Delaware
|
8211 | 95-4774688 | ||
(State or Other Jurisdiction
of
Incorporation or Organization) |
(Primary Standard Industrial
Classification Number) |
(IRS Employer
Identification No.) |
William P. ONeill, Esq. | Howard D. Polsky, Esq. | Richard D. Truesdell, Jr., Esq. | ||
Blaise F. Brennan, Esq. | Senior Vice President, General Counsel and Secretary | Davis Polk & Wardwell | ||
Latham & Watkins LLP | K12 Inc. | 450 Lexington Avenue | ||
555 Eleventh Street, N.W | 2300 Corporate Park Drive | New York, NY 10017 | ||
Washington, D.C. 20004 | Herndon, VA 20171 | (212) 450-4674 | ||
(202) 637-2200 | (703) 483-7000 |
Title of Each Class of
|
Proposed Maximum
|
Amount of
|
||||
Securities to be Registered | Aggregate Offering Price(a)(b) | Registration Fee | ||||
Common stock, $0.0001 par value | $172,500,000 | $5,296(c) | ||||
(a) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) promulgated under the Securities Act of 1933. | |
(b) | Including shares of common stock which may be purchased by the underwriters to cover overallotments, if any. | |
(c) | Previously paid. |
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities, and we are not soliciting offers to buy these
securities in any state or jurisdiction where the offer or sale
is not permitted.
|
Underwriting
|
Proceeds to
|
|||||||||||||||
Discounts and
|
Proceeds to
|
Selling
|
||||||||||||||
Price to Public | Commissions | K12 Inc. | Stockholders | |||||||||||||
Per Share
|
$ | $ | $ | $ | ||||||||||||
Total
|
$ | $ | $ | $ |
Morgan Stanley | Credit Suisse |
Robert W. Baird & Co. |
BMO Capital Markets |
ThinkEquity Partners LLC |
Page
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F-1
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28
II-3
II-4
1
According to the National Center for Education Statistics
(NCES), a division of the U.S. Department of Education,
there were more than 49 million students in K-12 public
schools during the
2005-06
school year. In addition, according to National Home Education
Research, approximately two million students are home schooled
and, according to a March 2006 NCES report, approximately five
million students are enrolled in private schools.
According to the NCES, the public school system alone
encompassed more than 98,000 schools and 17,000 school
districts during the
2005-06
school year.
The NCES estimates that total spending in the public K-12 market
was $558 billion for the
2005-06
school year.
2
3
Most of our revenues depend on per pupil funding amounts
remaining near the levels existing at the time we execute
service agreements with the virtual public schools we serve. If
those funding levels are materially reduced, new restrictions
adopted or payments delayed, our business, financial condition,
results of operations and cash flows could be adversely affected.
The poor performance or misconduct of other virtual public
school operators could tarnish the reputation of all virtual
public school operators, which could have a negative influence
on our business.
Opponents of virtual public schools have sought to challenge the
establishment and expansion of such schools through the judicial
process. If their interests prevail, it could damage our ability
to sustain or grow our current business in certain jurisdictions.
We have a limited operating history, and sustained losses of
approximately $90 million before only recently achieving
profitability. If we fail to remain profitable or achieve
further marketplace acceptance for our products and services,
our business, financial condition and results of operations will
be adversely affected.
Highly qualified teachers are critical to the success of our
learning system. If we are not able to continue to recruit,
train and retain quality certified teachers, our lessons might
not be effectively delivered to students, compromising their
academic performance and our reputation with the virtual public
schools we serve. As a result, our brand, business and operating
results may be adversely affected.
4
shares
shares
shares
shares
shares from the selling stockholders
Proposed New York Stock Exchange symbol
LRN
Use of proceeds from this offering
We estimate that our net proceeds from this offering will be
approximately $ million,
based on an assumed initial public offering price of
$ per share (which is the
midpoint of the range on the cover page of this prospectus). We
intend to use the net proceeds from this offering for general
corporate purposes, including working capital, capital
expenditures and the development of new courses and product
offerings, to repay approximately $15.0 million of
borrowings under our revolving credit facility and to pay a cash
dividend of approximately $6.4 million to the holders of
our Series C Preferred Stock, which will become payable
upon the closing of this offering. The net proceeds will also
provide us with the financial flexibility to make acquisitions
and strategic investments. We will receive no proceeds from the
sale of common stock to be sold by the selling stockholders in
this offering or any shares to be sold by the selling
stockholders if the underwriters exercise their overallotment
option. In addition, we anticipate that we will receive net
proceeds of $14.9 million from the sale of additional
shares in the Regulation S Transaction. See Use of
Proceeds.
is based on 2,045,217 shares of common stock outstanding as
of September 30, 2007;
gives effect to the automatic conversion of all 101,386,536 of
the outstanding shares of our preferred stock into
19,879,675 shares of our common stock immediately prior to
the completion of this offering;
gives effect to the sale
of shares
of common stock pursuant to the Regulation S Transaction
concurrently with the consummation of the offering (assuming an
initial offering price of
$ per share, the midpoint of
the range set forth on the cover of this prospectus);
excludes 4,860,973 shares of common stock issuable upon the
exercise of options outstanding as of September 30, 2007 at
a weighted average exercise price of $10.37 per share,
2,328,358 shares of preferred stock that may be issued upon
the exercise of warrants outstanding as of September 30,
2007 (or upon the consummation of the offering,
456,540 shares of common stock that may be issued upon the
exercise of such warrants at a purchase price of $6.83 per
share), all of which are currently exercisable at a purchase
price of $1.34 per share, and 21,299 shares of common
stock that may be issued upon the exercise of warrants
outstanding as of September 30, 2007, all of which are
exercisable at a purchase price of $8.16 per share;
excludes an additional 784,313 shares of common stock
reserved for issuance under the K12 Inc. 2007 Equity Incentive
Award Plan;
excludes an additional 588,235 shares of common stock
reserved for issuance under the K12 Inc. 2007 Employee Stock
Purchase Plan.
a 1 for 5.10 stock split of our common stock that was effected
on November 2, 2007, as a result of which each
5.10 shares of preferred stock are now convertible into one
share of common stock;
an initial offering price of $ per
share (which is the midpoint of the range on the cover page of
this prospectus); and
the underwriters option to purchase up
to additional
shares of common stock is not exercised.
5
Three Months Ended
September 30,
Year Ended June 30,
2007
2006
2007
2006
2005
(dollars in thousands, except per share data)
$
59,353
$
37,743
$
140,556
$
116,902
$
85,310
34,778
19,177
76,064
64,828
49,130
16,039
11,385
51,159
41,660
30,031
2,527
2,206
8,611
8,568
9,410
53,344
32,768
135,834
115,056
88,571
6,009
4,975
4,722
1,846
(3,261
)
(304
)
(94
)
(639
)
(488
)
(279
)
5,705
4,881
4,083
1,358
(3,540
)
7,117
(146
)
(218
)
12,822
4,735
3,865
1,358
(3,540
)
(1,671
)
(1,519
)
(6,378
)
(5,851
)
(5,261
)
(6,560
)
(5,367
)
(22,353
)
(18,697
)
(15,947
)
$
4,591
$
(2,151
)
$
(24,866
)
$
(23,190
)
$
(24,748
)
$
2.25
$
(1.08
)
$
(12.42
)
$
(11.73
)
$
(12.54
)
$
0.20
$
(1.08
)
$
(12.42
)
$
(11.73
)
$
(12.54
)
$
0.58
n/a
$
0.18
n/a
n/a
$
0.56
n/a
$
0.18
n/a
n/a
2,043,589
1,998,853
2,001,661
1,977,195
1,973,053
22,744,525
1,998,853
2,001,661
1,977,195
1,973,053
21,923,244
n/a
21,881,316
n/a
n/a
22,744,525
n/a
21,890,720
n/a
n/a
$
(2,740
)
$
3,398
$
5,563
$
3,625
$
9,697
$
2,252
$
1,224
$
7,404
$
4,986
$
5,509
$
8,494
$
4,784
$
13,418
$
10,842
$
5,133
$
8,261
$
6,199
$
12,126
$
6,832
$
2,248
39,493
26,405
27,005
20,220
15,097
6
As of
September 30,
As of June 30,
2007
2007
2006
2005
(dollars in thousands)
$
2,903
$
1,660
$
9,475
$
19,953
106,202
61,212
48,485
41,968
12,500
1,500
13,406
7,135
4,025
4,466
237,787
229,556
200,825
176,277
(192,891
)
(197,807
)
(173,451
)
(150,299
)
9,939
8,548
15,421
22,953
(1)
Pro forma net income per common
share gives effect to the automatic conversion of all of our
outstanding shares of preferred stock into common stock
immediately prior to the completion to this offering. Assuming
the completion of this offering on September 30, 2007, all
of our outstanding shares of preferred stock would convert into
19,879,675 shares of common stock.
(2)
Capital expenditures consist of the
purchase of property and equipment, capitalized software and new
capital lease obligations.
(3)
EBITDA consists of net income
(loss) minus interest income, plus interest expense, plus income
tax expense and plus depreciation and amortization. Interest
income consists primarily of interest earned on short-term
investments or cash deposits. Interest expense primarily
consists of interest expense for capital leases, long-term and
short-term borrowings. We use EBITDA as a measure of operating
performance. However, EBITDA is not a recognized measurement
under U.S. generally accepted accounting principles, or GAAP,
and when analyzing our operating performance, investors should
use EBITDA in addition to, and not as an alternative for, net
income (loss) as determined in accordance with GAAP. Because not
all companies use identical calculations, our presentation of
EBITDA may not be comparable to similarly titled measures of
other companies. Furthermore, EBITDA is not intended to be a
measure of free cash flow for our managements
discretionary use, as it does not consider certain cash
requirements such as tax payments.
We believe EBITDA is useful to an
investor in evaluating our operating performance because it is
widely used to measure a companys operating performance
without regard to items such as depreciation and amortization,
which can vary depending upon accounting methods and the book
value of assets, and to present a meaningful measure of
corporate performance exclusive of our capital structure and the
method by which assets were acquired.
as a measurement of operating performance, because it assists us
in comparing our performance on a consistent basis, as it
removes depreciation, amortization, interest and taxes; and
in presentations to the members of our board of directors to
enable our board to have the same measurement basis of operating
performance as is used by management to compare our current
operating results with corresponding prior periods and with the
results of other companies in our industry.
Three Months
Ended
September 30,
Year Ended June 30,
2007
2006
2007
2006
2005
(dollars in thousands)
$
12,822
$
4,735
$
3,865
$
1,358
$
(3,540
)
304
94
639
488
279
(7,117
)
146
218
2,252
1,224
7,404
4,986
5,509
$
8,261
$
6,199
$
12,126
$
6,832
$
2,248
(4)
To ensure that all schools are
reflected in our measure of enrollments, we consider our
enrollments as of the end of September to be our opening
enrollment level, and the number of students enrolled at the end
of May to be our ending enrollment level. To provide
comparability, we do not consider enrollment levels for June,
July and August as all schools are not open during these months.
For each period, average enrollments represent the average of
the month end enrollment levels for each month that has
transpired between September and the end of the period, up to
and including the month of May.
legislative proposals could result in budget cuts for the
virtual public schools we serve, and therefore reduce or
eliminate the products and services those schools purchase from
us, causing our revenues to decline. From time to time,
proposals are introduced in state legislatures that single out
virtual public schools for disparate treatment. For example, in
its fiscal year
2007-09
education budget appropriation, the Indiana legislature decided
not to fund any virtual public school that provided for the
online delivery of more than 50 percent of its instruction
to students. As a result, we decided not to open a virtual
public school in Indiana that was already approved by a
chartering authority and therefore the anticipated associated
revenues were not realized. Other examples include laws that
decrease per pupil funding for virtual public schools or alter
eligibility and attendance criteria or other funding conditions
that could decrease our revenues and limit our ability to grow;
as a public company, we will be required to file periodic
financial and other disclosure reports with the Securities and
Exchange Commission, or the SEC. This information may be
referenced in the legislative process, including budgetary
considerations, related to the funding of alternative public
school options, including virtual public schools. The disclosure
of this information by a for-profit education company,
regardless of parent satisfaction and student academic
achievement, may nonetheless be used by opponents of virtual
public schools to propose funding reductions; and
from time to time, government funding to schools is not provided
when due, which sometimes causes the affected schools to delay
or cease payments to us for our products and services. These
payment delays have occurred in the past and can deprive us of
significant working capital until the matter is resolved, which
could hinder our ability to implement our growth strategies and
conduct our business. For example, in 2003 the Pennsylvania
state legislature withheld monthly payments for every school
because it was unable to approve an education budget for six
months, which necessitated our borrowing of funds to continue
operations.
8
9
10
11
our development of public hybrid schools, which will produce
different operational challenges than those we currently
encounter. In addition to the online component, hybrid schools
require us to lease facilities for classrooms, staff classrooms
with teachers, provide meals, adhere to local safety and fire
codes, purchase additional insurance and fulfill many other
responsibilities;
our expansion into international markets may require us to
conduct our business differently than we do in the United
States. For example, we may attempt to open a tuition-based
private school or establish a traditional brick and mortar
school. Additionally, we may have difficulty training and
retaining qualified teachers or generating sufficient demand for
our products and services in international markets.
International opportunities will also produce different
operational challenges than those we currently
encounter; and
our use of our curriculum in classrooms will produce challenges
with respect to adapting our curriculum for effective use in a
traditional classroom setting.
12
13
14
the Childrens Online Privacy Protection Act, which
restricts the distribution of certain materials deemed harmful
to children and imposes additional restrictions on the ability
of online companies to collect personal information from
children under the age of 13; and
the Family Educational Rights and Privacy Act, which imposes
parental or student consent requirements for specified
disclosures of student information, including online information.
15
16
17
foreign currency fluctuations, which could result in reduced
revenues and increased operating expenses;
potentially longer payment and sales cycles;
difficulty in collecting accounts receivable;
the effect of applicable foreign tax structures, including tax
rates that may be higher than tax rates in the United States or
taxes that may be duplicative of those imposed in the United
States;
tariffs and trade barriers;
general economic and political conditions in each country;
inadequate intellectual property protection in foreign countries;
uncertainty regarding liability for information retrieved and
replicated in foreign countries;
the difficulties and increased expenses in complying with a
variety of U.S. and foreign laws, regulations and trade
standards, including the Foreign Corrupt Practices Act; and
unexpected changes in regulatory requirements.
quarterly variations in our operating results compared to market
expectations;
changes in expectations as to our future financial performance,
including financial estimates or reports by securities analysts;
changes in market valuations of similar companies;
liquidity and activity in the market for our common stock;
sales of our common stock by our stockholders;
strategic moves by us or our competitors, such as acquisitions
or restructurings;
general market conditions; and
domestic and international economic, legal and regulatory
factors unrelated to our performance.
18
19
20
21
22
23
on an actual basis;
on a pro forma basis, giving effect to the automatic conversion
of all of the outstanding shares of our preferred stock into
19,879,675 shares of our common stock immediately prior to
the completion of this offering; and
on a pro forma basis as discussed in the prior bullet point, as
adjusted to give effect to (i) our receipt of the estimated
net proceeds from the sale
of shares
of common stock offered by us in this offering, assuming an
initial public offering price of
$ , the midpoint of the estimated
price range shown on the cover page of this prospectus, after
deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us and (ii) our
receipt of the estimated net proceeds from the sale of shares of
common stock in the Regulation S Transaction, assuming the
sale
of shares
of common stock (based on the same assumed initial public
offering price of
$
per share, which is the midpoint of the range shown on the cover
page of this prospectus), after deducting estimated expenses
payable by us, and our use of proceeds from this offering and
the Regulation S Transaction to repay approximately
$15.0 million of outstanding indebtedness under our
revolving credit facility and to pay a cash dividend of
approximately $6.4 million to the holders of our
Series C Preferred Stock, which will become payable upon
the closing of this offering.
As of September 30, 2007
Pro forma
Actual
Pro forma
as
adjusted
(1)
(dollars in thousands)
$
2,903
$
2,903
$
25,906
25,906
95,571
142,216
1
11
237,777
(192,892
)
(192,892
)
(192,891
)
44,896
$
70,802
$
70,802
$
(1)
A $1.00 increase (decrease) in the
assumed initial public offering price of
$ per share, which is the midpoint
of the range on the cover page of this prospectus, would
increase (decrease) each of cash and cash equivalents,
additional paid-in capital, total stockholders equity and
total capitalization by approximately
$ million, assuming the
number of shares offered by us, as set forth on the cover page
of this prospectus, remains the same and after deducting the
underwriting discounts and commissions and estimated offering
expenses payable by us.
(2)
A $1.00 increase (decrease) in the
assumed initial public offering price of
$ per share, which is the midpoint
of the range shown on the cover page of this prospectus, would
decrease (increase) the number of shares issued and outstanding
by approximately shares,
assuming the $15.0 million purchase price of the
Regulation S Transaction remains the same.
24
Per Share
$
$
0.40
$
the total number of shares of common stock purchased from us by
our existing stockholders, by the investor in the
Regulation S Transaction and by new investors purchasing
shares in this offering;
the total consideration paid to us by our existing stockholders,
by the investor in the Regulation S Transaction and by new
investors purchasing shares in this offering, assuming an
initial public offering price of $
per share and the sale
of shares in the
Regulation S Transaction (before deducting the estimated
underwriting discount and commissions and offering expenses
payable by us in connection with this offering and expenses of
the Regulation S Transaction); and
25
the average price per share paid by existing stockholders, by
the investor in the Regulation S Transaction and by new
investors purchasing shares in this offering:
stock options outstanding as of September 30, 2007 to
purchase 4,860,973 shares of common stock at a weighted
average exercise price of $10.37 per share;
2,328,358 shares of preferred stock that may be issued upon
the exercise of warrants outstanding as of September 30,
2007, all of which are currently exercisable at a purchase price
of $1.34 per share (or upon the consummation of the
offering, 456,540 shares of common stock that may be issued
upon the exercise of such warrants at a purchase price of $6.83
per share), and 21,299 shares of common stock that may be
issued upon the exercise of warrants outstanding as of
September 30, 2007, all of which are exercisable at a
purchase price of $8.16 per share; or
the underwriters overallotment option.
26
Three Months Ended
September 30,
Year Ended June 30,
2007
2006
2007
2006
2005
2004
2003
(dollars in thousands, except per share data)
$
59,353
$
37,743
$
140,556
$
116,902
$
85,310
$
71,434
$
30,930
34,778
19,177
76,064
64,828
49,130
39,943
25,580
16,039
11,385
51,159
41,660
30,031
25,656
20,903
2,527
2,206
8,611
8,568
9,410
12,750
12,416
53,344
32,768
135,834
115,056
88,571
78,349
58,899
6,009
4,975
4,722
1,846
(3,261
)
(6,915
)
(27,969
)
(304
)
(94
)
(639
)
(488
)
(279
)
(516
)
(388
)
5,705
4,881
4,083
1,358
(3,540
)
(7,431
)
(28,357
)
7,117
(146
)
(218
)
12,822
4,735
3,865
1,358
(3,540
)
(7,431
)
(28,357
)
(1,671
)
(1,519
)
(6,378
)
(5,851
)
(5,261
)
(2,667
)
(6,560
)
(5,367
)
(22,353
)
(18,697
)
(15,947
)
(15,768
)
(11,912
)
$
4,591
$
(2,151
)
$
(24,866
)
$
(23,190
)
$
(24,748
)
$
(25,866
)
$
(40,269
)
$
2.25
$
(1.08
)
$
(12.42
)
$
(11.73
)
$
(12.54
)
$
(13.17
)
$
(20.52
)
$
0.20
$
(1.08
)
$
(12.42
)
$
(11.73
)
$
(12.54
)
$
(13.17
)
$
(20.52
)
$
0.58
n/a
$
0.18
$
n/a
n/a
n/a
n/a
$
0.56
n/a
$
0.18
n/a
n/a
n/a
n/a
2,043,589
1,998,853
2,001,661
1,977,195
1,973,053
1,964,147
1,962,726
22,744,525
1,998,853
2,001,661
1,977,195
1,973,053
1,964,147
1,962,726
21,923,244
n/a
21,881,316
n/a
n/a
n/a
n/a
22,744,525
n/a
21,890,720
n/a
n/a
n/a
n/a
$
(2,740
)
$
3,398
$
5,563
$
3,625
$
9,697
$
(8,020
)
$
(15,990
)
$
2,252
$
1,224
$
7,404
$
4,986
$
5,509
$
4,922
$
4,005
$
8,494
$
4,784
$
13,418
$
10,842
$
5,133
$
4,643
$
4,677
$
8,261
$
6,199
$
12,126
$
6,832
$
2,248
$
(1,993
)
$
(23,964
)
39,493
26,405
27,005
20,220
15,097
11,158
5,872
27
As of
September 30,
As of June 30,
2007
2007
2006
2005
2004
2003
(dollars in thousands)
$
2,903
$
1,660
$
9,475
$
19,953
$
15,881
$
7,727
106,202
61,212
48,485
41,968
42,714
21,331
12,500
1,500
13,406
7,135
4,025
4,466
3,432
1,697
237,787
229,556
200,825
176,277
155,069
111,634
(192,891
)
(197,807
)
(173,451
)
(150,299
)
(125,621
)
(99,762
)
9,939
8,548
15,421
22,953
24,130
6,823
(1)
Pro forma net income per common
share gives effect to the automatic conversion of all of our
outstanding shares of preferred stock into common stock
immediately prior to the completion to this offering. Assuming
the completion of this offering on September 30, 2007, all
of our outstanding shares of preferred stock would convert into
19,879,675 shares of common stock.
(2)
Capital expenditures consist of the
purchase of property and equipment, capitalized software and new
capital lease obligations.
(3)
EBITDA consists of net income
(loss) minus interest income, plus interest expense, plus income
tax expense and plus depreciation and amortization. Interest
income consists primarily of interest earned on short-term
investments or cash deposits. Interest expense primarily
consists of interest expense for capital leases, long-term and
short-term borrowings. We use EBITDA as a measure of operating
performance. However, EBITDA is not a recognized measurement
under U.S. generally accepted accounting principles, or GAAP,
and when analyzing our operating performance, investors should
use EBITDA in addition to, and not as an alternative for, net
income (loss) as determined in accordance with GAAP. Because not
all companies use identical calculations, our presentation of
EBITDA may not be comparable to similarly titled measures of
other companies. Furthermore, EBITDA is not intended to be a
measure of free cash flow for our managements
discretionary use, as it does not consider certain cash
requirements such as tax payments.
We
believe EBITDA is useful to an investor in evaluating our
operating performance because it is widely used to measure a
companys operating performance without regard to items
such as depreciation and amortization, which can vary depending
upon accounting methods and the book value of assets, and to
present a meaningful measure of corporate performance exclusive
of our capital structure and the method by which assets were
acquired. Our management uses EBITDA:
as a measurement of operating performance, because it assists us
in comparing our performance on a consistent basis, as it
removes depreciation, amortization, interest and taxes; and
in presentations to the members of our board of directors to
enable our board to have the same measurement basis of operating
performance as is used by management to compare our current
operating results with corresponding prior periods and with the
results of other companies in our industry.
Three Months Ended September 30,
Year Ended June 30,
2007
2006
2007
2006
2005
2004
2003
(dollars in thousands)
$
12,822
$
4,735
$
3,865
$
1,358
$
(3,540
)
$
(7,431
)
$
(28,357
)
304
94
639
488
279
516
388
(7,117
)
146
218
2,252
1,224
7,404
4,986
5,509
4,922
4,005
$
8,261
$
6,199
$
12,126
$
6,832
$
2,248
$
(1,993
)
$
(23,964
)
(4)
To ensure that all schools are
reflected in our measure of enrollments, we consider our
enrollments as of the end of September to be our opening
enrollment level, and the number of students enrolled at the end
of May to be our ending enrollment level. To provide
comparability, we do not consider enrollment levels for June,
July and August as all schools are not open during these months.
For each period, average enrollments represent the average of
the month end enrollment levels for each month that has
transpired between September and the end of the period, up to
and including the month of May.
29
the number of states and school districts in which we operate;
30
the appeal of our curriculum to students and families;
the effectiveness of our program in delivering favorable
academic outcomes;
the quality of the teachers working in the virtual public
schools we serve; and
the effectiveness of our marketing and recruiting programs.
31
32
33
34
Access to the
K
12
Online School and Online Lessons.
Our OLS
revenues come primarily from contracts with charter schools and
school districts. Students are provided access to the OLS and
online lessons at the start of the school year for which they
have enrolled. On a per student basis, we invoice schools an
upfront fee at the beginning of the school year or at the time a
student enrolls and a monthly fee for each month during the
school year in which the student is enrolled. A school year
generally consists of 10 months. The upfront fee is
initially recorded as deferred revenue and is recognized as
revenues ratably over the remaining months of the current school
year. If a student withdraws prior to the end of a school year,
any remaining deferred revenue related to the upfront fee is
recognized ratably over the remaining months of the school year.
The monthly fees are recognized in the month in which they are
earned.
Offline Learning Kits.
Our offline learning
kit revenues come primarily from contracts with virtual public
schools and our curriculum blends which online and offline
content. The lessons in our online school are meant to be used
in conjunction with selected printed materials, workbooks,
laboratory materials and other manipulative items which we
provide to students. We generally ship all offline learning kits
to a student when their enrollment is approved and invoice the
schools in full for the materials at that time. Once materials
have been shipped, our efforts are substantially complete.
Therefore, we recognize revenues upon shipment. Because offline
learning kits revenues are recognized near the time of
enrollment in its entirety, we generate a majority of these
revenues in our first fiscal quarter which coincides with the
start of the school year.
Student Personal Computers.
In most of our
contracts with virtual public schools, we are responsible for
ensuring that each enrolled student has the ability to access
our online school. To accomplish this, we generally provide each
enrolled student with the use of a personal computer, complete
technical support through our call center, and reclamation
services when a student withdraws or a computer needs to be
exchanged. Schools are invoiced on a per student basis for each
enrolled student to whom we have provided a personal computer.
This may include an upfront fee at the beginning of the school
year or at the time a student enrolls and a monthly fee for each
month during the school year in which the student is enrolled. A
school year generally consists of 10 months. The upfront
fee is initially recorded as deferred revenue and is recognized
as revenues ratably over the remaining months of the current
school year. If a student withdraws prior to the end of a school
year, any remaining deferred revenue related to the upfront fee
is recognized ratably over the remaining months of the school
year. All deferred revenue will be recognized by the end of our
fiscal year, June 30. The monthly fees are recognized in
the month in which they are earned.
35
Management and Technology Services.
Under most
of our school contracts, we provide the boards of the virtual
public schools we serve with turnkey management and technology
services. We take responsibility for all academic and fiscal
outcomes. This includes responsibility for all aspects of the
management of the schools, including monitoring academic
achievement, teacher recruitment and training, compensation of
school personnel, financial management, enrollment processing
and procurement of curriculum, equipment and required services.
Management and technology fees are generally determined based
upon a percentage of the funding received by the virtual public
school. We generally invoice schools for management and
technology services in the month in which they receive such
funding.
36
37
38
39
Three Months
Ended
Year Ended
September 30,
June 30,
2007
2006
2007
2006
2005
100
%
100
%
100
%
100
%
100
%
59
51
54
55
58
27
30
36
36
35
4
6
6
7
11
90
87
96
98
104
10
13
4
2
(4
)
(1
)
(1
)
10
13
3
1
(4
)
12
22
%
13
%
3
%
1
%
(4
)%
40
41
42
43
Three Months Ended
Sep 30, 2005
Dec 31, 2005
Mar 31, 2006
Jun 30, 2006
Sep 30, 2006
Dec 31, 2006
Mar 31, 2007
Jun 30, 2007
Sep 30, 2007
$
31,176
$
28,245
$
30,667
$
26,814
$
37,743
$
32,356
$
34,831
$
35,626
$
59,353
17,416
15,696
15,361
16,355
19,177
18,022
17,904
20,961
34,778
8,742
8,402
11,259
13,257
11,385
11,030
12,644
16,100
16,039
1,864
1,862
1,861
2,981
2,206
1,566
2,083
2,756
2,527
28,022
25,960
28,481
32,593
32,768
30,618
32,631
39,817
53,344
3,154
2,285
2,186
(5,779
)
4,975
1,738
2,200
(4,191
)
6,009
(135
)
(127
)
(132
)
(94
)
(94
)
(263
)
(117
)
(165
)
(304
)
3,019
2,158
2,054
(5,873
)
4,881
1,475
2,083
(4,356
)
5,705
(146
)
(30
)
(51
)
9
7,117
$
3,019
$
2,158
$
2,054
$
(5,873
)
$
4,735
$
1,445
$
2,032
$
(4,347
)
$
12,822
Three Months Ended
Sep 30, 2005
Dec 31, 2005
Mar 31, 2006
Jun 30, 2006
Sep 30, 2006
Dec 31, 2006
Mar 31, 2007
Jun 30, 2007
Sep 30, 2007
100
%
100
%
100
%
100
%
100
%
100
%
100
%
100
%
100
%
56
56
50
61
51
56
52
59
59
28
30
37
50
30
34
36
45
27
6
6
6
11
6
5
6
8
4
90
92
93
122
87
95
94
112
90
10
8
7
(22
)
13
5
6
(12
)
10
(1
)
10
8
7
(22
)
13
4
6
(12
)
10
12
10
%
8
%
7
%
(22
)%
13
%
4
%
6
%
(12
)%
22
%
44
45
46
47
For the Twelve Months Ending September 30,
Total
2008
2009
2010
2011
2012
Thereafter
(dollars in thousands)
$
14,686
$
6,105
$
5,520
$
3,061
$
$
$
16,712
2,126
2,130
1,396
1,404
1,376
8,280
12,500
12,500
335
193
101
41
$
44,233
$
20,924
$
7,751
$
4,498
$
1,404
$
1,376
$
8,280
(1)
Includes interest expense.
(2)
Pertains to revolving line of
credit and excludes interest expense due to short-term repayment
period.
48
49
50
51
52
According to the National Center for Education Statistics
(NCES), a division of the U.S. Department of Education,
there were more than 49 million students in K-12 public
schools during the 2005-06 school year. In addition, according
to National Home Education Research, approximately two million
students are home schooled and, according to a March 2006 NCES
report, approximately five million students are enrolled in
private schools.
According to the NCES, the public school system alone
encompassed more than 98,000 schools and 17,000 districts during
the 2005-06 school year.
The NCES estimates that total spending in the public K-12 market
was $558 billion for the 2005-06 school year.
53
54
55
Apply Tried and True Educational Approaches for
Instruction.
Our learning system is designed to utilize both
tried and true methods to drive academic
success. True methodologies are based on cognitive
research regarding the way in which individuals learn. We also
supplement our learning system with teaching tools and
methodologies that have been tested, or tried, and
proven to be effective. This tried and true
philosophy allows us to benefit from both decades of research
about learning, and effective methods of teaching.
Employ Technology Appropriately for Learning.
While all
of our courses are delivered primarily through an online
platform and generally include a significant amount of online
content, we employ technology only where we feel it is
appropriate and can enhance the learning process. In addition to
online content, our curriculum includes a rich mix of offline
course materials, including engaging textbooks and hands-on
materials such as phonics kits and musical instruments. We
believe our balanced use of technology and offline materials
helps to maximize the effectiveness of our learning system.
Base Learning Objectives on Rich Content and Big
Ideas.
We refer to big ideas as the key,
subconscious frameworks that serve as the foundation to a
students future understanding of a subject matter. For
example, an understanding of waves is fundamental to a
physicists understanding of quantum mechanics; therefore,
we teach 1st graders the fundamentals of waves. We use
these big ideas to organize and provide the master
objectives of every course we develop. We then utilize rich,
engaging content to best communicate these concepts to students
to promote mastery of the topics.
Assess Every Objective to Ensure Mastery.
Ongoing
assessments are the most effective way to evaluate a
students mastery of a lesson or concept. To facilitate
effective assessment, our curriculum establishes clear
objectives for each lesson. Throughout a course, each
students progress is assessed and evaluated by a teacher
at a point when each objective is expected to be mastered,
providing direction for appropriate pacing. These periodic and
well-timed assessments reinforce learning and promote mastery of
a topic before a student moves to the next lesson or course.
Facilitate Flexibility as the Level, Pace and Hours Spent on
Each Objective Vary by Child.
We believe that each student
should be challenged appropriately. Generally, adequate progress
for most students is to complete one academic years
curriculum within a nine-month school year. Each individual
student may take greater or fewer instructional hours and more
or less effort than the average student to achieve this
progress. Our learning system is designed to facilitate this
flexibility in order to ensure that the appropriate amount of
time and effort is allocated to each lesson.
Prioritize Important, Complex Objectives.
We have
developed a clear understanding of those subjects and concepts
that are difficult for students. Greater instructional effort is
focused on the most important and difficult concepts and skills.
We use existing research, feedback from parents and students and
experienced teacher judgments to determine these priorities, and
to modify our learning system to guide the allocation of each
students time and effort.
56
57
Elementary School
Middle School
High School
Elementary School
Middle School
High School
Kindergarten Language Arts
Kindergarten Phonics
1st Grade Language Arts
1st Grade Phonics
2nd Grade Language Arts
3rd Grade Language Skills
3rd Grade Spelling
3rd Grade Literature
4th Grade Language Skills
4th Grade Spelling
4th Grade Literature
5th Grade Language Skills
5th Grade Spelling
5th Grade Literature
Intermediate Language Skills A
Intermediate Language Skills B
Intermediate Literature A
Intermediate Literature B
Literary Analysis and Composition
Literary Analysis and Composition I Foundations
Literary Analysis and Composition I
Literary Analysis and Composition II
American Literature
AP English Literature and Composition
World Literature and Language
History
Kindergarten History
1st Grade History
2nd Grade History
3rd Grade History
4th Grade History
American History Before 1865
American History Since 1865
Intermediate World History A
Intermediate World History B
Modern World Studies
World History
U.S. History
AP U.S. History
American Government and Economics
Macroeconomics
Kindergarten Math
1st Grade Math
2nd Grade Math
3rd Grade Math
4th Grade Math
5th Grade Math
Pre-Algebra A
Pre-Algebra B
Algebra I
Pre-Algebra
Pre-Algebra Foundations
Algebra Foundations
Algebra I
Geometry
Algebra II
Art
Kindergarten Art
1st Grade Art
2nd Grade Art
3rd Grade Art
4th Grade Art
Intermediate Art: American A
Intermediate Art: American B
Intermediate Art: World A
Intermediate Art: World B
Art History
Fine Art and Art Appreciation
Kindergarten Science
1st Grade Science
2nd Grade Science
3rd Grade Science
4th Grade Science
5th Grade Science
Kindergarten Science (classroom)
1st Grade Science (classroom)
2nd Grade Science (classroom)
3rd Grade Science (classroom)
Earth Science
Life Science
Physical Science
Earth Science Foundations
Physical Science Foundations
Biology Foundations
Earth Science
Biology
Physical Science
Music/Other
Preparatory Music
Beginning 1 Music
Beginning 2 Music
Introduction to Music
Intermediate 1 Music
Intermediate 2 Music
Intermediate 3 Music
Exploring Music
Music Concepts A
Music Concepts B
Music Appreciation
Learning Online
Physical Education
Spanish I, II, III
French I, II, III
German I, II
Latin I, II
Chinese I
58
Lesson Planning and Scheduling Tools.
In a school year, a
typical student will complete between 800 and 1,200 lessons
across six or more subject areas. Our lesson planning and
scheduling tools enable teachers and parents to establish a
master plan for completing these lessons. These tools are
designed to dynamically update the lesson plan as a student
progresses through each lesson and course, allowing flexibility
to increase or decrease the pace at which the student moves
through the curriculum while ensuring that the student
progresses towards completion in the desired time frame. For
example, the schedule can easily be adapted to accommodate a
student who desires to attend school six days a week, a student
who is interested in studying during the winter holidays to take
time off during the spring, or a student who chooses to take two
math classes a day for the first month of the school year and
delay art classes until the second month of the school year.
Moreover, changes can be made to the schedule at any point
during the school year and the remainder of the students
schedule will automatically adjust in the OLS.
Progress Tracking Tools.
Once a master schedule has been
established, the OLS delivers lessons based upon the specified
parameters. Each day, a student is initially directed to a
screen listing the syllabus for that particular day and begins
the school day by selecting one of the listed lessons. As each
lesson is completed, the student returns to the days
syllabus to proceed to the next subject. If a student does not
complete a lesson during the session, the lesson will be
rescheduled to the next day and will resume at the point where
the student left off. Our progress tracking tool allows
students, parents and teachers to monitor student progress. In
addition, information collected by our progress tracking tool
regarding student performance, attendance and other data is
transferred to our proprietary management system for use in
providing administrative support services.
59
60
Cognitive Scientists, Evaluation and Research
Specialists
conduct and review cognitive
research to determine how students master the key ideas in a
subject area, the common misconceptions that present obstacles
to mastery and available techniques that can effectively address
common misconceptions.
61
Curriculum and Teaching
Specialists
bring deep subject matter
knowledge and experience with a variety of pedagogical
approaches to our course design process.
Writers and Editors
script out the text
of the lessons, ensuring that the information is accurate,
meaningful and suitable for the age group we are trying to reach.
Instructional Designers
weave together
all elements of a lesson and determine the extent to which
online, multi-media components, textbooks and other offline
materials, and activities can be integrated to achieve the
desired learning outcomes.
Graphic Artists/Media Specialists/Flash
Designers
ensure overall visual integrity
of each lesson and build creative and interactive content.
Print Designers
design and publish our
proprietary textbooks and printed learning materials.
User Experience Specialists
work closely
with our design teams to ensure that lessons are easy for
students to navigate and understand.
Training Specialists
concurrent with the
development of the courses, develop training materials and
programs to support the effective delivery of our curriculum by
teachers.
Project Managers
coordinate all of the
activities, including the work of the above-listed resources to
develop the product as designed, on time, and on budget.
62
User Feedback
we receive a substantial
amount of feedback from teachers, parents and students. Some
feedback is directly incorporated into course modifications. In
addition, we observe students in our usability labs and visit
students and parents to better understand how our products are
being used;
Progress Reports
through our OLS, we are
able to monitor each students progress through a course.
This data helps us identify portions of a course that may be
especially difficult for students, and may require revision or
enhancements; and
State Test Scores
students in the
virtual public schools we serve participate in proctored state
exams. These tests provide an impartial assessment of how these
students are performing against established benchmarks and
within their state.
Thomas C. Boysen, Ed.D., Senior Vice President of Classroom
Solutions, K12 Inc. and formerly Kentucky Commissioner of
Education, Chief Operating Officer of the Los Angeles Unified
School District, Senior Vice President of the Milken Family
Foundation and a school district superintendent in California,
Washington and New York. Mr. Boysen is also the Chair of
the Education Advisory Committee.
Barbara Byrd-Bennett, Ed.D., Executive-In-Residence, College of
Education and Human Services, Cleveland State University and
formerly Chief Executive Officer of the Cleveland Municipal
School District and a school district superintendent for two
school districts in New York City.
Benjamin Canada, Ph.D., Associate Executive Director,
District Services, Texas Association of School Boards and
formerly President of the American Association of School
Administrators and a school district superintendent in Georgia,
Mississippi and Oregon.
Ramon Cortines, Ed.D., Deputy Mayor for Education, Youth and
Families, City of Los Angeles and formerly a school district
superintendent in California and New York.
Jo Lynne DeMary, Ed.D., Educational Leadership Director, Center
for School Improvement, Virginia Commonwealth University and
formerly Virginia Superintendent of Public Instruction.
David Driscoll, Ed.D., Education Consultant and formerly
President, Council of Chief State School Officers, Commissioner
of Education, Commonwealth of Massachusetts and a school
district superintendent in Massachusetts. Dr. Driscoll
currently serves on the board of the National Assessment
Governing Board.
Chester Finn, Ed.D., President, Thomas B. Fordham Foundation and
formerly Assistant Secretary for Research and
Improvement & Counselor to the Secretary,
U.S. Department of Education.
63
Charles Fowler Ed.D., President of School Leadership, LLC,
Executive Secretary of the Suburban School Superintendents, an
Adjunct Professor of School Organization and Leadership,
Teachers College, Columbia University and formerly Chairperson
of State and National Relations for the American Association of
School Administrators and a school district superintendent in
Connecticut, Florida, Illinois and New York.
Mary Futrell, Ed.D., Dean, Graduate School of Education and
Human Development, George Washington University, Director,
George Washington Institute for Curriculum Standards and
Technology and founding President, World Confederation of the
Teaching Procession and formerly President, National Education
Association, President, Virginia Education Association,
President, Education International and President, ERAmerica.
Michael Kirst, Ph.D., Professor Emeritus of Education and
Business, Stanford University and formerly President of the
California State Board of Education.
Dale Mann, Ph.D., Managing Director, Interactive Inc. and
Professor Emeritus of Educational Administration, Teachers
College, Columbia University and formerly Senior Research
Associate, Institute on Education and the Economy, Teachers
College, Columbia University.
Thomas Payzant, Ed.D., Professor of Practice, Harvard Graduate
School of Education and formerly Assistant Secretary for
Elementary and Secondary Education, U.S. Department of
Education and a school district superintendent in California,
Pennsylvania, Massachusetts, Oklahoma and Oregon.
Betty Rosa, Ed.D., Education Consultant and formerly a school
district superintendent in New York City. Ms. Rosa also
serves on the board of the Alumni Council of the Harvard
Graduate School of Education.
Bernice Stafford, M.A., Principal Consultant, Center for
Interactive Learning and Collaboration and formerly Vice
President of School Strategies and Evaluation, PLATO Learning,
Inc. and a co-founder of Lightspan, Inc.
64
65
track record of academic results and customer satisfaction;
quality of curriculum and online delivery platform;
qualifications and experience of teachers;
66
comprehensiveness of school management and student support
services; and
cost of the solution.
67
68
69
70
71
No Child Left Behind (NCLB) Act.
Through the
funding of the Title I programs for disadvantaged students
under NCLB, the federal government requires public schools to
develop a state accountability system based on academic
standards and assessments developed by the state, which are
applicable to all public school students. Each state must
determine a proficiency level of academic achievement based on
the state assessments, and must determine what constitutes
adequate yearly progress (AYP) toward that goal. NCLB has a
timeline to ensure that no later than the
2013-14
school year, all students, including those in all identified
subgroups (such as economically disadvantaged, limited English
proficient and minority students,), will meet or exceed the
state proficient level of academic achievement on state
assessments. The progress of each school is reviewed annually to
determine whether the school is making adequate yearly progress.
If a Title I school does not make adequate yearly progress
as defined in the states plan, the local education agency
(LEA) is required to identify the school as
needing school
improvement
, and to provide all students enrolled in the
school with the option to transfer to another public school
served by the LEA, which may include a virtual public school.
The LEA must develop a school improvement plan for each school
identified as needing improvement in consultation with parents,
staff and outside experts and this plan must be implemented not
later than the beginning of the next full school year. If the
school does not make adequate yearly progress in subsequent
years, the school transfer option remains open to students and
other corrective action must be taken ranging from providing
supplemental education services to the students who remain in
the school to taking corrective action including, but not
limited to, replacing school staff, implementing a new
curriculum, appointing outside experts to advise the school,
extending the school year or the school day, reopening the
school as a public charter school with a private management
company or turning over the operation of the school to the state
educational agency.
72
Individuals with Disabilities Education Act
(IDEA).
The IDEA is implemented through
regulations governing every aspect of the special education of a
child with one or more of the specific disabilities listed in
the act. The IDEA created a responsibility on the part of a
school to identify students who may qualify under the IDEA and
to perform periodic assessments to determine the students
needs for services. A student who qualifies for services under
the IDEA must have in place an individual education plan, which
must be updated at least annually, created by a team consisting
of school personnel, the student, and the parent. This plan must
be implemented in a setting where the child with a disability is
educated with non-disabled peers to the maximum extent
appropriate. The act provides the student and parents with
numerous procedural rights relating to the students
program and education, including the right to seek mediation of
disputes and make complaints to the state education agency. The
schools we manage are responsible for ensuring the requirements
of this act are met. The virtual schools could be required to
comply with requirements in the act concerning teacher
certification and training. We or the virtual public school
could be required to provide additional staff, related services
and supplemental aids and services at our own cost to comply
with the requirement to provide a free appropriate public
education to each child covered under the IDEA. If we fail
to meet this requirement, we or the virtual public school could
lose federal funding and could be liable for compensatory
educational services, reimbursement to the parent for
educational service the parent provided, and payment of the
parents attorneys fees.
Section 504 of the Rehabilitation Act of
1973.
A virtual public school receiving federal
funds is subject to Section 504 of the Rehabilitation Act
of 1973 (Section 504) insofar as the regulations
implementing the act govern the education of students with
disabilities as well as personnel and parents. Section 504
prohibits discrimination against a person on the basis of
disability in any program receiving federal financial assistance
if the person is otherwise qualified to participate in or
receive benefit from the program. Students with disabilities not
specifically listed in the IDEA may be entitled to specialized
instruction or related services pursuant to Section 504 if
their disability substantially limits a major life activity.
There are many similarities between the regulatory requirements
of Section 504 and the IDEA; however this is a separate law
which may require a virtual public school to provide a qualified
student with a plan to accommodate his or her disability in the
educational setting. If a school fails to comply with the
requirements and the procedural safeguards of Section 504,
it may lose federal funds even though these funds flow
indirectly to the school
73
through a local board. In the case of bad faith or intentional
wrongdoing, some courts have awarded monetary damages to
prevailing parties in Section 504 lawsuits.
Family Educational Rights and Privacy
Act.
Virtual public schools are subject to the
Family Educational Rights and Privacy Act which protects the
privacy of a students educational records and generally
prohibits a school from disclosing a students records to a
third-party without the parents prior consent. The law
also gives parents certain procedural rights with respect to
their minor childrens education records. A schools
failure to comply with this law may result in termination of its
eligibility to receive federal education funds.
74
44
Chief Executive Officer, Founder and Director
43
Chief Operating Officer and Chief Financial Officer
44
Executive Vice President, Worldwide Business Development
53
Senior Vice President, Human Resources
49
Executive Vice President, School Services
56
Senior Vice President, General Counsel and Secretary
48
Chief Learning Officer
43
Chief Marketing Officer
43
Senior Vice President, Strategic Relationships
41
Senior Vice President, Public Affairs
43
Vice President, Financial Planning and Analysis &
Investor Relations
40
Senior Vice President, High School Programs
and Classroom Solutions
39
Senior Vice President, School Development
41
Senior Vice President, Product Development
45
Senior Vice President, Systems and Technology
57
Chairman
32
Director
55
Director
55
Director
67
Director
64
Director
75
76
77
78
79
80
any breach of the directors duty of loyalty to us or our
stockholders;
any act or omission not in good faith or that involves
intentional misconduct or a knowing violation of law;
any act related to unlawful stock repurchases, redemptions or
other distributions or payment of dividends; or
any transaction from which the director derived an improper
personal benefit.
we may indemnify our directors, officers and employees to the
fullest extent permitted by the Delaware General Corporation
Law, subject to limited exceptions;
81
we may advance expenses to our directors, officers and employees
in connection with a legal proceeding to the fullest extent
permitted by the Delaware General Corporation Law, subject to
limited exceptions; and
the rights provided in our amended and restated bylaws are not
exclusive.
82
Attract and retain individuals of superior ability and
managerial talent;
Ensure senior executive compensation is aligned with our
corporate strategies, business objectives and the long-term
interests of our stockholders;
Provide an incentive to achieve key strategic and financial
performance measures by linking incentive award opportunities to
the achievement of performance goals in these areas; and
Enhance the executives incentive to increase our stock
price and maximize stockholder value, as well as promote
retention of key people, by providing a portion of total
compensation opportunities for senior management in the form of
direct ownership in our stock through stock options.
83
84
85
86
87
Nonequity
Option
Incentive Plan
All Other
Year
Salary
Bonus
(1)
Awards
(2)
Compensation
Compensation
(3)
Total
2007
$
410,000
$
410,000
$
116,436
$
$
2,050
$
938,486
2007
300,000
210,000
1,646
511,646
2007
144,423
120,000
(5)
4,791
269,214
2007
310,000
93,000
2,713
405,713
2007
221,052
80,000
1,847
302,899
(1)
This column represents cash awards
to the named executive officers for performance with respect to
fiscal year ended June 30, 2007. These awards were paid in
September 2007. These awards were generally based upon corporate
performance, but were not determined based upon the achievement
of specific objective performance targets.
(2)
This column represents the dollar
amount recognized by us for financial statement reporting
purposes of the fair value of stock options granted in fiscal
year ended June 30, 2007, and prior years in accordance
with FAS 123R, assuming no forfeitures. For additional
information, including information regarding the assumptions
used when valuing the stock options, refer to note 9 of our
consolidated financial statements filed herewith. The amounts
set forth in this column reflect our accounting expense for
these awards and do not correspond to the actual value that may
be realized by the named executive officer receiving the awards.
See the Grants of Plan-Based Awards Table for additional
information on stock options granted during fiscal year ended
June 30, 2007.
(3)
The amounts in this column consist
of 401(k) matching contributions paid by us.
(4)
Mr. Davis commenced his
employment with us on January 8, 2007. Amounts included in
the table reflect Mr. Davis compensation from his
date of hire through the end of the fiscal year ended on
June 30, 2007.
(5)
Pursuant to the terms of his
employment agreement, Mr. Davis was entitled to a
guaranteed bonus of $120,000 for fiscal year 2007 which was paid
on July 8, 2007.
88
Estimated
Possible
All
Payouts
Other
Grant
Under
Option
Date
Nonequity
Awards:
Closing
Fair
Incentive
Estimated Future Payouts
Number of
Exercise or
Market
Value
Plan
Under Equity
Securities
Base
Price
of
Awards
Incentive Plan
Awards
(1)
Underlying
Price
on Date
Option
Grant
Target
Threshold
Target
Maximum
Options
(2)
of Option
of
Awards
Date
($)
(#)
(#)
(#)
(#)
Awards
Grant
(3)
($/Sh)
$
7/27/2006
68,627
$
7.65
$
2.96
$
14,802
7/27/2006
117,645
7.65
2.96
87,206
7/27/2006
29,411
7.65
2.96
6,178
7/27/2006
39,215
7.65
2.96
16,715
7/27/2006
39,215
7.65
2.96
19,986
7/27/2006
9,803
7.65
2.96
4,996
7/27/2006
29,411
235,294
7.65
2.96
171,652
7/27/2006
14,705
117,647
7.65
2.96
85,826
7/27/2006
294,117
30.60
2.96
113,217
2/1/2007
98,039
9.18
4.23
153,117
(1)
Stock options were granted pursuant
to stand-alone stock option agreements with exercise prices in
excess of the fair market value of a share of our common stock
subject to such option on the date of grant, expire on
December 31, 2012, and are subject to performance vesting
schedules, as further described in the footnotes to the
Outstanding Equity Awards at Fiscal Year End Table. The stock
options with performance vesting schedules do not have maximum
payout amounts.
(2)
Stock options were granted pursuant
to stand-alone stock option agreements with exercise prices in
excess of the fair market value of a share of our common stock
subject to such option on the date of grant, expire on
December 31, 2014 and are subject to a four year
time-based vesting schedule.
(3)
The closing market price of our
common stock on the date of grant is based upon our analysis of
its fair market value. For a discussion of this analysis, see
Managements Discussion and Analysis of Financial
Condition and Results of Operations Critical
Accounting Policies and Estimates Accounting for
Stock-based Compensation.
89
Option Awards
Equity Incentive Plan
Number of
Number of
Awards: Number of
Securities Underlying
Securities Underlying
Securities Underlying
Option
Option
Unexercised Options
Unexercised Options
Unexercised Unearned
Exercise
Expiration
Name and Principal Position
Exercisable
Unexercisable
Options
Price
Date
68,627
$
7.65
7/27/2014
117,645
7.65
7/27/2014
29,411
7.65
7/27/2014
39,215
7.65
7/27/2014
39,215
7.65
7/27/2014
9,803
7.65
7/27/2014
235,294
7.65
7/27/2014
58,824
58,824
7.65
7/27/2014
294,117
30.60
7/27/2014
132,353
6.83
7/1/2011
176,469
6.83
7/23/2010
19,607
58,824
7.65
6/1/2014
88,234
68,628
6.83
3/24/2013
98,039
9.18
2/1/2015
14,705
44,118
7.65
4/26/2014
9,926
7,721
6.83
3/1/2013
11,028
28,186
7.65
4/26/2014
(1)
Mr. Packards outstanding
unvested options are subject to performance-based vesting.
39,215 options with exercise prices of $7.65 per share will vest
in each of fiscal year ending June 30, 2008 and 2009
contingent upon our attaining revenues and EBITDA goals during
each of the respective preceeding fiscal years. 9,803 options
with exercise prices of $7.65 per share will vest in fiscal year
ending June 30, 2009 contingent upon Mr. Packard
attaining leadership goals during the preceeding fiscal year.
235,294 options with exercise prices of $7.65 per share will
vest on dates that jurisdictional expansion and related EBITDA
goals are obtained, if any. 58,824 options with exercise prices
of $7.65 per share will vest on dates that jurisdictional
expansion and enrollment targets are achieved. 294,117 options
with exercise prices of $30.60 per share will vest upon the fair
market value of a share of our common stock equaling $30.60.
(2)
Mr. Baules outstanding
unvested options are subject to time-based vesting. 4,901
options with exercise prices of $7.65 per share will vest every
three months beginning on September 1, 2007 through
June 1, 2010. 9,803 options with exercise prices of $6.83
per share will vest every three months beginning on
September 24, 2007 through March 24, 2009.
(3)
Mr. Daviss outstanding
unvested options are subject to time-based vesting. 24,509
options will vest on February 1, 2008 and 6,127 options
will vest every three months thereafter beginning on May 1,
2008 through February 1, 2011.
(4)
Mr. Saxbergs outstanding
unvested options are subject to time-based vesting. 3,676
options will vest every three months beginning on July 27,
2007 through April 27, 2010, and 1,102 will vest every
three months beginning on September 24, 2007 through
March 24, 2009.
(5)
Ms. Stokes outstanding
unvested options are subject to time-based vesting. 1,225
options vest every three months beginning on July 27, 2007
through April 27, 2010, and 1,225 vest every three months
beginning on September 21, 2007 through March 21, 2010.
90
Option Awards
Number of
Shares
Acquired
Value Realized
Name and Principal
Position
on
Exercise
(1)
on Exercise
$
39,215
64,000
(2)
(1)
None of the named executive
officers other than Mr. Saxberg exercised any stock options
during fiscal year ended June 30, 2007.
(2)
Represents the exercise of
39,215 options on May 29, 2007, each with an exercise
price of $6.83 per share. The estimated fair market value of a
share of our common stock on the date of exercise was $8,47 For
a discussion of the analysis of the fair market value of our
common stock, see Managements Discussion and
Analysis of Financial Condition and Results of
Operations Critical Accounting Policies and
Estimates Accounting for Stock-based
Compensation.
91
92
93
Without
Good
Change in
Payment
Death
Cause
Reason
Control
Salary continuation
$
202,192
$
505,479
$
505,479
$
Benefit continuation
Option vesting
624,000
Salary continuation
300,000
300,000
Benefit continuation
16,734
16,734
Option vesting
264,000
Salary continuation
147,945
147,945
Benefit continuation
Option vesting
10,000
Salary continuation
152,877
152,877
Benefit continuation
Option vesting
90,900
Salary continuation
109,012
109,012
Benefit continuation
Option vesting
46,000
(1)
Amounts do not reflect the terms of
Mr. Packards amended and restated employment agreement
effective July 12, 2007. If Mr. Packards amended
and restated employment agreement was in effect as of
June 30, 2007, Mr. Packards salary continuation
upon death, termination without cause or termination for good
reason would have been $209,589, $637,500 and $637,500,
respectively. The value of Mr. Packards option
vesting would not have changed because the exercise price of the
new stock options would have exceeded the value of a share of
our common stock on such date.
(2)
Amounts do not reflect the terms of
Mr. Baules amended employment agreement or stock
option agreement effective July 12, 2007. If
Mr. Baules amended employment agreement and option
agreement were in effect as of June 30, 2007,
Mr. Baules salary continuation upon termination
without cause or termination for good reason would have been
$340,000. The value of Mr. Baules option vesting
would not have changed because the exercise price of the new
stock options would have exceeded the value of a share of our
common stock on such date. The value of the benefit continuation
would not have changed.
94
Option
Awards
(1)
Total
(1)
$
708
(2)
$
708
354
(3)
354
354
(4)
354
708
(5)
708
708
(6)
708
708
(7)
708
354
(8)
354
(1)
This column represents the dollar
amount recognized by us for financial statement reporting
purposes of the fair value of stock options granted in fiscal
year ended June 30, 2007, and prior years under our Amended
and Restated Stock Option Plan in accordance with FAS 123R,
assuming no forfeitures. For additional information, including
information regarding the assumptions used when valuing the
stock options, refer to note 9 of our consolidated
financial statements filed herewith. The amounts set forth in
this column reflect our accounting expense for these awards and
do not correspond to the actual value that may be realized by
the directors receiving the awards.
(2)
During fiscal year ended
June 30, 2007, Mr. Tisch was granted 9,803 options on
May 17, 2007 with a fair value of $33,975. As of
June 30, 2007, Mr. Tisch held options to purchase
53,916 shares of common stock, consisting of 9,803 granted
on May 17, 2007; 9,803 granted on April 27, 2006;
9,803 granted on March 24, 2005; 9,803 granted on
March 31, 2004; 9,803 granted on February 10, 2003;
and 4,901 granted on July 23, 2002.
(3)
During fiscal year ended
June 30, 2007, Mr. Bilger was granted 4,901 options on
May 17, 2007 with a fair value of $16,988. As of
June 30, 2007, Mr. Bilger held options to purchase
29,406 shares of common stock, consisting of 4,901 granted
on May 17, 2007; 4,901 granted on April 27, 2006;
4,901 granted on March 24, 2005; 4,901 granted on
March 31, 2004; 4,901 granted on February 10, 2003;
and 4,901 granted on July 23, 2002. Mr. Bilger
resigned from the board of directors on June 29, 2007.
(4)
During fiscal year ended
June 30, 2007, Mr. Finn was granted 4,901 options on
May 17, 2007 with a fair value of $16,988. As of
June 30, 2007, Mr. Finn held options to purchase
41,170 shares of common stock, consisting of 4,901 granted
on May 17, 2007; 4,901 granted on April 27, 2006;
4,901 granted on March 24, 2005; 4,901 granted on
March 31, 2004; 4,901 granted on February 10, 2003;
4,901 granted on July 23, 2002; and 11,764 granted on
August 31, 2000. Mr. Finn resigned from the board of
directors on July 19, 2007.
(5)
Ms. Boyd serves as a director
on behalf of certain funds managed by Constellation Ventures.
During fiscal year ended June 30, 2007, Ms. Boyd was
granted 9,803 options on May 17, 2007 with a fair value of
$33,975, which have been assigned to these funds. The options
granted to the director serving on behalf of these funds in
prior years have also been assigned to these funds. As of
June 30, 2007, these funds held options to purchase
46,564 shares of common stock, consisting of 9,803 granted
on May 17, 2007; 9,803 granted on April 27, 2006;
9,803 granted on March 24, 2005; 9,803 granted on
March 31, 2004; and 7,352 granted on February 10, 2003.
(6)
During fiscal year ended
June 30, 2007, Mr. Milken was granted 9,803 options on
May 17, 2007 with a fair value of $33,975. As of
June 30, 2007, Mr. Milken held options to purchase
53,916 shares of common stock, consisting of 9,803 granted
on May 17, 2007; 9,803 granted on April 27, 2006;
9,803 granted on March 24, 2005; 9,803 granted on
March 31, 2004; 9,803 granted on February 10, 2003;
and 4,901 granted on July 23, 2002. Mr. Milken
resigned from the board of directors on July 11, 2007.
(7)
During fiscal year ended
June 30, 2007, Mr. Fink was granted 9,803 options on
May 17, 2007 with a fair value of $33,975. As of
June 30, 2007, Mr. Fink held options to purchase
40,326 shares of common stock, consisting of 9,803 granted
on May 17, 2007; 9,803 granted on April 27, 2006;
9,803 granted on March 24, 2005; 9,803 granted on
March 31, 2004; 188 granted on December 18, 2003; and
926 granted on October 24, 2003.
(8)
During fiscal year ended
June 30, 2007, Mr. Wilford was granted
4,901 options on May 17, 2007 with a fair value of
$16,988. As of June 30, 2007, Mr. Wilford held options
to purchase 24,505 shares of common stock, consisting of
4,901 granted on May 17, 2007; 4,901 granted on
April 27, 2006; 4,901 granted on March 24, 2005; 4,901
granted on March 31, 2004; and 4,901 granted on
February 10, 2003.
95
4% of our outstanding common stock on the applicable July 1;
2,745,098 shares; or
a lesser number of shares as determined by our Board of
Directors.
96
Nonqualified stock options, or NQSOs, will provide for the right
to purchase shares of our common stock at a specified price
which may not be less than the greater of the par value of a
share of common stock on the date of grant or 85% of fair market
value, and usually will become exercisable (at the discretion of
our Compensation Committee or the Board of Directors, in the
case of awards to non-employee directors) in one or more
installments after the grant date, subject to the
participants continued employment or service with us
and/or
subject to the satisfaction of performance targets established
by our Compensation Committee (or the Board of Directors, in the
case of awards to non-employee directors). NQSOs may be granted
for any term specified by our Compensation Committee (or the
Board of Directors, in the case of awards to non-employee
directors), but the term may not exceed ten years.
Incentive stock options, or ISOs, will be designed to comply
with the provisions of the Internal Revenue Code and will be
subject to specified restrictions contained in the Internal
Revenue Code. Among such restrictions, ISOs must have an
exercise price of not less than the fair market value of a share
of common stock on the date of grant, may only be granted to
employees, must expire within a specified period of time
following the optionees termination of employment, and
must be exercised within the ten years after the date of grant.
In the case of an ISO granted to an individual who owns (or is
deemed to own) more than 10% of the total combined voting power
of all classes of our capital stock, the 2007 Plan provides that
the exercise price must be more than 110% of the fair market
value of a share of common stock on the date of grant and the
ISO must expire upon the fifth anniversary of the date of its
grant.
Restricted stock may be granted to participants and made subject
to such restrictions as may be determined by our Compensation
Committee (or the Board of Directors, in the case of awards to
non-employee directors). Typically, restricted stock may be
forfeited for no consideration if the conditions or restrictions
are not met, and may not be sold or otherwise transferred to
third parties until restrictions are removed or expire.
Recipients of restricted stock, unlike recipients of options,
may have voting rights and may receive dividends, if any, prior
to the time when the restrictions lapse.
Restricted stock units may be awarded to participants, typically
without payment of consideration or for a nominal purchase
price, but subject to vesting conditions including continued
employment or on performance criteria established by our
Compensation Committee (or the Board of Directors, in the case
of awards to non-employee directors). Like restricted stock,
restricted stock units may not be sold or otherwise transferred
or hypothecated until vesting conditions are removed or expire.
Unlike restricted stock, stock underlying restricted stock units
will not be issued until the restricted stock units have vested,
and recipients of restricted stock units generally will have no
voting or dividend rights prior to the time when vesting
conditions are satisfied.
SARs may be granted in connection with stock options or other
awards, or separately. SARs granted under the 2007 Plan in
connection with stock options or other awards typically will
provide for payments to the holder based upon increases in the
price of our common stock over the exercise price of the related
option or other awards. Except as required by
Section 162(m) of the Internal Revenue Code with respect to
SARs intended to qualify as performance-based compensation,
there are no restrictions specified in the 2007 Plan on the
exercise of SARs or the amount of gain realizable therefrom. Our
Compensation Committee (or the Board of Directors, in the case
of awards to non-employee directors) may elect to pay SARs in
cash or in common stock or in a combination of both.
Dividend equivalents represent the value of the dividends, if
any, per share paid by us, calculated with reference to the
number of shares covered by the stock options, SARs or other
awards held by the participant.
Performance awards (i.e., performance share awards, performance
stock units, performance bonus awards, performance-based awards
and deferred stock) may be granted by our Compensation Committee
(or the
97
Board of Directors, in the case of awards to non-employee
directors) on an individual or group basis. Generally, these
awards will be based upon specific performance targets and may
be paid in cash or in common stock or in a combination of both.
Performance awards may include phantom stock awards
that provide for payments based upon increases in the price of
our common stock over a predetermined period. Performance awards
may also include bonuses that may be granted by our Compensation
Committee (or the Board of Directors, in the case of awards to
non- employee directors) on an individual or group basis, which
may be paid on a current or deferred basis and may be payable in
cash or in common stock or in a combination of both. The maximum
amount of any such bonuses to a covered employee
within the meaning of Section 162(m) of the Internal
Revenue Code must not exceed $1,000,000 for any fiscal year
during the term of the 2007 Plan.
Stock payments may be authorized by our Compensation Committee
(or the Board of Directors, in the case of awards to
non-employee directors) in the form of common stock or an option
or other right to purchase common stock as part of a deferred
compensation arrangement, made in lieu of all or any part of
compensation, including bonuses, that would otherwise be payable
to employees, consultants or members of our Board of Directors.
a transaction or series of related transactions (other than an
offering of our stock to the general public through a
registration statement filed with the United States Securities
and Exchange Commission, or SEC) whereby any person or entity or
related group of persons or entities (other than us, our
subsidiaries, an employee benefit plan maintained by us or any
of our subsidiaries or a person or entity that, prior to such
transaction, directly or indirectly controls, is controlled by,
or is under common control with, us) directly or indirectly
acquires beneficial ownership (within the meaning of
Rule 13d-3
under the Exchange Act) of more than 50% of the total combined
voting power of our securities outstanding immediately after
such acquisition;
during any two-year period, individuals who, at the beginning of
such period, constitute our Board of Directors together with any
new director(s) whose election by our Board of Directors or
nomination for election by our shareholders was approved by a
vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the
two-year period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a
majority of our Board of Directors;
our consummation (whether we are directly or indirectly involved
through one or more intermediaries) of (x) a merger,
consolidation, reorganization, or business combination that
results in our outstanding voting securities immediately before
the transaction continuing to represent a majority of the voting
power of the acquiring companys outstanding voting
securities or a merger, consolidation, reorganization, or
business combination after which no person or entity owns 50% of
the successor companys voting power, (y) the sale,
exchange or transfer of all or substantially all of our assets
in any single transaction or series of transactions or
(z) the acquisition of assets or stock of another entity.
98
2% of our outstanding common stock on the applicable July 1;
1,372,549 shares; or
a lesser amount determined by our Board of Directors.
99
100
101
each person or group who beneficially owns more than 5% of our
capital stock on a fully diluted basis;
each of the executive officers named in the Summary Compensation
Table;
each of our directors;
each of the selling stockholders; and
all of our directors and executive officers as a group.
Shares Beneficially
Owned Prior
Shares Beneficially
Shares Beneficially Owned
to This
Shares to
Owned After This
Shares to be
After this Offering with
Offering
(1)
be Sold in
Offering
Sold in the
the Over-Allotment
Number
Percent
This Offering
Number
Percent
Over-Allotment
Number
Percent
917,908
4.07
%
122,547
*
91,910
*
22,254
*
15,808
*
14,705
*
1,087,195
4.95
%
825,993
3.76
%
84,850
*
23,157
*
3,206,327
14.04
%
5,396,355
24.48
%
3,445,849
15.70
%
2,549,427
11.51
%
1,566,472
7.14
1,566,472
7.14
1,566,472
7.14
1,566,472
7.14
102
Shares Beneficially
Owned Prior
Shares Beneficially
Shares Beneficially Owned
to This
Shares to
Owned After This
Shares to be
After this Offering with
Offering
(1)
be Sold in
Offering
Sold in the
the Over-Allotment
Number
Percent
This Offering
Number
Percent
Over-Allotment
Number
Percent
825,997
3.77
731,636
3.34
588,234
2.65
341,430
1.56
304,503
1.39
292,654
1.33
249,834
1.14
249,834
1.14
178,765
*
166,378
*
166,378
*
152,456
*
83,189
*
73,163
*
73,162
*
73,162
*
73,162
*
48,775
*
48,775
*
47,556
*
23,491
*
8,823
*
478
*
*
Less than 1% beneficial ownership.
(1)
Beneficial ownership of shares is
determined in accordance with the rules of the Securities and
Exchange Commission and generally includes any shares over which
a person exercises sole or shared voting or investment power.
Except as indicated by footnote, and subject to applicable
community property laws, to our knowledge, each stockholder
identified in the table possesses sole voting and investment
power with respect to all shares of common stock shown as
beneficially owned by the stockholder. The number of shares
beneficially owned by a person includes shares of common stock
subject to options and warrants held by that person that are
currently exercisable or exercisable within 60 days of
September 30, 2007 and not subject to repurchase as of that
date. Shares issuable pursuant to options and warrants are
deemed outstanding for calculating the percentage ownership of
the person holding the options and warrants but are not deemed
outstanding for the purposes of calculating the percentage
ownership of any other person. For purposes of this table, the
number of shares of common stock outstanding as of
September 30, 2007 is deemed to be 21,924,892 after giving
effect to the conversion of our outstanding
103
preferred stock into
19,879,675 shares of common stock immediately prior to the
closing of this offering. For purposes of calculating the
percentage beneficially owned by any person, shares of common
stock issuable to such person upon the exercise of any options
or warrants exercisable within 60 days of
September 30, 2007 are also assumed to be outstanding.
(2)
Includes options for
622,543 shares of common stock and warrants to purchase
1,248 shares of common stock. These totals include both shares
and options held individually and in the 2006 Packard Investment
Partnership, L.P.
(3)
Includes options for
122,547 shares of common stock.
(4)
Includes options for
33,087 shares of common stock.
(5)
Includes options for
22,254 shares of common stock.
(6)
Includes options for
15,808 shares of common stock.
(7)
Includes options for
14,705 shares of common stock.
(8)
Includes options for
36,758 shares of common stock and warrants to purchase
2,497 shares of common stock. Also includes
244,882 shares of common stock issuable upon conversion of
preferred stock held by Andrew H. Tisch 1991 Trust #2,
35,711 shares of common stock issuable upon conversion of
preferred stock held by KAL Family Partnership and
35,711 shares of common stock issuable upon conversion of
preferred stock held by KSC Family Partnership. Mr. Tisch
has voting and investment control with respect to the shares
held by these entities. The address of these stockholders is
c/o Loews
Corporation, 667 Madison Avenue, 7th Floor,
New York, New York 10021. Also includes 731,636 shares
of common stock issuable upon conversion of preferred stock held
by Continental Casualty Company. Mr. Tisch is on the board
of directors of CNA Financial Corporation, which is affiliated
with Continental Casualty Company. Mr. Tisch disclaims
beneficial ownership of the shares held by Continental Casualty
Company. The address for Continental Casualty Company is c/o CNA
Financial Corporation, CNA Center, Chicago, Illinois 60685.
(9)
Includes options for
15,926 shares of common stock. Also includes 810,067 shares
of common stock held by Alscott Investments, LLC.
Mr. Wilford has voting and investment power with respect to
shares held by this stockholder. The address of Alscott
Investments, LLC is 501 Baybrook Court, Boise, Idaho 83706.
Mr. Wilford disclaims beneficial ownership of the shares
held by Alscott Investment, LLC except to the extent of his
pecuniary interest therein.
(10)
Includes 84,850 shares of common
stock issuable upon conversion of preferred stock held by The
Bron Trust, dated July 27, 1998. Mr. Bron is not the
trustee of The Bron Trust, however, he is the beneficiary of The
Bron Trust and, therefore, is deemed to beneficially own such
shares. Mr. Bron disclaims beneficial ownership of the
shares held by The Bron Trust except to the extent of his
pecuniary interest, if any, therein.
(11)
Includes options for
23,157 shares of common stock. Does not include the shares
of common stock or preferred stock held by Mollusk Holdings,
LLC. Mr. Fink is the Chief Executive Officer of Lawrence
Investments, LLC. Lawrence Investments, LLC is a managing member
of Mollusk Holdings, LLC. Mr. Fink does not have voting
power nor investment power with respect to the common stock
directly or beneficially owned by Mollusk Holdings, LLC.
(12)
Does not include the shares of
preferred stock or options to acquire common stock held by
Constellation Venture Capital II, L.P., Constellation Venture
Capital Offshore II, L.P., The BSC Employee Fund IV, L.P.
and CVC II Partners, LLC (See note (14)). Ms. Boyd is a
Managing Director of Constellation Ventures. Ms. Boyd does
not have voting power nor investment power with respect to the
common stock beneficially owned by such funds.
(13)
Includes 4,665,084 shares of
common stock issuable upon conversion of preferred stock,
609,171 shares of common stock, warrants to purchase 7,965
shares of common stock and warrants to purchase shares of
preferred stock convertible into 114,135 shares of common
stock upon consummation of this offering. Learning Group LLC may
be deemed to be controlled by Michael R. Milken and/or Lowell J.
Milken and as such, Michael R. Milken and/or Lowell J. Milken
may be deemed to have the power to exercise investment and
voting control over, and to share in the beneficial ownership
of, the shares beneficially owned by Learning Group LLC. The
address for Messrs. M. Milken and L. Milken and Learning
Group LLC is 1250 Fourth Street, Santa Monica, CA 90401.
(14)
The CV II Entities consist of
(i) Constellation Venture Capital II, L.P. (CVC II),
(ii) Constellation Venture Capital Offshore II, L.P.
(Offshore), (iii) The BSC Employee Fund IV, L.P. (BSC)
and (iv) CVC II Partners, LLC (CVC II Partners, and
together with CVC II, Offshore and BSC, the Constellation
Funds). Constellation Ventures Management II LLC is the
sole general partner of CVC II, the sole general partner of
Offshore and the sole managing general partner of BSC. Bear
Stearns Asset Management Inc. is the managing member of CVC II
Partners and the investment adviser to each Constellation Fund.
Clifford Friedman is a member of Constellation Ventures
Management II, LLC and a senior managing director of Bear
Stearns Asset Management Inc. The Bear Stearns Companies Inc., a
registered broker-dealer, is the sole managing member of
Constellation Ventures Management II, LLC and the parent
corporation of Bear Stearns Asset Management Inc. Constellation
Ventures Management II, LLC, Bear Stearns Asset Management Inc.
and Mr. Friedman share investment and voting control of
shares beneficially owned by CVC II, Offshore and BSC. Bear
Stearns Asset Management Inc. exercises sole investment and
voting control of the shares beneficially owned by CVC II
Partners. The address for each such entity and person is 237
Park Avenue, New York, New York 10017.
The holdings of the CV II Entities
include: (i) 1,807,855 shares of common stock issuable upon
conversion of preferred stock held by CVC II and options for
14,256 shares of common stock assigned to CVC II by
Ms. Boyd or a former director appointed by the
Constellation Funds; (ii) 854,698 shares of common stock
issuable upon conversion of preferred stock held by Offshore and
options for 6,740 shares of common stock assigned to Offshore by
Ms. Boyd or a former director appointed by the
Constellation Funds; (iii) 716,228 shares of common stock
issuable upon conversion of preferred stock held by BSC and
options for 5,648 shares of common stock assigned to BSC by Ms.
Boyd or a former director appointed by the Constellation Funds;
and (iv) 40,108 shares of common stock issuable upon conversion
of preferred stock held by CVC II Partners and options for 316
shares of common stock assigned to CVC II Partners by
Ms. Boyd or a former director appointed by the
Constellation Funds. Ms. Boyd is affiliated with the
Constellation Funds but disclaims beneficial ownership of the
shares held by them. The CV II Entities has informed us that it
purchased the shares being registered on their behalf in the
ordinary course of business and, at the time of their purchase,
had no agreement or understanding, directly or indirectly, with
any person to distribute those shares.
(15)
Includes 1,561,253 shares of
common stock issuable upon conversion of preferred stock and
warrants to purchase shares of preferred stock convertible into
228,270 shares of common stock upon consummation of this
offering. The address of this stockholder is 101 Ygnacio
Valley Road, Suite 310, Walnut Creek, California 94596.
Cephalopod Corporation and Lawrence Investments, LLC are the
members of Mollusk Holdings, LLC. Cephalopod Corporation is the
managing member of Mollusk Holdings, LLC. Mr. Lawrence J.
Ellison is the Chief Executive Officer of Cephalopod
Corporation. The Lawrence J. Ellison Revocable Trust U/D/D
12/8/95 (Ellison Trust), Philip B.
104
Simon and Steven B. Fink are the
members of Lawrence Investments, LLC. Mr. Fink is the Chief
Executive Officer of Lawrence Investments, LLC and
Mr. Simon is the President of Lawrence Investments, LLC.
Mr. Ellison is the sole beneficiary and co-trustee of the
Ellison Trust. Mr. Simon is the other co-trustee.
Mr. Ellison may be deemed to exercise investment and voting
control over the shares beneficially owned by Mollusk Holdings,
LLC. The address for Mr. Ellison is 500 Oracle Parkway,
Redwood Shores, California 94065.
(16)
The general partner of Tallulah,
Ltd. (Tallulah) is Mr. Sam Wyly. Mr. Sam Wylys
children are contingent beneficiaries of a trust that is the
owner of all of the shares of stock of Locke Limited (Locke).
The general partner of Stargate, Ltd. (Stargate) is The Charles
J. Wyly, Jr. and Caroline D. Wyly Revocable Trust of which
Mr. Charles J. Wyly, Jr. is a trustee. Mr. Charles J.
Wyly, Jr.s children or Mr. Charles J. Wyly, Jr., his
spouse and his issue are present or contingent beneficiaries of
certain trusts that own subsidiaries that are the owners of all
of the shares of stock of First Dallas International Ltd. (First
Dallas). First Dallas is under voluntary liquidation under the
direction of Kinetic Partners Cayman LLP. Mr. Sam Wyly and
Mr. Charles J. Wyly, Jr. are brothers. Collectively, Sam
Wyly, Charles J. Wyly, Jr., Tallulah, Stargate, Locke and First
Dallas may be deemed to beneficially own, for purposes of
Section 13(d) of the Exchange Act, 1,566,472 shares of
common stock issuable upon conversion of preferred stock. The
address for each of Tallulah, and Stargate is
c/o Highland
Stargate, Ltd., 300 Crescent Court, Suite 1000, Dallas,
Texas 75201. The address for Locke is International House,
Castle Hill, Victoria Road, Douglas, Isle of Man IM2 4RB. The
address for First Dallas is
c/o Kinetic
Partners, P.O. Box 10387, Grand Cayman Islands
KY1-1004.
Includes 435,218 shares of
common stock issuable upon conversion of preferred stock held by
First Dallas, 870,176 shares of common stock issuable upon
conversion of preferred stock held by Locke, 86,939 shares
of common stock issuable upon conversion of preferred stock held
by Stargate and 174,139 common stock issuable upon conversion of
preferred stock held by Tallulah. Locke disclaims beneficial
ownership of the shares held by First Dallas, Stargate and
Tallulah.
(17)
Includes 810,067 shares of
common stock issuable upon conversion of preferred stock and
options for 15,930 shares of common stock.
(18)
Includes 731,636 shares of
common stock issuable upon conversion of preferred stock.
(19)
Includes options for
294,117 shares of common stock.
(20)
Includes 341,430 shares of
common stock issuable upon conversion of preferred stock.
(21)
Includes 101,501 shares of
common stock issuable upon conversion of preferred stock. Also
includes 203,002 shares of common stock issuable upon
conversion of preferred stock held by Ray R. Irani, Trustee of
the Ray R. Irani Declaration of Trust dtd 11/13/90.
(22)
Includes 292,654 shares of
common stock issuable upon conversion of preferred stock.
(23)
Includes 166,729 shares of
common stock issuable upon conversion of preferred stock. Also
includes 17,075 shares of common stock issuable upon
conversion of preferred stock held by AT Investors, LLC,
45,202 shares of common stock issuable upon conversion of
preferred stock held by Bahram Nour-Omid and options for
20,828 shares of common stock held by Arthur Bilger.
(24)
Includes 17,075 shares of
common stock issuable upon conversion of preferred stock. Also
includes 166,729 shares of common stock issuable upon
conversion of preferred stock held by Adase Partners, L.P.,
45,202 shares of common stock issuable upon conversion of
preferred stock held by Bahram Nour-Omid and options for
20,828 shares of common stock held by Arthur Bilger.
(25)
Includes 178,765 shares of
common stock issuable upon conversion of preferred stock.
(26)
Includes 166,378 shares of
common stock issuable upon conversion of preferred stock.
(27)
Includes 166,378 shares of
common stock issuable upon conversion of preferred stock.
(28)
Includes 152,456 shares of
common stock issuable upon conversion of preferred stock.
(29)
Includes 83,189 shares of
common stock issuable upon conversion of preferred stock.
Mr. Nathanson is the trustee for the David F.
Nathanson Revocable Trust dtd 7/22/06.
(30)
Includes 73,163 shares of
common stock issuable upon conversion of preferred stock.
(31)
Includes 29,265 shares of
common stock issuable upon conversion of preferred stock. Also
includes 29,265 shares of common stock issuable upon
conversion of preferred stock held by Violet Hanna &
David W. Hanna, Trustees for the Hanna Living Trust dtd
7/7/83
and
14,632 shares of common stock issuable upon conversion of
preferred stock held by Hanna Ventures, LLC. Mr. Hanna is the
trustee for the David William Hanna Trust dtd 10/30/89.
(32)
Includes 29,265 shares of
common stock issuable upon conversion of preferred stock. Also
includes 29,265 shares of common stock issuable upon
conversion of preferred stock held by David William Hanna,
Trustee for the David William Hanna Trust dtd
10/30/89
and
14,632 shares of common stock issuable upon conversion of
preferred stock held by Hanna Ventures, LLC. Ms. Hanna and Mr.
Hanna are the trustees for the Hanna Living Trust dtd 7/7/83.
(33)
Includes 14,632 shares of
common stock issuable upon conversion of preferred stock. Also
includes 29,265 shares of common stock issuable upon
conversion of preferred stock held by David William Hanna,
Trustee for the David William Hanna Trust dtd
10/30/89
and
29,265 shares of common stock issuable upon conversion of
preferred stock held by Violet Hanna & David W. Hanna,
Trustees for the Hanna Living Trust dtd
7/7/83.
(34)
Includes 48,775 shares of
common stock issuable upon conversion of preferred stock.
(35)
Includes 48,775 shares of
common stock issuable upon conversion of preferred stock.
(36)
Includes 47,556 shares of
common stock issuable upon conversion of preferred stock.
(37)
Includes 23,491 shares of
common stock issuable upon conversion of preferred stock.
(38)
Includes 8,823 shares of
common stock issuable upon conversion of preferred stock.
(39)
Includes 365 shares of common
stock issuable upon conversion of preferred stock.
105
106
provide that special meetings of the stockholders may be called
only by our Chairman of the Board, Chief Executive Officer, by
the request in writing of a majority of the members of the board
of directors or by the request in writing of stockholders
holding in aggregate at least 40 % of the number of shares
outstanding;
establish procedures with respect to stockholder proposals and
stockholder nominations, including requiring advance written
notice of a stockholder proposal or director nomination;
not permit action by stockholders by written consent in lieu of
a meeting of stockholders;
not include a provision for cumulative voting in the election of
directors. Under cumulative voting, a minority stockholder
holding a sufficient number of shares may be able to ensure the
election of one or more directors. The absence of cumulative
voting may have the effect of limiting the ability of minority
stockholders to effect changes in the board of directors and, as
a result, may have the effect of deterring a hostile takeover or
delaying or preventing changes in control or management of our
company;
provide that vacancies on our board of directors may be filled
by a majority of directors in office, although less than a
quorum, and not by the stockholders;
require that the vote of holders of
66
2
/
3
%
of the voting power of the outstanding shares entitled to vote
generally in the election of directors is required to amend our
amended and restated certificate of incorporation and amended
and restated bylaws; and
provide that the board of directors has the power to alter,
amend or repeal the bylaws without stockholder approval.
the number of shares constituting any class or series;
the designations, powers and preferences of each class or series;
the relative, participating, optional and other special rights
of each class or series; and
any qualifications, limitations or restrictions on each class or
series.
107
prior to the date of the business combination, the board of
directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder
becoming an interested stockholder;
on consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the voting stock
outstanding (but not the outstanding voting stock of the
interested stockholder) those shares owned:
by persons who are directors and also officers, and
by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange
offer; or
at or subsequent to such time, the business combination is
approved by the board of directors and authorized at an annual
or special meeting of stockholders, and not by written consent,
by the affirmative vote of at least
66
2
/
3
%
of the outstanding voting stock that is not owned by the
interested stockholder.
any merger or consolidation involving the corporation and the
interested stockholder;
any sale, transfer, pledge or other disposition of 10% or more
of the assets of the corporation involving the interested
stockholder;
subject to certain exceptions, any transaction that results in
the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder;
any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested
stockholder; or
the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
108
banks, insurance companies, or other financial institutions;
persons subject to the alternative minimum tax;
tax-exempt organizations;
dealers in securities or currencies;
traders in securities that elect to use a mark-to-market method
of accounting for their securities holdings;
entities treated as partnerships for U.S. federal income
tax purposes or investors in such entities;
controlled foreign corporations, passive
foreign investment companies and corporations that
accumulate earnings to avoid U.S. federal income tax;
U.S. expatriates or former long-term residents of the
United States;
persons who hold our common stock as a position in a hedging
transaction, straddle, conversion
transaction or other risk reduction transaction; or
persons deemed to sell our common stock under the constructive
sale provisions of the Code.
an individual who is a citizen or resident of the United States,
including an alien individual who is a lawful permanent resident
of the United States or who meets the substantial
presence test under Section 7701(b) of the Code;
109
a corporation, or other entity taxable as a corporation for
U.S. tax purposes, created or organized in the United
States or under the laws of the United States or of any state
therein or the District of Columbia;
an estate whose income is subject to U.S. federal income
tax regardless of its source; or
a trust (1) whose administration is subject to the primary
supervision of a U.S. court and which has one or more
U.S. persons who have the authority to control all
substantial decisions of the trust or (2) which has made an
election to be treated as a U.S. person.
the gain is effectively connected with your conduct of a
U.S. trade or business (and, where a tax treaty applies, is
attributable to a U.S. permanent establishment maintained
by you);
you are an individual who is present in the United States for a
period or periods aggregating 183 days or more during the
calendar year in which the sale or disposition occurs and
certain other conditions are met; or
our common stock constitutes a U.S. real property interest
by reason of our status as a United States real property
holding corporation (a USRPHC) for U.S. federal
income tax purposes at any time within the shorter of the
five-year period preceding the disposition or your holding
period for our common stock.
110
111
1% of the number of shares of our common stock then outstanding,
which will equal
approximately shares
immediately after the offering; or
the average weekly trading volume of our common stock on the New
York Stock Exchange during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to that sale.
112
113
Number of
Shares
114
Paid by Us
Paid by Selling Stockholders
Total
Full
Full
Full
No Exercise
Exercise
No Exercise
Exercise
No Exercise
Exercise
$
$
$
$
$
$
$
$
$
$
$
$
offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of directly or indirectly, any
shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock;
file any registration statement with the Securities and Exchange
Commission relating to the offering of any shares of common
stock or any securities convertible into or exercisable or
exchangeable for common stock; or
enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences
of ownership of the common stock;
the sale of shares to the underwriters;
the issuance by us of shares of common stock upon the exercise
of an option or a warrant or the conversion of a security
outstanding on the date of this prospectus of which the
underwriters have been advised in writing;
any shares of common stock issued upon the exercise of options
granted under existing employee option plans, grants of employee
stock options or restricted stock in accordance with the terms
in effect on the date hereof and the filing by the Company of
any registration statement with the SEC on
Form S-8
relating to the offering of securities pursuant to the terms of
a plan in effect on the date hereof;
the issuance by us of shares of common stock or any security
convertible into shares of common stock in connection with a
bona fide merger or acquisition transaction; provided, however,
that the aggregate number of shares issued in these transactions
shall not exceed 5% of the total shares offered in this offering
and that any recipient of these shares executes a copy of the
lock-up
agreement;
transactions relating to shares of common stock or other
securities acquired in open market transactions after completion
of this offering, provided, however, that no filing under the
Securities Exchange Act of 1934, as amended (Exchange Act),
shall be required or shall be voluntarily made in connection
with such transaction (other than a filing on Form 4 after
the expiration of the lock-up period or on a Form 5 made
when required); or
115
the transfer of shares of common stock (i) pursuant to a
will, other testamentary document or applicable laws of descent,
(ii) as a bona fide gift or (iii) to a family member
or trust, provided that, in each case, the transferee agrees to
be bound in writing by the terms of the
lock-up
agreement prior to such transfer and no filing by any party
(donor, donee, transferor or transferee) under the Exchange Act
shall be required or shall be voluntarily made in connection
with such transfer (other than a filing on a Form 5 made
when required) and such transfer does not involve a disposition
for value.
Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum.
Overallotment involves sales by the underwriters of shares in
excess of the number of shares the underwriters are obligated to
purchase, which creates a syndicate short position. The short
position may be either a covered short position or a naked short
position. In a covered short position, the number of shares
over-allotted by the underwriters is not greater than the number
of shares that they may purchase in the overallotment option. In
a naked short position, the number of shares involved is greater
than the number of shares in the overallotment option. The
underwriters may close out any covered short position by either
exercising their overallotment option
and/or
purchasing shares in the open market.
Syndicate covering transactions involve purchases of the common
stock in the open market after the distribution has been
completed in order to cover syndicate short positions. In
determining the source of shares to close out the short
position, the underwriters will consider, among other things,
the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through
the overallotment option. If the underwriters sell more shares
than could be covered by the over-allotment option, a naked
short position, the position can only be closed out by buying
shares in the open market. A naked short position is more likely
to be created if the underwriters are concerned that there could
be downward pressure on the price of the shares in the open
market after pricing that could adversely affect investors who
purchase in the offering.
Penalty bids permit the representatives to reclaim a selling
concession from a syndicate member when the common stock
originally sold by the syndicate member is purchased in a
stabilizing or syndicate covering transaction to cover syndicate
short positions.
116
117
the purchaser is entitled under applicable provincial securities
laws to purchase the shares without the benefit of a prospectus
qualified under those securities laws,
where required by law, that the purchaser is purchasing as
principal and not as agent,
the purchaser has reviewed the text above under Resale
Restrictions, and
the purchaser acknowledges and consents to the provision of
specified information concerning its purchase of the shares to
the regulatory authority that by law is entitled to collect the
information.
118
119
120
121
122
F-2
F-3
F-4
F-5
F-6
F-7
F-24
F-25
F-26
F-27
F-28
F-37
F-1
K12 Inc.
Herndon, Virginia
Bethesda, Maryland
September 25, 2007, except for Note 15,
as to which date is November 2, 2007
F-2
F-3
Year Ended June 30,
2007
2006
2005
(in thousands, except per share data)
$
140,556
$
116,902
$
85,310
76,064
64,828
49,130
51,159
41,660
30,031
8,611
8,568
9,410
135,834
115,056
88,571
4,722
1,846
(3,261
)
(639
)
(488
)
(279
)
4,083
1,358
(3,540
)
(218
)
3,865
1,358
(3,540
)
(6,378
)
(5,851
)
(5,261
)
(22,353
)
(18,697
)
(15,947
)
$
(24,866
)
$
(23,190
)
$
(24,748
)
$
(12.42
)
$
(11.73
)
$
(12.54
)
2,001,661
1,977,195
1,973,053
F-4
Redeemable
Redeemable
Stockholders Deficit
Convertible Series C
Convertible Series B
Additional
Preferred Stock
Preferred Stock
Common Stock
Paid-in
Accumulated
Shares
Amount
Shares
Amount
Shares
Amount
Capital
Deficit
Total
(dollars in thousands)
37,461,730
$
54,629
51,524,974
$
100,440
1,964,552
$
1
$
$
(125,622
)
$
(125,621
)
11,760
70
70
4,403
11,544
(70
)
(15,877
)
(15,947
)
3,746,173
5,261
(5,261
)
(5,261
)
(3,540
)
(3,540
)
41,207,903
64,293
51,524,974
111,984
1,976,312
1
(150,300
)
(150,299
)
22,584
38
38
6,067
12,630
(38
)
(18,659
)
(18,697
)
4,120,790
5,851
(5,851
)
(5,851
)
1,358
1,358
45,328,693
76,211
51,524,974
124,614
1,998,896
1
(173,452
)
(173,451
)
42,708
292
292
218
218
8,533
13,820
(510
)
(21,843
)
(22,353
)
4,532,869
6,378
(6,378
)
(6,378
)
3,865
3,865
49,861,562
$
91,122
51,524,974
$
138,434
2,041,604
$
1
$
$
(197,808
)
$
(197,807
)
F-5
Year Ended June 30,
2007
2006
2005
(in thousands)
$
3,865
$
1,358
$
(3,540
)
7,404
4,986
5,509
218
(852
)
(275
)
1,113
95
(39
)
(50
)
(48
)
174
(256
)
362
2,118
1,188
(3,154
)
(2,718
)
3,434
(2,790
)
(5,359
)
(555
)
(763
)
100
(431
)
(255
)
(258
)
(468
)
(322
)
(268
)
(56
)
579
1,559
(163
)
(824
)
122
1,208
1,100
1,782
994
1,224
501
(348
)
86
1,598
5,563
3,625
9,697
(5,366
)
(10,842
)
(4,692
)
(8,683
)
(655
)
(3,787
)
(14,049
)
(11,497
)
(8,479
)
(4,025
)
4,025
441
(62
)
1,500
(1,384
)
(441
)
(3,432
)
292
38
70
1,577
2,332
(2,203
)
2,191
671
(2,606
)
2,854
(7,815
)
(10,478
)
4,072
9,475
19,953
15,881
$
1,660
$
9,475
$
19,953
F-6
1.
Description
of the Business
2.
Summary
of Significant Accounting Policies
F-7
F-8
Useful Life
3 years
3 years
5-6 years
5-6 years
3-12 years
F-9
F-10
F-11
3.
Property
and Equipment
June 30,
2007
2006
$
20,208
$
12,617
5,811
6,615
3,390
4,127
4,905
1,717
2,270
2,130
809
752
784
1,083
38,177
29,041
(20,943
)
(18,653
)
$
17,234
$
10,388
F-12
4.
Income
Taxes
June 30,
2007
2006
$
25,376
$
25,445
4,202
5,247
613
935
491
857
486
671
180
131
130
87
31,566
33,285
(1,378
)
(522
)
(262
)
(236
)
(1,640
)
(758
)
29,926
32,527
(29,926
)
(32,527
)
$
$
Year Ended June 30,
2007
2006
2005
35.00
%
35.00
%
35.00
%
20.22
55.77
(20.19
)
13.65
12.98
2.12
(63.56
)
(103.75
)
(16.93
)
5.31
%
%
%
F-13
5.
Lease
Commitments
Year ending June 30,
$
3,238
2,888
1,399
6
7,531
(777
)
6,754
(2,780
)
$
3,974
F-14
Year Ending
June 30,
$
2,138
2,127
1,576
1,386
1,367
8,627
$
17,221
6.
Line of
Credit
F-15
7.
Debt and
Warrants
8.
Equity
F-16
9.
Stock
Option Plan
F-17
Year Ended
June 30, 2007
0.0%
51%
4.53% to 5.01%
3.25 6.40
20% to 30%
F-18
Weighted-
Average
Exercise
Shares
Price
2,050,299
$
6.83
611,903
7.50
(22,584
)
1.65
(126,812
)
7.01
2,512,806
7.03
1,249,409
13.35
(42,708
)
6.84
(96,657
)
7.06
3,622,850
$
9.21
Weighted-Average
Options
Weighted-Average
Grant-Date
Granted
Exercise Price
Fair Value
Intrinsic Value
1,007,113
$
14.35
$
2.96
$
0.00
188,381
$
9.18
$
4.84
$
0.00
53,915
$
9.18
$
8.06
$
0.00
Weighted-Average
Grant-Date
Shares
Fair Value
968,004
$
7.25
1,249,409
3.46
(560,673
)
4.92
(42,708
)
6.84
(96,657
)
6.99
1,517,375
$
5.02
F-19
Weighted-
Average
Weighted-
Weighted-
Range of
Remaining
Average
Average
Exercise
Number
Contractual
Exercise
Number
Exercise
Outstanding
Life
Price
Exercisable
Price
3,328,733
5.3 years
$
7.32
2,105,475
$
7.05
294,117
5.5 years
$
30.60
10.
Commitments
and Contingencies
F-20
F-21
11.
Related
Party Transactions
12.
Employee
Benefits
13.
Supplemental
Disclosure of Cash Flow Information
Year Ended June 30,
2007
2006
2005
$
1,317
$
33
$
446
$
8,052
$
$
441
14.
Subsequent
Events
F-22
15.
Subsequent
Event Reverse Stock Split
F-23
F-24
Three Months Ended September 30,
2007
2006
(in thousands, except per share data)
$
59,353
$
37,743
34,778
19,177
16,039
11,385
2,527
2,206
53,344
32,768
6,009
4,975
(304
)
(94
)
5,705
4,881
7,117
(146
)
12,822
4,735
(1,671
)
(1,519
)
(6,560
)
(5,367
)
$
4,591
$
(2,151
)
$
2.25
$
(1.08
)
$
0.20
$
(1.08
)
2,043,589
1,998,853
22,744,525
1,998,853
F-25
Stockholders Deficit
Redeemable Convertible
Redeemable Convertible
Additional
Series C Preferred Stock
Series B Preferred Stock
Common Stock
Paid-in
Accumulated
Shares
Amount
Shares
Amount
Shares
Amount
Capital
Deficit
Total
(dollars in thousands, except share amounts)
49,861,562
$
91,122
51,524,974
$
138,434
2,041,604
$
1
$
$
(197,808
)
$
(197,807
)
3,613
25
25
2,778
3,782
(325
)
(6,235
)
(6,560
)
1,671
(1,671
)
(1,671
)
300
300
12,822
12,822
49,861,562
$
95,571
51,524,974
$
142,216
2,045,217
$
1
$
$
(192,892
)
$
(192,891
)
F-26
Three Months Ended September 30,
2007
2006
(in thousands)
$
12,822
$
4,735
2,252
1,224
300
41
(7,117
)
21
(958
)
7
(31
)
161
(153
)
(34,248
)
(20,397
)
7,029
3,680
261
(75
)
(933
)
(1,112
)
557
34
4,100
3,187
2,374
3,321
(2,880
)
(2,074
)
12,571
11,963
(17
)
13
(2,740
)
3,398
(1,530
)
(4,784
)
(250
)
(1,622
)
(2,066
)
(3,402
)
(6,850
)
(1,371
)
(44
)
11,000
(648
)
25
(1,577
)
7,385
1,243
(3,452
)
1,660
9,475
$
2,903
$
6,023
F-27
1.
Basis of
Presentation
2.
Summary
of Significant Accounting Policies
F-28
3.
Line of
Credit
F-29
4.
Income
Taxes
5.
Stock
Option Plan
F-30
Three Months Ended
September 30, 2007
0.0%
41% 47%
4.93% 4.97%
4.05 5.76
F-31
Weighted-
Average
Exercise
Shares
Price
3,622,850
$
9.21
1,257,948
13.66
(3,613
)
6.85
(16,212
)
8.12
4,860,973
$
10.37
Weighted Average
Options
Weighted-Average
Grant-Date
Intrinsic
Granted
Exercise Price
Fair Value
Value
1,257,948
$
13.66
$
9.28
$
0.00
Weighted
Average
Unvested
Grant Date
Options
Fair Value
1,517,375
$
5.02
1,257,948
9.28
(102,326
)
6.16
(3,613
)
6.85
(16,212
)
3.52
2,653,172
$
7.00
F-32
Weighted-
Average
Weighted-
Weighted-
Range of
Remaining
Average
Average
Exercise
Number
Contractual
Exercise
Number
Exercise
Outstanding
Life
Price
Exercisable
Price
3,310,201
5.1 years
$
7.32
2,206,821
$
7.07
1,256,655
7.8 years
$
13.66
980
$
13.66
294,117
5.3 years
$
30.60
6.
Lease
Commitments
Capital
Leases
$
6,105
5,520
3,061
14,686
(1,616
)
13,070
(5,111
)
$
7,959
F-33
7.
Commitments
and Contingencies
F-34
8.
Supplemental
Disclosure of Cash Flow Information
Three Months Period Ended September 30,
2007
2006
$
281
$
$
6,964
$
9.
Subsequent
Events
F-35
10.
Subsequent
Event Reverse Stock Split
F-36
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 2006, 2005 AND 2004
Additions
Balance at
Charged to
Deductions
Beginning of
Cost and
from
Balance at End
Period
Expenses
Allowance
of Period
$
1,440,499
106,038
957,566
$
588,971
$
1,715,781
174,895
450,177
$
1,440,499
$
602,919
1,407,143
294,281
$
1,715,781
Additions
Balance at
Charged to
Deductions
Beginning of
Cost and
Shrinkage and
Balance at End
Period
Expenses
Obsolescence
of Period
$
232,055
320,960
225,407
$
327,608
$
270,611
38,556
$
232,055
$
320,809
19,572
69,770
$
270,611
Additions
(Deductions)
Balance at
Charged to
Deductions
Beginning of
Cost and
Shrinkage and
Balance at End
Period
Expenses
Obsolescence
of Period
$
664,186
(47,825
)
$
616,361
$
490,533
173,653
$
664,186
$
746,294
(255,761
)
$
490,533
(1)
A reserve account is maintained against potential shrinkage and
obsolescence for those computers provided to our students. The
reserve is calculated based upon several factors including
historical percentages, the net book value and remaining useful
life.
Balance at
Changes in Net
Beginning of
Deferred
Income Tax
Balance at End
Period
Tax Assets
Benefit Realized
of Period
$
32,527,019
(2,601,121
)
$
29,925,898
$
33,866,482
(1,339,463
)
$
32,527,019
$
33,267,514
598,968
$
33,866,482
F-37
Item 13.
Other
Expenses of Issuance and Distribution
$
5,296
*
17,750
*
*
*
*
*
$
*
*
To be completed by amendment.
Item 14.
Indemnification
of Directors and Officers
II-1
Item 15.
Recent
Sales of Unregistered Securities
Item 16.
Exhibits
and Financial Statement Schedule
II-2
1
.1
Form of Underwriting Agreement
3
.1*
Amended and Restated Certificate of Incorporation
3
.2*
Bylaws (as amended)
3
.3
Certificate of Amendment, dated December 15, 2006, to
Second Amended and Restated Certificate of Incorporation
3
.4
Certificate of Amendment to Second Amended and Restated
Certificate of Incorporation dated November 2, 2007, and
Certificate of Correction related thereto
3
.5
Form of Third Amended and Restated Certificate of Incorporation
to be effective upon completion of this offering
3
.6
Form of Amended and Restated Bylaws to be effective upon
completion of this offering
4
.1
Form of stock certificate of common stock
4
.2*
Amended and Restated Stock Option Plan and Amendment thereto
4
.3*
Form of Stock Option Contract Employee
4
.4*
Form of Stock Option Contract Director
4
.5*
Form of Second Amended and Restated Stockholders Agreement
4
.6*
Form of Common Stock Warrant Agreement
4
.7*
Form of Series B Convertible Preferred Stock Warrant Agreement
4
.8
2007 Equity Incentive Award Plan
4
.9
2007 Employee Stock Purchase Plan
5
.1
Opinion of Latham & Watkins LLP
10
.1*
Revolving Credit Agreement and Certain Other Loan Documents by
and among K12 Inc., School Leasing Corporation, American
School Supply Corporation and PNC Bank, N.A.
10
.2*
Stockholders Agreement dated as of April 26, 2000 (as
amended) by and among Premierschool.com, Inc., Knowledge
Universe Learning, Inc. and Ronald J. Packard
10
.3*
Stockholders Agreement dated as of February 20, 2000 (as
amended) by and among Premierschool.com, Inc., Knowledge
Universe Learning, Inc. and William J. Bennett
10
.4*
Series B Convertible Preferred Stock Warrant Agreement of
Mollusk Holdings LLC
10
.5*
Amended and Restated Stock Option Agreement of Ronald J.
Packard dated as of July 12, 2007
10
.6*
Stock Option Agreement of Bruce J. Davis
10
.7*
Stock Option Agreement of John Baule
10
.8*
Stock Option Agreement of Bror Saxberg
10
.9*
Amended and Restated Employment Agreement of Ronald J.
Packard
10
.10*
Employment Agreement of John F. Baule and Amendment thereto
10
.11*
Employment Agreement of Bruce J. Davis
10
.12*
Employment Agreement of Bror V. H. Saxberg
10
.13*
Deed of Lease by and between ACP/2300 Corporate Park Drive, LLC
and K12 Inc.
10
.14*
Sublease between France Telecom Long Distance USA, LLC and K12
Inc.
10
.15*
Employment Agreement of Celia M. Stokes
10
.16*
Employment Agreement of Howard D. Polsky
10
.17*
Stock Option Agreement of Ronald J. Packard dated as of
July 12, 2007
10
.18
First Amendment to Employment Agreement of Howard D. Polsky
10
.19
Amendment No.1 to Revolving Credit Agreement by and among K12
Inc., School Leasing Corporation, American School Supply
Corporation and PNC Bank N.A.
10
.20
Stock Subscription Agreement dated as of November 1, 2007
by and among K12 Inc. and KB Education Investments Limited
10
.21
Second Amended and Restated Educational Products, and
Administrative, and Technology Services Agreement between the
Ohio Virtual Academy and K12 Ohio L.L.C.
21
.1*
Subsidiaries of K12 Inc.
23
.1
Consent of BDO Seidman, LLP
23
.2
Consent of Latham & Watkins LLP (included in
Exhibit 5.1)
24
.1*
Power of Attorney (excluding Dr. Mary H. Futrell)
24
.2*
Power of Attorney of Dr. Mary H. Futrell
*
Previously filed.
Portions omitted pursuant to a
request for confidential treatment. The omitted information has
been filed separately with the Securities and Exchange
Commission.
Item 17.
Undertakings
By:
Name:
Ronald J. Packard
Title:
Chief Executive Officer
Chief Executive Officer
(Principal Executive Officer)
November 7, 2007
Chief Operating Officer and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
November 7, 2007
Chairman of the Board and Director
November 7, 2007
Director
November 7, 2007
Director
November 7, 2007
Director
November 7, 2007
Director
November 7, 2007
Director
November 7, 2007
*By:
Attorney-in-Fact
II-5
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
Very truly yours,
K12 INC. |
||||
By | ||||
Name: | ||||
Title: | ||||
The Selling Stockholders named in
Schedule I hereto, acting severally |
||||
By: | ||||
Attorney-in-Fact | ||||
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first
above written.
|
Morgan Stanley & Co. Incorporated | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Name: | |||||
|
Title: | |||||
|
||||||
Credit Suisse Securities (USA) LLC | ||||||
|
||||||
|
By: | |||||
|
||||||
|
Name: | |||||
|
Title: | |||||
|
||||||
|
Acting on behalf of themselves and as the
Representatives of the several
Underwriters.
|
24
Number of | ||
Firm Securities | ||
Underwriter | to be Purchased | |
Morgan Stanley & Co. Incorporated
|
[ ] | |
Credit Suisse Securities (USA) LLC
|
[ ] | |
Merrill
Lynch, Pierce, Fenner & Smith Incorporated
|
[ ] | |
Robert W. Baird & Co. Incorporated
|
[ ] | |
BMO Capital Markets Corp
|
[ ] | |
ThinkEquity Partners LLC
|
[ ] | |
|
||
Total
|
[ ] |
25
Number of | Number of | |||
Firm | Optional | |||
Securities to | Securities to | |||
Selling Stockholder | be Sold | be Sold | ||
|
||||
|
||||
|
||||
|
||||
|
||||
Total
|
||||
|
26
1. | General Use Free Writing Prospectuses (included in the General Disclosure Package) |
2. | Other Information Included in the General Disclosure Package |
27
1. | Section 2(g)(1) of Article VIII of the Amended and Restated Certificate of Incorporation is amended and restated to read as follows: | ||
(1) incur indebtedness in respect of borrowed money in excess of an aggregate of $22,000,000 in principal amount outstanding at any time; provided , however , that financing provided by vendors or suppliers (including, without limitation, equipment lessors) in connection with the provision of goods and services shall not be deemed to be indebtedness in respect of borrowed money for the purposes hereof; or | |||
2. | This amendment of the Amended and Restated Certificate of Incorporation herein certified has been duly adopted and approved by the Board of Directors of the Corporation and by written consent of the stockholders of the Corporation in accordance with the provisions of Section 228 and 242 of the General Corporation Law of the Sate of Delaware. |
2
|
By: | /s/ Howard D. Polsky | ||
|
||||
Name: Howard D. Polsky
Title: Senior Vice President, General Counsel and Secretary |
3
By: | /s/ John D. Baule | |||
Name: | John D. Baule | |||
Title: | Chief Operating Officer and Chief Financial Officer | |||
2
3
4
5
K12 INC.,
a Delaware Corporation |
||||
|
||||
|
By: | |||
|
||||
Name: Howard D. Polsky
Title: Senior Vice President, General Counsel and Secretary |
6
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
|
|
|
|
Howard D. Polsky | |
|
Senior Vice President, General Counsel and | |
|
Secretary |
18
The Company will furnish without charge to each stockholder who so requests a statement of the number of shares constituting each class or series of stock and the designation thereof, and a copy of the powers, designations, preferences and relative, participating or optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR DESTROYED THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM as tenants in common UNIF GIFT MIN ACT custodian (Cust)~ (Minor) . TEN ENT as tenants by the entireties under Uniform Gifts to Minors JTTEN as joint tenants with right of survivorship Act and not as tenants in common (State) Additional abbreviations may also be used though not in the above list. For value received, hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS. INCLUDING ZIP CODE, OF ASSIGNEE) Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within named Company with full power of substitution in the premises. Dated NOTICE- THE SIGNATURE TO THIS ASSIGNMENT MUST COARESPONDt NAME AS UPON THE FACE (THE CERTIFICATE IN EVERY PARTICUlAR, WITHOUT AlTERATION OR ENLARGEMENT OB y CHANGE WHATEVE Signature(s) Guaranteed:. THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO SEC. RULE 17Ad-15. |
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2
3
4
5
6
7
8
9
10
11
12
13
Barcelona
|
New Jersey | |
Brussels
|
New York | |
Chicago
|
Northern Virginia | |
Frankfurt
|
Orange County | |
Hamburg
|
Paris | |
Hong Kong
|
San Diego | |
London
|
San Francisco | |
Los Angeles
|
Shanghai | |
Madrid
|
Silicon Valley | |
Milan
|
Singapore | |
Moscow
|
Tokyo | |
Munich
|
Washington, D.C. |
Re: |
Registration Statement No. 333-144894; [ ] shares of Common
Stock, par value $0.0001 per share |
K12 INC.
|
||||
/s/ Andrew Tisch | ||||
Andrew Tisch | ||||
Chair, Compensation Committee | ||||
EXECUTIVE
|
||||
/s/ Howard D. Polsky | ||||
Howard D. Polsky | ||||
Period | Limitation | |||
From the Closing Date through June 30, 2007
|
$ | 6,500,000 | ||
From July 1, 2007 through June 30, 2008
|
$ | 15,000,000 | ||
From July 1, 2008 through the Termination Date
|
$ | 17,500,000 |
Very truly yours, | ||||||
|
||||||
K12 Inc. | ||||||
|
||||||
|
By: | |||||
|
|
|||||
|
Title: | |||||
|
|
|||||
|
||||||
School Leasing Corporation | ||||||
|
||||||
|
By: | |||||
|
|
|||||
|
Title: | |||||
|
|
|||||
|
||||||
American School Supply Corporation | ||||||
|
||||||
|
By: | |||||
|
|
|||||
|
Title: | |||||
|
|
PNC Bank, National Association | ||||||
|
||||||
|
By: | |||||
|
|
|||||
|
Title: | |||||
|
|
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
|
If to the Company: | Howard D. Polsky | ||
|
Senior Vice President and General Counsel | |||
|
K12 Inc. | |||
|
2300 Corporate Park Drive | |||
|
Herndon, VA 20171 | |||
|
Fax: (703) 483-7496 | |||
|
||||
|
With a copy to: | William P. ONeill | ||
|
Latham & Watkins LLP | |||
|
555 Eleventh Street, NW, Suite 1000 | |||
|
Washington, DC 20004 | |||
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Fax: (202) 637-2201 | |||
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If to Investor: | Attn: Kamal Bahamdan | ||
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KB Education Investments Limited | |||
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c/o Sara Holding | |||
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112-116 Al Dugaither Center | |||
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Tahliyah Street | |||
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Riyadh 11561 | |||
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Telephone: +9661 463 6324 | |||
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Fax: +9661 463 6370 |
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K12 INC. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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By: | /s/ Ronald J. Packard | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Name: | Ronald J. Packard | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Title: | Chief Executive Officer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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INVESTOR: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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KB EDUCATION INVESTMENTS LIMITED | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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By: | /s/ Kamal Bahamdan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Name: | Kamal Bahamdan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Title: | Director | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| promoting and encouraging new methods of effective education; | ||
| implementing innovative and effective instructional systems in elementary and secondary education. |
a) | fees payable to the Sponsor; | ||
b) | legal fees for representation of the Academy and/or the Governing Authority; | ||
c) | directors and officers liability insurance; | ||
d) | directors and officers reimbursable expenses; | ||
e) | general accounting, audit, and/or tax preparation fees for the Academy; | ||
f) | taxes, if any; | ||
g) | other fees and/or expenses involved in oversight of the Academy or K12 under this Agreement. The Academy agrees that K12 will not be obligated to advance funds under Section 2.07 for any oversight expenses, including |
the employment of program or financial oversight personnel or services, that exceed $25,000 per fiscal year; |
h) | Facility expenses (e.g., rent, maintenance, etc.); | ||
i) | ongoing professional development and training expenses, including travel reimbursements for employees of the Academy; | ||
j) | administrators office, and travel within Ohio; | ||
k) | administrators travel outside of Ohio as agreed to within the Academy budget or with prior approval by the Governing Authority; | ||
1) | teacher salaries, benefits, travel, phone, conferences, supplies, materials, printing/copying and other expenses necessary to fulfill the teachers duties; | ||
m) | student support staff (as defined in Section 6.06(b)) salaries, benefits, travel, phone, conferences, supplies, materials, printing/copying and other expenses necessary to fulfill the teachers duties; | ||
n) | fees payable to K12 for Educational Products, and Administrative and Technology Services; | ||
o) | Internet service provider reimbursement for students and teachers; | ||
p) | the fair market value of non-consumable materials and computers not returned by students and not paid by available insurance; | ||
q) | cost of proctored examinations, including all costs related to the delivery of such examinations; | ||
r) | school sponsored outings and events for existing students and / or families (but not including K12 sponsored retention programs); | ||
s) | special education services (except as provided by K12 in Section 6.03 of this Agreement); | ||
t) | Academy liability insurance; | ||
u) | annual report expenses; and | ||
v) | all other discretionary expenses approved by the Governing Authority from time to time; provided, however, that the Governing Authority shall not incur or approve any expense that would cause the Academy to operate in a deficit, without prior approval from K12. |
a) | Annual Balanced Budget . K12 agrees that it will present the Governing Authority with an annual balanced budget in each fiscal year of the Term pursuant to Section 2.02(a)(iv). This budget will be balanced through a combination of increased funding, reduced Academy Expenses, reduced K12 service fees and/or estimated credits to K12 service fees set forth in Section 5.01 subdivisions (e) and (f) (Service Credits). In the event, OHVA does not agree with K12s proposed balanced budget, the parties agree to work together in a good faith, cooperative manner to resolve any disagreements. During that process, OHVA, in consultation with K12, will have discretion over reductions in Academy Expenses, and K12, in consultation with OHVA, will have discretion over reductions in its service fees and/or the issuance of Service Credits. | ||
b) | Reserve Fund . The parties agree that the Academy will maintain a $250,000 reserve (Reserve Fund) during the Term. The Reserve Fund is defined as Academy Total Net Assets, at fiscal year end, excluding Net Capital Assets, as those terms are used in the Academys audited financial statements. | ||
c) | Fiscal Year Service Credits . At the end of the fiscal year, if necessary based on the Academys audited financial statements, K12 will issue Service Credits in an amount sufficient to balance the Academys budget and satisfy the Reserve Fund. Except as otherwise stated in Section 2.08(d), the Academy has no obligation to repay the Service Credits. | ||
d) | Repayment of Service Credits . At the end of each fiscal year, if the Academy has surplus funds that exceed the Reserve Fund, as evidenced by the Academys audited financial statement for such fiscal year, the Academy will repay the Service Credits of the prior fiscal year, provided the basic state education funding per pupil did not exceed $6000. In the event the basic state education funding per pupil exceeds $6,000 in the fiscal year in which a surplus is experienced, the Academy will retain twenty five percent (25%) of the surplus and the remaining seventy five percent (75%) will be applied to repayment of Service Credits issued the prior fiscal year. In no event will any payment exceed the sum of Service Credits issued the prior fiscal year. | ||
e) | In the event the Academy ceases operations or wrongfully terminates this Agreement, and the Academy has Net Assets (excluding Net Capital Assets), as evidenced by the Academys audited financial statement for such fiscal year, the Academy will pay K12 the balance of all Service Credits previously issued by K12. If this Agreement expires and the Academy does not enter into a renewal Agreement with K12 or if K12 rightfully terminates this Agreement as permitted under Sections 7.01(a), (d) or (e) then the Academy will reimburse K12 in an amount equal to all Service Credits previously issued by K12 as long as the Net Assets (excluding Net Capital Assets) of the Academy do not fall below $100,000. |
OHIO VIRTUAL ACADEMY INC., an Ohio nonprofit corporation | ||||
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Its:
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vp of board | |||
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K12 OHIO L.L.C., a Delaware limited liability company | ||||
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| Research, study, and select a Web-based student information system to handle student records, grades, attendance, registration, enrollment, health, and other necessary information | ||
| Set up and maintain student information and accounting systems | ||
| Provide electronic security of student records (through the use of encryption, firewalls, etc. | ||
| Prepare for, supervise, and implement all system roll-overs at the end of each academic year | ||
| Maintain and improve SAMS to meet evolving student and teacher requirements | ||
| Design and implement systems in support of student performance research and analysis |
| Place ads for administration, teacher, and staff recruiting | ||
| Arrange for recruiting sites for teaching staff interviews across the state | ||
| Review and sort resumes | ||
| Assemble interview team | ||
| Conduct interviewing across the state (including second- and third-round, if necessary) | ||
| Correspond with applicants regarding the status of their applications | ||
| Check references / certification / background checks of finalists | ||
| Prepare employment agreements on behalf of the Governing Authority | ||
| Negotiate and secure benefits for health, retirement, etc. for teachers on the Academys behalf | ||
| Manage employee benefits for the Academy |
| Assist in obtaining third party financing as agreed to by the Governing Authority | ||
| Hire and train the Academys Business Manager | ||
| Set up and maintain accounting and reporting software |
| Maintain the Academys chart of accounts according to state guidelines | ||
| Prepare annual budget for adoption by the Governing Authority | ||
| Perform accounting services for the Academy | ||
| Manage employee benefits for the Academy | ||
| Assist with the administration of federal entitlement programs (e.g., Title I, I.D.E.A.) | ||
| Assist in identifying and developing fundraising and revenue enhancements on behalf of the Academy | ||
| Administer school payroll | ||
| Establish and implement policies and procedures to maintain proper internal controls | ||
| Assist and coordinate in third-party audit of the Academy |
| Research and identify a location for the Academys administrative space | ||
| Negotiate a lease for the Academys administrative facility | ||
| Arrange for the remodeling of space for office and training needs, as needed | ||
| Arrange for the wiring of the space for network | ||
| Arrange for the set-up of the network | ||
| Arrange for the installation of PBX phone system |
| Hire Head of School, Assistant Head of School (as needed), Director of Technology (as needed), Director of Special Education, Business Manager, and other administrators, as needed | ||
| Draft and propose policies and procedures for the Academy | ||
| Enter student data into the Academys student information system and generate administrative reports | ||
| Plan, arrange, and lead school orientation sessions | ||
| Arrange contracts with school districts, education services centers, and professional service providers for special education and other support services | ||
| Manage day-to-day operations with families, students, teachers, Governing Authority, press, vendors, contractors, districts, education service centers, etc. | ||
| Oversee compliance with the schools policies and procedures | ||
| Report to the Governing Authority all significant developments in the school | ||
| Manage budgets, personnel, and human resources issues | ||
| Develop strategic plan for school development (including year-end transitions and addition of new grades) in consultation with the Governing Authority | ||
| Work with families to improve the quality of the schools program | ||
| Prepare the school to meet reporting and audit requirements | ||
| Prepare the school for the accreditation process | ||
| Represent the school at conferences, Open Houses, and other meetings | ||
| Work with school staff to create, design, and arrange for the publication and dissemination the Academys annual report | ||
| Participate in Academy Governing Authority meetings in a nonvoting capacity |
| Arrange for and attend meetings with individuals and groups interested in the Academy | ||
| Develop community outreach strategy and connect with local organizations (e.g., YMCAs, Boys & Girls Clubs) | ||
| Work regularly with the administration to develop HR policies, bonus plans, and strategic plans for staffing, development, and growth | ||
| Participate in the charter renewal process with the Governing Authority, as needed |
| Create, design, and publish OHVA applications and enrollment packages and make them available on the web site for downloading | ||
| Answer enrollment questions from potential families (phone, mail, and e-mail) and assist the school in managing the enrollment process, including the processing of paperwork, data entry, and training and security in the process | ||
| Send out letters or notices to families apprising them of their status in the schools enrollment process, in conjunction with the schools administration | ||
| Work with the school to conduct a random lottery, by grade, if there are more applicants than slots available | ||
| Assist with getting out the word about the school and its Open Houses and other events via mail, e-mail, newspapers, magazines, journals, radio, television, community forums, town hall meetings, and other forms of communication and outreach | ||
| Assist with the drafting and distribution of Academy press releases | ||
| Schedule, organize, ship all materials to, and participate in Open Houses for families across the state | ||
| Assist the Academy staff in other aspects of the admissions and enrollment process |
| Field and respond to incoming calls, letters, faxes, and e-mails about the Academy, its curriculum, the application/enrollment process, instructional materials, etc. | ||
| Pass along questions and concerns to the administration and work with them in resolving issues | ||
| Conduct focus groups, surveys, interviews, observation sessions, and/or user testing on the online school program to obtain feedback on how to improve the program | ||
| Create feedback buttons on lessons so that students, parents, and teachers may send in lesson comments and suggestions; respond to suggestions and implement improvements | ||
| Assist the Academy with setting up the Open Houses and school outings and events throughout the year | ||
| Assist with setting up and implementing special education policies, procedures, and services for children with special needs |
| Conduct exit interviews for those who withdraw in order to learn more about how to improve the program for families |
| Arrange for the negotiation, selection, contracting, distribution, leasing, and re-shipment or return (as necessary) of computers and printers for students, administrators, and teachers | ||
| Arrange for the negotiation, selection, contracting, rollout, and reimbursement process (as needed) for Internet Service Provider (ISP) service for students, administrators, and teachers | ||
| Arrange for the negotiation, selection, contracting, distribution, and re-shipment or return (as necessary) of instructional materials for students, administrators, and teachers | ||
| Create, design, and deliver virtual school binders to Academy teachers and administrators | ||
| Set up and disseminate K12 login and password accounts to students, teachers, and administrators and manage changes to those accounts |
| Produce, design, and disseminate a teacher training manual to all OHVA teachers, and an administrator manual for all OHVA administrators, as needed | ||
| Design and deliver comprehensive teacher training on the schools curriculum, technological systems, policies and procedures, and more | ||
| Complete and mail a parent manual and/or student handbook which includes a starting kit for logging onto the system | ||
| Design and deliver orientation sessions with the school administration, including curriculum, technological systems, policies and procedures, and more | ||
| Support teachers as they connect with families via email and phone in the days leading up to launch and throughout the school year | ||
| Work with the OHVA administration to address the continuing professional development needs of the staff |
| Design and continually revise and refresh the look and feel of the OHVA web site | ||
| Design and create teacher, administrator, and student recruitment ads | ||
| Design and create school recruitment materials | ||
| Design and create school letterhead, cards, and logos | ||
| Design and create school application and enrollment forms | ||
| Design, create, and code teacher web pages, school calendars, threaded discussion groups, message boards, and other community-building aspects of the OHVA web site | ||
| Test and ensure the quality and functionality of each web page and link on the OHVA web site | ||
| Proof the quality of all new images and text for the OHVA web site | ||
| Test and ensure the security of all password-protected sections of the school web site |
| Identify and source all curriculum and assessment materials necessary for the educational program | ||
| Identify the requirements and software to meet the computing needs of OHVA students, teachers, and administrators | ||
| Negotiate a distribution agreement with the Academys school supply vendors | ||
| Negotiate a distribution agreement with the Academys curriculum providers | ||
| Negotiate a distribution agreement with the Academys computer, printer, ISP and software vendors | ||
| Negotiate agreements with the Academys professional service providers and testing centers for proctored examinations |
| Support teachers and customer care associates in answering technology-related questions from students, parents, teachers, and administrators | ||
| Install software to generate master image of computer configurations for teachers, administrators, and students in order to standardize the user experience and lower costs and turn-around time for implementation and trouble shooting | ||
| Ensure electronic security of student records (through the use of encryption, firewalls, etc.) | ||
| Provide a Web-filtering device to ensure that students do not have access to inappropriate materials on the Internet | ||
| Prepare for, supervise, and implement all system roll-overs at the end of each academic year | ||
| Work with the schools Business Manger to send invoices to the appropriate state, local, and federal entities and contractors | ||
| Assist with local, state, and federal reporting requirements | ||
| Assist the school for audits related to attendance and other subjects | ||
| Design and implement inventory management systems with the schools distribution and hardware vendors, as well as reclamation programs, as needed | ||
| Support and design the schools accounting system as it connects with all other systems | ||
| Provide online enrollment, registration and placement services | ||
| Provide school email accounts for school employees | ||
| Provide customer care and technology support services on OLS, computer and software issues |
| Oversee changes to the OHVA web site to maintain quality assurance and make sure that there are not version control problems | ||
| Coordinate security, creative, and content issues pertaining to the web site | ||
| Coordinate Web hosting contracts and relationships with vendors across Ohio, as needed | ||
| Handle troubleshooting issues for the schools web site and send issues to the appropriate person or division for resolution |
K12 2006-2007 Course Offerings
Language Arts, Math, History, Science, Art and Music
Algebra II
American History
AP Calculus AB
AP English Language and Composition
AP English Literature and Composition
AP French
AP Macroeconomics (1 Semester)
AP Microeconomics (1 Semester)
AP Physics B
AP Psychology (1 Semester)
AP Spanish
AP Statistics
AP U.S. Government and Politics (1 Semester)
AP
®
Biology
AP
®
Chemistry
AP
®
U.S. History
Chemistry
English II: Critical Reading and Effective Writing
English III: American Literature
Health and Physical Education
Introductory Physical Science
Math Fundamentals
Music Appreciation
Physical Education (1 Semester)
Skills for Health (1 Semester)
U.S. and Global Economics (1 Semester)
U.S. Government and Politics (1 Semester)
World History
Algebra I
Biology
Earth Science
Geometry
Literary Analysis and Composition I
Pre-Algebra B
Fine Art
French I
French II
German I
German II
Latin
Spanish I
Spanish II