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 March 31, 2003
[ ] 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
(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 May 1,
2003: 14,367,461
Transitional Small Business Disclosure Format YES NO X
THE AMERICAN EDUCATION CORPORATION
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets
March 31, 2003 and December 31, 2002 3
Consolidated Statements of Income
For the Three Months Ended March 31, 2003 4
and for the Three Months Ended March 31, 2002
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2003 5
and for the Three Months Ended March 31, 2002
Notes to Interim Consolidated Financial
Statements 6
Item 2 Management's Discussion and Analysis
Of Financial Conditions and Results of
Operations 8
Item 3 Controls and Procedures 10
PART II - OTHER INFORMATION 11
SIGNATURE PAGES 13
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Balance Sheets
THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31 December 31
2003 2002
------------ -----------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 63,439 $ 74,405
Accounts receivable, net of allowance
for returns and uncollectible accounts
of $107,319 and $102,309 2,027,276 2,001,019
Inventory 45,070 36,444
Prepaid expenses and deposits 57,003 62,758
Deferred tax asset 54,620 54,620
Note receivable from officer 300,000 300,000
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Total current assets 2,547,408 2,529,246
Property and equipment, at cost 1,241,828 1,237,222
Less accumulated depreciation and
amortization (942,906) (900,213)
---------- ----------
Net property and equipment 298,922 337,009
Other assets:
Capitalized software costs, net of
accumulated amortization of $4,536,889
and $4,195,444 4,630,748 4,610,365
Goodwill, net of accumulated
amortization of $369,097 and $369,097 1,840,446 1,840,446
---------- ----------
Total other assets 6,471,194 6,450,811
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Total assets $9,317,524 $9,317,066
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable trade $ 590,291 $ 569,066
Accrued liabilities 1,135,263 1,084,655
Accounts payable - Affiliate 60,000 60,000
Deferred revenue 244,047 238,080
Notes payable and current portion of
long-term debt 1,072,476 1,148,701
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Total current liabilities 3,102,077 3,100,502
Other long-term accrued liabilities 187,785 171,555
Deferred income tax liability - Long-term 187,665 206,952
Long-term debt 16,771 26,549
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Total liabilities 3,494,298 3,505,558
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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 357,874 357,874
Additional paid in capital 6,646,746 6,649,240
Treasury stock, at cost, 34,000 shares (19,125) (19,125)
Retained deficit (1,176,481) (1,176,481)
Year-to-date earnings 14,212 -
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Total stockholders' equity 5,823,226 5,811,508
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Total liabilities and stockholders'
equity $9,317,524 $9,317,066
========== ==========
The accompanying notes are an integral part of the financial statements.
THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(unaudited)
2003 2002
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Sales $1,897,319 $ 1,945,947
Cost of goods sold 287,157 549,631
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Gross profit 1,610,162 1,396,316
Operating expenses:
Selling and marketing 542,986 623,589
Operations 77,596 62,922
General and administrative 643,267 641,622
Amortization of capitalized software costs 340,375 241,292
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Total operating expenses 1,604,224 1,569,425
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Operating income (loss) 5,938 (173,109)
Other income (expense):
Interest income -- 1,916
Interest expense (11,013) (31,015)
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Net (loss) before income taxes (5,075) (202,208)
Current income tax benefit -- (5,281)
Deferred income tax benefit (19,287) (73,842)
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Net Income (loss) $ 14,212 $ (123,085)
=========== ==========
Basic 14,314,961 14,279,544
Earnings per share $ 0.001 $ (0.009)
Diluted 14,314,961 14,328,600
Earnings per share $ 0.001 $ (0.009)
The accompanying notes are an integral part of the financial statements.
THE AMERICAN EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(unaudited)
2003 2002
----------- -----------
Cash flows from operating activities:
Net income (loss) $ 14,212 $ (123,085)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 384,138 289,635
Reserve for bad debts 5,010 20,259
Services rendered for common stock -- 8,500
Deferred compensation 16,230 16,230
Other (2,494) 8,282
Changes in assets and liabilities:
Accounts receivable (31,267) 191,478
Inventories (8,626) 18,228
Prepaid expenses and other 5,755 ( 14,547)
Accounts payable and accrued liabilities 71,833 23,580
Accounts payable - Affiliate -- 60,000
Deferred revenue 5,967 37,665
Income taxes payable -- (1,987)
Deferred income taxes (19,287) (74,844)
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Net cash provided by operating activities 441,471 459,394
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Cash flow from investing activities:
Software development costs capitalized (361,828) (472,602)
Purchase of property and equipment (4,606) (21,266)
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Net cash used in investing activities (366,434) (493,868)
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Cash flows from financing activities:
Proceeds received from issuance of debt -- --
Principal payments on notes payable (86,003) (80,113)
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Net cash used in financing activities (86,003) (80,113)
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Net (decrease) in cash (10,966) (114,587)
Cash at beginning of the period 74,405 612,052
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Cash at end of the period $ 63,439 $497,465
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 MARCH 31, 2003 AND 2002
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 subsidiaries,
Learning Pathways, Ltd. ("LPL"), Derby, UK, and Dolphin,Inc.
("Dolphin"), Gibbsboro, NJ. LPL modifies the Company's U.S. curriculum
offfering to conform to the UK's educational system and markets these
products directly to UK and other international markets. 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 March 31, 2003, and for
the three month periods ended March 31, 2003 and 2002 are unaudited, but
include all adjustments that the Company considers necessary for a fair
presentation. The December 31, 2002 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, 2002. The accompanying unaudited
interim financial statements for the three month period ending March 31,
2003 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, 98-9 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 was amortized with a fifteen year life.
Beginning January 1, 2002, goodwill is no longer amortized. Impairment
evaluations are made annually and any necessary expense recognized.
6. Inventories:
-----------
Inventories are stated at the lower of cost (first-in, first-out), or
market, and consist of packaging and educational software materials.
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 March 31, 2003, paid-in capital includes $27,514 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.
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 March 31, 2003 the Company's principal sources of liquidity
included cash and cash equivalents of $63,439 net accounts receivable of
$2,027,276 and inventory of $45,070. The Company's net cash provided by
operating activities during the first quarter was $441,471 in 2003
compared to $459,394 in 2002. Net cash used in investing activities for
the same period decreased by 26% from $493,868 in 2002 to $366,434 in
2003, and was comprised primarily of investment in capitalized software
development costs. During the quarter ended March 31, 2003 total debt
was reduced by $86,003, or 7.3%.
At March 31, 2003, the Company had working capital of $(554,669)
compared to $(571,256) at December 31, 2002. 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 Company has reached an agreement with its lenders to
extend its recently matured loans until at least September 1, 2003.
At March 31, 2003, the debt was reclassified as current, resulting in
a negative working capital position. The Company is continuing to seek
alternative borrowing arrangements with several financing sources.
With the expansion of the Company's product lines, the addition of new
products and markets and the increase in school spending that the
Company expects to see in 2003, management believes that the
Company will return to a pattern of growth similar to that demonstrated
in prior years. Management believes that it can undertake this expansion
with most of the Company's working capital requirements secured from its
operating cash flows. If successful, the Company should be able to
enhance the liquidity of the business and the overall strength of the
Company's balance sheet and financial position.
Additional working capital beyond that available within the Company has
been and may be required to expand operations. Management has and will
consider options available in providing such funding, including debt
financing and capital enhancement.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2003
AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2002
- ---------------------------------------------------------
Net sales for the three months ended March 31, 2003, totaled $1,897,319
compared to $1,945,947 for the same period in 2002. This represents a
decrease of 2% over the comparable 2002 quarter and is attributable to a
combination of an increase in orders at AEC, offset by planned sales
decreases at the LPL and Dolphin subsidiaries. A decline in the
subsidiaries' revenues is a result of downsizing operations and a
refocusing of these business units to achieve a return to profitable
operations. AEC's revenue increase over the same quarter in 2002 is a
result of certain states beginning to increase their education spending
for the type of products offered by the Company, after over a year of
spending delays or deferments associated with many, important to the
Company's sales plan, state economies experiencing difficulties that
were also amplified by delays in federal funding being released to most
individual states. Dolphin's decrease results because in 2002 a number
of contract awards were signed in the first quarter that qualified for
revenue recognition, whereas in 2003 most of their new contracts were
signed subsequent to the end of the quarter. We believe that these
contracts will have a positive effect on the subsequent quarterly periods
in the 2003 fiscal year for Dolphin and consolidated operations.
During 2002, it became evident at both LPL and Dolphin that their cost
structures were too high based upon the revenue generated and immediate
prospects for increase in revenues, resulting in losses at both
subsidiaries. At LPL a decision was made to reduce the staff from 24
employees to 7 employees in the last half of 2002. Due to severance
and benefit rules in the UK, the effects of this reduction, along with
the corresponding reduction in benefits and other associated
administrative costs, did not fully impact LPL until after the beginning
of 2003. At Dolphin, changes in subsidiary management were implemented
in the third quarter of 2002 and personnel levels were reduced from 23
to 12 employees. Total cost savings realized from these completed
actions during the first quarter of 2003 approximated $206,000.
Cost of goods sold as a percentage of sales revenue for the three months
ending March 31, 2003 decreased to 15% from 28% of net revenues for the
same period in 2002. This major improvement is attributed to a reduction
in cost of goods sold at LPL as a result of lower sales and
discontinuance of the resale of low margin computer hardware and other
products. The decrease at Dolphin is primarily due to the reduction in
personnel costs noted above and a smaller contribution of Dolphin-
related revenues to consolidated corporate net revenues. The Company's
principal product family, A+dvanced Learning System, registered
trademark, (A+LS), provided gross profit margins of 96% in the first
quarter of 2003. Cost of goods sold represents the actual cost to
produce the software products and includes certain allocated overhead
costs.
Total operating expenses, which include selling and marketing, general
and administrative, operations, and amortization of product development
costs, increased slightly to $1,604,224 for the three months ended March
31, 2003, compared to $1,569,425 for the same 2002 quarter. As a
percentage of sales revenue, operating expenses increased from 80.7% in
2002 to 84.6% in 2003. This increase in operating expenses as a
percentage of revenues is primarily due to the increase in amortization
of product development costs. During the first quarter of 2003, the
Company made substantial progress in development efforts on revised,
updated and expanded curriculum offerings for its A+nyWhere Learning
System, registered trademark, product family as well as continued its
investment into A+dvancer, trademark, the Company's post-secondary
testing and online curriculum offering. The increase in amortization
expense is a result of increases in capitalized development costs that
are associated with these essential investments in the Company's future
and competitive position.
As a component of total operating expenses, selling and marketing costs
decreased by 12.9%, from $623,589 for the three months ended March 31,
2002, to $542,986 for the current period. The decrease in the first
quarter 2003 selling expenses are largely attributable to the reductions
in personnel at LPL and Dolphin. General and administrative expenses,
including operations, increased slightly from $704,544 to $720,863. This
increase is primarily attributable to increased technical support
department costs and professional fees offset by decreases in operating
costs at LPL and Dolphin, discussed above.
Interest expense was $11,013 for the three months ended March 31, 2003
compared to $31,015 for the same 2002 quarter reflecting the lower
amount of debt and lower interest rates in effect in 2003. The credit
for income taxes differs from the amount that would normally be expected
because pre-tax income at LPL is offset against a loss carry forward and
no tax is provided since the tax effect of the loss carry forward has
not been recorded under UK accounting rules. There is net income of
$14,212 for the three months ended March 31, 2003, compared to net loss
of $123,085 for the same period in 2002 primarily as a result or the
decreases in costs discussed above.
Company management continues to believe that significant future growth
opportunities exist in the school, adult literacy, post secondary and
the 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 the
growth and increasing acceptance of electronic learning, or e-learning.
The Company's ongoing investment in content, computer adaptive
assessment tools, programming technology, and server infrastructure
should 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 its online 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-based A+nyWhere Learning System,
A+ University, trademark, staff development product line and A+dvancer,
a post-secondary testing and online curriculum product offering. In its
planning of the future, management believes that the Internet will
become a principal method for the future delivery of its product to its
customers. These investments combine to form a stronger overall
corporate foundation that combined with what management believes to be a
new lower cost structure and the development of important new
partnerships provide a favorable, competitive basis for sustained,
future growth and profitability.
Item 3 - Controls and Procedures
- --------------------------------
Within 90 days prior to the filing of this report, the Management of the
Company, including the Chief Executive Officer and the Chief Financial
Officer has evaluated the Company's disclosure controls and procedures.
Based upon this evaluation, management has concluded that the controls
and procedures are designed to ensure that information required to be
disclosed by the issuer in the reports filed or submitted by it under
the Exchange Act are recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms.
There have been no significant changes in internal controls, subsequent
to the date that management, including the Chief Executive Officer and
Chief Financial Officer, completed this evaluation.
THE AMERICAN EDUCATION CORPORATION
PART II - OTHER INFORMATION
- ---------------------------
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
May 15, 2003
By: /s/Jeffrey E. Butler
--------------------
Jeffrey E. Butler,
Chief Executive Officer
Chairman of the Board
Treasurer
CERTIFICATIONS
I, Jeffrey E. Butler, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of The American
Education Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"), and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: May 15, 2003
/s/ Jeffrey E. Butler
- ----------------------
Jeffrey E. Butler
Title: Chief Executive Officer
I, Neil R. Johnson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of The American
Education Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"), and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: May 15, 2003
/s/ Neil R. Johnson
- --------------------
Neil R. Johnson
Title: Chief Financial Officer
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 three months
ended March 31, 2003 (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: May 15, 2003 /s/ Jeffrey E. Butler
---------------------
Jeffrey E. Butler,
Chief Executive Officer
Dated: May 15, 2003 /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.