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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 000-29953
EDULINK, INC.
(Exact name of registrant as specified in its charter)
Nevada 95-4562316
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 Wilshire Boulevard
Second Floor
Santa Monica, California 90401
-----------------------
(Address of principal executive offices including zip code)
(310) 310-393-4901
-----------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of June 30, 2003, there were 883,195,100 outstanding shares of the
Registrant's Common Stock, $0.001 par value.
EDULINK, INC., DBA THE LEARNING PRIORITY
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
Balance Sheets at June 30, 2003(unaudited) and December 31, 2002 (audited)
Statements of Operations for the three months ended June 30, 2003 and
2002 (unaudited) and for the period from January 25, 1996
(inception) to June 30, 2003 (unaudited)
Statements of Cash Flows for the three months ended March 31, 2003 and
2002 (unaudited) and for the period from January 25, 1996
(inception) to March 31, 2003 (unaudited)
Notes to Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits
SIGNATURES
CERTIFICATIONS
Unless otherwise indicated, all references to "EduLink," "we," "us" and
"our" refer to EduLink, Inc. and its predecessor.
CAUTIONARY NOTICE
REGARDING FORWARD-LOOKING STATEMENTS
This report contains statements that we believe are "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may,"
"will," "expect," "should," "intend," "estimate," "anticipate,"
"believe," "plan," "continue" or similar terminology. We undertake no
obligation to publicly update or revise any forward-looking statements
contained in this report. These forward-looking statements are not
guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond our control,
that could cause actual results to differ materially from those we
express or imply in those forward-looking statements. These risks,
uncertainties and other factors include, but are not limited to, the
raising of additional capital, the acceptance of our products in the
market, competition, the status of our intellectual property and our
dependence on educational customers for sales of our specialized
educational products, statements regarding our competitive strengths,
business strategy, expected benefits of any acquisition, future
financial position, budgets, projected costs and plans and objectives
of management. Other uncertainties related to our business and
securities, which are traded on the OTC Bulletin Board, are outlined in
our Annual Report on Form 10-K for the fiscal year ended December 31,
2002.
EDULINK, INC. DBA THE LEARNING PRIORITY
(A DEVELOPMENT STATE COMPANY)
BALANCE SHEETS
JUNE 30,M 2003 (UNAUDITED) AND DECEMBER 31, 2002 (AUDITED)
- --------------------------------------------------------------------------------
ASSETS
June 30, December 31,
2003 2002
------------- -------------
(unaudited)
CURRENT ASSETS
Cash $ 56,307 $ 917
Prepaid expenses and other current assets 25,000 25,000
------------- -------------
Total current assets 81,307 $ 25,917
PROPERTY AND EQUIPMENT, net 15,282 18,572
DEPOSIT 2,198 2,198
------------- -------------
TOTAL ASSETS $ 98,787 $ 46,687
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Bridge notes payable and other notes
payable, net of unamortized discount $ 397,500 $ 350,000
Accounts payable and accrued expenses 653,689 645,872
Compensation Payable 414,954 229,954
Due to related party 90,500 90,500
Accrued interest 117,981 94,958
Other current liabilities 18,000 18,000
------------- ------------
Total current liabilitites 1,692,624 1,429,284
STOCKHOLDER' DEFICIT
Common stock, $0.01 par value
1,500,000,000 shares authorized
883,195,100 (unaudited) and
821,695,100 shares issued and
outstanding 883,196 821,696
Shares committed to be issued 100,000 100,000
Stock issued for future consulting
services net of expensed portion
for services rendered (553,500) -
Additional paid-in capital 13,199,904 12,649,543
Deficit accumulated during the
development stage (15,223,437) 14,649,543
------------- ----953-836--
Total stockholders' deficit (1,593,837) (1,382,597)
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 98,787 $ 46,687
============= =============
The accompanying notes are an integral part of these financial statements.
EDULINK, INC. DBA THE LEARNING PRIORITY
(A DEVELOPMENT STATE COMPANY)
BALANCE SHEETS
JUNE 30,M 2003 (UNAUDITED) AND DECEMBER 31, 2002 (AUDITED)
- --------------------------------------------------------------------------------
For the For the January 25,
Three Months Ended Six Months Ended 1996
June 30, June 30, (Inception) to
------------------------- ----------------------- June 30,
2003 2002 2003 2002 2003
----------- ---------- ---------- --------- -------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
REVENUE AND INCOME
License Fees $ 25,000 $ - $ 25,000 $ $ - $ 25,000
Interest Income - 17 - 130 144,239
----------- ---------- ---------- ------------ -------------
Total Revenue & Income 25,000 17 25,000 130 169,239
EXPENSES
Software development costs - - - 12,884 7,220,268
Selling, general and
administrative 134,342 203,674 294,601 611,556 8,172,408
------------ ---------- ---------- ------------ -------------
Total Expenses 134,342 203,674 294,601 624,440 15,392,676
------------ ---------- ---------- ------------ -------------
NET LOSS $ (109,342) $ (203,657) $ (269,601) $ (624,310) $ (15,223,437)
============ =========== =========== =========== =============
BASIC AND DILUTED LOSS
PER SHARE (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.02)
============= =========== =========== ============ =============
WEIGTED-AVERAGE SHARES
USED IN COMPUTATION OF BASIC
AND DILUTED LOSS PER SHARE 842,195,097 809,318,480 831,528,431 $737,055,116 693,923,056
============= ============ =========== ============= =============
The accompanying notes are an integral part of these financial statements.
EDULINK, INC. DBA THE LEARNING PRIORITY
(A DEVELOPMENT STATE COMPANY)
BALANCE SHEETS
JUNE 30,M 2003 (UNAUDITED) AND DECEMBER 31, 2002 (AUDITED)
- --------------------------------------------------------------------------------
For the For the January 25,
Three Months Ended Six Months Ended 1996
June 30, June 30, (Inception) to
------------------------- ----------------------- June 30,
2003 2002 2003 2002 2003
----------- ---------- ---------- --------- -------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
REVENUE AND INCOME
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Loss $ (109,342) $ (203,657) $ (269,601) $ (624,310) $ (15,223,437)
Adjustments to reconcile net
loss to net cash used in
operating activities
Loan from shareholder
contributed to capital - - - - 140,403
Common stock to be issued
for software development
costs - - - - 571,750
Common stock issued for
professional services - - - - 70,000
Compensation waived by officers - 97,500 - 97,500 130,000
Options issued to officers
vesting as compensation 20,661 - 58,361 - 246,890
Options issued for services - - - - 10,000
Warrants issued for services - - - - 3,252,301
Amortization of debt discount - - - 119,524 11,950
Cancellation of shares committed - - - - (566,750)
Depreciation expense 1,940 - 3,290 23,138
(Increase) / decrease in
current assets
Prepaid expenses - - - - (25,000)
Deposits - - - - (2,198)
Increase / (decrease) in
current liabilities
Accounts payable (800) 35,115 7,817 83,901 667,864
Compensation payable 87,500 - 185,000 - 414,954
Related party liability - 21,000 - 21,000 90,500
Accrued expenses and
other current liabilities 8,848 15,027 23,023 15,747 90,228
----------- ---------- ---------- --------- -------------
Net cash provided by (used in)
operating activities 8,807 (35,015) 7,890 (286,638) (10,097,407)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property and
equipment $ - $ - $ - $ (2,363) $ (39,992)
Net cash used in investing
----------- ---------- ---------- --------- -------------
activities 0 0 0 (2,363) (39,992)
----------- ---------- ---------- --------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issuance of
bridge notes and other
short-term notes payable $ 47,500 $ - $ 47,500 $ 185,850 $ 863,000
Payments on bridge notes - - - - (50,000)
Proceeds from issuance of
common stock - - - - 9,777,579
Cost of issuance of
common stock - - - - (396,873)
----------- ---------- ---------- --------- -------------
The accompanying notes are an integral part of these financial statements.
EDULINK, INC., DBA THE LEARNING PRIORITY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND June 30, 2003 (UNAUDITED)
NOTE 1 - DESCRIPTION OF BUSINESS
URREA Enterprises, Inc. ("URREA"), a Nevada corporation, acquired
EduLink, Inc. ("OLD EduLink"), a California corporation engaged in the
development of educational software, on October 28, 1999. After the
acquisition, URREA changed its name to EduLink, Inc. (the "Company").
URREA issued 388,800,000 shares of common stock to acquire 100% of the
common stock of OLD EduLink. The acquisition was accounted for as an
issuance of stock by OLD EduLink for the net assets of URREA as the
shareholders of OLD EduLink owned 60% of the common stock of URREA
after the acquisition, resulting in a recapitalization of OLD EduLink.
URREA had no significant assets or liabilities at the date of
acquisition and did not have significant operations prior to the
acquisition. Therefore, no pro forma information is presented.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The accompanying financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown
in the financial statements, during the years ended December 31,2002,
2001, and 2000, the Company incurred losses of $918,398, $2,844,647,
and $7,426,105, respectively. As of June 30, 2003, the Company is in
the development stage and is primarily engaged in research and
development activities. Accordingly, the accompanying statements of
operations should not be regarded as typical for normal periods of
operation. The Company's development stage status, recurring net
losses, and capital deficit raise substantial doubt about its ability
to continue as a going concern. Additional funds will be required in
order for the Company to complete its development stage activities and
continue its operations. Management intends to attempt to obtain such
funds from new investors and from the generation of revenue.
The financial statements do not include any adjustments relating to
the recoverability and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
Development Stage Enterprise
The Company is a development stage company as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7, "Accounting and
Reporting by Development Stage Enterprises." The Company is devoting
substantially all of its present efforts to establish a new business,
and its planned principal operations have not yet commenced. All
losses accumulated since inception have been considered as part of the
Company's development stage activities.
Comprehensive Income
The Company utilizes SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting comprehensive income
and its components in a financial statement. Comprehensive income as
defined includes all changes in equity (net assets) during a period
from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include
foreign currency translation adjustments and unrealized gains and
losses on available-for-sale securities. Comprehensive income is not
presented in the Company's financial statements since the Company did
not have any of the items of comprehensive income in any period
presented.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and
amortization are provided on a straight-line basis over an estimated
useful life of five years.
Impairment of Long-Lived Assets
The Company reviews long-lived assets to be held and used for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. If the sum of
the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, the Company
would recognize an impairment loss based on the estimated fair value of
the asset.
Stock Split
In October 1999, the Company's Board of Directors declared a 50-for-1
stock split. All applicable share and per share data have been
retroactively restated for the stock split.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes
and encourages the use of the fair value based method of accounting for
stock-based compensation arrangements under which compensation cost is
determined using the fair value of stock-based compensation determined
as of the date of grant and is recognized over the periods in which the
related services are rendered. The statement also permits companies to
elect to continue using the current implicit value accounting method
specified in Accounting Principles Bulletin ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," to account for stock-based
compensation issued to employees. The Company has elected to use the
intrinsic value based method and has disclosed the pro forma effect of
using the fair value based method to account for its stock-based
compensation.
Software Development Costs
Development costs incurred in the research and development of new
software products are expensed as incurred until technological
feasibility in the form of a working model has been established. To
date, the Company has not completed its software development to the
point of technological feasibility, and accordingly, no costs have been
capitalized.
Income Taxes
The Company uses the asset and liability method of accounting for
income taxes. The asset and liability method accounts for deferred
income taxes by applying enacted statutory rates in effect for periods
in which the difference between the book value and the tax bases of
assets and liabilities are scheduled to reverse. The resulting deferred
tax asset or liability is adjusted to reflect changes in tax laws or
rates. Because the Company has incurred losses from operations, no
benefit is realized for the tax effect of the net operating loss
carryforward and software development costs capitalized for tax
purposes due to the uncertainty of its realization.
Loss per Share
Basic loss per share is computed by dividing loss available to common
shareholders by the weighted-average number of common shares
outstanding. Diluted loss per share is computed similar to basic loss
per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if
the potential common shares had been issued and if the additional
common shares were dilutive. Because the Company has incurred net
losses, basic and diluted loss per share are the same.
Estimates
The preparation of financial statements 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
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
NOTE 3 - ACCOUNTS PAYABLE
On January 5, 2000, the Company entered into an agreement with its
major vendor and the vendor's affiliates to settle a disputed amount of
a contractual obligation arising from a software development contract.
The agreement calls for a settlement of the entire outstanding balance
for $1,000,000 within the period specified by the agreement. The
Company has agreed to pay the vendor at specified dates 15% of the net
financing proceeds it receives pursuant to its financing activities.
During the year ended December 31, 2000, the Company paid $600,000 to
this vendor and its affiliates in accordance with the settlement
agreement. The remaining balance of $400,000 is included in the
accounts payable balance at March 31, 2003.
In addition, the agreement states that the Company will assign to the
vendor intellectual property rights of the software developed if the
$1,000,000 obligation is not paid by December 31, 2002. As of December
31, 2002, the vendor agreed to extend this agreement until further
notice.
Further, the Company had agreed to issue approximately 11,435,000
shares of common stock as part of the settlement agreement within 60
days of the date of this agreement in lieu of shares and warrants that
were agreed upon previously. During the year ended December 31, 2000,
the number of shares agreed to be issued as part of the settlement
agreement was reduced to 100,000, which was issued to the vendor in
December 2000. As a result, $566,750 of the commitment to issue common
stock was reversed. Accordingly, the software development costs were
also reduced by $566,750.
NOTE 4 - BRIDGE NOTES PAYABLE
Bridge notes represent notes payable at 10% (annual percentage rate
10.47%) per annum and are currently due for payment. The Company issued
20,869,412 and 11,435,294 warrants to purchase shares of common stock
to the 1998 and 1996 lenders, respectively, at an average exercise
price of $0.034 per share. These warrants expire four years from the
date of grant or four years from the date of an initial public
offering.
During the year ended December 31, 2000, two of the 1998 bridge note
lenders converted $100,000 of the loan balance and $24,000 of accrued
interest into 2,480,000 shares of common stock.
During the year ended December 31, 2000, 8,004,706 warrants issued to
1996 bridge loan lenders expired.
During December 2001, the Company obtained a loan for $250,000 to be
received in two installments. The first installment of $100,000 was
received on December 5, 2001. The second installment of $150,000 was
received on January 5, 2002. The note bears interest at 10% (annual
percentage rate 10.47%) and matured on March 31, 2002, but the maturity
date was orally extended by the lender to August 31, 2002. The Company
as of June 30, 2003 is in loan default. The loan may be converted at
the lender's request into common stock. The number of shares will be
determined by dividing $0.05 into that portion of the money owed by the
Company.
The lender was also assigned an aggregate of 6,000,000 existing
warrants to purchase shares of the Company's common stock at an
exercise price of $0.0022 per share.
The proceeds of the $250,000 loan have been allocated between the note
payable and the warrants based on their relative fair value. The
resulting interest is being amortized over the term of the loan. At
June 30, 2003, the loan is shown net of amortized interest of $50,025.
During June, 2003, the Company obtained a loan of $50,000. The note
bears interest at 5% and matures on September 16, 2003. The loan was
secured by the personal guarantee of Michael Rosenfeld, the Company's
current Executive Vice President and prior Chief Executive Officer.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Employment Agreements
In September 1999, the Company entered into five-year employment
contracts with its President, Chief Executive Officer, and Senior Vice
President that provide for a minimum annual salary, incentives, and
bonuses, which are based on the Company's attainment of specified
levels of sales and earnings. The annual salaries for the three
officers are $150,000, $150,000, and $90,000, respectively. As of June
1, 2003, the annual salary of one of the prior Chief Executive Officer
and now Executive Vice President has been reduced to $30,000.
In 2000, following the issuance of warrants for completion of the
design phase of the Company's educational software product but prior to
the issuance of any of the remaining
warrants, the agreements were amended to eliminate the right to receive
the remaining warrants in exchange for $50,000 additional salary in
2000 for each officer and a base salary of $300,000 in 2001 for each of
the President and Chief Executive Officer, and $30,000 additional
salary in 2000 for the Senior Vice President, who also received in
February 2000 additional warrants to purchase 34,305,000 shares of
common stock at an exercise price of $.0022 per share.
As of June 1, 2003, the Chief Executive Officer, Michael Rosenfeld,
resigned his position as contemplated in his original employment
agreement and agreed to serve as Executive Vice President of Business
Development for the balance of the five year term at a reduced annual
salary of $30,000 (from $150,000). In addition, Mr. Rosenfeld waived
his claims to all compensation he deferred through May 31, 2003; and he
agreed to defer his compensation at the new rate until such time as the
Company received funds equal to $350,000.
As of June 1, 2003, the Company entered into an employment agreement
with Mr. Charles Guy, appointing him as Chief Executive Officer for a
term of three years and seven months, providing for annual minimum
salary, bonuses and incentives. The minimum salary is at the annual
rate of $120,000 during the first 19 months, increasing to $150,000 for
year 2005 and $240,000 during the year 2006, provided that a portion of
the salary during the balance of 2003 is deferred until the Company
obtains funds in the form of revenue and/or capital contributions of
fund in excess of $100,000; and provided that if the per share price of
Company's common stock closes at $.03 or higher during 2003 for a
consecutive period of five days, the salary is reduced during the
balance of 2003 from $10,000 per month to $5,000 per month. Mr. Guy
also received 20 million shares of Company's common stock and is
entitled to receive options to purchase 10 million shares, 5 million of
which are to bear an exercise price of $.004 per share and the balance
of which are to bear an exercise price of $.01 per share. Lastly, the
Company has the right to terminate the employment agreement as of
January 1, 2005 and/or January 1, 2006.
Consulting Agreements
In June, 2003, the Company entered into consulting agreements with
Boris Berenfeld, Sanford Lang, Paul Despot, Cathy Lockwood, Justin Quiz
Quiz, Paul Cruz Takash, E Alodavar, Alain Michael, Evan Berger, Barry
Alter and Jerome Crumpler. Each consultant is to provide various
consulting and professional services for a period of 12 months, each
having received in June, 2003 shares of company's common stock or
options to purchase shares of company's common stock, all in lieu of
cash consideration, in the following amounts, respectively: 5 million,
5 million, 1 million, 1 million, 4 million, 3 million, 5 million, 5.5
million, 5 million and 5 million.
Form S8 Registration
In June, 2003, Company filed with the SEC to register an aggregate of
200 million shares of Company's common stock under Form S-8 for the
purpose of issuing, from time to time, shares of Company's common stock
or options to purchase shares of Company's common stock to key
employees and consultants and directors so as to induce such employees,
consultants and directors to provide services to Company at favorable
rates without requiring significant cash payments. As of June 30,
Company has issued 61.5 million of these shares and options to one
employee and 10 consultants.
Agreement with Genesis Technology Group
In June, 2003, Company entered into an agreement with Genesis
Technology Group wherein Company and Genesis agreed to negotiate in
good faith to formulate a joint venture for the purpose of implementing
and exploiting Company's education technology system in the country of
China. Pursuant to that agreement, Company committed to refrain from
entering into any agreements with third parties in connection with
exploiting its technologies in China for a period of 90 days and
Genesis agreed to pay Company a non-refundable advance against any
license fees otherwise payable to Company as a result of any its
activities in China through the contemplated joint venture. The advance
payable equaled $50,000, 50% of which was paid in June, 2003.
NOTE 6 - RELATED PARTY TRANSACTIONS
Through December 31, 2002 and the quarter ended March 31, 2003, Michael
Rosenfeld, a member of the Board of Directors and officer, loaned the
Company $97,500 for operating costs. This amount is reflected as Due to
Related Party on the balance sheet.
NOTE 7 - SUBSEQUENT EVENTS
In July, 2003, Company entered into an agreement with the shareholders
of Jaqkar, Inc. to acquire 100% of the issued and outstanding shares of
Jaqkar in return for 10 million shares of Company's common stock. The
acquisition was scheduled to close on August 1, 2003, but has been
delayed by Company in order to complete certain due diligence and
establish agreed upon operational procedures. The agreement is now
scheduled to close on September 1, 2003.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is provided to afford the reader an
understanding of the material matters of EduLink's financial condition,
results of operation, capital resources and liquidity. It should be
read in conjunction with the financial statements and notes thereto and
other information appearing elsewhere in this report.
OVERVIEW
EduLink, Inc. is a development stage company engaged in the design and
development of a seamless integrated Internet educational service,
called the Smart Schoolhouse system, for schools and homes, that is
intended to be marketed to and utilized by students, parents, teachers
and school administrators. The planned service will be delivered over
the Internet to personal computer users.
The Company originally estimated that it needed a total of
approximately $8.5 million to produce, alpha test, beta test and launch
the system for the 7th and 8th grades only. The Company subsequently
(in August 2001) determined that to successfully launch the system, it
was necessary to include curricula for all grades from 3rd through 12th
as well as the homeschool market, and the Company therefore also needed
to license and make third party content available through its system.
The Company estimated that it needed an additional $5 million through
June 2002 to complete the modifications required for the system's
application for the entire 3rd through 12th grades and to the
homeschool market, to license and integrate third party content, to
complete production of additional enabling
tools, to create proprietary curriculum for two additional grade
levels, launch the system and conduct marketing activities up to the
end of the customary school year (i.e., June 2002), and to provide the
infrastructure to market and exploit the Company's technologies outside
of the grade 3-12 education market. Therefore, taking into account the
revised capital requirements, the Company estimated it needed to raise
a total of $13.5 million, of which it had raised a total of $8,062,578,
net of expenses, as of September 30, 2001, primarily through the
private placement of its Common Stock. As of December 31, 2001, the
Company had raised only $200,000 of the additional $5.5 million in
capital it needed, and had not completed the modifications required for
the production of additional enabling tools, the license of additional
third party curriculum content, or the completion of the infrastructure
to exploit its technologies outside of the grade 3-12 education market.
And as of December 31, 2002, the Company had raised only an additional
$150,000. And as of March 31,2003, the Company had not raised any
additional investment funds.
During the second quarter of 2003, the Company determined that it while
focusing on the use its core system for the global K-12 education
market, it would also focus on models to generate revenue from other
sources, including using the same core technology for implementation by
libraries and as a resource repository to distribute digital education
oriented resources within and outside of the formal education market.
The Company now expects that expenses (including software development
costs and general and administrative costs) will be approximately $3
million for the period July 1, 2003 to June 30, 2004, to upgrade its
technology, integrate certain software without itself producing added
enabling tools, license and integrate third party content for the K-12
market and for its planned digital repository, conduct marketing
activities and launch its system for the education markets in January,
2004, as well as launch its intended repository at the same time, and
provide necessary support and maintenance services to licensees. In
June 30, 2003, the Company received $25,000 in revenue and $50,000 in a
bridge loan.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2003 as compared to Three Months Ended June
30, 2002
FOR THREE MONTHS ENDED JUNE 30,
Income statement: 2003 2002
-------- --------
Revenue $ 25,000 $ --
Interest Income $ -- $ 17
Software Development Costs $ -- $ --
General and Administrative Expenses $134,342 $203,674
Total Expenses $134,342 $203,674
Net Loss $109,342 $203,657
Revenue
EduLink is a development stage enterprise and has spent most of its
efforts during the past six years in developing its core technology
content management system, initially contemplated to constitute a Smart
Schoolhouse web-based software system. The
Company had generated no revenue from inception through March 31, 2003;
and has generated only $25,000 in revenues as of June 30, 2003.
EduLink's cumulative losses from inception through June 30, 2003 are
$15,223,437.
Interest Income
Interest income in 2002 arose from investment of capital raised through
the December 1999 private placement of common stock.
Software Development Costs
Software development costs remained at 0 for the quarters ending June
30, 2003 and June 30,, 2002. The Failure to expend sums on software
development costs resulted, in part, from the completion of a part of
EduLink's software development activities after the third quarter 2001,
but in substantial part due to Company's limited amount of available
funds. Moreover, the Company paid various consulting firms and
individual contractors for the development and promotion of the Smart
Schoolhouse system in the first quarter, 2001.
General and Administrative Expenses
General and administrative expenses decreased by $69,332 to $134,342
for the quarter ended June 30, 2003 compared with $203,674 for the
quarter ended June 30, 2002. The main reasons for the variance are
decrease of wages, consulting and professional fees, rent and interest
expense in the quarter ending June 30, 2003, as compared to the quarter
ending June 30, 2002.
Liquidity and Capital Resources
Since 1996, EduLink has financed its working capital needs through
capital contributions by stockholders, private placement of common
equity and bridge loans. As of December 31, 2002, the Company had cash
of approximately $917. As of March 31,2003, the Company had no cash. As
of June 30, the Company had $56,307 in cash. Cash used in operations
was $442,734 for the year ended December 31,2002, and $10,126,717 from
inception through December 31, 2002. Cash used in operations during
each of these periods was primarily for expenses related to the design
and development of computer software and general and administrative
expenses. Since 1996 and through December 31, 2002, the Company has
raised $8,162,578 through sales of common stock and approximately
$350,000 through bridge loans.
The Company's current cash resources will not be sufficient to meet its
immediate requirements. The Company is not currently generating
sufficient revenues to fund its ongoing operations and without
additional capital the Company will not be able to operate.
As indicated above under the caption "Overview," the estimated cost of
EduLink's development program and its projected expenses during the
period July 1, 2003 through June 30, 2004 will require $3 million in
funds to provide the anticipated cash requirements. Changes in the
Company's development program or other changes affecting operating
expenses could alter the timing and amount of expenditures and
therefore the amount and timing of when the Company will require
additional funding. Our independent auditor, Singer, Lewak, Greenbaum &
Goldstein, LLP, has expressed
substantial doubt as to EduLink's ability to continue as a going
concern for the year ended December 31, 2002, based on significant
operating losses that EduLink has incurred since inception and the fact
that EduLink is currently in default of its bridge notes payable.
EduLink currently plans to raise funds through either revenue generated
from licensing its software or the private placement of its equity or
debt securities, or a combination of both, in order to meet its ongoing
cash needs. However, the additional funding the Company requires may
not be available on acceptable terms or at all. If the Company cannot
obtain adequate funding, it will be required to shutdown operations.
Part II Other Information
Item 1 Legal Proceedings
None
Item 2 Changes In Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters To Vote of Securities Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
99.1 Written Statement of Chief Executive Officer Pursuant to 18
U.S.C. SS 1350
99.1 Written Statement of Chief Financial Officer Pursusant to 18
U.S.C SS 1350
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned on its behalf by the undersigned thereunto duly authorized.
EDULINK, INC.
Date: August 19, 2003 By: /s/ Charles H. Guy III
-----------------------------------------
Chief Executive Officer
(On behalf of the registrant)
Date: August 19, 2003 By: /s/ Michael Rosenfeld
-----------------------------------------
Principal Financial Officer
(On behalf of the registrant)
CERTIFICATION
I, CHARLES H. GUY III, certify that:
1. I have reviewed this quarterly report on Form 10-Q of EduLink, Inc.
(the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) Evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date:
5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of the Registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies in the design and operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
August 19, 2003 /s/ CHARLES H. GUY III
- --------------- --------------------------------
Date Chief Executive Officer
CERTIFICATION
I, MICHAEL ROSENFELD, certify that:
1. I have reviewed this quarterly report on Form 10-Q of EduLink, Inc.
(the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) Evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date:
5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of the Registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies in the design and operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
August 19, 2003 /s/ MICHAEL ROSENFELD
--------------- --------------------------------
Date Primary Financial Officer