Attached files
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended August 31, 2009
[ ] Transition Report under Section 13 or 15(d) of the Exchange Act for
the Transition Period from ________ to ________
Commission File Number: 0-50333
PROGRESSIVE TRAINING, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 32-0186005
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17337 Ventura Boulevard, Suite 305
Encino, California 91316
Issuer's Telephone Number: (818) 784-0040
(Address and phone number of principal executive offices)
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 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 [_]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [_] No [_]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer [_] (Do not check if smaller reporting company)
Smaller reporting company [_]
Check whether the issuer is a "shell company" as defined in Rule 12b-2 of the
Securities Exchange Act of 1934. Yes [ ] No [X]
As of August 31, 2009 the issuer had of 2,280,000 shares of common
stock outstanding.
Traditional Small Business Disclosure Format (check one) Yes [_] No [X]
1
INDEX TO QUARTERLY REPORT
-------------------------
ON FORM 10-Q
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PART I FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements.............................................. 3
Condensed Balance Sheets
August 31, 2009 (Unaudited) and May 31, 2009.................. 4
Condensed Statements of Operations and Accumulated Deficit
For the Three Months Ended
August 31, 2009 and 2008 (Unaudited).......................... 5
Condensed Statements of Shareholders' Deficit
For the Three Months Ended August 31, 2009 (Unaudited)........ 6
Condensed Statements of Cash Flows
For the Three Months Ended
August 31, 2009 and 2008 (Unaudited).......................... 7
Condensed Notes to Financial Statements (Unaudited)............... 8
Item 2. Management's Discussion and Analysis or Plan of Operation........ 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Item 4T. Controls and Procedures.......................................... 16
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................................ 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds...... 18
Item 3. Defaults upon Senior Securities.................................. 18
Item 4. Submission of Matters to a Vote of Security Holders.............. 18
Item 5. Other Information................................................ 18
Item 6. Exhibits ........................................................ 18
Signatures................................................................... 19
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
(Financial Statements Commence on Following Page)
3
PROGRESSIVE TRAINING, INC.
CONDENSED BALANCE SHEETS
-------------------------------------------------------------------------------
August 31,
2009 May 31,
(Unaudited) 2009
----------- -----------
ASSETS
Cash.............................................. $ 1,527 $ 2,318
Accounts receivable, net of allowance
for doubtful accounts of $4,000................. 4,220 5,424
Property and equipment, Net of accumulated
depreciation of $11,709 -- --
Prepaid expenses and other assets ................ 1,850 1,946
----------- ----------
TOTAL ASSETS ..................................... $ 7,597 $ 9,688
=========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES:
Line of credit ................................... $ 39,338 $ 38,726
Accounts payable and accrued expenses............. 47,565 57,582
Accrued interest due to shareholder............... 7,378 6,848
Note payable due to shareholder .................. 34,040 16,262
----------- ----------
Total liabilities ................................ 128,321 119,418
----------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, par value - $.0001;
100,000,000 shares authorized; 5,280,000
shares issued and outstanding, ............... 528 528
Additional paid-in capital ....................... 1,567,123 1,556,723
Accumulated deficit .............................. (1,688,375) (1,666,981)
----------- ----------
Total shareholders' deficit ...................... (120,724) (109,730)
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT ...... $ 7,597 $ 9,688
=========== ==========
See accompanying notes to financial statements.
4
PROGRESSIVE TRAINING, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED AUGUST 31, 2009 AND 2008(UNAUDITED)
--------------------------------------------------------------------------------
2009 2008
--------- ---------
REVENUES ................... $ 31,873 $ 46,965
COST OF REVENUES ........... 7,709 4,107
--------- ---------
GROSS PROFIT ............... 24,164 42,858
--------- ---------
EXPENSES:
Selling and marketing ...... 3,877 19,484
General and administrative . 39,817 66,806
Research and development ... -- 36
Interest expense ........... 1,064 4,443
--------- ---------
Total expenses ............. 44,758 90,769
--------- ---------
INCOME(LOSS) BEFORE INCOME
TAXES .................. (20,594) (47,911)
INCOME TAXES ............... 800 800
--------- ---------
NET INCOME (LOSS)........... $ (21,394) $ (48,711)
========= =========
BASIC AND DILUTED INCOME
(LOSS)PER SHARE ......... $ (0.00) $ (0.02)
========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING ............. 5,280,000 2,280,000
========= =========
See accompanying notes to financial statements.
5
PROGRESSIVE TRAINING, INC.
CONDENSED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED AUGUST 31, 2009 (UNAUDITED)
-----------------------------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL
------------------------- PAID-IN SHAREHOLDER
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
----------- ----------- ----------- ----------- -----------
BALANCE, MAY 31, 2009 ... 5,280,000 $ 528 $ 1,556,723 $(1,666,981) $ (109,730)
CONTRIBUTED CAPITAL ....... -- -- 10,400 -- 10,400
NET LOSS .................. -- -- -- (21,394) (21,394)
----------- ----------- ----------- ----------- -----------
BALANCE, AUGUST 31, 2009 5,280,000 $ 528 $ 1,567,123 $(1,688,375) $ (120,724)
=========== =========== =========== =========== ===========
See accompanying notes to financial statements.
6
PROGRESSIVE TRAINING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 31, 2009 AND 2008 (UNAUDITED)
-------------------------------------------------------------------------------
2009 2008
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................... $ (21,394) $ (48,711)
Adjustments to reconcile net loss to net
cash used by operating activities:
Contribution of capital for services........... 10,400 10,400
Changes in operating assets and liabilities:
Accounts receivable ....................... 1,204 (10,671)
Prepaid Expenses 96 --
Accounts payable and accrued expenses ..... (9,487) 10,967
--------- ---------
Net cash used by operating activities .............. (19,181) (38,015)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) from (to) shareholder .. 17,778 37,674
Net borrowings (repayments) on line of credit ...... 612 50
--------- ---------
Net cash provided by financing activities........... 18,390 37,724
--------- ---------
NET DECREASE IN CASH ............................... (791) (291)
CASH, BEGINNING OF PERIOD .......................... 2,318 1,610
--------- ---------
CASH, END OF PERIOD................................. $ 1,527 $ 1,319
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ............................. $ 535 $ 698
Cash paid for income taxes ......................... $ -- $ --
See accompanying notes to financial statements
7
PROGRESSIVE TRAINING, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS BACKGROUND
Progressive Training, Inc. the "Company") was incorporated under this name in
Delaware on October 31, 2006. The Company is engaged in the development,
production and distribution of training and educational video products and
services. From August 10, 2004 through December 11, 2006 the business of the
development, production and distribution of management and general workforce
training videos was previously conducted under the name Advanced Media Training,
Inc.
2. INTERIM CONDENSED FINANCIAL STATEMENTS
FISCAL PERIODS
The Company's fiscal year-end is May 31. References to a fiscal year refer to
the calendar year in which such fiscal year ends.
PREPARATION OF INTERIM CONDENSED FINANCIAL STATEMENTS
These interim condensed financial statements for the three months ended August
31, 2009 and 2008 have been prepared by the Company's management, without audit,
in accordance with accounting principles generally accepted in the United States
of America and pursuant to the rules and regulations of the United States
Securities and Exchange Commission ("SEC"). In the opinion of management, these
interim condensed consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments, unless otherwise noted)
necessary to present fairly the Company's financial position, results of
operations and cash flows for the fiscal periods presented. Certain information
and note disclosures normally included in annual financial statements prepared
in accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted in these interim financial statements
pursuant to the SEC's rules and regulations, although the Company's management
believes that the disclosures are adequate to make the information presented not
misleading. The financial position, results of operations and cash flows for the
interim periods disclosed herein are not necessarily indicative of future
financial results. These interim condensed consolidated financial statements
should be read in conjunction with the annual financial statements and the notes
thereto included in the Company's most recent Annual Report on Form 10K for the
fiscal year ended May 31, 2009.
RECLASSIFICATIONS
Certain 2008 amounts have been reclassified to conform to presentation in 2009.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
certain estimates and assumptions that affect the reported amounts and timing of
revenue and expenses, the reported amounts and classification of assets and
liabilities, and the disclosure of contingent assets and liabilities. These
estimates and assumptions are based on the Company's historical results as well
as management's future expectations. The Company's actual results could vary
materially from management's estimates and assumptions.
SIGNIFICANT CUSTOMERS
During the three months ended August 31, 2009 the Company had two customers that
accounted for 36% and 11%% of the Company's revenues. During the three months
ended August 31, 2008, the Company had one customer that accounted for 36% of
the Company's revenues. The Company had two customers whose accounts receivable
were 12% and 21% of gross accounts receivable as of August 31, 2009. Foreign
sales (primarily royalty income from Canada) amounted to $8,799 and $23,729 for
the three months ended August 31, 2009 and 2008, respectively.
8
NET LOSS PER SHARE
Basic and diluted net loss per share has been computed by dividing net loss by
the weighted average number of common shares outstanding during the applicable
fiscal periods. At August 31, 2009 and 2008, the Company had no potentially
dilutive shares.
RECENTLY ISSUED ACCOUNTING STANDARDS
In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments. The guidance applies to
investments in debt securities for which other-than-temporary impairments may be
recorded. If an entity's management asserts that it does not have the intent to
sell a debt security and it is more likely than not that it will not have to
sell the security before recovery of its cost basis, then an entity may separate
other-than-temporary impairments into two components: 1) the amount related to
credit losses (recorded in earnings), and 2) all other amounts (recorded in
other comprehensive income). This FSP is to be applied prospectively and is
effective for interim and annual periods ending after June 15, 2009 with early
adoption permitted for periods ending after March 15, 2009. The Company adopted
this FSP for its period ending August 31, 2009. There was no impact on the
Company's financial statements.
In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board
(APB) 28-1, Interim Disclosures about Fair Value of Financial Instruments. The
FSP amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments
to require an entity to provide disclosures about fair value of financial
instruments in interim financial information. This FSP is to be applied
prospectively and is effective for interim and annual periods ending after June
15, 2009 with early adoption permitted for periods ending after March 15, 2009.
The Company has no financial instruments that would qualify for such disclosure
as of August 31, 2009.
Effective January 1, 2009, the Company adopted Financial Accounting Standard
Board's (FASB) Statement No. 160 (FAS 160), Noncontrolling Interests in
Consolidated Financial Statement-an Amendment of ARB No. 51. FAS 160 changed the
accounting and reporting for minority interests, which will be recharacterized
as noncontrolling interests and classified as a component of equity. FAS 160
requires retrospective adoption of the presentation and disclosure requirements
for existing minority interests. All other requirements of FAS 160 will be
applied prospectively. The adoption of FAS 160 did not have a material impact on
the Company's financial statements.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events, which requires
entities to disclose the date through which they have evaluated subsequent
events and whether the date corresponds with the release of its financial
statements. The statement established general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. SFAS No. 165 is
effective for interim or annual financial periods ending after June 15, 2009,
and shall be applied prospectively. The adoption of SFAS No. 165 did not have a
material impact on the Company's financial statements.
In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of
Financial Assets ("SFAS 166"). Statement 166 is a revision to FASB Statement No.
140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, and will require more information about
transfers of financial assets, including securitization transactions, and where
entities have continuing exposure to the risks related to transferred financial
assets. It eliminates the concept of a "qualifying special-purpose entity,"
changes the requirements for derecognizing financial assets, and requires
additional disclosures. SFAS 166 enhances information reported to users of
financial statements by providing greater transparency about transfers of
financial assets and an entity's continuing involvement in transferred financial
assets.
9
SFAS 166 will be effective at the start of a reporting entity's first fiscal
year beginning after November 15, 2009. Early application is not permitted. The
Company does not anticipate the adoption of SFAS 166 will have an impact on its
consolidated results of operations or consolidated financial position.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation
No. 46(R) ("SFAS 167"). Statement 167 is a revision to FASB Interpretation No.
46 (Revised December 2003), Consolidation of Variable Interest Entities, and
changes how a reporting entity determines when an entity that is insufficiently
capitalized or is not controlled through voting (or similar rights) should be
consolidated. The determination of whether a reporting entity is required to
consolidate another entity is based on, among other things, the other entity's
purpose and design and the reporting entity's ability to direct the activities
of the other entity that most significantly impact the other entity's economic
performance. SFAS 167 will require a reporting entity to provide additional
disclosures about its involvement with variable interest entities and any
significant changes in risk exposure due to that involvement. A reporting entity
will be required to disclose how its involvement with a variable interest entity
affects the reporting entity's financial statements. SFAS 167 will be effective
at the start of a reporting entity's first fiscal year beginning after November
15, 2009. Early application is not permitted. The Company is currently
evaluating the impact, if any, of adoption of SFAS 167 on its financial
statements.
In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles
("SFAS 168"). SFAS 168 will become the single source authoritative
nongovernmental U.S. generally accepted accounting principles ("GAAP"),
superseding existing FASB, American Institute of Certified Public Accounts
("AICPA"), Emerging Issues Task Force ("EITF"), and related accounting
literature. SFAS 168 reorganized the thousands of GAAP pronouncements into
roughly 90 accounting topics and displays them using a consistent structure.
Also included is relevant Securities and Exchange Commission guidance organized
using the same topical structure in separate sections. SFAS 168 will be
effective for financial statements issued for reporting periods that end after
September 15, 2009. The Company does not expect the adoption of the Codification
to have an impact on its financial position or results of operations.
3. LINE OF CREDIT
The Company has a revolving line of credit with a bank which permits borrowings
up to $40,000. The line is guaranteed by the Company's President. Interest is
payable monthly at 2.22% above the bank's prime rate of interest (5.48% at
August 31, 2009). The line is callable upon demand.
4. COMMITMENTS AND CONTINGENCIES
The Company has agreements with companies to pay a royalty on sales of certain
videos (co produced with these companies). The royalty is based on a specified
formula, which averages approximately 35% of net amounts collected.
The Company leased its operating facility for $2,500 per month in Encino,
California under an operating lease which expired on August 31, 2009. The
Company relocated to a smaller space and is renting the space for $900 per month
on a month-to-month basis. Rent expense was $7,500 and $7,209 for the three
months ended August 31, 2009 and 2008 respectively.
5. RELATED PARTY TRANSACTIONS
The Company had a consulting agreement with Howard Young, the son of Buddy Young
(the Company's Chief Executive Officer) for administrative and sales
consultation through November 2008. The fee was allocated equally between
General and Administrative and Selling and Marketing expense in the Statement of
Operations for the three months ended August 31 2008. Total expense was $-0- and
$25,200 for the three months ended August 31, 2009 and 2008, respectively.
The Company has an agreement with its President and majority shareholder to fund
any shortfall in cash flow up to $250,000 at 8% interest through June 30, 2010.
The note is secured by all right, title and interest in and to the Company's
video productions and projects, regardless of their state of production,
including all related contracts, licenses, and accounts receivable. Any unpaid
principal and interest under the Note will be due and payable on December 31,
2010. On March 16, 2009, the Company issued 3,000,000 shares of its common stock
to its President in payment of $180,000 on this note. As of August 31, 2009, the
balance on the note and related accrued interest was $34,040 and $7,378,
respectively.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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You should read this section together with our financial statements and related
notes thereto included elsewhere in this report. In addition to the historical
information contained herein, this report contains forward-looking statements
that are subject to risks and uncertainties. Forward-looking statements are not
based on historical information but relate to future operations, strategies,
financial results or other developments. Forward-looking statements are based
upon estimates and assumptions that are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of
which are beyond our control and many of which, with respect to future business
decisions, are subject to change. Certain statements contained in this Form 10,
including, without limitation, statements containing the words "believe,"
"anticipate," "estimate," "expect," "are of the opinion that" and words of
similar import, constitute "forward-looking statements." You should not place
any undue reliance on these forward-looking statements.
You should be aware that our results from operations could materially be
effected by a number of factors, which include, but are not limited to the
following: economic and business conditions specific to the workforce training
industry, competition from other producers and distributors of training videos;
our ability to control costs and expenses, access to capital, and our ability to
meet contractual obligations. There may be other factors not mentioned above or
included elsewhere in this report that may cause actual results to differ
materially from any forward-looking information.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations
are based upon our statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses. In
consultation with our Board of Directors, we have identified two accounting
policies that we believe are key to an understanding of our financial
statements. These are important accounting policies that require management's
most difficult, subjective judgments.
The first critical accounting policy relates to revenue recognition. We
recognize revenue from product sales upon shipment to the customer. Rental
income is recognized over the related period that the videos are rented. Based
on the nature of our product, we do not accept returns. Damaged or defective
product is replaced upon receipt. Such returns have been negligible since the
Company's inception.
The second critical accounting policy relates to production costs. The Company
periodically incurs costs to produce new management training videos and to
enhance current videos. Historically, the Company has been unable to accurately
forecast revenues to be earned on these videos and has, accordingly, expensed
such costs as incurred. No such costs were incurred in the periods ended August
31, 2009 or 2008.
11
RESULTS OF OPERATIONS
GENERAL
Our principal customers are companies having 100 or more employees with an
established training department. In many cases, training departments are part of
and supervised by the company's human resource department.
We face competition from numerous other providers of training videos. We believe
many of these competitors are larger and better capitalized than the Company.
Additionally, if the Company is to grow its business by financing and producing
additional training videos, it will require additional capital. Further, as
reflected in our financial statements, our revenues have been severely impacted
by the current general economic condition. Corporations tend to reduce their
training budgets during an economic slowdown.
To date our cash flows from operations have been minimal. Other than from
operations and our line of credit, our only source of capital is an agreement
with our President and majority shareholder to fund any shortfall in cash flow
up to $250,000 at 8% interest through June 30, 2010. Repayment is to be made
when funds are available with the balance of principal and interest due December
31, 2010. On March 16, 2009, the Company entered into an agreement to issue 3.0
million shares of restricted common stock of the Company in exchange for a total
of $180,000 of debt due to the Company's President. As a result, the Company
owes Mr. Young $34,040 as of August 31, 2009.
We anticipate that the cash flow from operations, together with the available
funds under the above referenced agreement with our president will be sufficient
to fulfill our capital requirements through fiscal year 2010.
Our efforts during the next 12 months will mainly be focused on, increasing
revenue by (a) seeking to retain additional free lance commissioned sales
representatives, (b) improve the functionality of our website by adding features
such as providing customers the ability to preview videos online, and by
enhancing the website's search capabilities and user interface, and (c) by
allocating a portion of available cash flow for the production of new training
videos. Further, in all probability, we will attempt to raise additional funds
through the sale of equity, which may have a substantial dilutive effect on the
holdings of existing shareholders.
If during the next twelve months our revenue is insufficient to continue
operations, and we are unable to raise funds through the sale of additional
equity, or from traditional borrowing sources, we may be required to totally
abandon our business plan and seek other business opportunities in a related or
unrelated industry. Such opportunities may include a reverse merger with a
privately held company. The result of which could cause the existing
shareholders to be severely diluted.
12
SELECT FINANCIAL INFORMATION
For the Three Months Ended
08/31/09 08/31/08
(Unaudited) (Unaudited)
----------- -----------
Statement of Operations Data
Total revenue $ 31,873 $ 46,965
Net loss $ (21,394) $ (48,711)
Net loss per share $ (0.00) $ (0.02)
Balance Sheet Data
Total assets $ 7,597 $ 35,842
Total liabilities $ 128,321 $ 265,979
Stockholder's deficit $ (120,724) $ (230,137)
Three-Month Period Ended August 31, 2009 Compared to Three-Month Period Ended
August 31, 2008
Revenues
Our revenues for the three month period ended August 31, 2009 were $31,873.
Revenues for the prior three month period ended August 31, 2008, were $46,965.
This represents a decrease of $15,092. This substantial decrease is mainly the
result of the following factors:(a) the slowdown in the general economy which
has a direct impact on corporate training budgets, (b) the aging of the videos
produced by us and the fact that we have not introduced any new videos into the
marketplace during fiscal years 2009 and 2008, and (c) the loss of the full time
services of two of our sales personnel.
Domestic product sales and rentals, royalties resulting from the closed circuit
telecast of our videos, and royalties derived from international sales made up
100% of the total revenue in the three-month periods ended August 31, 2009 and
2008. Sales of videos produced by other companies accounted for approximately
70% of revenues in the three-month period ended August 31, 2009 and
approximately 54% in the same period in 2008. As a result of our limited
financial resources which prevent us from financing and producing many new
videos, we expect that the sale of videos produced by others will continue to
represent approximately 60 to 75% of revenues.
Costs and Expenses
Our cost of goods sold during the three month period ended August 31, 2009,
increased to $7,709 from $4,107 during the three months ended August 31, 2008.
This represents an increase of $3,602. The cost of goods sold as a percent of
sales increased by approximately 15% (9% in 2008 to 24% in 2009). This increase
is a direct result of the sales mix during the quarter ended August 31, 2009
shifting to lower gross profit items (i.e., videos produced by other companies).
13
Approximately 70% of our revenue is generated from the sale of training videos
produced by companies with which we have distribution contracts with. The terms
of these distribution contracts vary with regard to percentage of discount we
receive. These discounts range from a low of 35% to a high of 50% of gross
receipts. As we cannot predict which companies will produce better selling
videos in any one period, we cannot predict future product mix. However, we
anticipate that excluding production costs, the cost of goods sold as a
percentage of revenues will be approximately within the 15 to 35 percent range.
Total operating expenses decreased to $44,758 during the three months ended
August 31, 2009 from $90,769 in the three month period ended August 31, 2008.
This represents a decrease of $46,011.
Selling and marketing expenses decreased to $3,877 during the three months ended
August 31, 2009 from $19,484 during the three months ended August 31, 2008. This
represents a decrease of $15,607. Our selling and marketing costs are
substantially related to the introduction of new videos produced by us. These
costs are mainly comprised of the creation of advertising and publicity
materials, the making of preview copies of the video to be sent to other
distributors, advertising space in trade publications, and commissions on sales.
General and administrative expenses decreased to $39,817 during the three months
ended August 31, 2009 from $66,806 during the three months ended August 31,
2008. This represents a decrease of $26,989. The main components in these
general and administrative expenses are salaries for our employees, consulting
fees, and professional fees for accounting and legal services, and rent. We
anticipate that our general and administrative expenses will remain at this
level until we generate additional revenues to support an increase in our
infrastructure.
The Company incurred no significant research and development expenses in either
period. This was due to the fact that we did not research any new training
products during these periods due to negative cash flows in 2009 and 2008.
Interest expense decreased to $1,064 during the three months ended August 31,
2009 from $4,443 during the three months ended August 31, 2008. This represents
a decrease of $3,379. This decrease is primarily due to the Company entering
into an agreement in March 2009, to issue 3.0 million shares of restricted
common stock of the Company in exchange for a total of $180,000 of debt due to
the Company's President. As a result, the Company owes Mr. Young $34,040 as of
August 31, 2009, pursuant to an agreement to fund any shortfall in cash flow up
to $250,000 at 8% interest through June 30, 2010. Repayment is to be made when
funds are available with the balance of principal and interest due December 31,
2010.
14
Our net loss decreased to $21,394 during the three months ended August 31, 2009
from $48,711 during the three months ended August 31, 2008. This is a decrease
of $27,317. The primary cause of this decrease is due to the decrease in sales
which was partially offset by the increase in cost of sales as a percentage due
to the change in the sales mixture, along with a general decrease in the
remaining operating expenses.
PLAN OF OPERATION
We will continue to devote our very limited resources to marketing and
distributing workforce training videos and related training materials, through
our website. At this time these efforts are focused on the sale of videos
produced by third parties. Approximately 70% of our revenue is derived from
these sales. Additionally, we will continue to market videos produced by us,
Among these are "The Cuban Missile Crisis: A Case Study In Decision Making And
Its Consequences," "What It Really Takes To Be A World Class Company," "How Do
You Put A Giraffe In The refrigerator?." If cash flow permits we will spend some
of our resources on the production and marketing of additional training videos
produced by us. The amount of funds available for these expenditures will be
determined by cash flow from operations, as well as, our ability to raise
capital through an equity offering or further borrowing from our President, and
other traditional borrowing sources. There can be no assurance that we will be
successful in these efforts.
Management expects that sales of videos and training materials, along with
available funds under an agreement with its President and majority shareholder
should satisfy our cash requirements through fiscal 2010. The Company's
marketing expenses and the production of new training videos will be adjusted
accordingly.
As previously stated, if during the next twelve months our revenue is
insufficient to continue operations, and we are unable to raise funds through
the sale of additional equity, or from traditional borrowing sources, we may be
required to totally abandon our business plan and seek other business
opportunities in a related or unrelated industry. Such opportunities may include
a reverse merger with a privately held company. The result of which could cause
the existing shareholders to be severely diluted.
We currently have no full time employees. We do have two part time consultants
who assist with the administration functions. We mainly utilize outside services
to handle our accounting and other administrative requirements, and commissioned
sales personnel to handle the selling and marketing of our videos. Mr. Buddy
Young, our Chief Executive Officer, Chief Financial Officer and Chairman of the
Board of Directors works on a part-time basis. During the quarter ended August
31, 2009, Mr. Young contributed non-cash compensation (representing the
estimated value of services contributed to the Company) of $10,400.
15
Liquidity and Capital Resources
Our working capital deficit decreased to $79,306 during the three months ended
August 31, 2009 from $106,422 during the three months ended August 31, 2008.
This is the result of a decrease in our accounts receivable that was offset by a
decrease in our accounts payable.
Our cash flows used by operations were $19,181 during the three months ended
August 31, 2009. This is the result of our net loss of $21,394 partially offset
by a contribution of capital for services in the amount of $10,400 and a
decrease in accounts payable and accrued expenses of $9,487.
Our cash flows used by operations were $38,015 during the three months ended
August 31, 2008. This is the result of our net loss of $48,711 partially offset
by a contribution of capital for services in the amount of $10,400, and an
increase in accounts receivable in the amount of $10,671 that was partially
offset by an increase in accounts payable and accrued expenses of $10,967.
During 2009 and 2008 we did not use any cash for investing activities.
Our cash flows provided by financing activities were $18,390 during the three
months ended August 31, 2009. During the three months ended August 31, 2009 we
borrowed an additional $17,778, from our shareholder and an additional $612 on
our line of credit.
Our cash flows provided by financing activities were $37,724 during the three
months ended August 31, 2008. During the three months ended August 31, 2008 we
borrowed an additional $37,674 from our shareholder and an additional $50 on our
line of credit.
We currently have no material commitments at this time to fund development of
new videos or to acquire any significant capital equipment
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Based on the nature of our current operations, we have not identified any issues
of market risk at this time.
ITEM 4T. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of
August 31, 2009 (the "Evaluation Date"). This evaluation was carried out under
the supervision and with the participation of Buddy Young, who serves as both
our Chief Executive Officer and Chief Financial Officer. Based upon that
evaluation, Mr. Young concluded that our disclosure controls and procedures were
not effective as of the Evaluation Date as a result of the material weaknesses
in internal control over financial reporting discussed below.
16
Disclosure controls and procedures are those controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act are recorded, processed, summarized
and reported within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.
Notwithstanding the assessment that our internal control over financial
reporting was not effective and that there were material weaknesses as
identified in our annual report on Form 10-K, for our year ended May 31, 2009,
we believe that our financial statements contained in our Quarterly Report on
Form 10-Q for the quarter ended August 31, 2009 accurately present our financial
condition, results of operations and cash flows in all material respects.
Changes in Internal Control over Financial Reporting
As of the Evaluation Date, there were no changes in our internal control over
financial reporting that occurred during the quarter ended August 31, 2009 that
have materially affected, or that are reasonably likely to materially affect,
our internal control over financial reporting.
Limitations on the Effectiveness of Controls and Procedures
Our management, including Buddy Young our Chief Executive Officer and the Chief
Financial Officer, do not expect that our controls and procedures will prevent
all potential errors or fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met.
17
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended August 31, 2009, no matters were
submitted to the Company's security holders.
ITEM 5. OTHER INFORMATION None.
ITEM 6. EXHIBITS
31.1 Certification of CEO Pursuant to Securities Exchange Act
Rules 13a-14 and 15d-14, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
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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.
PROGRESSIVE TRAINING, INC.
(Registrant)
Dated: October 15, 2009 /s/ Buddy Young
--------------------------------
Buddy Young, President and Chief
Executive Officer
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