Filed On 10/13/00 3:01pm ET ˇ SEC File 333-47906 ˇ Accession Number 1019056-0-544
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
10/13/00 Youthline USA Inc SB-2 3:91 Borer Financial Com..LLC
Registration of Securities by a Small-Business Issuer ˇ Form SB-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SB-2 Registration of Securities by a Small-Business 89 299K
Issuer
2: EX-23 Consent of Experts or Counsel 1 3K
3: EX-27 Financial Data Schedule 1 4K
SB-2 ˇ Registration of Securities by a Small-Business Issuer
Document Table of Contents
As Filed with the Securities and Exchange Commission on October 13, 2000,
Registration No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
YouthlineUSA, INC.
------------------------------------------------------
(Exact name of Registrant as Specified in Its Charter)
Delaware 2700 22-3674998
------------------------------- ---------------------------- ------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code) Identification No.)
Youthline USA, Inc.
4581 US9
Howell, New Jersey 07731
(732) 886-0833
------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Saki Dodelson
President
Youthline USA, Inc.
4581 Us9
Howell, New Jersey 07731
(732) 886-0833
--------------------------------------------------------
(Name, address, including zip code, and telephone number
including area code, of agents for service)
------------------------------------
Copies to:
Stuart Neuhauser, Esq.
Berlack, Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
(212) 704-0100
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
Continued overleaf
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------
[Enlarge/Download Table]
==========================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount To Be Offering Price Per Aggregate Amount Of
Securities To Be Registered Registered Security (1) Offering Price Registration Fee
----------------------------------------------------------------------------------------------------------
Common Stock(2) 14,760,000 $ .30 $4,428,000 $1,168.99
----------------------------------------------------------------------------------------------------------
Common Stock(3) 550,000 $3.00 $1,650,000 $ 435.60
----------------------------------------------------------------------------------------------------------
Common Stock(3) 1,390,000 $4.00 $5,560,000 $1,467.84
----------------------------------------------------------------------------------------------------------
Common Stock(3) 950,000 $5.00 $4,750,000 $1,254.00
----------------------------------------------------------------------------------------------------------
Common Stock(4) 40,459,768 $ .2175 $8,800,000 $2,323.20
----------------------------------------------------------------------------------------------------------
Total $6,649.63
==========================================================================================================
(1) Estimated solely for purposes of calculating registration fee pursuant
to Rule 457(c) under the Securities Act of 1933, as amended (the "Act")
based upon the average of the high and low sales prices of the Common
Stock on October 10, 2000, as reported on the NASD OTC Bulletin Board.
(2) Common stock outstanding held by selling securityholders.
(3) These shares of common stock are not outstanding and are issuable upon
exercise of warrants to purchase common stock (that are not being
registered hereunder) held by selling securityholders. In accordance
with Rule 457(g) of the Act, the offering price is based on the highest
of the following: (a) the price at which such warrants may be exercised
or (b) the price of the common stock as determined in accordance with
Rule 457(c) under the Act. See Footnote 1.
(4) Common stock issuable upon conversion of $4,000,000 in principal amount
of 10% Convertible Notes. For purposes of estimating the number of
common stock to be included in this registration statement, we
calculated 200% of the aggregate number of shares of common stock into
which 110% of the principal amount of such notes would be convertible
in full at $.2175 per share, which was the conversion price on October
11, 2000.
-------------------------------
Pursuant to Rule 416 of the Act, this registration statement also
covers such indeterminate additional shares of common stock as may become
issuable as a result of stock splits, stock dividends or other similar events.
-------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
securities and exchange commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS SUBJECT TO COMPLETION; DATED OCTOBER 13, 2000
58,109,768 SHARES OF COMMON STOCK
OF
YouthlineUSA, INC.
We are registering up to 58,109,768 shares of our common stock for sale
by certain shareholders of our company identified in this prospectus. These
shareholders are referred to throughout this prospectus as "selling
securityholders."
These individuals who wish to sell their shares of our common stock may
offer and sell their shares on a continuous or delayed basis in the future.
These sales may be conducted in the open market or in privately negotiated
transactions and at market prices, fixed prices or negotiated prices. We will
not receive any of the proceeds from the sales of shares by the selling
securityholders but we will receive funds from the exercise of their warrants.
Our common stock is traded on the OTC Electronic Bulletin Board under
the symbol "YLNE". On October 10, 2000, the closing sales price for the common
stock on the OTC Electronic Bulletin Board was $.30 per share.
Our principal executive offices are located at 4581 US9, Howell, NJ
07731. Our telephone number is (732) 886-0833.
Our common stock being offered by this prospectus involves a high
degree of risk. You should read the "Risk Factors" section beginning on page 8
before you decide to purchase any common stock.
------------------------------------
Neither the Securities and Exchange Commission nor any state commission
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is _________ __, 2000
TABLE OF CONTENTS
Prospectus summary...........................................................3
Selected financial data......................................................6
Risk factors.................................................................7
Forward-looking statements..................................................14
Use of proceeds.............................................................14
Selling securityholders.....................................................15
Plan of distribution........................................................18
Directors, Executive Officers, Promoters and Control Persons................20
Security ownership of certain beneficial owners and management..............24
Description of securities...................................................25
Disclosure of commission position on indemnification for securities
act liabilities...........................................................30
Our business................................................................31
Management's discussion and analysis of financial condition and results
of operations.............................................................44
Certain relationships and related transactions..............................51
Market for common equity and related stockholders matters...................53
Executive Compensation......................................................54
Legal matters...............................................................55
Experts.....................................................................55
Available Information.......................................................55
You should rely only on the information contained in this document. We have not
authorized anyone to provide you with information that is different. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.
2
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus. You should read the following summary together with the more
detailed information regarding YouthlineUSA and our financial statements and the
related notes appearing elsewhere in this prospectus.
OUR COMPANY
Youthline USA is an industry leader in integration of technology and
curriculum, together with the news, into the classroom. Our mission is to
promote reading excellence, combat the digital divide, and offer
school-to-career training through our award-winning weekly newspaper, monthly
magazine, and daily Web site. We have created a niche in the youth and
educational markets by being the only company to offer this total integration of
news, technology, and curriculum basics directly into the classroom. At the same
time, we are forging strong relationships with corporate America by providing
them with an effective vehicle for reaching today's youth through advertising
and sponsorships.
Our suite of products include:
o Youthline-usa.com, a daily subscription Web site used in schools and homes
throughout the country. News articles on the Web site are linked to
curriculum-based interactive activities, offering educators a customized
reading curriculum together with technology training. Full assessment and
accountability allow tracking of student performance.
o Youthline USA newspaper, a weekly national newspaper with regional inserts
with 640,000 subscribers throughout the country. The newspaper comes
together with lesson plans, giving educators an excellent resource for
teaching current events and other subjects. It also provides a reading
curriculum for schools that are not yet using the Internet in their
classrooms.
o Youthline USA Fun and Feature magazine, a monthly magazine that offers
in-depth coverage of complex topics. Children enjoy the colorful graphics
and exciting features, while the sturdy format is an attractive advertising
vehicle for corporate sponsors.
o The three products combine to offer schools a solution to the demands of
integrating today's technology while maintaining the standards of the core
reading curriculum. Schools lack the time, resources, and training to fully
manage both challenges successfully. Youthline USA provides a total
solution, whereby today's technology is already fully integrated with the
reading curriculum and is further supplemented by print publications.
BUSINESS STRATEGY
Key elements of our strategy are to:
o Develop distinctive products. Our mission is to develop niche products in
the multi-media educational market, particularly news and curriculum-based
products. Our distinctive suite of products offers educators
curriculum-based resources that address reading, technology, and
school-to-career training--three of the most the important issues facing
schools today.
3
o Leverage strategic corporate partnerships. Our strategy is to develop
strategic alliances with large corporations through advertising and
corporate sponsorships to take advantage of their existing sales, marketing
and distribution networks. Our strategy is to become the market leader for
enhanced Internet and multi-media curriculum-based educational products.
o Create barriers to entry through first mover positioning and proprietary
products. We are moving rapidly to establish the Youthline USA product line
as the multi-media educational products of choice for schools. In addition,
we hope to create sufficient barriers to entry for other new entrants by
leveraging the distribution channels of its partners.
o Capitalize on specialized expertise. Our executive officers and employees
have extensive experience in business, education, finance, publishing,
marketing, and sales. Within three years, the team has successfully managed
to grow the business from a single youth newspaper to a broad range of
print and online products and services for children, parents, and teachers.
STRATEGIC ALLIANCES
Youthline USA has established several alliances with major corporations
to promote its products through their existing sales networks. Presently, our
partners include Sun Microsystems, VillageNet, Disney, the Academy of Natural
Sciences, and Notesys, among others. We presently are negotiating possible
partnerships with leading suppliers of educational products and services, and
intend to leverage these and future partnerships into an extensive distribution
network for the Youthline USA product line.
HISTORICAL INFORMATION
Youthline USA, Inc. was incorporated on July 27, 1999 pursuant to the
laws of the State of Delaware as the successor to Ult-I-Med Health Centers,
Inc., a Utah corporation ("Ult-I-Med"), which was incorporated in 1983 under the
laws of the State of Utah (originally under the name Picadilly Technology,
Inc.). We were organized to effectuate a reincorporation of Ult-I-Med with and
into Youthline USA on August 16, 1999.
Ulti-I-Med was originally organized to engage in the mining of
metalliferous chemicals. In 1988, Ulti-I-Med ceased such activities and began
engaging in the business of owning and operating camping and recreation
facilities. In 1991, Ulti-I-Med ceased such activities and began engaging in the
business of owning and operating supervised primary care, health and
rehabilitation centers. In January 1996, Ulti-I-Med filed a Chapter 11
bankruptcy petition. Ult-I-Med liquidated all of its assets and its plan of
reorganization was filed with the court in February 1998. All of Ult-I-Med debts
were paid, and the court entered a final decree in September 1999.
4
In August 1999, Ult-I-Med acquired all of the outstanding capital stock
of S&S Plus, Inc., a wholly-owned subsidiary of Youthline USA which operates the
publication Youthline USA, in exchange for the issuance of 5,500,000 shares of
its common stock, representing a majority of the total issued and outstanding
capital stock of Youthline USA. On such date, the directors and officers
resigned and were replaced with some of the current officers and directors.
Our principal place of business is located at 4581 US Highway 9,
Howell, NJ, 07731. Our general phone number is (732) 886-0833. Our Web site
address is www.youthline-usa.com.
THE OFFERING
Shares outstanding before offering (1).................... 20,739,350 shares of
common stock.
Shares outstanding offered by selling securityholders..... 14,760,000 shares of
common stock.
Shares underlying warrants offered by selling 2,890,000 shares of
securityholders........................................... common stock.
Shares underlying convertible notes offered by selling 40,459,768 shares of
securityholders (2)....................................... common stock
Plan of distribution...................................... The offering of our
shares of common
stock is being made
by shareholders of
our company who wish
to sell their
shares. Sales of our
common stock may be
made by the selling
securityholders in
the open market or
in privately
negotiated
transactions and at
market prices, fixed
prices or negotiated
prices.
Use of proceeds........................................... We will not receive
any of the proceeds
from the sale of the
shares owned by the
selling
securityholders.
However, we will
receive $11,960,000
if all of the
warrants are
exercised. Such
funds will be used
for working capital
and general
corporate purposes.
--------------------
(1) As of September 30, 2000.
(2) Represents 200% of the aggregate number of shares of common stock into
which 110% of the principal amount of our 10% convertible notes would be
convertible in full at $.2175 per share, which was the conversion price on
October 11, 2000.
5
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to, and
should be read in conjunction with, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus. The financial information set forth below is audited with respect to
the annual period ended December 31, 1999 and unaudited for the six month period
ended June 30, 2000, and has been prepared by our management.
Year Ended Six Months Ended
---------------------------------------
December 31, June 30,
1999 2000
---- ----
STATEMENT OF OPERATIONS DATA: (audited) (unaudited)
Revenues .............................
$ 168,967 $ 567,035
Costs of goods sold .................. 321,320 1,336,643
Operating expenses.................... 3,271,695 5,540,722
Loss from operations.................. (3,424,048) (6,310,330)
Interest expense, net................. 1,362,952 2,947,047
Net loss.............................. (4,787,000) (9,257,377)
As of As of
December 31, 2000 June 30, 2000
----------------------------------------
Actual
------
SELECTED BALANCE SHEET DATA: (audited) (unaudited)
Cash and cash equivalents......... 572,720 164,760
Working capital................... -- --
Total assets...................... 988,082 1,316,573
Total liabilities................. 2,030,118 4,126,580
Stockholders' equity (deficit).... (1,042,036) (2,810,007)
6
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before investing in our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could adversely affect our business, financial condition and
results of operations and could result in a complete loss of your investment.
The risks and uncertainties described below are not the only ones we may face.
We have a recent history of losses.
We have incurred net losses of $323,835 and $4,787,000 ($3,403,768 of
which was stock compensation expenses) for the years ended December 31, 1998 and
1999, respectively and $9,257,377 ($1,550,000 of which was stock compensation
expenses) for the six month period ended June 30, 2000. We expect that losses
will increase and continue until such time, if ever, as we can generate
sufficient revenue through website and newspaper subscribers and/or obtain
sufficient advertisements and sponsorships. We will need to generate a
substantial increase in revenues to become profitable. In addition, we had an
accumulated deficit of $14,544,615 at June 30, 2000.
Because we have been in business for a short period of time, there is limited
information upon which investors can evaluate our business; we are in our early
stages of development.
We initiated deployment of our newspaper product in 1997, and our
Web-based product in January 2000. Because our products are new, we should be
evaluated as an early-stage company. Consequently, we have a very limited
operating history upon which investors may base an evaluation of our business
and determine our prospects for achieving our intended business objectives. We
are prone to all of the risks inherent to the establishment of any new business
venture, including unforeseen changes in our business plan. Investors should
consider the likelihood of our future success to be highly speculative in light
of our limited operating history, as well as the limited resources, problems,
expenses, risks and complications frequently encountered by similarly situated
companies in the early stages of marketing, particularly companies in new and
rapidly evolving markets, such as the Internet. To address these risks, we must,
among other things, maintain and increase its customer base, implement and
successfully execute our business and marketing strategies, continue to develop
and upgrade our information technology, continually update and improve our
product offerings and features, provide superior customer service, respond to
industry and competitive developments, and attract, train, integrate, retain and
motivate qualified personnel. We may not be successful in addressing these
risks. If we are unable to do so, our business, prospects, financial condition
and results of operations would be materially and adversely affected.
Our additional financing requirements could result in dilution to existing
stockholders.
If additional financing is required, it could be obtained through one
or more transactions which effectively dilute the ownership interests of holders
of our common stock. Further, there can be no assurance that we will be able to
secure such additional financing. We have the authority to issue additional
shares of common stock, as well as additional classes or series of ownership
interests or debt obligations of Youthline USA which may be convertible into any
class or series of ownership interests in Youthline USA. We are authorized to
issue 50,000,000 shares of Common Stock and 5,000,000 shares of preferred stock.
Such securities may be issued without the approval or other consent of the
holders of our common stock. In light of existing derivative securities
currently outstanding, we would be obligated to take steps to have authority to
issue additional shares of common stock.
7
We believe that cash on hand and anticipated revenues from operations,
will be sufficient to meet our presently anticipated working capital and capital
expenditure requirements for at least the next six to twelve months. Our belief
is based on our operating plan which in turn is based on assumptions, which may
prove to be incorrect. As a result, our financial resources may not be
sufficient to satisfy our capital requirements for this period. In addition, we
may need to raise significant additional funds prior to the completion of this
period in order to support our growth, develop new or enhanced products, respond
to competitive pressures, acquire or invest in complementary or competitive
businesses or technologies or take advantage of unanticipated opportunities. If
our financial resources are insufficient and, in any case, after this six to
twelve month period, we will require additional financing in order to implement
our growth strategy. We cannot be certain that this additional financing, if
needed, will be available when needed, on acceptable terms, or at all.
Furthermore, any additional debt financing, if available, may involve
restrictive covenants, which may limit our operating flexibility with respect to
business matters. If adequate funds are not available when needed on acceptable
terms, we may be unable to develop or enhance our products, take advantage of
future opportunities, repay debt obligations as they become due or respond to
competitive pressures, any of which would have a material adverse effect on our
business, prospects, financial condition and results of operations.
We depend upon our senior management, and their loss or unavailability could put
us at a competitive disadvantage.
Our success depends largely on the skills, experience and reputation of
certain key management and technical personnel. The loss or unavailability of
any of these individuals for any significant period of time could have a
material adverse effect on our business, prospects, financial condition and
results of operations. There can be no assurance that we will be able to replace
these key individuals in the event their services become unavailable. See
"Management."
Others may develop or purchase comparable or superior technology.
Our management believes that our Internet-based technology reflects the
current state of the art for educational and multi-media Internet offerings.
However, others could develop, and may have developed, comparable or superior
technology that we are not aware of. We cannot guarantee that future innovations
in curriculum-based Internet Web site development will not eliminate any
technological advantage we may currently enjoy over our competition or render
our approach obsolete. We expect that we will be required to maintain a
continuous program of technological innovation in order to take advantage of
general technological advances and to remain competitive.
Others may develop or purchase comparable or superior publications.
8
Our management believes that Youthline USA's publications and content
occupy a unique and important niche in the youth and educational markets.
However, existing publishing firms, especially those with much greater resources
than us, could develop, or may have developed, comparable publications that we
are is not aware of. We cannot guarantee that future publications for children
will not eliminate any advantage we may currently enjoy over its competition.
We depend on the continued growth of Internet usage and infrastructure for our
business.
Our market is new and rapidly evolving. Our business would be adversely
affected if usage of the Internet does not continue to grow. Internet usage may
be inhibited for a number of reasons, such as:
o inadequate network infrastructure;
o security concerns; and
o inconsistent quality of service.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth or its performance and
reliability may decline. In addition, Web sites have experienced interruptions
in their service as a result of outages and other delays occurring throughout
the Internet network infrastructure. If use of the Internet does not continue to
grow, or if the Internet infrastructure does not effectively support growth that
may occur, our business, results of operations and financial condition would be
materially and adversely affected.
We must keep pace with rapidly changing technologies to be successful.
The Internet and educational multi-media markets are characterized by
rapidly changing technologies, evolving industry standards, frequent new product
and service introductions and changing customer demands. The introduction of new
products and services embodying new technologies and the emergence of new
industry standards and practices can render existing products and services
obsolete and unmarketable or require unanticipated investments in research and
development.
Our future success will depend on our ability to adapt to rapidly
changing technologies, to enhance existing solutions and to develop and
introduce a variety of new solutions to address the changing demands of our
customers. In addition, increased availability of Internet access that delivers
greater amounts of data faster is expected to enable the development of new
products and services that take advantage of this expansion in delivery
capability. Our failure to adapt successfully to these changes could adversely
affect our business, results of operations and financial condition. We may also
experience difficulties that could delay or prevent the successful design,
development, introduction or marketing of our products or services. In addition,
any new products or services that we develop must meet the requirements of our
current and prospective customers and must achieve significant market
acceptance. Material delays in introducing new products and services may cause
customers to forego purchases of our products and services and purchase those of
its competitors.
We may not be able to compete effectively in the industries in which we conduct
operations.
9
The educational multi-media industry is a fast moving, highly
innovative industry. We need to constantly develop leading edge products and
services and market them effectively in order to retain a competitive edge. We
expect that competition will intensify and increase in the future. As a result,
our potential competitors may be better positioned to address the changes to the
industry or may react more favorably to these changes, which could have a
material adverse effect on our business, prospects, financial condition and
results of operations. Although at the present time, we believe our products are
competitive, potential competitors could, at any time, elect to focus additional
resources in our target markets, which could materially adversely affect our
business, prospects, financial condition and results of operations. Many of our
potential competitors have longer operating histories, larger customer bases,
longer relationships with clients and significantly greater financial,
technical, marketing and public relations resources than we do. We must rely on
the skill of our personnel to implement our plans. The emergence of competition
with more resources could have a material adverse effect on our business,
prospects, financial condition and results of operations.
The limited prior public market and trading market may cause possible volatility
in our stock price.
There has only been a limited public market for our securities and
there can be no assurance that an active trading market in our securities will
be maintained. In addition, the stock market in recent years has experienced
extreme price and volume fluctuations that have particularly affected the market
prices of many smaller companies. The trading price of our common stock is
expected to be subject to significant fluctuations in response to variations in
quarterly operating results, changes in analysts' earnings estimates,
announcements of innovations by us or our competitors, general conditions in the
industry in which we operate and other factors. These fluctuation, as well as
general economic and market conditions, may have a material or adverse effect on
the market price of our common stock.
Penny stock regulations may impose certain restrictions on marketability of our
securities.
The Securities and Exchange Commission (the "Commission") has adopted
regulations which generally define a "penny stock" to be any equity security
that has a market price (as defined) of less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exceptions. As a result,
our common stock is subject to rules that impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse). For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of such
securities and have received the purchaser's written consent to the transaction
prior to the purchase. Additionally, for any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to the transaction,
of a risk disclosure document mandated by the Commission relating to the penny
stock market. The broker-dealer must also disclose the commission payable to
both the broker-dealer and the registered representative, current quotations for
the securities and, if the broker-dealer is the sole market maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Finally, monthly statements must be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell our securities and may affect the
ability of investors to sell our securities in the secondary market and the
price at which such purchasers can sell any such securities.
10
Shareholders should be aware that, according to the Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include:
o control of the market for the security by one or a few broker-dealers
that are often related to the promoter or issuer;
o manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases;
o "boiler room" practices involving high pressure sales tactics and
unrealistic price projections by inexperienced sales persons;
o excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
o the wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired level,
along with the inevitable collapse of those prices with consequent
investor losses.
Our management is aware of the abuses that have occurred historically in the
penny stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our common stock.
Anti-takeover provisions may adversely affect the value of our outstanding
securities.
Pursuant to our Certificate of Incorporation, our Board of Directors
may issue up to 5,000,000 shares of preferred stock in the future with such
preferences, limitations and relative rights as the Board may determine without
stockholder approval. The rights of the holders of common stock will be subject
to, and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The issuance of preferred stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of delaying or preventing a change in
control of Youthline USA without further action by the stockholders. We have no
present plans to issue any shares of preferred stock. In addition, we are
subject to the anti-takeover provisions of Section 203 of the Delaware General
Corporation Law, which will prohibit us from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the persons became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 also could have the effect of delaying or
preventing a change of control of our company.
11
Additional authorized shares of common stock and preferred stock available for
issuance may adversely affect the market.
We are authorized to issue 50,000,000 shares of our common stock. As of
September 30, 2000 there were 20,739,350 shares of our common stock issued and
outstanding. However, the total number of shares of common stock issued and
outstanding does not include the exercise of up to 25,000 shares of common stock
issuable upon exercise of warrants at $1.00 per share, 25,000 shares of common
stock issuable upon exercise of warrants at $2.00 per share, 665,000 shares of
common stock issuable upon exercise of warrants at $3.00 per share, 1,390,000
shares of common stock issuable upon exercise of warrants at $4.00 per share,
950,000 shares of common stock issuable upon exercise of warrants at $5.00 per
share, 250,000 shares of common stock issuable upon exercise of warrants at
$7.00 per share, 250,000 shares of common stock issuable upon exercise of
warrants at $9.00 per share, 5,875,000 shares of common stock issuable upon
exercise of warrants at $.10 per share, 750,000 shares of common stock issuable
upon exercise of warrants at $.05 per share, 100,000 shares of common stock
issuable upon exercise of warrants at $14.63 per share and 300,000 shares of
common stock issuable upon exercise of warrants at $12.00 per share. In
addition, there are approximately 18,391,000 shares of common stock issuable
upon conversion of outstanding convertible notes (subject to certain
limitations, See "Description of Securities"), approximately 6,000,000 shares of
common stock issuable (subject to certain limitations, See "Description of
Securities") upon conversion of convertible notes that may be purchased by
certain selling securityholders and 15,600 shares of common stock issuable upon
exercise of outstanding options that have been granted pursuant to our Incentive
Stock Option Plan. As a result, any issuance of additional shares of common
stock may cause our current shareholders to suffer significant dilution which
may adversely affect the market. In light of the above described existing
derivative securities, we would be obligated to take steps to have authority to
issue additional shares of common stock.
In addition to the above-referenced shares of common stock which may be
issued without shareholder approval, we have 5,000,000 shares of authorized
preferred stock, the terms of which may be fixed by our Board of Directors. We
presently have no issued and outstanding shares of preferred stock and while we
have no present plans to issue any shares of preferred stock, our Board of
Directors has the authority, without shareholder approval, to create and issue
one or more series of such preferred stock and to determine the voting, dividend
and other rights of holders of such preferred stock. The issuance of any of such
series of preferred stock could have an adverse effect on the holders of common
stock.
The exercise of outstanding options and warrants and the conversion of
convertible notes may adversely affect the market of our common stock.
The exercise of our outstanding options and warrants and the conversion
of our notes will dilute the percentage ownership of our stockholders, and any
sales in the public market of shares of common stock underlying such securities
may adversely affect prevailing market prices for the common stock. Moreover,
the terms upon which we will be able to obtain additional equity capital may be
adversely affected since the holders of such outstanding securities can be
expected to exercise their respective rights therein at a time when we would, in
all likelihood, be able to obtain any needed capital on terms more favorable to
us than those provided in such securities.
12
Shares eligible for future sale may adversely affect the market.
As of September 30, 2000, we had 20,739,350 shares of our Common Stock
issued and outstanding, 16,334,150 of which are "restricted securities". Rule
144 provides, in essence, that a person holding "restricted securities" for a
period of one year may sell only an amount every three months equal to the
greater of (a) one percent of a company's issued and outstanding shares, or (b)
the average weekly volume of sales during the four calendar weeks preceding the
sale. The amount of "restricted securities" which a person who is not an
affiliate of our company sell is not so limited, since non-affiliates may sell
without volume limitation their shares held for two years if there is adequate
current public information available concerning our company. In such an event,
"restricted securities" would be eligible for sale to the public at an earlier
date. The sale in the public market of such shares of common stock may adversely
affect prevailing market prices of our common stock.
Limitation on director liability.
As permitted by Delaware law, our Certificate of Incorporation limits
the liability of our directors for monetary damages for breach of a director's
fiduciary duty except for liability in certain instances. As a result of our
charter provision and Delaware law, stockholders may have limited rights to
recover against directors for breach of fiduciary duty.
We have no history of paying dividends on our common stock.
We have never paid any cash dividends on our common stock and do not
anticipate paying any cash dividends on our common stock in the foreseeable
future. We plan to retain any future earnings to finance growth. If we determine
that we will pay dividends to the holders of our common stock, there is no
assurance or guarantee that such dividends will be paid on a timely basis. In
addition, pursuant to the terms of our outstanding convertible notes, we are
prohibited from paying any dividends until such notes are repaid in full.
13
FORWARD-LOOKING STATEMENTS
You should not rely on forward-looking statements in this prospectus.
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates", "believes", "plans",
"expects", "future", "intends" and similar expressions to identify these
forward-looking statements. Prospective investors should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this prospectus. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by our company described in "Risk factors" and elsewhere in this
prospectus.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares
owned by the selling securityholders. However, we will receive $11,960,000 if
all of the warrants are exercised. We intend to use all of such proceeds for
working capital and general corporate purposes. Pending use of the proceeds,
they will be invested in short-term, interest bearing securities or money market
funds.
14
SELLING SECURITYHOLDERS
The following table sets forth the shareholders who are offering their
shares for sale under this prospectus, the amount of shares owned by such
shareholder prior to this offering, the amount to be offered by such shareholder
and the amount to be owned by such shareholders following completion of the
offering. The prior-to offering figures are as of September 30, 2000. All share
numbers are based on information that these shareholders supplied to us. This
table assumes that each shareholder will sell all of its shares available for
sale during the effectiveness of the registration statement that includes this
prospectus. Shareholders are not required to sell their shares.
Beneficial ownership is determined in accordance with SEC rules and
includes voting or investment power with respect to the securities. In the case
of selling securityholders who own convertible notes, the number of shares owned
prior to the offering also includes the number of shares which would be issued
upon conversion in payment of all accrued interest through maturity. As noted
below, some selling securityholders are subject to certain limits on the
conversion of their convertible notes. Therefore, although they are included in
the table below, the number of shares of common stock for some listed persons
may include shares that are not subject to purchase during the 60 day period.
The number of shares registered for resale by each of Mcallum Limited
and Praxis Assets Limited under this prospectus includes shares currently
outstanding and owned by them, shares issuable upon exercise of warrants held by
Mcallum, and, to take into account the fact that the actual conversion rate will
be based on a formula stated in the convertible notes and may fluctuate from the
assumed rate, 200% of the aggregate number of shares of common stock into which
110% of the principal amount of such notes would be convertible. Such holders
may not convert their notes if such conversion would cause such holder's
beneficial ownership of our common stock (excluding shares underlying any of
their unconverted notes) to exceed 9.99% of the outstanding shares of common
stock. However, because of these possible fluctuations in the conversion price
applicable to the convertible notes, the number of shares actually issued to and
sold by selling securityholders who own convertible notes may ultimately be more
or less than the number of shares shown in this table as being held by these
selling securityholders. This variation is due to factors that cannot be
predicted by us at this time. The most significant of these factors is the
future market price of our common stock.
The percentage interest of each selling securityholder is based on the
beneficial ownership of that selling securityholder divided by the sum of the
current outstanding shares of common stock plus the additional shares, if any,
which would be issued to that selling securityholder (but not any other selling
shareholder) when converting debentures or exercising warrants or other rights
in the future. For purposes of presentation in this table, the 9.99% limit
referred to above was disregarded.
15
[Enlarge/Download Table]
Number of Shares
Position with Owned Prior to Percentage of Number of Shares Number of Shares
Name The Company Offering Shares Owned Being Offered Owned After Offering
---- ----------- -------- ------------ ------------- --------------------
L&M Merchandising None 750,000
Greenwood Capital Principal Stockholder 4,900,000
Partners, Inc.(1)
Magdalena Zafir None 50,000
NBM Investments None 25,000
Frontier Capital Partners, None 527,000
Ltd.(2)
HAA Inc. None 27,000
Phil Lipshitz None 1,000
Zichron Avrahom Abba None 4,000
Avrahom Weiss None 1,000
Congregation Ahavas Chesed None 17,000
M. Bassman None 50,000
Resonance Limited None 448,000
Pokares Corp. None 160,000
Mcallum Limited (3) Principal Stockholder 11,155,172
Montana Bay Ltd. (4) None 375,000
New Sales Limited (5) Principal Stockholder
1,100,000
Margaret Kestenbaum None 50,000
Gold Mine Asset Management Principal Stockholder 3,600,000
Ltd.(6)
Southstone Ltd. None 500,000
Praxis Asset Limited (7) Principal Stockholder 10,405,172
Soreq, Inc. None 500,000
Hosford Trading Corp. None 500,000
Integrity International Ltd. None 500,000
Neot Israel Ltd. None 250,000
Aveze Development Corp. (8) None 450,000
Global Professional Services None 250,000
Ltd.(9)
General Trading Corp.(10) None 165,000
Citywide Consulting, Inc. (11) None 250,000
16
(1) The principal stockholder of this entity is Jacob Y. "Rocky" Stefansky, the
Chairman of the Board of Directors of Youthline USA, Inc. He is also the
sole officer and director of this entity. See "Principal Stockholders" and
"Management."
(2) Includes 27,000 currently outstanding and 500,000 shares underlying
warrants at $5.00 per share.
(3) Includes 1,250,000 shares currently outstanding and 250,000 shares
underlying warrants at $4.00 per share. Also represents shares issuable
upon conversion of $2 million in principal amount of our 10% convertible
notes and in lieu of interest thereon. For this selling securityholder, we
are registering 200% of the aggregate number of shares of common stock into
which 110% of the principal amount of such notes would be convertible plus
1,500,000 shares currently held or issuable upon exercise of warrants.
(4) Includes 250,000 shares currently outstanding and 125,000 shares underlying
warrants at $4.00 per share.
(5) Includes 750,000 shares currently outstanding and 350,000 shares underlying
warrants at $4.00 per share.
(6) Includes 3,000,000 shares currently outstanding, 500,000 shares underlying
warrants at $4.00 per share and 100,000 shares underlying warrants at $5.00
per share.
(7) Includes 750,000 shares currently outstanding. Also represents shares
issuable upon conversion of $2 million in principal amount of our 10%
convertible notes and in lieu of interest thereon For this selling
securityholder, we are registering 200% of the aggregate number of shares
of common stock into which 110% of the principal amount of such notes would
be convertible plus 750,000 shares currently held.
(8) Includes 350,000 shares underlying warrants at $3.00 per share and 100,000
shares underlying warrants at $5.00 per share.
(9) Includes 250,000 shares underlying warrants at $3.00 per share.
(10) Includes 165,000 shares underlying warrants at $4.00 per share.
(11) Includes 250,000 shares underlying warrants at $5.00 per share.
17
PLAN OF DISTRIBUTION
In this section of the prospectus, the term "selling securityholder"
means and includes: (1) the persons identified in the tables above as the
selling securityholders and (2) any of their donees, pledgees, distributees,
transferees or other successors in interest who may (a) receive any of the
common stock offered hereby after the date of this prospectus and (b) offer or
sell those shares hereunder.
The common stock offered by this prospectus may be sold from time to
time directly by the selling securityholders. Alternatively, the selling
securityholders may from time to time offer those shares through underwriters,
brokers, dealers, agents or other intermediaries. The selling securityholders as
of the date of this prospectus have advised us that at that time there were no
underwriting or distribution arrangements entered into with respect to the
common stock offered hereby. The distribution of the common stock by the selling
securityholders may be effected in one or more transactions that may take place
on the OTC Electronic Bulletin Board (including one or more block transaction)
through customary brokerage channels, either through brokers acting as agents
for the selling securityholders, or through market makers, dealers or
underwriters acting as principals who may resell these shares on the OTC
Electronic Bulletin Board; in privately-negotiated sales; by a combination of
such methods; or by other means. These transactions may be effected at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at other negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the selling
securityholders in connection with sales of the common stock.
The selling securityholder may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with the selling securityholder. The
selling securityholder also may sell shares short and redeliver the shares to
close out such short positions. The selling securityholder may enter into option
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus.
The selling securityholders also may loan or pledge the shares to a
broker-dealer. The broker-dealer may sell the shares so loaned, or upon a
default the broker-dealer may sell the pledged shares pursuant to this
prospectus. Any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 promulgated under the Securities Act may be sold under Rule
144 rather than pursuant to this prospectus. The selling securityholders have
advised us that they have not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of their
securities. There is no underwriter or coordinating broker acting in connection
with the proposed sale of shares by the selling securityholders.
Although the common stock covered by this prospectus are not currently
being underwritten, the selling securityholders or their underwriters, brokers,
dealers or other agents or other intermediaries that may participate with the
selling securityholders in any offering or distribution of common stock may be
deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any profits realized or commissions received
by them may be deemed underwriting compensation thereunder.
18
At the time a particular offer of common stock is made by or on behalf
of a selling securityholder, to the extent required under applicable rules of
the SEC, we will prepare a prospectus supplement setting forth the number of
shares being offered and the terms of the offering, including the name or names
of any underwriters, dealers, brokers, agents or other intermediaries, if any,
the purchase price paid by any underwriter for securities purchased from the
selling securityholders and any discounts, commissions or concessions allowed or
reallowed or paid to others, and the proposed selling price to the public.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), any person engaged in a
distribution of the common stock offered hereby may not simultaneously engage in
market making activities with respect to the common stock for a period of up to
five days preceding such distribution. The selling securityholders will be
subject to the applicable provisions of the Exchange Act and the rules and
regulations promulgated thereunder, including without limitation Regulation M,
which provisions may limit the timing of purchases and sales by the selling
securityholders.
In order to comply with certain state securities laws, if applicable,
the common stock offered hereby will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In certain states, the common stock
may not be sold unless they are registered or qualified for sale in such state,
or unless an exemption from registration or qualification is available and is
obtained.
All costs, expenses and fees in connection with the registration of the
common stock offered hereby will be borne by Youthline USA. However, any
brokerage or underwriting commissions and similar selling expenses, if any,
attributable to the sale of the common stock will be borne by the selling
securityholders.
We have agreed to indemnify certain of the selling securityholders
against certain liabilities, including liabilities under the Securities Act of
1933, or to contribute to payments to which any of those securityholders may be
required to make in respect thereof.
19
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Officers and directors
The names and ages of the directors and executive officers of
Youthline USA are set forth below. All Directors are elected annually by the
stockholders to serve until the next annual meeting of the stockholders and
until their successors are duly elected and qualified. Officers are elected
annually by the Board of Directors to service at the pleasure of the Board.
Name Age Position(s) with the Company
---- --- ----------------------------
Jacob Y. "Rocky" Stefansky 33 Chairman of the Board
Saki Dodelson 36 President, Treasurer and Director
Susan Gertler, Ph.D. 36 Vice President, Secretary and Director
Emanuel Yarmish 50 Director
Louis Libin 42 Director
Mark Siegel 40 Vice President - Educational Sales
Jay Ricci 49 Vice President - Advertising
Kathleen Hoffman 44 Director of Marketing
Background of Executive Officers, Directors and Significant Employees
JACOB Y. "ROCKY" STEFANSKY, has been a Director of Youthline USA since June
1999. From November 1991 to present, Mr. Stefansky has been the President and
Director of KID International, Inc., an international trading company. From 1997
until present, Mr. Stefansky has been the President and director of Portugal
Investment Group, Inc., a privately held investment fund involved with
undervalued and start-up companies. In 1999 Mr. Stefansky became the President
and a director of Greenwood Capital Partners, Inc., a privately held investment
fund involved with Internet and media companies.
SAKI DODELSON, is the co-founder of the Youthline USA newspaper. She has served
as the President, Treasurer and Director of Youthline USA since August 1999 and
the President, Treasurer and Director of our subsidiary, S&S Plus, Inc., since
inception. From 1987 to May 1999 she was a business and finance manager with
AT&T. During this time, Ms. Dodelson was contacted by the Israeli government and
asked to redesign, improve and market the acclaimed Israeli 2000 project--the
Israeli Knesset's website dedicated to the memory of former Prime Minister
Yitzhak Rabin. She has been credited with turning a cumbersome government
endeavor into an efficient, profitable project. Since 1993, Ms. Dodelson has
been president of Harton Financial, a currency trading company. She has 15 years
experience in business and finance, computer science and marketing. She has a BS
in computer science and a BA in education. Ms. Dodelson is the sister-in-law of
Dr. Gertler.
20
SUSAN GERTLER PH.D., created and developed the concept of Youthline USA and is
its co-founder, publisher and executive editor. She has served as Vice
President, Secretary and a Director of Youthline USA since August 1999 and has
been Vice President, Secretary and Director of our subsidiary, S&S Plus, Inc.,
since inception. From 1992 to 1994, Dr. Gertler worked as a researcher in a
long-term study. She designed and developed systems in the area of health
psychology, including an on-line application for quantitative analysis of mental
health status. From 1991 to 1993, Dr. Gertler conducted individual and family
therapy in a disadvantaged area. She maintained contact with schools to
coordinate and individualize treatment for optimal social and development
progress. She holds a BA in education and an MA and Ph.D. in clinical psychology
from Fordham University. Dr. Gertler is the sister-in-law of Ms. Dodelson.
EMANUEL YARMISH, has been a Director of Youthline USA since June 1999. Form 1982
to present, Mr. Yarmish has been the President of Nicole Holdings, Inc., a
privately held real estate investment and management company.
LOUIS LIBIN, has been a Director of Youthline USA since July 2000. Mr. Libin is
a recognized expert in strategic broadcast and communication systems, and has
acted as a consultant and advisor to the FCC and US State Department. From 1996
to present, Mr. Libin has been the President and founder of Broad Comm, a
consulting group specializing in satellite and wireless communications with high
profile clients including GE, NBC, CBS, International Olympic Committee, various
television stations, foreign governments, and a myriad of Internet, wireless,
and broadcast startups.
MARK SEIGEL, has served as Vice President of Educational Sales since March 2000.
From December 1998 to March 2000, he was the Sales and Marketing Vice President
of PCS Revenue Control Systems, Inc., where he. was directly responsible for
more than 500 public school districts and 5,000 individual public school
accounts. During such period, he planned and directed a sales, marketing and
Internet strategy for an industry-leading vendor of computerized school
food-service equipment. Mr. Seigel has also held senior executive positions with
Webspan Communications, Inc. from December 1997 to December 1998, and
MicroWarehouse, Inc from July 1995 to December 1997. He holds an MBA from Adam
Smith University and he served worldwide as a United States Air Force officer
from 1979-1995.
JAY RICCI, has served as Vice President of Advertising since March 2000. He
brings many years of experience in textbook and educational publishing including
product acquisition, development, sales and marketing. Mr. Ricci was a salesman,
acquisitions editor and district sales manager at McGraw Hill educational
publishing from 1976 to 1985. He has served as eastern regional sales manager at
Addison Wesley educational publishing from 1985 to 1990, and as senior executive
editor at Harcourt Brace Jovanovich from 1990 to 1995. In addition, Mr. Ricci
was the national accounts manager for new business development at Rodale
Publishing from 1995 until joining Youthline USA. Mr. Ricci holds a BA in
English/Education from the University of Massachusetts.
KATHLEEN HOFFMANN joined Youthline USA in August 2000 as Director of Marketing.
From January 1998 to August 2000, she was an Account Director at CCM Advertising
in New York City, servicing a variety of consumer services and products. Prior
to CCM, Ms. Hoffmann led the marketing team that successfully launched the
History Channel for A&E Network. Ms. Hoffmann is also credited for being part of
the marketing team that launched the Prodigy On-line service from 1988-1994,
where she developed an on-line promotion. She holds a BA from William Paterson
University and also attended The School of Visual Arts in Manhattan.
21
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers, and persons who own more than ten percent
(10%) of a registered class of our equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of Youthline
USA. Officers, directors and greater than ten percent shareholders are required
by SEC regulation to furnish the us with copies of all Section 16(a) forms they
file.
To our knowledge, based solely upon its review of the copies of such
reports furnished to us during the year ended December 31, 1999, all Section
16(a) filing requirements applicable to its officers and directors and greater
than ten percent beneficial owners were satisfied.
ADVISORY BOARDS
Youthline USA has three Advisory Boards in the areas of multimedia,
education, and technology.
Multimedia
The following persons are experts in the field of entertainment, television,
radio, and newspaper. They assist us in delivering top quality media products to
Youthline USA readers.
Mike Glenn, is a former professional basketball player. He is a
literacy advocate for elementary school students across the nation.
Youthline USA is one of his many vehicles for the promotion of
education, and he is a frequent participant in educational programs and
initiatives.
Russell Simmons is a prominent entrepreneur, music star, and
philanthropist. His endeavors include the successful Def Jam Recording,
Phat Farm clothing line, and Rush Philanthropic Arts Foundation.
Dedicated to the education of kids from every walk of life, Mr. Simmons
is a frequent participant in educational programs and initiatives
across the nation.
Mike O'Hara is a business entrepreneur whose experience in marketing
and management have gained him prominent positions with publishers such
as the New York Press and Princeton Packet. He is currently the Chief
Operating Officer of blahblah.com, an exciting new Internet-based
company.
Education
The following experienced educators and psychologists provide
invaluable advice and guidance on the development of the core Youthline USA
products, including news, curriculum, and accountability.
Dr. L'Tanya Sloan, Vice President of Technology In Schools and
President of Ed-Tech Group, has designed and implemented comprehensive
systems that use technology to improve student achievement in many
schools throughout the country.
Irma Feld Getz, independent consultant for Newspapers in Education,
currently works as a consultant to the Philadelphia Inquirer, the New
York Times, and Youthline USA. She has been an advisor to the
Burlington County Times, the Delaware County Times, the New York Post,
and several other newspapers and school districts throughout the
country.
22
Dr. Larry Aber is the Director of National Center for Children in
Poverty.
Sally Hindes, Ed.D. is a Learning Disabilities Consultant.
Technology
The following persons are technology experts who have teamed up to
ensure that Youthline USA stays on the cutting edge of technological advances,
in the worlds of both media and education.
Dr. Howard Brown is Director of DCPS TANF Programs and the Washington,
DC school system. In addition, he is Director of Twenty-first Century
Community Learning Centers.
Mark Gura is the Director of Instructional Technology for the New York
City Board of Education.
DIRECTOR COMPENSATION
Each director of Youthline USA is entitled to receive reasonable
out-of-pocket expenses incurred in attending meetings of the Board of Directors
of Youthline USA but do not receive compensation for services that they have
provided as directors. Youthline USA may elect to pay non-cash consideration in
the form of options to directors in the future. In the future, we may elect a
cash payment as well as a non-cash consideration.
23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of September
30, 2000 with respect to the beneficial ownership of the outstanding shares of
our Common Stock (20,739,350 as of such date plus, where relevant for particular
beneficial owners, shares which such beneficial owner has the right to acquire)
by (i) any holder known to us owning more than five percent (5%) of the
outstanding shares; (ii) our officers and directors; and (iii) the directors and
officers of Youthline USA as a group:
Number of Shares Percentage (%) of
Name of Beneficial Owner* Common Stock Ownership
------------------------- ------------ ---------
Greenwood Capital Partners, Inc. (2) 4,900,000 23.63%
Jacob Y. "Rocky" Stefansky (2) 8,400,000 34.65%
Emanuel Yarmish (3) 210,000 1.01%
Saki Dodelson (4) 1,845,000 8.42%
Susan Gertler (4) 1,845,000 8.42%
Louis Libin (5) 150,000 .72%
McCallum Limited (6) 2,163,077 9.99%
New Sales Limited (7) 1,100,000 5.22%
Gold Mine Asset Management Ltd. (8) 3,600,000 16.89%
Praxis Assets Limited (9) 2,218,571 9.99%
All Officers and Directors 12,440,000 52.21%
as a group (5 persons) (10)
* Unless otherwise indicated, the address of all persons listed in this section
is c/o Youthline USA, Inc., 4581 US9, Howell, NJ 07731.
(1) Beneficial ownership as reported in the table above has been determined in
accordance with Instruction (4) to Item 403 of Regulation S-B of the
Exchange Act.
(2) Includes (i) 4,900,000 shares owned by Greenwood Capital Partners, Inc.
("Greenwood"), a corporation controlled by Mr. Stefansky, (ii) 1,000,000
warrants exercisable at $.10 per share owned by GIG Consultants Inc.
("GIG"), a corporation controlled by Mr. Stefansky, (iii) 1,500,000
warrants exercisable at $.10 per share, (iv) 333,333 warrants exercisable
at $.10 per share owned by Portugal Investment Group Inc. ("Portugal"), a
corporation controlled by Mr. Stefansky, and (v) 666,667 warrants
exercisable at $.10 per share owned by Katimon Partners Inc. ("Katimon"), a
corporation controlled by Mr. Stefansky. All such warrants expire on
December 31, 2004. See "Certain Transactions."
(3) Represents his indirect minority ownership interest through Greenwood.
(4) Includes 1,170,000 warrants exercisable at $.10 per share and 375,000
warrants exercisable at $.05 per share. Such warrants expire on December
31, 2004. See "Certain Transactions."
(5) Includes 25,000 warrants exercisable at $1.00 per share, 25,000 warrants
exercisable at $2.00 per share and 25, 000 warrants exercisable at $3.00.
Such warrants expire on December 31, 2004. See "Certain Transactions."
(6) The address for this holder is 7 Cours de Rive, 1204 Geneva, Switzerland.
Includes 250,000 warrants exercisable at $4.00 per share through December
31, 2004. Also includes a maximum of 663,077 additional shares of common
stock currently issuable upon conversion of a convertible note. See
"Certain Transactions."
24
(7) The address for this holder is 7 Cours de Rive, 1204 Geneva, Switzerland.
Includes 350,000 warrants exercisable at $4.00 per share through December
31, 2004. See "Certain Transactions."
(8) The address for this holder is c/o Lowe Lippman, 5 St. Kilda Road, St.
Kilda, 3182, Victoria, Australia. Includes 500,000 warrants exercisable at
$4.00 and 100,000 warrants exercisable at $5.00. Such warrants expire on
December 31, 2004. See "Certain Transactions."
(9) The address for this holder is 7 Cours de Rive, 1204 Geneva, Switzerland.
Includes a maximum of 1,468,571 additional shares of common stock currently
issuable upon conversion of a convertible note. See "Certain Transactions."
(10) See Notes (2) through (5) above.
DESCRIPTION OF SECURITIES
GENERAL
The following description of our capital stock does not purport to be
complete and is subject to and qualified in its entirety by our certificate of
incorporation and bylaws, which are included as exhibits to the registration
statement of which this prospectus forms a part, and by the applicable
provisions of Delaware law.
We are authorized to issue up to 50,000,000 shares of common stock,
$.0001 par value per share, of which 20,739,350 shares were issued and
outstanding as of September 30, 2000. Our certificate of incorporation
authorizes 5,000,000 shares of "blank check" preferred stock, none of which are
outstanding.
COMMON STOCK
Subject to the rights of holders of preferred stock, if any, holders of
shares of our common stock are entitled to share equally on a per share basis in
such dividends as may be declared by our Board of Directors out of funds legally
available therefor. There are presently no plans to pay dividends with respect
to the shares of our common stock. Upon our liquidation, dissolution or winding
up, after payment of creditors and the holders of any of our senior securities,
including preferred stock, if any, our assets will be divided pro rata on a per
share basis among the holders of the shares of our common stock. The common
stock is not subject to any liability for further assessments. There are no
conversion or redemption privileges nor any sinking fund provisions with respect
to the common stock and the common stock is not subject to call. The holders of
common stock do not have any pre-emptive or other subscription rights.
Holders of shares of common stock are entitled to cast one vote for
each share held at all stockholders' meetings for all purposes, including the
election of directors. The common stock does not have cumulative voting rights.
25
All of the issued and outstanding shares of common stock are fully
paid, validly issued and non-assessable.
PREFERRED STOCK
None of the 5,000,000 "blank check" preferred shares are currently
outstanding. Our Board of Directors have the authority, without further action
by the holders of the outstanding common stock, to issue shares of preferred
stock from time to time in one or more classes or series, to fix the number of
shares constituting any class or series and the stated value thereof, if
different from the par value, and to fix the terms of any such series or class,
including dividend rights, dividend rates, conversion or exchange rights, voting
rights, rights and terms of redemption (including sinking fund provisions), the
redemption price and the liquidation preference of such class or series.
WARRANTS 