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 January 31, 2004
Commission File Number 000-21535
ProsoftTraining
(Exact name of Registrant as specified in its charter)
| NEVADA | 87-0448639 | |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
410 N. 44th Street, Suite 600, Phoenix, AZ 85008
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (602) 794-4199
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 in Rule 12b-2 of the Exchange Act). YES ¨ NO x
The number of shares of the registrants’ common stock, $.001 par value, outstanding as of March 12, 2004 was 24,221,326 shares.
TABLE OF CONTENTS
PROSOFTTRAINING AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three Months Ended January 31, |
Six Months Ended January 31, |
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| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Content |
$ | 1,649 | $ | 2,182 | $ | 3,377 | $ | 5,212 | ||||||||
| Certification |
347 | 647 | 950 | 1,273 | ||||||||||||
| Services |
— | 11 | — | 75 | ||||||||||||
| Total revenues |
1,996 | 2,840 | 4,327 | 6,560 | ||||||||||||
| Costs and expenses: |
||||||||||||||||
| Costs of revenues |
635 | 1,256 | 1,431 | 2,836 | ||||||||||||
| Content development |
143 | 420 | 296 | 957 | ||||||||||||
| Sales and marketing |
684 | 877 | 1,305 | 2,190 | ||||||||||||
| General and administrative |
615 | 1,376 | 1,286 | 2,764 | ||||||||||||
| Depreciation and amortization |
126 | 279 | 254 | 502 | ||||||||||||
| Total costs and expenses |
2,203 | 4,208 | 4,572 | 9,249 | ||||||||||||
| Loss from operations |
(207 | ) | (1,368 | ) | (245 | ) | (2,689 | ) | ||||||||
| Interest income |
— | 1 | — | 5 | ||||||||||||
| Interest expense |
(79 | ) | (73 | ) | (151 | ) | (142 | ) | ||||||||
| Net loss |
$ | (286 | ) | $ | (1,440 | ) | $ | (396 | ) | $ | (2,826 | ) | ||||
| Net loss per share: basic and diluted |
$ | (0.01 | ) | $ | (0.06 | ) | $ | (0.02 | ) | $ | (0.12 | ) | ||||
| Weighted average shares outstanding: basic and diluted |
24,209 | 24,201 | 24,209 | 24,199 | ||||||||||||
The accompanying notes are an integral part of these consolidated statements.
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PROSOFTTRAINING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| January 31, 2004 |
July 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 1,210 | $ | 1,567 | ||||
| Accounts receivable, less allowances of $477 and $494 |
842 | 1,023 | ||||||
| Prepaid expenses and other current assets |
199 | 157 | ||||||
| Total current assets |
2,251 | 2,747 | ||||||
| Property and equipment, net of accumulated depreciation of $3,158 and $3,013 |
379 | 483 | ||||||
| Goodwill, net of accumulated amortization of $5,506 |
6,745 | 6,745 | ||||||
| Licenses, net of accumulated amortization of $2,628 and $2,499 |
358 | 486 | ||||||
| Other |
110 | 118 | ||||||
| Total assets |
$ | 9,843 | $ | 10,579 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable, trade |
$ | 757 | $ | 1,061 | ||||
| Accrued expenses |
713 | 826 | ||||||
| Current portion of capital lease obligations |
52 | 54 | ||||||
| Other |
158 | 255 | ||||||
| Total current liabilities |
1,680 | 2,196 | ||||||
| Long-term debt |
3,113 | 2,968 | ||||||
| Obligations under capital leases, net of current portion |
38 | 64 | ||||||
| Total liabilities |
4,831 | 5,228 | ||||||
| Stockholders’ equity: |
||||||||
| Common shares, par value $.001 per share; authorized shares: 75,000,000; issued: 24,221,326 shares |
24 | 24 | ||||||
| Additional paid-in capital |
104,422 | 104,422 | ||||||
| Accumulated deficit |
(99,557 | ) | (99,161 | ) | ||||
| Accumulated other comprehensive income |
198 | 141 | ||||||
| Less common stock in treasury, at cost: 11,912 shares |
(75 | ) | (75 | ) | ||||
| Total stockholders’ equity |
5,012 | 5,351 | ||||||
| Total liabilities and stockholders’ equity |
$ | 9,843 | $ | 10,579 | ||||
The accompanying notes are an integral part of these consolidated statements.
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PROSOFTTRAINING AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months Ended January 31, |
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| 2004 |
2003 |
|||||||
| Operating activities: |
||||||||
| Net loss |
$ | (396 | ) | $ | (2,826 | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: |
||||||||
| Depreciation and amortization |
255 | 717 | ||||||
| Non-cash interest |
145 | 132 | ||||||
| (Gain) loss on the disposal of fixed assets |
(2 | ) | 112 | |||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable, net |
195 | 723 | ||||||
| Prepaid expenses and other current assets |
(32 | ) | 185 | |||||
| Accounts payable |
(300 | ) | (502 | ) | ||||
| Accrued expenses |
(124 | ) | (331 | ) | ||||
| Other |
(96 | ) | (123 | ) | ||||
| Net cash used in operating activities |
(355 | ) | (1,913 | ) | ||||
| Investing activities: |
||||||||
| Purchase of property and equipment |
(15 | ) | (14 | ) | ||||
| Courseware and license purchases |
— | (34 | ) | |||||
| Net cash used in investing activities |
(15 | ) | (48 | ) | ||||
| Financing activities: |
||||||||
| Issuance of common stock |
— | 2 | ||||||
| Principal payments on capital leases |
(29 | ) | (27 | ) | ||||
| Net cash used in financing activities |
(29 | ) | (25 | ) | ||||
| Effects of exchange rate changes on cash |
42 | 37 | ||||||
| Net decrease in cash and cash equivalents |
(357 | ) | (1,949 | ) | ||||
| Cash and cash equivalents at the beginning of period |
1,567 | 3,525 | ||||||
| Cash and cash equivalents at the end of period |
$ | 1,210 | $ | 1,576 | ||||
| Supplementary disclosure of cash paid during the period for: |
||||||||
| Interest |
$ | 5 | $ | 10 | ||||
The accompanying notes are an integral part of these consolidated statements.
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PROSOFTTRAINING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
1. General
These interim consolidated financial statements do not include certain footnotes and 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 2003 Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC. The results of operations for any interim period are not necessarily indicative of results that can be expected for the fiscal year ending July 31, 2004. 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 reclassifications have been made in the prior-period consolidated financial statements to conform with the current-period presentation.
2. Comprehensive Income
The components of comprehensive income for the three and six months ended January 31, 2004 and 2003 are as follows:
| Three months ended January 31 |
Six months ended January 31 |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net loss |
$ | (286 | ) | $ | (1,440 | ) | $ | (396 | ) | $ | (2,826 | ) | ||||
| Other comprehensive income: |
||||||||||||||||
| Foreign currency translation adjustments |
42 | 46 | 57 | 44 | ||||||||||||
| Comprehensive loss |
$ | (244 | ) | $ | (1,394 | ) | $ | (339 | ) | $ | (2,782 | ) | ||||
3. New Accounting Pronouncements
In January 2003, the Financial Accounting Standards Board, or the FASB, issued FASB Interpretation No. 46, or FIN No. 46, Consolidation of Variable Interest Entities (“VIE”). FIN No. 46 requires that if a company holds a controlling interest in a VIE, the assets, liabilities and results of the VIE’s activities should be consolidated in the entity’s financial statements. In December 2003, the FASB revised FIN No. 46 which, among other revisions, resulted in the deferral of the effective date of applying the provisions of FIN No. 46 to the first interim or annual period ending after March 15, 2004 for qualifying VIE’s. The Company does not expect that the adoption of FIN No. 46, as revised, will have a material impact on its consolidated financial condition or results of operations.
4. Earnings (Loss) Per Share of Common Stock
Basic earnings (loss) per share, or basis EPS, of common stock is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during each the period. Diluted earnings (loss) per share, or diluted EPS, is computed by dividing net income (loss) by the weighted average numbers of common shares and common share equivalents outstanding (if dilutive) during each period. Common share equivalents include stock options and warrants. Since the Company recorded losses for all periods presented, the diluted EPS of common stock is the same as the basic EPS, as any potentially dilutive securities would be anti-dilutive.
5. Goodwill and License Agreements
License agreements are those rights acquired from others through business combinations to produce and distribute courseware and other publications. License agreements are amortized on a straight-line basis over a period of seven years, subject to impairment based on the carrying value exceeding fair value. Goodwill is not amortized, but tested for impairment at least annually in accordance with SFAS, No. 142, Goodwill and Other Intangible Assets. The Company adopted SFAS No. 142 on August 1, 2002 and identified one reporting unit and discontinued goodwill amortization at that time.
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