Solutions in a Virtual World".
Cytation.com's executive office is at 809 Aquidneck Avenue, Middletown, Rhode
Island, 02842, tel. (401) 845-8800; fax. 401-845-8816; www.cytation.com.
Completion of Merger
On March 5, 1999, Cytation.com Incorporated (the "Company") finalized a Plan
of Merger with Cytation Corporation, a Rhode Island corporation (hereinafter
referred to as "Disappearing Corporation"). The Disappearing Corporation's
Operations, Business Plan, Articles of Incorporation, Bylaws, Financial
Statements, Board of Directors and Officers became those of the Company.
Pursuant to Section 615 and 904 of the Business Corporation Law of New York
and the provisions of the Rhode Island General Laws (R.I.G.L. 7-1.1-27,
7-1.1-30.3, 7-1.1-65, 7-1.1-67, 7-1.1-67, 7-1.1-68 and 7-1.1-74, et seq., as
amended) the Company and the Disappearing Corporation adopted Articles of
Merger.
The Company, a corporation organized and existing under the laws of the State
of New York, and the Disappearing Corporation, a corporation organized and
existing under the laws of the State of Rhode Island, agreed that the
Disappearing Corporation be merged into the Company. The terms and conditions
of the merger and the mode of carrying the same into effect are incorporated
herein by reference and set forth in said Articles of Merger at Exhibit 2.1 of
Form 8-K/A, filed on April 2, 1999 with the Securities and Exchange Commission
("SEC").
The Company has survived and continues under the name of CYTATION.COM
INCORPORATED. The total number of shares of stock of all classes which the
Company has authority to issue is one hundred million (100,000,000) shares of
Common Stock (hereinafter referred to as the "Common Stock") and ten million
(10,000,000) shares of Preferred Stock (hereinafter referred to as the
"Preferred Stock").
<PAGE> 21
The Plan of Merger, incorporated herein by reference and set forth at Exhibit
2.2 of Form 8-K/A, filed on April 2, 1999 with the SEC, was duly adopted by
the Boards of Directors of the respective corporations on January 25, 1999,
and approved by the Shareholders of the Disappearing Corporation on February
11, 1999, in the manner prescribed by Sections 7-1.1-27, 7-1.1-30.3, 7-1.1-65,
7-1.1-67, 7-1.1-67, 7-1.1-68 and 7-1.1-74, et seq., as amended of the General
Laws of Rhode Island. The number of shares voted for the Plan of Merger was,
with respect to each corporation, sufficient for approval as set forth below.
The number of shares of the Disappearing Corporation outstanding at the time
of such adoption was 1,231,493, and the number of Shares entitled to vote
thereon was 1,231,493. The Company is issuing 7,099,577 additional, restricted
Shares to the Shareholders of the Disappearing Corporation, representing the
fully diluted ownership in the Company by such Shareholders of the
Disappearing Corporation.
RESULTS OF OPERATIONS
Revenue
The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended March 31,
- ----------------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues:
Online Training 50% 0%
Web Hosting 45% 12%
Subscriber Access 11% 4%
Website Origination 2% 76%
Other 1% 9%
Returns -9% -1%
-------- --------
100% 100%
======== ========
</TABLE>
<PAGE> 22
The revenue table shows the significance of the shift in business focus of the
Company over the past year. One year ago, the principal business of the
Company was the hosting and development of Web content, which accounted for
substantially all the Company's revenue. While the Company maintains Web
hosting services for certain clients, this is the first quarter in which the
majority of the income has been from the online training services provided
principally through RollCall.
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
has been operational since mid-1998. RollCall Version 2 is under active
development, with design input from the Company's existing customers.
The Company presently has approximately $200,000 of contracts in place as well
as multiple quotations out to numerous companies which, if accepted, would
result in additional revenues. Among the diverse types of companies with
contracts in place are: Banyan Systems, Inc.; WebEd, Inc.; Morgan Stanley Dean
Witter & Co.; American Power Conversion; Real World University; Rhode Island
Technology Council; a major national chain that self brands the Company's
services; and a leading authority on information technology that provides
measurement, research, decision support, analysis, and training to its
national clients.
Operating Expenses
Operating expenditures for the quarter ended March 31, 1999 were 24% higher
than the same quarter one year ago. This is attributable to the fact that the
Company changed its principal business during the year, and 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. The second reason for the increase
in operating expenses was the recently completed merger. The Plan of Merger,
incorporated herein by reference, is set forth at Exhibit 2.2 of Form 8-K/A,
filed on April 2, 1999 with the SEC. A major portion of the increase in
operating expenses resulted from increased legal and professional services
required to complete the merger.
Payroll expenses were 5% higher than the same quarter one year previously. For
the quarter ending March 31, 1999, the staff size was comparable to the size
of the Company a year ago, although the mix of skills and specialties has
changed somewhat as the business focus changed. The staff size is expected to
grow in the near term to enhance the sales effort for the Company's services
and to intensify the software development process. Consequently, salary
expense is expected to increase substantially in the future.
<PAGE> 23
As part of the increased level of effort, the Company hired a Vice President
of Business Development, four sales representatives and several additional
software developers during the first quarter of 1999. As of March 31, 1999,
the Company employed 23 staff members.
DISCONTINUED 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 Web site
development business. During the quarter recently completed, the Company did
not receive any revenue from Web site 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 Web site developer are
contemplated.
MARKET RISKS AND OTHER BUSINESS FACTORS
In passing the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"), 15 U.S.C.A. Sections 77z 2 and 78u 5 (Supp. 1996), Congress encouraged
public companies to make "forward looking statements" by creating a safe
harbor to protect companies from securities law liability in connection with
forward looking statements. The Company intends to qualify both its written
and oral forward looking statements for protection under the Reform Act and
any other similar safe harbor provisions.
"Forward looking statements" are defined by the Reform Act. Generally, forward
looking statements include expressed expectations of future events and the
assumptions on which the expressed expectations are based. All forward looking
statements are inherently uncertain as they are based on various expectations
and assumptions concerning future events and they are subject to numerous
known and unknown risks and uncertainties which could cause actual events or
results to differ materially from those projected. Due to those uncertainties
and risks, the investment community is urged not to place undue reliance on
written or oral forward looking statements of the Company. The Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, the Company undertakes no obligation
to update or revise forward looking statements to reflect changed assumptions,
the occurrence of unanticipated events or changes to future operating results
over time.
The Company provides the following risk factor disclosure in connection with
its continuing effort to qualify its written and oral forward looking
statements for the safe harbor protection of the Reform Act and any other
similar safe harbor provisions. Important factors currently known to
management that could cause actual results to differ materially from those in
forward looking statements include the disclosures incorporated herein by
reference and set forth in Item 5, Other Information, Business Plan, of Form
8-K/A, filed on April 2, 1999 with the Securities and Exchange Commission
("SEC") and also include the following:
<PAGE> 24
Liquidity
The Company is considering the sale of equity in connection with a secondary
offering later in 1999. The Company does not have any underwriting commitments
for such sale of equity. There can be no assurance that any such sale will
close by such date or at all or that the Company will continue to consider
such an offering.
Litigation And Government Investigations
Numerous federal and state civil and criminal laws govern computer technology
and Internet service activities. In general, these laws provide for various
fines, penalties, multiple damages, assessments and sanctions for violations.
Evolving Industry Standards; Rapid Technological Changes
The Company's success in its business will depend in part upon its continued
ability to enhance its existing products and services, to introduce new
products and services quickly and cost effectively to meet evolving customer
needs, to achieve market acceptance for new product and service offerings and
to respond to emerging industry standards and other technological changes.
There can be no assurance that the Company will be able to respond effectively
to technological changes or new industry standards. Moreover, there can be no
assurance that competitors of Cytation will not develop competitive products,
or that any such competitive products will not have an adverse effect upon
Cytation's operating results.
Moreover, management intends to continue to implement "best practices" and
other established process improvements in its operations going forward. There
can be no assurance that the Company will be successful in refining, enhancing
and developing its operating strategies and systems going forward, that the
costs associated with refining, enhancing and developing such strategies and
systems will not increase significantly in future periods or that the
Company's existing software and technology will not become obsolete as a
result of ongoing technological developments in the marketplace.
Year 2000
It is possible that the Company's currently installed computer systems,
software products or other business systems, or those of the Company's
customers, vendors or resellers, working either alone or in conjunction with
other software or systems, will not accept input of, store, manipulate and
output dates for the year 2000 or thereafter without error or interruption
(commonly known as the "Year 2000" problem). The Company has conducted a
review of its business systems, including its computer systems, and is
querying its customers, vendors and resellers as to their progress in
identifying and addressing problems that their computer systems may face in
correctly interrelating and processing date information as the year 2000
approaches and is reached. Through its review, the Company has identified a
number of older legacy systems that
<PAGE> 25
are being abandoned in favor of a limited
number of more efficient processing systems, rather than make all the systems
Year 2000 compatible. Customers, vendors and resellers have been identified
and requests for information distributed regarding the Year 2000 readiness of
such parties.
Most responses have been received during the first quarter of 1999. The
Company will develop contingency plans during the second quarter of 1999 in
response to assessments of the Year 2000 readiness of customers, vendors and
resellers. The estimated cost of the Company's Year 2000 efforts is $10,000 to
$15,000 over 1998 and 1999, the majority of which represents redirection of
internal resources and replacement or purchases of upgraded vendor software.
However, there can be no assurance that the Company will identify all such
Year 2000 problems in its computer systems or those of its customers, vendors
or resellers in advance of their occurrence or that the Company will be able
to successfully remedy any problems that are discovered. The expenses of the
Company's efforts to identify and address such problems, or the expenses or
liabilities to which the Company may become subject as a result of such
problems, could have a material adverse effect on the Company's business,
financial condition and results of operations.
The revenue stream and financial stability of existing customers may be
adversely impacted by Year 2000 problems, which could cause fluctuations in
the Company's revenue. In addition, failure of the Company to identify and
remedy Year 2000 problems could put the Company at a competitive disadvantage
relative to companies that have corrected such problems.
Volatility Of Stock Price
Cytation.com believes factors such as the Company's liquidity and financial
resources, potential Internet reform measures and quarter to quarter and year
to year variations in financial results could cause the market price of the
Company's common stock to fluctuate substantially. Any adverse announcement
with respect to such matters or any shortfall in revenue or earnings from
levels expected by management could have an immediate and material adverse
effect on the trading price of the Company's common stock in any given period.
As a result, the market for the Company's common stock may experience material
adverse price and volume fluctuations and an investment in the Company's
common stock is not suitable for any investor who is unwilling to assume the
risk associated with any such price and volume fluctuations.
<PAGE> 26
LIQUIDITY AND CAPITAL RESOURCES
The Company, as successor to Cytation Corporation, has funded operations
primarily through cash from operations and equity and debt investment, since
inception.
On February 2, 1999 the Board of Directors voted to change the name of the
Company from Stylex Homes, Inc. 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, under Section 904 of the New York
Business Corporation Law. The effective date of the merger was March 5,
1999. Cytation.com Incorporated continues as the 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 Cytation.com
Incorporated for each share of common stock of Cytation Corporation.
Accordingly, 7,081,028 shares of Cytation.com Incorporated's common stock will
be issued as a result of this merger.
Preferred Stock
The Company received $3,100,000 through the sale of preferred stock to
Provident Life and Accident Insurance Company and one other investor. The
Purchase Agreement with 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")
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.
Secondary Offering of Common Stock
The Company is considering the sale of equity in connection with a secondary
offering prior to the end of 1999. The Company has not received any
commitment for such an offering, and no assurance can be provided that the
Company will receive any such commitment, or that any such offering, if
undertaken, will be successful.
<PAGE> 27
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. 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.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
Neither the Registrant nor any of its affiliates are a
party, nor is any of their property subject, to material
pending legal proceedings or material proceedings known
to be contemplated by governmental authorities.
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) On February 22, 1999, the Registrant entered into a Plan of Merger with
Cytation Corporation, a Rhode Island corporation (hereinafter referred to as
"Disappearing Corporation"). The Disappearing Corporation's Operations,
Business Plan, Articles of Incorporation, Bylaws, Financial Statements, Board
of Directors and Officers became that of the Registrant.
(b) Pursuant to the provisions of the Rhode Island General Laws (R.I.G.L.
7-1.1-27, 7-1.1-30.3, 7-1.1-65, 7-1.1-67, 7-1.1-67, 7-1.1-68 and 7-1.1-74, et
seq., as amended) the Registrant and the Disappearing Corporation adopted
Articles of Merger.
<PAGE> 28
Cytation, a corporation organized and existing under the laws of the
State of New York, and the Disappearing Corporation, a corporation organized
and existing under the laws of the State of Rhode Island, agreed that the
Disappearing Corporation be merged into Cytation. The terms and conditions of
the merger and the mode of carrying the same into effect are as herein set
forth in said Articles of Merger at Exhibit 2.1.
Cytation has survived and continues under the name of CYTATION.COM
INCORPORATED. No amendment is made to the Articles of Incorporation of
Cytation as part of the merger. The total number of shares of stock of all
classes which Cytation has authority to issue is one hundred million
(100,000,000) shares of Common Stock (hereinafter referred to as the "Common
Stock").
The Plan of Merger set forth at Exhibit 2.2 was duly adopted by the
Boards of Directors of the respective corporations on January 25, 1999, and
approved by the Shareholders of the Disappearing Corporation on February 11,
1999, in the manner prescribed by Sections 7-1.1-27, 7-1.1-30.3, 7-1.1-65,
7-1.1-67, 7-1.1-67, 7-1.1-68 and 7-1.1-74, et seq., as amended of the General
Laws of Rhode Island. The number of shares voted for the Plan of Merger was,
with respect to each corporation, sufficient for approval as set forth below.
The number of shares of the Disappearing Corporation outstanding at the
time of such adoption was 1,231,493, and the number of Shares entitled to vote
thereon was 1,231,493.
ITEM 5. Other Information
(i)A Series A Convertible Preferred Stock Purchase Agreement (the "Agreement")
was executed on the 2nd day of April, 1999, by and between CYTATION.COM
INCORPORATED, a New York corporation (the "Company" and/or "Registrant"), and
the persons listed on Exhibit 1 to the Agreement who are signatories (the
"Investors") as follows:
Exhibit 1
LIST OF INVESTORS
Name Number of Shares
Provident Life and Accident 750,000
Insurance Company
1 Fountain Square
Chattanooga, TN 37402
Attn: James A. Ramsay
<PAGE> 29
Subject to the terms and conditions of the Agreement, a copy of which is
attached hereto at Exhibit 20.1, the Investors agreed to purchase 750,000
shares of Series A Convertible Preferred Stock (the "Series A Preferred
Shares") of the Company at a purchase price of $4.00 per share.
The initial purchase and sale of the Series A Preferred Shares being purchased
by the Investors took place on April 2, 1999. Additional closings, upon
substantially identical terms and conditions as those contained herein, may be
held until Series A Preferred Shares having an aggregate purchase price of
$10,000,000 have been sold, provided that all of such closings are held on or
prior to June 30, 1999. Except as provided in the Agreement, the Company may
not issue additional Series A Preferred Shares or warrants, options or other
rights to acquire Series A Preferred Shares without the prior written approval
of holders of at least two-thirds of the outstanding Series A Preferred Shares
purchased under this Agreement.
The Company agrees to use the proceeds from the sale of the Series A Preferred
Shares for working capital purposes, for the repayment of outstanding
obligations and for the reduction of trade debt.
(ii)Reference is made to the Safe Harbor Compliance Statement, attached hereto
as Exhibit 99.1, as prescribed by the Private Securities Litigation Reform Act
of 1995, Safe Harbor Compliance Statement for Forward Looking Statements.
(iii)Reference is made to the press release issued to the public by the
Registrant on January 27, 1999, the text of which is attached hereto as
Exhibit 99.2, for a description of the events reported pursuant to this Form 8
K.
ITEM 6.Exhibits and Reports on Form 8 K
a.Exhibits
Exhibit 27. Financial Data Schedule
b.Reports on Form 8 K
(i) Form 8-K, Current Report of Events filed January 29, 1999
(ii) Form 8-K, Current Report of Events filed March 18, 1999
(iii)Form 8-K, Current Report of Events filed April 2, 1999
<PAGE> 30
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION
<S> <C> <C>
# 2.1 Articles of Merger between Cytation.com Incorporated and
Cytation Corporation, dated February 11, 1999;
# 2.2 Plan of Merger dated February 11, 1999;
* 3.1 Articles of Incorporation of the Registrant, as amended;
* 3.2 Bylaws of the Registrant;
# 4.1 Instruments Defining Rights of Security Holders/Minutes of
Annual/Special Meetings of the Registrant;
# 5.1 Opinion on Legality of Securities to be Issued;
# 10.1 Issuance of Restricted Shares from Authorized Shares
# 10.2 Opinion to Transfer Agent Authorizing Issuance of
Restricted Shares from Authorized Shares
# 20.1 Board of Director's Resolution authorizing the name change
from Stylex Homes, Inc. to Cytation.com Incorporated;
## 20.2 Series A Convertible Stock Purchase Agreement, dated
April 2, 1999, between Cytation.com Incorporated and
Provident Life and Accident Insurance Company
## 20.3 Provident Life and Accident Insurance Company Receipt
## 20.4 Designation of Rights and Preferences for Series A
Convertible Preferred Stock, as issued by Cytation.com
Incorporated in connection with a $10,000,000
"accredited investor" private placement,
# 23.1 Consent of Mark T. Thatcher, P.C.;
<PAGE> 31
x 27 Financial Data Schedule
x 99.1 Safe Harbor Compliance Statement
x 99.2 Text of press release dated January 27, 1999
_______________________
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 January 29, 1999.
## Incorporated by reference from the Registrant's Form 8-K, Current Report,
filed March 18, 1999, and later amended on April 2, 1999.
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CYTATION.COM INCORPORATED
/s/ Kevin J. High
DATE: May 12, 1999 By:KEVIN J. HIGH
Name: KEVIN J. HIGH
Title: President
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
Article 5 Fin. Data Schedule for 1st Qtr 10-Q
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 40,670
<SECURITIES> 0
<RECEIVABLES> 107,217
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 166,086
<PP&E> 134,638
<DEPRECIATION> (168,463)
<TOTAL-ASSETS> 521,399
<CURRENT-LIABILITIES> 920,544
<BONDS> 0
<COMMON> 8,805
0
0
<OTHER-SE> 1,807,501
<TOTAL-LIABILITY-AND-EQUITY> 521,399
<SALES> 151,770
<TOTAL-REVENUES> 139,521
<CGS> 0
<TOTAL-COSTS> 472,971
<OTHER-EXPENSES> 2,055
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,127
<INCOME-PRETAX> (333,664)
<INCOME-TAX> (333,450)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (333,450)
<EPS-PRIMARY> (.041)
<EPS-DILUTED> (.041)
</TABLE>
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD LOOKING STATEMENTS
MARKET RISKS AND OTHER BUSINESS FACTORS
In passing the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"), 15 U.S.C.A. Sections 77z 2 and 78u 5 (Supp. 1996), Congress encouraged
public companies to make "forward looking statements" by creating a safe
harbor to protect companies from securities law liability in connection with
forward looking statements. The Company intends to qualify both its written
and oral forward looking statements for protection under the Reform Act and
any other similar safe harbor provisions.
"Forward looking statements" are defined by the Reform Act. Generally, forward
looking statements include expressed expectations of future events and the
assumptions on which the expressed expectations are based. All forward looking
statements are inherently uncertain as they are based on various expectations
and assumptions concerning future events and they are subject to numerous
known and unknown risks and uncertainties which could cause actual events or
results to differ materially from those projected. Due to those uncertainties
and risks, the investment community is urged not to place undue reliance on
written or oral forward looking statements of the Company. The Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, the Company undertakes no obligation
to update or revise forward looking statements to reflect changed assumptions,
the occurrence of unanticipated events or changes to future operating results
over time.
The Company provides the following risk factor disclosure in connection with
its continuing effort to qualify its written and oral forward looking
statements for the safe harbor protection of the Reform Act and any other
similar safe harbor provisions. Important factors currently known to
management that could cause actual results to differ materially from those in
forward looking statements include the disclosures incorporated herein by
reference and set forth in Item 5, Other Information, Business Plan, of Form
8-K/A, filed on April 2, 1999 with the Securities and Exchange Commission
("SEC") and also include the following:
<PAGE> 36
Liquidity
The Company is considering the sale of equity in connection with a secondary
offering later in 1999. The Company does not have any underwriting commitments
for such sale of equity. There can be no assurance that any such sale will
close by such date or at all or that the Company will continue to consider
such an offering.
Litigation And Government Investigations
Numerous federal and state civil and criminal laws govern computer technology
and Internet service activities. In general, these laws provide for various
fines, penalties, multiple damages, assessments and sanctions for violations.
Evolving Industry Standards; Rapid Technological Changes
The Company's success in its business will depend in part upon its continued
ability to enhance its existing products and services, to introduce new
products and services quickly and cost effectively to meet evolving customer
needs, to achieve market acceptance for new product and service offerings and
to respond to emerging industry standards and other technological changes.
There can be no assurance that the Company will be able to respond effectively
to technological changes or new industry standards. Moreover, there can be no
assurance that competitors of Cytation will not develop competitive products,
or that any such competitive products will not have an adverse effect upon
Cytation's operating results.
Moreover, management intends to continue to implement "best practices" and
other established process improvements in its operations going forward. There
can be no assurance that the Company will be successful in refining, enhancing
and developing its operating strategies and systems going forward, that the
costs associated with refining, enhancing and developing such strategies and
systems will not increase significantly in future periods or that the
Company's existing software and technology will not become obsolete as a
result of ongoing technological developments in the marketplace.
Year 2000
It is possible that the Company's currently installed computer systems,
software products or other business systems, or those of the Company's
customers, vendors or resellers, working either alone or in conjunction with
other software or systems, will not accept input of, store, manipulate and
output dates for the year 2000 or thereafter without error or interruption
(commonly known as the "Year 2000" problem). The Company has conducted a
review of its business systems, including its computer systems, and is
querying its customers, vendors and resellers as to their progress in
identifying and addressing problems that their computer systems may face in
correctly interrelating and processing date information as the year 2000
approaches and is reached. Through its review, the Company has identified a
number of older legacy systems that
<PAGE> 37
are being abandoned in favor of a limited
number of more efficient processing systems, rather than make all the systems
Year 2000 compatible. Customers, vendors and resellers have been identified
and requests for information distributed regarding the Year 2000 readiness of
such parties.
Most responses have been received during the first quarter of 1999. The
Company will develop contingency plans during the second quarter of 1999 in
response to assessments of the Year 2000 readiness of customers, vendors and
resellers. The estimated cost of the Company's Year 2000 efforts is $10,000 to
$15,000 over 1998 and 1999, the majority of which represents redirection of
internal resources and replacement or purchases of upgraded vendor software.
However, there can be no assurance that the Company will identify all such
Year 2000 problems in its computer systems or those of its customers, vendors
or resellers in advance of their occurrence or that the Company will be able
to successfully remedy any problems that are discovered. The expenses of the
Company's efforts to identify and address such problems, or the expenses or
liabilities to which the Company may become subject as a result of such
problems, could have a material adverse effect on the Company's business,
financial condition and results of operations.
The revenue stream and financial stability of existing customers may be
adversely impacted by Year 2000 problems, which could cause fluctuations in
the Company's revenue. In addition, failure of the Company to identify and
remedy Year 2000 problems could put the Company at a competitive disadvantage
relative to companies that have corrected such problems.
Volatility Of Stock Price
Cytation.com believes factors such as the Company's liquidity and financial
resources, potential Internet reform measures and quarter to quarter and year
to year variations in financial results could cause the market price of the
Company's common stock to fluctuate substantially. Any adverse announcement
with respect to such matters or any shortfall in revenue or earnings from
levels expected by management could have an immediate and material adverse
effect on the trading price of the Company's common stock in any given period.
As a result, the market for the Company's common stock may experience material
adverse price and volume fluctuations and an investment in the Company's
common stock is not suitable for any investor who is unwilling to assume the
risk associated with any such price and volume fluctuations.
99.2 Text of press release dated January 27, 1999
Exhibit 99.2
Stylex Homes Inc. Signs Letter of Intent to Merge With Cytation Corp.;
Merged Company to be Renamed Cytation.com
Business Wire - January 27, 1999 14:06
VOORHEES, N.J.--(BUSINESS WIRE)--Jan. 27, 1999--Stylex Homes Inc. (OTC
BULLETIN BOARD: SYLX) announced today that it has signed a binding letter of
intent to merge with Cytation Corp., a Middletown, R.I. provider of Internet
training services to corporate and government markets.
The merger, which is subject to approval by shareholders of both companies, is
expected to be completed by mid-February. At that time, all of the assets of
Cytation will transfer to Stylex, and Stylex will issue 6,465,338 common
shares to the shareholders of Cytation. Cytation shareholders will own
approximately 85.5 percent of the issued and outstanding shares of the
combined enterprise.
Upon completion of the merger, Stylex will change its name to Cytation.com
Incorporated.
"We believe this merger will provide Cytation with the capital growth
formation potential and valuation required to aggressively compete in the
rapidly growing market for Internet training and related services," said Kevin
High, Cytation's president. High added that "Cytation's Web-based training
delivery services will enable organizations to deploy and manage online
learning solutions efficiently and cost-effectively. Corporate trainers are
just beginning to realize the tremendous cost-savings that can be achieved by
putting employees in front of computers instead of on airplanes."
Cytation is a provider of Internet training and related services and competes
in the $85 billion a year corporate training market. The company's principal
service is Roll Call(tm), 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.
<PAGE> 39
Forward-looking statements in this release concerning trends or anticipated
operating results are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are not guarantees of future performance and are subject to risks
and uncertainties related to the company's operations. These risks and
uncertainties include, but are not limited to, competitive factors (including
the possibility of increased competition or technological development,
competitors and price pressures); legal factors (such as limited protection of
the company's proprietary technology and changes in government regulation);
and the company's dependence on key personnel and significant customers.
CONTACT: Cytation
Kevin High, President
401/845-8800
[email protected]
www.cytation.com
