UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-QSB
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2001
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transitional Period from to
Commission File Number 0-29379
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LEARNCOM, INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA 87-0622927
(State or other (I.R.S. Employer
Jurisdiction Identification No.)
of Incorporation or
Organization)
720 Industrial Drive 60106
(Zip Code)
BENSENVILLE, ILLINOIS
(Address of Principal
Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (630) 227-1080
---------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 of the
registrant's common stock outstanding as of August 14, 2001 was approximately
801,723,898.
Disclosure Page 1
LearnCom, Inc.
Form 10-QSB
For the Quarterly Period Ended June 30, 2001
Index
PAGE
NO.
-----
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
Condensed Consolidated Balance Sheets as of 3
June 30, 2001 and December 31, 2000
Condensed Consolidated Statements of 4
Operations for the three and six months ended
June 30, 2001 and 2000.
Condensed Consolidated Statements of Cash 5
Flows for the six months ended June 30,
2001 and 2000.
Notes to Condensed Consolidated Financial 6-8
Statements.
Item 2. Management's Discussion and Analysis of 9-13
Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures about 13
Market Risk.
PART II OTHER INFORMATION
Item 1. Legal Proceedings. 14
Item 2. Changes in Securities and Use of Proceeds. 14
Item 3. Defaults and Senior Securities. 14
Item 4. Submission of Matters To a Vote of Security Holders. 14
Item 5. Other Information. 14
Item 6. Reports on Form 8-K. 14
SIGNATURE 15
Disclosure Page 2
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
LearnCom, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets - Unaudited
June 30 December 31,
2001 2000
-------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 114,651 $ 105,495
Accounts receivable, net 638,521 425,410
Inventory 411,156 359,027
Prepaid expenses and other current assets 230,411 147,151
-------------------------------------
Total current assets 1,394,739 1,037,083
Furniture, fixtures and office equipment, net 437,316 370,109
Publishing rights and masters, net 1,177,253 1,265,824
Distribution rights, net 1,012,500 -
Goodwill, net 363,976 -
Deferred financing costs - 191,667
Other non-current assets 131,191 53,177
-------------------------------------
Total assets $ 4,516,975 $ 2,917,860
=====================================
Liabilities and shareholders' equity (deficit)
Current liabilities:
Accounts payable and accrued expenses $ 1,435,892 $ 841,530
Revolving line of credit 450,000 450,000
Note payable--employee 181,450 108,296
Note payable--related party - 50,000
Bridge loan payable-related party - 350,000
Notes payable-distribution rights 1,090,000 120,000
Current portion of purchase consideration payable 100,000 125,000
Current portion of note payable 797,500 260,000
-------------------------------------
Total current liabilities 4,054,842 2,304,826
-------------------------------------
Long-term liabilities:
Note payable-employee 40,356 -
Subordinated bridge loan payable-related party 600,000 -
Note payable, net of current portion - 597,500
-------------------------------------
Total long-term liabilities 640,356 597,500
-------------------------------------
Shareholders' equity (deficit):
Common stock 801,724 757,500
Additional paid in capital 1,073,517 402,000
Common stock subscribed 12,500 125,000
Accumulated deficit (2,065,964) (1,268,966)
-------------------------------------
Total shareholders' equity (deficit) (178,223) 15,534
-------------------------------------
Total liabilities and shareholders' equity (deficit)
$ 4,516,975 $ 2,917,860
=====================================
See accompanying notes.
Disclosure Page 3
LearnCom, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations - Unaudited
Three Months Ended Six Months Ended
June 30 June 30
2001 2000 2001 2000
----------------------------------------------------------------------------
Net sales $ 1,187,990 $ 1,274,338 $ 2,397,915 $ 2,387,189
Cost of sales 618,015 553,896 1,263,829 975,660
----------------------------------------------------------------------------
Gross profit 569,975 720,442 1,134,086 1,411,529
Selling, marketing, general and
administrative expenses 642,375 644,606 1,375,202 1,366,716
----------------------------------------------------------------------------
Operating income (loss) (72,400) 75,836 (241,116) 44,813
Other income (expenses):
Interest expense (58,386) (44,198) (103,022) (81,638)
Other income (expense), net (292,963) 82 (452,860) 221
----------------------------------------------------------------------------
Total other (expenses) (351,349) (44,116) (555,882) (81,417)
----------------------------------------------------------------------------
Income (loss) before taxes (423,749) 31,720 (796,998) (36,604)
Income tax provision - - - -
----------------------------------------------------------------------------
Net income (loss) $ (423,749) $ 31,720 $ (796,998) $ (36,604)
============================================================================
Basic and diluted loss per share - - - -
============================================================================
Weighted-average shares outstanding 790,019,077 628,750,000 784,870,650 541,666,000
============================================================================
See accompanying notes.
Disclosure Page 5
LearnCom, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows - Unaudited
Six Months Ended
June 30
2001 2000
-------------------------------------
Operating activities
Net (loss) income $ (796,998) $ (36,604)
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Depreciation expense 43,012 32,236
Amortization expense 348,829 160,349
Changes in operating assets and liabilities
Accounts receivable 163,933 (92,865)
Inventory 2,045 (10,799)
Prepaid expenses and other assets (211,660) (49,660)
Accounts payable and accrued expenses 246,329 126,432
-------------------------------------
Net cash provided (used) by operating activities (204,510) 129,089
-------------------------------------
Investing activities
Purchases of property and equipment (94,779) (84,425)
Payments for publishing rights and masters (3,984) (158,790)
Proceeds from sale of marketable securities 593,250 -
Business acquisitions, net of cash acquired (517,328) -
-------------------------------------
Net cash (used) provided by investing activities (22,841) (243,215)
-------------------------------------
Financing activities:
Issuance of common stock 125,000 -
Proceeds from revolving line of credit - 50,000
Proceeds from notes payable - employee - 120,000
Proceeds from bridge loan payable - related party 250,000 -
Principal payment on notes payable (85,000) (111,261)
Principal payment on notes payable - employee and related
party (53,493) -
-------------------------------------
Net cash provided by financing activities 236,507 58,739
-------------------------------------
Net increase (decrease)in cash and cash equivalents 9,156 (55,387)
Cash at beginning of period 105,495 79,167
-------------------------------------
Cash at end of period $ 114,651 $ 23,780
=====================================
See accompanying notes.
Disclosure Page 5
1. Nature of Business
LearnCom operates in a single business segment producing and distributing
proprietary video programs and courses, and related consulting services, for use
in human resource and safety compliance training, and management development.
The programs and consulting contracts are sold to corporations, professional
organizations, government agencies and financial institutions, primarily in
North America.
2. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three- and six-month periods ended June
30, 2001 are not necessarily indicative of the results that may be expected for
the year ended December 31, 2001.
The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in LearnCom's consolidated financial statement
included in LearnCom's Annual Report on Form 10-KSB for the year ended December
31, 2000.
Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
No. 141, "Business Combinations" and Statement No. 142 "Goodwill and Other
Intangible Assets." Statement 141 improves the transparency of the accounting
and reporting for business combinations by requiring that all business
combinations be accounted for under a single method, the purchase method. Use of
pooling-of-interests method is no longer permitted. Statement 141 requires that
the purchase method be used for all business combinations initiated after June
30, 2001. Statement 142 requires that goodwill no longer be amortized to
earnings, but instead be reviewed for impairment. This change provides investors
with greater transparency regarding the economic value of goodwill and its
impact on earnings. The amortization of goodwill ceases upon adoption of
Statement 142, which for LearnCom will be January 1, 2002. Goodwill amortization
amounted to $4,607 during the six month period ended June 30, 2001.
Disclosure Page 6
3. Loss Per Share
Basic and diluted income (loss) per common share amounted to less than $0.01 for
all periods presented and are based upon the weighted average number of shares
of common stock outstanding, giving retroactive effect of the merger discussed
in Note 6. LearnCom has excluded all outstanding stock options from the
calculation of diluted income (loss) per share because they would have an
anti-dilutive effect.
4. Acquisitions
Videolearning Systems, Inc.
On January 24, 2001 LearnCom-Illinois purchased 100% of the outstanding common
stock of Videolearning Systems, Inc. (VLS) for $533,000 in cash, a note payable
to the seller in the amount of $67,000 and 26,666,667 shares of LearnCom common
stock with an estimated market value on the date of purchase of $400,000. VLS
distributes a range of training media from producers and publishers and offers
management guidance in the selection of programs for management, leadership,
change, supervision, customer service, harassment, diversity and other employee
development topics. The acquisition of VLS was accounted for as a purchase. The
consolidated statements of operations of LearnCom include the results of
operations of VLS for the period subsequent to the effective date of
acquisition.
The consolidation was accounted for as a purchase business combination under
generally accepted accounting principles. Accordingly, the purchase price was
allocated to VLS tangible assets acquired and liabilities assumed based on their
estimated fair values. The determination of fair values of the tangible and
intangible assets acquired is currently in process and estimates were used for
assets acquired and liabilities assumed. Goodwill has been recorded for the
excess in fair market value of the purchase price over the net tangible assets
of VLS and is being amortized over a 15-year period. The preliminary purchase
price allocation will be adjusted as the fair value of the assets acquired and
liabilities assumed is finalized.
The pro forma unaudited consolidated results of operations for the six months
ended June 30, 2000, assuming the consummation of the acquisition of VLS as of
January 1, 2000 would have been as follows:
Total revenue $3,580,461
Net income $11,428
Basic and diluted net loss per share -
TrainSeek, Inc.
On March 16, 2001, LearnCom entered into an agreement to purchase certain assets
of TrainSeek, Inc. for $200,000 in cash and 57,500,000 shares of unregistered
common stock with a value on such date of $862,500. In addition, the agreement
provides for an additional 42,500,000 shares of unregistered common stock to be
issued based upon certain performance goals attained by LearnCom using the
assets purchased. TrainSeek, Inc. was an on-line distributor of training
resources operating under the "trainseek.com" website. Consumation of this
purchase agreement is contingent upon creditor approval.
5. Provant Media, Inc.
On June 30, 2001, LearnCom entered into a 10-year license and exclusive
distribution agreement for LearnCom to provide master distribution services for
PMI's line of 300 videos and CD-ROM products and use the Provant Media, Inc.
(PMI) trademark. PMI and its predecessor, American Media, Inc. (AMI) had
developed the most sophisticated distributor networks in the training media
market. The network includes 168 domestic distributors and 75 international
Disclosure Page 7
5. Provant Media, Inc. (continued)
distributors operating out of 100 countries. The licensing paid by LearnCom
included $1,000,000 in cash and 250,000 shares of unregistered common stock with
an estimated market value on the date of the transaction of $12,500. The cost of
the distribution rights will be amortized over the term of the agreement.
In the year prior to LearnCom's acquisition of the distribution rights, revenues
for the PMI master distributor channel were approximately $4 million.
6. Reverse Acquisition
In May 2000, LearnCom-Illinois entered into an Agreement and Plan of
Reorganization with Smokey Hill Services, Inc., a Nevada corporation
incorporated in 1986, whereby Smokey Hill acquired 100% of the issued and
outstanding stock of LearnCom in exchange for approximately 66% interest in its
common stock. In contemplation of the merger Smokey Hill: 1) increased its
authorized common shares from 50,000,000 shares to 2,000,000,000 shares; 2)
received 14,000,000 shares that were returned and cancelled from its parent
company, VIP Worldnet, Inc.; and 3) completed a 125-for-1 split of its stock,
increasing its outstanding Common Stock from 2,060,000 shares to 257,500,000
shares.
7. Financing Arrangements
On April 30, 2001 the Company entered into a loan and security agreement with
American National Bank, whereby the maturity dates of the note payable ($797,500
outstanding at June 30, 2001) and the $500,000 revolving line of credit
($450,000 outstanding at June 30, 2001) were extended to April 28, 2002. Based
on the new agreement, substantially all of the assets of LearnCom, including BNA
Communications, Inc. and VLS are pledged to secure the borrowings owed to
American National Bank. In addition, the line of credit is subject to a
borrowing base formula of eligible receivables and the new agreement provides,
among other things, for the maintenance of collateral and places limits on
divides, capital expenditures and other transactions. Certain shareholders of
the Company have guaranteed the amounts outstanding under the American National
Bank financing arrangements.
In July 2001, an agreement was reached with the bridge loan creditor, whereby
the outstanding balance of the Bridge Loan Payable - Related Party of $600,000
would be reclassified as subordinated long-term debt. The subordinated debt is
due to a shareholder of the Company, bears interest at 12.5% and is due 2011.
6. Common Stock
On June 15, 2001, LearnCom issued 5,057,231 shares of common stock at a price of
$0.013 per share in exchange for professional fees of $65,744 due to a related
party. The price per share is based on the value of stock at the date services
were rendered.
Disclosure Page 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following information should be read in conjunction with the financial
statements and the notes thereto.
In order to keep our stockholders informed of LearnCom's future plans and
objectives, this Quarterly Report on Form 10-QSB and other reports and
statements issued by LearnCom from time-to-time contain, among other things,
certain statements concerning LearnCom's future plans, objectives, performance,
intentions and expectations that are or may be deemed to be "forward-looking
statements". For example, the words "believe," "expect," "anticipate," "project"
and similar expressions, this should alert you that this is a forward-looking
statement. Forward-looking statements speak only as of the date the statement is
made. LearnCom's ability to do this has been fostered by the Private Securities
Litigation Reform Act of 1995, which provides a "safe harbor" for
forward-looking statements to encourage companies to provide prospective
information so long as those statements are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement.
Although LearnCom believes that its expectations are based on reasonable
assumptions, these forward-looking statements are subject to a number of known
and unknown risks and uncertainties that could cause LearnCom's actual results,
performance and achievements to differ materially from those described or
implied in the forward-looking statements. These factors include among others,
LearnCom's ability to complete new products at planned costs and on planned
schedules, LearnCom's ability to attract and retain strategic partners and
consummate acquisitions, LearnCom's ability to leverage intangible assets in its
technology, and LearnCom's ability to maintain a sufficient level of financing
for its business strategy. Additional factors that are beyond LearnCom's control
and could influence results include market acceptance of LearnCom's products and
services and adoption of the Internet as a medium of commerce and communication.
OVERVIEW
We are a leading provider of human resource, management and safety training
courseware and consulting services to large and small businesses and
organizations. We offer over 6,000 courses, both proprietary and distributed,
that encompass a wide array of management skills and business topics typically
characterized as "soft skills." Our courseware and consulting services have
traditionally been delivered over a variety of channels, including film,
videotape, compact disk, e-learning, textbooks and workbooks, and internal
customer workshops.
As with other training products and services companies, LearnCom has been
adversely effected by the slow down in the economy. This has been particularly
apparent with our Human Resources Consulting and Training unit which offers
turnkey solutions for companies in the area of sexual harassment prevention,
diversity and employment law. In response to the slow down in demand, LearnCom
has streamlined the organization and cost reduced its payroll by approximately
1/3.
LearnCom currently provides its courseware and consulting services through
the following product lines:
VideoLearning, Systems, Inc. (VLS). The VideoLearning Systems unit, which
was acquired on January 24, 2001, is a leading distributor of training
videotapes and compact disks. VLS markets over 6,000 titles through a team of 10
salespeople and VLS' website at www.videolrn.com. Sales of VLS products were
$1,072,281 for the six months ended June 30, 2001.
Human Resources Consulting and Training. The Human Resources Consulting
and Training unit consists of the sexual harassment, diversity and employment
law courseware and consulting business of BNAC. BNAC was the leading provider of
modularized, video-supported workshops in the areas of sexual harassment
prevention, diversity management and employment law of for over 50 years.
LearnCom also operates a consulting business to provide custom, enterprise-wide
solutions for major corporations and organizations in these areas. The Human
Resources product line provides courseware and consulting for over 90% of the
Fortune 1000 organizations. During
Disclosure Page 10
the six months ended June 30, 2001, sales of Human Resources product line and
consulting services were $646,306 compared to $1,263,618 for the six months
ended June 30, 2000, a decrease of $617,312.
Safety Expectation International (SEI). The Safe Expectations
International product line provides courseware and consulting in the area of
business and government safety and environmental health, primarily regulatory
compliance under the Federal Occupational Safety and Health Act (OSHA). The
Safety Training product line offers over 100 titles to a broad spectrum of
customers. During the six months ended June 30, 2001, Safety Training product
sales were $222,201 compared to $529,022 for the six months ended June 30, 2000,
a decrease of $306,821. Efforts are underway to sell this unit which operates in
one of the most competitive segments of the market.
Management Development Resources. The Management Development Resources
(MDR) product line distributes a broad line of video-based training and
development content for executive and management development that includes
well-known business authors, consultants and educators, including, Ken
Blanchard, Stephen Covey, Jim Belasco, Warren Bennis and John Kotter. During the
six months ended June 30, 2001, MDR product sales were $457,127 compared to
$594,549 for the six months ended June 30, 2000, a decrease of $137,422.
However, this sales level was achieved with just two salespeople, where the
prior year MDR was staffed with six sales people and a vice-president.
LearnCom believes it is in a unique position to become a significant
participant in the e-learning revolution that is currently taking place in the
$70 billion training industry. LearnCom believes its extensive content library,
large customer base and trained sales force, will provide the Company with
significant strategic advantages as it seeks to compete in the emerging
e-learning market. In addition, unlike most of its competitors that have adopted
a strategy of initially building extensive e-commerce and e-learning platforms
but have little and, in many cases, only the most basic content to offer their
customers, LearnCom has followed a strategy of acquiring a large and valuable
video-based library of human resource and management compliance training
solutions that it believes can quickly be converted to an interactive,
feature-rich e-learning format on a cost-effective basis. As LearnCom's more
than 75,000 customers develop the technical and broadband capability necessary
to purchase e-learning courseware, LearnCom expects to be in a position to meet
the e-learning needs of its customers. Currently, LearnCom sells third-party
content and the focus in the market is on infrastructure (learning management
systems, network issues, hosting, etc.) rather than content. LearnCom
anticipates that in the next three to five years the market will focus more on
content.
Our reported results of operations for all periods prior to January 1, 2001 do
not reflect the results of VLS or PMI. Consequently, the results prior to these
dates are not reflective of our operations and financial position as presently
constituted.
NET SALES
Net sales decreased $86,348 or 7% to $1,187,990 for the three months ended
June 30, 2001, compared to $1,274,338 for the three months ended June 30, 2000.
For the three months ended June 30, 2001 VLS related sales were $568,484; Human
Resources Consulting and Training related sales were $230,035; Safety Training
related sales were $103,180; and Management Development Resources related sales
were $286,291. Without giving effect to the net sales of VLS, LearnCom's net
sales for the three months ended June 30, 2001 declined by $654,833 or 51%.
Overall, net sales have decreased in all units as a result of receission-fed
market for business education and training solutions that is highly competitive,
constantly evolving and subject to rapidly emerging technologies.
COST OF SALES
The total cost of sales as a percentage of revenues fluctuated from year to
year as a result of significant differences in the product composition of sales
prior to the VLS acquisition in January 2001. Cost of sales for the three months
ended June 30, 2001 was $618,015 or 52% of net sales compared to $553,896 or 43%
of net sales for the three months ended June 30, 2000. The results for the six
months ended June 30, 2001 included VLS cost of sales, which were substantially
higher than LearnCom's because the majority of VLS sales were distributor sales
in which VLS received a commission averaging 40% of the sales price. Most of the
existing LearnCom sales are of proprietary products that have a cost of sales
ranging from
Disclosure Page 11
35% to 40%. VLS has a cost of sales that ranges from 50% to 60%. The average
consolidated cost of sales is 51%. Management is attempting to improve the cost
of sales for VLS by improving commission rates and acquiring additional
exclusive distributor rights.
SALES AND MARKETING
Sales and marketing expenses were $192,066 for the three months ended June
30, 2001, compared to $262,083 for the three months ended June 30, 2000, a
decrease of $70,017. The decrease was a result of management's cost reduction
efforts. Sales and marketing expenses consist primarily of salaries,
commissions, advertising, trade show expenses and costs of marketing materials.
The 2001 amounts include the sales and marketing expenses of the combined
companies for the entire quarter, whereas the 2000 amounts do not include VLS.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $450,310 for the three months ended
June 30, 2001, compared to $382,523 for the three months ended June 30, 2000.
General and administrative expenses consist primarily of personnel related
costs, occupancy costs and professional service fees. The 2001 amount includes
the general and administrative expenses of the combined companies for the entire
quarter, whereas the 2000 amounts do not include VLS. As a result, the overall
increase is attributable primarily to the inclusion of general and
administrative expenses of VLS for the quarter ended June 30, 2001.
AMORTIZATION
Amortization expense increased for the three months ended June 30, 2001,
primarily due to the amortization of a one-year distribution agreement and
amortization of financing costs were $59,435 for the three months ended June 30,
2001 and $105,017 for the three months ended June 30, 2000. The 2001 expenses
included approximately $42,946 of depreciation on fixed assets, $359,597 of
amortization of capitalized publishing rights and masters. The 2000 expenses
included $32,236 of depreciation on fixed assets, and $160,350 related to the
amortization of capitalized publishing rights and masters.
INTEREST EXPENSE
Interest expense increased for the three months ended June 30, 2001
primarily due to the additional interest expense resulting from the Bridge Loan.
Interest expense was $58,386 for the quarter ended June 30, 2001 compared to
$44,198 for the quarter ended June 30, 2000, an increase of $14,188.
NET LOSS
The net loss was $423,750 for the three months ended June 30, 2001, compared
to the net income of $31,720 for the three months ended June 30, 2000. The net
loss was primarily due to a significant increase in cost of sales and other
expenses, particularly from professional fees, interest expense and amortization
of financing fees and depreciation expenses in comparison to the comparable
period of fiscal 2000. The 2001 amount includes income and expenses of the
combined companies for the entire quarter, whereas the 2000 amounts do not
include VLS.
Disclosure Page 12
LIQUIDITY AND CAPITAL RESOURCES
Since inception our operations have been financed primarily through private
placements of equity and debt instruments.
Net cash used by operating activities was $204,510 for the six-month period
ended June 30, 2001.
Net cash used by investing activities for the six-month period was $22,841.
This represented cash proceeds from sale of marketable securities of $593,250
and cash used to purchase computers and office equipment in the amount of
$94,779, cash for payments of publishing rights and masters in the amount of
$3,984 and cash received net of cash paid for business acquisition in the amount
of $517,328.
Net cash provided by financing activities for the six-month period was
$236,507, consisting of additional borrowings on LearnCom's bridge loan with a
shareholder of the Company in the amount of $250,000; cash received for the
subscription of common stock in the amount of $124,997; reduction in notes to
shareholders in the amount of $53,490 and the reduction of LearnCom's term debt
used in the acquisition of BNAC in the amount of $85,000.
To meet immediate liquidity concerns, during 2001 LearnCom has extended its
lending agreement with American National Bank until April 28, 2002 and has
obtained a subscription for equity funding of $125,000. In addition, agreements
have been reached with related party lenders to convert outstanding debt to
subordinated debt. To further strengthen the financial position, LearnCom is
attempting to raise a total of $5 million including $2 million of subordinated
debt and $3 million in equity through a private placement. Both the subordinated
debt infusion and the capital infusion are anticipated to be completely funded
by the end of the third quarter of 2001, although there can be no assurance that
LearnCom will be successful in raising funds within such timeframe, if at all.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Disclosure Page 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
On January 11, 2001, LearnCom sold 9,375,000 shares of common stock in
exchange for an aggregate purchase price of $124,997. Such transaction was
effected pursuant to Section 4(2) of the Securities Act of 1933, amended.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters To a Vote of Security Holders
None
Item 5. Other Information.
None
Item 6. Reports on Form 8-K.
(a) Reports on Form 8-K.
The following reports on Form 8-K were filed during the quarter.
None
Disclosure Page 14
LEARNCOM, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEARNCOM, INC.
Date: August 14, 2001 By: /s/ Lloyd W. Singer
--------------------------
Lloyd W. Singer
Chief Executive Officer
------------------------------------------------------------------------
Disclosure Page 15