<PAGE>
UNITED STATES
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 May 31, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number: 001-25758
MULTI-MEDIA TUTORIAL SERVICES,INC.
----------------------------------
(NAME OF SMALL BUSINESS ISSUER SPECIFIED IN ITS CHARTER)
DELAWARE 73-1293914
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
205 KINGS HIGHWAY BROOKLYN, NEW YORK 11223
------------------------------------------
(Address of principal executive offices, including zip code)
718-234-0404
------------
(Issuer's telephone number, including area code)
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
Name of each exchange
Title of each class on which registered
------------------- -------------------
NONE NONE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
COMMON STOCK, $0.01 PAR VALUE PER SHARE
REDEEMABLE WARRANTS
-------------------
(Title of Class)
<PAGE>
CHECK WHETHER THE ISSUER: (I) 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 (II) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
---- ----
THE NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK AS OF MAY 31, 2000
WAS 10,986,676 SHARES.
TRANSACTIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES NO X
---- ----
THIS QUARTERLY REPORT ON FORM 10-QSB (THE "REPORT") MAY BE DEEMED TO
CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT"). FORWARD-LOOKING STATEMENTS IN
THIS REPORT OR HEREAFTER INCLUDED IN OTHER PUBLICLY AVAILABLE DOCUMENTS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), REPORTS TO THE
COMPANY'S STOCKHOLDERS AND OTHER PUBLICLY AVAILABLE STATEMENTS ISSUED OR
RELEASED BY THE COMPANY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS WHICH COULD CAUSE THE COMPANY'S ACTUAL RESULTS, PERFORMANCE (FINANCIAL
OR OPERATING) OR ACHIEVEMENTS TO DIFFER FROM THE FUTURE RESULTS, PERFORMANCE
(FINANCIAL OR OPERATING) OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. SUCH FUTURE RESULTS ARE BASED UPON MANAGEMENT'S BEST
ESTIMATES BASED UPON CURRENT CONDITIONS AND THE MOST RECENT RESULTS OF
OPERATIONS. THESE RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS SET FORTH
HEREIN, EACH OF WHICH COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS AND THE
ACCURACY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
ii
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
THIS REPORT, INCLUDING THE DISCLOSURES BELOW, CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES.
WHEN USED HEREIN, THE TERMS "ANTICIPATES," "EXPECTS," "ESTIMATES," "BELIEVES"
AND SIMILAR EXPRESSIONS, AS THEY RELATE TO THE COMPANY OR ITS MANAGEMENT, ARE
INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED
OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH MATERIAL DIFFERENCES INCLUDE THE FACTORS DISCLOSED IN THE
"RISK FACTORS" SECTION OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE
FISCAL YEARS ENDED FEBRUARY 28, 2000 AND 1999, WHICH READERS OF THIS REPORT
SHOULD CONSIDER CAREFULLY.
RESULTS OF OPERATIONS FOR THE FISCAL QUARTERS ENDED MAY 31, 2000 AND
1999. Net sales for the fiscal quarter ended May 31, 2000 (the "2000 Period")
were $525,255 compared to $972,024 in the fiscal quarter ended May 31, 1999 (the
"1999 Period").
Gross profit was $442,768 in the 2000 Period compared to $833,569 in
the 1999 Period. Net sales and related gross profit decreased in the 2000 Period
from the 1999 Period due to a reduction in advertising in the 2000 Period. This
reduction was a result of an increase in advertising prices, which caused the
advertising to cease to be cost effective. Sales and marketing expense was 48%
of net sales in the 2000 period, as compared to 93% of net sales in the 1999
Period.
Selling and marketing expenses were $254,562 in the 2000 Period
compared to $899,176 for the 1999 Period. Selling and marketing expenses were
significantly reduced as the Company eliminated advertising, which had become
inefficient.
General and administrative expenses were $232,624 in the 2000 Period
compared to $284,238 in the 1999 Period. General and administrative expenses
were reduced in the fiscal quarter ended May 31, 2000, as the Company reduced
its overhead personnel by consolidating its operations under a leaner management
team.
Interest expense was $99,909 in the 2000 Period compared to $42,200 in
the 1999 Period. The Company also had non-cash interest charges of $357,908 in
the 2000 Period related to the below-market conversion features of certain
convertible promissory notes issued by the Company between November, 1999 and
May, 2000. Of the $99,209 of interest expense in the 2000 Period, $46,200
related to a cash payment related to the financing of the convertible promissory
notes.
Net loss was $590,485 in the 2000 Period compared to $457,264 in the
1999 Period. Loss from operations was $132,668 in the 2000 Period compared to
$415,064 in the 1999 Period. The non-cash interest charges constituted $357,908
of the net losses in the 2000 Period. Loss from operations before depreciation
and amortization was $80,668 and $349,845 for the fiscal quarters ended May 31,
2000 and May 31, 1999, respectively.
During the first half of fiscal year ended February 29, 2000, the
Company was still actively purchasing significant quantities of advertising time
on national radio. Due to the influx of dot com advertisers, the inventory
available was limited to unfavorable air times and rates for such advertising
increased. This resulted in a deterioration in the advertising performance.
Beginning in the second half of fiscal year ended February 29, 2000,
management reduced the Company's dependency on such advertising and restricted
its purchasing to those areas of advertising, which were still available on
favorable terms. The Company also took steps to diversify its revenue base,
which included a greater share of revenue from teleservicing.
Consequently, the Company was able to improve its financial performance
in the second half of the fiscal year ended February 29, 2000 and the fiscal
quarter ended May 31, 2000.
<PAGE>
Management also took steps to transition its educational sales from
off-line advertising to an internet model. The Company developed a fully
functioning e-commerce site, 1800USAMATH.COM, and has developed an advertising
strategy designed to procure leads from other educational and family related
sites at a lower cost per lead than what the Company had been paying for
off-line leads. Additionally, the Company is developing its product line for
on-line learning, which it intends to provide on a subscription basis.
LIQUIDITY AND CAPITAL RESOURCES. The Company's cash and restricted cash
decreased to $25,000 at May 31, 2000 from $50,000 at February 29, 2000. The
Company did not have any cash, other than restricted cash, at May 31, 2000.
Net cash used in operations in the 2000 Period was $308,401 compared to
$158,674 in the 1999 Period.
Net cash used in investing activities in the 2000 Period was $26,143
compared to $3,232 in the 1999 Period.
Net cash provided from financing activities in the 2000 Period was
$375,500, compared to $283,295 in the 1999 Period.
As of May 24, 1999, the Company effected a reverse split of its issued
and outstanding Common Stock on a one-for-ten basis.
In April 1996, the Company received gross proceeds of $500,000 from the
issuance of convertible notes. The notes bear interest at 10% per annum and an
accelerated rate of 17% per annum beginning April 17, 1997. The noteholders have
the right to convert the principal and accrued interest into common shares of
the Company at a price of (i) $1.2656 per share or (ii) 75% of the closing bid
for the five trading days immediately preceding the conversion. In the event of
default, as defined, the Company will not have the right to compel conversion.
The Company placed 909,090 shares of common stock into escrow for the benefit of
the noteholders. During the nine months ended November 30, 1996, $250,000 was
converted into 34,190 shares and $250,000 of principal remain outstanding and
are currently due and payable. As a result of the conversion, 45,455 shares
remained in escrow.
In May and June 1997, the Company secured approximately $350,000 of
loans ("1997 Loans"), which were used for working capital and for debt
repayment. As of June 9, 2000, the noteholders had converted all of the loans
into 5,200,000 shares of Common Stock, including 1,600,000 shares of Common
Stock issued in the fiscal quarter ended May 31, 2000.
The Company has received advances aggregating $375,000, which bear
interest at the rate of 10% per year, and are currently due and payable.
At May 31, 2000, the Company maintained advances of $40,624 from Barry
and Anne Reichman, who are directors and executive officers of the Company.
In December, 1999 the Company entered into an agreement with Gaspra,
Inc., a software development company, to develop a website and to convert a
portion of its educational video product into on-line learning courses utilizing
flash technology. The Company agreed to pay $130,000 for these services and
issued 433,333 shares of Common Stock in satisfaction of $65,000 of this
obligation in the fiscal quarter ended May 31, 2000. The Company has agreed to
issue an additional 433,333 shares in satisfaction of the $65,000 balance, once
the Company has determined that the project has been completed to its
satisfaction.
From November, 1999, to June, 2000, the Company issued approximately
$763,000 of convertible, unsecured promissory notes. The notes bear interest at
the rate of 10% PER ANNUM, and are due 10-months following the date of issuance.
The notes are convertible into Common Stock at the lesser of: (i) $0.50 per
share, or (ii) 50% of the average of the closing bid price for the Common Stock
during the five (5) days immediately preceding conversion. However, the notes
may not be converted at a price of less than $0.10 per share. The notes may be
converted into a number of shares of common stock of the Company's subsidiary,
The Tutorial Channel.com, equal to 1% of the issued and outstanding shares of
<PAGE>
common stock of such subsidiary for each $25,000 principal amount with respect
to $600,000 of certain of these notes (Series A Notes), and equal to 0.25% of
the issued and outstanding shares of common stock of such subsidiary for each
$25,000 principal amount with respect to $163,000 of certain of these notes
(Series B Notes). Each class of these notes is convertible on the earlier of (i)
the last business day preceding the filing of the first registration statement
for the common stock of such subsidiary, or (ii) December 1, 2000. As of July
14, 2000, the Company had received instructions to convert $225,000 principal
amount of the Series A Notes and $100,000 principal amount of Series B Notes,
plus accrued interest, at a conversion price of $0.10 per share, into an
aggregate of 3,258,611 shares of Common Stock. The Company recorded a non-cash
interest expense of $357,908 in connection with the below-market conversion
feature of these notes.
From November, 1999 to February, 2000, the Company issued $100,000 of
unsecured, demand promissory notes, bearing interest at the rate of 10% PER
ANNUM.
As of February 2, 2000, the Company converted an account payable of
$135,500 due to its former accountants, Holtz Rubenstein & Co., LLP, into a
one-year Series B Note, in the principal amount of $135,500, bearing interest at
the rate of 10% PER ANNUM.
In March, 2000, the Company issued 150,000 shares of Common Stock for
public relations consultant for $21,000 for services rendered. The Company
recognized an consulting expense of $10,500 during the fiscal quarter ended May
31, 2000.
In March, 2000, the Company granted options to purchase up to 150,000
shares of Common Stock at an exercise price of $0.25 per share to a consultant.
The Company recognized an consulting expense of $10,500 during the fiscal
quarter ended May 31, 2000.
As of July 14, 2000, the Company had judgments entered against it by
certain of its vendors in the aggregate amount of approximately $70,000. The
Company has reached agreements or is in the course of negotiating agreements
with these vendors to make scheduled payments on these obligations. Further,
certain creditors of the Company have commenced various lawsuits asserting
claims in the aggregate amount of approximately $235,000. In addition, the
Company has been sued by a vendor for approximately $100,000, and the Company
has asserted a counterclaim against the vendor seeking damages in the sum of
$500,000. The Company also has reached agreements with certain of its vendors
relating to obligations in the aggregate amount of approximately $800,000. Of
these settled amounts, approximately $765,000 is payable over a period of two
(2) years, and the other $35,000 is payable over a period between 6 to 18
months.
The Company continues to meet its working capital requirements through
debt and equity funding from outside sources and internally generated funds. In
addition, the Company may have increased capital requirements as it seeks to
expand its product lines and customized telemarketing services. In order to meet
its current and future cash requirements, the Company is in discussions to
negotiate additional debt and equity financing. There can be no assurance that
any financing will be successful nor that the Company will be able to fund
internally its working capital requirements or meet its debt repayment
obligations. In the event that the Company is unable to secure additional
financing, it may be obligated to significantly reduce its operations and seek
to sell assets, which would have a material adverse affect on the Company's
prospects and financial results.
The Company has received a report from its independent public
accountants, which has been filed with the Company's Annual Report on Form
10-KSB for the fiscal year ended February 29, 2000, that includes an explanatory
paragraph describing the uncertainty as to the ability of the Company's
operations to continue as a going concern.
The Company's operations have not been materially affected by the
impact of inflation.
YEAR 2000
The Company has updated its computer systems to address issues related
to year 2000 compliance. Financial and operational systems were developed to
address systems modification requirements to become year 2000 compliant. The
financial impact of making the required systems changes was not material to the
Company's consolidated financial position, liquidity and results of operations.
<PAGE>
In the first week of January, 2000, the Company experienced a year 2000 problem
relating to the operations of its voice mail system. The problem has been
resolved with minimal expense, and the problem did not have a material adverse
effect on the operations of the Company during the weeklong period and the
Company does not anticipate that there will be a material adverse effect on the
Company relating to the matter for the foreseeable future.
DOCUMENTS INCORPORATED BY REFERENCE
THE COMPANY IS CURRENTLY SUBJECT TO THE REPORTING REQUIREMENTS OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT") AND IN
ACCORDANCE THEREWITH FILES REPORTS, PROXY STATEMENTS AND OTHER INFORMATION WITH
THE COMMISSION. SUCH REPORTS, PROXY STATEMENTS AND OTHER INFORMATION MAY BE
INSPECTED AND COPIED AT THE PUBLIC REFERENCE FACILITIES OF THE COMMISSION AT
JUDICIARY PLAZA, 450 FIFTH STREET, N.W., WASHINGTON D.C. 20549; AT ITS NEW YORK
REGIONAL OFFICE, SUITE 1300, 7 WORLD TRADE CENTER, NEW YORK, NEW YORK, 10048;
AND AT ITS CHICAGO REGIONAL OFFICE, 500 WEST MADISON STREET, SUITE 1400,
CHICAGO, ILLINOIS 60661, AND COPIES OF SUCH MATERIALS CAN BE OBTAINED FROM THE
PUBLIC REFERENCE SECTION OF THE COMMISSION AT ITS PRINCIPAL OFFICE IN
WASHINGTON, D.C., AT PRESCRIBED RATES. IN ADDITION, SUCH MATERIALS MAY BE
ACCESSED ELECTRONICALLY AT THE COMMISSION'S SITE ON THE WORLD WIDE WEB, LOCATED
AT HTTP://WWW.SEC.GOV.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
c. RECENT SALES OF UNREGISTERED SECURITIES.
---------------------------------------
From November, 1999, to June, 2000, the Company issued approximately
$763,000 of convertible, unsecured promissory notes. The notes bear interest at
the rate of 10% PER ANNUM, and are due 10-months following the date of issuance.
The notes are convertible into Common Stock at the lesser of: (i) $0.50 per
share, or (ii) 50% of the average of the closing bid price for the Common Stock
during the five (5) days immediately preceding conversion. However, the notes
may not be converted at a price of less than $0.10 per share. The notes may be
converted into a number of shares of common stock of the Company's subsidiary,
The Tutorial Channel.com, equal to 1% of the issued and outstanding shares of
common stock of such subsidiary for each $25,000 principal amount with respect
to $600,000 of certain of these notes (Class A Notes), and equal to 0.25% of the
issued and outstanding shares of common stock of such subsidiary for each
$25,000 principal amount with respect to $163,000 of certain of these notes
(Class B Notes). Each class of these notes is convertible on the earlier of (i)
the last business day preceding the filing of the first registration statement
for the common stock of such subsidiary, or (ii) December 1, 2000. As of July
14, 2000, the Company had received instructions to convert $225,000 principal
amount of the Series A Notes and $100,000 principal amount of Series B Notes,
plus accrued interest, at a conversion price of $0.10 per share, into an
aggregate of 3,258,611 shares of Common Stock.
In March, 2000, the Company issued 150,000 shares of Common Stock to a
public relations consultant for $21,000 of services rendered.
In March, 2000, the Company issued 52,000 shares of Common Stock to a
consultant for $13,000 of services rendered.
In March, 2000, the Company granted options to purchase up to 150,000
shares of Common Stock at an exercise price of $0.25 per share to a consultant.
In December, 1999 the Company entered into an agreement with Gaspra,
Inc., a software development company, to develop a website and to convert a
portion of its educational video product into on-line learning courses utilizing
flash technology. The Company agreed to pay $130,000 for these services and
issued 433,333 shares of Common Stock in satisfaction of $65,000 of this
obligation in the fiscal quarter ended May 31, 2000.
In April, 2000, the Company issued 20,000 shares of Common Stock to a
consultant for $7,000 of services rendered.
In May and June 1997, the Company secured approximately $350,000 of
loans ("1997 Loans"), which were used for working capital and for debt
repayment. As of June 9, 2000, the noteholders had converted all of the loans
into 5,200,000 shares of Common Stock, including 1,600,000 shares of Common
Stock issued in the fiscal quarter ended May 31, 2000.
These securities were issued in transactions exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None
<PAGE>
ITEM 4. SUBMISSION TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBIT 27 - Financial Data Schedule.
(b) REPORTS ON FORM 8-K - The Company did not file any Reports on Form
8-K during the quarter ended May 31, 2000.
<PAGE>
SIGNATURES
In accordance with the requirements of Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MULTI-MEDIA TUTORIAL SERVICES, INC.
Date: July 17, 2000 By: /S/ Barry Reichman
-----------------------------
Barry Reichman
Chief Executive Officer and
Chief Financial Officer
<PAGE>
MULTI-MEDIA TUTORIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MAY 31, 2000 (UNAUDITED) AND FEB 29, 2000 (AUDITED)
--------------------------------------------------------------------------------
ASSETS
MAY 31, FEBRUARY 29,
2000 2000
------------ ------------
(UNAUDITED) (AUDITED)
CURRENT ASSETS
Accounts receivable $ 93,455 $ 44,605
Inventories 84,678 88,102
Prepaid income taxes 3,453 3,453
Prepaid expenses 46,401 120,601
------------ ------------
Total current assets 227,987 256,761
FURNITURE AND EQUIPMENT, net 190,387 214,184
INTANGIBLE ASSETS, net 238,289 162,349
RESTRICTED CASH 25,000 50,000
OTHER ASSETS 21,681 21,681
------------ ------------
TOTAL ASSETS $ 703,344 $ 704,975
============ ============
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
MULTI-MEDIA TUTORIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MAY 31, 2000 (UNAUDITED) AND FEBRUARY 29, 2000 (AUDITED)
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
MAY 31, FEBRUARY 29,
2000 2000
------------ ------------
(UNAUDITED) (AUDITED)
CURRENT LIABILITIES
Book overdraft $ 5,736 $ 46,692
Short-term notes payable 1,568,176 1,580,176
Convertible promissory notes 963,190 662,500
Capital lease obligations 114,391 114,391
Due to related party 40,624 83,224
Accounts payable 1,284,844 1,282,047
Accrued payroll and other expenses 228,121 298,000
Accrued interest 504,099 463,161
------------ ------------
Total current liabilities 4,709,181 4,530,191
LONG-TERM TRADE PAYABLE 282,686 366,980
------------ ------------
Total liabilities 4,991,867 4,897,171
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock, Series A, $0.01 par value
1,000,000 shares authorized
no shares issued and outstanding --
Preferred stock, Series B, $0.01 par value
50 shares authorized
no shares issued and outstanding --
Common stock, $0.01 par value
20,000,000 shares authorized and
10,938,676 shares issued and outstanding 109,388 86,835
Common stock committed, $0.01 par value 88,500
Additional paid-in capital 11,774,841 11,214,736
Accumulated deficit (16,172,752) (15,582,267)
------------ ------------
Total stockholders' deficit (4,288,523) (4,192,196)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 703,344 $ 704,975
============ ============
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
MULTI-MEDIA TUTORIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MAY 31,2000 AND
FOR THE THREE MONTHS ENDED MAY 31, 1999 (UNAUDITED)
--------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED MAY 31,
2000 1999
------------ ------------
(UNAUDITED) (UNAUDITED)
NET SALES $ 525,255 $ 972,024
COST OF SALES 82,487 138,455
------------ ------------
GROSS PROFIT 442,768 833,569
------------ ------------
OPERATING EXPENSES
Selling and marketing 254,562 899,176
General and administrative 232,624 284,238
Depreciation and amortization 52,000 65,219
Stock-based compensation 36,250 --
------------ ------------
Total operating expenses 575,436 1,248,633
------------ ------------
LOSS FROM OPERATIONS (132,668) (415,064)
------------ ------------
OTHER EXPENSE
Non-cash interest charges (357,908) --
Interest expense (99,909) (42,200)
------------ ------------
Total other expense (457,817) (42,200)
------------ ------------
NET LOSS $ (590,485) $ (457,264)
============ ============
BASIC LOSS PER SHARE $ (0.06) $ (0.17)
============ ============
DILUTED LOSS PER SHARE $ (0.06) $ (0.17)
============ ============
WEIGHTED-AVERAGE SHARES OUTSTANDING 9,866,075 2,743,646
============ ============
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
MULTI-MEDIA TUTORIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MAY 31, 2000 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Common Stock Common Additional
----------------------------- Stock Paid-In Accumulated
Shares Amount Committed Capital Deficit Total
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, FEB 29, 2000 8,683,343 $ 86,835 $ 88,500 $ 11,214,736 $(15,582,267) $ (4,192,196)
ISSUANCE OF COMMON STOCK FOR
Conversion of notes payable 1,600,000 16,000 84,000 100,000
Services 655,333 6,553 (88,500) 99,447 17,500
CONVERSION FEATURE ON CONVERTIBLE DEBT 357,908 357,908
STOCK OPTIONS ISSUED FOR SERVICES 18,750 18,750
NET LOSS (590,485) (590,485)
------------- ------------- ------------- ------------- ------------- -------------
BALANCE, MAY 31, 2000 (UNAUDITED) 10,938,676 $ 109,388 $ -- $ 11,774,841 $(16,172,752) $ (4,288,523)
============= ============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
MULTI-MEDIA TUTORIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 31, 2000 AND
FOR THETHREE MONTHS ENDED MAY 31, 1999 (UNAUDITED)
--------------------------------------------------------------------------------------------
<CAPTION>
FOR THE THREE MONTHS ENDED MAY 31,
2000 1999
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (590,485) $ (457,264)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 52,000 65,219
Below-market conversion feature of
convertible debt 357,908 --
Common stock issued for services 17,500 --
Stock options issued for services 18,750 --
(Increase) decrease in
Restricted cash 25,000 --
Accounts receivable (48,850) 55,228
Inventories 3,424 2,000
Prepaid expenses (3,800) (4,896)
Increase (decrease) in
Due to related party (42,600) 12,524
Accounts payable (81,497) 168,515
Accrued payroll and other expenses (69,879) --
Accrued interest 54,128 --
------------- -------------
Net cash used in operating activities (308,401) (158,674)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment (7,003) (3,232)
Increase in intangibles (19,140) --
------------- -------------
Net cash used in investing activities (26,143) (3,232)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of capital lease obligations -- (15,212)
Proceeds from issuance of notes payable 387,500 298,507
Repayment of notes payable (12,000) --
------------- -------------
Net cash provided by (used in) financing activities 375,500 283,295
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
MULTI-MEDIA TUTORIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 31,2000 AND
FOR THE THREE MONTHS ENDED MAY 31, 1999 (UNAUDITED)
--------------------------------------------------------------------------------
FOR THE MONTHS ENDED MAY 31,
2000 1999
------------ ------------
(UNAUDITED) (UNAUDITED)
Net increase (decrease) in cash and cash
equivalents $ 40,956 $ 121,389
CASH AND CASH EQUIVALENTS (BOOK OVERDRAFT),
BEGINNING OF YEAR (46,692) (118,277)
------------ ------------
Cash and Cash Equivalent
(BOOK OVERDRAFT), END OF YEAR $ (5,736) $ 3,112
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
INTEREST PAID $ 46,200 $ 6,200
============ ============
INCOME TAXES PAID $ 6,400 $ --
============ ============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the three months ended May 31,2000, the Company converted $100,000 of
notes payable into 1,600,000 shares of common stock.
During the three months ended May 31,2000, the Company issued 150,000 shares of
common stock for $21,000 of consulting services. $10,500 of consulting services
were rendered during the three months ended May 31,2000 and $10,500 of the
consulting services were rendered in the prior year.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
MULTI-MEDIA TUTORIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 31,2000 AND
FOR THE THREE MONTHS ENDED MAY 31, 1999 (UNAUDITED)
--------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES (CONTINUED)
During the three months ended May 31, 2000, the Company issued 433,333 shares of
common stock for $65,000 of services.
During the three months ended May 31, 2000, the Company issued 52,000 shares of
common stock for $13,000 services.
During the three months ended May 31, 2000, the Company issued 20,000 shares of
common stock for $7,000 of consulting services.
During the three months ended May 31, 1999 the Company converted $201,000 of
accounts payable into 670,000 shares of common stock.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
MULTI-MEDIA TUTORIAL SERVICES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MAY 31, 2000 AND
FOR THE THREE MONTHS ENDED MAY 31, 1999 (UNAUDITED)
--------------------------------------------------------------------------------
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Multi-Media Tutorial Services, Inc. (the "Company") have been prepared in
accordance with generally accepted accounting principals for interim financial
information and in accordance with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principals for complete financial statements. In the opinion
of management, all material adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended May 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
February 28, 2001. The information contained in this Form 10-QSB should be read
in conjunction with the audited financial statements filed as part of the
Company's Form 10-KSB ending February 29, 2000.
NET LOSS PER SHARE
The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per share is
computed by dividing loss available to common stockholders by the
weighted-average number of commons shares outstanding. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. For the years ended February 29, 2000 and February
28, 1999, the Company incurred net losses; therefore, basic and diluted loss per
share are the same.
COMPREHENSIVE INCOME
The Company utilizes SFAS No. 130 "Reporting Comprehensive Income." This
statement establishes standards for reporting comprehensive income and its
components in a financial statement. Comprehensive income as defined includes
all changes in equity (net assets) during a period from non-owner sources.
Examples of items to be included in comprehensive income, which are excluded
from net income, include foreign currency translation adjustments and unrealized
gains and losses on available-for-sale securities. Comprehensive income is not
presented in the Company's financials statements since the Company did not have
any of the items of comprehensive income in ay period presented.
9
<PAGE>
MULTI-MEDIA TUTORIAL SERVICES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MAY 31, 2000 AND
FOR THE THREE MONTHS ENDED MAY 31, 1999 (UNAUDITED)
--------------------------------------------------------------------------------
STOCKHOLDER'S EQUITY
During the first three months ended May 31, 2000, the Company converted $100,000
of short-term notes payable into 1,600,000 shares of common stock.
In addition, the Company issued 655,333 shares of common stock for consulting
services valued at $106,000, of which $88,500 was committed and recorded as of
February 29, 2000.
In March and May 2000, the Company issued $400,690 of short-term, secured
convertible promissory notes. The notes bear interest at 10% per annum and are
convertible into common stock at a price of (i) $0.50 or (ii) 50% of the average
of the closing bid price for the five days immediately preceding the conversion.
The notes cannot be converted at a price less than $0.10 per share. The shares
are convertible at a price less than $0.10 per share. The shares are convertible
at a par value of $0.01 of the Company's stock or at a par value of $0.001 of
the common stock of TheTutorialChannel.com. Related to the issuance, the Company
recognized the below-market conversion feature by recording non-cash interest
expense of $357,908.
STOCK OPTIONS
The Company uses APB Opinion No. 25 "Accounting for Stock Issued to Employees"
to calculate the compensation expense related to the grant of options to
purchase Common Stock under the intrinsic value method. Accordingly, the Company
makes no adjustments to its compensation expense or equity accounts for the
grant of options. The Company granted options for the period ended May 31, 2000.
In March 2000, the Company granted 150,000 options for consulting services
valued at $10,500 at an exercise price of $0.25.
The Company granted 250,000 options in October 1999 for consulting services of
which $8,250 was booked as of February 29, 2000 and $8,250 for the three months
ended May 31, 2000 per the vesting period.
SUBSEQUENT EVENTS
Subsequent to May 31, 2000 the company converted $325,000 of its short term 10%
unsecured promissory notes into 3,258,611 shares of its common stock.
10
