U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: December 31, 2001
Commission file number: 033-25900
VIRTUAL ACADEMICS.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2228820
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6421 Congress Avenue, Suite 201
Boca Raton, Florida 33432
(Address of principal executive offices)
(Zip code)
(561) 994-4446
(Registrant's telephone number, including area code)
Indicate by check mark whether 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 for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No
APPLICABLE TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practical date:
On January 18, 2002, the issuer had outstanding 8,690,331 shares of common
stock, $.001 par value per share.
VIRTUAL ACADEMICS.COM, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTERLY PERIOD ENDED DECEMBER 31, 2001
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets
As of December 31, 2001 (Unaudited) and June 30, 2001.......... 3
Consolidated Statements of Operations (Unaudited)
For the Three and Six Months Ended December 31, 2001 and 2000.. 4
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended December 31, 2001 and 2000............ 5
Condensed Notes to Consolidated Financial Statements..................6-7
Item 2 - Management's Discussion and Analysis.........................8-12
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings............................................ 12
Item 2 - Changes in Securities and Use of Proceeds.................... 13
Item 4 - Submission of Matters to a Vote of Security Holders.......... 13
Item 6 - Exhibits and Reports on Form 8-K............................. 13
Signatures............................................................ 13
-2-
VIRTUAL ACADEMICS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, June 30,
2001 2001
------------ ------------
(Unaudited)
CURRENT ASSETS:
Cash and Cash Equivalents .................... $ 1,620,932 $ 1,775,206
Tuition Receivable (Net of Allowance for
Doubtful Accounts of $198,584 and
$193,000, respectively) .................. 1,898,695 2,119,182
Prepaid Recruiting Fees ...................... 166,127 145,018
Other Current Assets ......................... 107,380 25,830
----------- -----------
Total Current Assets ..................... 3,793,134 4,065,236
----------- -----------
PROPERTY AND EQUIPMENT:
Computer Equipment and Software .............. 90,148 69,274
Furniture, Fixtures and Office Equipment ..... 47,970 46,932
Leasehold Improvements ....................... 3,051 3,051
141,169 119,257
----------- -----------
Less: Accumulated Depreciation ............... (46,121) (32,647)
----------- -----------
Total Property and Equipment ............. 95,048 86,610
----------- -----------
OTHER ASSETS:
Tuition Receivable (Net of Allowance for
Doubtful Accounts of $279,797 and
$172,000, respectively) .................. 915,053 379,921
Prepaid Recruiting Fees ...................... 25,044 16,511
Deferred Tax Asset ........................... 96,779 114,681
Security Deposits ............................ 8,177 7,941
----------- -----------
Total Other Assets ....................... 1,045,053 519,054
----------- -----------
Total Assets ............................. $ 4,933,235 $ 4,670,900
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable ............................. $ 16,294 $ 15,392
Unearned Revenues ............................ 2,966,085 2,914,678
Accrued Recruiting Fees ...................... 122,484 89,318
Other Accrued Expenses ....................... 196,115 137,874
----------- -----------
Total Current Liabilities ................ 3,300,978 3,157,262
NON-CURRENT LIABILITIES:
Unearned Revenues ............................ 391,607 336,919
Accrued Recruiting Fees ...................... 18,466 19,286
----------- -----------
Total Non-Current Liabilities ............ 410,073 356,205
----------- -----------
Total Liabilities ........................ 3,711,051 3,513,467
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock ($.001 Par Value;
1,000,000 Shares Authorized;
No Shares Issued and Outstanding ) ....... - -
Common Stock ($.001 Par Value;
10,000,000 Shares Authorized;
8,690,331 and 8,604,617 Shares Issued
and Outstanding at December 31, 2001
and June 30, 2001, respectively) ......... 8,690 8,604
Additional Paid-in Capital ................... 1,376,858 1,346,944
Accumulated Deficit .......................... (163,364) (198,115)
----------- -----------
Total Stockholders' Equity ............... 1,222,184 1,157,433
----------- -----------
Total Liabilities and Stockholders' Equity $ 4,933,235 $ 4,670,900
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
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VIRTUAL ACADEMICS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Six Months
Ended December 31, Ended December 31,
------------------------- -------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
NET REVENUES ..................................... $ 771,502 $ 613,378 $ 1,585,679 $ 1,091,242
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Instructional and Educational Support ........ 28,787 125,526 168,055 181,700
Selling and Promotion ........................ 61,736 107,046 194,634 184,312
General and Administrative ................... 673,106 451,905 1,193,329 828,956
----------- ----------- ----------- -----------
Total Operating Expenses ................. 763,629 684,477 1,556,018 1,194,968
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS .................... 7,873 (71,099) 29,661 (103,726)
OTHER INCOME:
Interest Income .............................. 10,493 9,221 22,992 17,278
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ................ 18,366 (61,878) 52,653 (86,448)
PROVISION FOR INCOME TAXES ....................... 5,216 - 17,902 -
----------- ----------- ----------- -----------
NET INCOME (LOSS) ................................ $ 13,150 $ (61,878) $ 34,751 $ (86,448)
=========== =========== =========== ===========
BASIC AND DILUTED:
Net Income (Loss) Per Common Share - Basic . $ 0.00 $ (0.01) $ 0.00 $ (0.01)
=========== =========== =========== ===========
Net Income (Loss) Per Common Share - Diluted $ 0.00 $ (0.01) $ 0.00 $ (0.01)
=========== =========== =========== ===========
Weighted Common Shares Outstanding - Basic . 8,616,729 7,503,617 8,610,673 7,500,847
=========== =========== =========== ===========
Weighted Common Shares Outstanding - Diluted 8,930,991 7,503,617 8,924,935 7,500,847
=========== =========== =========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
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VIRTUAL ACADEMICS.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
December 31,
--------------------------
2001 2000
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) .............................. $ 34,751 $ (86,448)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Flows (Used in) Provided by
Operating Activities:
Depreciation ............................ 13,474 5,845
Non-Cash Compensation ................... 30,000 -
Consulting Expense on Common Stock
Options Issued to Non-employees ...... - 55,305
Consulting Expense on Stock Options
Issued to Non-employees .............. - 17,820
(Increase) Decrease in:
Tuition Receivable .................... (314,645) (776,933)
Prepaid Recruiting Fees ............... (29,642) (16,294)
Other Prepaid Expenses ................ (81,550) 42,859
Security Deposits ..................... (236) -
Increase (Decrease) in:
Accounts Payable ..................... 902 41,554
Unearned Revenues .................... 106,095 1,166,465
Accrued Recruiting Fees .............. 32,346 (54,910)
Deferred Income Taxes ................ 17,902 -
Other Accrued Expenses ............... 58,241 (57,909)
----------- -----------
Net Cash Flows (Used in) Provided by
Operating Activities ........................... (132,362) 337,354
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment .......... (21,912) (24,937)
----------- -----------
Net Cash Flows Used in Investing Activities ........ (21,912) (24,937)
----------- -----------
Net (Decrease) Increase in Cash and Cash Equivalents (154,274) 312,417
Cash and Cash Equivalents - Beginning of Period .... 1,775,206 465,683
----------- -----------
Cash and Cash Equivalents - End of Period .......... $ 1,620,932 $ 778,100
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ........................................ $ - $ -
=========== ===========
Income Taxes .................................... $ - $ -
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
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VIRTUAL ACADEMICS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
Virtual Academics.com, Inc. ("VADC" or the "Company") is a distance learning
company that provides Internet education to students throughout the world. The
business is primarily conducted under the names of Barrington University and
Virtual Academics.com, Inc.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). The accompanying consolidated
financial statements for the interim periods are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the periods presented. The consolidated
financial statements include the accounts of the Company and its subsidiaries.
All significant intercompany accounts and transactions have been eliminated.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements for the year ended June 30, 2001 and notes
thereto contained in the Company's report on Form 10-KSB. The results of
operations for the six months ended December 31, 2001 are not necessarily
indicative of the results for the full fiscal year ending June 30, 2002.
The consolidated statements include the accounts of Virtual Academics.com, Inc.
and its wholly owned subsidiaries. All significant inter-company balances and
transactions have been eliminated.
Certain reclassifications have been made to the prior period's consolidated
statements of operations to conform to the current period's presentation.
NOTE 2 - REVENUE RECOGNITION
Through September 30, 2000, the Company recognized tuition and registration
revenue evenly over an estimated 24-month instructional period. The Company has
developed a new database of student activity, which will allow it to more easily
and accurately track student data including student progress on a
course-by-course basis. Accordingly, the Company changed its method of
calculating revenue to be recognized each quarter. For students registering on
or after October 1, 2000, the Company will recognize tuition and registration
revenue based on the number of courses actually completed in each student's
course of study. For example, if a student completes three out of his nine
required courses, the Company will recognize 33% of the tuition regardless of
the amount of time that the student has taken to fulfill these requirements. The
Company will utilize the previous method for all students registered prior to
October 1, 2000. The change in accounting method did not have a material effect
on the consolidated financial statements.
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VIRTUAL ACADEMICS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 - OTHER PREPAID EXPENSES
In connection with a software licensing agreement with Nokia Mobile Phones Ltd.
(the "Licensor"), a Finnish corporation, the Company paid a total of $108,900 to
obtain the right to use and distribute certain software products of the Licensor
to be used in or together with the Company's wireless products. The term of the
agreement is for a period of one year from the effective date of August 15,
2001. The prepaid licensing fee is being amortized by the Company over the one
year term. Accordingly, the Company recorded licensing expense of $40,837 during
the six month ` period ended December 31, 2001.
NOTE 4 - STOCKHOLDERS' EQUITY
On February 1, 2000, the Company adopted a stock option plan (the "2000
Performance Equity Plan"). The purpose of the plan is to advance the interests
of the Company by providing an additional incentive to attract and retain
qualified and competent persons as employees, officers, directors and
consultants upon whose efforts and judgment the success of the Company is
largely dependent. The plan was effective as of February 1, 2000 and, unless
sooner terminated by the Board of Directors of the Company in accordance with
the terms thereof, shall terminate on February 1, 2010. The plan provides for
both incentive stock options and nonqualified stock options to be granted.
Options to purchase a maximum of 1,000,000 shares may be granted and the
exercise prices of the options granted pursuant to this plan are determined by
the Board or an option committee but may not be less than 100% of the fair
market value on the day of grant. For holders of 10% or more of the combined
voting power of all classes of the Company's stock, incentive options may not be
granted at less than 110% of the fair value of the common stock at the date of
grant and the option may not exceed 5 years.
On December 19, 2001, the Company granted options to purchase 20,000 shares of
common stock to non-employee directors. The options expire on December 19, 2011
and are exercisable at $.35 per share, which was the fair market value of the
common stock at the grant date. Accordingly, under APB 25, no compensation
expense was recognized.
On the same date, the Company granted options to purchase 200,000 shares of
common stock to certain employees of the Company. The options are exercisable at
$.35 per share, which was the fair market value of the common stock at the grant
date. Accordingly, under APB 25, no compensation expense was recognized.
The Board of Directors authorized the issuance of 85,714 shares of common stock
to employees as a year-end bonus. The shares were valued at $.35 per share or an
aggregate of $30,000, which was charged to compensation expense at the grant
date.
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VIRTUAL ACADEMICS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Litigation
The Trade School Review Association filed a complaint against us on July 3, 2001
in the Superior Court for the State of California for the County of San Diego.
The association alleges in its complaint that we have violated California's
Private Postsecondary and Vocational Education Reform Act of 1989, California's
false advertising statutes and California's Consumer Legal Remedies Act and
seeks an injunction against unlawful practices, disgorgement of profits,
restitution and attorneys' fees, all in unspecified amounts. Recently, the
Company and the Trade School Review Association reached an agreement in
principle to settle for $80,000. As a result, the Company recorded settlement
expense of $80,000, which is included in general and administrative expenses and
in accrued liabilities in the accompanying consolidated financial statements.
Other litigation is from time to time pending against us is in the ordinary
course of business and we believe this litigation will not have a material
adverse effect on our financial condition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The following analysis of the results of operations and financial condition of
the Company should be read in conjunction with the consolidated financial
statements for the year ended June 30, 2001 and notes thereto contained in the
Report on Form 10-KSB of Virtual Academics.com, Inc. (the "Company") as filed
with the Securities and Exchange Commission. These financial statements reflect
the consolidated operations of Virtual Academics.com, Inc. ("VADC" or the
"Company") for the six and three month periods ended December 31, 2001 and 2000,
respectively.
This report on Form 10-QSB contains 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.
Through our subsidiaries, we are engaged in the online distance learning
industry with a focus on the international, second-career adult and corporate
training markets. We currently operate our main school, Barrington University,
from Mobile, Alabama, where the State of Alabama Department of Education, Code
of Alabama, Title 16-46-1 through 10, licenses the school. We offer degrees and
training programs to students in over 80 countries and in multiple languages.
The programs are virtual in their delivery format and can be completed from a
laptop, home computer or through a wireless device.
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
In addition to degree completion programs, we are focusing on training corporate
personnel, continuing education (CE) courses and wireless technology for
education, which we believe is a major growth area.
Additionally, we are currently developing affordable wireless platforms to
provide companies with quality training services for their employees. Our staff
will work directly with Human Resource departments to ensure the training is
scalable and applicable to their employees' needs. We will enable our WAP
technology to provide seamless information to all employees, regardless if they
are in the home, office or out in the field. Through a pilot program, we are
currently offering a limited number of our business courses through the wireless
Palm and other WAP enabled equipment through a Nokia gateway system. This
technology will provide students the means to post messages, communicate with
instructors and fellow students, complete exams, and to review syllabi and
grades.
SEASONALITY IN RESULTS OF OPERATIONS
We experience seasonality in our results of operations primarily as a result of
changes in the level of student enrollments and course completion. While we
enroll students throughout the year, December and January average enrollments
and course completion and related revenues generally are lower than other
quarters due to seasonal breaks in December and January. Accordingly, costs and
expenses historically increase as a percentage of tuition and other net revenues
as a result of certain fixed costs not significantly affected by the seasonal
second quarter declines in net revenues.
We experience a seasonal increase in new enrollments in August of each year when
most other colleges and universities begin their fall semesters. As a result,
instructional costs and services and selling and promotional expenses
historically increase as a percentage of tuition and other net revenues in the
fourth quarter due to increased costs in preparation for the August peak
enrollments.
We anticipate that these seasonal trends in the second and fourth quarters will
continue in the future.
RESULTS OF OPERATIONS
Six months ended December 31, 2001 compared to six months ended December 31,
2000.
For the six-month period ended December 31, 2001, we had a 45% increase in
earned revenues to $1,585,679 in 2001 from $1,091,242 for the comparable period
in 2000. The increase in revenues is due primarily to an increase in the number
of students that have been registered. Substantial increases in revenue and
profitability can be achieved through modest improvements in student course
completion rates. Unearned revenue represents the portion of tuition revenue
invoiced but not earned and is reflected as a liability in the accompanying
consolidated balance sheets. Since we will recognize tuition and registration
revenue based on the number of courses actually completed in each student's
course of study, student course completion efforts, if successful, are extremely
beneficial to operating results. School personnel typically employ an approach
based upon establishing personal relationships with students; for example,
students may receive a telephone call from a school counselor if they have not
completed courses. Our operating results may be impacted negatively by the
registration of new students because we incur costs to enroll students but
registration fees are initially deferred and then recognized with tuition over
the course of the study period, under the guidelines of SEC Staff Accounting
Bulletin 101.
-9-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
RESULTS OF OPERATIONS (Continued)
Six months ended December 31, 2001 compared to six months ended December 31,
2000.
Instructional and educational support expenses consist primarily of student
supplies such as textbooks as well as postage and shipping, credit card fees,
computer related expenses, and printing fees. For the six months ended December
31, 2001, instructional and educational support expenses decreased by 7.5% to
$168,055 or 11% of net revenues as compared to $181,700 or 17% of net revenues
for the six months ended December 31, 2000. The decrease in instructional and
educational support expenses and the related percentages was attributable to a
second quarter adjustment of $71,823 for the over-accrual of costs incurred for
books and supplies to our students. This was offset by increased credit card
fees due to the fact that we encourage students to join our tuition payment
program whereby students pay monthly by credit card, and an increase in student
supplies. Additionally, computer and internet related expenses increased to
$44,741 or 2.8% of net revenues for the six months ended December 31, 2001 as
compared to $22,600 or 2.1 % of net revenues for the six months ended December
31, 2000 due to web site maintenance and upgrades as well as the development of
additional websites for our wireless products.
Selling and promotion expense consists primarily of recruiting fees and
advertising. For the six month period ended December 31, 2001, selling and
promotion expenses increased by 6% to $194,634 or 12% of net revenues as
compared to $184,312 or 17% of net revenues for the six months ended December
31, 2000. The increase in selling and promotion expenses is attributable to our
increased advertising efforts. Although we are currently running advertisements
in various national publications and newspapers in order to attract more
students, we expect our advertising budget to remain constant through the end of
fiscal 2002.
General and administrative expenses, which include payroll, professional fees,
consulting fees, rent, travel and entertainment, insurance, bad debt, and other
expenses, were $1,193,329 for the six months ended December 31, 2001 as compared
to $828,956 for six months ended December 31, 2000. This amounted to 75% of net
revenues for the six months ended December 31, 2001 as compared to 76% for the
six months ended December 31, 2000. The increase was primarily due to four
factors:
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
RESULTS OF OPERATIONS (Continued)
Six months ended December 31, 2001 compared to six months ended December 31,
2000. (Continued)
First, personnel-related costs increased by 68% to $452,653 for the six months
ended December 31, 2001 from $273,347 for the comparable period in 2000. This
reflected the growth in the number of employees from 13 at December 31, 2000 to
approximately 20 employees during the quarter ended December 31, 2001. We
currently have 15 employees as of December 31, 2001 to handle student relations,
develop new programs, and perform administrative tasks and to develop our
wireless technologies. Second, the cost of professional fees increased to
$281,746 for the six months ended December 31, 2001 as compared to $191,711 for
the comparable period in 2000. The increase was attributable to the additional
costs associated with the filing of a registration statement with the Securities
and Exchange Commission during the three months ended December 31, 2001. Third,
the increased costs relating to office operations, such as postage and delivery
costs incurred to ship degree program information, computer-related expenses,
office supplies and credit card fees, reflected our increased operational
activities. Fourth, the Company and the Trade School Review Association have
reached an agreement in principle to settle for $80,000, for which we recorded
settlement expense.
Interest income was $22,992 for the six months ended December 31, 2001 as
compared to $17,278 for the six months ended December 31, 2000. We currently
invest our excess cash balances in an interest-bearing account with a financial
institution.
As a result of the foregoing factors, we recognized net income of $34,751 or net
income of $.00 per share for the six months ended December 31, 2001 as compared
to net loss of $(86,448) or a loss of $(0.01) per share for the six months ended
December 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
On December 31, 2001, we had $1,620,932 in cash and cash equivalents on hand to
meet our obligations, which represented a decrease of $154,274 from the
beginning of the current fiscal year. We have financed our operating activities
and our internal growth through cash generated from operations and through a
private placement which raised $990,000.
For the six months ended December 31, 2001 and 2000, we had a (negative)
positive cash flow from operating activities of $(132,362) and $337,354,
respectively. During the six months ended December 31, 2001, we prepaid a
licensing fee amounting to $108,900 in connection with a software licensing
agreement.
We currently believe that with future positive cash flows, we expect to be
sufficiently well capitalized to fund our operations over the ensuing 12-month
period, including the expected growth during this period. There can be no
assurances, however, that there will be positive cash flows or that we will not
have to incur significant unexpected expenses.
-11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
We currently have no significant commitments for capital expenditures and
believe that our cash on hand plus future cash flows from operations will
provide adequate liquidity for the remainder of the fiscal year based on current
operations. If we decide to pursue any acquisition opportunities or other
expansion opportunities, we may need to raise additional capital, although there
can be no assurance such capital- raising activities would be successful.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets (the "Statements"). Statement No. 141 is
effective for all business combinations initiated after June 30, 2001, while
Statement No. 142 is effective for fiscal years beginning after December 15,
2001. Under the new rules, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives. The Company applied the new
rules on accounting for goodwill and other intangible assets beginning in the
first quarter of 2002. Application of the non-amortization provisions of
Statement No. 142 did not have an effect on our financial position or results of
operations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Trade School Review Association filed a complaint against us on July 3, 2001
in the Superior Court for the State of California for the County of San Diego.
The association alleges in its complaint that we have violated California's
Private Postsecondary and Vocational Education Reform Act of 1989, California's
false advertising statutes and California's Consumer Legal Remedies Act and
seeks an injunction against unlawful practices, disgorgement of profits,
restitution and attorneys' fees, all in unspecified amounts. Recently, the
Company and the Trade School Review Association reached an agreement in
principle to settle for $80,000. As a result, we recorded settlement expense of
$80,000, which is included in general and administrative expenses and in accrued
liabilities in the accompanying consolidated financial statements.
Other litigation is from time to time pending against us is in the ordinary
course of business and we believe this litigation will not have a material
adverse effect on our financial condition.
-12-
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On December 19, 2001, the Company granted options to purchase 20,000 shares of
common stock to non-employee directors. The options expire on December 19, 2011
and are exercisable at $.35 per share, which was the fair market value of the
common stock at the grant date. Accordingly, under APB 25, no compensation
expense was recognized.
On the same date, the Company granted options to purchase 200,000 shares of
common stock to certain employees of the Company. The options are exercisable at
$.35 per share, which was the fair market value of the common stock at the grant
date. Accordingly, under APB 25, no compensation expense was recognized. All of
the foregoing grants or awards were undertaken pursuant to the exemption from
registration under Section 4(2) of the Securities Act. The Company did not pay
any fees or commissions in connection therewith.
The Company also awarded 85,714 shares of common stock to employees as a
year-end bonus. The shares were valued at $.35 per share or an aggregate of
$30,000, which was charged to compensation expense at the grant date.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, duly authorized.
VIRTUAL ACADEMICS.COM, INC.
Dated: February 13, 2002 By: /s/ Steven Bettinger
---------------------------------
Steven Bettinger, President and
Chief Executive Officer
Dated: February 13, 2002 By: /s/ Robert Bettinger
---------------------------------
Robert Bettinger, Chairman of the
Board, Treasurer, Principal
Financial and Accounting Officer
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