10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

FORM 10-Q 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

For the quarterly period ended July 1, 2016

Or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

For the transition period from            to

 Commission File Number: 0-27248

Learning Tree International, Inc.

(Exact name of registrant as specified in its charter)

Delaware	95-3133814
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
13650 Dulles Technology Drive Herndon, VA	20171
(Address of principal executive offices)	(Zip Code)

703-709-9119

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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     ☐  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 (§ 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐	(do not check if smaller reporting company)	Smaller reporting company	☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

 The number of shares of common stock, $.0001 par value, outstanding as of August 10, 2016 was 13,224,349.

 LEARNING TREE INTERNATIONAL, INC.

FORM 10-Q July 1, 2016

TABLE OF CONTENTS

		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of July 1, 2016 (unaudited) and October 2, 2015	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months and nine months ended July 1, 2016 (unaudited) and July 3, 2015 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended July 1, 2016 (unaudited) and July 3, 2015 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
SIGNATURES		25
EXHIBIT INDEX		26

PART I—FINANCIAL INFORMATION

Item 1.           FINANCIAL STATEMENTS.  

LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	July 1,			October 2,
	2016			2015
	(unaudited)
Assets
Current Assets
Cash and cash equivalents	$	9,055		$	17,936
Trade accounts receivable, net		9,316			10,475
Income tax receivable		239			498
Prepaid expenses		2,625			2,773
Other current assets		1,505			1,747
Total current assets		22,740			33,429
Equipment, Property and Leasehold Improvements:
Education and office equipment		32,000			33,165
Transportation equipment		64			70
Property and leasehold improvements		18,529			17,931
		50,593			51,166
Less: accumulated depreciation and amortization		(44,600	)		(45,096	)
		5,993			6,070
Restricted interest-bearing investments		2,988			3,265
Deferred income taxes		477			476
Other assets		608			681
Total assets	$	32,806		$	43,921
Liabilities and Stockholders' (Deficit) Equity
Current Liabilities
Trade accounts payable	$	5,358		$	6,744
Deferred revenues		22,710			22,909
Accrued payroll, benefits and related taxes		3,127			2,865
Other accrued liabilities		692			1,225
Income taxes payable		0			174
Current portion of deferred facilities rent and other		822			1,401
Total current liabilities		32,709			35,318
Asset retirement obligations		1,475			1,669
Deferred income taxes		133			134
Deferred facilities rent and other		4,827			2,575
Noncurrent tax liabilities		1,215			1,178
Total liabilities		40,359			40,874
COMMITMENTS AND CONTINGENCIES
Stockholders' (Deficit) Equity
Preferred stock, $.0001 par value; 1,000,000 shares authorized; 0 shares issued and outstanding		0			0
Common stock, $.0001 par value; 75,000,000 shares authorized; 13,224,349 issued and outstanding		1			1
Additional paid-in capital		6,347			6,224
Accumulated other comprehensive loss		(821	)		(578	)
Accumulated Deficit		(13,080	)		(2,600	)
Total stockholders' (deficit) equity		(7,553	)		3,047
Total liabilities and stockholders' (deficit) equity	$	32,806		$	43,921

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES

 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data) 

Unaudited 

	Three months ended						Nine months ended
	July 1, 2016			July 3, 2015			July 1, 2016			July 3, 2015
Revenues	$	21,073		$	22,703		$	59,892		$	69,255
Cost of revenues		13,232			14,361			37,745			42,049
Gross profit		7,841			8,342			22,147			27,206
Operating expenses:
Course development		1,354			2,575			3,990			6,395
Sales and marketing		4,710			5,387			14,219			16,999
General and administrative		4,750			4,420			14,408			14,275
		10,814			12,382			32,617			37,669
Loss from operations		(2,973	)		(4,040	)		(10,470	)		(10,463	)
Other income (expense):
Interest income, net		6			16			21			27
Foreign exchange gains (losses)		147			(52	)		157			336
Other, net		41			(5	)		7			(17	)
		194			(41	)		185			346
Loss from continuing operations before provision for income taxes		(2,779	)		(4,081	)		(10,285	)		(10,117	)
Provision for income taxes		51			222			195			432
Loss from continuing operations	$	(2,830	)	$	(4,303	)	$	(10,480	)	$	(10,549	)
Discontinued operations (Note 11)
Loss from discontinued operations, net of tax	$	0		$	0		$	0		$	(264	)
Loss on disposal of discontinued segment		0			0			0			(2,501	)
Loss from discontinued operations, net of tax	$	0		$	0		$	0		$	(2,765	)
Net loss	$	(2,830	)	$	(4,303	)	$	(10,480	)	$	(13,314	)
Loss per share basic and diluted:
Continuing operations	$	(0.21	)	$	(0.33	)	$	(0.79	)	$	(0.80	)
Discontinued operations		0.00			0.00			0.00			(0.21	)
Basic and diluted loss per share	$	(0.21	)	$	(0.33	)	$	(0.79	)	$	(1.01	)
Weighted average shares outstanding:
Weighted average shares - basic		13,224			13,224			13,224			13,224
Weighted average shares - diluted		13,224			13,224			13,224			13,224
Comprehensive loss:
Net loss	$	(2,830	)	$	(4,303	)	$	(10,480	)	$	(13,314	)
Foreign currency translation adjustments		(113	)		251			(243	)		(93	)
Comprehensive loss	$	(2,943	)	$	(4,052	)	$	(10,723	)	$	(13,407	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Unaudited

	Nine months ended
	July 1, 2016			July 3, 2015
Cash flows - operating activities
Net Loss	$	(10,480	)	$	(13,314	)
Add: Loss on sale of France Unit		0			2,501
Loss from discontinued operations, net of tax		0			264
Loss from continuing operations		(10,480	)		(10,549	)
Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities:
Depreciation and amortization		2,159			3,515
Share-based compensation		123			57
Deferred income taxes		(37	)		103
Provision for doubtful accounts		116			28
Accretion on asset retirement obligations		59			59
(Gain) loss on disposal of equipment, property and leasehold improvements		(2	)		11
Unrealized foreign exchange gains		(136	)		(331	)
Settlement of asset retirement obligation		(106	)		0
Changes in operating assets and liabilities:
Trade accounts receivable		977			3,497
Prepaid expenses and other assets		243			(407	)
Income tax receivable / payable		111			(137	)
Trade accounts payable		(1,268	)		202
Deferred revenues		358			(1,751	)
Deferred facilities rent and other		528			(1,032	)
Other accrued liabilities		(336	)		(2,028	)
Net cash used in operating activities of continuing operations		(7,691	)		(8,763	)
Net cash used in operating activities of discontinued operations		0			(206	)
Net cash used in operating activities		(7,691	)		(8,969	)
Cash flows - investing activities:
Purchases of equipment, property and leasehold improvements		(1,106	)		(2,260	)
Proceeds from sale of equipment, property and leasehold improvements		2			20
Net cash used in investing activities of continuing operations		(1,104	)		(2,240	)
Net cash used in investing activities of discontinued operations		0			(745	)
Net cash used in investing activities		(1,104	)		(2,985	)
Effects of exchange rate changes on cash and cash equivalents of continuing operations		(86	)		(196	)
Effects of exchange rate changes on cash and cash equivalents of discontinued operations		0			(246	)
Effects of exchange rate changes on cash and cash equivalents		(86	)		(442	)
Net change in cash and cash equivalents of discontinued operations		0			1,197
Net decrease in cash and cash equivalents		(8,881	)		(11,199	)
Cash and cash equivalents at the beginning of the period		17,936			29,881
Cash and cash equivalents at the end of the period	$	9,055		$	18,682
Supplemental non-cash disclosures:
Non-cash leasehold improvements	$	1,221		$	0

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

 LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES

 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Unaudited

NOTE 1—BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements of Learning Tree International, Inc. and our subsidiaries (collectively, “Learning Tree,” “we,” “our” or “us”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and, therefore, omit or condense certain note disclosures and other information required by accounting principles generally accepted in the United States of America for complete financial statements. These financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended October 2, 2015.

We use the 52/53-week fiscal year method to better align our external financial reporting with the manner in which we operate our business. Under this method, each fiscal quarter ends on the Friday closest to the end of the calendar quarter. Accordingly, our third quarter of the current fiscal year ended on July 1, 2016 and encompassed 13 weeks, while our third quarter of the prior fiscal year ended on July 3, 2015 and also encompassed 13 weeks.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, that are only of a normal recurring nature, considered necessary to present fairly our financial position as of July 1, 2016, and our results of operations for the three months and nine months ended July 1, 2016 and July 3, 2015, and our cash flows for the nine months ended July 1, 2016 and July 3, 2015. Certain items in the condensed consolidated financial statements have been reclassified to conform to the current presentation.

NOTE 2—SHARE-BASED COMPENSATION

Share-based compensation expense related to grants of employee stock options and restricted stock units was less than $0.1 million for both the three months ended July 1, 2016 and July 3, 2015, and was charged in a manner consistent with the related employee salary costs. Share based compensation expense for the nine month ended July 1, 2016 was $0.1 million compared to less than $0.1 million for the nine months ended July 3, 2015.

NOTE 3—ASSET RETIREMENT OBLIGATIONS

The following table presents the activity for the asset retirement obligations (“ARO”) liabilities from continuing operations, which are primarily related to the restoration of classroom facilities in our Learning Tree Education Centers:

	Nine months ended July 1, 2016			Year ended October 2, 2015
ARO balance, beginning of period	$	1,669		$	1,656
Accretion expense		59			79
Settlement of ARO liability		(106	)		0
Foreign currency translation		(147	)		(66	)
ARO balance, end of period	$	1,475		$	1,669

6

NOTE 4—LOSS PER SHARE

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding (which excludes unvested shares of our common stock granted under our 2007 Equity Incentive Plan) during the reporting period. Diluted loss per share is computed similarly to basic loss per share except that the weighted average shares outstanding are increased to include common stock equivalents, to the extent their effect is dilutive. Approximately 850,000 stock options and 250,000 stock options were excluded from the computations of diluted earnings per share for the three and nine month ended July 1, 2016 and July 3, 2015, respectively, because their effect would have been anti-dilutive. The computations for basic and diluted earnings per share are as follows:

	Three months ended						Nine months ended
	July 1, 2016			July 3, 2015			July 1, 2016			July 3, 2015
Numerator:
Loss from continuing operations	$	(2,830	)	$	(4,303	)	$	(10,480	)	$	(10,549	)
Loss from discontinued operations		0			-			0			(2,765	)
Net loss	$	(2,830	)	$	(4,303	)	$	(10,480	)	$	(13,314	)
Denominator:
Weighted average shares outstanding
Basic		13,224			13,224			13,224			13,224
Effect of dilutive securities		0			0			0			0
Diluted		13,224			13,224			13,224			13,224
Loss per common share - basic and diluted:
Continuing operations	$	(0.21	)	$	(0.33	)	$	(0.79	)	$	(0.80	)
Discontinued operations		0			0			0			(0.21	)
Basic and diluted loss per share	$	(0.21	)	$	(0.33	)	$	(0.79	)	$	(1.01	)

NOTE 5—INCOME TAXES

          Our income tax provision for continuing operations was $0.1 million and $0.2 million in our third quarters of fiscal years 2016 and 2015, respectively. Our income tax provision for continuing operations for our first nine months of fiscal year 2016 was $0.2 million, as compared to $0.4 million for the first nine months of fiscal year 2015. Our third quarter and nine months to date 2016 and 2015 tax provisions were comprised primarily of income tax expense for our foreign subsidiaries and an adjustment of our U.S. income tax expense for fiscal year 2015 to reflect a true up of the actual return to provision estimates. The Company established a valuation allowance against deferred tax assets in the U.S. in the third quarter of fiscal year 2012 and has continued to maintain a full valuation allowance in the U.S. through the third quarter of fiscal year 2016. 

NOTE 6—COMMITMENTS AND CONTINGENCIES

Contingencies

Currently, and from time to time, we are involved in litigation incidental to the conduct of our business. We are not a party to any lawsuit or legal proceeding that, in the opinion of management, is likely to have a material adverse effect on our consolidated financial position or results of operations.

7

NOTE 7—SEGMENT REPORTING

 Our worldwide operations involve the design and delivery of instructor-led classroom training courses and related services to multinational companies and government entities. The training and education we offer is presented in a consistent manner in every country in which we operate. Our instructors present our courses in a virtually identical fashion worldwide, regardless of whether presented in leased classroom space or external facilities, the content of the class being taught or the location or method of distribution. No one commercial customer or government agency accounted for 10% or more of our revenues in the three and nine month ended July 1, 2016 or July 3, 2015.  

We conduct and manage our business globally and have reportable segments that operate in five countries: the United States, Canada, the United Kingdom, Sweden and Japan.   Summarized financial information by country for the three months and nine months ended July 1, 2016 and July 3, 2015 from continuing operations are as follows:

	Three months ended				Nine months ended
	July 1, 2016		July 3, 2015		July 1, 2016		July 3, 2015
Revenues:
United States	$	14,020	$	15,147	$	36,985	$	40,621
Canada		1,549		1,392		5,994		6,681
North America		15,569		16,539		42,979		47,302
United Kingdom		3,899		4,878		12,763		16,831
Sweden		867		822		2,457		3,770
Japan		738		464		1,693		1,352
Total	$	21,073	$	22,703	$	59,892	$	69,255
Gross profit:
United States	$	5,402	$	5,464	$	13,227	$	14,211
Canada		414		594		2,495		3,399
North America		5,816		6,058		15,722		17,610
United Kingdom		1,030		1,580		3,943		6,357
Sweden		459		393		1,290		2,354
Japan		536		311		1,192		885
Total	$	7,841	$	8,342	$	22,147	$	27,206

	July 1, 2016		July 3, 2015
Total assets:
United States	$	15,481	$	23,254
Canada		3,517		3,859
North America		18,998		27,113
United Kingdom		8,815		12,604
Sweden		2,953		3,591
Japan		2,040		1,489
Total	$	32,806	$	44,797

8

NOTE 8—FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal market for the asset or liability, or in the absence of a principal market, the most advantageous market for the asset or liability. The fair value is measured using assumptions that market participants would use, including assumptions about nonperformance risk and credit risk.

ASC 820 establishes a fair value hierarchy for valuation inputs and prioritizes them based on the extent to which the inputs are observable in the marketplace. Categorization is based on the lowest level of input that is available and significant to the measurement. These levels are:

Level 1—Quoted prices in active markets for identical assets and liabilities.

Level 2—Observable inputs other than quoted prices in active markets, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs.

Level 3—Unobservable inputs that reflect management’s assumptions about the estimates and risks that market participants would use in pricing the asset or liability.

Non-Financial Liabilities Measured at Fair Value on a Nonrecurring Basis

We measure our ARO liabilities at fair value on a nonrecurring basis when we believe there has been an indication the fair value has changed. We did not adjust the values of those liabilities during the three months and nine months ended July 1, 2016 and July 3, 2015.

NOTE 9—DEFERRED FACILITIES RENT AND OTHER

Deferred Facilities Rent and Other

The following tables show details of the following line items in our consolidated balance sheets.

Current Portion of Deferred Facilities Rent and Other

	July 1, 2016		October 2, 2015
Deferred rent	$	822	$	1,074
LA lease liability		0		327
	$	822	$	1,401

Deferred Facilities Rent and Other

	July 1, 2016		October 2, 2015
Deferred rent	$	4,827	$	2,575
	$	4,827	$	2,575

NOTE 10—RECENT ACCOUNTING PRONOUNCEMENTS

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. Accordingly, the standard is effective for us on September 30, 2017 and we are currently evaluating the impact that the standard will have on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The standard requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. Accordingly, the standard is effective for us on September 28, 2019 using a modified retrospective approach. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

9

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. We do not expect to early adopt ASU 2015-17. Accordingly, the standard is effective for us on September 30, 2017 and we are currently evaluating the impact that this standard will have on our financial statements. 

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09"). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14 "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date" ("ASU 2015-14"), which defers the effective date of ASU 2014-09 by one year to fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2017. Accordingly, the standard is effective for us on September 29, 2018 using either a full retrospective or a modified retrospective approach. We are currently evaluating which transition approach to use and the impact that the standard will have on our financial statements.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). The standard requires management to evaluate, at each interim and annual reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued, and provide related disclosures. ASU 2014-15 is effective for reporting periods ending after December 15, 2016, with early adoption permitted. We do not expect to early adopt ASU 2014-15. Accordingly, the standard is effective for us on September 30, 2017 and we are currently evaluating the impact that this standard will have on our financial statements.

Other recent accounting pronouncements issued by the FASB (including the Emerging Issues Task Force), the American Institute of Certified Public Accountants and the SEC did not, or management believes will not, have a material impact on our present or future consolidated financial statements. 

NOTE 11—DISCONTINUED OPERATIONS

On March 3, 2015, we entered into an Agreement (“Agreement”) to sell our subsidiary in France, Learning Tree International S. A. (“LTRE(FR)”), to Educinvest SPRL (“Educinvest”) for consideration of € 1 (One Euro) (“Sale Transaction”). The Sale Transaction was consummated on the same date that the Agreement was signed by the parties. The purchase price was established in recognition of the potential liabilities being assumed by Educinvest related to continuation of the LTRE(FR) business. As part of the Sale Transaction, the Company and Educinvest concurrently entered into a license agreement, dated March 3, 2015 (the “License Agreement”). After the closing of the Sale Transaction, we agreed to provide certain temporary services to Educinvest, including the use of its website and the operational systems in place for a period of two years after the closing date. In connection with the Sale Transaction, we also agreed that during the term of the License Agreement we will not, without the prior written consent of Educinvest, (i) establish a physical presence in mainland France in competition with the business of LTRE(FR) as carried on as of the closing of the Sale Transaction or (ii) solicit employees of LTRE(FR), except for persons responding to general recruitment advertisements not specifically targeting LTRE(FR). 

The sale of LTRE(FR) resulted in a loss on sale of $2.5 million. This loss plus the results of operations for LTRE(FR) for the three and nine months ended July 3, 2015 have been reclassified to the loss from discontinued operations line on the Condensed Consolidated Statements of Operations and Comprehensive Loss presented herein. In addition, historical Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Cash Flow amounts for LTRE(FR) at and for the three and nine months ended July 3, 2015 have also been reclassified as discontinued operations.

Calculation of the loss on disposal of LTRE(FR):
(in thousands)
Investment in Learning Tree International S.A.	$	1,324
Costs of sale		619
Cumulative translation adjustment realized		558
Loss on sale	$	2,501

10

The summarized operating results of LTRE(FR) included in our Condensed Consolidated Statements of Operations and Comprehensive Loss are as follows:

	Three months ended				Nine months ended
	July 1, 2016		July 3, 2015		July 1, 2016		July 3, 2015
Revenues	$	0	$	0	$	0	$	3,335
Cost of revenues		0		0		0		2,046
Gross profit		0		0		0		1,289
Operating expenses		0		0		0		1,626
Loss from operations		0		0		0		(337	)
Other (expense) income, net		0		0		0		(44	)
Loss from discontinued operations before income taxes		0		0		0		(381	)
Income taxes		0		0		0		117
Loss from discontinued operations, net of tax	$	0	$	0	$	0	$	(264	)

NOTE 12—SUBSEQUENT EVENTS

We have accelerated our comprehensive cost reduction program with the goal of significantly reducing our fiscal year 2017 overall expenses in the range of $11.0 to $12.0 million when compared to the Company's expenses for fiscal year 2016. These targeted cost reductions have been initiated to right-size the Company’s operations, modernize its business operations to meet customer demand and preserve capital. In order to implement these cost reductions for the 2017 fiscal year, we have taken or are taking the following steps:

● Eliminating our direct mail course catalog advertising program effective immediately. Besides being a “green initiative”, we believe that our overall customer-base has shifted the manner in which it selects and purchases courses away from printed catalogs toward greater use of digital channels, such as website, social media and digital advertising.

● Making our course notes available electronically and only producing a paper copy if requested by our attendee.

● Reduced staffing in North America by 26 full time equivalent employees.

● Reduced the compensation paid to our Board of Directors, effective immediately, which our directors unanimously agreed to do as part of our cost reduction program.

● Reducing our real estate costs, which will begin with our Education Center lease in the Chicago area that is expiring. As other facility leases expire, additional cost reductions will be evaluated.

 As part of this program, Learning Tree will continue to review and take appropriate actions to streamline its operations in order to reduce or eliminate excess costs.

We have evaluated all events subsequent to the balance sheet date of July 1, 2016 through the date these condensed consolidated financial statements were filed with the SEC, and have determined that there are no other subsequent events to be disclosed.

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Item 2.            MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.   

The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, our unaudited condensed consolidated financial statements and notes included in this Quarterly Report on Form 10-Q (“Report” or “Form 10-Q”) and our consolidated financial statements and notes included in our Annual Report on Form 10-K, for the fiscal year ended October 2, 2015 (our “2015 10-K”). We use the terms “we,” “our,” “us” and “Learning Tree” to refer to Learning Tree International, Inc. and our subsidiaries unless the context indicates otherwise.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Report. Our forward-looking statements, including the Future Outlook section contained herein, relate to future events or our future performance and include, but are not limited to, statements concerning our business strategy, future commercial revenues, market growth, capital requirements, new product introductions, expansion plans, expense reduction initiatives and the adequacy of our funding. Other statements contained in this Report that are not historical facts are also forward-looking statements. 

We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995. We caution investors that any forward-looking statements presented in this Report, or that we may make orally or in writing from time to time, are based on our beliefs and assumptions made by us and information currently available to us. Such statements are based on assumptions, and the actual outcome will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance, and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences may be material. Accordingly, investors should use caution in relying on forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include those related to the following: risks associated with the timely development, introduction, and customer acceptance of our courses; efficient delivery and scheduling of our courses; technology development and new technology introduction; competition; international operations, including currency fluctuations; attracting and retaining qualified personnel; intellectual property, including having to defend potential infringement claims; risks associated with cyber security; changing economic and market conditions; and adverse weather conditions, strikes, acts of war or terrorism and other external events. Please refer to the risk factors under “Item 1A. Risk Factors” beginning on page 10 and elsewhere in our 2015 10-K, as well as in our other filings with the Securities and Exchange Commission (“SEC”).

The risks included in our filings are not exhaustive, and additional factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We do not undertake and specifically disclaim any obligation to update such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements, except as otherwise required by law.

OVERVIEW

We are a leading worldwide vendor-independent provider to business and government organizations for the training and education of their information technology (“IT”) professionals and managers. Since our founding in 1974, we have provided high-quality training to over 2.4 million IT professionals and managers.

Our objective is to provide our customers with job-focused, hands-on learning experiences that best meet their needs for the development of their professional IT staff and managers. We design our courses to provide participants an unbiased perspective of both the strengths and limitations of software and hardware products and an understanding of how to compare and integrate multiple platforms and technologies from various vendors. Drawing from the expertise of our international team of instructors, each course incorporates multiple points of view concerning IT applications used throughout the world. Our IT courses are designed to be highly interactive, with virtually all of our courses involving “hands-on” training on networked state-of-the-art workstations so that participants can practice and assimilate the skills being taught. Participants spend a significant portion of each hands-on course working on computer-based exercises and participating in group workshops and class interactions. As a result, they return to their jobs with the confidence to immediately apply the new skills and knowledge they have gained. Participants receive or are provided access to extensive course materials that facilitate learning and serve as a post-course reference tool.

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 Our management courses, while including core concepts and theory, focus heavily on providing practical skills, tools, and techniques that participants can apply immediately upon returning to their jobs. Participants work extensively in group exercises that provide the opportunity for them to practice applying the key concepts in real-world situations. These real-world scenarios are primarily delivered through our performance-based management training platform. Our courses bring the real world to life in the classroom through the use of computer-based and rich-media simulations, supplemented with substantial amounts of hands-on exercises and group activities, facilitated by experts in their respective fields.

We market and deliver our courses through locally staffed operations in the United States, the United Kingdom, Canada, Sweden and Japan, and, pursuant to our License Agreement entered into in connection with the sale of our former French subsidiary, in France. We currently generate approximately 40% of our revenues internationally. Our sophisticated infrastructure and logistics capabilities allow us to coordinate, plan and deliver Learning Tree courses at our education centers and external hotel and conference facilities worldwide. We also present standard or customized courses at customer facilities whenever and wherever desired, with quality standards that are identical to those of courses presented in our Learning Tree Education Centers.

We also offer courses through Learning Tree AnyWare™ — our web-based attendance platform. With the use of our AnyWare™ product, our clients anywhere in the world can participate in any course event being taught at any of our education centers, without the need to travel or commute to the actual course site. Our clients can take our courses at work, home, or at one of our AnyWare™ Learning Centers. Worldwide, we currently have a total of 31 stand-alone AnyWare™ Learning Centers as well as a dedicated AnyWare™ Learning Center within each of our Education Centers which provide our customers convenient access to our courses via our AnyWare™ platform in a setting optimized for learning and training and give our customers firsthand experience with our on-line capabilities. As acceptance of the AnyWare™ product has increased in the United States and Canada, and with our customers increasingly attending courses from home or their office using our AnyWare™ platform, we are evaluating the costs and benefits of maintaining all of our stand-alone AnyWare™ Learning Centers as part of our ongoing review of our business operations.  

We use a well-defined systematic approach to develop and update the Learning Tree course library so as to provide training that is immediately applicable by course participants to their work in a broad range of applications and industries. After assessing market need, courses may be translated into Swedish and Japanese. Our License Agreement with Educinvest determines which courses are translated into French. Our proprietary course development process also allows us to efficiently and effectively customize our courses to specific customer requirements for delivery at their sites. In the United Kingdom, our courses can be used to gain a Master’s degree in Professional Computing at Staffordshire University under a program administered by the Faculty of Computing, Engineering and Technology. We are a trusted continuing professional education (“CPE”) provider of the International Information Systems Security Certification Consortium. In addition, we are on the National Association of State Boards of Accountancy National Registry of CPE sponsors; a Registered Education Provider of the Project Management Institute; an APMG International Accredited Training Organization; an International Institute of Business Analysis (“IIBA”) Endorsed Education Provider; and a SFIA Foundation Accredited Training Partner.

Our instructors are not full time employees of Learning Tree; rather, they are practicing professionals who apply the same IT and management skills they teach in our classrooms while working on development and management projects as independent consultants or full-time employees elsewhere when they are not teaching. This ensures that our instructors stay at the forefront of their respective disciplines, and also enables us to structure our business so over half of our course delivery costs are variable. On average, each of our expert instructors teaches about nine courses per year on an “as needed” basis.

STRATEGIC INITIATIVES

The Company has been experiencing a decline in course attendance. To address this decline, the Company has been executing upon new strategies to increase the number of attendees in our courses and expand our overall customer base. One of the strategies implemented worldwide is to Guarantee To Run (GTR) a higher percentage of our courses than in the past, which makes these courses more attractive to potential attendees that schedule their training in advance of the scheduled course date and want the certainty of the course being delivered on that date. While increasing the number of GTR courses will increase our direct costs, we believe that the certainty of a course being delivered along with the number of pricing promotions we are now offering will generate additional revenues to offset this increase in direct costs with the goal of increasing profitability. The number of pricing promotions to attract more attendees and the increase in one-day courses have the impact of lowering our overall average revenue per participant. Other strategies being initiated include leveraging resellers and other partner models to increase our sales reach, amplifying the growth of our internal sales teams, and partnering with certification organizations and other appropriate training providers to broaden and deepen the training products we offer. Our overall objective is to stabilize the training offered via our Education Centers, and reverse the year-over-year declines in revenue.

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An additional core strategy is to grow our position as a leading worldwide provider of training and workforce development to IT professionals and managers and to become the provider of choice for large national and multinational companies, medium-size companies and government organizations. Over the past few years, we have started working with clients to address the life cycle of organizational performance challenges. To that end, we introduced IT Workforce Optimization Solutions during the 2016 fiscal year, which is a comprehensive suite of services to support IT organizations in: defining organizational structure, processes, and job roles; assessing current staff skills and abilities; and implementing performance improvements by enhancing the skills and abilities of staff and helping to implement process improvements. Workforce Optimization Solutions augments and enhances our core training capabilities enabling Learning Tree to partner with our customers in helping them develop a high-performing organization through workforce development and process improvement.

As part of Workforce Optimization Solutions, we released a skills assessment solution that ultimately will be aligned with the competencies as defined by the non-profit organization, Skills Assessment for the Information Age (SFIA) Foundation. Our current skills assessment library contains more than 9,000 questions that cover 67 different roles across many IT disciplines. We have developed an automated, online tool for individuals to complete assessments, and we are working with several companies that are using our skills assessment solution for helping them assess current competencies of their staff as input to developing individual learning plans.

Through Workforce Optimization Solutions, we have been successfully providing Project Acceleration Workshops for organizations. These workshops combine a training component for an organization, while leveraging that training to support work on a specific customer project. A Project Acceleration Workshop might be focused on creating a Work Break Down (WBS) structure for a project, and as such our instructor would provide training to a customer project team on that subject. But the Workshop would then focus on the creation of a WBS for a specific customer project, so that at the end of the Workshop, the customer project team has a tangible product that can be used to help manage that project. We have received positive feedback on the value of these workshops by both attendees and the customer organizations.

While we do believe Workforce Optimization Solutions is a meaningful strategy for the Company and its future growth, the Company does not expect that this strategy will have a significant impact on the Company’s revenues for the remainder of this fiscal year.

We continue to invest in our sales functions as we make the transition from direct marketing to direct sales. We believe this investment along with Workforce Optimization Solutions will enable us to achieve our goal of reversing the year over year declines in revenue that we have been experiencing and have positive operating income for fiscal year 2017. Although we will be working diligently to accomplish these goals, there is no assurance that we will achieve them, and if so, by the effective timing of fiscal year 2017.

Comprehensive Cost Reduction Program

We have accelerated our comprehensive cost reduction program with the goal of significantly reducing our fiscal year 2017 overall expenses in the range of $11.0 to $12.0 million when compared to the Company’s expenses for fiscal year 2016. These targeted cost reductions are in addition to approximately $6.2 million in overall cost reductions already achieved during the first nine months of fiscal year 2016 when compared to the Company’s expenses for the first nine months of fiscal year 2015. These reductions have been initiated to right-size the Company’s operations, modernize its business operations to meet customer demand and preserve capital. In order to implement these cost reductions for the 2017 fiscal year, we have taken or are taking the following steps:

● Eliminating our direct mail course catalog advertising program effective immediately. Besides being a “green initiative”, we believe that our overall customer-base has shifted the manner in which it selects and purchases courses away from printed catalogs toward greater use of digital channels, such as website, social media and digital advertising.

● Making our course notes available electronically and only producing a paper copy if requested by our attendee.

● Complete a reduction in force of 26 full time equivalent employees in North America.

● Reduced the compensation paid to our Board of Directors, effective August 1, 2016, which our directors unanimously agreed to do as part of our cost reduction program.

● Reducing our real estate costs, which will begin with our Education Center lease in the Chicago area that is expiring and will not be replaced. As other facility leases expire, additional cost reductions will be evaluated.

 As part of this program, Learning Tree will continue to review and take appropriate actions to streamline its operations in order to reduce or eliminate excess costs.

In addition, Learning Tree is exploring other strategic options available to it to enhance shareholder value. Learning Tree does not expect to comment further or update the market with any additional information on the strategic options it is evaluating, unless and until its Board of Directors deems disclosure appropriate or necessary.

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KEY METRICS OF OUR THIRD QUARTER AND NINE MONTHS OF FISCAL YEAR 2016

We use the 52/53-week fiscal year method to better align our external financial reporting with the manner in which we operate our business. Under this method, each fiscal quarter ends on the Friday closest to the end of the calendar quarter. Accordingly, our third quarter of the current fiscal year ended on July 1, 2016 and encompassed 13 weeks, while our third quarter of the prior fiscal year ended on July 3, 2015 and also encompassed 13 weeks. The nine months ended July 1, 2016 and July 3, 2015 also both encompassed 39 weeks

Following the sale of our subsidiary in France, Learning Tree International S.A. (“LTRE(FR)”) in March 2015, we reclassified the historical operating results, including operating statistics of LTRE(FR), to discontinued operations. The following discussions reflect comparisons of our continuing operations excluding LTRE(FR).

 The following is an overview of our results of continuing operations, and net losses for the third quarter of fiscal year 2016 which ended July 1, 2016, compared to the same quarter of fiscal year 2015 which ended July 3, 2015:

• Revenues decreased to $21.1 million from $22.7 million.

•  Gross profit increased to 37.2% of revenues from 36.7% of revenues.

•  Operating expenses decreased by $1.6 million to $10.8 million from $12.4 million. Operating expenses were 51.3% of revenues compared to 54.5% of revenues.

• Loss from operations was $3.0 million compared to a loss from operations of $4.0 million.

• Net loss totaled $2.8 million compared to a net loss of $4.3 million.

The following is an overview of our results of continuing operations, discontinued operations, and net losses for the nine months ended July 1, 2016, compared to the equivalent period of fiscal year 2015:

•  Revenues decreased to $59.9 million from $69.3 million

•  Gross profit declined to 37.0% of revenues from 39.3% of revenues.

• Operating expenses decreased by $5.1 million to $32.6 million from $37.7 million. Operating expenses were 54.5% of revenues compared to 54.4% of revenues.

• Loss from operations was $10.5 million, the same as the nine months ended July 3, 2015.

• Net loss totaled $10.5 million compared to a net loss of $13.3 million.

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RESULTS OF OPERATIONS

The following table summarizes our consolidated statements of operations for the periods indicated, expressed as a percentage of our revenues for these periods:

	Three months ended						Nine months ended
	July 1, 2016			July 3, 2015			July 1, 2016			July 3, 2015
Revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenues		62.8	%		63.3	%		63.0	%		60.7	%
Gross profit		37.2	%		36.7	%		37.0	%		39.3	%
Operating expenses:
Course development		6.4	%		11.3	%		6.7	%		9.2	%
Sales and marketing		22.4	%		23.7	%		23.7	%		24.6	%
General and administrative		22.5	%		19.5	%		24.1	%		20.6	%
		51.3	%		54.5	%		54.5	%		54.4	%
Loss from operations		-14.1	%		-17.8	%		-17.5	%		-15.1	%
Other income (expense):
Interest income, net		0.0	%		0.0	%		0.0	%		0.0	%
Foreign exchange losses		0.7	%		-0.2	%		0.3	%		0.5	%
Other, net		0.2	%		0.0	%		0.0	%		0.0	%
		0.9	%		-0.2	%		0.3	%		0.5	%
Loss from continuing operation before provision for income taxes		-13.2	%		-18.0	%		-17.2	%		-14.6	%
Provision for income taxes		0.2	%		1.0	%		0.3	%		0.6	%
Loss from continuing operations		-13.4	%		-19.0	%		-17.5	%		-15.2	%
Discontinued operations (Note 11)
Loss from discontinued operations (including loss on disposal of $2,501), net of tax		0.0	%		0.0	%		0.0	%		-4.0	%
Net loss		-13.4	%		-19.0	%		-17.5	%		-19.2	%

THREE MONTHS AND NINE MONTHS ENDED JULY 1, 2016 COMPARED WITH THE THREE MONTHS AND NINE MONTHS ENDED JULY 3, 2015

Revenues. Revenues from continuing operations of $21.1 million in our third quarter of fiscal year 2016 were 7.2% lower than revenues of $22.7 million in the same quarter of fiscal year 2015. The decrease in revenues primarily resulted from a 13.2% decrease in average revenue per participant partially offset by a 6.9% increase in the number of course participants. The decrease in the average revenue per participant was caused primarily by lower average revenue per participant from one-day courses which we began introducing in the second quarter of fiscal year 2015, lower average revenue from implementation of periodic pricing promotions to attract new course attendees, and changes in foreign exchange rates, that negatively impacted revenues by approximately 1.1% quarter over quarter. The increase in the number of course participants compared to the same quarter of our prior year was primarily due to higher attendance as a result of our pricing promotions and our one-day courses. Revenues from customers who purchased courses under our U.S. Government General Service Administration (“GSA”) contract schedules were $2.2 million lower for the third quarter of fiscal year 2016 compared to the third quarter of fiscal year 2015.

During our third quarter of fiscal year 2016, we trained 14,823 course participants, a 6.9% increase from the 13,862 course participants we trained in our third quarter of fiscal year 2015.

During our third quarter of fiscal year 2016, we provided 43,842 attendee-days of training, 12.3% fewer than the 50,003 attendee-days of training we provided in the same quarter in fiscal year 2015. In our IT courses, we provided 27,373 attendee-days of training during our third quarter of fiscal year 2016, a 7.3% decrease from the 29,527 attendee-days in the corresponding period in fiscal year 2015. In our management courses, we provided 16,469 attendee-days of training, during our third quarter of fiscal year 2016, a 19.6% decrease from the 20,476 attendee-days in the corresponding period in fiscal year 2015.   

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Our revenues from continuing operations of $59.9 million during our first nine months of fiscal year 2016 were 13.5% lower than revenues of $69.3 million in the same period of fiscal year 2015. The decrease in revenues primarily resulted from a 2.6% decrease in the number of course participants and an 11.2% decrease in average revenue per participant. The decrease in the number of course participants compared to the same nine month period of our prior year is primarily due to the continued decline in enrollments in the United Kingdom and Sweden. The 11.2% decrease in average revenue per participant was caused primarily by the lower average revenue per participant from one-day courses which we began introducing in the second quarter of fiscal year 2015, lower average revenue from the use of periodic pricing promotions to attract new course attendees, and changes in foreign exchange rates. Revenues were negatively impacted by approximately 2.1% period over period as a result of changes in foreign exchange rates.

During our first nine months of fiscal year 2016, we trained 40,291 course participants, a 2.6% decrease from the 41,378 course participants we trained in our first nine months of fiscal year 2015. 

During our first nine months of fiscal year 2016, we provided 124,018 attendee-days of training, 15.6% fewer than the 146,981 attendee-days in the same period in fiscal year 2015. In our IT courses during our first nine months of fiscal year 2016, we provided 78,431 attendee-days of training, an 11.0% decrease from the 88,095 attendee-days in the corresponding period in fiscal year 2015. In our management courses during our first nine months of fiscal year 2016, we provided 45,587 attendee-days of training, a 22.6% decrease from the 58,886 attendee-days in the corresponding period in fiscal year 2015.

Cost of Revenues. Our cost of revenues from continuing operations primarily includes the costs of course instructors and their travel expenses, course materials, classroom facilities, equipment, freight and refreshments.

 During our third quarter of fiscal year 2016, we presented 1,319 events, an 11.4% increase from 1,184 events during the same period in fiscal year 2015. The increase was primarily due to the decision to GTR more courses in order to support the pricing promotions during the period. Our cost of revenues for our third quarter of fiscal year 2016 was $13.2 million, or 62.8% of revenues, compared to $14.4 million, or 63.3% of revenues, in the same period in fiscal year 2015. Accordingly, our gross profit percentage for our third quarter of fiscal year 2016 was 37.2% compared to 36.7% in the same period of the prior fiscal year.

The change in cost of revenues as a percentage of revenues in our third quarter of fiscal year 2016 primarily reflects the 13.2% decrease in revenue per participant that was offset by a 13.8% decrease in cost per participant. The decrease in cost per participant is primarily the result of a 7.9% decrease in the cost of revenues and the 6.9% increase in participants. Changes in foreign exchange rates do not materially affect our gross profit percentage, since fluctuations in exchange rates affect our cost of revenues by approximately the same percentage as they affect our revenues.

During our first nine months of fiscal year 2016, we presented 3,661 events, an 8.3% increase from 3,381 events during the same period in fiscal year 2015. The increase was primarily due to our decision to GTR more courses and the addition of one-day courses during the first nine months of fiscal year 2016. Our cost of revenues for our first nine months of fiscal year 2016 was $37.7 million, or 63.0% of revenues, compared to $42.0 million, or 60.7% of revenues, in the same period in fiscal year 2015. Accordingly, our gross profit percentage for our first nine months of fiscal year 2016 was 37.0% compared to 39.3% in the same period of the prior fiscal year.

The change in cost of revenues as a percentage of revenues during our first nine months of fiscal year 2016 primarily reflects the 11.2% decrease in revenue per participant partially offset by a 7.8% decrease in the cost per participant. The decrease in cost per participant is primarily the result of a 10.2% decrease in the cost of revenues partially offset by the 2.6% decrease in participants.

Course Development Expenses. Costs incurred to develop new courses and update our existing courses are expensed when incurred and are included in course development expenses. These costs are principally for internal product development staff and for subject matter experts.

During our third quarter of fiscal year 2016, course development expenses were 6.4% of revenues, compared to 11.3% in our third quarter of fiscal year 2015. Overall spending on course development in our third quarter of fiscal year 2016 was $1.4 million, compared to $2.6 million spent on course development in our third quarter of fiscal year 2015. The $1.2 million decrease in course development expenses quarter over quarter was primarily due to the development of a series of one-day courses during the third quarter of fiscal year 2015 that did not occur during the third quarter of fiscal year 2016 and lower personnel expenses during the third quarter of fiscal year 2016.

Course development expense during our first nine months of fiscal year 2016 was $4.0 million, a decrease of $2.4 million compared to $6.4 million in the same period of fiscal year 2015.

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In our third quarter of fiscal year 2016, we introduced nine new multi-day IT course titles, one new multi-day management course title, and four one day course titles. We retired nine one-day course titles during the third quarter of fiscal year 2016. At the end of our third quarter of fiscal year 2016, our library of instructor-led courses numbered 374 titles compared with 274 titles at the end of the same quarter of fiscal year 2015. At the end of our third quarter of this fiscal year, we had 136 multi-day IT titles in our course library, compared with 121 multi-day titles at the end of the same quarter of fiscal year 2015. Our library of multi-day management titles numbered 71 at the end of our third quarter of fiscal year 2016, compared to 67 at the end of the same quarter of fiscal year 2015. Our library of 1-Day Boot Camp courses numbered 167 at the end of our third quarter of fiscal year 2016, compared to 86 at the end of the same quarter of fiscal year 2015. 

Sales and Marketing Expenses. Sales and marketing expenses include the costs of designing, producing and distributing direct mail and media advertisements; distributing marketing e-mails; maintaining and further developing our website; compensation and travel for sales and marketing personnel; and information systems to support these activities.

Sales and marketing expenses in our third quarter of fiscal year 2016 were 22.4% of revenues, compared to 23.7% in the same quarter of fiscal year 2015. Sales and marketing expenses were $4.7 million in our third quarter of fiscal year 2016, compared to $5.4 million during our third quarter of fiscal year 2015. The decrease is driven primarily by decreases in direct marketing costs when compared to the third quarter of fiscal year 2015. Changes in foreign exchange rates during the third quarter of fiscal year 2016 caused total sales and marketing expenses to decrease by about 2.2% compared to the same period of fiscal year 2015.

Sales and marketing expenses during our first nine months of fiscal year 2016 were $14.2 million, a decrease of $2.8 million compared to $17.0 million in the same period of fiscal year 2015. The decrease was primarily due to a $2.4 million decrease in direct marketing costs and $0.4 million of reduced personnel expense. Changes in foreign exchange rates included in these figures caused total sales and marketing expenses to decrease by about 2.8% for the first nine months of fiscal year 2016 compared to the same period of fiscal year 2015.

 General and Administrative Expenses. General and administrative expenses in our third quarter of fiscal year 2016 were 22.5% of revenues, compared with 19.5% for the same quarter in fiscal year 2015. General and administrative expenses during our third quarter of fiscal year 2016 were $4.7 million, compared to $4.4 million in our third quarter of fiscal year 2015. The increase was primarily due to a $0.3 million increase in outside professional services. Changes in foreign exchange rates during the first quarter of fiscal year 2016 caused total general and administrative expenses to decrease by approximately 1.2% compared to the same period of fiscal year 2015.

 General and administrative expenses during our first nine months of fiscal year 2016 were $14.4 million, an increase of $0.1 million compared to $14.3 million in the same period of fiscal year 2015. The increase was due primarily to a $0.3 million increase in outside professional services, partially offset by a $0.1 million decrease in personnel cost and a $0.1 million decrease in facilities cost. Changes in foreign exchange rates had a 1.8% favorable impact on the nine months expenses incurred by our foreign subsidiaries.

Other Income (Expense), Net. Other income (expense), net consists primarily of interest income and foreign currency transaction gains and losses.

During our third quarter of fiscal year 2016, we had other income of $0.2 million compared to other expense of less than $0.1 million in the third quarter of fiscal year 2015, both primarily from foreign exchange gains or losses.

During our first nine months of fiscal year 2016 other expense totaled $0.2 million compared to other income of $0.3 million in our first nine months of fiscal year 2015 both primarily from foreign exchange gains or losses.

Income Taxes. Our income tax provision in our third quarter of fiscal year 2016 was less than $0.1 million, compared to $0.2 million in our third quarter of fiscal year 2015. Our third quarter of fiscal year 2016 and 2015 provisions are primarily related to the income tax expense of the Company's foreign subsidiaries.

Our income tax provision for our first nine months of fiscal year 2016 was $0.2 million, compared to $0.4 million for our first nine months of fiscal year 2015, and are primarily related to US State taxes and the income tax expense of the Company's foreign subsidiaries.

Loss from Continuing Operations. Our loss from continuing operations for our third quarter of fiscal year 2016 was $2.8 million compared to a loss of $4.3 million for our third quarter of fiscal year 2015.

For the first nine months of fiscal year 2016, our loss from continuing operations was $10.5 million, which is the same as the loss in the first nine months of fiscal year 2015.

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Loss from Discontinued Operations. For the first nine months of fiscal year 2016, we did not have any activity from discontinued operations, compared to our loss from discontinued operations of $2.8 million in the first nine months of fiscal year 2015.

Net Loss. Our net loss for our third quarter of fiscal year 2016 was $2.8 million compared to net loss of $4.3 million for our third quarter of fiscal year 2015.

Our net loss for our first nine months of fiscal year 2016 was $10.5 million compared to net loss of $13.3 million for our first nine months of fiscal year 2015.

Effects of Foreign Exchange Rates. Although our consolidated financial statements are stated in U.S. dollars, all of our subsidiaries outside of the U.S. have functional currencies other than the U.S. dollar. Gains and losses arising from the translation of the balance sheets of our subsidiaries from the functional currencies to U.S. dollars are reported as adjustments to stockholders’ equity. Fluctuations in exchange rates, including those recently experienced following a referendum on June 23, 2016 in which voters in the United Kingdom approved an exit from the European Union (referred to as “Brexit”), may also have an effect on our results of operations. The strengthening of the U.S. dollar against the functional currencies of most of our foreign subsidiaries has negatively impacted our results of operations. Since both revenues and expenses are generally denominated in our subsidiaries’ local currency, changes in exchange rates that have an adverse effect on our foreign revenues are partially offset by a favorable effect on our foreign expenses. The impact of future exchange rates on our results of operations cannot be accurately predicted, including those related to Brexit. To date, we have not sought to hedge the risks associated with fluctuations in exchange rates, and therefore we continue to be subject to such risks. Even if we undertake such hedging transactions in the future, there can be no assurance that any hedging techniques we implement would be successful in eliminating or reducing the effects of currency fluctuations. See Item 1A “Risk Factors” in this Form 10-Q and in our 2015 10-K.

FLUCTUATIONS IN QUARTERLY RESULTS

Our quarterly results are affected by many factors, including the number of weeks during which courses can be conducted in a quarter, the nature and extent of our marketing, the timing of the introduction of new courses, competitive forces within the markets we serve, the mix of our course events between IT and management and customer site or education center venues, and currency fluctuations.

In addition, we use the 52/53-week fiscal year method to better align our external financial reporting with the manner in which we operate our business. Under this method, each fiscal quarter ends on the Friday closest to the end of the calendar quarter. Accordingly, our third quarter of the current fiscal year ended July 1, 2016 encompassed 13 weeks, while our third quarter of the prior fiscal year ended July 3, 2015 also encompassed 13 weeks.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity at July 1, 2016 included cash and cash equivalents on hand of $9.1 million. During the first nine months of fiscal year 2016, our total cash and cash equivalents decreased by $8.9 million, primarily as a result of the need to use cash to fund our operating activities of $7.7 million and cash used for capital expenditures of $1.1 million.

At July 1, 2016, our net working capital deficit (current assets minus current liabilities) was $(10.0) million, an $8.1 million decrease from our working capital balance at October 2, 2015. Current assets decreased $10.7 million during the nine month period, due primarily to decreases in trade accounts receivable and cash. Current liabilities decreased $2.6 million during the period, primarily due to decreases in accounts payable and accrued expenses.

 Cash Flows from Continuing Operations. Our cash and cash equivalents from continuing operations decreased $8.9 million to $9.1 million at July 1, 2016 from $17.9 million at October 2, 2015.

	Nine months ended
(in thousands)	July 1, 2016			July 3, 2015			Net Change
Cash used in operating activities of continuing operations	$	(7,691	)	$	(8,763	)	$	1,072
Cash used in investing activities of continuing operations		(1,104	)		(2,240	)		1,136
Effects of exchange rate changes on cash and cash equivalents of continuing operations		(86	)		(196	)		110
Net decrease in cash and cash equivalents of continuing operations	$	(8,881	)	$	(11,199	)	$	2,318

19

Cash used in continuing operating activities decreased $1.1 million in the first nine months of fiscal year 2016, compared to the first nine months of fiscal year 2015. Cash used in investing activities decreased by $1.1 million in the first nine months of fiscal year 2016 compared to the first nine months of fiscal 2015, due to decreased capital spending for equipment and leasehold improvements.     

Liquidity. The continued decline in operating performance has resulted in net cash being used in operating activities, and we expect the net cash usage to continue until the Company returns to profitability. Our ability to access the capital markets is limited. We have no outstanding debt or line-of-credit agreements. We anticipate we will continue to rely primarily on our balance of cash and cash equivalents on hand, cash flows from operations, and other lease financing available to us to finance our operational cash needs. As described above, we have implemented a comprehensive cost reduction program while continuing to invest in our sales function to reverse the year-over-year decline in revenue. With these actions, we believe that such funds will be sufficient to satisfy our anticipated cash requirements for the foreseeable future.  

Capital Requirements. During the nine months ended July 1, 2016, we made capital expenditures of $1.1 million for leasehold improvements and the purchase of network computer and other equipment. Additionally, $1.2 million of leasehold improvement costs were funded directly by the landlord to the contractor performing such improvements. We have no plans to purchase additional equipment and other capital assets during the remainder of fiscal year 2016. Our contractual obligations as of July 1, 2016 are consistent in all material respects with our fiscal year-end disclosure in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources–Capital Requirements” of our 2015 10-K.

We have a number of operating leases for our administrative offices and education center classroom facilities located worldwide. These leases expire at various dates over the next 11 years. In addition to requiring monthly or quarterly payments for rent, some of the leases contain asset retirement provisions whereby we are required to return the leased facility back to a specified condition at the expiration of the lease.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

 Management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements. The preparation of these financial statements is based on the selection of accounting policies and the application of significant accounting estimates, some of which require management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and notes. We believe some of the more critical estimates and policies that affect our financial condition and results of operations are in the areas of revenue recognition, operating leases, AROs, stock-based compensation and income taxes. For more information regarding our critical accounting estimates and policies, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Policies” of our 2015 10-K. We have discussed the application of these critical accounting policies and estimates with the Audit Committee of our Board of Directors.

FUTURE OUTLOOK

Our clients are shortening the average time from initial enrollment in a course to their actual attendance. This shorter buying cycle has reduced our visibility for future enrollments and has made forecasting future financial results more difficult. We have taken this into consideration in developing our forward-looking outlook for our fourth quarter of fiscal year 2016. In addition, while the fourth quarter of fiscal year 2016 has 13 weeks, the same as in the fourth quarter of fiscal year 2015,  the fiscal year 2016 fourth quarter includes the Fourth of July holiday week in the U.S., which fell in the third quarter in fiscal year 2015. We typically do not run courses the week of July 4^th in the U.S.

Effect of Exchange Rates. Approximately 40% of our business annually is conducted in currencies other than U.S. dollars and fluctuations in exchange rates will affect future revenues and expenses when translated into U.S. dollars. If the exchange rates as of August 1, 2016 remain constant for the remainder of our fourth quarter of fiscal year 2016, then we would expect foreign exchange rates to negatively impact fourth quarter revenues from continuing operations by approximately 2.4% when compared to the fourth quarter of fiscal year 2015. To the extent that the U.S. dollar rises against the functional currencies of our foreign subsidiaries, we would expect to experience further negative impact to our fourth quarter 2016 revenues. As a large percentage of our overhead costs are U.S. dollar-based, we would expect the corresponding positive impact to expense to be substantially less.

20

Fourth Quarter Revenues. We currently expect revenues from continuing operations for our fourth quarter of fiscal year 2016 of between $22.1 million and $23.1 million, compared to revenues of $25.6 million in our fourth quarter of fiscal year 2015.

Fourth Quarter Gross Profit. We expect a gross profit percentage from continuing operations in our fourth quarter of fiscal year 2016 of between 42.3% and 43.3% compared to 46.3% in our fourth quarter of fiscal year 2015.

Fourth Quarter Operating Expenses. We expect overall operating expenses from continuing operations for our fourth quarter of fiscal year 2016 to be between $10.3 million and $11.3 million, compared to $11.1 million in our fourth quarter of fiscal year 2015.

Fourth Quarter Loss from Operations. As a result of the above factors, we expect to incur a fourth quarter operating loss of between $0.3 million and $2.0 million compared with an operating profit of $0.8 million in our fourth quarter of fiscal year 2015.

Fourth Quarter Other Income (Expense), Net. We expect fourth quarter other expense to be less than $0.1 million.

Fourth Quarter Pre-Tax Loss. Overall, we expect to report a pre-tax loss for our fourth quarter of fiscal year 2016 of between $0.3 million and $2.1 million, compared with pre-tax income of $0.8 million in our fourth quarter of fiscal year 2015.

Impact of the Comprehensive Cost Reduction Program on the Fourth Quarter. We expect that the negative impact of employee severance costs related to our cost reduction program being implemented during the fourth quarter of fiscal 2016 will be offset by the related cost savings from the ongoing monthly reduction in salary and benefit costs. We are targeting for our other cost reduction initiatives, as generally described under “Strategic Initiatives - Comprehensive Cost Reduction Program” in this Management’s Discussion and Analysis on page 14, to be in place for the start of fiscal year 2017, however, if we are able to implement these initiatives sooner than expected, the Company may realize slight savings in the fourth quarter of fiscal year 2016.

21

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.   

Disclosure under this item is not required for a Smaller Reporting Company.

Item 4. CONTROLS AND PROCEDURES.   

Disclosure Controls and Procedures

As of the end of the period covered by this report, management performed an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective.

 Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that we believe have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.   

As of July 1, 2016, other than routine legal proceedings and claims incidental to our business, we are not involved in any legal proceedings that we believe could reasonably be expected to have a material adverse effect on our financial condition or results of operations.

Item 1A. RISK FACTORS.   

Our working capital requirements may negatively affect our liquidity and capital resources.

Our working capital needs have exceeded, and are anticipated to continue to exceed for the near future, our cash flows from operations. Accordingly, we have historically relied on our cash and cash equivalents to satisfy our working capital needs. If we do not increase our revenues or gain access to additional capital, whether through a line or credit or other sources of capital, which may not be available on satisfactory terms or in adequate amounts, then our cash and cash equivalents will continue to decline which will have an adverse impact upon our liquidity and capital resources.   

We may be unable to realize our business strategy of improving operating performance, growing our business and generating savings and improvements.

We have been implementing strategic and other initiatives, including the recently implemented Comprehensive Cost Reduction Program that are designed to improve our operating performance, increase revenues and grow our business. The failure to achieve the goals of these initiatives could have a material adverse effect on our financial condition and our business as a whole. There is no assurance that we will be able to pursue, successfully implement or realize the expected benefits of any initiative or that we will be able to sustain improvements made to date.

Our operations in the United Kingdom pose additional risks to our profitability and operating results.

Following a referendum on June 23, 2016 in which voters in the United Kingdom (“U.K.”) approved an exit from the European Union ("EU"), it is expected that the U.K. government will initiate a process to leave the EU (often referred to as “Brexit”), including negotiating the terms of the U.K.’s future relationship with the EU. Such an exit from the EU is unprecedented, and it is unclear how the U.K.’s access to the EU Single Market, and the wider commercial, legal and regulatory environment, will impact our U.K. operations and customers. Our U.K. operations service customers in the U.K. as well as in other countries in the EU, and these operations could be disrupted by Brexit, particularly if there is a change in the U.K.’s relationship to the EU Single Market. Even prior to any change to the U.K.’s relationship with the EU, the announcement of Brexit may create economic uncertainty surrounding the terms of the U.K.’s exit and its consequences could adversely impact customer confidence resulting in customers reducing their spending budgets on our products and services, which would adversely affect our businesses and results of operations.

The announcement of Brexit caused significant volatility in global stock markets and currency exchange rate fluctuations that resulted in the strengthening of the U.S. dollar against foreign currencies in which we conduct business. The further strengthening of the U.S. dollar against the U.K. currency and other currencies of most of our foreign subsidiaries has negatively impacted our results of operations. In addition, the losses arising from the translation of the balance sheets of our foreign subsidiaries from the functional foreign currencies to U.S. dollars that we have been experiencing are reported as adjustments to our consolidated stockholders’ equity, which has contributed to our current negative stockholders’ equity. We do not hedge the risks associated with fluctuations in exchange rates, and therefore we continue to be subject to such risks.

22 

Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.  

None.

Item 3.  DEFAULTS UPON SENIOR SECURITIES.  

None.

Item 4.  MINE SAFETY DISCLOSURES.  

Not Applicable.

Item 5.  OTHER INFORMATION.  

None.

23

Item 6.  EXHIBITS.  

Exhibit No.	Document Description	Incorporation by Reference
31.1	Certification of Chief Executive Officer. Pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as amended.	Filed herewith.
31.2	Certification of Chief Financial Officer. Pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as amended.	Filed herewith.
32.1	Certification of Chief Executive Officer. Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith.
32.2	Certification of Chief Financial Officer. Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith.
101 INS	XBRL Instance Document.	Filed herewith.
101 SCH	XBRL Taxonomy Extension Schema Document.	Filed herewith.
101 CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	Filed herewith.
101 DEF	XBRL Taxonomy Extension Definition.	Filed herewith.
101 LAB	XBRL Taxonomy Extension Label Linkbase Document.	Filed herewith.
101 PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	Filed herewith.

24

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

August 15, 2016 

LEARNING TREE INTERNATIONAL, INC.

By:  /s/ Richard A. Spires 

Richard A. Spires

Chief Executive Officer

(Principal Executive Officer)

By:  /s/ David W. Asai 

David W. Asai

Chief Financial Officer

(Principal Financial and Accounting Officer)

25

Exhibit No.	Document Description	Incorporation by Reference
31.1	Certification of Chief Executive Officer. Pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as amended.	Filed herewith.
31.2	Certification of Chief Financial Officer. Pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as amended.	Filed herewith.
32.1	Certification of Chief Executive Officer. Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith.
32.2	Certification of Chief Financial Officer. Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith.
101 INS	XBRL Instance Document.	Filed herewith.
101 SCH	XBRL Taxonomy Extension Schema Document.	Filed herewith.
101 CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	Filed herewith.
101 DEF	XBRL Taxonomy Extension Definition.	Filed herewith.
101 LAB	XBRL Taxonomy Extension Label Linkbase Document.	Filed herewith.
101 PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	Filed herewith.

26

EX-31.1

Exhibit 31.1

WRITTEN CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Richard A. Spires, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Learning Tree International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 15, 2016

By:	/s/ Richard A. Spires
	Richard A. Spires
	Chief Executive Officer

EX-31.2

Exhibit 31.2

WRITTEN CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, David W. Asai, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Learning Tree International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 15, 2016

By:	/s/ David W. Asai
	David W. Asai
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard A. Spires, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report of Learning Tree International, Inc. on Form 10-Q for the quarter ended July 1, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Learning Tree International, Inc.

August 15, 2016

By:	/s/ Richard A. Spires
	Richard A. Spires
	Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Learning Tree International, Inc. and will be retained by Learning Tree International, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, David W. Asai, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report of Learning Tree International, Inc. on Form 10-Q for the quarter ended July 1, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Learning Tree International, Inc.

August 15, 2016

By:	/s/ David W. Asai
	David W. Asai
	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Learning Tree International, Inc. and will be retained by Learning Tree International, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	9 Months Ended
	Jul. 01, 2016	Aug. 10, 2016
Document Information [Line Items]
Entity Registrant Name	LEARNING TREE INTERNATIONAL, INC.
Entity Central Index Key	0001002037
Trading Symbol	ltre
Current Fiscal Year End Date	--09-30
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		13,224,349
Document Type	10-Q
Document Period End Date	Jul. 01, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jul. 01, 2016	Oct. 02, 2015
Assets
Cash and cash equivalents	$ 9,055,000	$ 17,936,000
Trade accounts receivable, net	9,316,000	10,475,000
Income tax receivable	239,000	498,000
Prepaid expenses	2,625,000	2,773,000
Other current assets	1,505,000	1,747,000
Total current assets	22,740,000	33,429,000
Education and office equipment	32,000,000	33,165,000
Transportation equipment	64,000	70,000
Property and leasehold improvements	18,529,000	17,931,000
	50,593,000	51,166,000
Less: accumulated depreciation and amortization	(44,600,000)	(45,096,000)
	5,993,000	6,070,000
Restricted interest-bearing investments	2,988,000	3,265,000
Deferred income taxes	477,000	476,000
Other assets	608,000	681,000
Total assets	32,806,000	43,921,000
Current Liabilities
Trade accounts payable	5,358,000	6,744,000
Deferred revenues	22,710,000	22,909,000
Accrued payroll, benefits and related taxes	3,127,000	2,865,000
Other accrued liabilities	692,000	1,225,000
Income taxes payable	0	174,000
Current portion of deferred facilities rent and other	822,000	1,401,000
Total current liabilities	32,709,000	35,318,000
Asset retirement obligations	1,475,000	1,669,000
Deferred income taxes	133,000	134,000
Deferred facilities rent and other	4,827,000	2,575,000
Noncurrent tax liabilities	1,215,000	1,178,000
Total liabilities	40,359,000	40,874,000
COMMITMENTS AND CONTINGENCIES
Stockholders' (Deficit) Equity
Preferred stock, $.0001 par value; 1,000,000 shares authorized; 0 shares issued and outstanding	0	0
Common stock, $.0001 par value; 75,000,000 shares authorized; 13,224,349 issued and outstanding	1,000	1,000
Additional paid-in capital	6,347,000	6,224,000
Accumulated other comprehensive loss	(821,000)	(578,000)
Accumulated Deficit	(13,080,000)	(2,600,000)
Total stockholders' (deficit) equity	(7,553,000)	3,047,000
Total liabilities and stockholders' (deficit) equity	$ 32,806,000	$ 43,921,000

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Jul. 01, 2016	Oct. 02, 2015
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, authorized shares (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	75,000,000	75,000,000
Common stock, issued (in shares)	13,224,349	13,224,349
Common stock, outstanding (in shares)	13,224,349	13,224,349

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 01, 2016	Jul. 03, 2015	Jul. 01, 2016	Jul. 03, 2015
Revenues	$ 21,073,000	$ 22,703,000	$ 59,892,000	$ 69,255,000
Cost of revenues	13,232,000	14,361,000	37,745,000	42,049,000
Gross profit	7,841,000	8,342,000	22,147,000	27,206,000
Operating expenses:
Course development	1,354,000	2,575,000	3,990,000	6,395,000
Sales and marketing	4,710,000	5,387,000	14,219,000	16,999,000
General and administrative	4,750,000	4,420,000	14,408,000	14,275,000
Operating expenses	10,814,000	12,382,000	32,617,000	37,669,000
Loss from operations	(2,973,000)	(4,040,000)	(10,470,000)	(10,463,000)
Other income (expense):
Interest income, net	6,000	16,000	21,000	27,000
Foreign exchange gains (losses)	147,000	(52,000)	157,000	336,000
Other, net	41,000	(5,000)	7,000	(17,000)
Other operating items	194,000	(41,000)	185,000	346,000
Loss from continuing operations before provision for income taxes	(2,779,000)	(4,081,000)	(10,285,000)	(10,117,000)
Provision for income taxes	51,000	222,000	195,000	432,000
Loss from continuing operations	(2,830,000)	(4,303,000)	(10,480,000)	(10,549,000)
Discontinued operations (Note 11)
Loss from discontinued operations, net of tax	0	0	0	(264,000)
Loss on disposal of discontinued segment	0	0	0	(2,501,000)
Loss from discontinued operations, net of tax	0	0	0	(2,765,000)
Net loss	$ (2,830,000)	$ (4,303,000)	$ (10,480,000)	$ (13,314,000)
Loss per common share - basic and diluted:
Continuing operations (in dollars per share)	$ (0.21)	$ (0.33)	$ (0.79)	$ (0.80)
Discontinued operations (in dollars per share)	0	0	0	(0.21)
Basic and diluted loss per share (in dollars per share)	$ (0.21)	$ (0.33)	$ (0.79)	$ (1.01)
Denominator:
Weighted average shares - basic (in shares)	13,224,000	13,224,000	13,224,000	13,224,000
Weighted average shares - diluted (in shares)	13,224,000	13,224,000	13,224,000	13,224,000
Comprehensive loss:
Net Loss	$ (2,830,000)	$ (4,303,000)	$ (10,480,000)	$ (13,314,000)
Foreign currency translation adjustments	(113,000)	251,000	(243,000)	(93,000)
Comprehensive loss	$ (2,943,000)	$ (4,052,000)	$ (10,723,000)	$ (13,407,000)

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Jul. 01, 2016	Jul. 03, 2015
Leasehold Improvements [Member]
Supplemental non-cash disclosures:
Non-cash leasehold improvements	$ 1,221,000	$ 0
Net Loss	(10,480,000)	(13,314,000)
Loss on sale	0	2,501,000
Loss from discontinued operations, net of tax	0	264,000
Loss from continuing operations	(10,480,000)	(10,549,000)
Depreciation and amortization	2,159,000	3,515,000
Share-based compensation	123,000	57,000
Deferred income taxes	(37,000)	103,000
Provision for doubtful accounts	116,000	28,000
Accretion on asset retirement obligations	59,000	59,000
(Gain) loss on disposal of equipment, property and leasehold improvements	(2,000)	11,000
Unrealized foreign exchange gains	(136,000)	(331,000)
Settlement of asset retirement obligation	(106,000)	0
Trade accounts receivable	977,000	3,497,000
Prepaid expenses and other assets	243,000	(407,000)
Income tax receivable / payable	111,000	(137,000)
Trade accounts payable	(1,268,000)	202,000
Deferred revenues	358,000	(1,751,000)
Deferred facilities rent and other	528,000	(1,032,000)
Other accrued liabilities	(336,000)	(2,028,000)
Net cash used in operating activities of continuing operations	(7,691,000)	(8,763,000)
Net cash used in operating activities of discontinued operations	0	(206,000)
Net cash used in operating activities	(7,691,000)	(8,969,000)
Purchases of equipment, property and leasehold improvements	(1,106,000)	(2,260,000)
Proceeds from sale of equipment, property and leasehold improvements	2,000	20,000
Net cash used in investing activities of continuing operations	(1,104,000)	(2,240,000)
Net cash used in investing activities of discontinued operations	0	(745,000)
Net cash used in investing activities	(1,104,000)	(2,985,000)
Effects of exchange rate changes on cash and cash equivalents of continuing operations	(86,000)	(196,000)
Effects of exchange rate changes on cash and cash equivalents of discontinued operations	0	(246,000)
Effects of exchange rate changes on cash and cash equivalents	(86,000)	(442,000)
Net change in cash and cash equivalents of discontinued operations	0	1,197,000
Net decrease in cash and cash equivalents	(8,881,000)	(11,199,000)
Cash and cash equivalents at the beginning of the period	17,936,000	29,881,000
Cash and cash equivalents at the end of the period	$ 9,055,000	$ 18,682,000

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Note 1 - Basis of Presentation

9 Months Ended

Jul. 01, 2016

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

NOTE 1—BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements of Learning Tree International, Inc. and our subsidiaries (collectively, “Learning Tree,” “we,” “our” or “us”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and, therefore, omit or condense certain note disclosures and other information required by accounting principles generally accepted in the United States of America for complete financial statements. These financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended October 2, 2015.

We use the 52/53-week fiscal year method to better align our external financial reporting with the manner in which we operate our business. Under this method, each fiscal quarter ends on the Friday closest to the end of the calendar quarter. Accordingly, our third quarter of the current fiscal year ended on July 1, 2016 and encompassed 13 weeks, while our third quarter of the prior fiscal year ended on July 3, 2015 and also encompassed 13 weeks.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, that are only of a normal recurring nature, considered necessary to present fairly our financial position as of July 1, 2016, and our results of operations for the three months and nine months ended July 1, 2016 and July 3, 2015, and our cash flows for the nine months ended July 1, 2016 and July 3, 2015. Certain items in the condensed consolidated financial statements have been reclassified to conform to the current presentation.

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Note 2 - Share-based Compensation

9 Months Ended

Jul. 01, 2016

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 2—SHARE-BASED COMPENSATION

Share-based compensation expense related to grants of employee stock options and restricted stock units was less than $0.1 million for both the three months ended July 1, 2016 and July 3, 2015, and was charged in a manner consistent with the related employee salary costs. Share based compensation expense for the nine month ended July 1, 2016 was $0.1 million compared to less than $0.1 million for the nine months ended July 3, 2015.

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Note 3 - Asset Retirement Obligations

9 Months Ended

Jul. 01, 2016

Notes to Financial Statements

Asset Retirement Obligation Disclosure [Text Block]

NOTE 3—ASSET RETIREMENT OBLIGATIONS

The following table presents the activity for the asset retirement obligations (“ARO”) liabilities from continuing operations, which are primarily related to the restoration of classroom facilities in our Learning Tree Education Centers:

	Nine months ended July 1, 2016			Year ended October 2, 2015
ARO balance, beginning of period	$	1,669		$	1,656
Accretion expense		59			79
Settlement of ARO liability		(106	)		0
Foreign currency translation		(147	)		(66	)
ARO balance, end of period	$	1,475		$	1,669

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Note 4 - Loss Per Share

9 Months Ended

Jul. 01, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

NOTE 4—LOSS PER SHARE

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding (which excludes unvested shares of our common stock granted under our 2007 Equity Incentive Plan) during the reporting period. Diluted loss per share is computed similarly to basic loss per share except that the weighted average shares outstanding are increased to include common stock equivalents, to the extent their effect is dilutive. Approximately 850,000 stock options and 250,000 stock options were excluded from the computations of diluted earnings per share for the three and nine month ended July 1, 2016 and July 3, 2015, respectively, because their effect would have been anti-dilutive. The computations for basic and diluted earnings per share are as follows:

	Three months ended						Nine months ended
	July 1, 2016			July 3, 2015			July 1, 2016			July 3, 2015
Numerator:
Loss from continuing operations	$	(2,830	)	$	(4,303	)	$	(10,480	)	$	(10,549	)
Loss from discontinued operations		0			-			0			(2,765	)
Net loss	$	(2,830	)	$	(4,303	)	$	(10,480	)	$	(13,314	)
Denominator:
Weighted average shares outstanding
Basic		13,224			13,224			13,224			13,224
Effect of dilutive securities		0			0			0			0
Diluted		13,224			13,224			13,224			13,224
Loss per common share - basic and diluted:
Continuing operations	$	(0.21	)	$	(0.33	)	$	(0.79	)	$	(0.80	)
Discontinued operations		0			0			0			(0.21	)
Basic and diluted loss per share	$	(0.21	)	$	(0.33	)	$	(0.79	)	$	(1.01	)

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Note 5 - Income Taxes

9 Months Ended

Jul. 01, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 5—INCOME TAXES

          Our income tax provision for continuing operations was $0.1 million and $0.2 million in our third quarters of fiscal years 2016 and 2015, respectively. Our income tax provision for continuing operations for our first nine months of fiscal year 2016 was $0.2 million, as compared to $0.4 million for the first nine months of fiscal year 2015. Our third quarter and nine months to date 2016 and 2015 tax provisions were comprised primarily of income tax expense for our foreign subsidiaries and an adjustment of our U.S. income tax expense for fiscal year 2015 to reflect a true up of the actual return to provision estimates. The Company established a valuation allowance against deferred tax assets in the U.S. in the third quarter of fiscal year 2012 and has continued to maintain a full valuation allowance in the U.S. through the third quarter of fiscal year 2016. 

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Note 6 - Commitments and Contingencies

9 Months Ended

Jul. 01, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE 6—COMMITMENTS AND CONTINGENCIES

Contingencies

Currently, and from time to time, we are involved in litigation incidental to the conduct of our business. We are not a party to any lawsuit or legal proceeding that, in the opinion of management, is likely to have a material adverse effect on our consolidated financial position or results of operations.

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Note 7 - Segment Reporting

9 Months Ended

Jul. 01, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE 7—SEGMENT REPORTING

 Our worldwide operations involve the design and delivery of instructor-led classroom training courses and related services to multinational companies and government entities. The training and education we offer is presented in a consistent manner in every country in which we operate. Our instructors present our courses in a virtually identical fashion worldwide, regardless of whether presented in leased classroom space or external facilities, the content of the class being taught or the location or method of distribution. No one commercial customer or government agency accounted for 10% or more of our revenues in the three and nine month ended July 1, 2016 or July 3, 2015.  

We conduct and manage our business globally and have reportable segments that operate in five countries: the United States, Canada, the United Kingdom, Sweden and Japan.   Summarized financial information by country for the three months and nine months ended July 1, 2016 and July 3, 2015 from continuing operations are as follows:

	Three months ended				Nine months ended
	July 1, 2016		July 3, 2015		July 1, 2016		July 3, 2015
Revenues:
United States	$	14,020	$	15,147	$	36,985	$	40,621
Canada		1,549		1,392		5,994		6,681
North America		15,569		16,539		42,979		47,302
United Kingdom		3,899		4,878		12,763		16,831
Sweden		867		822		2,457		3,770
Japan		738		464		1,693		1,352
Total	$	21,073	$	22,703	$	59,892	$	69,255
Gross profit:
United States	$	5,402	$	5,464	$	13,227	$	14,211
Canada		414		594		2,495		3,399
North America		5,816		6,058		15,722		17,610
United Kingdom		1,030		1,580		3,943		6,357
Sweden		459		393		1,290		2,354
Japan		536		311		1,192		885
Total	$	7,841	$	8,342	$	22,147	$	27,206

	July 1, 2016		July 3, 2015
Total assets:
United States	$	15,481	$	23,254
Canada		3,517		3,859
North America		18,998		27,113
United Kingdom		8,815		12,604
Sweden		2,953		3,591
Japan		2,040		1,489
Total	$	32,806	$	44,797

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Note 8 - Fair Value Measurements

9 Months Ended

Jul. 01, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 8—FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal market for the asset or liability, or in the absence of a principal market, the most advantageous market for the asset or liability. The fair value is measured using assumptions that market participants would use, including assumptions about nonperformance risk and credit risk.

ASC 820 establishes a fair value hierarchy for valuation inputs and prioritizes them based on the extent to which the inputs are observable in the marketplace. Categorization is based on the lowest level of input that is available and significant to the measurement. These levels are:

Level 1—Quoted prices in active markets for identical assets and liabilities.

Level 2—Observable inputs other than quoted prices in active markets, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs.

Level 3—Unobservable inputs that reflect management’s assumptions about the estimates and risks that market participants would use in pricing the asset or liability.

Non-Financial Liabilities Measured at Fair Value on a Nonrecurring Basis

We measure our ARO liabilities at fair value on a nonrecurring basis when we believe there has been an indication the fair value has changed. We did not adjust the values of those liabilities during the three months and nine months ended July 1, 2016 and July 3, 2015.

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Note 9 - Deferred Facilities Rent and Other

9 Months Ended

Jul. 01, 2016

Notes to Financial Statements

Deferred Facilities Rent and Other [Text Block]

NOTE 9—DEFERRED FACILITIES RENT AND OTHER

Deferred Facilities Rent and Other

The following tables show details of the following line items in our consolidated balance sheets.

Current Portion of Deferred Facilities Rent and Other

	July 1, 2016		October 2, 2015
Deferred rent	$	822	$	1,074
LA lease liability		0		327
	$	822	$	1,401

Deferred Facilities Rent and Other

	July 1, 2016		October 2, 2015
Deferred rent	$	4,827	$	2,575
	$	4,827	$	2,575

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Note 10 - Recent Accounting Pronouncements

9 Months Ended

Jul. 01, 2016

Notes to Financial Statements

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

NOTE 10—RECENT ACCOUNTING PRONOUNCEMENTS

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, “

Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting

” (“ASU 2016-09”). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. Accordingly, the standard is effective for us on September 30, 2017 and we are currently evaluating the impact that the standard will have on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “

Leases (Topic 842)

”(“ASU 2016-02”). The standard requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. Accordingly, the standard is effective for us on September 28, 2019 using a modified retrospective approach. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, “

Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes

”(“ASU 2015-17”). The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. We do not expect to early adopt ASU 2015-17. Accordingly, the standard is effective for us on September 30, 2017 and we are currently evaluating the impact that this standard will have on our financial statements. 

In May 2014, the FASB issued ASU No. 2014-09, "

Revenue from Contracts with Customers (Topic 606)

" ("ASU 2014-09"). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14 "

Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date

" ("ASU 2015-14"), which defers the effective date of ASU 2014-09 by one year to fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2017. Accordingly, the standard is effective for us on September 29, 2018 using either a full retrospective or a modified retrospective approach. We are currently evaluating which transition approach to use and the impact that the standard will have on our financial statements.

In August 2014, the FASB issued ASU 2014-15,

“Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”

(“ASU 2014-15”). The standard requires management to evaluate, at each interim and annual reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued, and provide related disclosures. ASU 2014-15 is effective for reporting periods ending after December 15, 2016, with early adoption permitted. We do not expect to early adopt ASU 2014-15. Accordingly, the standard is effective for us on September 30, 2017 and we are currently evaluating the impact that this standard will have on our financial statements.

Other recent accounting pronouncements issued by the FASB (including the Emerging Issues Task Force), the American Institute of Certified Public Accountants and the SEC did not, or management believes will not, have a material impact on our present or future consolidated financial statements. 

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Note 11 - Discontinued Operations

9 Months Ended

Jul. 01, 2016

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

NOTE 11—DISCONTINUED OPERATIONS

On March 3, 2015, we entered into an Agreement (“Agreement”) to sell our subsidiary in France, Learning Tree International S. A. (“LTRE(FR)”), to Educinvest SPRL (“Educinvest”) for consideration of € 1 (One Euro) (“Sale Transaction”). The Sale Transaction was consummated on the same date that the Agreement was signed by the parties. The purchase price was established in recognition of the potential liabilities being assumed by Educinvest related to continuation of the LTRE(FR) business. As part of the Sale Transaction, the Company and Educinvest concurrently entered into a license agreement, dated March 3, 2015 (the “License Agreement”). After the closing of the Sale Transaction, we agreed to provide certain temporary services to Educinvest, including the use of its website and the operational systems in place for a period of two years after the closing date. In connection with the Sale Transaction, we also agreed that during the term of the License Agreement we will not, without the prior written consent of Educinvest, (i) establish a physical presence in mainland France in competition with the business of LTRE(FR) as carried on as of the closing of the Sale Transaction or (ii) solicit employees of LTRE(FR), except for persons responding to general recruitment advertisements not specifically targeting LTRE(FR). 

The sale of LTRE(FR) resulted in a loss on sale of $2.5 million. This loss plus the results of operations for LTRE(FR) for the three and nine months ended July 3, 2015 have been reclassified to the loss from discontinued operations line on the Condensed Consolidated Statements of Operations and Comprehensive Loss presented herein. In addition, historical Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Cash Flow amounts for LTRE(FR) at and for the three and nine months ended July 3, 2015 have also been reclassified as discontinued operations.

Calculation of the loss on disposal of LTRE(FR):
(in thousands)
Investment in Learning Tree International S.A.	$	1,324
Costs of sale		619
Cumulative translation adjustment realized		558
Loss on sale	$	2,501

The summarized operating results of LTRE(FR) included in our Condensed Consolidated Statements of Operations and Comprehensive Loss are as follows:

	Three months ended				Nine months ended
	July 1, 2016		July 3, 2015		July 1, 2016		July 3, 2015
Revenues	$	0	$	0	$	0	$	3,335
Cost of revenues		0		0		0		2,046
Gross profit		0		0		0		1,289
Operating expenses		0		0		0		1,626
Loss from operations		0		0		0		(337	)
Other (expense) income, net		0		0		0		(44	)
Loss from discontinued operations before income taxes		0		0		0		(381	)
Income taxes		0		0		0		117
Loss from discontinued operations, net of tax	$	0	$	0	$	0	$	(264	)

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Note 12 - Subsequent Events

9 Months Ended

Jul. 01, 2016

Notes to Financial Statements

Subsequent Events [Text Block]

NOTE 12—SUBSEQUENT EVENTS

We have accelerated our comprehensive cost reduction program with the goal of significantly reducing our fiscal year 2017 overall expenses in the range of $11.0 to $12.0 million when compared to the Company's expenses for fiscal year 2016. These targeted cost reductions have been initiated to right-size the Company’s operations, modernize its business operations to meet customer demand and preserve capital. In order to implement these cost reductions for the 2017 fiscal year, we have taken or are taking the following steps:

● Eliminating our direct mail course catalog advertising program effective immediately. Besides being a “green initiative”, we believe that our overall customer-base has shifted the manner in which it selects and purchases courses away from printed catalogs toward greater use of digital channels, such as website, social media and digital advertising.

● Making our course notes available electronically and only producing a paper copy if requested by our attendee.

● Reduced staffing in North America by 26 full time equivalent employees.

● Reduced the compensation paid to our Board of Directors, effective immediately, which our directors unanimously agreed to do as part of our cost reduction program.

● Reducing our real estate costs, which will begin with our Education Center lease in the Chicago area that is expiring. As other facility leases expire, additional cost reductions will be evaluated.

 As part of this program, Learning Tree will continue to review and take appropriate actions to streamline its operations in order to reduce or eliminate excess costs.

We have evaluated all events subsequent to the balance sheet date of July 1, 2016 through the date these condensed consolidated financial statements were filed with the SEC, and have determined that there are no other subsequent events to be disclosed.

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Note 3 - Asset Retirement Obligations (Tables)

9 Months Ended

Jul. 01, 2016

Notes Tables

Schedule of Change in Asset Retirement Obligation [Table Text Block]

	Nine months ended July 1, 2016			Year ended October 2, 2015
ARO balance, beginning of period	$	1,669		$	1,656
Accretion expense		59			79
Settlement of ARO liability		(106	)		0
Foreign currency translation		(147	)		(66	)
ARO balance, end of period	$	1,475		$	1,669

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Note 4 - Loss Per Share (Tables)

9 Months Ended

Jul. 01, 2016

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three months ended						Nine months ended
	July 1, 2016			July 3, 2015			July 1, 2016			July 3, 2015
Numerator:
Loss from continuing operations	$	(2,830	)	$	(4,303	)	$	(10,480	)	$	(10,549	)
Loss from discontinued operations		0			-			0			(2,765	)
Net loss	$	(2,830	)	$	(4,303	)	$	(10,480	)	$	(13,314	)
Denominator:
Weighted average shares outstanding
Basic		13,224			13,224			13,224			13,224
Effect of dilutive securities		0			0			0			0
Diluted		13,224			13,224			13,224			13,224
Loss per common share - basic and diluted:
Continuing operations	$	(0.21	)	$	(0.33	)	$	(0.79	)	$	(0.80	)
Discontinued operations		0			0			0			(0.21	)
Basic and diluted loss per share	$	(0.21	)	$	(0.33	)	$	(0.79	)	$	(1.01	)

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Note 7 - Segment Reporting (Tables)

9 Months Ended

Jul. 01, 2016

Notes Tables

Reconciliation of Revenue from Segments to Consolidated [Table Text Block]

	Three months ended				Nine months ended
	July 1, 2016		July 3, 2015		July 1, 2016		July 3, 2015
Revenues:
United States	$	14,020	$	15,147	$	36,985	$	40,621
Canada		1,549		1,392		5,994		6,681
North America		15,569		16,539		42,979		47,302
United Kingdom		3,899		4,878		12,763		16,831
Sweden		867		822		2,457		3,770
Japan		738		464		1,693		1,352
Total	$	21,073	$	22,703	$	59,892	$	69,255
Gross profit:
United States	$	5,402	$	5,464	$	13,227	$	14,211
Canada		414		594		2,495		3,399
North America		5,816		6,058		15,722		17,610
United Kingdom		1,030		1,580		3,943		6,357
Sweden		459		393		1,290		2,354
Japan		536		311		1,192		885
Total	$	7,841	$	8,342	$	22,147	$	27,206

Reconciliation of Assets from Segment to Consolidated [Table Text Block]

	July 1, 2016		July 3, 2015
Total assets:
United States	$	15,481	$	23,254
Canada		3,517		3,859
North America		18,998		27,113
United Kingdom		8,815		12,604
Sweden		2,953		3,591
Japan		2,040		1,489
Total	$	32,806	$	44,797

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Note 9 - Deferred Facilities Rent and Other (Tables)

9 Months Ended

Jul. 01, 2016

Notes Tables

Schedule of Current Portion of Deferred Facilities Rent and Other [Table Text Block]

	July 1, 2016		October 2, 2015
Deferred rent	$	822	$	1,074
LA lease liability		0		327
	$	822	$	1,401

Schedule of Long Term Portion of Deferred Facilities Rent and Other [Table Text Block]

	July 1, 2016		October 2, 2015
Deferred rent	$	4,827	$	2,575
	$	4,827	$	2,575

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Note 11 - Discontinued Operations (Tables)

9 Months Ended

Jul. 01, 2016

Notes Tables

Disposal Groups, Including Discontinued Operations [Table Text Block]

Calculation of the loss on disposal of LTRE(FR):
(in thousands)
Investment in Learning Tree International S.A.	$	1,324
Costs of sale		619
Cumulative translation adjustment realized		558
Loss on sale	$	2,501

Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Table Text Block]

	Three months ended				Nine months ended
	July 1, 2016		July 3, 2015		July 1, 2016		July 3, 2015
Revenues	$	0	$	0	$	0	$	3,335
Cost of revenues		0		0		0		2,046
Gross profit		0		0		0		1,289
Operating expenses		0		0		0		1,626
Loss from operations		0		0		0		(337	)
Other (expense) income, net		0		0		0		(44	)
Loss from discontinued operations before income taxes		0		0		0		(381	)
Income taxes		0		0		0		117
Loss from discontinued operations, net of tax	$	0	$	0	$	0	$	(264	)

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Note 2 - Share-based Compensation (Details Textual) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 01, 2016	Jul. 03, 2015	Jul. 01, 2016	Jul. 03, 2015
Allocated Share-based Compensation Expense	$ 0.1	$ 0.1	$ 0.1	$ 0.1

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Note 3 - Asset Retirement Obligations Liabilities Activity (Details) - USD ($)	9 Months Ended		12 Months Ended
	Jul. 01, 2016	Jul. 03, 2015	Oct. 02, 2015
ARO balance, beginning of period	$ 1,669,000	$ 1,656,000	$ 1,656,000
Accretion on asset retirement obligations	59,000	$ 59,000	79,000
Settlement of ARO liability	(106,000)		0
Foreign currency translation	(147,000)		(66,000)
ARO balance, end of period	$ 1,475,000		$ 1,669,000

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Note 4 - Loss Per Share (Details Textual) - shares	3 Months Ended		9 Months Ended
	Jul. 01, 2016	Jul. 03, 2015	Jul. 01, 2016	Jul. 03, 2015
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	850,000	250,000	850,000	250,000

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Note 4 - Basic and Diluted Earnings Per Share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 01, 2016	Jul. 03, 2015	Jul. 01, 2016	Jul. 03, 2015
Numerator:
Loss from continuing operations	$ (2,830,000)	$ (4,303,000)	$ (10,480,000)	$ (10,549,000)
Loss from discontinued operations	0	0	0	(2,765,000)
Net loss	$ (2,830,000)	$ (4,303,000)	$ (10,480,000)	$ (13,314,000)
Denominator:
Basic (in shares)	13,224,000	13,224,000	13,224,000	13,224,000
Effect of dilutive securities (in shares)	0	0	0	0
Diluted (in shares)	13,224,000	13,224,000	13,224,000	13,224,000
Loss per common share - basic and diluted:
Continuing operations (in dollars per share)	$ (0.21)	$ (0.33)	$ (0.79)	$ (0.80)
Discontinued operations (in dollars per share)	0	0	0	(0.21)
Basic and diluted loss per share (in dollars per share)	$ (0.21)	$ (0.33)	$ (0.79)	$ (1.01)

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Note 5 - Income Taxes (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 01, 2016	Jul. 03, 2015	Jul. 01, 2016	Jul. 03, 2015
Income Tax Expense (Benefit)	$ 51,000	$ 222,000	$ 195,000	$ 432,000

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Note 7 - Segment Reporting (Details Textual)	Jul. 01, 2016
Number of Countries in which Entity Operates	5

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Note 7 - Financial Information by Reportable Segment (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 01, 2016	Jul. 03, 2015	Jul. 01, 2016	Jul. 03, 2015
UNITED STATES | Continuing Operations [Member]
Revenues:
Revenues	$ 14,020,000	$ 15,147,000	$ 36,985,000	$ 40,621,000
Gross profit:
Gross Profit	5,402,000	5,464,000	13,227,000	14,211,000
CANADA | Continuing Operations [Member]
Revenues:
Revenues	1,549,000	1,392,000	5,994,000	6,681,000
Gross profit:
Gross Profit	414,000	594,000	2,495,000	3,399,000
North America [Member] | Continuing Operations [Member]
Revenues:
Revenues	15,569,000	16,539,000	42,979,000	47,302,000
Gross profit:
Gross Profit	5,816,000	6,058,000	15,722,000	17,610,000
UNITED KINGDOM | Continuing Operations [Member]
Revenues:
Revenues	3,899,000	4,878,000	12,763,000	16,831,000
Gross profit:
Gross Profit	1,030,000	1,580,000	3,943,000	6,357,000
SWEDEN | Continuing Operations [Member]
Revenues:
Revenues	867,000	822,000	2,457,000	3,770,000
Gross profit:
Gross Profit	459,000	393,000	1,290,000	2,354,000
JAPAN | Continuing Operations [Member]
Revenues:
Revenues	738,000	464,000	1,693,000	1,352,000
Gross profit:
Gross Profit	536,000	311,000	1,192,000	885,000
Revenues	21,073,000	22,703,000	59,892,000	69,255,000
Total-Revenue	21,073,000	22,703,000	59,892,000	69,255,000
Gross Profit	7,841,000	8,342,000	22,147,000	27,206,000
Total	$ 7,841,000	$ 8,342,000	$ 22,147,000	$ 27,206,000

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Note 7 - Assets (Details) - USD ($)	Jul. 01, 2016	Oct. 02, 2015	Jul. 03, 2015
UNITED STATES | Continuing Operations [Member]
Assets	$ 15,481,000		$ 23,254,000
CANADA | Continuing Operations [Member]
Assets	3,517,000		3,859,000
North America [Member] | Continuing Operations [Member]
Assets	18,998,000		27,113,000
UNITED KINGDOM | Continuing Operations [Member]
Assets	8,815,000		12,604,000
SWEDEN | Continuing Operations [Member]
Assets	2,953,000		3,591,000
JAPAN | Continuing Operations [Member]
Assets	2,040,000		1,489,000
Assets	$ 32,806,000	$ 43,921,000	$ 44,797,000

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Note 9 - Current Portion of Deferred Facilities Rent and Other (Details) - USD ($)	Jul. 01, 2016	Oct. 02, 2015
Deferred rent	$ 822,000	$ 1,074,000
LA lease liability	0	327,000
Current portion	$ 822,000	$ 1,401,000

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Note 9 - Deferred Facilities Rent and Other (Details) - USD ($) $ in Thousands	Jul. 01, 2016	Oct. 02, 2015
Deferred rent	$ 4,827	$ 2,575
Deferred	$ 4,827	$ 2,575

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Note 11 - Discontinued Operations (Details Textual)		3 Months Ended		9 Months Ended
	Mar. 03, 2015 USD ($)	Jul. 01, 2016 USD ($)	Jul. 03, 2015 USD ($)	Jul. 01, 2016 USD ($)	Jul. 03, 2015 USD ($)	Mar. 03, 2015 EUR (€)
Learning Tree International S.A. [Member]
Disposal Group, Including Discontinued Operation, Consideration | €						€ 1
Discontinued Operation, Period of Continuing Involvement after Disposal	2 years
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax	$ (2,501,000)
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax		$ 0	$ 0	$ 0	$ (2,501,000)

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Note 11 - Calculation of the Loss On Disposal (Details) - USD ($)		3 Months Ended		9 Months Ended
	Mar. 03, 2015	Jul. 01, 2016	Jul. 03, 2015	Jul. 01, 2016	Jul. 03, 2015
Learning Tree International S.A. [Member]
Calculation of the loss on disposal of LTRE(FR):
Investment in Learning Tree International S.A.	$ 1,324,000
Costs of sale	619,000
Cumulative translation adjustment realized	558,000
Loss on sale	$ 2,501,000
Loss on sale		$ 0	$ 0	$ 0	$ 2,501,000

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Note 11 - Condensed Income Statement (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 01, 2016	Jul. 03, 2015	Jul. 01, 2016	Jul. 03, 2015
Learning Tree International S.A. [Member]
Revenues	$ 0	$ 0	$ 0	$ 3,335,000
Cost of revenues	0	0	0	2,046,000
Gross profit	0	0	0	1,289,000
Operating expenses	0	0	0	1,626,000
Loss from operations	0	0	0	(337,000)
Other (expense) income, net	0	0	0	(44,000)
Loss from discontinued operations before income taxes	0	0	0	(381,000)
Income taxes	0	0	0	117,000
Loss from discontinued operations, net of tax	0	0	0	(264,000)
Loss from discontinued operations, net of tax	$ 0	$ 0	$ 0	$ (2,765,000)

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Note 12 - Subsequent Events (Details Textual) - Subsequent Event [Member] $ in Millions	Aug. 15, 2016 USD ($)
Minimum [Member]
Annual Overall Costs, Targeted Reduction Amount	$ 11
Maximum [Member]
Annual Overall Costs, Targeted Reduction Amount	$ 12
North America [Member]
Restructuring and Related Cost, Number of Positions Eliminated	26