FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission File Number 1-13722
WHITMAN EDUCATION GROUP, INC.
New Jersey 22-2246554
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4400 Biscayne Boulevard, 6th Floor, Miami, Florida 33137
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(Address of principal executive offices) (Zip Code)
(305) 575-6534
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(Registrant's telephone number, including area code)
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
---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
AS OF AUGUST 11, 1997, THERE WERE 12,678,582 SHARES OF COMMON STOCK
OUTSTANDING.
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<PAGE>
WHITMAN EDUCATION GROUP, INC.
FORM 10-Q
JUNE 30, 1997
TABLE OF CONTENTS
PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements......................................... 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................. 12
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<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1997
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(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 2,373,881 $ 3,853,932
Restricted cash................................................... 511,927 511,927
Accounts receivable, net.......................................... 19,255,136 18,159,383
Inventories....................................................... 1,148,361 1,084,124
Deferred income taxes............................................. 853,267 853,267
Other current assets.............................................. 1,113,437 1,072,511
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Total current assets.............................................. 25,256,009 25,535,144
Property and equipment, net....................................... 10,917,218 10,062,815
Marketable securities............................................. 296,250 296,250
Deferred costs.................................................... 63,568 93,567
Deposits and other assets, net ................................... 1,369,451 1,497,495
Goodwill, net..................................................... 10,442,005 10,516,165
Restricted cash -escrow........................................... 16,058 16,058
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$ 48,360,559 $ 48,017,494
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 1,922,815 $ 2,390,283
Accrued expenses.................................................. 2,883,963 2,873,923
Income taxes payable.............................................. 26,112 34,816
Short-term notes payable.......................................... 900,000 --
Current portion of capitalized lease obligations.................. 973,592 1,040,403
Current portion of long-term debt................................. 296,158 540,565
Deferred tuition revenue.......................................... 13,720,687 12,999,348
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Total current liabilities......................................... 20,723,327 19,879,338
Other liabilities................................................. 872,893 921,859
Capitalized lease obligations..................................... 1,780,934 2,013,125
Long-term debt.................................................... 10,247,073 9,096,017
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, authorized 100,000,000
shares, issued and outstanding 12,677,582 shares............ 20,584,014 20,584,014
Additional paid-in capital..................................... 671,536 671,536
Accumulated deficit............................................ (5,509,945) (4,139,122)
Treasury stock, 239,694 shares................................. (1,009,273) (1,009,273)
------------ -------------
Total stockholders' equity........................................ 14,736,332 16,107,155
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$ 48,360,559 $ 48,017,494
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</TABLE>
See accompanying notes to financial statements.
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WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30,
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1997 1996
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<S> <C> <C>
Net revenues..................................... $ 13,440,788 $ 11,398,868
Costs and Expenses:
Instructional and educational support....... 9,490,645 6,910,247
Selling and promotion....................... 1,956,144 1,482,001
General and administrative.................. 3,134,428 2,613,182
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Total costs and expenses......................... 14,581,217 11,005,430
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(Loss) income from operations.................... (1,140,429) 393,438
Interest expense, net............................ 230,394 222,942
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(Loss) income before income taxes ............... (1,370,823) 170,496
Income tax provision............................. -- (94,479)
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Net (loss) income ............................... $ (1,370,823) $ 76,017
============ =============
Net (loss) income per share of common stock...... $ (0.11) $ 0.01
============ =============
Average number of common stock and
common stock equivalent shares
outstanding, excluding common stock
shares held in escrow in 1996................... 12,677,582 13,726,469
============ =============
</TABLE>
See accompanying notes to financial statements.
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WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30,
------------------------------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ....................................... $ (1,370,823) $ 76,017
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization.......................... 821,507 631,664
Bad debt expense....................................... 727,374 343,446
Deferred tax provision................................. -- 39,159
Changes in operating assets and liabilities:
Accounts receivable.................................... (1,823,127) 926,102
Inventories............................................ (64,237) (10,883)
Other current assets................................... (40,580) (79,855)
Deposits and other assets.............................. (65,454) (123,617)
Accounts payable....................................... (468,796) 77,240
Accrued expenses....................................... 143,960 28,707
Income taxes payable................................... 1,922 37,913
Deferred tuition revenue............................... 721,339 (1,794,922)
Other.................................................. (180,867) --
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Net cash (used in) provided by operating activities.... (1,597,782) 150,971
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CASH FLOWS FROM INVESTING ACTIVITIES:
Payments into escrow for acquisition of
Sanford-Brown College.................................. -- (32,049)
Purchase of property and equipment....................... (1,389,917) (651,850)
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Net cash used in investing activities.................... (1,389,917) (683,899)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term notes payable................... 900,000 --
Proceeds from revolving line of credit
and long-term borrowings............................... 8,651,385 5,642,467
Principal payments on revolving line of credit,
long-term borrowings and other liability............... (7,744,736) (7,829,555)
Principal payments on capitalized lease obligations...... (299,001) (245,775)
Proceeds from exercise of options and warrants........... -- 287,833
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Net cash provided by (used in) financing activities...... 1,507,648 (2,145,030)
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Decrease in cash and cash equivalents.................... (1,480,051) (2,677,958)
Cash and cash equivalents at beginning of year........... 3,853,932 2,762,141
CTU activity for the three-months ended March 31, 1996... -- (15,423)
------------- --------------
Cash and cash equivalents at end of year................. $ 2,373,881 $ 68,760
============= ==============
</TABLE>
Continued on the following page.
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<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) --(CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30,
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1997 1996
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<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING
AND INVESTING ACTIVITIES:
Equipment acquired under capital leases............... $ -- $ 25,494
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid......................................... $ 241,054 $ 164,436
=========== ============
Income taxes paid..................................... $ -- $ 233,057
=========== ============
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The accompanying unaudited condensed 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 condensed 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 Form 10-K for the fiscal
year ended March 31, 1997. 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
Education Group, Inc., and its wholly-owned subsidiaries, which consist of
Ultrasound Technical Services, Inc. ("Ultrasound Diagnostic Schools"),
Sanford-Brown College, Inc. ("Sanford-Brown College"), and MDJB, Inc. ("Colorado
Technical University"). All intercompany accounts and transactions have been
eliminated.
The Company experiences seasonality in its quarterly results of operations
as a result of changes in the level of student enrollment. New enrollment in the
Company's schools tends to be lower in the first and second fiscal quarters
covering the summer months which are traditionally associated with recess from
school, with the greatest seasonal effect in the second quarter. Costs are
generally not significantly affected by the seasonal factors on a quarterly
basis. Accordingly, quarterly variations in net revenues will result in
fluctuations in income from operations on a quarterly basis.
2. ACQUISITION OF HURON UNIVERSITY
On December 30, 1996, Colorado Technical University acquired the South
Dakota operations and certain assets at two campuses of Huron University. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, operations were included in the Company's Statement of Operations
beginning on January 1, 1997.
The following unaudited pro forma information combines the results of
operations of Whitman and Huron University for the three months ended June 30,
1996 as if the transaction had occurred at April 1, 1996, after giving effect to
certain adjustments including additional rent expense and reductions in interest
and depreciation expense (amounts are in thousands, except per share amounts).
Net revenues.............. $ 11,967
Net loss ................. $ (324)
Loss per common share..... $ ( .02)
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3. DEBT
On May 21, 1997, the Company's $5.5 million revolving credit facility was
increased from $5.5 million to $7.5 million under the same terms and conditions.
On June 4, 1997, the remaining balance of the $926,421 note payable was
refinanced with the former owner of Sanford-Brown College bearing interest at
12% and secured by equipment, and is payable in monthly installments of interest
of $9,000. The principal balance and all unpaid interest is due on June 3, 1998.
On June 13, 1997, the Company entered into a $1.5 million loan agreement
with a new lender. Under the terms of this agreement, the Company is required to
draw down the $1.5 million on or before December 12, 1997 and shall pay interest
only through July 1998 and thereafter, pay monthly principal and interest
installments through June 2002 at prime plus 1.25%.
4. CONTINGENCIES
The Company has received final determination letters from the United States
Department of Education ("DOE") on the program reviews conducted by the DOE with
respect to Sanford-Brown College for the federal fiscal years 1993 through 1995.
The determination letters culminate the program review process leaving only
payment of the program review liabilities to close the reviews. The Company will
pay all program review liabilities within the 45-day period established by the
Department.
Whitman purchased Sanford-Brown College in December 1994. Accordingly, the
program reviews relate primarily to activities of the College prior to Whitman's
ownership. Liabilities in the amount of $516,154 were assessed against
Sanford-Brown in the reviews. Pursuant to the purchase agreement by which
Whitman purchased Sanford-Brown, Whitman is fully indemnified for these
liabilities by the former owner of Sanford-Brown College. To date, $500,000 has
already been advanced to Whitman toward payment of these liabilities.
The Company is a party to routine litigation incidental to its business.
Management does not believe that an adverse result in any or all of such routine
litigation will have a material adverse effect on the Company's financial
condition or results of operations.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements of the Company, the related notes to
consolidated financial statements and Management's Discussion and Analysis of
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<PAGE>
Financial Condition and Results of Operations included in the Company's
Form 10-K for the year ended March 31, 1997 and the condensed consolidated
financial statements and the related notes to the condensed consolidated
financial statements included in Item 1 of this Quarterly Report on Form 10-Q.
Except for the historical matters contained herein, statements made in this
report are forward looking and are made pursuant to the safe harbor provisions
of the Securities Litigation Reform Act of 1995. Investors are cautioned that
forward looking statements involve risks that may affect the Company's business
and prospects, including economic, competitive, governmental, and other factors
discussed in this report and in the Company's filings with the Securities and
Exchange Commission.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain
statement of operations data to net revenues for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------
1997 1996
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<S> <C> <C>
Net revenues................................... 100.0% 100.0%
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Costs and expenses:
Instruction and educational support......... 70.6 60.6
Selling and promotional..................... 14.6 13.0
General and administrative.................. 23.3 22.9
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Total costs and expenses....................... 108.5 96.5
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(Loss) income from operations.................. (8.5) 3.5
Interest expense, net.......................... 1.7 2.0
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(Loss) income before income tax
provision................................... (10.2) 1.5
Income tax provision........................... -- 0.8
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Net (loss) income.............................. (10.2%) 0.7%
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</TABLE>
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1996
Net revenues increased by $2.0 million or 17.9% to $13.4 million for the
three months ended June 30, 1997 from $11.4 million for the three months ended
June 30, 1996. The increase was primarily due to an increase in average student
enrollment and tuition increases. Student enrollment increased 14.0% overall
with the University Degree Division experiencing a 39.9% increase and the
Associate Degree Division experiencing a 3.1% increase. Tuition increases
averaged three to five percent.
The increase in student enrollment in the University Degree Division
resulted in increased net revenues of $1.3 million or 49.3%. This increase
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<PAGE>
was primarily due to the opening of a Colorado Technical University campus
in Denver in October 1996 and the acquisition of Huron University in December
1996.
The increase in student enrollment in the Associate Degree Division
resulted in increased net revenues of $755,000 or 8.6%. The increased enrollment
was primarily in the medical assisting programs offered by the Ultrasound
Diagnostic Schools.
Instruction and educational support increased by $2.6 million or 37.3% to
$9.5 million for the three months ended June 30, 1997 from $6.9 million for the
three months ended June 30, 1996. As a percentage of net revenues, instruction
and educational support expenses increased to 70.6% for the three months ended
June 30, 1997 as compared to 60.6% for the three months ended June 30, 1996.
These increases were primarily due to start-up costs associated with Colorado
Technical University's Denver campus which was opened in October 1996 and the
acquisition of Huron University in December 1996 at the University Degree
Division. At Huron University, instruction and educational costs as a percentage
of net revenues increased substantially during the summer session, which
overlaps with the Company's first and second fiscal quarters. This percentage
increase is primarily a result of the seasonality associated with the operations
of Huron University, a more traditional university that experiences a
significant decline in tuition revenue during the summer. In addition, the
increase is also attributable to the addition of faculty, staff and management
to support the increase in student enrollment at the Associate Degree Division.
Selling and promotional expenses increased by $0.5 million or 32.0% to $2.0
million for the three months ended June 30, 1997 from $1.5 million for the three
months ended June 30, 1996. As a percentage of net revenues, selling and
promotional expenses increased to 14.6% for the three months ended June 30, 1997
as compared to 13.0% for the three months ended June 30, 1996. The increase in
selling and promotional expenses was primarily due to increased marketing and
advertising costs at the Associate Degree Division for new programs offered at
the Ultrasound Diagnostic Schools and to an increase in selling and promotional
costs at the University Degree Division related to Colorado Technical
University's new Denver campus and Huron University.
General and administrative expenses increased by $0.5 million or 19.9% to
$3.1 million for the three months ended June 30, 1997 from $2.6 million for the
three months ended June 30, 1996. As a percentage of net revenues, general and
administrative expenses were 23.3% and 22.9%, respectively, for the three months
ended June 30, 1997 and June 30, 1996. The increase in general and
administrative expenses was due primarily to an increase in bad debt expense at
the Associate Degree Division due to an increase in student enrollment which has
resulted in increased student account receivable balances.
The Company reported a net loss of $1.4 million and net income of $76,000
for the three months ended June 30, 1997 and 1996, respectively. The net loss
for fiscal 1997 was primarily due to the investments made for the addition of
personnel, the upgrade of equipment and facilities, and the opening and
acquisition of new campuses.
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<PAGE>
SEASONALITY
The Company experiences seasonality in its quarterly results of operations
as a result of changes in the level of student enrollment. New enrollment in the
Company's schools tends to be lower in the first and second fiscal quarters
covering the summer months which are traditionally associated with recess from
school, with the greatest seasonal effect in the second quarter. Costs are
generally not significantly affected by the seasonal factors on a quarterly
basis. Accordingly, quarterly variations in net revenues will result in
fluctuations in income from operations on a quarterly basis.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at June 30, 1997 and March 31, 1997 were $2.4
million and $3.9 million, respectively. The Company's working capital totalled
$4.5 million at June 30, 1997 and $5.7 million at March 31, 1997. In accordance
with DOE regulations, the Company maintained $512,000 in restricted cash at June
30, 1997 and March 31, 1997, for funds to be available for student refunds.
Net cash of $1.6 million was used for operating activities for the three
months ended June 30, 1997 compared to net cash of $151,000 generated from
operations for the three months ended June 30, 1996. The $1.7 million increase
in cash utilized in operations was primarily due to a net loss of $1.4 million
for the three months ended June 30, 1997 and an increase in student receivables
of $1.3 million.
Net cash of $1.4 million and $684,000 was used for investing activities for
the three months ended June 30, 1997 and 1996, respectively. The increase of
$706,000 was primarily due to an increase in capital expenditures for the
upgrade and expansion of school facilities.
Net cash of $1.5 million was provided by financing activities for the three
months ended June 30, 1997, an increase of $3.7 million from the three months
ended June 30, 1996. The increase was primarily due to increased borrowings
necessary to fund the net loss and capital expenditures for the three months
ended June 30, 1997.
The Company has bank lines of credit of $2.0 million expiring in May 1998
and a revolver note maturing in April 1999 in the amount of $7.5 million. The
revolver note was increased from $5.5 million to $7.5 million in March 1997. At
June 30, 1997, the Company had $9.4 million outstanding and $100,000 available
under these facilities. Borrowings under these facilities increased by $1.9
million from the amounts outstanding at March 31, 1997. The amounts borrowed
under the working capital facility for the three months ended June 30, 1997 were
primarily used for operations and capital expenditures.
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As of August 1, 1997, as a result of new DOE regulations (scheduled for
implementation on July 1, 1997, but delayed until August 1), if an institution
is on reimbursement for Pell and campus-based programs, then it may also be
required to obtain prior approval from the DOE before it may disburse and/or
certify a student's eligibility for a Federal Family Education Loan ("FFEL"). In
July 1997, the DOE granted Sanford-Brown approval to certify and disburse FFEL
funds without obtaining prior approval from the DOE. This approval is
conditional upon the demonstrated ability of Sanford-Brown to properly
administer Title IV funds. In the event the DOE rescinds this approval status
and Sanford-Brown, therefore, is required to obtain the pre-approval for
certification and/or disbursement of the FFEL loans described above, this may
have a material adverse effect on the cash flow of the Company. In such an
event, the Company anticipates that it will be able to increase its financings
if necessary; however, there can be no assurance that it will be able to do so.
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 1996 Stock Option Plan, as amended
11 Computation of Net Income (Loss) Per Share of Common Stock
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 1997.
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 EDUCATION GROUP, INC.
(Registrant)
Date: August 13, 1997 /S/ FERNANDO L. FERNANDEZ
-----------------------------------------
FERNANDO L. FERNANDEZ
VICE PRESIDENT - FINANCE,
CHIEF FINANCIAL OFFICERAND TREASURER
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EXHIBIT 10.1
WHITMAN EDUCATION GROUP, INC.
1996 STOCK OPTION PLAN
1. PURPOSES.
The purposes of this 1996 Stock Option Plan (the "Plan") are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to the Employees of the Company or its
Subsidiaries as well as other individuals who perform services for the Company
or its Subsidiaries, and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or Non-Qualified
Stock Options, at the discretion of the Committee and as reflected in the terms
of the written option agreement.
2. DEFINITIONS.
As used herein, the following definitions shall apply:
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall mean the common stock, no par value per share, of the
Company.
"COMPANY" shall mean Whitman Education Group, Inc., a New Jersey
corporation.
"COMMITTEE" shall mean the committee appointed by the Board of Directors in
accordance with Section 4(a) of the Plan.
"CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any
interruption or termination of service as an Employee. Service as an Employee
shall not be considered interrupted for purposes of the Plan, in the case of
sick leave, military leave, or any other bona fide leave of absence approved by
the Committee.
"DISABLED" or "DISABILITY" shall mean a physical or mental disability as
defined in Section 22(e)(3) of the Code.
"EMPLOYEE" shall mean any person, including officers and directors,
employed by the Company or any Parent or Subsidiary. The payment of a director's
fee by the Company shall not be sufficient to constitute the recipient an
"employee" of the Company.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"INCENTIVE STOCK OPTION" shall mean a stock option intended to qualify as
an "incentive stock option" within the meaning of Section 422 of the Code.
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"NON-QUALIFIED STOCK OPTION" shall mean a stock option not intended to
qualify as an "incentive stock option" within the meaning of Section 422 of the
Code.
"OPTION" shall mean a stock option granted pursuant to the Plan.
"OPTIONED STOCK" shall mean the Common Stock subject to an Option.
"OPTIONEE" shall mean the recipient of an Option.
"PARENT" shall mean a "parent corporation" of the Company, whether now or
hereafter existing, as defined in Section 424(e) of the Code.
"RULE 16B-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act or any successor rule.
"SHARE" shall mean a share of Common Stock, as adjusted in accordance with
Section 13 of the Plan.
"SUBSIDIARY" shall mean a "subsidiary corporation" of the Company, whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK.
Subject to the provisions of Section 13 of the Plan, the maximum aggregate
number of Shares which may be issued under the Plan is 1,500,000. If an Option
should expire or become unexercisable for any reason without having been
exercised in full, the unpurchased Shares which were subject thereto shall,
unless the Plan shall have been terminated, become available for further grant
under the Plan.
4. ADMINISTRATION.
(a) COMMITTEE. The Plan at all times shall be administered by a Committee
appointed by the Company's Board of Directors. The Committee shall consist of
not less than two members of the Board of Directors, each of whom is a
"non-employee director" as defined in Rule 16b-3 and an "outside director" as
defined for purposes of Section 162(m) of the Code.
(b) POWERS OF THE COMMITTEE. Subject to the provisions of the Plan, the
Committee shall have the authority, in its discretion: (i) to grant Incentive
Stock Options or Non- Qualified Stock Options; (ii) to determine the fair market
value of the Common Stock; (iii) to determine the exercise price per Share of
Options to be granted; (iv) to determine the persons to whom, and the time or
times at which, Options shall be granted and the number of Shares to be
represented by each Option; (v) to determine the vesting schedule of Options to
be granted; (vi) to prescribe, amend and rescind rules and regulations relating
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to the Plan; (vii) to determine the terms and provisions of each Option
granted under the Plan (which need not be identical); (viii) to accelerate the
exercise date of any Option; (ix) to authorize any person to execute on behalf
of the Company any instrument required to effectuate the grant of an Option
previously granted by the Committee; (x) subject to the provisions of the Plan
and subject to such additional limitations and restrictions as the Committee may
impose, to delegate to specific members of management or to a committee of
management personnel the authority to determine: (a) the persons to whom, and
the time and times at which, Options shall be granted and the number of Shares
to be represented by each Option; (b) the vesting schedule of Options; (c) the
term of Options, and (d) other terms and conditions of any Options; provided
that the Committee shall not have the authority to delegate such matters with
respect to awards to be granted to any person subject to Section 16 of the
Exchange Act or any "covered employee" under Section 162(m) of the Code; and
(xi) to interpret the Plan and make all other determinations deemed necessary or
advisable for the administration of the Plan. The Committee may require the
voluntary surrender of all or any portion of any Option granted under the Plan
as a condition precedent to a grant of a new Option to such Optionee. Subject to
the provisions of the Plan, such new Option shall be exercisable at the price,
during the period and on such other terms and conditions as are specified by the
Committee at the time the new Option is granted. Upon surrender, the Options
surrendered shall be unexercisable and the Shares previously subject to such
Options shall be available for the grant of other Options.
(c) EFFECT OF THE COMMITTEE'S DECISION. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Optionees.
5. ELIGIBILITY.
Incentive Stock Options may be granted only to Employees. Non-Qualified
Stock Options may be granted to Employees, non-Employee directors (in accordance
with the provisions of Section 8 of the Plan or otherwise in the discretion of
the Committee), independent contractors and agents. Any person who has been
granted an Option may, if he is otherwise eligible, be granted an additional
Option or Options. Subject to the provisions of Section 15 of the Plan, the
maximum number of Shares with respect to which Options may be granted under the
Plan to any Employee in any calendar year is 1 % of the authorized and
outstanding Shares of Common Stock on the date of adoption of the Plan.
6. DOLLAR LIMITATION.
Except as otherwise provided under the Code, to the extent that the
aggregate fair market value of stock for which Incentive Stock Options (under
all stock option plans of the Company and of any Parent or Subsidiary) are
exercisable for the first time by an Employee during any calendar year exceeds
$100,000, such Options shall be treated as Non-Qualified Stock Options. For
purposes of this limitation, (a) the fair market value of stock is determined as
of the time the Option is granted; (b) the limitation is applied by taking into
account Options in the order in which they were granted, and (c) Incentive Stock
Options granted before 1987 are not to be taken into account.
-3-
<PAGE>
7. RIGHTS OF OPTIONEES.
The Plan shall not confer upon any Optionee any right with respect to
continuation of employment by the Company, nor shall it interfere in any way
with his right or the Company's right to terminate his employment at any time.
8. AUTOMATIC GRANT OF OPTION TO NON-EMPLOYEE DIRECTORS.
Subject to Section 3 of the Plan, each person who is a non-Employee
director of the Company on the first business day following any annual meeting
of shareholders of the Company and who is not a common law employee of the
Company or of any Subsidiary shall automatically receive on such date an Option
to acquire 7,500 Shares and the person who is serving as the Chairman of the
Board of Directors on such day following any annual meeting and who is not a
common law employee of the Company or any Subsidiary shall automatically be
granted options to acquire 37,500 Shares, as adjusted in accordance with Section
15 of the Plan. The exercise price for the Shares to be issued pursuant to
Options granted under this Section 8 shall be as set forth in Section 11(a)(ii)
of the Plan. The Options granted pursuant to this Section 8 shall have a term of
ten years from the date of grant. The foregoing formula may not be amended more
than once every six months other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder. Non-Employee directors shall have the right, if they so wish, to
decline receipt of any Options to be granted under this Section 8.
9. TERM OF PLAN.
The Plan shall become effective upon its adoption by the Board of Directors
of the Company; provided that, if the Plan is not approved by the shareholders
of the Company in accordance with Section 20 of the Plan within 12 months after
the date of adoption by the Board of Directors, the Plan and any Options granted
thereunder shall terminate and become null and void. The Plan shall continue in
effect until July 25, 2006 unless sooner terminated in accordance with Section
17 of the Plan.
10. TERM OF OPTION.
The term of each Option shall be ten years from the date of grant thereof
or, except for Options granted pursuant to Section 8 of the Plan, such shorter
term as may be determined by the Committee. However, in the case of an Incentive
Stock Option granted to an Employee who, immediately before the Incentive Stock
Option is granted, owns stock representing more than 10% of the voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five years from the date of grant thereof or
such shorter time as may be determined by the Committee.
-4-
<PAGE>
11. EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price of the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Committee, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option: (A) granted to an
Employee who, immediately before the grant of such Incentive Stock Option,
owns stock representing more than 10% of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share exercise
price shall be no less than 110% of the fair market value per Share on the
date of grant; and (B) granted to any other Employee, the per share
exercise price shall be no less than the fair market value per Share on the
date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per Share
exercise price shall be no less than the fair market value per Share on the
date of grant and, with respect to Options granted to non-Employee
directors as provided in Section 8 of the Plan, shall be equal to the fair
market value per Share on the date of the grant.
(b) Notwithstanding Section 11(a) of the Plan, in the event the Company
substitutes an Option for a stock option issued by another corporation in
connection with a corporate transaction, such as a merger, consolidation,
acquisition of property or stock, separation (including a spin-off or other
distribution of stock or property), reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the
Code) or partial or complete liquidation involving the Company and such other
corporation, the exercise price of such substituted Option shall be as
determined by the Committee in its discretion (subject to the provisions of
Section 424(a) of the Code in the case of a stock option that was intended to
qualify as an "incentive stock option") to preserve, on a per share basis
immediately after such corporate transaction, the same ratio of fair market
value per option share to exercise price per share which existed immediately
prior to such corporate transaction under the option issued by such other
corporation.
(c) The fair market value per Share shall be determined by the Committee in
its discretion; provided, however, that if the Common Stock is listed on a stock
exchange, the fair market value per Share shall be the closing price on such
exchange on the date of grant of the Option, as reported in the Wall Street
Journal.
(d) The consideration to be paid for the Shares to be issued upon exercise
of an Option shall consist of cash or check in an amount equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised or such
other consideration as the Committee shall determine. Payment may also be made,
in the discretion of the Committee, by delivery (including by facsimile) to the
Company or its designated agent of an executed irrevocable option exercise form
together with irrevocable instructions to a broker-dealer designated by the
Company to sell (or margin) a sufficient portion of the Shares and deliver the
-5-
<PAGE>
sale (or margin loan) proceeds directly to the Company to pay for the
exercise price; provided that Optionees subject to Section 16 of the Exchange
Act shall not be entitled to make payment by such method until either the
holders of a majority of the outstanding shares of the Company entitled to vote
have approved an amendment to the Plan permitting payment by such method or
counsel to the Company has advised the Committee that such approval is not
required by Rule 16b-3. For purposes of this Section 11(d), the exercise date of
such Option shall be the date on which such documents have been delivered to the
Company or its designated agent.
12. EXERCISE OF OPTION.
(a) Procedure for Exercise. Any Option granted hereunder shall be
exercisable at such times and under such conditions as determined by the
Committee, including performance criteria with respect to the Company and/or the
Optionee, and as shall be permissible under the terms of the Plan. An Option may
not be exercised for a fraction of a Share. An Option shall be deemed to be
exercised when written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may, as authorized by
the Committee, consist of any consideration and method of payment allowable
under Section 11(d) of the Plan.
(b) Rights as a Shareholder. Until the issuance, which in no event (except
as provided in Section 18 of the Plan) will be delayed more than 30 days from
the date of the exercise of the Option, of the stock certificate evidencing such
Shares (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in the Plan. Exercise
of an Option in any manner shall result in a decrease in the number of Shares
which thereafter may be available, both for purposes of the Plan and for sale
under the Option, by the number of Shares as to which the Option is exercised.
13. TERMINATION OF EMPLOYMENT.
(a) Termination of Status as an Employee. If an Employee ceases to be in
Continuous Status as an Employee, other than (i) by reason of retirement or (ii)
as a result of a termination by the Company for deliberate, willful or gross
misconduct, any Option held by such Employee shall be exercisable within twelve
(12) months after the date he ceases to be in Continuous Status as an Employee
(or such shorter or longer time as may be determined by the Committee) to the
extent the Employee was entitled to exercise such Option as of the date of his
termination of employment.
(b) Retirement of Optionee. If any Employee ceases to be in Continuous
Status as an Employee by reason of such Employee's retirement, any Option held
-6-
<PAGE>
by such Employee shall be exercisable within 36 months after the date he
ceases to be in Continuous Status as an Employee to the extent that he was
entitled to exercise such Option as of the date of his retirement. For purposes
of the Plan, "retirement" means termination of services as an Employee at or
after age 65 other than as a result of deliberate, willful or gross misconduct.
(c) Death or Disability of Optionee. Subject to the provisions of the Plan,
any Option held by an Optionee at the time of his death may be exercised
subsequently by the legal representative of the Optionee's estate or by the
person or persons who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise such
Option as of the date of his death. In the event of the death or disability of
an Optionee during the time period specified in Section 13(a) or 13(b), as
applicable, the Option may be exercised, at any time within three months
following the date of his death or disability, by the Optionee, or, in the case
of death, by the legal representative of the Optionee's estate or by a person or
persons who acquired the right to exercise the option by bequest or inheritance,
but only to the extent the Optionee was entitled to exercise such Option as of
the date of his death or disability.
(d) Termination for Misconduct. If any Employee ceases to be in Continuous
Status as an Employee as a result of a termination by the Company for
deliberate, willful or gross misconduct, any Option held by such Employee shall
terminate immediately and automatically on the date of his termination as an
Employee unless otherwise determined by the Committee.
(e) Expiration of Options. None of the events described above in this
Section 13 shall extend the period of exercisability of the Option beyond the
expiration date thereof. To the extent that an Optionee was not entitled to
exercise an Option on the date he ceased to be in Continuous Status as an
Employee or the date of the Optionee's death, or if he does not exercise such
Option (which he was entitled to exercise) within the time period specified in
this Section 13, the Option shall terminate and become null and void.
Notwithstanding the provisions of Section 13(a), 13(b) or 13(d) of the Plan, no
Options shall be exercisable after an Optionee ceases to be in Continuous Status
as an Employee in the event the Optionee shall have during the time period in
which his Options are exercisable, engaged in deliberate action which, as
determined by the Committee, causes substantial harm to the interests of the
Company or constitutes a breach of any obligation of the Optionee to the
Company. In such event, the Optionee shall forfeit all rights to any unexercised
Option as of the date of such deliberate action.
14. NON-TRANSFERABILITY OF OPTIONS.
An Option may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent and
distribution or, in the case of a Non-Qualified Stock Option, pursuant to a
qualified domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, and, except with respect to a qualified domestic relations order as
aforesaid, may be exercised, during the lifetime of the Optionee, only by the
Optionee.
-7-
<PAGE>
15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION;
CHANGE IN CONTROL; DISSOLUTION.
(a) Subject to any required action by the shareholders of the Company, each
of (i) the number of shares of Common Stock covered by each outstanding Option,
(ii) the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, (iii) the price per share of Common Stock covered by each such
outstanding Option, (iv) the number of shares of Common Stock to be granted to
non-Employee directors pursuant to Section 8 of the Plan, and (v) the maximum
number of Shares with respect to which Options may be granted to any Employee,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split or the payment of a
stock dividend with respect to the Common Stock or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that (a) each such
adjustment with respect to an Incentive Stock Option shall comply with the rules
of Section 424(a) of the Code (or any successor provision) and (b) in no event
shall any adjustment be made which would render any Incentive Stock Option
granted hereunder other than an "incentive stock option" as defined in Section
422 of the Code; and provided further, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) If: (1) any person (as defined for purposes of Section 13(d) and 14(d)
of the Exchange Act, but excluding the Company and any of its wholly-owned
subsidiaries) acquires direct or indirect ownership of 50% or more of the
combined voting power of the then outstanding securities of the Company as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise; or (2) the shareholders of the Company
approve (i) any consolidation or merger of the Company in which the Company is
not the surviving corporation (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of the surviving corporation immediately after the
merger), or (ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company to an entity which is not a wholly-owned subsidiary of the
Company, then the exercisability of each Option outstanding under the Plan shall
be automatically accelerated so that each such Option shall, immediately prior
to the specified effective date of any of the foregoing transactions, become
fully exercisable with respect to the total number of Shares subject to such
Option and may be exercisable for all or any portion of such Shares. Upon the
consummation of any of such transaction, all outstanding Options under the Plan
shall, to the extent not previously exercised, either be assumed by the
successor corporation or parent thereof or be replaced with a comparable option
to purchase shares of the capital stock of the successor corporation or parent
thereof.
-8-
<PAGE>
(c) In the event of the proposed dissolution or liquidation of the Company,
all outstanding Options will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Committee.
16. TIME FOR GRANTING OPTIONS.
The date of grant of an Option shall be the date on which the Committee
makes the determination granting such Option or such later date as the Committee
may specify. Notice of the determination shall be given to each Employee to whom
an Option is so granted within a reasonable time after the date of such grant.
17. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Subject to the limitations set forth in Section 8 of the Plan, the
Committee may terminate or amend the Plan from time to time in such respects as
the Committee may deem advisable; provided that, the following revisions or
amendments shall require approval of the Company's shareholders in accordance
with Section 20 of the Plan: (i) any increase in the number of Shares subject to
the Plan, other than in connection with an adjustment under Section 15 of the
Plan; (ii) any change in the designation of the class of persons eligible to be
granted Options; (iii) any material increase in the benefits accruing to
participants under the Plan; or (iv) any increase in the maximum number of
Shares with respect to which Options may be granted to any Employee.
(b) Effect of Amendment or Termination. No amendment or termination or
modification of the Plan shall in any manner affect any Option theretofore
granted without the consent of the Optionee, except that the Committee may amend
or modify the Plan in a manner that does affect Options theretofore granted upon
a finding by the Committee that such amendment or modification is in the best
interest of shareholders or Optionees.
18. CONDITIONS UPON ISSUANCE OF SHARES.
Shares shall not be issued pursuant to the exercise of an Option unless the
exercise of such Option and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be further subject
to the advice of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by law.
-9-
<PAGE>
19. OPTION AGREEMENTS.
Options shall be evidenced by written option agreements in such form as the
Committee shall approve. Such agreements shall contain such provisions,
including, without limitation, restrictions upon the exercise of the option, as
the Committee shall determine.
20. SHAREHOLDER APPROVAL.
The effectiveness of the Plan shall be subject to approval by the
shareholders of the Company, in a separate vote, within twelve months after the
date the Plan is adopted. The approval of such shareholders of the Company shall
be solicited substantially in accordance with Section 14(a) of the Exchange Act
and the rules and regulations promulgated thereunder, and shall be obtained, at
a duly held shareholders' meeting, by the affirmative vote of the holders of a
majority of the outstanding shares of the Company present or represented and
entitled to vote thereon.
21. INDEMNIFICATION OF COMMITTEE MEMBERS.
In addition to such other rights of indemnification as they may have as
Directors, the members of the Committee shall be indemnified by the Company
against the reasonable expenses, including attorneys' fees actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
to the extent required by and in the manner provided by the Articles of
Incorporation or Bylaws of the Company), or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member did not act in good faith and in a manner he reasonably
believed to be in and not opposed to the best interests of the Company; provided
that within 60 days after institution of any such action, suit or proceeding a
Committee member shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
22. OTHER COMPENSATION PLANS.
The adoption of the Plan shall not affect any other stock option or
incentive or other compensation plans in effect for the Company or any
Subsidiary, nor shall the Plan preclude the Company from establishing any other
forms of incentive or other compensation for employees and directors of the
Company or any Subsidiary.
23. HEADINGS.
Headings of Articles and Sections hereof are inserted for convenience and
reference; they constitute no part of the Plan.
-10-
<PAGE>
24. WITHHOLDING.
The Company and any Subsidiary may, to the extent permitted by law, deduct
from any payments or transfers of any kind due to an Optionee the amount of any
federal, state, local or foreign taxes required by any governmental regulatory
authority to be withheld or otherwise deducted with respect to the Options or
the Optioned Stock.
25. GOVERNING LAW.
The Plan, the Options granted hereunder and all related matters shall be
governed by, and construed and enforced in accordance with, the laws of the
State of New Jersey.
26. COMPLIANCE WITH RULE 16b-3.
It is the intent of the Company that this plan comply in all respects to
Rule 16b-3, as amended (or any successor rule), in connection with any Option
granted to a person who is subject to Section 16 of the Exchange Act.
Accordingly, any provision of this Plan or any Option agreement that does not
comply with the requirements of Rule 16b-3 (or any successor rule) as then
applicable to any such person shall be construed or deemed amended to the extent
necessary to conform to such requirements, except that such automatic amendment
shall not apply to any other participant in the Plan who is not (at the time of
such application) subject to Section 16 of the Exchange Act. Any action taken by
the Committee pursuant to the Plan that does not comply with the requirements of
Rule 16b-3 (or any successor rule) shall be null and void.
27. RESERVATION OF SHARES
The Company shall, during the term of the Plan and any Option granted
hereunder, reserve and keep available a number of Shares as shall be sufficient
to satisfy the requirements of the Plan.
-11-
EXHIBIT 11
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF NET (LOSS) INCOME PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
===================================
JUNE 30, 1997 JUNE 30, 1996
============= ===============
<S> <C> <C>
Primary:
Average shares outstanding ............................. 12,677,582 10,428,323
Net effect of dilutive stock options and warrants
based on the treasury stock method using the
average market price .............................. -- 2,276,534
Sanford-Brown shares held in escrow .................... -- 1,021,612
------------- ------------
Total .................................................. 12,677,582 13,726,469
============= ============
Net (loss) income ...................................... $ (1,370,823) $ 76,017
Per share amount ....................................... $ (0.11) $ .01
Fully diluted:
Average shares outstanding ........................ 12,677,582 10,428,323
Net effect of stock options and warrants based on
the treasury stock method using average quarter
and quarter-end market prices ..................... 870,294 2,508,131
Sanford-Brown shares held in escrow .................... -- 1,021,612
------------- ------------
Total .................................................. 13,547,876 13,958,066
============= ============
Net (loss) income ...................................... $ (1,370,823) $ 76,017
Per share amount ....................................... $ (0.10) $ .01
</TABLE>
Net (loss) income per share of common stock for primary purposes is computed by
dividing net (loss) income 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 Company has considered all common
stock equivalents for purposes of calculating fully diluted earnings per share
regardless of their dilutive affect. Included as common stocks equivalents for
the three months ended June 30, 1996 for fully diluted proposes are 1,021,612
shares issued in connection with the acquisition of Sanford-Brown College that
remained in escrow to be disbursed to the seller or returned to the Company upon
the occurrence of, or failure to achieve certain events.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 2,885,808
<SECURITIES> 296,250
<RECEIVABLES> 22,813,929
<ALLOWANCES> (3,558,793)
<INVENTORY> 1,148,361
<CURRENT-ASSETS> 25,256,009
<PP&E> 17,591,345
<DEPRECIATION> (6,674,127)
<TOTAL-ASSETS> 48,360,559
<CURRENT-LIABILITIES> 20,723,327
<BONDS> 0
0
0
<COMMON> 20,584,014
<OTHER-SE> (5,847,682)
<TOTAL-LIABILITY-AND-EQUITY> 48,360,559
<SALES> 13,440,788
<TOTAL-REVENUES> 13,440,788
<CGS> 9,490,645
<TOTAL-COSTS> 14,581,217
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 230,394
<INCOME-PRETAX> (1,370,823)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,370,823)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,370,823)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
