<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
QUARTERLY REPORT ISSUED UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Nine-Month period ending March 31, 2000
VIRTUAL ACADEMICS.COM, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2228820 33-25900
- -------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Commission File
of Incorporation) Identification Number) Number
6421 Congress Avenue, Suite 201, Boca Raton, Florida 33487
- -------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (561) 994-4446
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15 (d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or 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[ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE TO CORPORATE ISSUERS
On March 31, 2000, the Registrant had outstanding 7,446,733 shares of common
stock, $.001 par value.
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VIRTUAL ACADEMICS.COM, INC.
INDEX
PART I. FINANCIAL INFORMATION.......................................... 3
Item 1. Financial Statements........................................... 3
Item 2. Management's Discussion and Analysis or Plan of Operation..... 7
PART II. OTHER INFORMATION..............................................10
Item 1. Legal Proceedings..............................................10
Item 2. Changes in Securities..........................................10
Item 3. Defaults Upon Senior Securities................................10
Item 4. Submission of Matters to a Vote of Security Holders............10
Item 5. Other Information..............................................10
Item 6. Exhibits and Reports on Form 8-K...............................11
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
VIRTUAL ACADEMICS.COM, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, 2000
--------------
(UNAUDITED)
<S> <C>
ASSETS
CURRENT ASSETS
Cash and Equivalents $ 483,499
Tuition Receivable, Current, net of allowance for doubtful
accounts of $ 44,319 860,147
Prepaid Recruiting Fees, Current 157,261
Other Prepaid Expenses 2,493
---------
Total Current Assets 1,503,400
---------
PROPERTY AND EQUIPMENT
Computer Equipment 24,826
Furniture and Fixtures 51,062
---------
Sub-total 75,888
Less: Accumulated Depreciation (19,577)
---------
Total Property and Equipment 56,311
=========
OTHER ASSETS
Tuition Receivable, Non-current, net of allowance for doubtful
accounts of $ 10,533 204,431
Prepaid Recruiting Fess, Non-current 33,012
Deferred Tax Assets 11,629
Security Deposits 4,102
---------
TOTAL ASSETS $ 1,812,885
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 29,266
Unearned Revenue 892,513
Accrued Recruiting Fees 159,367
Income Taxes Payable 18,560
Other Accrued Expenses 7,779
---------
Total Current Liabilities 1,107,485
=========
NON-CURRENT LIABILITIES
Unearned Revenue 187,356
Accrued Recruiting Fees 37,877
Deferred Income Tax 2,233
---------
Total Non-Current Liabilities 227,466
=========
STOCKHOLDERS' EQUITY
Common Stock, Authorized 11,000,000 shares, par value $.001
Issued and Outstanding 7,446,733 shares 7,447
Preferred Stock, Authorized 1,000,000 shares, par value $.001
Issued and Outstanding 0 shares --
Capital Paid-in Excess of Par Value 982,616
Note Receivable from Subscription (550,000)
Retained Earnings 37,871
Total Stockholders' Equity 477,934
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,812,885
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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VIRTUAL ACADEMICS.COM, INC.
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
YEAR TO DATE
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------- -------------------------------
MARCH 31, 2000 MARCH 31, 1999 MARCH 31, 2000 MARCH 31, 1999
-------------- -------------- -------------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE $ 339,551 $ 179,839 $ 895,861 $ 565,606
------------ ----------- ----------- -----------
COSTS AND EXPENSES
Recruiting Fees 55,842 38,159 169,353 120,012
Other Cost of Delivering Services 67,794 17,237 114,055 54,210
General and Administrative Expenses 199,053 74,643 474,752 227,071
Interest -- -- -- --
Depreciation 3,935 1,335 6,566 4,005
------------ ----------- ----------- -----------
Total Costs and Expenses 326,624 131,374 764,726 405,298
------------ ----------- ----------- -----------
INCOME FROM OPERATIONS 12,927 48,465 131,135 160,308
INTEREST INCOME (EXPENSE) 1,562 (22) 1,562 (1,672)
------------ ----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 14,489 48,443 132,697 158,636
PROVISION FOR INCOME TAXES 4,947 1,555 10,816 5,091
------------ ----------- ----------- -----------
NET INCOME $ 9,542 $ 46,888 $ 121,881 $ 153,545
============ =========== =========== ===========
Weighted Average Shares Outstanding 6,951,129 4,200,000 6,548,939 4,200,000
============ =========== =========== ===========
Net Income per Share, Basic and Diluted $ 0.00 $ 0.01 $ 0.02 $ 0.04
============ =========== =========== ===========
PRO FORMA NET INCOME
Income before Provision for Income Taxes $ 14,489 $ 48,443 $ 132,697 $ 158,636
Provision for Income Taxes 4,947 16,540 45,307 54,163
------------ ----------- ----------- -----------
Net Income $ 9,542 $ 31,903 $ 87,390 $ 104,473
============ =========== =========== ===========
Pro Forma Net Income per Share, Basic and Diluted $ 0.00 $ 0.01 $ 0.01 $ 0.02
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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VIRTUAL ACADEMICS.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR TO DATE
NINE MONTHS ENDED
--------------------------------
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit $ 121,881 $ 153,545
Adjustments to Reconcile Net Profit to Net Cash Provided
by Operating Activities
Depreciation 6,566 4,005
(Increase) Decrease in Assets
Tuition Receivable, Current (303,606) (307,192)
Prepaid Recruiting Fees, Current (12,858) (113,057)
Other Prepaid Expenses (2,493) --
Other Assets
Tuition Receivable, Non-current (65,296) (76,798)
Prepaid Recruiting Fees, Non-Current (18,701) (11,167)
Deferred Tax Assets (11,629) --
Security Deposits 298 --
Increase (Decrease) in Liabilities
Accounts Payable 12,007 (4,563)
Unearned Revenue, Current 254,126 365,777
Accrued Recruiting Fees, Current 33,477 43,698
Income Taxes Payable 14,133 8,347
Other Accrued Expenses and Taxes Payable 2,337 (3,067)
Other Liabilities
Unearned Revenue, Non-current 124,088 37,157
Accrued Recruiting Fees, Non-current 6,405 25,389
Deferred Income Tax 2,233 --
--------- ---------
Net Cash Provided by Operating Activities 162,968 122,074
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Property and Equipment (41,002) (10,918)
--------- ---------
Net Cash Used by Investing Activities (41,002) (10,918)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock 990,000 --
Note Receivable from Subscription (550,000) --
Distributions to Members (88,189) (106,881)
--------- ---------
Net Cash Provided (Used) by Financing Activities 351,811 (106,881)
--------- ---------
Net Increase in Cash and Equivalents 473,777 4,275
--------- ---------
CASH AND EQUIVALENTS
At Beginning of Period 9,722 9,863
========= =========
At End of Period $ 483,499 $ 14,138
========= =========
Supplemental Information:
Interest Paid $ -- $ --
========= =========
Income Taxes Paid $ -- $ 5,091
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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VIRTUAL ACADEMICS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:
Virtual Academics.com, Inc. is a distance learning school that provides Internet
education to students throughout the world. The business is conducted under the
name of Barrington University and Virtual Academics.
The consolidated balance sheet as of March 31, 2000, the consolidated income for
the threemonths and the nine-months ended March 31, 2000 and 1999 and cash flows
for the nine-months ended March 31, 2000, and 1999 have been prepared by Virtual
Academics.com, Inc. (the "Company") without audit. In the opinion of management,
all adjustments necessary to present the financial position, the results of
operations and cash flows for the periods reported have been made. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These consolidated financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
Company's annual report. The results for the nine-month period ending March 31,
2000 are not indicative of the results that may occur for the fiscal year ending
June 30, 2000
NOTE 2:
On December 8, 1999, Steve Bettinger and Robert Bettinger (the "Bettingers")
acquired 4,200,000 shares of Donnebrooke Corp. Prior to the purchase of these
shares Donnebrooke had 6,346,733 shares outstanding. Accordingly, the Bettingers
owned approximately 66% of Donnebrooke Corp.'s outstanding common shares after
the purchase. In connection with the purchase of Donnebrooke Corp.'s shares, the
Bettingers, also owners of International Educational Group, LLC, and its
subsidiaries, Barrington University, Inc., a Florida Corporation, Barrington
University, Inc., an Alabama Corporation, and Spanish University of America
Foundation, Inc., transferred their interest in these companies to Donnebrooke
Corp. Donnebrooke Corp. then changed its name to Virtual Academics.com, Inc.
Since Donnebrooke was inactive and had no operations, for accounting purposes
the acquisitions of the Bettingers' entities were accounted for as a reverse
merger and recapitalization. Therefore, the financial statements of the Company
reflect the assets, liabilities and operations of the Bettingers' entities as if
they had been the reporting entity since inception.
6
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VIRTUAL ACADEMICS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3:
Reconciliation of Retained Earnings as of March 31, 2000:
Retained Earnings at beginning of Year $ 4,242
Net Income for the nine months ended March 31, 2000 121,881
Less: Distributions to Members Prior to Reorganization (88,189)
Less: Retained Earnings Reclassified to Common Stock (63)
---------
Retained Earnings as of March 31, 2000 $ 37,871
=========
NOTE 4:
Prior to the reverse merger and reorganization the Company was a Limited
Liability Company. Net income was allocated to the members, and as a result the
provision for income tax relates to earnings for the period from December 8,
1999 through March 31, 2000 only. Pro forma net income amounts for the affected
periods are presented for comparison.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with the
financial statements appearing in this report. These financial statements
reflect the consolidated operations of Virtual Academics.com, Inc. for the
three-month and the nine-month periods ending March 31, 2000 and 1999,
respectively.
The following may contain forward-looking statements. These statements consist
of any statement other than a recitation of historical fact and can be
identified by the use of forward-looking terminology such as "may," "expect,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. The reader is cautioned that all
forward-looking statements are necessarily speculative and there are certain
risks and uncertainties that could cause actual events or results to differ
materially from those referred to in such forward-looking statements. We do not
have a policy of updating forward-looking statements and thus it should not be
assumed that silence over time means that actual events are bearing out as we
estimated in such forward-looking statements.
On December 8, 1999 Donnebrooke Corp. acquired us through a reverse acquisition.
In December 1999 we moved our operations from New York City to Boca Raton,
Florida. In January 2000 we changed the Donnebrooke Corp. name to Virtual
Academics.com, Inc.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)
We are in the distance learning industry. We currently offer degrees and
training programs in six languages (English, Spanish, Japanese, Chinese,
Portuguese and Arabic) and we have students registered in 43 countries. The
programs are online and offer students the convenience of completing their
education and training from a laptop or home computer. We are licensed by the
State Education Department of the State of Alabama and recognized by state owned
education departments in China, Egypt and Canada. We focus on the national and
international educational and corporate training markets, and anticipate
significant growth in these markets.
Revenue - For the three-month period ending March 31, 2000 we had an 89%
increase in earned revenues to $339,551 from $179,839 for the comparable period.
For the nine-month period ending March 31, 2000 we had a 58% increase in earned
revenues to $895,861 from $565,606 for the comparable period. The increase for
these periods is due primarily to an increase in the number of students that
have registered with the school. We recognize tuition as earned revenue over a
twenty-four month period. Unearned revenue is the amount of tuition that has not
yet been earned. The following table sets forth the computation of unearned
revenue for the nine-month period ending March 31, 2000.
<TABLE>
<CAPTION>
CURRENT NON-CURRENT TOTAL
------- ----------- -----
<S> <C> <C> <C>
Unearned revenue at the beginning of year $ 638,387 $ 63,268 $ 701,655
============ =========
Tuition from students during the year - net 1,274,075
Earned revenue (895,861)
-----------
Unearned revenue at end of period $ 892,513 $ 187,356 $ 1,079,869
============ ========= ===========
</TABLE>
Recruiting fees, and other costs of delivering services, which consist primarily
of supplies such as textbooks, to the students vary with the revenue recognized
from tuition.
Recruiting Fees - Recruiting fees vary with revenue. For the three-month period
ending March 31, 2000 we experienced a 4.7% decrease as a percentage of revenue
to $55,842 from $38,159 for the comparable period. For the nine-month period
ending March 31, 2000 we experienced a decrease of 2.2% as a percentage of
revenue to $169,353 from $120,012 for the comparable period.
Recruiting fees are paid to third parties when the tuition is received;
recruiting fees are accrued for tuition receivable. The decrease in recruiting
fees as a percentage of revenue is attributable to an increasing number of
students enrolling from direct marketing efforts, including the Internet.
The trend is expected to continue.
8
<PAGE> 9
Other Cost of Delivering Services - Other cost of delivering services consists
vary with revenue and consist primarily of research and curriculum development.
For the three-month period ending March 31, 2000 we experienced a 10.4% increase
as a percentage of revenue to $67,794 from $17,237 for the comparable period.
For the nine-month period ending March 31, 2000 we experienced an increase of
3.1% as a percentage of revenue to $114,055 from $54,210 for the comparable
period. During the quarter our costs of textbooks and related materials
increased as a result of a new program with our primary supplier.
General and Administrative Expenses - For the three-month period ending March
31, 2000 we experienced an increase of 17.1% as a percentage of revenues to
$199,053 from $74,643 for the comparable period. For the nine-month period
ending March 31, 2000 we experienced an increase of 12.9% as a percentage of
revenues to $474,752 from $227,071 for the comparable period.
The increase for the nine-month and the three-month periods were primarily due
to three factors. Personnel-related costs increased reflecting growth in the
number of employees from 3 at December 31, 1999 to 7 at March 31, 2000. The cost
of professional services increased because of the cost of operating a public
entity. We also had increased expenses for optimizing our internet applications.
LIQUIDITY AND CAPITAL RESOURCES
On March 31, 2000, we had $483,499 in cash and equivalents on hand to meet our
obligations, which represented an increase of $473,777 from the beginning of the
fiscal year.
In February 2000 we consummated a private placement of our common stock to an
investor, for which we received cash proceeds of $440,000. All of the cash
proceeds from this private placement will be used as working capital. We feel
that with the infusion of this additional working capital we are well
capitalized to fund our operations over the next twelve-month period, including
the growth we expect during this period.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In February 2000 the Company issued 1,100,000 shares of its common
stock to an accredited investor in a private transaction exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended, and
Rule 506 promulgated under that Act. See the Company's Report on Form 10-QSB for
the quarter ended December 31, 1999, incorporated herein by this reference, for
supplemental information concerning this transaction.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On May 5, 2000, the Company changed its independent accountant from
S.W. Hatfield + Associates, Dallas, Texas, to a Florida-based accounting firm,
Sweeney, Gates & Co., 2691 E. Oakland Park Blvd., Suite 302, Ft. Lauderdale,
Florida 33306, concurrently with the Company's relocation to Boca Raton,
Florida. The reports of S.W. Hatfield + Associates on the financial statements
of the Company for the two fiscal years ended December 31, 1998, contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. In connection with the
Company's audits for the fiscal years ended December 31, 1997 and 1998, and
through May 5, 2000, there have been no disagreements with the former
accountants on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of the former accountants, would have caused them
to make reference to the subject matter of the disagreement in their report on
the financial statements for such year. The Company does not believe that during
the two years ended December 31, 1999, and through May 5, 2000, there were any
reportable events (as defined in Regulation S-B, Item 304(a)(1)(v)) with S.W.
Hatfield + Associates. Pursuant to Regulation S-B, Item 304(a)(3), the Company
has asked S.W. Hatfield + Associates to provide the Company within ten (10) days
of this Report with a letter addressed to the Securities and Exchange Commission
stating that it agrees with the above statements and, if not, stating the
respects in which it does not agree.
10
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibit 27.1 Financial Data Schedule (for SEC use only)
B. REPORTS ON FORM 8-K
The Company filed a Report on Form 8-K on January 12, 2000,
with respect to a change in control of the Company (Item 1 of the Report) and
the Company's acquisition of assets (Item 2 of the Report).
On February 18, 2000, the Company amended the 8-K filed
January 12, 2000, to provide financial exhibits, pro forma financial information
and exhibits (Item 7 of the Report) and to report the change in the Company's
fiscal year from December 31 to June 30. The financial statements filed with
Form 8-K/A included (i) an audited combined balance sheet, statement of
operations, statement of cash flows, and statement of partners' equity as of
June 30, 1999, and (ii) unaudited combined statement of operations, statement of
operations, statement of cash flows, and statement of partners' equity for the
three months ended September 30, 1999, of International Educational Group,
L.L.C., a predecessor of the Company.
11
<PAGE> 12
SIGNATURES
In accordance with 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, duly authorized.
VIRTUAL ACADEMICS.COM, INC.
---------------------------------------------
(Registrant)
Dated: May 10, 2000 By: /s/ STEVEN BETTINGER
-----------------------------------------
Steven Bettinger, President and
Chief Operating Officer
Dated: May 10, 2000 By: /s/ ROBERT BETTINGER
-----------------------------------------
Robert Bettinger, Chief Executive
Officer, Treasurer, Principal
Financial and Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 483,499
<SECURITIES> 0
<RECEIVABLES> 860,147
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,503,400
<PP&E> 75,888
<DEPRECIATION> 19,577
<TOTAL-ASSETS> 1,812,885
<CURRENT-LIABILITIES> 1,107,485
<BONDS> 0
0
0
<COMMON> 7,447
<OTHER-SE> 470,487
<TOTAL-LIABILITY-AND-EQUITY> 1,812,885
<SALES> 0
<TOTAL-REVENUES> 339,551
<CGS> 0
<TOTAL-COSTS> 326,624
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,562
<INCOME-PRETAX> 14,489
<INCOME-TAX> 4,947
<INCOME-CONTINUING> 9,542
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,542
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
