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 March 31, 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
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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 May 15, 2000 was 10,270,007
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS.................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.................................4
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................6
SIGNATURES....................................................................7
INDEX TO EXHIBITS.............................................................8
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ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Learner's World, Inc., a
New York corporation, and its subsidiaries and predecessors unless otherwise
indicated. Consolidated, unaudited, condensed interim financial statements
including a balance sheet for the Company as of the quarter ended March 31, 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.]
3
<PAGE>
<TABLE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31,
2000 1999
============== ===============
ASSETS
<S> <C> <C>
Current assets
Cash $ 10,527 $ 23,715
Receivables 8,416 9,855
Receivable from shareholders - 70,000
------------- -------------
Total current assets 18,943 103,570
------------- -------------
Property and equipment, net of accumulated depreciation 1,001,401 992,499
------------- -------------
Other assets
School licensing 1,447 1,750
Security deposits 52,214 52,214
Internet website 160,042 131,744
------------- -------------
Total other assets $ 213,703 $ 185,708
------------- -------------
Total assets $ 1,234,047 $ 1,281,777
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts and notes payable $ 60,959 $ 71,464
Taxes payable 62,943 63,352
Current portion of long term debt - non stockholders 16,296 16,296
------------- -------------
Total current liabilities 140,198 151,112
------------- -------------
Long-term liabilities
Term debt - long term portion - non stockholders 8,376 16,753
Due to stockholders 1,114,726 1,076,921
------------- -------------
Total other liabilities 1,123,102 1,093,674
------------- -------------
Total liabilities 1,263,300 1,244,786
------------- -------------
Stockholders' equity (deficit)
Commonstock, $.0001 par value 20,000,000
shares authorized with 9,776,250 and
140,000 shares issued and outstanding
at March 31, 2000 and December 31,
1999 respectively 978 978
Paid in capital 1,197,343 1,197,343
Stock issued not paid (262,500) (279,063)
Retained Earnings (deficit) (965,074) (882,267)
------------- -------------
Total stockholders' equity (deficit) (29,253) 36,991
------------- -------------
Total liabilities and stockholders' equity (deficit) $ 1,234,047 $ 1,281,777
============== ============
</TABLE>
F-1
<PAGE>
<TABLE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDING MARCH 31,
<CAPTION>
2000 1999
================ ===============
<S> <C> <C>
Revenue $ 390,185 $ 338,842
Expenses
Cost of sales 221,380 225,814
General and administrative 222,504 193,957
Depreciation, amortization and interest 29,108 29,606
------------- -----------
Income (loss) from continuing operations before
income taxes (82,807) (110,175)
Provision for income taxes - -
------------- -----------
Net (loss) $ (82,807) $ (110,175)
============== ===========
Income (loss) per weighted-average share of common
stock outstanding
Basic net (loss) per share $ (0.01) $ (0.04)
============== ============
Weighted-average number of common stock outstanding 7,950,449 2,724,375
============== ============
</TABLE>
F-2
<PAGE>
<TABLE>
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDING MARCH 31,
2000 1999
============== =================
Cash Flows From Operating Activities
<S> <C> <C>
Net (loss) $ (82,807) $ (110,175)
-------------- ------------
Adjustments To Reconcile Net (Loss) To Net Cash
Used In Operating Activities
Depreciation, net of adjustment 26,098 8,294
Amortization 303 -
Stock issued for services - -
Interest eliminated and reclassified to paid in capital - -
Decrease (Increase) in receivables 1,439 2,000
Decrease (Increase) in receivables from stockholders 70,000 (60,000)
Increase (Decrease) in accounts and notes payable (10,505) (34,948)
Increase (Decrease) in taxes payable (409) -
-------------- ------------
Net Adjustment 86,926 (84,654)
--------------- ------------
Net Cash (Used) In Operating Activities 4,119 (194,829)
-------------- ------------
Cash Flows From Investing Activities
Purchase of equipment (35,000) -
Purchase of school licensing - -
Internet website (28,298) -
-------------- ------------
Net Cash (Used) By Investing Activities (63,298) -
-------------- ------------
Cash Flows From Financing Activities
(Decrease) Increase in notes and loans payable
non stockholders (8,377) (6,200)
(Decrease) Increase in notes and loans payable
stockholders 37,805 42,584
Proceeds from unpaid capital stock issued 16,563 192,500
-------------- ------------
Net Cash Provided By Financing Activities 45,991 228,884
-------------- ------------
Net Increase (Decrease) In Cash (13,188) 34,055
Cash - Beginning 23,715 2,195
-------------- ------------
Cash - Ending $ 10,527 $ 36,250
============== ============
Other Information
Interest paid in cash $ 2,707 $ 13,563
============== ============
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.
Notes to Financial Statements
NOTE 1 - BASIS OF PRESENTATION
The interim consolidated financial statements at March 31, 2000 and for
the three month periods ended March 31, 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 three month periods ended March 31, 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 -ADDITIONAL FOOTNOTES INCLUDED BY REFERENCE
Except as indicated in Notes above, there have been no other material
changes in the information disclosed in the notes to the financial
statements included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1999. Therefore, those footnotes are
included herein by reference.
F-4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
During the first quarter of 2000, Learner's World, Inc., a New York
corporation and its subsidiaries (hereinafter the "Company" unless the context
indicates otherwise) improved its financial condition. The Company increased its
revenues over the comparable quarter in 1999. As a direct result of increased
revenues for the first quarter of 2000 and the year ended December 31, 1999, the
Company's overall financial health improved.
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.
Results of Operations
Gross revenues for the quarter ended March 31, 2000 were $390,185 compared to
$338,842 for the same period in 1999, an increase of $51,343. The gross revenues
for March 31, 2000, were higher than the comparable quarter in 1999 due to an
increase in tuition and fees collected from an increased number of students.
Costs of revenues were $221,380 for the quarter ended on March 31, 2000,
compared to $225,814 for the comparable period in 1999, a decrease of
approximately 2%.
Gross profit was $168,805 for the quarter ended on March 31, 2000 and $113,028
for the comparable quarter in 1999. Gross profit as a percentage of revenues was
43% and 33%, respectively.
Selling, general, and administrative expenses were $251,612 for the quarter
ended on March 31, 2000 and $223,203 for the comparable period in 1999, an
increase of $28,409. The primary reason for the increase/decrease was an
increase in other administrative costs.
Operating loss was $82,807 during the quarter ended on March 31, 2000, compared
to an operating loss of $110,175 for the comparable quarter in 1999. The
Company's operating loss decreased for the quarter ended March 31, 2000, as a
result of an increase in revenues.
Capital Resources and Liquidity
The Company had a net working capital deficit of $121,255 for the quarter ended
March 31, 2000, as compared to a $47,542 deficit at the end of March 31, 1999.
Net stockholders' deficit in the Company was $29,253 as of March 31, 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.
The Company's cash flows fluctuate during the year due to the seasonal nature
ofthe 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 first quarter of 2000, the Company did not issue any equity
securities to finance its operations.
4
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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 quarters ended March 31, 2000 or 1999.
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 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 $965,074 as of March 31, 2000 compared to a
deficit of $882,267 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.
5
<PAGE>
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 May 15, 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.
-------------------
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6
<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 19th day of May 2000.
Learner's World, Inc.
/s/ Sal Casaccio May 19, 2000
- --------------------
President, Chief Executive Officer and Director
/s/ Sal Casaccio May 19, 2000
- --------------------
Controller
7
<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).
* Previously filed as indicated and incorporated herein by reference from
the referenced filings previously made by the Company.
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 2000 THAT
WERE WERE FILED WITH THE COMPANY'S REPORT ON FORM 10-QSB AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001047733
<NAME> Learner's World, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 10,527
<SECURITIES> 0
<RECEIVABLES> 8,416
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,943
<PP&E> 1,001,401
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,234,047
<CURRENT-LIABILITIES> 140,198
<BONDS> 0
0
0
<COMMON> 978
<OTHER-SE> (30,321)
<TOTAL-LIABILITY-AND-EQUITY> 1,234,047
<SALES> 390,185
<TOTAL-REVENUES> 390,185
<CGS> 221,380
<TOTAL-COSTS> 221,380
<OTHER-EXPENSES> 251,612
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (82,807)
<INCOME-TAX> 0
<INCOME-CONTINUING> (82,807)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,807)
<EPS-BASIC> (0.001)
<EPS-DILUTED> (0.001)
</TABLE>
