þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 83-0479936 | |
(State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization) | Identification No.) | |
5301 S. Highway 16, Suite 200 | 57701 | |
Rapid City, SD | (Zip Code) | |
(Address of principal executive offices) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
-2-
November 30, | May 31, | |||||||
2009 | 2009 | |||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | 26,637 | $ | 3,508 | ||||
Investments |
3,073 | 4,417 | ||||||
Student receivables net of allowance of $403 and $115
at November 30, 2009 and May 31, 2009,
respectively |
3,860 | 1,207 | ||||||
Institutional receivables |
1,137 | 173 | ||||||
Student notes receivable current portion net of
allowance |
0 | 30 | ||||||
Bookstore inventory |
687 | 604 | ||||||
Deferred income taxes |
1,140 | 1,090 | ||||||
Prepaid and other current assets |
400 | 410 | ||||||
Total current assets |
36,934 | 11,439 | ||||||
PROPERTY AND EQUIPMENT |
||||||||
Land |
718 | 718 | ||||||
Land improvements |
374 | 374 | ||||||
Buildings and building improvements |
16,487 | 16,147 | ||||||
Furniture, vehicles, and equipment |
15,441 | 14,564 | ||||||
Total gross property and equipment |
33,020 | 31,803 | ||||||
Less accumulated depreciation |
(20,578 | ) | (19,651 | ) | ||||
Total net property and equipment |
12,442 | 12,152 | ||||||
OTHER ASSETS: |
||||||||
Condominium inventories |
3,636 | 3,802 | ||||||
Student notes receivable net of current portion
and allowance |
131 | 105 | ||||||
Land held for future development |
312 | 312 | ||||||
Course development net of accumulated amortization
of $981 and $804 at November 30, 2009 and May 31, 2009,
respectively |
746 | 767 | ||||||
Restricted Investment |
209 | 0 | ||||||
Other |
281 | 288 | ||||||
5,315 | 5,274 | |||||||
TOTAL |
$ | 54,691 | $ | 28,865 | ||||
-3-
November 30, | May 31, | |||||||
2009 | 2009 | |||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
CURRENT LIABILITIES: |
||||||||
Long-term debt current portion |
$ | 2,322 | $ | 2,147 | ||||
Lines of credit |
3,135 | 3,305 | ||||||
Accounts payable |
5,375 | 3,564 | ||||||
Dividends payable |
1,896 | 0 | ||||||
Student accounts payable |
253 | 314 | ||||||
Deferred income |
499 | 367 | ||||||
Income tax payable |
1,554 | 551 | ||||||
Accrued and other liabilities |
5,841 | 4,900 | ||||||
Total current liabilities |
20,875 | 15,148 | ||||||
LONG-TERM DEBT Net of current portion |
4,077 | 6,507 | ||||||
DEFERRED INCOME TAXES |
1,081 | 1,503 | ||||||
OTHER LONG-TERM LIABILITIES |
857 | 815 | ||||||
COMMITMENTS AND CONTINGENCIES |
||||||||
STOCKHOLDERS EQUITY: |
||||||||
Class A Common (100,000 authorized, issued and outstanding;
$0.0001 par) |
0 | 0 | ||||||
Common stock (50,000,000 authorized, 6,031,105 issued and
outstanding; $0.0001 par) |
1 | 0 | ||||||
Additional paid-in capital |
17,679 | 385 | ||||||
Retained earnings |
10,318 | 7,251 | ||||||
Accumulated other comprehensive income |
118 | 109 | ||||||
28,116 | 7,745 | |||||||
Less treasury stock at cost |
0 | (1,869 | ) | |||||
Total National American University Holdings, Inc. |
||||||||
stockholders equity |
28,116 | 5,876 | ||||||
Non-controlling interest |
(315 | ) | (984 | ) | ||||
Total equity |
27,801 | 4,892 | ||||||
TOTAL |
$ | 54,691 | $ | 28,865 | ||||
-4-
Six Month Period Ended | Three Month Period Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
REVENUE: |
||||||||||||||||
Academic revenue |
$ | 37,336 | $ | 25,103 | $ | 21,463 | $ | 14,321 | ||||||||
Auxiliary revenue |
2,644 | 1,918 | 1,504 | 1,032 | ||||||||||||
Rental income apartments |
483 | 478 | 232 | 240 | ||||||||||||
Condominium sales |
238 | 211 | 238 | 0 | ||||||||||||
Total revenue |
40,701 | 27,710 | 23,437 | 15,593 | ||||||||||||
OPERATING EXPENSES: |
||||||||||||||||
Cost of educational services |
7,385 | 5,980 | 3,978 | 3,252 | ||||||||||||
Selling, general and administrative |
23,563 | 19,133 | 12,384 | 9,745 | ||||||||||||
Auxiliary expense |
1,036 | 789 | 610 | 431 | ||||||||||||
Cost of condominium sales |
166 | 176 | 166 | 0 | ||||||||||||
Total operating expenses |
32,150 | 26,078 | 17,138 | 13,428 | ||||||||||||
INCOME FROM OPERATIONS |
8,551 | 1,632 | 6,299 | 2,165 | ||||||||||||
OTHER INCOME (EXPENSE): |
||||||||||||||||
Interest income |
119 | 129 | 33 | 53 | ||||||||||||
Interest expense |
(315 | ) | (438 | ) | (158 | ) | (205 | ) | ||||||||
Gain on disposition of property and equipment |
0 | 118 | 0 | 0 | ||||||||||||
Other income net |
48 | 45 | 24 | 19 | ||||||||||||
Total other expense |
(148 | ) | (146 | ) | (101 | ) | (133 | ) | ||||||||
INCOME BEFORE INCOME TAXES |
8,403 | 1,486 | 6,198 | 2,032 | ||||||||||||
INCOME TAX EXPENSE |
(3,456 | ) | (530 | ) | (2,501 | ) | (758 | ) | ||||||||
NET INCOME |
4,947 | 956 | 3,697 | 1,274 | ||||||||||||
NET (INCOME) LOSS ATTRIBUTABLE TO
NON-CONTROLLING INTEREST |
16 | (32 | ) | 7 | 28 | |||||||||||
NET INCOME ATTRIBUTABLE TO NAU
HOLDINGS, INC. |
4,963 | 924 | 3,704 | 1,302 | ||||||||||||
OTHER COMPREHENSIVE INCOME |
||||||||||||||||
Unrealized gains on investments |
9 | 171 | 22 | 141 | ||||||||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO NAU HOLDINGS, INC. |
$ | 4,972 | $ | 1,095 | $ | 3,726 | $ | 1,443 | ||||||||
(continued) | ||
The accompanying notes are an integral part of these condensed consolidated financial statements. |
-5-
Six Month Period Ended | Three Month Period Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Basic EPS |
||||||||||||||||
Class A |
||||||||||||||||
Distributed earnings |
$ | 17.30 | $ | | $ | 17.30 | $ | | ||||||||
Undistributed earnings |
$ | 30.23 | $ | 9.24 | $ | 17.57 | $ | 13.02 | ||||||||
Total |
$ | 47.53 | $ | 9.24 | $ | 34.87 | $ | 13.02 | ||||||||
Common |
||||||||||||||||
Distributed earnings |
$ | 0.03 | $ | | $ | 0.03 | $ | | ||||||||
Undistributed earnings |
$ | 0.19 | $ | | $ | 0.11 | $ | | ||||||||
Total |
$ | 0.22 | $ | | $ | 0.14 | $ | | ||||||||
Diluted EPS |
||||||||||||||||
Class A |
||||||||||||||||
Distributed earnings |
$ | 17.30 | $ | | $ | 17.30 | $ | | ||||||||
Undistributed earnings |
$ | 30.16 | $ | 9.24 | $ | 17.49 | $ | 13.02 | ||||||||
Total |
$ | 47.46 | $ | 9.24 | $ | 34.79 | $ | 13.02 | ||||||||
Common |
||||||||||||||||
Distributed earnings |
$ | 0.03 | $ | | $ | 0.03 | $ | | ||||||||
Undistributed earnings |
$ | 0.19 | $ | | $ | 0.10 | $ | | ||||||||
Total |
$ | 0.22 | $ | | $ | 0.13 | $ | | ||||||||
Weighted Average Shares |
||||||||||||||||
Basic EPS |
||||||||||||||||
Class A |
100,000 | 100,000 | 100,000 | 100,000 | ||||||||||||
Common |
227,589 | n/ a | 457,680 | n/ a | ||||||||||||
Diluted EPS |
||||||||||||||||
Class A |
100,000 | 100,000 | 100,000 | 100,000 | ||||||||||||
Common |
262,788 | n/ a | 528,465 | n/ a |
-6-
Equity attributable to NAU Holdings, Inc. | ||||||||||||||||||||||||||||||||
Accumulated | Equity | |||||||||||||||||||||||||||||||
Additional | other | attributable to | Total | |||||||||||||||||||||||||||||
Class A | Common | paid-in | Retained | comprehensive | Treasury | non-controlling | stockholders | |||||||||||||||||||||||||
common | stock | capital | Earnings | income | stock | interest | equity | |||||||||||||||||||||||||
Balance May 31, 2008 |
0 | $ | 0 | $ | 385 | $ | 4,187 | $ | 28 | $ | (1,869 | ) | $ | (971 | ) | $ | 1,760 | |||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||||
Net (Loss) income |
0 | 0 | 0 | 924 | 0 | 0 | 32 | 956 | ||||||||||||||||||||||||
Unrealized gain on
investments |
0 | 0 | 0 | 0 | 171 | 0 | 0 | 171 | ||||||||||||||||||||||||
Balance November 30,
2008 |
$ | 0 | $ | 0 | $ | 385 | $ | 5,111 | $ | 199 | $ | (1,869 | ) | $ | (939 | ) | $ | 2,887 | ||||||||||||||
Balance May 31, 2009 |
$ | 0 | $ | 0 | $ | 385 | $ | 7,251 | $ | 109 | $ | (1,869 | ) | $ | (984 | ) | $ | 4,892 | ||||||||||||||
Recapitalization of
Dlorah, Inc. |
0 | 1 | 22,508 | 0 | 0 | 0 | 0 | 22,509 | ||||||||||||||||||||||||
Retirement of Treasury
Stock |
0 | 0 | (1,869 | ) | 0 | 0 | 1,869 | 0 | 0 | |||||||||||||||||||||||
Merger costs associated
with reverse merger |
0 | 0 | (3,345 | ) | 0 | 0 | 0 | 0 | (3,345 | ) | ||||||||||||||||||||||
Contributed capital from
non-controlling interest
holders |
0 | 0 | 0 | 0 | 0 | 0 | 685 | 685 | ||||||||||||||||||||||||
Dividends declared |
0 | 0 | 0 | (1,896 | ) | 0 | 0 | 0 | (1,896 | ) | ||||||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||||
Net income (loss) |
0 | 0 | 0 | 4,963 | 0 | 0 | (16 | ) | 4,947 | |||||||||||||||||||||||
Unrealized loss on
investments |
0 | 0 | 0 | 0 | 9 | 0 | 0 | 9 | ||||||||||||||||||||||||
Balance November 30,
2009 |
$ | 0 | $ | 1 | $ | 17,679 | $ | 10,318 | $ | 118 | $ | 0 | $ | (315 | ) | $ | 27,801 | |||||||||||||||
-7-
November 30, | November 30, | |||||||
2009 | 2008 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net Income |
$ | 4,947 | $ | 956 | ||||
Adjustments to reconcile net income to net cash flows
provided
by operating activities: |
||||||||
Depreciation and amortization |
1,103 | 1,070 | ||||||
Gain on disposition of property and equipment |
0 | (118 | ) | |||||
Provision for uncollectable tuition |
1,057 | 762 | ||||||
Deferred income taxes |
(94 | ) | 0 | |||||
Changes in assets and liabilities: |
||||||||
Accounts and other receivables |
(4,674 | ) | (1,485 | ) | ||||
Student notes |
4 | 17 | ||||||
Bookstore inventory |
(83 | ) | (46 | ) | ||||
Prepaid and other current assets |
10 | (5 | ) | |||||
Condominium inventories |
166 | 149 | ||||||
Accounts payable |
1,476 | (943 | ) | |||||
Deferred income |
132 | 256 | ||||||
Other long-term liabilities |
42 | 52 | ||||||
Income tax receivable/payable |
1,003 | 1,097 | ||||||
Accrued and other liabilities |
(921 | ) | (156 | ) | ||||
Net cash flows provided by operating activities |
4,168 | 1,606 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchases of investments |
(175 | ) | (1,848 | ) | ||||
Proceeds from sale of investments |
1,319 | 180 | ||||||
Purchases of property and equipment |
(943 | ) | (321 | ) | ||||
Proceeds from sale of property and equipment |
0 | 204 | ||||||
Course development |
(155 | ) | (96 | ) | ||||
Construction of development property with line of credit
borrowings |
0 | (412 | ) | |||||
Other |
7 | 0 | ||||||
Net cash flows provided by (used in) investing
activities |
53 | (2,293 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Borrowings on lines of credit |
0 | 2,190 | ||||||
Repayments of lines of credit |
(170 | ) | (2,405 | ) | ||||
Increase in outstanding checks in excess of book balance |
0 | 53 | ||||||
Borrowings of long-term debt |
44 | 0 | ||||||
Repayments of long-term debt |
(2,299 | ) | (1,474 | ) | ||||
Construction of development property with line of credit borrowings |
0 | 412 | ||||||
Contributed capital by non-controlling interest members |
685 | 0 | ||||||
Cash received in reverse merger |
22,092 | 0 | ||||||
Cash paid for merger costs |
(1,444 | ) | 0 | |||||
Net cash flows provided by (used in) financing
activities |
18,908 | (1,224 | ) | |||||
-8-
November 30, | November 30, | |||||||
2009 | 2008 | |||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
$ | 23,129 | $ | (1,911 | ) | |||
CASH AND CASH EQUIVALENTS Beginning of year |
3,508 | 2,108 | ||||||
CASH AND CASH EQUIVALENTS End of period |
$ | 26,637 | $ | 197 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||
Cash paid for interest net of $-0- and $38 capitalized
during the six months ended November 30, 2009 and
November 30, 2008,
respectively |
$ | 316 | $ | 447 | ||||
Cash paid (received) for income taxes |
$ | 2,727 | $ | (567 | ) | |||
Dividends declared at November 30, 2009 and November 30, 2008 |
$ | 1,896 | $ | |
(Concluded) | ||
The accompanying notes are an integral part of these condensed consolidated financial statements. |
-9-
1. | BASIS OF PRESENTATION | |
The condensed financial statements are presented on a consolidated basis. The accompanying financial statements include the accounts of National American University Holdings, Inc. (the Company), its subsidiary, Dlorah, Inc. (Dlorah), and its divisions, National American University (NAU), and Fairway Hills. The accompanying unaudited condensed consolidated financial statements have been prepared on a basis substantially consistent with the Companys audited financial statements. These financial statements are condensed and do not contain all disclosures required in annual financial statements. Accordingly, these financial statements should be read in conjunction with the Companys annual financial statements which were filed with the Companys Current Report on Form 8-K on November 30, 2009. Furthermore, the results of operations and cash flows for the six month periods ended November 30, 2008, and November 30, 2009, are not necessarily indicative of the results that may be expected for the full year. These financial statements include consideration of subsequent events through January 12, 2010. All intercompany transactions and balances have been eliminated. | ||
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States (GAAP). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to the Condensed Consolidated Financial Statements | ||
Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. On an ongoing basis, the Company evaluates the estimates and assumptions, including those related to revenue recognition, bad debts, fixed assets, income taxes, benefit plans, and certain accruals. Actual results could differ from those estimates. |
2. | NATURE OF OPERATIONS | |
The Company was incorporated in the State of Delaware on April 10, 2007 as Camden Learning Corporation (Camden). Camden was a special purpose acquisition company formed to serve as a vehicle for the acquisition of an operating business. On November 23, 2009, pursuant to an Agreement and Plan of Reorganization, Dlorah, became a wholly-owned subsidiary of the Company. The stockholders of Dlorah, received approximately 77% of the equity of the Company. As more fully described in Note 12, the transaction has been accounted for as a reverse merger accompanied by a recapitalization of the Company. The Company is now publicly traded, and is listed on the Over-the-Counter Bulletin Board. | ||
Dlorah is a South Dakota corporation operating NAU. NAU operates 15 campuses within the states of South Dakota, Colorado, Kansas, Missouri, Minnesota, New Mexico, and Texas, including its headquarters in Rapid City, South Dakota. A substantial portion of NAUs academic income is dependent upon federal student financial aid programs, company tuition |
-10-
assistance, distance learning programs, and contracts to provide instruction and course materials to other educational institutions. To maintain eligibility for financial aid programs, NAU must comply with Department of Education requirements, which include, among other items, the maintenance of certain financial ratios. | ||
The Company, through its Fairway Hills division, also operates luxury apartment units and develops real estate in the Rapid City, South Dakota area. | ||
Approximately 92% and 91% of the Companys total revenues for the six months ended November 30, 2009 and November 30, 2008, respectively, were derived from NAUs academic income. Approximately 92% of the Companys total revenue for the three months ended November 30, 2009 and November 30, 2008 were derived from NAUs academic income. | ||
3. | EARNINGS PER SHARE | |
Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per share reflect the potential dilution that could occur assuming vesting, conversion or exercise of all dilutive unexercised warrants and restricted stock. As described in Note 6, the Company has two classes of common stock outstanding as of November 30, 2009 with different dividend rates. Therefore, the Company utilized the two class method to calculate and report earnings per share for each class of stock for 2009. During 2008, only one class of common stock was outstanding and there were no dilutive securities outstanding. |
For the six months | For the three months | |||||||
ended November 30, | ended November 30, | |||||||
2009 | 2009 | |||||||
Weighted average shares outstanding used to compute basic net income per share |
227,589 | 457,680 | ||||||
Incremental shares issuable upon the assumed exercise of warrants |
35,199 | 70,785 | ||||||
Shares used to compute diluted net income per share |
262,788 | 528,465 | ||||||
4. | RECENTLY ADOPTED AND NEW ACCOUNTING PRONOUNCEMENTS | |
In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements (codified in FASB ASC Topic 820, Fair Value Measurements and Disclosures). This standard establishes a framework for measuring fair value. It does not require any new fair value measurements, but does require expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. The Company adopted this standard as of June 1, 2008. It did not have a material impact on the consolidated financial statement. In February 2008, the FASB issued FASB Staff Position (FSP) FAS No. 157-2, Effective Date of FASB Statement No. 157 (codified in FASB ASC Topic 820). This standard delayed the effective date for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. The implementation of this standard for financial assets and financial liabilities did not have a material impact on the Companys consolidated financial statement. The additional |
-11-
disclosures required by this standard are included in Note 11 fair value measurements. | ||
In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115 (codified in FASB ASC Topic 825, Financial Instruments). This standard expands the use of fair value accounting but does not affect existing standards that require assets or liabilities to be carried at fair value. Under this standard, a company may elect to use fair value to measure various assets and liabilities, including accounts receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees, and issued debt. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. The Company adopted this standard as of June 1, 2008; however, has elected not to use the fair value option. As a result, there is no impact on the consolidated financial statement. | ||
In December 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51 (codified in FASB ASC Topic 810). This standard requires that a noncontrolling interest in a consolidated entity be reported in equity, but separate from the parent companys equity, in the financial statements. This standard was effective for fiscal years beginning on or after December 15, 2008. A noncontrolling interest exists in the Partnership. The Company adopted this guidance for the Companys fiscal year that began on June 1, 2009, which required the Company to record the noncontrolling interest within equity. | ||
In December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business Combinations (codified in FASB ASC Topic 805, Business Combinations). This standard significantly changes the accounting for business combinations in a number of areas, including the treatment of contingent consideration, preacquisition contingencies, transaction costs, in-process research and development and restructuring costs. In addition, under this standard changes in an acquired entitys deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. This standard is effective for fiscal years beginning after December 15, 2008. The Company has adopted this standard, and is applying the accounting treatment for business combinations on a prospective basis. | ||
On December 11, 2008, the FASB issued FSP FAS No. 140-4 and FIN No. 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities (both codified in FASB ASC Topic 860, Transfers and Servicing). This standard requires additional disclosures by public entities with continuing involvement in transfers of financial assets to special-purpose entities and with variable interests in VIEs, including sponsors that have a variable interest in a VIE. This standard became effective for the first interim or annual reporting period that ends after December 15, 2008. The implementation of this standard did not have a material impact on the Companys consolidated financial statement. | ||
In June 2009, the FASB issued FASB Statement No. 165, Subsequent Events (codified in FASB ASC Topic 855, Subsequent Events). This standard established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued. This standard is effective for financial periods ending after June 30, 2009. The Company has adopted this standard, but it |
-12-
did not have a material effect on the Companys consolidated balance sheet or required financial statement disclosures. | ||
In June 2009, the FASB issued FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R) (codified in FASB ASC Topic 810). This standard is intended to improve financial reporting by enterprises involved with VIEs. This statement nullifies FSP FAS No. 140-4 and FIN No. 46(R)-8 (codified in FASB ASC Topic 860). This standard is effective as of the beginning of each reporting entitys first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. This will be effective for the Companys fiscal year beginning June 1, 2010. The Company is still evaluating the impact of this statement on its consolidated financial statement. | ||
In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (both codified in FASB ASC Topic 320, Investments), which provides additional guidance related to the disclosure of impairment losses on securities and the accounting for impairment losses on debt securities. These standards do not amend existing guidance related to other-than-temporary impairments of equity securities. These standards are effective for fiscal years and interim periods ended after June 15, 2009, and was effective for the Company in the first quarter of the fiscal year beginning June 1, 2009. The implementation of this standard did not have a material effect on its consolidated balance sheet or required financial statement disclosures. |
-13-
5. | LONG-TERM DEBT | |
At November 30, 2009, long-term debt consisted of the following: | ||
Notes Payable |
Note payable to Great Western Bank; matures February 2014;
requires monthly payments of $42, including principal and interest;
accrues interest at 6.45%; secured by real estate and personally
guaranteed by a Company stockholder. |
$ | 3,448 | ||
Note payable to Wells Fargo Bank; matures June 1, 2011; requires
monthly payments of $30; accrues interest at 6%; secured by cash,
savings, and investment accounts held at Wells Fargo Bank. |
551 | |||
Note payable to VFS Financing, Inc.; matures April 2014; requires an
initial monthly payment of $19 and monthly payments of $15
thereafter, including principal and interest; accrues interest at a fixed
rate of 6.89% per annum; secured by airplane, paid in full
in December 2009 and classifed as current at November
30, 2009. |
686 | |||
Note payable to Great Western Bank; matures March 26, 2012;
requires monthly payments of $19, including principal and interest;
accrues interest at a variable rate (a) (3.25% at November 30, 2009);
secured by substantially all assets of the University and personally
guaranteed by a Company stockholder. |
522 | |||
Note payable to Great Western Bank; matures November 28, 2012;
requires monthly payments of $13, including principal and interest;
accrues interest at a variable rate (a) (4.00% at November 30, 2009);
secured by substantially all assets of the University and personally
guaranteed by a Company stockholder. |
426 | |||
Note payable to Great Western Bank; matures August 17, 2011;
requires monthly payments of $15, including principal and interest;
accrues interest at a variable rate (a) (3.25% at November 30, 2009);
secured by substantially all assets of the University and personally
guaranteed by a Company stockholder. |
262 |
-14-
Notes Payable |
Note payable to Great Western Bank; matures on May 18, 2011;
requires monthly payments of $13, including principal and interest;
accrues interest at a variable rate (a) (3.25% at November 30, 2009);
secured by substantially all assets of the University and personally
guaranteed by a Company stockholder. |
$ | 193 | ||
Note payable to Great Western Bank; matures on May 18, 2010;
requires monthly payments of $16, including principal and interest;
accrues interest at a variable rate (a) (3.25% at November 30, 2009);
secured by substantially all assets of the University and personally
guaranteed by a Company stockholder. |
81 | |||
Note payable to Great Western Bank; matures on December 8, 2010;
requires monthly payments of $10, including principal and interest;
accrues interest at a variable rate (a) (4.00% at November 30, 2009);
secured by substantially all assets of the University and personally
guaranteed by a Company stockholder. |
118 | |||
Note payable to Great Western Bank; matures on December 22, 2009;
requires monthly payments of $14, including principal and interest;
accrues interest at a variable rate (a) (3.25% at November 30, 2009);
secured by substantially all assets of the University and personally
guaranteed by a Company stockholder. |
17 | |||
Note payable to Great Western Bank; matures on September 25, 2010;
requires monthly payments of $9, including principal and interest;
accrues interest at a variable rate (a) (3.25% at November 30, 2009);
secured by substantially all assets of the University and personally
guaranteed by a Company stockholder. |
83 | |||
Note payable to Great Western Bank; matures on June 2, 2010;
requires monthly payments of $2, including principal and interest;
accrues interest at a variable rate (a) (3.25% at November 30, 2009);
secured by substantially all assets of the University and personally
guaranteed by a Company stockholder. |
12 | |||
Total long-term debt |
6,399 | |||
Less current portion |
2,322 | |||
Long-term portion |
$ | 4,077 | ||
-15-
(a) | Variable rates are based on prime rate plus an adjustment, which is specific to each note payable agreement. |
Future maturities of long-term debt for the five years ending November 30 are as follows: |
2010 |
$ | 2,322 | ||
2011 |
1,035 | |||
2012 |
505 | |||
2013 |
345 | |||
2014 |
2,192 | |||
Thereafter |
0 | |||
$ | 6,399 | |||
The Company was in compliance with all debt covenants at November 30, 2009. |
6. | STOCKHOLDERS EQUITY | |
The authorized capital stock for the Company is 51,100,000 shares, consisting of (i) 50,000,000 shares of Common Stock, par value $0.0001, (ii) 100,000 shares of Class A Common Stock, par value $0.0001, and (iii) 1,000,000 shares of Preferred Stock, par value $0.0001. | ||
Of the authorized shares, the following were issued and outstanding as of November 30, 2009: (i) 6,031,105 shares of Common Stock and (ii) 100,000 shares of Class A Common Stock (which are convertible into Common Stock at a rate of 157.3 shares of Common Stock for each share of Class A Common Stock). No shares of Preferred Stock were outstanding as of November 30, 2009. | ||
The shares of Common Stock outstanding include the 250,000 shares of restricted Common Stock issued to the former Dlorah stockholders, and the 575,000 shares of restricted Common Stock issued to Camden Learning LLC, in connection with the reverse merger. The restriction lapses when the Companys stock trades above $8.00 for 60 consecutive days. Should the restriction not lapse by November 23, 2014, the restricted shares will be canceled. | ||
Also, in connection with the reverse merger, the former Dlorah stockholders were issued, in the aggregate, warrants to purchase up to 2,800,000 shares of Common Stock at $5.50 per share that will expire if not converted by November 23, 2011. These warrants contain a cashless exercise feature. These warrants remain outstanding and have not been exercised as of November 30, 2009. | ||
At November 30, 2009, the Companys outstanding and issued shares consisted of (i) 6,031,105 shares of Common Stock, which includes 825,000 restricted shares (250,000 referred to above and 575,000 with the same restriction), (ii) 100,000 shares of Class A Stock, (iii) -0- shares of Preferred Stock, and (iv) 2,800,000 Warrants. Future equity transactions may include exercise of warrants or issuances of stock, which could result in substantial dilution of existing stockholders. | ||
The holders of Class A Common Stock are entitled to a quarterly dividend equal to $0.11 per quarter (for a total of $0.44 per year) per share of the Common Stock into which such Class A Common Stock is convertible, paid when and if declared by the Board of Directors. If a dividend is paid on the Class A Common Stock, there will also be a dividend paid to holders |
-16-
of Common Stock equal to one-fourth of the per share amount of any Class A Common Stock dividend paid. A dividend totaling $1,896 was declared on November 30, 2009, and is scheduled to be paid in January 2010. |
7. | INCOME TAXES | |
The effective tax rate for the six months ended November 30, 2009 and November 30, 2008, was 41.1% and 35.7%, respectively. The effective tax rate for the three months ended November 30, 2009 and November 30, 2008, was 40.4% and 37.3%. |
8. | COMMITMENTS AND CONTINGENCIES | |
From time to time, the Company is a party to various claims, proceedings, or lawsuits relating to the conduct of its business. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims, or proceedings may be disposed of unfavorably to the Company, management believes, based on facts presently known, that the outcome of such legal proceedings and claims will not have a material adverse effect on the Companys unaudited condensed consolidated financial position, cash flows, or future results of operations. | ||
The Company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. On an ongoing basis, the Company evaluates the results of internal compliance monitoring activities and those of applicable regulatory agencies and, when appropriate, records liabilities to provide for the estimated costs of any necessary remediation. There are no current outstanding actions, but the Company cannot predict the outcome of future program reviews and any unfavorable outcomes could have a material adverse effect on the results of unaudited condensed consolidated statements of operations, cash flows, and financial position. |
9. | RELATED-PARTY TRANSACTIONS | |
The Company is required under 34 CFR668.23(d) to disclose all related-party transactions (as defined within the regulation) regardless of materiality to the financial statements. As described in Note 5, certain notes payable are personally guaranteed by a stockholder of the Company and notes payable are due to stockholders and related parties at November 30, 2009 and May 31, 2009, of $0 and $1,147, respectively. |
10. | CONDOMINIUM PROJECT | |
During 2008, the Company broke ground on a new building that will house 24 condominiums to be sold to the general public (Vista Park). The Vista Park project was funded by a construction line of credit and was completed in 2009. In July 2008, the Company sold one unit within the Vista Park condominium project for approximately $250. In addition, two units were sold for $230 and $225 in December 2008 and April 2009, respectively. The Company sold one unit in September 2009 for approximately $238. Subsequent to November 30, 2009, a unit was sold for approximately $231. |
-17-
11. | FAIR VALUE MEASUREMENTS | |
The Company adopted a new accounting standard that defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Following is a description of each category in the fair value hierarchy and the financial assets and liabilities of the Company that are included in each category at November 30, 2009 and May 31, 2009: | ||
Level 1 Quoted prices in active markets for identical assets or liabilities. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted market prices. | ||
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The type of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using observable inputs. | ||
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The type of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation. The Company does not have any Level 3 assets or liabilities. | ||
In accordance with the fair value hierarchy, the following table shows the fair value as of November 30, 2009 and May 31, 2009, of those financial assets that are measured at fair value on a recurring basis, according to the valuation techniques the Company used to determine their fair market value. |
Quoted | ||||||||||||||||
Prices in | Other | |||||||||||||||
Active | Observable | Unobserva | ||||||||||||||
Markets | Inputs | ble Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Fair Value | |||||||||||||
November 30, 2009 |
||||||||||||||||
Investments (cds, US treasury bills,
money market accounts) |
$ | 2,828 | $ | 245 | $ | | $ | 3,073 | ||||||||
Restricted Investments (checking account) |
209 | | | 209 | ||||||||||||
Total assets at fair value |
$ | 3,037 | $ | 245 | $ | | $ | 3,282 | ||||||||
May 31, 2009 |
||||||||||||||||
Investments (cds, US treasury bills,
money market accounts) |
$ | 4,299 | $ | 231 | $ | | $ | 4,530 | ||||||||
Total assets at fair value |
$ | 4,299 | $ | 231 | $ | | $ | 4,530 | ||||||||
-18-
12. | COMPLETED MERGER | |
In August 2009, Camden entered into an Agreement and Plan of Reorganization, under which Camden agreed to purchase all of the ownership interests in Dlorah for cash and stock. | ||
In connection with the approval of the transaction, Camdens stockholders adopted an amendment to Camdens amended and restated articles of incorporation (i) to change Camdens corporate name to National American University Holdings, Inc., (ii) to create a new class of common stock to be designated as Class A Common Stock, par value $0.0001 per share (the Class A Stock), (iii) to increase the authorized capital stock of Camden from 21,000,000 shares consisting of 20,000,000 shares of common stock, par value $0.0001 per share (the Common Stock), and 1,000,000 shares of preferred stock, par value $0.0001 per share (the Preferred Stock), to 51,100,000 shares, consisting of 50,000,000 shares of Common Stock, 100,000 shares of Class A Stock, and 1,000,000 shares of Preferred Stock, and (iv) to remove the provisions related to Camdens status as a blank check company, including, among other things, the classification of the board of directors, and to make Camdens corporate existence perpetual. Furthermore, Camdens stockholders adopted the 2009 Stock Option and Compensation Plan (the Incentive Plan) pursuant to which Camden reserved 1,300,000 shares of Common Stock for issuance pursuant to the Incentive Plan. | ||
The acquisition closed on November 23, 2009, and on that date, Dlorah became a wholly owned subsidiary of the Company. The stockholders of Dlorah received shares and warrants representing approximately 77% of the issued capital shares of the Company. The acquisition was accounted for as a reverse merger accompanied by a recapitalization of the Company. Under this accounting method, Dlorah is considered the acquirer for accounting purposes because it obtained effective control of the Company as a result of the acquisition. This determination was primarily based on the following facts: Dlorahs retention of a significant voting interest in the Company; Dlorahs appointment of a majority of the members of the Companys initial board of directors; Dlorahs operations comprising the ongoing operations of the Company; and Dlorahs senior management serving as the senior management of the Company. Under this method of accounting, the recognition and measurement provisions of the accounting guidance for business combinations do not apply and therefore, the Company did not recognize goodwill or other intangible assets. Instead, the acquisition has been treated as the equivalent of Dlorah issuing stock for the net monetary assets of the Company, primarily cash, which are stated at their carrying value. Because of the reverse merger, the historical results represent those of Dlorah. | ||
At the time of the merger, all the issued and outstanding equity interests of Dlorah were automatically converted into the right to receive the aggregate of (i) 100,000 shares of Class A Stock, automatically convertible after two years (or earlier if elected by the stockholders) into 15,730,000 shares of the Common Stock at a ratio of 157.3 shares of Common Stock for every 1 share of Class A Stock, (ii) 2,800,000 newly issued common stock purchase warrants |
-19-
(the Warrants at a purchase price of $5.50 per share, and (iii) 250,000 shares of Restricted Common Stock that are not freely tradable until such time as the Common Stock trades at or above $8.00 per share for any sixty consecutive trading day period, provided that such shares shall be forfeited on the fifth anniversary of the date of issuance if such restriction has not been satisfied by then. | ||
Additionally, the Company has entered into an employment agreement with its Chairman of the Board of Directors through December 2011. The agreement requires, among other things, an annual incentive payment of 10% of the Companys annual income as defined in the agreement, which is paid out annually. Effective November 23, 2009, this changed to 7% of the Companys annual income. As of November 30, 2009, the Company has recorded a liability of $1,562, which is included in accrued and other liabilities in the accompanying consolidated balance sheet. Furthermore, the agreement provides for a deferred compensation payment payable upon retirement or death equal to one years salary. The liability totals $158 at November 30, 2009, and is included in other long-term liabilities in the accompanying consolidated balance sheet. |
13. | SEGMENT REPORTING | |
Operating segments are defined as business areas or lines of an enterprise about which financial information is available and evaluated on a regular basis by the chief operating decision makers, or decision-making groups, in deciding how to allocate capital and other resources to such lines of business. | ||
The Company operates two operating and reportable segments: National American University (NAU) and other. These operating segments are divisions of the Company for which separate financial information is available and evaluated regularly by executive management in deciding how to allocate resources and in assessing performance. | ||
General administrative costs of the Company are allocated to specific divisions of the Company. | ||
The majority of the Companys revenue is derived from the NAU division, which provides undergraduate and graduate education programs. NAU derives its revenue primarily from student tuition. The other division operates multiple apartment and condominium complexes and derives its revenues primarily from condominium sales and rental income (in thousands). |
-20-
Six Months Ended November 30, 2009 | Six Months Ended November 30, 2008 | |||||||||||||||||||||||
Consolidated | Consolidated | |||||||||||||||||||||||
NAU | Other | Total | NAU | Other | Total | |||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Academic revenue |
$ | 37,336 | $ | 0 | $ | 37,336 | $ | 25,103 | $ | 0 | $ | 25,103 | ||||||||||||
Auxiliary revenue |
2,644 | 0 | 2,644 | 1,918 | 0 | 1,918 | ||||||||||||||||||
Rental income apartments |
0 | 483 | 483 | 0 | 478 | 478 | ||||||||||||||||||
Condominium sales |
0 | 238 | 238 | 0 | 211 | 211 | ||||||||||||||||||
Total revenue |
39,980 | 721 | 40,701 | 27,021 | 689 | 27,710 | ||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Educational services and facilities |
7,385 | 0 | 7,385 | 5,980 | 0 | 5,980 | ||||||||||||||||||
Selling, general and administrative |
22,213 | 1,350 | 23,563 | 18,213 | 920 | 19,133 | ||||||||||||||||||
Auxiliary expense |
1,036 | 0 | 1,036 | 789 | 0 | 789 | ||||||||||||||||||
Cost of condominium sales |
0 | 166 | 166 | 0 | 176 | 176 | ||||||||||||||||||
Total operating expenses |
30,634 | 1,516 | 32,150 | 24,982 | 1,096 | 26,078 | ||||||||||||||||||
Income (loss) from operations |
9,346 | (795 | ) | 8,551 | 2,039 | (407 | ) | 1,632 | ||||||||||||||||
Other income (expense): |
||||||||||||||||||||||||
Interest income |
119 | 0 | 119 | 129 | 0 | 129 | ||||||||||||||||||
Interest expense |
(56 | ) | (259 | ) | (315 | ) | (222 | ) | (216 | ) | (438 | ) | ||||||||||||
Gain on disposal of property and
equipment |
5 | 113 | 118 | |||||||||||||||||||||
Other income net |
0 | 48 | 48 | 0 | 45 | 45 | ||||||||||||||||||
Total other expense |
63 | (211 | ) | (148 | ) | (88 | ) | (58 | ) | (146 | ) | |||||||||||||
Income (loss) before taxes |
$ | 9,409 | $ | (1,006 | ) | $ | 8,403 | $ | 1,951 | $ | (465 | ) | $ | 1,486 | ||||||||||
Total assets |
$ | 43,956 | $ | 10,735 | $ | 54,691 | ||||||||||||||||||
Expenditures for long-lived assets |
$ | (918 | ) | $ | (25 | ) | $ | (943 | ) | $ | (305 | ) | $ | (16 | ) | $ | (321 | ) | ||||||
Depreciation and amortization |
$ | 858 | $ | 245 | $ | 1,103 | $ | 897 | $ | 173 | $ | 1,070 | ||||||||||||
-21-
Three Months Ended November 30, 2009 | Three Months Ended November 30, 2008 | |||||||||||||||||||||||
Consolidated | Consolidated | |||||||||||||||||||||||
NAU | Other | Total | NAU | Other | Total | |||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Academic revenue |
$ | 21,463 | $ | 0 | $ | 21,463 | $ | 14,321 | $ | 0 | $ | 14,321 | ||||||||||||
Auxiliary revenue |
1,504 | 0 | 1,504 | 1,032 | 0 | 1,032 | ||||||||||||||||||
Rental income apartments |
0 | 232 | 232 | 0 | 240 | 240 | ||||||||||||||||||
Condominium sales |
0 | 238 | 238 | 0 | 0 | 0 | ||||||||||||||||||
Total revenue |
22,967 | 470 | 23,437 | 15,353 | 240 | 15,593 | ||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Educational services and facilities |
3,978 | 0 | 3,978 | 3,252 | 0 | 3,252 | ||||||||||||||||||
Selling, general and administrative |
11,417 | 967 | 12,384 | 9,215 | 530 | 9,745 | ||||||||||||||||||
Auxiliary expense |
610 | 0 | 610 | 431 | 0 | 431 | ||||||||||||||||||
Cost of condominium sales |
0 | 166 | 166 | 0 | 0 | |||||||||||||||||||
Total operating expenses |
16,005 | 1,133 | 17,138 | 12,898 | 530 | 13,428 | ||||||||||||||||||
Income (loss) from operations |
6,962 | (663 | ) | 6,299 | 2,455 | (290 | ) | 2,165 | ||||||||||||||||
Other income (expense): |
||||||||||||||||||||||||
Interest income |
33 | 0 | 33 | 53 | 0 | 53 | ||||||||||||||||||
Interest expense |
(23 | ) | (135 | ) | (158 | ) | (98 | ) | (107 | ) | (205 | ) | ||||||||||||
Other income net |
0 | 24 | 24 | (4 | ) | 23 | 19 | |||||||||||||||||
Total other expense |
10 | (111 | ) | (101 | ) | (49 | ) | (84 | ) | (133 | ) | |||||||||||||
Income (loss) before taxes |
$ | 6,972 | $ | (774 | ) | $ | 6,198 | $ | 2,406 | $ | (374 | ) | $ | 2,032 | ||||||||||
Total assets |
$ | 43,956 | $ | 10,735 | $ | 54,691 | ||||||||||||||||||
Expenditures for long-lived assets |
$ | (542 | ) | $ | (24 | ) | $ | (566 | ) | $ | (224 | ) | $ | (2 | ) | $ | (226 | ) | ||||||
Depreciation and amortization |
$ | 434 | $ | 122 | $ | 556 | $ | 421 | $ | 86 | $ | 507 | ||||||||||||
-22-
3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | |||||||||||||
November 30, | November 30, | November 30, | November 30, | |||||||||||||
In percentages | In percentages | In percentages | In percentages | |||||||||||||
2009 | 2009 | 2008 | 2008 | |||||||||||||
Total revenue |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Operating expenses |
||||||||||||||||
Cost of Educational
Services |
17.0 | 18.1 | 20.9 | 21.6 | ||||||||||||
Selling, General,
and Administrative |
52.8 | 57.9 | 62.5 | 69.0 | ||||||||||||
Auxiliary Expense |
2.6 | 2.5 | 2.8 | 2.8 | ||||||||||||
Cost of
Condominium Sales |
0.7 | 0.4 | 0.0 | 0.6 | ||||||||||||
Total operating expenses |
73.1 | 79.0 | 86.1 | 94.1 | ||||||||||||
Operating income (loss) |
26.9 | 21.0 | 13.9 | 5.9 | ||||||||||||
Interest expense |
(0.7 | ) | (0.8 | ) | (1.3 | ) | (1.6 | ) |
-23-
3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | |||||||||||||
November 30, | November 30, | November 30, | November 30, | |||||||||||||
In percentages | In percentages | In percentages | In percentages | |||||||||||||
2009 | 2009 | 2008 | 2008 | |||||||||||||
Gain on disposition of
property and equipment |
0.0 | 0.0 | 0.0 | 0.4 | ||||||||||||
Interest income |
0.1 | 0.3 | 0.3 | 0.5 | ||||||||||||
Other Income Net |
0.1 | 0.1 | 0.1 | 0.2 | ||||||||||||
Income (loss) before income
taxes and noncontrolling
interest |
26.4 | 20.6 | 13.0 | 5.4 | ||||||||||||
Income tax (expense)
benefit |
(10.7 | ) | (8.5 | ) | (4.9 | ) | (1.9 | ) | ||||||||
Net (Income) Loss
attributable to
non-controlling interest |
0.0 | 0.0 | 0.2 | (0.1 | ) | |||||||||||
Net income (loss)
attributable to NAU
Holdings, Inc. |
15.8 | 12.2 | 8.3 | 3.3 |
-24-
-25-
-26-
-27-
-28-
3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | |||||||||||||
November 30, | November 30, | November 30, | November 30, | |||||||||||||
In percentages | In percentages | In percentages | In percentages | |||||||||||||
2009 | 2009 | 2008 | 2008 | |||||||||||||
Total revenue |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Operating expenses |
||||||||||||||||
Cost of Educational
Services |
17.3 | 18.5 | 21.2 | 22.1 | ||||||||||||
Selling, General,
and Administrative |
49.7 | 55.6 | 60.0 | 67.4 | ||||||||||||
Auxiliary Expense |
2.7 | 2.6 | 2.8 | 2.9 | ||||||||||||
Total operating expenses |
69.7 | 76.6 | 84.0 | 92.5 | ||||||||||||
Operating income (loss) |
30.3 | 23.4 | 16.0 | 7.5 | ||||||||||||
Interest expense |
(0.1 | ) | (0.1 | ) | (0.6 | ) | (0.8 | ) | ||||||||
Gain on disposition of
prop and equip |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Interest income |
0.1 | 0.3 | 0.3 | 0.5 | ||||||||||||
Income (loss) before income
taxes and noncontrolling
interest |
30.4 | 23.5 | 15.7 | 7.2 |
-29-
-30-
-31-
-32-
3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | |||||||||||||
November 30, | November 30, | November 30, | November 30, | |||||||||||||
In percentages | In percentages | In percentages | In percentages | |||||||||||||
2009 | 2009 | 2008 | 2008 | |||||||||||||
Total revenue |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Operating expenses |
||||||||||||||||
Cost of Educational Services |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Selling, General, and
Administrative |
205.7 | 187.2 | 220.8 | 133.5 | ||||||||||||
Auxiliary Expense |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Cost of Condo Sales |
35.3 | 23.0 | 0.0 | 25.5 | ||||||||||||
Total operating expenses |
241.1 | 210.3 | 220.8 | 159.1 | ||||||||||||
Operating income (loss) |
(-141.1 | ) | (110.3 | ) | (120.8 | ) | (59.1 | ) | ||||||||
Interest expense |
(28.7 | ) | (35.9 | ) | (44.6 | ) | (31.3 | ) | ||||||||
Gain on disposition of
prop and equip |
0.0 | 0.0 | 0.0 | 16.4 | ||||||||||||
Interest income |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Other Income |
5.1 | 6.7 | 9.6 | 6.5 | ||||||||||||
Income (loss) before income
taxes and non-controlling
interest |
(164.7 | ) | (139.5 | ) | (155.8 | ) | (67.5 | ) |
-33-
-34-
-35-
-36-
From time to time, the Company is a party to various claims, proceedings, or lawsuits relating to the conduct of its business. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims, or proceedings may be disposed of unfavorably to the Company, management believes, based on facts presently known, that the outcome of such legal proceedings and claims will not have a material adverse effect on the Companys unaudited condensed consolidated financial position, cash flows, or future results of operations. |
The Company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. On an ongoing basis, the Company evaluates the results of internal compliance monitoring activities and those of applicable regulatory agencies and, when appropriate, records liabilities to provide for the estimated costs of any necessary remediation. There are no current outstanding actions, but the Company cannot predict the outcome of future program reviews and any unfavorable outcomes could have a material adverse effect on the results of unaudited condensed consolidated statements of operations, cash flows, and financial position. |
The condensed financial statements are presented on a consolidated basis. The accompanying financial statements include the accounts of the Company, its ssubsidiary, Dlorah, and its divisions, NAU and Fairway Hills. The accompanying unaudited consolidated financial statements have been prepared on a basis substantially consistent with the Companys audited financial statements. The financial statements are condensed and do not contain all disclosures required in annual financial statements. Accordingly, financial statements should be read in conjunction with the Companys annual financial statements which were filed with the Companys Current Report on Form 8-K on November 30, 2009. Furthermore, the results of operations and cash flows for the six month periods ended November 30, 2008, and November 30, 2009, are not necessarily indicative of the results that may be expected for the full year. All intercompany transactions and balances have been eliminated. |
Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. On an ongoing basis, the Company evaluates the estimates and assumptions, including those related to revenue recognition, bad debts, fixed assets, income taxes, benefit plans, and certain accruals. Actual results could differ from those estimates. |
In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements (codified in FASB ASC Topic 820, Fair Value Measurements and Disclosures). This standard establishes a framework for measuring fair value. It does not require any new fair value measurements, but does require expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. The Company adopted this standard as of June 1, 2008. It did not have a material impact on the consolidated financial statement. In February 2008, the FASB issued FASB Staff Position (FSP) FAS No. 157-2, Effective Date of FASB Statement No. 157 (codified in FASB ASC Topic 820). This standard delayed the effective date for all nonfinancial assets and |
-37-
nonfinancial liabilities to fiscal years beginning after November 15, 2008. The implementation of this standard for financial assets and financial liabilities did not have a material impact on the Companys consolidated financial statement. The additional disclosures required by this standard are included in Note 11 fair value measurements. |
In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115 (codified in FASB ASC Topic 825, Financial Instruments). This standard expands the use of fair value accounting but does not affect existing standards that require assets or liabilities to be carried at fair value. Under this standard, a company may elect to use fair value to measure various assets and liabilities, including accounts receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees, and issued debt. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. The Company adopted this standard as of June 1, 2008; however, has elected not to use the fair value option. As a result, there is no impact on the consolidated financial statement. |
In December 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51 (codified in FASB ASC Topic 810). This standard requires that a noncontrolling interest in a consolidated entity be reported in equity, but separate from the parent companys equity, in the financial statements. This standard was effective for fiscal years beginning on or after December 15, 2008. A noncontrolling interest exists in the Partnership. The Company adopted this guidance for our year that began on June 1, 2009, which required the Company to record the noncontrolling interest within equity. |
In December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business Combinations (codified in FASB ASC Topic 805, Business Combinations). This standard significantly changes the accounting for business combinations in a number of areas, including the treatment of contingent consideration, preacquisition contingencies, transaction costs, in-process research and development and restructuring costs. In addition, under this standard changes in an acquired entitys deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. This standard is effective for fiscal years beginning after December 15, 2008. The Company has adopted this standard, and is applying the accounting treatment for business combinations on a prospective basis. |
On December 11, 2008, the FASB issued FSP FAS No. 140-4 and FIN No. 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities (both codified in FASB ASC Topic 860, Transfers and Servicing). This standard requires additional disclosures by public entities with continuing involvement in transfers of financial assets to special-purpose entities and with variable interests in VIEs, including sponsors that have a variable interest in a VIE. This standard became effective for the first interim or annual reporting period that ends after December 15, 2008. The implementation of this standard did not have a material impact on the Companys consolidated financial statement. |
In June 2009, the FASB issued FASB Statement No. 165, Subsequent Events (codified in FASB ASC Topic 855, Subsequent Events). This standard established general standards of |
-38-
accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued. This standard is effective for financial periods ending after June 30, 2009. The Company has adopted this standard, but it did not have a material effect on the Companys consolidated balance sheet or required financial statement disclosures. |
In June 2009, the FASB issued FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R) (codified in FASB ASC Topic 810). This standard is intended to improve financial reporting by enterprises involved with VIEs. This statement nullifies FSP FAS No. 140-4 and FIN No. 46(R)-8 (codified in FASB ASC Topic 860). This standard is effective as of the beginning of each reporting entitys first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. This will be effective for the Companys fiscal year beginning June 1, 2010. The Company is still evaluating the impact of this statement on its consolidated financial statement. |
In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (both codified in FASB ASC Topic 320, Investments), which provides additional guidance related to the disclosure of impairment losses on securities and the accounting for impairment losses on debt securities. These standards do not amend existing guidance related to other-than-temporary impairments of equity securities. These standards are effective for fiscal years and interim periods ended after June 15, 2009, and was effective for the Company in the first quarter of the fiscal year beginning June 1, 2009. The implementation of this standard did not have a material effect on its consolidated balance sheet or required financial statement disclosures. |
-39-
-40-
Proposal | Voted for | Voted Against | Votes Abstained | |||||||||
1. The merger proposal |
3,917,367 | 1,887,918 | 300,000 | |||||||||
2. Proposal to change
name of the Company |
4,004,919 | 1,545,966 | 554,400 | |||||||||
3. Proposal to create
Class A Stock |
4,004,919 | 1,545,966 | 554,400 |
-41-
Proposal | Voted for | Voted Against | Votes Abstained | |||||||||
4. Proposal to increase
number of authorized
capital stock |
4,004,919 | 1,545,966 | 554,400 | |||||||||
5. Proposal to make the
Companys corporate
existence perpetual |
4,004,919 | 1,545,966 | 554,400 | |||||||||
6. Proposal to adopt
the Incentive Plan |
4,031,603 | 1,519,282 | 554,400 | |||||||||
7. Warrant redemption
proposal |
6,692,536 | 698,738 | 0 |
10.1 | Form of Restricted Stock Award Agreement under the registrants 2009 Stock Option and Compensation Plan |
31.1 | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
-42-
Dated:
January 12, 2010
|
By: | /s/ Ronald Shape
|
||||
Ronald L. Shape, Ed. D. | ||||||
Chief Executive Officer and
Chief Financial Officer |
-43-
Exhibit | Description | |
10.1
|
Form of Restricted Stock Award Agreement under the registrants 2009 Stock Option and Compensation Plan | |
31.1
|
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2
|
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
-44-