<PAGE> 1
As filed with the Securities and Exchange Commission on February 5, 1998
Registration No: 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO 1 TO
FORM S-1 REGISTRATION STATEMENT (FILE NO. 333-33025)
ON
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------
EDUCATIONAL MEDICAL, INC.
(Exact name of small business registrant as specified in its charter)
DELAWARE 65-0038445
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1327 NORTHMEADOW PARKWAY, SUITE 132
ROSWELL, GEORGIA 30076
(770) 475-9930
(Address, including zip code, and telephone number,
including area code of registrant's principal
executive offices)
------------------
MR. GARY D. KERBER
CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT AND CHIEF EXECUTIVE OFFICER
1327 NORTHMEADOW PARKWAY, SUITE 132
ROSWELL, GEORGIA 30076
(770) 475-9930
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
Copies of Communications to:
MORRIS C. BROWN, ESQ.
GREENBERG TRAURIG HOFFMAN LIPOFF ROSEN & QUENTEL, P.A.
777 SOUTH FLAGLER DRIVE, SUITE 310-EAST TOWER
WEST PALM BEACH, FLORIDA 33401
(561) 650-7928
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement become effective.
<PAGE> 2
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered on in connection with dividend or
reinvestment plans, check the following box: |X|
If this Form is filed to register additional securities for an offering pursuant
to rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: |_|
<TABLE>
<CAPTION>
================================================================================================================
CALCULATION OF REGISTRATION FEE
================================================================================================================
Proposed
Title of each class of Proposed maximum Amount of
securities to be Amount to be maximum offering aggregate registration
registered(1) registered price per unit(2) offering price(2) fee*
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 718,048(3) $9.94 $7,137,397.12 $0.00
================================================================================================================
</TABLE>
*No fee is due herein as all fees were paid in connection with the prior filing
of Registrant's Registration Statement on Form S-1 (File No. 333-33025).
(1) These securities were previously registered on Form S-1 (No. 333-33025)
effective September 24, 1997. The prospectus contained in this Form S-3
is a post-effective amendment to the Form S-1, and serves as the
current prospectus for these securities.
(2) Offering price is calculated based pursuant to Rule 457(c), based on
the average of the high ($10.00) and low ($9.875) prices for the
registrant's Common Stock on February 2, 1998, as reported by Nasdaq.
(3) The previous registration statement (File No. 333-33025) registered
723,379 shares of the Company's Common Stock. In settlement of certain
liabilities as more fully explained in "Fiscal Year 1997 Acquisitions
The Nebraska Acquisition," 5,331 shares were returned to, and cancelled
by, the Company, leaving a total of 718,048 shares to be sold by the
Selling Shareholders. In addition to serving as the current prospectus
for the 718,048 shares, this registration statement on Form S-3
deregisters the 5,331 shares which were cancelled by the Company.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
i
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY ___, 1998
PRELIMINARY PROSPECTUS
718,048 SHARES
[LOGO]
EDUCATIONAL MEDICAL, INC.
COMMON STOCK
------------------
This Prospectus relates to the possible future resale (the "Offering"),
from time to time, by the holders thereof, of up to 718,048 shares (the
"Shares") of common stock, $.01 par value per share (the "Common Stock") of
Educational Medical, Inc. (the "Company"). See "Selling Stockholders." The
Company granted registration rights to the Selling Stockholders with regard to
the resale of the Shares. Pursuant to the terms of these registration rights,
the Company is obligated to pay all fees and expenses incurred by it incident to
this Offering. It is estimated that such fees and expenses will be approximately
$26,000. The Company will not receive any proceeds from the sale of the Shares.
The Common Stock of the Company is traded over-the-counter and quoted
on NASDAQ National Market ("NASDAQ") under the symbol "EDMD." The last reported
sale price of the Common Stock on NASDAQ on February 2, 1998 was $9.875 per
share.
SEE "RISK FACTORS" BEGINNING ON PAGE ___ HEREOF FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN
THE COMMON STOCK.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Selling Stockholders may offer the shares offered hereby from time
to time to purchasers directly or through agents, brokers or dealers, The Shares
may be sold at market prices prevailing at the time of sale or at negotiated
prices. The agents, brokers or dealers through whom sales are made may be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as
amended ( the "Securities Act"), and any amount received by them in exchange for
their services in connection with such sales may be deemed to be underwriting
commissions. See "Plan of Distribution."
THE DATE OF THIS PROSPECTUS IS FEBRUARY ___, 1998.
<PAGE> 4
REPORTS TO SECURITY HOLDERS
The Company furnishes its stockholders annual reports containing
audited consolidated financial statements. In addition, the Company is required
to file periodic reports on Forms 8-K, 10-QSB and 10-KSB with the Commission and
to make such reports available to its stockholders.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act of
1933, as amended (the "Securities Act"), of which this Prospectus is a part,
with respect to the Common Stock offered hereby. This Prospectus omits certain
information contained in the Registration Statement, and reference is made to
the Registration Statement for further information with respect to the Company
and the Common Stock offered hereby. Statements contained herein concerning the
provisions of documents are necessarily summaries of such documents and when any
such document is an exhibit to the Registration Statement, each such statement
is qualified in its entirety by reference to the copy of such document filed
with the Commission. Copies of the Registration Statement may be obtained upon
payment of the prescribed fees or examined without charge at the public
referenced facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549.
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information with
the Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and Northwest Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies can also be
obtained at prescribed rates from the Public Reference Section of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition,
such materials filed electronically by the Company with the Commission are
available at the Commission's World Wide Web Site at http://www.sec.gov.
The Common Stock is listed on the NASDAQ National Market. Reports,
proxy statements and other information concerning the Company can be inspected
at the offices of The NASDAQ Stock Market, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006-1506.
REFERENCE DATA
Industry, market and market share information contained herein is based
on information appearing in publicly available reports. The Company has not
independently verified such information.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this prospectus by reference:
(1) Annual Report on Form 10-K for the fiscal year ended March 31,
1997 filed with the Commission on June 30, 1997;
(2) Annual Report on Form 10-K/A for the fiscal year ended March
31, 1997 filed with the Commission on February 3, 1998.
(3) Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, filed with the Commission on August 14, 1997;
(4) Quarterly Report on Form 10-Q for the quarter ended September
30, 1997, filed with the Commission on November 6, 1997;
(5) Quarterly Report on Form 10-Q/A for the quarter ended
September 30, 1997, filed with the Commission on November 10,
1997.
(6) Proxy Statement on Schedule 14A filed with the Commission on
July 30, 1997;
2
<PAGE> 5
(7) Current Report on Form 8-K regarding the Company's Annual
Meeting of Shareholders and Election of Directors, filed with
the Commission on September 26, 1997;
(8) Registration Statement on Form S-1 (Registration No.
333-33025) filed by the Company, effective September 24, 1997,
for the description of the Company's securities contained
therein, including any amendments or reports filed for the
purpose of updating such description; and
(9) Registration Statement on Form 8-A filed by the Company on
August 18, 1997.
Each document filed subsequent to the date of this Prospectus pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this Offering shall be deemed to be incorporated in this
Prospectus by reference and to be a part hereof from the date of the filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any document incorporated by reference in this Prospectus
(other than exhibits unless such exhibits are specifically incorporated by
reference in such documents). Requests should be directed to Shareholder
Relations, Educational Medical, Inc., 1327 Northmeadow Parkway, Suite 132,
Roswell, Georgia 30076, telephone: 770-475-9930.
FORWARD-LOOKING INFORMATION
This Prospectus contains certain forward-looking statements that
involve substantial risks and uncertainties. When used in this Prospectus, the
words "anticipate," "believe," "estimate," "expect" and similar expressions as
they relate to the Company or its management are intended to identify such
forward-looking statements. Actual results, performance or achievements could
differ materially from the results expressed in, or implied by, these forward
- - -looking statements. Factors that could cause or contribute to such differences
include those discussed in "Risk Factors."
3
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and the consolidated
financial statements and notes thereto appearing elsewhere in this Prospectus or
incorporated into it by reference. Prospective investors should consider
carefully the information set forth under the heading "Risk Factors."
THE COMPANY
The Company, a Delaware corporation, was founded in 1988 by Gary D.
Kerber, the Chairman of the Board and President of the Company. The Company
began business by acquiring seven schools in fiscal 1989 and 1990, all of which
offered programs in the healthcare field. In fiscal 1992, the Company continued
to grow by acquisition and implemented a new strategy to diversify outside of
the healthcare field by acquiring a fashion and design school. In fiscal 1993
and 1994, the Company acquired seven additional schools which included schools
offering programs in the fields of healthcare, business, fashion and design, and
photography. In fiscal 1997, the Company acquired six schools which included
schools offering programs in the fields of healthcare and business -- See
"Fiscal Year 1997 Acquisitions." As a result of its fiscal 1992, 1993, 1994 and
1997 acquisitions (4,176 students were attending such schools at the date of
their respective acquisitions) and increasing enrollment at its existing and
newly acquired schools, the number of students attending the Company's schools
rose 3,153 from 2,840 at March 31, 1993 to 5,993 at March 31, 1997. During the
same period, the Company's net revenues increased 97% from $25.1 million for the
year ended March 31, 1993 to $49.4 million for the year ended March 31, 1997.
The foregoing and all other information in this Prospectus include the
operations of the Company's two schools in Nebraska, which were acquired in
fiscal 1997 and accounted for as a pooling of interests.
As of March 31, 1997, the Company provided diversified career oriented
postsecondary education to approximately 6,000 students in 19 schools located in
nine states. The Company's schools offer diploma and/or associate degree
programs designed to provide students with the knowledge and skills necessary to
qualify them for entry level employment in the fields of healthcare (offered in
17 schools), business (offered in seven schools), fashion and design (offered in
three schools), and photography (offered in one school). In July 1997, the
Company consolidated two of its schools, both of which were located in Vista,
California. The Company's curricula include programs leading to employment in
nine of the 15 fastest growing occupations (measured by percentage growth from
1994 through 2005) as projected by the U.S. Department of Labor. At March 31,
1997, approximately 67% of the Company's students were enrolled in programs in
the healthcare field. As of the same date, approximately 32% of the Company's
students were enrolled in associate degree programs and the remainder were
enrolled in diploma programs. Due to the diversity of the programs offered by
the Company's schools, graduates of the Company's programs are employed by a
wide variety of employers, including hospitals, physicians, insurance companies,
retailers, corporate graphics departments, photographic studios and other
businesses.
The Company believes the demand for postsecondary career oriented
education will increase over the next several years as a result of recognized
trends, including (i) a projected 21% growth in the number of new high school
graduates from approximately 2.5 million in 1993-94 to approximately 3.0 million
in 2005-06, (ii) the increasing enrollment of students over the age of 24 in
postsecondary education institutions as they seek to enhance their skills or
retrain for new technologies, and (iii) the increasing recognition of the income
premium attributable to higher education degrees, with individuals holding
associate degrees earning on average approximately 30% more income during their
lifetimes than individuals holding only high school diplomas.
According to the Department of Education, there were approximately
2,187 accredited, proprietary postsecondary main campuses that participate in
Title IV programs as of March 1997. The ownership of
4
<PAGE> 7
these schools is highly fragmented. Although the industry appears to be moving
into a consolidation phase, management believes that no organization either
holds a significant national market share or owns or operates more than 75
schools.
The Company's goal is to increase its market share in the expanding
market for postsecondary education and improve profitability by (i) acquiring
additional schools, (ii) promoting internal growth at the Company's existing and
any newly acquired schools, and (iii) enhancing operating efficiencies. The
Company has implemented the following strategies to achieve these goals:
THE IPO
In October 1996, the Company completed an initial public offering (the
"IPO") of 2,200,000 shares of its common stock and received net proceeds of
approximately $19.3 million. Approximately $4.8 million of the net proceeds of
the IPO were used to repay indebtedness and related interest and expenses. The
remainder of the net proceeds, approximately $14.5 million, have been and
continue to be used for general corporate purposes, principally the expansion of
its operations through the acquisition of additional schools and adding academic
programs at existing schools. Certain stockholders also sold 410,000 shares in
the IPO; the Company received no proceeds related to these sales.
ACQUISITION STRATEGY
The Company intends to acquire additional schools and integrate them
into its existing school system. The Company believes that the fragmentation of
the postsecondary education market provides significant opportunities to
consolidate existing independently owned schools. The Company expects to utilize
a majority of the proceeds of the IPO, its bank credit facility, and seller
financing in connection with such acquisitions.
INTERNAL GROWTH STRATEGY
The Company intends to increase student enrollment at its existing and
any newly acquired schools by continuing to enhance local marketing efforts and
increasing the number and variety of program offerings at its schools.
The Company intends to continue to increase the number and variety of
programs offered at its schools by (i) developing new diploma and degree
programs, (ii) replicating existing programs at schools where such programs were
not previously offered, and (iii) introducing associate degree granting programs
at all of its schools currently offering only diploma programs.
OPERATING STRATEGY
The Company provides each of its schools with certain services which
the Company believes can be performed most efficiently and cost effectively by a
centralized office. Such services include marketing analysis, accounting,
information systems, financial aid and regulatory compliance. The Company
believes this will enable it to achieve significant economies of scale during
its planned expansion by combining a number of general and administrative
functions at the home office and regional levels. The Company believes that this
leaves local management the flexibility to react to the needs of its students
and changing job markets both promptly and effectively.
5
<PAGE> 8
FISCAL YEAR 1997 ACQUISITIONS
During the fiscal year ended March 31, 1997, the Company acquired a
total of six schools operating in Texas, Maryland and Nebraska.
THE TEXAS ACQUISITION
In September 1996, the Company acquired three Texas schools (the "Texas
Schools") for $2.5 million (the "Texas Acquisition"). As of the acquisition
date, approximately 706 students attended the schools, which offer diploma and
degree programs in the healthcare field at locations in San Antonio, McAllen,
and El Paso, Texas. As of March 31, 1997, approximately 844 students attended
the Texas Schools.
THE MARYLAND ACQUISITION
In December 1996, the Company acquired one school in Maryland known as
Hagerstown Business College (the "Hagerstown School") for $2.7 million in cash
(the "Maryland Acquisition"). As of the date of the acquisition, approximately
495 students attended Hagerstown Business College, which offers diploma and
degree programs in the field of business at a single location in Hagerstown,
Maryland, which is located in the Washington, D.C.-Baltimore corridor. As of
March 31, 1997, approximately 435 students attended the Hagerstown School. The
decrease is a result of the seasonal timing of student starts.
THE NEBRASKA ACQUISITION
On March 31, 1997, the Company acquired two schools located in Nebraska
(the "Nebraska Schools") by merging a privately held corporation, which
previously operated the schools, into a wholly-owned subsidiary of the Company
in exchange for 761,263 shares (the "Merger Shares") of the Company's common
stock (the "Nebraska Acquisition"). A total of 95,000 shares were held in escrow
pending resolution of certain contingencies related to the acquisition. In July
1997, 37,884 shares were returned to the Company and in October 1997, an
additional 5,331 shares were returned to the Company. In January 1998, the
Company agreed to the release of 32,735 shares from escrow to the Selling
Stockholders, leaving 19,050 shares remaining in escrow which shares will become
available for sale upon termination of the escrow. As of March 31, 1997,
approximately 687 students attended the Nebraska Schools, which offer degree and
diploma programs in business and healthcare at locations in Lincoln, Nebraska
("Lincoln") under the name of the "Lincoln School of Commerce," and Omaha,
Nebraska ("Omaha") under the name "Nebraska College of Business."
The Company has filed a registration statement pursuant to the
Securities Act of 1933 (the "Act") with respect to the Merger Shares of which
this Prospectus is a part. When declared effective by the Securities and
Exchange Commission (the "SEC"), and provided it continues to be effective, such
registration statement will enable the holders of the Merger Shares (who are the
Selling Stockholders) to sell their shares in the public market.
The Company operates the majority of its business through 13
subsidiaries. The Company's principal executive offices are located at 1327
Northmeadow Parkway, Suite 132, Roswell, Georgia 30076. Its telephone number is
(770) 475-9930.
RESULTS FOR QUARTERS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED).
On January 12, 1998, the Company announced its results of operations
for the quarter ended December 31, 1997; the Company has not yet filed its Form
10-Q for the quarter ended December 31, 1997. Summarized unaudited financial
information for the three months ended December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1997 December 31, 1996(a)
----------------- -------------------
(In Thousands, Except Per Share Data)
<S> <C> <C>
Net revenues $14,820 $13,325
Income Before Income Taxes and
Extraordinary Item $ 2,181 $ 1,456
Income Taxes 873 316
Income Before Extraordinary Item $ 1,308 $ 1,140
Extraordinary Item(b) ---- 309
Net Income $ 1,308 $ 831
Pro Forma Information (c):
Income Before Income Taxes and
Extraordinary Item ---- $ 1,456
Income Taxes ---- 385
Income Before Extraordinary Item ---- $ 1,071
Extraordinary Item(b) ---- 309
Net Income ---- $ 762
Basic Earnings Per Share:
Earnings Per Share $ .18 $ .14
Pro Forma Earnings Per Share Before
Extraordinary Item ---- $ .18
Pro Forma Earnings Per Share ---- $ .13
Diluted Earnings Per Share:
Earnings Per Share $ .17 $ .12
Pro Forma Earnings Per Share Before
Extraordinary Item ---- $ .15
Pro Forma Earnings Per Share ---- $ .11
Basic Average Shares Outstanding
(In Thousands) 7,461 6,008
Diluted Average Shares Outstanding
(In Thousands) 7,585 7,023
Number of Schools at End of Period (d) 18 19
Number of Students at End of Period 5,978 5,658
Number of New Student Starts During
Period 1,345 1,225
</TABLE>
- - ---------------
a) All data contained herein has been restated to reflect the
Nebraska Acquisition, which was accounted for as a pooling of
interests. All earnings per share data have been restated
pursuant to FASB Statement No. 128.
b) Extraordinary item consisted of a one-time charge totaling
$309,000, net of tax for early payoff of subordinated debt from
the proceeds of the Company's initial public offering.
c) Reflects a pro forma income tax provision for the Nebraska
Acquisition, which previously operated as a Subchapter S
Corporation as if it had been merged, operated as a C Corporation
and was combined with the Company for the periods presented and
includes the effects of accounting for income taxes under FASB
Statement No. 109.
d) Two schools located in Vista, California, were combined into one
location in the second quarter of fiscal year 1998.
Revenues increased 11.2% to $14.8 million for the three months ended
December 31, 1997 from $13.3 million for the three months ended December 31,
1996. Revenues from schools included in the Company's results for the entire
first quarters ending December 31, 1997 and 1996, respectively, increased
8.0%. The remainder of the increase is attributable to the Maryland school
acquired in December 1996.
During the quarter ended December 31, 1997, there were no significant
changes in estimates of income taxes, no school closures, no extraordinary,
unusual or infrequently occurring items, and no significant changes in financial
position.
The Company believes that the information includes all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of such quarterly information when read in conjunction with the
consolidated financial statements included elsewhere herein. The operating
results for any quarter are not necessarily indicative of the results for any
future period.
6
<PAGE> 9
RISK FACTORS
The following factors, among others, could cause actual results to
differ materially from those contained in forward-looking statements made in
this Prospectus and presented elsewhere by management from time-to-time.
Dependence On Title IV Funding; Regulatory Compliance As A Condition
For Continued Eligibility For Title IV Funding. The Company derives a
substantial majority of its revenues from federal financial aid received by the
students at its schools under Title IV programs administered by the United
States Department of Education under the HEA. Each of the Company's schools
participates in Title IV Programs. In order to participate in Title IV Programs,
an institution, such as each of the schools owned and operated by the Company,
must obtain certification by the Department of Education as an "eligible
institution." To obtain such certification, the institution must satisfy certain
eligibility, program, and general requirements imposed by the HEA and by
regulations thereunder (the "Regulations") promulgated and enforced by the
Department of Education. Generally, a school (a main campus and any additional
locations for purposes of the Regulations) is considered separately for
compliance with the Regulations. All but two of the Company's schools are main
campuses. An institution also must be authorized to offer its programs by the
relevant state agency where it is located and it must be accredited by a
nationally recognized accrediting agency to obtain and maintain such
certification. Each of the Company's schools is licensed and approved in the
state where it operates and is accredited by at least one nationally recognized
accrediting agency.
The provisions of the HEA and the Regulations govern many aspects of
the operation of the Company and its schools, including, but not limited to (i)
the maximum acceptable rate of default by a school's students with respect to
federally guaranteed or funded student loans, (ii) the maximum acceptable
proportion of school revenues derived from Title IV Programs, (iii) the school's
satisfaction of certain financial responsibility standards, (iv) the school's
satisfaction of certain administrative capability standards, (v) the ability of
a school to add locations and educational programs, and (vi) the ability of the
Company to engage in transactions involving a change in ownership resulting in a
change in control of the schools or the Company. Generally, each school is
considered separately for purposes of determining compliance with the regulatory
requirements, although certain financial reporting is done on a consolidated
basis.
Financial Responsibility Requirements. The HEA and the Regulations
prescribe specific standards of financial responsibility which the Department of
Education must consider with respect to qualification for participation in the
Title IV Programs ("Financial Responsibility Standards"). These standards are
generally applied on an individual school basis. However, there can be no
assurance that the Department of Education will not attempt to apply such
standards on a consolidated basis. If the Department of Education determines
that any of the Company's schools fails to satisfy the Financial Responsibility
Standards, it may require that such schools post an irrevocable letter of credit
(a "Financial Responsibility Bond") in favor of the Secretary of Education in an
amount equal to not less than one-half of Title IV Program funds received by the
school during the last complete award year or, in the Department of Education's
discretion, require some other less onerous demonstration of financial
responsibility (a "Demonstration of Financial Responsibility").
Among the principal Financial Responsibility Standards which a school
must satisfy are: (i) an "acid test" ratio (defined as the ratio of the total of
cash, cash equivalents and current accounts receivable to current liabilities)
of at least 1-to-1 at the end of the most recent fiscal year, (ii) a positive
tangible net worth, as defined by the applicable Regulations, at the end of the
most recent fiscal year (the "Tangible Net Worth Standard") and (iii) net
operating results for the two most recent fiscal years, excluding extraordinary
losses or losses from discontinued operations, which do not show an aggregate
net loss in excess of 10% of tangible net worth at the beginning of the two year
period.
Student Loan Defaults. The HEA provides that a school may lose its
eligibility to participate in some or all Title IV Programs if defaults on the
repayment of federally guaranteed student loans or direct loans exceed certain
rates ("Cohort Default Rates"). Cohort Default Rates are calculated for each
school for each federal fiscal year by determining the rate at which the
school's students entering in that federal fiscal year default on repayment of
their loan by the end of the following federal fiscal year. Cohort default rates
are subject to revision by the Department of Education if new data becomes
available and are subject to appeal by schools contesting the accuracy of the
data or the adequacy of the servicing of the loans by the loan servicer. A
school that is determined to have had Cohort Default
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<PAGE> 10
Rates of 25% or greater for the three most recent federal fiscal years for which
data is available is subject to immediate loss of eligibility to participate in
substantially all Title IV Student Loan Programs, subject to a limited appeal of
the determination, including an appeal based on a claim of exemption from the
Cohort Default Rate requirements by virtue of exceptional mitigating
circumstances. The loss of eligibility lasts for the duration of the federal
fiscal year in which the determination of ineligibility is made, plus the two
succeeding federal fiscal years. However, an institution remains eligible for
Title IV funding while an appeal of such determination is pending. The loss of
Title IV eligibility at one or more of the Company schools could have a material
adverse effect on the Company's operations.
Change In Ownership Resulting In Change In Control. Upon a change in
ownership resulting in a change in control of the Company, as defined in the HEA
and the Regulations, each of the Company's schools would lose its eligibility to
participate in Title IV Programs for an indeterminate period of time during
which it applies to regain eligibility. A change of control also could have
significant regulatory consequences for the Company at the state level and could
affect the accreditation of the Company's schools.
The Department of Education's regulations provide that after a Company
becomes publicly-traded, a change in control occurs when a report on Form 8-K is
required to be filed with the Securities and Exchange Commission disclosing a
change in control. Most states and accrediting agencies have similar
requirements, but they do not provide a uniform definition of change in control.
If the Company were to lose its eligibility to participate in Title IV Programs
for a significant period of time pending an application to regain eligibility,
or if it were determined not to be eligible, its operations would be materially
adversely affected. The possible loss of Title IV eligibility resulting from a
change in control may also discourage or impede a tender offer, proxy contest or
other similar transaction involving control of the Company.
Participation In Federal Direct Lending Program; Risk Of Legislative
Action. Prior to fiscal 1995, the Company derived all of its Title IV loan
funding from the FFEL loan program. Since fiscal 1995, the Company's schools
elected to administer their Title IV loan funding pursuant to the Federal Direct
Student Loan Program ("FDSLP"). As of this date, the Company expects to derive
all of its Title IV loan funding pursuant to the FDSLP program in fiscal 1998.
Funding for the FDSLP, as well as for the FFEL program, must be appropriated by
Congress annually. FDSLP and FFEL loans represent a substantial majority of the
Company's revenues. There can be no assurance that funding will continue at
current levels, or that the FDSLP program itself will be continued. If the FDSLP
program were discontinued, or funding reduced so as to reduce the amount of
direct lending funds available to the Company's schools, the Company would have
to rely on loans provided pursuant to FFEL. Loans pursuant to FFEL are
administered through outside lenders, such as banking institutions and are
federally guaranteed. Although the Company believes that it would have no
difficulty finding lenders for federally guaranteed student loans to its
students under FFEL, there can be no assurance that such loans would be
available in amounts sufficient to provide for the Company's schools to operate
at current and anticipated levels, or at all.
Furthermore, there can be no assurance that federal funding for the
FFEL Program will be continued at current levels, or at all. Because the Company
derives a substantial majority of its cash receipts from Title IV funding,
discontinuance or significant reductions in the FDSLP and, if the FDSLP program
is discontinued or reduced, the FFEL program, would have a material adverse
effect on the Company's operations.
Reliance On Acquisitions. The Company has acquired all of its schools.
Several of the schools acquired by the Company have experienced losses following
their acquisition either in connection with their integration into the Company's
operations or because of their failure to perform as anticipated by the Company.
The Company expects that a significant part of its future growth will be based
on its ability to identify, acquire and profitably operate additional schools.
While the Company is continually searching for acquisition opportunities, there
can be no assurance that the Company will be successful in identifying,
acquiring and operating additional schools. When the Company acquires an
existing school and accounts for the acquisition as a "purchase" rather than a
"pooling of interests" a significant portion of the purchase price for such
school is often allocated to goodwill and intangibles because most of these
acquisitions do not involve the purchase of significant amounts of tangible
property. All of such goodwill and intangibles must be amortized over a
relatively short period of time, which reduces the Company's reported earnings.
If any potential acquisition opportunities are identified, there can be no
assurance that the Company will be able to consummate the acquisition on terms
favorable to the Company and successfully integrate any such
8
<PAGE> 11
acquisition into its existing operations and there can be no assurance as to the
timing or effect on the business of the Company of any such acquisitions.
The Company's acquisition of a school constitutes a change in ownership
resulting in a change of control with respect to such school for purposes of
Title IV eligibility, which means that schools must either be acquired subject
to recertification of eligibility by the Department of Education or that the
school will lose its eligibility to participate in Title IV Programs for an
indeterminate period of time during which it applies for recertification of
eligibility. The Company's experience has been that the Department of Education
typically processes such applications for recertification in three to six
months. Since this is less than the minimum enrollment period for each of the
Company's schools, there generally should be no significant interruption of
Title IV funding caused by the need to apply for a recertification of
eligibility as a result of an acquisition. There can be no assurance, however,
that recertification applications will be acted upon on a timely basis by the
Department of Education so as to avoid any significant interruption of Title IV
funding to students at the acquired school. Prior to recertification by the
Department of Education, the Company must also obtain approval of the change in
control from applicable states and accrediting agencies. In the past this
process has taken from three to six months for the Company to complete. The
Company has been timely recertified for eligibility by the Department of
Education with respect to each of its acquisitions. Although the Company has had
no difficulty in obtaining such recertification and approval in the past, there
can be no assurance that such state, accrediting and Department of Education
approvals may not be subject to unexpected delays or difficulties which may
materially and adversely effect the Company's operations.
In acquiring a school, the Company becomes liable to the Department of
Education for any liabilities of the seller on account of the seller's failure
to comply with the HEA or the Regulations prior to the date of acquisition. The
Company attempts to minimize the impact of any such liabilities by including
representations as to regulatory compliance and indemnification provisions in
the relevant acquisition agreements. No material amount of unindemnified Title
IV regulatory liabilities have been asserted against the Company with respect to
any of its prior acquisitions, however, no assurance can be given that any
assertions will not be made in the future. In addition, if available offsets are
insufficient, there can be no assurance that the parties responsible for
indemnification of the Company from such liabilities will have the financial
resources necessary to indemnify the Company for all or any portion of such
possible liabilities.
Variability In Quarterly Operating Results. The Company's quarterly
revenues have varied in the past and may vary significantly in the future as a
result of a number of factors, including fluctuations in the number of new
students enrolling in the Company's programs. New enrollments in the Company's
schools tend to be higher in the third and fourth fiscal quarters because the
third and fourth quarters cover periods associated with the beginning of school
semesters. The Company expects these seasonal trends will continue.
Competition. The postsecondary education market is highly fragmented
and competitive with no private or public institution having a significant
market share. The Company's schools compete for students with not-for-profit
public and private colleges and proprietary institutions which offer degree
and/or non-degree granting programs. Such proprietary institutions include
vocational and technical training schools, continuing education programs and
commercial training programs. Public and private colleges may offer programs
similar to those offered by the Company's schools at lower tuition costs due in
part to government subsidies, foundation grants, tax deductible contributions,
or other financial resources not available to proprietary institutions. Certain
of the Company's competitors in both the public and private sector have greater
financial and other resources than the Company.
Dependence On Key Personnel. The Company's success depends upon the
availability and performance of its senior management, particularly Gary D.
Kerber, the Company's Chairman and President. Mr. Kerber has entered into an
employment contract with the Company, however, it may be terminated by him at
any time. Although the Company maintains key man life insurance on Mr. Kerber in
the amount of $1,000,000, the loss of Mr. Kerber's services could have a
material adverse effect on the Company.
Absence Of Dividends. The Company has not paid any dividends to date.
The Company does not currently intend to declare or pay dividends on its Common
Stock in the foreseeable future, but plans to retain any earnings for use in its
business operations. In addition, the Bank Credit Facility contains restrictions
which prohibit the Company from paying dividends while such credit line is in
effect.
9
<PAGE> 12
Anti-Takeover Provisions And Title IV Change In Control Regulations.
Certain provisions of the Company's Certificate of Incorporation and Bylaws
authorize the issuance of "Blank Check" preferred stock and establishing advance
notice requirements for director nominations and actions to be taken at
stockholder meetings. These provisions could discourage or impede a tender
offer, proxy contest or other similar transaction involving control of the
Company, which transactions might be viewed favorably by minority stockholders.
Provisions in the applicable Regulations pursuant to which the Company would
lose its Title IV eligibility in the event of a change in ownership resulting in
a change of control could have a similar discouraging effect.
Limitation on Liability of Directors and Officers. The Certificate of
Incorporation of the Company provides that (i) the Company will indemnify any
director, officer, employee or agent of the Company with respect to actions,
suits or proceedings relating to the Company and (ii) subject to certain
limitations, a director shall not be personally liable for monetary damages for
breach of his fiduciary duty. In addition, the Company has entered into an
indemnification agreement with each of the directors of the Company, which
provides that the director is entitled to indemnification to the fullest extent
permitted by law. Such indemnification will cover all expenses, liabilities,
judgments, penalties, fines and amounts paid in settlement which are incurred or
imposed upon the director if the director is a party, threatened to be made a
party to any action, suit or proceeding of any kind by reason of the fact that
such person served or serves as a director of the Company or served as a
director, officer, employee or agent with any other enterprise at the request of
the Company.
No Assurance of Continued Market for Securities; "Penny Stock"
Regulations. Although the Company's Common Stock is listed on the Nasdaq
National Market, there can be no assurance that a public trading market for the
securities will be sustained. If for any reason the Company fails to maintain
sufficient qualifications for continued listing on the Nasdaq National Market,
purchasers of the securities may have difficulty in selling their securities
should they desire to do so because certain restrictions (the "penny stock"
rules) may be placed upon the sale of securities unless the securities qualify
for an exemption from the "penny stock" rules. The Commission has adopted
regulations which generally define "penny stock" to be any equity security that
has a market price of less than $5 per share or an exercise price of less than
$5 per share, subject to certain exceptions. Since the Common Stock is quoted on
Nasdaq, it is exempt from the definition of "penny stock." If it is later
removed from listing by Nasdaq and traded at a price below $5 per share, the
securities may become subject to the "penny stock" rules that impose burdensome
sales practice requirements on broker-dealers who sell such securities to
persons other than established customers and institutional accredited investors.
The "penny stock" rules may restrict the ability or desirability of
broker-dealers to sell the Company's Common Stock. Some brokerage firms will not
effect transactions in the securities if they trade below $5 per share and it is
unlikely that any bank or financial institution will accept the securities as
collateral, which could have an adverse effect in developing or sustaining any
market for the securities and may affect the ability of purchasers in this
Offering to sell the Common Stock in the secondary market.
Listing Maintenance Criteria for Nasdaq System. The Company's Common
Stock is listed on the Nasdaq National Market. Continued inclusion on Nasdaq
requires the Company to maintain certain criteria such as, among others, market
value, public float, capital and surplus. Nasdaq has recently adopted revisions
to its listing and maintenance criteria which would make it more difficult for
the Company to maintain its listing. If the Company fails to maintain the Nasdaq
minimum threshold requirements, it would lose Nasdaq listing and trading in the
securities would be conducted in the over-the-counter market known as the NASD
OTC Electronic Bulletin Board, or more commonly referred to as "pink sheets",
whereupon trading in the Company's securities will be subject to the "penny
stock" regulations. As a result, an investor may find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, the
Company's Common Stock if it were to lose its Nasdaq listing.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares.
DIVIDEND POLICY
The Company has not paid cash dividends on the Common Stock in the past
and does not expect to pay any cash dividends on the Common Stock in the
foreseeable future. The Company instead intends to retain its earning to
10
<PAGE> 13
support the operations and growth of its business. Any future cash dividends
would depend on future earnings, capital requirements, the Company's financial
condition and other factors deemed relevant by the Board of Directors. In
addition, the Company's credit facility with Bank of America contains
restrictions which prohibit the Company from paying dividends while such credit
line is in effect.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
Selling Stockholders and the beneficial ownership of Common Stock by each of
them before and after the Offering being made hereby. At December 31, 1997, the
Company had 7,369,100 shares of Common Stock outstanding.
<TABLE>
<CAPTION>
SHARES OWNED PRIOR NUMBER OF SHARES TO BE OWNED
TO OFFERING(1) SHARES TO AFTER THE OFFERING(2)
NAME AND ADDRESS OF BENEFICIAL OWNER ------------------ BE SOLD IN -----------------------
NUMBER PERCENT OFFERING NUMBER PERCENT
- - --------------------------------------- -------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Richard D. Wikert 485,170 6.58% 485,170 0 0.0
1770 N. Colson
Fremont, NE 68025
The A. Lauren Rhude Trust 46,590 .63% 46,590 0 0.0
c/o a. Lauren Rhude, Trustee
4550 N. Calle Loma Linda
Tucson, AZ 85718
The Lila Rhude Trust 72,761 .99% 72,761 0 0.0
c/o Lila Rhude, Trustee
4550 N. Calle Loma Linda
Tucson, AZ 85718
The Scott L. Rhude Trust 71,805 .97% 71,805 0 0.0
c/o Scott L. Rhude, Trustee
4020 N. Pontatoc
Tucson, AZ 85718
Roger B. Bojens 41,722 .57% 41,722 0 0.0
4113 Lincoln Way
Sioux City, IA 51105
Total of Selling Shareholders 718,048 9.74% 718,048 0 0.0
</TABLE>
(1) The Shares stated in the table were issued to the Selling Shareholders
in connection with the merger and pooling of interest transaction in
which the Company acquired two schools located in Nebraska as of March
31, 1997. The Shares are being offered pursuant to certain registration
rights granted in that transaction. None of the Selling Shareholders
had any material relationship with the Company or any of its affiliates
prior to the transaction.
(2) Assumes all Shares offered hereby are sold.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue (i) 15,000,000 shares of Common
Stock, $0.01 part value, of which 7,369,100 are issued and outstanding as of the
date of this Prospectus; (ii) 5,000,000 shares of "blank check" Preferred Stock,
$0.01 part value, of which none are issued and outstanding as of the date of
this Prospectus; and (iii) 1,029,023 shares of Series A Preferred Stock, which
were all converted to Common Stock at the time of the Company's initial public
offering effective October 28, 1996, and were cancelled.
PLAN OF DISTRIBUTION
The distribution of the Shares may be effected from time to time in one
or more transactions (which may include block transactions) on the Nasdaq
National Market or on any national or regional securities exchange in which the
Common Stock is listed or traded, in negotiated transactions, or a combination
of such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. The
11
<PAGE> 14
Selling Stockholders may effect such transactions by selling the Shares to or
through broker dealers, and such broker dealers may receive compensation in the
form of underwriting discounts, concessions or commissions from the Selling
Stockholders or purchasers of Shares for whom they may act as agent (which
compensation may be in excess of customary commissions). Such brokers or dealers
may be deemed to be "underwriters" within the meaning of the Securities Act in
connection with such sales and any commissions received by them may be deemed to
be underwriting compensation.
The Selling Stockholders will pay the commissions and discounts of
underwriters, dealers or agents, if any, incurred in connection with the sale of
the Shares. The Company will pay all expenses incident to the offering and sale
of the Shares by the Selling Stockholders including but not limited to, fees and
expenses of compliance with state securities or "blue sky" laws. No underwriters
are employed with respect to the sale of the Shares, nor will the Company pay
any fees upon their sale.
In accordance with applicable rules and regulations promulgated under
the Exchange Act, any person engaged in the distribution of any of the Shares
may not simultaneously engage in market activities with respect to any of the
Common stock for a period of nine business days prior to the commencement of
such distribution. In addition and without limiting the foregoing, the Selling
Stockholders may be subject applicable provisions of the Exchange Act and the
rules and regulations promulgated thereunder, including, without limitation,
Regulation M, which provisions may limit the timing of purchases and sales of
Shares by the Selling Stockholders.
The Company has agreed to keep the Registration Statement, of which
this Prospectus is a part, effective until all the Shares are sold or can be
sold freely under an appropriate exemption from the securities laws of the
United States and the states, without limitation. In addition, any shares that
qualify for sale pursuant to Rule 144 under the Securities Act of 1933, as
amended, may be sold under Rule 144 rather than pursuant to this Prospectus.
The Company and the Selling Stockholders have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act. The Company will not receive any proceeds from the sale of the Shares.
LEGAL MATTERS
The validity of the issuance of the Common Stock being offering hereby
has been passed upon by the firm of Greenberg Traurig Hoffman Lipoff Rosen &
Quentel, P.A., West Palm Beach, Florida 33401.
EXPERTS
The consolidated financial statements and schedule of Educational
Medical, Inc. (the "Company") at March 31, 1997 and 1996, and for each of the
three years in the period ended March 31, 1997, appearing in the Company's
Annual Report (Form 10-K/A) for the year ended March 31, 1997, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon and incorporated by reference elsewhere herein, which is based
in part on the reports of Winther Strave & Co. LLP, independent auditors. The
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such reports given upon the authority of such firms
as experts in accounting and auditing.
The combined financial statements of San Antonio College of Medical
and Dental Assistants, Inc. and Career Centers of Texas - El Paso, Inc. as of
December 31, 1996 and 1995 and for the years then ended appearing in the
Company's Annual Report (Form 10-K/A) for the year ended March 31, 1997, have
been audited by Tsakopulos Brown Schott & Anchors, independent auditors, as
set forth in their report thereon and incorporated by reference elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
The divisional financial statements of Hagerstown Business College (a
division of O/E Learning, Inc.) as of October 31, 1995 and 1994 and for the
years then ended appearing in the Company's Annual Report (Form 10-K/A) for the
year ended March 31, 1997, have been audited by Plante & Moran, LLP,
independent auditors, as set forth in their report thereon also appearing
elsewhere herein and incorporated by reference elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is First Union
National Bank of North Carolina, N.A., Charolotte, North Carolina 28228-1179.
12
<PAGE> 15
<TABLE>
<S> <C>
====================================================== =================================================================
No underwriter, dealer, salesperson or other person
has been authorized to give any information or to EDUCATIONAL
make any representations in connection with the MEDICAL, INC.
offering made by this Prospectus and, if given or made,
such information or representations may not be relied
upon as having been authorized by the Company. This
Prospectus does not constitute an offer to sell, or
a solicitation of any offer to buy, any securities
offered hereby by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in
which the person making such offer or solicitation 718,048 SHARES OF COMMON STOCK
is not qualified to do so or to any person to whom it
is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any
circumstances, create any implication that the
information herein is correct as of any time subsequent
to the date of this Prospectus.
------------------------------
Table of Contents
Available Information............................ 2
Incorporation of Certain Information ----------------------------------
by Reference..................................... 2 PROSPECTUS
Prospectus Summary............................... 3 ---------------------------------
Risk Factors..................................... 7
Use of Proceeds..................................10
Plan of Distribution.............................11
Description of Capital Stock.....................11
Legal Matters....................................12
Experts..........................................12
Transfer Agent...................................12
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN
THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED FEBRUARY ____, 1998
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WITH
RESPECT TO THEIR SOLICITATIONS TO PURCHASE THE
SECURITIES OFFERED HEREBY.
====================================================== =================================================================
</TABLE>
13
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities being registered hereby.
The Selling Stockholders will pay the commissions and discounts of underwriters,
dealers or agents, if any, incurred in connection with the sale of the Shares.
The Company will pay all other expenses incident to the offering and sale of the
Shares. All amounts, with the exception of the SEC Registration Fee (which was
paid in connection with prior filings) and the NASDAQ National Market Fee, are
estimated.
<TABLE>
<S> <C>
SEC Registration Fee....................................................................$ 0.00
NASDAQ National Market Fee..............................................................$ 0.00
Accountants' Fees and Expenses..........................................................$ 10,000.00
Legal Fees and Expenses.................................................................$ 10,000.00
Printing and Filing Expenses............................................................$ 3,000.00
Miscellaneous...........................................................................$ 3,000.00
---------
TOTAL........................................................................$ 26,000.00
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Bylaws effectively provide that the Registrant shall,
to the full extent permitted by Section 145 of the General Corporation Law of
the State of Delaware, as amended from time to time ("Section 145"), indemnify
all persons whom it may indemnify pursuant thereto. In addition, the
Registrant's Certificate of Incorporation eliminates personal liability of its
directors to the full extent permitted by Section 102(b)(7) of the General
Corporation Law of the State of Delaware, as amended from time to time ("Section
102(b)(7)").
Section 145 permits a corporation to indemnify its directors and
officers against expenses (including attorney's fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by a third party if such
directors or officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reason to believe
their conduct was unlawful. In a derivative action, indemnification may be made
only for expenses actually and reasonably incurred by directors and officers in
connection with the defense or settlement of an action or suit and only with
respect to a matter as to which they shall have acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interest of
the corporation, except that no indemnification shall be made if such person
shall have been adjudged liable to the corporation, unless and only to the
extent that the court in which the action or suit was brought shall determine
upon application that the defendant officers or directors are reasonably
entitled to indemnity for such expenses despite such adjudication of liability.
Section 102(b)(7) provides that a corporation may eliminate or limit
the personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for willful or negligent conduct
in paying dividends or repurchasing stock out of other than lawfully available
funds or (iv) for any transaction from which the director derived an improper
personal benefit. No such provisions shall eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such provision
becomes effective.
The Company maintains insurance against liabilities under the
Securities Act of 1933 for the benefit of its officers and directors.
II-1
<PAGE> 17
ITEM 16. EXHIBITS.
4.1* Form of Common Stock Certificate (incorporated by reference from
Exhibit 4.1 to Amendment No. 3 to Registration Statement on Form S-1
(File No. 333-09777) filed with the Commission on October 22, 1996).
5.1** Opinion of counsel to the Company concerning the legality of the
securities being offered.
23.1** Consent of Ernst & Young, LLP
23.2** Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A.
(contained in Exhibit 5.1 hereto).
23.3** Consent of Winther, Stave & Co., LLP
23.4** Consent of Plante & Moran, LLP
23.5** Consent of Tsakopulos Brown Schott & Anchors
24.1** Power of Attorney (contained on signature page of the Registration
Statement).
27.1** Financial Data Schedule (for SEC use only).
* The exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such exhibits is a
reference to the copy of the exhibit heretofore filed with the
Commission, to which there have been no amendments or changes.
** Filed with this Registration Statement.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in this Registration Statement or any
material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d)
of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to
and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X are
not set forth in the prospectus, to deliver, or cause to be delivered
to each person to whom the prospectus is sent or given, the
II-2
<PAGE> 18
latest quarterly report that is specifically incorporated by reference
in the prospectus to provide such interim financial information.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication
of such issue.
II-3
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Roswell, State of Georgia, on February 5, 1998.
Educational Medical, Inc. (registrant)
By: /s/ Gary D. Kerber
--------------------------------------
Gary D. Kerber, Chairman of the Board,
Chief Executive Officer and President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints GARY D. KERBER his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below on February 5, 1998 by the
following persons in the capacities indicated.
<TABLE>
<S> <C>
/s/ Gary D. Kerber
- - ------------------------------------------- Chairman of the Board of Directors, Chief
Gary D. Kerber Executive Officer and President
(Principal Executive Officer)
/s/ Vince Pisano
- - ------------------------------------------- Vice President - Finance and Chief
Vince Pisano Financial Officer (Principal Financial
and Accounting Officer)
/s/ Richard J. Cresci
- - ------------------------------------------- Director
Richard J. Cresci
/s/ Carl S. Hutman
- - ------------------------------------------- Director
Carl S. Hutman
/s/ Richard E. Kroon
- - ------------------------------------------- Director
Richard E. Kroon
/s/ W. Patrick Ortale, III
- - ------------------------------------------- Director
W. Patrick Ortale, III
</TABLE>
II-4
<PAGE> 1
Exhibit 5.1
GREENBERG TRAURIG LETTERHEAD
February 5, 1998
Educational Medical, Inc.
1327 Northmeadow Parkway, Suite 132
Roswell, Georgia 30076
Ladies and Gentlemen:
We have acted as counsel to Educational Medical, Inc. (the "Corporation")
in connection with the preparation and filing with the Securities and Exchange
Commission of a registration statement on Form S-3 (Registration Statement No.
333-09777), and any amendments thereto (the "Registration Statement"). The
Registration Statement relates to a proposed public offering pursuant to which
up to 718,048 Shares are being offered by certain stockholders of the
Corporation (the "Selling Stockholder Shares"). Based upon and subject to the
foregoing and the other qualifications, limitations and assumptions contained
herein, we are of the opinion that:
The Selling Stockholder Shares, when sold as contemplated in the
Registration Statement, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to us in the Prospectus contained
therein under the caption "Legal Matters."
Very Truly yours,
GREENBERG TRAURIG HOFFMAN
LIPOFF ROSEN & QUENTEL, P.A.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Educational Medical,
Inc. for registration of 718,048 shares of its common stock and to the
incorporation by reference therein of our report dated June 30, 1997, except
for the second paragraph of Note 3 as to which the date is August 27, 1997,
with respect to the consolidated financial statements and schedule of
Educational Medical, Inc. included in its Annual Report (Form 10-K/A) for the
year ended March 31, 1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 2, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm as "Experts" and to the use of our
report dated April 18, 1997 with respect to the audited combined financial
statements of Educational Management, Inc. and Wikert and Rhude, general
partnership, as of December 31, 1996 and 1995 and for each of the three years in
the period ended December 31, 1996 and our reports dated May 16, 1997 with
respect to the balance sheet of Nebraska College of Business (a division of
Nebraska Acquisition Corp., a wholly-owned subsidiary of Educational Medical,
Inc.) as of March 31, 1997 and the balance sheet of Lincoln School of Commerce
(a division of Nebraska Acquisition Corp., a wholly owned subsidiary of
Educational Medical, Inc.) as of March 31, 1997 in the Registration Statement on
Form S-3 (No. 333-33025) of Educational Medical, Inc. for the registration of
718,048 shares of its common stock.
/s/ Winther, Stave & Co. LLP
Winther, Stave & Co., LLP
Spencer, Iowa
February 2, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated December 30,
1996 on the divisional financial statements of Hagerstown Business College (a
division of O/E Learning, Inc.) for the years ended October 31, 1996 and 1995
in the Post Effective Amendment No. 1 to Form S-1 Registration Statement (File
No. 333-33025) on Form S-3 of Educational Medical, Inc. for the registration of
718,048 shares of its common stock.
/s/ Plante & Moran, LLP
Southfield, Michigan
February 2, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
Educational Medical, Inc.
1327 Northmeadow Parkway, Suite 132
Roswell, GA 30076
We consent to the reference to our firm under the caption "Experts" and to
the use of our report with respect to the combined financial statements of San
Antonio College of Medical and Dental Assistants, Inc. and Careers of Texas -
El Paso, Inc. dated March 12, 1996, except for Note 1, as to which the date is
August 2, 1996, in Amendment No. 1 to the Registration Statement on Form S-1
(No. 333-33025) on Form S-3 of Educational Medical, Inc. for the registration
of 718,048 shares of its Common Stock.
/s/ Tsakopulos Brown Schott & Anchors
-------------------------------------------
TSAKOPULOS BROWN SCHOTT & ANCHORS
San Antonio, Texas
February 5, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF EDUCATIONAL MEDICAL, INC. FOR THE NINE MONTHS ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 9,303,194
<SECURITIES> 0
<RECEIVABLES> 8,838,422
<ALLOWANCES> 1,021,824
<INVENTORY> 0
<CURRENT-ASSETS> 19,849,731
<PP&E> 14,911,805
<DEPRECIATION> 6,547,348
<TOTAL-ASSETS> 40,017,796
<CURRENT-LIABILITIES> 7,114,256
<BONDS> 2,551,079
0
0
<COMMON> 73,691
<OTHER-SE> 30,329,496
<TOTAL-LIABILITY-AND-EQUITY> 40,017,796
<SALES> 41,468,515
<TOTAL-REVENUES> 41,468,515
<CGS> 36,473,977
<TOTAL-COSTS> 36,473,977
<OTHER-EXPENSES> 938,233
<LOSS-PROVISION> 803,414
<INTEREST-EXPENSE> (256,082)
<INCOME-PRETAX> 3,508,973
<INCOME-TAX> 1,403,715
<INCOME-CONTINUING> 2,105,258
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,105,258
<EPS-PRIMARY> 0.28<F1>
<EPS-DILUTED> 0.28<F2>
<FN>
<F1>BASIC EPS IS BASED ON 7,449,541 WEIGHTED AVERAGE SHARES OUTSTANDING AND IS
TAGGED (EPS-PRIMARY).
<F2>DILUTED EPS IS BASED ON 7,582,962 WEIGHTED AVERAGE SHARES OUTSTANDING.
</FN>
</TABLE>
