丝瓜视频. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Significant Accounting Policies (Policies)

Significant Accounting Policies (Policies)

9 Months Ended

Jan. 31, 2015

Significant Accounting Policies [Abstract]

Principles of Consolidation

The unaudited consolidated financial statements include the accounts of 丝瓜视频. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of the unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the unaudited consolidated financial statements. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited consolidated financial statements include the allowance for doubtful accounts and other receivables, the valuation of collateral on certain receivables, amortization periods and valuation of courseware and software development costs, valuation of beneficial conversion features in convertible debt, valuation of stock-based compensation, the valuation of net assets and liabilities from discontinued operations and the valuation allowance on deferred tax assets.

Cash and Cash Equivalents

Cash and Cash Equivalents

For the purposes of the unaudited condensed consolidated statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at January 31, 2015 and April 30, 2014 respectively. The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits of $250,000 per financial institution. The Company has not experienced any losses in such accounts from inception through January 31, 2015. As of January 31, 2015, there was $176,602, $760,169 and $638,028 located in three institutions greater than the federally insured limits.

Restricted Cash

Restricted Cash

Restricted cash represents amounts pledged as security for letters of credit for transactions involving Title IV programs, as well as funds held in escrow. The company considers $888,225 and $868,298 as restricted cash (shown as a current asset as of January 31, 2015 and April 30, 2014 respectively).

Fair Value Measurements

Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and

Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Refunds Due Students

Refunds Due Students

The Company receives Title IV funds from the Department of Education to cover tuition and living expenses. Until forwarded to the student, this amount is captured in a current liability account called Refunds Due Students. Typically, the funds are paid to the students within two weeks.

Revenue Recognition and Deferred Revenue

Revenue Recognition and Deferred Revenue

Revenues consist primarily of tuition and fees derived from courses taught by the Company online as well as from related educational resources that the Company provides to its students, such as access to our online materials and learning management system. Tuition revenue is recognized pro-rata over the applicable period of instruction. The Company allows a student to make three monthly tuition payments during each 10-week class. The Company maintains an institutional tuition refund policy, which provides for all or a portion of tuition to be refunded if a student withdraws during stated refund periods. Certain states in which students reside impose separate, mandatory refund policies, which override the Company's policy to the extent in conflict. If a student withdraws at a time when a portion or none of the tuition is refundable, then in accordance with its revenue recognition policy, the Company recognizes as revenue the tuition that was not refunded. Since the Company recognizes revenue pro-rata over the term of the course and because, under its institutional refund policy, the amount subject to refund is never greater than the amount of the revenue that has been deferred, under the Company's accounting policies revenue is not recognized with respect to amounts that could potentially be refunded. The Company's educational programs have starting and ending dates that differ from its fiscal quarters. Therefore, at the end of each fiscal quarter, a portion of revenue from these programs is not yet earned and is therefore deferred. The Company also charges students annual fees for library, technology and other services, which are recognized over the related service period. Deferred revenue represents the amount of tuition, fees, and other student payments received in excess of the portion recognized as revenue and it is included in current liabilities in the accompanying consolidated balance sheets. Other revenues may be recognized as sales occur or services are performed.

Net Loss Per Share

Net Loss Per Share

Net loss per common share is based on the weighted average number of common shares outstanding during each period. Options to purchase 14,576,412 and 9,583,086 common shares, warrants to purchase 44,007,963 and 19,196,635 common shares, and $650,000 and $2,240,000 of convertible debt (convertible into 1,207,143 and 8,093,985 common shares, respectively) were outstanding during the nine months ended January 31, 2015 and 2014, respectively, but were not included in the computation of diluted loss per share because the effects would have been anti-dilutive. The options, warrants and convertible debt are considered to be common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive.

Reclassifications

Reclassifications

For the three and the nine months ending January 31, 2014, the Company reclassified $55,314 and $168,155 respectively, from Cost of Revenues to General and Administrative, both within Operating Expenses, to conform to the current period presentation.

	For the 9 Months ended January 31, 2014
		Reclassifications

				Dues,			Internet
		As Previously		Fees, &			Related			Marketing		Library		As
		Reported		Licenses			Expense			Fees		Services		Reclassified

Operating Expenses:
Instructional		$	734,597		(55,127	)		(113,028	)	—		—		$	566,442
Marketing			824,002		—			—		—		—			824,002
Cost of Revenues		$	1,558,599		(55,127	)		(113,028	)		—		—	$	1,390,444
Receivable collateral valuation reserve			123,647		—			—			—		—		123,647
General and administrative			4,698,343		55,127			113,028			—		—		4,866,498
Depreciation and amortization			350,990		—			—			—		—		350,990
Total Operating Expenses		$	6,731,579		—			—			—		—	$	6,731,579

	For the 3 Months ended January 31, 2014
		Reclassifications

				Dues,			Internet
		As Previously		Fees, &			Related			Marketing		Library		As
		Reported		Licenses			Expense			Fees		Services		Reclassified

Operating Expenses:
Instructional		$	285,221		(14,878	)		(40,436	)	—		—		$	229,907
Marketing			270,404		—			—		—		—			270,404
Cost of Revenues		$	555,625		(14,878	)		(40,436	)		—		—	$	500,311
Receivable collateral valuation reserve			123,647		—			—			—		—		123,647
General and administrative			1,697,403		14,878			40,436			—		—		1,752,717
Depreciation and amortization			121,904		—			—			—		—		121,904
Total Operating Expenses		$	2,498,579		—			—			—		—	$	2,498,579

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Financial Accounting Standards Board, Accounting Standard Updates which are not effective until after January 31, 2015 are not expected to have a significant effect on the Company's unaudited consolidated financial position or results of operations.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements – Going Concern (Topic 205-40)”, which requires management to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure is required. This new standard will be effective for the Company for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the implementation of this standard to have a material effect on it disclosures.