SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 2000.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ------------ to -------------- .
Commission file number:000-28513
---------
LEARNER'S WORLD, INC.
(Exact name of small business issuer as specified in its charter)
NEW YORK 11-3331350
---------- -----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
369 Avenue U, Brooklyn, New York 11223
--------------------------------------
(Address of principal executive office) (Zip Code)
(718) 449-3194
--------------
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 XX No
The number of outstanding shares of the issuer's common stock, $0.001
par value (the only class of voting stock), as of June 30, 2000 was 9,916,250
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS..................................2
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................5
SIGNATURES.....................................................................6
INDEX TO EXHIBITS..............................................................7
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Learner's World, Inc. and
subsidiaries and predecessors unless otherwise indicated. Consolidated,
unaudited, condensed interim financial statements including a balance sheet for
the Company as of the quarter ended June 30, 2000 and statements of operations,
and statements of cash flows for the interim period up to the date of such
balance sheet and the comparable period of the preceding year are attached
hereto as Pages F-1 through F-4 and are incorporated herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
1
<PAGE>
<TABLE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2000
<CAPTION>
ASSETS
Current assets
<S> <C>
Cash $ 17,063
Receivables 8,416
Receivable from shareholders -
------------------
Total current assets 25,479
------------------
Property and equipment, net of accumulated depreciation 975,303
------------------
Other assets
School licensing 1,144
Security deposits 52,214
------------------
Total other assets $ 53,358
------------------
Total assets $ 1,054,140
==================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts and notes payable $ 90,906
Taxes payable 65,565
Current portion of long term debt - non stockholders 16,296
------------------
Total current liabilities 172,767
------------------
Long-term liabilities
Term debt - long term portion - non stockholders 4,377
Due to stockholders 1,114,726
------------------
Total other liabilities 1,119,103
------------------
Total liabilities 1,291,870
------------------
Stockholders' equity (deficit)
Common stock, $.0001 par value
20,000,000 shares authorized with 9,776,250 and
140,000 shares issued and outstanding 978
Paid in capital 1,197,343
Stock issued (not paid) (262,500)
Retained Earnings (deficit) (1,173,551)
------------------
Total stockholders' equity (deficit) (237,730)
------------------
Total liabilities and stockholders' equity (deficit) $ 1,054,140
==================
</TABLE>
F-1
<PAGE>
<TABLE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDING JUNE 30,
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
============ ============ ============== ===============
<S> <C> <C> <C> <C>
Revenue $ 365,581 $ 323,586 $ 755,766 $ 662,428
============ ============ ============== ===============
Expenses
Cost of sales 199,610 241,658 420,990 467,472
General and administrative 185,293 185,923 436,095 379,520
Depreciation, amortization and interest 29,113 69,030 58,221 98,636
------------ ------------ -------------- ---------------
Total expenses 414,016 496,611 915,306 945,628
------------ ------------ -------------- ---------------
Income (loss) from continuing operations
before income taxes (48,435) (173,025) (159,540) (283,200)
Provision for income taxes - 600 - 600
------------ ------------ -------------- ---------------
Net (loss) $ (48,435) $ (173,625) $ (159,540) $ (283,800)
============ ============ ============== ===============
Income (loss) per weighted-average share
of common stock outstanding
Basic net (loss) per share $ (0.00) $ (0.03) $ (0.07) $ (0.05)
============ ============ ============== ===============
Weighted-average number of common
stock outstanding 9,776,250 6,206,979 9,776,250 6,206,979
============ ============ ============== ===============
</TABLE>
F-2
<PAGE>
<TABLE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE MONTHS ENDING JUNE 30,
<CAPTION>
2000 1999
=============== ================
<S> <C> <C>
Cash Flows From Operating Activities
Net (loss) $ (159,540) $ (283,800)
------------ -------------
Adjustments To Reconcile Net (Loss) To Net Cash
Used In Operating Activities
Depreciation, net of adjustment 52,196 71,474
Amortization 606 -
Stock issued for services - -
Interest eliminated and reclassified to paid in capital - -
Decrease (Increase) in receivables 1,439 -
Decrease (Increase) in receivables from stockholders 70,000 (50,000)
Increase (Decrease) in accounts and notes payable 19,442 (49,121)
Increase (Decrease) in taxes payable 2,213 -
------------ -------------
Net Adjustment 145,896 (27,647)
------------ -------------
Net Cash (Used) In Operating Activities (13,644) (311,447)
------------ -------------
Cash Flows From Investing Activities
Purchase of equipment (35,000) (63,132)
Purchase of school licensing - -
------------ -------------
Net Cash (Used) By Investing Activities (35,000) (63,132)
------------ -------------
Cash Flows From Financing Activities
(Decrease) Increase in notes and loans payable
non stockholders (12,376) (6,200)
(Decrease) Increase in notes and loans payable
stockholders 37,805 42,584
Proceeds from unpaid capital stock issued 16,563 352,500
------------ -------------
Net Cash Provided By Financing Activities 41,992 388,884
------------ -------------
Net Increase (Decrease) In Cash (6,652) 14,305
Cash - Beginning 23,715 2,195
------------ -------------
Cash - Ending $ 17,063 $ 16,500
============= =============
Other Information
Interest paid in cash $ 5,419 $ -
============= =============
Non Cash Items
Stock issued for services $ -$ -
Stock issued for debt conversion - 120,000
Debt to shareholders contributed to paid in capital $ -$ -
</TABLE>
F-3
<PAGE>
LEARNER'S WORLD, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1 - BASIS OF PRESENTATION
The interim consolidated financial statements at June 30, 2000 and for
the six month periods ended June 30, 2000 and 1999 are unaudited, but
include all adjustments which the management considers necessary for a
fair presentation. . The December 31, 1999 balance sheet was derived
from the Company's audited financial statements.
The accompanying unaudited consolidated financial statements are for
the interim periods and do not include all disclosures normally
provided in annual financial statements, and should be read in
conjunction with the Company's Form 10-KSB for the year ended December
31, 1999. The accompanying unaudited interim consolidated financial
statements for the six month periods ended June 30, 2000 and 1999 are
not necessarily indicative of the results which can be expected for the
entire year.
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 at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 2 - INCOME TAXES
The Company accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"), which requires an asset and liability
approach to accounting for income taxes. Under SFAS 109, deferred tax
assets or liabilities are computed on the difference between the
financial statement and income tax bases of assets and liabilities
("temporary differences") using the enacted marginal tax rate. Deferred
income tax expenses or benefits are based on the changes in the
deferred tax asset or liability from period to period.
NOTE 3 - COMMON STOCK
On February 25, 1999, the Company amended its articles of
incorporation. The articles of incorporation, as amended, made a 30 for
1 reverse stock split, effective March 1, 1999. This 30 for 1 reverse
stock split has been recognized in these financial statements
retroactive to December 31, 1998 for comparative purposes.
In March 1999, the Company issued new stock under Rule 504 Regulation D
offering. The issuance of 3,506,250 shares were issued for $876,562 of
which $614,062 has been received as of June 30, 2000. The amount
receivable of $262,500 is secured by marketable securities.
F-4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
As used herein the term "Company" refers to Learner's World, Inc., a New York
Corporation, and its subsidiaries and predecessors, unless the context indicates
otherwise. The Company was formed on June 28, 1996, with the intent to own and
operate facilities for the care, education and recreation of children. In
December 1996, the Company acquired three children's care and learning
facilities from three affiliated corporations for a four year note of $775,000,
bearing interest at the rate of 7% per annum. (See "Certain Relationships and
Related Transactions"). The Company's facilities are at the following locations
in the New York metropolitan area: (i) 369 Avenue U, Brooklyn, New York,
established in May 1993; (ii) 1535 First Avenue, New York New York established
in September 1994, the Company has since moved the location of this facility to
432 Lakeville, Lake Success, New York 11402; and (iii) 208-34 Cross Island
Parkway, Bayside, New York, established in June 1994. The Company provides the
following services for children and students: (1) day care and recreational
services for children between the ages of two and one-half and ten, (2) academic
tutorial services for students of all ages through high school, (3) instruction
in computer skills and functions for students and adults, and (4) psychological
diagnostic and remedial services for children, provided through licensed
consulting professionals.
The Company's earns revenue from tuition and fees, generally charged on an
hourly basis for day care, tutoring and computer instruction. Charges for
diagnostic and treatment services are also currently made on an hourly basis.
Although the Company's family entertainment centers, which include locations in
Manhattan, Brooklyn and Queens, are financially solvent, the addition of child
care, tutorial and computer instruction has enhanced revenue as these programs
operate mostly during the hours when the play activities are minimal. All of
these services are easily and logically merged. They are compatible in both
theme and space utilization.
The Company also has several products and plans for others which have been used
to create a dynamic interactive on line test preparation and vocational training
website. The Company's new website became fully operational in January of 2000
and is located on the Internet at www.learnersworld.com. Through this website
the Company plans to offer to the public a location on the Internet where the
customers can prepare for tests such as the SAT and other educational exams
including but not limited to medical, law, and business. The site will be
designed to help customers prepare for vocational tests, such as civil service,
post office, park ranger, police or firefighters The Company also hopes to be
able in the future to offer courses in other professions such as insurance
agent, stock broker, or real estate agent. The Company intends to bring this
content to the Internet and pair it with existing and emerging software to
create an exciting interactive on line learning environment.
The Company intends to supply online computer based training to be used to
prepare for vocational and educational placement testing. All test preparation
courses will be interactive with live chat rooms and instructor availability.
Each course includes simulated test environment for time and content as well as
a specific section on test taking techniques for the particular exam By offering
it's services online, the Company will attempt to address a perceived need for
alternative modes of training that are both flexible and convenient. Unlike the
current educational offerings now available on the Internet, which are mostly
university or government based or highly technical in content, the Company
intends to offer training which will assist people to obtain necessary knowledge
or certification to prepare for exams and to train for new skills. The
exams/training which the Company intends to offer will help the customer to
obtain such benefits as gaining employment or advancing in their current careers
and advancing their educational goals.
The Company's strategy is to offer an extensive array of test preparation and
training courses covering needs in academics, health care, vocations and
professions in a dynamic and enjoyable fashion. A separate segment of the
Company's web site will deal with custom designed training and test preparation
courses for private industry, government agencies and unions. The Company will
attempt to create brand recognition by implementing an aggressive advertising
campaign emphasizing the Company's benefits, including quality content, a
learner community, support services, and a high level of interaction.
The Company plans to continue its expansion into the child care and adult
education fields. This will be accomplished through the building of new
locations, the acquisition of suitable locations and its venture onto the
Internet with its Internet based educational, test preparation and vocational
training web site.
2
<PAGE>
Results of Operations
During the second quarter of 2000, the Company continued to improve its
financial condition. The Company increased its revenues over the comparable
quarter and six month period in 1999. As a direct result of increased revenues
for the second quarter of 2000 and the year ended December 31, 1999, the
Company's overall financial health is improving.
Three Months ended June 30, 2000. Six Months ended June 30, 2000
Gross revenues for the three months ended June 30, 2000 were $365,581 compared
to $323,586 for the same period in 1999, an increase of $41,995. The gross
revenues for the three months ended June 30, 2000, were higher than the
comparable three months in 1999 due to an increase in tuition and fees collected
from an increased number of students.
Gross revenues for the six months ended June 30, 2000 were $755,766 compared to
$662,428 for the same period in 1999, an increase of $93,338. The gross revenues
for the six months ended June 30, 2000, were higher than the comparable six
months in 1999 due to an increase in tuition and fees collected from an
increased number of students.
Costs of revenues were $199,610 for the three months ended on June 30, 2000,
compared to $241,658 for the comparable period in 1999, a decrease of
approximately 17.4%.
Costs of revenues were $420,990 for the six months ended on June 30, 2000,
compared to $467,472 for the comparable period in 1999, a decrease of
approximately 10%.
Net losses were $48,435 for the three months ended on June 30, 2000 and $173,625
for the comparable three months in 1999. Net loss as a percentage of revenues
for the three month periods were -13% and -53%, respectively. The decrease in
net losses resulted from a decrease in total expenses coupled with an increase
in revenues.
Net losses were $159,540 for the six months ended on June 30, 2000 and $283,800
for the comparable six months in 1999. Net loss as a percentage of revenues for
the six month periods were -21% and -67%, respectively. The decrease in net
losses resulted from a decrease in total expenses coupled with an increase in
revenues.
General, and administrative expenses were $185,293 for the three months ended on
June 30, 2000 and $185,923 for the comparable period in 1999, a decrease of
$630, or less than 1%.
General, and administrative expenses were $436,095 for the six months ended on
June 30, 2000 and $379,520 for the comparable period in 1999, an increase of
$56,575. The primary reason for the increase was an increase in administrative
costs during the first quarter.
Operating loss was $48,435 during the three months ended on June 30, 2000,
compared to an operating loss of $173,625 for the comparable three months in
1999. The Company's operating loss decreased $125,190 or 72% for the three
months ended June 30, 2000 because of a decline in cost of revenues and General
and Administrative costs coupled with an increase in revenues.
Operating loss was $159,540 during the six months ended on June 30, 2000,
compared to an operating loss of $283,800 for the comparable six months in 1999.
The Company's operating loss decreased $124,260 or 43.8% for the six months
ended June 30, 2000 because of a decline in cost of revenues and General and
Administrative costs coupled with an increase in revenues.
Capital Resources and Liquidity
The Company had a net working capital deficit of $147,288 for the six months
ended June 30, 2000, as compared to a $47,524 net working capital deficit as of
December 31, 1999.
Net stockholders' deficit in the Company was $237,730 as of June 30, 2000,
compared to stockholder's equity of $36,991 as of December 31, 1999. The
decrease in net stockholder's equity is primarily due to losses in operations.
3
<PAGE>
Cash flows used in operations were $13,644 for the six months ended June 30,
2000 as compared to cash flows used in operations of $311,477 for the comparable
period in 1999. Negative cash flows are primarily attributable to marketing
costs.
Cash flows used by investing activities were $35,000 for the six months ended
June 30, 2000 and $63,132 for the six months ended June 30, 1999. The Company's
investing activities have been primarily in the purchase of equipment used in
generating revenues.
Cash flows generated from financing activities were $41,992 for the six months
ending June 30, 2000, as compared to $388,884 for the comparable period in 1999.
The Company's financing activities have primarily consisted of private
placements of its common stock.
The Company's cash flows fluctuated during the year due to the seasonal nature
of the Company's business. Traditionally, enrollments are higher during the
period of the year when schools are in regular session (September-May) with
lower enrollments during the summer months (June-August). The decline in
enrollments during the summer is offset to some degree by the revenues from the
Company's summer camps.
Due to the Company's cash flow fluctuations, the Company experiences occasional
cash flow shortages. To satisfy its cash requirements, including the debt
service, the Company must periodically raise funds from external sources. This
often involves the Company conducting exempt offerings of its equity securities.
However, during the second quarter of 2000, the Company did not issue any equity
securities to finance its operations.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations
over the past three years. The Company believes that it can offset inflationary
increases in the cost of materials and labor through increased sales and
improved operating efficiency.
Capital Expenditures
The Company made no significant capital expenditures on property or equipment
for the quarter ended June 30, 2000.
Trends, Events, Uncertainties that may have a Material Effect on Liquidity Risk
of Lawsuits
Inherent in the business of education and caring for children in a commercial
business is the risk of lawsuits for alleged injuries to the children. The
Company has an insurance policy with liability limits of $3,000,000 aggregate
limit which includes $1,000,000 in personal injury liability coverage to protect
the Company from legal claims to the amount of the policy coverage for risks as
specified in the policy of insurance. Although currently there are no pending
lawsuits against the Company, there is no assurance that there will not be such
lawsuits in the future and that the Company will not incur losses as the result
of such lawsuits in excess of its insurance coverage. Lawsuits against the
Company will tend to increase operating expenses and lower the potential for
profitability, as well as cause possible harm to the Company's reputation.
Labor Related Risks
The Company depends extensively on the availability, quality and reliability of
teachers, instructors, tutors and care-givers which it utilizes to provide
children's educational and day care services. There is no assurance that the
Company will have an adequate supply of qualified personnel at acceptable cost
to operate a profitable business. The Company is subject to all of the risks
inherent in a business that utilized skilled labor, including but not limited to
strikes, disadvantageous collective bargaining agreements, labor showdowns,
unavailability of qualified employees, worker's compensation claims, increases
in worker's compensation and other insurance premiums (or unavailability of such
insurance), wage disputes, discrimination claims, wrongful termination claims,
the loss of qualified employees and inability to replace them, and related
risks. At the current time, none of the Company's employees are unionized. The
risks may also inhibit the Company's ability to expand or establish new
facilities. If such labor issues should arise the Company will attempt to remedy
the situation by using temporary employees and
4
<PAGE>
its current staff to temporarily cover shortages until additional qualified
permanent employees can be found.
Uncertainties Regarding Market Acceptance of New Services
Although the Company's management will attempt to complete the market research
necessary to determine whether there will be sufficient demand for its new
Internet based services, it is possible that the Company will decide to offer a
service that will be rejected by its target customers. The inability to amortize
development marketing and sales support costs could adversely affect the
financial condition and operating results of the Company. There remains
uncertainty regarding the Internet as a viable distribution method of the
Company's products. There is a risk that the customers of the Company will not
use the Internet for their test training and would rather continue to use more
traditional training methods.
Going Concern
The Company's ability to continue as a going concern is an issue raised as a
result of an accumulated deficit of $1,173,551 as of June 30, 2000 compared to a
deficit of $1,014,011 at December 31, 1999. The Company's ability to continue as
a going concern is subject to the ability of the Company to obtain a profit and
/or obtaining the necessary funding from outside sources. Management is
committed to taking the necessary steps to ensure the Company remains a going
concern. Management's plan to address the Company's ability to continue as a
going concern, includes: (1) obtaining additional funding from the sale of the
Company's securities; (2) increasing sales; (3) obtaining loans and grants from
various financial institutions where possible. Although management believes that
it will be able to obtain the necessary funding to allow the Company to remain a
going concern through the methods discussed above, there can be no assurances
that such methods will prove successful.
Year 2000 Compliance
The Year 2000 problem is a result of computer programs being written using two
digits to define the applicable year. If not corrected, any programs or
equipment that have time sensitive components could fail or create erroneous
results. As of August 1, 2000, The Company has not experienced any year 2000
problems.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation
S-B are listed in the Index to Exhibits on page 10 of this Form
10-QSB, and are incorporated herein by this reference.
(b) Reports on Form 8-K. No reports were filed on Form 8-K during the
quarter.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
5
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 10th day of August, 2000.
Learner's World, Inc.
/s/ Sal Casaccio August 10, 2000
-----------------
President, Chief Executive Officer and Director
/s/ Sal Casaccio August 10, 2000
-------------------
Controller
6
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE DESCRIPTION
NO. NO.
3(i) * Articles of Incorporation of the Company (note that these
were amended by the Articles of Merger constituting Exhibit
2 to this Form 10-KSB) (incorporated herein by reference
from Exhibit No. 3(i) to the Company's Form 10-KSB for the
year ended December 31, 1993).
3(ii) * Bylaws of the Company, as amended (incorporated herein by
reference from Exhibit 3(ii) of the Company's Form 10 KSB
for the year ended December 31, 1995).
MATERIAL CONTRACTS
10(i)(a) * Acquisition Agreement between the Company's majority owned
subsidiary Innovative Property Development Corp. And
Diversified Holdings - I, Inc., dated April 2, 1999
(incorporated herein by reference from Exhibit No. 10(i)(a)
to the Company's Form 10KSB for the period ended December
31, 1998).
10(i)(b) * Real Estate Purchase Agreement between Oasis International
Hotel & Casino, Inc., a consolidated subsidiary of the
Company, and Pienne Chow Sau Har, consummated on January 11,
1999, regarding the sale of a one-half interest in 1.45
acres in Oasis, Nevada (incorporated herein by reference
from Exhibit No. 10(i)(b) to the Company's Form 10-KSB for
the period ended December 31, 1998).
10(i)(c) * Real Estate Purchase Agreement between Oasis International
Hotel & Casino, Inc., a consolidated subsidiary of the
Company, and Oasis Fields, L.L.C., consummated on January
11, 1999, regarding the sale of 2.45 acres in Oasis, Nevada
(incorporated herein by reference from Exhibit No. 10(i)(c)
to the Company's Form 10-KSB for the period ended December
31, 1998).
27 Financial Data Schedule "CE"
* Previously filed as indicated and incorporated herein by reference from
the referenced filings previously made by the Company.
7
