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 June 30, 2001.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
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Commission file number:000-28513
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LEARNER'S WORLD, INC.
(Exact name of small business issuer as specified in its charter)
NEW YORK 11-3331350
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
369 Avenue U, Brooklyn, New York 11223
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(Address of principal executive office) (Zip Code)
(718) 449-3194
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes XX No
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The number of outstanding shares of the issuer's common stock, $0.001
par value (the only class of voting stock), as of August 8, 2001 was 12,261,006.
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS.................................................1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.................................2
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................4
SIGNATURES....................................................................4
INDEX TO EXHIBITS.............................................................5
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Learner's World, Inc., a
New York corporation, and its subsidiaries and predecessors unless otherwise
indicated. Consolidated, unaudited, condensed interim financial statements
including a balance sheet for the Company as of the quarter ended June 30, 2001
and statements of operations, and statements of cash flows for the interim
period up to the date of such balance sheet and the comparable period of the
preceding year are attached hereto as Pages F-1 through F-5 and are incorporated
herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
1
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2001
ASSETS
Current assets
Cash $ -
Receivables 1,816
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Total current assets 1,816
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Property and equipment, net of accumulated depreciation 849,458
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Other assets
School licensing 583
Security deposits 52,214
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Total other assets 52,797
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Total Assets $ 904,071
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LIABILITIES AND STOCKHOLDERS'EQUITY (DEFICIT)
Current liabilities
Bank overdraft $ 23,638
Accounts and notes payable 94,105
Taxes payable 64,814
Current portion of long term debt - non stockholders 5,875
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Total current liabilities 188,432
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Long-term liabilities
Due to stockholders 1,276,979
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Total other liabilities 1,276,979
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F-1
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(Continued)
June 30, 2001
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Total liabilities 1,465,411
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Stockholders' equity (deficit)
Common stock, $.0001 par value, 20,000,000 shares
Authorized with 10,297,250 shares issued and
Outstanding at June 30, 2001 1,030
Paid in capital 1,282,521
Stock issued not paid (262,500)
Retained earnings (deficit) (1,582,391)
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Total stockholders' equity (deficit) (561,340)
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Total liabilities and stockholders' equity (deficit) $ 904,071
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See Accompanying Notes To Financial Statements
F-2
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDING JUNE 30, 2000 and 2001
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
--------------- --------------- --------------- ---------------
Revenue $ 331,390 $ 365,581 $ 732,161 $ 755,766
--------------- --------------- --------------- ---------------
Expenses
Cost of sales 170,362 199,610 373,191 420,990
General and administrative expenses 184,150 185,293 384,561 436,095
Depreciation, amortization and interest 43,682 29,113 87,364 58,221
--------------- --------------- --------------- ---------------
Total Expenses 398,194 414,016 845,116 915,306
--------------- --------------- --------------- ---------------
Income (loss) from continuing operations before
income taxes (66,804) (48,435) (112,955) (159,540)
Provision for income taxes - - 269 _
--------------- --------------- --------------- ---------------
Net (loss) $ (66,804) (48,435) (113,224) (159,540)
=============== =============== =============== ===============
Income (loss) per weighted-average share of
common stock outstanding
Basic and dilutive net (loss) per share $ (0.01) (0.00) (0.01) (0.02)
=============== =============== =============== ===============
Basic and dilutive weighted-average number of
common stock outstanding 10,297,250 9,776,250 10,297,250 9,776,250
=============== =============== =============== ===============
See Accompanying Notes To Financial Statements
F-3
LEARNER'S WORLD, INC.
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDING JUNE 30,
2001 2000
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Cash Flows From Operating Activities
Net (loss) $ (113,224) $ (159,540)
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Adjustments To Reconcile Net (Loss) To
Net Cash Used In Operating Activities
Depreciation 60,238 52,196
Amortization - 606
Stock issued for services - -
Interest eliminated and reclassified to paid in capital - -
Decrease (increase) in receivables 6,600 1,439
Decrease in security deposit - 70,000
Increase (decrease) in accounts and notes payable 35,385 19,442
Increase (decrease) in taxes payable (14,316) 2,213
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Net Adjustment 87,907 145,896
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Net Cash (Used) In Operating Activities (25,317) (13,644)
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Cash Flows From Investing Activities
Purchase of equipment - (35,000)
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Net Cash (Used) By Investing Activities - (35,000)
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Cash Flows From Financing Activities
(Decrease) increase bank overdraft 4,029 -
(Decrease) increase in notes and loans payable
Non stockholders (24,520) (12,376)
(Decrease) increase in notes and loans payable
stockholders 45,808 37,805
Proceeds from unpaid capital stock issued - 16,563
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Net Cash Provided By Financing Activities 25,317 41,992
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Net Increase (Decrease) In Cash - (6,652)
Cash - Beginning - 23,715
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Cash - Ending $ - $ 17,063
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Other Information
Interest paid in cash $ - $ 5,419
See Accompanying Notes To Financial Statements
F-4
LEARNER'S WORLD, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 1. BASIS OF PRESENTATION
The interim consolidated financial statements for the three and six
month periods ended June 30, 2001 are unaudited, but include all
adjustments which the management considers necessary for a fair
presentation.
The accompanying unaudited consolidated financial statements are for
the interim period and do not include all disclosures normally
provided in annual financial statements, and should be read in
conjunction with the Company's Form 10-KSB for the year ended December
31, 2000. The accompanying unaudited consolidated financial statements
for the three and six month periods ended June 30, 2001 are not
necessarily indicative of the results which can be expected for the
entire year.
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
F-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
During the second quarter of 2001, Learner's World, Inc., a New York
corporation and its subsidiaries (hereinafter the "Company" unless the context
indicates otherwise) continued to record net losses for the second quarter of
2001. The Company's revenues decreased approximately 10% over the comparable
quarter in 2000. While there has been a decrease in overall revenues for the
first six months of 2001, the Company is cautiously optimistic that once the
summer is over, revenues will increase.
Three Months ended June 30, 2001 and Six Months ended June 30, 2001
Gross revenues for the three months ended June 30, 2001 were $331,390 compared
to $365,581 for the same period in 2000, a decrease of $34,191. The gross
revenues for the three months ended June 30, 2001, were lower than the
comparable three months in 2000 due to a decrease in child entertainment
revenues.
Gross revenues for the six months ended June 30, 2001 were $732,161 compared to
$755,766 for the same period in 2000, a decrease of $23,605. The gross revenues
for the six months ended June 30, 2001, were lower than the comparable six
months in 2000 due to a decrease in child entertainment revenues.
Net loss was $66,804 for the three months ended on June 30, 2001 compared to a
net loss of $48,435 for the comparable three months in 2000. Net loss as a
percentage of revenues for the three month periods were (20%) and (13%),
respectively. The increase in net loss resulted from a decrease in income from
child entertainment revenues.
Net losses were $113,224 for the six months ended on June 30, 2001 and $159,540
for the comparable six months in 2000. Net loss as a percentage of revenues for
the six month periods were (__%) and (__%), respectively.
General, and administrative expenses were $184,150 for the three months ended on
June 30, 2001 and $185,283 for the comparable period in 2000, a decrease of
$1,143, or less then 1%.
General, and administrative expenses were $384,561 for the six months ended on
June 30, 2001 and $436,095 for the comparable period in 2000, a decrease of
$51,534. The primary reason for the decrease was a decrease in Internet
development costs and a decrease in legal and professional services.
Operating loss was $66,804 during the three months ended on June 30, 2001,
compared to an operating loss of $48,435 for the comparable three months in
2000. The Company's operating loss increased $18,369 or over 37% for the three
months ended June 30, 2001 because of a decrease in revenues without a
corresponding decrease in operating costs.
Operating loss was $113,224 during the six months ended on June 30, 2001,
compared to an operating loss of $159,540 for the comparable six months in 2000.
The Company's operating loss decreased $46,316 or 29% for the six months ended
June 30, 2001 because of decreases in Internet development costs and in the cost
of professional services.
Capital Resources and Liquidity
The Company had a net working capital deficit of $186,616 for the six months
ended June 30, 2001, as compared to $166,923 as of December 31, 2000 (year-end).
6
Net stockholders' deficit in the Company was $561,340 as of June 30, 2001,
compared to a stockholder's deficit of $448,116 as of December 31, 2000. The
increase in net stockholder's deficit is due to an increase in operating losses.
Cash flows used by operations were $25,317 for the six months ended June 30,
2001 as compared to cash flows used in operations of $13,644 for the comparable
period in 2000.
Cash flows used by investing activities were $0 for the six months ended June
30, 2001 and $35,000 for the six months ended June 30, 2000.
Cash flows provided by financing activities were $25,317 for the six months
ending June 30, 2001, as compared to $41,992 generated by financing activities
for the comparable period in 2000.
The Company's cash flows fluctuate during the year due to the seasonal nature of
the Company's business. Traditionally, enrollments are higher during the period
of the year when schools are in regular session (September-May) with lower
enrollments during the summer months (June-August). The decline in enrollments
during the summer is offset to some degree by the revenues from the Company's
summer camps. During the summer months the Company also experiences a decline in
revenues from children entertainment sales
Due to the Company's cash flow fluctuations, the Company experiences occasional
cash flow shortages. To satisfy its cash requirements, including the debt
service, the Company must periodically raise funds from external sources. This
often involves the Company conducting exempt offerings of its equity securities.
However, during the second quarter of 2001, the Company did not issue any equity
securities to finance its operations.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations
over the past three years. The Company believes that it can offset inflationary
increases in the cost of materials and labor through increased sales and
improved operating efficiency.
Capital Expenditures
The Company made no significant capital expenditures on property or equipment
for the quarters ended June 30, 2001 or 2000.
Trends, Events, Uncertainties that may have a Material Effect on Liquidity Risk
of Lawsuits
Inherent in the business of education and caring for children in a commercial
business is the risk of lawsuits for alleged injuries to the children. The
Company has an insurance policy with liability limits of $3,000,000 aggregate
limit which includes $1,000,000 in personal injury liability coverage to protect
the Company from legal claims to the amount of the policy coverage for risks as
specified in the policy of insurance. Although currently there are no pending
lawsuits against the Company, there is no assurance that there will not be such
lawsuits in the future and that the Company will not incur losses as the result
of such lawsuits in excess of its insurance coverage. Lawsuits against the
Company will tend to increase operating expenses and lower the potential for
profitability, as well as cause possible harm to the Company's reputation.
Labor Related Risks
The Company depends extensively on the availability, quality and reliability
7
of teachers, instructors, tutors and care-givers which it utilizes to provide
children's educational and day care services. There is no assurance that the
Company will have an adequate supply of qualified personnel at acceptable cost
to operate a profitable business. The Company is subject to all of the risks
inherent in a business that utilizes skilled labor, including but not limited to
strikes, disadvantageous collective bargaining agreements, labor showdowns,
unavailability of qualified employees, worker's compensation claims, increases
in worker's compensation and other insurance premiums (or unavailability of such
insurance), wage disputes, discrimination claims, wrongful termination claims,
the loss of qualified employees and inability to replace them, and related
risks. At the current time, none of the Company's employees are unionized. The
risks may also inhibit the Company's ability to expand or establish new
facilities. If such labor issues should arise the Company will attempt to remedy
the situation by using temporary employees and its current staff to temporarily
cover shortages until additional qualified permanent employees can be found.
Going Concern
The Company's ability to continue as a going concern is an issue raised as a
result of an accumulated deficit of $1,582,391 as of June 30, 2001 compared to a
deficit of $1,460,167 at December 31, 2000. The Company's ability to continue as
a going concern is subject to the ability of the Company to obtain a profit and
/or obtaining the necessary funding from outside sources. Management is
committed to taking the necessary steps to ensure the Company remains a going
concern. Management's plan to address the Company's ability to continue as a
going concern, includes: (1) obtaining additional funding from the sale of the
Company's securities; (2) increasing sales; (3) obtaining loans and grants from
various financial institutions where possible. Although management believes that
it will be able to obtain the necessary funding to allow the Company to remain a
going concern through the methods discussed above, there can be no assurances
that such methods will prove successful.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation
S-B are listed in the Index to Exhibits on page 10 of this Form
10-QSB, and are incorporated herein by this reference.
(b) Reports on Form 8-K. No reports were filed on Form 8-K during the
quarter.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, this 14th day of August 2001.
Learner's World, Inc. August 14, 2001
/s/ Sal Casaccio
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Sal Casaccio
President, Chief Executive Officer and Director
INDEX TO EXHIBITS
8
No. Page No. Description
3(i) * Certificate of Incorporation of Learner's World, Inc., a New
York corporation, dated June 27, 1996.
3(ii) * Certificate of Amendment of the Articles of Incorporation of
the Company filed on April 11, 1997 effecting the change of
the authorized number of shares to 20,000,000, par value to
$.0001 and effecting a 39,000-for-1 forward split of the
issued shares.
3(iii) * Certificate of Amendment of the Articles of Incorporation of
the Company filed on January 31, 1999 effecting a 1-for-30
reverse split of the issued shares.
3(iv) * By-laws of the Company.
10(i) * Promissory Note dated October 26, 1999, between the Company
and Antonio Casaccio, Agrippino Casaccio and Salvatore
Casaccio, showing the terms of payment for the Agreement of
Sale dated December 17, 1996.
10(ii) * Leases for building located at 3 69 Avenue U, Brooklyn, New
York II 223.
10(iii) * Leases for building located at 208-32 to 208-46 Bell
Boulevard, Bayside, New York 11360.
* incorporated by reference from Form 10-SB/A filed March 22, 2000.
9