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: December 31, 2002
Commission file number: 033-25900
CENUCO, INC.
(FORMERLY VIRTUAL ACADEMICS.COM, INC.)
--------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-2228820
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(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
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(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 January 30, 2003, the issuer had outstanding 8,714,757 shares of common
stock, $.001 par value per share.
CENUCO, INC. AND SUBSIDIARIES
(FORMERLY VIRTUAL ACADEMICS.COM, INC.)
FORM 10-QSB
QUARTERLY PERIOD ENDED DECEMBER 31, 2002
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets
As of December 31, 2002 (Unaudited) and June 30, 2002................3
Consolidated Statements of Operations (Unaudited)
For the Three and Six Months Ended December 31, 2002 and 2001........4
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended December 31, 2002 and 2001..................5
Condensed Notes to Consolidated Financial Statements...................6-8
Item 2 - Management's Discussion and Analysis and
Results of Operations.............................................8-16
Item 3 - Control and Procedures.........................................16
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings..............................................16
Item 2 - Changes in Securities and Use of Proceeds......................16
Item 4 - Submission of Matters to a Vote of Security Holders............17
Item 5 - Other Information..............................................17
Item 6 - Exhibits and Reports on Form 8-K...............................17
Signatures..............................................................17
Certifications.......................................................18-19
-2-
CENUCO, INC. AND SUBSIDIARIES
(FORMERLY VIRTUAL ACADEMICS.COM, INC.)
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, June 30,
2002 2002
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and Cash Equivalents .................................... $ 1,229,645 $ 1,529,851
Tuition Receivable (Net of Allowance for Doubtful Accounts
of $150,000 and $152,000, respectively) ............. 984,022 1,303,766
Accounts Receivable .......................................... 53,330 28,413
Inventories .................................................. 56,835 107,293
Prepaid Recruiting Fees ...................................... 93,604 94,975
Other Current Assets ......................................... 45,446 38,554
----------- -----------
Total Current Assets ..................................... 2,462,882 3,102,852
----------- -----------
PROPERTY AND EQUIPMENT:
Computer Equipment and Software .............................. 134,440 100,391
Furniture, Fixtures and Office Equipment ..................... 50,700 46,932
Leasehold Improvements ....................................... 3,051 3,051
----------- -----------
188,191 150,374
Less: Accumulated Depreciation ............................... (78,604) (60,619)
----------- -----------
Total Property and Equipment ............................. 109,587 89,755
----------- -----------
OTHER ASSETS:
Tuition Receivable (Net of Allowance for Doubtful Accounts
of $384,000 and $296,000, respectively) .............. 1,227,994 1,040,965
Prepaid Recruiting Fees ...................................... 15,314 15,065
Deferred Tax Asset ........................................... 351,880 153,156
Security Deposits ............................................ 8,642 8,642
----------- -----------
Total Other Assets ....................................... 1,603,830 1,217,828
----------- -----------
Total Assets ............................................. $ 4,176,299 $ 4,410,435
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable ............................................. $ 39,099 $ 31,730
Unearned Revenues ............................................ 2,815,687 2,697,062
Accrued Recruiting Fees ...................................... 67,540 95,492
Other Accrued Expenses ....................................... 72,031 71,293
----------- -----------
Total Current Liabilities ................................ 2,994,357 2,895,577
NON-CURRENT LIABILITIES:
Unearned Revenues ............................................ 480,671 430,040
Accrued Recruiting Fees ...................................... 11,050 15,147
----------- -----------
Total Non-Current Liabilities ............................ 491,721 445,187
----------- -----------
Total Liabilities ........................................ 3,486,078 3,340,764
----------- -----------
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;
8,714,757 and 8,701,467 Shares Issued and Outstanding at
December 31, 2002 and June 30, 2002, respectively) ... 8,715 8,701
Additional Paid-in Capital ................................... 1,401,724 1,383,264
Accumulated Deficit .......................................... (720,218) (322,294)
----------- -----------
Total Stockholders' Equity ............................... 690,221 1,069,671
----------- -----------
Total Liabilities and Stockholders' Equity ............... $ 4,176,299 $ 4,410,435
=========== ===========
See accompanying notes to consolidated financial statements
-3-
CENUCO, INC. AND SUBSIDIARIES
(FORMERLY VIRTUAL ACADEMICS.COM, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months For the Six Months
Ended December 31, Ended December 31,
----------------------------- -----------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NET REVENUES ..................................... $ 480,914 $ 771,502 $ 937,440 $ 1,585,679
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of Equipment Sales ...................... 49,006 - 147,016 -
Instructional and Educational Support ........ 32,806 28,787 52,874 168,055
Research and Development ..................... 1,639 - 23,607 -
Selling and Promotion ........................ 102,299 61,736 216,765 194,634
Salaries ..................................... 232,029 210,365 434,811 413,147
General and Administrative ................... 401,402 462,741 672,432 780,182
----------- ----------- ----------- -----------
Total Operating Expenses ................. 819,181 763,629 1,547,505 1,556,018
----------- ----------- ----------- -----------
(LOSS) INCOME FROM OPERATIONS .................... (338,267) 7,873 (610,065) 29,661
OTHER INCOME:
Interest Income .............................. 4,703 10,493 13,417 22,992
----------- ----------- ----------- -----------
(LOSS) INCOME BEFORE INCOME TAXES ................ (333,564) 18,366 (596,648) 52,653
INCOME TAX BENEFIT (EXPENSE):
Deferred Income Tax .......................... 82,460 (5,216) 198,724 (17,902)
----------- ----------- ----------- -----------
Total Income Tax Benefit (Expense) ....... 82,460 (5,216) 198,724 (17,902)
----------- ----------- ----------- -----------
NET (LOSS) INCOME ................................ $ (251,104) $ 13,150 $ (397,924) $ 34,751
=========== =========== =========== ===========
BASIC AND DILUTED:
Net (Loss) Income Per Common Share - Basic . $ (0.03) $ 0.00 $ (0.05) $ 0.00
=========== =========== =========== ===========
Net (Loss) Income Per Common Share - Diluted $ (0.03) $ 0.00 $ (0.05) $ 0.00
=========== =========== =========== ===========
Weighted Common Shares Outstanding - Basic . 8,705,656 8,616,729 8,703,562 8,610,673
=========== =========== =========== ===========
Weighted Common Shares Outstanding - Diluted 8,705,656 8,930,991 8,703,562 8,924,935
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements
-4-
CENUCO, INC. AND SUBSIDIAIRES
(FORMERLY VIRTUAL ACADEMICS.COM, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
Ended December 31,
-----------------------------
2002 2001
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income .......................................... $ (397,924) $ 34,751
Adjustments to Reconcile Net (Loss) Income to Net Cash Flows
Used in Operating Activities:
Depreciation ........................................ 17,985 13,474
Non-cash Compensation ............................... 18,474 30,000
Deferred Income Taxes ............................... (198,724) 17,902
(Increase) Decrease in:
Tuition Receivable ................................ 319,744 220,487
Accounts Receivable ............................... (24,917) -
Inventories ....................................... 50,458 -
Prepaid Recruiting Fees ........................... 1,371 (21,109)
Other Current Assets .............................. (6,892) (81,550)
Other Assets:
Tuition Receivable - Non-current .................. (187,029) (535,132)
Prepaid Recruiting Fees - Non-current ............. (249) (8,533)
Security Deposits ................................. - (236)
Increase (Decrease) in:
Accounts Payable ................................. 7,369 902
Unearned Revenues ................................ 118,625 51,407
Accrued Recruiting Fees .......................... (27,952) 33,166
Other Accrued Expenses ........................... 738 58,241
Other Liabilities:
Unearned Revenues - Non-current .................. 50,631 54,688
Accrued Recruiting Fees - Non-current ............ (4,097) (820)
----------- -----------
Net Cash Flows Used in Operating Activities .................... (262,389) (132,362)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment ...................... (37,817) (21,912)
----------- -----------
Net Cash Flows Used in Investing Activities .................... (37,817) (21,912)
----------- -----------
Net Decrease in Cash and Cash Equivalents ...................... (300,206) (154,274)
Cash and Cash Equivalents - Beginning of Period ................ 1,529,851 1,775,206
----------- -----------
Cash and Cash Equivalents - End of Period ...................... $ 1,229,645 $ 1,620,932
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest .................................................... $ - $ -
=========== ===========
Income Taxes ................................................ $ - $ -
=========== ===========
See accompanying notes to consolidated financial statements
-5-
CENUCO, INC. AND SUBSIDIARIES
(Formerly Virtual Academics.com, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
Cenuco, Inc. (formerly Virtual Academics.com, Inc.) (the "Company") is 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.
Additionally, the Company is a distance learning company that provides Internet
education to students throughout the world. The Company's businesses are
primarily conducted under the names of Barrington University (the "School"),
Virtual Academics.com, Cenuco and the Academy of Health Science and Nutrition
(the "Academy"). Additionally, the Company established a wireless e-learning
platform in the academic, consumer and corporate marketplaces.
On December 17, 2002, the Company changed its name to Cenuco, Inc. and symbol to
CNUO. The Board of Directors of Virtual Academics.Com, Inc. recommended and the
majority of the shareholders approved the change of its name to Cenuco, Inc. to
better reflect its business direction and operation. Reflecting the changing
focus of its business, the Company plans to accelerate the development of its
suite of fully integrative wireless solutions for the Security, Real Estate and
Insurance markets.
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 wholly-owned
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, 2002 and notes
thereto contained in the Company's report on Form 10-KSB as filed with the SEC.
The results of operations for the six months ended December 31, 2002 are not
necessarily indicative of the results for the full fiscal year ending June 30,
2003.
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
The Company recognizes 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.
In connection with 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 Company recognizes revenue as services are performed or
on a pro rata basis over the contract term.
-6-
CENUCO, INC. AND SUBSIDIARIES
(Formerly Virtual Academics.com, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 - STOCKHOLDERS' EQUITY
On August 29, 2002, the Company granted options to purchase 240,000 shares of
common stock to certain employees of the Company. The options are exercisable at
$.42 per share, which was the fair market value of the common stock at the grant
date. Accordingly, under APB 25, no compensation expense was recognized.
On August 29, 2002, the Company granted options to purchase 20,000 shares of
common stock to non-employee directors. The options expire on August 29, 2012
and are exercisable at $.42 per share, which was the fair market value of the
common stock at the grant date. Accordingly, under APB 25, no compensation
expense was recognized.
Had compensation cost for the stock option plan been determined based on the
fair value of the options at the grant dates consistent with the method of SFAS
123, "Accounting for Stock Based Compensation", the Company's net earnings and
earnings per share would have been changed to the pro forma amounts indicated
below for the six months ended December 31, 2002:
Net earnings
As reported ............... $ (397,924)
Pro forma ................. (484,244)
Basic earnings per share
As reported ............... (.05)
Pro forma ................. (.06)
On December 3, 2002, the Company issued 13,290 shares of common stock to
consultants for services rendered. Such shares were valued at their market value
on the date of issuance at $1.39 per share and recorded consulting expense of
$18,474 related to the consulting services.
NOTE 4 - SEGMENT INFORMATION
Currently, 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 online distant learning segment provides
internet education to students internationally. 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 complement each other. They are managed separately based on the
fundamental differences in their operations. During the six months ended
December 31, 2001, operations from our wireless solutions segment were not
material.
-7-
CENUCO, INC. AND SUBSIDIARIES
(Formerly Virtual Academics.com, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4 - SEGMENT INFORMATION (Continued)
Information with respect to these reportable business segments for the six and
three months December 31, 2002 is as follows.
For the Six Months
Ended December 31, 2002
------------------------------------------
Online Distance Wireless Consolidated
Learning Solutions Total
------------------------------------------
Net Sales ......................... $ 652,172 $ 285,268 $ 937,440
Costs and Operating Expenses ...... (735,348) (812,157) (1,547,505)
Interest Income ................... 8,990 4,427 13,417
Income Tax Benefit ................ 26,172 172,552 198,724
----------- ----------- -----------
Net Income (Loss) ................. $ (48,014) $ (349,910) $ (397,924)
=========== =========== ===========
Total Assets ...................... $ 2,951,278 $ 1,225,021 $ 4,176,299
----------- ----------- ===========
For the Three Months
Ended December 31, 2002
------------------------------------------
Online Distance Wireless Consolidated
Learning Solutions Total
------------------------------------------
Net Sales ......................... $ 371,553 $ 109,361 $ 480,914
Costs and Operating Expenses ...... 410,010) (409,171) (819,181)
Interest Income ................... 2,222 2,481 4,703
Income Tax Benefit ................ 9,895 72,565 82,460
----------- ----------- -----------
Net Income (Loss) ................. $ (26,340) $ (224,764) $ (251,104)
=========== =========== ===========
-8-
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, 2002 and notes thereto
contained in the Report on Form 10-KSB of Virtual Academics.com, Inc. as filed
with the SEC. These financial statements reflect the consolidated operations of
Cenuco, Inc. (formerly Virtual Academics.com, Inc.) for the three and six months
ended December 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.
On December 11th, 2002, the Board of Directors of Virtual
Academics.Com, Inc. recommended and approved the change of its name to Cenuco,
Inc. to better reflect our business direction and operation. Effective December
17, 2002, a majority of our shareholders approved of the name change. Reflecting
the changing focus of our business, we plan to accelerate the development of our
suite of fully integrative wireless solutions for the Security, Real Estate and
Insurance markets.
The change in name signifies the focus on our development of wireless
applications, while maintaining our market presence in the distance- learning
sector. We will continue to expand our online distance- learning programs,
including the AIG Environmental Institute, the Innovation Institute, Barrington
University and the Academy of Health Science and Nutrition.
The development and cultivation of wireless applications will now serve
as the focal point for our initiatives. Already, the wireless subsidiary has
produced viable solutions for the real estate and security markets. In addition,
we launch our line of wireless video monitoring solutions, MommyTrack(TM) and
CenVid(TM). Both products offer the world's first truly mobile surveillance
monitoring solution for the consumer and business market.
Through our subsidiaries, we are engaged in the online distance
learning business 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.
-9-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
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.
We have released other wireless application products that are currently
being used in the Security, and Real Estate industries and are currently
developing application products for the Insurance and Sports Information
industries. The software applications are compatible with all existing wireless
devices. We expect to release several academic and training solutions in fiscal
2003. Future applications include solutions for the medical and hospitality
industries.
We have received full licensure from the Alabama Department of
Education for Barrington University, which is owned by Cenuco, Inc.
We have received full licensure from the Florida Department of
Education for The Academy of Health Science and Nutrition, which is owned by
Cenuco, Inc.
We have received full approval for Sallie Mae funding for our students
that qualify for Sallie Mae loans. Sallie Mae has been providing funds for
educational loans. Sallie Mae currently owns or manages student loans for more
than seven million borrowers and is the nation's leading provider of educational
loans.
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. Our reportable segments are
strategic business units that offer different products, which complement each
other. They are managed separately based on the fundamental differences in their
operations and are discussed separately below.
SEASONALITY IN RESULTS OF OPERATIONS
We experience seasonality in our results of operations from our online
distance learning segment 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.
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 2002 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
2001
ONLINE DISTANCE LEARNING SEGMENT
REVENUES
For the six months ended December 31, 2002, we had a 58.2% decrease in
earned revenues to $652,172 from $1,561,451 for the six months ended December
31, 2001. The decrease in revenues is due primarily to a decrease in the number
of students that have registered for our programs. Additionally, our students
completed their courses at a slower rate than expected. 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. During the six months ended December 31, 2002, we experienced a general
slowdown in course completion by our students, which had an adverse effect on
our revenue.
EXPENSES
INSTRUCTION AND EDUCATIONAL SUPPORT
Instruction and educational support expenses consist primarily of
student supplies such as textbooks as well as course development fees, credit
card fees, computer related expenses, and printing fees. For the six months
ended December 31, 2002, instructional and educational support expenses
decreased by 68.5% to $52,874 or 8.1% of net revenues as compared to $168,055 or
11% of net revenues for the six months ended December 31, 2001. The decrease in
instructional and educational support expenses and the related percentages was
mainly attributable to the fact that we have enrolled less students in the
current period and we are able to purchase text books from a new supplier at
reduced prices. Accordingly, student supply expense was $12,745 or 2% of
revenues for the six months ended December 31, 2002 as compared to $82,583 or
5.3% of revenue for the six months ended December 31, 2001. Printing and
reproduction costs decreased to $15,631 for the six months ended December 31,
2002 as compared to $21,220 for the six months ended December 31, 2001. Computer
and internet expenses decreased to $3,420 for the six months ended December 31,
2002 as compared to $46,396 for the six months ended December 31, 2001 due to a
decreased need for development and maintenance of our websites related to our
online university. This was offset by increased costs associated with course
development for the six months ended December 31, 2002 of $8,292.
-11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS (CONTINUED)
SIX MONTHS ENDED DECEMBER 31, 2002 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
2001
ONLINE DISTANCE LEARNING SEGMENT (CONTINUED)
SELLING AND PROMOTION
Selling and promotion expense consists primarily of recruiting fees,
advertising and travel. For the six months ended December 31, 2002, selling and
promotion expenses decreased by 53% to $91,776 or 14% of net revenues as
compared to $194,634 or 12.5% of net revenues for the six months ended December
31, 2001. The decrease in selling and promotion expenses is attributable to the
shift in our selling and promotion efforts to our wireless solutions segment.
For the six months ended December 31, 2002, advertising expense amounted to
$64,145 as compared to $67,689 for the six months ended December 31, 2001.
Additionally, our recruiting fees decreased to $19,557 for six months ended
December 31, 2002 from $105,233 for the six months ended December 31, 2001. The
decrease is attributable to our decreased use of recruiters to obtain students
and a general slow-down in new students. 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 2003.
SALARIES
For the six months ended December 31, 2002, salaries were $145,527 as
compared to salaries of $413,147 for the six months ended December 31, 2001. The
decrease in salaries was attributable to the allocation of administrative and
executive salaries to our wireless segment, which we have concentrated a
significant part of our resources and efforts.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses, which includes professional fees,
rent, travel and entertainment, insurance, bad debt, and other expenses, were
$445,171 for the six months ended December 31, 2002 as compared to $766,564 for
the six months ended December 31, 2001. This amounted to 68% of net revenues for
the six months ended December 31, 2002 as compared to 49% for the six months
ended December 31, 2001. The decrease was primarily due to the following
factors:
The cost of professional fees decreased to $57,385 for the six months
ended December 31, 2002 as compared to $186,228 for the six months ended
December 31, 2001. During the six months ended December 31, 2001, we incurred
additional costs associated with the filing of a registration statement with the
Securities and Exchange Commission and incurred legal expenses in connection
with the settlement of a lawsuit. Additionally, we experienced a decrease in
postage and delivery and telephone expenses due to a decrease in student
activity. Due to continuing analysis of our tuition receivables, we incurred bad
debt expense of $253,524 for the six months ended December 31, 2002 as compared
to $113,063 for the six months ended December 31, 2001.
-12-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS (CONTINUED)
SIX MONTHS ENDED DECEMBER 31, 2002 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
2001
ONLINE DISTANCE LEARNING SEGMENT (CONTINUED)
INTEREST INCOME
Interest income was $8,990 for the six months ended December 31, 2002
as compared to $22,845 for the six months ended December 31, 2001. We currently
invest our excess cash balances in primarily two interest-bearing accounts with
two financial institutions.
WIRELESS AND WEB SOLUTIONS SEGMENT
Our wireless and web solutions subsidiary began operations in December
2001. Accordingly, comparable financial information is not material for the
comparable period in fiscal 2001.
For the six months ended December 31, 2002, we had net revenues of
$285,268, which consisted of the following:
Equipment Sales $ 157,194
Web Hosting and Development 29,213
Wireless Solutions 98,861
---------
$ 285,268
=========
We incurred cost of sales related to the sale of equipment of $147,106.
We incurred research and development expenses from the development of
our new products of $23,607.
Selling and promotion expenses amounted to $124,989, which included
$5,119 in commission expense, $17,865 in advertising expense, $58,5347 of trade
show expense, printing and reproduction expense of $14,635, travel expenses of
$19,836, licensing fees of $20,418 and other expenses.
Salaries were $289,284 for the six months ended December 31, 2002. This
reflected a growth in the number of employees during the six months ended
December 31, 2002 as a result of the growth that we are experiencing and new
development projects. We increased our technical staff to develop our wireless
technologies.
For the six months ended December 31, 2002, we incurred $227,261 of
general and administrative expenses, which included consulting expense of
$36,000, computer and internet related expenses of $14,929, rent expense of
$15,031, professional fees of $31,577 and other expenses.
Interest income was $4,427 for the six months ended December 31, 2002.
We currently invest our excess cash balances in primarily two interest-bearing
accounts with two financial institutions.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
OVERALL CONSOLIDATED RESULTS
INCOME TAXES
Deferred tax assets and liabilities are provided for significant income
and expense items recognized in different years for tax and financial reporting
purposes. As of December 31, 2002, we did not record a valuation allowance on
the deferred tax assets because our ability to realize these benefits is "more
likely than not". The deferred tax asset was reported in the accompanying
balance sheet at December 31, 2002 and June 30, 2002. The deferred tax asset is
sustained by the Company's ability to generate operating profits and should
projected operating profits deteriorate then the deferred tax asset would be
eliminated. We were able to utilize previous year's net operating losses to
offset our income in fiscal year 2001. Accordingly, for the six months ended
December 31, 2002 and 2001, we recorded an income tax benefit (expense) of
$198,724 and $(17,902), respectively.
As a result of the foregoing factors, we recognized a net loss of
$(397,924) or $(.05) per share on a consolidated basis for the six months ended
December 31, 2002 as compared to net income of $34,751 or $.00 per share for the
six months ended December 31, 2001.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2002, we had $1,229,645 in cash and equivalents on
hand to meet our obligations.
During the six months ended December 31, 2002, we invested substantial
time and resources developing and evaluating products and opportunities for our
wireless solutions segment. We will continue to develop new wireless solutions
for both of our segments and may consider acquisitions, business combinations,
or start up proposals, which could be advantageous to our product lines or
business plans. No assurance can be given that any such project, acquisition or
combination will be successful.
Net cash used in operations was $262,389 for the six months ended
December 31, 2002 as compared to net cash used in operations of $132,362 for the
six months ended December 31, 2001. We used additional cash funds for salaries
and expenses related to the development of our wireless security products. We
feel that with expected positive cash flow, we are well capitalized to fund our
operations over the ensuing 12-month period, including the expected growth
during this period.
Net cash used in investing activities for the six months ended December
31, 2002 was $37,817 as compared to $21,912 for the six months ended December
31, 2001 and related to the acquisition of property and equipment.
We currently have no material commitments for capital expenditures. Our
future growth is dependent on our ability to raise capital for expansion, and to
seek additional revenue sources. 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.
-14-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
CRITICAL ACCOUNTING POLICIES
A summary of significant accounting policies is included in Note 1 to
the audited financial statements included in our Annual Report on Form 10-KSB
for the year ended June 30, 2002 as filed with the United States Securities and
Exchange Commission. We believe that the application of these policies on a
consistent basis enables us to provide useful and reliable financial information
about our operating results and financial condition.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
We account for stock transactions in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees." In accordance with Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," we adopted the pro forma disclosure requirements of SFAS 123.
RECENT ACCOUNTING PRONOUNCEMENTS
In August 2001, the FASB issued Statement No. 144 (SFAS 144)
"Accounting for the Impairment or Disposal of Long-Lived Assets." This statement
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. This statement supersedes Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." SFAS 144 is effective for fiscal years beginning after December 15, 2001.
The adoption of SFAS No. 144 did not have a material effect on our consolidated
financial position or results of operations.
In November 2001, the FASB EITF reached a consensus to issue a FASB
Staff Announcement Topic No. D-103 (re-characterized in January 2002 as EITF
Issue No. 01-14), "Income Statement Characterization of Reimbursement Received
for `Out-of-Pocket' Expenses Incurred" which clarifies that reimbursements
received for out-of-pocket expenses incurred should be characterized as revenue
in the statement of operations. This consensus should be applied in financial
reporting periods beginning after December 15, 2001. Upon application of this
consensus, comparative financial statements for prior periods should be
reclassified to comply with the guidance in this consensus. The adoption of this
consensus did not have a material effect on our consolidated financial position
or results of operations.
In July 2002, the FASB issued Statement No. 146 (SFAS 146), "Accounting
for Costs Associated with Exit or Disposal Activities." This Standard supercedes
the accounting guidance provided by Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity" (including "Certain Costs Incurred in a Restructuring").
SFAS No. 146 requires companies to recognize costs associated with exit
activities when they are incurred rather than at the date of a commitment to an
exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or
disposal activities initiated after December 31, 2002. We are currently
evaluating this Standard.
-15-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure. Statement 148 provides alternative methods of transition to
Statement 123's fair value method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of Statement 123 and APB
Opinion No. 28, Interim Financial Reporting, to require disclosure in the
summary of significant accounting policies of the effects of an entity's
accounting with respect to stock-based employee compensation on reported net
income and earnings per share in annual and interim financial statements.
Statement 148's amendment of the transition and annual disclosure requirements
of Statement's 123 are effective for fiscal years ending after December 15,
2002. Statement 148's amendment of the disclosure requirements of Opinion 28 is
effective for interim periods beginning after December 15, 2002.
ITEM 3. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management, under the supervision and with the participation of
our chief executive officer and principal financial and accounting officer,
conducted an evaluation of our "disclosure controls and procedures" (as defined
in the Securities Exchange Act of 1934 (the "Exchange Act") Rules 13a-14(c))
within 90 days of the filing date of this Quarterly Report on Form 10-QSB (the
"Evaluation Date"). Based on their evaluation, our chief executive officer and
principal financial and accounting officer have concluded that as of the
Evaluation Date, our disclosure controls and procedures are effective to ensure
that all material information required to be filed in this Quarterly Report on
Form 10-QSB has been made known to them in a timely fashion.
CHANGES IN INTERNAL CONTROLS
There have been no significant changes (including corrective actions
with regard to significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these controls
subsequent to the Evaluation Date set forth above.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On December 3, 2002, we issued 13,290 shares of common stock to
consultants for services rendered. Such shares were valued at their market value
on the date of issuance at $1.39 per share and recorded consulting expense of
$18,474 related to the consulting services.
-16-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
In our 10-QSB for the period ended September, we reported that World
Wide Net had signed a distribution contract obligating it to purchase
$3.1 million of our MommyTrack(TM) and corporate monitoring systems. We
do not expect to ship any product under this agreement due to
non-performance by World Wide Net.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley
Act of 2002 99.2 - Certification of CFO Pursuant to Section
906 of Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
On January 2, 2003, we filed an 8-K that disclosed our name
change to Cenuco, Inc.
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.
CENUCO, INC. AND SUBSIDIARIES
(Formerly Virtual Academics.com, Inc.)
Dated: February 14, 2003 By: /s/ Steven Bettinger
-----------------------------------
Steven Bettinger, President and
Chief Executive Officer
Dated: February 14, 2003 By: /s/ Robert Bettinger
-----------------------------------
Robert Bettinger, Chairman of the
Board, Treasurer, Principal
Financial and Accounting Officer
-17-
CERTIFICATION
I, Steven Bettinger, the Chief Executive Officer of Cenuco, Inc. (formerly
Virtual Academics.com, Inc.), certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Cenuco, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 14, 2003 /s/ Steven Bettinger
-----------------------------------------
Steven Bettinger, Chief Executive Officer
-18-
CERTIFICATION
I, Robert Bettinger, Principal Financial and Accounting Officer of Cenuco, Inc.
(formerly Virtual Academics.com, Inc.) certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Cenuco, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 14, 2003 /s/ Robert Bettinger
-----------------------------------------
Robert Bettinger, Principal Financial
and Accounting Officer
-19-