National American University Holdings, Inc. - Quarter Report: 2009 November (Form 10-Q)

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2009

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from      to

Commission File No. 000-52919

National American University Holdings, Inc.

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)

(605) 721-5220
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
			(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     As of January 11, 2010, there were 6,031,105 shares of Common Stock, $0.0001 par value per share, and 100,000 shares of Class A Common Stock, $0.0001 par value per share, outstanding.

 

 

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES

INDEX

				Page of
				Form 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1.		FINANCIAL STATEMENTS			3
		Unaudited Condensed Consolidated Balance Sheets as of November 30, 2009 and May 31, 2009			3
		Unaudited Condensed Consolidated Statements of Operations for the six months ended and three months ended November 30, 2009 and November 30, 2008			5
		Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended November 30, 2009 and November 30, 2008			8
		Notes to Unaudited Condensed Consolidated Financial Statements			10
ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			23
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			39
ITEM 4T.		CONTROLS AND PROCEDURES			39
PART II. OTHER INFORMATION
ITEM 1.		LEGAL PROCEEDINGS			40
ITEM 1A.		RISK FACTORS			40
ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			40
ITEM 3.		DEFAULTS UPON SENIOR SECURITIES			41
ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			41
ITEM 5.		OTHER INFORMATION			42
ITEM 6.		EXHIBITS			42
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
(formerly Dlorah, Inc.)

		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

(continued)

The accompanying notes are an integral part of these condensed consolidated financial statements.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
(formerly Dlorah, Inc.)

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF NOVEMBER 30, 2009 AND MAY 31, 2009
(In thousands except per share data)

		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

(concluded)

The accompanying notes are an integral part of these condensed consolidated financial statements.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
(formerly Dlorah, Inc.)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS AND THREE MONTHS ENDED NOVEMBER 30, 2009 AND
     NOVEMBER 30, 2008
(In thousands except per share data)

		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.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
(formerly Dlorah, Inc.)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS AND THREE MONTHS ENDED NOVEMBER 30, 2009 AND
     NOVEMBER 30, 2008
(In thousands except per share data)

		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

(concluded)

The accompanying notes are an integral part of these condensed consolidated financial statements.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
(formerly Dlorah, Inc.)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2009 AND NOVEMBER 30, 2008
(In thousands except per share data)

		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

The accompanying notes are an integral part of these condensed consolidated financial statements.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
(formerly Dlorah, Inc. )

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2009 AND NOVEMBER 30, 2008
(In thousands except per share data)

		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	)

(Continued)

The accompanying notes are an integral part of these condensed consolidated financial statements.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
(formerly Dlorah, Inc.)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2009 AND NOVEMBER 30, 2008
(In thousands except per share data)

		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.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED NOVEMBER 30, 2009 AND NOVEMBER 30, 2008
(Dollar amounts, except per share, in thousands)

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 Company’s 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 Company’s annual financial statements which were filed with the Company’s 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 NAU’s academic income is dependent upon federal student financial aid programs, company tuition

		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 Company’s total revenues for the six months ended November 30, 2009 and November 30, 2008, respectively, were derived from NAU’s academic income. Approximately 92% of the Company’s total revenue for the three months ended November 30, 2009 and November 30, 2008 were derived from NAU’s 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 Company’s 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 company’s 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 Company’s 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 entity’s 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 Company’s 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

		did not have a material effect on the Company’s 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 entity’s 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 Company’s 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.

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

(continued)

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

(Concluded)

(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 Company’s 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 Company’s 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

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 Company’s 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.

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 (cd’s, 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 (cd’s, US treasury bills, money market accounts)		$	4,299			$	231			$	—			$	4,530
Total assets at fair value		$	4,299			$	231			$	—			$	4,530

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, Camden’s stockholders adopted an amendment to Camden’s amended and restated articles of incorporation (i) to change Camden’s 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 Camden’s status as a blank check company, including, among other things, the classification of the board of directors, and to make Camden’s corporate existence perpetual. Furthermore, Camden’s 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: Dlorah’s retention of a significant voting interest in the Company; Dlorah’s appointment of a majority of the members of the Company’s initial board of directors; Dlorah’s operations comprising the ongoing operations of the Company; and Dlorah’s 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

		(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 Company’s annual income as defined in the agreement, which is paid out annually. Effective November 23, 2009, this changed to 7% of the Company’s 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 year’s 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 Company’s 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).

		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

		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