U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: March 31, 2002
Commission file number: 033-25900
VIRTUAL ACADEMICS.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2228820
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
6421 Congress Avenue, Suite 201
Boca Raton, Florida 33432
(Address of principal executive offices)
(Zip code)
(561) 994-4446
(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practical date:
On April 25, 2002, the issuer had outstanding 8,701,287 shares of common stock,
$.001 par value per share.
VIRTUAL ACADEMICS.COM, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTERLY PERIOD ENDED MARCH 31, 2002
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets
As of March 31, 2002 (Unaudited) and June 30, 2001......................3
Consolidated Statements of Operations (Unaudited)
For the Three and Nine Months Ended March 31, 2002 and 2001.............4
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended March 31, 2002 and 2001.......................5
Condensed Notes to Consolidated Financial Statements......................6-8
Item 2 - Management's Discussion and Analysis and Results of Operations...8-13
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings.................................................13
Item 2 - Changes in Securities and Use of Proceeds.........................14
Item 4 - Submission of Matters to a Vote of Security Holders...............14
Item 6 - Exhibits and Reports on Form 8-K..................................14
Signatures.................................................................14
-2-
VIRTUAL ACADEMICS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, June 30,
2002 2001
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and Cash Equivalents ........................ $ 1,566,907 $ 1,775,206
Tuition Receivable (Net of Allowance for Doubtful
Accounts of $206,000 and $193,000, respectively) 1,784,556 2,119,182
Prepaid Recruiting Fees .......................... 88,530 145,018
Other Current Assets ............................. 54,254 25,830
----------- -----------
Total Current Assets ........................... 3,494,247 4,065,236
----------- -----------
PROPERTY AND EQUIPMENT:
Computer Equipment and Software .................. 94,668 69,274
Furniture, Fixtures and Office Equipment ......... 46,932 46,932
Leasehold Improvements ........................... 3,051 3,051
----------- -----------
144,651 119,257
Less: Accumulated Depreciation ................... (53,108) (32,647)
----------- -----------
Total Property and Equipment ................... 91,543 86,610
----------- -----------
OTHER ASSETS:
Tuition Receivable (Net of Allowance for Doubtful
Accounts of $349,000 and $172,000, respectively) 924,581 379,921
Prepaid Recruiting Fees .......................... 14,177 16,511
Deferred Tax Asset ............................... 211,049 114,681
Security Deposits ................................ 8,177 7,941
----------- -----------
Total Other Assets ............................. 1,157,984 519,054
----------- -----------
Total Assets ................................... $ 4,743,774 $ 4,670,900
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable ................................. $ 28,916 $ 15,392
Unearned Revenues ................................ 2,728,925 2,914,678
Accrued Recruiting Fees .......................... 110,000 89,318
Other Accrued Expenses ........................... 198,026 137,874
----------- -----------
Total Current Liabilities ...................... 3,065,867 3,157,262
NON-CURRENT LIABILITIES:
Unearned Revenues ................................ 392,401 336,919
Accrued Recruiting Fees .......................... 17,615 19,286
----------- -----------
Total Non-Current Liabilities .................. 410,016 356,205
----------- -----------
Total Liabilities .............................. 3,475,883 3,513,467
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock ($.001 Par Value; 1,000,000 Shares
Authorized) No Shares Issued and Outstanding ) . - -
Common Stock ($.001 Par Value; 10,000,000 Shares
Authorized; 8,696,287 and 8,604,617 Shares
Issued and Outstanding at March 31, 2002 and
June 30, 2001, respectively) ................... 8,696 8,604
Additional Paid-in Capital ....................... 1,381,352 1,346,944
Accumulated Deficit .............................. (122,157) (198,115)
----------- -----------
Total Stockholders' Equity ..................... 1,267,891 1,157,433
----------- -----------
Total Liabilities and Stockholders' Equity ..... $ 4,743,774 $ 4,670,900
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements
-3-
VIRTUAL ACADEMICS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
------------------------ ------------------------
2002 2001 2002 2001
----------- ---------- ----------- ----------
NET REVENUES ..................................... $ 951,554 $ 808,031 $ 2,537,233 $1,899,273
----------- ---------- ----------- ----------
COSTS AND EXPENSES:
Cost of Equipment Sales ...................... 6,363 - 6,363 -
Instructional and Educational Support ........ 79,514 101,244 247,569 282,944
Selling and Promotion ........................ 194,935 104,841 389,569 289,153
General and Administrative ................... 654,943 441,488 1,848,272 1,270,444
----------- ---------- ----------- ----------
Total Operating Expenses ................. 935,755 647,573 2,491,773 1,842,541
----------- ---------- ----------- ----------
INCOME FROM OPERATIONS ........................... 15,799 160,458 45,460 56,732
OTHER INCOME:
Interest Income .............................. 8,383 9,253 31,375 26,531
----------- ---------- ----------- ----------
INCOME BEFORE INCOME TAXES ....................... 24,182 169,711 76,835 83,263
PROVISION FOR INCOME TAXES
Current ...................................... 97,245 - 115,147 -
Deferred ..................................... (114,270) - (114,270) -
----------- ---------- ----------- ----------
Total (Benefit) Provision for Income Taxes (17,025) - 877 -
----------- ---------- ----------- ----------
NET INCOME ....................................... $ 41,207 $ 169,711 $ 75,958 $ 83,263
=========== ========== =========== ==========
BASIC AND DILUTED:
Net Income Per Common Share - Basic ........ $ 0.00 $ 0.02 $ 0.01 $ 0.01
=========== ========== =========== ==========
Net Income Per Common Share - Diluted ...... $ 0.00 $ 0.02 $ 0.01 $ 0.01
=========== ========== =========== ==========
Weighted Common Shares Outstanding - Basic . 8,695,294 7,503,617 8,642,441 7,500,847
=========== ========== =========== ==========
Weighted Common Shares Outstanding - Diluted 8,946,341 7,503,617 8,905,565 7,500,847
=========== ========== =========== ==========
The accompanying notes are an integral part of these
consolidated financial statements
-4-
VIRTUAL ACADEMICS.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months
Ended March 31,
-------------------------
2002 2001
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ........................................ $ 75,958 $ 83,263
Adjustments to Reconcile Net Income to Net Cash
Flows (Used in) Provided by Operating Activities:
Depreciation ................................. 20,461 11,221
Non-Cash Compensation ........................ 30,000 -
Consulting Expense on Common Stock Options
Issued to Non-employees .................... - 55,305
Consulting Expense on Stock Options
Issued to Non-employees .................... - 17,820
(Increase) Decrease in:
Tuition Receivable ........................... (210,034) (996,346)
Prepaid Recruiting Fees ...................... 58,822 (14,292)
Other Current Assets ......................... (28,424) 42,859
Deferred Income Taxes ........................ (96,368) -
Security Deposits ............................ (236) -
Increase (Decrease) in:
Accounts Payable ............................. 13,524 2,668
Unearned Revenues ............................ (130,271) 1,364,202
Accrued Recruiting Fees ...................... 19,011 (54,389)
Other Accrued Expenses ....................... 64,652 (22,472)
----------- -----------
Net Cash Flows (Used in) Provided by
Operating Activities .............................. (182,905) 489,839
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment ............. (25,394) (37,354)
----------- -----------
Net Cash Flows Used in Investing Activities ......... (25,394) (37,354)
----------- -----------
Net (Decrease) Increase in Cash and Cash Equivalents (208,299) 452,485
Cash and Cash Equivalents - Beginning of Period ..... 1,775,206 465,683
----------- -----------
Cash and Cash Equivalents - End of Period ........... $ 1,566,907 $ 918,168
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest .......................................... $ - $ -
=========== ===========
Income Taxes ...................................... $ - $ -
=========== ===========
Common stock issued for debt ........................ $ 4,500 $ -
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements
-5-
VIRTUAL ACADEMICS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
Virtual Academics.com, Inc. ("VADC" or the "Company") is a distance learning
company that provides Internet education to students throughout the world. The
business is primarily conducted under the names of Barrington University,
Virtual Academics.com and Cenuco. Additionally, the Company established a
wireless e-learning platform in the academic, consumer and corporate
marketplaces. The Company is also engaged in the development and sale of
wireless solutions and web services, which include the development of
business-to-business and business-to-consumer wireless applications, and state
of the art web technology and design services.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). The accompanying consolidated
financial statements for the interim periods are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the periods presented. The consolidated
financial statements include the accounts of the Company and its subsidiaries.
All significant intercompany accounts and transactions have been eliminated.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements for the year ended June 30, 2001 and notes
thereto contained in the Company's report on Form 10-KSB. The results of
operations for the nine months ended March 31, 2002 are not necessarily
indicative of the results for the full fiscal year ending June 30, 2002.
The consolidated statements include the accounts of Virtual Academics.com, Inc.
and its wholly owned subsidiaries. All significant inter-company balances and
transactions have been eliminated.
Certain reclassifications have been made to the prior period's consolidated
statements of operations to conform to the current period's presentation.
NOTE 2 - REVENUE RECOGNITION
Through September 30, 2000, the Company recognized tuition and registration
revenue evenly over an estimated 24-month instructional period. The Company has
developed a new database of student activity, which will allow it to more easily
and accurately track student data including student progress on a
course-by-course basis. Accordingly, the Company changed its method of
calculating revenue to be recognized each quarter. For students registering on
or after October 1, 2000, the Company will recognize tuition and registration
revenue based on the number of courses actually completed in each student's
course of study. For example, if a student completes three out of his nine
required courses, the Company will recognize 33% of the tuition regardless of
the amount of time that the student has taken to fulfill these requirements. The
Company will utilize the previous method for all students registered prior to
October 1, 2000. The change in accounting method did not have a material effect
on the consolidated financial statements.
-6-
VIRTUAL ACADEMICS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 - OTHER CURRENT ASSETS
In connection with a software licensing agreement with Nokia Mobile Phones Ltd.
(the "Licensor"), a Finnish corporation, the Company paid a total of $108,900 to
obtain the right to use and distribute certain software products of the Licensor
to be used in or together with the Company's wireless products. The term of the
agreement is for a period of one year from the effective date of August 15,
2001. The prepaid licensing fee is being amortized by the Company over the one
year term. Accordingly, the Company recorded licensing expense of $68,062 during
the nine month period ended March 31, 2002.
NOTE 4 - STOCKHOLDERS' EQUITY
On February 1, 2000, the Company adopted a stock option plan (the "2000
Performance Equity Plan"). The purpose of the plan is to advance the interests
of the Company by providing an additional incentive to attract and retain
qualified and competent persons as employees, officers, directors and
consultants upon whose efforts and judgment the success of the Company is
largely dependent. The plan was effective as of February 1, 2000 and, unless
sooner terminated by the Board of Directors of the Company in accordance with
the terms thereof, shall terminate on February 1, 2010. The plan provides for
both incentive stock options and nonqualified stock options to be granted.
Options to purchase a maximum of 1,000,000 shares may be granted and the
exercise prices of the options granted pursuant to this plan are determined by
the Board or an option committee but may not be less than 100% of the fair
market value on the day of grant. For holders of 10% or more of the combined
voting power of all classes of the Company's stock, incentive options may not be
granted at less than 110% of the fair value of the common stock at the date of
grant and the option may not exceed 5 years.
On January 15, 2002, the Company issued 5,956 shares of common stock to a
consultant to settle debt of $4,500, which was outstanding as of December 31,
2001 for services previously rendered.
NOTE 5 - SEGMENT INFORMATION
The Company operates in two reportable business segments - (1) the online
distance learning industry, and (2) the development and sales of wireless
solutions and web services. The latter segment includes development of
business-to- business and business-to-consumer wireless applications, and state
of the art web technology and design services. The Company's reportable segments
are strategic business units that offer different products, which compliment
each other. They are managed separately based on the fundamental differences in
their operations.
For the Nine Months Ended March 31, 2002
--------------------------------------------------
Online Distance Wireless and Consolidated
Learning Web Solutions Total
---------- ------------- ------------
Net Revenues ............... $2,448,565 $ 88,668 $2,537,233
========== ========= ==========
Costs and Operating Expenses $2,261,378 $ 230,395 $2,491,773
========== ========= ==========
Income from Operations ..... $ 187,187 $(141,727) $ 45,460
========== ========= ==========
Interest Income ............ $ 29,154 $ 2,221 $ 31,375
========== ========= ==========
Net Income ................. $ 215,464 $(139,506) $ 75,958
========== ========= ==========
-7-
VIRTUAL ACADEMICS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Litigation
The Trade School Review Association has filed complaints against certain schools
that are licensed by local state education departments outside California and on
July 3, 2001, it filed against Barrington University in the Superior Court for
the State of California for the County of San Diego. The association alleged in
its complaint that the Company violated California's Private Postsecondary and
Vocational Education Reform Act of 1989, California's false advertising statutes
and California's Consumer Legal Remedies Act and sought an injunction against
unlawful practices, disgorgement of profits, restitution and attorneys' fees,
all in unspecified amounts. In April 2002, the court dismissed this case with
Prejudice. The Company recorded a legal expense of $80,000 in the previous
quarter, which is included in general and administrative expenses.
From time to time, the Company faces litigation in the ordinary course of
business. Currently the Company is not involved with any litigation which will
have a material adverse effect on its financial condition.
NOTE 6 - SUBSEQUENT EVENT
During April 2002, the Company issued 5,000 shares of common stock to an
employee for services rendered.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
GENERAL
The following analysis of the results of operations and financial condition of
the Company should be read in conjunction with the consolidated financial
statements for the year ended June 30, 2001 and notes thereto contained in the
Report on Form 10-KSB of Virtual Academics.com, Inc. as filed with the
Securities and Exchange Commission. These financial statements reflect the
consolidated operations of Virtual Academics.com, Inc. for the nine and three
month periods ended March 31, 2002 and 2001, respectively.
This report on Form 10-QSB contains forward-looking statements. These statements
consist of any statement other than a recitation of historical fact and can be
identified by the use of forward-looking terminology such as "may," "expect,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. The reader is cautioned that all
forward-looking statements are necessarily speculative and there are certain
risks and uncertainties that could cause actual events or results to differ
materially from those referred to in such forward-looking statements. We do not
have a policy of updating forward-looking statements and thus it should not be
assumed that silence over time means that actual events are bearing out as we
estimated in such forward-looking statements.
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
Through our subsidiaries, we are engaged in the online distance learning
industry with a focus on the international, second-career adult and corporate
training markets. We currently operate our main school, Barrington University,
from Mobile, Alabama, where the State of Alabama Department of Education, Code
of Alabama, Title 16-46-1 through 10, licenses the school. We offer degrees and
training programs to students in over 80 countries and in multiple languages.
The programs are virtual in their delivery format and can be completed from a
laptop, home computer or through a wireless device.
In addition to degree completion programs, we are focusing on training corporate
personnel, continuing education (CE) courses and wireless technology for
education, which we believe is a major growth area.
Additionally, we are currently developing affordable wireless platforms to
provide companies with quality training services for their employees. Our staff
works directly with Human Resource departments to ensure the training is
scalable and applicable to their employees' needs. Our technology provides
seamless information to all employees, regardless if they are in the home,
office or out in the field.
The company has released other wireless application products that are currently
being used in the Real Estate, Insurance and Sports Information verticals. The
software applications are compatible with all existing wireless devices. We
expect to release several academic and training solutions in fiscal 2002. Future
applications include solutions for the medical and hospitality industries.
SEASONALITY IN RESULTS OF OPERATIONS
We experience seasonality in our results of operations primarily as a result of
changes in the level of student enrollments and course completion. While we
enroll students throughout the year, December and January average enrollments
and course completion and related revenues generally are lower than other
quarters due to seasonal breaks in December and January. Accordingly, costs and
expenses historically increase as a percentage of tuition and other net revenues
as a result of certain fixed costs not significantly affected by the seasonal
second quarter declines in net revenues.
We experience a seasonal increase in new enrollments in August of each year when
most other colleges and universities begin their fall semesters. As a result,
instructional costs and services and selling and promotional expenses
historically increase as a percentage of tuition and other net revenues in the
fourth quarter due to increased costs in preparation for the August peak
enrollments.
We anticipate that these seasonal trends in the second and fourth quarters will
continue in the future.
-9-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
We operate in two reportable business segments - (1) the online distance
learning industry, and (2) the development and sales of wireless solutions and
web services. The latter segment includes development of business-to- business
and business-to-consumer wireless applications, and state of the art web
technology and design services. The Company's reportable segments are strategic
business units that offer different products, which compliment each other. They
are managed separately based on the fundamental differences in their operations.
Nine months ended March 31, 2002 compared to nine months ended March 31, 2001.
As a result of the following factors, we recognized net income of $75,958 or net
income of $.01 per share for the nine months ended March 31, 2002 as compared to
net income of $83,263 or net income of $0.01 per share for the nine months ended
March 31, 2001.
Online Distance Learning Segment
For the nine months ended March 31, 2002, we had a 34% increase in earned
revenues to $2,537,233 from $1,899,273 for the comparable period in 2001. The
increase in revenues is due primarily to an increase in the number of students
that have been registered. Substantial increases in revenue and profitability
can be achieved through modest improvements in student course completion rates.
Unearned revenue represents the portion of tuition revenue invoiced but not
earned and is reflected as a liability in the accompanying consolidated balance
sheets. Since we will recognize tuition and registration revenue based on the
number of courses actually completed in each student's course of study, student
course completion efforts, if successful, are extremely beneficial to operating
results. School personnel typically employ an approach based upon establishing
personal relationships with students; for example, students may receive a
telephone call from a school counselor if they have not completed courses. Our
operating results may be impacted negatively by the registration of new students
because we incur costs to enroll students but registration fees are initially
deferred and then recognized with tuition over the course of the study period,
under the guidelines of SEC Staff Accounting Bulletin 101.
Instructional and educational support expenses consist primarily of student
supplies such as textbooks as well as postage and shipping, credit card fees,
computer related expenses, and printing fees. For the nine months ended March
31, 2002, instructional and educational support expenses decreased by 12% to
$247,569 or 10% of net revenues as compared to $282,944 or 15% of net revenues
for the nine months ended March 31, 2001. The decrease in instructional and
educational support expenses and the related percentages was attributable to a
second quarter adjustment of $71,823 for the over-accrual of costs incurred for
books and supplies to our students. This was offset by increased credit card
fees due to the fact that we encourage students to join our tuition payment
program whereby students pay monthly by credit card, and an increase in student
supplies. Additionally, computer and internet related expenses increased to
$54,287 or 2% of net revenues for the nine months ended March 31, 2002 as
compared to $42,694 or 2 % of net revenues for the nine months ended March 31,
2001 due to web site maintenance and upgrades as well as the development of
additional websites for our wireless products.
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
Nine months ended March 31, 2002 compared to nine months ended March 31, 2001.
Online Distance Learning Segment (Continued)
Selling and promotion expense consists primarily of recruiting fees and
advertising. For the nine month period ended March 31, 2002, selling and
promotion expenses increased by 15% to $333,764 or 13% of net revenues as
compared to $289,153 or 15% of net revenues for the nine months ended March 31,
2001. The increase in selling and promotion expenses is attributable to our
increased advertising efforts. Although we are currently running advertisements
in various national publications and newspapers in order to attract more
students, we expect our advertising budget to remain constant through the end of
fiscal 2002.
General and administrative expenses, which include payroll, professional fees,
consulting fees, rent, travel and entertainment, insurance, bad debt, and other
expenses, were $1,680,045 for the nine months ended March 31, 2002 as compared
to $1,270,444 for nine months ended March 31, 2001. This amounted to 69% of net
revenues for the nine months ended March 31, 2002 as compared to 76% for the
nine months ended March 31, 2001. The increase was primarily due to four
factors:
First, personnel-related costs increased by 44% to $570,392 for the nine months
ended March 31, 2002 from $396,094 for the comparable period in 2001. This
reflected the growth in the number of employees from 13 at March 31, 2001 to
approximately 20 employees during the period ended March 31, 2002. We currently
have 15 employees as of March 31, 2002 to handle student relations, develop new
programs, and perform administrative tasks and to develop our wireless
technologies. Second, the cost of professional fees increased to $258,696 for
the nine months ended March 31, 2002 as compared to $201,007 for the comparable
period in 2001. The increase was attributable to the additional costs associated
with the filing of a registration statement with the Securities and Exchange
Commission during the nine months ended March 31, 2002. Third, the increased
costs relating to office operations, such as postage and delivery costs incurred
to ship degree program information, computer-related expenses, office supplies
and credit card fees, which reflects our increased operational activities.
Fourth, the Company recorded $80,000 in legal expenses related to the dismissal
with prejudice of the Trade School Review Association lawsuit in the previous
quarter.
Interest income was $29,154 for the nine months ended March 31, 2002 as compared
to $26,531 for the nine months ended March 31, 2001. We currently invest our
excess cash balances in an interest-bearing account with a financial
institution.
-11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
Nine months ended March 31, 2002 compared to nine months ended March 31, 2001.
Wireless and Web Solutions Segment
Our wireless and web solutions subsidiary, Cenuco, Inc., began operations in
December 2001. Accordingly, no comparable financial information is available for
the comparable period in fiscal 2001.
For the nine months ended March 31, 2002, we had revenues from web design and
hosting and wireless solutions amounting to $88,668. We incurred cost of sales
related to the sale of equipment of $6,363. Selling and promotion expenses
amounted to $55,805, which included $40,000 in commission expense. We incurred
$168,227 of general and administrative expenses, which includes salaries of
$49,385, licensing fees of $68,062, and other expenses. Interest income amounted
to $2,221.
LIQUIDITY AND CAPITAL RESOURCES
On March 31, 2002, we had $1,566,907 in cash and cash equivalents on hand to
meet our obligations, which represented a decrease of $208,299 from the
beginning of the current fiscal year.
For the nine months ended March 31, 2002 and 2001, we had a (negative) positive
cash flow from operating activities of $(182,905) and $489,839, respectively.
During the nine months ended March 31, 2002, we prepaid a licensing fee
amounting to $108,900 in connection with a software licensing agreement.
Additionally, we have spent additional cash on payroll for technical staff,
related to our wireless solutions development.
We currently believe that with future positive cash flows, we expect to be
sufficiently well capitalized to fund our operations over the ensuing 12-month
period, including the expected growth during this period. There can be no
assurances, however, that there will be positive cash flows or that we will not
have to incur significant unexpected expenses.
-12-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
We currently have no significant commitments for capital expenditures and
believe that our cash on hand plus future cash flows from operations will
provide adequate liquidity for the remainder of the fiscal year based on current
operations. If we decide to pursue any acquisition opportunities or other
expansion opportunities, we may need to raise additional capital, although there
can be no assurance such capital- raising activities would be successful.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets (the "Statements"). Statement No. 141 is
effective for all business combinations initiated after June 30, 2001, while
Statement No. 142 is effective for fiscal years beginning after December 15,
2001. Under the new rules, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives. The Company applied the new
rules on accounting for goodwill and other intangible assets beginning in the
first quarter of 2002. Application of the non-amortization provisions of
Statement No. 142 did not have an effect on our financial position or results of
operations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Trade School Review Association has filed complaints against certain schools
that are licensed by local state education departments outside California and on
July 3, 2001, it filed against Barrington University in the Superior Court for
the State of California for the County of San Diego. The association alleged in
its complaint that the Company violated California's Private Postsecondary and
Vocational Education Reform Act of 1989, California's false advertising statutes
and California's Consumer Legal Remedies Act and sought an injunction against
unlawful practices, disgorgement of profits, restitution and attorneys' fees,
all in unspecified amounts. In April 2002, the court dismissed this case with
Prejudice. The Company recorded a legal expense of $80,000 in the previous
quarter which is included in general and administrative expenses.
From time to time the company faces litigation in the ordinary course of
business. Currently we are not involved with any litigation which will have a
material adverse effect on our financial condition.
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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 15, 2002, the Company issued 5,956 shares of common stock to settle
debt of $4,500, which was outstanding as of December 31, 2001 for services
previously rendered by a consultant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, duly authorized.
VIRTUAL ACADEMICS.COM, INC.
Dated: May 13, 2002 By: /s/ Steven Bettinger
-------------------------------
Steven Bettinger, President and
Chief Executive Officer
Dated: May 13, 2002 By: /s/ Robert Bettinger
-------------------------------
Robert Bettinger, Chairman of the
Board, Treasurer, Principal
Financial and Accounting Officer
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