FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ________ to ________
Commission File #0-11078
THE AMERICAN EDUCATION CORPORATION
(Exact name of registrant as specified in its charter)
Colorado
- - --------
(State or other jurisdiction of incorporaion, or organization)
84-0838184
- - ----------
(IRS Employer Identification number)
7506 North Broadway Extension, Suite 505, Oklahoma City, OK 73116
(Address of principal executive offices)
(405) 840-6031
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.025 per share
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 / / NO /X/
Indicate by check mark if there is no disclosure
of delinquent filers in response to Item 405 of Regulation
SB contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment
to this Form 10-KSB.
YES / / NO /X/
There is presently no market maker for shares of
the Registrant's common stock. Therefore, the Registrant is
unable to determine the market value (if any) of the voting
stock held by non affiliates of the Registrant.
Number of shares of the registrant's common stock
outstanding as of December 1, 1996: 12,457,345
Transitional Small Business Disclosure Format
YES / / NO /X/
THE AMERICAN EDUCATION CORPORATION
INDEX
Page No.
--------
PART 1 - FINANCIAL INFORMATION
Item 1 Balance Sheets 3
September 30, 1996 and December 31, 1995
Statements of Operations
For the Quarter Ended September 30, 1996 4
and for the Quarter Ended September 30, 1995
For the Nine Months Ended September 30, 1996 5
and for the Nine Months Ended September 30, 1995
Statements of Cash Flows 6
For the Nine Months Ended September 30, 1996
and for the Nine Months Ended September 30, 1995
Notes to Interim Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial 9
Conditions and Results of Operations
PART II - OTHER INFORMATION 12
SIGNATURE PAGE 13
PART 1 - FINANCIAL INFORMATION
THE AMERICAN EDUCATION CORPORATION
BALANCE SHEETS
<TABLE>
September 30 December 31
1996 1995
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 187,559 $ 56,882
Accounts receivable, net of allowance for
uncollectible accounts of $28,822 880,749 130,352
Inventories, net of impairment reserve of $10,000 24,976 19,986
Prepaid expenses and deposits 20,129 7,147
--------- -----------
Total current assets 1,113.413 214,367
Property and equipment, at cost 162,587 135,115
Less accumulated depreciation and amortization (120,575) (99,641)
---------- -----------
Net property and equipment 42,012 35,474
Other assets:
Capitalized software costs, net of accumulated
amortization of $931,793 and $745,989 313,836 312,364
Goodwill, net of accumulated amortization
of $188,968 and $154,264 57,832 92,536
---------- -----------
Total other assets 371,668 404,900
---------- -----------
Total Assets $1,527,093 $ 654,741
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 772,462 $1,063,384
Current maturities of notes payable
and long term debt 50,000 726,989
----------- -----------
Total current liabilities 822,462 1,790,373
Long-term debt 60,000 65,000
----------- -----------
Total liabilities 882,462 1,855,373
Commitments and contingencies - -
Stockholders' Deficit
Preferred Stock, $.001 par value; Authorized -
50,000,000 shares;
issued and outstanding - none - -
Common Stock, $.025 par value; Authorized -
15,000,000 shares;
issued and outstanding - 12,433,850 and
8,570,865 shares. 303,683 214,272
Additional paid-in capital 5,271,471 4,083,616
Retained deficit (4,930,523) (5,498,520)
----------- -----------
Total stockholders' deficit 644,631 (1,200,632)
----------- -----------
Total liabilities and stockholders' equity $1,527,093 $ 654,741
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
THE AMERICAN EDUCATION CORPORATION
STATEMENTS OF OPERATIONS
QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Net Sales $ 695,537 $ 312,643
Cost of goods sold 102,358 74,315
---------- ----------
Gross profit 593,179 238,328
Operating expenses:
Sales and marketing 152,874 82,707
General and administrative 213,379 198,774
Amortization of capitalized software costs 65,007 55,509
---------- ---------
Total operating expenses 431,260 336,990
---------- ---------
Operating earnings (loss) 161,919 (98,662)
---------- ----------
Other income (expense):
Miscellaneous income 250 47
Interest expense (1,250) (31,993)
Factoring costs (6,744) (9,512)
----------- ----------
Net earnings (loss) $ 154,175 $(140,120)
=========== ==========
Weighted average common shares outstanding 12,197,162 8,397,218
=========== ==========
Earnings (loss) per share $ 0.013 $ (0.017)
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
THE AMERICAN EDUCATION CORPORATION
STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Net Sales $ 2,055,474 $ 830,084
Cost of goods sold 300,957 204,448
----------- ----------
Gross profit 1,754,517 625,636
Operating expenses:
Sales and marketing 388,944 220,154
General and administrative 582,578 572,818
Amortization of capitalized software costs 185,804 161,527
----------- ----------
Total operating expenses 1,157,326 954,499
----------- ----------
Operating earnings (loss) 597,191 (328,863)
----------- -----------
Other income (expense):
Miscellaneous income 27,370 47
Interest expense (36,230) (84,885)
Factoring costs (20,332) (21,928)
----------- -----------
Net earnings (loss) $ 567,999 $ (435,629)
========== ===========
Weighted average common shares outstanding 12,197,162 8,397,218
========== ===========
Earnings (loss) per share $ 0.0470 $ (0.052)
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
THE AMERICAN EDUCATION CORPORATION
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 567,999 $ (435,529)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 235,274 212,784
Gain on debt settlement (27,060) -
Reserve for bad debts 87,593 (20,000)
Changes in assets and liabilities:
Accounts receivable (694,733) (15,500)
Inventories (4,990) -
Prepaid expenses and other (12,982) 1,400
Accounts payable and accrued liabilities 48,388 96,000
------------ -----------
Net cash provide by (used in) operating
activities 199,489 (160,945)
Cash flow from investing activities:
Purchase of capitalized software costs (181,109) (101,000)
Purchase of property and equipment (27,472) (6,000)
------------ ----------
Net cash used in investing activities (208,581) (107,000)
Cash flows from financing activities:
Proceeds received from issuance of debt 42,268 274,000
Principal payment on debt (2,499) (6,500)
Issuance of common stock for cash 100,000 -
----------- ----------
Net cash provided by financing activities 139,769 267,500
----------- ----------
Net increase (decrease) in cash 130,677 (445)
Cash at beginning of the period 56,882 2,746
---------- ----------
Cash at end of the period $ 187,559 $ 2,301
========== ==========
Supplemental Cash Flow Disclosures:
Interest paid $ 11,200 $ 18,200
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
THE AMERICAN EDUCATION CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
1. BASIS OF PRESENTATION
The interim financial statements at September 30, 1996,
and for the three month and nine month periods ended
September 30, 1996, and 1995 are unaudited, but include
all adjustments which the Company considers necessary
for a fair presentation. The December 31, 1995,
balance sheet was derived from the Company's audited
financial statements.
The accompanying unaudited financial statements are for
the interim periods and do not include all disclosures
normally provided in annual financial statements and
should be read in conjunction with the Company's
audited financial statements included in the Company's
Form 10-KSB for the year ended December 31, 1995. The
accompanying unaudited interim financial statements for
the three month and nine month periods ended September
30, 1996, are not necessarily indicative of the results
which can be expected for the entire year.
The accompanying financial statements have been
prepared on a going-concern basis which contemplates
the realization of assets and the satisfaction of
liabilities in the normal course of business. The
Company has incurred continuous losses and has not
generated sufficient working capital to support its
operations. The Company's continued existence is
dependent on its ability to generate positive cash flow
from its operations and/or raise additional financing
or capital. In June 1996, $721,989 of current notes
payable as of December 31, 1995, were converted to
common stock and additional capital was raised through
the sale of stock for cash.
The preparation of the financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and
the reported revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
2. EXERCISE OF OPTIONS TO PURCHASE COMMON STOCK
As of December 31, 1995, options for 100,000 shares of
common stock at $.20 per share remained outstanding.
These options were exercised in July 1996. Outstanding
warrants to purchase 286,517 shares of common stock at
$.50 per share were outstanding at December 31, 1995.
These warrants were exercised in September 1996.
3. COMMITMENTS AND CONTINGENCIES
The Company amortizes capitalized software costs over
the product's estimated useful life. Due to inherent
technological changes in the software development
industry, the period over which such capitalized
software cost is being amortized may have to be
accelerated.
In October 1996, the Company became a party to
litigation in United States District Court for the
District of Columbia entitled Securities and Exchange
Commission, Plaintiff v. The American Education
Corporation, Defendant (the "Action"). In the Action,
the Company admitted that, in violation of certain
provisions of the Securities and Exchange Act of 1934,
as amended (the "Exchange Act"), it failed to file,
among other things, certain annual and quarterly
reports. The Company voluntarily entered into a
Consent and Undertaking pursuant to which the Court
will issue a Final Judgment of Permanent Injunction
requiring the Company to (i) file all its delinquent
Exchange Act reports and (ii) in the future, timely
file all of its Exchange Act reports. The failure to
file any required report could result in a contempt
citation, the assessment of fines against the Company,
or an action by the Securities and Exchange Commission
to deregister the Company's common stock.
The Company has various vendor claims pending on
delinquent trade payables. The Company uses the
services of a professional firm to work out settlements
with these creditors. As a result, these payables may
be settled for less than their recorded amounts.
4. CORPORATE RESTRUCTURING
The Company issued 160,000 shares of common stock for
cash at $.50 per share in March 1996. In March 1996,
the Company also issued 363,677 shares of common stock
valued at $.02 per share in exchange for services
provided by officers and directors of the Company.
Notes payable and accrued interest totaling $976,710 at
June 30, 1996, were converted to 2,666,274 shares of
common stock at rates between $.20 and $.75 per share.
Stock options to purchase 100,000 shares of common
stock at $.20 per share were exercised for cash in July
1996. Warrants for 286,517 shares of common stock at
$.50 per share were exercised in September 1996. In
October 1996, trade debt of $11,747 was converted to
23,495 shares of common stock at a price of $.50 per
share.
Summary of 1996 Equity Transactions
- - -----------------------------------
<TABLE>
No. Shares Debt
Type of Transaction Issued Cash Conversion
- - ------------------- ---------- ---- ----------
<S> <C> <C> <C>
Options and warrants exercised 546,517 $ 243,258 $ -
Accrued compensation 363,377 - 7,298
Convertible notes and
accrued interest payable 2,651,274 - 965,460
Notes payable converted 15,000 - 11,250
Accounts payable converted 23,495 - 11,747
--------- ---------- ----------
3,599,963 $ 243,258 $ 995,755
</TABLE>
5. INCOME TAXES
The Company accounts for income taxes in accordance
with the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which requires an asset and
liability approach to accounting for income taxes.
Under SFAS 109, deferred tax assets or liabilities are
computed on the difference between the financial
statement and income tax bases of assets and
liabilities ("temporary differences") using the enacted
marginal tax rate. Deferred income tax expenses or
benefits are based on the changes in the deferred tax
asset or liability from period to period.
Management has determined that the Company will most
likely not be able to realize all the tax benefits from
available net operating loss carryforwards and has,
therefore, provided a valuation allowance of an equal
amount for the three months and nine months ended
September 30, 1996.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
LIQUIDITY AND CAPITAL RESOURCES
The Company has invested significantly in personnel
additions, the development of new products, and the
acquisition and licensing of new products, to improve
the ability of the organization and its published
products to meet the needs of the marketplace. These
changes were required to update the Company's product
offerings. To finance the business, management has
utilized long-term, subordinated debt from private
investment sources, secured bank revolving credit
lines, and accounts receivable financing sources.
Management anticipates that additional financing will
be required to continue to develop and position the
Company for the significant growth opportunities that
exist in the electronic media for education industry.
The Company has several marketing partnerships that
were entered into in the fiscal 1995 and 1996 periods.
Since mid 1995, the Company has been a Compaq/Microsoft
Educational Partner and a Microsoft NT Solutions
Partner. These two relationships provide the Company
with significant advertising and promotional exposure
in literature and various promotions directed to the
school market place. On June 29, 1996, the Company
entered into a marketing agreement with HomeQuest, Inc.
to provide a private brand version of its A+dvanced
Learning System product family for the home market.
HomeQuest is a direct seller of educational products to
the home with approximately 400 marketing consultants.
An agreement was entered into with the Davidson Group
(division of CUC International [NYSE]) on August 29,
1996, to provide certain elements of A+dvanced Learning
System software technology and curriculum content to
Davidson.
The Company views accounts receivable, inventory, and
cash as its principle measures of liquidity. To
supplement its anticipated short-term working capital
requirements, the Company entered into various
convertible loan agreements beginning in January 1991,
with private investors. These loans were convertible
into common stock of the Company at conversion prices
ranging from $.136 to $.50 per common share. Loans of
this nature were the only viable sources of borrowing
for the Company during this period.
At December 31, 1995, the Company had $791,989 of
unpaid principal outstanding on convertible notes,
including $33,201 owed to a vendor. Effective June 30,
1996, the Company exchanged 2,651,274 shares of common
stock for $731,989 of principal and $233,471 of accrued
interest related to these convertible notes. At
November 22, 1996, $50,000 of convertible notes, with a
conversion price per share of $.136, remained
outstanding.
The Company's working capital was $290,951 at September
30, 1996, an improvement of $1,866,957 from a deficit
of $1,567,006 at December 31, 1995. This significant
improvement is associated with higher levels of sales
and collection of sales proceeds during the period,
conversion of debt for equity as of June 30, 1996 and
exercise of warrants to purchase common stock,
exercised during the period.
Additional working capital beyond that available within
the Company has been and may be required to expand
operations. Management has and will consider options
available in providing such funding, including debt
financing and capital enhancement.
RESULTS OF OPERATIONS - QUARTER ENDED SEPTEMBER 30, 1996
AS COMPARED TO THE QUARTER ENDED SEPTEMBER 30, 1995
Net software revenues for the three months ended
September 30, 1996, totaled $695,537 compared to net
software revenues of $312,643 for the same period in
1995. This represents an increase of approximately
123% in 1996. The dramatic increase in sales is
primarily attributed to the acceptance of the A+dvanced
Learning System family of products, following a lengthy
period of development and technical improvement.
Cost of goods sold for the three months ended September
30, 1996, increased by approximately 38%, even though
sales increased by 123%. This disproportionately low
increase in direct costs reflects the efficiency in
which software products are now produced on CD-ROM.
The use of this medium also positively effects the cost
of packaging, handling and freight associated with
products that are marketed primarily into the school
market, as opposed to traditional retail outlets. Cost
of goods sold represents the actual cost to produce the
software products, including certain allocated overhead
costs, a portion of which is fixed. Actual component
costs as well as the direct labor costs associated with
the assembly of software products is now very low.
Excluding the costs of allocated overhead, product
costs provide gross profit margins ranging from 75 to
95 percent on the Company's principal products. As
sales volumes increase, overall gross profit margins
are expected to increase, as total allocable overhead
costs remain relatively fixed.
Total operating expenses recorded for the three months
ended September 30, 1996, were $431,260, compared to
$336,990 for the previous year. This represents an
increase of approximately 28%. Selling and marketing
costs increased by approximately 85%, from $82,707 for
the three months ended September 30, 1995 to $152,874
for the current period. The increase in 1996 is
related to expanded sales and marketing efforts and
higher commission costs related to the higher sales
levels achieved. General and administrative expenses
increased by approximately 7% during 1996, from
$198,774 to $213,379. This increase is related to
higher levels of product development and technical
support during 1996 as a result of the larger installed
base of products for the Company.
Due to restricted cash flows from operations, the
Company entered into a factoring arrangement whereby it
would assign from time to time, the payment of specific
invoices to the factoring entity. The cost of
factoring is disclosed as a separate line item within
the Statement of Operations. Such costs decreased by
approximately 29% during the three months ended
September 30, 1996 compared to the same period in 1995,
from $9,512 to $6,744, reflecting the reduced need for
such financing as the profitability of the Company has
improved.
Interest expense decreased by approximately 96% during
1996, from $31,993 in 1995 to $1,250 for 1996. This
decrease reflects the lower levels of interest bearing
debt present during the 1996 period.
Net earnings for the three months ended September 30,
1996, improved by approximately 210% as compared to the
prior year. This improvement from a net loss of
$140,120 in 1995 to net earnings of $154,175 in 1996,
reflects the higher sales levels noted above, as well
as the improving gross margins related to concentration
of sales in more profitable markets. Management
believes that with network problems resolved and with
the expansion of sales and marketing efforts through
third party organizations and independent dealers, the
Company is now positioned to develop more dependable
sales results from the home and school education
markets.
The Company has been constrained by the lack of
adequate capital and proper financing for the past
several years. As sales of the enhanced product line
have improved, management has taken action to reduce
debt and to supplement capital through the private sale
of restricted common stock and conversion of
convertible debt to common stock.
Company management believes that significant, future
opportunities exist in both the school and home
markets. The Company is now equipped with Macintosh,
DOS and Windows program shells that facilitate the
rapid and less expensive development of new subject
titles. Management also believes that the Company is
better positioned to compete in the multimedia field as
a result of its software development tools and
capabilities, growing marketing strengths and its
position within the school and home market places.
Accordingly, this area which is now emerging as a major
market, is under study and the Company is investigating
sources for intellectual property and potential
partnerships with other publishers on which it may base
future publications. Management believes that the
Company can make significant progress within its
existing product development and marketing budgets to
position the Company to identify and plan products for
this business.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1996
AS COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Net software revenues for the nine months ended
September 30, 1996, totaled $2,055,474 compared to net
software revenues of $830,084 for the same period in
1995. This represents an increase of approximately
148% in 1996. The dramatic increase in sales is
primarily attributed to the acceptance of the A+dvanced
Learning System family of products, following a lengthy
period of development and technical improvement.
Cost of goods sold for the nine months ended September
30, 1996, increased by approximately 47%, even though
sales increased by 148%. This disproportionately low
increase in direct costs reflects the efficiency in
which software products are now produced on CD-ROM.
The use of this medium also positively affects the cost
of packaging, handling and freight associated with
products that are marketed primarily into the school
market, as opposed to traditional retail outlets. Cost
of goods sold represents the actual cost to produce the
software products, including certain allocated overhead
costs, a portion of which is fixed. Actual component
costs as well as the direct labor costs associated with
the assembly of software products is now very low.
Excluding the costs of allocated overhead, product
costs provide gross profit margins ranging from 75 to
95 percent on the Company's principal products. As
sales volumes increase, overall gross profit margins
are expected to increase, as total allocable overhead
costs remain relatively fixed.
Total operating expenses recorded for the nine months
ended September 30, 1996, were $1,157,326, compared to
$954,499 for the previous year. This represents an
increase of approximately 21%. Selling and marketing
costs increased by approximately 77%, from $220,154 for
the nine months ended September 30, 1995 to $388,944
for the current period. The increase in 1996 is
related to expanded sales and marketing efforts and
higher commission costs related to the higher sales
levels achieved. General and administrative expenses
increased by approximately 2% during 1996, from
$572,818 to $582,578. This marginal increase reflects
higher levels of product development and technical
support during 1996 as a result of the larger installed
base of products for the Company, netted against lower
legal and professional fees incurred during the initial
portion of 1996.
The cost of factoring is disclosed as a separate line
item within the Statement of Operations. Such costs
decreased by approximately 7% during the nine months
ended September 30, 1996 compared to the same period in
1995, from $21,928 to $20,332, reflecting higher use of
factoring during the early portion of 1996 and reduced
need for such financing as the profitability of the
Company has improved during the second and third
quarters of the year.
Interest expense decreased by approximately 57% during
1996, from $84,885 in 1995 to $36,230 for 1996. This
decrease reflects the lower levels of interest bearing
debt present during the 1996 period.
Net earnings for the nine months ended September 30,
1996, improved by approximately 230% as compared to the
prior year. This improvement from a net loss of
$435,629 in 1995 to net earnings of $567,999 in 1996,
reflects the higher sales levels noted above, as well
as the improving gross margins related to concentration
of sales in more profitable markets.
THE AMERICAN EDUCATION CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
In October 1996, the Company became a party to
litigation in United States District Court for the
District of Columbia entitled Securities and Exchange
Commission, Plaintiff v. The American Education
Corporation, Defendant (the "Action"). In the Action,
the Company admitted that, in violation of certain
provisions of the Securities and Exchange Act of 1934,
as amended (the "Exchange Act"), it failed to file,
among other things, certain annual and quarterly
reports. The Company voluntarily entered into a
Consent and Undertaking pursuant to which the Court
will issue a Final Judgment of Permanent Injunction
requiring the Company to (i) file all its delinquent
Exchange Act reports and (ii) in the future, timely
file all of its Exchange Act reports. The failure to
file any required report could result in a contempt
citation, the assessment of fines against the Company,
or an action by the Securities and Exchange Commission
to deregister the Company's common stock.
Item 2. Changes in Securities
---------------------
Summary of 1996 Equity Transactions
- - -----------------------------------
<TABLE>
No. Shares Debt
Type of Transaction Issued Cash Conversion
- - ------------------- ---------- ---- ----------
<S> <C> <C> <C>
Options and warrants exercised 546,517 $ 243,258 $ -
Accrued compensation 363,377 - 7,298
Convertible notes and
accrued interest payable 2,651,274 - 965,460
Notes payable converted 15,000 - 11,250
Accounts payable converted 23,495 - 11,747
--------- --------- ----------
3,599,963 $ 243,258 $ 995,755
========= ========= ==========
</TABLE>
Item 3. Default Upon Senior Securities
------------------------------
Omitted from this report as inapplicable.
Item 4. Submission of Matters to Vote of Securities Holders
---------------------------------------------------
No matters were submitted to a vote of security holders during the period.
Item 5. Other Information
-----------------
Omitted from this report as inapplicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. Exhibits
Omitted from this report as inapplicable.
B. Reports on Form 8-K
In November, 1996, the Company filed Form 8-K
describing the pertinent factors associated with a
change in the Company's independent auditing firm.
SIGNATURES
Pursuant to the requirements of Section 13, or 15(d) 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.
The American Education Corporation
December 10, 1996 By: /s/ Jeffrey E. Butler
----------------------
Chief Executive Officer
Chairman of the Board
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 187,559
<SECURITIES> 0
<RECEIVABLES> 909,571
<ALLOWANCES> (28,822)
<INVENTORY> 24,976
<CURRENT-ASSETS> 1,113,413
<PP&E> 162,587
<DEPRECIATION> (120,575)
<TOTAL-ASSETS> 1,527,093
<CURRENT-LIABILITIES> 822,462
<BONDS> 0
0
0
<COMMON> 303,683
<OTHER-SE> 5,271,471
<TOTAL-LIABILITY-AND-EQUITY> 1,527,093
<SALES> 695,537
<TOTAL-REVENUES> 695,787
<CGS> 102,358
<TOTAL-COSTS> 431,260
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,994
<INCOME-PRETAX> 154,175
<INCOME-TAX> 0
<INCOME-CONTINUING> 154,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 154,175
<EPS-PRIMARY> .013
<EPS-DILUTED> .013
</TABLE>
