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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
 
 
FORM 10-Q
 
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 
For the fiscal quarter ended October 31, 2002
 
Commission File Number 000-21535
 
 
ProsoftTraining
(Exact name of Registrant as specified in its charter)
 
 
NEVADA
  
87-0448639
(State or other jurisdiction of
  
(IRS Employer
incorporation or organization)
  
Identification No.)
 
 
3001 Bee Caves Road, Suite 300, Austin, TX 78746
(Address of principal executive offices) (Zip Code)
 
(512) 328-6140
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
None
 
Securities registered pursuant to Section 12(g) of the Act:
 
Common Stock, Par Value $.001 Per Share
(Title of class)
 
 
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 twelve 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 ninety 90 days. YES  x  NO  ¨
 
Indicate by check mark whether the registrant is an accelerated filer as defined by Rule 12b-2 of the Securities Exchange Act of 1934. YES  ¨  NO  x
 
The number of shares of the registrant’s common stock, $.001 par value, outstanding as of December 4, 2002 was 24,197,414 shares.
 

Table of Contents
 
PROSOFTTRAINING
 
INDEX TO QUARTERLY REPORT ON FORM 10-Q
 
         
Page
    
PART I
     
    
Financial Information
     
Item 1.
   
Financial Statements
     
       
3
       
4
       
5
       
6
Item 2.
      
8
Item 3.
      
13
Item 4.
      
13
    
PART II
     
    
Other Information
     
Item 5.
      
14
Item 6.
      
14
  
15
  
16
 

Table of Contents
 
PROSOFTTRAINING AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
    
Three Months Ended October 31,
  
    
2002
     
2001
  
Revenues:
                  
Content
   
$
3,030
 
   
$
3,582
 
Certification
   
 
626
 
   
 
859
 
Services
   
 
64
 
   
 
162
 
    
  
Total revenues
   
 
3,720
 
   
 
4,603
 
    
  
Costs and expenses:
                  
Costs of revenues
   
 
1,580
 
   
 
2,309
 
Content development (inclusive of amortization)
   
 
536
 
   
 
497
 
Sales and marketing
   
 
1,312
 
   
 
1,568
 
General and administrative
   
 
1,389
 
   
 
1,744
 
Depreciation and amortization
   
 
223
 
   
 
891
 
Restructuring charge
   
 
—  
 
   
 
762
 
    
  
Total costs and expenses
   
 
5,040
 
   
 
7,771
 
    
  
Loss from operations
   
 
(1,320
)
   
 
(3,168
)
Interest income
   
 
3
 
   
 
21
 
Interest expense
   
 
(69
)
   
 
(17
)
    
  
Net loss
   
$
(1,386
)
   
$
(3,164
)
    
  
Net loss per share:
                  
Basic
   
$
(0.06
)
   
$
(0.13
)
    
  
Diluted
   
$
(0.06
)
   
$
(0.13
)
    
  
Weighted average shares outstanding:
                  
Basic
   
 
24,197
 
   
 
23,724
 
    
  
Diluted
   
 
24,197
 
   
 
23,724
 
    
  
 
See accompanying notes.

3

Table of Contents
 
PROSOFTTRAINING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 
    
October 31, 2002
     
July 31, 2002
  
    
(Unaudited)
         
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
2,730
 
   
$
3,526
 
Accounts receivable, less allowances of $523 and $478
   
 
1,751
 
   
 
1,995
 
Prepaid expenses and other current assets
   
 
302
 
   
 
379
 
    
  
Total current assets
   
 
4,783
 
   
 
5,900
 
Property and equipment, net
   
 
934
 
   
 
1,166
 
Goodwill, net of accumulated amortization of $5,506
   
 
6,745
 
   
 
6,745
 
Courseware and licenses, net of accumulated amortization of $2,243
   
 
1,171
 
   
 
1,296
 
    
  
Total assets
   
$
13,633
 
   
$
15,107
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable – trade
   
$
2,174
 
   
$
2,239
 
Accrued expenses
   
 
2,277
 
   
 
2,266
 
Current portion of capital lease obligations
   
 
60
 
   
 
59
 
Deferred revenue
   
 
28
 
   
 
103
 
Accrued restructuring costs
   
 
43
 
   
 
48
 
    
  
Total current liabilities
   
 
4,582
 
   
 
4,715
 
Long-term debt
   
 
2,761
 
   
 
2,698
 
Obligations under capital leases, net of current portion
   
 
102
 
   
 
118
 
    
  
Total liabilities
   
 
7,445
 
   
 
7,531
 
    
  
Commitments and contingencies (See Notes)
   
 
—  
 
   
 
—  
 
Stockholders’ equity:
                  
Common shares, par value $.001 per share; authorized shares: 75,000,000; issued: 24,209,326 shares
   
 
24
 
   
 
24
 
Additional paid-in capital
   
 
104,421
 
   
 
104,421
 
Accumulated deficit
   
 
(98,239
)
   
 
(96,853
)
Accumulated other comprehensive income
   
 
57
 
   
 
59
 
Less common stock in treasury, at cost: 11,912 shares
   
 
(75
)
   
 
(75
)
    
  
Total stockholders’ equity
   
 
6,188
 
   
 
7,576
 
    
  
Total liabilities and stockholders’ equity
   
$
13,633
 
   
$
15,107
 
    
  

4

Table of Contents
 
PROSOFTTRAINING AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
    
Three Months Ended October 31,
  
    
2002
     
2001
  
Operating activities:
                  
Net loss
   
$
(1,386
)
   
$
(3,164
)
Adjustments to reconcile net loss to cash used in operating activities:
                  
Depreciation and amortization
   
 
319
 
   
 
1,195
 
Restructuring charge
   
 
—  
 
   
 
692
 
Non-cash interest
   
 
64
 
   
 
10
 
Changes in operating assets and liabilities:
                  
Accounts receivable
   
 
244
 
   
 
752
 
Prepaid expenses and other current assets
   
 
139
 
   
 
95
 
Accounts payable
   
 
(63
)
   
 
(328
)
Accrued expenses and deferred income
   
 
(70
)
   
 
51
 
Accrued restructuring costs
   
 
22
 
   
 
(58
)
    
  
Net cash used in operating activities
   
 
(731
)
   
 
(755
)
    
  
Investing activities:
                  
Purchase of property and equipment
   
 
(14
)
   
 
(88
)
Courseware and license purchases
   
 
(23
)
   
 
(224
)
    
  
Net cash used in investing activities
   
 
(37
)
   
 
(312
)
    
  
Financing activities:
                  
Issuance of long-term debt
   
 
—  
 
   
 
2,500
 
Issuance of common stock
   
 
—  
 
   
 
5
 
Principal payments on capital leases
   
 
(15
)
   
 
(24
)
Other
   
 
—  
 
   
 
(20
)
    
  
Net cash (used in) provided by financing activities
   
 
(15
)
   
 
2,461
 
    
  
Effects of exchange rate changes on cash
   
 
(13
)
   
 
21
 
    
  
Net (decrease) increase in cash and cash equivalents
   
 
(796
)
   
 
1,415
 
Cash and cash equivalents at the beginning of period
   
 
3,526
 
   
 
5,136
 
    
  
Cash and cash equivalents at the end of period
   
$
2,730
 
   
$
6,551
 
    
  
Supplementary disclosure of cash paid during the period for:
                  
Interest
   
$
6
 
   
$
7
 
    
  
Income taxes
   
$
—  
 
   
$
—  
 
    
  
Noncash financing activities:
                  
Common stock issued under separation agreements
   
$
—  
 
   
$
175
 
    
  
 
See accompanying notes.

5

Table of Contents
 
PROSOFTTRAINING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
 
1.
 
General
 
These interim consolidated financial statements do not include footnotes and certain financial information normally presented annually under accounting principles generally accepted in the United States of America and, therefore, should be read in conjunction with the Consolidated Financial Statements and the Notes thereto contained in the Company’s 2002 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The results of operations for the three-month period ended October 31, 2002, are not necessarily indicative of results that can be expected for the fiscal year ending July 31, 2003. The interim consolidated financial statements are unaudited but contain all adjustments, consisting of normal recurring adjustments management considers necessary to present fairly its consolidated financial position, results of operations, and cash flows as of and for the interim periods. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Certain prior period amounts have been reclassified to conform to the current period presentation.
 
2.
 
Comprehensive income
 
The components of comprehensive income for the three months ended October 31, 2002 and 2001 are as follows:
 
    
Three months ended October 31