The Virtual Learning Company, Inc.
1,000,000 Shares of Common Stock at $0.50 per share
The Virtual Learning Company, Inc.
60 Knolls Crescent, Suite 9M
Bronx, New York 10463
(973) 768-4181
MARKET FOR THE SHARES
This is the initial public offering of common stock of The Virtual Learning Company, Inc. (“Virtual”, the
“Company”, “we”, “us” or in the possessive “our”). Before this offering, there has been no public market for our
common stock and our common stock is not listed on any stock exchange or on the over-the-counter market. This
distribution of our common shares is the first public distribution of our shares. It is our intention to seek a market
maker to publish quotations for our shares on the OTC Electronic Bulletin Board (“Bulletin Board”). Capital Path
Securities has agreed to be our primary market maker on the Bulletin Board but has not yet filed with FINRA to do
so. We can provide no assurance to you that a public market for our shares will develop and if so, what the market
price of our shares may be. The shares will be offered at $0.50 per share by the Company on a best efforts basis.
There is no minimum amount needed to close this offering.
Underwriting
Number of
Discounts &
Proceeds to the
Shares
Offering Price
Commissions
Company
1,000,000
$0.50
$0.00
$500,000.00
The securities offered in this Prospectus involve a high degree of risk. YOU SHOULD CAREFULLY
CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING “RISK FACTORS” BEGINNING ON
PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
1
TABLE OF CONTENTS
Questions and Answers about the Offering
3
Summary of Prospectus
3
Summary Financial Data
5
Risk Factors
6
Plan of Distribution
22
Determination of Offering Price
23
Use of Proceeds
24
Dilution
24
Description of Business
25
Competition
37
Management’s Discussion and Analysis
39
Plan of Operation
40
Results of Operations
48
Off-Balance Sheet Arrangements
52
Management
52
Executive Compensation
53
Certain Relationships and Related Party Transactions
54
Security Ownership of Certain Beneficial Owners and Management
54
Plan of Distribution
55
Shares Eligible for Future Sale
58
Description of Securities
59
Interest of Named Experts and Counsel
59
Transfer Agent
59
Legal Matters
60
Experts
60
Description of Property
60
Litigation
60
Where You Can Find More Information
61
Financial Statements
F-2
Notes to the Financial Statements
F-11
2
Questions And Answers About The Offering
Q: How Many Virtual Shares Will I Receive?
A: Virtual will issue to you one (1) share of our common stock for each fifty (50) cents that you choose to invest.
Fractional shares will not be issued.
Q: What Are Shares Of Virtual Worth?
A: The value of our shares will be determined by their trading price after the offering. We do not know what the
trading price will be and we can provide no assurances as to value or even if the shares will trade at all.
Q: What Will Virtual do After The Offering?
A: The Company’s business will not change as a result of this transaction. We are currently a development stage
enterprise.
Q: Will Virtual Shares Be Listed On a National Stock Exchange Or The NASDAQ Stock Market?
A: Our shares will not be listed on any national stock exchange or the NASDAQ Stock Market. It is our hope that
the shares will be quoted by one or more market makers on the Bulletin Board.
SUMMARY OF PROSPECTUS
You should read the following summary together with the more detailed business information, financial statements
and related notes that appear elsewhere in this prospectus. In this Prospectus, unless the context otherwise denotes,
references to "we," "us," "our", “Virtual Learning” and “Company” are to The Virtual Learning Company, Inc.
A Cautionary Note on Forward-Looking Statements
This prospectus contains forward-looking statements, which relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,”
“expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of
these terms or other comparable terminology. These statements are only predictions and involve known and
unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors,” that may
cause our industry’s actual results, levels of activity, performance, or achievements to be materially different from
any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking
statements.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith
and reflect our current judgment regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions or other future performance
suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these statements to actual results.
General Information about Our Company
Virtual was formed as a Nevada corporation on January 6, 2009. Virtual Learning is a subscription-based, software-
as-a-service provider of education products. The Company provides standards-based instruction, practice and
assessments that improve the performance of students via proprietary web-based platforms through any one of our
several websites on the World Wide Web with the URL www.mathisbasic.com; www.learningisbasic.com ;
www.eschoolroom.com; and www.educationisbasic.com. All of these web sites feed into the Company’s sole
consolidated content providing web site www.learningisbasic.com.
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Virtual Learning is also a producer and distributor of computer software and video educational materials on CD and
DVD formatted disks which will be available through various distributors and our websites either as a download or
in boxed format. We have combined rigorous content in math with interactive features and games that engage
students, reinforce and reward learning achievement.
We are a development stage company and have not yet commenced business operations or generated any revenues.
We have been issued a "substantial doubt" going concern opinion from our auditors and our only assets are our
cash, property and equipment, and capitalized curriculum development costs which, at September 30, 2011, consist
of approximately $7,200, $2,500, and $243,000, respectively.
Virtual Learning’s principal place of business and corporate offices are located at 60 Knolls Crescent, Suite 9M,
Bronx, NY 10463. Our telephone number is (973) 768-4181 and our registered agent for service of process is
Marilyn Radloff, 115 Taurus Circle, Reno, NV 89511. Our fiscal year end is December 31.
We received our initial funding of $10,000 through the sale of common stock to our officers and directors. To date,
Virtual Learning’ cash-based operations have been funded by the issuance of 10,000,000 shares of common stock
for $10,000 or $.001 per share to Thomas P. Monahan (President and majority shareholder) and the issuance of an
additional 100,000 shares of common stock for an aggregate price of $20,000 or $.20 per share to an unrelated party.
In addition, as of September 30, 2011, Mr. Monahan loaned Virtual Learning cash of $26,150, charged Virtual
Learning costs and expenses of $12,662 on a personal credit card, and contributed computer equipment at a stated
value of $3,000, for a total of $41,812. As of September 30, 2011, $41,800 of this amount has been repaid.
This is our initial public offering. We are registering a total of 1,000,000 shares of our common stock, all for sale by
the Company. All of the shares being registered for sale by the Company will be sold at a price per share of $0.50
for the duration of the Offering. We cannot guarantee that our shares will ever be quoted on the OTCBB, or if
quoted, that a market will develop. Additionally, our stock will be subject to ‘penny stock’ rules, as described more
fully in the Risk Factors section, below.
We will be selling all of the 1,000,000 shares of common stock we are offering as a self-underwritten offering.
There is no minimum amount we are required to raise in this offering and any funds received will be immediately
available to us. This Offering will terminate on the earlier of the sale of all of the shares offered or 270 days after
the date of the Prospectus, unless extended an additional 90 days by our board of directors.
There is no current public market for our securities. As our stock is not publicly traded, investors should be aware
they probably will be unable to sell their shares and their investment in our securities is not liquid.
The Offering
Following is a brief summary of this Offering. Please see the Plan of Distribution and Terms of the Offering
sections for a more detailed description of the terms of the offering.
Offering
Securiti
We are offering 1,000,000 shares of common stock . This offering will terminate on the earlier of the sale of all of
the shares offered by the Company or 270 days after the date of the Prospectus, unless extended by our Board of
Directors for an additional 90 days.
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Price per share
All of the shares being registered for sale by the Company will be sold at a fixed price per share of $0.50 for the
duration of the offering.
Securities Issued and Registration Costs
There are currently 15,350,000 shares of common stock issued and outstanding before the Offering and 16,350,000
shares will be outstanding after the Offering, assuming all shares are sold. However, if 50% or 75% of the shares
being offered are sold, there will be 15,850,000 or 16,100,000 shares outstanding, respectively.
We estimate our total offering registration costs to be $20,000. If we experience a shortage of funds prior to
funding, our directors have informally agreed to advance funds to allow us to pay for offering costs, filing fees, and
correspondence with our shareholders; however, our directors have no formal commitment or legal obligation to
advance or loan funds to the Company.
Our officers, directors, control persons and/or affiliates do not intend to purchase any Shares in this Offering. If all
the Shares in this Offering are sold, our executive officers and directors will own 61.16% of our common stock.
However, if only 50% or 25% of the Shares in this Offering are sold, our executive officers and directors will own
63.15% or 64.16%, respectively.
Summary Financial Information
The following table summarizes selected financial data regarding our business and should be read in conjunction
with our financial statements and related notes contained elsewhere in this prospectus as well as the information
under “Management’s Discussion and Analysis or Plan of Operations”.
The financial statement data as of and for the fiscal year ended December 31, 2010, from inception (January 6,
2009) through December 31, 2009, and from inception (January 6, 2009) through December 31, 2010 has been
derived from our audited financial statements which are included elsewhere in this prospectus.
Summary of Statements of Operations Data
From inception Totals from
(January 6,
inception
For the year
2009) to
(January 6,
ended
December 31, 2009) through
December 31,
2009
December 31,
2010
2010
Sales
$ -0-
$ -0-
$ -0-
Total operating expenses
$ 129,236
$ 680,672
$ 809,908
Net loss
$ (129,236)
$ (680,672)
$ (809,908)
For the nine
For the nine
From inception
months ended months ended
(January 6, 2009) to
September 30, September 30,
September 30,
2011
2010
2011
Sales
$ -0-
$ -0-
$ -0-
Total operating expenses
64,079
128,109
873,896
Net loss
$ (64,079)
$(128,109)
$(873,896)
5
September 30,
As of
As of December 31,
2011
December 31,
2009
Unaudited
2010
Summary of Balance Sheets Data
TOTAL CURRENT ASSETS
$7,196
$ 18,573
$ 22,028
TOTAL ASSETS
$ 252,726
$ 295,732
$ 176,728
TOTAL LIABILITIES
$ 13,712
$ 1,640
$ 15,400
TOTAL STOCKHOLDERS' EQUITY
$239,014
$ 294,092
$ 161,328
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
$ 252,726
$ 295,732
$ 176,728
RISK FACTORS
An investment in our common stock is highly speculative and involves a high degree of risk. Therefore, we are
disclosing all material risks herein and you should consider all of the risk factors discussed below, as well as the
other information contained in this document. You should not invest in our common stock unless you can afford to
lose your entire investment and you are not dependent on the funds you are investing.
Added Costs Due to Being a Public Company.
There is a substantial increase of costs to the Company as a result of being Public. These costs include, but are not
limited to the cost of conducting a yearly audit of the financial condition and quarterly reviews of the Company and
such costs can be in excess of $50,000 yearly. In addition, there can be additional legal costs associated with
preparing all necessary filings with the Securities and Exchange Commission or other regulatory body, if the
Company is not subject to the reporting requirements of section 13 or 15(d) of the Securities Act. There are also
assorted other additional costs to the Company for being Public. As a result of all of these additional costs, the
Company is likely to be less profitable, if it becomes profitable, if it does not generate enough revenue, when and if
commences producing revenue, to cover the additional costs.
Current Economic Conditions May Impact Our Commercial Success and Ability to Obtain Financing.
The current economic conditions could have a serious impact on the ability of the Company to achieve viability.
Due to the decrease in overall spending, there is a possibility that spending on educational software and related
services may decrease for the foreseeable future, resulting in less potential economic activity for the Company.
Since we are a very small operation, we may not be able to create sufficient sales to sustain ourselves. In addition,
due to the severe difficulty in obtaining credit in the current economic crisis, we may have trouble seeking out and
locating additional funds or require financing of our operations.
If we fail to develop subscriber relationships, our ability to grow our business will be impaired.
Our growth depends to a significant degree upon our ability to develop subscriber relationships. We cannot
guarantee that subscribers will be found; that any such relationships will be successful when they are in place, or
that business with the subscribers will increase. Failure to develop such relationships could have a material adverse
effect on our business, results of operations, and financial condition.
Effect of Governmental Regulations: Compliance with Environmental Laws
We do not believe that we are subject to any material government or industry regulations.
The recent ongoing adoption of online learning in established education markets makes it difficult for us to
evaluate our current and future business prospects for sales to school systems. If web-based education fails to
achieve widespread acceptance by students, parents, teachers, schools and other institutions, our growth and
profitability may suffer.
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The use of online learning technology is a relatively new approach in the traditional K-12 education testing and
assessment markets. There can be no assurance that our online products and services will achieve success in the K-
12 or postsecondary education markets. Our success depends in part upon the adoption by students, teachers, and
school districts of technology-based education initiatives. Some academicians and educators oppose online
education in principle and have expressed concerns regarding the perceived loss of control over the education
process that can result from offering content online. As a necessary corollary to the acceptance of web-based
education in the classroom, our growth depends in part on parental acceptance of the role of technology in education
and the availability of internet access in the home. If the acceptance of technology-based education does not
continue to increase, our ability to continue to grow our business could be materially impaired.
Our revenue will be primarily generated by sales of subscriptions to our website over the term of the
subscription. Our subscriber renewal rates are difficult to predict and declines in sales of our products or
subscriber renewal rates may materially adversely affect our business and results of operations.
We anticipate that revenue from subscription sales will account for a substantial majority of our revenue for the next
few years. The average subscription period for our products is expected to be 12 months. Additionally, promotional
incentives, such as complimentary months of service, will be offered periodically to new subscribers, resulting in a
subscription term longer than one year. Our subscribers will not be obligated to renew their subscriptions at the end
of the term, nor will they be required to pay any penalties if they fail to renew their subscriptions. As a result, our
subscribers have no obligation to renew their subscriptions after the expiration of their initial subscription period.
We will begin the renewal process approximately two months prior to a subscription ending. Sales of our products
or services or our subscriber renewal rates may decline or fluctuate as a result of a number of factors, including
decreased demand, adverse regulatory actions, pricing pressures, competitive factors or any other reason. These and
other factors that have affected our product sales or subscriber renewal rates in the past are not predictive of the
future, and, as a result, we cannot accurately predict subscriber renewal rates. If planned sales to new subscribers do
not materialize or our subscribers do not renew their subscriptions at anticipated previous levels, our revenue, when
and if such revenue generation commences, may decline, which would negatively impact our business, financial
condition, results of operations and cash flow.
Our business is expected to be subject to seasonal fluctuations, which may cause our cash flow to fluctuate
from quarter-to-quarter and materially adversely impact the market price of our common stock.
Our cash flow may fluctuate as a result of seasonal variations in our anticipated business, principally due to:
• our subscribers’ spending patterns, which we expect to relate to typical gift giving holidays and the start of
the academic year
• the timing of expirations and renewals of subscriptions;
• the timing of special promotions and discounts, including additional free months of subscriptions
It is expected that a significant percentage of our new sales and subscription renewals will occur in the second and
fourth quarters because parents make purchases related to the new academic year. The fourth calendar quarter may
produce the second highest level of sales and renewals, relating to holidays which are occasions for gift giving.
Because payment in full for subscriptions is typically due at the time of subscription or renewal, and our operating
expense, of which labor and sales commissions make up the largest portion, will be been fairly consistent throughout
the year, we typically expect higher cash flow in the quarters with stronger sales and renewals. We do. however,
expect quarterly fluctuations in cash flow.
System disruptions, vulnerability from security risks to our networks, databases and online applications and
an inability to expand and upgrade our systems in a timely manner to meet unexpected increases in demand
could damage our reputation, impact our ability to generate revenue and limit our ability to attract and
retain subscribers.
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The performance and reliability of our technology infrastructure is critical to our business. Any failure to maintain
satisfactory online product performance, reliability, security, or availability of our web platform infrastructure may
significantly reduce subscriber satisfaction and damage our reputation, which would negatively impact our ability to
attract new subscribers and obtain subscriber renewals. The risks associated with our web platform include:
• breakdowns or system failures resulting in a prolonged shutdown of our servers, including failures
attributable to power shutdowns or attempts to gain unauthorized access to our systems, which may cause
loss or corruption of data or malfunction of software or hardware;
• breakdowns or system failures resulting from the release of new features or functionality, which may
cause unintended malfunctions of software or hardware;
• human error by systems engineers, programmers, other internal staff, and other vendor staff; performance
issues, such as low response time or bugs, that detract from the user experience;
• increased complexity or more difficult navigation resulting from implementation of new features and
functionality, that detract from the user experience;
• disruption or failure in our Web Host provider, which would make it difficult or impossible for students
to log on to our websites;
• damage from fire, flood, tornado, power loss, or telecommunications failures;
• Infiltration by hackers or other unauthorized persons; and
• any infection by or spread of computer viruses.
In addition, increases in the volume of traffic on our websites could strain the capacity of our Web Host’s existing
infrastructure, which could lead to slower response times or system failures. This would cause a disruption or
suspension of our product and service offerings. Any web platform interruption or inadequacy that causes
performance issues or interruptions in the availability of our websites could reduce subscriber satisfaction and result
in a reduction in the number of subscribers using our products and services. If sustained or repeated, these
performance issues could reduce the attractiveness of our websites and products and services.
We may need to incur additional costs to Web Host’s systems in order to accommodate system disruptions, security
risks, and increased demand if we anticipate that our systems cannot handle higher volumes of traffic in the future.
We may also need to upgrade our web platform and systems as new technologies become available that we are
required to implement in order to keep our infrastructure up-to-date and product offerings relevant. We may be
forced to make upgrades in response to new competitors or significant improvements to existing competitors’ web
platforms and system capabilities. However, the costs and complexities involved in expanding and upgrading our
systems may prevent us from doing so in a timely manner and may prevent us from adequately meeting the demand
placed on our systems.
We are subject to laws and regulations as a result of our collection and use of personal information,
particularly from our K-12 student users, and any violations of such laws or regulations, or any breach, theft
or loss of such information, could materially adversely affect our reputation and operations and expose us to
costly litigation.
We anticipate that the vast majority of our product users will be minors. The Child Online Protection Act and the
Children’s Online Privacy Protection Act restrict the distribution of materials considered harmful to children and
impose additional restrictions on the ability of online services to collect information from minors. Many states have
also passed laws requiring notification to users when there is a security breach of personal data. Additionally, the
Family Educational Rights and Privacy Act, or FERPA, protects the privacy and restricts the disclosure of student
8
information, and we must remain FERPA-compliant through security policies, processes, systems, and controls,
including using software that detects hackers and other unauthorized or illegal activities. We cannot predict whether
new technological developments could circumvent these security measures. If the security measures that we use to
protect personal or student information or credit card information are ineffective, we may be subject to liability,
including claims for invasion of privacy, impersonation, unauthorized purchases with credit card information or
other similar claims. In addition, the Federal Trade Commission and several states have investigated the use of
personal information by certain internet companies. We could incur significant expense and our business could be
materially adversely affected if new regulations regarding use of personal information are introduced, if our security
measures are ineffective or if our privacy practices are investigated.
We may not be able to develop new products and services or expand our existing product lines in a timely and
cost effective manner.
Each of our products are created from state standards for a particular grade level and subject in the K-12 market for
math subjects. With these standards continually changing, as well as the updating of our current learning products,
our product and content development teams may not be able to respond to changing market requirements on a timely
basis. If we are not able to generate sufficient new revenue to exceed the incremental costs associated with
developing and delivering new products and entering new markets, our results of operations may be materially and
adversely affected. Furthermore, we may be unable to develop and offer additional products and services on
commercially reasonable terms and in a timely manner or maintain the quality and consistency necessary to keep
pace with changes in market requirements and respond to competitive pressures. A failure to do any of these things
may result in a material decline in our revenue and may prevent us from achieving profitability.
If we are unable to develop, maintain and enhance our brand identity, our business and results of operations
may suffer.
The initial development and continued development of our brand identity is important to our business, and
expanding brand awareness is critical to attracting and retaining our subscribers. Potential subscribers may not be
aware of the relationship of our brands with one and another, particularly “Learning is Basic” serving as an umbrella
for each of our product lines. If and when we begin to obtain subscriptions and extend our geographic reach,
maintaining quality and consistency across all of our products and services may become more difficult to achieve,
and any significant and well-publicized failure to maintain this quality and consistency will have a detrimental effect
on our brands. We cannot provide assurances that our sales and marketing efforts will be successful in promoting
our brands in a competitive and cost-effective manner. If we are unable to create, maintain and enhance our brand
recognition and awareness of our products and services, or if we incur excessive sales and marketing expense, our
business and results of operations could be materially and adversely affected.
Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our
sales and marketing expenditures in recruiting subscribers.
Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our sales
efforts, including our ability to:
• Obtain any subscribers and if obtained retain the then existing subscribers and sell them additional
products and services
• Develop and then enhance “word-of-mouth” subscriber referrals
• Obtain sales personnel and, once obtained, retain our most productive sales managers and staff
• Compete effectively against larger competitors to secure sales.
9
In addition, our future growth and profitability will depend in large part upon the effectiveness and efficiency of our
marketing expenditures, including our ability to:
• create awareness of our brands
• select the right market, media and specific media vehicles in which to advertise
• identify the most effective and efficient level of spending in each market, media and specific media vehicle
• provide timely and appropriate sales collateral to assist the sales team
• determine the appropriate creative message and media mix for advertising, marketing and promotional
expenditures
• determine the most appropriate pricing models and simple quote generator for subscribers and sales reps
• effectively manage marketing costs, including creative and media expense, in order to maintain acceptable
subscriber acquisition costs
• keep the website navigation and messaging simple and relevant to subscribers;
• generate leads for sales, including obtaining subscriber lists in a cost-effective manner
• drive traffic to our website
• convert subscriber inquiries into actual orders.
Our planned sales and marketing efforts and expenditures may not result in increased revenue or generate sufficient
levels of product and brand awareness, and we may not be able to increase our net sales at the same rate as we
increase our sales and marketing efforts and expenditures.
If our products or services contain errors, new product releases could be delayed or our services could be
disrupted. As a result, our subscribers may choose not to renew their subscriptions and our business could be
materially adversely affected.
If our products or services contain defects, errors or security vulnerabilities, our reputation could be harmed, which
could result in significant costs to us and impair our ability to sell our products and services in the future. Because
our products and services are complex and because we do not “pre-launch” any of our products or upgrades to any
third parties prior to the official launch, they may contain undetected errors or defects, known as bugs. Bugs can be
detected at any point in time, but are more common when a new product or service is introduced or when new
versions are released. We expect that, despite our testing, errors will be found in the future. If an error occurs, our
product and service offerings may be disrupted, causing delays or interruptions. Significant errors, delays, or
disruptions could lead to:
• decreases in subscriber satisfaction with and loyalty toward our products and services;
• delays in or loss of market acceptance of our products and services;
• diversion of our resources;
• a lower rate of subscription renewals or upgrades;
• injury to our reputation;
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• rebates or refunds of subscription fees;
• increased service expense or payment of damages; or
• increased competitive focus on our existing and prospective subscriber base.
If we are unable to adapt our products and services to technological changes, the emergence of new
computing devices or to more sophisticated online services, we may lose market share and revenue, and our
business could suffer.
We need to anticipate, develop, and introduce new products, services, and applications on a timely and cost effective
basis that keeps pace with technological developments and changing subscriber needs. For example, the number of
individuals who access the internet through devices other than a personal computer, such as personal digital
assistants, mobile telephones, televisions and set-top box devices, has increased dramatically and this trend is likely
to continue. Our products and services were designed for internet use on desktop and laptop computers. The lower
resolution, functionality, and memory associated with alternative devices currently available may make the use of
our products and services through such devices difficult. We have no experience to date in operating versions of our
products and services developed or optimized for users of alternative devices. Accordingly, it is difficult to predict
the problems we may encounter in developing versions of our products and services for use on these alternative
devices, and we may need to devote significant resources to the creation, support, and maintenance of such versions.
If we fail to develop or sell products and services cost effectively that respond to these or other technological
developments and changing subscriber needs, we may lose market share and revenue and our business could
materially suffer.
Protection of our intellectual property is limited, and any misuse of our intellectual property by others,
including software piracy, could harm our business, reputation, and competitive position.
Our trademarks, copyrights, trade secrets, and designs are valuable and integral to our success and competitive
position. However, we cannot assure you that we will be able to adequately protect our proprietary rights through
reliance on a combination of copyrights, trademarks, trade secrets, confidentiality procedures, contractual
provisions, and technical measures. Protection of trade secrets and other intellectual property rights in the markets in
which we operate and compete is highly uncertain and may involve complex legal questions. We cannot completely
prevent the unauthorized use or infringement of our intellectual property rights as such prevention is inherently
difficult. Despite enforcement efforts against software piracy, we may lose significant revenue due to illegal use of
our software in the event that we develop significant revenue. If piracy activities increase, they may further harm our
future business, if any develops.
We also expect that the more successful we are, the more likely that competitors will try to illegally use our
proprietary information and develop products that are similar to ours, which may infringe on our proprietary rights.
In addition, we could potentially lose future trade secret protection for our source code if any unauthorized
disclosure of such code occurs. The loss of future trade secret protection could make it easier for third parties to
compete with our products by copying the basic functionality. Any changes in or unexpected interpretations of, the
trade secret and other intellectual property laws in any country in which we operate may compromise our ability to
enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to
enforce and determine the scope of our confidential information and trade secret protection. If we are unable to
protect our proprietary rights or if third parties independently develop or gain access to our or similar technologies,
our business, revenue, reputation and competitive position could be materially adversely affected.
We may be sued for infringing the intellectual property rights of others and such actions would be costly to
defend, could require us to pay damages or enter into royalty or license agreements with third parties and
could limit our ability or increase our costs to use certain content or technologies in the future.
We may be sued for infringing the intellectual property rights of others or be subject to litigation based on
allegations of infringement or other violations of intellectual property rights. Regardless of merits, intellectual
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property claims are often time-consuming and expensive to litigate and settle. In addition, to the extent claims
against us are successful, we may have to pay substantive monetary damages or discontinue any of our products,
services or practices that are found to be in violation of another party’s rights. We also may have to seek a license
and make royalty payments to continue offering our products and services or following such practices, which may
significantly increase our operating expense.
The confidentiality, non-disclosure and other agreements we use to protect our products, trade secrets, and
proprietary information may prove unenforceable or inadequate.
We intend to protect our products, trade secrets and proprietary information, in part, by requiring all of our
employees and consultants to enter into agreements providing for the maintenance of confidentiality and the
assignment of rights to inventions made by them while employed by us. We will also enter into non-disclosure
agreements with our technical consultants, vendors, and resellers to protect our confidential and proprietary
information. We cannot assure you that our confidentiality agreements with our employees, consultants and other
third parties will not be breached, that we will be able to effectively enforce these agreements, that we will have
adequate remedies for any breach, or that our trade secrets and other proprietary information will not be disclosed or
will otherwise be protected.
We have not registered copyrights for all of our products, which may limit our ability to enforce them.
We have not registered or copyrighted all of our software, written materials, website information, designs, or other
copyrightable works. The U.S. Copyright Act automatically protects all of our copyrightable works, but without
registration, we cannot enforce those copyrights against infringers or seek certain statutory remedies for any such
infringement. Preventing others from copying our products, written materials and other copyrightable works is
important to our overall success in the marketplace. In the event we decide to enforce any of our copyrights against
infringers, we will first be required to register the relevant copyrights, and we cannot be sure that all of the material
for which we seek copyright registration would be registered in whole or in part, or that once registered, we would
be successful in bringing a copyright claim against any such infringers.
We must monitor and protect our internet domain names to preserve their value. We may be unable to
prevent third parties from acquiring domain names that are similar to, infringe on or otherwise decrease the
value of our trademarks.
We own several domain names that include the terms Learning and Basic among others. Third parties may acquire
substantially similar domain names that may decrease the value of our domain names and trademarks and other
proprietary rights, and this may hurt our business. Moreover, the regulation of domain names in the United States
and foreign countries is subject to change. Governing bodies could appoint additional domain name registrars or
modify the requirements for holding domain names. Governing bodies could also establish additional “top-level”
domains, which are the portion of the web address that appears to the right of the “dot,” such as “com,” “net,” “gov”
or “org.” As a result, we may not maintain exclusive rights to all potentially relevant domain names in the United
States or in other countries in which we conduct business, which could harm our business and reputation.
We do not own all of the software, content and other technologies used in our products and services.
Some of our products and services include intellectual property owned by third parties. From time to time, we may
be required to renegotiate with these third parties or negotiate with new third parties to include or continue using
their technology or content in our existing products, in new versions of our existing products or in wholly new
products. We may not be able to negotiate or renegotiate licenses on commercially reasonable terms, or at all, and
the third-party software we use may not be appropriately supported, maintained, or enhanced by the licensors. If we
are unable to obtain the rights necessary to use or continue to use third-party technology or content in our products
and services, or if those third parties are unable to support, maintain and enhance their software, we could
experience increased costs or delays or reductions in product releases and functionality until equivalent software or
content can be developed, identified, licensed and integrated.
12
As a start-up or development stage enterprise, an investment in our company is considered a high-risk
investment whereby you could lose your entire investment.
We have not commenced operations and, therefore, we are considered a “start-up” or “development stage
enterprise” company. We have limited experience selling educational software. We may incur significant expenses
in order to implement our business plan. As an investor, you should be aware of the difficulties, delays, and
expenses normally encountered by an enterprise in its development stage, many of which are beyond our control,
including unanticipated developmental expenses, inventory costs, employment costs, and advertising and marketing
expenses. We cannot assure you that our proposed business plan as described in this prospectus will materialize or
prove successful, or that we will ever be able to operate profitably. If we cannot operate profitably, you could lose
your entire investment.
Our Board of Directors does not contain any independent directors.
Our board is composed of one member, Thomas Monahan, our sole officer and director. Thus, the Board member is
not an “independent” director, based on the independence criteria set forth in the corporate governance listing
standards of the NASDAQ Stock Market. The NASDAQ is the exchange that we selected in order to determine
whether our directors and committee members meet the independence criteria of a national securities exchange, as
required by Item 407(a)(1) of Regulation S-K. An independent director means a person who is not an employee (or a
relative of an employee), who has no material business relationship with the company, and also is not a significant
owner of the company’s shares. Due to our small size the Company does not presently have a separately designated
audit committee, compensation committee, or nominating committee.
We have a history of no revenue and no income and recent losses since our inception that may continue and
cause investors to lose their entire investment.
Virtual was formed on January 6, 2009, and it has cumulative net losses amounting to $680,672 from Inception to
December 31, 2009, losses amounting to $129,236 for the year ended December 31, 2010 and losses amounting to
$64,079, for the nine months ending September 30, 2011.
Because of these conditions, we will require additional working capital to develop our business operations. We have
not achieved profitability and we can give no assurances that we will achieve profitability within the foreseeable
future, as we fund operating and capital expenditures, in such areas as sales and marketing and research and
development. We cannot assure investors that we will ever achieve or sustain profitability or that our operating
losses will not increase in the future. If we continue to incur losses, we will not be able to fund any of our sales and
marketing and research and development activities, and we may be forced to cease our operations. If we are forced
to cease operations, investors will lose the entire amount of their investment.
Our independent auditors have expressed substantial doubt about our ability to continue as a going concern,
which may hinder our ability to obtain future financing and which may force us to cease operations.
In their report dated April 15, 2011, our independent auditors stated that our financial statements for the year ended
December 31, 2009 and 2010 were prepared assuming that we would continue as a going concern. Our ability to
continue as a going concern is an issue raised as a result of recurring losses from operations and cash flow
deficiencies since our inception. We continue to experience net losses. Our ability to continue as a going concern is
subject to our ability to generate a profit and/or obtain necessary funding from outside sources. These include
obtaining additional funding from the sale of our securities, increasing sales or obtaining loans and grants from
various financial institutions. In light of our financial position, and the current global credit crisis, we may be unable
to raise working capital sufficient to continue to fund the operations of the business. If we are unable to continue as
a going concern, you may lose your entire investment. Our management has currently been advancing funds to the
Company to help sustain its operations on a non-interest bearing and unsecured basis. Given the difficult current
economic environment, we believe that it will be difficult to raise additional funds and there can be no assurance as
to the availability of additional financing or the terms upon which additional financing may be available. In addition,
the going concern explanatory paragraph included in our auditor’s report on our financial statements could inhibit
13
our ability to enter into strategic alliances or other collaborations or our ability to raise additional financing. If we
are unable to obtain such additional capital, we will not be able to sustain our operations and would be required to
cease our operations and/or seek bankruptcy protection. Even if we do raise sufficient capital and generate revenues
to support our operating expenses, there can be no assurance that the revenue will be sufficient to enable us to
develop our business to a level where it will generate profits and cash flows from operations. In addition, if we raise
additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our
stockholders could be significantly diluted, and these newly-issued securities may have rights, preferences, or
privileges senior to those of existing stockholders. If we obtain additional debt financing, a substantial portion of our
operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, and the terms
of the debt securities issued could impose significant restrictions on our operations.
The loss of Thomas Monahan, our President, or our inability to attract and retain qualified personnel could
significantly disrupt our business.
We are wholly dependent, at present, on the personal efforts and abilities of Thomas Monahan, our President. He is
63 years old. The loss of services of Mr. Monahan will disrupt, if not stop, our operations. In addition, our success
will depend on our ability to attract and retain highly motivated, well-educated specialists to our staff. Our inability
to recruit and retain such individuals may delay implementing and conducting our business on the internet, and or
result in high employee turnover, which could have a materially adverse effect on our business or results of
operations once commenced. There is no assurance that personnel of the caliber that we require will be available.
We expect to incur losses in the future and, as a result, the value of our shares and our ability to raise
additional capital may be negatively affected.
There is no assurance that our operations will initiate a successful profitable enterprise. Due to our limited operating
history as well as the recent emergence of the market addressed by us, we have neither internal nor industry-based
historical financial data for any significant period of time upon which to base planned operating revenues and
expenses. We expect to incur losses during the next 12 months of operations or possibly for a longer period of time.
We are also likely to experience significant fluctuations in quarterly operating results caused by many factors,
including the rate of growth, usage and acceptance of the Internet, changes in the demand for the our products and
services, introductions or enhancements of products and services by us and our competitors, delays in the
introduction or enhancement of products and services by us or our competitors, subscriber order deferrals in
anticipation of new products, changes in our pricing policies or those of our competitors and suppliers, changes in
the distribution channels through which products are purchased, our ability to anticipate and effectively adapt to
developing markets and rapidly changing technologies, our ability to attract, retain and motivate qualified personnel,
changes in the mix of products and services sold, changes in foreign currency exchange rates and changes in general
economic conditions. We are attempting to expand our channels of supply and distribution. There also may be other
factors that significantly affect our quarterly results that are difficult to predict given our limited operating history,
such as seasonality and the timing of receipt and delivery of orders within a fiscal quarter. As a retail business, we
expect to operate with little or no backlog. As a result, quarterly sales and operating results depend generally on the
volume and timing of orders and the ability of the Company to fulfill orders received within the quarter, All of these
factors can be difficult to forecast. Our expense levels are based in part on our expectations as to future orders and
sales, which, given our limited operating history, are also extremely difficult to predict. Our expense levels are, to a
certain extent fixed, and it will be difficult for us to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall in demand for our products and services in
relation to our expectations would have an immediate adverse impact on our business, results of operations and
financial condition, and could be material. Due to all of the foregoing factors, we believe that our quarterly operating
results are likely to vary significantly in the future. In some future quarter our operating results may fall below the
expectations of securities analysts and investors. In such event, the trading price of our common stock would likely
be materially adversely affected.
We plan to use any revenues received to further develop and advance our range of educational products, and to
increase our sales and marketing. Many of the expenses associated with these activities (for example, costs
associated with hiring professional programmers) are relatively fixed in the short-term. We may be unable to adjust
spending quickly enough to offset unexpected revenue shortfalls. If so, our operational results will suffer.
14
Because we have a limited operating history, we may not be able to successfully manage our business or
achieve profitability, it will be difficult for you to evaluate an investment in our stock, and you may lose your
entire investment.
We were initially formed in January 2009. We have a limited operating history. The market for our products sold
through the Internet has not begun to develop and will be rapidly evolving when marketing of our products on the
internet commences. If our website is inactive, we may experience limited sales. Our prospects must be considered
in light of the risks, costs and difficulties frequently encountered by companies in their early stage of development,
particularly companies in the new and rapidly evolving Internet market. In order to be successful, we must, among
other things, attract, retain and motivate qualified subscribers to view our website, successfully implement our
Internet marketing programs, respond to competitive developments and successfully expand our internal
infrastructure, particularly sales, marketing and administrative personnel and its accounting system. There is,
therefore, nothing at this time on which to base an assumption that our business will prove successful, and there is
no assurance that it will be able to operate profitably if or when operations commence. You may lose your entire
investment due to our lack of experience.
Our industry is highly competitive and we may not have the resources to compete effectively and be
profitable, and as a result, you may lose your entire investment.
The markets for our products and services are new and intensely competitive. We expect competition to persist,
increase, and intensify in the future as the markets for our products and services continue to develop and as
additional companies enter each of its markets. We are aware of a few major retailers as well as smaller
entrepreneurial companies that are focusing significant resources on developing and marketing products and services
that will compete with our products and services. Numerous product offerings and services that compete with those
of ours can be expected in the near future. Intense price competition may develop in our markets. We face
competition in the overall Internet market, as well as in each of the market segments where our products and
services compete. We have multiple competitors for each of our products and services. Many of our current and
potential competitors in each of its markets have longer operating histories and significantly greater financial,
technical, and marketing resources, name recognition and a more developed subscriber base. We do not believe our
markets will support the increasing number of competitors and their products and services. In the past, a number of
product markets have become dominated by one or a small number of suppliers, and a small number of suppliers or
even a single supplier may dominate one or more of our market segments. There can be no assurance that we will be
able to compete effectively with current and future competitors.
Our future success depends upon successful sale of our products through electronic market media, and if we
do not successfully achieve significant market acceptance and usage of our products, such failure would
materially adversely affect our business.
Many of our products and services are intended to be introduced for sale through electronic market media. Our
success will depend largely upon the success of these and future products and services, and marketing presentation
enhancements. Failure of these products and services or enhancements to achieve significant market acceptance and
usage would materially adversely affect our results of operations and financial condition. If we are unable to
successfully market our products and services, develop new products, services, and enhancements, complete
products and services currently under development, or if such new products and services or enhancements do not
achieve market acceptance, our business, results of operations and financial condition would be materially adversely
affected. The market for our products and services is characterized by rapid technological change, changing
subscriber needs, frequent new product introductions, and evolving industry standards. These market characteristics
are exacerbated by the emerging nature of the Internet market and the fact that many companies are expected to
introduce new products through the Internet in the near future. Our future success will depend in significant part on
our ability to continually and on a timely basis introduce new products, services, and technologies and to continue to
improve our products and services in response to both evolving demands of the marketplace and competitive
product offerings. As a result, demand for and market acceptance of new products or services is subject to a high
level of uncertainty, risk, and competition. These pressures may force us to incur significant expenditures to become
and remain competitive in these marketplaces, and, if we fail to appropriately address these pressures, our business,
financial condition, and prospects could be materially adversely affected.
15
Our limited experience in implementing and conducting internet based commerce may impair our ability to
grow and adversely affect our prospects.
Our growth depends to a significant degree upon the development of our Internet/Direct Commerce business. If our
website is inactive, we may experience limited sales. We have limited experience in the businesses comprising our
Internet/Direct Commerce business. In order for our Internet/Direct Commerce business to succeed, we must, among
other things:
•
make significant investments in our Internet/Direct Commerce business, including upgrading our
technology and adding a significant number of new employees;
•
significantly increase our online traffic and sales volume;
•
attract and retain a loyal base of frequent visitors to our website;
•
expand the products and services we offer over our website;
•
respond to competitive developments and maintain a distinct brand identity;
•
form and maintain relationships with strategic partners;
•
provide quality subscriber service; and
•
continue to develop and upgrade our technologies.
We cannot assure you that we will be successful in achieving these and other necessary objectives or that our
Internet/Direct Commerce business will ever be profitable. If we are not successful in achieving these objectives,
our business, financial condition and prospects would be materially adversely affected.
Transactions conducted on the internet involve security risks, and there can be no assurance that all of our
subscribers’ transactions will be secure.
We rely on encryption and authentication technology licensed from third parties to provide the security and
authentication necessary to effect secure transmission of confidential information, such as subscriber credit card
numbers. There can be no assurance that advances in computer capabilities; new discoveries in the field of
cryptography, or other events or developments will not result in a compromise or breach of the algorithms used by
us to protect our subscriber’s transaction data. Any compromise of our security could have a material adverse effect
on our reputation. A party who is able to circumvent our security measures could misappropriate proprietary
information or cause interruptions in our operations. We may be required to expend significant capital and other
resources to protect against such security breaches or to alleviate problems caused by such breaches. To the extent
that activities of our or third-party contractors involve the storage and transmission of proprietary information, such
as credit card numbers, security breaches could damage our reputation and expose our company to a risk of loss or
litigation and possible liability which could have a material adverse effect on us.
Thomas Monahan will continue to control matters affecting our company after this offering, which may
conflict with your interests.
After giving effect to this offering, Thomas Monahan, director and President of our Company will beneficially own
10,000,000 shares (61.16%) of the common stock of our Company. Mr. Monahan will control the vote on all matters
submitted to a vote of our stockholders, including the election of directors, amendments to the certificate of
incorporation and the by-laws, and the approval of significant corporate transactions.
Our working capital is limited and we will likely need to complete this offering to fully implement our
business.
We have limited working capital on hand. Our ability to commence and continue operations and operate as a going
concern is wholly contingent on the successful completion of this offering, our ability to borrow funds from Thomas
P. Monahan, President of the Company, and unrelated third parties, and the receipt of proceeds from the sale
subscriptions and of our CD/DVD products on commencement of operation. If adequate funds are not available, we
may not be able to fund our expansion, take advantage of acquisition opportunities, develop or enhance products or
16
services or respond to competitive pressures. Such inability could have a material adverse effect on our business,
results of operations and financial condition. As of this date, we have generated no income and there can be no
assurance that any such income will be forthcoming in the future.
There may be a major change in the core curriculum requirements of school systems throughout the United
States which would require a complete reprogramming of our virtual textbooks.
Core curricula change from time to time and any significant change in such curricula would force us to reprogram
our virtual textbooks to address such changes. This would consume both management time and corporate resources,
especially funding, to conform our textbooks to the changes. If such changes are extensive it could find the
Company in a position where such changes could not be addressed rapidly enough to remain competitive and thus
could materially and adversely affect our business operations.
We depend on products made using one technology; and products using different technologies may attract
subscribers jeopardizing our business prospects.
We are using Adobe Flash as the platform for all of our software. Adobe Flash is one of the most versatile
programming systems available. It is unique in its ability to allow the integration of many forms of electronic
formatted media into an interactive and user friendly system. It is this quality that has allowed us to adopt our style
of presenting educational materials into saleable products. Adobe Flash offers the ability to output our programs in a
format that will play both PC based computer systems and Macintosh computer systems.
If Adobe Flash were to become deleted from Adobe’s product line or become not supported or updated to keep pace
with current computer hardware, then our software products would become obsolete very quickly. To our
knowledge no other programming system can match the product abilities of Adobe Flash.
In the unfortunate event that Adobe ceases to produce and sell Adobe Flash, we cannot assure that we will be
successful in finding a substitute for the same. Our failure to find a substitute may lead to termination of the
operation, and thus cause adverse effects to our prospects.
We may need and be unable to obtain additional funding on satisfactory terms, which could dilute our
shareholders or impose burdensome financial restrictions on our business.
Unforeseeable circumstances may occur which could compel us to seek additional funds. Future events, including
the problems, delays, expenses and other difficulties frequently encountered by start-up companies may lead to cost
increases that could require additional financing Thus, we may have to borrow or otherwise raise additional funds to
accomplish such objectives. We may seek additional sources of capital, including an offering of our equity
securities, an offering of debt securities or obtaining financing through a bank or other entity. This may not be
available on a timely basis, in sufficient amounts or on terms acceptable to us. Our inability to raise additional equity
capital or borrow funds required to affect our business plan, may have a material adverse effect on our financial
condition and future prospects. Additionally, to the extent that further funding ultimately proves to be available, both
debt and equity financing involve risks. Debt financing may require us to pay significant amounts of interest and
principal payments, reducing the resources available to us to expand our existing businesses. Some types of equity
financing may be highly dilative to our stockholders' interest in our assets and earnings. Any debt financing or other
financing of securities senior to common stock will likely include financial and other covenants that will restrict our
flexibility.
RISKS RELATING TO OUR COMMON SHARES
You will not receive dividend income from an investment in the shares and as a result, you may never see a
return on your investment.
17
We have never declared or paid a cash dividend on our shares nor will we in the foreseeable future. We currently
intend to retain any future earnings, if any, to finance the operation and expansion of our business. Accordingly,
investors who anticipate the need for immediate income from their investments by way of cash dividends should
refrain from purchasing any of the securities offered by our company. As we do not intend to declare dividends in
the future, you may never see a return on your investment and you indeed may lose your entire investment.
Since this is a direct public offering and there is no underwriter, we may not be able to sell any shares
ourselves.
We have not retained an underwriter to sell these shares. We will conduct this offering as a direct public offering,
meaning there is no guarantee as to how much money we will be able to raise through the sale of our stock. If we
fail to sell all the shares we are trying to sell, our ability to expand and complete our business plan will be materially
affected, and you may lose all or substantially all of your investment.
Our officers, directors and holders of 10% or more of the issued and outstanding common shares of the
Company own 84.7% of the outstanding shares of our common stock. After the completion of this Offering,
they will beneficially own 79.5% of the outstanding shares, if the maximum is sold. If they or our present
non-affiliated shareholders choose to sell their shares in the future, it might have an adverse effect on the
price of our stock.
Prior to this offering there has been no market for the common stock of the Company. If a market develops and due
to the controlling amount of their share ownership in our Company, if our officers, directors and holders of 10% or
more of the issued and outstanding common shares of the Company (presently Thomas Monahan and John Swint)
decide to sell their shares in the public market, the market price of our stock could decrease and all shareholders
suffer a reduction to the value of their stock. Unless registered in the future, if our officers, directors and 10% or
more holders decide to sell any of their common stock, they will be subject to Rule 144 under the 1933 Securities
Act. Rule 144 restricts the ability of a director, officer or person holding 10% or more of the common stock
(affiliates) to sell shares by limiting the sales of securities made under Rule 144 during the three-month period
preceding the date of sale to the greater of: (1) 1% of the outstanding common stock of the issuer (163,500 shares if
the maximum is sold); or (2) the average weekly reported trading volume in the outstanding common stock reported
on all securities exchanges during the four calendar weeks preceding the filing of the required notice of the sale
under Rule 144 with the SEC.
Based on the number of shares outstanding on March 31, 2011, upon completion of this offering 16,350,000 shares
of common stock will be outstanding, assuming the maximum is sold. All of the shares of common stock sold in this
offering, 1,000,000 if the maximum is sold, will be freely tradable without restrictions or further registration under
the Securities Act, except for any shares sold to our “affiliates,” as that term is defined under Rule 144 under the
Securities Act. The remaining 13,000,000 shares of common stock held by existing affiliate stockholders and an
additional 2,350,000 shares held by non-affiliates are “restricted securities,” as that term is defined in Rule 144
under the Securities Act. Restricted securities may be sold in the public market only if registered or if their resale
qualifies for exemption from registration described below under Rule 144 promulgated under the Securities Act.
As a result of Rules 144, the shares sold in this offering and the restricted securities will be available for sale in the
public market as follows:
Rule 144
In general, persons who have beneficially owned restricted shares of our common stock for at least six months, and
any affiliate of the company who owns either restricted or unrestricted shares of our common stock, are entitled to
18
sell their securities without registration with the SEC under an exemption from registration provided by Rule 144
under the Securities Act.
Non-Affiliates
Any person who is not deemed to have been one of our affiliates at the time of, or at any time during the three
months preceding a sale, may sell an unlimited number of restricted securities under Rule 144 if:
• the restricted securities have been held for at least six months (including the holding period of any prior owner
other than one of our affiliates);
• we have been subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale; and
• we are current in our Exchange Act reporting at the time of sale.
Affiliates
Persons seeking to sell restricted securities who are our affiliates at the time of, or any time during the three months
preceding, a sale, would be subject to the restrictions described above. They are also subject to additional
restrictions, by which such person would be required to comply with the manner of sale and notice provisions of
Rule 144 and would be entitled to sell within any three-month period only that number of securities that does not
exceed the greater of either of the following:
• 1% of the number of shares of our common stock then outstanding, which will equal approximately
163,500 shares immediately after the completion of this offering based on the number of common shares
outstanding as of March 31, 2010; or
• the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of
a notice on Form 144 with respect to the sale.
Additionally, persons who are our affiliates at the time of, or any time during the three months preceding, a sale may
sell unrestricted securities under the requirements of Rule 144 described above, without regard to the six month
holding period of Rule 144, which does not apply to sales of unrestricted securities.
Unlimited Resales by Non-Affiliates
Any person who is not deemed to have been an affiliate of ours at the time of, or at any time during the three months
preceding, a sale and has held the restricted securities for at least one year, including the holding period of any prior
owner other than one of our affiliates, will be entitled to sell an unlimited number of restricted securities without
regard to the length of time we have been subject to Exchange Act periodic reporting or whether we are current in
our Exchange Act reporting.
State securities laws may limit secondary trading, which may restrict the states in which and conditions
under which you can sell the shares offered by this prospectus.
Secondary trading in common stock sold in this offering will not be possible in any state until the common stock is
qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as
listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or
qualify, or to obtain or verify an exemption for the secondary trading of, the common stock in any particular state,
the common stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a
significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common
stock could be significantly impacted thus causing you to realize a loss on your investment.
19
Our Common Stock Is A “Penny Stock,” And Compliance With Requirements For Dealing In Penny Stocks
May Make It Difficult For Holders Of Our Common Stock To Resell Their Shares.
Currently there is no public market for our common stock. If the common stock is ever listed in, the public market in
what is known as the over-the-counter market and at least for the foreseeable future, our common stock will be
deemed to be a “penny stock” as that term is defined in Rule 3a51-1 under the Securities Exchange Act of 1934.
Rule 15g-2 under the Exchange Act requires broker/dealers dealing in penny stocks to provide potential investors
with a document disclosing the risks of penny stocks and to obtain from these investors a manually signed and dated
written acknowledgement of receipt of the document before effecting a transaction in a penny stock for the
investor's account. Compliance with these requirements may make it more difficult for holders of our common stock
to resell their shares to third Parties or otherwise, which could have a material adverse effect on the liquidity and
market price of our common stock.
Penny stocks are stocks with a price of less than $5.00 per share unless traded on NASDAQ or a national securities
exchange.
Penny stocks are also stocks, which are issued by companies with Net tangible assets of less than $2.0 million (if the
issuer has been in continuous operation for at least three years); or $5.0 million (if in continuous operation for less
than three years); or average revenue of less than $6.0 million for the last three years.
The application of laws and regulations from jurisdictions whose laws do not currently apply to our business,
or the application of existing laws and to the Internet and other online services could have a material adverse
effect on us.
We are not currently subject to direct regulation by any domestic or foreign governmental agency, other than
regulations applicable to businesses generally, and laws or regulations directly applicable to access to online
commerce. However, due to the increasing popularity and use of the Internet and other online services, it is possible
that a number of laws and regulations may be adopted with respect to the Internet or other online services covering
issues such as user privacy, pricing, content, copyrights, distribution, and characteristics and quality of products and
services. Furthermore, the growth and development of the market for online commerce may prompt more stringent
consumer protection laws that may impose additional burdens on those companies conducting business online. The
adoption of any additional laws or regulations may decrease the growth of the Internet or other online services,
which could, in turn, decrease the demand for our products and services and increase our cost of doing business, or
otherwise have an adverse effect on us. Moreover, the applicability to the Internet and other online services of
existing laws in various jurisdictions governing issues such as property ownership, sales and other taxes and
personal privacy is uncertain and may take years to resolve. In addition, as our service is available over the Internet
in multiple states and foreign countries, and as we sell to numerous consumers residing in such states and foreign
countries, such jurisdictions may claim that we are required to qualify to do business as a foreign corporation in each
such state and foreign country. We are qualified to do business in only two states, and failure by us to qualify as a
foreign corporation in a jurisdiction where it is required to do so could subject us to taxes and penalties for the
failure to qualify. Any such new legislation or regulation, the application of laws and regulations from jurisdictions
whose laws do not currently apply to our business, or the application of existing laws and to the Internet and other
online services could have a material adverse effect on us.
Our stock price may fluctuate significantly, and you may not be able to resell your shares at or above the
current market price.
The trading price of our common stock is likely to be volatile and subject to wide price fluctuations in response to
various factors, including:
• regulatory or political developments;
• market conditions in the broader stock market;
20
• actual or anticipated fluctuations in our quarterly financial and results of operations;
• introduction of new products or services by us or our competitors;
• issuance of new or changed securities analysts’ reports or recommendations;
• investor perceptions of us and the educational industry;
• sales, or anticipated sales, of large blocks of our stock;
• additions or departures of key personnel;
• litigation and governmental investigations; and
• changing economic conditions.
These and other factors may cause the market price and demand for our common stock to fluctuate substantially,
which may limit or prevent investors from readily selling their shares of common stock and may otherwise
negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has
been volatile, holders of that stock have sometimes instituted securities class action litigation against the Company
that issued the stock. If any of our stockholders were to bring a lawsuit against us, we could incur substantial costs
defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.
If a trading market if the Company’s common stock develops, and if securities or industry analysts do not
publish research or reports about our business, if they adversely change their recommendations regarding
our stock or if our results of operations do not meet their expectations, our stock price and trading volume
could decline in the event that a trading market for the Company’s common stock develops.
If a trading market for our common stock develops, it will be influenced by the research and reports that industry or
securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company
or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause
our stock price or trading volume to decline, if such a market develops. Moreover, if one or more of the analysts
who cover us downgrade recommendations regarding our stock, or if our results of operations do not meet their
expectations, our stock price could decline and such decline could be material, if a trading market in the Company’s
common stock develops.
Sales of substantial amounts of our common stock in the public markets, or the perception that such sales
might occur, could reduce the price of our common stock and may dilute your voting power and your
ownership interest in us.
If our existing stockholders sell substantial amounts of our common stock in the public market, the market price of
our common stock could decrease significantly. The perception in the public market that our existing stockholders
might sell shares of common stock could also depress our market price
Insiders have substantial control over us and could limit your ability to influence the outcome of key
transactions, including a change of control.
As of December 31, 2010 and March 31, 2011, our principal stockholders, directors, and executive officers and
entities affiliated with them owned approximately 84.7% of the outstanding shares of our common stock. As a
result, these stockholders, if acting together, would be able to influence or control matters requiring approval by our
stockholders, including the election of directors and the approval of mergers or other extraordinary transactions.
They may also have interests that differ from yours and may vote in a way with which you disagree and which may
be adverse to your interests. The concentration of ownership may have the effect of delaying, preventing, or
deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a
21
premium for their common stock as part of a sale of our company and may materially adversely affect the market
price of our common stock.
As a result of becoming a public company, we are obligated to develop and maintain proper and effective internal
control over financial reporting and are subject to other requirements that will be burdensome and costly. We may
not timely complete our analysis of our internal control over financial reporting, or these internal controls may not
be determined to be effective, which could adversely affect investor confidence in our company and, as a result, the
value of our common stock.
Prior to our initial public offering, we are operating our business as a private company. We will now be required to
file with the Securities and Exchange Commission, or SEC, annual and quarterly information and other reports that
are specified in Section 13 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We will also
be required to ensure that we have the ability to prepare financial statements that are fully compliant with all SEC
reporting requirements on a timely basis. In addition, we are subject to other reporting and corporate governance
requirements, including the requirements of listing on the OTCBB, and if listed for continuing to remain listed on
the OTCBB, and certain provisions of the Sarbanes-Oxley Act of 2002 and the regulations promulgated there under,
which impose significant compliance obligations upon us. As a public company, we will be required to:
• Prepare and distribute periodic public reports and other stockholder communications in compliance with our
obligations under the federal securities laws and OTCBB rules;
• create or expand the roles and duties of our board of directors and committees of the board;
• maintain a more comprehensive financial reporting and disclosure compliance functions;
• maintain an accounting and financial reporting department, including personnel with expertise in accounting
and reporting for a public company;
• enhance and formalize closing procedures at the end of our accounting periods;
• maintain an internal audit function;
• enhance our investor relations function;
• establish and maintain new internal policies, including those relating to disclosure controls and procedures;
and
• involve and retain to a greater degree outside counsel and accountants in the activities listed above.
These requirements entail a significant commitment of additional resources. We may not be successful in
implementing these requirements and implementing them could adversely affect our business or results of
operations. In addition, if we fail to implement the requirements with respect to our internal accounting and audit
functions, our ability to report our results of operations on a timely and accurate basis could be impaired.
FORWARD LOOKING STATEMENT
Certain statements in this document are forward-looking in nature and relate to trends and events that may affect the
Company’s future financial position and operating results. The words “expect” “anticipate” and similar words or
expressions are to identify forward-looking statements. These statements speak only as of the date of the document;
those statements are based on current expectations, are inherently uncertain, and should be viewed with caution.
Actual results may differ materially from the forward-looking statements as a result of many factors, including
changes in economic conditions and other unanticipated events and conditions. It is not possible to foresee or to
identify all such factors. The Company makes no commitment, other than as required, to update any forward-
looking statement or to disclose any facts, events, or circumstances after the date of this document that may affect
the accuracy of any forward-looking statement.
22
RELIANCE ON MANAGEMENT
The investors will have no rights to participate in the management decisions of the Company; the shareholder will
only have such rights as other shareholders.
PLAN OF DISTRIBUTION
Distributing Company:
Virtual is distributing up to 1,000,000 shares of its common stock in its capacity
as underwriter of this offering
Shares To Be Distributed:
1,000,000 shares of our common stock, $0.001 par value. The shares to be
Distributed in the offering will represent 6.1% of our total common shares
outstanding.
Payment Required:
The offering price of $0.50 must be paid in cash and the subscription attached to
the Prospectus must be executed before the Company will deliver certificates for
the shares purchased.
Prospectus Mailing Date:
January 3, 2012 or thereafter. We have mailed this prospectus to you on or
about this date free of charge.
Closing Date:
The Company may close on subscriptions from time to time up to one year after
the Effective Date. The common shares which are purchased will be delivered
as soon as practical after acceptance of any subscriptions.
Listing and Trading of
There is currently no public market for our shares. We do not expect a market
Our Shares:
for our common shares to develop until after the distribution date. Our shares
will not qualify for trading on any national or regional stock exchange or on the
NASDAQ Stock Market. Capital Path Securities has agreed to file to become
our primary market maker but has not yet done so. If a public trading market
develops for our common shares, of which there can be no assurance, we cannot
ensure that an active trading market will be available to you. Many factors will
influence the market price of our shares, growth prospects and general market
conditions.
We plan to apply for trading of our common stock on the over-the-counter (OTC) Bulletin Board upon the
effectiveness of the registration statement of which this prospectus forms a part. To have our securities quoted on the
OTC Bulletin Board we must: (1) be a company that reports its current financial information to the Securities and
Exchange Commission, banking regulators or insurance regulators; and (2) has at least one market maker who
completes and files a Form 211 with NASD Regulation, Inc., which Capital Path Securities has agreed to do but has
not yet filed. The OTC Bulletin Board differs substantially from national and regional stock exchanges because it (1)
operates through communication of bids, offers and confirmations between broker-dealers, rather than one
centralized market or exchange; and, (2) securities admitted to quotation are offered by one or more broker-dealers
rather than “specialists” which operate in stock exchanges. There is currently no market for our shares of common
stock. There can be no assurance that a market for our common stock will be established or that, if established, such
market will be sustained. Therefore, purchasers of our shares registered hereunder may be unable to sell their
securities, because there may not be a public market for our securities. As a result, you may find it more difficult to
dispose of, or obtain accurate quotes of our common stock. Any purchaser of our securities should be in a financial
position to bear the risks of losing their entire investment.
DETERMINATION OF THE OFFERING PRICE
There is no established public market for our shares of common stock. The offering price for the sale of common
stock of $0.50 per share was determined by us arbitrarily. This price bears no relationship whatsoever to our
23
business plan, the price paid for our shares by our founder, our assets, earnings, book value or any other criteria of
value. The offering price should not be regarded as an indicator of the market price, if any, of the common stock that
may develop in a trading market after this offering, which is likely to fluctuate.
The $0.50 price of the shares that are being offered on a best efforts basis was arbitrarily determined in order for us
to raise up to a total of $500,000 in this offering.
There are no warrants, rights or convertible securities associated with this offering.
USE OF PROCEEDS
The net proceeds from the sale of the Maximum Offering are estimated at $480,000 after deducting estimated
Offering expenses of $20,000. The net proceeds from the sale of the maximum number of Shares should satisfy the
Company's current working capital needs. The following table details the Company's projected use of proceeds of
the Offering based upon 100%, 50% and 25% of the Offering sold.
Percentage of Offering
100%
50%
25%
Salaries
$47,000
$47,000
$11,750
Rent
18,000
18,000
18,000
Office equipment
45,000
45,000
10,000
Inventory
5,000
5,000
5,000
Marketing
125,000
65,000
10,250
Working capital
240,000
50,000
50,000
Total
$480,000
$230,000
$105,000
1. The Offering has no minimum and funds will be deposited in our operating bank account as subscriptions are
accepted. Funds will be applied as received in the most productive manner to be determined by Management.
DILUTION
As of September 30, 2011, we had a net tangible book value of $(3,986) or $(0.000) per Share. Net tangible book
value per Share represents our tangible assets, less its liabilities, divided by the number of Shares outstanding prior
to the Offering.
If the Maximum Offering is sold, there will be 16,350,000 Shares of Common Stock outstanding, having a net
tangible book value of $.030 per share. The shareholders purchasing Shares will suffer an immediate dilution in
value of $0.47 per share in the net tangible book value of Shares held by them. The immediate dilution in value is
due in part to the lower net tangible book value of the Shares of Common Stock outstanding prior to the Offering
and to the payment of the Offering expenses.
If the 50% Offering is sold, there will be 15,850,000 Shares of Common Stock outstanding, having a net tangible
book value of $.014 per share. The shareholders purchasing Shares will suffer an immediate dilution in value of
$0.486 per share in the net tangible book value of Shares held by them. The immediate dilution in value is due in
part to the lower net tangible book value of the Shares of Common Stock outstanding prior to the Offering and to the
payment of the Offering expenses.
24
If the 25% Offering is sold, there will be 15,600,000 Shares of Common Stock outstanding, having a net tangible
book value of $.006 per share. The shareholders purchasing Shares will suffer an immediate dilution in value of
$0.494 per share in the net tangible book value of Shares held by them. The immediate dilution in value is due in
part to the lower net tangible book value of the Shares of Common Stock outstanding prior to the Offering and to the
payment of the Offering expenses.
The immediate dilution in value represents the difference between the Offering Price and the net tangible book value
per share immediately after the completion of the public offering. It is determined by subtracting net tangible book
value per Share after the Offering from the amount paid by a Subscriber for a Share. The following tables illustrate
the dilution of Subscribers in the Offering purchasing Shares.
100%
50%
25%
Public Offering price
$.50
$.50
$.50
Net tangible book value per Share of Common Stock before the
$(0.000) $(0.000) $(0.000)
Offering(1)
Net tangible book value per share after the Offering(1)
$.030
$.014
$.006
Increase per Common Share attributable to offering
$.030
$.014
$.006
Dilution to Investors
$.470
$.486
$.494
1. After deducting Offering expenses (estimated, in the aggregate, at $20,000).
DESCRIPTION OF BUSINESS
BUSINESS
History of the Company
Virtual was formed as a Nevada corporation on January 6, 2009. Virtual Learning plans to become a subscription-
based online education company. We intend to provide standards-based instruction through our fully animated
talking virtual textbooks. Our fully animated, interactive featured, colorful, and audio virtual textbooks have
combined rigorous content along with a variety of practice problems, activities, assessments, games, and
productivity tools that we hope will improve the performance of students via proprietary web-based platforms that
engage students, reinforce and reward learning achievement.
As part of our “Learning is Basic” series we have created, as a subset, our “Math is Basic” series of virtual math
textbooks and assessment programs. It is intended that our core product line will help students in First through 12th
grade, master grade level academic standards in a fun and engaging manner. We provide our products via
proprietary web-based platforms through one of our several websites on the World Wide Web with the URL
www.mathisbasic.com; www.learningisbasic.com, www.eschoolroom.com, www.educationisbasic.com. Please note
though that we have only one operational website www.learningisbasic.com.
Virtual Learning is also a producer and plans to be a distributor of computer software and video educational
materials on CD and DVD formatted disks which we plan to make available through various distributors and our
websites either as a download or in boxed format. We have established ecommerce store fronts on Amazon.com,
Ebay.com, and Yahoo.com.
We plan to capitalize on two significant trends in the education market: (1) an increased focus on higher academic
standards and educator accountability for student achievement, which has led to periodic assessment in the
classroom to gauge student learning and inform instruction, also known as formative assessment, and (2) the
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increased availability and utilization of web-based technologies to enhance and supplement teacher instruction,
engage today’s technology-savvy learners and improve student outcomes.
Despite spending an estimated $630 billion in the 2007-2008 school year on K-12 education — more than any other
developed country — the United States ranks 25th in the world in the quality of its primary education system,
according to the World Economic Forum. In response to this gap, policymakers and parents are paying greater
attention to the effectiveness of U.S. public schools, demanding higher educational standards and accountability
from teachers, administrators, and school districts. In addition, increased usage and acceptance of online technology
is changing how educational content, such as lessons, homework and assessments, is delivered and utilized. These
new educational tools and technologies help improve the learning experience of students by augmenting the teaching
techniques of skilled teachers and supporting and strengthening the skills of inexperienced or less effective
instructors. An estimated $8 billion was spent on the K-12 instructional materials market in 2008, according to the
Center for education Reform 2009 and the National Center for Educational Statistics.
Our virtual textbooks and assessment programs are designed to improve educational results and meet accountability
criteria, leveraging the widespread adoption of online technologies. Virtual Learning combines rigorous content that
is highly customized to specific standards in math with interactive features that reinforce and reward student
accomplishments. We believe that our subscribers purchase our products because we are innovative, low-cost and a
high-impact solution for enhancing teacher effectiveness, promoting student learning of core subject concepts and
skills and preparing students for state standardized tests. We believe that our flexible web-based distribution model
and in-house content development capabilities will allow us to continually update and improve our products,
distribute our products in a cost-efficient manner, and price our products affordably.
To date, we have completed 5 titles on CD formatted disks relating to the teaching of basic English to foreign
speaking individuals. These titles include “English for Russian Speaking People”; English for Portuguese Speaking
People”; “English for Spanish Speaking People”; “English for Chinese Speaking People”; and “English for Polish
Speaking People”. These are not yet available online.
We have also completed virtual textbooks with the titles: “First Grade Math”; “Second Grade Math”; “Third Grade
Math”; Third Grade Math: Geometry”;” Fourth Grade math: Geometry”; ”Fifth Grade Math: Geometry”; “First
Grade Math: Learning to Tell Time”; Second Grade Math: Learning to Tell Time”; “Third Grade Math: Algebra”;
“Mr. Clock for First Grade”; “Mr. Clock Teaching Time”; and “Mr. Clock Teaches Elapsed Time” and assessment
based review level titles for grades first through third grade . Our other educational titles on CD and or DVD
formatted disks will consist primarily of virtual mathematics text books and work book courses for grades First
grade through college level. We intend to follow the core curriculum requirements required to be taught throughout
the United States.
We are also in production stage on several other virtual audio and animated teaching textbook computer program
titles relating to teaching “Money” for First Grade”; “Fourth Grade Algebra” and “Fifth Grade Algebra”;” First
Grade Math: Measurements”; “Second Grade Math: Measurement”; “Third Grade Math: Measurement”; “High
School Geometry” and “High School Algebra” in CD format and one video title relating to teaching Calculus I,
college level. We are also in preproduction on additional video titles relating to Trigonometry, pre-calculus, and
Calculus II.
The business of the Company was originally developed through a prior entity formed under the name the Terra
Media, Ltd., a Delaware company (“Terra”). Terra did complete a registration statement pursuant to the 1933 Act
and was approved for trading on the Bulletin Board. On June 2, 2008, the volume in Terra’s Common Stock was
non-existent.
In January 2009, Terra decided to pursue the purchase and development of coal leases and entered into an agreement
with Thomas Monahan to sell to Mr. Monahan the assets of Terra's subsidiary Ding Dong School, Ltd. for a
26
purchase price of $5,000 which included certain assets including computers, various software titles, Trade Marks,
and production software with a book value of $37,688, assumption of officer loans aggregating $28,437, and the
assumption of accrued liabilities aggregating $35,085. Mr. Monahan was the former President and controlling
shareholder of both Terra and Ding Dong School, Ltd. and during the time when Mr. Monahan was in control of
Terra, the Ding Dong School subsidiary was the only asset of Terra. Control, of Terra was purchased by Catherine
Balloqui who also became Terra’s President and sole director. In 2009, Ms. Balloqui made the determination that
Ding Dong School’s business was less desirable than energy assets and Terra then sold the assets to Mr. Monahan in
exchange for the forgiveness of $5,000 owed to Roger Fidler by Terra for legal fees. Mr. Monahan retains no shares
in Terra and Ms. Balloqui has no shares in Virtual Learning.
Our Markets
The U.S. educational system, consisting of K-12 and postsecondary education, collectively includes approximately
59 million students. Our virtual textbooks and materials are being developed to appeal primarily in the U.S. K-12
education market, which consists of approximately 59 million students in more than 132,656 schools according to
schools according to Center for education Reform 2009.
Since 1999, the National Household Education Surveys Program (NHES), conducted by the U.S. Department
of Education’s National Center for Education Statistics (NCES) in the Institute of Education Sciences, has collected
nationally representative data that can be used to estimate the number of home schooled students in the United
States. Additionally, according to the U.S. Department of Education Institute of Education Sciences both the number
and the proportion of students in the United States who were being home schooled increased between 1999 and
2003. Approximately 1.1 million students (1,096,000) were being home schooled in the United States in the spring
of 2003, an increase from the estimated 850,000 students who were being home schooled in the spring of 1999
(Bielick, Chandler, and Broughman 2001). In addition, the percentage of the entire student population who were
being home schooled increased from 1.7 percent in 1999 to 2.2 percent in 2003. Data from the 2007 NHES survey
show an estimated 1.5 million students (1,508,000) were home schooled in the United States in the spring of 2007.
This represents an increase from the estimated 1.1 million students who were home schooled in the spring of 2003
(Princiotta, Bielick, and Chapman 2004). The percentage of the school-age population that was home schooled
increased from 2.2 percent in 2003 to 2.9 percent in 2007.
A number of key dynamics have impacted the K-12 education market in recent years:
Increased Accountability. Despite spending an estimated $650 billion during the 2007-2008 school year on K-12
education — more than any other developed country — the United States ranks 25th in the world in the quality of its
primary education system, according to a 2008-2009 report by the World Economic Forum, which describes this as
a “competitive disadvantage.” American students are slipping further behind their foreign peers in international
assessments, and fewer are showing an interest in the science, technology, engineering, and math fields that are vital
to innovation and entrepreneurial vigor. Within the United States, there exists a growing disparity in the academic
performance of students in public schools in affluent communities compared to that of students in poorer
neighborhoods. As a result, policymakers and parents have paid greater attention to the effectiveness of U.S. public
schools, demanding higher educational standards and accountability from teachers, administrators, and school
districts. States publish accountability reports that show each school’s progress and ability to meet proficiency
standards, and these results are often reported by local press outlets. This increased visibility into school
performance has led to increased parent and policymaker pressure on schools and teachers, including at the
presidential level. President Obama’s administration has launched the $4.35 billion “Race to the Top” fund to
highlight and replicate innovative education strategies as part of the administration’s highly publicized efforts to
reform education.
Legislative Developments. In 2001, Congress passed the reauthorization of the Elementary and Secondary Education
Act, commonly referred to as No Child Left Behind, or NCLB. NCLB requires states receiving federal funding for
education to establish high, state-wide, academic standards in reading, mathematics and science for students in
grades 3 through 8 and in high school and to assess students’ proficiency in meeting these standards annually.
NCLB requires states to set incremental milestones for all students to show yearly proficiency improvements, with
27
the goal that all students perform at grade-level proficiency by 2014. As states implemented new, higher academic
standards and assessments in response to NCLB, it became clear that after the first two years of implementation,
many schools, particularly those in large, urban, poorer communities were not meeting NCLB’s Adequate Yearly
Progress, or AYP, milestones. As a result, educators began exploring instructional tools to help students master
academic standards and improve performance on accountability assessments. This has driven demand for standards-
based content and both formative and summative, or end-of-year, assessment products. The Elementary and
Secondary Education Act initially was scheduled for reauthorization in October 2008, but was extended in order to
allow the new U.S. presidential administration to impact the direction of any future reauthorization. In early 2009,
Congress passed the American Recovery and Reinvestment Act, better known as the stimulus act, which provides
more than $64 billion of federal funds for the Department of Education, with a phased roll-out of such funds to
states between April 2009 and the spring of 2010. In order to receive these education funds, states must satisfy
certain conditions, which are expected to correspond with the basic tenets of NCLB reauthorization. These
conditions include assurances that states will strive to meet more rigorous educational standards, improve
underperforming schools, lower high school dropout rates and ensure student readiness for success in college and in
the workforce.
Increased Access to Computers and the Internet. Today’s students use computer technology in and out of the
classroom, and many students have access to internet-enabled computers at school and home. Increased usage and
acceptance of online technology is changing how educational content is delivered and utilized by teachers and
students. According to the Consortium for School Networking, 98% of rural and wealthy schools have high-speed
internet access in classrooms, as do 93% of classrooms in poor urban school districts. More than 80% of Americans
now have a computer in their homes and, of those, almost 92% have internet access, according to a study on home
internet access from The Nielsen Company. In addition, NCLB mandates that schools improve school-to-home or
school-to-parent communication and involvement in their child’s education. As a result, schools are increasingly
looking for integrated website portals and productivity tools to more easily comply with this mandate, more
effectively use student achievement data to keep parents informed and more readily guide parents’ ability to help
their children improve their skills and proficiency.
The Market for Supplemental Learning Materials. Schools use a variety of supplemental materials to augment their
core curriculum, provide remediation and enrichment and offer additional learning opportunities in the classroom
and at home. These materials include traditional print-based materials, such as textbooks, workbooks, problem
sheets and printed reading materials. With increased availability and use of computers in the classroom and at home,
vendors have developed software and, increasingly, online programs and content as an alternative to print-based
materials.
An estimated $8 billion was spent on the K-12 instructional materials market in 2008, according to Association of
American Publishers. In 2007, according to Market Data Research's annual expenditures report, the national average
for instructional materials spending is $237 per pupil.
Limitations of Traditional Print Products. Educators increasingly are recognizing the limitations of traditional print-
based textbook and workbook learning materials, which are static, cannot be quickly corrected for errors or updated
to address evolving standards, cannot provide individualized feedback to students, do not provide teachers with a
method to quickly track student progress and become ragged and obsolete with time and usage. Such traditional
print-based learning materials are costly and need to be replaced on a regular basis due to the publication of newer
editions or, in the case of workbooks, use by students. These materials also do not provide administrators with easily
obtainable metrics to measure the performance of classes, teachers, or individual grades in their schools on a regular
basis. Increasingly, parents are finding their children coming home with fewer and fewer textbooks and other printed
materials because the costs of providing children with materials to take home is simply too costly.
Limitations of Software Products. As a result of the recognition of the limitations of print-based products and the
perceived advantages of computer-based materials, educators began to utilize software-based supplemental
materials, such as CD-ROMs. However, these materials also have significant limitations. Software products are
designed to run on specific operating systems with specific memory requirements, and require installation on
individual computers or costly and time-consuming installations on centralized computer systems. Software
products place increased demands on schools’ limited IT personnel, systems, and budgets. Access to these products
28
is typically limited to the computers in a specific classroom or computer lab and cannot be used at home unless
schools provide a student with a disk containing the software and the student has access to a computer with the
appropriate operating system or ability to play a CD-ROM. Any updates require the publication, receipt, distribution
and installation of new software or CD-ROMs, which would require the school and parents to purchase new
versions. In addition, software-based products are typically unable to provide real-time feedback about student
performance to teachers or educators. CD-ROM’s are also subject to being illegally duplicated.
Advantages of Online Learning Solutions. Online products can provide educators and parents with real-time
feedback on student progress, allowing for tailored instruction based on individual student or classroom needs, and
can generate reports for parents and teachers. Online products also are easily, automatically, and frequently updated
with new or more current content, additional features and enhancements and provide students with instant feedback,
positive reinforcement and remediation when proficiency levels are not met. Also, unlike software- or CD-ROM-
based learning materials, web-based products require no software to be installed in school or home computers and
can be accessed anywhere the internet is available. Web-based products can be offered at lower prices as they do not
require expenditures for publishing, paper, or electronic media, shipping or warehousing. Web-based products are
also becoming increasingly available for Smartphones, Tablets and Ebooks.
Our Competitive Strengths
We believe the following are our key competitive strengths:
Customized, Standards-Based Content. Our line of virtual textbooks and assessment programs offers online,
standards-based instruction, practice and assessments for certain subjects, primarily math in the first, second, third,
fourth and fifth grades which we hope to expand to cover all grades and most subjects from first grade through
twelfth grade and which we have attempted to build to meet the applicable standards in 43 states, i.e. trying to
comply with the Common Core State Standard Initiative. We believe this customization will be attractive to parents
and educators, providing them with a resource that meets their specific state and grade-level teaching needs in a
variety of subjects.
Real-time Student Tracking, Built-in Remediation and Enrichment. In addition to our virtual textbooks, we have
designed software that will assess a student’s progress in learning. We can provide real-time reporting on student
achievement, allowing parents and educators the option to quickly identify learning gaps and provide targeted
instruction and practice. Our assessment software also provides students with immediate feedback and explanations
and, when required, remediation content designed to build foundational skills in order to accelerate students to
grade-level proficiency.
Engaging, Fun and Easy to Use for Students. Our products utilize a simple, graphical user interface that we believe
to be intuitive and easy to use. In addition, our virtual textbooks and supplementary web-based programs incorporate
games and rewards in an attempt to make learning fun and engaging for students. By engaging students and
providing them with the tools they need to succeed, we hope to enable them to take control of their own learning,
boost their confidence, and keep them interested in using our products, while creating a culture of academic success.
Accessible, Dynamic Web-based Platform. Our products are delivered online so they can be used by teachers and
students on computers wherever internet access is available, such as classrooms, computer labs, media centers,
school libraries, public libraries or at home. Our programs are compatible with existing school and home systems
and require no additional software, no installation or maintenance and no extensive implementation or training.
Moreover, unlike traditional workbooks or software products, our Virtual Learning content is easily and quickly
updated whenever content or functionality enhancements are introduced or products are modified due to changes in
state standards.
High Impact, Low Cost Solution. Virtual Learning plans to offer a comprehensive online educational solution on a
hosted platform and provides high quality content, assessment, and reporting for core subjects in a wide range of
grade levels. At an anticipated annual subscription rate of $29.95 per family, Virtual Learning products are
significantly less expensive than competing traditional print, software and online alternatives provided by large
education publishers.
29
We have designed our software to enable quick modification to any language: We have designed into our software
the ability to easily modify and convert its content to any language that we feel there is a market or would be
required to meet the requirements of any of our subscriber base.
We believe increased accountability, including the need for school districts and states to meet the requirements of
NCLB and other legislative developments, combined with the increased availability and utilization of web-based
technologies by teachers, students, and administrators has resulted in decreased spending on traditional print-based
and software-based supplemental materials and increased spending on innovative online programs that offer
functionality and real-time assessment and reporting not provided by traditional solutions.
Our online products are easily, automatically, and frequently updated with new or more current content, additional
features and enhancements and can provide students with instant feedback, positive reinforcement and remediation
when proficiency levels are not met. Web-based products require no software to be installed in school or home
computers and can be accessed anywhere the internet is available. Web-based products can be offered at lower
prices as they do not require expenditures for publishing, paper, or electronic media, shipping or warehousing
Key Attributes of Our Business Model
We believe the following are the key attributes of our business model (Please note that NONE of the key attributes
of our business model have materialized yet):
High Revenue Visibility and Strong Cash Flow Generation. We believe we have an attractive business model
characterized by a visible recurring revenue stream and high profit margins, neither of which have materialized to
the date of this Prospectus. We have not yet generated any revenue and have never generated a profit. In addition,
we believe our low capital expenditure requirements and up-front subscription payments by subscribers should
result in strong cash flow generation and high returns on invested capital when and if our future sales materialize.
Scalability and Flexibility. We continue to scale our business by increasing our product offerings using our products
without incurring significant incremental expense. Our content development process, our flexible sales model and
our cost-effective centralized, hosted online delivery platform will allow us to minimize our costs as we expand our
product offerings and, hopefully, our business when and if sales develop.
Solution to Various Learning Problems: As a software development company, we have developed our products in
direct response to parents and teachers concerns relating to student’s ability to master all of the material mandated
the national core curriculum requirements in a timely manner. Our software includes, at present, over fifty modules
that teach subjects as diverse as geometry, algebra, measurement, addition, subtraction, multiplication, division, and
fractions, to name a few, This time pressure issue was further substantiated and further reported by such sources as
the Education Resources Information Center; through several studies documenting the importance of time needed
for learning and time spent in learning as parameters of educational achievement. Several studies have examined
differences in student learning rates, amount of information acquired, and amount of information retained in three
common types of classroom tasks. Tasks that required knowledge of specific facts; comprehension of basic concepts
and principles; or application of facts, concepts, and principles to problem-solving activities. Results of studies
indicated large differences among knowledge, comprehension, and application tasks for all measures of student
performance. The effect of this is apparent in the “The National Assessment of Educational Progress”, commonly
known as NAEP, or the nation’s report card, shows that not only have state scores not changed since the test was last
administered in 2008, the states have not seen significant growth since the late 1990s.
An attempt at resolving this problem hopefully will be accomplished by the adoption of “The Common Core
Standards” which has been adopted by 43 States and the District of Columbia is a state-led initiative that aims to
establish basic, uniform education requirements across the country. These standards are sponsored by the National
Governors Association and the Council of Chief State School Officers with the participation of many states.
The standards will be phased in over time, with curriculum development scheduled to begin in 2010-2011. The State
Board’s resolution “directs that school district curricula for all students be aligned with these revised K-12 standards
in mathematics and English language arts and literacy in history/social studies, science, and technical subjects,”
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according to the phased-in timeline. The standards will provide more clarity about and consistency in what is
expected of student learning across the country. Until now, every state has had its own set of academic standards,
meaning public education students at the same grade level in different states have been expected to achieve at
different levels.
Falling budgets, increased student density per classroom, and what may be perceived by parents and teachers as
more demanding learning requirements will only place a greater burden for the student to keep up. Our virtual
textbooks and other learning products may help a student overcome this problem by learning on an individual level
and at his or her own rate in a non-threatening, non-judgmental environment,
Secondly: Granting access to all our subscribing students to all of our materials for all grade levels with the payment
of one annual subscription fee gives students the opportunity to learn beyond his or her level and get a head start
when advancing to a higher grade or the next level in the learning process.
Third: Granting access to all of our subscribing students to all of our virtual courses and supplementary material and
assessment programs will allow students who are deficient in having mastered content required in a prior classroom
module, prior grade or from another school, will give students an opportunity to make up for any deficiencies at his
or her own pace and in a non-threatening and non-judgmental environment.
Fourth: The software platform we currently use for all of our products is ideally suited to adapt all of our products to
any number of languages with minimal programming changes. It is our intention to make all of our products
available in the Spanish language.
Our Growth Strategy
Ability to Implement Growth Initiatives. With regard to the section “Develop New Products and Enhance our
Online Platform” below, the reference to new products in that section refers to completing the additional titles
mentioned below and this process is on-going and the essence of our growth strategy. The completion of the
additional titles is the primary goal of the Company during the next year. The main obstacle to achieving the growth
strategy initiatives is the fact that at present we have one employee and limited funds. The failure to complete this
offering or obtain additional funding elsewhere, would seriously impair or prevent achieving any of the growth
strategy initiatives set forth below prior to development of the 32 titles mentioned below. With such funding, prior
to developing the 32 titles we contemplate achieving certain of our growth initiatives or substantial parts of them.
For example, with respect to cross platform functionality, while we are in the process of completing the four stages
of development for any given title, we are constantly seeking ways to adapt the programming of each title to be
operational on as many platforms as possible. By taking into account several other changes our files will play any
standard PC, android cellphone and also play in a video player. Other initiatives such as commencing development
of an eBook platform will not be possible until additional funds are acquired and employees hired. Use of the
HTML5 standard is not anticipated until 2014 when we anticipate that HTML5 will become standard. Similarly,
programming for additional science and reading titles, as well as translation into other languages need additional
employees and funding and thus will not occur prior to completion of the 32 titles.
Develop New Products and Enhance our Online Platform. Once we have achieved a revenue stream we intend to
develop new products, as well as new features and functionality for our online platform, to address student needs,
parents, and teacher requests in order to maintain the competitiveness we feel necessary to maintain growth both in
the number of subscribers to our online services and to enable us to increase our per subscriber revenue by offering
increased value. The development of new products and the enhancement of our Online Platform are relevant to our
growth because such development and enhancement improve functionality of content to be viewed over a broader
base of communications platforms, e.g. it is now primarily viewed over a desk top or laptop computer over the
internet whereas in the future it will be viewable over cellphones and tablets. To date our system is viewable through
any Windows or MacIntosh computer systems over the internet and has been modified to be viewed over any cell
phone or tablet using Android operating system. In the future we want to extend this to include the iPhone, iPad and
Blackberry. We also want to convert our modules to become a video presentation.
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Continue development in cross platform functionality for mobile telephone systems. As briefly addressed above, in
order to address additional subscribers we intend to make our online services available to mobile telephone users.
We are currently capable of serving Android and Blackberry Tablet users. We intend to extend this cross platform
functionality to iPad and IPhone and Blackberry cell phones. These Smartphones appear to be establishing a
significant and increasing market share of the mobile telecommunications business. A Smartphone is a mobile
phone that offers more advanced computing ability and connectivity than a contemporary feature phone.
Smartphones and feature phones may be thought of as handheld computers integrated with a mobile telephone, but
while most feature phones are able to run applications based on platforms such as Java Me a smartphone usually
allows the user to install and run more advanced applications. Smartphones run complete operating system software
providing a platform for application developers. Thus, they combine the functions of a camera phone and a Personal
digital assistant (PDA). The increased availability and utilization of web-based and mobile technologies enhances
and supplements teacher instruction, engages today’s technology-savvy learners and improves student outcomes.
Some smartphones, sometimes called NirvanaPhones, have a docking station with an external display and keyboard
to create a desktop or laptop environment. Growth in demand for advanced mobile devices boasting powerful
processors, abundant memory, larger screens, and open operating systems has outpaced the rest of the mobile phone
market for several years. According to a study by ComScore, over 45.5 million people in the United States owned
smartphones in 2010 out of 234 million total subscribers. Despite the large increase in smartphone sales in the last
few years, smartphone shipments only make up 20% of total handset shipments, as of the first half of 2010. In
March 2011, Berg Insight reported data that showed global smartphone shipments increased 74% from 2009 to
2010.
Develop New Products and Enhance our EBook Platform. Our strategy calls for development of electronic books as
an additional source of revenue, additive to revenue coming from online services. An electronic book (also e-book,
ebook, digital book) is a text and image-based publication in digital form produced on, published by, and readable
on computers or other digital devices. Numerous e-book formats emerged and proliferated, some supported by major
software companies such as Adobe with its PDF format, and others supported by independent and open-source
programmers. Multiple readers follow multiple formats, most of them specializing in only one format. As of 2009,
new marketing models for e-books were being developed and dedicated reading hardware was produced. E-books
have yet to achieve global distribution.
In the United States, as of September 2009, Amazon Kindle and Sony’s PRS-500 were the dominant e-reading
devices. By March 2010, some reported that the Barnes & Noble Nook may be selling more units than the Kindle.
On January 27, 2010 Apple Inc. launched a multi-function device called the iPad In July 2010, online bookseller
Amazon.com reported sales of ebooks for its proprietary Kindle outnumbered sales of hardcover books for the first
time ever during the second quarter of 2010, saying it sold 140 e-books for every 100 hardcover books, including
hardcovers for which there was no digital edition. By January 2011, ebook sales at Amazon had surpassed its
paperback sales. In the overall U.S. market, paperback book sales are still much larger than either hardcover or e-
book; the American Publishing Association estimated e-books represented 8.5% of sales as of mid-2010.
This last year 2010 saw an expansion of eBook platforms. Amazon released the Kindle DX International Edition
worldwide and released the third generation Kindle, available in 3G+Wi-Fi and Wi-Fi versions. Bookeen revealed
the Cybook Orizon at CES and debuted the Orizon touchscreen e-book reader. Apple released the iPad with an e-
book app called iBooks. Between its release in April 2010, to October, Apple has sold 7 million iPads. Kobo Inc.
released its Kobo eReader to be sold atIndigo/Chapters in Canada and Borders in the United States. Kobo Inc.
released an updated Kobo eReader, which now includes Wi-Fi. Barnes & Noble released the new NOOKcolor. Sony
released its second generation Daily Edition PRS-950. PocketBook expanded its successful line of e-readers in the
ever-growing market. Lastly, Google launched Google eBooks. The development of new products and the adapting
and enhancement of our present courses to the EBook Platform are relevant to our growth because such
development and enhancements improves the functionality of content to be viewed by the students through systems
that are most relevant to them which includes the eBook platform. To date we have applied to become a registered
developer for Amazon Kindle and Barnes and Noble Nookcolor. In the future, if approved we will have to adapt our
modules from Adobe Flash into Java and JavaScript and then market the products to the users of these platforms
expanding our customer base, i.e. growth.
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Develop New Products and Modify Products Based Upon the HTML5 Standard. At present only iPad and the
iPhone can run a fully developed HTML5 application. However, we believe that HTML5 will become the new
standard for web sites. Thus, we intend to make all of our web sites, both present and future, fully functional in
HTML5 so that we will continue to present what we believe to be the most advanced instructional software for each
of the modules we create hopefully insuring that our future growth will become impaired by less than current
functionality. HTML5 is a language for structuring and presenting content for the World Wide Web, a core
technology of the Internet. The target date for full adoption of the HTML5 standard is schedule for 2014. It is the
latest revision of the HTML standard (originally created in 1990) and currently remains under development. Its core
aims have been to improve the language with support for the latest multimedia while keeping it easily readable by
humans and consistently understood by computers and devices (web browsers, parsers etc.). HTML5 promises to
offer extensive cross platform features and functionality in animation, video applications and products for use on the
World Wide Web for PC’s, mobile phones and Tablets. The development of new products and the enhancement of
our Online Platform is relevant to our growth because such development and enhancement improve the functionality
of content to be viewed over a broader base of communications platforms, At present, we are relying upon Adobe
Flash to continue its own development and continue to be the most viewed and adaptable software platform to create
our courses. Adobe Flash has built its reputation as one of the most media rich platforms on the market with an
installed user base in excess of 90% on the desktop and laptop computers marketed today. HTML5 is expected to be
the new challenger to the success of Adobe Flash. It is expected that beginnin in 2014, HTML5 will rival Adobe
Flash’s abilities to present an equally broad base of content over a broader range of communication devices
including but not limited to cellphones, tablets and eBook devices. To date our system is viewable through any
Windows or MacIntosh computer systems over the internet and has been modified to be viewed over any cell phone
or tablet using Android operating system. In the future we want to extend this to include the iPhone, iPad and
Blackberry cellphone. By so doing we will expand our customer base and further the growth of our business.
Our flexible web-based distribution model and in-house content development capabilities allow us to continually
update and improve our products, make our products immediately available on the World Wide Web regardless of
platform and distribute our products in a cost-efficient manner.
Increasingly tech-savvy students today are increasingly relying on multiple devices and media to access information,
through the World Wide Web. As such, it is important to deliver our content in the way that best suits their needs.
With 3 Screen access,(PC, Mobile, Tablet) we will open up new distribution channels, extending our reach while
making our content conveniently accessible, regardless of time or place. And, since our content is ‘always on', we
may achieve higher numbers of subscribers. In this way we hope that our products will garner the widest possible
user audience and hence positively impact our growth.
We have adapted our software platform to permit us to embed video content which will allow our subscribers to
seamlessly watch our videos, regardless of whether they come to our site by way of a PC, mobile Smart Phone, or
Tablet. We feel that by re-designing the format of our virtual courses, we can create a line of virtual courses that
may be viewed using an interactive video format such as is available through the smartphone and tablet
technologies. The development of new products and the enhancement of our Online Platform to a video platform are
relevant to our growth because such development and enhancement improve functionality of content to be viewed
over a broader base of communications platforms, e.g. it is now primarily viewed over a desktop or laptop computer
over the internet whereas in the future it will be viewable over cellphones, tablets and internet ready television sets.
To date our system is viewable through any Windows or MacIntosh computer systems over the internet and has
been modified to be viewed over any cell phone or tablet using Android operating system. In the future we want to
extend this to include the cellphone, tablet and internet connected television systems to expand the customer base,
especially among young viewers.
Expand Into New Related Markets for Further Growth. We believe there is a significant opportunity to utilize our
programming language platform to create fully animated, talking, colorful, interactive content for the subject fields
of science and reading and sell our products in new geographic and end markets that will enhance our growth.
We believe there is a significant opportunity to modify the content of our virtual textbooks and related assessment
materials into other languages. Bilingual Education is a program used to help limited English proficient (LEP)
33
children keep up with all their required academic competencies, such as math, history and science, while they are
learning English through ESL (English as a Second Language) classes. Many LEP students learn to speak
conversational English within the first 2 years, but research consistently shows that it takes 4 to 7 years before most
students are able to use English to learn academic subjects and perform on a par with native English-speaking peers.
A recent national research (Collier & Thomas 1996) shows that late-exit quality bilingual programs actually create
the best results, with students in 2-way bilingual programs (bilingual students and native-English speakers learning
in 2 languages in the same classroom) out-performing their mainstream peers. Despite what the research is showing,
most bilingual education programs transition their students into the mainstream within the first 3 years.
Bilingual program students continue learning academic subjects like math and science in the language in which they
are able to learn most effectively, while learning English. There is always an ESL component to each bilingual
program. Uninterrupted development of children's cognitive, academic, and linguistic skills is critical in the
academic success of limited English proficient students. Moreover, is it not better to build on the assets that the
students bring with them- their knowledge, languages and cultures- rather than discouraging the development of
those valuable resources.
Bilingual programs have been proven to be cost effective for school systems to implement for the following reasons:
1) LEP students who chose bilingual education programs are less likely to be placed into expensive special
education programs as those who chose to stay in the sink or swim English-only programs, 2) With the additional
support, bilingual education students are less likely to drop out of high school than their language minority peers in
English-only programs, 3) Bilingual education helps to nurture and support the continual development of valuable
bilingual/bicultural skills that are needed in our global economy.
There are numerous contributing factors that help explain the desertion of bilingual children and the cultural diverse
child. Some of them reside in teenagers themselves, some are institutional, and some are social. Teenagers start
questioning the educational system in which their needs are not satisfied. Families pressed by economic needs
encourage teenagers to work, because they see education as a very expensive commodity. Pressing economic need
impels them to earn a living instead of continuing their education. The exorbitant and rising costs of a college
education and misinformation about the opportunities to succeed in college combine to present a bleak future for
minority students. The lack of basic skills is another contributing factor. A typical bilingual student lags two years
behind his or her classmates, which imprint on them a label that in some cases is very difficult to overcome.
Children know who are the good students and are the ones who lack behind. Teenagers feel the alienation and
become truants. Truancy makes their stay at school even more difficult. While the students who come to class
regularly gain knowledge, the youngsters who are truant fall farther behind, and the gap between their knowledge
level and the ideal level becomes greater.
By addressing bi-lingual educational needs and by translating our online programming and eBooks into other
languages we will expand our potential user base and hence promote subscriber and revenue growth. The
development of new products and the enhancement of our business by producing product for non-English speakers
is relevant to our growth because such development and enhancement aims to expand customer base into new
markets to be viewed over a broader base of communications platforms, e.g. it is now primarily viewed over a desk
top or laptop computer over the internet whereas in the future it will be viewable over cellphones and tablets, for
non-English speakers. To date we have translated third and fourth grade geometry courses into Spanish and in the
future we intend to translate all modules into Spanish to expand our market to include more Spanish speaking
customers. We also have been having preliminary discussions for marketing Asian language courses again with an
eye toward expanding the customer base in the future.
We have designed into our User Registration and billing procedure the flexibility to attract sales and offer
promotions and incentives to school systems, organizations and groups to sign on groups of students.
In addition to attracting individual students to sign on to our web-based virtual textbooks and related assessment
materials, we have designed into our system the flexibility to permit a school system, organization, or group to
enroll any number of students and have our system track their subscription and learning progress and to notify the
parents and/or sponsors as to the student’s progress. This capability should enhance our prospects for growth by
34
allowing organizations to acquire access to our web site for many subscribers in one easy registration process. The
registration and billing procedure are relevant to our growth because such programs allow large user groups to be
serviced at lower per pupil cost and paying the group for the benefit derived by the Company through the lowered
servicing costs per pupil. To date our system has been adapted to allow sales to a group and tie them to one payer.
In the future we expect this system to be upgraded as we gain more experience in group sales. This will also allow
us to us commissioned salespersons with less effort. All of these are anticipated to enhance sales growth.
Our Products and Services
Virtual Learning is a subscription-based online education company. As of September 30, 2011, we have not begun
to accept subscribers. We have had only preliminary discussions with a very limited number of potential
distributors. We provide standards-based instruction through our fully interactive virtual textbooks. Our fully
animated, interactive featured, colorful and audio virtual textbooks have combined rigorous content along with a
variety of practice problems, activities, assessments, games, and productivity tools that improve the performance of
students via proprietary web-based platforms games that engage students, reinforce and reward learning
achievement. As part of our “Learning is Basic” series we have created, as a subset, our “Math is Basic” series of
virtual math textbooks and assessment programs. Our core product line helps students in First through 12th grade,
master grade level academic standards in a fun and engaging manner. We provide our products via proprietary web-
based platforms through one of our several websites on the World Wide Web with the URL www.mathisbasic.com;
www.learningisbasic.com, www.eschoolroom.com, www.educationisbasic.com. Please note that we have only one
operational website www.learningisbasic.com.
When a student logs into our web-based system, the student is granted total access to all subjects regardless of grade.
Falling budgets, increased student density per classroom, and what may be perceived by parents and teachers as
more demanding learning requirements have only placed a greater burden for the student to keep up. Our virtual
textbooks and other learning products may help a student overcome this problem by learning on an individual level
and at his or her own rate in a non-threatening, non-judgmental environment. Since it is self-paced and fully
contained it allows students to work at an advanced pace as well as provide remedial support.
Virtual Learning is also a producer and intends to distribute computer software and video educational materials on
CD and DVD formatted disks which will be available through various distributors and our websites either as a
download or in boxed format. We have opened ecommerce store fronts on Amazon.com, Ebay.com and Yahoo.com.
We have combined rigorous content in math with interactive features and games that engage students, reinforce and
reward learning achievement. It is our intention to eventually have all our content available both online and in the
CD and DVD formats. However, at present there are some titles that are not available in both formats.
To date, we have completed 5 titles on CD formatted disks relating to the teaching of basic English to foreign
speaking people. These titles include “English for Russian Speaking People”; English for Portuguese Speaking
People”; “English for Spanish Speaking People”; “English for Chinese Speaking People”; and “English for Polish
Speaking People”. These are not yet available online.
We have also completed virtual textbooks with the titles: “First Grade Math”; “Second Grade Math”; “Third Grade
Math”; Third Grade Math: “Geometry”;” Fourth Grade math: “Geometry”; ”Fifth Grade Math: “Geometry”; First
Grade Math: “Learning to Tell Time”; Second Grade Math: Learning to Tell Time”; “Third Grade Math: Algebra”
“Mr. Clock for First Grade”; “Mr. Clock Teaching Time”; and “Mr. Clock Teaches Elapsed Time” and assessment
based review level titles for grades first through third grade . These titles will all be available online, as well as in
CD and DVD format. Our other educational titles on CD and or DVD formatted disks will consist primarily of
virtual mathematics and science text books and work book courses for grades Pre-K through college level. We
intend to follow the core curriculum requirements required to be taught by each of the 50 United States.
We are also in production stage on several other virtual audio and animated teaching textbook computer program
titles relating to teaching “Money” for First Grade; ”Fourth Grade Algebra” and “Fifth Grade Algebra”; First Grade
Math: Measurements”; “Second Grade Math: Measurement”; “Third Grade Math: “Measurement”; “High School
35
Geometry” and “High School Algebra” in CD format and one video title relating to teaching Calculus I, college
level. We are also in preproduction on additional video titles relating to Trigonometry, pre-calculus, and Calculus II.
Core Educational Principles
We believe that one of the keys to our success lies in our core educational principles that guide product design and
development:
•
Clear expectations. We have subdivided each grade into approximately twenty four different
modules. Each module focuses on an underlying topic which is further explored with rigorous
content which has been presented in an in depth, animated, colorful, and interactive format. Our
initial presentation starts out with a review of the basic underlying concepts and skills and is
patiently and painstaking incremented with all of the content and skills required to be learned and
mastered for that particular grade. Clear goals for the student to master the targeted skills or
concepts. Each module includes activities and various types of questions to assess the student’s
mastery and progress.
•
High quality, rigorous content. We are in the process of building courses from the ground-up,
customized to each set of standards for a particular topic. We utilize a scaffolding approach to
content development that begins with skill building and then builds to higher level thinking skills.
•
Fun and engaging assignments. Our virtual textbooks are embedded with short games, an
assortment of activities and a variety of question formats to assess the student’s mastery of the
material. These features provide continual positive reinforcement and reward learning to engage
students and build student confidence in a non-judgmental and non-threatening environment.
•
Immediate feedback. Students will receive immediate feedback and explanations for each question
and activity, allowing them to learn and quickly apply new knowledge to subsequent questions and
to build skills and conceptual understanding in order to handle more complex content that follows.
Our Subscribers
Our target market is the approximately 74 million students that attend school throughout the United States consisting
of K-12 and postsecondary education and the approximately 1.5 million students that are being home schooled
though out the United States.
Marketing, Sales and Subscriber Support
Marketing Activities
When implemented our marketing strategy will be to continually increase our brand and Web-site awareness, to
introduce and to continually generate qualified subscriber leads for our web-site. We intend to focus our marketing
efforts on individual students and their parents, individual schools, principals, and teachers for sales to both new and
existing subscribers.
Our primary marketing activities will include:
•
targeted campaigns to individual students and their parents and other family members, schools, and
organizations sponsoring after school learning opportunities by using search engine marketing,
direct mail, e-mail marketing and print advertisements;
•
participation in tradeshows;
36
•
building on relationships with satisfied students and parents, organizations, and school subscribers
to target new sales to other interested parties in the geographic area;
•
Webinars for existing subscribers introducing them to new products, add-on features and upgrades;
•
incentives such as free months to attract new subscribers or free trials of add-on products to attract
renewals; and we intend to promote ourselves through magazine advertisements describing and
offering our virtual textbooks.
Subscriber Support
We will provide our subscribers with service through “contact us” via phone, live chat or by email.
Our Competition
Virtual Learning will compete primarily with other providers of supplemental educational materials and online
learning tools.
We believe our principal competitors will include:
•
providers of online and offline supplemental instructional materials for the core subject areas of
reading, mathematics, science and social studies for K-12 institutions;
•
companies that provide K-12-oriented software and online-based educational assessment and
remediation products and services to students, educators, parents, and educational institutions;
•
the assessment divisions of established education publishers, including Pearson Education, Inc., The
McGraw-Hill Companies, and Houghton Mifflin Harcourt Company;
•
providers of online and offline test preparation materials;
•
traditional print textbook and workbook companies that publish K-12 core subject educational
materials, standardized test preparation materials or paper and pencil assessment tools;
•
summative assessment companies that have expanded their product lines to include formative
assessment and instruction products;
•
non-profit and membership educational organizations and government agencies that offer online and
offline products and services, including in some cases at no cost, to assist individuals in standards
mastery and test preparation; and
•
providers of website hosting for students, teachers and schools.
We believe the principal competitive factors in Virtual Learning’s market will be:
•
quality of content and deep customization to standards;
•
formative assessment and reporting to inform instruction;
•
ease of use, including whether a product is available online;
•
program efficacy and the ability to provide improved student outcomes;
•
ability to engage students;
37
•
quality of subscriber support;
•
vendor reputation; and
•
price.
Virtual Learning expects to compete primarily with textbook, workbook, study guide and software products
published by the large postsecondary publishers, such as Pearson, McGraw-Hill, Cengage, Wiley, and Mosby (Reed
Elsevier).
Concentrations
We anticipate that the majority of our revenues from the sale of subscriptions and our products and services will
occur in North America.
The Technology
We are using Adobe Flash as the platform upon which to develop our virtual textbooks and CD and DVD formatted
educational titles. Adobe Flash has several unique features that make it ideal for our purposes. First, it has the ability
to publish our work in several formats including as an executable file which may be played on either a PC or a
Macintosh Computer. In additional the same programming may also be used as the basis for presentation on our
website with no change in the basic core code. Adobe Flash is especially useful in its ability to incorporate and
integrate many forms of media into a single interactive program.
Adobe Flash is one of the most popular and versatile applications for digital multimedia and website development.
Flash is a vector-based medium able to deliver compelling vector animated content at a fraction of the bandwidth
required by other animation media. Flash is now one of the most flexible interactive digital-media authoring tools
available, offering the capabilities to run not only on the Internet and desktop computer platforms, but on game
consoles and mobile devices as well.
As the Internet has become more complex, more easily accessed, and more plentiful in rich media, it has
increasingly become a destination for those wanting to be educated and entertained at the same time. Education is a
subset of media (online or offline, interactive or not) that presents science, math, history or culture in a compelling
and entertaining manner. This is where Flash-based education and entertainment enters the scene. Flash allows for
the creation of nonlinear, self-motivated, educational experiences that feature compelling and powerful use of sound,
video, imagery, and interactivity.
Flash offers a series of file types to which our creations can be published. Each format has its own particular
strengths and weaknesses. In particular and as they relate to our products we utilize the publishing option of
producing our content as SWF files. SWF, is viewable only if our intended audience has installed a “Flash Player”
on their computer. Adobe Flash CS5 is the latest in the Flash family of software. Not only is the player that plays
Flash content one of the most downloaded pieces of software-surpassing both Internet Explorer and Netscape as
well as nearly all media players. Flash Players 4,5,6, 7,8, 9 and now version 10 accompanied virtually every copy of
Windows, from Windows 98 first edition on up through Windows XP SP2 and Internet Explorer 7, 8 and 9. The
only exceptions are Windows 2000, Windows XP Pro x64 and Windows Server 2003. The Flash Player is also
available as a free downloadable file from Adobe’s home website.
In addition, we also publish our titles in the “Windows Projector” format, which is a self-executing EXE file that
does not need a web browser or a plug-in to view the content. We can distribute the Windows Projector without
having to worry whether our intended audience has the necessary Flash plug-in, a compatible web browser, or even
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an Internet connection. Our titles are self-contained packages produced and distributed on CD ROM or DVD
formatted disks. We can also produce our titles in the Macintosh equivalent of the Windows Projector as a self-
executing HQX file. The Macintosh Projector does not need the Flash plug-in or a browser to be viewed.
One of the most important and relevant characteristics of Adobe Flash is its ability to present material in almost any
language. The language component of the computer program is documented as an image file, which then is
displayed independent of the computer user’s operating system limitations and graphic display limitations. This will
allow us to present our content in many languages simultaneously from within the program and not have to worry
about the user’s computer system to display that language.
Intellectual Property
The Company has copyrighted the content on all of its virtual textbooks and related materials and CD or DVD
products and has obtained a trademark on our URL “Learning is Basic”.
We consider elements of our software and peer-to-peer clustering technology to be proprietary. We rely on a
combination of trade secrets, copyright and trademark law, contractual provisions, confidentiality agreements, and
certain technology and security measures to protect our intellectual property, proprietary technology, and know-
how. Our future results of operations are highly dependent on the proprietary technology that we have developed
internally.
Employees
As of December 31, 2010, we had 1 full-time employee. Our success is highly dependent on our ability to attract and
retain qualified resellers and to retain qualified outsourced information system management. To date, we believe we
have been successful in our efforts, but there is no assurance that we will continue to be as successful in the future.
Our employee is not subject to a collective bargaining agreement.
Facilities
We currently occupy office space rent free from our President on a month to month basis.
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statements
Management’s Discussion and Analysis or Plan of Operation contains “forward-looking” statements, as well as
historical information. Although we believe that the expectations reflected in these forward-looking statements are
reasonable, we can give no assurance that the expectations reflected in these forward-looking statements will prove
to be correct. Forward-looking statements include those that use forward-looking terminology, such as the words
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “project,” “plan,” “will,” “shall,” “should,” and
similar expressions, including when used in the negative. Although we believe the expectations reflected in these
forward-looking statements are reasonable and achievable, these statements involve risks and uncertainties, and no
assurance can be given that actual results will be consistent with these forward-looking statements. Current
shareholders and prospective investors are cautioned that any forward-looking statements are not guarantees of
future performance. Such forward-looking statements by their nature involve substantial risks and uncertainties,
certain of which are beyond our control, and actual results for future periods could differ materially from those
discussed in this report, depending on a variety of important factors, among which are our ability to implement our
business strategy, our ability to compete with major established companies, the acceptance of our products in our
target markets, the outcome of litigation, our ability to attract and retain qualified personnel, our ability to obtain
financing, our ability to continue as a going concern, and other risks described from time to time in our filings with
the Securities and Exchange Commission. Forward-looking statements contained in this report speak only as of the
date of this report. Future events and actual results could differ materially from the forward-looking statements. You
39
should read this report completely and with the understanding that actual future results may be materially different
from what management expects. We will not update forward-looking statements even though its situation may
change in the future.
We undertake no obligation to update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. Important factors on which such statements are based are assumptions
concerning uncertainties, including but not limited to uncertainties associated with the following:
(a) potential fluctuation in quarterly results;
(b) our failure to earn revenues or profits;
(c) inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement
its business plans;
(d) inadequate capital to continue business;
(e) changes in demand for our products and services;
(f) rapid and significant changes in markets;
(g) litigation with or legal claims and allegations by outside parties;
(h) insufficient revenues to cover operating costs.
You should read the following discussion and analysis in conjunction with our financial statements and notes
thereto, included herewith. This discussion should not be construed to imply that the results discussed herein will
necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual
operating results in the future. Such discussion represents only the best present assessment of management.
PLAN OF OPERATION
Overview
Virtual Learning was formed as a Nevada corporation on January 6, 2009. We are a development stage enterprise
who is a subscription-based, software-as-a-service provider of education products. Virtual Learning provides
standards-based instruction, practice, and assessments that improve the performance of students via proprietary web-
based platforms through one of our several websites on the World Wide Web with the URL www.mathisbasic.com;
www.learningisbasic.com; and www.eschoolroom.com; www.educationisbasic.com. Please note that we have only
one operational website learningisbasic.com. Virtual Learning is also a producer and distributor of computer
software and video educational materials on CD and DVD formatted disks, which will be available through various
distributors and our websites either as a download or in boxed format. We have combined rigorous content in math
with interactive features and games that engage students, reinforce, and reward learning achievement.
The Company has one curriculum development contract with Lawrence William Kazmierczak, a professor of
mathematics at Stevens Institute of Technology, Hoboken, New Jersey which requires the Company to pay him to
author courses in Pre-Calculus, Calculus I and II, and to consult on the creation of high school level math courses.
This Agreement provides for Professor Kazmierczak to receive 5% royalties on the Company’s net revenues up to
one million dollars of net revenues, and 5% royalty on net revenues beyond one million one dollar on projects in
which he directly participates and has made material contributions. In addition, he has received 200,000 shares of
the Company’s common stock. We determine what projects in which he has directly participated and made material
contributions by our internal record keeping as to time devoted to each project. We determine the revenue attributed
to those projects by monitoring devices that allow us to determine which authorized user has devoted how much
time to which module and then comparing the same to the entire revenue stream.
40
Events and Uncertainties critical to our business
Demand for our products and services are affected by the general economic conditions in the United States. When
economic conditions are favorable and discretionary income increases, purchases of non-essential items like
software generally increase. When economic conditions are less favorable, sales of non-essential educational items
are generally lower. In addition, we may experience more competitive pricing pressures during economic
downturns. Therefore, any significant economic downturn or any future changes in consumer spending habits could
have a material adverse effect on our financial condition and results of operations.
There is no guarantee that we will be able to generate sufficient sales to make our operations profitable. We may
continue to have little or no sales and continue to sustain losses in the future. If we continue to sustain losses, we
will be forced to curtail our operations and go out of business. Our success depends in a large part in the ability of
our ability to create additional product lines sufficient to create a catalog of programs to offer allowing us to
implement a successful marketing and sales plan. While we are currently seeking to hire additional computer
programmers and educators to consult with as to program accuracy and content there is no guarantee that these
efforts will result in any substantial sales. Because of the lack of funding, we are unable to hire a dedicated
programming and research consulting team who will devote their efforts to helping us design and create new
programs of high quality in a timely manner.
If we are able to obtain sufficient funding to become fully operational, there is no guarantee that we will be able to
find personnel who will be able to work closely with the Company to help design and create new lines of product or
to process orders, including special orders, made via the internet.
Critical Accounting Policies
We have identified the following policies below as critical to our business and results of operations. For further
discussion on the application of these and other accounting policies, see Note 1 to the accompanying audited
financial statements for the year ended December 31, 2010, from inception (January 6, 2009) through December 31,
2009, and from inception (January 6, 2009) through December 31, 2010, included elsewhere in this Prospectus. Our
reported results are impacted by the application of the following accounting policies, certain of which require
management to make subjective or complex judgments. These judgments involve making estimates about the effect
of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all
of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates
routinely require adjustment. Specific risks associated with these critical accounting policies are described in the
following paragraphs.
Basis of Presentation/Going Concern
These financial statements have been prepared for purposes of registration with the Securities and Exchange
Commission ("SEC"), and they present Virtual Learning’s financial position, results of operations, and cash flows in
accordance with accounting principles generally accepted in the United States of America. These standards
contemplate continuation of Virtual Learning as a going concern.
However, Virtual Learning has sustained substantial stock-based operating losses aggregating $800,000 and cash-
based losses of $9,908 for the period from inception (January 6, 2009) through December 31, 2010, and additional
stock-based operating losses of $40,000 and cash-based losses of $24,079 for the period from inception (January 6,
2009) through September 30, 2011. This factor alone raises substantial doubt about Virtual Learning’s ability to
continue as a going concern. Virtual Learning has also capitalized an aggregate of $243,000 and $274,000 of stock-
based curriculum development costs as of September 30, 2011 and December 31, 2010, respectively. The recovery
of these assets and continuation of future operations are dependent upon Virtual Learning’s ability to obtain
additional debt or equity capital and its ability to generate revenues sufficient to continue pursuing its business
purposes. Virtual Learning is actively pursuing financing to fund future operations.
To date, Virtual Learning’s cash-based operations have been funded by the issuance of 10,000,000 shares of
41
common stock for $10,000 or $.001 per share to Thomas P. Monahan (President and majority shareholder) and the
issuance of an additional 100,000 shares of common stock for an aggregate price of $20,000 or $.20 per share to an
unrelated third party.
In addition, as of September 30, 2011, Mr. Monahan loaned Virtual Learning cash of $26,150, charged Virtual
Learning costs and expenses of $12,662 on a personal credit card, and contributed computer equipment at a stated
value of $3,000, for a total of $41,812. As of September 30, 2011, $41,800 of these amounts has been repaid.
Virtual Learning is subject to a number of risks similar to those of other development stage enterprises. These risks
include, but are not limited to, rapid technological change, dependence on key personnel, competing new product
introductions and other activities of competitors, the successful development and marketing of its products, and the
need to obtain adequate additional capital necessary to fund future operations.
Since its inception on January 6, 2009, Virtual Learning has devoted its efforts principally to creating initial
computer software products, research and development, and the accumulation of content for additional titles,
business development activities, and raising capital. As a result, Virtual Learning is considered a development stage
enterprise as defined in accounting principles generally accepted in the United States of America. Virtual Learning’s
accumulated deficit during the development stage (the period from inception (January 6, 2009) through September
30, 2011 and December 31, 2010) equals $873,986 and $809,908, respectively.
Virtual Learning's future capital requirements will depend upon many factors, including progress with marketing its
technologies, competing technological and market developments, and its ability to establish collaborative
arrangements, effective commercialization, marketing activities, and other arrangements.
There is no assurance that Virtual Learning can reverse its operating losses, or that it can raise additional capital to
allow it to continue its planned future operations. These factors raise substantial doubt about Virtual Learning's
ability to continue as a going concern. These financial statements do not include any adjustments relating to the
recoverability of recorded asset amounts that might be necessary from an unfavorable resolution of this uncertainty.
Management expects that Virtual Learning will experience negative cash flows from operations and net losses for
the foreseeable future or until Virtual Learning completes enough software and video educational titles to implement
a successful marketing program. Management believes that a total of sixteen (16) titles representing courses in
mathematics and science for grades K through 8 will be sufficient to generate sufficient revenue to bring Virtual
Learning to a break-even-point. Management has completed five (5) computer software titles relating to the teaching
of Basic English for foreign speaking individuals ( these 5 language titles are in addition to the 16 minimum titles
needed to achieve breakeven) and eleven (11) titles relating to geometry and algebra for grades first through fifth
grade. To complete the 16 titles required 1) generation of a core curriculum analysis; 2) generation of a storyboard
incorporating and outlining the core curriculum; 3) development of the related content, i.e. generating a artistic
rendition of the storyboard in an Adobe Flash based environment; and 4) iterative improvements upon the
preliminary product based upon feedback from educators, parents and students. The estimated time to complete the
5 additional minimum titles needed to achieve breakeven is approximately 2 months if the offering is successful to
the extent of the sale of at least 50% of the shares offered hereby, four months if 25% of the shares offered hereby
are sold, and up to seven months if no proceeds result from this offering. The cost to produce these additional titles
is approximately $16,000. However, it should be noted that if necessary, the expense to produce these titles will be a
further capital contribution made by Mr. Monahan if the offering is not completed in that Mr. Monahan intends to
continue to perform all programming needed to complete the additional five titles as well as planning to continue
beyond those five additional titles to add additional titles himself if funding is not achieved.
On June 2, 2011, Virtual Learning filed a registration statement on form S-1 pursuant to the Securities Act of 1933,
as amended to offer an aggregate of 1,000,000 shares of common stock at $.50 per share for an aggregate offering of
42
$500,000. On August 10, 2011, Virtual Learning’s S-1 registration became effective. As of September 30, 2011,
the Company has not sold any shares of its common stock.
Based upon current expectations, management believes that Virtual Learning's existing capital resources, plus the
proceeds of a planned public offering of approximately $500,000 will be sufficient to meet Virtual Learning's
operating expenses and capital requirements to create the minimum of 16 additional titles to achieving a goal of 32
titles (which also is in addition to the five language titles described above) at which point Virtual Learning expects
to have been shipping commercial product and recognizing revenue for over twelve months and selling annual
memberships to view courses on line. To complete the next 16 titles will require the same steps as for the eleven
titles set forth above.. It is hoped that by utilizing the proceeds of this Offering that the time frame for generating
the next 16 titles can be substantially decreased and accomplished in the next year following the completion of the
Offering contemplated herein. It is believed by management that the proceeds of this Offering, if the maximum is
sold, will be sufficient to meet all of the anticipated capital requirements of the Company during the next twelve
months.
With respect to the time line for accomplishing the above milestones and their associated cost, please note that the
percentage of the maximum offering proceeds obtained by the Company will effect the speed with which each
function is met. The following table presents those trade-offs for the development of the five additional
mathematics and science courses needed to complete the first sixteen titles as well as the sixteen additional titles
mentioned above:
Maximum
50% of Maximum
25% of Maximum
Sold
Sold
Sold
1) Curriculum
3 months
5 months
7 months
Analysis
$8,000
$4,000
$2,000
2) Storyboards
3 months
5 months
8 months
$8,000
$4,000
$2,000
3) Flash
4 months
7 months
12 months
Rendition
$120,000
$60,000
$29,000
4) Feedback
2 months
4 months
3 months
Improvements $30,000
$15,000
$6,750
Totals
12 months
21 months
30 months
$166,000
$83,000
$39,750
In the event a public offering cannot be completed in a timely manner or under acceptable conditions, Virtual
Learning believes that it can continue to run its operations by operating at minimal staffing and relying on the
services of Thomas P. Monahan to provide the funds and skills required to continue operating and complete the
design and computer programming of the required educational titles and enable Virtual Learning to complete its
marketing plans.
If Virtual Learning does not complete the planned public offering, and if no other sources of additional capital are
available, management anticipates that it would substantially reduce Virtual Learning's operating expenses to the
minimum required to support the continued development of its technology. Mr. Monahan has agreed to provide the
additional funds as needed to ensure the continuation of Virtual Learning and to provide the programming and
technical skills needed to complete the planned software and video titles on CD and DVD formatted disks. There
43
can be no assurance that Mr. Monahan will be able to complete the titles in a timely manner to take advantage of the
void in the market place for this form of educational materials in these formats. There can be no assurance that
Virtual Learning's negative cash flows will not necessitate ceasing operations entirely.
We intend to start soliciting membership for our website within the next two months regardless of the results of this
offering. Only the extent of the solicitation will be affected by the offering proceeds. We would commence the
solicitation with fewer modules. To solicit memberships and ship product with the sixteen planned titles would
occur in seven months if no proceeds resulted from this offering (assuming no other funds were obtained by the
Company); six months if 25% of the shares offered hereby are sold; four months if 50% of the shares offered hereby
are sold and three months if the maximum number of shares offered hereby are sold.
The costs of the marketing plan is set forth below based upon the amounts of proceeds derived from this offering
and the individually planned marketing efforts:
Percentage of Maximum Proceeds
100%
50%
25%
None(2)
Radio advertising
$5,000
$5,000
$1,000
$1,000
Trade shows
30,000
5,000
1,000
100
Newspaper and magazine ads
10,000
5,000
-0-
-0-
Bill board
5,000
3,000
1,000
500
Advertising on Cable TV
4,000
2,000
-0-
-0-
Direct Email advertising
4,000
2,000
500
500
Internet marketing (pay per click budget)
3,600
1,800
600
300
Internet banners
5,000
5,000
-0-
-0-
Purchasing Internet space on another website
4,000
2,000
500
500
Search engine optimization
4,000
2,000
-0-
-0-
Social media presence on Face Book, My Space etc
NC(1)
NC
NC
NC
Sales through commissioned salespeople
NC
NC
NC
NC
Direct marketing to teachers
5,000
3,000
1,000
500
Direct marketing to homeschoolers
5,000
3,000
1,000
500
Distributor marketing (word of mouth)
NC
NC
NC
NC
Permission marketing
NC
NC
NC
NC
Pass-it-On Viral marketing
NC
NC
NC
NC
Affiliate Programs
NC
NC
NC
NC
Total marketing costs
$84,600
$38,800
$6,600
$3,900
Unallocated marketing budget
40,400
26,200
3,650
Total marketing budget
$125,000
$65,000
$10,250
(1)NC means no cash is needed to execute these marketing avenues.
(2)Cash amounts in the None category will be supplied from other sources.
(3)Cash uncommitted from the use of proceeds for marketing will be reallocated based upon results from the above
initial outlays from the offering proceeds to reinforce the most successful marketing approaches based upon the
experience derived from those outlays
Recent Developments
During the period from August 10, 2011, to December 2, 2011, we made the following improvements in that we:
1.
improved our methods of animation workflow to the point of being able to render our work product as
both an interactive animation and video format suitable for playing on You Tube or manufacturing, production and
distribution as a DVD formatted disc;
44
2.
completed and filed for copyright on our title “First Grade Math Workbook”;
3.
completed our “Second Grade Math Workbook”; and
4.
changed the utilization of our www.mathisbasic.com and www.learningisbasic.com websites making the
www.mathisbasic.com website as a free access marketing tool for our materials and offering our subscription
services. The www.learningisbasic.com website has been changed to be used as our subscription based service and
to house the student database. The major difference between the two websites now is that www.learningisbasic.com
will offer our full complement of teaching programs in various formats while www.mathisbasic.com will only offer
a limited number of teaching programs, workbooks and videos as samplers to the viewing public.
Property and Equipment
Property and equipment is presented at stated value upon contribution or at the cost of acquisition. Depreciation is
provided using the straight-line method over an estimated useful life of five years. Repairs and maintenance is
expensed as incurred, and renewals and betterments are capitalized.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the amounts reported and
disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these
estimates.
On an ongoing basis, Virtual Learning’s management evaluates its estimates, including those related to revenue
recognition, the need for an allowance for uncollectible accounts receivable, fair value of investments, fair value of
acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment, deemed value
of common stock for the purpose of determining stock-based compensation, and income taxes, among others.
Management bases its estimates on historical experience and on various other assumptions that are believed to be
reasonable, the results of which form the basis for making judgments about the carrying values of assets and
liabilities.
Virtual Learning’s management (board of directors) determines the value assigned to shares of common stock in the
absence of a public market for these shares.
Fair Value of Financial Instruments
The carrying amounts of Virtual Learning’s financial instruments, including cash and cash equivalents, short-term
investments, accounts receivable, accounts payable, and accrued liabilities, approximate fair value because of their
short maturities.
Capitalized Curriculum Development Costs
Virtual Learning internally develops curriculum, which is primarily provided as web content and accessed via the
Internet. Virtual Learning also creates textbooks and other offline materials.
Virtual Learning capitalizes curriculum development costs incurred during the application development stage in
accordance with accounting principles generally accepted in the United States of America. These principles provide
guidance for the treatment of costs associated with computer software development and defines those costs to be
capitalized and those to be expensed. Costs that qualify for capitalization are external direct costs, payroll and
payroll-related expenses. Costs related to general and administrative functions are not capitalized and are expensed
as incurred. Virtual Learning capitalizes curriculum development costs when the projects under development reach
45
technological feasibility. Many of our new courses are leveraged off of proven delivery platforms and are primarily
content, which has no technological hurdles. As a result, a significant portion of our courseware development costs
qualify for capitalization due to the concentration of our development efforts on the content of the courseware.
Technological feasibility is established when we have completed all planning, designing, coding, and testing
activities necessary to establish that a course can be produced to meet its design specifications. Capitalization ends
when a course is available for general release to our customers, at which time amortization of the capitalized costs
begins. The period of time over which these development costs will be amortized is generally five years. This is
consistent with the capitalization period used by others in our industry and corresponds with our product
development lifecycle.
Total capitalized curriculum development costs are $243,000 as of September 30, 2011. These incurred capitalized
costs were $9,000, $122,000 and $152,000, for the nine months ended September 30, 2011, for the year ended
December 31, 2010, and from inception (January 6, 2009) through December 31, 2009, respectively. The asset
balance at September 30, 2011, also includes a reduction of $40,000 reflecting a write-off of work by a programmer
whose work product was considered unsatisfactory. These amounts are recorded in the accompanying balance
sheets, net of amortization and impairment charges. Amortization and impairment charges are recorded in product
development expenses on the accompanying statements of operations. Amortization expense for the nine months
ended September 30, 2011 was none.
Cash and Cash Equivalents and Short-Term Investments
Virtual Learning invests its excess cash, if any, in money market funds and in highly liquid debt instruments of the
U.S. government, its agencies, and municipalities. All highly liquid investments with stated maturities of three
months or less from date of purchase are classified as cash equivalents; all highly liquid investments with stated
maturities of greater than three months are classified as short-term investments.
Offering Costs
Deferred offering costs incurred by Virtual Learning in connection with the proposed registration statement will be
expensed as incurred
Revenue Recognition
Revenue is recognized when all of the following conditions are satisfied: there is persuasive evidence of an
arrangement, the customer has access to full use of the product, the collection of the fees is reasonably assured, and
the amount of the fees to be paid by the customer is fixed or determinable.
Revenue from customer subscriptions is recognized ratably over the subscription term beginning on the
commencement date of each subscription. The average subscription term is twelve (12) months for our products, and
all subscriptions are on a non-cancelable basis. When additional months are offered as a promotional incentive,
those months are part of the subscription term. As part of their subscriptions, customers generally benefit from new
features and functionality with each release at no additional cost.
Although our membership contracts are generally non-cancelable, customers have the right to cancel their contracts
by providing prior written notice to us of their intent to cancel the remainder of the contract term. In the event a
customer cancels its contract, they are not entitled to a refund for prior services we have provided to them.
On a quarterly basis, the amount of revenue that is reserved for future cancellations is calculated based on our
historical trends and data specific to each reporting period. We review the actual cancellations evidenced in prior
quarters as a percent of revenue to determine a historical cancellation rate. We then apply the historical rate to the
current period revenue as a basis for estimating future cancellations. When necessary, we will also provide a specific
cancellation reserve.
46
Customer support is provided to customers following the sale at no additional charge and at a minimal cost per call.
Virtual Learning does not incur significant up-front costs related to providing its products and services and therefore
does not defer any expenses.
Revenue from the sale of CD’s or DVD’s and other materials is recognized when shipped or available to the
customer in a downloadable format.
Cost of Revenue
Cost of revenue includes the cost to host and make available Virtual Learning’s products and services to its
customers. A significant portion of the cost of revenue includes salaries and related costs of engineering employees
and contractors who maintain Virtual Learning’s servers and technical equipment and work on Virtual Learning’s
web-based hosted platform. Other costs include facility costs for Virtual Learning’s web platform servers and
routers, network monitoring costs, depreciation of network assets and amortization of the technical development
intangible assets.
Operating Expenses
Operating expenses consists of sales and marketing, content development and general and administrative expense.
Sales and marketing expense consists primarily of salaries, commissions and related costs for Virtual Learning’s
inside and field sales teams, marketing, customer service, training, and account management. Sales and marketing
also includes direct marketing costs, travel, and amortization of customer relationship intangible assets.
Content development expense consists primarily of salaries and related costs for employees who write the questions
for Virtual Learning’s products and amortization of content intangible costs. General and administrative expense
consists primarily of salaries and related costs for executives, finance and accounting, human resources, customer
relations and order management. General and administrative expense also includes professional services, rent,
insurance, travel, depreciation, and other corporate expenses.
Net Income (Loss) Per Share
Per share data has been computed and presented pursuant to the provisions of accounting principles generally
accepted in the United States of America. Net income (loss) per common share - basic is calculated by dividing net
income (loss) by the weighted average number of common shares outstanding during the period.
Income Taxes
Virtual Learning accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax reporting purposes. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities
of a change in tax rates is recognized in the provision for income tax in the statements of operations. Virtual
Learning evaluates the probability of realizing the future benefits of its deferred tax assets and provides a valuation
allowance when realization of the assets is not reasonably assured.
Virtual Learning recognizes in its financial statements the impact of tax positions that meet a “more likely than not”
threshold, based on the technical merits of the position. The tax benefits recognized from such a position are
measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate
settlement.
47
Seasonality of Business
In the United States, seasonal trends associated summer vacations, start of academic years, normal gift giving
holidays, popular shopping holidays and occasions, promotion to the next grade level expected to be higher because
of relationship of purchasing gifts and needed items for friends and family members being specifically associated
with these occasions. In addition, sales of subscriptions to organizations willing to sponsor group subscribers, start
of school budget years, and state testing calendars also affect the timing of our sales of subscriptions to new and
existing subscribers. At present, we anticipate that subscriptions to our products will generate the vast majority of
our revenue. We rely significantly on our ability to secure renewals for subscriptions to our products as well as sales
to new subscribers.
RESULTS OF OPERATIONS – VIRTUAL LEARNING COMPANY
Results of Operations - Comparison for the periods ended December 31, 2009 and 2010
We are a development stage enterprise formed to market a unique line of educational software, including audio-
visual textbooks and online content through our website with the registered domain name of mathisbasic.com and
learningisbasic.com. The lack of completed titles and working capital hampered operations in both 2009 and 2010.
Management has taken substantial time in the development and programming of our virtual textbooks and related
materials and thought was spent in updating our website. The measure of our success in the future will depend on
our ability to navigate through a treacherous macroeconomic environment and challenging market conditions,
execute our strategic vision, including attracting and retaining the management talent necessary for such execution,
designing and delivering products that are acceptable to the marketplaces that we serve, sourcing the manufacture
and distribution of our products on a competitive and optimal basis and focusing our retail capabilities.
The summary of selected financial data table below should be referenced in connection with a review of the
following discussion of our results of operations for both the year ending December 31, 2010, from inception
(January 9, 2009) through December 31, 2009, and from inception (January 9, 2009) through December 31, 2010.
STATEMENTS OF OPERATIONS
(A Development Stage Enterprise)
For the
From
From
Year ended
January 6, 2009
January 6, 2009
December 31,
(inception)
(inception)
2010
To December 31, To December 31,
2009
2010
Revenue
$ -
$ -
$ -
Operating Expenses
Selling, general and administrative
8,540
372
8,912
Common stock issued for consulting fees
600,000
600,000
Common stock issued for legal fees
120,000
80,000
200,000
Depreciation and amortization
_____696
_____300
____996
Total operating expenses
__129,236
__680,672
809,908
Loss from operations
(129,236)
(680,672)
(809,908)
Other income/deductions
______-
______-
______-
Net loss
$ (129,236)
$ (680,672)
$ (809,908)
48
Revenues
From inception (January 9, 2009) through December 31, 2009, revenues were none as compared to none for the year
ended December 31, 2010. This lack of revenue was mainly the result of the lack of capital to implement its
business plan and hire additional personnel to help complete virtual textbook courses.
Cost of Sales
From inception (January 9, 2009) through December 31, 2009, cost of sales were none as compared to none for the
year ended December 31, 2010. This lack of cost of sales can be attributed to lack of initiating our marketing plan.
Operating Expenses
From inception (January 9, 2009) through December 31, 2009, we incurred $372 in selling, general, and
administrative expenses as compared to $8,540 for the year ended December 31, 2010. Expenses for the year ending
December 31, 2010 aggregating $8,540 include: Nevada state franchise taxes of $700; computer expenses of $6,871;
office expenses of $437; and, travel expenses of $532. This increase of $8,168, results in the increase in expenses
relating to the development of our website, courses, and the purchase of services from web hosting companies. In
addition, the Company issued an aggregate of 3,000,000 shares of common stock to Dr. John Swint for an aggregate
consideration of $600,000 or $0.20 per share, in consideration for educational, marketing, and financial consulting
services for the year ended December 31, 2009. We also issued an aggregate of 600,000 shares of common stock to
Mr. Roger Fidler in consideration for legal services valued at $120,000 or $0.20 per share.
Liquidity and Capital Resources
As of December 31, 2009 and 2010, our cash balance was $22,028 and $18,573, respectively, total assets were
$176,728 and $295,732, respectively, and total current liabilities amounted to $15,400 and $1,640, respectively,
including an advance from Mr. Monahan of $18,500 and $9,040 respectively and repayments of officer loans
payable of $3,100 and $22,800 respectively. As of December 31, 2009 and 2010, the total stockholders’ equity was
$161,328 and $294,092, respectively. Until the company achieves a net positive cash flow from operations, we are
dependent on Mr. Monahan to advance the Company sufficient funds to continue operations as well as the continued
contribution of services by officers of the Company. We may seek additional capital to fund potential costs
associated with expansion and/or acquisitions.
Results of Operations - Comparison for the three and nine months ended September 30, 2009, 2010 and 2011
The summary of selected financial data table below should be referenced in connection with a review of the
following discussion of our results of operations for both the three and nine months ending September 30, 2011 and
2010, from inception (January 6, 2009) through September 30, 2009, and from inception (January 6, 2009) through
March 31, 2011.
49
STATEMENTS OF OPERATIONS
Unaudited
From
For the three
For the three
For the nine
For the nine
inception
months ended months ended months ended months ended
(January 6,
September
September
September
September
2009) to
30, 2011
30, 2010
30, 2011
30, 2010
September
31, 2011
Revenue
$-0-
$-0-
$-0-
$-0-
$-0-
Operating Expenses:
Selling, general and
15,398
2,391
23,449
7,544
32,361
administrative
Common stock issued for
-
-
120,000
600,000
consulting fees
Common stock issued for legal
40,000
40,000
240,000
fees
Depreciation and amortization
330
265
630
565
1,625
Total operating expenses
55,728
2,656
64,079
128,109
873,986
Loss from operations
(55,728)
(2,656)
(64,079)
(128,109)
(873,986)
Other income/deductions
Net loss
$(55,728)
$(2,656)
$(64,079)
$(128,109)
$(873,986)
Basic and diluted loss per
$(0.00)
$(0.00)
$(0.00)
$(.01)
common share
Weighted average shares
15,350,000
15,350,000
15,350,000
14,550,000
outstanding
Revenues
From inception (January 9, 2009) through September 30, 2011, revenues were none as compared to none for the
nine months ended September 30, 2011 and 2010. . This lack of revenue was mainly the result of the lack of capital
to implement its business plan and hire additional personnel to help complete virtual textbook courses.
Cost of Sales
From inception (January 9, 2009) through September 30, 2011, costs of goods sold were none as compared to none
for the nine months ended September 30, 2011 and 2010. This lack of cost of sales can be attributed to lack of
initiating our marketing plan.
Operating Expenses
For the nine months ended September 30, 2011, we incurred $23,449 in selling, general, and administrative
expenses as compared to $7,544 for the nine months ended September 30, 2010. Expenses for the nine months
ending September 30, 2011 aggregating $23,449 include: accounting fees of $17,300; computer and internet
expenses of $4,975, copyright expense of $385; office expenses of $96; publications of $143 and Nevada Franchise
Tax of $550. For the nine months ended September 30, 2010, we incurred $7,544 in selling, general and
administrative expenses which include computer and internet expenses of $5,971; $700 in Nevada franchise Taxes;
50
travel expenses of $531 and $342 in bank charges. This increase of $15,905, results in the increase in expenses
relating to the development of our website, courses, and the purchase of services from web hosting companies and
accounting fees.
In July, 2011, Mr. Roger Fidler received an additional 200,000 shares of common stock in consideration for legal
fees aggregating $40,000 or $.20 per share.
For the three months ended September 30, 2011, we incurred $15,398 in selling, general, and administrative
expenses, respectivel as compared to $2,391 for the three months ended September 30, 2010. Expenses for the
three months ending September 30, 2011 aggregating $15,39 include: accounting fees of $13,700; computer and
internet expenses of $1,410, copyright expense of $105; office expenses of $40;and publications of $143.
Expenses for the three months ended September 30, 2010 aggregated $2,391 include computer and internet expenses
of $2,277 and office expenses of $114. This increase of $13,007, results in the increase in expenses relating to the
development of our website, courses, and the purchase of services from web hosting companies and accounting fees.
Liquidity and Capital Resources
As of December 31, 2010 and September 30, 2011, our cash balance was $18,573 and $7,196, respectively, total
assets were $295,732 and 252,726, respectively, and total current liabilities amounted to $1,640 and $13,712,
respectively, including an advance from Mr. Monahan of $9,040and 4,272 respectively and repayments of officer
loans payable of $22,800 and $5,900 respectively. As of December 31, 2010 and September 30, 2011, the total
stockholders’ equity was $294,092 and $239,014, respectively. Until the company achieves a net positive cash flow
from operations, we are dependent on Mr. Monahan to advance the Company sufficient funds to continue operations
as well as the continued contribution of services by officers of the Company. We may seek additional capital to fund
potential costs associated with expansion and/or acquisitions.
In their report dated April 15, 2011, our independent auditors stated that our financial statements for the year ended
December 31, 2009 and 2010 were prepared assuming that we would continue as a going concern. Our ability to
continue as a going concern is an issue raised as a result of recurring losses from operations and cash flow
deficiencies since our inception. We continue to experience net losses. Our ability to continue as a going concern is
subject to our ability to generate a profit and/or obtain necessary funding from outside sources, including obtaining
additional funding from the sale of our securities, increasing sales or obtaining loans and grants from various
financial institutions where possible. In light of our financial position, and the current global credit crisis, we may be
unable to raise working capital sufficient to continue to fund the operations of the business. If we are unable to
continue as a going concern, you may lose your entire investment. Our management has currently been advancing
funds to the Company to help sustain its operations on a non-interest bearing and unsecured basis. Given the
difficult current economic environment, we believe that it will be difficult to raise additional funds and there can be
no assurance as to the availability of additional financing or the terms upon which additional financing may be
available. In addition, the going concern explanatory paragraph included in our auditor’s report on our financial
statements could inhibit our ability to enter into strategic alliances or other collaborations or our ability to raise
additional financing. If we are unable to obtain such additional capital, we will not be able to sustain our operations
and would be required to cease our operations and/or seek bankruptcy protection. Even if we do raise sufficient
capital and generate revenues to support our operating expenses, there can be no assurance that the revenue will be
sufficient to enable us to develop our business to a level where it will generate profits and cash flows from
operations. In addition, if we raise additional funds through the issuance of equity securities, the percentage
ownership of our stockholders could be significantly diluted.
We believe that future funding may be obtained from public or private offerings of equity securities, debt or
convertible debt securities or other sources. Stockholders should assume that any additional funding will likely be
dilutive. Accordingly, our officers, directors, and other affiliates are not legally bound to provide funding to us.
Because of our limited operations, if our officers and directors do not pay for our expenses, we will be forced to
obtain funding. We currently do not have any arrangements to obtain additional financing from other sources. In
view of our limited operating history, our ability to obtain additional funds is limited. Additional financing may only
be available, if at all, upon terms which may not be commercially advantageous to us.
51
Inflation
The impact of inflation on the costs of our company, and the ability to pass on cost increases to its subscribers over
time is dependent upon market conditions. We are not aware of any inflationary pressures that have had any
significant impact on our operations over the past quarter, and we do not anticipate that inflationary factors will have
a significant impact on future operations.
OFF-BALANCE SHEET ARRANGEMENTS
We do not maintain off-balance sheet arrangements nor do we participate in non-exchange traded contracts requiring
fair value accounting treatment.
We estimate that in the next twelve months we will need a minimum of approximately $230,000 in new funds;
specifically $47,000 in salaried, $18,000 in general and administrative costs, $45,000 for the purchase of additional
computers and $65,000 in marketing and promotion, $5,000 for inventory and product samples, and $50,000 in
working capital.
We believe that future funding may be obtained from public or private offerings of equity securities, debt or
convertible debt securities or other sources. Stockholders should assume that any additional funding will likely be
dilutive. Accordingly, our officers, directors and other affiliates are not legally bound to provide funding to us.
Because of our limited operations, if our officers and directors do not pay for our expenses, we will be forced to
obtain funding. We currently do not have any arrangements to obtain additional financing from other sources. In
view of our limited operating history, our ability to obtain additional funds is limited. Additional financing may only
be available, if at all, upon terms which may not be commercially advantageous to us.
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Executive Officers and Directors
Below are the names and certain information regarding our sole executive officer and directors:
Name
Age
Position
Thomas Monahan
64
Chief Executive Officer, Chief Financial Officer, President,
Secretary and Director
Set forth below is a biographical description of our executive officers and directors based on information supplied
by each of them.
Thomas Monahan has been President of the Company from its inception to present. Mr. Monahan is a retired
Certified Public Accountant who was in public practice as a sole practitioner from 1986 through December 2005.
During this time, an injury to both of his legs and an extensive hospital and rehabilitation period no longer permitted
him to meet the travel requirements of his engagements. On December 19, 2005, the New Jersey State Board of
Accountancy entered a Consent Order whereby Mr. Monahan voluntarily agreed not to renew his license to practice
accountancy in the State of New Jersey and to surrender his license, which expired December 31, 2005. The action
arose because Mr. Monahan did not respond to an ethics inquiry by the American Institute of Certified Public
Accountants. The failure to respond was due initially to Mr. Monahan’s prolonged hospital stay, caused by an
accident and his failure to receive the notice mailed to his vacated residence during the hospital stay. Subsequently,
Mr. Monahan had no interest in pursuing public accountancy due to his physical disability and thus did not bother to
respond to the inquiry. No further action was taken by either the American Institute of Certified Public Accountants
or the New Jersey State Board of Accountancy with respect to the underlying ethics inquiry that had been pending
for many years concerning Mr. Monahan’s involvement in the audit of Searex, Inc., a private company because Mr.
Monahan decided not to renew his license to practice accounting in 2006.
52
Before working as a Certified Public Accountant, Mr. Monahan served as Comptroller for Superior Steakhouse
Systems, Inc. Mineola, New York. From 1983 to 1984, Mr. Monahan was Assistant Comptroller for CoverTemp,
Inc. in White Plains, New York. Mr. Monahan received his B.A. degree from Rutgers University in 1970, his M.A.
in Distributive and General Business Education from Montclair State College in Montclair, New Jersey in 1975 and
was certified as a teacher for the State of New Jersey K-12 and Distributive and Marketing education. Mr.
Monahan’s teaching license has lapsed. He served as a student teacher at Orange High School in Orange, New
Jersey for 16 weeks specializing in Urban Education and taught at John F. Kennedy High School in Paterson, New
Jersey.
CODE OF ETHICS
We have not adopted a Code of Ethics and Business Conduct for Officers, Directors, and Employees that applies to
all of the officers, directors, and employees of our company.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation (including cash bonuses) paid or accrued and equity awards
granted by us from inception (January 9, 2009) through December 31, 2009 and for the year ended December 31,
2010 to our Chief Executive Officer and our most highly compensated officers other than the Chief Executive
Officer at December 31, 2010, whose total compensation exceeded $100,000. No compensation greater than
$100,000 was awarded during the period ended December 31, 2009.
Change in
Pension Value
and Non-
Non-Equity
Qualified
Name &
Option Incentive Plan Deferred
All Other
Principal
Salary Bonus Stock
Awards Compensation Compensation Compensation Total
Position
Year ($)
($)
Awards($) ($)
($)
Earnings ($)
($)
($)
Thomas
Monahan(1) 2009 --
--
--
--
--
--
--
--
2010 --
--
--
--
--
--
--
--
(1) President and director.
OUTSTANDING EQUITY AWARDS
No named executive officer has received an equity award.
DIRECTOR COMPENSATION
We do not pay directors compensation for their service as directors.
Employment and Other Agreements
We have not entered into any employment agreement as of the date hereof.
DIRECTOR INDEPENDENCE
Our board of directors has determined that Thomas P. Monahan is not an “independent” director, based on the
independence criteria set forth in the corporate governance listing standards of the NASDAQ Stock Market, the
exchange that we selected in order to determine whether our directors and committee members meet the
independence criteria of a national securities exchange, as required by Item 407(a) (1) of Regulation S-K. An
53
independent director means a person who is not an employee (or a relative of an employee), who has no material
business relationship with the company, and is not a significant owner of the company’s shares. Due to its small
size, the Company does not presently have a separately designated audit committee, compensation committee, or
nominating committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 6, 2009, Virtual Learning issued an aggregate of 10,000,000 shares of common stock valued at $.001 per
share to Thomas P. Monahan, President, in consideration for cash of $10,000.
As of December 31, 2009 and 2010 and March 31, 2011, Thomas P. Monahan had advanced Virtual Learning net
interest free loans aggregating $15,400, $1,640 and $2,542 respectively.
Virtual Learning occupies office space rent free on a month to month basis at 60 Knolls Crescent, Apartment 9M,
Bronx,
New York 10463.
Virtual Learning has accumulated capitalized software development costs at December 31, 2009 and 2010
aggregating $12,000 and $12,000 and contributed these amounts to Virtual Learning as additional paid-in capital.
These costs represent the fair market value of time contributed to Virtual Learning by Thomas Monahan, President.
In July, 2011, Virtual Learning reached a agreement with a programmer that was engaged to perform certain
functions relating to software and video production and whose work was found unacceptable to return 200,000
shares of common stock for cancellation that was issued as part payment for his services. The cancellation of these
shares was recorded at the price issued of $40,000 or $.20 per share.
In July, 2011, Mr. Roger Fidler received an additional 200,000 shares of common stock in consideration for legal
fees aggregating $40,000 or $.20 per share.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of December 31, 2010 with respect to the beneficial ownership
of the Company's outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of the
named executive officers, directors, and director nominees; and (iii) our directors, director nominees, and named
executive officers as a group, as such will exist after the issuance of shares. Except as otherwise indicated, each of
the stockholders listed below has sole voting and investment power over the shares beneficially owned. The below
table is based on 15,350,000 shares of common stock outstanding as of May 31, 2011.
Common
Stock
Percentage of
Beneficially
Common
Owned (1)
Stock (1)
Thomas Monahan
60 Knolls Crescent Apt 9M
Bronx, New York 10463
10,000,000
65.15%
The following table sets forth certain information, as of December 31, 2010 with respect to the pro forma beneficial
ownership of the Company's outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each
of the named executive officers, directors, and director nominees; and (iii) our directors, director nominees, and
named executive officers as a group, as such will exist after the issuance of shares, assuming the maximum numbers
of shares offered hereby are sold. Except as otherwise indicated, each of the stockholders listed below has sole
54
voting and investment power over the shares beneficially owned. The below table is based on 15,350,000 shares of
common stock outstanding as of December 31, 2010 and at May 31, 2011.
Common Stock
Percentage of Common
Beneficially Owned (1)
Stock (1)
Thomas Monahan (2)
10,000,000
65.15%
60 Knolls Crescent Apt 9M
Bronx, New York 10463
Dr. John Swint (3)
3,000,000
19.54%
1302 Normandy Road
Macon, Georgia 31210
Roger L. Fidler (3)
1,000,000
6.51%
400 Grove Street
Glen Rock, New Jersey 07452
All officers and directors as group of 1 person
10,000,000
65.15%
(1) Beneficial ownership is determined in accordance with the Rule 13d-3(d) (1) of the Exchange Act, as amended
and generally includes voting or investment power with respect to securities. Pursuant to the rules and regulations of
the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire
within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of
computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the
purposes of computing the percentage ownership of any other person shown in the table.
(2) Officer and/or director of the Company.
(3) Any holder of more than five (5%) percent.
Blue Sky
Thirty-eight states and the District of Columbia have what is commonly referred to as a “manual exemption” for
secondary trading of securities. In these states, so long as we obtain and maintain a listing in Standard and Poor’s
Corporate Manual, secondary trading can occur without any filing, review or approval by state regulatory authorities
in these states. These states are: Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, District of Columbia,
Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi,
Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio,
Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Washington, West
Virginia, and Wyoming. We cannot secure this listing, and thus this qualification, until after this registration
statement is declared effective. Once we secure this listing, secondary trading can occur in these states without
further action.
All our shareholders currently reside in these states, outside the U.S. or in Pennsylvania, New York, and Louisiana.
We will make the appropriate filings in Pennsylvania, New York, and Louisiana to permit sales of the securities
registered in this offering.
We currently do not intend to and may not be able to qualify securities for resale in other states which require shares
to be qualified before they can be resold by our shareholders.
PLAN OF DISTRIBUTION
This Offering relates to the sale of up to 1,000,000 Shares at the estimated Offering price of $.50 per share in a
“best-efforts” direct public offering, without any involvement of underwriters. The Shares will be offered and sold
by our officers, directors, and/or employees. None of these persons will receive a sales commission or any other
form of compensation for this Offering. In connection with their efforts, our officers, directors and employees will
55
rely on the safe harbor provisions of Rule 3a4-1 of the Securities Exchange Act of 1934. Generally speaking, Rule
3a4-1 provides an exemption from the broker/dealer registration requirements of the Securities Exchange Act of
1934 for persons associated with an issuer provided that they meet certain requirements. No one has made any
commitment to purchase any or all of the Shares being offered. Rather, our directors, officers, and/or employees will
use their best efforts to find purchasers for the Shares. We are not required to sell any minimum number of Shares in
this Offering. Funds received from investors will not be placed in an escrow, trust, or similar account. Instead, all
cleared funds will be immediately available to us following their deposit into our bank account, and there will be no
refunds once a subscription for Shares are accepted. We cannot predict how many Shares, if any, will be sold.
We will bear any expenses of this offering, which we estimate to be $20,000.
We also may retain an underwriter to assist us or to supplant our selling efforts in the Offering. At this time we do
not have any binding commitments, agreements, or understandings with any potential underwriter. If we elect to
utilize an underwriter, we will amend this Prospectus. We have prepared this prospectus as if we are not using an
underwriter to assist us with this Offering. To the extent that we are able to sell the Shares directly through our
officers, directors, and employees, the net proceeds received from this Offering will be correspondingly higher than
if we engage an underwriter.
This Offering will terminate no later than 12 months after the effective date of this prospectus, unless the Offering is
fully subscribed before that date or we decide to close the Offering prior to that date. In either event, the Offering
may be closed without further notice to you. All costs associated with the registration will be borne by us.
We have not authorized any person to give any information or to make any representations in connection with this
Offering other than those contained in this prospectus and if given or made, that information or representation must
not be relied on as having been authorized by us. This prospectus is not an offer to sell or a solicitation of an offer to
buy any of the securities to any person in any jurisdiction in which that offer or solicitation is unlawful. Neither the
delivery of this prospectus nor any sale hereunder shall under any circumstances, create any implication that the
information in this prospectus is correct as of any date later than the date of this prospectus. Purchasers of share
either in this Offering or in any subsequent trading market that may develop must be residents of states in which the
securities are registered or exempt from registration. Some of the exemptions are self-executing, that is to say that
there are no notice or filing requirements, and compliance with the conditions of the exemption renders the
exemption applicable.
Prior to the date of this prospectus, there has been no trading market for our Common Stock. We hope our shares of
Common Stock will be quoted for trading on the OTCBB. Until an active and steady trading market develops for
our Common Stock, the price at which shares of our Common Stock may trade may fluctuate significantly. Prices
for our Common Stock will be determined in the marketplace and may be influenced by many factors, including the
depth and liquidity of the market for our shares, developments affecting our businesses generally, including the
impact of the factors referred to in “RISK FACTORS” above, investor perception of the Company, and general
economic and market conditions. No assurances can be given that an orderly or liquid market will ever develop for
our shares or that an investor will be able to resell the Shares purchased in this Offering.
Shares of Common Stock sold in this Offering will be freely transferable, except for shares of our Common Stock
received by persons who may be deemed to be “affiliates” of the Company under the Securities Act. Persons who
may be deemed to be affiliates of the Company generally include individuals or entities that control, are controlled
by or are under common control with us, and may include our senior officers and directors, as well as principal
stockholders. Persons who are affiliates will be permitted to sell their shares of Common Stock only pursuant to an
effective registration statement under the Securities Act or an exemption from the registration requirements of the
Securities Act, such as the exemption afforded by Section 4(1) of the Securities Act or Rule 144 adopted under the
Securities Act.
Penny Stock Regulations
Our Common Stock is considered a “penny stock” as defined by Section 3(a)(51) and Rule 3a51-1(g) under the
Securities Exchange Act of 1934 because we do not have:
Net tangible assets (i.e., total assets less intangible assets and liabilities) in excess of $2,000,000, and
56
Average revenue of at least $6,000,000 for the last three years.
For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer
approve a person’s account for transactions in penny stocks and the broker or dealer receive from the investor a
written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial
information and investment experience and objectives of the person and make a reasonable determination that the
transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in
financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by
the SEC relating to the penny stock market, which, in highlight form, sets forth the basis on which the broker or
dealer made the suitability determination, and that the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary
trading and commissions payable to both the broker-dealer and the registered representative, current quotations for
the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.
Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. The above-referenced requirements may create a
lack of liquidity, making trading difficult or impossible, and accordingly, shareholders may find it difficult to
dispose of our shares.
State Securities – Blue Sky Laws
Transfer of our Common Stock may also be restricted under the securities laws or securities regulations promulgated
by various states and foreign jurisdictions, commonly referred to as “Blue Sky” laws. Absent compliance with such
individual state laws, our Common Stock may not be traded in such jurisdictions. Because the securities registered
hereunder have not been registered for resale under the blue sky laws of any state, the holders of such shares and
persons who desire to purchase them in any trading market that might develop in the future, should be aware that
there may be significant state blue-sky law restrictions upon the ability of investors to sell the securities and of
purchasers to purchase the securities. Accordingly, investors may not be able to liquidate their investments and
should be prepared to hold the Common Stock for an indefinite period of time.
We are not currently listed in Standard and Poor's Corporation Records, a nationally recognized securities manual,
which would provide us with “manual” exemptions in 38 states as indicated in 1 Blue Sky L. Rep. (CCH) 2401
(2008), entitled “Standard Manuals Exemptions.” We intend to obtain a listing in Standard and Poor's Corporation
Records and intend to do so as soon as possible.
Thirty-eight states have what is commonly referred to as a “manual exemption” for secondary trading of securities
purchased under this registration statement. In these states, so long as we obtain and maintain a Standard and Poor’s
Corporate Records listing or another acceptable manual, secondary trading of our Common Stock can occur without
any filing, review or approval by state regulatory authorities in these states. These states are: Alaska, Arizona,
Arkansas, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Maine, Maryland,
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New
Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South
Dakota, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming. In most instances, under
current state rules, secondary trading can occur in these states without further action. However, no assurance can be
given that such rules will not change in the future or that a specific secondary trading transaction will qualify for a
manual exemption.
We may not be able to qualify securities for resale in other states which require shares to be qualified before they
can be resold by our shareholders.
57
Procedures for Subscribing to Shares Offered by the Company
If you decide to subscribe for any shares in this Offering, you are required to execute a Subscription Agreement and
tender it, together with a check or certified funds to us. All checks for subscriptions should be made payable to The
Virtual Learning Company, Inc.
OTC Bulletin Board Considerations
To be quoted on the OTC Bulletin Board, a market maker must file an application on our behalf in order to make a
market for our common stock. We have engaged in preliminary discussions with an FINRA Market Maker and they
have filed our application on Form 211 with the FINRA, and FINRA has cleared such listing pending the
effectiveness of the registration statement of which this prospectus forms a part. Based upon our counsel’s prior
experience, we anticipate that after this registration statement is declared effective, it will take approximately 2 - 8
weeks for the FINRA to issue a trading symbol.
The OTC Bulletin Board is separate and distinct from the NASDAQ stock market. NASDAQ has no business
relationship with issuers of securities quoted on the OTC Bulletin Board. The SEC’s order handling rules, which
apply to NASDAQ-listed securities, do not apply to securities quoted on the OTC Bulletin Board.
Although the NASDAQ stock market has rigorous listing standards to ensure the high quality of its issuers, and can
delist issuers for not meeting those standards, the OTC Bulletin Board has no listing standards. Rather, it is the
market maker who chooses to quote a security on the system, files the application, and is obligated to comply with
keeping information about the issuer in its files. FINRA cannot deny an application by a market maker to quote the
stock of a company. The only requirement for inclusion in the bulletin board is that the issuer be current in its
reporting requirements with the SEC.
Although we anticipate listing on the OTC Bulletin board will increase liquidity for our stock, investors may have
greater difficulty in getting orders filled because it is anticipated that if our stock trades on a public market, it
initially will trade on the OTC Bulletin Board rather than on NASDAQ. Investors’ orders may be filled at a price
much different than expected when an order is placed. Trading activity in general is not conducted as efficiently and
effectively as with NASDAQ-listed securities.
Investors must contact a broker-dealer to trade OTC Bulletin Board securities. Investors do not have direct access to
the bulletin board service. For bulletin board securities, there only has to be one market maker.
Bulletin board transactions are conducted almost entirely manually. Because there are no automated systems for
negotiating trades on the bulletin board, they are conducted via telephone. In times of heavy market volume, the
limitations of this process may result in a significant increase in the time it takes to execute investor orders.
Therefore, when investors place market orders - an order to buy or sell a specific number of shares at the current
market price - it is possible for the price of a stock to go up or down significantly during the lapse of time between
placing a market order and getting execution.
Because bulletin board stocks are usually not followed by analysts, there may be lower trading volume than for
NASDAQ-listed securities.
SHARES ELIGIBLE FOR FUTURE SALE
As of December 31, 2010, and May 31, 2011, the Company’s 15,350,000 shares of issued and outstanding Common
Stock were held by the Company’s twelve (12) present shareholders. Only the shares to be held by Thomas P.
Monahan and Dr. John Swint will be subject to the volume selling requirements and manner of sale requirements of
Rule 144.
In general with respect to companies who are reporting companies under the 1934 Securities Exchange Act , under
Rule 144 as currently in effect, an affiliate person or persons who has beneficially owned Restricted Shares for at
58
least six months is entitled to sell, within any three-month period, a number of such shares that does not exceed the
greater of:
(i) One percent of the outstanding shares of Common Stock; or
(ii) The average weekly trading volume in the Common Stock during the four calendar weeks preceding the date on
which notice of such sale is filed with the Securities and Exchange Commission. These shares must be sold in a
open market transaction and the Company must have been current in its required filings under the 1934 Securities
Exchange Act for the preceding twelve months or such shorter time that the Company was subject to the reporting
requirements and must be presently current for ninety (90) days in those filings. An affiliate must also file a notice
of the sale
A person who is not an Affiliate and has not been an Affiliate for at least three months prior to the sale and who has
beneficially owned Restricted Shares for at least six months may resell such shares without regard to the quantity of
sale, manner of sale or notice requirements described above. VIRTUAL is unable to estimate the number of
Restricted Shares that ultimately will be sold under Rule 144 because the number of shares will depend in part on
the market price for the Common Stock, the personal circumstances of the sellers and other factors. See “Risk
Factors--Shares Eligible for Future Sale” and “Risk Factors--Possible Volatility of Stock Price”.
If the Company is not a reporting company or not current in its filing requirements then the non-affiliates’ holding
period is increased to one year. Affiliates may not sell under such circumstances pursuant to Rule 144.
DESCRIPTION OF SECURITIES
The authorized capital stock consists of 70,000,000 shares of common stock, par value $.001 per share. As of
December 31, 2010, there were 15,350,000 shares of Common Stock issued and outstanding. The following
summary description of the Common Stock is qualified in its entirety by reference to the Company's Certificate of
Incorporation and all amendments thereto.
Common Stock
Our authorized capital stock consists of 70,000,000 shares of common stock, par value $.001 per share. Each share
of Common Stock entitles its holder to one non-cumulative vote per share and, the holders of more than fifty percent
(50%) of the shares voting for the election of directors can elect all the directors if they choose to do so, and in such
event the holders of the remaining shares will not be able to elect a single director. Holders of shares of Common
Stock are entitled to receive such dividends, as the board of directors may, from time to time, declare out of
Company funds legally available for the payment of dividends. Upon any liquidation, dissolution, or winding up of
the Company, holders of shares of Common Stock are entitled to receive pro rata all of the assets of the Company
available for distribution to common stockholders.
Stockholders do not have any pre-emptive rights to subscribe for or purchase any stock, warrants, or other securities
of the Company. The Common Stock is not convertible or redeemable. Neither the Company's Certificate of
Incorporation nor its By-Laws provide for pre-emptive rights.
We have to mention preferred shares at $.001 par value nothing outstanding at December 31, 2010 with rights and
privileges as may be determined from time to time by the Board of Directors.
INTEREST OF NAMED EXPERTS AND COUNSEL
None of the experts named herein was or is a promoter, underwriter, voting trustee, director, officer, or employee of
the Company. Furthermore, none of the experts was hired on a contingent basis and none of the other experts named
herein will receive a direct or indirect interest in the Company except Roger Fidler.
TRANSFER AGENT
The Transfer Agent and Registrar for the common stock will be Manhattan Transfer Registrar Company of Miller
Place, New York.
59
LEGAL MATTERS
The validity of the shares of common stock offered in this prospectus has been passed upon for us by Roger L.
Fidler, Esq., 145 Highview Terrace, Hawthorne, New Jersey 07506. His telephone number is (973) 949-4193. Mr.
Fidler owns 1,000,000 shares of the Company’s common stock.
EXPERTS
Our audited financial statements as of December 31, 2010 and 2009 and for the periods then ended and for the
period from January 6, 2009 (inception) to December 31, 2010 have been included in this prospectus and in the
registration statement filed with the Securities and Exchange Commission in reliance upon the report of independent
auditors, dated April 15, 2011 upon authority as experts in accounting and auditing. LGG & Associates, PC’s report
on the financial statements can be found at the end of this prospectus and in the registration statement.
DESCRIPTION OF PROPERTY
We maintain our principal office at 60 Knolls Crescent, Apt. 9M, Bronx, NY 10463. Our telephone number is (973)
768-4181. We currently do not occupy office space, as our business is primarily e-commerce. This arrangement is
expected to continue until such times as it becomes necessary for us to relocate, as to which no assurances can be
given.
Our management does not currently have policies regarding the acquisition or sale of real estate assets primarily for
possible capital gain or primarily for income. We do not presently hold any investments or interests in real estate,
investments in real estate mortgages, or securities of or interests in persons primarily engaged in real estate
activities.
LITIGATION
The Company is not engaged in any litigation, nor is any litigation pending or been threatened.
OUR TRADING SYMBOL
The Common Stock of Virtual does not have a trading symbol at this time.
As of March 31, 2011 there were 11 shareholders of record for the Company’s 15,350,000 shares of outstanding
common stock.
DIVIDENDS
We have never paid a cash dividend on our common stock. It is our present policy to retain earnings, if any, to
finance the development and growth of our business. Accordingly, we do not anticipate that cash dividends will be
paid until our earnings and financial condition justify such dividends, and there can be no assurance that we can
achieve such earnings.
CERTAIN PROVISIONS OF THE BYLAWS REGARDING INDEMNIFICATION OF DIRECTORS AND
OFFICERS REGARDING INDEMNIFICATION
Article X of the By-Laws of the Company provides indemnification to the fullest extent permitted by Nevada law
for any person whom the Company may indemnify there under, including directors, officers, employees, and agents
of the Company. In addition, the By-Laws, as permitted under the Nevada General Corporation Law, eliminates the
personal liability of the directors to the Company or any of its stockholders for damages for breaches of their
fiduciary duty as directors except for liability for (1) a breach of the director's duty of loyalty to the corporation or
its stockholders, (2) any act or omission not in good faith or that involves intentional misconduct or a knowing
violation of the law, (3) unlawful payments of dividends or unlawful stock repurchases or redemptions, or (4) any
transaction from which the director derived an improper personal benefit.. As a result of the inclusion of such
provision, stockholders may be unable to recover damages against directors for actions taken by directors which
constitute negligence or gross negligence or that are in violation of their fiduciary duties. The inclusion of this
60
provision in the Company's By-laws may reduce the likelihood of derivative litigation against directors and other
types of stockholder litigation, even though such action, if successful, might otherwise benefit the Company and its
stockholders.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to
directors, officers, and controlling persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. The
Company's By-Laws provides that no director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director except as limited by Nevada law. The
Company's Bylaws provide that the Company shall indemnify to the full extent authorized by law each of its
directors and officers against expenses incurred in connection with any proceeding arising by reason of the fact that
such person is or was an agent of the corporation.
Insofar as indemnification for liabilities may be invoked to disclaim liability for damages arising under the
Securities Act of 1933, as amended, or the Securities Act of 1934, (collectively, the “Acts”) as amended, it is the
position of the Securities and Exchange Commission that such indemnification is against public policy as expressed
in the Acts and are therefore, unenforceable.
NEVADA ANTI-TAKEOVER LAW AND OUR CERTIFICATE OF INCORPORATION AND BY-LAW
PROVISIONS
Provisions of Nevada law and our Certificate of Incorporation and By-Laws could make more difficult our
acquisition by a third party and the removal of our incumbent officers and directors. These provisions, summarized
below, are expected to discourage coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of the Company to first negotiate with us. We believe that the benefits of
increased protection of our ability to negotiate with proponent of an unfriendly or unsolicited acquisition proposal
outweigh the disadvantages of discouraging such proposals because, among other things, negotiation could result in
an improvement of their terms.
We are subject to the Nevada General Corporation Law, which regulates corporate acquisitions. In general, Section
203 prohibits a publicly held Nevada corporation from engaging in a “business combination” with an “interested
stockholder” for a period of three years following the date the person became an interested stockholder, unless:
(i) The Board of Directors approved the transaction in which such stockholder became an interested stockholder
prior to the date the interested stockholder attained such status;
(ii) Upon consummation of the transaction that resulted in the stockholder's becoming an interested stockholder, he
or she owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced,
excluding shares owned by persons who are directors and also officers; or
(iii) On subsequent to such date the business combination is approved by the Board of Directors and authorized at an
annual or special meeting of stockholders.
A “business combination” generally includes a merger, asset or stock sale, or other transaction resulting in a
financial benefit to the interested stockholder. In general, an “interested stockholder” is a person who, together with
affiliates and associates, owns, or within three years prior to the determination of interested stockholder status, did
own, 15% or more of the corporation's voting stock.
WHERE YOU CAN FIND MORE INFORMATION
Upon effectiveness of this registration statement, we will commence filing reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy any report, proxy statement or
other information we file with the Commission at the Public Reference Room at 100 F Street, N.E., Washington,
D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Commission
61
at 1-800-SEC-0330. In addition, we will file electronic versions of these documents on the Commission's Electronic
Data Gathering Analysis and Retrieval, or EDGAR, System. The Commission maintains a website at
http://www.sec.gov that contains reports, proxy statements and other information filed with the Commission.
We have filed a registration statement on Form S-1 with the Commission to register shares of our common stock.
This prospectus is part of that registration statement and as permitted by the Commission’s rules, does not contain
all of the information set forth in the registration statement. For further information with respect to us, or our
common stock, you may refer to the registration statement and to the exhibits and schedules filed as part of the
registration statement. You can review a copy of the registration statement and its exhibits and schedules at the
public reference room maintained by the Commission, and on the Commission's web site, as described above. You
should note that statements contained in this prospectus that refer to the contents of any contract or other document
are not necessarily complete. Such statements are qualified by reference to the copy of such contract or other
document filed as an exhibit to the registration statement.
62
INDEX TO THE FINANCIAL STATEMENTS
Page(s)
Index to the Financial Statements
F-1
Report of Independent Registered Certified Public Accounting Firm
F-2
on the Audited Financial Statements
Report of Independent Registered Certified Public Accounting Firm
F-3
on the Unaudited Financial Information
Balance Sheets as of September 30, 2011 (Unaudited)
and December 31, 2010 and 2009
F-4
Statements of Operations for the year ended December 31, 2010, from
Inception (January 6, 2009) through December 31, 2009, and from
Inception (January 6, 2009) through December 31, 2010
F-5
Statements of Operations for the nine months ended September 30, 2011 and 2010,
from inception (January 6, 2009) through September 30, 2009, and
from Inception (January 6, 2009) through September 30, 2011 (Unaudited)
F-6
Statements of Operations for the three months ended September 30, 2011, 2010 and 2009
F-7
Statement of Changes in Stockholders’ Equity from Inception
(January 6, 2009) through December 31, 2010, and for the nine
months ended September 30, 2011 (Unaudited)
F-8
Statements of Cash Flows for the year ended December 31, 2010, from
Inception (January 6, 2009) through December 31, 2009, and from
Inception (January 6, 2009) through December 31, 2010
F-9
Statements of Cash Flows for the three months ended September 30, 2011 and 2010,
from inception (January 6, 2009) through March 31, 2009, and
from Inception (January 6, 2009) through March 31, 2011 (Unaudited)
F-10
Notes to the Financial Statements
F-11
F-1
REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
ON THE AUDITED FINANCIAL STATEMENTS
To the Stockholders and Board of Directors
THE VIRTUAL LEARNING COMPANY, INC.
New York, New York
In accordance with the terms and objectives of our engagement, we have audited the accompanying balance sheets
of The Virtual Learning Company, Inc. (A Development Stage Enterprise) as of December 31, 2010 and 2009, and
the related statements of operations and cash flows for the year ended December 31, 2010, from inception (January
6, 2009) through December 31, 2009, and from inception (January 6, 2009) through December 31, 2010, and the
statement of changes in stockholders’ equity from inception (January 6, 2009) through December 31, 2010. The
Virtual Learning Company, Inc.’s management is responsible for these financial statements. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan our audits to obtain reasonable assurance about whether the
financial statements are free of material misstatements. The Virtual Learning Company, Inc. is not required, at this
time to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of The
Virtual Learning Company, Inc.’s internal control over financial reporting. Accordingly, we do not express such an
opinion.
An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by the management of The
Virtual Learning Company, Inc., as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph of this report present fairly, in all material
respects, the financial position of The Virtual Learning Company, Inc. at December 31, 2010 and 2009, and the
results of its operations and its cash flows for the year ended December 31, 2010, from inception(January 6, 2009)
through December 31, 2009, and from inception (January 6, 2009) through December 31, 2010, and the changes in
stockholders’ equity from inception (January 6, 2009) through December 31, 2010 in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared and are presented assuming that The Virtual Learning
Company, Inc. will continue as a going concern. As discussed in the notes to the financial statements and elsewhere
in this Form S-1, The Virtual Learning Company, Inc. has incurred cash and significant non-cash operating losses
for the year ended December 31, 2010, from inception (January 6, 2009) through December 31, 2009, and from
inception (January 6, 2009) through December 31, 2010, has no revenue from sales of products or services, and has
not commenced planned principal business operations. There is no assurance that The Virtual Learning Company,
Inc. can reverse its operating losses, or that it can raise additional debt or equity capital to allow it to proceed with its
planned future operations.
These factors, among others, raise substantial doubt about The Virtual Learning Company, Inc.’s ability to continue
as a going concern. The Virtual Learning Company, Inc.’s management plans regarding these matters are disclosed
in the notes to the financial statements and elsewhere in this Form S-1. These financial statements do not include
any adjustments related to the recoverability of recorded asset values that might be necessary from an unfavorable
resolution of this significant uncertainty.
/s/ LGG & Associates, PC
LGG & Associates, PC
Certified Public Accountants and
Management Consultants
Lawrenceville, Georgia
Friday, April 15, 2011
F-2
REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
ON THE UNAUDITED FINANCIAL INFORMATION
To the Stockholders and Board of Directors
THE VIRTUAL LEARNING COMPANY, INC.
New York, New York
In accordance with the terms and objectives of our engagement, we have reviewed the accompanying balance sheet
of The Virtual Learning Company, Inc. (A Development Stage Enterprise) as of March 31, 2011, and the related
statements of operations, changes in stockholders’ equity, and cash flows for the three months ended March 31,
2011, 2010, and 2009, and from inception (January 6, 2009) through March 31, 2011. These financial statements are
the responsibility of The Virtual Learning Company, Inc.’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board
(United States). A review of interim financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. A review (as defined by the Public
Company Accounting Oversight board (United States)) is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of
which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying
financial statements referred to in the first paragraph of this report for them to be in conformity with accounting
principles generally accepted in the United States of America.
We audited the company financial statements as of and for the years ended December 31, 2010 and 2009, and from
inception (January 6, 2009) through December 31, 2010, and we expressed an unqualified opinion on them in our
report dated Friday, April 15, 2011. We have not performed any auditing procedures since that date.
The accompanying financial statements assume that The Virtual Learning Company, Inc. will continue as a going
concern. As discussed in the notes to the financial statements and elsewhere in this Form S-1, The Virtual Learning
Company, Inc. has incurred cash and significant non-cash operating losses for the three months ended March 31,
2011 and 2010, and from inception (January 6, 2009) through March 31, 2009, has no revenue from sales of
products or services, and has not commenced planned principal business operations. There is no assurance that The
Virtual Learning Company, Inc. can reverse its operating losses, or that it can raise additional debt or equity capital
to allow it to proceed with its planned future operations.
These factors, among others, raise substantial doubt about The Virtual Learning Company, Inc.’s ability to continue
as a going concern. The Virtual Learning Company, Inc.’s management plans regarding these matters are disclosed
in the notes to the financial statements and elsewhere in this Form S-1. These interim financial statements do not
include any adjustments related to the recoverability of recorded asset values that might be necessary from an
unfavorable resolution of this significant uncertainty.
Lawrenceville, Georgia
/s/ LGG & Associates, PC
Friday, May 20, 2011
LGG & Associates, PC
Certified Public Accountants and
Management Consultants
F-3
THE VIRTUAL LEARNING COMPANY, INC.
(A Development Stage Enterprise)
BALANCE SHEETS
September 30,
2011
December 31,
December 31,
ASSETS
Unaudited
2010
2009
CURRENT ASSETS
Cash and cash equivalents
$
7,196
$
18,573
$
22,028
-PROPERTY AND EQUIPMENT, net
2,530
3,159
2,700
OTHER ASSETS
Capitalized curriculum development costs
243,000
274,000
152,000
Total assets
$ 252,726
$
295,732
$
176,728
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accrued liabilities
$13,700
Officer loan payable
12
$ 1,640
$ 15,400
Total current liabilities
13,712
STOCKHOLDERS’ EQUITY
Preferred stock; 5,000,000 shares authorized, $.001 par
value, as of September 30, 2011, December 31, 2010 and
2009, there are no shares outstanding
Common stock; 70,000,000 shares authorized, $.001 par
value, as of September 30, 2011 and December 31, 2010
and 2009, there are 15,350,000, 15,350,000 and
14,100,000 shares outstanding, respectively
15,350
15,350
14,100
Additional paid-in capital
1,091,650
1,088,650
827,900
Deficit accumulated during the development stage
(873,986)
(809,908)
(680,672)
Net stockholders’ equity
239,014
294,092
161,328
Total liabilities and stockholders’ equity
$252,726
$ 295,732
$ 176,728
The accompanying notes are an integral part of these financial statements.
F-4
THE VIRTUAL LEARNING COMPANY, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
From inception
From inception
Year ended
(January 6, 2009) to(January 6, 2009) to
December 31, 2010 December 31, 2009 December 31, 2010
Revenue
$
-
$
-
$
-
Operating Expenses
Selling, general and administrative
8,540
372
8,912
Common stock issued for consulting fees
600,000
600,000
Common stock issued for legal fees
120,000
80,000
200,000
Depreciation and amortization
696
300
996
Total operating expenses
129,236
680,672
809,908
Loss from operations
(129,236)
(680,672)
(809,908)
Other income/deductions
-
-
-
Net loss
$ (129,236)
$ (680,672)
$ (809,908)
Basic and diluted loss per common share
$ (.00)
$ (.05)
-
Weighted average shares outstanding
14,750,000
13,075,000
-
The accompanying notes are an integral part of these financial statements
F-5
THE VIRTUAL LEARNING COMPANY, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
Unaudited
Nine months
Nine months
From inception
From inception
ended
ended
(January 6, 2009) to (January 6, 2009)
September 30,
September 30,
September 30,
to September 30,
2011
2010
2009
2011
Revenue
$
-
$
- $
-
$
-
Selling, general and administrative
23,449
7,544
183
32,361
Common stock issued for consulting
-
600,000
600,000
fees
Common stock issued for legal fees
40,000
120,000
80,000
240,000
Depreciation and amortization
630
565
150
1,625
Total operating expenses
64,079
128,109
680,333
873,986
Loss from operations
(64,079)
(128,109)
(680,333)
(873,986)
Other income/deductions
-
-
-
-
Net loss
$
(64,079)
$ (128,109)
$ (680,333)
$ (873,986)
Basic and diluted loss per common
$ (.00)
$ (.00)
$ (.05)
-
share
Weighted average shares outstanding
15,350,000
14,750,000
13,075,000
-
The accompanying notes are an integral part of these financial statements
F-6
THE VIRTUAL LEARNING COMPANY, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
Unaudited
Three months
Three months Three months
ended
ended
ended
September 30,
September 30, September 30,
2011
2010
2009
Revenue
$
-
$
- $
-
Selling, general and administrative
15,398
2,391
183
Common stock issued for consulting
-
fees
Common stock issued for legal fees
40,000
Depreciation and amortization
330
265
150
Total operating expenses
55,728
2,656
333
Loss from operations
(55,728)
(2,656)
(333)
Other income/deductions
-
-
Net loss
$
(55,728)
$ (2,656)
$(333)
Basic and diluted loss per common
$ (.00)
$ (.00)
$(.00)
share
Weighted average shares outstanding
15,350,000
15,350,000
15,350,000
F-7
THE VIRTUAL LEARNING COMPANY, INC.
(A Development Stage Enterprise)
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
From Inception (January 6, 2009) through December 31, 2010
and for the nine months ended September 30, 2011 (Unaudited)
Deficit
Accumulated
Common stock
During the
Shares Amount
Additional
Development
Paid in Capital
Stage
Total
Common stock issued to founder for cash 10,000,000
$ 10,000
$
- $
-
$ 10,000
Issuance of common stock for capitalized
3,100,000
3,100
616,900
-
620,000
curriculum development costs of
$140,000
Issuance of common stock for legal fees
600,000
600
119,400
120,000
Issuance of common stock for legal fees
400,000
400
79,600
-
80,000
Capitalized curriculum development
-
-
12,000
-
12,000
costs
Net loss from inception to December 31,
________-
______-
_________-
(680,672)
(680,672)
2009
Balance at December 31, 2009
14,100,000
14,100
827,900
(680,672)
161,328
Issuance of common stock for cash
100,000
100
19,900
-
20,000
Issuance of common stock for capitalized
550,000
550
109,450
-
110,000
curriculum development costs
Issuance of common stock for legal fees
600,000
600
119,400
120,000
Capitalized curriculum development
-
-
12,000
-
12,000
costs
64
Net loss for the year ended December 31,
_______
_____
______
( 129,236)
(129,236)
2010
15,350,000
15,350
$ 1,088,650
(809,908)
$ 294,092
Unaudited
Capitalized curriculum development
9,000
9,000
costs
Cancellation of consulting shares
(200,000)
(200)
(39,800)
(40,000)
Issuance of common stock for legal fees
200,000
200
39,800
40,000
Net loss for the nine months ended
(64,079)
(64,079)
September 30, 2011
_________
_______
________
______
________
Balance at September 30, 2011
15,350,000
$ 15,350
$ 1,097,650
$ ( 873,986)
$ 294,092
(Unaudited)
The accompanying notes are an integral part of these financial statements.
F-8
THE VIRTUAL LEARNING COMPANY, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
For the
From inception
From inception
year ended December (January 6, 2009) to (January 6, 2009)
31,
December 31,
to December 31,
2010
2009
2010
OPERATING ACTIVITIES
Net loss
$ (129,236)
$ (680,672)
$ (809,908)
Adjustments for noncash and non-operating items:
Depreciation and amortization
696
300
996
Issuance of common stock for consulting
services
-
600,000
600,000
Issuance of common stock for legal fees
_120,000
__80,000
___200,000
Net cash flows from operating activities
__(8,540)
____(372)
___(8,912)
INVESTING ACTIVITIES
Property and equipment
__(1,155)
__(3,000)
___(4,155)
FINANCING ACTIVITIES
Proceeds from officer loan payable
9,040
18,500
27,540
Repayments of officer loan payable
(22,800)
(3,100)
(25,900)
Issuance of common stock for cash
__20,000
__10,000
__30,000
Net cash flows from financing activities
___6,240
__25,400
__31,640
NET INCREASE (DECREASE) IN CASH
(3,455)
22,028
18,573
CASH BALANCE BEGINNING OF PERIOD
__22,028
_____-_
_______-
CASH BALANCE END OF PERIOD
$ 18,573
$ 22,028
$ 18,573
Supplemental Disclosures of Cash Flow Information:
Interest expense
$
-
$
-
$
-
Paid in capital for asset purchase
$ 12,000
$ 12,000
$ 24,000
Income taxes
$ -
$ -
$ -
The accompanying notes are an integral part of these financial statements
F-9
THE VIRTUAL LEARNING COMPANY, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
Unaudited
From
From inception
inception (January 6, 2009)
For the nine
For the nine
(January 6,
to
Months ended
months ended
2009) to
September 30,
September 30,
September 30, September 30,
2011
2011
2010
2009
Net loss
$ (64,079)
$ (128,109) $ (680,333)
$ (873,986)
Adjustments for noncash and non-operating
items:
Depreciation and amortization
630
565
150
1,625
Issuance of common stock for consulting
120,000
600,000
600,000
services
Issuance of common stock for legal fees
40,000
1
80,000
240,000
Changes in operating assets and liabilities, net
of
Acquired and liabilities assumed:
Accrued liabilities
13,700
_______
_______
13,700
Net cash flows from operating activities
(9,749)
(7,544)
(183)
(18,661)
INVESTING ACTIVITIES
Property and equipment
-
(1,155)
(3,000)
___(4,155)
Net cash flows from investing activities
(1,155)
(3,000)
(4,155)
FINANCING ACTIVITIES
Proceeds from officer loan payable
4,272
8,158
20,000
41,812
Repayments of officer loan payable
(5,900)
(17,300)
(8,700)
(41,800)
Issuance of common stock for cash
________
20,000
10.000
__30,000
Net cash flows from financing activities
(1,628)
10,858
21,300
__30,012
NET INCREASE (DECREASE) IN CASH
(11,377)
2,159
18,117
7,196
CASH BALANCE BEGINNING OF
___18,573
____22,028
_____-0-
_______-
PERIOD
CASH BALANCE END OF PERIOD
$ 7,196
$ 24,187
$ 18,117
$ 7,196
Supplemental Disclosures of Cash Flow
Information:
Interest expense
$
-
$
- $$- $
-
Paid in capital for asset purchase
$ 9,000
$
9,0000 $
9,000 $
33,000
Income taxes
$
_
$
_
$
- $
-
The accompanying notes are an integral part of these financial statements
F-10
THE VIRTUAL LEARNING COMPANY, INC.
(A Development Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
Year Ended December 31, 2010, from Inception (January 6, 2009) through
December 31, 2009, and from Inception (January 6, 2009) through December 31, 2010
and for the nine months ended September 30, 2011, 2010 and from Inception (January 6, 2009)
through September 30, 2011 (Unaudited)
1 - Summary of Significant Accounting Policies
Nature of Operations
The Virtual Learning Company, Inc. (“Virtual Learning”) was incorporated on January 6, 2009 as a Nevada
corporation with 75,000,000 shares of capital stock authorized, of which 70,000,000 shares are common shares
($.001 par value), and 5,000,000 shares are preferred shares ($.001 par value).
Virtual Learning is a subscription-based, software-as-a-service (“SaaS”) provider of education products. Virtual
Learning provides standards-based instruction, practice, assessments, and productivity tools that improve the
performance of educators and students via proprietary web-based platforms on one of several websites on the World
Wide Web with the following URLs www.mathisbasic.com, www.learningisbasic.com, and www.eschoolroom.com
Virtual Learning is also a producer and distributor of computer software and video educational materials on CD and
DVD formatted disks that are available through various distributors and Virtual Learning’s websites either as a
download or in boxed format.
Basis of Presentation/Going Concern
These financial statements have been prepared and are presented for purposes of registration with the Securities and
Exchange Commission ("SEC"), and they present Virtual Learning’s financial position, results of operations, and
cash flows in accordance with accounting principles generally accepted in the United States of America. These
standards contemplate continuation of Virtual Learning as a going concern.
However, Virtual Learning has sustained substantial stock-based operating losses aggregating $840,000 and cash-
based losses of $9,908 for the period from inception (January 6, 2009) through December 31, 2010, and additional
stock-based operating losses of $40,000 and cash-based losses of $24,079 for the period from inception (January 6,
2009) through September 30, 2011. This factor alone raises substantial doubt about Virtual Learning’s ability to
continue as a going concern. Virtual Learning has also capitalized an aggregate of $243,000 and $274,000 of stock-
based curriculum development costs as of September 30,2011 and December 31, 2010, respectively. The recovery of
these assets and continuation of future operations are dependent upon Virtual Learning’s ability to obtain additional
debt or equity capital and its ability to generate revenues sufficient to continue pursuing its business purposes.
Virtual Learning is actively pursuing financing to fund future operations.
To date, Virtual Learning’ cash-based operations have been funded by the issuance of 10,000,000 shares of common
stock for $10,000 or $.001 per share to Thomas P. Monahan (President and majority shareholder) and the issuance
of an additional 100,000 shares of common stock for an aggregate price of $20,000 or $.20 per share to an unrelated
party.
In addition, as of September 30, 2011, Mr. Monahan loaned Virtual Learning cash of $26,150, charged Virtual
Learning costs and expenses of $12,662 on a personal credit card, and contributed computer equipment at a stated
value of $3,000, for a total of $41,812. As of September 30, 2011, $41,800of these amounts have been repaid.
F-11
Virtual Learning is subject to a number of risks similar to those of other development stage enterprises. These risks
include, but are not limited to, rapid technological change, dependence on key personnel, competing new product
introductions and other activities of competitors, the successful development and marketing of its products, and the
need to obtain adequate additional capital necessary to fund future operations.
Since its inception on January 6, 2009, Virtual Learning has devoted its efforts principally to creating initial
computer software products, research and development, and the accumulation of content for additional titles,
business development activities, and raising capital. As a result, Virtual Learning is considered a development stage
enterprise as defined in accounting principles generally accepted in the United States of America. Virtual Learning’s
accumulated deficit during the development stage (the period from inception (January 6, 2009) through September
30, 2011 and December 31, 2010) equals $873,986 and $809,908, respectively.
Virtual Learning's future capital requirements will depend upon many factors, including progress with marketing its
technologies, competing technological and market developments, and its ability to establish collaborative
arrangements, effective commercialization, marketing activities, and other arrangements.
There is no assurance that Virtual Learning can reverse its operating losses, or that it can raise additional capital to
allow it to continue its planned future operations. These factors raise substantial doubt about Virtual Learning's
ability to continue as a going concern. These financial statements do not include any adjustments relating to the
recoverability of recorded asset amounts that might be necessary from an unfavorable resolution of this uncertainty.
Management expects that Virtual Learning will experience negative cash flows from operations and net losses for
the foreseeable future or until Virtual Learning completes enough software and video educational titles to implement
a successful marketing program. Management believes that a total of sixteen (16) titles representing courses in
mathematics and science for grades K through 8 will be sufficient to generate sufficient revenue to bring Virtual
Learning to a break-even-point. Management has completed five (5) computer software titles relating to the teaching
of Basic English for foreign speaking individuals and eleven (11) titles relating to geometry and algebra for grades
first through fifth grade.
Based upon current expectations, management believes that Virtual Learning's existing capital resources, plus the
proceeds of a planned public offering of approximately $500,000 will be sufficient to meet Virtual Learning's
operating expenses and capital requirements to create the minimum of 16 additional titles to achieving a goal of 36
titles at which point Virtual Learning expects to have been shipping commercial product and recognizing revenue
for over twelve months and selling annual memberships to view courses on line.
In the event a public offering cannot be completed in a timely manner or under acceptable conditions, Virtual
Learning believes that it can continue to run its operations by operating at minimal staffing and relying on the
services of Thomas P. Monahan to provide the funds and skills required to continue operating and complete the
design and computer programming of the required educational titles and enable Virtual Learning to complete its
marketing plans.
On June 2, 2011, Virtual Learning filed a registration statement on form S-1 pursuant to the Securities Act of 1933,
as amended to offer an aggregate of 1,000,000 shares of common stock at $.50 per share for an aggregate offering of
$500,000. On August 10, 2011, Virtual Learning’s S-1 registration became effective. As of September 30, 2011,
the Company has not sold any shares of its common stock.
If Virtual Learning does not complete the public offering, and if no other sources of additional capital are available,
management anticipates that it would substantially reduce Virtual Learning's operating expenses to the minimum
required to support the continued development of its technology. Mr. Monahan has agreed to provide the additional
funds as needed to ensure the continuation of Virtual Learning and to provide the programming and technical skills
F-12
needed to complete the planned software and video titles on CD and DVD formatted disks. There can be no
assurance that Mr. Monahan will be able to complete the titles in a timely manner to take advantage of the void in
the market place for this form of educational materials in these formats. There can be no assurance that Virtual
Learning's negative cash flows will not necessitate ceasing operations entirely.
Property and Equipment
Property and equipment is presented at stated value upon contribution or at the cost of acquisition. Depreciation is
provided using the straight-line method over an estimated useful life of five years. Repairs and maintenance costs
are expensed as incurred, and renewals and betterments are capitalized.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the amounts reported and
disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these
estimates.
On an ongoing basis, Virtual Learning’s management evaluates its estimates, including those related to revenue
recognition, the need for an allowance for uncollectible accounts receivable, fair value of investments, fair value of
acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment, deemed value
of common stock for the purpose of determining stock-based compensation, and income taxes, among others.
Management bases its estimates on historical experience and on various other assumptions that are believed to be
reasonable, the results of which form the basis for making judgments about the carrying values of assets and
liabilities.
Virtual Learning’s management (board of directors) determines the value assigned to shares of common stock in the
absence of a public market for these shares.
Fair Value of Financial Instruments
The carrying amounts of Virtual Learning’s financial instruments, including cash and cash equivalents, short-term
investments, accounts receivable, accounts payable, and accrued liabilities, approximate fair value because of their
short maturities.
Capitalized Curriculum Development Costs
Virtual Learning internally develops curriculum, which is primarily provided as web content and accessed via the
Internet. Virtual Learning also creates textbooks and other offline materials.
Virtual Learning capitalizes curriculum development costs incurred during the application development stage in
accordance with accounting principles generally accepted in the United States of America. These principles provide
guidance for the treatment of costs associated with computer software development and defines those costs to be
capitalized and those to be expensed. Costs that qualify for capitalization are external direct costs, payroll, and
payroll-related expenses. Costs related to general and administrative functions are not capitalized and are expensed
as incurred. Virtual Learning capitalizes curriculum development costs when the projects under development reach
technological feasibility. Many of our new courses are leveraged off of proven delivery platforms and are primarily
content, which has no technological hurdles. As a result, a significant portion of our courseware development costs
qualify for capitalization due to the concentration of our development efforts on the content of the courseware.
Technological feasibility is established when we have completed all planning, designing, coding, and testing
activities necessary to establish that a course can be produced to meet its design specifications. Capitalization ends
when a course is available for general release to our customers, at which time amortization of the capitalized costs
begins. The period of time over which these development costs will be amortized is generally five years. This is
F-13
consistent with the capitalization period used by others in our industry and corresponds with our product
development lifecycle.
Total capitalized curriculum development costs are $243,000 as of September 30, 2011. These incurred capitalized
costs were $9,000, $122,000 and $152,000, for the nine months ended September 30, 2011, for the year ended
December 31, 2010, and from inception (January 6, 2009) through December 31, 2009, respectively. The asset
balance at September 30, 2011, also includes a reduction of $40,000 reflecting a write-off of work by a programmer
whose work product was considered unsatisfactory. These amounts are recorded in the accompanying balance
sheets, net of amortization and impairment charges. Amortization and impairment charges are recorded in product
development expenses on the accompanying statements of operations. Amortization expense for the nine months
ended September 30, 2011 was none.
Cash and Cash Equivalents and Short-Term Investments
Virtual Learning invests its excess cash, if any, in money market funds and in liquid debt instruments of the U.S.
government, its agencies and municipalities. All liquid investments with stated maturities of three months or less
from date of purchase are classified as cash equivalents; all liquid investments with stated maturities of greater than
three months are classified as short-term investments.
Offering Costs
Deferred offering costs incurred by Virtual Learning in connection with the proposed registration statement will be
expensed as incurred
Revenue Recognition
Revenue is recognized when all of the following conditions are satisfied: there is persuasive evidence of an
arrangement, the customer has access to full use of the product, the collection of the fees is reasonably assured, and
the amount of the fees to be paid by the customer is fixed or determinable.
Revenue from customer subscriptions is recognized ratably over the subscription term beginning on the
commencement date of each subscription. The average subscription term is twelve (12) months for our products, and
all subscriptions are on a non-cancelable basis. When additional months are offered as a promotional incentive,
those months are part of the subscription term. As part of their subscriptions, customers generally benefit from new
features and functionality with each release at no additional cost.
Although our membership contracts are generally non-cancelable, customers have the right to cancel their contracts
by providing prior written notice to us of their intent to cancel the remainder of the contract term. In the event a
customer cancels its contract, they are not entitled to a refund for prior services we have provided to them.
Customer support is provided to customers following the sale at no additional charge and at a minimal cost per call.
Virtual Learning does not incur significant up-front costs related to providing its products and services and therefore
does not defer any expenses.
Revenue from the sale of CD’s or DVD’s and other materials is recognized when shipped or available to the
customer in a downloadable format.
Cost of Revenue
Cost of revenue includes the cost to host and make available Virtual Learning’s products and services to its
customers. A significant portion of the cost of revenue includes salaries and related costs of engineering employees
F-14
and contractors who maintain Virtual Learning’s servers and technical equipment and work on Virtual Learning’s
web-based hosted platform. Other costs include facility costs for Virtual Learning’s web platform servers and
routers, network monitoring costs, depreciation of network assets and amortization of the technical development
intangible assets.
Operating Expenses
Operating expenses consists of sales and marketing, content development and general and administrative expense.
Sales and marketing expense consists primarily of salaries, commissions and related costs for Virtual Learning’s
inside and field sales teams, marketing, customer service, training, and account management. Sales and marketing
also includes direct marketing costs, travel, and amortization of customer relationship intangible assets.
Content development expense consists primarily of salaries and related costs for employees who write the questions
for Virtual Learning’s products and amortization of content intangible costs.
General and administrative expense consists primarily of salaries and related costs for executives, finance and
accounting, human resources, customer relations and order management. General and administrative expense also
includes professional services, rent, insurance, travel, depreciation, and other corporate expenses.
Net Income (Loss) Per Share
Per share data has been computed and presented pursuant to the provisions of accounting principles generally
accepted in the United States of America. Net income (loss) per common share - basic is calculated by dividing net
income (loss) by the weighted average number of common shares outstanding during the period.
Income Taxes
Virtual Learning accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax reporting purposes. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities
of a change in tax rates is recognized in the provision for income tax in the statements of operations. Virtual
Learning evaluates the probability of realizing the future benefits of its deferred tax assets and provides a valuation
allowance when realization of the assets is not reasonably assured.
Virtual Learning recognizes in its financial statements the impact of tax positions that meet a “more likely than not”
threshold, based on the technical merits of the position. The tax benefits recognized from such a position are
measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate
settlement.
Recent Accounting Pronouncements
Effective January 1, 2009, Virtual Learning adopted SFAS No. 157, “Fair Value Measurements” (codified in “ASC
820”), for its non-financial assets and liabilities and for its financial assets and liabilities measured at fair value on a
non-recurring basis. ASC 820 provides a framework for measuring fair value in generally accepted accounting
principles, expands disclosures about fair value measurements, and establishes a fair value hierarchy that requires an
entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. The adoption of ASC 820 for Virtual Learning’s non-financial assets and liabilities did not have a material
impact on Virtual Learning’s financial statements, though it may in the future. In April 2009, the FASB issued FSP
FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly,” FSP No. FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments,” and FSP FAS 107-1 and APB 28-1,
F-15
“Interim Disclosures about Fair Value of Financial Instruments” (all codified in ASC 820). Virtual Learning adopted
the FSPs as of January 2009, which did not have a material impact on Virtual Learning’s financial statements.
In May 2009, the FASB issued new standards for subsequent events, which establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date but before financial statements are
issued or are available to be issued. The new standards are effective for interim and annual reporting periods ending
after June 15, 2009. Virtual Learning adopted the new standards during the third quarter of fiscal 2009 and, as the
pronouncement only requires additional disclosures, the adoption did not have an impact on our financial position,
results of operations or cash flows. Virtual Learning has evaluated subsequent events through the date of the report
of Virtual Learning’s independent registered certified public accounting firm (LGG & Associates, PC) that these
financial statements were issued.
In June 2009, the FASB issued the FASB Accounting Standards Codification (the “Codification”) for financial
statements issued for interim and annual periods ending after September 15, 2009, which was effective for us
beginning in the fourth quarter of fiscal 2009. The Codification became the single authoritative source for GAAP.
Accordingly, previous references to GAAP accounting standards are no longer used in Virtual Learning’s
disclosures, including these Notes to the Financial Statements. The Codification does not affect our financial
position, cash flows, or results of operations.
In September 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605) — Multiple-Deliverable
Revenue Arrangements. The new standard modifies the revenue recognition guidance for arrangements that involve
the delivery of multiple elements to a customer at different times as part of a single revenue generating transaction.
The new standard provides principles and application guidance to determine whether multiple deliverables exist,
how the individual deliverables should be separated and how to allocate the revenue in the arrangement among those
separate deliverables. The new standard allows the use of companies’ estimated selling prices as the value for
deliverable elements under certain circumstances and to eliminate the use of the residual method for allocation of
deliverable elements. The new standard also expands the disclosure requirements for multiple deliverable revenue
arrangements. The new standard will be effective for fiscal years beginning on or after June 15, 2010, with earlier
adoption permitted. Virtual Learning does not expect the adoption of this new standard will have a material impact
on its financial position, results of operations, and cash flows.
In September 2009, the FASB also issued ASU No. 2009 — 14 — Software (Topic 985) — Certain Revenue
Arrangements That Include Software Elements. This standard removes tangible products from the scope of software
revenue recognition guidance and also provides guidance on determining whether software deliverables in an
arrangement that includes a tangible product, such as embedded software, are within the scope of the software
revenue guidance. The new standard will be effective for fiscal years beginning on or after June 15, 2010, with
earlier adoption permitted. Virtual Learning does not expect the adoption of this new standard will have a material
impact on its financial position, results of operations, and cash flows.
In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2010 — 06 — Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about
Fair Value Measurements. This standard amends the disclosure guidance with respect to fair value measurements
for both interim and annual reporting periods. Specifically, this standard requires new disclosures for significant
transfers of assets or liabilities between Level 1 and Level 2 in the fair value hierarchy; separate disclosures for
purchases, sales, issuances and settlements of Level 3 fair value items on a gross, rather than net basis; and more
robust disclosure of the valuation techniques and inputs used to measure Level 2 and Level 3 assets and liabilities.
Virtual Learning does not expect the adoption of this new standard will have a material impact on its financial
position, results of operations, and cash flows.
In December 2010, the FASB issued ASU 2010-29 which will change the disclosures of supplementary pro forma
information for business combinations. The new standard clarifies that if a public entity completes a business
combination and presents comparative financial statements, the entity should disclose revenue and earnings of the
combined entity as though the business combination that occurred during the current year had occurred as of the
beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro
F-16
forma disclosures under ASC topic 805 to include a description of the nature and amount of material, nonrecurring
pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue
and earnings. ASU 2010-29 is effective for any business combination we complete on or after January 1, 2011. The
revised disclosure requirements will not affect the Virtual Learning’s financial position, results of operations, or
cash flows.
2 - Property and Equipment
Property and equipment is summarized as follows:
Estimated
Useful Lives
March 31,
December 31,
December 31,
Years
2011
2010
2009
____________
__________
___________
___________
Office Equipment 5-10
$
4,155
$ 4,155
$ 3,000
Less: Accumulated depreciation
1,146
996
300
__________
___________
___________
$
3,009
$
3,159
$
2,700
__________
___________
___________
__________
___________
___________
Depreciation expense for the year ended December 31, 2010 and from inception (January 6, 2009) through
December 31, 2009 and for the nine months ended September 30, 2011was $630, $696 and $150, respectively
3 - Related Party Transactions
On January 6, 2009, Virtual Learning issued an aggregate of 10,000,000 shares of common stock valued at $.001 per
share to Thomas P. Monahan, President, in consideration for cash of $10,000.
As of December 31, 2009 and 2010 and September 30, 2011, Thomas P. Monahan had advanced Virtual Learning
net interest free loans aggregating $15,400, $1,640 and $12 respectively.
Virtual Learning occupies office space rent free on a month to month basis at 60 Knolls Crescent, Apartment 9M,
Bronx, New York 10463.
Virtual Learning has accumulated capitalized software development costs at December 31, 2009 and 2010
aggregating $12,000 and $12,000 and contributed these amounts to Virtual Learning as additional paid-in capital.
These costs represent the fair market value of time contributed to Virtual Learning by Thomas Monahan, President.
4 - Employment Contracts
Virtual Learning is currently negotiating with Thomas P. Monahan to establish an employment contract. The terms
of an employment agreement have not been determined.
5 - Deferred Income Taxes
For the year ended December 31, 2010, and for the period from inception (January 6, 2009) through December 31,
2009 and for the three months ended September 30, 2011, Virtual Learning incurred net operating losses for income
tax reporting purposes of $9,236, $672 and 4,296, respectively. These net operating losses expire in various years
F-17
through December 31, 2022. The significant components of Virtual Learning's deferred tax asset as of December 31,
2010 and 2009 and March 31, 2011 are as follows:
The components of the net deferred tax assets and liabilities are as follows:
March 31,
December 31,
2011
2010
2011
Deferred tax assets:
Net operating loss carry forward
$4,296
$9,236
$672
Stock-based compensation
-___
120,000
680,000
Total deferred tax assets before valuation allowance
4,296
129,236
680,672
Valuation allowance
(4,296)
(129,236)
(680,672)
Total deferred tax assets
$ -
$ -
$ -__
Deferred tax liabilities
$ -
$ -
$ -__
SFAS No. 109 requires a valuation allowance to be recorded when it is more likely than not that some or all of the
deferred tax asset will not be realized. At December 31, 2010 and 2009 and September 30, 2011, a valuation
allowance for the full amount of the net deferred tax asset was recorded.
The Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109" ("FIN 48"). This Interpretation clarifies accounting for uncertainty in
income taxes recognized in an enterprise's financial statements. FIN 48 establishes guidelines for recognition and
measurement of a tax position taken or expected to be taken in a tax return. The Company has not made any
adjustments, and there is no impact, as a result of the adoption of this interpretation. The company reports interest
and penalties associated with its tax positions, if any, as interest expense.
6 - Commitments and contingencies
In March 2009, Virtual Learning entered into certain agreements for curriculum development costs with three
individuals for services in video production and the design of high school and college level math courses. The
agreements call for the payment of 5% royalties each on net revenues up to $1,000,000 and 5% royalty on net
revenues beyond $1,000,001 on projects in which they directly participated and have made material contributions in
consideration for 200,000 shares of stock each valued at $40,000 or $0.20 per share.
In May 2010, the agreement with one individual was rescinded for non-performance. The stock certificate for
200,000 shares was returned to Virtual Learning and canceled. In addition, the parties signed mutual releases. The
Statement of Stockholders’ Equity has been prepared to reflect these shares as never have been issued.
In May 2010, the agreement with another individual was superseded by an updated agreement under similar terms
and conditions.
7 - Common Stock Issuances
On February 17, 2009, Virtual Learning issued an aggregate of 10,000,000 shares of common stock at par value
($.001 per share) to Thomas P. Monahan, President, in exchange for cash of $10,000.
On March 31, 2009, Virtual Learning issued an aggregate of 700,000 shares of common stock to four individuals for
an aggregate consideration of $140,000 for curriculum development costs or $.20 per share.
On March 31, 2009, Virtual Learning issued an aggregate of 3,000,000 shares of common stock to Dr. John Swint
for an aggregate consideration of $600,000 in consulting and professional fees or $.20 per share.
F-18
On March 31, 2009, Virtual Learning issued an aggregate of 400,000 shares of common stock to Mr. Roger Fidler
for an aggregate consideration of $80,000 in legal fees or $.20 per share.
In March 2010, Virtual Learning issued 100,000 shares of common stock for a cash price of $20,000 at $.20 per
share to one individual.
In June 2010, Mr. Roger Fidler received an additional 600,000 shares of common stock in consideration for legal
fees aggregating $120,000 or $.20 per share.
In July, 2011, Virtual Learning reached a agreement with a programmer that was engaged to perform certain
functions relating to software and video production and whose work was found unacceptable to return 200,000
shares of common stock for cancellation that was issued as part payment for his services. The cancellation of these
shares was recorded at the price issued of $40,000 or $.20 per share.
In June 2010, Virtual Learning issued an aggregate of 550,000 shares of common stock to several individuals for an
aggregate consideration of $110,000 for curriculum development costs or $.20 per share.
In July, 2011, Virtual Learning reached a agreement with a programmer that was engaged to perform certain
functions relating to software and video production and whose work was found unacceptable to return 200,000
shares of common stock for cancellation that was issued as part payment for his services. The cancellation of these
shares was recorded at the price issued of $40,000 or $.20 per share.
In July, 2011, Mr. Roger Fidler received an additional 200,000 shares of common stock in consideration for legal
fees aggregating $40,000 or $.20 per share.
Virtual Learning’s management (board of directors) determines the value assigned to shares of common stock issued
in non-cash transactions in the absence of a public market for these shares.
F-19
SUBSCRIPTION AGREEMENT
The undersigned hereby subscribes for _____________ shares of the common stock of The Virtual Learning
Company, Inc. at a price of $0.50 per share. The undersigned acknowledges receipt of the Prospectus of The Virtual
Learning Company, Inc. of which this Subscription Agreement is part.
Please return this Subscription Agreement, signed below, together with a check payable to The Virtual Learning
Company, Inc. addressed to The Virtual Learning Company, Inc., 60 Knolls Crescent, Suite 9M, Bronx, NY 10463.
Subscriber’s Signature
Co-Subscriber’s Signature
Print Name:
Print Name:
_____________________________________
______________________________________
_____________________________________
______________________________________
Subscriber’s Address
Co-Subscriber’s Address
_________________________________
________________________________________
Subscriber’s Social Security Number
Co-Subscriber’s Social Security Number
Type of Ownership (Check One):
_______ Individual
_______ Joint
_______ Corporate: State Name of Corporation or other business entity: _________________________
_______ Trust: State Name of Trust: ______________________________________________________
_______ Other (Specify): _______________________________________________________________
Subscriber Date:
Date:
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The Virtual Learning Company, Inc.
1,000,000 Shares
Common Stock
PROSPECTUS
You should rely only on the information contained in this document or that we have referred you to. We have not
authorized anyone to provide you with information that is different. This prospectus is not an offer to sell common
stock and is not soliciting an offer to buy common stock in any state where the offer or sale is not permitted.
Until March 19, 2012 all dealers that effect transactions in these securities, whether or not participating in the
offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments or subscriptions.
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