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Previous: DYNAMIC HEALTHCARE TECHNOLOGIES INC, 10-K/A, 1995-11-16 |
Next: CARDINAL HEALTH INC, 8-K, 1995-11-16 |
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-KA
Amendment to Application or Report
Filed Pursuant to Section 12, 13 or 15 (d) of
The Securities Exchange Act of 1934
Nobel Education Dynamics, Inc.
(Exact Name of Registrant as Specified in Charter)
Amendment No. 2
The undersigned Registrant hereby amends the following items,
financial statements, exhibits or other portions of its current Report on Form
8-K (date of earliest event reported September 1 , 1995) dated November 14,
1995, as set forth in the pages attached hereto:
Item 8 Financial Statements and Exhibits
- ------ ---------------------------------
A. Pro Forma Financial Information
1. Pro Forma Combined Statements of Operations of Registrant,
Carefree Learning Centers, Inc., Keystone Real Estate
Development Company, Inc. and Educo, Inc. for the year
ended December 31, 1994 and nine months ended September
30, 1995 (Unaudited).
2. Notes to the Pro Forma Combined Financial Statements.
B. Exhibits
1. Balance Sheet and Income Statement for Educo, Inc. for the
year ended August 31, 1994 (including unaudited
information for the nine month period ending May 31,
1995).
<PAGE>
NOBEL EDUCATION DYNAMICS, INC.
AND SUBSIDIARIES
PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements include the
accounts of Nobel Education Dynamics, Inc. and subsidiaries (the Company),
Carefree Learning Centers, Inc., Keystone Real Estate Company, Inc. and Educo,
Inc. The acquisition of Carefree Learning Centers, Inc. was completed in March
1995. The acquisition of Keystone Real Estate Development Company, Inc. (the
related real estate company) was completed in June 1995. The acquisition of
Educo, Inc. was completed on September 1, 1995. Such pro forma combined
financial statements assume that the acquisitions were accounted for as purchase
at the beginning of the respective period for the combined statements of
operations.
The pro forma combined financial statements are unaudited, but in the opinion of
management, all adjustments necessary to present fairly such pro forma combined
financial statements have been made.
These pro forma combined financial statements should be read in connection with
the related notes thereto and in connection with the historical financial
statements of the Company, Carefree Learning Centers, Inc., Keystone Real Estate
Development Company, Inc. and Educo, Inc., either incorporated herein by
reference or included. The pro forma combined statements of operations are not
necessarily indicative of what the actual results of operations would have been
had the transactions occurred as of the beginning of the respective periods, nor
do they purport to indicate the results of future operations of the Company.
2
<PAGE>
NOBEL EDUCATION DYNAMICS, INC., CAREFREE LEARNING CENTERS, INC., KEYSTONE REAL
ESTATE DEVELOPMENT COMPANY, INC. AND EDUCO, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
CAREFREE
REGISTRANT CAREFREE KEYSTONE EDUCO,INC. PRO FORMA
HISTORICAL HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES 30,765,128 945,206 204,652 4,498,035
OPERATING EXPENSES 24,918,719 848,581 112,117 3,784,768 (196,076) A
-------------------------------------------------------------------
SCHOOL OPERATING PROFIT 5,846,409 96,625 92,535 713,267 196,076
GENERAL & ADMINISTRATIVE
EXPENSES 2,973,863 105,751 3,869 436,149 (84,918) B
-------------------------------------------------------------------
OPERATING INCOME 2,872,546 (9,126) 88,666 277,118 280,994
INTEREST EXPENSE 1,213,746 27,920 100,505 (7,008) 28,420 C
OTHER INCOME (LOSS) (92,038) 11,337 8,333
MINORITY INTEREST IN
INCOME OF SUBSIDIARY 65,330
-------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES 1,685,508 (48,383) (20,172) 284,126 252,574
INCOME TAX (BENEFIT)
EXPENSE (1,614,900) (14,492) (4,003) 119,333 104,468
-------------------------------------------------------------------
NET INCOME 3,300,408 (33,891) (16,169) 164,793 148,106
PREFERRED STOCK DIVIDENDS 145,288 0 0 0 0
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS 3,155,120 (33,891) (16,169) 164,793 148,106
===================================================================
PRIMARY EARNINGS PER SHARE 0.71
FULLY DILUTED EARNINGS PER
SHARE 0.55
WEIGHTED AVERAGE NUMBER
OF SHARES
PRIMARY 4,485,939
FULLY DILUTED 5,984,299
</TABLE>
<TABLE>
<CAPTION>
KEYSTONE EDUCO, INC.
PRO FORMA PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS COMBINED
----------- ----------- --------
<S> <C> <C> <C>
REVENUES (204,652) F (453,260) K 35,755,109
OPERATING EXPENSES (39,810) G (338,945) L 29,089,354
-----------------------------------------------------
SCHOOL OPERATING PROFIT (164,842) (114,315) 6,665,755
GENERAL & ADMINISTRATIVE
EXPENSES H (206,917) M 3,227,797
----------------------------------------------------
OPERATING INCOME (164,842) 92,602 3,437,958
INTEREST EXPENSE 40,735 I 120,000 N 1,524,318
OTHER INCOME (LOSS) (8,333) (80,701)
MINORITY INTEREST IN
INCOME OF SUBSIDIARY 65,330
----------------------------------------------------
INCOME (LOSS) BEFORE TAXES (197,244) (27,398) 1,929,011
INCOME TAX (BENEFIT)
EXPENSE (78,898) J 19,992 O (1,468,500)
----------------------------------------------------
NET INCOME (118,346) (47,390) 3,397,511
PREFERRED STOCK DIVIDENDS 145,288
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS (118,346) (47,390) 3,252,223
====================================================
PRIMARY EARNINGS PER SHARE 0.72
FULLY DILUTED EARNINGS PER
SHARE 0.57
WEIGHTED AVERAGE NUMBER
OF SHARES
PRIMARY 4,485,939
FULLY DILUTED 5,984,299
</TABLE>
SEE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS.
3
<PAGE>
NOBEL EDUCATION DYNAMICS, INC., CAREFREE LEARNING CENTERS, INC., KEYSTONE REAL
ESTATE DEVELOPMENT COMPANY, INC. AND EDUCO, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
CAREFREE
REGISTRANT CAREFREE KEYSTONE EDUCO, INC. PRO FORMA
HISTORICAL HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES 34,371,501 4,446,210 614,809 5,370,911
OPERATING EXPENSES 28,160,537 3,832,743 333,258 4,607,505 (563,341) A
--------------------------------------------------------------------
SCHOOL OPERATING PROFIT 6,210,964 613,467 281,551 763,406 563,341
GENERAL & ADMINISTRATIVE
EXPENSES 2,896,076 746,377 16,328 435,005 (621,377) B
--------------------------------------------------------------------
OPERATING INCOME 3,314,888 (132,910) 265,223 328,401 1,184,718
INTEREST EXPENSE 1,222,971 (3,566) 292,019 (17,080) 170,569 C
OTHER INCOME (LOSS) 106,960 (8,500) (9,092) 8,500 D
MINORITY INTEREST IN
INCOME OF SUBSIDIARY 83,491
--------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES 1,901,466 (120,844) (26,796) 354,573 1,005,649
INCOME TAX (BENEFIT)
EXPENSE (438,300) (21,450) 5,386 159,238 422,846 E
--------------------------------------------------------------------
NET INCOME 2,339,766 (99,394) (32,182) 195,335 582,803
PREFERRED STOCK DIVIDENDS 198,555 0 0 0
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS 2,141,211 (99,394) (32,182) 195,335 582,803
====================================================================
PRIMARY EARNINGS PER SHARE 0.52
FULLY DILUTED EARNINGS PER
SHARE 0.48
WEIGHTED AVERAGE NUMBER
OF SHARES
PRIMARY 4,019,675
FULLY DILUTED 5,037,002
</TABLE>
<TABLE>
<CAPTION>
KEYSTONE EDUCO, INC.
PRO FORMA PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS COMBINED
----------- ----------- --------
<S> <C> <C> <C>
REVENUES (614,809) F 44,188,622
OPERATING EXPENSES (171,049) G 100,000 L 36,299,653
---------------------------------------------
SCHOOL OPERATING PROFIT (443,760) (100,000) 7,888,969
GENERAL & ADMINISTRATIVE
EXPENSES (16,328) H (277,480) M 3,178,601
---------------------------------------------
OPERATING INCOME (427,432) 177,480 4,710,368
INTEREST EXPENSE 131,881 I 160,000 N 1,956,794
OTHER INCOME (LOSS) 97,868
MINORITY INTEREST IN
INCOME OF SUBSIDIARY 83,491
---------------------------------------------
INCOME (LOSS) BEFORE TAXES (559,313) 17,480 2,572,215
INCOME TAX (BENEFIT)
EXPENSE (223,725) J 46,992 O 49,013
---------------------------------------------
NET INCOME (335,588) (29,512) 2,621,228
PREFERRED STOCK DIVIDENDS 198,555
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS (335,588) (29,512) 2,422,673
=============================================
PRIMARY EARNINGS PER SHARE 0.61
FULLY DILUTED EARNINGS PER
SHARE 0.52
WEIGHTED AVERAGE NUMBER
OF SHARES
PRIMARY 4,019,675
FULLY DILUTED 5,037,002
</TABLE>
SEE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
4
<PAGE>
NOBEL EDUCATION DYNAMICS, INC.
Notes to Pro Forma Combined Financial Statements
1. Basis of Presentation
The pro forma combined financial statements include the accounts and
results of the Company, Carefree Learning Centers, Inc., Keystone Real
Estate Development Company, Inc. and Educo, Inc. as if the acquisitions had
been consummated as of the beginning of the 12 months ended December 31,
1994 and nine month period ended September 30, 1995.
The Company acquired certain assets and liabilities of Carefree Learning
Centers, Inc. from Pennsylvania Blue Shield on March 10, 1995 for $500,000
in cash and a subordinated promissory note of the Company in the principal
amount of approximately $1,585,000 and the assumption of certain other
liabilities of Carefree in the amount of $360,000
The Company subsequently acquired certain assets and liabilities of
Keystone Real Estate Development Company, Inc. for cash of $1.5 million, a
subordinated promissory note of $630,000, and the refinancing of the
existing mortgages totaling $3,567,300 as of June 2, 1995.
On September 1, 1995 the Company acquired all of the outstanding shares of
common stock of Educo, Inc. The purchase price for the stock consisted of
(i) $2,000,000 in cash and (ii) an agreement to issue and deliver to the
Educo stockholders an aggregate 312,500 shares (after reverse split) of the
Company's Common Stock on January 15, 1996. The cash portion of the
purchase price was financed with proceeds of the Term Loan with a bank.
2. Pro Forma Adjustments
Combined Statements of Operations - Carefree Learning Centers, Inc.
-------------------------------------------------------------------
A. To eliminate rent totaling $614,809 and $204,652 in the 12 month and 9
month periods, respectively, due to the acquisition of Keystone Real
Estate Development Company, Inc., which owned the real estate of
Carefree Learning Centers, Inc., offset by amortization of goodwill
totaling $51,468 and $8,576 for the 12 and 9 month periods or net
savings of $563,341 and 196,076 for the two periods.
B. The following represents adjustments to general and administrative
expenses of the acquired companies that have been or will have been
implemented by management. These adjustment assume that management's
actions were carried out at the beginning of the periods presented and
only give effect to those items that are factually supportable.
5
<PAGE>
<TABLE>
<CAPTION>
12 Month Nine
Period Month
Period
------------ ----------------
<S> <C> <C>
Eliminate corporate expenses of Carefree; the Company
closed the office (746,377) (105,751)
Additional Regional Manager and related costs
benefits, car, postage etc. 95,000 15,833
Additional accounting clerk and benefits 30,000 5,000
------------ ----------------
Total (621,377) (84,918)
============ ================
</TABLE>
In conjunction with the Carefree acquisition, Bluegrass Real Estate
Company, a subsidiary of the Company, subsequently acquired the
Keystone Real Estate Company.
C. To record interest expense related to cash of $500,000 and
subordinated promissory note
<TABLE>
<CAPTION>
12 Month Nine
Period Month
Period
------------ ----------------
<S> <C> <C>
$500,000 at a 10% interest rate 50,000 8,333
$1,507,111 at a 8% interest rate 120,569 20,087
------------ --------------
Total 170,569 28,420
============= ==============
</TABLE>
Note: Prime was assumed to be 8.5%
D. To eliminate other income totaling $8,500 for the 12 month period.
E. To tax effect adjustments using an estimated 40% tax rate (excluding
non-deductible goodwill).
Statement of Operations - Keystone Real Estate Development Company, Inc.
------------------------------------------------------------------------
F. To eliminate intercompany revenues of rental income.
6
<PAGE>
G. To eliminate Keystone's expenses of salaries/wages and charges from
Pennsylvania Blue Shield.:
<TABLE>
<CAPTION>
12 Month Nine
Period Month
Period
---------- ----------
<S> <C> <C>
Salaries/Wages 144,594 36,477
Professional fees 12,600 0
Occupancy 7,815 1,248
Pennsylvania Blue Shield 6,040 2,085
----------- ----------
Total 171,049 39,810
=========== ==========
</TABLE>
H. To eliminate general and administrative expenses. Additions for
Keystone are included in Carefree's pro forma adjustments..
I. To adjust interest expense:
<TABLE>
<CAPTION>
12 Month Nine
Period Month
Period
------------- --------------
<S> <C> <C>
$1,500,000 at a 10% interest rate 150,000 49,950
$612,180 at a 8% interest rate 48,974 16,323
$2,647,178 at a 8.5% interest rate (amortized
payments) 224,926 74,967
------------- --------------
Total 423,900 141,240
Less: Amounts recorded (292,019) (100,505)
------------- --------------
Interest Expense Adjustment 131,881 40,735
============= ==============
</TABLE>
J. To tax effect adjustments using an estimated 40% tax rate (excluding
non-deductible goodwill).
7
<PAGE>
Statement of Operations - Educo, Inc.
-------------------------------------
K. To adjust one months activity in the nine month period as a result of
the different reporting cycle of Educo and the timing of the
acquisition.
<TABLE>
<S> <C>
Revenue (453,260)
Operating Expense 413,945
</TABLE>
L. To record estimated goodwill amortization related to the approx. $4
million excess of purchase price over fair value of tangible net
assets totaling $100,000 and $75,000 for the 12 and nine month
periods.
M. The following represents adjustments to general and administrative
expenses of the acquired companies that have been or will have been
implemented by management. These adjustment assume that management's
actions were carried out at the beginning of the periods presented and
only give effect to those items that are factually supportable.
<TABLE>
<CAPTION>
12 Month Nine
Period Month
Period
----------- -----------
<S> <C> <C>
Eliminate corporate expenses of Educo; the Company
closed the office (307,480) (229,417)
Additional accounting clerk and benefits 30,000 22,500
----------- -----------
Total (277,480) (206,917)
=========== ===========
</TABLE>
N. To adjust interest expense to reflect the additional $2 million bank
debt incurred to finance the acquisition. Using an estimated 8%
interest rate such adjustments are $160,000 and $120,000 for the 12
and nine month periods, respectively.
O. To tax effect adjustments using an estimated 40% tax rate (excluding
non-deductible goodwill).
8
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Nobel Education Dynamics, Inc.
(Registrant)
Date: November 14, 1995 By: A. J. Clegg
---------------------------
Chairman, President and CEO
Date: November 14, 1995 By: Yvonne DeAngelo
---------------------------
Controller and Secretary
9
<PAGE>
EDUCO INCORPORATED
________
FINANCIAL STATEMENTS
for year ended August 31, 1994
(including unaudited information for
the nine month period ending May 31,1995)
________
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Educo Incorporated:
We have audited the accompanying consolidated balance sheet of Educo
Incorporated as of August 31, 1994 and the related statements of income,
shareholder's equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Educo
Incorporated as of August 31, 1994, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 6, 1995
<PAGE>
EDUCO INCORPORATED
BALANCE SHEETS
________
<TABLE>
<CAPTION>
August 31, May 31, 1995
1994 (Unaudited)
--------------- -----------------
<S> <C> <C>
Cash $ 645,600 $ 643,322
Accounts receivable, less allowance for
doubtful accounts of $ 10,338 79,948 18,831
Notes receivable 27,009 15,315
Prepaid and other current assets 68,217 81,106
--------------- -----------------
Current Assets 820,774 758,574
Property and equipment, at cost 1,360,202 1,304,499
Accumulated depreciation (891,111) (930,388)
--------------- -----------------
Property and equipment, net 469,091 374,111
Cash surrender value of life insurance 159,486 159,486
Deposits and other assets 24,210 19,567
--------------- -----------------
Total Assets $1,473,561 $ 1,311,738
=============== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long-term obligations $ 31,979 $ -
Accounts payable and other current liabilities 337,419 149,351
Deferred Income 473,010 345,933
Income taxes payable 104,858 129,147
--------------- -----------------
Total Current Liabilities 947,266 624,431
Long-term obligations 3,781 -
Commitments and Contingencies
Shareholders' equity:
Common stock, no par value, 1,000 100 100
Additional paid-in capital 7,301 7,301
Retained earnings 515,113 679,906
--------------- -----------------
Total shareholders' equity 522,514 687,307
--------------- -----------------
Total liabilities and shareholders' equity $1,473,561 $ 1,311,738
=============== =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
EDUCO INCORPORATED
STATEMENTS OF INCOME
__________
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended May 31,
August 31, 1995
1994 (Unaudited)
---------- -----------
<S> <C> <C>
Revenues $5,370,911 $4,498,035
---------- ----------
Operating Expenses:
Center operating costs 4,607,505 3,784,768
General and administrative expenses 435,005 436,149
---------- ---------
5,042,510 4,220,917
---------- ---------
Operating Income 328,401 277,118
---------- ----------
Other
Interest income, net of expense 17,080 7,008
Other income 9,092 -
---------- ----------
Income before income taxes 354,573 284,126
Income tax expense 159,238 119,333
---------- ----------
Net income $ 195,335 $ 164,793
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
EDUCO INCORPORATED
STATEMENTS OF CASH FLOWS
for the year ended August 31, 1994
and the unaudited period ending May 31, 1995
<TABLE>
<CAPTION>
Nine months
ended
Year ended May 31, 1995
August 31, 1994 (Unaudited)
---------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 195,335 164,793
Items not affecting cash flows:
Depreciation 60,378 39,277
Bad debts 10,388 -
Changes in current assets and current liabilities
relating to operating activites:
(Increase) decrease in accounts receivable 343,995 61,117
(Increase) decrease in other receivables 47,296 -
(Increase) decrease in deferred revenue (322,342) (127,077)
(Increase) decrease in prepaid expenses 15,839 3,340
Increase (decrease) in accounts payable and accrued liabilities (15,545) (191,849)
Increase (decrease in provisions for income taxes 104,858 24,289
Increase (decrease) in deposits and other assets (53) (11,586)
-------- --------
Net cash provided from/(used by) operating activities 440,149 (37,696)
Cash flows from investing activities:
(Purchases)/ Dispositions of property and equipment (135,062) 59,484
Repayment of notes receivable 35,279 11,694
(Increase) in cash surrender value of Life Ins. (13,015) -
Decrease in investment 14,350 -
-------- --------
Cash flows provided from/(used by) investing activities (98,448) 71,178
Cash flow from financing activities:
Decrease in notes payable (6,330) (35,760)
Payment of dividends (225,000) -
-------- --------
Cash flows used by financing activities (231,330) (35,760)
Net Increase (decrease) in cash 110,371 (2,278)
Cash, beginning of year 535,229 645,600
-------- --------
Cash, end of year $ 645,600 $ 643,322
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
EDUCO INCORPORATED
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Paid-in Retained
Amount Shares Capital Earnings Total
------------ ------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
September 1, 1993 $100 100 $7,301 $ 544,778 $ 552,179
Net income - - - 195,335 195,335
Less: Dividends - - - (225,000) (225,000)
---- --- ------ --------- ---------
August 31, 1994 100 100 7,301 515,113 522,514
Net income (unaudited) - - - 164,793 164,793
---- --- ------ --------- ---------
May 31, 1995 (unaudited) $100 100 $7,301 $ 679,906 $ 687,307
==== === ====== ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
EDUCO INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
1. Summary of Significant Accounting Policies and Company Background
EDUCO Incorporated ("Educo"), a privately held Maryland
corporation, was founded in 1963. Educo is currently comprised of eight
owned schools and two schools operated in partnership with Valschool, Inc.
of Virginia Beach (VB Joint Venture).
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
Educo and the VB Joint Venture. All significant intercompany balances
and transactions have been eliminated.
Recognition of Revenues
-----------------------
Revenue is recognized as the services are performed. Expenses
associated with opening new centers are charged to expense as incurred.
Property and Equipment
----------------------
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on a tax basis which
approximates GAAP over the estimated useful lives of the related assets
as follows:
Leasehold improvements and The shorter of the lease-
assets under capital lease hold period or useful life
Furniture and equipment 3 to 5 years
Automobiles 5 years
Maintenance, repairs and minor renewals are expensed as incurred.
Upon retirement or other disposition of buildings and furniture and
equipment, the cost of the items and the related accumulated
depreciation are removed from the accounts and any gain or loss is
included in operations.
6
<PAGE>
EDUCO INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
Income Taxes
------------
The Company records income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes which requires an asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred income
taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying
amounts and the tax basis of existing assets and liabilities. The
effect on deferred taxes of a change in tax rate is recognized in
income in the period of enactment. A valuation allowance is recorded
based on the uncertainty regarding the ultimate realizability of future
deferred tax assets.
Interim Financial Information
-----------------------------
The financial statements for the nine months ended May 31, 1995
are unaudited but, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments and
accruals) which the Company feels are necessary for a fair presentation
of the financial position, operating results and cash flows for that
period. Results of interim periods are not indicative of results for
the entire year.
2. Property and Equipment
The balances of major property and equipment classes are as follows:
<TABLE>
<CAPTION>
August 31,
1994
-----------
<S> <C>
Leasehold improvements $ 541,593
Furniture and equipment 818,609
----------
1,360,202
Accumulated depreciation (891,111)
----------
$ 469,091
==========
</TABLE>
7
<PAGE>
EDUCO INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
3. Long-Term Obligations
Long-term obligations consists of various notes payable bearing
interest rates ranging from 8% to 12%. These notes were all paid prior to
the acquisition of the Company (see Note 9).
4. Accounts Payable and Other Current Liabilities
Accounts payable and accrued expenses were as follows:
<TABLE>
<CAPTION>
August 31,
1994
-----------
<S> <C>
Accounts payable and accrued expenses $163,114
Accrued payroll and related items 145,418
Other liabilities 16,427
--------
Total accounts payable and other liabilities $324,959
========
</TABLE>
8
<PAGE>
EDUCO INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
5. Lease Obligations
Future minimum rentals, for the real properties utilized by the
Company by year and in the aggregate, under noncancelable operating leases,
consisted of the following at August 31, 1994:
<TABLE>
<S> <C>
1995 $752,705
1996 689,950
1997 659,970
1998 659,970
1990 659,970
2000 and
Thereafter 2,973,865
----------
Total $6,396,430
==========
</TABLE>
Total rent expense for the year ended August 31, 1994 totaled approximately
$693,000. In connection with the acquisition (see Note 9) the leases were
subsequently renegotiated.
6. Income Taxes
<TABLE>
<CAPTION>
Taxes currently payable:
Year ended
August 31, 1994
----------------
<S> <C>
Federal $ 120,117
States 48,143
-------
$168,260
========
</TABLE>
9
<PAGE>
EDUCO INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
The difference between the actual income tax rate and the
statutory federal income tax rate is attributable to the following:
<TABLE>
<CAPTION>
August 31,
1994
-----------
<S> <C>
U.S. federal statutory rate 35%
State taxes, net of federal
tax benefit 7%
Other 3%
---
45%
===
</TABLE>
Deferred income taxes reflect the impact of temporary differences
between amounts of assets and liabilities for financial reporting purposes
and amounts as measured by tax laws, such differences for the Company are
immaterial.
7. Commitments
At August 31, 1994, the Company along with others was a guarantor of
indebtedness owed by landlords of six of the Company's leased facilities. All
such guarantees were released on the acquisition date (See Note 9) except for a
$170,000 Small Business Administration loan which was assumed by the acquirer,
Nobel Education Dynamics Inc.
8. Defined Contribution Plan
The Company sponsors a defined contribution plan for eligible employees.
Contributions to the plan are based upon hours worked during the plan year and
participants may make voluntary contributions to the plan up to 16% of their
salary in the employees choice of an equity fund, a balanced fund or a fixed
income fund. The company matches employees contributions up to 4%. Vesting
accumulates ratably over a 5 year period. Total 401-K expense for the year
ended August 31, 1994 amounted to approximately $33,000.
10
<PAGE>
EDUCO INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
9. Subsequent Event
On September 1, 1995 Nobel Education Dynamics, Inc. (Nobel) acquired all
of the outstanding shares of common stock of the Company. The purchase price
consisted of (i) $2,000,000 in cash and (ii) an agreement to issue to the Educo
stockholders an aggregate 1,250,000 shares of Nobel (prior to reverse stock
split) on January 15, 1996. On September 27, 1995, Nobel completed a four for
one reverse stock split which effects the above mention shares.
11
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