FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the Transition Period from ________ to ________
Commission File #0-11078
THE AMERICAN EDUCATION CORPORATION
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(Exact name of small business issuer as specified in its charter)
Colorado
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(State or other jurisdiction of incorporation or organization)
84-0838184
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(IRS Employer Identification No.)
7506 North Broadway Extension, Suite 505, Oklahoma City, OK 73116
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(Address of principal executive offices)
(405) 840-6031
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(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.025 per share
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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_
Number of shares of the issuer's common stock outstanding as of
November 1, 2002: 14,314,961
Transitional Small Business Disclosure Format YES NO X
THE AMERICAN EDUCATION CORPORATION
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets
September 30, 2002 and December 31, 2001 3
Consolidated Statements of Income
For the Three Months Ended September 30, 2002 4
and for the Three Months Ended September 30, 2001
For the Nine Months Ended September 30, 2002
and for the Nine Months Ended September 30, 2001 5
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2002 6
and for the Nine Months Ended September 30, 2001
Notes to Interim Consolidated Financial
Statements 7
Item 2 Management's Discussion and Analysis
Of Financial Conditions and Results of
Operations 9
PART II - OTHER INFORMATION 12
SIGNATURE PAGE 14
PART 1 - FINANCIAL INFORMATION
THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30 December 31
2002 2001
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(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 44,436 $ 612,052
Accounts receivable, net of allowance
for returns and uncollectible accounts
of $188,247 and $172,393 2,936,699 2,552,598
Inventory 32,236 75,892
Prepaid expenses and deposits 77,058 137,513
Deferred tax asset 194,024 194,024
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Total current assets 3,284,453 3,572,079
Note receivable from officer 300,000 300,000
Property and equipment, at cost 1,225,682 1,187,417
Less accumulated depreciation and
amortization (852,414) (707,037)
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Net property and equipment 373,268 480,380
Other assets:
Capitalized software costs, net of
accumulated amortization of $3,820,120
and $3,034,534 4,640,035 4,277,975
Goodwill, net of accumulated amortization
of $694,097 and $694,097 1,840,446 1,840,446
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Total other assets 6,480,481 6,118,421
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Total assets $10,438,202 $10,470,880
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable trade $ 608,764 $ 488,443
Accrued liabilities 977,390 682,308
Accounts payable - Affiliate 60,000 --
Deferred revenue 260,942 103,416
Notes payable and current portion of
long-term debt 1,233,705 1,086,543
Foreign income taxes payable 48,496 106,746
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Total current liabilities 3,189,297 2,467,456
Other long-term accrued liabilities 155,325 106,635
Deferred income tax liability - Long-term 482,361 444,853
Long-term debt 39,538 902,269
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Total liabilities 3,866,521 3,921,213
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Commitments and contingencies - -
Stockholders' Equity:
Preferred Stock, $.001 par value;
Authorized - 50,000,000 shares-issued
and outstanding-none - -
Common Stock, $.025 par value
Authorized 30,000,000 shares
Issued and outstanding -
14,314,961 shares 357,661 356,811
Additional paid in capital 6,647,408 6,626,578
Treasury stock, at cost, 34,000 shares (19,125) (19,125)
Retained earnings (414,597) (414,597)
Year-to-date earnings 334 -
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Total stockholders' equity 6,571,681 6,549,667
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Total liabilities and stockholders'
equity $10,438,202 $10,470,880
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The accompanying notes are an integral part of the financial statements.
THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(unaudited)
2002 2001
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Net Sales $ 2,377,816 $ 2,278,218
Cost of goods sold 685,492 355,986
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Gross profit 1,692,324 1,922,232
Operating expenses:
Sales and marketing 631,264 648,206
Operations 102,212 68,474
General and administrative 629,833 779,265
Amortization of capitalized software costs 287,685 200,942
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Total operating expenses 1,650,994 1,696,887
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Operating income 41,330 225,345
Other income (expense):
Interest income 1,072 5,627
Interest expense (21,189) (33,136)
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Net income before income taxes 21,213 197,836
Current income taxes 24,575 56,020
Deferred income taxes (21,852) 2,945
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Net Income $ 18,490 $ 138,871
=========== ===========
Basic 14,314,961 14,269,494
Earnings per share $ 0.001 $ 0.010
Diluted 14,314,961 14,269,494
Earnings per share $ 0.001 $ 0.010
The accompanying notes are an integral part of the financial
statements.
THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(unaudited)
2002 2001
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Net Sales $ 7,038,154 $ 7,329,557
Cost of goods sold 1,866,731 1,553,399
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Gross profit 5,171,423 5,776,158
Operating expenses:
Sales and marketing 2,058,922 2,161,529
Operations 282,346 215,397
General and administrative 1,964,325 2,451,820
Amortization of capitalized software costs 781,140 519,135
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Total operating expenses 5,086,733 5,347,881
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Operating income 84,690 428,277
Other income (expense):
Interest income 5,128 17,973
Interest expense (73,354) (108,936)
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Net income before income taxes 16,464 337,314
Current income taxes (21,349) (2,737)
Deferred income taxes 37,479 131,899
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Net Income $ 334 $ 208,152
=========== ===========
Basic 14,303,285 14,177,148
Earnings per share $ -- $ 0.015
Diluted 14,303,285 14,177,148
Earnings per share $ -- $ 0.015
The accompanying notes are an integral part of the financial statements.
THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(unaudited)
2002 2001
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Cash flows from operating activities:
Net income $ 334 $ 208,152
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 930,963 808,113
Reserve for bad debts 15,854 1,328
Services rendered for common stock 8,500 41,400
Deferred compensation 48,690 35,580
Other 13,180 (29,826)
Changes in assets and liabilities:
Accounts receivable (399,955) 230,273
Inventories 43,656 7,758
Prepaid expenses and other 60,455 71,846
Accounts payable and accrued liabilities 415,403 (39,956)
Accounts payable - Affiliate 60,000 --
Deferred revenue 157,526 125,468
Income taxes payable (58,250) (16,429)
Deferred income taxes 37,508 100,777
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Net cash provided by operating activities 1,333,864 1,544,484
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Cash flow from investing activities:
Software development costs capitalized (1,147,646) (1,647,103)
Purchase of property and equipment (38,265) (36,538)
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Net cash used in investing activities (1,185,911) (1,683,641)
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Cash flows from financing activities:
Proceeds received from issuance of debt -- 240,836
Principal payments on notes payable (715,569) (200,062)
Issuance of common stock for cash -- 26,000
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Net cash provided by (used in)
financing activities (715,569) 66,774
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Net increase (decrease) in cash (567,616) (72,383)
Cash at beginning of the period 612,052 763,967
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Cash at end of the period $ 44,436 $ 691,584
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The accompanying notes are an integral part of the financial statements.
THE AMERICAN EDUCATION CORPORATION
Part I
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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1. Nature of Business:
------------------
The American Education Corporation's ("the Company") business is the
development and marketing of educational software to elementary,
middle and secondary schools, adult literacy centers and vocational,
junior and community colleges. In addition, the Company has two
active subsidiaries, Learning Pathways, Ltd. ("LPL") and Dolphin,
Inc. ("Dolphin"). LPL is the exclusive schools and libraries
distributor of the print, multimedia and online versions of the World
Book Encyclopedia in Great Britain. Dolphin is a developer of
educational software for many of the nation's leading textbook and
electronic publishers.
2. Basis of Presentation:
---------------------
The summary of significant accounting policies of the Company is
presented to assist in understanding the Company's financial
statements. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the
preparation of the financial statements.
The Company's consolidated financial statements include the Company
and its wholly-owned subsidiaries. All material intercompany
transactions have been eliminated.
The interim consolidated financial statements at September 30, 2002,
and for the three and nine month periods ended September 30, 2002 and
2001 are unaudited, but include all adjustments that the Company
considers necessary for a fair presentation. The December 31, 2001
balance sheet was derived from the Company's audited financial
statements.
The accompanying unaudited financial statements are for the interim
periods and do not include all disclosures normally provided in annual
financial statements. They should be read in conjunction with the
Company's audited financial statements included in the Company's Form
10-KSB for the year ended December 31, 2001. The accompanying
unaudited interim financial statements for the three and nine month
periods ending September 30, 2002 are not necessarily indicative of
the results that can be expected for the entire year.
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
3. Revenue Recognition:
-------------------
The Company recognizes revenue in accordance with the American
Institute of Certified Public Accountant's Statement of Position 97-2
and modifications thereto on software revenue recognition. Revenue for
software design services at Dolphin is recognized on the percentage-
of-completion method.
4. Capitalized Software Costs:
--------------------------
Capitalized software costs consist of licenses for the rights to
produce and market computer software, salaries and other direct costs
incurred in the production of computer software. Costs incurred in
conjunction with product development are charged to research and
development expense until technological feasibility is established.
Thereafter, all software development costs are capitalized and
amortized on a straight-line basis over the product's estimated
economic life of between three and five years.
5. Goodwill:
--------
Goodwill relates to the acquisitions in 1998 of LPL and in 1999 of
Dolphin. Through 2001, goodwill has been amortized over a period of
fifteen (15) years. Beginning January 1, 2002, goodwill is no longer
being amortized on a straight-line basis but will be measured for
impairment each year and any necessary expense recognized.
6. Inventories:
-----------
Inventories are stated at the lower of cost (first-in, first-out), or
market, and consist primarily of educational software materials,
packing materials and World Book Encyclopedia print and multimedia
products.
7. Property and Equipment:
----------------------
Property and equipment is stated at cost. Depreciation is provided on
the straight-line basis over the estimated useful life of the assets,
which is five years.
8. Statements of Cash Flows:
------------------------
In the Consolidated Statements of Cash Flows, cash and cash
equivalents may include currency on hand, demand deposits with banks
or other financial institutions, treasury bills, commercial paper,
mutual funds or other investments with original maturities of three
months or less. The carrying values of the Company's assets and
liabilities approximate fair value due to their short-term nature.
9. Income Taxes:
------------
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have
been included in the financial statements or tax returns, determined
by using the enacted tax rates in effect for the year in which the
differences are expected to reverse.
10. Computation of Earnings Per Share:
---------------------------------
The Company has adopted Statement of Financial Accounting Standards
No. 128 "Earnings Per Share" (SFAS 128). SFAS 128 requires
presentation of basic and diluted earnings per share. Basic earnings
per share are calculated based only upon the weighted average number
of common shares outstanding during the period. Diluted earnings per
share are calculated based upon the weighted average number of common
and, where dilutive, potential common shares outstanding during the
period, utilizing the treasury stock method. Potential common shares
include options to purchase common stock.
11. Stockholders' Equity:
--------------------
At September 30, 2002, paid-in capital includes $26,851 of foreign
currency translation adjustments.
12. Commitments and Contingencies:
-----------------------------
The Company amortizes capitalized software costs over the product's
estimated useful life. Due to inherent technological changes in the
software development industry, the period over which such capitalized
software cost is being amortized may have to be accelerated.
13. Discontinued Operations:
-----------------------
Effective December 31, 2001 the operations of Projected Learning
Programs, Inc. were discontinued. Revenues, expenses, assets and
liabilities of the discontinued operation for the three months and
nine months ended September 30, 2002 were not material, and therefore
no separate balance sheet or income statement disclosure is necessary.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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This report contains forward-looking statements. These forward-
looking statements can generally be identified as such because the
context of the statement will include words such as the Company
"believes," "plans," "intends," "anticipates," "expects" or words of
similar import. Similarly, statements that describe the Company's
future plans, objectives, estimates or goals are also forward-looking
statements. Such statements address future events and conditions
concerning capital expenditures, earnings, litigation, liquidity,
capital resources and accounting matters. Actual results in each case
could differ materially from those currently anticipated in such
statements by reason of factors such as economic conditions, including
changes in customer demands; future legislative, regulatory and
competitive developments in markets in which the Company operates; and
other circumstances affecting anticipated revenues and costs.
Liquidity and Capital Resources
- -------------------------------
As of September 30, 2002 the Company's principal sources of liquidity
included cash and cash equivalents of $44,436, net accounts receivable
of $2,936,699 and inventory of $32,236. The Company's net cash
provided by operating activities during the nine months ended
September 30, 2002 was $1,333,864 compared to $1,544,484 for the same
period in 2001. Net cash used in investing activities for the nine
months ended September 30 decreased by 30% from $1,683,641 in 2001 to
$1,185,911 in 2002, and was comprised primarily of investment in
capitalized software development costs. During the nine months ended
September 30, total debt was reduced by $715,569.
At September 30, 2002, the Company had working capital of $95,156
ccompared to $1,104,623 at December 31, 2001. The majority of the cash
for the Dolphin acquisition in late 1999 was borrowed under a portion
of the Company's lines of credit and has, in the past, been recorded
as long-term debt. The maturity date of this term debt is April 30,
2003 and therefore at September 30, 2002 has been classified as
current, resulting in lower working capital. The Company is currently
negotiating a restructuring of its debt with several financing
sources. The Company believes, however, that cash flows from
operations will be adequate to finance its normal financing and
investing activities for the remainder of 2002.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2002
AS COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2001
- -------------------------------------------------------------
Net sales for the three months ended September 30, 2002, totaled
$2,377,816 compared to $2,278,218 for the same period in 2001, an
increase of 4% over the comparable 2001 quarter. This increase
primarily is a result of AEC's net revenue beginning to slowly
increase as individual states begin to increase education expenditures
for the type and class of the product offered by the Company. Sales
for the Learning Pathways, Ltd. ("LPL") and Dolphin, Inc. ("Dolphin")
subsidiaries are virtually unchanged from the prior year.
Cost of goods sold as a percentage of sales revenue for the three
months ending September 30, was 29% for 2002 compared to 16% for
the same period in 2001. The change is attributable to both the
results of Dolphin, which has lower gross margins than the Company's
primary business, and the results of LPL where sales in 2002 included
an increase in lower margin computer hardware over 2001. The
Company's principal product family, A+dvanced Learning System(r) (A+LS),
provided gross profit margins of 95% in the third quarter of 2002.
Cost of goods sold represents the actual cost to produce the
software products, or in the case of LPL, the cost to acquire software
from other publishers or hardware from vendors, and includes certain
allocated overhead costs.
Total operating expenses, which include selling and marketing, general
and administrative, operations, and amortization of product
development costs, were $1,650,994 for the three months ended
September 30, 2002, compared to $1,696,887 for the same 2001 quarter.
As a percentage of sales revenue, operating expenses decreased to 69%
in 2002 compared to 74% in 2001. As a component of total operating
expenses, selling and marketing costs decreased by 3%, from $648,206
for the three months ended September 30, 2001, to $631,264 for the
current period. This decrease is attributable to a reduction in
marketing costs at LPL.
General and administrative expenses, including operations, decreased
from $847,739 to $732,045, and as a percentage of net revenues
decreased from 37% for 2001 to 31% for the current quarter. This
decrease is primarily attributable to decreases in royalty payments
and the effect of cost controls.
Interest expense for the quarter ended September 30, 2002 decreased
from $33,136 in 2001 to $21,189 in 2002 reflecting the lower amount
of debt and the lower interest rates in effect in 2002. Net income for
the three months ended September 30, 2002, was $18,490 compared to
$138,871 for the same period in 2001, a decrease of 87%.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2002
AS COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2001
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Net sales for the nine months ended September 30, 2002, totaled
$7,038,154 compared to $7,329,557 for the same period in 2001. This
represents a decrease of 4% over the comparable 2001 period. This
decrease is attributable to increases in sales at Dolphin being offset
by decreases in sales at AEC and, to a lesser extent, at LPL. Dolphin
received a number of contract awards in late 2001 and early 2002 that
have resulted in increased sales and profitability compared to the
prior year. AEC's revenues year-to-date, while improving, have been
affected by the previously mentioned curtailment or deferral by a
number of states of spending in the educational area due to budget
constraints.
Cost of goods sold as a percentage of sales revenue for the nine
months ending September 30, 2002 was 26% compared to 21% for the same
period in 2001. The increase is primarily due to the results of
Dolphin and LPL for the reasons cited in the three month comparison.
The Company's principal product families, A+dvanced Learning System
registered trademark and the A+nyWhere Learning System trademark,
provided gross profit margins of 95% in the first nine months of 2002.
Total operating expenses, which include selling and marketing, general
and administrative, operations, and amortization of product
development costs, were $5,086,733 for the nine months ended September
30, 2002, compared to $5,347,881 for the same 2001 fiscal period. As
a percentage of sales revenue, operating expenses remained relatively
unchanged at 72% in 2002 compared to 73% in 2001. Selling and
marketing costs decreased 5% from $2,161,529 for the nine months ended
September 30, 2001, to $2,058,922 for the current period primarily as
a result of cost controls.
General and administrative expenses, including operations, decreased
from $2,667,217 to $2,246,671 or 16% and as a percentage of net
revenues decreased from 36% to 32% for the nine month period. The
decrease is primarily attributable to rigorous cost controls at AEC over
the prior year and decreases in royalty payments.
Interest expense for the nine months ended September 30, decreased
from $131,899 in 2001 to $73,354 in 2002 reflecting the reduction in
debt levels and interest rates in 2002 compared to the prior
year. There is net income of $334 for the nine months ended September
30, 2002, compared to $208,152 for the same period in 2001 resulting
primarily from the decrease in sales.
Company management continues to believe that significant future growth
opportunities exist in the school, adult literacy and home or self-
directed education markets on a worldwide basis. These markets
may be accessed by not only the Company's traditional distribution-
based methods of selling and marketing, but also by new, rapidly
emerging electronic learning delivery of content business models, or
e-learning. The Company's ongoing investment in content, academic
assessment tools, programming technology, and server infrastructure
provide a broad platform to secure new business partners and address
the many opportunities that are believed to be emerging in the
educational technology industry on a global basis. The Company's
investment into the United Kingdom through its acquisition of
Learning Pathways, Ltd. in 1998 underscores management's conviction
that the Company is engaged in a global marketplace. In this global
market, the Company's English-language content, which is suitable
for both the U.S. and the UK's instructional systems, will meet the
requirements for many countries where English-language instruction is
part of the required coursework. Management believes that the
Company's investment into content, technology and the e-learning
business model should provide for expanded growth opportunities on a
worldwide basis in the future.
The Company's future competitive position has been enhanced as a
result of its ongoing investment in personnel, facilities, additional
content and infrastructure as well as its entry into international
markets. The most significant of these investments has been the
sustained spending on the Company's new Java 2-based A+nyWhere
Learning System trademark and A+ University trademark. During 2001,
the Company initiated development of the A+ University, a product
training and staff development product line, which is designed to
instruct school administrators, curriculum specialists and teachers in
the use of the Company's various products. Initial release of this
new product family occurred in the second quarter of 2002. It is
believed that this product family should become an important source of
incremental revenue from existing and new customers in future years.
In its planning of the future, management believes that the Internet
will become a principal method for the future delivery of its
products, technical support, documentation and training to its
customers. These investments combine to form a stronger overall
corporate foundation that, combined with what management believes to be
overall favorable world market conditions, provide a basis for
sustained, future growth.
THE AMERICAN EDUCATION CORPORATION
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
-----------------
Management knows of no pending or threatened litigation involving the
Company that is considered material to the on-going operations and
viability of the Company.
Item 2. Changes in Securities
---------------------
None.
Item 3. Default Upon Senior Securities
------------------------------
Omitted from this report as inapplicable.
Item 4. Submission of Matters to Vote of Securities Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
Omitted from this report as inapplicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
The following exhibits have been filed as a part of this report:
Exhibit
No. Description of Exhibits
- ------- -----------------------------------------------------------
3.1 Amended and Restated Articles of Incorporation of The
American Education Corporation (incorporated by reference
to the exhibit in the Current Report on Form 8-K filed with
the Securities and Exchange Commission on June 25, 1998)
3.2 Bylaws of The American Education Corporation (incorporated
by reference to the Company's registration statement on
Form S-8 filed with the Securities and Exchange Commission
on October 22, 1999)
4.1 Form of Stock Certificate (incorporated by reference to the
Company's registration statement on Form S-8 filed with the
Securities and Exchange Commission on October 22, 1999)
4.2 Directors' Stock Option Plan (incorporated by reference to
Exhibit B to the Definitive Proxy Statement filed with the
Securities and Exchange Commission on April 24, 1998)
4.3 First Amendment to the Directors' Stock Option Plan
(incorporated by reference to the Company's registration
statement on Form S-8 filed with the Securities and
Exchange Commission on October 22, 1999)
4.4 Stock Option Plan for Employees (incorporated by reference
to Exhibit C to the Definitive Proxy Statement filed with
the Securities and Exchange Commission on April 24, 1998)
4.5 First Amendment to the Stock Option Plan for Employees
(incorporated by reference to the Company's registration
statement on Form S-8 filed with the Securities and
Exchange Commission on October 22, 1999)
4.6 Second Amendment to the Stock Option Plan for Employees
(incorporated by reference to Exhibit 4.7 to the Company's
registration statement on Form S-8 filed with the
Securities and Exchange Commission on September 29, 2000)
10.1 Purchase Agreement for the acquisition by the Company of
Learning Pathways, Limited (incorporated by reference to
the exhibit in the Current Report on Form 8-K filed with
the Securities and Exchange Commission on December 15,
1998)
10.2 Stock Purchase Agreement for the acquisition by the Company
of Dolphin, Inc. (incorporated by reference to the exhibit
in the Current Report on Form 8-K filed with the Securities
and Exchange Commission on January 10, 2000)
(b) Reports on Form 8-K
None.
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.
The American Education Corporation
November 14, 2002 By: /s/Jeffrey E. Butler
-----------------------
Jeffrey E. Butler,
Chief Executive Officer
Chairman of the Board
Treasurer
November 14, 2002 By: /s/Neil R. Johnson
-----------------------
Neil R. Johnson,
Chief Financial Officer
THE AMERICAN EDUCATION CORPORATION
Certification of Periodic Financial Report
Pursuant to 18 U.S.C. Section 1350
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of
The American Education Corporation (the "Company") certifies that the
Quarterly Report on Form 10-QSB of the Company for the quarter ended
June 30, 2002 (the "Report") fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
Dated: November 14, 2002 By: /s/Jeffrey E. Butler
-----------------------
Jeffrey E. Butler,
Chief Executive Officer
Dated: November 14, 2002 By: /s/Neil R. Johnson
-----------------------
Neil R. Johnson,
Chief Financial Officer
This certification is made solely for purpose of 18 U.S.C. Section 1350,
subject to the knowledge standard contained therein, and not for any
other purpose.