U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to ______
Commission File Number: 0-28773
Tutornet.com Group, Inc.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 65-0910071
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1036 Leigh Mill Rd, Building #1, Great Falls, VA 22066
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(703) 759-5711
--------------
(Registrant's telephone number, including area code)
14120 Newbrook Dr., Suite 101, Chantilly, VA 20151
--------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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) has been
subject to such filing requirements for the past 90 days.
[x] Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 30, 2000
Common stock, par value $.00001 16,306,356
(Class A, Class B)
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
Consolidated Condensed Balance Sheets
Assets
Unaudited Audited
As of Year Ended
September 30, 2000 December 31, 1999
--------------------------------------------
<S> <C> <C>
Current Assets:
Cash 54,562 115,220
Accounts Receivable, Net of Allowance for Doubtful Accou 127,103 15,785
Marketable Securities, At Market Value 0 570,963
Prepaid Expenses 529,447 631,105
Deferred Taxes 336,130 336,130
--------------------------------------------
Total Current Assets 1,047,242 1,669,203
Fixed Assets:
Office Furniture & Fixtures 11,687 16,031
Office Equipment 127,717 127,717
Computer Hardware & Peripherals 959,702 829,738
Computer Network 12,873 12,873
Leasehold Improvements (Net of Accumulated Amortization) 10,804 33,531
--------------------------------------------
1,122,783 1,019,890
Less: Accumulated Depreciation 133,929 54,287
--------------------------------------------
Total Fixed Assets 988,854 965,603
Other Assets:
Computer Software, Net of Accumulated Amortization 900,030 1,071,365
Software Development Costs 0 0
Goodwill, Net of Accumulated Amortization 330,066 424,196
Deposits 89,106 171,182
Other 0 0
--------------------------------------------
Total Other Assets 1,319,202 1,666,743
--------------------------------------------
Total Assets 3,355,298 4,301,549
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Liabilities
Unaudited Audited
As of Year Ended
September 30, 2000 December 31, 1999
--------------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts Payable 3,114,633 2,617,495
Notes Payable CSR Stockholders 52,500 52,500
Accrued Gross Margin on Contract 0
Accrued Salaries & Wages 737,144 0
Accrued Interest 83,204 5,422
Accrued & Withheld Payroll Taxes 667,744 39,187
Income Taxes Payable 5,637 29,691
Officer Loan Payable 0 0
Shareholder Loan Payable 5,614,340 5,625,340
--------------------------------------------
Total Current Liabilities 10,275,201 8,369,635
Long Term Liabilities:
Subordinated Shareholder Loans Payable 832,029 947,028
Deferred Income Taxes 29,450 29,450
--------------------------------------------
Total Liabilities 11,136,680 9,346,113
--------------------------------------------
Minority Interest In Net Assets (2,734,191) (2,477,750)
--------------------------------------------
SHAREHOLDER'S EQUITY
Common Stock,
Class A, ($ 0.00001 Par Value; 950,000,000 Authorized 16,306,356
Issued and Outstanding as of September 30, 2000 and
28,307,050 outstanding in 1999) 163 163
Class B, ($0.00001 Par Value; 50,000,000 Authorized
4,750,000 Outstanding as of September 30, 2000 ) 48 48
Preferred Stock
(10,000,0000 Authorized with a Par Value of $ 0.00001
and none iissued at September 30, 2000) 0 0
--------------------------------------------
211 211
Additional Paid In Capital 6,230,641 3,708,691
Retained Earnings (Deficit) (11,278,044) (6,275,716)
--------------------------------------------
Total Shareholders' Equity (Deficit) (5,047,192) (2,566,814)
--------------------------------------------
Total Liabilities & Shareholder's Equity 3,355,298 4,301,549
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Condensed Statement of Income
Unaudited Unaudited Audited
3-Months Ended 9-Months Ended Year Ended
September 30, 2000 September 30, 2000 December 31, 1999
---------------------------------------------------------------
<S> <C> <C> <C>
Net Consulting Fees & Sales 127,103 154,567 132,126
---------------------------------------------------------------
Cost Of Fees:
Consultants & Subcontractors 33,401 805,629 1,665,868
Computer Systems Support (0) 6,603 76,361
Customer Service Expenses 0 0 0
Amortization of Software Costs 0 132,936 247,091
Depreciation of Computer Equipment 0 11,784 47,136
Factoring Expense 0 0 0
Gross Margin Expense 0 0 0
Printing & Reproduction (0) 1,954 176,478
---------------------------------------------------------------
Total Costs Of Fees 33,400 958,906 2,212,934
Gross Profit 93,703 (804,339) (2,080,808)
---------------------------------------------------------------
Selling, General & Administrative Expenses 728,857 4,442,760 9,873,218
---------------------------------------------------------------
Income (Loss) From Operations (635,154) (5,247,099) (11,954,026)
Discontinued Operations 0 0 0
Loss on Disposal of Subsidiary 0 0 0
Abacus II of Colorado 0 0 0
---------------------------------------------------------------
(635,154) (5,247,099) (11,954,026)
Other Income (Expenses):
Interest & Dividend Income 0 5,347 44,035
Interest Expense (24,179) (77,087) (110,043)
Loss on Investment in Tutornet UK 0 (39,375) (680,000)
Loss on Foreign Currency Exchange 0 (98) (1,503)
Realized Gains on Sales of Marketable Securities 0 0 754,908
Miscellaneous (Expense) 0 (745) (8,717)
---------------------------------------------------------------
(24,178) (111,958) (1,320)
---------------------------------------------------------------
Net Loss Before Extraordinary Item (659,332) (5,359,056) (11,955,346)
Extraordinary Item 0 0 0
Gain From Extinguishment of Debt 0 0 0
---------------------------------------------------------------
Loss/Gain Before Income Taxes (659,332) (5,359,056) (11,955,346)
Income Taxes 0 0 (190,589)
---------------------------------------------------------------
Net Loss (659,332) (5,359,056) (11,764,757)
Minority Interest in Net Loss/Gain 322,815 2,624,866 5,762,378
---------------------------------------------------------------
Net Loss (336,517) (2,734,191) (6,002,379)
============= ============= ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Cashflows
9-Months Ended Year Ended
September 30, 2000 December 31, 1999
-------------------------------------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Loss (3,057,005) (11,744,764)
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities
Amortization 22,727 272,481
Depreciation 79,642 53,268
Deferred Taxes - 29,094
Changes in Current Assets and Current Liabilities:
(Increase) Decrease in Accounts Receivable (111,318) 19,616
Increase (Decrease) in Prepaid Expenses 101,658 (631,105)
Deferred Taxes - (267,202)
Increase (Decrease) in Accounts Payable 497,138 2,468,358
Accrued Gross Margin on Contract - (715,108)
Increase (Decrease) in Accrued Wages 737,144 (278,729)
Increase (Decrease) in Accrued Interest 77,782 (38,755)
Increase (Decrease) in Accrued & Withheld Taxes 628,557 39,187
(Increase) Decrease in Income Tax Payable (24,054) 22,778
-------------------------------------------
TOTAL ADJUSTMENTS 2,009,275 973,883
NET CASH (USED) BY OPERATING ACTIVITIES (1,047,730) (10,770,881)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (125,620) (1,006,741)
Purchase & Development of Computer Software 171,335 (112,059)
Decrease in Deposits 82,076 (171,182)
Purchase of Goodwill 94,130 (68,739)
Shareholder Loan Payable (11,000)
Payments of Organization Expenses - -
-------------------------------------------
NET CASH (USED) BY INVESTING ACTIVITIES 210,921 (1,358,721)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances From Officer - -
Investments in Marketable Securities (Net) 570,963 (570,963)
Payments on Note Payable - (69,796)
Proceeds from Issuance of Stock - 12,145,791
Cost of Issuance of Stock - (25,000)
Proceeds from Borrowing - -
Reclassification of Subordinated Shareholder Loan 205,188 947,028
Payments on CSR Note Payable - (262,500)
-------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 776,151 12,164,560
NET INCREASE (DECREASE) IN CASH (60,658) 34,958
CASH BALANCE, BEGINNING OF PERIOD 115,220 66,128
-------------------------------------------
CASH BALANCE, END OF PERIOD 54,562 101,086
============= =============
SUPPLEMENTARY INFORMATION:
Cash Paid During the Year for:
Interest 52,908 110,043
Income Taxes -
-------------------------------------------
52,908 110,043
============= =============
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The financial statements have been prepared assuming the Company will continue
to exist as a going concern. The Company continues to actively seek
additional funding. Pending the receipt of such financing, the Company has
suspended its classroom service activities and reduced its staff to perform
only business critical operations to conserve its available cash. Currently,
the Company's only source of revenues is payments under the Software License
Agreement between Tutornet and Blackboard, Inc. Those payments approximate
$23,000 per month, payable quarterly. Although at lease one preliminary
proposal has been received that incorporate terms that are acceptable to the
Company, there can be no assurance that additional financing will be obtained.
The Company's normal business operations will not commence prior to the time
such additional financing is obtained. The failure to obtain such financing
may result in the bankruptcy of the company and/or Tutornet, the Company's
subsidiary. Further, even if such financing is obtained, there can be no
assurance that the Company's suspension of operations pending receipt of
additional financing will not result in the Company's ultimate demise or
that the Company's business has not suffered a material adverse affect as
a result of such suspension. Notwithstanding the foregoing, the Company,
intends to resume complete operations as soon as its financial condition
permits.
The Statement made in the Company's May 18 Form 8-K with respect to the
Company's involvement in a process by which it would obtain a $30 million
investment from an accredited investor has not been made and the Company
currently doubts that the investment will ever be made. As a result,
the Company was unable to meet its projected revenue target because of this
lack of investment capital that was required to support its marketing and
sales program. Also, the lack of operating capital affected the Company's
ability to support certain co-marketing arrangements with other companies.
Item 3. Quantitative and Qualitative Disclosures About Market Risk - N/A
The recent entrance of other online tutoring services may affect the price
that Tutornet charges for its services which could result in a reduction
in the monthly subscription fees, ultimately affecting the Company's
gross margins.
Part II - Other Information
Item 1. Legal Proceedings
On October 10, 2000, two creditors of the Company and its subsidiary,
Tutornet.com, Inc. ("Tutornet"), Business Development Corporation, a
Colorado corporation ("BDC"), and GJM Trading Partners Ltd., a Colorado
limited partnership ("GJM"), filed Motions for Judgement in Fairfax County,
Virginia Circuit Court against the Company, Tutornet and Forde. The Motions
alleged various causes of action against the defendants, including fraud,
negligent misrepresentation, recission, breach of contract and foreclosure
against specified assets. The allegations arise out of the merger
transaction pursuant to which the Company merged with Zycom Corp and became
a publicly traded company and the bridge loan transaction between the Company
and BDC and GJM pursuant to which the Company borrowed $500,000 from BDC
and GJM, secured by a pledge of the Company's operating assets. The parties
have agreed in principle to the terms of a settlement of this litigation
which will, if finalized and effected, result in the deferral of the Company's
and Tutornet's obligation to repay the borrowed funds, together with
interest, fees and other expenses, along with other amounts owed to BDC
and GJM until the Company or Tutornet has received the proceeds of another
financing it is currently trying to effect. Should Tutornet be unable to
effect the financing it is trying to effect, it may have no source of funds
from which to pay amounts owed to BDC and GJM other than amounts payable
to Tutornet under the Software License Agreement between Tutornet and
Blackboard, Inc. These funds approximate $23,000 per month and, as part
of the proposed settlement, the bulk of such funds (after deduction for
specified legal fees) will be assigned directly to BDC and GJM in respect
of the indebtedness owed to them. If additional financing is not obtained,
BDC and GJM may be able to foreclose on and take possession of
substantially all of the Company's and Tutornet's operating assets. The
possibility of such an event may cause the Company or Turornet to seek
protection from creditors under the bankruptcy laws.
<PAGE>
Item 2. Changes in Securities and Use of Proceeds - N/A
Item 3. Defaults Upon Senior Securities - N/A
Item 4. Submission of Matters to a Vote of Security Holders - N/A
Item 5. Other Information
Amounts previously shown for 'Marketable Securities' and Accounts Receivable
were incorrect. These accounts have been adjusted to accurately reflect the
application of those assets to reduce accounts payable and to reflect the
uncollectibilty of certain accounts receivable.
Item 6. Some Exhibits and Reports on Form 8-K - N/A
SIGNATURES*
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.
Euburn R. A. Forde
___________________________________
(Registrant)
November 15, 2000 Euburn R. A. Forde
__________________________________ ___________________________________
Date (Signature)**
___________________________________ ___________________________________
Date (Signature)**
Tutornet.com Group, Inc.
