UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1995 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 0-10819
WHITMAN MEDICAL CORP.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2246554
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
485-E US Route 1 South, Suite 100, Iselin, New Jersey 08803
(Address of principal executive offices) (Zip Code)
(908) 636-3640
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of Securities under a plan
confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class
of common stock, as of the latest practicable date.
Class Outstanding at August 3, 1995
Common stock, no par value 3,854,748
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Whitman Medical Corp. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995
------------ -----------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 605,583 $1,658,104
Restricted cash 312,000 312,000
Accounts receivable less allowance
for doubtful accounts of $1,324,152
in June 1995 and $1,000,864
in March 1995 15,377,287 14,216,126
Inventories 518,213 290,450
Other current assets 464,739 520,044
------------ -----------
Total current assets 17,277,822 16,996,724
Equipment and leasehold improvements,
net 4,607,323 3,678,239
Marketable securities 738,750 750,000
Deferred costs, net of accumulated
amortization of $624,820 in June
1995 and $553,434 in March 1995 452,197 518,705
Deposits and other assets, net of
amortization of $65,082 in June
1995 and $58,998 in March 1995 534,444 449,872
Goodwill, net of accumulated
amortization of $132,180 in June
1995 and $113,762 in March 1995 2,555,913 2,572,979
Restricted cash - escrow 2,400,000 2,400,000
------------ -----------
$28,566,449 $27,366,519
============ ============
</TABLE>
See accompanying notes
- 3 -
Whitman Medical Corp. and Subsidiaries
Consolidated Balance Sheet - Continued
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995
------------ -----------
(Unaudited)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 994,759 829,959
Accrued expenses 833,705 764,881
Income taxes payable 13,272
Bank notes payable 7,063,621
Current portion of capitalized
lease obligations 586,736 391,496
Deferred tuition revenue 11,460,116 9,910,213
------------ -----------
Total current liabilities 20,952,209 11,896,549
Capitalized lease obligations 2,239,965 1,620,453
Long-term bank notes 7,623,621
Commitments and contingencies
Stockholders' equity:
Common stock, no par value,
authorized 50,000,000 shares,
issued and outstanding, excluding
shares held in escrow, 3,854,748
shares in June 1995 and March 1995 7,008,878 7,008,878
Additional paid-in capital 175,000 175,000
Retained (deficit) (1,165,353) (324,982)
Treasury stock, 58,374 shares in
June 1995 and in March 1995 (430,500) (430,500)
Net unrealized loss on noncurrent
marketable securities (213,750) (202,500)
------------ -----------
Total stockholders' equity 5,374,275 6,225,896
------------ -----------
$28,566,449 $27,366,519
============ ===========
</TABLE>
See accompanying notes
- 4 -
Whitman Medical Corp. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
June 30,
1995 1994
------------ -----------
<S> <C> <C>
Revenues
Tuition $ 5,756,876 $1,479,030
Other educational materials 433,022 18,874
Other 9,407 1,035
------------ -----------
Total revenues 6,199,305 1,498,939
Costs and expenses
Cost of educational services 3,874,480 991,675
General and
administrative expenses 2,882,005 636,073
------------ -----------
Total costs and expenses 6,756,485 1,627,748
------------ -----------
Loss from operations (557,180) (128,809)
Interest Income 11,798 9,389
Interest Expense (276,015) (22,236)
------------ -----------
Loss before income taxes (821,397) (141,656)
Income tax provision (benefit) 18,974 (32,541)
------------ -----------
Net loss $ (840,371) $ (109,115)
============ ===========
Net loss
per share of common stock $ (.22) $ (.03)
============ ===========
Weighted average number of common and
common equivalent shares outstanding 3,854,748 3,541,263
============ ===========
</TABLE>
See accompanying notes
- 5 -
Whitman Medical Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
June 30,
1995 1994
------------ -----------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (840,371) $ (109,115)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 233,576 104,318
Changes in operating assets and
liabilities:
Accounts receivable (1,161,161) (811,190)
Inventory (227,763)
Other current assets 55,305 (30,424)
Deferred costs (4,878) (27,088)
Deposits and other assets (70,645) 20,416
Accounts payable 164,800 (38,921)
Accrued expenses 68,824 (7,181)
Income taxes payable 13,272 1,818
Deferred tuition revenue 1,549,903 734,378
------------ -----------
Net cash used in
operating activities (219,138) (162,989)
------------ -----------
Cash flows from investing activities
Purchase of equipment & leasehold
improvements (151,930) (14,686)
------------ -----------
Net cash used in investing
activities (151,930) (14,686)
------------ -----------
Cash flows from financing activities
Proceeds from revolving line of credit
and long-term borrowings 2,225,000
Principal payment on revolving line of
credit and long-term borrowings (2,785,000)
Principal payments of capitalized
lease obligations (121,449) (40,349)
------------ -----------
Net cash used in
financing activities (681,449) (40,349)
------------ -----------
</TABLE>
See accompanying notes
- 6 -
Whitman Medical Corp. and Subsidiaries
Consolidated Statements of Cash Flows - continued
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
June 30,
1995 1994
------------ -----------
<S> <C> <C>
Decrease in cash and
cash equivalents $(1,052,521) $ (218,024)
Cash and cash equivalents at
beginning of period 1,658,104 1,369,462
------------ -----------
Cash and cash equivalents
at end of period $ 605,583 $1,151,438
============ ===========
Supplemental disclosures of cash flow
information
Interest paid $ 228,603 $ 19,201
============ ===========
Income taxes paid $ 7,389 $ 52,174
============ ===========
Equipment and leasehold
improvements financed through
capital leases $ 936,201
============
</TABLE>
See accompanying notes
- 7 -
Whitman Medical Corp. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1995
(Unaudited)
Reference is made to the financial statements included in the Company's Annual
Report on Form 10K for the year ended March 31, 1995.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and, in the opinion of the
management of the Company, include all adjustments, which are of a normal
recurring nature, necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods presented. However, the
financial statements do not include all information and footnotes required for a
presentation in accordance with generally accepted accounting principles. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included or incorporated
by reference in the Company's 1995 Annual Report on Form 10-K. The results of
operations for the interim periods are not necessarily indicative of the results
of operations to be expected for the full year.
The accompanying financial statements include the accounts of Whitman Medical
Corp., and its subsidiaries, all of which are wholly owned. All intercompany
accounts and transactions have been eliminated.
Certain June 30, 1994 balances have been reclassified to conform to the current
year's presentation.
1. Acquisition
On December 21, 1994, the Company completed the purchase of Sanford-Brown
College, a privately held proprietary business and allied healthcare college.
Sanford-Brown was acquired for $3.5 million in cash and $500,000 (98,232 shares)
in common stock and contingent consideration of $2.4 million in cash and 510,806
shares of common stock held in escrow at June 30, 1995.
The following table summarizes, on an unaudited pro forma basis, the combined
results of operations of the Company and its subsidiaries for the three months
ended June 30, 1995 and 1994 as though the acquisition described above was made
at the beginning of each fiscal year:
<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
Revenues $6,199,305 $5,016,414
(Loss) income before taxes (821,397) 113,036
Net (loss) income (840,371) 68,952
Net (loss) income per share $ (.22) $ .02
</TABLE>
- 8 -
Item 2. Management Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations Three Months Ended June 30, 1995
Compared to Three Months Ended June 30, 1994
For the three months ended June 30, 1995 (the "1995 June
Quarter"), the Company had a net loss of $840,371, or $.22 per share.
The 510,806 shares that remain in escrow in connection with the SBC
acquisition are not considered outstanding for the purpose of the per
share loss computation as their effect is anti-dilutive. For the three
month period ended June 30, 1994 (the "1994 June Quarter"), the Company
had a net loss of $109,115, or $.03 per share.
In both periods, virtually all of the Company's revenues were
received by its school operations. However, in the 1994 June Quarter,
the Company's school operations consisted solely of the Ultrasound
Diagnostic School ("UDS"), where as, in the 1995 June Quarter, the school
operations also consisted of Sanford-Brown College ("SBC") which was
acquired in December 1994.
During fiscal 1995, with the addition of the CVT and MA
programs, UDS began a planned expansion to increase the number of career
programs offered, which expansion is expected to be substantially
completed during the second half of fiscal 1996. The addition of the new
programs requires UDS to incur significant expenses in advance of the
expected increases in revenues. Management believes the Company will not
realize the benefits from this plan until the fourth quarter of fiscal
1996 when the implementation of its new programs is substantially
complete.
For the 1995 June Quarter the contribution to the
- 9 -
operating performance of the Company from each of its two school operations,
exclusive of $231,643 of the Company's corporate overhead, was:
<TABLE>
<CAPTION>
UDS SBC
---------- ----------
<S> <C> <C>
Total revenues $2,208,134 $3,991,171
Operating expenses 2,897,505 3,627,337
Operating (loss) income (689,371) 363,834
Interest expense, net 87,750 176,467
Pretax (loss) income (777,121) 207,247
</TABLE>
SBC interest expense reflects the bank debt associated with its
acquisition by the Company.
The Company had total revenues of $6,199,305 for the 1995 June
Quarter, as compared to total revenues of $1,498,939 for the 1994 June
Quarter. Of the Company's total 1995 June Quarter revenues, $2,208,134
were earned by UDS and $3,991,171 were earned by SBC.
UDS revenues increased 47% in the 1995 June Quarter as compared
to the 1994 June Quarter, due approximately two-thirds to an increase in
enrollment in the new CVT and MA programs and approximately one-third to
the increased tuition rate of the general ultrasound program. Enrollment
in the UDS general ultrasound program at June 30, 1995 decreased 3% as
compared to enrollment at June 30, 1994, but, as a result of the
enrollment in the new CVT and MA programs, total enrollment at UDS rose
by 47% at June 30, 1995 as compared to total enrollment at June 30, 1994.
As part of the addition of the CVT and MA programs, additional
employees are being hired (administrative and
- 10 -
teaching), equipment is being acquired and school facilities are being expanded.
As a result, expenses are being incurred in advance of the anticipated increases
in enrollments and revenues that management believes will occur from the
expansion.
Cost of educational services were $3,874,480 in the 1995 June
Quarter as compared to $991,675 in the 1994 June Quarter. Of the
$3,874,480 in the 1995 June Quarter, $1,419,057 was incurred by UDS and
$2,455,423 was incurred by SBC.
At UDS, cost of educational services increased by approximately
43% in the 1995 June Quarter as compared to the 1994 June Quarter. In
the 1995 June Quarter, instructor payroll increased by approximately
119%, administrative payroll increased by approximately 38% and facility
rent expense increased by approximately 127% as compared to the 1994 June
Quarter. Instructor payroll increased due, principally to the addition
of instructors to teach the new CVT and MA programs. Administration
payroll increased due to the addition of full time school staff necessary
to service the increased student population. Facility rent increased
because of the relocation or expansion of 11 school facilities to larger,
more expensive facilities.
General and administrative expense was $2,882,005 in the 1995
June Quarter as compared to $636,073 in the 1994 June Quarter. Of the
$2,882,005, $1,710,091 was incurred by UDS and $1,171,914 was incurred by
SBC.
At UDS, general and administrative expense increased
approximately 169% in the 1995 June Quarter as compared to the 1994 June
Quarter. Sales and marketing expenses, including the
- 11 -
cost of admission representatives and advertising, increased 508% in the 1995
June Quarter as compared to the 1994 June Quarter. The other major components
of general and administrative expense that increased in the 1995 June
Quarter were travel, depreciation and amortization and general office
expense, due, principally, to the effect of the expansion plan.
For accounting purposes, tuition income is recorded as income in
the period in which it is earned and any unearned portion is treated as
deferred tuition revenue, a liability account. In the 1995 June Quarter
deferred tuition revenue increased $1,549,903 as compared to the 1994
June Quarter. At UDS, deferred tuition revenue at June 30, 1995 as
compared to March 31, 1995 increased $3,323,408 due, principally, to the
increased number of students currently enrolled in UDS and attending
classes and to the increased number of students currently enrolled in
classes that have not yet begun. At SBC, deferred tuition revenue
decreased $1,773,505 at June 30, 1995 as compared to March 31, 1995.
Liquidity and Capital Resources
At June 30, 1995, the Company had cash on hand of $917,583, as
compared to $1,658,104 at March 31, 1995. Included in cash on hand at June
30, 1995 were $312,000 set aside in accordance with Department of
Education regulations to be available for student refunds. Receivables
at June 30, 1995 were $15,377,287 (net of an allowance of $1,324,152 for
doubtful accounts), compared to receivables of $14,216,126 (net of an
allowance of
- 12 -
$1,000,864 for doubtful accounts) at March 31, 1995. Of the $15,377,287 in
accounts receivable, $10,721,024 were held by UDS and $4,656,263 were held by
SBC.
The Company's primary source of operating liquidity is the cash
received from payments of tuition and fees. At both UDS and SBC, most
students receive some form of financial aid under the federal student
financial aid programs.
In order to finance the acquisition of SBC, the Company obtained
a bank term loan in the amount of $6,000,000 which is due on April 16,
1996 and is reflected as a current liability on the balance sheet at June
30, 1995. The Company does not expect to have sufficient positive cash
flow by April 16, 1996 to repay the entire obligation. The Company
intends to seek financing which may include an extension of the due date
of the term loan, refinancing of the loan and/or equity financing. If
the Company is not able to refinance the term loan it could have a
material adverse effect on the Company.
The Company entered into master equipment leases totalling
$2,190,00 to finance the purchase of capital equipment. At June
30, 1995, approximately $300,000 remained available under those
leases with which to purchase capital equipment.
The Company has available to it a working capital facility
expiring April 16, 1996 in the amount of $2,500,000. At June 30,
1995, the Company had approximately $1,911,000 available for use
from this credit facility as compared to approximately $876,000
available for use at March 31, 1995. Since the recertification of
SBC in May 1995, cash flow generated from the operations of SBC,
- 13 -
particularly cash received from the federal government, have been
applied to reduce the outstanding balance in the working capital
facility. Management believes the cash flow from SBC operations
will be sufficient to repay the balance on the working capital
facility in fiscal 1996. The Company also has a bank line of
credit expiring August 31, 1996 in the amount of $500,000 with
approximately $25,000 available for use from this credit facility
at June 30, 1995.
In the 1995 June Quarter, the Company used cash in
operating activities of $219,138 as compared to $162,989 used in
the 1994 June Quarter. UDS used $930,928 in its operations and
SBC had positive cash flow from its operations of $711,790.
At UDS, the cash used in operating activities was due,
principally, to the expenditures utilized to expand UDS in advance
of the receipt of revenues from anticipated expanded enrollments
in existing and new programs and to an increase in accounts
receivable. Management believes that UDS will continue to use
cash in the first three quarters of fiscal 1996 but by the fourth
quarter the UDS planned expansion will begin to generate positive
cash flow from operations. Management further believes that the
excess cash generated from SBC operations, the availability of the
bank line of credit and the working capital facility and the
balance available under the master equipment leases will be
sufficient to provide the necessary resources to accomplish the
expansion of UDS.
- 14 -
PART II - OTHER INFORMATION
Item 1. Legal proceedings
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security
Holders.
None
Item 5. Other Information.
In June 1995, the Company entered into a letter of
intent which contemplates a transaction whereby all of
the shares of MDJB Inc., owner of Colorado Technical
College and Concept Communications, would be acquired in
exchange for 1,250,000 shares of the Company's Common
Stock. Colorado Technical College is a regionally
accredited degree granting institution with
approximately 1600 students enrolled primarily in
computer science, engineering and management programs.
Colorado Technical College confers degrees at the
associate, bachelor, master and doctoral levels.
Concept Communications is an advertising agency which
provides services to Colorado Technical College and to
outside clients. The consummation of the transaction is
subject to the fulfillment of a number of conditions.
There can be no assurance that a final agreement will be
entered into, or if entered into, the terms of any such
agreement.
Item 6. Exhibits and Reports on Form 8-K.
No reports on Form 8-K were filed during the
quarter for which this report is filed.
- 15 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Whitman Medical Corp.
(Registrant)
Date: August 14, 1995 /s/ Randy S. Proto
Randy S. Proto, President
Date: August 14, 1995 /s/ Joseph Lichtenstein
Joseph Lichtenstein
Vice President and Treasurer
Exhibit 11
WHITMAN MEDICAL CORP. AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER SHARE OF COMMON STOCK
FOR THE THREE MONTHS ENDED
JUNE 30,
<TABLE>
<CAPTION>
1995
-------------
<S> <C>
Primary:
Average shares outstanding 3,854,748
Net effect of dilutive
stock options and warrants
based on the treasury stock
method using the average
market price 262,833
Total 4,117,581
=============
Net loss $(840,371)
=============
Per share amount $(.20)
=======
Fully diluted:
Average shares outstanding 3,854,748
Net effect of dilutive
stock options and warrants
based on the treasury stock
method using quarter-end
market price 264,633
Total 4,119,381
=============
Net loss $(840,371)
=============
Per share amount $(.20)
=======
</TABLE>
Net loss per share of common stock is computed by dividing net loss
by the weighted average number of shares outstanding during the period
adjusted for common stock equivalents when such adjustments result in
dilution of earnings per share. The 510,806 shares issued in connection
with the acquisition of Sanford Brown College that remain in escrow to be
disbursed to the seller or returned to the Company upon the occurrence of
failure to occur of certain events are not considered outstanding for
purposes of computing net loss for the three months ended June 30, 1995 as
their effect is anti-dilutive.
