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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-22785
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American Career Centers, Inc.
(Name of registrant in its charter)
Nevada 87-0636498
(State of incorporation) (I. R. S. Employer Identification No.)
2490 South 300 West
South Salt Lake City, Utah 84115
(801) 485-6200
(Address and telephone number of principal executive offices and principal
place of business)
________________
Securities registered pursuant to Section 12(b) of the Act:
None
________________
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.0001 per share of Common Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) and
has been subject to such filing requirements for the past 90 days.
Yes X No
As of September 30, 2000, there were 6,061,070 shares of the issuer's
Common Stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item I. Financial Statements
The registrant represents that the Consolidated Financial Statements
furnished herein have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior years, and
that such Consolidated Financial Statements reflect, in the opinion of
the management of the Company, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the consolidated
financial position of American Career Centers, Inc. (the "Company"), as
of September 30, 2000, and the results of its operations and its cash
flows for the three months then ended.
AMERICAN CAREER CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2000
AMERICAN CAREER CENTERS, INC.
AND SUBSIDIARIES
CONTENTS
PAGE 1 CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2000
(UNAUDITED) AND DECEMBER 31, 1999
PAGE 2 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
PAGE 3 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
PAGE 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AMERICAN CAREER CENTERS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
2000 1999
(Unaudited)
CURRENT ASSETS
Cash 95,288 42,879
Accounts receivable, net 106,780 83,988
Notes receivable 15,000 -
Inventories 9,994 3,447
Prepaid expenses and other assets 5,979 357
------- -------
Total Current Assets 233,041 130,671
------- -------
PROPERTY AND EQUIPMENT - NET 179,546 122,538
------- -------
OTHER ASSETS
Intangibles, net 45,586 115,106
Deposits 12,889 14,464
------- -------
Total Other Assets 58,475 129,570
------- -------
TOTAL ASSETS 471,062 382,779
======= =======
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and
other accrued expenses 353,561 256,892
Payroll taxes payable 231,375 238,076
Accrued payroll and payroll taxes 167,790 317,594
Deferred revenue 610,080 273,736
Notes payable 179,250 162,500
--------- ---------
Total Current Liabilities 1,542,056 1,248,798
--------- ---------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.0001 par value,
20,000,000 shares authorized,
none issued
Common stock, $.0001 par value,
100,000,000 shares authorized, -
6,061,070 and 5,902,500 shares
issued
and outstanding, respectively 606 590
Additional paid in capital 2,138,727 1,258,962
Accumulated deficit (3,210,327) (2,064,321)
--------- ---------
(1,070,994) (804,769)
Less subscriptions receivable - (61,250)
--------- ---------
Total Stockholders' Deficiency (1,070,994) (866,019)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY 471,062 382,779
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
AMERICAN CAREER CENTERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For The Three For The Three For The Nine For The Nine
Months Ended Months Ended Months Ended Months Ended
September 30, 2000 September 30, 1999 September 30, 2000 September 30, 1999
REVENUES 561,250 150,635 1,410,035 646,439
COST OF SALES 260,883 105,017 635,694 338,896
------- ------- --------- -------
GROSS PROFIT 300,367 45,618 774,341 307,543
------- ------- --------- -------
OPERATING EXPENSES
Selling and marketing 323,968 101,273 847,964 305,968
General and administrative 369,441 226,250 1,003,045 635,271
------- ------- --------- -------
Total Operating Expenses 693,409 327,523 1,851,009 941,239
------- ------- --------- -------
LOSS FROM OPERATIONS (393,042) (281,905) (1,076,668) (633,696)
------- ------- --------- -------
OTHER INCOME (EXPENSE)
Gain on exchange of securities - - - 10,000
Interest expense (1,586) (5,783) (17,413) (17,560)
Interest income 92 - 296 -
Tax penalties (9,137) (6,260) (51,867) (23,120)
Other income 25 - 25 -
Other expense - - (80) (7,700)
------- ------- --------- -------
Total Other Income (Expense) (10,606) (12,043) (69,039) (38,380)
------- ------- --------- -------
LOSS BEFORE INCOME TAXES (403,648) (293,948) (1,145,707) (672,076)
------- ------- --------- -------
FEDERAL AND STATE INCOME TAX - - 300 -
------- ------- --------- -------
NET LOSS (403,648) (293,948) (1,146,007) (672,076)
======= ======= ========= =======
Net loss per share
- basic and diluted (0.07) (0.07) (0.19) (0.21)
======= ======= ========= =======
Weighted average number
of shares outstanding
- basic and diluted 6,058,403 4,060,928 6,055,717 3,164,980
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
AMERICAN CAREER CENTERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
For The Nine For The Nine
Months Ended Months Ended
September 30, 2000 September 30, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (1,146,007) (672,076)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and Amortization 103,320 52,381
Gain on exchange of securities - (10,000)
(Increase) in accounts receivable (22,792) 24,216
(Increase) in inventories (6,547) 3,795
(Increase) Decrease in prepaid expenses and other assets (5,622) 3,832
Increase (Decrease) in accounts payable and accrued expenses 96,670 87,004
Increase (Decrease) in payroll taxes payable (6,701) 133,846
Increase (Decrease) in accrued payroll and payroll taxes (59,554) 277,746
Increase in deferred revenue 336,344 (80,494)
Net Cash Used In Operating Activities (710,889) (179,750)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (90,808) (6,177)
Notes receivable (15,000) -
Deposits 1,575 (2,175)
Net Cash Used in Investing Activities (104,233) (8,352)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on notes payable (47,250) -
Loan proceeds 64,000 98,519
Proceeds from issuance of common stock 850,781 97,989
Net Cash Provided By Financing Activities 867,531 196,508
NET INCREASE (DECREASE) IN CASH 52,409 8,406
CASH, BEGINNING OF PERIOD 42,879 11,246
CASH, END OF PERIOD 95,288 19,652
</TABLE>
See accompanying notes to consolidated financial statements.
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepred in accordance with generally accepted accounting principles and
the rules and regulations of the Securities and Exchange Commission for
the interim financial information. Accordingly, they do not include
all the information and footnotes necessary for a comprehensive
presentation of financial position and results of operations.
It is management's opinion, however, that all adjustments (consisting
of normal recurring adjustments) have been made which are necessary for
a fair financial statements presentation. The results for the interim
period are not necessarily indicative of the results to be expected for
the year.
For further information, refer to the consolidated financial statements
and footnotes included in the Company's Form 10-KSB for the year ended
December 31, 1999.
NOTE 2 INVENTORIES
Inventories, consisting of training materials are stated at the lower
of cost or market determined on the first-in, first-out method.
NOTE 3 STOCKHOLDERS' EQUITY
During July 2000, the Company issued 4,000 restricted shares of common
stock for a total of $15,000 or $3.75 per share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK
This quarterly report may contain forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and uncertainties,
certain of which are beyond the Company's control. Actual results could
differ materially from these forward-looking statements as a result of
such risks and uncertainties, including, among others, general economic
conditions, governmental regulation and competitive factors, and, more
specifically, interest rate levels availability of financing, consumer
confidence and preferences, the effectiveness of the Company's
competitors, and costs of materials and labor. In light of these
risks and uncertainties, there can be no assurance that the forward-
looking information contained in this quarterly report will in fact
occur. Forward-looking statements may be identified by use of
forward-looking terminology such as "believe", "intends", "may",
"will", "expects", "estimate", "anticipate", "continue", or similar
terms, variations of those terms or the negative of those terms.
Thirteen Weeks Ended September 30, 2000 and September 30, 1999.
Overview.
American Career Centers Inc. (the "Company" or "ACCI") was formed in
June 1999 as a holding company for the acquisition of information
technology career training centers and related businesses. We
completed our first acquisition in June 1999 through the purchase of
one hundred percent (100%) of the capital stock of Alpha Computer
Solutions, Inc., a Utah corporation ("Alpha"). Alpha began operations
in June 1998 and trained over fourteen thousand (14,000) students in
its first two years of operation. Alpha's training facility in Salt
Lake City, Utah, known as the Alpha Computer Solutions Career Center,
is the largest in the state. Our management plans to expand the
number of Alpha Computer Solutions Career Centers, potentially opening
in twelve or more new cities by the end of 2001.
Effective December 3, 1999, we acquired 100% of the outstanding shares
of Tunlaw International Corporation ("Tunlaw"), a public company for
reporting purposes under the Securities Exchange Act of 1934. With
the completion of this acquisition, we became the successor issuer to
Tunlaw and we retain that public company's reporting status.
Trends in the Computer Training Industry
Several converging trends have contributed to the accelerated growth
of the Computer Training industry. A strong economy, corresponding
increases in high-tech positions, and higher salaries have substan-
tially impacted market demographics. As global competition has fostered
ever-increasing computerization, shifts in technology have advanced the
mainframe paradigm to PCs, then to LANs, WANs, the Internet, "B2B" and
other models. The result has been an explosion of computers, software,
applications, networks and Internet sites. But while demand for trained
IT personnel has exploded, the number of experienced professionals has
grown slowly. In fact, demand has exceeded supply for several years and
the gap continues to grow at an accelerated rate.
ACCI's Strategic Perspective
The Computer Training marketplace is generally segmented into
corporations and other organizations with specific employee training
needs and individuals seeking advancement or a new career. Corporations
and organizations are marketed on the basis of increased productivity,
while individuals are marketed on the basis of a more challenging career
and increased earning power. Unlike our competitors, we target both
market segments because contact with businesses provides the ultimate
forecast of demand in the marketplace for specific types of training and
the associated high-paying careers.
Alpha Computer Solutions, Inc.
Alpha Computer Solutions, Inc. was founded in May 1998. It offers over
250 different instructor-led computer training courses from a 16,000
square foot classroom facility in its Salt Lake City, UT location. Day,
evening and weekend classes are provided and Alpha trained over 14,000
students in its first two years of operation. Alpha's training orien-
tation is marked by instructor-led classes that combine real-world
knowledge, testing preparation, computer-based curriculum, and the latest
in hardware and software and Internet access for each student. Over
2,000 major corporations and organizations train their employees at
Alpha, including (among others) American Express, American Stores, AT&T,
Barnes & Noble, Delta Airlines, IBM, IRS, Kennecott, Novell, US West and
the State of Utah.
Alpha Computer Solutions Products
Alpha's products are all applicable to both individual and corporate
market segments and fall into three broad categories: applications,
certification tracks and proprietary curriculum such as the Internet
Webmaster PyramidTM. This product offers in-depth training in all
aspects of web site design and is unique in the computer training
industry.
Strategic Implications of the Internet
The Internet and E-commerce revolution are at the center of Alpha's
plans for expansion and growth. There is no question that the Internet
represents a paradigm shift in the Information Technology industry.
Use of the Net is the fastest growing technological advance in history.
It has provided new models for communications, sales, marketing and
distribution and promises unparalleled growth and profitability for
companies that win the race for the "next big breakthrough". Not only
have existing organizations embraced the Internet, but new companies
in new industries have been created from scratch and blossomed in
record time, as whole technologies and industry sub-segments can be
developed today at a highly-accelerated pace, in what has come to be
known as "Internet time". The implications for the computer training
industry are fairly clear. There is a competitive mania to create
Internet Web sites, and even to create whole new delivery systems,
uch as wireless technologies, which are anticipated to expand the
global base of Internet users significantly. There is a huge market
for trained personnel who can participate in the creation of Web sites
and the demand (and associated pay) is accelerating.
The Alpha Internet Webmaster PyramidTM
In this environment, the ideal computer training curriculum for the
Internet has the following characteristics:
1 in-depth training and hands-on experience in all aspects of web
site design
2 classes that bridge all levels of difficulty, from overview to
advanced technical specialties
3 complete career preparation in a matter of months, not years; and
4 affordable and priced incrementally.
Alpha has designed the Webmaster Pyramid curriculum to fully address
each of these issues. The Pyramid encompasses all aspects of Internet
web site creation and is unique in the computer training industry.
The Alpha Webmaster PyramidTM curriculum is divided into three areas
of specialization: design, programming and technical administration.
Students progress down the Pyramid as they advance to more difficult
areas of specialization.
Marketing Channels
Alpha utilizes a variety of marketing channels including print and
media ads, outbound telemarketing, seminars, trade shows and its
Internet Web Site.
Geographic Expansion
As part of our overall growth, our management has developed an expansion
pan which calls for us to acquire Information Technology training
facilities in various locations throughout the United States. Our
primary criteria for acquisition will include that our target has
proven profitability, a good local reputation, local market potential,
and similarity of current programs to our Alpha model. In each case, we
intend to conduct a stringent analysis of the target's projected ability
to provide a strong return on our investment. We have ranked expansion
cities based upon 10 factors including population, pr capita IT spending,
per capita IT training spending, regional demographics and Internet
infrastructure. Management hopes to open locations in 12 cities by the
end of 2001.
Our subsidiary, Alpha Computer Solutions, Inc., began its operations in
June of 1998. Throughout 1998 and 1999, Alpha focused on building the
foundation for geographic expansion. This process involved several
steps:
1 recruiting management talent
2 raising additional capital
3 recruiting training and sales staffs
4 developing proprietary curriculum that would be replicable in
multiple locations
5 designing effective marketing programs, and
6 perfecting training delivery and management systems
It is management's intention to continue these processes as we acquire
additional computer training organizations and integrate them into our
current model described above.
Results of Operations
For the quarter ended September 30, 2000, the Company had revenues of
$561,250, and a net loss from operations of $403,648.
Quarter Ended September 30, 2000 Versus Quarter Ended September 30, 1999
During 1999, we focused heavily on recruiting, curriculum development
and the design of effective marketing programs. As we moved into the
year 2000, revenues began to ramp up significantly as the Company's
marketing efforts drove increased sales of new products. In addition,
we continued to increase both our fundraising efforts and our
acquisition target search activities.
For the three months ended September 30, 2000, the Company increased
consolidated revenues 272% to $561,250, as compared to $150,635 for the
same period in 1999. We experienced a net loss from operations of
$403,648 for the three months ended September 30, 2000, an increase of
37%, or $109,700, over the net loss of $293,948 for the same period in
1999. This increase in net loss is attributable to an increase during
the three months ended September 30, 2000 in marketing and selling
expenses, general and administrative expenses and net losses from
operations, due to additional recruiting, marketing and product
delivery.
During the third quarter of 2000, we generated a gross profit of
$300,367, up 558% from the same period in 1999. Gross profit for the
third quarter totaled 53% of sales as compared to 30% of sales in the
same period in 1999. Management attributes the increase in revenues
and gross profits during the three months ended September 30, 2000 to
an increase in the sale of computer classes, primarily in connection
with internet related curriculum.
General and administrative expenses, totaling $369,441 for the three
months ended September 30, 2000, increased 63% from $226,250 in the
same period in 1999. Selling and marketing expenses, totaling
$323,968 for the third quarter of 2000 increased 220% from $101,273
in the same period in 1999. These increases are also primarily due
to an increase during the three months ended September 30, 2000 in
marketing and selling expenses, general and administrative expenses
and net losses from operations, due to additional recruiting,
marketing and product delivery designed to drive sales and revenues.
Plan of Operations
There are three key components to our plan of growth for the Company.
These are:
1. Raising additional capital through the private placement of
common stock. The Company will require additional funds to operate,
to expand geographically and to establish credit facilities for
anticipated acquisitions.
2. Expanding the Alpha Education and Training model to a total
of 12 cities in the Western U.S. in the next 20 months.
3. Acquiring other information technology facilities in
complementary locations throughout the United States.
Of course, there can be no assurance that we will be able to achieve
these objectives in the near future, or at all.
Liquidity and Capital Resources
Our primary source of liquidity and capital resources has been from the
private placement of common stock and borrowings from related and non-
related parties. See Note 3 to the Financial Statements (Stockholders'
Equity) for further descriptions of these activities. The Company's
cash balance at September 30, 2000 increased to $95,288, up 122% from
$42,879 at December 31, 1999. We will require additional capital
financing to continue the development of our business plan consistent
with anticipated growth in operations, infrastructure and personnel.
We anticipate that the cash on hand coupled with the ash to be raised
from additional private placements and public offerings, assuming they
will be successful, should be sufficient to satisfy our operating
expenses and capital until such time as revenues are sufficient to
meet operating requirements. In September 2000, the Company effected
the cancellation of 125,000 shares of common stock, in accordance with
a resolution of its Board of Directors to do so. The reason for the
cancellation of these shares, which had originally been issued in
consideration for the performance of certain legal and consulting
services to be rendered to the Company, was the failure of the
recipient of the shares to complete the performance of these services.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no matters during this reporting period that require
disclosure under this item.
ITEM 2. CHANGES IN SECURITIES
During July 2000, the Company issued 4,000 restricted shares of common
stock to one accredited investor, for a total of $15,000 or $3.75 per
share. These shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933,
and Regulation D promulgated thereunder, as a private transaction with
an accredited investor not involving any public distribution.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There have been no matters during this reporting period that require
disclosure under this item.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
There have been no matters during this reporting period that require
disclosure under this item.
ITEM 5. OTHER INFORMATION
There have been no matters during this reporting period that require
disclosure under this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K relating to the quarter ended
September 30, 2000.
The Company did not file any reports on Form 8-K during the quarter
ended September 30, 2000.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
AMERICAN CAREER CENTERS, INC.
/s/ Thomas D. Keene
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Thomas D. Keene
Principal Financial
and Accounting Officer
Dated: November 17, 2000
