<PAGE>
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM-10QSB
(X) Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995
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 No. 0-18222
QUANTUM LEARNING SYSTEMS, INC. (formerly known as CCR, Inc.)
(Exact name of Registrant as specified in its charter)
NEVADA 87-0432572
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 S.W. 17th Street, Ocala, Florida 34474-3530
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (904) 620-0492
Indicate by check mark whether the Registrant (1) had 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
----- -----
The number of shares outstanding of Registrant's common stock, par value $.001
per share, as of September 30, 1995 was 4,246,027 (excluding treasury shares)
shares.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
See attached financial statements.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Cambridge Academy, the Company's principle operating division for this
period, posted strong growth, increasing its operating income 259% over
the same period last year (See Note 6 to these financials).
Consolidated revenue for the three months ended September 30, 1995 was
$273,657 representing an increase of $134,032 or 96% from the three
months ended September 30, 1994. The increase is primarily due to
increases in Cambridge Academy educational revenues.
Gross profit for the three months ended September 30, 1995 was
$261,730, an increase of $149,367 or 133% from the three months ended
September 30, 1994. The increase is due primarily to increases in
Cambridge Academy educational revenues.
Selling, general, and administrative expenses for the three months
ended September 30, 1995 were $318,993, an increase of $106,843 or 50%
from the three months ended September 30, 1994. The increase is due
primarily to increases in educational subsidiary expenses, audit
expense, and corporate administrative expense.
Interest income for the three months ended September 30, 1995 decreased
$2,691 or 13% from the three months ended September 30, 1994.
Interest expense for the three months ended September 30, 1995 was
$453, a decrease of $1,357 from the three months ended September 30,
1994.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, cash and cash equivalents were $14,997 compared
to $10,214 at September 30, 1994. The Company generally relies upon
internally generated funds to satisfy working capital needs and to fund
capital expenditures.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 14,997 $ 0
Accounts and Contracts Receivable (Note 2) 236,339 178,437
Notes Receivable, current portion (Note 3) 160,877 83,442
Prepaid expenses and other 446,050 539,236
---------- ----------
Total Current Assets 858,263 801,115
Property and Equipment-at cost:
Machinery and equipment 496,010 496,010
Furniture and fixtures 42,470 42,470
---------- ----------
Property and Equipment 538,480 538,480
Less accumulated depreciation (199,377) (163,322)
---------- ----------
Net property and equipment 339,103 375,158
Other:
Notes Receivable, less current portion
(Note 3) 1,703,651 1,838,885
Deferred Tax Asset 52,763 52,763
Other (Note 8) 226,999 162,674
---------- ----------
Total Other Assets 1,983,413 2,054,322
---------- ----------
Total Assets $3,180,779 $3,230,595
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- ----------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other liabilities $ 55,442 $ 63,581
Accrued expenses 85,969 86,102
Current maturities of long-term debts (Note 4) 13,649 13,649
---------- ----------
Total current liabilities 155,060 163,332
Deferred Income Taxes 52,763 52,763
Long-term Debt, less current maturities (Note 4) 17,838 19,852
---------- ----------
Total Liabilities 225,661 235,947
Commitments and Contingencies (Note 7)
Stockholders' Equity: (Note 5)
Preferred stock, $1.00 par; 1,000,000 shares
authorized, 0 outstanding. 0 0
Common stock, $.001 par; 20,000,000 shares
authorized, 4,353,161 outstanding at Sept. 30,
1995 and June 30, 1995 4,353 4,353
Additional paid-in capital 4,547,961 4,547,961
Retained earnings (Accumulated deficit) (1,476,667) (1,437,137)
Treasury Stock, 107,134 shares at cost (120,529) (120,529)
---------- ----------
Total stockholders' equity 2,955,118 2,994,648
---------- ----------
Total Liabilities and Stockholders' Equity $3,180,779 $3,230,595
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(unaudited)
Three months ended
September 30
------------------
Restated
1995 1994
---------- ----------
<S> <C> <C>
Revenues $ 273,657 $ 139,625
Cost of Sales 11,927 27,262
--------- ----------
Gross profit 261,730 112,363
Selling, general, and administrative expenses 318,993 212,150
--------- ----------
Operating Income (Loss) (57,263) (99,787)
Other income (expense):
Interest income 18,186 20,877
Interest expense (453) (1,810)
--------- ----------
Total Other Income (Expense) 17,733 19,067
--------- ----------
Income (loss) from Operations before Income Taxes (39,530) (80,720)
Income Tax Benefit (Expense) 0 0
--------- ----------
Net Income (Loss) $ (39,530) $ (80,720)
========= ==========
Income (Loss) per common share: (Note 1) $ (.009) $ (.019)
Weighted Average Shares 4,353,161 4,353,161
</TABLE>
See accompanying notes to financial statements.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1995 AND QUARTER ENDED SEPT. 30, 1995
<TABLE>
<CAPTION>
Preferred Stock Common Stock
-------------------- ------------------ Additional
Number of Number of Paid-In
Shares Amount Shares Amount Capital
--------- ------- --------- ------- -----------
<S> <C> <C> <C> <C> <C>
Balance, June 30,
1994 (as restated) 0 $ 0 4,353,161 $ 4,353 $ 4,547,961
Net Loss 0 0 0 0 0
--------- ------- --------- ------- -----------
Balance, June 30,
1995 0 0 4,353,161 4,353 4,547,961
Net Loss 0 0 0 0 0
--------- ------- --------- ------- -----------
Balance, Sept. 30,
1995 0 $ 0 4,353,161 $ 4,353 $4,547,961
========= ======= ========= ======= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1995 AND QUARTER ENDED SEPT. 30, 1995
<TABLE>
<CAPTION>
Total
Treasury Accumulated Shareholders'
Stock (Deficit) Equity
---------- ----------- -----------
<C> <C> <C>
$(120,529) $ (765,603) $3,666,182
0 (671,534) (671,534)
--------- ----------- ----------
(120,529) (1,437,137) 2,994,648
0 (39,530) (39,530)
--------- ----------- ----------
$(120,529) $(1,476,667) $2,955,118
========= =========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(unaudited)
Three months ended
September 30,
-----------------
Restated
1995 1994
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(39,530) $ (80,720)
Adjustments to reconcile net income (loss) to
net cash from operations
Depreciation & Amortization 42,902 19,391
Changes in operating assets and liabilities:
Accounts receivable (57,902) (41,711)
Accounts payable and accrued interest (8,272) (48,530)
Inventory 0 (5,687)
Other assets and liabilities 79,813 (31,371)
-------- ---------
Net cash provided by operating activities 17,011 (188,628)
Cash flows from investing activities:
Purchase of fixed assets 0 (2,500)
-------- ---------
Net cash used by investing activities 0 (2,500)
Cash flows from financing activities:
Principal payments on long-term debt and
notes payable (2,014) (945)
-------- ---------
Net cash used by financing activities (2,014) (945)
-------- ---------
Net increase (decrease) in cash and cash equivalents 14,997 (192,073)
Cash and cash equivalents at beginning of period 0 202,287
-------- ---------
Cash and cash equivalents at end of period $ 14,997 $ 10,214
======== =========
Supplemental disclosures:
Cash paid for:
Interest $ 453 $ 1,810
</TABLE>
See accompanying notes to financial statements.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Quantum
Learning Systems, Inc. and its wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with original maturities of
three months or less to be cash equivalents.
DEPRECIATION, MAINTENANCE, AND REPAIRS
Depreciation is provided by the straight-line method. Estimated useful
lives for depreciation purposes are as follows:
Machinery and equipment 3 - 20 years
Furniture and fixtures 4 - 15 years
Maintenance and repairs and renewals which do not prolong the useful life
of an asset are expensed as incurred.
AMORTIZATION
Amortization of intangible assets which include copyrights, royalties,
and goodwill is provided by the straight-line method. Estimated useful
lives for amortization purposes are as follows:
Goodwill 5 years
Royalties 5 - 10 years
Copyrights 10 - 20 years
CAPITALIZED PRODUCTION COSTS
The Company capitalizes all direct production costs and allocates indirect
production costs based on man hours for all internally produced video
products.
EARNINGS PER SHARE
Earnings per share have been computed based upon the weighted average
number of shares outstanding during the quarter of 4,353,161 and
4,353,161 for the quarters ended September 30, 1995 and 1994,
respectively. Common Stock Equivalents in the aggregate do not
dilute earnings per share by more than 3%. Therefore, no change is
presented.
REVISION OF FINANCIAL STATEMENTS
The accompanying financial statements for the quarter ended September
30, 1994 has been revised. The revisions consisted of the restatement
of intangible assets and related amortization consistent with the
settlement reached for the adjusted purchase price of Current Concepts
Seminars ("CCS"). The original
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(CONTINUED)
REVISION OF FINANCIAL STATEMENTS (CON.)
agreement caused the issuance of 700,000 shares of QLS common stock, but
the settlement adjusts the number to 115,000 shares. The settlement
was executed in March, 1995.
NOTE 2 - ACCOUNTS AND CONTRACTS RECEIVABLE
Accounts and contracts receivable consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- ---------
<S> <C> <C>
Trade accounts receivable $ 454,514 $ 385,952
Due from related parties 1,230 0
Other 945 0
--------- ---------
Total Accounts Receivable 456,689 385,952
Less: Allowance for Bad Debt (220,350) (207,515)
--------- ---------
Accounts Receivable - Net $ 236,339 $ 178,437
========= =========
</TABLE>
NOTE 3 - NOTES RECEIVABLE
Notes receivable consist of:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------ ----------
<S> <C> <C>
Gulf Ventures - Interest rate of 8%;
payments of $20,987 due December 31,
each year. $ 202,327 $ 202,327
W.T. Young Construction Company -
Interest rate of 3.6%; payments of
$150,000 plus interest on July 10,
1995 and 1996; payments of $200,000
plus interest on July 10, 1997 and
1998 with the balance plus interest
due on July 10, 1999; collateralized
by pledge of W.T. Young Construction
Company and the common stock of QlS
owned by W.T. Young 1,644,701 1,720,000
8% note receivable from Central Florida
Hearing dated July 31, 1995. 17,500 0
Less current portion (160,877) (83,442)
---------- ----------
Total noncurrent note receivable $1,703,651 $1,838,885
========== ==========
</TABLE>
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(CONTINUED)
NOTE 4 - DEBT
Long-term debt consist of:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
---- ----
<S> <C> <C>
Note payable on various financing
leases for operating equipment $ 31,487 $ 33,501
-------- --------
Totals 31,487 33,501
Less current maturities (13,649) (13,649)
-------- --------
Total Long-term debt $ 17,838 $ 19,852
======== ========
</TABLE>
The aggregate long-term debt matures during the next five years as
follows:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
---- ----
<S> <C> <C>
1996 $ 11,635 $ 13,649
1997 9,651 9,651
1998 7,704 7,704
1999 2,497 2,497
2000 0 0
-------- ---------
Total $ 31,487 $ 33,501
</TABLE>
NOTE 5 - STOCK WARRANTS
On January 21, 1994, the Company entered into an investment banking
agreement with M.H. Meyerson & Co. In part, the agreement required the
Company to issue warrants to purchase 300,000 shares of common stock
with an exercise price of $1.85 per Warrant with demand and piggyback
registration rights. The registration rights may not be asked for a
period of 18 months from the date of the agreement. Such rights will
be available starting in month 19 through month 48 from the date of the
agreement.
On June 1, 1994, the Management of the Company approved a new director.
As compensation for services, the Company issued warrants for the
purchase of 50,000 shares of common stock at $.50 per share. The
warrants shall be effective for a period of five years from the date of
issue.
On June 1, 1994, the Management of the Company approved the issuance of
warrants to purchase 200,000 shares of common stock at $.75 per share
to an outside consultant for services to be rendered to the company.
On July 2, 1995, the Company entered into an agreement with SeaCoast
Electric, Inc. (SCE) for management services. SCE is owned, in part, by
children of officers and directors of the Company. The agreement calls
for SCE to provide management, in the form of Chief Executive Officer and
Chief Financial Officer, for all operations of all QLS subsidiaries.
In exchange, the Company
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(CONTINUED)
NOTE 5 - STOCK WARRANTS (CON.)
shall pay SCE the sum of $150,000 for management services for each fiscal
year (July to June). In addition, Cambridge Academy, a subsidiary of QLS,
shall pay one individual an annual salary of $50,000 for her work as
Director of Education. Any unpaid salary shall be eligible for the
calculation of warrants to be issued. SCE agrees to take their fees as
QLS and its subsidiaries funds allow so as not to jeopardize the
operations. In the event that at the end of the fiscal year, SCE has
not taken its entire fee, QLS shall issue a warrant for stock, with
registration rights paid for by QLS, at the strike price of $0.10 per
share. The number of shares shall be determined by the remaining unpaid
management fee.
On August 1, 1995, the company approved the sale of Warrants to two of its
Board of Directors and two independent consultants for the purchase price
of $100 to each individual. The warrants are for a total of 250,000 shares
of the Company's $0.001 Common Stock at an exercise price of $0.10 per
share. The warrants may be exercised anytime from August 1, 1995 to
August 1, 2000.
NOTE 6 - BUSINESS SEGMENT INFORMATION
The Company's business operations consist of educational activities,
seminar and publication, and video production. Segment operating
information is presented for the two quarters as follows:
<TABLE>
<CAPTION>
September 30, September 30,
Restated
1995 1994
---- ----
<S> <C> <C>
Net sales to unaffiliated customers:
Educational $ 268,452 $ 133,229
Seminar and publication 5,205 6,396
Video production 0 0
--------- ---------
Consolidated $ 273,657 $ 139,625
========= =========
Operating income (loss):
Educational $ 106,741 $ 41,146
Seminar and publication (29,672) (7,659)
Video production (11,327) (42,172)
--------- ---------
Consolidated 65,742 (8,685)
Corporate expenses (123,005) (91,102)
Interest expenses (453) (1,810)
Interest income 18,186 20,877
--------- ---------
Income (loss) before federal
income taxes $ (39,530) $ (80,720)
========= =========
</TABLE>
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Prior to the commencement of its office lease, the Company issued 25,000
shares of its common stock to the landlord of its corporate offices for
debt owed. The landlord is to sell the shares at a rate of no more than
2,000 shares per day to satisfy the debt. This stock was issued April 5,
1994.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(CONTINUED)
NOTE 7 - COMMITMENTS AND CONTINGENCIES (CON.)
If the sale of the 25,000 shares of common stock yields net proceeds of
less than the aforesaid debt of $45,598, then the deficiency immediately
becomes due and payable within five days of notice. Management has not
yet received confirmation of the monies collected from the sale of the
common stock. In addition, the Company is currently paying a discounted
rent amount. If the Company does not exercise its option to purchase the
building prior to 30 days before the expiration of the lease, April 30,
1995, then the rent shortfall between the discounted rent and the actual
rent of $24,695 will become due and payable.
On July 2, 1995 the Company entered into an agreement with SeaCoast
Electric, Inc. (SCE) for management services. SCE is owned, in part, by
children of Officers and directors of the Company. The agreement
calls for SCE to provide management, in the form of Chief Executive
Officer and Chief Financial Officer, for all operations of all QLS
subsidiaries. In exchange, the Company shall pay SCE the sum of $150,000
for management services for each fiscal year (July to June). In
addition, Cambridge Academy, a subsidiary of QLS, shall pay one
individual an annual salary of $50,000 for her work as Director of
Education. Any unpaid salary shall be eligible for the calculation of
warrants to be issued. SCE agrees to take their fees as QLS and its
subsidiaries funds allow so as not to jeopardize the operations. In the
event that at the end of the fiscal year SCE has not taken its entire fee,
QLS shall issue a warrant for stock, with registration rights paid for by
QLS, at the strike price of $0.10 per share. The number of shares shall
be determined by the remaining unpaid management fee.
The payment on the note receivable from W.T. and Glenn Young is in
dispute. The Youngs have filed for the courts to make a determination on
the agreement. Property was sold by W.T. Young Construction Company and
the proceeds applied as a payment of the note due from the Youngs.
Management's position is that an additional payment is due July 10, 1995
pursuant to the agreement. The Youngs have indicated that if the ruling
is that a payment was due July 10, 1995 in addition to the proceeds of
the land, they will return the property to the company and allow the
proceeds already given to the Company to apply as the payment due so the
note will not be in default.
NOTE 8 - OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
---- ----
<S> <C> <C>
Capitalized production costs $ 137,100 $ 137,100
Intangibles 33,437 33,437
Less: Accumulated Depreciation (8,333) (7,863)
Other assets 64,795 0
--------- ---------
Total Other Assets $ 226,999 $ 162,674
========= =========
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
An individual invested $100,0 00 in Cambridge Academy, a subsidiary of
the Company, prior to the merger of Cambridge Academy with QLS, Inc. and
Cambridge Academy set aside a block of stock for the individual. She
subsequently passed away. The estate filed a several count complaint,
all of which in essence alleges that the estate would like to recapture
the full value of the investment and does not want the block of stock
reserved for the individual issued to her satisfaction of the investment.
The maximum possible action against the company would be to return the
$100,000. Management has responded to the claim and Counsel for both
parties are exploring possible settlement as well as preparing for trial.
ITEM 2. Changes in Securities
No changes in securities during the periods.
ITEM 3. Defaults upon Senior Securities
No senior securities outstanding.
ITEM 4. Submission of Matters to a Vote of Security Holders
No annual or special meeting of security holders has been held in the
current quarter.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports of Form 8-K
No exhibits as set forth in Item 601 of Regulation S-K are considered
necessary in this 10-QSB filing.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Quantum Learning Systems, Inc.
Dated: November 10, 1995 By: /s/ James K. Isenhour
-----------------------------------
James K. Isenhour
Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
CHIEF FINANCIAL OFFICER
Dated: November 10, 1995 By: /s/ James K. Isenhour
-----------------------------------
James K. Isenhour
Treasurer
SECRETARY
Dated: November 10, 1995 By: /s/ Tanzee Nahas
-----------------------------------
Tanzee Nahas
Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 14,997
<SECURITIES> 0
<RECEIVABLES> 456,689
<ALLOWANCES> 220,350
<INVENTORY> 0
<CURRENT-ASSETS> 858,263
<PP&E> 538,480
<DEPRECIATION> 199,377
<TOTAL-ASSETS> 3,180,779
<CURRENT-LIABILITIES> 155,060
<BONDS> 0
<COMMON> 4,353
0
0
<OTHER-SE> 2,990,295
<TOTAL-LIABILITY-AND-EQUITY> 3,180,779
<SALES> 273,657
<TOTAL-REVENUES> 291,843
<CGS> 11,927
<TOTAL-COSTS> 11,927
<OTHER-EXPENSES> 318,993
<LOSS-PROVISION> 12,835
<INTEREST-EXPENSE> 453
<INCOME-PRETAX> (39,530)
<INCOME-TAX> 0
<INCOME-CONTINUING> (39,530)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,530)
<EPS-PRIMARY> (.009)
<EPS-DILUTED> 0
</TABLE>
