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Filed Pursuant to Rule 424(b)(4)
File No. 333-85079
PROSPECTUS
[COLLEGELINK.COM LOGO]
2,200,000 Shares
Common Stock
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We are offering 2,200,000 shares of our common stock.
Our common stock has been accepted for quotation on the American Stock
Exchange under the symbol "APS." From November 26, 1999 to January 19, 2000, our
common stock traded on the OTC Electronic Bulletin Board under the symbol
"CLNK." Prior to November 26, 1999, our common stock traded on the OTC
Electronic Bulletin Board under the symbol "CYTA."
On January 19, 2000, the last reported sale price of our common stock on
the OTC Bulletin Board was $4.625.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price....................................... $4.00 $8,800,000
Underwriting discounts and commissions...................... $0.36 $ 792,000
Proceeds, before expenses, to CollegeLink.com............... $3.64 $8,008,000
</TABLE>
We have granted the underwriters a 45-day option to purchase up to an
additional 272,500 shares of common stock to cover over-allotments. Also, five
of our stockholders have granted the underwriters a 45-day option to purchase up
to 57,500 shares of common stock to cover over-allotments. This option is
subject to these stockholders' further agreement to sell these shares at the
time the underwriters exercise their option. To the extent these stockholders
decide not to sell such shares, we will issue shares to the underwriters. The
underwriters have agreed to exercise in full the over-allotment option granted
to them by us before exercising the over-allotment option granted to them by our
stockholders.
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CRUTTENDEN ROTH INCORPORATED
PENNSYLVANIA MERCHANT GROUP
The date of this Prospectus is January 24, 2000
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[INSIDE FRONT COVER]
YOU SHOULD ONLY RELY ON THE INFORMATION IN THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED
IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES
OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE
OF OUR COMMON STOCK. IN THIS PROSPECTUS, "COLLEGELINK," "WE," "US" AND "OUR"
REFER TO COLLEGELINK.COM INCORPORATED AND ITS SUBSIDIARIES AND PREDECESSORS, AND
REFERENCES TO "COLLEGELINK.COM" REFER ONLY TO COLLEGELINK.COM INCORPORATED, IN
EACH CASE UNLESS THE CONTEXT OTHERWISE REQUIRES.
------------------------
We own or have rights to trademarks or trade names that we use in
conjunction with the sale of our products and services. CollegeLink(R) is a
registered trademark owned by us. CollegeLink.com(TM) is a trademark owned by
us. Making College Count(R) is a registered trademark owned by Student Success,
Inc. This prospectus also refers to trademarks and trade names of other
companies.
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[INSIDE SPREAD]
[A two page spread containing the names of colleges and universities listed
alphabetically.]
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PROSPECTUS SUMMARY
This summary does not include all of the information that may be important
to you. You should read the following summary together with the more detailed
information, including our financial statements and related notes, appearing
elsewhere in this prospectus. Unless otherwise indicated, all information in
this prospectus assumes the underwriters will not exercise their over-allotment
option.
On November 16, 1999, we changed our name to CollegeLink.com Incorporated
from Cytation.com Incorporated and changed our state of incorporation to
Delaware from New York.
COLLEGELINK.COM INCORPORATED
OUR COMPANY
We provide college bound students and their families with a range of
solutions to the challenges of the college admission process, from college
selection to submission of college, financial aid, and scholarship applications.
We have recently entered into an agreement to acquire a related business,
Student Success, Inc., and a letter of intent to acquire another related
business, Online Scouting Network, Inc.
We have developed an Internet hub with a college application, financial aid
and scholarship service. We expect that a large number of applications will be
submitted by computer within the next several years because of increasing
student computer literacy and the significant financial and administrative
benefits to colleges and universities of receiving applications electronically.
In addition, through the Making College Count(R) and Making High School
Count(TM) programs, we help prepare students for success in college.
We also continuously obtain demographic and other information which can be
used by students, their families, colleges and other service providers to assist
in the college admissions process and enhance the entire college experience. Due
to the volume of college bound students who visit our Internet hub, we are
developing an attractive e-commerce location for students and their families.
CollegeLink.com. Through CollegeLink.com, and its relationships with more
than 900 colleges and universities, we are a leading provider of computer-based
college applications and admissions services to college bound students and their
families.
Student Success. Student Success is a leading provider of onsite high
school and college preparatory programs for students and their families under
its Making College Count(R) and Making High School Count(TM) trademarks. Through
this channel, we intend to continue to expand our presence and awareness of our
services with high school students. Student Success presented its seminars to
more than 215,000 students at about 900 high schools and junior colleges
nationwide last year. These programs were sponsored by eight major consumer
products companies.
Online Scouting Network. Online Scouting Network is a leading provider of
online recruiting services offering student athletes greater visibility to more
than 3,000 college and university professionals. To date, approximately 25,000
high school students from over 500 high schools nationwide have registered with
Online Scouting Network.
OUR RELATIONSHIPS
We have entered into agreements and developed relationships with more than
900 colleges and universities to accept applications in their respective formats
through CollegeLink(R). A complete list of these colleges and universities is
included in this prospectus.
We have an agreement with PNC Bank, N.A., one of the largest student loan
providers in the United States, to provide certain financial products and
services to college bound students and their families through our
CollegeLink.com Internet hub. PNC Investment Corp., an affiliate of PNC Bank,
has made a $4,000,000 investment in our company.
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We have an agreement with The College Board(R) to be the exclusive provider
of electronic college applications through The College Board's ExPAN(R) guidance
software. The College Board(R) is a membership organization of colleges and
secondary schools and is the provider of the SAT(R) and the AP(R) Exams.
We also have co-marketing relationships with Student Advantage, Inc. and
FastWeb.com L.L.C. and are negotiating similar relationships with other
Web-based businesses including The FamilyEducation Company. We are continually
seeking appropriate relationships to expand our service and product offerings.
OUR MARKET
There are about 13.8 million high school students in the United States.
According to the National Center for Education Statistics, this number will
increase to more than 15.5 million over the next five years. Each year about 3.2
million students enter colleges and universities for the first time. Of these
about 2.2 million apply as first time freshman to undergraduate colleges and
universities. The remaining students apply to continuing education programs of
various sorts.
Each year about 3.2 million applicants submit more than seven million
applications for undergraduate admission to nearly 3,400 U.S. colleges and
universities. About 50% of these students apply for some form of financial aid.
According to the Department of Education, it is expected that the total number
of college bound students will continue to increase each year for the
foreseeable future. Based on industry statistics, we believe colleges spend
about $3 billion annually to recruit and enroll students.
OUR STRATEGY
Our strategy is to build upon the thousands of relationships we have
developed with high school guidance counselors and college admissions
professionals through one-on-one marketing efforts. We plan to build our brand,
reach increasing numbers of high school and college students, and drive traffic
to our Internet hub. Our objectives are to:
Expand our market leadership position. We intend to leverage our
relationships with more than 2,500 high schools and more than 900 colleges and
universities to establish new affiliations, attract additional students to our
website, and create a premier Internet hub for college bound students. We plan
to continue to add high schools, colleges and universities through on campus
direct sales calls by sales personnel, corporate sponsorships, direct mailings,
targeted periodical advertising, online and broadcast advertising, partnerships
and various promotional campaigns.
Expand existing brand awareness. We intend to build upon our established
brands and our relationships with PNC Bank, N.A., The College Board(R), Student
Advantage, Inc., FastWeb.com L.L.C. and others to establish CollegeLink.com as a
leading Internet hub and e-commerce site.
Capitalize on our strong high school presence. Last year, The College
Board(R) distributed our CollegeLink(R) software with its ExPAN(R) guidance
software to about 2,000 high schools nationwide. Last school year, Making
College Count(R) presented at about 900 high schools and junior colleges and
Online Scouting Network registered athletes from over 500 high schools. We
intend to grow our presence in the high school market through expansion of these
programs.
Develop strategic web partnerships. We have initiated a web partnership
program to co-brand our products and services on targeted high school and
college-related high traffic websites and add content to our Internet hub.
Overcome resistance to online applications. We believe many college bound
students and their families perceive that colleges and universities prefer
applications that are submitted on the institution's specific format.
CollegeLink(R) software is the only program currently available that permits
students applying to more than one college to enter general information only
once and still deliver to each
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institution an application in that institution's own format. We believe this
feature gives us a significant competitive advantage and we intend to promote it
to increase use of our services.
Our executive offices are located at 55 Hammarlund Way, Middletown, Rhode
Island 02842 and our telephone number is (401) 845-8800. Our website is located
at http://www.collegelink.com. Information contained on our website is not part
of this prospectus.
THE OFFERING
Common stock offered by
CollegeLink......................... 2,200,000 shares
Common stock to be outstanding after
the offering(1)..................... 12,126,239 shares
Use of proceeds..................... We intend to use our net proceeds for
the acquisitions of Student Success and
Online Scouting Network, general
corporate purposes, including working
capital, expansion of our sales and
marketing programs and in acquisitions
of and investments in complementary
businesses. See "Use of Proceeds."
Over-the-Counter Electronic Bulletin
Board Symbol........................ CLNK (Prior to November 26, 1999, our
common stock traded on the
Over-the-Counter Electronic Bulletin
Board under the symbol "CYTA.")
American Stock Exchange symbol(2)... APS
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(1) The number of shares of common stock to be outstanding after the offering
excludes (a) 330,000 shares of the underwriters' over-allotment option, (b)
220,000 shares of common stock reserved for issuance upon exercise of the
representatives' warrants, (c) options outstanding at January 19, 2000, to
purchase 1,886,185 shares of common stock, and 1,980,065 shares reserved for
future grants under our option plans at January 19, 2000, (d) 1,140,000
shares of common stock issuable upon conversion of 1,140,000 shares of
Series A Convertible Preferred Stock outstanding at January 19, 2000, (e)
550,369 shares of common stock issuable upon conversion of 279,771 shares of
Series B Convertible Preferred Stock outstanding at January 19, 2000
(assuming the maximum number of shares of common stock issuable upon such
conversion), (f) 1,000,000 shares of common stock issuable upon conversion
of 1,000,000 shares of Series C Convertible Preferred Stock outstanding at
January 19, 2000, and (g) warrants to purchase 940,283 shares of common
stock outstanding at January 19, 2000.
(2) Our shares of common stock have been accepted for quotation on the American
Stock Exchange under the symbol "APS."
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes our financial data. The data presented in
this table is derived from the "Selected Financial Data" and the financial
statements and related notes which are included elsewhere in this prospectus.
You should read those sections for a further explanation of the financial data
summarized here. The pro forma financial data presented in the table gives
effect to the proposed issuance of common stock to the stockholders of Student
Success and Online Scouting Network, and assumes a $4.00 per share price in this
offering. The pro forma as adjusted financial data also gives effect to this
offering.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30, 1999
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PRO FORMA
ACQUISITIONS PRO FORMA
1998 1999 1999 ACTUAL ACQUISITIONS
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<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Revenues.................................. $1,243 $ 562 $ 1,840 $ 266 $ 678
Expenses.................................. 1,873 3,106 7,962 1,627 2,412
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Net Loss.................................. $ (630) $(2,586) $(6,123) $(1,361) (1,734)
====== ======= ======= ======= =======
Weighted Average Primary Shares........... 3,499 6,531 8,540 9,495 11,196
====== ======= ======= ======= =======
Net Loss Per Share........................ $(0.18) $ (0.40) $ (0.72) $ (0.14) $ (0.15)
====== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, SEPTEMBER 30, 1999
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PRO FORMA
ACQUISITIONS PRO FORMA PRO FORMA
1998 1999 1999 ACTUAL ACQUISITIONS AS ADJUSTED
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<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
Current Assets............................ $ 131 $1,557 $ 2,249 $ 4,639 $ 1,988 $ 8,985
Total Assets.............................. 358 1,807 21,619 13,181 21,297 28,294
Stockholders' Equity (Deficit)............ (69) 1,377 19,232 12,202 19,051 26,048
Shares Outstanding........................ 3,482 9,152 11,053 9,846 11,196 13,396
</TABLE>
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RISK FACTORS
You should carefully consider the following risk factors in evaluating our
business before purchasing any of our common stock. If any of the following
events actually occurs, our business, financial condition or results of
operations would likely suffer. In this case, the market price of our common
stock could decline, and you could lose all or part of your investment in our
common stock.
RISKS RELATING TO OUR BUSINESS
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY AS AN INTERNET COMPANY.
One of our predecessor entities established the CollegeLink business in
1991. While we previously sold CollegeLink(R) as a computer-based service, we
are converting this business to an Internet-based service. Accordingly, the
CollegeLink business in its current form has only a very limited operating
history on which you can base your evaluation of this business. As a result, you
will find it difficult to predict our future revenues or results. In addition,
you must consider our prospects in light of the risks and uncertainties
encountered by companies in an early stage of development in a new and rapidly
evolving market such as the market for Internet-based services.
WE HAVE NEVER BEEN PROFITABLE AND MAY NOT BE PROFITABLE IN THE FUTURE.
Each of our predecessors has incurred significant losses in every fiscal
period since inception. Since our recent mergers with each of these
corporations, we have continued to incur losses in the CollegeLink.com business
and our other businesses. We incurred net losses of $630,332 in fiscal 1998,
$2,586,425 in fiscal 1999 and $1,361,141 for the quarter ended September 30,
1999. As of June 30, 1999, we had a cumulative pro forma net loss of $6,122,899,
and as of September 30, 1999 we had a cumulative pro forma net loss of
$7,856,899. We expect to continue to experience losses at least for the
foreseeable future, and we cannot be certain when we will become profitable, if
at all. Our failure to achieve and maintain profitability could adversely affect
the market price of our common stock.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL.
If the funds raised in this offering together with our other resources are
not sufficient to finance our business, we may need to raise more capital
through public or private financing. We do not know if additional financing will
be available to us when we need it or, if it is available, whether it will be
available on attractive terms. If we do raise more capital in the future, it
could result in dilution to our stockholders. If we need to raise more capital
but cannot, we may need to curtail our business activities.
WE FACE COMPETITION FROM COMPANIES OPERATING BUSINESSES SIMILAR TO OURS, AND OUR
FAILURE TO COMPETE SUCCESSFULLY WITH OUR CURRENT OR FUTURE COMPETITORS COULD
MATERIALLY ADVERSELY AFFECT OUR BUSINESS.
The market in which CollegeLink(R) operates is very competitive. We face
direct competition from a number of sources, the most significant of which are
Apply!, Embark.com (formerly CollegeEdge), CollegeNet, CollegeQuest and XAP.
Apply!, owned by The Princeton Review, provides a CD-based college application
product to students, primarily through a high school distribution scheme.
Embark.com, CollegeNet, CollegeQuest and XAP are Internet companies which allow
students to complete and submit college applications electronically. Our
CollegeLink(R) service also faces competition from traditional print media
companies such as The Princeton Review, Petersons, a subsidiary of Thorne
Publishing, and Kaplan Educational Centers, which provide offline information
and resources such as self help guides on college admission and selection, and
from software companies already providing packaged software to educational
institutions and professionals. Some of these companies have already moved to
provide these resources on the Internet. We also face competition from
educational not-for-profit and membership organizations such as ACT and The
College Board(R) which already provide significant online information and other
resources to students. The College Board(R) has recently announced plans to
provide a broad range of college admissions, test preparation and related
services on the Internet.
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Student Success faces competition from a variety of sources including other
providers of self-help and educational programs such as Kaplan, Barrons,
Princeton Review, Houghton Mifflin and Learning Forum. The market in which
Online Scouting Network operates is also competitive. We are aware of three
significant competitors in its market: Athletes Online, All-statersports.com and
Recruit. These companies provide online college athletic recruitment information
and services. While we have relationships with more than 900 colleges and
universities and will have significant exposure to large numbers of high school
students and their families through our acquisitions of Student Success and
Online Scouting Network, we expect that these factors will not prevent
additional competitors from entering the markets in which we operate with
competing products and services. Our current or future competitors may have
greater resources, including contacts in the educational industry, than we
currently have at our disposal. Our competitors may be more able to react more
quickly to changes in technology in our industry and/or to expend greater time
and funds than we can to develop and promote their products or services.
Increased competition could result in pricing pressures, reduced margins or the
failure of our products and services to achieve or maintain market acceptance.
If we cannot compete effectively with current or future competitors, our
business, operating results and financial condition could be materially
adversely affected.
STUDENTS MAY BE RELUCTANT TO SUBMIT COMPUTER-BASED APPLICATIONS AND ANY
DIFFICULTY CONVINCING STUDENTS TO USE OUR SERVICE COULD MATERIALLY ADVERSELY
AFFECT OUR BUSINESS AND OPERATING RESULTS.
College bound students may not feel comfortable using our products.
Students may feel that applications submitted electronically will not receive
the same treatment as traditional applications, they may feel insecure about
relying on an intermediary for submitting applications, or they may be unwilling
to pay the additional fees we charge for processing applications. Any of these
factors could inhibit development of a market for CollegeLink(R). If we have
difficulty developing a viable market for CollegeLink(R), our business and
operating results could be materially adversely affected.
COLLEGES AND UNIVERSITIES MAY BE UNWILLING TO DESIGNATE COLLEGELINK(R) AS AN
ACCEPTABLE ONLINE FILING SERVICE.
Various colleges and universities may not wish to establish a relationship
with any particular online application service or they may not be willing to
accept online filing from any service. The adoption of such a policy by a
significant number of these institutions could have a material adverse effect on
our results of operations and financial condition.
FAILURE TO ESTABLISH RELATIONSHIPS WITH FURTHER COLLEGES AND UNIVERSITIES OR TO
MAINTAIN OUR EXISTING RELATIONSHIPS MAY AFFECT OUR ABILITY TO COMPETE IN OUR
MARKET.
We believe our ability to successfully compete in the online college
application market is dependent upon our ability to enter into new relationships
with colleges not currently accepting CollegeLink(R) applications and to
maintain our existing relationships with a large number of colleges and
universities. If we are unable to continue to enter into new relationships with
colleges and universities not currently accepting CollegeLink(R) applications,
the growth of our business could be inhibited. Our failure to maintain our
existing relationships with colleges and universities for any reason could cause
us to lose existing and potential customers. A loss of customers or restrictions
on our ability to grow our business could have a material adverse effect on our
results of operations and financial condition.
OUR FAILURE TO MANAGE OUR EXPANDING OPERATIONS SUCCESSFULLY COULD ADVERSELY
AFFECT OUR BUSINESS.
If we are to be successful, we must expand our operations. We have
experienced significant growth in our expenses and employee base as a result of
acquisitions. This growth creates new and increased management and training
responsibilities for our employees. This growth also increases the demands on
our internal systems, procedures and controls, and on our managerial,
administrative, financial, marketing and other resources. We depend heavily upon
the managerial, operational and administrative skills of our officers to manage
this growth. Nonetheless, new responsibilities and demands may adversely affect
the overall quality of our work. Any failure on our part to improve our internal
systems, procedures and
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controls, to attract, train, motivate, supervise and retain additional
professional, managerial, administrative, financial, marketing and other
personnel, or otherwise to manage growth successfully could have a material
adverse effect on our business, financial condition and results of operations.
WE MAY HAVE DIFFICULTY INTEGRATING THE BUSINESSES OF ECI, STUDENT SUCCESS AND
OTHER BUSINESSES WHICH WE EXPECT TO ACQUIRE.
On August 10, 1999, we acquired ECI, Inc., now renamed CollegeLink
Corporation. CollegeLink Corporation provides online college admission,
scholarship and financial aid application services. On October 20, 1999, we
signed an agreement to acquire Student Success, Inc. Student Success offers
onsite high school and college preparatory programs for students and their
families under its Making College Count(R) and Making High School Count(TM)
trademarks. On August 18, 1999, we signed a letter of intent to acquire Online
Scouting Network, Inc., an Internet-based company that operates the Online
Scouting Network and provides student-athlete recruiting services at its
website, http://www.osn.com. Both of our pending acquisitions are subject, among
other things, to certain usual and customary closing conditions. No assurance
can be given to you that we will complete these acquisitions.
We cannot assure you that we will be able to absorb and effectively manage
the acquisition of ECI and, assuming their completion, the acquisitions of
Student Success and Online Scouting Network. There can be no assurance that we
will be able to develop, market and sell our CollegeLink(R) products and
services and the products and services of Student Success and Online Scouting
Network successfully. The difficulty and management distraction inherent in
integrating each acquired business, the substantial charges expected to be
incurred in connection with each acquisition, including costs of integrating
each business and transaction expenses arising from each acquisition, the risks
of entering markets in which we have no or limited direct prior experience, the
potential loss of key employees of each acquired company and the risk that the
benefits sought in each acquisition will not be fully achieved, could have a
material adverse effect on our business, operating results and financial
condition.
WE ARE DEPENDENT UPON CERTAIN KEY PERSONNEL WHOSE SERVICES COULD BE DIFFICULT TO
REPLACE.
Our future success depends to a significant degree on the skills,
experience and efforts of our key executive officers and key marketing and
management personnel such as our Chairman, Richard Fisher, and Thomas Burgess,
who has run the operations of CollegeLink Corporation since January 1999, all of
whom currently devote their full time to our business and would be difficult to
replace if they left our employment. While we have employment agreements with
the foregoing individuals, such agreements do not guarantee their continued
employment with us. While we also have noncompetition agreements with these
individuals, there is no assurance that the noncompetition agreements will be
enforceable. The loss of the services of any of the foregoing individuals could
have a material adverse effect on our business, operating results and financial
condition. We do not currently maintain a key person life insurance policy
covering any of our officers.
OUR INABILITY TO HIRE AND RETAIN SKILLED PERSONNEL COULD HARM OUR BUSINESS.
Qualified personnel are in great demand throughout the software and
Internet start-up industries. Our success depends in large part upon our ability
to attract, train, motivate and retain highly skilled sales and marketing
personnel, web designers, software engineers and other senior personnel. Our
inability to attract and retain the highly trained technical personnel that are
integral to our direct sales, product development, service and support teams may
limit the rate at which we can generate sales and develop new products and
services or product and service enhancements. This could have a material adverse
effect on our business, operating results and financial condition.
SEASONAL FACTORS MAY CAUSE OUR OPERATING RESULTS TO FLUCTUATE AND WE MAY NOT BE
ABLE TO GENERATE SUFFICIENT REVENUE IN CERTAIN PERIODS TO OFFSET EXPENSES IN
THOSE PERIODS.
Because our CollegeLink business derives a substantial portion of its
revenues from the college application process which occurs in the fall, winter,
and early spring, revenue from our CollegeLink(R)
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products and services has historically been much lower during the late spring
and summer months, and we expect this trend to continue. In addition, revenues
for student loan applications are also seasonal. We expect most of these
revenues to be received between July and December. This seasonality of the
CollegeLink business may cause our revenue and operating results to fluctuate
significantly in the future and to be difficult to predict. In such an event,
the price of our common stock could decline.
IF OUR ONLINE SERVERS BECAME UNAVAILABLE, WE COULD LOSE CUSTOMERS.
We could lose existing or potential customers for our online CollegeLink(R)
business if they do not have ready access to our online servers, or if our
online servers and computer systems do not perform reliably and to our
customers' satisfaction. Network interruptions or other computer system
shortcomings, such as inadequate capacity, could reduce customer satisfaction
with our services or prevent customers from accessing our services and seriously
damage our reputation.
As the number of students and colleges and universities using
CollegeLink(R) online increases, we will need to expand and upgrade the
technology underlying our CollegeLink(R) services. We may be unable to predict
accurately changes in the volume of user traffic and therefore may be unable to
expand and upgrade our systems and infrastructure in time to avoid system
interruptions. System interruptions will affect the quality of our services we
provide to our existing customers and may cause us to lose customers. In
addition, we may need to divert significant resources to expand and upgrade our
existing systems and infrastructure to meet any increase in user demand. This
could have a material adverse effect on our business, results of operations and
financial condition.
Although we are planning to provide a redundant server capability in
another geographic area, all of our computer and communications equipment is
currently located in Middletown, Rhode Island. This equipment is vulnerable to
interruption or damage from fire, flood, power loss, telecommunications failure
and earthquake. Some of the components of our computer and communication systems
do not have immediate automatic backup equipment. The failure of any of these
components could result in down time for our server and could seriously harm our
business. Our property damage and business interruption insurance may not
protect us from any loss that we may suffer.
Our computer and communications systems are also vulnerable to computer
viruses, physical or electronic break-in and other disruptions. These problems
could lead to interruptions, delays, loss of data or the ineffective operation
of our server. Any of these outcomes could seriously harm our business.
WE COULD LOSE REVENUE AND INCUR SIGNIFICANT COSTS IF OUR SYSTEMS OR MATERIAL
THIRD-PARTY SYSTEMS ARE NOT YEAR 2000 COMPLIANT.
Many currently installed computer systems and software products accept only
two digits to identify the year in any date. Thus, the year 2000 will appear as
"00," which a system or software might consider to be the year 1900 rather than
the year 2000. This error could result in system failures, delays or
miscalculations that disrupt our operations. The failure of our internal
systems, the systems of any companies we acquire, or any material third-party
systems, to be year 2000 compliant could result in significant liabilities and
could seriously harm our business.
We have conducted a review of our business systems, including our computer
systems. We have taken steps to remedy potential problems, but have not yet
developed a year 2000 contingency plan. There can be no assurance that we have
identified all year 2000 problems in our computer systems before they occur or
that we will be able to remedy any problems that are discovered.
We have also asked many of our suppliers about their progress in
identifying and addressing problems that their computer systems may face in
correctly interrelating and processing date information in the year 2000. We
have ascertained that several of these parties are in compliance, but there can
be no assurance that we have identified all such year 2000 problems in the
computer systems of our suppliers or that we will be able to remedy any problems
that are discovered.
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Our efforts to identify and address year 2000 problems, and the expenses we
may incur as a result of such problems, could have a material adverse effect on
our business, financial condition and results of operations. We expect that
costs to address the year 2000 issue, directly or indirectly, will total about
$15,000, the majority of which was spent in fiscal 1998 and 1999, with the
remainder being spent during fiscal 2000. To date, we have incurred expenses of
about $12,000 related to the assessment of and preliminary efforts in dealing
with the year 2000 issue. We cannot assure you that these costs will not be
significantly higher.
In addition, the revenue stream and financial stability of existing
customers may be adversely impacted by year 2000 problems, which could cause
fluctuations in our revenue. If we fail to identify and remedy year 2000
problems, we could also be at a competitive disadvantage relative to companies
that have corrected such problems. It is also possible that concerns over year
2000 problems could cause potential customers for our products and services to
lose confidence in computer-based solutions to college applications needs. Any
of these outcomes could have significant adverse effects on our business,
financial condition and results of operations.
WE MAY BE UNABLE TO PROTECT ADEQUATELY OUR INTELLECTUAL PROPERTY RIGHTS, AND
ASSERTING OUR INTELLECTUAL PROPERTY RIGHTS MAY SUBJECT US TO LITIGATION WHICH
COULD HARM OUR OPERATING RESULTS.
The unauthorized reproduction or other misappropriation of our proprietary
technology or use of our other intellectual property rights could enable third
parties to benefit from our technology and other intellectual property rights
without paying us for it. This could have a material adverse effect on our
business, operating results and financial condition.
Although we have taken steps to protect our proprietary technology and
other intellectual property, they may be inadequate. We do not know whether we
will be able to defend our proprietary rights because the validity,
enforceability and scope of protection of proprietary rights in Internet-related
industries are uncertain and still evolving. Moreover, the laws of some foreign
countries are uncertain and may not protect intellectual property rights to the
same extent as the laws of the United States.
If we resort to legal proceedings to enforce our intellectual property
rights, the proceedings could be burdensome and expensive and could involve a
high degree of risk.
WE MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT AND OTHER CLAIMS FROM THIRD
PARTIES IN CONNECTION WITH THE USE OF OUR TECHNOLOGY WHICH COULD REQUIRE US TO
INCUR SUBSTANTIAL COSTS AND DIVERT OUR RESOURCES FROM OUR BUSINESS.
Although we attempt to avoid infringing known proprietary rights of third
parties, we are subject to the risk of claims alleging infringement of third
party proprietary rights. If we were to discover that any of our products
violated third party proprietary rights, there can be no assurance that we would
be able to obtain licenses on commercially reasonable terms to continue offering
the product without substantial reengineering or that any effort to undertake
such reengineering would be successful. We do not conduct comprehensive patent
searches to determine whether the technology used in our products infringes
patents held by third parties. In addition, product development is inherently
uncertain in a rapidly evolving technological environment in which there may be
numerous patent applications pending, many of which are confidential when filed,
with regard to similar technologies.
Any claim of infringement could cause us to incur substantial costs
defending against the claim, even if the claim is invalid, and could distract
our management from our business for periods of time. Furthermore, a party
making such a claim could secure a judgment that requires us to pay substantial
damages. A judgment could also include an injunction or other court order that
could prevent us from selling our products or services. Any of these events
could have a material adverse effect on our business, operating results and
financial condition.
11
<PAGE> 13
RISKS RELATING TO OUR INDUSTRY
WE DEPEND ON THE CONTINUED GROWTH OF THE INTERNET AND ANY DECREASE IN CONSUMER
USE OF THE INTERNET OR THE GROWTH OF THE INTERNET COULD HARM OUR BUSINESS.
Our ability to generate revenues is substantially dependent upon continued
growth in the acceptance and use of the Internet and the infrastructure for
providing Internet access and carrying Internet traffic. We cannot be certain
that the necessary infrastructure or complementary products or services will be
developed or that the Internet will prove to be a viable commercial marketplace.
To the extent that the Internet continues to experience significant growth in
the level of use and the number of users, there can be no assurance that the
infrastructure will continue to be able to support the demands placed upon it by
such potential growth. In addition, delays in the development or adoption of new
standards or protocols required to handle increased levels of Internet activity,
increased governmental regulation or taxation of Internet commerce may restrict
the growth of the Internet. If the necessary infrastructure or complementary
products and services are not developed or if the Internet does not become a
viable commercial marketplace, it would have a material adverse effect on our
business, operating results and financial condition.
OUR BUSINESS MAY BE HARMED BY THE SECURITY RISKS RELATED TO INTERNET COMMERCE.
A significant barrier to submission of personal data in college
applications over the Internet by students is the secure transmission of
confidential information over public networks. Internet companies rely on
encryption and authentication technology to provide the security and
authentication necessary to effect secure transmission of confidential
information. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography or other developments will not
result in a compromise or breach of the algorithms used by companies to protect
consumer transaction data. If any such compromise of this security were to
occur, it could have a material adverse effect on our potential clients,
business, prospects, financial condition and results of operations. A party who
is able to circumvent security measures could misappropriate proprietary
information or cause interruptions in operations. We may be required to expend
significant capital and other resources to protect against such security
breaches or to alleviate problems caused by such breaches.
Concerns over the security of transactions conducted on the Internet and
the privacy of users may also hinder the growth of online services generally. To
the extent that our activities or third-party contractors involve the storage
and transmission of proprietary information, such as credit card numbers, or
personal data information, security breaches could damage our reputation and
expose us to a risk of loss or litigation and possible liability. We cannot be
sure that our security measures will not prevent security breaches or that
failure to prevent such security breaches will not have a material adverse
effect on our business.
RISKS RELATING TO THIS OFFERING
OUR OFFERING HAS NOT BEEN "APPROVED" BY THE SECURITIES AND EXCHANGE COMMISSION.
On October 29, 1999, Mr. Kevin J. High, our former President and Chief
Executive Officer, granted an interview to StockHouse.com, a Canadian Internet
provider of stock market information. This interview was posted on the
StockHouse.com website from October 29, 1999 through November 11, 1999. In the
first paragraph of this interview, the interviewer wrote, "with an
approved . . . filing with the US Securities and Exchange Commission . . ."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS OFFERING OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
12
<PAGE> 14
INACCURATE STATEMENTS MADE IN AN INTERVIEW BY MR. HIGH, OUR FORMER PRESIDENT AND
CHIEF EXECUTIVE OFFICER, CONCERNING OUR BUSINESS COULD MISLEAD INVESTORS.
On October 29, 1999, Mr. High granted an interview to StockHouse.com, a
Canadian Internet provider of stock market information. This interview was
posted on the StockHouse.com website from October 29, 1999 through November 11,
1999 and contained a number of statements, attributed to Mr. High, which are not
accurate or with which we do not agree. You should not rely upon the statements
made by Mr. High in this interview in making a decision to invest in our
company. You should rely exclusively on the information provided in this
prospectus.
Mr. High said that $15 per share was a "realistic" stock price and that a
$150,000,000 market capitalization for our company was "still too cheap." These
statements reflect Mr. High's personal views. We believe that per share price
and market capitalization are sensitive to many factors including, among others,
our performance, general market conditions, general economic conditions, and the
performance of our competitors. We do not know what share price is realistic or
what share price will be realistic at the time of the offering.
The interviewer describes Online Scouting Network, Inc. as having "the
nation's largest database of high school athletic talent." We do not know
whether or not Online Scouting Network has the nation's largest database of high
school athletic talent. We have recently entered into a letter of intent to
acquire Online Scouting Network, Inc. We are currently negotiating a definitive
agreement with Online Scouting Network. We can provide no assurance that we will
be able to complete the proposed acquisition. Furthermore, it is our policy not
to comment on the status of ongoing negotiations.
Mr. High said that we were "the only one that is on America Online." While
our software is available through America Online, we do not have a sole or
exclusive arrangement with America Online. Although we are pleased to have this
relationship with America Online, we do not believe it is material to our
business.
Mr. High said that we would be profitable in 24 months and that our
revenues would triple from the year 2000 to the year 2001. These statements
reflect Mr. High's personal views and do not reflect our views. We do not have
projections that we consider sufficiently reliable for public disclosure
concerning when we expect to achieve profitability or what our revenue growth
will be. We believe that profitability and revenue growth are sensitive to many
factors including, among others, acceptance of our products and services,
execution of our business plan, performance of our competitors, general market
conditions, and general economic conditions. We do not know when, or if, we will
be profitable or at what rate revenues will grow.
Mr. High said that our ultimate goal is to have every college in the world
using CollegeLink(R) within the next "couple of years." He also said that we are
going to dominate our market and that we are the biggest in our industry. These
statements reflect Mr. High's personal views and do not reflect our view.
Although we intend to increase the number of colleges that accept applications
using CollegeLink, we do not believe that every college in the world will be
using CollegeLink(R) within the next two years. Although we believe that we have
more relationships with colleges and high schools than any of our competitors,
we do not believe that we, or indeed any company, dominate this market at this
time. We believe we are the largest participant in this market because more
colleges have agreed to accept applications on our CollegeLink(R) software than
on the software of any of our competitors. Other measures of size could yield
different results.
Forward looking statements are necessarily speculative in nature, and it
can be expected that actual results will vary from Mr. High's statements. We
have a very limited operating history as an Internet company. Furthermore,
Internet companies and their stocks are highly dynamic and their performance is
subject to many uncertainties. Within the context of Internet companies
generally, our market is just beginning to develop. This makes it particularly
hard to make predictions about future performance. Neither we nor any of the
underwriters in this offering have confirmed, endorsed or adopted any of the
statements that were not made by us for utilization by, or distribution to,
prospective purchasers in this
13
<PAGE> 15
offering. To the extent any such statements are inconsistent with, or conflict
with, the information contained in this prospectus, or relate to information not
contained in this prospectus, they are disclaimed by us and the underwriters.
Accordingly, you should not rely on any such statements not made by us.
MR. HIGH HAS RESIGNED AS CHIEF EXECUTIVE OFFICER AND PRESIDENT.
On November 16, 1999, Mr. High resigned his positions as Chief Executive
Officer and President of our company. We are in discussions with Mr. High
concerning what his future role might be.
OUR EXISTING PRINCIPAL SHAREHOLDERS WILL CONTINUE TO EXERCISE SIGNIFICANT
CONTROL OF COLLEGELINK.
Of our outstanding 9,926,239 shares of common stock, our principal
shareholders, officers and directors beneficially own 4,671,291 shares or about
47 percent of our common stock prior to this offering and following this
offering will own more than 38 percent of our common stock. In addition, our
officers and directors have currently exercisable options to purchase 485,884
shares of our common stock. As a result, they may have the ability to control
and direct our affairs and business. Such concentration of ownership may also
have the effect of delaying, deferring or preventing a change in control in
CollegeLink.
THERE HAS BEEN LITTLE PREVIOUS PUBLIC MARKET FOR OUR STOCK, AND IF SUCH A MARKET
DOES DEVELOP, OUR STOCK PRICE COULD POTENTIALLY BE VOLATILE.
Although our common stock is quoted on the Over-the-Counter Electronic
Bulletin Board, there has been little public market for the common stock, and
there can be no assurance that an active trading market will develop or be
sustained. At a future date, provided a public market for the stock does
develop, the market price of the shares of common stock is likely to be highly
volatile and may be significantly affected by factors such as fluctuations in
our operating results, announcements of technological innovations or new
products and/or services by us or our competitors, governmental regulatory
action, developments with respect to proprietary rights and general market
conditions.
WE WILL HAVE BROAD DISCRETION IN USING THE PROCEEDS OF THIS OFFERING.
We intend to use all of our proceeds from this offering for the
acquisitions of Student Success and Online Scouting Network, working capital and
general corporate purposes, including other potential acquisitions. Accordingly,
we will have broad discretion in using our proceeds. You will not have the
opportunity to evaluate the economic, financial or other information that we
will use to determine how to use our proceeds.
FUTURE SALES OF COMMON STOCK BY EXISTING SECURITY HOLDERS COULD DEPRESS THE
MARKET PRICE FOR THE COMMON STOCK.
Sales of substantial amounts of the common stock in the public market, or
the prospect of such sales, could depress the prevailing market price of the
common stock and our ability to raise equity capital in the future. Upon
completion of this offering, we will have outstanding 12,126,239 shares of
common stock, warrants and options to purchase 2,826,468 shares and 2,690,369
shares issuable upon conversion of our preferred stock (assuming the maximum
number of shares to be issued upon conversion and assuming the over-allotment
option is not exercised). Of these shares, 8,671,244 shares of common stock and
5,516,837 shares issuable upon exercise of warrants and options and conversion
of our preferred stock (assuming the maximum number of shares to be issued upon
conversion) will be restricted shares under the Securities Act of 1933, as
amended. The common stock in this offering will be immediately eligible for sale
in the public market without restriction on the date of the prospectus. Taking
into account the lock-up agreements which certain of our shareholders have
signed and the restrictions of Rules 144, 144(k) and 701 promulgated under the
Securities Act, 1,951,918 of the restricted shares will be available for sale in
the public market beginning March 5, 2000, and all of the restricted shares will
be available for sale in the public market by October 26, 2000.
14
<PAGE> 16
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION OF YOUR INVESTMENT.
If you buy the common stock you will incur immediate and substantial
dilution of about $3.45 per share, or 86% of your investment in the common stock
(at a public offering price of $4.00 per share), in that the net tangible book
value of the common stock after this offering will be about $0.55 per share of
common stock.
ISSUANCE OF PREFERRED STOCK MAY ADVERSELY AFFECT HOLDERS OF COMMON STOCK OR
DELAY OR PREVENT CORPORATE TAKE-OVER.
Our certificate of incorporation provides that we may issue preferred stock
from time to time in one or more series. Our Board of Directors is authorized to
determine the rights (including voting rights), preferences, privileges and
restrictions granted to and imposed upon any wholly unissued series of preferred
stock and the designation of any such shares, without any vote or action by our
common shareholders. The Board of Directors may authorize and issue preferred
stock with voting power or other rights that could adversely affect the voting
power or other rights of the holders of common stock. In addition, the issuance
of preferred stock could have the effect of delaying, deferring or preventing a
change in control, because the terms of preferred stock that might be issued
could potentially prohibit the consummation of any merger, reorganization, sale
of substantially all of its assets, liquidation or other extraordinary corporate
transaction without the approval of the holders of the outstanding shares of the
preferred stock.
OUR CHARTER, BY-LAWS AND DELAWARE LAW MAY DETER TAKE-OVERS.
Our certificate of incorporation, by-laws and Delaware law contain
provisions that could have anti-takeover effects and that could discourage,
delay or prevent a change in control of CollegeLink or an acquisition of
CollegeLink at a price that many stockholders may find attractive. These
provisions may also discourage proxy contests and make it more difficult for our
stockholders to take some corporate actions, including the election of
directors. The existence of these provisions could limit the price that
investors might be willing to pay in the future for shares of our common stock.
FORWARD-LOOKING STATEMENTS
Statements in this prospectus that are not purely historical, such as
statements regarding our expectations, beliefs, intentions, plans and strategies
regarding the future, are forward-looking statements. These statements are only
predictions, and they involve risks, uncertainties and assumptions that could
cause our actual results to differ materially from the results we express in the
forward-looking statements, including those risks and uncertainties discussed
under "Risk Factors." This section includes important factors that could cause
or contribute to these differences. We cannot guarantee the results expressed in
any forward-looking statement. We have based all forward-looking statements on
information available to us on the date of this prospectus and we have no
obligation to update any forward-looking statement.
15
<PAGE> 17
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 2,200,000 shares of
common stock we are offering, after deducting the estimated underwriting
discount and estimated offering expenses payable by us, will be about $7.1
million, or about $8.0 million if the underwriters exercise their over-allotment
option in full and certain of our stockholders participate. Five of our
stockholders have granted the underwriters a 45-day option to purchase up to
57,500 shares to cover over-allotments. This option is subject to these
stockholders' agreement to sell these shares at the time the underwriters
exercise their over-allotment option. We will not receive any proceeds from such
sales. To the extent these stockholders decide not to sell such shares, we will
issue shares to the underwriters.
We intend to use the net proceeds from the offering for the acquisitions of
Student Success and Online Scouting Network, general corporate purposes,
including working capital, expansion of our sales and marketing programs and in
acquisitions of and investments in complementary businesses. Accordingly, we
will have broad discretion in the application of the net proceeds. We have
recently signed a definitive agreement to acquire Student Success and a letter
of intent to acquire Online Scouting Network. Pending the foregoing uses, we
intend to invest the net proceeds from the offering in investment-grade,
interest-bearing instruments. While the net proceeds are so invested, the
interest earned by us on such proceeds will be limited by available market
rates.
PRICE RANGE OF COMMON STOCK
Our common stock was publicly traded on the Over-the-Counter Electronic
Bulletin Board under the symbol "CYTA." From November 26, 1999 to January 19,
2000, our common stock was traded on the Over-the-Counter Electronic Bulletin
Board under the symbol "CLNK." The following table sets forth, for the periods
indicated, the high and low closing sales prices per share for the common stock
as quoted on the Over-the-Counter Electronic Bulletin Board.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
-----------------
HIGH LOW
------- ------
<S> <C> <C>
FISCAL 1999:
Third Quarter ending March 31, 1999 (commencing March 18,
1999)..................................................... $ 7.125 $6.000
Fourth Quarter ending June 30, 1999......................... $ 9.750 $6.250
FISCAL 2000:
First Quarter ending September 30, 1999..................... $ 6.750 $4.375
Second Quarter ending December 31, 1999..................... $12.500 $5.000
Third Quarter ending March 31, 2000 (through January 19,
2000)..................................................... $ 7.625 $4.625
</TABLE>
On January 19, 2000 the closing price of our common stock as quoted on the
Over-the-Counter Electronic Bulletin Board was $4.625. On that date, we had
about 1,400 holders of record of the common stock. This number does not include
stockholders for whom shares were held in a "nominee" or "street" name.
DIVIDEND POLICY
We have never declared or paid any dividends on our common stock. We
currently intend to retain any future earnings to finance operations and
expansion of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future. The payment of future dividends, if any,
will depend, among other things, on our results of operations, cash flows and
financial condition and on such other factors as our Board of Directors may, in
its discretion, consider relevant.
16
<PAGE> 18
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999,
on an actual basis, on a pro forma basis as if the acquisitions of Student
Success and Online Scouting Network had occurred as of September 30, 1999, and
as adjusted to reflect the completion of the foregoing acquisitions and the sale
by us of 2,200,000 shares of common stock in this offering (at an offering price
of $4.00 per share and after deducting estimated underwriting discounts and
commissions and offering expenses payable by us) and the application of the
estimated net proceeds from this offering. You should read the following in
conjunction with the more detailed financial statements and related notes
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------------------
PRO FORMA PRO FORMA AS
ACTUAL ACQUISITIONS(1) ADJUSTED
----------- --------------- ------------
<S> <C> <C> <C>
STOCKHOLDERS' EQUITY:
Series A Convertible Preferred Stock, $4.00 stated
value, par value $0.01 per share; 2,500,000
shares authorized, and 890,000 shares issued and
outstanding...................................... $ 3,534,980 $ 4,534,980 $ 4,534,980
Series B Convertible Preferred Stock, $7.625 stated
value, par value $0.01 per share; 300,000 shares
authorized, and 279,771 shares issued and
outstanding...................................... 4,175,000 4,175,000 4,175,000
Series C Convertible Preferred Stock $4.00 stated
value, par value $0.01 per share; 1,000,000
shares authorized, and 1,000,000 shares issued
and outstanding.................................. 4,000,000 4,000,000 4,000,000
Common Stock, par value $0.001 per share;
100,000,000 shares authorized and 9,846,340
shares issued and outstanding, actual; 11,196,340
shares issued and outstanding, pro forma;
13,396,340 shares issued and outstanding, pro
forma as adjusted(2)............................. 9,846 11,196 13,396
Additional paid-in capital......................... 6,035,664 11,883,314 18,878,097
Retained earnings (accumulated deficit)............ (5,553,359) (5,553,359) (5,553,359)
----------- ----------- -----------
Total stockholders' equity............... 12,202,131 19,051,131 26,048,114
----------- ----------- -----------
Total capitalization..................... $12,202,131 $19,051,131 $26,048,114
=========== =========== ===========
</TABLE>
- ---------------
(1) This amount gives effect to the 225,000 shares of common stock proposed to
be issued to the stockholders of Online Scouting Network and 1,125,000
shares of common stock proposed to be issued to the stockholders of Student
Success, in connection with the acquisition of these companies.
(2) Does not give effect to an aggregate of up to 7,829,402 shares of common
stock as follows: (a) 330,000 shares issuable upon exercise of the
underwriters' over-allotment option; (b) 220,000 shares of common stock
reserved for issuance upon exercise of the representatives' warrants, (c)
1,716,185 shares of common stock reserved for issuance upon the exercise of
options outstanding, and 2,125,065 shares of common stock reserved for
future grants under our option plans, (d) 940,283 shares of common stock
reserved for issuance upon exercise of outstanding warrants, (e) 1,140,000
shares of common stock issuable upon conversion of 1,140,000 shares of
Series A Convertible Preferred Stock outstanding, (f) 550,369 shares of
common stock issuable upon conversion of 279,771 shares of Series B
Convertible Preferred Stock outstanding (assuming the maximum number of
shares of common stock issuable upon such conversion), and (g) 1,000,000
shares of common stock issuable upon conversion of 1,000,000 shares of
Series C Convertible Preferred Stock outstanding. See "Underwriting,"
"Certain Relationships and Related Transactions" and "Management -- Benefit
Plans." In September 1999, no options to purchase shares of our common stock
were exercised.
17
<PAGE> 19
DILUTION
The pro forma net tangible book value of our common stock as of September
30, 1999 was approximately $298,000, or $.03 per share of common stock. Pro
forma net tangible book value per share represents the amount of our total
tangible assets less total liabilities, divided by 11,196,340 shares of common
stock outstanding as of September 30, 1999 after giving effect to the proposed
issuance of common stock to the stockholders of Student Success and Online
Scouting Network in connection with our acquisition of those companies, and
assuming a $4.00 per share price in this offering.
Pro forma net tangible book value dilution per share represents the
difference between the amount per share paid by new investors who purchase
shares of common stock in this offering and the pro forma net tangible book
value per share of common stock immediately after completion of this offering
and after the issuance of common stock to the stockholders of Student Success
and Online Scouting Network in connection with our acquisition of those
companies. After giving effect to the sale of 2,200,000 shares of common stock
in this offering at an offering price of $4.00 per share, after deduction of
estimated underwriting discounts and commissions and offering expenses, the pro
forma net tangible book value of the Company at September 30, 1999 would have
been $7,382,983 or $0.55 per share.
This represents an immediate increase in pro forma net tangible book value
of $0.52 per share to existing shareholders, and an immediate dilution in net
pro forma tangible book value of $3.45 per share to new investors in this
offering, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed offering price per share(1)................................ $4.00
Net tangible book value per share at September 30, 1999... $ .03
Increase per share attributable to new investors.......... $0.52
-----
Pro forma net tangible book value per share after this
offering(2)...................................................... $0.55
-----
Dilution per share to new investors(3)............................. $3.45
=====
</TABLE>
- ---------------
(1) Before deduction of estimated underwriting discounts and commissions and
offering expenses to be paid by us.
(2) Does not give effect to an aggregate of up to 7,829,402 shares of common
stock as follows: (a) 330,000 shares issuable upon exercise of the
underwriters' over-allotment option; (b) 220,000 shares of common stock
reserved for issuance upon exercise of the representatives' warrants, (c)
1,716,185 shares of common stock reserved for issuance upon the exercise of
options outstanding, and 2,125,065 shares of common stock reserved for
future grants under our option plans at September 30, 1999, (d) 940,283
shares of common stock reserved for issuance upon exercise of outstanding
warrants, (e) 1,140,000 shares of common stock issuable upon conversion of
1,140,000 shares of Series A Convertible Preferred Stock outstanding, (f)
550,369 shares of common stock issuable upon conversion of 279,771 shares of
Series B Convertible Preferred Stock outstanding at September 30, 1999
(assuming the maximum number of shares of common stock issuable upon such
conversion), and (g) 1,000,000 shares of common stock issuable upon
conversion of 1,000,000 shares of Series C Convertible Preferred Stock
outstanding at September 30, 1999. See "Underwriting," "Certain
Relationships and Related Transactions" and "Management -- Benefit Plans."
(3) Represents dilution of about 86% to purchasers of the shares of common stock
in this offering.
18
<PAGE> 20
The following table summarizes as of September 30, 1999, on a pro forma
basis to reflect the same adjustments described above, the number of shares of
common stock sold by us, the total consideration paid and the average price per
share paid by (i) the existing holders of common stock and (ii) the new
investors in the offering, assuming the sale of 2,200,000 shares of common stock
by us at an offering price of $4.00 per share. The calculations are based upon
total consideration given by new and existing shareholders, before any deduction
of estimated underwriting discounts and commissions and offering expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ ------------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders......... 11,196,340 83.6% $11,714,905 57.1% $1.05
New Investors................. 2,200,000 16.4% $ 8,800,000 42.9% $4.00
---------- ----- ----------- -----
Total(1)............ 13,396,340 100.0% $20,514,905 100.0%
========== ===== =========== =====
</TABLE>
- ---------------
(1) The foregoing table does not give effect to the items described in footnotes
(1) and (2) to the previous dilution table.
19
<PAGE> 21
SELECTED FINANCIAL DATA
You should read the following information in conjunction with our financial
statements and related notes and the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section appearing elsewhere in
this prospectus. The following selected financial data for the period from our
inception (January 29, 1996) through June 30, 1996 and as of June 30, 1997, 1998
and 1999 and for each of the three years in the period ended June 30, 1999 are
derived from our financial statements included in this prospectus, which have
been audited by Radin, Glass & Co., LLP, independent accountants. The pro forma
net loss per common share data for the year ended June 30, 1999 gives effect to
the conversion of all series of preferred stock outstanding as of June 30, 1999
into common stock. The following selected data for the three months ended
September 30, 1999 and as of September 30, 1999 are derived from our unaudited
financial statements also included in this prospectus. The pro forma net loss
per common share gives effect to the conversion of all series of preferred stock
outstanding as of September 30, 1999 into common stock. The historical results
are not necessarily indicative of results to be expected for future periods.
<TABLE>
<CAPTION>
PERIOD FROM THREE
INCEPTION MONTHS
(JANUARY 29, YEAR ENDED JUNE 30, ENDED
1996) TO JUNE 30, ------------------------------------- SEPTEMBER 30,
1996 1997 1998 1999 1999
----------------- ---------- ---------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Revenue:
CollegeLink revenues............. $ -- $ -- $ -- $ -- $ 125,680
Development of proprietary
technology..................... -- -- 500,000 -- --
Online training service
revenues....................... -- -- -- 162,884 77,499
Website hosting.................. 6,921 82,971 210,700 235,522 56,252
Other revenues................... 36,744 376,754 533,183 163,515 6,654
---------- ---------- ---------- ----------- -----------
43,665 459,725 1,243,883 561,921 266,085
---------- ---------- ---------- ----------- -----------
OPERATING EXPENSES:
Payroll, payroll taxes and
related benefits............... 37,177 589,356 1,018,786 1,173,439 628,661
Depreciation and amortization.... -- 66,949 93,554 131,545 111,591
Advertising...................... 6,678 127,155 13,268 49,428 3,777
Other general and administrative
expenses....................... 61,772 558,978 741,028 1,751,881 883,197
---------- ---------- ---------- ----------- -----------
Total Costs and Expenses......... 105,627 1,342,438 1,866,636 3,106,293 1,627,226
---------- ---------- ---------- ----------- -----------
Loss From Operations............... (61,962) (882,713) (622,753) (2,544,372) (1,361,141)
Interest Expense................... -- 5,786 7,579 42,053 --
---------- ---------- ---------- ----------- -----------
Net Loss........................... $ (61,962) $ (888,499) $ (630,332) $(2,586,425) $(1,361,141)
========== ========== ========== =========== ===========
Net Loss Per Common Share.......... $ (0.06) $ (0.29) $ (0.18) $ (0.40) $ (0.14)
========== ========== ========== =========== ===========
Weighted Average Primary Number of
Shares Outstanding............... 1,076,452 3,033,036 3,499,857 6,531,153 9,495,324
========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, AT
----------------------------------------------------- SEPTEMBER 30,
1996 1997 1998 1999 1999
------------- ---------- ---------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficit)............. $ (78,273) $ (168,485) $ (286,580) $ 1,126,168 3,669,717
Total Assets.......................... 44,057 373,576 358,189 1,806,996 13,181,622
Long-Term Liabilities................. 15,914 13,086 9,580 -- 10,171
Stockholders' Equity (Deficit)........ (24,607) 78,089 (69,321) 1,376,652 12,202,131
</TABLE>
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<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with "Selected Financial
Data" and CollegeLink's financial statements and related notes appearing
elsewhere in this prospectus.
CORPORATE BACKGROUND
On February 2, 1999, the Board of Directors of an inactive public company
voted to change the name of that company to Cytation.com Incorporated. On
February 2, 1999, the Board of Cytation.com Incorporated voted to effect a
one-for-two reverse stock split which became effective on February 25, 1999. On
March 5, 1999, Cytation Corporation, a Rhode Island corporation (formerly known
as Web Services International, Inc.) and the provider of a browser-based online
training system, was merged into Cytation.com Incorporated. In the merger, each
share of Cytation Corporation was converted into 5.765 shares of common stock of
Cytation.com Incorporated. A total of 7,081,028 shares of Cytation.com
Incorporated were issued as a result of this merger.
Although Cytation.com Incorporated was the surviving entity from the merger
of March 5, 1999, in accordance with applicable SEC accounting requirements, we
are considered the successor to Cytation Corporation which was the disappearing
entity in the March 5, 1999 merger.
On August 10, 1999, Cytation.com Incorporated acquired ECI, Inc., a
Massachusetts corporation and provider of online college application services.
ECI was merged into Cytation.com Incorporated's wholly owned subsidiary,
CollegeLink.com Incorporated. CollegeLink.com Incorporated became a wholly owned
subsidiary of Cytation.com Incorporated. On November 1, 1999, CollegeLink.com
Incorporated changed its name to CollegeLink Corporation.
On November 16, 1999, Cytation.com Incorporated was merged into
CollegeLink.com Incorporated, a Delaware corporation and a wholly owned
subsidiary of Cytation.com Incorporated which was organized on November 1, 1999.
The surviving corporation is CollegeLink.com Incorporated.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
PRO FORMA
INCLUDING THREE MONTHS ENDED
YEAR ENDED JUNE 30, ACQUISITIONS SEPTEMBER 30,
--------------------------------------- YEAR ENDED -----------------------
JUNE 30,
1997 1998 1999 1999 1998 1999
----------- ----------- ----------- ------------ --------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net revenue:
CollegeLink revenues........... $ -- $ -- $ -- $ -- $ -- $ 125,680
Development of proprietary
technology................. -- 500,000 -- -- -- --
Online training service
revenues................... -- -- 162,884 -- 32,000 77,499
Website hosting.............. 82,971 210,700 235,522 -- 49,467 56,252
Other revenues............... 376,754 533,183 163,515 -- 137,958 6,654
Revenues related to
acquisitions............... -- -- -- 1,839,840 -- --
----------- ----------- ----------- ----------- --------- -----------
459,725 $ 1,243,883 $ 561,921 $ 1,839,840 $ 219,425 $ 266,085
</TABLE>
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<PAGE> 23
<TABLE>
<CAPTION>
PRO FORMA
INCLUDING THREE MONTHS ENDED
YEAR ENDED JUNE 30, ACQUISITIONS SEPTEMBER 30,
--------------------------------------- YEAR ENDED -----------------------
JUNE 30,
1997 1998 1999 1999 1998 1999
----------- ----------- ----------- ------------ --------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating expenses:
Payroll, payroll taxes and
related benefits........... $ 589,356 $ 1,018,786 $ 1,173,439 $ 1,967,153 $ 209,461 $ 628,662
Cost of sales................ -- -- -- 618,068 -- --
Depreciation and
amortization............... 66,949 93,554 131,545 241,153 26,071 19,601
Advertising.................. 127,155 13,268 49,428 121,801 1,931 3,777
Other general and
administrative expenses.... 558,978 741,028 1,751,881 2,832,345 221,232 883,137
Amortization of goodwill..... -- -- -- 1,887,416 -- 91,990
----------- ----------- ----------- ----------- --------- -----------
Total operating expenses..... $(1,342,438) $(1,866,636) $(3,106,293) $(7,667,936) 458,695 1,627,226
----------- ----------- ----------- ----------- --------- -----------
Interest Expense............... 5,786 7,579 42,053 294,803 293 --
Net income (loss).............. $ (888,499) $ (630,332) $(2,586,425) $(6,122,899) $(239,563) $(1,361,141)
=========== =========== =========== =========== ========= ===========
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998
Revenues for the three months ended September 30, 1999 include, for the
first time, the operations of CollegeLink Corporation which was acquired on
August 10, 1999. The acquisition was treated as a purchase with the results of
operations of CollegeLink Corporation included in consolidated operations from
that date. Other revenues declined, reflecting our decision to focus primarily
on the CollegeLink business.
Payroll expenses have increased as a result of personnel additions as well
as salary increases for present personnel. Other general and administrative
expenses increased both for software development to support the CollegeLink
operations, costs of supporting the expanded operations and costs related to the
business which we intend not to emphasize in the future. Goodwill amortization
results from the acquisition of CollegeLink Corporation.
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 our
business focus over the past year. In the first part of 1998 and in prior years
our principal business was the development and sales of other services related
to the hosting of web content, which accounted for approximately $743,883 of our
revenue. During the latter half of fiscal year 1998, we began development of an
online training management system. The $500,000 of revenue for development of
proprietary technology was the result of a joint venture with EER Systems Inc.,
a Washington, D.C. systems integrator ("EER"). This joint venture ultimately
resulted in EER acquiring in excess of 10% of our shares. While we maintain web
hosting services for certain clients, we no longer provide website development
services. A significant portion of our fiscal year 1999 revenue was derived from
the online training services.
We expect future revenue will derive from the operations of CollegeLink.com
and the continued development of the CollegeLink(R) Internet-based college
admission service and Internet hub.
Operating Expenses. Operating expenditures for the year ended June 30,
1999 were 68% greater than the previous year. This increase is attributable to
the fact that we changed our principal business during the year. In addition, a
significant amount of increased cost was related to software development of our
online training management system. Another reason for the increase in operating
expenses was the merger completed on March 5, 1999 with Cytation Corporation. A
major portion of the increase in operating expenses resulted from increased
legal, professional and investor relations services required to complete the
merger. Operating expenses are expected to increase substantially in the future
as we increase our marketing effort, and as sales increase, as we believe will
occur.
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<PAGE> 24
FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997
In April 1997 we sold the assets related to our Internet service provider
("ISP") business. Final consideration from that sale was received in November
1998. In fiscal 1998, we discontinued our website development business. After
the quarter ended March 31, 1999, we did not receive any revenue from either
website development or operations as an ISP, nor did we have any expenses
associated with those former components of our business. No future operations as
an ISP or website developer are contemplated. In the fiscal year ended June 30,
1997, 37% of revenue was derived from subscriber access (internet dial-up
service), 24% of revenue was derived from website origination and a development,
18% of revenue was derived from website hosting and 21% of revenue was derived
from other services.
PRO FORMA ACQUISITIONS
Revenues Related to Acquisitions. Pro forma net revenue of the combined
companies for the fiscal year ended June 30, 1999 was $1,839,840. Of this amount
$561,921, $104,073, $98,178, and $1,075,668 were attributable to CollegeLink,
ECI, Online Scouting Network and Student Success, respectively. ECI's revenues
were derived from its online college applications business. Student Success'
revenues were derived from its Making College Count(R) and Making High School
Count(TM) programs. OSN's revenues were derived from registration fees of high
school student athletes. We expect that our future revenues will be derived from
these businesses.
Operating Expenses. Operating expenses of the combined companies were
$7,667,936. Of the $1,887,416 attributable to amortization of goodwill,
$827,907, $804,550, and $254,959 were attributable to the acquisitions of ECI,
Student Success and OSN, respectively. Payroll expenses for ECI, Student Success
and OSN were $400,248, $384,205 and $9,261, respectively. Other general and
administrative expenses for ECI, Student Success and OSN were $580,166, $220,377
and $532,672, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded operations primarily through cash from
operations and equity and debt investment.
Preferred Stock. We received $3,100,000 through a private placement of
preferred stock to The Provident Life and Accident Insurance Company and one
other accredited investor. The Purchase Agreement with The Provident Life and
Accident Insurance Company was signed April 2, 1999, and the transaction closed
shortly thereafter. After the end of the fiscal year, we received $460,000
through the private placement of additional shares of preferred stock to five
accredited investors. We also received $4,000,000 through the private placement
of preferred stock to PNC Investment Corp. on September 30, 1999. On October 26,
1999, we received $1,000,000 through a private placement of preferred stock to
an accredited investor.
Common Stock. We received $195,000 in January 1999 from the sale of shares
of common stock.
Debt Financing. We issued a note payable to EER for $300,000 in July 1998.
We received $300,000 from EER and a total of $70,000 from various individuals in
debt instrument financing during the quarter ended March 31, 1999. These debt
financings were repaid with the proceeds of the sale of preferred stock to The
Provident Life and Accident Insurance Company described above. We had two
short-term debt instruments representing a total of $58,000 outstanding at July
30, 1998. We repaid these debt instruments in the year ended June 30, 1999.
Sufficiency of Cash Flows. We believe that current cash balances and any
cash generated from operations will be sufficient to meet our cash needs for
working capital and capital expenditures for at least the next twelve months. A
portion of our 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, we evaluate potential acquisitions
of such businesses, products or technologies.
Net cash used in operating activities was $2,097,809 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 was $11,870 and $78,551 for the fiscal year
ended June 30, 1999 and June 30, 1998, respectively. Financing activities
provided
23
<PAGE> 25
$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, we had cash 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
("AICPA") 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 with respect to accounting for computer
software developed or obtained for internal use, including the requirement to
capitalize specified costs and the amortization of such costs. We adopted this
standard and its adoption had no material effect on our 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 our 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, 2000. We do not expect the adoption of
this statement to have an impact on its results of operations, financial
position or cash flows.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. 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. We have recognized the Year 2000 problem
and have taken steps to mitigate the situation. Our 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. We have completed vendor-provided upgrades of
vendor-developed software. Although the upgrades are claimed by the vendors to
be Year 2000 compliant, we are testing the hardware and software for Year 2000
compliance and will install vendor-provided software patches if necessary. We
are also testing the internally developed software which is included in the
services sold to customers.
We expect 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, we have incurred expenses of approximately
$12,000 related to the assessment of and preliminary efforts in dealing with the
Year 2000 issue.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We 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
Qualitative Information about Market Risk Inherent in Derivative Commodity
Instruments." We have no holdings of derivative financial or commodity
instruments.
We are exposed to financial market risks, including changes in interest
rates. To reduce these risks somewhat, we invest excess cash in a money market
account. We do not use any financial instruments for speculative or trading
purposes.
24
<PAGE> 26
BUSINESS
OUR COMPANY
We provide college bound students and their families a range of solutions
to the challenges of the college admission process, from college selection to
submission of college, financial aid, and scholarship applications. We have
recently entered into an agreement to acquire Student Success, Inc. and a letter
of intent to acquire Online Scouting Network, Inc.
We have developed an Internet hub with a college application, financial aid
and scholarship service. We expect that a large number of applications will be
submitted by computer within the next several years because of increasing
student computer literacy and the significant financial and administrative
benefits to colleges and universities of receiving applications electronically.
In addition, through the Making College Count(R) and Making High School
Count(TM) programs, we help prepare students for success in college.
We continuously obtain demographic and other information which can be used
by students, their families, colleges and other providers of services to assist
in the college admission process and enhance the entire college experience.
Because of the demographic makeup and the volume of the college bound students
who visit CollegeLink.com, we have also developed an attractive e-commerce
location for students and their families.
CollegeLink.com. Through CollegeLink.com, and its relationships with more
than 900 colleges and universities that have agreed to accept applications in
their respective formats through CollegeLink, we are a leading provider of
computer-based college applications and admissions services to college bound
students and their families.
Student Success. Student Success is a leading provider of onsite high
school and college preparatory programs for students and their families under
its Making College Count(R) and Making High School Count trademarks. Through
this channel, we intend to continue to expand our presence and awareness of our
services with high school students who are most likely to use CollegeLink.
Student Success presented its seminars to more than 215,000 students at about
900 high schools and junior colleges nationwide last year. These programs were
sponsored by eight major consumer products companies.
Online Scouting Network. Online Scouting Network is a leading provider of
online recruiting services offering student athletes greater visibility to more
than 3,000 college and university professionals. To date, approximately 25,000
high school students from over 500 high schools nationwide have registered with
Online Scouting Network.
We have an agreement with PNC Bank, N.A., one of the largest student loan
providers in the United States, to provide certain financial products and
services to college bound students and their families through our
CollegeLink.com Internet hub. The PNC Bank agreement will terminate on September
29, 2004. However, after September 29, 2001, PNC Bank may elect to terminate the
agreement upon 180 days notice. PNC Investment Corp., an affiliate of PNC Bank,
has made a $4,000,000 investment in our company.
We have an agreement with The College Board(R) to be the exclusive provider
of electronic college applications through The College Board's ExPAN(R) guidance
software. The College Board agreement terminates on June 30, 2000 unless
extended by mutual agreement. The College Board(R) is a membership organization
of colleges and secondary schools and provider of the SAT(R) and the AP(R)
Exams. We are the only third party electronic application provider on The
College Board's website.
We also have co-marketing relationships with Student Advantage, Inc.,
FastWeb.com L.L.C. and are negotiating similar relationships with other
Web-based businesses including The FamilyEducation Company. We are continually
seeking appropriate relationships to expand our service and product offerings.
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<PAGE> 27
COLLEGELINK.COM
We are developing an Internet hub designed to offer college bound students
and their families a range of services and products to assist throughout the
college admission process.
CollegeLink(R). We have developed proprietary software that permits high
school students to complete and submit college applications online.
CollegeLink(R) guides a student with access to a personal computer through the
entire application process. It permits the student to answer questions, print
and review drafts and ultimately to submit the application electronically or in
hard copy, depending upon the college's preference. Students enter information
only once when using CollegeLink(R)'s application service, then select the
colleges and universities to which they wish to apply, complete college specific
essays and then transmit all their applications electronically. Each college
receives an application that replicates its own form or electronic format.
CollegeLink(R) is the only program that permits students to enter general
information only once and still deliver to each college an application in its
own format. We believe that students and their families prefer our service to
filling out multiple forms or mailing a generic application because they
perceive colleges favor applications submitted on their own formats.
CollegeLink(R) also contains hyperlinks to websites for college admissions tests
and scholarship and financial aid searches. We expect to devote a significant
portion of our resources to the growth in the use of CollegeLink(R) as we expand
our traditional and online marketing programs and as the Internet becomes more
available and accepted by high schools, colleges and their students.
Student Success. On October 20, 1999, we entered into an agreement to
acquire Student Success. Student Success is the leading provider of on-site high
school and college preparatory programs for students and their families under
its Making College Count(R) and Making High School Count(TM) trademarks. Student
Success offers schools and students value added educational and organizational
tools. Student programs include live presentations held in schools during the
school day, as well as direct mail follow-up, websites, email newsletters, and
various other printed materials. Student Success presented its seminars to more
than 215,000 students at about 900 high schools and junior colleges nationwide
last school year. Products for sale include books, books on tape, and academic
planners.
We expect Student Success to enhance our market position by providing
contact with hundreds of thousands of college bound students through focused
presentations delivered by trained speakers. We believe Student Success has
opened a significant marketing channel to cross-sell the full range of our
CollegeLink(R) and Online Scouting Network products and services. Through this
channel, we intend to expand awareness of our services with high school
students. We believe these programs offer service providers an attractive and
effective way to reach the teen market segment.
Online Scouting Network. On August 18, 1999, we entered into a letter of
intent to acquire Online Scouting Network. Online Scouting Network is a leading
Internet recruiting company that operates the Online Scouting Network ("OSN")
and provides student athletes greater visibility to more than 3,000 college and
university professionals. To date, approximately 25,000 high school athletes
from 500 high schools nationwide have registered with OSN. OSN provides
significant exposure to student athletes and enhances the recruiting process for
college athletic directors and coaches through its website. OSN has been
designed to increase the exposure of about 5 million U.S. high school athletes
to colleges and to reduce the time and expense colleges incur in identifying
prospective student athletes.
We believe these acquisitions will enhance our market position by
attracting additional college bound students to our services. We also believe
that there will be substantial efficiencies for our marketing efforts and
expansion of the services we provide to college bound students.
INDUSTRY BACKGROUND
There are about 13.8 million high school students in the United States.
According to the National Center for Education Statistics, this number will
increase to more than 15.5 million over the next five years. Each year, about
3.2 million students enter colleges and universities for the first time. Of
these about 2.2 million apply as first time freshman to undergraduate colleges
and universities. The remaining students apply to continuing education programs
of various sorts.
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<PAGE> 28
Each year about 3.2 million students submit more than seven million
applications for undergraduate admission to nearly 3,400 U.S. colleges and
universities. About 50% of these students apply for some form of financial aid.
According to the Department of Education, it is expected that the total number
of college bound students will continue to increase each year for the
foreseeable future. Based on industry statistics, we believe colleges spend
approximately $3 billion annually to recruit and enroll students.
MARKETING STRATEGY
Our strategy is to build upon the thousands of relationships we have
developed with high school guidance counselors and college admissions
professionals through one-on-one marketing efforts. We plan to build our brand,
reach increasing numbers of high school and college students, and drive traffic
to our Internet hub. Our objectives are to:
- Expand Our Market Leadership Position. We intend to leverage our
relationships with more than 2,500 high schools and more than 900
colleges and universities to establish new affiliations, attract
additional students to our website and create a premier Internet hub for
college bound students. We believe the number of colleges and
universities accepting our applications is central to students who will
want to apply to many colleges and will appreciate the ability to apply
to all of them from one source. We believe our ability to submit
applications on college specific forms, together with our existing
relationships, will establish us as the standard for the industry and
drive traffic across our Internet hub. We plan to continue to add high
schools, colleges and universities through on campus direct sales calls
by sales personnel, corporate sponsorship direct mailings, targeted
periodical advertising, online and broadcast advertising, partnerships
and various promotional campaigns. We have also established a
telemarketing sales team to provide sales support to existing and
inquiring colleges and universities. Upon completion of the OSN and
Student Success acquisitions, we will have a national direct sales force
calling on high schools.
- Expand Existing Brand Awareness. We intend to build upon our established
brands and our relationships with PNC Bank, N.A. and others to establish
CollegeLink.com as a leading Internet hub and e-commerce site. We plan to
use our market position and existing relationships with these service
providers to reach increasing numbers of college bound students.
- Capitalize on Our Strong High School Presence. Last year, The College
Board(R) distributed our CollegeLink(R) software with its
ExPAN(R)guidance software to about 2,000 high schools nationwide. This
school year, Making College Count(R) expects to present at more than
1,700 high schools and junior colleges, and OSN expects to register
athletes from about 600 high schools. We believe our established presence
in the high school market gives us early access to college bound students
and will continue to solidify our brand in the online education market.
We intend to grow our presence in the high school market through
expansion of these programs. In addition, we intend to grow our presence
in the high school market through online direct marketing and other
multimedia.
- Develop strategic web partnerships. We have initiated a web partnership
program to co-brand our products and services on targeted high school and
college related high traffic websites and add content to our Internet
hub. In addition to our relationships with PNC Bank, N.A., and The
College Board(R) we have relationships with other Web hubs and portals
with college bound students and parent traffic to create content and
commerce opportunities.
- Overcome resistance to online applications. We believe many college
bound students and their families perceive that colleges and universities
prefer applications that are submitted on the institution's specific
format. CollegeLink(R) software is the only program currently available
that permits students to enter general information only once and still
deliver to each institution an application in that institution's own
format. We believe this feature gives us a significant competitive
advantage, and we intend to promote it to increase use of our services.
We believe that we have addressed equal consideration issues by providing
student applications in each college's own format.
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COMPETITIVE ENVIRONMENT
The markets we serve are large and fragmented. We do not believe that any
competitor has achieved dominance in any of the markets we serve. These markets
are highly competitive, constantly evolving, and subject to the effects of
changing technology. We believe the principal competitive factors in the markets
we serve include:
- establishing relationships with colleges and universities
- establishing a significant presence in high schools and colleges
- developing brand awareness
- developing strategic web partnerships to expand service offerings
- overcoming resistance to online applications
- building an effective direct sales force
CollegeLink(R) faces direct competition from a number of companies
including: -- Apply!, Embark.com (formerly CollegeEdge), CollegeNet and XAP. We
also face competition from traditional service providers such as guidance
counselors, self-help guides available in print as well as CD-ROM, for profit
service providers such as Kaplan Educational Centers, and not-for-profit
organizations such as The College Board(R) which has announced plans to provide
a broad range of college admissions, test preparation and related services on
the Internet.
Student Success faces competition from a variety of sources including other
providers of self-help and educational enhancement programs such as Kaplan,
Barrons, Princeton Review, Houghton Mifflin and Learning Forum. OSN faces direct
competition from a variety of companies including: Athletes Online,
Allstatersports.com and Recruit.
We believe CollegeLink.com's relationships with our partners, together with
our strategy of building on our existing leadership position, growing our
brands, and reaching into the high school population, provide a substantial
competitive advantage over our current competition.
Following is a list, as of November 22, 1999, of colleges that have agreed
to accept applications through our CollegeLink(R) software.
Abilene Christian University
Academy of Art College
Adelphi University
Adrian College
Agnes Scott College
Alabama A & M University
Alabama State University
Alaska Pacific University
Albertson College of Idaho
Albertus Magnus College
Albion College
Albright College
Alderson-Broaddus College
Alfred University
Allegheny College
Allen University
Allentown College of St. Francis de Sales
Alma College
American International College
The American University
Anderson College
Anderson University
Anna Maria College
Antioch College
Aquinas College (Michigan)
Aquinas College -- Milton
Aquinas College -- Newton
Arizona State University
Art Institute of Boston
Ashland University
Assumption College
Atlantic Union College
Auburn University
Auburn University, Montgomery
Augsburg College
Augusta State University
Augustana College (Illinois)
Augustana College (South Dakota)
Aurora University
Austin College
Averett College
Avila College
Babson College
Baker University
Baldwin-Wallace College
Ball State University
Barat College
Barber-Scotia College
Bard College
Barry University
Bartlesville Wesleyan College
Bates College
Bay Path College
Bay State College
Beaver College
Becker College
Belhaven College
Belmont Abbey College
Beloit College
Benedictine University
Bennington College
Bentley College
Berea College
Berry College
Bethany College
Bethel College
Bethel College and Seminary
Biola University
Birmingham Southern College
Bloomfield College
Boston University
28
<PAGE> 30
Bowdoin College
Bowie State University
Bowling Green State University
Bradford College
Bradley University
Brandeis University
Briar Cliff College
Bridgewater State College
Broome Community College
Bryant College
Bryn Mawr College
Buena Vista University
Burdett College
Burlington College
Cabrini College
Caldwell College
Calumet College of St. Joseph
Calvary Bible College
Calvin College
Campbell University
Campbellsville University
Canisius College
Capital University
Cardinal Stritch College
Carleton College
Carlow College
Carnegie Mellon University
Carroll College
Carroll College of Montana
Carson-Newman College
Carthage College
Case Western Reserve University
Castleton State College
Catawba College
The Catholic University of America
Cazenovia College
Cedar Crest College
Centenary College
Centenary College of Louisiana
Central College
Central Connecticut State University
Central Methodist College
Central Michigan University
Central Missouri State University
Central State University
Central Washington University
Centre College
Chapman University
Charleston Southern University
Chatham College
Chestnut Hill College
Chowan College
The Citadel
Claremont McKenna College
Clarion University of Pennsylvania
Clark Atlanta University
Clark University
Clarke College
Clarkson University
Clemson University
Cleveland Institute of Art
Cleveland State University
Coe College
Colby College
Colby-Sawyer College
Colgate University
College of Charleston
College of Mount St. Joseph
The College of New Rochelle
College of Notre Dame
College of Saint Elizabeth
College of Santa Fe
College of St. Benedict
College of St. Joseph
College of St. Scholastica
College of the Atlantic
College of the Holy Cross
College of William & Mary
The College of Wooster
Colorado College
Colorado School of Mines
Colorado Technical University
Columbia College
Columbia College of Missouri
Concordia College
Concordia College -- Moorhead
Concordia University -- St. Paul
Concordia University at Austin
Concordia University Wisconsin
Connecticut College
Converse College
Coppin State College
Cornell College
The Culinary Institute of America
Culver-Stockton College
Cumberland College
Curry College
Daemen College
Dakota Wesleyan University
Dana College
Daniel Webster College
Dartmouth College
David N. Myers College
Davidson College
Dean College
The Defiance College
Delaware State University
Delaware Valley College
Denison University
DePaul University
DePauw University
Dickinson College
Dillard University
Dominican College of Blauvelt
Dominican College of San Rafael
Dordt College
Dowling College
Drake University
Drew University
Drexel University
Drury College
Duke University
Duquesne University
Earlham College
East Coast Aero Tech
East Stroudsburg University
Eastern College
Eastern Connecticut State University
Eastern Mennonite University
Eastern Washington University
Eckerd College
Edgewood College
Edinboro University of Pennsylvania
Edward Waters College
Elizabethtown College
Elmhurst College
Elmira College
Elms College
Elon College
Embry-Riddle Aeronautical University
(Arizona)
Embry-Riddle Aeronautical University
(Florida)
Emerson College
Emmanuel College
Emory & Henry College
Emory University
Endicott College
Erskine College
Eugene Lang College
Eureka College
The Evergreen State College
Fairfield University
Faulkner University
Ferris State University
Ferrum College
Fisk University
Fitchburg State College
Flagler College
Florida A & M University
Florida Atlantic University
Florida Institute of Technology
Florida International University
Florida Memorial College
Florida Southern College
Florida State University
Fontbonne College
Fordham University
Framingham State College
Francis Marion University
Franciscan University of Steubenville
Franklin & Marshall College
Franklin College
Franklin Institute of Boston
Franklin Pierce College
Freed-Hardeman University
Fresno Pacific University
Furman University
Gardner-Webb University
Geneva College
George Mason University
George Washington University
Georgetown College
Georgia College & State University
Georgia Institute of Technology
Georgia Southwestern State University
Georgia State University
Georgian Court College
Gettysburg College
29
<PAGE> 31
Goddard College
Golden Gate University
Goldey-Beacom College
Gonzaga University
Gordon College
Goshen College
Goucher College
Grace College
Graceland College
Grand Valley State University
Grand View College
Green Mountain College
Greensboro College
Greenville College
Grinnell College
Grove City College
Guilford College
Gustavus Adolphus College
Hamilton College
Hamline University
Hampden-Sydney College
Hampshire College
Hanover College
Harding University
Hartwick College
Harvard College
Harvey Mudd College
Hastings College
Haverford College
Hawaii Pacific University
Heidelberg College
Hendrix College
High Point University
Hillsdale College
Hiram College
Hobart and William Smith Colleges
Hofstra University
Hollins University
Holy Family College
Holy Names College
Holyoke Community College
Hood College
Hope College
Hope International University
Howard University
Huntingdon College
Huntington College
Illinois College
Illinois Institute of Technology
Illinois Wesleyan University
Immaculata College
Indiana University Kokomo
Indiana University of Pennsylvania
Indiana University-Purdue Univ. at
Indianapolis
Iona College
Iowa State University
Iowa Wesleyan College
Ithaca College
Jackson State University
Jacksonville State University
Jacksonville University
James Madison University
Jamestown College
Jarvis Christian College
John Brown University
John Carroll University
Johns Hopkins University
Johnson & Wales University
Johnson C. Smith University
Johnson State College
Juniata College
Kalamazoo College
Kansas State University -- Manhattan
Kansas State University -- Salina
Keene State College
Kent State University
Kent State University Ashtabula
Kent State University Geauga
Kent State University Liverpool
Kent State University Salem
Kent State University Stark
Kent State University Trumbull
Kent State University Tuscarawas
Kentucky Wesleyan College
Kenyon College
Kettering University
Keuka College
Keystone College
King's College
Knox College
Kutztown University
Lafayette College
LaGrange College
Lake Erie College
Lake Forest College
Lakeland College
Lander University
LaSalle University
Lasell College
Lawrence University
Lebanon Valley College
Lees-McRae College
Lehigh University
LeMoyne College
LeMoyne-Owen College
Lenoir-Rhyne College
Lesley College
LeTourneau University
Lewis & Clark College
Lewis University
Lewis-Clark State College
Liberty University
Lincoln Memorial University
Lincoln University
Lindenwood University
Linfield College
Lipscomb University
Long Island University, C.W. Post
Campus
Long Island University-Southampton
College
Longwood College
Louisiana Tech University
Lourdes College
Loyola Marymount University
Loyola University Chicago
Loyola University New Orleans
Lubbock Christian University
Luther College
Lycoming College
Lynchburg College
Lyndon State College
Lynn University
Macalester College
MacMurray College
Maharishi University of Management
Maine Maritime Academy
Malone College
Manhattan College
Manhattanville College
Mansfield University
Marian Court College
Marietta College
Marist College
Marlboro College
Marquette University
Mars Hill College
Mary Baldwin College
Mary Washington College
Maryland Institute College of Art
Marymount College
Marymount Manhattan College
Marymount University
Maryville College
Maryville University of St. Louis
Marywood University
Massachusetts Bay Community College
Massachusetts College of Liberal Arts
Massachusetts Institute of Technology
Massachusetts Maritime Academy
Massasoit Community College
Mayville State University
McMurry University
Medaille College
Mercer University
Mercyhurst College
Meredith College
Merrimack College
Messiah College
Miami University
Michigan Technological University
Middle Tennessee State University
Middlebury College
Middlesex Community College
Milligan College
Millikin University
Millsaps College
Milwaukee Institute of Art & Design
Milwaukee School of Engineering
Minnesota State University Mankato
Mississippi University for Women
Mitchell College
Monmouth College
Montana State University
Montana State University -- Billings
Montana Tech of the University of
Montana
Moore College of Art and Design
30
<PAGE> 32
Moravian College
Morehouse College
Morgan State University
Morningside College
Morris Brown College
Mount Ida College
Mount Mercy College
Mount Saint Mary's College (Maryland)
Mount St. Clare College
Mount St. Mary's College, East Los
Angeles
Mount St. Mary's College, West Los
Angeles
Mount Wachusett Community College
Muhlenberg College
Muskingum College
Nazareth College of Rochester
Neumann College
New College of the University of
South Florida
New England College
New Hampshire College
New Jersey Institute of Technology
New Mexico Highlands University
New Mexico Institute of Mining &
Technology
New Mexico State University
New York Institute of Technology
New York University
Newberry College
Newbury College
Niagara University
Nichols College
Norfolk State University
North Carolina Agric. & Tech. State
Univ.
North Carolina State University
North Central College
North Georgia College & State
University
North Shore Community College
Northeast Institute of Industrial
Technology
Northeastern University
Northern Arizona University
Northern Essex Community College
Northern Michigan University
Northland College
Northwest Missouri State University
Northwestern College
Northwood University
Norwich University
Notre Dame College
Notre Dame College of Ohio
Nova Southeastern University
Nyack College
Oakland City University
Oakland University
Oberlin College
Occidental College
Oglethorpe University
Ohio Dominican College
Ohio Northern University
The Ohio State University
Ohio State University, Marion
Ohio University
Ohio University -- Zanesville
Ohio University -- Chillicothe
Ohio University-Eastern
Ohio University -- Lancaster
Ohio University-Southern
Ohio Wesleyan University
Oklahoma Baptist University
Oklahoma Christian University
Old Dominion University
Oral Roberts University
Oregon Institute of Technology
Oregon State University
Ottawa University
Otterbein College
Oxford College of Emory University
Pace University
Pacific Lutheran University
Pacific Union College
Pacific University
Paine College
Palm Beach Atlantic College
Paul Quinn College
Pepperdine University
Philadelphia College of Bible
Philadelphia University
Pine Manor College
Pitzer College
Plymouth State College
Polytechnic University
Pomona College
Presbyterian College
Providence College
Purdue University -- Calumet
Purdue University -- West Lafayette
Queens College
Quincy University
Quinnipiac College
Quinsigamond Community College
Radford University
Randolph-Macon College
Randolph-Macon Woman's College
Reed College
Regis College
Regis University
Rensselaer Polytechnic Institute
Rhodes College
Rice University
Richard Stockton College of New
Jersey
Ringling School of Art and Design
Ripon College
Roanoke College
Robert Morris College
Rochester Institute of Technology
Rockford College
Rockhurst College
Rocky Mountain College
Roger Williams University
Rollins College
Rose-Hulman Institute of Technology
Rosemont College
Roxbury Community College
Russell Sage College
Rutgers -- The State University of
New Jersey
Rutgers School of Business New
Brunswick
Rutgers School of Management --
Newark
Rutgers University -- Camden College
of Arts & Sciences
Rutgers University -- College of
Nursing
Rutgers University -- College of
Pharmacy
Rutgers University -- Cook College
Rutgers University -- Douglass
College
Rutgers University -- Livingston
College
Rutgers University -- Mason Gross
School of Arts
Rutgers University -- Rutgers College
Rutgers University -- School of
Business Camden
Rutgers University -- University
College Camden
Rutgers University -- Newark College
of Arts & Science
Rutgers University -- University
College New Brunswick
Rutgers University -- University
College Newark
Sacred Heart University
Saint Anselm College
Saint John's University
Saint Joseph College (West Hartford,
Connecticut)
Saint Joseph's College (Rensselaer,
Indiana)
Saint Joseph's University
Saint Leo University
Saint Louis University
Saint Martin's College
Saint Mary College
Saint Mary-of-the-Woods College
Saint Mary's College
Saint Mary's College of California
Saint Mary's University of Minnesota
Saint Mary's University of San
Antonio
Saint Peter's College
Salem College
Salisbury State University
Salve Regina University
Santa Clara University
Sarah Lawrence College
Savannah State University
Scripps College
Seattle Pacific University
Seattle University
Seton Hill College
Sheldon Jackson College
Shimer College
Shorter College
Siena College
Siena Heights University
Sierra Nevada College
Simmons College
31
<PAGE> 33
Simon's Rock College of Bard
Simpson College
Skidmore College
Slippery Rock University
Smith College
South Carolina State University
Southern Connecticut State University
Southern Methodist University
Southern Vermont College
Southwest Baptist University
Southwestern University
Spalding University
Spelman College
Spring Hill College
Springfield College
Springfield Technical Community
College
St. Ambrose University
St. Andrews College
St. Bonaventure University
St. Cloud State University
St. Edward's University
St. Francis College
St. John Fisher College
St. John's College (Annapolis)
St. John's College (New Mexico)
St. Lawrence University
St. Mary's College -- Maryland
St. Mary's University
St. Michael's College
St. Norbert College
St. Olaf College
St. Thomas University
State University College at Brockport
State University College at Buffalo
State University College at Cortland
State University College at Fredonia
State University College at Geneseo
State University College at New Paltz
State University College at Old
Westbury
State University College at Oneonta
State University College at Oswego
State University College at
Plattsburgh
State University College at Potsdam
State University College at Purchase
State University of New York at
Albany
State University of New York at
Binghamton
State University of New York at
Buffalo
State University of New York at Stony
Brook
State University of West Georgia
Stephen F. Austin State University
Stephens College
Stetson University
Stevens Institute of Technology
Suffolk University
SUNY Adirondack Community College
SUNY Agriculture and Technology at
Cobleskill
SUNY Agriculture and Technology at
Morrisville
SUNY Cayuga Community College
SUNY Clinton Community College
SUNY College of Ceramics at Alfred
SUNY College of Environmental Science
& Forestry
SUNY College of Technology at Alfred
SUNY College of Technology at Canton
SUNY College of Technology at Delhi
SUNY College of Technology at
Farmingdale
SUNY Columbia-Greene Community
College
SUNY Community College at Erie
(Orchard Park)
SUNY Dutchess Community College
SUNY Erie (Buffalo) Community College
SUNY Erie (Williamsville) Community
College
SUNY Fashion Institute of Technology
SUNY Finger Lakes Community College
SUNY Fulton-Montgomery Community
College
SUNY Genesee Community College
SUNY Health Science Center at
Brooklyn
SUNY Health Science Center at
Syracuse
SUNY Herkimer County Community
College
SUNY Institute of Technology at
Utica/ Rome
SUNY Jamestown Community College
SUNY Jamestown(Olean) Community
College
SUNY Jefferson Community College
SUNY Maritime College
SUNY Mohawk Valley Community College
SUNY Niagara Community College
SUNY Onondaga Community College
SUNY Schenectady County Community
College
SUNY Sullivan Community College
SUNY Tompkins Cortland Community
College
SUNY Ulster County Community College
Susquehanna University
Swarthmore College
Sweet Briar College
Syracuse University
Tabor College
Talladega College
Taylor University
Taylor University, Fort Wayne Campus
TCU
Teikyo Post University
Temple University
Texas Lutheran University
Texas Wesleyan University
Texas Woman's University
Thomas College
Tiffin University
Toccoa Falls College
Trinity College (Connecticut)
Trinity College (Washington, DC)
Trinity University
Tri-State University
Truman State University
Tulane University
Tusculum College
Tuskegee University
Union College (Kentucky)
Union College (New York)
Union University
United States International
University
Unity College
University of Alabama -- Birmingham
University of Alabama -- Huntsville
University of Alabama -- Tuscaloosa
University of Alaska, Fairbanks
University of Arizona
University of Bridgeport
University of Central Florida
The University of Charleston
University of Colorado
University of Colorado -- Boulder
University of Connecticut, Hartford
University of Connecticut, Storrs
University of Connecticut, Torrington
University of Dallas
University of Delaware
University of Denver
University of Detroit Mercy
University of Evansville
The University of Findlay
University of Georgia
University of Great Falls
University of Hartford
University of Houston
University of Illinois -- Urbana
University of Indianapolis
University of Iowa
University of Maine
University of Maine at Fort Kent
University of Maine at Machias
University of Maine at Presque Isle
University of Maine at Augusta
University of Maine at Farmington
University of Maryland -- Baltimore
County
University of Maryland -- Eastern
Shore
University of Maryland -- Germany
University of Maryland -- College
Park
University of Massachusetts at
Amherst
University of Massachusetts at Boston
University of Massachusetts at
Dartmouth
University of Massachusetts at Lowell
University of Miami
University of Michigan, Flint
University of Minnesota -- Morris
University of Minnesota -- Crookston
University of Mississippi
University of Missouri -- St. Louis
University of Mobile
University of Montana
University of Montevallo
32
<PAGE> 34
University of Nevada -- Las Vegas
University of New England
University of New Hampshire
University of New Haven
University of New Mexico
University of New Orleans
University of North Carolina
University of North
Carolina -- Asheville
University of North
Carolina -- Charlotte
University of North Carolina --
Greensboro
University of North Florida
University of Northern Iowa
University of Oregon
University of Pittsburgh
University of Pittsburgh at Bradford
University of Puget Sound
University of Redlands
University of Rhode Island
University of Rio Grande
University of Rochester
University of San Diego
University of San Francisco
The University of Scranton
University of South Carolina
University of South Carolina
Spartanburg
University of South Carolina, Aiken
University of South Florida
University of Southern California
University of Southern Colorado
University of Southern Maine
University of St. Francis
University of St. Thomas
University of Tampa
University of Texas -- Dallas
University of Texas at Arlington
The University of Tulsa
University of the Arts
University of the Incarnate Word
University of the Ozarks
University of the Pacific
University of the Sciences in
Philadelphia
University of Vermont
University of Virginia
University of Washington
University of Wisconsin, Madison
University of Wisconsin, Stout
University of Wyoming
Upper Iowa University
Ursinus College
Ursuline College
Utica College of Syracuse University
Valparaiso University
Vincennes University
Virginia Commonwealth University
Virginia Intermont College
Virginia State University
Viterbo College
Voorhees College
Wabash College
Wagner College
Wake Forest University
Walla Walla College
Walsh University
Warren Wilson College
Wartburg College
Washington & Jefferson College
Washington & Lee University
Washington College
Washington State University
Washington University
Wellesley College
Wells College
Wentworth Institute of Technology
Wesleyan College
Wesleyan University
West Chester University
West Virginia State College
West Virginia University
West Virginia Wesleyan College
Western Connecticut State University
Western Maryland College
Western Montana College
Western New England College
Western State College of Colorado
Western Washington University
Westfield State College
Westmar University
Westminster College (Missouri)
Westminster College (Pennsylvania)
Westmont College
Wheaton College
Wheeling Jesuit University
Wheelock College
Whitman College
Whittier College
Whitworth College
Widener University
Wilberforce University
Willamette University
William Jewell College
William Woods University
Williams College
Wilmington College
Wilson College
Wingate University
Winthrop University
Wittenberg University
Wofford College
The Women's College of Brenau
University
Woodbury University
Worcester Polytechnic Institute
Worcester State College
Xavier University
Yale University
York College of Pennsylvania
TECHNOLOGY AND INTELLECTUAL PROPERTY
Our technology has been designed with built-in redundancies and a
template-driven automated publishing engine to allow others to reliably and
cost-effectively integrate our content into their websites. Our technology
solution enables us to easily and rapidly permit others to add content to their
website by employing a distributed, scalable architecture adapted specifically
for our Internet-based content services, and has been designed to provide
support across multiple platforms. Our automated publishing engine dynamically
builds a page to conform to the display format and look and feel and navigation
features specific to each website. This feature helps build and maintain brands
by creating the impression to end users that they have not left the website. We
manage access to the content and process user queries from our own web server
until ultimate delivery of our services, serving as a cost-effective, single
source supplier of our services.
We rely primarily on a combination of copyright, trademarks, licenses,
trade secret laws and restrictions on disclosure to protect our intellectual
property and trade secrets. We also enter into confidentiality agreements with
our employees and consultants, and generally control access to, and distribution
of, our documentation and other proprietary information. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain
and use our intellectual property or trade secrets without authorization. In
addition, we rely in part on "clickwrap" licenses that are not signed by the end
user and, therefore, may be unenforceable under the laws of certain
jurisdictions.
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<PAGE> 35
We pursue the registration of certain of our trademarks in the United
States, although we have not secured registration of all of our marks. We have
registered a United States trademark for CollegeLink(R). Student Success has
registered a United States trademark for Making College Count(R). We also own
several unregistered copyrights in the CollegeLink(R) software. Student Success
owns several registered copyrights in its Making College Count(R) books and
related program materials. We do not have any patent rights.
We license our CollegeLink(R) software pursuant to a non-exclusive license
agreement which imposes restrictions on our customers' ability to use the
software and related services. We also seek to protect our software,
documentation and other written materials under trade secrets and copyright
laws.
We believe that we own all rights in our intellectual property, and have
not received any notices from any third party claiming ownership in our
intellectual property. We also have not received any notice that our products or
services infringe the intellectual property rights of any other person.
RECENT DEVELOPMENTS
We have recently entered into an agreement to acquire Student Success and a
letter of intent to acquire OSN. Both of our pending acquisitions are subject,
among other things, to certain usual and customary closing conditions. We will
acquire Student Success by merging it into our wholly-owned subsidiary,
CollegeLink Corporation. The aggregate purchase price for the outstanding
capital stock of Student Success is $8,000,000. We have agreed to pay the
purchase price by way of a cash payment of $3,500,000 and the balance of the
purchase price in shares of our common stock valued at the offering price of the
common shares in this offering. We will also assume all of the outstanding
options to purchase common stock of Student Success. In connection with the
acquisition, CollegeLink Corporation, will enter into one-year employment
agreements with Patrick S. O'Brien and Bradford J. Baker, two shareholders of
Student Success. The employment agreements will contain non-competition
covenants preventing Messrs. O'Brien and Baker from competing with our business
for a period of two years following termination of employment. In addition to
the salaries set forth in their respective employment agreements, Messrs.
O'Brien and Baker will each receive options to purchase 200,000 shares of our
common stock at an exercise price equal to the price per share of the stock
included in this offering, subject to certain vesting requirements.
On September 30, 1999, we sold 1,000,000 shares of Series C Convertible
Preferred Stock to PNC Investment Corp. for an aggregate purchase price of
$4,000,000. PNC Investment Corp. is an affiliate of PNC Bank, N.A. On September
29, 1999, we also entered into a Marketing Services and Administrative Agreement
with PNC Bank, N.A.
On October 26, 1999, we sold 250,000 shares of Series A Convertible
Preferred Stock to an accredited investor for an aggregate purchase price of
$1,000,000.
LEGAL PROCEEDINGS
We are not a party to any lawsuit or proceeding which, in the opinion of
management, is likely to have a material adverse effect on our business.
EMPLOYEES
As of January 11, 2000, we employed 44 persons full-time. None of our
employees is represented by a union and we have never experienced a work
stoppage. Our management considers its relations with our employees to be good.
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<PAGE> 36
FACILITIES
Our headquarters and all of our operations are located in Middletown, Rhode
Island, where we lease a total of 14,700 square feet of space pursuant to two
leases. We believe that these existing facilities are adequate to meet our
current and foreseeable requirements or that suitable additional or substitute
space will be available on commercially reasonable terms.
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<PAGE> 37
MANAGEMENT
DIRECTORS AND OFFICERS
Our directors and officers are as follows:
<TABLE>
<CAPTION>
NAME AGE* POSITION
- ---- ---- --------
<S> <C> <C>
Richard A. Fisher........................ 53 Chairman of the Board
Thomas J. Burgess........................ 34 President
Patrick O'Brien.......................... 36 Vice President -- Marketing
Bradford J. Baker........................ 35 Vice President -- Sales
Douglas J. Bush III...................... 32 Vice President -- Business Development
Timothy H. Jemison....................... 32 Vice President and Chief Technology
Officer
Edward F. Hayes.......................... 52 Vice President -- Finance
Peter J. Barkman......................... 32 Vice President and National Sales Manager
William Fink............................. 42 Vice President -- Network Operations
Ann Marie Gleason........................ 43 Vice President -- College Relations
Kevin J. High............................ 34 Director
Jeff Cunningham.......................... 47 Director
Bert Hensley............................. 39 Director
Mark Rogers.............................. 39 Director
</TABLE>
- ---------------
* As of October 19, 1999.
Our management consists of the following personnel:
RICHARD A. FISHER, CHAIRMAN. Mr. Fisher has been chairman of our board of
directors since February 1999. Mr. Fisher was a co-founder of our predecessor,
where he served as chairman of the board and general counsel from August 1996 to
February 1999. From January 1996 to August 1996, Mr. Fisher provided legal and
other consulting services to a number of start up and early stage companies.
From July 1987 through September 1994, Mr. Fisher was chairman, chief executive
officer and general counsel of, and from October 1994 to December 1995, a
consultant to, Quadrax Corporation, which he co-founded to engage in the
manufacture and sale of advanced composite materials. Mr. Fisher was a tax and
corporate partner in the Boston, Massachusetts law firm of Foley, Hoag and
Eliot, LLP, which is our legal counsel, 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).
THOMAS J. BURGESS, PRESIDENT. Mr. Burgess has served as our president
since November 11, 1999. Mr. Burgess has also served as president of our wholly
owned subsidiary, CollegeLink Corporation since August 1999. From January 1999
through August 1999, Mr. Burgess was president of ECI, Inc., CollegeLink
Corporation's predecessor. From February 1998 through January 1999, he served as
chief executive officer of 9th Square, Inc., an Internet e-commerce and
advertising software company. From January 1995 to June 1997, Mr. Burgess served
as chief executive officer of echoMEDIA, Inc., an Internet advertising
technology business. He also served as a consultant to echoMEDIA from July 1997
to February 1998. Mr. Burgess has a BA from Providence College (1987).
PATRICK O'BRIEN, VICE PRESIDENT, MARKETING. Mr. O'Brien has served as our
vice president of marketing since November 1999. He is a co-founder of Student
Success and has served as its president since its inception in June 1996. From
October 1993 through June 1996, he served as vice president and general manager
of Union Camp Corporation's Branigar subsidiary, a developer of exclusive golf
communities. From July 1990 to October 1993, Mr. O'Brien was the director of
marketing for Branigar, managing national marketing efforts for two communities,
running an in-house advertising agency, and managing telemarketing and MIS
operations. From 1985 through June 1990, Mr. O'Brien worked in brand management
and marketing at The Procter & Gamble Company, serving as brand manager of Crest
Toothpaste during this period. He is the author of three teen "success" books,
and has been featured in
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<PAGE> 38
the New York Times, USA Today, and CBS News. Mr. O'Brien graduated magna cum
laude from Miami University with BS degrees in Finance and Accounting (1985). If
we do not complete our acquisition of Student Success, Mr. O'Brien may not
continue as an officer of CollegeLink.
BRADFORD J. BAKER, VICE PRESIDENT -- SALES. Mr. Baker has served as our
vice president of sales since November 1999. He is a co-founder of Student
Success and has served as its chief operating officer and vice president of
sales since its inception in June 1996. From October 1990 to June 1996, Mr.
Baker served as vice president and general manager of Graphic Management, a
printing communications and graphic arts company. From October 1988 to September
1990, he served as a brand manager at Kraft, launching several new products and
building national distribution for the Tombstone Pizza brand. From June 1986 to
September 1988 he served as an assistant brand manager at The Procter & Gamble
Company helping integrate several acquired brands into that company. Mr. Baker
graduated magna cum laude with a BS degree in Economics from Harvard (1986). If
we do not complete our acquisition of Student Success, Mr. Baker may not
continue as an officer of CollegeLink.
DOUGLAS J. BUSH III, VICE PRESIDENT -- BUSINESS DEVELOPMENT. Mr. Bush has
served as our vice president of business development since September 1999. From
January 1996, he has served as chief financial officer and corporate secretary
for Online Scouting Network, Inc., an Internet-based athletic recruiting service
for high school athletes. From May 1995 to December 1995, Mr. Bush served as
senior consultant for Deloitte & Touche Consulting Group, focusing on business
process reengineering for firms in the financial services sector. From August
1993 through May 1995, Mr. Bush attended the University of Pennsylvania's
Wharton School of Business where he earned his MBA in Finance and Strategic
Management (1995). If we do not complete our acquisition of Online Scouting
Network, Mr. Bush may not continue as an officer of CollegeLink.
TIMOTHY H. JEMISON, VICE PRESIDENT AND CHIEF TECHNOLOGY OFFICER. Mr.
Jemison has served as our vice president and chief technology officer since
September 1999. From November 1995 he has served as president and chief
executive officer for Online Scouting Network, Inc., an Internet-based athletic
recruiting service for high school athletes. From November 1992 to October 1995,
Mr. Jemison was a senior sales engineer with Essex Computers, Network Sales
Division. Mr. Jemison holds a BS in Finance from Pennsylvania State University
(1989). If we do not complete our acquisition of Online Scouting Network, Mr.
Jemison may not continue as an officer of CollegeLink.
EDWARD F. HAYES, VICE PRESIDENT -- FINANCE. Mr. Hayes has served as our
vice president of finance since April 1999. Prior to joining us, from May 1996
to February 1999, he served as chief financial officer and engineering group
manager for Northeast Engineers & Consultants, Inc., a civil engineering firm.
From October 1987 to May 1996, 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. He also served twenty-two years in the United States Navy in
fiscal and inventory management and submarine and industrial support positions.
Mr. Hayes has taught for Pennsylvania State University, Chapman College, New
Hampshire College, Salve Regina University, and the US Naval War College in
multiple business and mathematics disciplines. 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).
PETER J. BARKMAN, VICE PRESIDENT AND NATIONAL SALES MANAGER. Mr. Barkman
has served as our vice president of sales and national sales manager since
September 1999. From November 1995, he has served as vice president of sales and
marketing for Online Scouting Network, Inc., an Internet-based athletic
recruiting service for high school athletes. From September 1993 to November
1995, Mr. Barkman was vice president of sales and national sales manager for
Interior Acoustics Inc., which provides acoustical solutions in the workplace.
From September 1990 to September 1993, Mr. Barkman was senior business manager
for College Pro Painters Inc, the largest residential painting company in North
America. Mr. Barkman holds a BS in Marketing from St. John's University (1990).
If we do not complete our acquisition of Online Scouting Network, Mr. Barkman
may not continue as an officer of CollegeLink.
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<PAGE> 39
WILLIAM FINK, VICE PRESIDENT -- NETWORK OPERATIONS. Mr. Fink has served as
our vice president of network operations since February 1999. From November 1998
to February, 1999, Mr. Fink served as an information technology consultant for
the United States Navy Information Technology Department. Mr. Fink is a
co-founder of our predecessor and served as its president from April 1996
through June 1998. Mr. Fink was in the United States Navy between 1976 and 1996.
During his last five years in the Navy, Mr. Fink was the sole network
administrator responsible for the system design, installations, administration
and technical support of a multi-location, 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) and
various operating system platforms. Mr. Fink also teaches "Connecting Businesses
to the Internet" for International Learning Tree International, Inc.
ANN MARIE GLEASON, VICE PRESIDENT, COLLEGE RELATIONS. Ms. Gleason has
served as our vice president, college relations since June 1999. Ms. Gleason
served as vice president of marketing of our predecessor from November 1997 to
June 1999. From April 1988 to November 1997, Ms. Gleason was Area Manager -- New
England for a supplier of technical adhesive machinery. Ms. Gleason has also
held senior sales and marketing positions with Augat, Inc. and Anaconda
Industries. Ms. Gleason holds a BS in Business Management from Providence
College (1977).
KEVIN J. HIGH, DIRECTOR. Mr. High has been one of our directors since
February 1999. Mr. High served as our president from February 1999 until
November 11, 1999 and served as our chief executive officer from November 11,
1999 until his resignation from that position on November 16, 1999. Mr. High was
a co-founder of our predecessor, where he served as vice president from April
1996 to December 1996 and from December 1996 to February 1999 as chief executive
officer. From April 1991 to April 1996, Mr. High served as branch manager of the
Middletown, Rhode Island office of the Corporate Securities Group, Inc. Mr. High
served as a vice president of Shearson Lehman Brothers, a national brokerage
firm, from August 1989 to April 1991.
JEFF CUNNINGHAM, DIRECTOR. Mr. Cunningham has been one of our directors
since November 1999. Since December 1998, he has served as president and chief
executive officer of MyWay.com, a majority owned subsidiary of CMGI, Inc.
MyWay.com is a provider of custom Web portal solutions. From June 1980 through
July 1998, Mr. Cunningham served as group publisher and publisher of Forbes
Magazine, publisher of American Heritage Media, and worldwide sales director for
Forbes Inc., the magazine and online publisher. From June 1976 through July
1980, Mr. Cunningham served as Eastern advertising and marketing director for
Business Week, a McGraw-Hill company. Mr. Cunningham holds a BA with honors from
Binghamton University (1974) and a degree in Finance and Accounting management
from the University of Pennsylvania's Wharton School of Business (1992).
BERT HENSLEY, DIRECTOR. Mr. Hensley has been one of our directors since
November 1999. Since August 1997, he has served as the president and chief
executive officer of Morgan Samuels Company, a national executive search firm.
From February 1993 to August 1997, Mr. Hensley was at Korn/Ferry International,
an executive search firm, where he served as vice president and led the
industrial practice for that firm's Los Angeles office. From February 1991 to
February 1993, he was a general partner of Meridian Strategies, Inc., a
strategic consulting and venture management firm. While at Meridian, he served a
broad range of clients on engagements involving corporate strategy, mergers,
acquisitions and divestitures, organization analysis and design, and process and
systems improvement. From February 1990 to February 1991, Mr. Hensley was a
building and project manager at LaSalle Partners, a real estate management and
advisory firm. From September 1988 to February 1990, he was an associate brand
manager for Kraft-General Foods. From May 1983 to August 1988, Mr. Hensley
served in the United States Army Aviation Branch, where he held various
leadership and staff positions, including pilot, aviation detachment commander,
battalion adjutant and brigade war plans officer. Mr. Hensley holds a JD from
Loyola Law School (1993), a MS in Business Administration from Boston University
(1987), and a BS in Engineering, with a concentration in International
Relations, from West Point (1983).
MARK ROGERS, DIRECTOR. Mr. Rogers has been one of our directors since
February 1999 and served as a director of our predecessor from April 1998 to
February 1999. Since 1989, Mr. Rogers has been a
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<PAGE> 40
principal in NFT Ventures, including acting as interim chief executive officer
and chief financial officer 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 several other high-tech
companies. Mr. Rogers holds a BBA from Pace University (1981).
JAI N. GUPTA, PH.D. Dr. Gupta was one of our directors from February 1999
to January 4, 2000 and served as a director of our predecessor from June 1998 to
February 1999. Dr. Gupta is the founder and president of EER Systems Inc., which
is a principal shareholder of the Company.
Our board of directors is divided into three classes, labeled Class I,
Class II and Class III, with the term of one of the three classes of directors
expiring each year at our annual meeting or special meeting held in lieu of our
annual meeting. Our Class I director is Bert Hensley, who will serve until our
next annual meeting or until his successor is elected and qualified, the Class
II directors are Mark Rogers and Jeffrey Cunningham, who will serve until our
2001 annual meeting or until their successors are elected and qualified, and the
Class III directors are Kevin J. High and Richard A. Fisher, who will serve
until our 2002 annual meeting or until their successors are qualified. The
number of directors has been fixed at six, and there is currently one vacancy on
the board of directors for a Class I director.
The holder of Series C Convertible Preferred Stock has the right to appoint
one director but has not yet appointed anyone. The holder of Series C
Convertible Preferred Stock has appointed an observer to the board of directors.
Our executive officers are appointed by and serve at the discretion of the
board of directors. There are no family relationships among any of our executive
officers or directors.
BOARD COMMITTEES
We established an audit committee and a compensation committee on May 7,
1999. The audit committee consists of Mr. Cunningham and Mr. Rogers. The audit
committee reviews our internal accounting procedures and consults with and
reviews the services provided by our independent accountants. The compensation
committee consists of Mr. Hensley and Mr. Cunningham. The compensation committee
reviews and recommends to the board of directors the compensation and benefits
of all our officers and directors, including stock compensation and loans, and
establishes and reviews general policies relating to the compensation and
benefits of our employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to establishing the compensation committee, the board of directors as
a whole performed the functions delegated to the compensation committee. No
member of the board of directors or the compensation committee serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of directors
or compensation committee.
DIRECTOR COMPENSATION
Outside directors who are not principals or shareholders which own more
than 10% of our common stock receive an annual option to purchase 10,000 shares
of our common stock. The price is determined as the closing bid price of the
stock on the date of our annual meeting. As of June 30, 1999, we had 20,000 of
such options outstanding. These outstanding options have an exercise price of
$6.00 per share. Further, each director entitled to a grant of options receives
compensation of $1,000 for each meeting attended. All directors receive
reimbursement for out-of-pocket expenses incurred in attending meetings of the
board.
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<PAGE> 41
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation provides that our directors shall not be
personally liable to us or to our stockholders for monetary damages for breach
of fiduciary duty as a director, except to the extent that the elimination or
limitation of such liability is not permitted by the Delaware General
Corporation Law. Our certificate of incorporation further provides for the
indemnification of our directors and officers to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law (and includes provisions
authorizing the advancement of expenses incurred in connection with certain
applicable proceedings). A principal effect of these provisions is to limit or
eliminate the potential liability of our directors for monetary damages arising
from breaches of their duty of care, subject to certain exceptions.
Our certificate of incorporation provides that the foregoing rights of
indemnification and advancement of expenses shall not be deemed exclusive of any
other rights to which our directors and officers may be entitled under any law
(common or statutory), agreement, vote of stockholders or disinterested
directors or otherwise.
At present, there is no pending litigation or proceeding involving any
director or officer as to which indemnification will be required or permitted
under our certificate of incorporation, by-laws, or an indemnification
agreement. We are not aware of any threatened litigation or proceeding that may
result in a claim for such indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by any of our directors, officers or
controlling persons in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
our chief executive officer and our four other most highly compensated executive
officers who were employed by us at June 30, 1999, excluding officers paid less
than $100,000 annually (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------------
NAME AND FISCAL YEAR OTHER ANNUAL SECURITIES ALL OTHER
PRINCIPAL POSITION ENDED SALARY COMPENSATION UNDERLYING OPTIONS COMPENSATION
- ------------------ ------------- -------- ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C>
Richard A. Fisher......... June 30, 1999 $105,093 -- 414,412 --
Chairman June 30, 1998 60,622 -- -- --
June 30, 1997 27,404 -- -- --
Kevin J. High............. June 30, 1999 $126,040 -- 414,412 --
President June 30, 1998 90,865 -- -- --
June 30, 1997 54,928 -- -- --
</TABLE>
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<PAGE> 42
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options to each of the Named
Executive Officers during the fiscal year ended June 30, 1999. No stock
appreciation rights were granted during the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR(1) PER SHARE DATE 5%($) 10%($)
- ---- ---------- -------------- --------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Fisher.... 14,412 1.24 2.50 June 30, 2008 22,659 57,423
400,000 34.30 4.00 February 11, 2009 1,006,231 2,549,988
Kevin J. High........ 14,412 1.24 2.50 June 30, 2008 22,659 57,423
400,000 34.30 4.00 February 11, 2009 1,006,231 2,549,988
</TABLE>
- ---------------
(1) Based on an aggregate of 1,161,185 shares subject to options granted to
employees during fiscal 1999.
(2) These amounts represent hypothetical gains that could be achieved for the
option if exercised at the end of the option term. These gains are based on
assumed rates of stock appreciation of 5% and 10% compounded annually from
the date the option was granted to its expiration date and are not presented
to forecast possible future appreciation, if any, in the price of our common
stock. The gains shown are net of the option exercise price, but do not
include deductions for taxes or other expenses associated with the exercise
of the option or the sale of the underlying shares. The actual gains, if
any, on the exercise of the option will depend on the future performance of
our common stock, the optionee's continued employment through the vesting
period applicable to the option and the date on which the option is
exercised.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information regarding stock options
exercised by Named Executive Officers in the fiscal year ended June 30, 1999,
and exercisable and unexercisable stock options held as of June 30, 1999 by each
of the Named Executive Officers. The value of unexercised in-the-money options
has been calculated by determining the difference between the exercise price per
share payable upon exercise of such options and the closing market price on June
30, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END AT FISCAL YEAR-END
ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Fisher.......... -- -- 86,937 327,475 228,181 855,368
Kevin J. High.............. -- -- 86,937 327,475 228,181 855,368
</TABLE>
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Mr. Fisher, our chairman,
and Mr. High, one of our directors. Each employment agreement provides for four
years of employment commencing February 11, 1999 at an annual salary of
$175,000. Each employment agreement will automatically be renewed for an
additional three-year term unless we or the employee give notice of an intent
not to renew the agreement at least 60 days before the initial four-year term
ends. The salary levels have been increased (with effect from January 1, 2000)
to $200,000 based on our obtaining in excess of $7,000,000 of new equity capital
since commencement of these employment agreements. Pursuant to these agreements,
Mr. Fisher and Mr. High has each received an option to purchase up to 400,000
shares of common stock at an exercise price of $4.00 per share. These options
vest in equal monthly installments over 24 months commencing on the date of
grant. In addition, on September 1, 1999, Messrs. Fisher and High were each
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<PAGE> 43
granted an option to purchase 100,000 shares of common stock at $5.00 per share.
These options vest in full on September 1, 2001.
If either Mr. Fisher or Mr. High is terminated by us without cause or
terminates his employment agreement for good reason, such employee will receive
from us his then applicable base salary and continuation of benefits until the
later of the expiration of the term of his employment agreement or either two
years after the date of termination in the case of Mr. High or one year after
the date of termination in the case of Mr. Fisher. In addition, all outstanding
options held by such employee shall become immediately exercisable in full.
The employment agreements also provide that we will provide a life
insurance policy and a monthly automobile allowance for these employees.
We have also entered into an employment agreement with our president, Mr.
Burgess. Mr. Burgess' employment agreement provides for one year of employment
commencing July 1, 1999 at an annual salary of $140,000. Pursuant to his
employment agreement, Mr. Burgess has received an option to purchase 300,000
shares of common stock at an exercise price of $6.125. The option vests as to
100,000 shares on June 30, 2000. The balance of the option shares vest in equal
monthly installments over the two year period commencing July 31, 2000 and
ending June 30, 2002, provided that Mr. Burgess continues his employment with
us. If Mr. Burgess is terminated for any reason other than cause, his option
will immediately become exercisable in full. In addition, Mr. Burgess'
employment agreement provides that we will issue 5,000 shares of common stock to
him on January 1, 2000.
BENEFIT PLANS
We maintain a 401(k) plan, qualified under Section 401(k) of the Internal
Revenue Code of 1986, as amended. All of our employees who are at least 18 years
of age are eligible to make salary reduction contributions pursuant to the
401(k) plan. A participant may contribute a maximum of 15% of his or her pre-tax
salary, commissions and bonuses through payroll deductions (up to the
statutorily prescribed annual limit of $10,000 in 1999) to the 401(k) plan.
1996 Stock Plan.
Our predecessor adopted our 1996 stock plan on December 16, 1996. The 1996
plan authorizes the grant of incentive stock options in accordance with section
422 of the Internal Revenue Code of 1986, as amended, and non-qualified options.
We have reserved a total of 1,441,250 shares of common stock for issuance under
the 1996 plan. No incentive stock option may be granted under the 1996 plan
after December 16, 2006. In certain situations, including changes in our capital
structure due to a stock dividend, stock split, recapitalization,
reorganization, merger, consolidation, combination or the like, the board of
directors may, in order to prevent changes in the existing rights of
optionholders, adjust the number and class of shares available for option grants
under the 1996 plan or revise the terms of outstanding options under the 1996
plan. However, the board shall not make any adjustment that would disqualify an
incentive stock option or that would change the minimum number of shares
issuable upon exercise of an option.
Our officers and other key employees are eligible to receive incentive
stock options under the 1996 plan. They, together with other persons who are not
employees of our company but who may provide services to us, are also eligible
to receive non-qualified options. Options may be granted in combination with or
in place of awards granted under any other employee plan maintained by us. The
aggregate fair market value of common stock with respect to which incentive
stock options are exercisable for the first time by any employee during any
calendar year may not exceed $100,000.
The term of any incentive stock option granted under the 1996 plan may not
exceed ten years or, in case of an optionee holding 10% of our shares, five
years from the date of the grant. The 1996 plan imposes certain restrictions on
exercisability of options in the event of termination of the optionees'
employment with our company.
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<PAGE> 44
Our board of directors administers the 1996 plan. The board of directors
has the authority at any time to suspend, terminate or amend the 1996 plan, to
grant options under the 1996 plan, to determine the terms of each option, to
designate options as incentive stock options or non-qualified options, to
prescribe, amend and rescind rules and regulations relating to the 1996 plan,
and to make all such other determinations in connection with the administration
of the 1996 plan so long as such action does not adversely affect the rights of
holders of previously granted options. All actions taken and determinations made
by the board of directors will be final and binding upon us, the optionees and
all other interested persons.
The terms and conditions of option agreements may vary. Under the 1996 plan
the exercise price of incentive stock options may not be less than 100%, or, in
case of an optionee who owns stock possessing more than 10% of the total
combined voting power of our capital stock, 110%, of the fair market value of
our common stock on the date the option is granted.
As of the date of this prospectus, options to acquire 216,185 shares of
common stock have been granted under the 1996 plan. The board of directors does
not intend to issue any further options under the 1996 plan.
1999 Stock Option Plan.
Our board of directors adopted our 1999 stock option plan on May 7, 1999
and our stockholders approved the 1999 plan on November 11, 1999. Only our
officers and key employees may participate in the 1999 plan. The 1999 plan
authorizes the grant of incentive stock options and non-qualified stock options.
We have reserved a total of 1,550,000 shares of common stock for issuance upon
exercise of outstanding options under the 1999 executive plan, subject to
adjustment in the event of any stock dividend, stock split, recapitalization,
reorganization, or certain defined changes of control. The number of shares with
respect to which options may be granted to any participant under the 1999 plan
may not exceed 750,000 shares in any fiscal year.
Our board of directors administers the 1999 plan. The board has the
authority to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the 1999 plan and to interpret its provisions. The board
may delegate authority under the 1999 plan to one or more committees of the
board and, subject to certain limitations, to one or more of our executive
officers. Subject to certain limitations contained in the 1999 plan, the board
of directors, the compensation committee or any other committee or any executive
officer to whom the board delegates authority, as the case may be, selects the
recipients of options and determines the number of shares of common stock
covered by options, the dates upon which such options become exercisable, the
exercise price and duration of options, and all other terms and conditions of
option grants.
Options under the 1999 plan may be granted at an exercise price which may
be less than, equal to or greater than the fair market value of our common stock
on the date of the grant. The exercise price of options may be paid in cash, by
check, by a "cashless exercise" through a broker, by surrender to us of common
shares, or by any combination of the foregoing permitted forms of payment. Under
present law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986 may not be granted with an exercise price less than the fair market
value of the common stock on the date of the grant (or less than 110% of the
fair market value in the case of incentive stock options granted to optionees
holding more than 10% of the combined voting power of our capital stock).
In the event of certain defined change in control events, all outstanding
options under the 1999 plan shall accelerate and become immediately exercisable
for a period of fifteen days (or such period as the board may prescribe)
immediately prior to the scheduled consummation of the change of control. Upon
consummation of the change of control, the 1999 plan and all outstanding and
unexercised options shall terminate as of the effective date of the change in
control unless the 1999 plan is continued after the change in control and such
options are assumed by the surviving entity.
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<PAGE> 45
No incentive stock option may be granted under the 1999 plan after August
31, 2009, but the vesting and effectiveness of options previously granted may
extend beyond that date. Our board of directors may at any time amend, suspend
or terminate the 1999 plan.
As of the date of this prospectus, options to acquire 795,000 shares of our
common stock have been granted under the 1999 plan.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
We have in the past borrowed money from certain of our officers. Such loans
have since been repaid in full. In no case did the amount borrowed exceed
$60,000.
During fiscal 1998, we entered into a joint venture agreement with EER
Systems to develop an online training service. During fiscal 1999, we have also
borrowed a total of $300,000 from EER Systems, one of our stockholders. One of
our former directors, Dr. Jai Gupta, is the president of EER Systems. These
loans have since been repaid in full.
On August 10, 1999, we entered into a consulting agreement with Mr. Gerald
Paxton, one of our stockholders. The consulting agreement provides for an annual
salary of $133,900, and expires on December 31, 2000. Mr. Paxton was formerly
the president of ECI, Inc., CollegeLink Corporation's predecessor.
On October 13, 1999, we entered into a consulting agreement with the
Honorable Bruce Sundlun. The consulting agreement provides for a monthly salary
of $5,000, an option to purchase 25,000 shares of our common stock at a per
share exercise price of $5.00 per share, and a cash payment of $75,000 upon the
execution of an agreement by The College Board and us making us the exclusive
provider of electronic and on-line college applications for The College Board.
The consulting agreement expires on October 13, 2000.
We have entered into an agreement to acquire Student Success. Messrs.
Patrick O'Brien and Bradford Baker, current officers of CollegeLink, are
stockholders and officers of Student Success.
We have entered into a letter of intent to acquire Online Scouting Network.
Messrs. Timothy Jemison, Douglas Bush III and Peter Barkman, current officers of
CollegeLink, are stockholders and officers of Online Scouting Network.
On May 10, 1999 we entered into an agreement with the Interactive Business
Channel ("IBC") pursuant to which IBC was to provide certain investor relations
services to us. On January 3, 2000 we received a letter from IBC's attorneys
making a claim for issuance of 25,000 shares of common stock and 150,000
warrants to purchase shares of common stock. According to the agreement the
warrants are exercisable at exercise prices ranging from $10 to $24.50 per
share. We do not believe this claim has merit and we intend to defend against
this claim.
On April 15, 1999 we entered into a contract with Genesis Communications
Group, Inc., ("Genesis") to provide investor relations services to us. Genesis
has made a claim for issuance of 35,000 shares of common stock under this
agreement. We believe the claim is without merit and we intend to defend against
it.
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<PAGE> 46
PRINCIPAL STOCKHOLDERS AND STOCKHOLDERS GRANTING
OVER-ALLOTMENT OPTION
The following table sets forth the beneficial ownership of our outstanding
common stock on January 19, 2000 by
- each of our directors and executive officers,
- all of our directors and executive officers as a group,
- each stockholder who was known by us to be the beneficial owner of more
than five percent (5%) of our outstanding shares, and
- each stockholder who has granted the underwriters a 45-day option to
cover over-allotments.
Unless otherwise noted below, the address of each person listed on the
table is c/o CollegeLink.com Incorporated, 55 Hammerlund Way, Middletown, Rhode
Island 02842.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER THE OFFERING
-------------------------------- -----------------------------
NAME OF BENEFICIAL OWNER NUMBER OF SHARES(1) PERCENTAGE NUMBER OF SHARES PERCENTAGE
- ------------------------ ------------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
Kevin J. High(2)......................... 1,386,506 10.78 1,386,506 9.21
Richard A. Fisher(3)..................... 1,024,421 7.97 1,024,421 6.80
William Fink............................. 671,636 5.32 671,636 4.53
Ann Marie Gleason........................ 319,958 2.54 319,958 2.16
Mark Rogers.............................. 161,420 1.28 161,420 1.09
Thomas J. Burgess(4)..................... 92,889 * 92,889 *
Jeff Cunningham.......................... -- -- --
Bert Hensley............................. -- -- --
Edward F. Hayes.......................... -- -- --
Patrick S. O'Brien....................... -- -- --
Bradford J. Baker........................ -- -- --
Timothy H. Jemison....................... -- -- --
Douglas J. Bush III...................... -- -- --
Peter J. Barkman......................... -- -- --
EER Systems(5)........................... 1,500,345 11.89 1,500,345 10.13
All Directors and Officers as a Group.... 3,656,830 27.91 3,656,830 23.90
NAME OF STOCKHOLDER GRANTING
OVER-ALLOTMENT OPTION(6)(7)
- -----------------------------------------
Frank Fernandez, Jr. .................... 10,000 * 10,000 *
Chelverton Fund, Ltd. ................... 30,000 * 30,000 *
John Sununu.............................. 43,750 * 43,750 *
BMJ Partnership.......................... 6,250 * 6,250 *
Carribean Investors Group Ltd. .......... 25,000 * 25,000 *
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the SEC.
485,884 shares of common stock issuable by us pursuant to options which may
be exercised within 60 days after January 19, 2000 and not subject to
repurchase by us are deemed to be beneficially owned and outstanding for
purposes of calculating the number of shares and the percentage
beneficially owned by a person or entity.
Except as otherwise indicated, each stockholder named in the table has sole
voting and investment power with respect to the shares set forth opposite
such stockholder's name. For purposes of calculating the percentage
beneficially owned, the number of shares deemed outstanding before the
offering includes: (a) 9,926,239 shares of common stock outstanding as of
January 19, 2000; (b) 2,690,369 shares of common stock issuable upon the
conversion of preferred stock (assuming the maximum number of shares to be
issued upon conversion); and (c) the presently exercisable options and
presently exercisable warrants held by that person.
(2) Includes 1,143,564 shares of common stock and 242,942 shares of common
stock issuable pursuant to currently exercisable options.
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<PAGE> 47
(3) Includes 781,479 shares of common stock held by Karen B. Fisher, the wife
of Richard A. Fisher, and 242,942 shares of common stock issuable pursuant
to currently exercisable options granted to Richard A. Fisher.
(4) Includes 92,889 shares of common stock. Includes 27,760 shares of common
stock issuable upon conversion of Series B Preferred Stock.
(5) The address for EER Systems is 3750 Centerview Drive, Chantilly, VA 20151.
(6) The underwriters have agreed to exercise in full the over-allotment option
granted to them by us before exercising the over-allotment options granted
to them by our stockholders.
(7) The shares of common stock subject to the over-allotment option are
issuable upon conversion of shares of Series A Preferred Stock owned by
these individuals.
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<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
As of the date hereof, our authorized share capital consists of 100,000,000
shares of common stock, par value $0.001 per share (the "Common Shares"), of
which 9,926,239 Common Shares are issued and outstanding, and 10,000,000 shares
of preferred stock, $.01 par value, of which (a) 2,500,000 shares have been
designated Series A (the "Series A Shares") of which 1,140,000 Series A Shares
are issued and outstanding, (b) 300,000 shares have been designated Series B
(the "Series B Shares") of which 279,771 Series B Shares are issued and
outstanding and (c) 1,000,000 shares have been designated Series C (the "Series
C Shares") of which 1,000,000 Series C Shares are issued and outstanding, and
(d) 6,200,000 shares are undesignated and available for issuance. The following
is a summary of the principal attributes of our share capital.
COMMON SHARES
The rights, privileges, restrictions and conditions attached to the Common
Shares are as follows:
Voting
Holders of Common Shares are entitled to receive notice of and to attend
and vote at all meetings of our shareholders, except meetings of holders of
another class of shares. Each Common Share entitles the holder thereof to one
vote.
Dividends
Subject to the preferences accorded to holders of Series A Shares, Series C
Shares and any other of our shares ranking senior to the Common Shares from time
to time with respect to the payment of dividends, holders of Common Shares are
entitled to receive, if, as and when declared by the Board of Directors, such
dividends as may be declared thereon by the Board of Directors from time to
time.
Liquidation, Dissolution or Winding-Up
In the event of our voluntary or involuntary liquidation, dissolution or
winding-up, or any other distribution of our assets among our shareholders for
the purpose of winding-up our affairs (such event referred to herein as a
"Distribution"), holders of Common Shares are entitled, subject to the
preferences accorded to holders of the Series A Shares, Series C Shares and any
other of our shares ranking senior to the Common Shares from time to time with
respect to payment on a Distribution, to receive an amount equal to that
distributed to the holders of Series A Shares and Series C Shares per share of
common stock held, if sufficient assets are available, and to share equally, pro
rata, in our remaining property.
The Common Shares have no preemptive, redemption, conversion or
subscription rights.
UNDESIGNATED PREFERRED STOCK
Our board of directors is authorized to provide for the issuance of
preferred stock in one or more series, and in connection with the creation of
any such series, to establish the number of shares to be included in each series
and to fix the voting powers, preferences, qualifications and special or
relative rights or privileges of each series all to the full extent permitted by
the Delaware General Corporation Law. The board of directors is authorized to
issue preferred stock with voting, conversion and other rights and preferences
that could adversely affect the voting power or other rights of the holders of
Common Shares.
As indicated above, 1,140,000 Series A Shares, 279,771 Series B Shares, and
1,000,000 Series C Shares have been issued. The issuance of additional preferred
stock or of rights to purchase preferred stock could have the effect of making
it more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, a majority of our outstanding voting stock.
47
<PAGE> 49
SERIES A SHARES
Voting
Each Series A Share entitles the holder thereof to one vote for each Common
Share into which such Series A Share is then convertible.
Liquidation
In the event of any Distribution, the holders of the issued and outstanding
Series A Preferred Stock are entitled to receive $4.00 per share (subject to
adjustment) plus all accrued and unpaid distributions declared thereon, without
interest, before any distribution of the Company's assets is made to the holders
of any other capital stock. After such payment is made to the holders of the
issued and outstanding Series A Preferred Stock, then, before any further
distribution of the Company's assets is made, a dollar amount equal to that
already distributed to the holders of the Series A Preferred Stock will be
distributed pro-rata to the holders of the Company's other issued and
outstanding capital stock, subject to the rights of any other class of capital
stock set forth in the Company's certificate of incorporation, as amended. After
such payment is made to the holders of such other issued and outstanding capital
stock, the holders of the issued and outstanding Series A Preferred Stock are
entitled to participate with the holders of all other classes of issued and
outstanding capital stock in the final distribution of the Company's remaining
assets, and, subject to any rights of any other class of capital stock set forth
in the Company's certificate of incorporation, as amended, the remaining assets
of the Company will be divided and distributed ratably among the holders of both
the Series A Preferred Stock and the other capital stock then issued and
outstanding.
Dividends
The holders of the Series A Shares are entitled to receive, out of funds at
the time legally available for payment of dividends in the State of Delaware, a
cumulative dividend at the rate of six percent (6%) of the stated value per
share per annum, payable quarterly in equal installments on the first days of
each successive quarter each year, if, as and when determined by the board of
directors, before any dividend shall be set apart or paid on any other capital
stock for such year.
Conversion
Each Series A Share is convertible, at the option of the holder thereof,
into one Common Share. The conversion ratio will be automatically adjusted to
account for any stock dividend, stock split, combination of shares,
reclassification or other similar event with respect to the Common Shares. In
addition, we may require mandatory conversion of all, but not less than all, of
the Series A Shares on or after April 2, 2000 provided that: (a) the average
closing bid price of the Common Shares on the Over-the-Counter Bulletin Board or
the Nasdaq Stock Market or other principal market for the Common Shares, as
applicable, for the 20 consecutive trading days immediately preceding the date
of the required conversion has exceeded $6.00 per share, or (b) we are
reorganized in a transaction involving the exchange of our Common Shares for
shares of a publicly traded U.S. corporation.
SERIES B SHARES
Voting
Except as otherwise required by law or as set forth in our certificate of
incorporation, the holders of Series B Shares are not entitled to vote on any
matter or to notice of any meeting of the stockholders.
Liquidation
The holders of Series B Shares are not entitled to any preferential payment
or distribution in the event of any Distribution, but shall share ratably on an
as-converted basis assuming automatic conversion
48
<PAGE> 50
in any distribution of our assets to all the holders of Common Stock and the
other holders of Preferred Stock.
Dividends
The holders of Series B Shares are not entitled to receive any dividends.
Conversion
On August 10, 2000 all outstanding Series B Shares shall automatically be
converted into a number of Common Shares determined by dividing $15.00 (as
adjusted to account for any stock dividend, stock split, combination of shares,
reclassification or other similar event with respect to the Series B Shares) by
the greater of $7.625 and the average of the closing bid price per share for the
20 consecutive trading days immediately prior to August 10, 2000 and multiplying
the result by the number of outstanding Series B Shares. Prior to August 10,
2000, each Series B Share is convertible at the option of the holder thereof
into such number of Common Share as is determined by dividing $15.00 by the
average of the closing bid price per share for the 10 consecutive trading days
immediately prior to the date of conversion, provided, however, that no Series B
Share is convertible on any day on which such average would not exceed $15.00
(as adjusted to account for any stock dividend, stock split, combination of
shares, reclassification or other similar event with respect to the Common
Shares).
SERIES C SHARES
Voting
Except as required by applicable law, the holders of Series C Shares are
not entitled to vote on any matter, provided, however, that if there are at
least 500,000 shares of Series C Preferred Stock outstanding (such number being
subject to proportional adjustment for any subdivisions, splits or reverse
splits of the Series C Shares), the holders of Series C Shares voting as a
separate class are entitled to elect one director to the board of directors or
appoint one observer to the board of directors.
Liquidation
In the event of any Distribution, the holders of the issued and outstanding
Series C Preferred Stock are entitled to receive $4.00 per share (subject to
adjustment) plus all accrued and unpaid distributions whether or not earned or
declared thereon, without interest, before any distribution of the Company's
assets is made to the holders of any other class of capital stock, except for
holders of the Series A Convertible Preferred Stock. After payments have been
made to all holders of any series of the Company's issued and outstanding
preferred stock, then, before any further distribution of the Company's assets
is made, a dollar amount equal to that already distributed to the holders of any
series of the Company's issued and outstanding preferred stock will be
distributed pro-rata to the holders of the Company's issued and outstanding
classes of capital stock, subject to the rights of any other class of capital
stock set forth in the Company's certificate of incorporation, as amended. After
such payment is made to the holders of such other issued and outstanding capital
stock, the holders of the issued and outstanding Series C Preferred Stock will
be entitled to participate with the holders of all other classes of issued and
outstanding capital stock in the final distribution of the Company's remaining
assets.
Dividends
The holders of the Series C Shares are entitled to receive, out of funds at
the time legally available for payment of dividends in the State of Delaware, a
cumulative dividend at the rate of six percent (6%) of the stated value of such
shares per share per annum. Such dividends shall be payable quarterly in arrears
on the last day of March, June, September and December, if, as and when
determined by the board of directors.
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<PAGE> 51
Conversion
Each Series C Share is convertible, at the option of the holder thereof,
into one Common Share. The conversion ratio will be automatically adjusted to
account for any stock dividend, stock split, combination of shares,
reclassification or other similar event with respect to the Common Shares. In
addition, we may require mandatory conversion of all, but not less than all, of
the Series C Shares on or after September 30, 2000 provided that: (a) the
average closing bid price of the Common Shares on the Over-the-Counter Bulletin
Board or the Nasdaq Stock Market, as applicable, for the 20 consecutive trading
days immediately preceding the date of the required conversion has exceeded
$6.00 per share, and (b) we elected to mandatorily convert all other series of
preferred stock. In no event, however, shall PNC Bank Corp. or any subsidiary
thereof (collectively, "PNC") be required or allowed to convert any Series C
Shares if doing so would cause PNC to hold five percent (5%) or more of our
issued and outstanding Common Shares and any of our shares of voting preferred
stock, unless PNC has provided us with a written opinion of counsel that this
greater percentage of beneficial ownership is permitted by all applicable laws
and regulations.
WARRANTS
We have outstanding warrants to purchase an aggregate of 940,283 shares of
common stock at a weighted average exercise price of $1.87 per share. The
warrants are currently exercisable in whole or in part, at any time or from time
to time until December 31, 2004. The warrants contain certain protections
against dilution resulting from stock splits, stock dividends and similar
events.
REGISTRATION RIGHTS
We sold 890,000 Series A Shares to The Provident Life and Accident
Insurance Company ("Provident") and six accredited investors commencing on April
2, 1999, pursuant to a Series A Convertible Preferred Stock Purchase Agreement
(the "Series A Agreement"). The Series A Agreement provided that we would
include all of the Common Shares into which the Series A Shares purchased
thereunder are convertible in the first registration statement we file under the
Securities Act of 1933, and that we would bear all expenses of such
registration, other than underwriting discounts and commissions. Provident and
each of the other investors in the Series A Shares have agreed not to, directly
or indirectly, sell or otherwise dispose of their shares for a period of 180
days after the date of this prospectus and to delay the filing of a registration
statement for the resale of Common Shares issuable upon conversion of their
Series A Shares. In consideration of this agreement we have agreed to issue
warrants to purchase up to 73,400 shares of common stock at $8.00 per share.
In connection with the issuance and sale of Series A Shares as described
above, we issued to Brennan Dyer & Company, LLC ("Brennan Dyer") 432,375 Common
Shares as consideration for advisory services pursuant to an agreement between
us and Brennan Dyer, dated November 16, 1998. In connection with this issuance,
we agreed to include these shares in a registration statement filed for sale of
Common Shares by us. The principals of Brennan Dyer have agreed not to, directly
or indirectly, sell or otherwise dispose of its shares for a period of 180 days
after the date of this prospectus and to delay the filing of a registration
statement for the resale of its Common Shares.
In connection with the merger of ECI into us, holders of the common stock
of ECI received a total of 550,809 Common Shares (the "ECI Common Shares") and
234,771 shares of our Series B Preferred Shares (the "ECI Preferred Shares").
Pursuant to a Registration Agreement executed on August 10, 1999 in connection
with the ECI merger, we agreed to register at our expense the ECI Common Shares
and the Common Shares issuable upon conversion of the ECI Preferred Shares on a
registration statement on Form S-3 and to keep such registration statement
effective until August 10, 2000, subject to the condition that any registration
of such shares may be delayed, if in our reasonable judgment, such delay is
desirable to permit the consummation by it of a financing including a public
offering by it. Mr. Burgess and Mr. Paxton have also agreed, in such
Registration Agreement, to sign any lock-up agreement with respect to all of
their ECI Common Shares which an underwriter for a public offering of our stock
may require such holder and our senior management to sign.
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<PAGE> 52
In connection with the ECI merger, we, ECI and USA Group Noel-Levitz, Inc.
("USA Group") entered into a letter agreement in settlement of certain claims
USA Group may have made (the "Letter Agreement"). Pursuant to the Letter
Agreement, we issued to USA Group 108,196 Common Shares (the "USA Group Common
Shares") and 45,000 Preferred Shares (the "USA Group Preferred Shares"). In
connection with the Letter Agreement, the Company and USA Group entered into a
Registration Rights Agreement, dated as of July 28, 1999. Pursuant to this
Agreement, if we propose to register any of our securities under the Securities
Act for our own account or for the accounts of other stockholders on a form that
would also permit the registration of the USA Group Common Shares or of the
Common Shares issuable upon conversion of the USA Group Preferred Shares, USA
Group is entitled to notice of such registration and to have the USA Group
Common Shares and the Common Shares issuable upon conversion of the USA Group
Preferred Shares included in such registration, subject to the right of the
underwriters (in the event of a registration pursuant to an underwritten
offering of common stock) to limit the number of shares included in such
registration.
On September 30, 1999, we sold 1,000,000 shares of Series C Convertible
Preferred Stock to PNC Investment Corp. pursuant to a Stock Purchase Agreement
(the "Series C Agreement"). The Series C Agreement provides that we shall
include all of the Common Shares into which the Series C Shares are convertible
in a registration statement on Form S-3 promptly after we become eligible to
file such a registration statement with the SEC.
On October 26, 1999, we sold 250,000 shares of Series A Convertible
Preferred Stock to an accredited investor pursuant to a Series A Convertible
Stock Purchase Agreement. The Stock Purchase Agreement provides that we shall
include all of the Common Shares into which the investor may convert its Series
A Shares in our first registration statement under the Securities Act filed 180
days after the effective date of this offering.
On December 22, 1999, we agreed to include the shares of common stock
(other than shares sold pursuant to the over-allotment option) held by Frank
Fernandez, Jr., Chelverton Fund Ltd., John Sununu, BMJ Partnership, and
Caribbean Investors Group Ltd. in a registration statement on Form S-3 promptly
after we become eligible to file such a registration statement with the SEC.
These persons have agreed not to directly or indirectly offer for sale, contract
to sell, sell, grant to any other person the right to acquire, or otherwise
dispose of or enter into any transaction or arrangement which is designed to, or
could be expected to, result in the disposition at any time in the future of any
shares of common stock for a period of 180 days after the date of this
prospectus without the consent of the representatives.
POSSIBLE AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION
On November 11, 1999, our stockholders approved four alternative amendments
to our certificate of incorporation providing for a one for two consolidation of
Common Shares, a two for three consolidation of Common Shares, a three for four
consolidation of Common Shares and a four for five consolidation of Common
Shares, respectively, and authorized our board of directors to file one such
amendment on or before March 15, 2000. The purpose of this action was, among
other things, to permit our board of directors to adjust, if necessary, our
capitalization to facilitate a public offering. In light of this offering, our
board of directors has irrevocably decided that it will not file any such
amendment after the closure of this offering.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BY-LAWS
A number of provisions of Delaware law, our certificate of incorporation
and our by-laws could make more difficult any attempt to acquire us by means of
a tender offer, a proxy contest or otherwise and the removal of incumbent
officers and directors. These provisions are intended to discourage certain
types of coercive takeover and inadequate takeover bid, even though such a
transaction may offer our shareholders the opportunity to sell their stock at a
price above the prevailing market price. This also encourages persons seeking to
acquire control of us to negotiate with us first.
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<PAGE> 53
Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the time that such stockholder became an
interested stockholder.
Section 203 does not apply if:
- prior to such time, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by persons who are
directors and also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
- on or subsequent to such time, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock which is not owned by
the interested stockholder.
The application of Section 203 may limit the ability of stockholders to
approve a transaction that they may deem to be in their best interests.
Section 203 defines "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation to or with the interested stockholder;
- subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an "interested stockholder" as any entity
or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person associated with, affiliated with or
controlling or controlled by such entity or person.
Our Certificate of Incorporation and By-Laws
Our certificate of incorporation and by-laws provide that, unless otherwise
prescribed by law or our certificate of incorporation, only a majority of the
board, the chairman of the board or our president is able to call a special
meeting of our stockholders. The certificate of incorporation and the by-laws
also provide that, unless otherwise prescribed by law or the certificate of
incorporation, stockholder action may be taken only at a duly called and
convened annual or special meeting of our stockholders and may not be taken by
written consent. These provisions, taken together, prevent our stockholders from
forcing consideration by the stockholders of stockholder proposals over the
opposition of our board, except at an annual meeting.
Our by-laws also establish an advance notice procedure for our stockholders
to make nominations of candidates for election as director, or to bring other
business before an annual meeting of our stockholders. Under this notice
procedure, notice of stockholder nominations or proposals to be made at an
annual or special meeting in lieu of an annual meeting generally must be
received by us not less than 60 days nor
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<PAGE> 54
more than 90 days prior to the scheduled date of the meeting. However, if less
than 70 days notice or prior public disclosure of the date of the meeting is
given, then notice must be received not later than the 10th day following the
earlier of the day such notice was mailed or the day such public disclosure was
made. Notice of stockholder nominations or proposals to be made at a special
meeting (other than a special meeting in lieu of an annual meeting), must be
received not later than the 10th day following the earlier of the day such
notice was mailed or the day such public disclosure was made. These notices must
contain certain prescribed information.
The foregoing notice procedure affords our board an opportunity to consider
the qualifications of proposed director nominees or the merit of stockholder
proposals, and, to the extent deemed appropriate by the board, to inform our
stockholders about such matters. The notice procedure also provides a more
orderly procedure for conducting annual meetings of our stockholders. The
by-laws do not give the board any power to approve or disapprove stockholder
nominations for the election of directors or proposals for action. However, the
notice procedure may prevent a contest for the election of directors or the
consideration of stockholder proposals. This could deter a third party from
conducting a solicitation of proxies to elect its own slate of directors or to
approve its own proposal if the proper advance notice procedures are not
followed, without regard to whether consideration of such nominees or proposals
might be harmful or beneficial to us and our stockholders.
Under our certificate of incorporation 79,184,359 shares of common stock
and 7,309,631 shares of preferred stock remain authorized and not reserved for
any purpose and are available for issuance. Although these shares were
authorized to allow the board, without further stockholder approval, to issue
additional shares of our capital stock to raise capital or to effect potential
acquisitions in the future, the authorization of such additional shares could
incidentally have an anti-takeover effect, in that such shares could potentially
be issued in such manner as to hamper the efforts of persons who might attempt
to gain control of CollegeLink. Also, our certificate of incorporation
specifically provides that our board of directors has the authority to create
the special terms and conditions of the preferred stock which it issues. The
board is authorized to establish the number of shares of preferred stock to be
issued in any series it decides to issue, and to fix the voting powers,
designations, preferences and relative, participating, optional or other special
rights of the preferred stock, including voting rights and conversion rights,
and the qualifications, limitations and restrictions thereon. Accordingly, it is
possible for the board to seek to authorize the issuance of a series of
preferred stock with rights and preferences that could affect an attempt to
acquire control of CollegeLink. For example, such additional authorized shares
could potentially be issued to dilute the stock ownership of persons seeking to
obtain control of CollegeLink, or shares of preferred stock with favorable
voting rights, such as the right to elect certain additional directors, or to
provide the holders of other special rights could be created and issued to
parties that support our management.
Our certificate of incorporation divides our board of directors into three
classes, labeled Class I, Class II and Class III, each containing, insofar as
possible, an equal number of directors, with the term of one of the three
classes expiring each year at our annual meeting or special meeting in lieu of
such annual meeting. Our certificate of incorporation further provides that any
vacancy on the board of directors resulting from an increase in the number of
directors may be filled by the affirmative vote of a majority of the directors
then in office, and any other vacancy on the board of directors may be filled by
the affirmative vote of a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. Any director elected to
fill a vacancy not resulting from an increase in the number of directors would
serve for a term equivalent to the remaining unserved portion of the term of
such newly elected director's predecessor.
Under Delaware law, the holders of a majority of a corporation's
outstanding shares may remove directors with or without cause unless such power
of removal is limited by the corporation's certificate of incorporation. Such
law also provides that if a corporation's certificate of incorporation provides
for classification of directors, directors may be removed only for cause unless
otherwise set forth in the certificate of incorporation. Cause is not defined
under Delaware law for this purpose. Our certificate of incorporation provides
that directors may be removed by a majority of our stockholders only for
"cause."
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"Cause" for this purpose is defined as (a) willful and continued material
failure, refusal or inability to perform one's duties to us or the willful
engaging in gross misconduct materially and demonstrably damaging to us; or (b)
conviction for any crime involving moral turpitude or any other illegal act that
materially and adversely reflects upon our business, affairs or reputation or on
one's ability to perform one's duties to us.
The foregoing provisions of our certificate of incorporation will restrict
the ability of our stockholders to change the composition of our board of
directors by extending the time required to elect a majority of directors from
one to two years, under most circumstances. Thus, the existence of a classified
board may have an anti-takeover effect because a person who has gained voting
control of CollegeLink will be unable to gain immediate control of our board of
directors unless the stockholder can obtain sufficient votes to amend our
certificate of incorporation pursuant to the supermajority requirements for such
an amendment set forth in our certificate of incorporation.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American
Securities Transfer & Trust Incorporated. Its address is 12039 West Alameda
Parkway, Lakewood, Colorado 80228 and its telephone number at this location is
(303) 986-5400.
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<PAGE> 56
UNDERWRITING
Under the terms and subject to the conditions set forth in an underwriting
agreement dated January 24, 2000, the underwriters named below, for whom
Cruttenden Roth Incorporated and Pennsylvania Merchant Group are acting as
representatives, have severally agreed to purchase from us, and we have agreed
to sell to the underwriters, the number of shares of common stock set forth
below opposite each underwriter's name, at the public offering price per share
less the underwriting discounts and commissions set forth on the cover page of
this prospectus.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ------------ ---------
<S> <C>
Cruttenden Roth Incorporated................................ 575,000
Pennsylvania Merchant Group................................. 575,000
Fahnestock & Co. Inc. ...................................... 150,000
Gruntal & Co., L.L.C. ...................................... 150,000
Sanders Morris Mundy Inc. .................................. 150,000
Sutro & Co. Incorporated.................................... 150,000
C.E. Unterberg, Towbin...................................... 150,000
John G. Kinnard & Company, Incorporated..................... 75,000
Pacific Crest Securities.................................... 75,000
Paulson Investment Company, Incorporated.................... 75,000
Schneider Securities, Inc. ................................. 75,000
---------
Total............................................. 2,200,000
=========
</TABLE>
The underwriting agreement sets forth that the obligations of the several
underwriters to pay for and accept delivery of the shares and provides that the
several underwriters will purchase all of the shares, if any of the shares are
purchased. The Company and the underwriters may agree prior to executing the
underwriting agreement to a sale of a lesser number of shares.
The representatives have advised us that the underwriters initially propose
to offer the shares of common stock directly to the public at the initial public
offering price per share set forth on the cover page of this prospectus and to
certain dealers at such price less a concession not in excess of $0.22 per
share. The underwriters may allow, and these dealers may reallow, a concession
not in excess of $0.10 per share to other dealers. After this offering, the
public offering price, concession and re-allowance may be changed.
We have granted to the underwriters an option, exercisable during the
45-day period after the date of this prospectus, to purchase up to an aggregate
of 272,500 additional shares of common stock at the public offering price per
share less the underwriting discounts and commissions set forth on the cover
page of this prospectus. Also, five of our stockholders have granted the
underwriters a 45-day option to purchase up to 57,500 shares of common stock at
the public offering price per share less the underwriting discounts and
commissions set forth on the cover page of this prospectus. This option is
subject to these stockholders' further agreement to sell these shares at the
time the underwriters exercise their option. To the extent these stockholders
decide not to sell such shares, we will issue shares to the underwriters. The
underwriters may exercise their option only to cover over-allotments, if any,
made in connection with the sale of the shares of common stock offered hereby.
To the extent that the underwriters exercise these options, each underwriter
will be obligated, subject to certain conditions, to purchase the number of
additional shares of common stock proportionate to the underwriters' initial
commitment reflected in the preceding table.
We entered into a consulting agreement with Cruttenden Roth Incorporated
pursuant to which we have agreed to pay an amount equal to 3.0% of the aggregate
price of the shares of common stock offered
55
<PAGE> 57
hereby including the shares of common stock underlying the over-allotment
option, if and to the extent it is exercised as set forth on the cover of this
prospectus.
We and the underwriters have agreed to indemnify each other against, or to
contribute to losses arising out of, untrue statements of omissions of material
facts contained in this prospectus and the registration statement of which it is
a part in connection with this offering. We and the underwriters are each aware
that, in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act of 1933 and is therefore unenforceable.
The representatives, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase shares so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of shares in the open
market after the distribution has been completed in order to cover syndicate
short positions. Penalty bids permit the representatives, on behalf of the
underwriters, to reclaim a selling concession from a syndicate member when the
shares originally sold by the syndicate member are purchased in a syndicate
covering transaction to cover syndicate short positions. Such over-allotment,
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the common stock to be higher than it would otherwise be in
the absence of such transactions. These transactions may be effected on the
American Stock Exchange or otherwise and, if commenced, may be discontinued at
any time.
We have agreed not to and we believe that each of our directors, officers,
employees, stockholders, option holders and warrant holders will agree not to,
directly or indirectly, offer for sale, contract to sell, sell, grant any other
person the right to acquire or otherwise dispose of (or enter into any
transaction or arrangement which is designed to, or could be expected to, result
in the disposition at any time in the future of) any shares of common stock for
a period of 180 days after the date of this prospectus, without the consent of
the representatives. We believe that each of our directors, officers, employees,
stockholders, option holders and warrant holders will agree not to exercise any
registration rights relating to any shares of common stock for a period of 180
days after the date of this prospectus, without the consent of the
representatives. We have agreed not to file with the SEC a registration
statement relating to any securities, for a period of 180 days after the date of
this prospectus, without the consent of the representatives.
The common stock has been approved for quotation on the American Stock
Exchange System under the symbol "APS."
In connection with this offering, we have agreed to sell the
representatives' warrants to the representatives for a nominal price. The
representatives' warrants entitle the representatives to purchase shares in an
amount equal to 10% of the total number of shares sold in this offering
(excluding shares subject to the underwriters' over-allotment option). The
shares issuable upon exercise of the representatives' warrants will be in all
respects identical to the shares offered to you. The representatives' warrants
will be limited to a term of five years from the date of this prospectus and
will be exercisable for a four-year period commencing 12 months after the date
of this prospectus, at a per share exercise price equal to 165% of the initial
public offering price per share set forth on the cover page of this prospectus.
For a period of one year following the effective date of this offering the
representatives' warrants may not be sold, assigned, transferred, pledged or
hypothecated except to officers or partners of the underwriters and members of
the selling group and/or their officers or partners. Pursuant to the terms of
the underwriting agreement, we have agreed to register the securities underlying
the representatives' warrants in this offering. For the term of the
representatives' warrants, the holders thereof are given the opportunity to
profit from a rise in the market price of the common stock, which may result in
a dilution of the interest of other stockholders. As a result, we may find it
more difficult to raise additional equity capital if it should be needed for our
business while the representatives' warrants are outstanding. The holders of the
representatives' warrants might be expected to exercise them at a time when we
would, in all likelihood,
56
<PAGE> 58
be able to obtain additional equity capital on terms more favorable to us than
those provided by the representatives' warrants. Any profit realized on the sale
of the shares issuable upon the exercise of the representatives' warrants may be
deemed additional underwriting compensation.
The preceding description includes a summary of the principal terms of the
underwriting agreement and the representatives' warrant agreements and does not
purport to be complete. The underwriting agreement and the form of
representatives' warrant agreement are filed as exhibits to the registration
statement of which this prospectus forms a part and should be referenced for the
complete contents of these documents. Each statement is qualified in all
respects by reference to these documents.
The Company had an agreement with Gerard Klauer Mattison & Co., Inc.
("GKM") pursuant to which the Company had engaged GKM to act as lead investment
banker to the Company in connection with a proposed public offering by the
Company (the "GKM Engagement"). On November 24, 1999, the Company and GKM
entered into an agreement pursuant to which the GKM Engagement and the agreement
with GKM were terminated (the "Settlement Agreement"). The Settlement Agreement
provides, among other things, that (1) in consideration of GKM releasing a right
of first refusal to act as lead underwriter, the Company pay to GKM an amount
equal to 1% of the gross proceeds raised in this offering, (2) the Company
reimburse GKM for its out-of-pocket expenses, including its legal fees,
associated with the GKM Engagement, amounting to $115,359.74 and (3) the Company
pay GKM a fee of $50,000 for past advisory services and the release by GKM of
its right to act as sole and exclusive financial advisor to the Company in
connection with any business combination involving the Company. The Company has
reimbursed GKM for its out-of-pocket expenses.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for us by
Foley, Hoag & Eliot LLP, Boston, Massachusetts. Legal matters will be passed
upon for the underwriters by Nutter, McClennen & Fish, LLP, Boston
Massachusetts.
EXPERTS
Radin, Glass & Co., LLP, independent accountants, have audited our
consolidated financial statements at June 30, 1998 and 1999 and for each of the
three years in the period ended June 30, 1999, as set forth in their report. We
have included financial statements in this prospectus and elsewhere in the
registration statement in reliance on the report of Radin, Glass & Co., LLP
given on their authority as experts in accounting and auditing.
Radin, Glass & Co., LLP, independent accountants, have audited the
financial statements of Online Network, L.L.C., T/A Online Scouting Network at
September 30, 1998 and 1997, and for each of the two years in the period ended
September 30, 1998, as set forth in their report. We have included financial
statements in this prospectus and elsewhere in the registration statement in
reliance on the report of Radin, Glass & Co., LLP given on their authority as
experts in accounting and auditing.
Paolilli & Jarek, LLC, independent accountants, have audited the financial
statements of ECI, Inc. at December 31, 1998, 1997 and 1996, and for each of the
three years in the period ended December 31, 1998, as set forth in their report.
We have included financial statements in this prospectus and elsewhere in the
registration statement in reliance on the report of Paolilli & Jarek, LLC, given
on their authority as experts in accounting and auditing.
Schenck & Associates SC, independent accountants, have audited the
financial statements of Student Success (a Division of Graphic Management
Corporation) at December 31, 1998 and 1997, and for each of the two years in the
period ended December 31, 1998, as set forth in their report. We have included
financial statements in this prospectus and elsewhere in the registration
statement in reliance on the report of Schenck & Associates SC, given on their
authority as experts in accounting and auditing.
57
<PAGE> 59
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC for our
common stock offered hereby. This prospectus does not contain all of the
information set forth in the registration statement. You should refer to the
registration statement and its exhibits for additional information. Whenever we
make reference in this prospectus to any of our contracts, agreements or other
documents, the references are not necessarily complete and you should refer to
the exhibits attached to the registration statement for the copies of the actual
contract, agreement or other document.
You can read our SEC filings, including the registration statement, over
the Internet at the SEC's website at http://www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference facilities at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade
Center, Thirteenth Floor, New York, New York 10048. You may also obtain copies
of the documents at prescribed rates by writing to the Public Reference Section
of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference facilities.
We are subject to the reporting requirements of Section 15(d) of the
Securities Exchange Act of 1934. We are current in the filing of all required
reports with the SEC.
58
<PAGE> 60
INDEX TO FINANCIAL STATEMENTS
PAGE
----
COLLEGELINK.COM INCORPORATED
Report of Independent Auditor............................... F-2
Balance Sheets as of June 30, 1999 and 1998................. F-3
Statements of Operations for the years ended June 30, 1999,
1998 and 1997............................................. F-4
Statement of Changes in Shareholders' Equity (Deficit)...... F-5
Statements of Cash Flows for the years ended June 30, 1999,
1998 and 1997............................................. F-6
Notes to Financial Statements............................... F-7
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES PRO FORMA
Pro Forma Balance Sheet as of June 30, 1999 (Unaudited)..... F-15
Pro Forma Statement of Operations for the year ended June
30, 1999 (Unaudited)...................................... F-16
Notes to the Pro-Forma Financial Statements................. F-17
ECI, INC
Report of Independent Auditor............................... F-19
Balance Sheets as of December 31, 1998 and 1997............. F-20
Statements of Operations for the years ended December 31,
1998, 1997 and 1996....................................... F-21
Statement of Changes in Stockholders' Deficit............... F-22
Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996....................................... F-23
Notes to Financial Statements............................... F-24
Unaudited Balance Sheet as of June 30, 1999 and Balance
Sheet as of December 31, 1998............................. F-29
Unaudited Statement of Operations for the six months ended
June 30, 1999............................................. F-30
Unaudited Statement of Cash Flows for the six months ended
June 30, 1999............................................. F-31
Notes to Unaudited Financial Statements..................... F-32
ONLINE SCOUTING NETWORK, L.L.C.
Report of Independent Auditor............................... F-33
Balance Sheets as of September 30, 1998 and 1997............ F-34
Statements of Operations for the years ended September 30,
1998 and 1997............................................. F-35
Statements of Cash Flows for the years ended September 30,
1998 and 1997............................................. F-36
Notes to Financial Statements............................... F-37
Unaudited Balance Sheet as of June 30, 1999................. F-41
Unaudited Statement of Operations for the nine months ended
June 30, 1999............................................. F-42
Unaudited Statement of Cash Flows for the nine months ended
June 30, 1999............................................. F-43
Notes to Unaudited Financial Statements..................... F-44
STUDENT SUCCESS (A DIVISION OF GRAPHIC MANAGEMENT
CORPORATION)
Report of Independent Auditor............................... F-45
Balance Sheets as of December 31, 1998 and 1997............. F-46
Statement of Income and Changes in Division Equity for the
years ended December 31, 1998 and 1997.................... F-47
Statements of Cash Flows for the years ended December 31,
1998 and 1997............................................. F-48
Notes to Financial Statements............................... F-49
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
Balance Sheets as of September 30, 1999 and June 30, 1999
(Unaudited)............................................... F-51
Statements of Operations for the three months ended
September 30, 1999 and 1998 (Unaudited)................... F-52
Statement of Changes in Shareholders' Equity (Deficit)
(Unaudited)............................................... F-53
Statements of Cash Flows for the three months ended
September 30, 1999 and 1998 (Unaudited)................... F-54
Notes to Financial Statements (Unaudited)................... F-55
STUDENT SUCCESS, INC.
Balance Sheet as of September 30, 1999 (Unaudited).......... F-57
Statement of Operations for the nine months ended September
30, 1999 (Unaudited)...................................... F-58
Statement of Changes in Shareholders' Equity (Unaudited).... F-59
Statement of Cash Flows for the nine months ended September
30, 1999 (Unaudited)...................................... F-60
Notes to Financial Statements (Unaudited)................... F-61
F-1
<PAGE> 61
INDEPENDENT AUDITOR'S REPORT
Shareholders and Directors
Collegelink.com Incorporated
We have audited the accompanying balance sheets of Collegelink.com
Incorporated as of June 30, 1999 and 1998, and the related statements of
operations, shareholders' equity (deficit) and cash flows for each of the three
years ended June 30, 1999, 1998 and 1997. 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 Collegelink.com Incorporated
as of June 30, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years ended June 30, 1999, 1998 and 1997 in
conformity with generally accepted accounting principles.
Radin, Glass & Co., LLP
Certified Public Accountants
New York, New York
September 3, 1999, except
for Note 1, which is
dated November 19, 1999.
F-2
<PAGE> 62
COLLEGELINK.COM INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
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 12,878
----------- -----------
TOTAL CURRENT ASSETS.............................. 1,556,512 131,353
FURNITURE AND EQUIPMENT, net of accumulated depreciation.... 250,484 190,553
SOFTWARE DEVELOPMENT, net of accumulated amortization of $0
and $36,287, respectively................................. -- 36,283
----------- -----------
$ 1,806,996 $ 358,189
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
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' DEFICIT:
Preferred stock, $1,000 stated value, $.001 par value,
authorized 1,000 shares, issued and outstanding 543
shares................................................. -- 542,500
Preferred stock, $0.01 par value, authorized 7,500,000.... -- --
Series A Convertible Preferred Stock, $4.00 stated value,
$.01 par value, authorized 2,500,000 shares, issued and
outstanding 775,000 shares............................. 3,100,000 --
Common stock, $.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 (DEFICIT).............. 1,376,652 (69,321)
----------- -----------
$ 1,806,996 $ 358,189
=========== ===========
</TABLE>
See notes to financial statements
F-3
<PAGE> 63
COLLEGELINK.COM INCORPORATED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
NET REVENUES:
Development of proprietary technology................. $ -- $ 500,000 $ --
Online training service revenues.................... 162,884 -- --
Web site hosting.................................... 235,522 210,700 82,971
Other revenues...................................... 163,515 533,183 376,754
----------- ---------- ----------
561,921 1,243,883 459,725
----------- ---------- ----------
EXPENSES:
Payroll, payroll taxes and related benefits......... 1,173,439 1,018,786 589,356
Depreciation and amortization....................... 131,545 93,554 66,949
Advertising......................................... 49,428 13,268 127,155
Other general and administrative expenses........... 1,751,881 741,028 558,978
----------- ---------- ----------
3,106,293 1,866,636 1,342,438
LOSS FROM OPERATIONS.................................. (2,544,372) (622,753) (882,713)
INTEREST EXPENSE...................................... 42,053 7,579 5,786
----------- ---------- ----------
NET LOSS.............................................. $(2,586,425) $ (630,332) $ (888,499)
=========== ========== ==========
NET LOSS PER SHARE.................................... $ (0.40) $ (0.18) $ (0.29)
=========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES USED IN
COMPUTATION......................................... 6,531,153 3,499,857 3,033,036
=========== ========== ==========
</TABLE>
See notes to financial statements
F-4
<PAGE> 64
COLLEGELINK.COM INCORPORATED
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL SHAREHOLDERS'
-------------------- ------------------ PAID-IN EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT)
------- ---------- --------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -- June 30, 1996...... -- $ -- 2,338,866 $2,338 $ 39,974 $ (61,962) $ (19,650)
Issuance of shares with
debt.......................... -- -- 36,994 37 2,082 -- 2,119
Issuance of shares for
compensation.............. -- -- 9,512 10 12,365 -- 12,375
Issuance of shares to
founder................... -- -- 422,684 423 (350) (25,000) (24,927)
Issuance of warrants for
compensation.............. -- -- -- -- 14,931 -- 14,931
Sale of common shares, less
expenses.................. -- -- 674,499 674 874,253 -- 874,927
Preferred issued............ 105 105,000 -- -- (4,945) -- 100,055
Net loss for the period..... -- -- -- -- -- (888,499) (888,499)
------- ---------- --------- ------ ---------- ----------- -----------
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
F-5
<PAGE> 65
COLLEGELINK.COM INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------
1999 1998 1997
----------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(2,586,425) $(630,332) $(888,499)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization........................... 131,545 93,554 66,949
Write off of accounts receivables....................... 89,800 -- --
Net loss on equipment disposal.......................... 1,231 8,061 3,033
Issuance of shares, options and warrants as compensation
and services.......................................... 384,308 52,180 27,106
Increase (decrease) to cash attributable to changes in
assets and liabilities:
Accounts receivable..................................... (117,850) (34,121) (37,992)
Due from sale of "dial-up" access service............... -- 69,810 (69,810)
Prepaid expenses and other assets....................... (72,372) (6,190) 13,518
Increase in other assets................................ -- -- (3,000)
Accounts payable........................................ 242,384 (15,874) 49,863
Accrued expenses........................................ (16,320) 23,615 24,952
Accrued payroll......................................... (131,984) 131,941 84,768
Unearned revenues....................................... (22,126) 30,180 26,946
----------- --------- ---------
NET CASH USED IN OPERATING ACTIVITIES................... (2,097,809) (277,176) (702,166)
----------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment....................... (26,520) (80,216) (216,795)
Proceeds from equipment disposals......................... 9,600 1,665 29,155
Proceeds from rent deposit................................ 5,050 -- --
Capitalization of software development costs.............. -- (72,570)
----------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES................. (11,870) (78,551) (260,210)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred shares................ 3,100,000 437,500 --
Proceeds/payments from issuance of debt................... 66,021 -- 114,306
Proceeds from issuance of common shares................... 195,000 -- 874,500
Issuance of shares to founder............................. -- -- (25,000)
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) (2,141)
----------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES............. 3,434,416 399,662 961,665
----------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 1,324,737 43,935 (711)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 46,362 2,428 3,139
----------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 1,371,100 $ 46,362 $ 2,428
=========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................................ $ 32,979 $ 7,579 $ 5,786
=========== ========= =========
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
F-6
<PAGE> 66
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS
CollegeLink.com Incorporated, a Delaware corporation ("CollegeLink.com"),
is the surviving corporation in a merger on November 16, 1999 between
Cytation.com Incorporated, a New York corporation and CollegeLink.com
Incorporated. Cytation.com Incorporated was the surviving corporation in a
merger on March 5, 1999 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") (Note 7). Cytation.com Incorporated was
previously known as Stylex Homes, Inc. ("Stylex"). Although Stylex was
incorporated in 1969, it did not conduct any business after 1992.
CollegeLink.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 Web sites 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. At the time, WSI discontinued its Web
content sale and development business (except for work in process and Web
hosting) and focused its operations on the development of its online training
system which generated some revenue for the balance of the fiscal year ended
June 30, 1999. As a result of the acquisition of ECI, Inc. in August 1999,
CollegeLink.com, through its CollegeLink Corporation subsidiary, is now engaged
in providing online college application and related services to high school
students and their parents (Note 12).
CollegeLink.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
CollegeLink.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 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.
F-7
<PAGE> 67
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 Web services are recognized as
such services are performed. Revenues from Web site 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 earnings per common share, assuming dilution, computation
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 computation for each of the three years ended June
30, 1999, 1998 and 1997 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 three years
ended June 30, 1999, 1998 and 1997, respectively.
3. CASH AND CASH EQUIVALENTS
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, a Delaware corporation, ("Cytation Delaware") 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 the Company purchased the assets of Cytation Delaware, of
which it was a fifty percent owner, in exchange for equity. (Note 7).
F-8
<PAGE> 68
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 EER. The
Company repaid the note in May 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.
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.
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 the years ended June 30, 1997 and 1996, the Company issued
$18,750 and $50,000 of debt with 36,994 and 49,325 shares, respectively. The
amounts allocated to the shares have been recorded as debt discount and were
amortized.
b. In February 1997, the Company completed a sale of 691,800 of its common
shares at $1.30 per share. A portion of these shares was sold over the Internet.
c. During the year ended June 30, 1997, the Company issued $105,000 of
debt units consisting of promissory notes and stock purchase warrants ("Units").
The promissory notes were automatically converted to shares of Series A 10%
Convertible Preferred Stock, $.001 par value per share, with a stated value of
$1,000 ("CPS"). 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.
d. During July through November 1997, the Company issued approximately
$438,000 of additional Units. The promissory notes were automatically
convertible into CPS. 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. Each share of CPS was subject to mandatory
and automatic conversion into the Company's common shares upon the effective
date of an initial public offering of the Company's common
F-9
<PAGE> 69
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
shares or September 1, 1998, whichever occurred first. All shares of CPS were
automatically converted into the Company's common shares on September 1, 1998.
e. 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 the
year ended June 30, 1999, the Company cancelled the authorization of one
thousand shares of $0.001 par value, preferred stock.
f. In July 1998, the Company issued approximately 1,325,000 shares of its
common stock 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.
g. 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.
h. In December 1998, when management believed the fair market value of the
shares was $0.002 per share, management reduced the exercise price of previously
outstanding stock options to $0.002 and all employees exercised such shares for
compensation. Such compensation was recorded at $0.002 per share for 1,372,000
shares.
i. 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.
j. In January 1999, the Company received $195,000 from the issuance in a
private placement of approximately 375,000 shares of its common stock.
k. On March 5, 1999 Cytation Corporation was acquired by Cytation.com
Incorporated (later renamed CollegeLink.com Incorporated) through a "reverse
merger" transaction, whereby each outstanding share of Cytation Corporation
(formerly WSI) was converted into 5.765 shares of CollegeLink.com Incorporated.
The merger has been accounted for as a "Recapitalization" as if CollegeLink.com
Incorporated issued additional shares for the $233 of assets of Stylex Homes,
Inc. The number of common share information has been adjusted to reflect the
effects of the merger agreement.
l. In April 1999, the Company received $3,100,000 in exchange for 775,000
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 Preferred A into Common Stock
of the Company at a ratio of one share of Common Stock for each share of
Preferred A. The Company may require conversion on or after the first
anniversary of the initial purchase 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 issued and
outstanding Preferred A are entitled to receive $4.00 for each share of
Preferred A, before any distribution of the assets of the Company shall be made
to the holders of any other capital stock.
m. In March 1999, the Company amended its Articles of Incorporation to
change the aggregate number of shares the Company has authority to issue to
110,000,000 shares, consisting of 100,000,000 shares of common stock, par value
$.001 per share and 10,000,000 shares of preferred stock, par value $.01 per
share.
F-10
<PAGE> 70
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
n. 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 totaling $376,000 which amount has been included in general and
administrative expenses.
o. In June 1999, the Company issued 20,000 shares of its common stock for
the purchase of computer equipment valued at $145,000.
p. 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 to be 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, exercisable at $6.00 per option, outstanding.
q. 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 years ended June 30, 1999,
1998 and 1997, respectively: annual dividends of $0.00, expected volatility of
65% at June 30, 1999 and 20.0% at June 30, 1998 and 1997, 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 year ended
June 30, 1999 was $1.48, and $0.77 for both years ended June 30, 1998 and 1997,
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, $672,000 and $902,000,
$0.45, $0.19 and $0.30, in years ended June 30 1999, 1998 and 1997,
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, 1996............................... -- --
Granted.................................................... 639,915 .43
Exercised................................................ -- --
Expired or cancelled..................................... -- --
---------- ----
Outstanding at June 30, 1997............................... 639,915 .43
Granted.................................................. 861,868 .43
Exercised................................................ -- --
Expired or cancelled..................................... (57,650) .43
---------- ----
Outstanding at June 30, 1998............................... 1,444,133 .43
Granted.................................................. 1,441,186 4.32
Exercised................................................ (1,444,133) .01
Expired or cancelled..................................... -- --
---------- ----
Outstanding at June 30, 1999............................... 1,441,186 4.32
========== ====
</TABLE>
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.
F-11
<PAGE> 71
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 repaid in April 1999.
b. Rent expense under all operating leases was approximately $42,000,
$43,000, and for each of the years ended June 30, 1999, 1998 and 1997,
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 Aquidneck Avenue location, at a
rate of $450 per month.
c. The Company entered into an agreement on April 19, 1999, with a
California corporation ("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 stockholders 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 the 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. CERTAIN 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 Web site development.
Revenue from Web site 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
F-12
<PAGE> 72
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 1997
-------- ---------- --------
<S> <C> <C> <C>
PRODUCT SALES
Development of proprietary technology............. $ -- $ 500,000 $ --
Online training service revenues................ 162,884 -- --
Web site hosting................................ 235,521 210,700 82,971
Web site design and origination................. 52,718 416,574 109,883
Subscriber access............................... 95,923 53,853 172,882
Other........................................... 14,875 62,756 93,989
-------- ---------- --------
Total sales..................................... $561,921 $1,243,883 $459,725
======== ========== ========
</TABLE>
No customer accounted for more than ten percent of the revenues, other than
for online training services (Note 4), of the Company in each of the three years
ended June 30, 1999, 1998 and 1997, 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 1997
--------- --------- ---------
<S> <C> <C> <C>
Income tax benefit computed at statutory rate... $(905,000) $(221,000) $(311,000)
Tax benefit not recognized...................... 905,000 221,000 311,000
--------- --------- ---------
Provision for income taxes...................... $ -- $ -- $
========= ========= =========
</TABLE>
12. SUBSEQUENT EVENTS
On August 10, 1999, the Company acquired ECI, Inc. through a merger
transaction. ECI is a provider of computer-based college applications and
admissions services.
The acquisition was structured as a merger of ECI with and into the
Company's wholly-owned subsidiary CollegeLink.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
F-13
<PAGE> 73
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 shares of the Company's Series B Stock. The
Company reserved 550,369 shares of its common stock for the conversion of the
above Series B Stock.
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.
F-14
<PAGE> 74
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
COLLEGELINK.COM INCORPORATED AND
SUBSIDIARIES PRO FORMA BALANCE SHEET
(UNAUDITED)
THE FOLLOWING PRO FORMA BALANCE SHEET OF COLLEGELINK, ECI, OSN AND SSI AT
JUNE 30, 1999 IS BASED UPON HISTORICAL FINANCIAL DATA OF COLLEGELINK, ECI, OSN
AND SSI
GIVING EFFECT TO THE PROPOSED TRANSACTIONS
<TABLE>
<CAPTION>
COLLEGELINK
COLLEGELINK ECI OSN SSI PRO FORMA
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1999 1999 1999 DEBIT CREDIT 1999
----------- ----------- ----------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents...... $ 1,371,100 $ 2,258 $ 2,410 $40,859 $4,435,000(7) $ $ 1,901,627
450,000(6D)
3,500,000(8A)
Accounts receivable.......... 100,163 -- -- 88,237 53,500(5C) 134,900
Prepaid expenses and other
assets..................... 85,249 111,760 9,341 6,208 212,558
----------- ----------- ----------- -------- -----------
TOTAL CURRENT ASSETS... 1,556,512 114,018 11,751 135,304 2,249,085
GOODWILL (including Other
Acquired Assets)............. -- -- -- -- 8,228,280(5A) 18,873,297
50,000(5B)
2,499,592(6A)
50,000(6B)
7,995,505(8A)
50,000(8B)
FURNITURE AND EQUIPMENT, net... 250,484 56,877 65,439 27,632 400,432
SOFTWARE DEVELOPMENT, net...... -- -- 54,428 -- 54,428
OTHER ASSETS................... 41,695 41,695
----------- ----------- ----------- -------- -----------
$ 1,806,996 $ 170,895 $ 131,618 $204,631 $21,618,937
=========== =========== =========== ======== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities................ $ 395,344 $ 1,035,499 $ 814,514 $125,136 $ 53,500(5C) $ 50,000(5B) $ 1,809,589
207,404(5E) 50,000(6B)
450,000(6A) 50,000(8B)
Unearned revenue............. 35,000 -- 87,748 75,000 197,748
Loan and notes payable....... -- 1,002,578 67,250 -- 1,002,578(5A) 67,250
----------- ----------- ----------- -------- -----------
TOTAL CURRENT
LIABILITIES.......... 430,344 2,038,077 969,512 200,136 2,074,587
LONG-TERM DEBT................. -- 912,188 311,698 -- 912,188(5A) 311,698
COMMITMENTS AND
CONTINGENCIES................ -- -- -- -- --
SHAREHOLDERS' DEFICIT:
Preferred shares............. 3,100,000 -- -- -- 4,175,000(5A) 11,710,000
4,435,000(7)
1,350,000(6A)
4,500,000(8A)
Paid-in capital.............. 2,468,870 996,797 -- -- 995,542(5A) 3,396,000(5A) 11,714,870
Accumulated equity
(deficit).................. (4,192,218) (3,776,167) (1,149,592) 4,495 3,776,167(5A) (4,192,218)
4,495(8A) 1,149,592(6A)
----------- ----------- ----------- -------- -----------
1,376,652 (2,779,370) (1,149,592) 4,495 19,232,652
----------- ----------- ----------- -------- -----------
$ 1,806,996 $ 170,895 $ 131,618 $204,631 $21,618,937
=========== =========== =========== ======== ===========
Pro forma outstanding common
shares....................... 9,152,211 550,809 225,000 1,125,000 -- -- 11,053,020
----------- ----------- ----------- -------- -----------
</TABLE>
See "Collegelink.com Incorporated and Subsidiaries' Notes to Pro Forma
Financial Statements assuming the purchase of ECI, OSN and SSI on June 30,
1999."
F-15
<PAGE> 75
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
THE FOLLOWING PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED
JUNE 30, 1999 OF COLLEGELINK, ECI, OSN AND SSI IS BASED ON HISTORICAL FINANCIAL
DATA OF COLLEGELINK, ECI, OSN AND SSI GIVING EFFECT TO THE PROPOSED TRANSACTIONS
<TABLE>
<CAPTION>
COLLEGELINK ECI OSN SSI COLLEGELINK
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1999 JUNE 30, 1999 JUNE 30,1999 ADJUSTMENTS JUNE 30, 1999
------------- ------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET REVENUES....................... $ 561,921 $ 104,073 $ 98,178 $1,075,668 $ 1,839,840
EXPENSES:
Payroll, payroll taxes and
related benefits............... 1,173,439 400,248 9,261 384,205 1,967,153
Cost of sales.................... -- -- -- 618,068 618,068
Depreciation and amortization.... 131,545 30,842 73,541 5,225 241,153
Advertising...................... 49,428 50,236 20,809 1,328 121,801
Other general and administrative
and interest expenses.......... 1,793,933 580,166 532,672 220,377 3,127,148
Amortization of goodwill......... -- -- -- 827,907(5D) 1,887,416
254,959(6C)
804,550(8C)
----------- ---------- --------- ---------- -----------
3,147,346 1,061,492 636,283 1,229,203 7,962,739
----------- ---------- --------- ---------- -----------
NET LOSS........................... $(2,586,425) $ (957,419) $(538,105) $ (153,535) $(6,122,899)
=========== ========== ========= ========== ===========
NET LOSS PER SHARE................. $ (0.72)
===========
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION.............. 8,540,158
===========
</TABLE>
See "Collegelink.com Incorporated and Subsidiaries' Notes to Pro Forma
Financial Statements assuming the purchase of ECI, OSN and SSI on July 1, 1998."
F-16
<PAGE> 76
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA FINANCIAL STATEMENTS ASSUMING
THE PURCHASE OF ECI, INC., ONLINE SCOUTING NETWORK, INC.,
AND STUDENT SUCCESS, INC.
(UNAUDITED)
1. BUSINESS TRANSACTIONS
The pro forma financial statements include three separate business
acquisition transactions, two of which have not been consummated, as follows:
a. The issuance of 550,809 shares of CollegeLink.com Incorporated
("CollegeLink") Common Stock and 234,771 shares of its Series B Convertible
Preferred Stock ("Series B") pursuant to the merger of ECI, Inc. ("ECI")
with and into CollegeLink's wholly-owned subsidiary CollegeLink Corporation
("CollegeLink Corporation"). As consideration for the acquisition, each of
the issued and outstanding shares of the capital stock of ECI was exchanged
for 1.2453 shares of CollegeLink Common Stock and .5308 shares of
CollegeLink's Series B. In addition ECI shareholders received cash from
CollegeLink for any fraction of a share remaining after the conversion
which totaled $488.56.
b. The proposed issuance of 225,000 shares of CollegeLink Common
Stock pursuant to the merger of Online Scouting Network, Inc. ("OSN") with
and into CollegeLink Corporation.
c. The proposed issuance of shares of CollegeLink in the aggregate
dollar amount of $4,500,000, the number of shares to be based on the
offering price in this prospectus, plus $3,500,000 in cash, for the
acquisition of Student Success, Inc. ("SSI")
2. ACCOUNTING POLICY
All acquisitions are being accounted for using the purchase method.
a. The shares issued for the acquisition of ECI 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.
b. The shares to be issued for the acquisition of OSN are recorded at
the estimated average fair market value at the date at which the merger
transaction is to be consummated. The total dollar basis of the Common
Stock recorded in the pro forma financial statements at June 30, 1999 was
$1,350,000.
c. The acquisition cost of SSI is the shares to be issued recorded at
$4,500,000 plus $3,500,000 of cash.
3. GOODWILL (INCLUDING OTHER ACQUIRED ASSETS)
The financial statements of CollegeLink will include the operations of ECI,
OSN and SSI from the date of each actual acquisition. The excess of purchase
price over designated assets has been temporarily classified as Goodwill
(including Other Acquired Assets). CollegeLink intends to allocate these amounts
to the specific assets acquired such as software, customer lists, customer
agreements or goodwill when evaluations of such assets become available. Such
allocations will be made within one year of the dates of acquisitions. Pending
such allocations, for the purpose of the pro forma statements, amortization has
been computed assuming a ten-year life.
4. SETTLEMENT OF CLAIMS
a. CollegeLink 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 CollegeLink 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.
F-17
<PAGE> 77
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA FINANCIAL STATEMENTS ASSUMING -- (CONTINUED)
b. CollegeLink assumed liabilities of OSN totalling $450,000.
5. ADJUSTMENTS TO PRO FORMA-ECI
Adjustments to the pro forma financial statements are as follows:
A. Issuance of shares of CollegeLink to former ECI shareholders
recorded as indicated in Notes 2 and 4 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.
6. ADJUSTMENTS TO PRO FORMA-OSN
Adjustments to the pro forma financial statements are as follows:
A. Issuance of shares of CollegeLink to former OSN members recorded
as indicated in Notes 2 and 4 above.
B. Estimated expenses of the transaction.
C. Amortization of goodwill as indicated in Note 3 above.
7. SUBSEQUENT EVENT
The Company sold Preferred Stock in September 1999 valued at $4,434,980.
8. ADJUSTMENTS TO PRO FORMA-SSI
Adjustments to the pro forma financial statements are as follows:
A. Issuance of CollegeLink shares to former SSI shareholders as
indicated in Note 2 above and payment of $3,500,000.
B. Estimated expenses of the transaction.
C. Amortization of goodwill as indicated in Note 3 above.
9. PRO FORMA COMMON SHARES
Pro forma common shares have been computed based on the CollegeLink.com
shares outstanding, plus common shares issued on the acquisitions, assuming a
$4.00 per share market value.
10. FINANCIAL STATEMENT INFORMATION
These financial statements should be read in conjunction with the
historical financial statements and notes thereto of CollegeLink, ECI, OSN and
SSI included elsewhere herein.
The financial position and results may not be indicative of future
activities of CollegeLink, ECI, OSN and SSI, or the results if the acquisitions
had been made at the dates indicated.
Loss per share is based upon the average shares outstanding for CollegeLink
during the period and the equivalent shares of CollegeLink issued for the ECI
and SSI shares outstanding.
The financial statements of ECI, OSN and SSI have each been restated to a
June 30 year-end.
F-18
<PAGE> 78
INDEPENDENT AUDITORS' 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 stockholders' 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 stockholders'
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
Chelmsford, MA
August 10, 1999
F-19
<PAGE> 79
ECI, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 3,439 $ 6,311
Deferred charges.......................................... 101,750 0
----------- -----------
TOTAL CURRENT ASSETS.............................. 105,189 6,311
FIXED ASSETS, NET........................................... 54,384 49,314
OTHER ASSETS................................................ 2,313 2,313
----------- -----------
$ 161,886 $ 57,938
=========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Capital Lease Obligation -- current maturities............ $ 63,320 $ 34,540
Note payable -- Credit Line............................... 125,000 0
Notes payable -- Investors................................ 477,000 95,000
Notes payable -- Officer.................................. 479,500 410,000
Accounts payable.......................................... 337,208 259,181
Accrued interest.......................................... 126,033 13,142
Accrued expenses.......................................... 167,946 75,000
----------- -----------
TOTAL CURRENT LIABILITIES......................... 1,776,007 886,863
----------- -----------
LONG-TERM DEBT:
Notes payable............................................. 742,878 742,878
Accrued interest.......................................... 167,054 92,959
Capital lease obligation -- net of current portion........ 33,082 31,844
----------- -----------
943,014 867,681
----------- -----------
STOCKHOLDERS' (DEFICIT):
Common stock, $.01 par value; 200,000 authorized 125,483
shares issued and outstanding.......................... 1,255 1,255
Additional paid in capital................................ 794,542 794,542
Accumulated deficit....................................... (3,352,932) (2,492,403)
----------- -----------
(2,557,135) (1,696,606)
----------- -----------
$ 161,886 $ 57,938
=========== ===========
</TABLE>
See notes to financial statements
F-20
<PAGE> 80
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
Other costs........................................... 187,281 387,315 323,305
--------- --------- ---------
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>
See notes to financial statements
F-21
<PAGE> 81
ECI, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL TOTAL
NUMBER OF PAR PAID-IN ACCUMULATED STOCKHOLDERS'
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>
See notes to financial statements
F-22
<PAGE> 82
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..................................... -- -- 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.......................................... -- -- 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............................ -- 18,450 --
Proceeds of debt financing............................ 576,500 547,878 700,000
Payments on capital lease obligation.................. (4,311) (4,573) (8,175)
Distributions to shareholders......................... -- -- (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
========= ========= =========
RECONCILIATION OF NET LOSS TO CASH FLOWS FROM
OPERATIONS:
NET LOSS:............................................... $(860,529) $(915,614) $(793,568)
--------- --------- ---------
Adjustments to reconcile Net Loss to Cash Flows from
Operations:
Gain on sale of computer equipment.................... -- (18,450) --
Depreciation and amortization......................... 30,842 23,221 13,136
--------- --------- ---------
30,842 4,771 13,136
--------- --------- ---------
(INCREASE) DECREASE IN ASSETS:
Accounts receivable................................ -- -- 2,609
Deferred charges................................... (101,750) 1,058 (1,058)
Other assets....................................... -- -- (2,313)
--------- --------- ---------
101,750 1,058 (762)
--------- --------- ---------
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable................................... 78,027 222,762 36,419
Accrued interest................................... 186,986 83,879 --
Accrued expenses................................... 92,946 47,072 50,150
--------- --------- ---------
357,956 353,713 86,569
--------- --------- ---------
CASH FLOWS FROM OPERATIONS.............................. $(573,478) $(556,072) $(694,625)
========= ========= =========
</TABLE>
See notes to financial statements
F-23
<PAGE> 83
ECI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
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, CollegeLink.com Incorporated acquired the
Company. Substantially all the outstanding shares of ECI, Inc. were exchanged
for preferred and common shares of CollegeLink.com Incorporated.
Prior to being acquired by CollegeLink.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.
F-24
<PAGE> 84
ECI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
Service revenues are recognized when the students' college application is
processed. The Company requires payment at the time the application is
processed.
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:
1998 1997
-------- -------
Capitalized leases of office and computer equipment........ $117,686 $81,774
Computer equipment......................................... 3,570 3,570
-------- -------
121,256 85,344
Less accumulated depreciation.............................. 66,872 36,030
-------- -------
Fixed assets, net.......................................... $ 54,384 $49,314
======== =======
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:
FOR THE YEAR ENDING DECEMBER 31,
- --------------------------------
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
========
NOTE 4. NOTE PAYABLE -- CREDIT LINE
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,
F-25
<PAGE> 85
ECI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 Point. 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 NBD 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:
FOR THE YEAR ENDING DECEMBER 31,
--------------------------------
1999........................................................ $ 0
2000........................................................ 142,878
2001........................................................ 40,000
2002........................................................ 40,000
2003........................................................ 40,000
Thereafter.................................................. 480,000
--------
$742,878
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.
F-26
<PAGE> 86
ECI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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:
NUMBER OF
SHARES
---------
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
======
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 finance". 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
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
F-27
<PAGE> 87
ECI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 lesser 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 lesser of the Company's net income, or the applicable
percentage of net revenues as shown in the following table:
YEAR ENDING APPLICABLE
DECEMBER 31, PERCENTAGE
- ------------ ----------
2001.............................................. 12%
2002.............................................. 11%
2003.............................................. 10%
2004.............................................. 9%
2005 and thereafter............................... 8%
On August 10, 1999, this license agreement was terminated in connection
with the merger of the Company into CollegeLink.com Incorporated.
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.
F-28
<PAGE> 88
ECI, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 2,258 $ 3,439
Advances.................................................. 108,547 --
----------- -----------
TOTAL CURRENT ASSETS.............................. 110,805 3,439
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$82,293 and $66,872, respectively......................... 56,876 54,384
SOFTWARE DEVELOPMENT net of accumulated amortization of
$152,750 and $51,000, respectively........................ -- 101,750
OTHER ASSETS................................................ 3,213 2,313
----------- -----------
$ 170,895 $ 161,886
=========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 312,531 $ 337,208
Accrued expenses.......................................... 610,103 167,946
Accrued interest-officer.................................. 94,220 126,033
Leases payable............................................ 33,644 63,320
Notes payable investors................................... 465,286 477,000
Notes payable officer..................................... 482,292 479,500
Long-term debt-current portion............................ 40,000 125,000
----------- -----------
TOTAL CURRENT LIABILITIES......................... 2,038,076 1,776,007
LONG-TERM DEBT, net of current maturities................... 912,188 943,014
SHAREHOLDERS' (DEFICIT):
Common stock, $.01 par value; 200,000 authorized, 125,483
shares issued and outstanding.......................... 1,255 1,255
Additional paid-in capital................................ 995,542 794,542
Accumulated (deficit)..................................... (3,776,167) (3,352,932)
----------- -----------
(2,779,370) (2,557,135)
----------- -----------
$ 170,895 $ 161,886
=========== ===========
</TABLE>
See notes to financial statements.
F-29
<PAGE> 89
ECI, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
REVENUES.................................................... $ 38,302
---------
EXPENSES:
Payroll, payroll taxes and related benefits............... 224,605
Depreciation and amortization............................. 15,421
Other general and administrative expenses................. 239,016
---------
479,041
---------
LOSS FROM OPERATIONS........................................ (440,739)
INTEREST EXPENSE............................................ 107,500
---------
NET LOSS.................................................... $(548,239)
=========
See notes to financial statements.
F-30
<PAGE> 90
ECI, INC.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(548,239)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 117,171
Increase (decrease) to cash attributable to changes in
assets and liabilities:
Prepaid expenses and other assets...................... (109,447)
Accounts payable....................................... (87,435)
Accrued expenses....................................... 535,348
---------
NET CASH USED IN OPERATING ACTIVITIES.................. (92,602)
---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment....................... (17,913)
---------
NET CASH USED IN INVESTING ACTIVITIES.................. (17,913)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts/payments of long-term debt....................... (82,744)
Receipts/payments of notes payable........................ (8,922)
Increase in additional paid-in capital.................... 201,000
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES.............. 109,334
---------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (1,181)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 3,439
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 2,258
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ --
=========
See notes to financial statements.
F-31
<PAGE> 91
ECI, INC
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements include the accounts of ECI, Inc.
("the Company"). Such statements have been prepared by the Company, without
audit, pursuant to the Rules and Regulations of the SEC and reflect all
adjustments (which include only normal recurring adjustments) which are
necessary to present a fair statement of the results for the interim period
reported. Certain footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the Company's audited financial statements and notes thereto
for the years ended December 31, 1998, 1997 and 1996.
NOTE 2. BUSINESS
On August 10, 1999, CollegeLink.com Incorporated ("CollegeLink.com")
acquired the Company. Substantially all the outstanding shares of the Company
were exchanged for preferred and common shares of CollegeLink.com.
Prior to being acquired by CollegeLink.com, all notes payable to investors
and an officer were exchanged for common shares of the Company. Also, all
outstanding stock purchase warrants and vested stock options were exchanged for
common shares of the Company at a price of $0.01 per share.
F-32
<PAGE> 92
INDEPENDENT AUDITOR'S REPORT
Managing Members
Online Network, L.L.C.
T/A Online Scouting Network
We have audited the accompanying balance sheets of Online Network, L.L.C.
T/A Online Scouting Network (the "Company") as of September 30, 1998 and 1997,
and the related statements of operations and cash flows for each of the two
years ended September 30, 1998 and 1997. 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 the Company as of September
30, 1998 and 1997, and the results of its operations and its cash flows for each
of the two years ended September 30, 1998 and 1997 in conformity with generally
accepted accounting principles.
Radin, Glass & Co., LLP
Certified Public Accountants
New York, New York
October 1, 1999
F-33
<PAGE> 93
ONLINE NETWORK, L.L.C.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 520 $ 49,276
Accounts receivable....................................... -- 26,025
Prepaid expenses.......................................... -- 29,787
Other assets.............................................. 1,725 8,564
--------- ---------
TOTAL CURRENT ASSETS.............................. 2,245 113,652
PROPERTY AND EQUIPMENT, net of accumulated depreciation..... 94,997 134,409
SOFTWARE DEVELOPMENT, net of accumulated amortization of
$56,754 and $30,532, respectively......................... 74,048 100,270
OTHER ASSETS................................................ 7,920 8,326
--------- ---------
$ 179,210 $ 356,657
========= =========
LIABILITIES AND MEMBERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 262,313 $ 239,693
Accrued expenses.......................................... 81,406 53,220
Payroll and payroll taxes payable......................... 323,234 140,070
Due to managing members................................... 9,171 5,000
Deferred revenue.......................................... 87,748 102,654
Long-term debt-current portion............................ 111,058 53,967
--------- ---------
TOTAL CURRENT LIABILITIES......................... 874,930 594,604
LONG-TERM DEBT, net of current maturities................... 252,190 269,366
COMMITMENTS AND CONTINGENCIES............................... -- --
MEMBERS' DEFICIT............................................ (947,910) (507,313)
--------- ---------
TOTAL MEMBERS' EQUITY (DEFICIT)................... (947,910) (507,313)
--------- ---------
$ 179,210 $ 356,657
========= =========
</TABLE>
See notes to financial statements
F-34
<PAGE> 94
ONLINE NETWORK, L.L.C.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
REVENUES.................................................... $ 325,134 $ 132,610
GENERAL AND ADMINISTRATIVE EXPENSES......................... 720,671 907,577
--------- ---------
LOSS FROM OPERATIONS........................................ (395,537) (774,967)
INTEREST EXPENSE............................................ 45,060 24,056
--------- ---------
NET LOSS.................................................... (440,597) (799,023)
MEMBERS' (DEFICIT) -- beginning of the year................. (507,313) 291,710
--------- ---------
MEMBERS' (DEFICIT) -- end of year........................... $(947,910) $(507,313)
========= =========
</TABLE>
See notes to financial statements.
F-35
<PAGE> 95
ONLINE NETWORK, L.L.C.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(440,597) $(799,023)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 65,634 64,871
Write off of organization expenses..................... -- 31,710
Increase (decrease) to cash attributable to changes in
assets and liabilities:
Accounts receivable.................................... 26,025 (26,025)
Prepaid expenses....................................... 29,787 (29,787)
Other assets........................................... 7,246 10,939
Accounts payable....................................... 22,618 111,566
Accrued expenses....................................... 28,187 40,469
Accrued payroll and payroll taxes payable.............. 183,164 120,412
Deferred revenues...................................... (14,906) 102,654
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES................ (92,842) (372,214)
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of software development.......................... -- (41,606)
Purchase of equipment..................................... -- (3,876)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES................ -- (45,482)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to managing members................................... 4,171 5,000
Members' contributions.................................... -- 90,000
Receipts/payments of debt................................. 39,915 253,250
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES............ 44,086 348,250
--------- ---------
NET DECREASE IN CASH........................................ (48,756) (69,446)
CASH AT BEGINNING OF PERIOD................................. 49,276 118,722
--------- ---------
CASH AT END OF PERIOD....................................... $ 520 $ 49,276
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest............................................... $ 9,343 $ 10,760
========= =========
</TABLE>
See notes to financial statements.
F-36
<PAGE> 96
ONLINE NETWORK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
1. BUSINESS
Online Network, L.L.C. T/A Online Scouting Network (the "Company") was
organized in November 1995 under the laws of Delaware. It was organized to
create the Online Scouting Network, a nationwide online database of high school
student-athletes for use by colleges and universities as an athletic recruiting
tool.
In August 1999, the Company reorganized as a "C" corporation in
contemplation of a private placement of its securities. Since then, the Company
has abandoned the private placement and has presently agreed to be acquired by
another company subject to the execution of definitive agreements.
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. Property and Equipment -- Property 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, software and
furniture.
c. Software Development Costs -- The Company capitalizes software
development costs in accordance with SFAS 86. The Company capitalized
approximately $42,000 in the year ended September 30, 1997. The Company did not
capitalize any software development costs during the year ended September 30,
1998.
Amortization included in the accompanying financial statements for years
ended September 30, 1998 and 1997 was approximately $26,000 and $25,000
respectively.
d. 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 results of limited liability company operation are
included on the income tax return of each member. Accordingly, no provision for
income taxes is included in these financial statements.
f. Revenue Recognition -- Revenues consist of yearly contracts which are
being recognized on a straight-line basis over the twelve month period of the
contract.
g. 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 September 30,
1998 and 1997 respectively, the Company believes that there has been no
impairment of long-lived assets.
h. Advertising Costs -- Advertising costs are expensed as incurred.
Advertising expense amounted to approximately $36,000 and $75,000 for the years
ended September 30, 1998 and 1997, respectively.
i. Costs of Start-Up Activities -- The Company has adopted Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities". This statement
requires costs of start-up activities and organization
F-37
<PAGE> 97
ONLINE NETWORK, L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
costs to be expensed as incurred. The Company, since inception, has incurred
start-up costs totaling approximately $38,000. In January 1996 through September
1996 the Company amortized start-up costs using the straight-line method over a
five-year life. In the year ended September 30, 1997, the Company expensed the
remaining balance of approximately $32,000.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at September 30:
1998 1997
-------- --------
Computer and office equipment............................. $162,069 $162,069
Software.................................................. 29,911 29,911
Furniture and fixtures.................................... 7,111 7,111
-------- --------
199,091 199,091
Accumulated depreciation.................................. 104,094 64,682
-------- --------
$ 94,997 $134,409
======== ========
4. LONG-TERM DEBT
Long-term debt consists of the following at September 30:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Loan payable to bank due in April 1999, payable monthly at
$2,417 plus interest at prime plus 1%, personally
guaranteed by three managing members and collateralized by
all assets of the Company. The loan was called and a
lawsuit filed against the Company in August 1998. The
Company paid the remaining balance in August 1999......... $29,000 $48,333
Note to a vendor, payable in January 2000, interest accrues
semiannually at prime plus 4% and 10% warrant coverage. As
of August 31, 1999, the cash due, including accrued interest
is $43,519 along with warrants on common shares of the
Company's stock of value $19,392.......................... 38,250 --
Notes payable to members, payable in 48 monthly installments
of $408 including interest at 10% per annum, commencing in
March 2003. Unpaid principal and accrued interest is due
February 2007. Interest is accrued annually on the unpaid
principal balance and may be capitalized as part of the
principal as the date of repayment commences at the option
of the Company............................................ 70,000 60,000
Note payable to a member. Original terms of the note
required monthly installments of $2,125 including interest
at 10%, commencing in April 1997. Unpaid principal and any
accrued interest are due in March 2002. Per verbal
agreement with investor, no payments are being made
because of capital constraints on the Company. Interest is
accrued annually on the unpaid balance.................... 100,000 100,000
Note payable to an individual. Interest is accrued annually
on the unpaid principal balance........................... 50,000 50,000
Note payable to a managing member. Interest is accrued
annually on the unpaid principal balance.................. 45,998 35,000
</TABLE>
F-38
<PAGE> 98
ONLINE NETWORK, L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Notes payable to managing members, payable in 48 monthly
installments of $613 including interest at 10%, commencing
in March 2003. Unpaid principal and any accrued interest are
due in February 2007. Interest is accrued annually on the
unpaid principal balance.................................. 30,000 30,000
-------- --------
Total..................................................... 363,248 323,333
Less current maturities................................... 111,058 53,967
-------- --------
Long-term debt, net of current maturities................. $252,190 $269,366
======== ========
</TABLE>
The maturities of long-term debt for the five years after September 30,
1998 are approximately as follows: 1999 -- $111,000; 2000 -- $21,000;
2001 -- $23,000; 2002 -- $12,000; 2003 -- $49,000, and thereafter $147,000.
4. COMMITMENTS AND CONTINGENCIES
a. Rent expense under all operating leases was approximately $15,000 and
$18,000 for the years ended September 30, 1998 and 1997, respectively. The
Company leased office space for $1,463 per month for year ended September 30,
1997 and for the first seven months of the year ended September 30, 1998. The
Company has a verbal agreement to continue to lease this office space on a month
to month basis at $1,500 per month.
b. The Company leases various equipment under a three-year lease expiring
in December 1999. Monthly payments under the current leases for the years ended
September 30, 1998 and 1997 were approximately $1,100, respectively.
c. The Company is a defendant in a lawsuit with a bank for defaulting on
the payments under the terms of a promissory note and a credit card account with
the bank. The suit asks for payment in full of the note and credit card account
plus interest, damages, attorneys' fees and costs of the suit. The three
principal members of the Company guaranteed this note. The total amount of the
claim including damages, attorney fees and costs of the suit are not readily
determinable. The principal balance on the note, accrued interest and the credit
card balance are recorded in the financial statements. The remaining balance of
the note was paid by the Company in August 1999.
d. Three of the managing members had agreements with the Company to
provide managerial services to the Company for a three-year period expiring in
December 1998. Compensation for these services was $48,000 to each member
annually.
e. A managing member, under an agreement dated November 1995, has the
right to acquire an additional 3.6232% interest in ownership of the Company.
This will dilute the percentages owned by the other members. Each percentage
acquired will require the payment of $21,000 to the Company.
f. No member or manager of the Company is liable for any obligation of the
Company or any other member or manager, unless personally guaranteed by the
member or manager through a separate document.
5. 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
F-39
<PAGE> 99
ONLINE NETWORK, L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SFAS No. 131, the Company's operations are treated as one operating segment
because it only reports profit and loss information to the chief operating
decision maker of the Company on an aggregate basis. Information about the
Company's sales and major customers are as follows at September 30:
1998 1997
-------- --------
SALES
Group high school sales................................... $303,781 $ 82,861
Individual sales........................................ 19,096 40,394
Other................................................... 2,257 9,355
-------- --------
Total Sales..................................... $325,134 $132,610
======== ========
No customer accounted for more than ten percent of the revenues of the
Company in each of the two years ended September 30, 1998 and 1997,
respectively.
6. SUBSEQUENT EVENTS
The Company is in the process of negotiating a merger transaction with
CollegeLink.com Incorporated which is expected to be completed during the
calendar year 1999.
F-40
<PAGE> 100
ONLINE NETWORK, L.L.C.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1999 1998
----------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 2,410 $ 520
Accounts receivable....................................... -- --
Prepaid expenses.......................................... -- --
Other assets.............................................. 1,725 1,725
----------- ---------
TOTAL CURRENT ASSETS.............................. 4,135 2,245
PROPERTY AND EQUIPMENT...................................... 65,439 94,997
SOFTWARE DEVELOPMENT........................................ 54,428 74,048
OTHER ASSETS................................................ 7,616 7,920
----------- ---------
$ 131,618 $ 179,210
=========== =========
LIABILITIES AND MEMBERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 291,548 $ 262,313
Accrued expenses.......................................... 82,906 81,406
Payroll and payroll taxes payable......................... 430,889 323,234
Due to managing members................................... 9,171 9,171
Deferred revenue.......................................... 87,748 87,748
Long-term debt-current portion............................ 131,361 111,058
----------- ---------
TOTAL CURRENT LIABILITIES......................... 1,033,623 874,930
LONG-TERM DEBT, net of current maturities................... 247,587 252,190
COMMITMENTS AND CONTINGENCIES............................... --
MEMBERS' (DEFICIT).......................................... (1,149,592) (947,910)
----------- ---------
TOTAL MEMBERS' (DEFICIT).......................... (1,149,592) (947,910)
----------- ---------
$ 131,618 $ 179,210
=========== =========
</TABLE>
See notes to financial statements.
F-41
<PAGE> 101
ONLINE NETWORK, L.L.C.
STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
REVENUES.................................................... $ 71,319
GENERAL AND ADMINISTRATIVE EXPENSES......................... 244,688
---------
LOSS FROM OPERATIONS........................................ (173,369)
INTEREST EXPENSE............................................ 28,313
---------
NET LOSS.................................................... $(201,682)
=========
See notes to financial statements.
F-42
<PAGE> 102
ONLINE NETWORK, L.L.C.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(201,682)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 49,482
Increase (decrease) to cash attributable to changes in
assets and liabilities:
Accounts payable....................................... 29,235
Accrued expenses....................................... 1,500
Accrued payroll and payroll taxes payable.............. 107,655
---------
NET CASH USED IN OPERATING ACTIVITIES................ (13,810)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts/payments of debt................................. 15,700
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES............ 15,700
---------
NET INCREASE IN CASH........................................ 1,890
CASH AT BEGINNING OF PERIOD................................. 520
---------
CASH AT END OF PERIOD....................................... $ 2,410
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ --
=========
See notes to financial statements.
F-43
<PAGE> 103
ONLINE NETWORK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements include the accounts of Online
Network, L.L.C. ("the Company"). Such statements have been prepared by the
Company, without audit, pursuant to the Rules and Regulations of the SEC and
reflect all adjustments (which include only normal recurring adjustments) which
are necessary to present a fair statement of the results for the interim period
reported. Certain footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the Company's audited financial statements and notes thereto
for the years ended September 30, 1998 and 1997.
NOTE 2. BUSINESS
In August 1999, the Company reorganized as a "C" corporation in
comtemplation of a private placement of its securities. Since then, the Company
has abandoned the private placement and has presently agreed to be acquired by
CollegeLink.com Incorporated subject to the execution of a definitive agreement.
F-44
<PAGE> 104
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Student Success, Inc.
Cincinnati, Ohio
We have audited the accompanying balance sheets of Student Success (a
Division of Graphic Management Corporation) as of December 31, 1998 and 1997,
and the related statements of income and changes in division equity 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Student Success (a Division
of Graphic Management Corporation) as of December 31, 1998 and 1997, and the
results of its operations and cash flows for the years then ended in conformity
with generally accepted accounting principles.
Schenck & Associates SC
Green Bay, Wisconsin
October 11, 1999
F-45
<PAGE> 105
STUDENT SUCCESS
A DIVISION OF GRAPHIC MANAGEMENT CORPORATION
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 208,343 $ 96,319
Accounts receivable....................................... 102,981 5,024
Prepaid expenses.......................................... 18,372 20,280
--------- ---------
TOTAL CURRENT ASSETS.............................. 329,696 121,623
PROPERTY AND EQUIPMENT
Leasehold improvement..................................... 2,678 --
Office and computer equipment............................. 12,152 --
--------- ---------
14,830 --
--------- ---------
Less accumulated depreciation............................. 247 --
--------- ---------
14,583 --
INTANGIBLE, net of accumulated amortization 1998 $8,638;
1997 $5,308............................................... 41,362 44,695
--------- ---------
$ 385,641 $ 166,318
========= =========
LIABILITIES AND DIVISION EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 27,611 $ --
Deferred revenue.......................................... 200,000 50,000
--------- ---------
TOTAL CURRENT LIABILITIES......................... 227,611 50,000
DIVISION EQUITY
Long-term working capital advanced by parent
corporation............................................ 569,183 367,137
Accumulated losses from operations........................ (411,153) (250,819)
--------- ---------
158,030 116,318
--------- ---------
$ 385,641 $ 166,318
========= =========
</TABLE>
See notes to financial statements.
F-46
<PAGE> 106
STUDENT SUCCESS
A DIVISION OF GRAPHIC MANAGEMENT CORPORATION
STATEMENTS OF INCOME AND CHANGES IN DIVISION EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
--------- ---------
Revenue................................................ $ 345,019 $ 76,982
Operating expenses..................................... 505,353 300,358
--------- ---------
Net loss.......................................... (160,334) (223,376)
Long-term working capital advanced by parent company... 202,046 291,944
Division equity, beginning............................. 116,318 47,750
--------- ---------
Division equity, ending................................ $ 158,030 $ 116,318
========= =========
See notes to financial statements.
F-47
<PAGE> 107
STUDENT SUCCESS
A DIVISION OF GRAPHIC MANAGEMENT CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $(160,334) $(223,376)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Amortization........................................... 3,333 3,055
Depreciation........................................... 247 --
Deferred revenues...................................... 150,000 50,000
Changes in operating assets and liabilities:
Accounts receivable.................................. (97,957) (5,024)
Prepaid expenses..................................... 1,908 (20,280)
Accounts payable..................................... 27,611 --
--------- ---------
Net cash used in operating activities................ (75,192) (195,625)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment........................ (14,830) --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term working capital advanced by parent company...... 202,046 291,944
--------- ---------
Increase in cash.................................. 112,024 96,319
Cash:
Beginning................................................. 96,319 --
--------- ---------
Ending.................................................... $ 208,343 $ 96,319
========= =========
</TABLE>
See notes to financial statements.
F-48
<PAGE> 108
STUDENT SUCCESS
A DIVISION OF GRAPHIC MANAGEMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Student Success (d/b/a Making College Count) is a national training and
advisory organization that teaches college-bound students how to succeed in
college and prepare themselves throughout their academic career to maximize
their opportunities upon graduation. A primary source of funding is generated
through corporate sponsorship.
Use of 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 these estimates.
A summary of the Division's significant accounting policies follows:
Reporting Entity
This entity is a Division of Graphic Management Corporation (GMC). These
financial statements include only the accounts of the Division referred to as
Student Success.
Revenue Recognition
The major source of revenue comes from corporate sponsorships. Under annual
contracts, the sponsors agree to compensate the Division for promotion to
program participants through distributed literature and other means of exposure.
Deferred revenue liability represents amount billed or received for which
programs have yet to be presented.
Property and equipment:
Property and equipment is stated at cost. Depreciation is computed
principally by straight-line methods over the estimated useful lives of the
assets.
Intangible:
Intangible asset consists of rights to the "Making College Count Program."
These rights were acquired in 1996 for $50,000 and are being amortized over 15
years using the straight-line method.
Income taxes:
GMC has elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code. Accordingly, as a Division of GMC, the financial
statements do not include a provision for income taxes because the Division does
not incur federal or state income taxes. Instead, its earnings and losses are
included in the stockholders' personal income tax returns and are taxed based on
their personal tax strategies.
F-49
<PAGE> 109
STUDENT SUCCESS
A DIVISION OF GRAPHIC MANAGEMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. PROFIT-SHARING PLAN
GMC maintains a qualified 401(k) retirement savings plan that covers
substantially all employees including employees of the Division. The Plan allows
the Division's employees to make voluntary contributions to the Plan. The
Division's contribution to the Plan includes a match of 25% of the first 5% of
employees' elective deferrals, and may include a discretionary contribution as
determined by the Board of Directors. Division contributions to the Plan for
1998 and 1997 were $1,411 and $5,082, respectively.
NOTE 3. TRANSACTIONS WITH PARENT CORPORATION
Certain operating expenses are allocated to the Division from GMC in the
ordinary course of business. Additionally, certain expenses have been absorbed
by GMC which would be ordinary expenses of the Division if it was operating
independently. Such expenses include, but may not be limited to, rent,
utilities, clerical support and certain operating overhead expenses.
NOTE 4. SPONSORSHIP CONTRACTS
As of December 31, 1998, the Division had secured commitments for
approximately $1,250,000 of sponsorship revenue representing eight contracts.
Terms of the promotional agreements limit the number of sponsorship contracts to
eight during the contract period ending August 31, 1999. Through December 31,
1998, no revenues had been recognized under these contracts, as program
presentation commenced in 1999.
NOTE 5. CONCENTRATION OF CREDIT RISK
The Division maintains a bank account at one financial institution. At
December 31, 1998, the Division had approximately $103,000 in its account in
excess of federally insured limits.
NOTE 6. SUBSEQUENT EVENTS
Effective January 1, 1999, the assets of the Division were sold to a newly
created S corporation.
F-50
<PAGE> 110
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1999 1999
------------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 4,303,222 $ 1,371,000
Accounts receivable, net of allowance for doubtful
accounts of $10,000 and $30,000, respectively.......... 218,101 100,163
Prepaid expenses and other assets......................... 117,714 85,349
----------- -----------
TOTAL CURRENT ASSETS................................... 4,639,037 1,556,512
FURNITURE AND EQUIPMENT, net of accumulated depreciation of
$287,896 and $201,422, respectively....................... 291,296 250,484
GOODWILL (including Other Acquired Assets), net of
amortization of $91,990 and $0, respectively.............. 8,187,076 --
OTHER ASSETS................................................ 64,213 --
----------- -----------
$13,181,622 $ 1,806,996
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 460,012 $ 278,372
Accrued payroll........................................... 124,119 84,725
Accrued expenses.......................................... 385,189 32,247
Unearned revenue.......................................... -- 35,000
----------- -----------
TOTAL CURRENT LIABILITIES.............................. 969,320 430,344
DEFERRED RENT CREDIT........................................ 10,171
COMMITMENTS AND CONTINGENCIES............................... -- --
SHAREHOLDERS' DEFICIT:
Series A Convertible Preferred Stock, $4.00 stated value,
$0.01 par value, authorized 2,500,000 shares, issued
and outstanding 890,000 and shares 775,000 shares,
respectively........................................... 3,534,980 3,100,000
Series B Convertible Preferred Stock, $7.625 stated value,
$0.01 par value, authorized 300,000 shares, issued and
outstanding 279,771 shares............................. 4,175,000 --
Series C Convertible Preferred Stock, $4.00 stated value,
$0.01 par value, authorized 1,000,000 shares, issued
and outstanding 1,000,000 shares....................... 4,000,000 --
Common stock, $.001 par value, authorized 100,000,000 and
100,000,000 shares, issued and outstanding 9,846,340
and 5,260,736 shares, respectively..................... 9,846 9,152
Additional paid-in capital................................ 6,035,664 2,459,718
Accumulated deficit....................................... (5,553,359) (4,192,218)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT)................... 12,202,131 1,376,652
----------- -----------
$13,181,622 $ 1,806,996
=========== ===========
</TABLE>
See notes to financial statements.
F-51
<PAGE> 111
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
NET REVENUES:
CollegeLink revenues...................................... $ 125,680 $ --
Online training service revenues.......................... 77,499 32,000
Web site hosting.......................................... 56,252 49,467
Other revenues............................................ 6,654 137,958
----------- -----------
266,085 219,425
----------- -----------
EXPENSES:
Payroll, payroll taxes and related benefits............... 628,661 209,461
Depreciation and amortization............................. 111,591 26,071
Advertising............................................... 3,777 1,931
Other general and administrative expenses................. 883,197 221,232
----------- -----------
1,627,226 458,695
----------- -----------
LOSS FROM OPERATIONS........................................ (1,361,141) (239,270)
INTEREST EXPENSE............................................ -- 293
NET LOSS.................................................... $(1,361,141) $ (239,563)
=========== ===========
NET LOSS PER SHARE.......................................... $ (0.14) $ (0.05)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES USED IN
COMPUTATION............................................... 9,495,324 4,958,085
=========== ===========
</TABLE>
See notes to financial statements.
F-52
<PAGE> 112
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCKHOLDERS'
----------------------- ------------------ PAID-IN EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT)
--------- ----------- --------- ------ ---------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -- June 30, 1999... 775,000 3,100,000 9,152,211 9,152 2,459,718 (4,192,218) 1,376,652
Preferred issued -- Series
A.......................... 115,000 434,980 -- -- -- -- 434,980
Effect of merger
transaction -- Preferred
Series B............... 279,771 4,175,000 659,005 659 3,395,688 -- 7,571,347
Issuance of shares for
services............... -- -- 34,836 35 178,782 -- 178,817
Preferred issued --
Series C............... 1,000,000 4,000,000 -- -- -- -- 4,000,000
Issuance of shares as per
benefit plan........... -- -- 288 -- 1,476 -- 1,476
Net loss for the
period................. -- -- -- -- -- (1,361,141) (1,361,141)
--------- ----------- --------- ------ ---------- ----------- -----------
Balance -- September 30,
1999..................... 2,169,778 $11,709,980 9,846,340 $9,846 $6,035,664 $(5,553,359) $12,202,131
========= =========== ========= ====== ========== =========== ===========
</TABLE>
See notes to financial statements.
F-53
<PAGE> 113
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
1999 1998
----------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(1,361,141) $(239,563)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 111,591 26,071
Issuance of shares for services........................ 178,817 --
Issuance of shares for benefit plan.................... 1,476 --
Deferred rent credit................................... 10,171 --
Increase (decrease) to cash attributable to changes in
assets and liabilities:
Accounts receivable.................................... (117,938) 3,426
Prepaid expenses and other assets...................... (96,578) (1,111)
Accounts payable....................................... 181,640 38,370
Accrued expenses....................................... 352,942 (23,419)
Accrued payroll........................................ 39,394 (96,026)
Unearned revenue....................................... (35,000) (38,563)
----------- ---------
NET CASH USED IN OPERATING ACTIVITIES.................. (734,627) (330,815)
----------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Excess of ECI liabilities assumed over tangible assets
acquired............................................... (766,518) --
Purchase of furniture and equipment....................... (2,706) (4,321)
----------- ---------
NET CASH USED IN INVESTING ACTIVITIES.................. (769,224) (4,321)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred shares................ 4,434,980 --
Shareholder advances payable.............................. -- 293,844
Principal payments on capital lease obligations........... -- (887)
----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES.............. 4,434,980 292,957
----------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 2,931,129 (42,179)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 1,371,000 46,362
----------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 4,302,130 $ 4,183
=========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ -- $ 293
=========== =========
Taxes.................................................. $ -- $ 996
=========== =========
Noncash:
Stock issued for purchase of ECI....................... $ 7,571,347 $ --
=========== =========
Stock issued for services.............................. $ 178,817 $ --
=========== =========
</TABLE>
See notes to financial statements.
F-54
<PAGE> 114
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Reference is made to the financial statements included in the Company's
Annual Report (Form 10-KSB) filed with the Securities and Exchange Commission
for the year ended June 30, 1999.
The financial statements for the periods ended September 30, 1999 and 1998
are unaudited and include all adjustments which, in the opinion of
management, are necessary to a fair statement of the results of operations
for the periods then ended. All such adjustments are of a normal recurring
nature. The results of the Company's operations for any interim period are
not necessarily indicative of the results of the Company's operations for a
full fiscal year.
2. COMMITMENTS AND CONTINGENCIES
a. The Company entered into a lease agreement in September 1999, expiring
in November 30, 2004. Rental expense for the entire five-year period
totals approximately $641,000. The Company has recorded a deferred rent
credit of approximately $10,000 for the first month of free rent and
will amortize the credit over the lease term.
b. The Company adopted a 401K plan in July 1999.
c. The Company entered into agreements for directors and officers liability
insurance.
3. ACQUISITION TRANSACTIONS
a. 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 CollegeLink Corporation
("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 Series B stock (see Pro forma in 10-KSB).
b. The Company has entered into letters of intent to buy two companies,
Online Scouting Network, Inc. and Student Success, Inc. for a total of
$9,350,000, payable in cash of $3,500,000 with the balance in common
stock. The acquisitions will be treated as purchases.
c. Goodwill (including Other Acquired Assets)
The financial statements of CollegeLink will include the operations of
ECI, OSN and SSI from the date of each actual acquisition. The excess of
purchase price over designated assets has been temporarily classified as
Goodwill (including Other Acquired Assets). CollegeLink intends to
allocate these amounts to the specific assets acquired such as software,
customer lists, customer agreements or goodwill when evaluations of such
assets become available. Such allocations will be made within one year of
the dates of acquisitions. Pending such allocations, for the purpose of
the pro forma statements, amortization has been computed assuming a
ten-year life.
4. EQUITY AND FINANCING
a. In September 1999, the Company received $460,000 in exchange for 115,000
shares of 6% cumulative preferred stock designated as "Series A
Convertible Preferred Stock" ("Preferred A") from five accredited
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 stock into the common stock of the
Company at a ratio of one share of common stock for each share of
Preferred A. The Company may require conversion on or after the first
anniversary of the
F-55
<PAGE> 115
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
initial purchase 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 issued
and outstanding Preferred A are entitled to receive $4.00 for each share
of Preferred A, before any distribution of the assets of the Company
shall be made to the holders of any capital stock.
b. In September 1999, the Company received $4,000,000 in exchange for
1,000,000 shares of 6% cumulative preferred stock designated as "Series
C Convertible Preferred Stock" ("Preferred C") from PNC Investment Corp.
Preferred C has a stated value of $4.00 per share, a par value of $0.01
per share and dividends payable quarterly.
PNC may at any time convert the Preferred C into common stock of the
Company at a ratio of one share of common stock for each share of
Preferred C, but in no event be entitled to convert any shares of
Preferred C nor shall the Company require conversion of any shares of
Preferred C in excess of that number of shares of Preferred C upon the
conversion of which the sum of (1) the number of shares of common stock
owned by PNC and (2) the number of shares of common stock issuable upon
the conversion of the number of shares of Preferred C would result in
the beneficial ownership of 5% or more of the issued and outstanding
shares of common stock.
The Company may require conversion on or after the first anniversary of
the initial purchase 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 issued
and outstanding Preferred C are entitled to receive $4.00 for each share
of Preferred C, before any distribution of the assets of the Company
shall be made to the holders of any capital stock, except for holders of
Series A Preferred Stock Convertible Preferred Stock which shall have
the rights and preferences as previously adopted by the Company's Board
of Directors.
F-56
<PAGE> 116
STUDENT SUCCESS, INC.
BALANCE SHEET
SEPTEMBER 30, 1999
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 39,878
Accounts receivable, net of allowance for doubtful
accounts of $3,212..................................... 231,631
Prepaid expenses and other assets......................... 15,158
--------
TOTAL CURRENT ASSETS.............................. 286,667
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$3,522.................................................... 68,228
INTANGIBLE, net of amortization of $2,500................... 38,862
OTHER ASSETS................................................ 2,920
--------
$396,677
========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 99,809
Accrued payroll........................................... 5,309
Accrued expenses.......................................... 11,100
Unearned revenue.......................................... 168,750
--------
TOTAL CURRENT LIABILITIES......................... 284,968
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Retained earnings......................................... 111,709
--------
TOTAL SHAREHOLDERS' EQUITY........................ 111,709
--------
$396,677
========
See notes to financial statements.
F-57
<PAGE> 117
STUDENT SUCCESS, INC.
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
SALES....................................................... $1,425,027
COST OF SALES............................................... 383,364
----------
GROSS PROFIT................................................ 1,041,663
EXPENSES:
Marketing and selling expenses............................ 192,258
Other general and administrative expenses................. 737,565
----------
929,823
----------
INCOME FROM OPERATIONS...................................... 111,840
OTHER INCOME (EXPENSE)...................................... (131)
----------
NET INCOME.................................................. $ 111,709
==========
See notes to financial statements.
F-58
<PAGE> 118
STUDENT SUCCESS, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
RETAINED STOCKHOLDERS'
EARNINGS EQUITY
-------- -------------
<S> <C> <C>
Balance -- January 1, 1999.................................. $ -- $ --
Net income for the period................................... 111,709 111,709
-------- --------
Balance -- September 30, 1999............................... $111,709 $111,709
======== ========
</TABLE>
See notes to financial statements.
F-59
<PAGE> 119
STUDENT SUCCESS, INC.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 111,709
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 6,022
Increase (decrease) to cash attributable to changes in
assets and liabilities:
Accounts receivable.................................... (231,631)
Prepaid expenses and other assets...................... (18,078)
Accounts payable....................................... 99,809
Accrued expenses....................................... 11,100
Accrued payroll........................................ 5,309
Unearned revenue....................................... 168,750
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.............. 152,990
---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................ (71,750)
Purchase of intangible asset.............................. (41,362)
---------
NET CASH USED IN INVESTING ACTIVITIES.................. (113,112)
---------
NET INCREASE IN CASH........................................ 39,878
CASH AT BEGINNING OF PERIOD................................. --
---------
CASH AT END OF PERIOD....................................... $ 39,878
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ --
=========
Taxes.................................................. $ --
=========
See notes to financial statements.
F-60
<PAGE> 120
STUDENT SUCCESS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements include the accounts of Student
Success, Inc. ("the Company"). Such statements have been prepared by the
Company, without audit, pursuant to the Rules and Regulations of the SEC and
reflect all adjustments (which include only normal recurring adjustments) which
are necessary to present a fair statement of the results for the interim period
reported. Certain footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the Company's audited financial statements and notes thereto
for the years ended December 31, 1998, and 1997.
F-61
<PAGE> 121
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 122
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 123
[INSIDE BACK COVER]
[On this page appears a continuation of the alphabetical list of colleges and
universities from the inside spread. The words "www.collegelink.com" appear on
the bottom right corner of this page. The "CollegeLink.com" logo appears over
the list of colleges and universities along the right side of the page running
from the bottom of the page to the top of the page.]
<PAGE> 124
[COLLEGELINK.COM LOGO]
---------------------------
TABLE OF CONTENTS
---------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Forward Looking Statements............ 15
Use of Proceeds....................... 16
Price Range of Common Stock........... 16
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 18
Selected Financial Data............... 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 25
Management............................ 36
Certain Relationships and
Transactions........................ 44
Principal Stockholders and
Stockholders Granting Over-allotment
Option.............................. 45
Description of Capital Stock.......... 47
Underwriting.......................... 55
Legal Matters......................... 57
Experts............................... 57
Where You Can Find More Information... 58
Index to Financial Statements......... F-1
</TABLE>
2,200,000 SHARES
COMMON STOCK
--------------------
PROSPECTUS
--------------------
CRUTTENDEN ROTH INCORPORATED
PENNSYLVANIA MERCHANT GROUP
JANUARY 24, 2000
