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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 March 31, 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 March 31, 2003, there were 821,695,100 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
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
Balance Sheets at March 31, 2003(unaudited) and December 31, 2002 3
Statements of Operations 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) ..................... 4
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) ...................... 5 - 6
Notes to Financial Statements (unaudited) ........................ 7 - 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................. 11-13
PART II. OTHER INFORMATION
Item 6. Exhibits...................................................... 14
SIGNATURES ............................................................ 15
CERTIFICATIONS............................................................16-17
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.
2
EDULINK, INC., DBA THE LEARNING PRIORITY
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
MARCH 31, 2003 and DECEMBER 31, 2002 (UNAUDITED)
- -------------------------------------------------------------------------------------------------
ASSETS
March 31, December 31,
2003 2002
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash $ -- $ 917
Prepaid expenses and other current assets 25,000 25,000
------------ ------------
Total current assets 25,000 25,917
PROPERTY AND EQUIPMENT, net 17,222 18,572
DEPOSIT 2,198 2,198
------------ ------------
TOTAL ASSETS $ 44,420 $ 46,687
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Bridge notes payable, net of unamortized discount $ 350,000 $ 350,000
Accounts payable and accrued expenses 654,489 645,872
Compensation payable 327,454 229,954
Due to related party 90,500 90,500
Accrued interest 94,958 94,958
Other current liabilities 18,000 18,000
------------ ------------
Total current liabilities 1,535,401 1,429,284
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value
1,500,000,000 shares authorized
821,695,100 (unaudited) and 821,695,100 shares
issued and outstanding 821,696 821,696
Shares committed to be issued 100,000 100,000
Additional paid-in capital 12,649,543 12,649,543
Deficit accumulated during the development stage (15,062,220) (14,953,836)
------------ ------------
Total stockholders' deficit (1,490,981) (1,382,597)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 44,420 $ 46,687
============ ============
The accompanying notes are an integral part of these financial statements.
3
EDULINK, INC., DBA THE LEARNING PRIORITY
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
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)
- --------------------------------------------------------------------------------------------
For the
Period from
For the January 25,
Three Months Ended 1996
March 31, (Inception) to
------------------------------ March 31,
2003 2002 2003
------------- ------------- -------------
(unaudited) (unaudited) (unaudited)
INCOME
Interest $ -- $ 113 $ 144,239
------------- ------------- -------------
EXPENSES
Software development costs -- 12,884 7,220,268
General and administrative 108,384 407,882 7,986,191
------------- ------------- -------------
Total expenses 108,384 420,766 15,206,459
------------- ------------- -------------
NET LOSS $ (108,384) $ (420,653) $ (15,062,220)
============= ============= =============
BASIC AND DILUTED LOSS PER SHARE $ -- $ -- $ (0.02)
============= ============= =============
WEIGHTED-AVERAGE SHARES USED TO COMPUTE
BASIC AND FULLY DILUTED LOSS PER SHARE 821,695,100 821,695,100 665,913,132
============= ============= =============
The accompanying notes are an integral part of these financial statements.
4
EDULINK, INC., DBA THE LEARNING PRIORITY
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (UNAUDITED) AND
FOR THE PERIOD FROM JANUARY 25, 1996 (INCEPTION) TO MARCH 31, 2003 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------
For the
Period from
For the January 25,
Three Months Ended 1996
March 31, (Inception) to
---------------------------- March 31,
2003 2002 2003
------------ ------------ ------------
(unaudited) (unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (108,384) $ (420,653) $(15,062,220)
Adjustments to reconcile net loss to net cash
used in operating activities
Loan from shareholder contributed to captial -- -- 140,403
Common stock to be issued for software
development costs -- -- 571,750
Common stock issued for professional services -- -- 70,000
Common stock issued for related party payable -- -- --
Compensation waived by officers -- -- 130,000
Options issued to officers as compensation -- 37,706 188,529
Options issued for services -- -- 10,000
Warrants issued for services -- 81,818 3,252,301
Amortization of debt discount -- -- 11,950
Cancellation of shares committed -- -- (566,750)
Depreciation expense 1,350 -- --
(Increase) decrease in -- -- (25,000)
Due from related party -- -- --
Prepaid expenses and other current assets -- -- --
Deposit -- -- (2,198)
Increase (decrease) in
Accounts payable and accrued expenses 8,617 49,506 654,489
Compensation payable 97,500 229,954 327,454
Due to related party -- 90,500 90,500
Accrued expenses -- 2,582 61,808
Other current liabilities -- 18,000 18,000
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment -- -- (18,572)
------------ ------------ ------------
Net cash provided by (used in)investing activities -- -- (18,572)
------------ ------------ ------------
The accompanying notes are an integral part of these financial statements.
5
EDULINK, INC., DBA THE LEARNING PRIORITY
(A DEVELOPMENT STAGE COMPANY)
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)
For the
Period from
For the January 25,
Three Months Ended 1996
March 31, (Inception) to
--------------------------------- March 31,
2003 2002 2003
---------------- --------------- ----------------
(unaudited) (unaudited) (unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of bridge notes $ - $ 340,500 $ 815,500
Repayment of bridge notes - - (50,000)
Proceeds from issuance of common stock - - 9,777,579
Cost of issuance of common stock - - (396,873)
---------------- --------------- ----------------
Net cash provided by financing activities - 340,500 10,146,206
---------------- --------------- ----------------
Net increase (decrease) in cash (917) (102,234)
CASH, BEGINNING OF PERIOD 917 103,151
---------------- --------------- ----------------
CASH, END OF PERIOD $ - $ 917 $ 917
================ =============== ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
INTEREST PAID $ - $ - $ -
================ =============== ================
INCOME TAXES PAID $ - 800 $ 4,000
================ =============== ================
The accompanying notes are an integral part of these financial statements.
6
EDULINK, INC., DBA THE LEARNING PRIORITY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND MARCH 31, 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., dba The Learning
Priority (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 March 31, 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 financing 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 financing from
new investors.
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.
7
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.
8
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 has 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.
9
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 December 31, 2002 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 March
31, 2003, the loan is shown net of amortized interest of $35,850.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Employment Agreement
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.
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.
NOTE 6 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 2002, a member of the Board of
Directors loaned the Company $90,500 for operating costs. This amount is
reflected as Due to Related Party on the balance sheet.
10
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. The Company
now estimates that it needs to raise a total of $5 million in capital to upgrade
its technology, license and integrate third party content for the 3rd through
12th grades, produce additional enabling tools, conduct marketing activities and
launch the system in September 2003. The Company intends to raise the additional
$5 million in capital it needs to complete those modifications and enabling
tools and to beta test the system while working with various school districts,
school district alliances and/or State Departments of Education. Concurrently,
the Company intends to obtain additional content from educational publishers,
universities and other content providers and to launch the system upon the start
of the next customary school year (i.e., August-September 2003),as well as to
create the infrastructure to market and exploit its technology in other markets.
The Company raised $8,412,578, net of expenses, as of March 31, 2003,
toward the goal of a total of $13.5 million, primarily through the private
placement of its common stock.
11
The Company now expects that expenses (including software development
costs and general and administrative costs) will be approximately $5 million per
year from April 1, 2003 to March 31, 2004, to license additional third party
curriculum content, to produce additional software tools, to alpha test and beta
test the content so licensed and the tools so produced, to upgrade technologies,
to continue operations, to provide necessary support and maintenance services to
licensees, to increase marketing activities for the Smart Schoolhouse system and
to continue and increase development, marketing and support activities relating
to the Company's technologies for application in markets outside of the 3rd
through 12th grade U.S. education market.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2003 as compared to Three Months Ended
March 31, 2002
FOR THREE MONTHS ENDED MARCH 31,
Income statement: 2003 2002
----------------- ---------------
Revenue $ - $ -
Interest income $ - $ 113
Software development costs $ 0 $ 12,884
General and administrative
expenses $ 108,384 $ 407,882
Total Expenses $ 108,384 $ 420,766
Net loss $ 108,384 $ 420,653
Revenue
EduLink is a development stage enterprise and has spent most of its
efforts during the past five years in developing its Smart Schoolhouse system
web-based software initially for the 7th and 8th grades, and now also for 3rd
through 6th and 9th through 12th grades as well as the home-school market, which
is intended to be launched upon the start of next customary school year in
September 2003 following the completion of the beta test and resultant
modifications to the system, if any. Accordingly, EduLink has not generated any
revenues to date. EduLink's cumulative losses from inception through March 31,
2003 are $15,129,140 .
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 decreased by $12,844 to 0 for the quarter
ended March 31, 2003 from $12,844 for the quarter ended March 31, 2002. The
decrease in software development costs resulted,in part, from the completion of
a part of EduLink's software development activities after the third quarter
2001, and in 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.
12
General and Administrative Expenses
General and administrative expenses decreased by $299,498 to $108,384
for the quarter ended March 31, 2003 compared with 407,882 for the quarter ended
March 31, 2002. The main reasons for the variance are decrease of wages,
consulting and professional fees, rent and interest expense in the first quarter
ending March 31, 2003, as compared to the first quarter ending March 31, 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. 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 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 over the next twelve
months will require $5 million in capital to provide the anticipated cash
requirements up to the planned launch of the Smart Schoolhouse system for the
3rd through 12th grades. 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, Leewak, 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 Edulinkis currently in default of its bridge notes payable. EduLink
currently plans to raise funds through either revenues generated from licensing
its software or the private placement of its equity or debt securities, or a
combination of both, in order to meet itsongoing cash needs. However, the
additional funding the Company requires may notbe available on acceptable terms
or at all. If the Company cannot obtain adequate funding, it will be required to
shutdown operations.
13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
99.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter
ended March 31, 2003.
14
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: May 19, 2003 By: /s/ Michael Rosenfeld
--------------------------------
Michael Rosenfeld
Chief Executive Officer
(On behalf of the registrant and
as principal financial officer)
15
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.
MAY 19, 2003 /s/ Michael Rosenfeld
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Date MICHAEL ROSENFELD
Chief Executive Officer
16
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.
MAY 19, 2003 /S/ Michael Rosenfeld
- ----------------- -------------------------
Date MICHAEL ROSENFELD
Chief Financial Officer
17