June 8, 1998 Form 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of report (Date of earliest event reported):
June 8, 1998
SIEMANN EDUCATIONAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
COLORADO 33-18174 84-1067172
(State or other (Commission File Number) (IRS Employer I.D. Number)
jurisdiction of
incorporation)
405 SOUTH PLATTE RIVER DRIVE SUITE 3A
DENVER, COLORADO 80203
(Address of principal executive offices)
Registrant's telephone number, including area code:(303) 733-9673
<PAGE>
Item 7. Financial Statements and Exhibits
DATA PROCESSING TRAINERS, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Independent Auditors' Report 1
Balance sheets 2
Statements of operations 3
Statements of stockholder's equity 4
Statements of cash flows 5
Notes to financial statements 6 - 14
Pro forma financial data 15 - 17
<PAGE>
(a) Financial statements of business acquired
INDEPENDENT AUDITORS' REPORT
The Board of Directors
and Stockholders
Data Processing Trainers, Inc.
Philadelphia, Pennsylvania
We have audited the accompanying balance sheets of Data Processing
Trainers, Inc. as of December 31, 1997 and 1996 and the related statements
of operations, stockholder's equity and cash flows for the years ended
December 31, 1997 and 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Data Processing
Trainers, Inc. as of December 31, 1997 and 1996, and the results of its
operations and cash flows for the years ended December 31, 1997 and 1996 in
conformity with generally accepted accounting principles.
GORDON, HUGHES & BANKS, LLP
Englewood, Colorado
April 24, 1998
1
<PAGE>
<TABLE>
<CAPTION>
DATA PROCESSING TRAINERS, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
Assets
1997 1996
----------- -----------
Current assets:
<S> <C> <C>
Cash $ 338,137 $ 68,105
Accounts receivable, less allowance for
doubtful accounts of $6,600 in 1997 1,125,876 507,022
Inventory 75,632 42,991
Prepaid expenses 24,618 6,332
----------- -----------
Total current assets 1,564,263 624,450
Property and equipment, net 300,799 163,914
Other assets 22,102 20,596
----------- -----------
Total assets $ 1,887,164 $ 808,960
=========== ===========
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $ 56,800 $ 27,742
Accrued employee benefits 107,733 50,138
Deferred tuition revenue 1,095,977 692,165
Current maturities of capital leases 71,654 0
----------- -----------
Total current liabilities 1,332,164 770,045
Capital leases, net of current maturities 109,464 0
----------- -----------
Total liabilities 1,441,628 770,045
Stockholder's equity:
Common stock $.01 per value, 1,000 shares authorized,
100 shares issued and outstanding 1 1
Additional paid-in capital 24,754 24,754
Retained earnings 525,210 359,090
----------- -----------
Total stockholder's equity 549,965 383,845
Less: accounts receivable - stockholder (104,429) (344,930)
----------- -----------
Net stockholder's equity 445,536 38,915
----------- -----------
Total liabilities and stockholder's equity $ 1,887,164 $ 808,960
=========== ===========
The accompanying notes are an integral part of
these financial statements.
Page 2
</TABLE>
<PAGE>
DATA PROCESSING TRAINERS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
----------- -----------
Revenue:
Tuition revenue & fees $ 6,553,668 $ 5,107,050
Textbooks 203,681 183,507
Other 21,758 20,148
----------- -----------
Total revenues 6,779,107 5,310,705
----------- -----------
Operating expenses:
Educational services and facilities 3,782,853 2,531,622
Cost of textbooks 197,457 221,800
Selling and promotion 422,664 272,161
General and administrative 1,984,947 2,156,681
Depreciation and amortization 116,001 59,849
----------- -----------
Total operating expenses 6,503,922 5,242,113
----------- -----------
Income from operations 275,185 68,592
Interest (expense) (10,065) (0)
----------- -----------
Net income $ 265,120 $ 68,592
=========== ===========
Net income per common share $ 2,651 $ 686
=========== ===========
Weighted number of common shares outstanding 100 100
=========== ===========
The accompanying notes are an integral part of
these financial statements.
Page 3
<PAGE>
<TABLE>
<CAPTION>
DATA PROCESSING TRAINERS, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Total Accounts Net
Common Stock Paid In Retained Stockholder's Receivable Stockholder's
Shares Amount Capital Earnings Equity Stockholder Equity
--------- --------- --------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995 100 $ 1 $ 24,754 $ 290,498 $ 315,253
Net income 0 0 0 68,592 68,592
--------- --------- --------- --------- ---------
Balances, December 31, 1996 100 1 24,754 359,090 383,845 $(344,930) $ 38,915
Net income 0 0 0 265,120 265,120
Distribution to owner 0 0 0 (99,000) (99,000)
--------- --------- --------- --------- ---------
Balances, December 31, 1997 100 $ 1 $ 24,754 $ 525,210 $ 549,965 $(104,429) $ 445,536
========= ========= ========= ========= =========
The accompanying notes are an integral
part of these financial statements.
Page 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DATA PROCESSING TRAINERS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
--------- ---------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 265,120 $ 68,592
Cash provided (used) by operating activities:
Depreciation and amortization 116,001 59,849
Non-cash compensation 344,930 0
Change in operating assets and liabilities:
Students accounts receivable (618,854) (48,104)
Inventory (32,641) (20,991)
Prepaid expenses and other assets (19,792) 14,093
Accounts payable 29,058 7,742
Accrued employee benefits 57,595 50,138
Deferred tuition income 403,812 340,087
--------- ---------
Net cash provided by operating activities 545,229 471,406
--------- ---------
Cash flows (used) by investing activities:
Purchases of property and equipment (46,222) (128,203)
--------- ---------
Net cash (used) by investing activities (46,222) (128,203)
--------- ---------
Cash flows (used) by financing activities:
Payment of capital leases (25,546) 0
Distribution to owner (203,429) (344,930)
--------- ---------
Net cash (used) by financing activities (228,975) (344,930)
--------- ---------
Net increase (decrease) in cash 270,032 (1,727)
Cash, beginning of period 68,105 69,832
--------- ---------
Cash, end of period $ 338,137 $ 68,105
========= =========
Supplemental disclosure of cash flow information:
Cash payments for interest $ 9,654 $ 0
========= =========
Non-cash transaction:
Acquisition of equipment through capitalized leases $ 206,664 $ 0
========= =========
The accompanying notes are an integral
part of these financial statements.
Page 5
</TABLE>
<PAGE>
DATA PROCESSING TRAINERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND NATURE OF BUSINESS
-----------------------------------
Data Processing Trainers, Inc. (the "Company") was incorporated in the
State of Pennsylvania on December 16, 1991. The Company is engaged in
proprietary education and training with two school facilities located in
Philadelphia, Pennsylvania.
A significant portion of the Company's revenues are provided by students
who participate in government financial aid programs. Of total tuition
revenue, revenue derived from governmental aid was approximately
$3,914,000, or 59.2%, and $3,468,000, or 67.9%, for the years ended
December 31, 1997 and 1996, respectively. In connection with this
participation, the Company is subject to rules and regulations promulgated
by the U.S. Department of Education. Failure to comply with the terms and
provisions of this participation could lead to suspension or termination of
the Company's ability to participate in government financial aid programs
and, consequently, could adversely affect the Company's operation.
REVENUE RECOGNITION
-------------------
Revenue is derived primarily from courses taught at the Company's school.
Textbook sales to students are recognized when the semester/school year
begins. Deferred tuition revenue represents amounts billed for the current
educational year, reduced for tuition revenue recognized ratably during the
year. If a student withdraws, unearned revenue is reduced by the amount of
lost revenue and a refund due to the student is recorded. Refunds are
calculated in accordance with federal, state and accrediting agency
standards.
ACCOUNTS RECEIVABLE
-------------------
Accounts receivable represent outstanding tuition and fee balances due from
students.
Page 6
<PAGE>
DATA PROCESSING TRAINERS, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CONCENTRATION OF CREDIT RISK AND FINANCIAL INSTRUMENTS
------------------------------------------------------
Statement of Financial Accounting Standards ("SFAS") No. 105, "Disclosure
of Information About Financial Instruments with Off-Balance Sheet Risk and
Financial Instruments with Concentrations of Credit Risk", requires
disclosure of significant concentrations of credit risk regardless of the
degree of such risk. Financial instruments with significant credit risk
include cash and accounts receivable. The carrying amount of assets
reasonably approximates their fair value, as determined by the amount of
cash or the collectibility of receivables. The carrying value of the
Company's debt obligations reasonably approximates their fair value as the
stated interest rate approximates current market interest rates of debt
with similar terms. As of December 31, 1997, the Company maintained cash
balances in excess of $100,000 at one bank. The Company's accounts at this
bank are insured by the Federal Deposit Insurance Corporation up to
$100,000. As of December 31, 1996, the Company did not maintain a cash
balance greater than the federally insured limit. Accounts receivable from
students are unsecured and subject to significant credit risk unless
guaranteed by the Federal government.
ACCOUNTING ESTIMATES
--------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
INVENTORY
---------
Inventory consists of textbooks which are sold to students enrolled in the
educational activities of the Company. Inventory is stated at the lower of
cost or market, cost being determined by the first-in, first-out method.
PROPERTY AND EQUIPMENT
----------------------
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the classes of
property and equipment. Lives range from three to five years. Depreciation
was $116,001 and $59,849 for the years ended December 31, 1997 and 1996,
respectively.
Page 7
<PAGE>
DATA PROCESSING TRAINERS, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ADVERTISING COSTS
-----------------
Advertising costs are charged to operations when incurred and included in
selling and promotion expenses. Advertising expense amounted to $422,664
and $272,161 for the years ended December 31, 1997 and 1996, respectively.
INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
-----------------------------------------------------------
In February 1997 SFAS No. 128, "Earnings Per Share", was issued effective
for periods ending after December 15, 1997. There is no impact on the
Company's 1996 financial statements from adoption of SFAS No. 128. The
Company has adopted the provisions of SFAS No. 128 effective for the year
ending December 31, 1997. Stock warrants are not considered in the
calculation of net loss per share if their inclusion would be
anti-dilutive. The weighted average number of common shares outstanding for
the years ended December 31, 1997 and 1996 was 100.
Income (loss) per share is the amount of earnings (loss) for the period for
each common stock share outstanding. Earnings is defined as operating
income (loss) less preferred stock dividends for the period. The number of
outstanding common shares is determined by the weighted average of shares
outstanding during the period. Diluted earnings per share, if any, is the
basic earnings per share for the period adjusted for the assumed exercise
or conversion of all stock options, warrants or other securities
convertible into common stock provided the resulting earnings per share is
not anti-dilutive. In years of net loss, there is no diluted earnings per
share since the result would be anti-dilutive.
STATEMENT OF CASH FLOWS
-----------------------
For the purposes of the statements of cash flows, the Company considers
investments and savings instruments with maturities of three months or less
to be cash equivalents.
Page 8
<PAGE>
DATA PROCESSING TRAINERS, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
------------
The Company has elected, with the consent of its stockholder, to be taxed
as an "S corporation" for federal income tax purposes. The income or loss
of an S corporation is included in the income tax returns of the
stockholder and, accordingly, the Company makes no provision for income
taxes in its financial statements.
New Accounting Standards:
CAPITAL STRUCTURE
-----------------
In February 1997, the Financial Accounting Standards Board issued SFAS No,
129, "Disclosure of Information about Capital Structure" ("SFAS No. 129"),
which requires companies to disclose all relevant information regarding
their capital structure. SFAS No. 129 presentation is required for
reporting periods ending after December 15, 1997. Based on the capital
structure disclosures presented in the accompanying financial statements
and notes thereto, the Company does not believe that any additional
disclosures are required as a result of adopting this pronouncement.
COMPREHENSIVE INCOME
--------------------
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"), which establishes
standards for the reporting of comprehensive income. This pronouncement
requires that all items recognized under accounting standards as components
of comprehensive income, as defined in the pronouncement, be reported in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. The financial statement presentation required
under SFAS No. 130 is effective for all fiscal years beginning after
December 15, 1997. The Company has not adopted SFAS No. 130 in 1997 but
will do so as part of a consolidated group in 1998.
Page 9
<PAGE>
DATA PROCESSING TRAINERS, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 2 - PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
December 31,
1997 1996
---- ----
Furniture and equipment $ 413,822 $ 367,600
Equipment under capital
leases 206,664 --
--------- ---------
620,486 367,600
Less accumulated depreciation
and amortization (319,687) (203,686)
--------- ---------
$ 300,799 $ 163,914
========= =========
The accumulated depreciation of assets under capital leases was $37,540 at
December 31, 1997. The amortization of capital leases is included in
depreciation expense.
NOTE 3 - CAPITAL LEASE OBLIGATIONS
Capital lease obligations at December 31, 1997 consist of the following:
Capital lease obligations to financing companies,
monthly capital lease payments totaling $6,988,
due in full through July 2001, collateralized by
security interests in purchased equipment $ 181,118
Less current maturities (71,654)
---------
$ 109,464
=========
Page 10
<PAGE>
DATA PROCESSING TRAINERS, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 3 - CAPITAL LEASE OBLIGATIONS (continued)
Aggregate maturities of capital leases at December 31, 1997, are as
follows:
Year ending December 31,
------------------------
1998 $ 71,654
1999 72,964
2000 35,439
2001 1,061
--------------
Total minimum lease payments 181,118
Less: Amount representing interest (34,696)
--------------
Present value of net minimum lease payments $ 146,422
==============
Interest rates on capitalized leases vary from 9% to 26.78% and are imputed
based on the Company's incremental borrowing rate at the inception of each
lease.
NOTE 4 - OPERATING LEASES
The Company leases its school facilities under operating leases. The
following is a schedule by years of future minimum rental payments required
under the operating leases which expire through April, 2000:
Year ending December 31,
------------------------
1998 $ 262,106
1999 162,762
2000 54,254
-------------
$ 479,122
=============
Total lease rentals, including common area charges, totaled $289,681 and
$292,861 for the years ended December 31, 1997 and 1996, respectively.
NOTE 5 - EMPLOYEE BENEFIT PLANS
The Company sponsors a 401(K) savings plan, whereby eligible employees may
elect to make contributions pursuant to a salary reduction agreement upon
meeting age and length-of-service requirements. The Company makes a
matching contribution of up to twenty-five percent (25%) of electing
employees' deferrals. Matching contributions to the plan were $8,470 and
$6,532 for the years ended December 31, 1997 and 1996, respectively.
Page 11
<PAGE>
DATA PROCESSING TRAINERS, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 5 - EMPLOYEE BENEFIT PLANS (continued)
In addition, the Company sponsors a pension plan, whereby the Company
contributes six percent (6%) of eligible employees' base compensation as
defined under the terms of the plan. Contributions to the pension plan were
$84,470 and $43,605 for the years ended December 31, 1997 and 1996,
respectively.
NOTE 6 - REGULATORY
The Company is subject to extensive regulation by federal and state
governmental agencies and accrediting bodies. In particular, the Higher
Education Act of 1965, as amended (the "HEA"), and the regulations
promulgated thereunder by the U.S. Department of Education ("DOE") subject
the Company to significant regulatory scrutiny on the basis of numerous
standards that schools must satisfy in order to participate in the various
student financial assistance programs under Title IV of the HEA (the "Title
IV Programs"). Under the HEA and its implementing regulations, certain
financial responsibility and other regulatory standards must be complied
with in order to qualify to participate in the Title IV Programs.
Under such standards, an institution must, among other things: (i) have an
acid test ratio (defined as the ratio of cash, cash equivalents, and
current accounts receivable to current liabilities) of at least 1:1 at the
end of each fiscal year, (ii) have a positive tangible net worth at the end
of each fiscal year, (iii) not have a cumulative net operating loss during
its two most recent fiscal years that results in a decline of more than 10%
of the institution's tangible net worth at the beginning of that two-year
period, (iv) collect 85% or less of its education revenues from Title IV
Program funds in any fiscal year, and (v) not have cohort default rates on
federally funded or federally guaranteed student loans of 25% or greater
for three consecutive federal fiscal years. The DOE may measure the
financial responsibility standards on a school-by-school basis or on a
corporate consolidated basis. Any regulatory violation could be the basis
for the initiation of a suspension, limitation or termination proceeding
against the Company or its school (institution).
In November 1997, the DOE published new regulations regarding financial
responsibility to take effect in July 1998. The regulations provide a
transition year alternative which will permit institutions to have their
financial responsibility for the 1998 fiscal year measured on the basis of
either the new regulations or the current regulations, whichever are more
favorable. Under the new regulations, the DOE will calculate three
financial ratios for an institution, each of which will be scored
separately and which will then be combined to determine the institution's
financial responsibility. If an institution's composite score is below the
Page 12
<PAGE>
DATA PROCESSING TRAINERS, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - REGULATORY (CONTINUED)
minimum requirement for unconditional approval but above a designated
threshold level, such institution may take advantage of an alternative that
allows it to continue to participate in the Title IV Programs for up to
three years under additional monitoring and reporting procedures. If an
institution's composite score falls below this threshold level or is
between the minimum for unconditional approval and the threshold for more
than three consecutive years, the institution will be required to post a
letter of credit in favor of the DOE. The Company does not believe that
these new regulations will have a material effect on the Company's
compliance with the DOE's financial responsibility standards.
The process of reauthorizing the HEA by the U.S. Congress, which takes
place approximately every five years, has begun and is expected to be
completed by 1998. It is not possible to predict the outcome of the
reauthorization process. Although there is no present indication that the
Congress will decline to reauthorize the Title IV Programs, there can be no
assurance that government funding for the Title IV Programs will continue
to be available or maintained at current levels, nor can there be assurance
that current requirements for student and institutional participation in
the Title IV Programs will be unchanged. Thus, the reauthorization process
could result in revisions to the HEA that increase the compliance burden on
the Company's school. A reduction in funding levels for federal student
financial assistance programs could impact the Company's ability to attract
students.
In order to operate and award degrees, diplomas and certificates and to
participate in the Title IV Programs, a campus must be licensed or
authorized to offer its programs of instruction by the relevant agencies of
the state in which such campus is located. The Company's campuses are
licensed or authorized by the relevant agencies of the state in which such
campus is located. In addition, in order to participate in the Title IV
Programs, an institution must be accredited by an accrediting agency
recognized by the DOE.
With each acquisition (or sale) of an institution that is eligible to
participate in the Title IV Programs, that institution undergoes a change
of ownership that results in a change of control, as defined in the HEA and
applicable regulations. In such event, that institution becomes ineligible
to participate in the Title IV Programs and may receive and disburse only
previously committed Title IV Program funds to its students until it has
applied for and received from the DOE recertification under the
institution's new ownership.
Page 13
<PAGE>
DATA PROCESSING TRAINERS, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 7 - RELATED PARTY TRANSACTIONS
On December 30, 1996, the Company distributed $334,930 to the owner and
sole stockholder of the Company. Subsequently, during 1997, management
determined that, based on the 1997 earnings of the Company and the year end
cash balance, the distribution was unearned by the owner in 1996. As a
result, the amount was recorded as a receivable at December 31, 1996. In
1997, the $334,930 was determined to be earned by the owner and was
recorded as compensation to the owner.
During 1997, the Company paid business expenses of $104,429 on behalf of
another company controlled by the owner of the Company. This amount was
recorded by the Company as a receivable from the owner at December 31,
1997. Subsequently in 1998, the $104,930 was recorded as a distribution to
the owner.
Based on the discretionary nature of the transactions, the private
ownership status of the Company at the time of the transactions and the
subsequent disposition of the receivables, both amounts have been presented
as reductions of equity at each respective year end.
NOTE 8 - SUBSEQUENT EVENT
On March 24, 1998, all of the Company's outstanding stock was acquired by
Siemann Educational Systems, Inc. ("SES"). On that date, the Company became
a wholly owned subsidiary of SES and ceased to be a Subchapter S
corporation for tax purposes. The former owner signed a noncompete
agreement and a consulting contract with a term of two years to assist in
the transition of ownership to SES.
As a result of the change in ownership, the Company ceased to be eligible
for Title IV Federal funding of tuition and tuition receivables. SES has
filed the appropriate documents with Federal and state agencies to restore
funding. Approval to restore funding was granted on May 18, 1998. The
Company expects to have full Title IV funding to be restored by
approximately June 8, 1998.
Page 14
<PAGE>
(b) Pro forma financial information
PRO FORMA FINANCIAL DATA
(UNAUDITED)
Pro forma consolidated statements of operations
The following unaudited pro forma statements of operations have been derived
from the statements of operations of Siemann Educational Systems ("SES" or the
"Company") and Data Processing Trainers, Inc. ("DPT") for the three months ended
March 31, 1998 and the twelve months ended December 31, 1997. The pro forma
statements are presented to give effect to the acquisition of DPT on March 24,
1998, as if the acquisition had occurred on January 1, 1997. The pro forma
statements of operations are presented for informational purposes only and do
not purport to be indicative of the results of operations that actually would
have resulted had the acquisition been consummated on January 1, 1997, nor which
may result from future operations.
The pro forma consolidated statements of operations should be read in
conjunction with the notes thereto and the Company's consolidated financial
statements and related notes contained in the 10-KSB for the year ended December
31, 1997 and the 10-QSB for the quarter ended March 31, 1998 and DPT's financial
statements for the year ended December 31, 1997 included in the 8-K filing.
<TABLE>
<CAPTION>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARIES
HISTORICAL AND PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
Pro forma
Historical Adjustments Pro forma
------------- -------------
Revenue:
<S> <C> <C> <C>
Education revenues $ 2,974,626 $ 2,974,626
College supplies and cafeteria sales 109,919 109,919
Other income 27,757 27,757
------------- -------------
3,112,302 3,112,302
Expenses:
Educational services and facilities 1,686,405 1,686,405
Cost of cafeteria and supply sales 201,022 201,022
Selling and promotion 438,030 438,030
General and administrative 360,173 3) (202,499) 157,674
Interest expense 94,995 1) 225,302 320,297
Depreciation and amortization 0 2) 63,169 63,169
Bad debt expense 48,231 48,231
------------- -------------
Operating expenses 2,828,856 2,914,828
------------- -------------
Operating income 283,446 197,474
Provision for income taxes 0 4) (67,141) (67,141)
------------- -------------
Net income $ 283,446 $ 130,333
============= =============
Net income per share:
Primary $ .03
=============
Fully diluted $ .02
=============
Weighted number of shares outstanding:
Primary 3,765,000
==============
Fully diluted 5,920,463
==============
Page 15
See notes to pro forma statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARIES
HISTORICAL AND PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDING DECEMBER 31, 1997
(UNAUDITED)
Pro forma
Historical Adjustments Pro forma
------------- -------------
Revenue:
<S> <C> <C>
Education revenues $ 9,359,742 $ 9,359,742
College supplies and cafeteria sales 368,020 368,020
Other income 161,690 161,690
------------- -------------
9,889,452 9,889,452
Expenses:
Educational services and facilities 4,880,604 4,880,604
Cost of cafeteria and supply sales 378,136 378,136
Selling and promotion 947,420 947,420
General and administrative 2,923,096 3) (1,480,621) 1,442,475
Interest expense 300,348 1) 901,207 1,201,555
Depreciation and amortization 91,091 2) 252,677 343,768
Bad debt expense 138,353 138,353
------------- -------------
Operating expenses 9,659,048 9,332,311
------------- -------------
Operating income 230,404 557,141
Provision for income taxes 0 4) (189,428) (189,428)
------------- -------------
Net income $ 230,404 $ 367,713
============= =============
Net income per share:
Primary $ .17
Fully diluted $ .08
=============
Weighted number of shares outstanding:
Primary 2,184,562
=============
Fully diluted 4,340,025
=============
See notes to pro forma statements
Page 16
</TABLE>
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA STATEMENTS
1) Adjustment to record interest expense related to notes payable obligations
incurred with the purchase of DPT in the amount of $213,456 and $853,825
for the periods ending March 31, 1998 and December 31, 1997, respectively.
Also, includes amortization (in the amounts of $11,846 and $47,382 for the
periods ending March 31, 1998 and December 31, 1997, respectively) of value
allocated to redeemable warrants granted to a lender.
2) Adjustment to record amortization of goodwill related to the purchase of
DPT of $54,452 and $217,810 for the periods ending March 31, 1998 and
December 31, 1998, respectively. Goodwill is being amortized over 40 years.
Also, includes amortization (in the amounts of $8,717 and $34,867 for the
periods ending March 31, 1998 and December 31, 1997, respectively) of the
deferred costs of obtaining debt.
3) Adjustment to exclude the compensation of the prior sole shareholder of
DPT. The shareholder's management position was not directly replaced;
however, campus managers' compensation increased due to increased
responsibility and has been added back.
4) Adjustment to record Federal and state income taxes based on an estimated
Federal and state statutory tax rate of 34%.
5) The fully diluted number of shares outstanding includes shares exercisable
under warrants issued to two lenders of funds that SES used to purchase DPT
as determined under the treasury stock method. In addition, the fully
diluted number of shares outstanding includes shares issuable in the future
to the former owner of DPT. The exact number of shares to be issued is
contingent upon the the market price one year from the closing date of the
sale of DPT to SES. For purposes of determining the number of shares for
inclusion in the diluted number of shares outstanding, the approximate
current price of $3.75 per share has been used.
Page 17
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIEMANN EDUCATIONAL SYSTEMS, INC.
(Registrant)
By: /s/ PAUL T. SIEMANN
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Paul T. Siemann, President and CEO
