<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number 1-11111
EDUCATION ALTERNATIVES, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-1581297
- - --------------------------------------- -------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1300 Norwest Financial Center
7900 Xerxes Avenue South
Minneapolis, Minnesota 55431
- - ---------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)
(612) 832-0092
----------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
As of April 30, 1996, there were issued and outstanding 7,488,970 shares of
Common Stock, $.01 par value.
<PAGE>
EDUCATION ALTERNATIVES, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1996
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
- - -----------------------------------------------------
Condensed consolidated balance sheets as of
March 31, 1996, and June 30, 1995 3
Condensed consolidated statements of operations for
the three months ended March 31, 1996 and 1995 4
Condensed consolidated statements of operations for
the nine months ended March 31, 1996 and 1995 5
Condensed consolidated statements of cash flows for
the nine months ended March 31, 1996 and 1995 6
Notes to condensed consolidated financial statements 7
Item 2. Management's Discussion and Analysis of
- - -----------------------------------------------
Financial Condition and Results of Operations 10
---------------------------------------------
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
- - ----------------------------------------
Signatures 13
</TABLE>
- 2 -
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EDUCATION ALTERNATIVES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, June 30,
(Dollars in thousands) 1996 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, including
restricted cash of $2,415 at
June 30, 1995 $ 14,406 $ 2,449
Marketable securities 5,734 -
Accounts receivable, net 267 184
Settlement receivable 116 3,000
Interest receivable 193 158
Prepaid expenses 165 243
----------- -----------
Total current assets 20,881 6,034
LONG-TERM MARKETABLE SECURITIES 7,362 28,972
PROPERTY AND EQUIPMENT, NET 9,511 8,475
----------- -----------
$ 37,754 $ 43,481
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 3,300 $ 3,300
Accounts payable 1,366 1,791
Other current liabilities 10,492 7,929
----------- -----------
Total current liabilities 15,158 13,020
LONG-TERM DEBT 386 636
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000
shares authorized; no shares issued
and outstanding - -
Common stock, $.01 par value, 25,000,000
shares authorized; issued and outstanding
7,488,970 at March 31, 1996 and
7,352,352 at June 30, 1995 75 74
Additional paid-in capital 46,386 46,080
Unrealized losses on marketable securities (3,239) (3,687)
Accumulated deficit (21,012) (12,642)
----------- -----------
Total shareholders' equity 22,210 29,825
----------- -----------
$ 37,754 $ 43,481
----------- -----------
----------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
EDUCATION ALTERNATIVES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
(Dollars in thousands, except per share amounts) March 31,
--------------------------------
1996 1995
------------ -----------
<S> <C> <C>
REVENUE
School management $ 7,224 $ 66,078
Tuition and other 1,349 1,188
------------ -----------
8,573 67,266
DIRECT EXPENSES
School management 7,797 66,024
Private school costs and other 991 919
------------ -----------
8,788 66,943
------------ -----------
GROSS PROFIT (LOSS) (215) 323
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 1,273 1,071
------------ -----------
OPERATING LOSS (1,488) (748)
OTHER INCOME (EXPENSE)
Investment income 423 567
Interest expense (101) (62)
------------ -----------
322 505
------------ -----------
LOSS BEFORE INCOME TAX EXPENSE (1,166) (243)
INCOME TAX EXPENSE - -
------------ -----------
NET LOSS $ (1,166) $ (243)
------------ -----------
------------ -----------
NET LOSS PER SHARE $ (.16) $ (.03)
------------ -----------
------------ -----------
WEIGHTED AVERAGE SHARES OUTSTANDING 7,488,970 7,032,827
------------ -----------
------------ -----------
</TABLE>
See notes to condensed consolidated financial statements.
- 4 -
<PAGE>
EDUCATION ALTERNATIVES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
(Dollars in thousands, except per share amounts) March 31,
-------------------------------
1996 1995
----------- -----------
<S> <C> <C>
REVENUE
School management $ 110,696 $ 137,172
Tuition and other 3,334 1,285
----------- -----------
114,030 138,457
DIRECT EXPENSES
School management 116,871 135,785
Private school costs and other 2,630 1,057
----------- -----------
119,501 136,842
----------- -----------
GROSS PROFIT (LOSS) (5,471) 1,615
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 4,131 3,609
----------- -----------
OPERATING LOSS (9,602) (1,994)
OTHER INCOME (EXPENSE)
Investment income 1,471 1,792
Interest expense (239) (76)
----------- -----------
1,232 1,716
----------- -----------
LOSS BEFORE INCOME TAX EXPENSE (8,370) (278)
INCOME TAX EXPENSE - -
----------- -----------
NET LOSS $ (8,370) $ (278)
----------- -----------
----------- -----------
NET LOSS PER SHARE $ (1.12) $ (.04)
----------- -----------
----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING 7,473,631 6,662,902
----------- -----------
----------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
- 5 -
<PAGE>
EDUCATION ALTERNATIVES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
March 31,
-------------------------------
(In thousands) 1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (8,370) $ (278)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,180 625
Changes in operating assets and liabilities 2,041 1,219
----------- -----------
Net cash provided by (used in) operating
activities (5,149) 1,576
INVESTING ACTIVITIES
Purchase of marketable securities - (166)
Proceeds from sales and maturities of
marketable securities 19,222 274
Additions to property and equipment (2,216) (2,128)
----------- -----------
Net cash provided by (used in) investing
activities 17,006 (2,020)
FINANCING ACTIVITIES
Proceeds from exercise of stock options and
warrants 307 953
Other
(207) 185
----------- -----------
Net cash provided by financing
activities 100 1,199
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 11,957 684
Cash and cash equivalents at beginning of
period 2,449 5,221
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14,406 $ 5,905
----------- -----------
----------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
EDUCATION ALTERNATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting solely of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three and nine month periods ended March 31, 1996, are not necessarily
indicative of the results that may be expected for the year ending June 30,
1996. For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended June 30, 1995.
2. ACCOUNTING POLICIES
BASIS OF CONSOLIDATION: The condensed consolidated financial statements
include the accounts of the Company and its wholly owned subsidiary.
Intercompany balances and transactions have been eliminated in
consolidation.
REVENUE RECOGNITION: The Company applies its accounting policy for revenue
recognition based on the terms of each individual contract. On management
contracts, where the Company has substantial control over the operation of
the school and assumes the full risks of loss/reward on the contract,
revenues and expenses are consolidated in the accompanying statements of
operations, as the Company believes this represents the most useful
presentation for the financial statement user. Consulting contracts, under
which the Company has less control than the management contracts, are
reported on a net fee basis, with consulting revenue recorded based on the
difference between total revenue and total expense on the contract.
On an interim basis, profit on management contracts and consulting revenue
on consulting contracts is determined using the percentage-of-completion
method. The percentage-of-completion method is based upon management's
estimates of total contract costs and total contract profitability. Overall
profit recognition on management contracts and consulting revenue on
consulting contracts is determined by calculating the ratio of year-to-date
actual costs to total estimated costs multiplied by the estimated contract
profitability. Subsequent results may fluctuate due to changes in estimates
on the contract during the year.
NEW ACCOUNTING PRONOUNCEMENTS: Financial Accounting Standards Board
Statement No. 123, "Accounting for Stock-Based Compensation" ("Statement
No. 123"), issued in October 1995 and effective for fiscal years beginning
after December 15, 1995, encourages, but does not require, a fair value
based method of accounting for employee stock options or similar equity
instruments. It also allows an entity to elect to continue to measure
compensation cost under Accounting Principals Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25"),
- 7 -
<PAGE>
but requires pro forma disclosures of net income and earnings per share as
if the fair value based method of accounting had been applied. The Company
will adopt Statement No. 123 in fiscal 1997. While the Company is still
evaluating Statement No. 123, it currently expects to elect to continue to
measure compensation cost under APB No. 25 and comply with the pro forma
disclosure requirements. If the Company makes this election, this statement
will have no impact on the Company's results of operations or financial
condition because the Company's plans are fixed stock option plans which
have no intrinsic value at the grant date under APB No. 25.
FINANCIAL STATEMENT RECLASSIFICATIONS: Certain fiscal 1995 amounts have
been reclassified to conform to the fiscal 1996 presentation. These
reclassifications have no effect on the results of operations or
shareholders' equity as previously reported.
3. MARKETABLE SECURITIES
During fiscal 1995, the Company and the firm hired to manage the Company's
investment portfolio became involved in a dispute over the purchase and
management of certain securities included in the investment portfolio. The
Company and its investment management firm entered into a binding
settlement on June 30, 1995, whereby the investment management firm agreed
to reimburse the Company a minimum of $3,000,000 for losses on the
Company's marketable securities portfolio. The investment management firm
could be required to pay an additional $1,500,000 depending on an
arbitrator's decision, which has not been rendered as of the date of this
filing.
In partial payment of the minimum settlement amount, the investment
management firm in fiscal 1996 purchased securities with an amortized cost
of $19,130,000 from the Company's portfolio. These securities had a fair
value of $16,246,000 at the time of such purchase, with the difference
between cost and fair value at the time of purchase allocated to the
settlement amount.
4. PUBLIC SCHOOL CONTRACTS
On November 1, 1994, the Company entered into a five-year management
contract with the board of education of the city of Hartford, Connecticut,
under which the Company would provide comprehensive educational and
management operating services for the 32-school public school system of the
city of Hartford.
The contract provides for the reimbursement of certain expenditures
incurred by the Company on the terms set forth therein. While the Company
believes it should be reimbursed for expenditures it has made under the
contract, city of Hartford and Hartford Board of Education officials have
not acknowledged nor fulfilled their contractual obligations.
As a result of uncertainties regarding collectibility, the Company recorded
charges of $620,000 and $4,255,000, respectively, during the three and nine
months ended March 31, 1996 related to costs incurred but not yet
reimbursed under the contract. These estimated charges will be adjusted
when the resolution of contract disputes is finalized.
- 8 -
<PAGE>
The Hartford Board of Education had the right to terminate the contract for
any reason upon ninety days' notice to the Company, and in January 1996,
voted to seek an amicable dissolution of the contract. The Board cited an
impasse in negotiations with the Company on amounts owed to the Company for
its management services. In late January, services being provided to the
Hartford schools were terminated. In March, the Hartford Board of Education
voted to formally end the Company's contract with the schools. The Company
continues to pursue with city of Hartford and Hartford Board of Education
officials the payment of amounts owed to the Company. If this matter is
not resolved, the Company will commence formal legal action against the
parties. With the January termination of services, the Company has
consolidated revenues and expenses under the management contract only
through December 31, 1995.
The Company has provided management services to ten schools in the
Baltimore, Maryland school system (the "Baltimore District"). In addition,
the Company provided consulting services to two schools in the Baltimore
District. The management and consulting contracts allowed the Baltimore
District to cancel the agreements for any reason upon ninety days' notice
to the Company, and in late November 1995, the Baltimore Board of School
Commissioners voted to cancel the management and consulting contracts with
the Company because of budgetary issues. The Company provided services to
the contracted schools through March 4, 1996 and has reached a tentative
settlement with the Baltimore District to resolve certain financial issues
and disputed amounts under the contracts.
In the second quarter of fiscal 1996, the Company recorded a charge of
$2,000,000 to cover estimated write-offs and shutdown costs associated with
the cancellation of the Baltimore and Hartford contracts. The Company also
recorded provisions in prior years for various disputed items and
contingencies under the contracts. The Company believes these reserves are
adequate to cover any balance sheet exposures and other commitments under
the management contracts. Although the Company believes no further write-
offs will be required based on preliminary discussions to date, there can
be no assurance that agreement will be reached on the Hartford and
Baltimore contracts on terms satisfactory to the Company. These estimated
charges will be adjusted when the resolution of contract disputes is
finalized.
5. PURCHASE OF PRIVATE SCHOOLS
In December 1994, the Company purchased the two private schools it had
operated under management agreements since March 1991. Beginning January 1,
1995, the Company has recorded all revenue and expense associated with the
operations of the two schools in its consolidated statement of operations.
The private schools purchase was financed through short-term borrowings,
which expires June 21, 1996, and is collateralized by approximately
$3,500,000 of securities in the Company's marketable securities portfolio.
The borrowing carries a monthly variable interest rate, based on LIBOR, and
was approximately 5.1% at March 31, 1996.
- 9 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue for the three months ended March 31, 1996, was $8,573,000, a decrease of
$58,693,000 from revenue recorded for the same period in the prior year. The
decrease reflects the impact of the cancellation of the Hartford and Baltimore
management and consulting contracts in the third quarter of the current fiscal
year. With the January termination of services, no revenue was recorded on the
Hartford contract during the quarter, compared to revenue of $56,982,000 in the
prior year quarter. Revenue on the Baltimore contracts was recorded through
March 4, 1996, the effective date of termination.
Revenue for the nine months ended March 31, 1996, was $114,030,000, a decrease
of $24,427,000 from revenue recorded in the prior year. Revenue of $89,192,000
was recorded on the Hartford contract for the nine months ended March 31, 1996,
compared to $111,092,000 in the prior year. Baltimore revenues were $21,504,000,
versus $24,341,000 recorded for the first nine months of the prior year.
Tuition and other revenue for the three and nine months ended March 31, 1996,
primarily represent tuition revenue from the two private schools owned by the
Company.
Direct expenses for the three months ended March 31, 1996, were $8,853,000, a
decrease of $58,090,000 from direct expenses recorded in the same period of the
prior year. For the nine months ended March 31, 1996, direct expenses were
$119,566,000, a decrease of $17,276,000 from direct expenses recorded in the
prior year.
School management expenses on the Hartford contract for the three and nine
months ended March 31, 1996, were $620,000 and $93,946,000, respectively,
compared to $56,982,000 and $111,092,000 in the same period of the prior year.
Current year Hartford expenses include $620,000 and $4,255,000 respectively,
related to costs incurred but not yet reimbursed under the Company's contract
with the Hartford Board of Education. The contract provides for the
reimbursement of certain expenditures incurred by the Company on the terms set
forth therein. While the Company believes it should be reimbursed for
expenditures it has made under the contract, city of Hartford and Hartford Board
of Education officials have not acknowledged nor fulfilled their contractual
obligations.
As a result of uncertainties regarding collectibility, the Company recorded
charges of $620,000 and $4,255,000, respectively, during the three and nine
months ended March 31, 1996 related to costs incurred but not yet reimbursed
under the contract. These estimated charges will be adjusted when the resolution
of contract disputes is finalized.
The Hartford Board of Education had the right to terminate the contract for any
reason upon ninety days' notice to the Company, and in January 1996, voted to
seek an amicable dissolution of the contract. The Board cited an impasse in
negotiations with the Company on amounts owed to the Company for its management
services. In late January, services being provided to the Hartford schools were
terminated. In March, the Hartford Board of Education voted to formally end the
Company's contract with the schools. The Company continues to pursue with city
of Hartford and Hartford Board
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<PAGE>
of Education officials the payment of amounts owed to the Company. If this
matter is not resolved, the Company will commence formal legal action against
the parties. With the January termination of services, the Company has
consolidated revenues and expenses under the management contract only through
December 31, 1995.
School management expenses recorded on the Baltimore school management contracts
for the three and nine months ended March 31, 1996, were $7,177,000 and
$22,957,000 respectively, compared to $9,050,000 and $23,075,000 in the prior
year. The management and consulting contracts allowed the Baltimore District to
cancel the agreements for any reason upon ninety days' notice to the Company,
and in late November 1995, the Baltimore Board of School Commissioners voted to
cancel the management and consulting contracts with the Company because of
budgetary issues. The Company provided services to the contracted schools
through March 4, 1996 and has reached a tentative settlement with the Baltimore
District to resolve certain financial issues and disputed amounts under the
contracts.
In the second quarter of fiscal 1996, the Company recorded a charge of
$2,000,000 to cover estimated write-offs and shutdown costs associated with the
cancellation of the Baltimore and Hartford contracts. The Company also recorded
provisions in prior years for various disputed items and contingencies under the
contracts. The Company believes these reserves are adequate to cover any
balance sheet exposures and other commitments under the management contracts.
Although the Company believes no further write-offs will be required based on
preliminary discussions to date, there can be no assurance that agreement will
be reached on the Hartford and Baltimore contracts on terms satisfactory to the
Company. These estimated charges will be adjusted when the resolution of
contract disputes is finalized.
Private school costs and other for the three and nine months ended March 31,
1996, primarily represent costs incurred at the two private schools owned by the
Company.
Selling, general, and administrative expenses were $1,273,000 and $1,071,000,
respectively, for the three months ended March 31, 1996 and 1995. For the nine
months ended March 31, 1996, selling, general, and administrative expenses were
$4,131,000, an increase of $522,000 over expenses recorded in the same period of
the prior year. The increase for the three and nine months ended March 31, 1996
is due to higher legal costs, an increase in personnel early in the year to
support the school management activities, and severance costs resulting from
recent cutbacks in personnel.
Investment income recorded in the three months ended March 31, 1996 and 1995,
was $423,000 and $567,000, respectively. For the nine months ended March 31,
1996 and 1995, investment income was $1,471,000 and $1,792,000, respectively.
The decline in investment income in both the three and nine month periods is due
to lower investment levels in fiscal 1996.
The Company recorded a net loss of $1,166,000 or $.16 per share in the three
months ended March 31, 1996, compared to a net loss of $243,000 or $.03 per
share in the same period of the prior year. For the nine months ended March 31,
1996, the Company's net loss was $8,370,000 or $1.12 per share compared to a net
loss of $278,000 or $.04 per share for the nine months ended March 31, 1995. The
net loss recorded during fiscal 1996 periods is primarily attributable to the
charge recorded on the Hartford contract due to the uncertainty regarding the
collectibility of reimbursable expenditures and the charge recorded to cover
estimated write-offs and shutdown costs associated with the cancellation of the
Hartford and Baltimore contracts.
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<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
During the nine months ended March 31, 1996, net cash used in operations totaled
$5,149,000, compared to $1,576,000 of cash provided by operations in the same
period of the prior year. The change is primarily due to the $8,370,000 net loss
recorded in the first nine months of the current fiscal year.
Cash generated from investing activities totaled $17,006,000 in the nine months
ended March 31, 1996, and includes $19,130,000 in proceeds from sales of
marketable securities (see Note 3). Additions to property and equipment totaled
$2,216,000 in the nine months ended March 31, 1996, and primarily relates to
equipment and capital improvements at the managed schools in Hartford and
Baltimore.
The Company has working capital of $5,723,000 at March 31, 1996, compared to a
working capital deficit of $6,986,000 at June 30, 1995. The beginning of the
year working capital deficit was eliminated through the liquidation of certain
securities as discussed in Note 3. The Company has approximately $8,152,000 of
marketable securities pledged as collateral for letters of credit on the
management and consulting contracts in Baltimore, for various capital lease
commitments, and for the financing of the private schools purchase.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Financial Accounting Standards Board Statement No. 123, "Accounting for Stock-
Based Compensation" ("Statement No. 123"), issued in October 1995 and effective
for fiscal years beginning after December 15, 1995, encourages, but does not
require, a fair value based method of accounting for employee stock options or
similar equity instruments. It also allows an entity to elect to continue to
measure compensation cost under Accounting Principals Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25"), but requires pro
forma disclosures of net income and earnings per share as if the fair value
based method of accounting had been applied. The Company expects to adopt
Statement No. 123 in fiscal 1997. While the Company is still evaluating
Statement No. 123, it currently expects to elect to continue to measure
compensation cost under APB No. 25 and comply with the pro forma disclosure
requirements. If the Company makes this election, this statement will have no
impact on the Company's results of operations or financial condition because the
Company's plans are fixed stock option plans which have no intrinsic value at
the grant date under APB No. 25.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
11 Statement regarding computation of per share loss.
27 Financial data schedule
(B) REPORTS ON FORM 8-K:
On March 22, 1996, the Company filed a report on Form 8-K related to
the termination of the Company's contract with the Hartford Board of
Education.
- 12 -
<PAGE>
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.
EDUCATION ALTERNATIVES, INC.
Date: May 1, 1996 By /s/ John T. Golle
----------------------------
John T. Golle
Chairman and Chief
Executive Officer
Date: May 1, 1996 By /s/ Gerald A. Haugen
----------------------------
Gerald A. Haugen
Chief Financial and
Administrative Officer
- 13 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBER FILING
- - ------- ------
<S> <C> <C>
11 Statement regarding computation of per share loss. Filed herewith electronically
27 Financial data schedule Filed herewith electronically
</TABLE>
<PAGE>
EDUCATION ALTERNATIVES, INC.
EXHIBIT (11)--STATEMENT REGARDING
COMPUTATION OF PER SHARE LOSS
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
--------------------------- --------------------------
1996 1995 1996 1995
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Weighted average number of
issued shares outstanding 7,488,970 7,032,827 7,473,631 6,692,902
Net loss $(1,166,000) $ (243,000) $(8,370,000) $(278,000)
----------- ---------- ----------- ---------
----------- ---------- ----------- ---------
Net loss per share $ (.16) $ (.03) $ (1.12) $ (.04)
----------- ---------- ----------- ---------
----------- ---------- ----------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 14,406
<SECURITIES> 5,734
<RECEIVABLES> 267
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,881
<PP&E> 9,511
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,754
<CURRENT-LIABILITIES> 15,158
<BONDS> 386
0
0
<COMMON> 75
<OTHER-SE> 22,135
<TOTAL-LIABILITY-AND-EQUITY> 37,754
<SALES> 0
<TOTAL-REVENUES> 114,030
<CGS> 0
<TOTAL-COSTS> 119,501
<OTHER-EXPENSES> 4,131
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 239
<INCOME-PRETAX> (8,370)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,370)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,370)
<EPS-PRIMARY> (1.12)
<EPS-DILUTED> (1.12)
</TABLE>
