UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 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 1-13722
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.)
485E 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 November 2, 1995
----- -------------------------------
Common stock, no par value 4,375,054
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Whitman Medical Corp. and Subsidiaries
Consolidated Balance Sheets
September 30, March 31,
1995 1995
------------- --------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 722,203 $ 1,658,104
Restricted cash 393,276 312,000
Accounts receivable less allowance
for doubtful accounts of $1,499,471
in September 1995 and $1,000,864
in March 1995 11,231,548 14,216,126
Inventories 682,800 290,450
Other current assets 360,257 520,044
------------- ------------
Total current assets 13,390,084 16,996,724
Equipment and leasehold improvements,
net 4,884,672 3,678,239
Marketable securities 903,750 750,000
Deferred costs, net of accumulated
amortization of $689,780 in September
1995 and $553,434 in March 1995 387,237 518,705
Deposits and other assets, net of
amortization of $69,645 in September
1995 and $58,998 in March 1995 676,823 449,872
Goodwill, net of accumulated
amortization of $149,999 in September
1995 and $113,762 in March 1995 2,564,647 2,572,979
Restricted cash - escrow 2,400,000 2,400,000
------------- ------------
$ 25,207,213 $27,366,519
============= ============
See accompanying notes
- 3 -
Whitman Medical Corp. and Subsidiaries
Consolidated Balance Sheet - Continued
September 30, March 31,
1995 1995
------------- ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 737,389 829,959
Accrued expenses 872,311 764,881
Income taxes payable 4,722
Bank notes payable 7,290,000
Current portion of capitalized
lease obligations 686,766 391,496
Deferred tuition revenue 8,451,675 9,910,213
------------- ------------
Total current liabilities 18,042,863 11,896,549
Capitalized lease obligations 2,167,195 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, 3,864,248
shares in September 1995
and 3,854,748 shares in March 1995 7,029,516 7,008,878
Additional paid-in capital 175,000 175,000
Retained deficit (1,728,111) (324,982)
Treasury stock, 58,374 shares in
September 1995 and March 1995 (430,500) (430,500)
Net unrealized loss on noncurrent
marketable securities (48,750) (202,500)
------------- ------------
Total stockholders' equity 4,997,155 6,225,896
------------- ------------
$ 25,207,213 $27,366,519
============= ============
See accompanying notes
4
Whitman Medical Corp. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For The Three Months Ended
September 30,
1995 1994
------------- ------------
REVENUES
Tuition $ 6,628,182 $1,922,402
Educational materials and other 582,632 79,722
------------- ------------
Total revenues 7,210,814 2,002,124
COSTS AND EXPENSES
Cost of educational services 4,281,150 1,013,444
General and
administrative expenses 3,224,343 865,489
------------- ------------
Total costs and expenses 7,505,493 1,878,933
------------- ------------
Loss from operations (294,679) 123,191
Interest Income 13,836 13,904
Interest Expense (263,268) (24,341)
------------- ------------
Loss before income taxes (544,111) 112,754
Income tax provision 18,647 82,173
------------- ------------
Net (loss) income $ (562,758) $ 30,581
============= ============
Net (loss) income
per share of common stock $ (.15) $ .01
============= ============
Weighted average number of common and
common equivalent shares outstanding,
excluding common shares held in escrow 3,854,851 3,493,802
============= ============
See accompanying notes
5
Whitman Medical Corp. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For The Six Months Ended
September 30,
1995 1994
------------- ------------
REVENUES
Tuition $12,385,058 $3,401,432
Educational materials and other 1,025,061 99,810
------------- ------------
Total revenues 13,410,119 3,501,242
COSTS AND EXPENSES
Cost of educational services 8,155,630 2,039,999
General and
administrative expenses 6,106,348 1,466,659
------------- ------------
Total costs and expenses 14,261,978 3,506,658
------------- ------------
Loss from operations (851,859) (5,416)
Interest Income 25,634 23,092
Interest Expense (539,283) (46,578)
------------- ------------
Loss before income taxes (1,365,508) (28,902)
Income tax provision 37,621 49,632
------------- ------------
Net loss $(1,403,129) $ (78,534)
============= ============
Net loss
per share of common stock $ (.36) $ (.02)
============= ============
Weighted average number of common and
common equivalent shares outstanding,
excluding common shares held in escrow 3,854,851 3,493,802
============= ============
See accompanying notes
6
Whitman Medical Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
For The Six Months Ended
September 30,
1995 1994
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,403,129) $ (78,534)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 473,372 210,286
Bad debt expense 1,168,720 52,056
Loss on sale of equipment 26,425
Changes in operating assets and
liabilities:
Restricted cash (81,276)
Accounts receivable 1,815,858 (1,238,678)
Inventory (392,350)
Other current assets 159,787 (34,794)
Deferred costs (4,878) (83,004)
Deposits and other assets (217,481) (42,553)
Accounts payable (92,570) (4,998)
Accrued expenses 107,430 78,690
Income taxes payable 4,722 48,261
Deferred tuition revenue (1,458,538) 944,149
------------- ------------
Net cash provided from (used in)
operating activities 106,092 (149,119)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment & leasehold
improvements (462,313) (104,248)
Proceeds from sale of equipment 11,300
------------- ------------
Net cash used in investing
activities (462,313) (92,948)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving line of credit
and long-term borrowings 3,850,000
Principal payment on revolving line of
credit and long-term borrowings (4,183,621)
Principal payments of capitalized
lease obligations (266,697) (82,970)
Proceeds from exercise of options-
common stock 20,638
------------- ------------
Net cash used in
financing activities (579,680) (82,970)
------------- ------------
See accompanying notes
7
Whitman Medical Corp. and Subsidiaries
Consolidated Statements of Cash Flows - continued
(Unaudited)
For The Six Months Ended
September 30,
1995 1994
------------- ------------
Decrease in cash and
cash equivalents $(935,901) $ (325,037)
Cash and cash equivalents at
beginning of period 1,658,104 1,369,462
------------- ------------
Cash and cash equivalents
at end of period $ 722,203 $1,044,425
============= ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Interest paid $ 518,086 $ 46,575
============= ============
Income taxes paid $ 7,389 $ 78,842
============= ============
Equipment and leasehold
improvements financed through
capital leases $ 1,160,758 $1,081,660
============= ============
See accompanying notes
8
Whitman Medical Corp. and Subsidiaries
Notes to Consolidated Financial Statements
September 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 September 30, 1994 balances have been reclassified to conform to
the current year's presentation.
Accounts receivable and deferred revenue balances reflect the activity
of currently enrolled students. Amounts from future enrollment have
been removed.
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 September 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 six months ended September 30, 1995 and 1994 as though the
acquisition described above was made at the beginning of each fiscal
year:
1995 1994
------------ ------------
Revenues $13,410,119 $10,899,363
(Loss) income before taxes (1,365,508) 272,470
Net (loss) income (1,403,129) 148,190
Net (loss) income per share $ (.36) $ .04
9
2. PROBABLE ACQUISITION
On September 12, 1995, the Company entered into an Agreement and Plan of
Merger with MDJB, Inc. ("MDJB") pursuant to which MDJB will merge into a
wholly owned subsidiary of the Company. Upon the merger of MDJB into
the subsidiary, 1,250,000 registered shares of the Company's common
stock will be exchanged for all of the outstanding MDJB stock.
The following table summarizes, on an unaudited pro forma basis, the
first six months of operations of MDJB for fiscal 1995 and 1994 combined
with the results of operations based on the pooling of interests method
of accounting of the Company and its subsidiaries for the six months
ended September 30, 1995 and 1994 as though the acquisition described
above was made at the beginning of each fiscal year:
1995 1994
------------ ------------
Revenues $17,757,946 $14,876,836
(Loss) income before taxes (783,840) 591,149
Net (loss) income (1,034,667) 339,661
Net (loss) income per share $ (.20) $ .07
10
Item 2. Management Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations Three Months Ended September 30, 1995
Compared to Three Months Ended September 30, 1994
For the three months ended September 30, 1995 (the "1995
September Quarter"), the Company had a net loss of $562,758, or $.15 per
share. The 510,806 shares that remain in escrow in connection with the
Sanford-Brown College 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 September 30, 1994 (the "1994
September Quarter"), the Company had net income of $30,581, or $.01 per
share.
In both periods, virtually all of the Company's revenues were
generated by its school operations. However, in the 1994 September
Quarter, the Company's school operations consisted solely of the
Ultrasound Diagnostic School ("UDS"), whereas, in the 1995 September
Quarter, the school operations also consisted of Sanford-Brown College
("SBC") which was acquired in December 1994. Therefore, the discussion
below of the 1994 September Quarter does not include SBC.
Total enrollment in the Company's schools has increased from 550 at
September 30, 1994 and 2,718 at September 30, 1995. Of this increase 1,505
was attributable to the acquisition of SBC.
In the 1994 September Quarter, with the addition of the
Cardiovascular Technology ("CVT") and Medical Assisting ("MA") programs,
UDS began a planned expansion to increase the number of career programs
offered. In the 1994 September Quarter, of the two new programs only CVT
was offered and it was offered at only two facilities. At September 30,
1995, UDS had substantially
11
completed the expansion of eleven of its fifteen facilities, and the new CVT
and MA programs were being offered in those eleven UDS facilities. UDS expects
that the remainder of its expansion will be substantially complete by the end
of fiscal 1996. The addition of the new programs requires UDS to incur
significant expenses in advance of the expected increases in enrollments and,
thereafter, revenues. Enrolled students at the UDS schools have increased from
550 at September 30, 1994 to 1,213 at September 30, 1995. However,
management believes the Company will not realize the benefits from the
eleven expanded facilities until the fourth quarter of fiscal 1996 when
the expected further increase in student enrollment at these facilities
has substantially occurred.
For the 1995 September Quarter, the contribution to the
operating performance of the Company from each of its two school
operations, exclusive of $175,713 of the Company's corporate overhead,
was:
UDS SBC
------------ ------------
Total revenues $3,159,011 $4,051,803
Operating expenses 3,659,773 3,670,007
Operating (loss) income (500,762) 381,796
Interest expense, net 131,016 118,416
Pretax (loss) income (631,778) 263,380
SBC interest expense reflects the bank debt associated with its
acquisition by the Company.
The Company had total revenues of $7,210,814 for the 1995
September Quarter, as compared to total revenues of $2,002,124 for the
1994 September Quarter. Of the Company's total 1995 September Quarter
revenues, $3,159,011 were earned by UDS and $4,051,803 were earned by
SBC.
12
UDS tuition revenues increased 55%, or $1,051,000, in the 1995
September Quarter as compared to the 1994 September Quarter. Revenues
from the general ultrasound program decreased $168,000 and revenues from
continuing medical education decreased $101,000 in the 1995 September
Quarter as compared to the 1994 September Quarter, as UDS emphasized
enrollments in the new programs, but tuition revenue from the CVT program
increased $454,000, from $43,000 to $497,000, and tuition revenue from
the MA program increased $808,000, from $0 to $808,000. UDS expects to
continue to focus on enrollments in the new programs as a means of
further growth. Management believes that enrollment and revenues in the
general ultrasound program will remain stable or decline slightly.
As part of the addition of the CVT and MA programs, additional
employees were hired (administrative and teaching), equipment was
acquired and school facilities were expanded. As a result, expenses are
being incurred in advance of the anticipated further increases in enroll-
ments and revenues that management believes will continue to occur from
the expansion.
Cost of educational services was $4,281,150 in the 1995 September
Quarter ($1,811,128 incurred by UDS and $2,470,022 incurred by SBC) as compared
to $1,013,444 for UDS only in the 1994 September Quarter, representing an
increase of approximately $798,000 in the 1995 September Quarter as compared to
the 1994 September Quarter.
At UDS, in the 1995 September Quarter as compared to the 1994 September
Quarter, instructor payroll increased by approximately $348,000 or 175%, from
$466,000 to $814,000; administration payroll increased by approximately
$159,000 or 68%, from $236,000 to $395,000; and facility rent expense increased
by approximately $151,000 or 80%, from $189,000 to $340,000. Instructor payroll
increased principally due to the addition of instructors to teach the new CVT
and MA programs. Administration payroll and facility rent increased because of
the increased student population. The anticipated further increase in student
population was preceded by the relocation or expansion of 11 of the school
facilities to larger, more expensive facilities, and the hiring of additional
school staff necessary to comprehensively service the increased student
population.
General and administrative expense, excluding corporate overhead of
$175,713, was $3,048,630 in the 1995 September Quarter ($1,848,645 incurred by
UDS and $1,199,985 incurred by SBC) as compared to $865,489 for UDS only in the
1994 September Quarter, representing an increase of approximately $883,000.
At UDS, general and administrative expense increased approximately
$883,000 or 134% in the 1995 September Quarter as compared to the 1994
September Quarter. Sales and marketing expenses, including the cost of
admission representatives and advertising, increased approximately $485,000 or
974%, from $55,000 to $540,000, in the 1995 September Quarter as compared to
the 1994 September Quarter. In the 1994 September Quarter the only new program
offered was CVT and it was only offered in two locations. In the 1995 September
Quarter, the CVT and MA programs were offered in 11 locations. With the
addition of the MA and CVT programs, UDS increased advertising expenditures
from $55,000 in the 1994 September Quarter to $290,000 in the 1995 September
Quarter in order to create market awareness and generate interest in the new
CVT and MA programs. In the 1994 September Quarter, UDS had no admissions
representatives because enrollment opportunities were limited. In the 1995
September Quarter, UDS employed a total of 30 admissions representatives in the
eleven expanded facilities in order to properly service and enroll the
significantly increased number of interested students. Expense for UDS'
management staff necessary to enhance the school operations and to deliver
student services increased approximately $81,000 or 46%, from $177,000 to
$258,000, in the 1995 September Quarter as compared to the 1994 September
Quarter. The other major components of general and administrative expense that
increased in the 1995 September Quarter, which in total increased $149,000,
were travel, depreciation and amortization and general office expense due,
principally, to the effect of the expansion plan.
13
The following table reflects the activity in the allowance for doubtful
accounts and bad debt expense for the three months ended September 30, 1995:
Allowance for doubtful Three months Three months
accounts roll forward ended ended
September 30, September 30,
1995 1995 Consolidated
UDS SBC Whitman
Beginning balance $254,188 $1,070,034 $1,324,152
Bad debt expense 146,672 405,615 552,287
Charged off during year (16,035) (360,433) (376,468)
Ending balance $384,755 $1,115,216 $1,499,971
The Company calculates the allowance for doubtful accounts based on
several factors including the age of the receivables, payment history and
historical collection experience and evaluates those factors periodically. At
present, the Company believes its calculation criteria and the amount reserved
are adequate to cover future uncollectible receivables. Management does not
expect the allowance for doubtful accounts or bad debt expense to increase
materially over the next 6 to 12 months.
Results of Operations Six Months Ended September 30, 1995
Compared to Six Months Ended September 30, 1994
For the six months ended September 30, 1995 (the "1995 Six Month
Period"), the Company had a net loss of $1,403,129, or $.36 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 six
month period ended September 30, 1994 (the "1994 Six Month Period"), the
Company had a net loss of $78,534, or $.02 per share.
In both periods, virtually all of the Company's revenues were
generated by its school operations. However, in the 1994 Six Month
Period, the Company's school operations consisted solely of UDS whereas,
in the 1995 Six Month Period, the school operations also consisted of SBC
which was acquired in December 1994. Therefore, the discussion below of
the 1994 Six Month Period does not include SBC.
14
For the 1995 Six Month Period the contribution to the operating
performance of the Company from each of its two school operations,
exclusive of $407,356 of the Company's corporate overhead, was:
UDS SBC
------------ ------------
Total revenues $5,367,145 $8,042,974
Operating expenses 6,557,278 7,297,344
Operating (loss) income (1,190,133) 745,630
Interest expense, net 218,766 294,883
Pretax (loss) income (1,408,899) 450,747
SBC interest expense reflects the bank debt associated with its
acquisition by the Company.
The Company had total revenues of $13,410,119 for the 1995 Six
Month Period, as compared to total revenues of $3,501,242 for the 1994
Six Month Period. Of the Company's total 1995 Six Month Period revenues,
$5,367,145 were earned by UDS and $8,042,974 were earned by SBC.
UDS tuition revenues increased 50%, or $1,689,000, in the 1995
Six Month Period as compared to the 1994 Six Month Period. Revenues from
the general ultrasound program decreased $200,000 and revenues from
continuing medical education decreased $82,000 in the 1995 Six Month
Period as compared to the 1994 Six Month Period, as UDS emphasized
enrollments in the new programs, but tuition revenue from the CVT program
increased from $43,000 to $803,000 and tuition revenue from the MA
program increased from $0 to $1,090,000. UDS expects to continue to
focus on enrollments in the new programs as a means of further growth.
Management believes that enrollment and revenue in the general ultrasound
program will remain stable or decline slightly.
15
As part of the addition of the CVT and MA programs, employees
were hired (administrative and teaching), equipment was acquired and
school facilities were expanded. As a result, expenses are being
incurred in advance of further anticipated increases in enrollments and
revenues that management believes will continue to occur from the
expansion.
Cost of educational services were $8,155,630 in the 1995 Six
Month Period ($3,230,185 incurred by UDS and $4,925,445 incurred by SBC)
as compared to $2,039,999 in the 1994 Six Month Period.
At UDS, cost of educational services increased by approximately
58% in the 1995 Six Month Period as compared to the 1994 Six Month
Period. In the 1995 Six Month Period, instructor payroll increased by
approximately 70%, from $904,000 to $1,538,000 as approximately 40
additional instructors were employed at UDS in the 1995 Six Month Period
as compared to the 1994 Six Month Period reflecting the staff necessary
to deliver the new CVT and MA programs. Administration payroll increased
by approximately 47%, $454,000 to $669,000, as additional staff were
hired to deliver enhanced services to the growing student body and
facility rent expense increased by approximately 76%, from $381,000 to
$669,000, because of the relocation or expansion of eleven school
facilities to larger, more expensive facilities, in order to accommodate
the increased student population.
16
General and administrative expense, excluding $407,356 in
corporate overhead, was $5,698,992 in the 1995 Six Month Period
($3,327,093 incurred by UDS and $2,371,899 incurred by SBC) as compared
to $1,466,659 in the 1994 Six Month Period.
At UDS, general and administrative expense increased
approximately 155% in the 1995 Six Month Period as compared to the 1994
Six Month Period. The expenses in most of the categories that comprise
general and administrative expense increased because of the increase at
UDS of its number of students, the corresponding financial commitment UDS
made to support this growth and the commensurate additional operating
expenses related to larger facilities and increased student body. The
categories that increased in the 1995 Six Month Period as compared to the
1994 Six Month Period and the respective increases were: sales and
marketing expenses, including the cost of admissions representatives and
advertising, increased $791,000, management employee expense increased
$95,000, equipment rental expense increased $51,000, consulting fees
increased $113,000, general office supplies increased $177,000, travel
expense increased $235,000, depreciation expense increased $119,000 and
bad debt expense increased $215,000.
17
For accounting purposes, tuition income is recorded as income in
the period in which it is earned and any portion not yet earned from
active students is treated as deferred tuition revenue, a liability
account. At September 30, 1995, deferred tuition revenue increased
$840,037 as compared to March 31, 1995. At UDS, deferred tuition revenue
at September 30, 1995 as compared to March 31, 1995 increased $3,920,379
due, principally, to the increased number of students currently enrolled
in UDS, which was 629 at March 31, 1995 and 1213 at September 30, 1995.
At SBC, deferred tuition revenue decreased $3,080,342 at September 30,
1995 as compared to March 31, 1995 due, principally, to the fact that SBC
changed its method of recording tuition charges for its programs from academic
year based programs to term based program. This change in the method of
recording tuition charges, which is reflected in SBC's accounts receivable and
deferred revenue accounts, was made in response to Department of Education
regulations. Prior to the change in recording tuition charges, SBC was charging
for an academic year equal to three terms or quarters as compared to the
current method of charging one term or quarter at a time. This change had the
effect of reducing both the amounts charged to accounts receivable and the
amounts recorded as liabilities for revenues not yet earned.
18
Liquidity and Capital Resources
At September 30, 1995, the Company had cash on hand of
$1,115,479, as compared to $1,970,104 at March 31, 1995. Included in
cash on hand at September 30, 1995 and March 31, 1995 were $393,276 and
$312,000, respectively, as cash set aside in accordance with Department
of Education regulations to be available for student refunds.
Receivables at September 30, 1995 were $11,231,548 (net of an allowance
of $1,499,971 for doubtful accounts), compared to receivables of
$11,917,551 (net of an allowance of $1,000,864 for doubtful accounts) at
March 31, 1995. Of the $11,231,548 in accounts receivable at September
30, 1995, $8,090,702 were held by UDS and $3,140,846 were held by SBC as
compared to $5,031,731 held by UDS and $6,885,820 held SBC at March 31,
1995. Receivables held by UDS increased at September 30, 1995 from March
31, 1995 because of the increase in the UDS student population.
Receivables held by SBC decreased at September 30, 1995 from March 31,
1995, even though the SBC student population increased because of the
change in its charging method to term based programs.
Of the $1,499,471 in allowance for doubtful accounts at September 30,
1995, $384,255 was provided by UDS and $1,115,216 was provided by SBC, as
compared to $146,575 provided by UDS and $854,109 by SBC at March 31, 1995. The
allowance for doubtful accounts of UDS increased at September 30, 1995 from
March 31, 1995 as a result of the corresponding increase in accounts
receivable. The allowance for doubtful accounts of SBC increased at September
30, 1995 from March 31, 1995 to provide additional exposure on such student
receivables, as a result of the delay in recertification during the period in
which the school was terminated from access to new Title IV Program funding.
This termination resulted from the change in control and ownership associated
with the acquisition of SBC by the Company on December 21, 1994. SBC was then
required to obtain certification from the Department of Education, which was
received on May 4, 1995.
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
September 30, 1995, resulting in a working capital deficit. 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, refi-
nancing 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's net income (loss), liquidity and equity.
19
The Company entered into master equipment leases totalling
$2,190,00 to finance the purchase of capital equipment. For the twelve-month
period ended September 30, 1995, Whitman acquired $1,890,000 in equipment,
furniture and fixtures to equip its facilities for the new CVT and MA programs.
As of September 30, 1995, $300,000 was available under the Company's master
equipment leases. In addition, during the twelve months ended September 30,
1995, the Company acquired an additional $565,000 of equipment, furniture and
fixtures independent of its master equipment leases.
The Company has available to it a working capital facility expiring
April 16, 1996 in the amount of $2,500,000. At September 30, 1995, the Company
had approximately $1,210,000 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 as a participant in the federal student financial
aid programs in May 1995, cash flow generated from the operations of SBC,
particularly cash received from the federal government, has been applied to
reduce the outstanding balance in the working capital facility and has repaid
all monies borrowed under the working capital facility to fund the SBC change
of ownership. The $2,500,000 working capital facility was opened originally to
fund the operations of SBC during the change of ownership. The acquisition of
SBC required the Company to fund its operations to the extent of $2,250,000
until SBC received recertification for the IV Program funding. At September 30,
1995, SBC had repaid its borrowings from the Company. The outstanding balance
of $1,290,000 under the line of credit was used to fund the expansion of UDS.
Management believes UDS will continue to require financing to fund its
operations during its expansion and anticipates that UDS will repay such
borrowings on or about the end of fiscal 1997. The Company also has a bank line
of credit expiring August 31, 1996 in the amount of $500,000 with the full
amount available for use from this credit facility at September 30, 1995.
20
In the 1995 Six Month Period, the Company had positive cash flow from
operating activities of $106,092 as compared to using cash in its operations of
$149,119 in the 1994 Six Month Period. Of the $106,092 positive cash flow from
operations, UDS used $1,303,550 in its operations and SBC had positive cash
flow from its operations of $1,409,647.
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 expanded enrollments in new programs and to an increase in accounts
receivable. Management believes that UDS will continue to use cash in the
third quarter 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. Management
further believes it will be able to extend or refinance the $6,000,000 term
loan due April 16, 1995 which will result in positive working capital. If,
however, the Company is unable to extend or refinance the term loan it will
have a material adverse effect on the Company's net income (loss), liquidity
and equity.
21
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.
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(Registrant)
Date: January 19, 1996 /s/ Randy S. Proto
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Randy S. Proto, President
Date: January 19, 1996 /s/ Joseph Lichtenstein
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Joseph Lichtenstein
Vice President and Treasurer
