| CONCORDE CAREER COLLEGES INC Item 1A Risk Factors Any of the following risks could materially adversely affect the Company’s business, results of operations or financial condition |
| Failure to Comply with Extensive Regulations Could Have a Material Adverse Effect on the Company’s Business |
| Failure of the Company’s Campuses to comply with extensive regulations could result in financial penalties, loss or suspension of federal funding |
| The Company’s revenue is derived almost entirely from tuition, textbook sales, fees and charges paid by, or on behalf of, the Company’s students |
| A large number of the Company’s students paid a substantial portion of tuition and other fees with funds received through student assistance financial aid programs under Title IV of the HEA The Company received approximately 80prca of cash receipts from such funds for the year ended December 31, 2005 |
| To participate in such programs, an institution must obtain and maintain authorization by the appropriate state agencies, accreditation by an accrediting agency recognized by the ED, and certification by the ED As a result, the Company’s Campuses are subject to extensive regulation by these agencies that, among other things, requires the Company to: ¨ undertake steps to assure that the students at each of our Campuses do not default on federally guaranteed or funded student loans at a rate of 25prca or more for three consecutive years; ¨ limit the percentage of revenues derived at each Campus from federal student financial aid programs to less than 90prca; ¨ adhere to financial responsibility and administrative capability standards; ¨ prohibit the payment of incentives to personnel engaged in student recruiting, admissions activities or awarding financial aid; and Part I- Page 7 ______________________________________________________________________ ¨ achieve stringent completion and placement outcomes for short-term programs |
| These regulations cover virtually all phases of the Company’s operations, including the Company’s educational programs, facilities, instructional and administrative staff, administrative procedures, financial operations and financial strength |
| They also affect the Company’s ability to acquire or open additional Campuses or change the Company’s corporate structure |
| These regulatory agencies periodically revise their requirements and modify their interpretations of existing requirements |
| If one of the Company’s Campuses were to violate any of these regulatory requirements, the Company could suffer a financial penalty |
| The regulatory agencies could also place limitations on or terminate the Company’s Campuses’ receipt of federal student financial aid funds, which could have a material adverse effect on the Company’s business, results of operations or financial condition |
| The Company believes that the Campuses substantially comply with the requirements of these regulatory agencies, but the Company cannot predict with certainty how all of these requirements will be applied, or whether the Company will be able to comply with all of the requirements in the future |
| Some of the most significant regulatory requirements and risks that apply to the Company’s Campuses are described in the following paragraphs |
| The US Congress may change the law or reduce funding for federal student financial aid programs, which could harm the Company’s business |
| The US Congress regularly reviews and revises the laws governing the federal student financial aid programs and annually determines the funding level for each of these programs |
| Congress must reauthorize HEA approximately every six years |
| The most recent reauthorization occurred in 1998 and reauthorized the HEA until September 30, 2004 which was temporarily extended |
| Any action by Congress that significantly reduces funding for the federal student financial aid programs or the ability of the Company’s Campuses or students to participate in these programs could have a material adverse effect on the Company’s business, results of operations or financial condition |
| Legislative action may also increase the Company’s administrative costs and burden and require the Company to modify the Company’s practices in order for the Company’s Campuses to comply fully with applicable requirements, which could have a material adverse effect on the Company’s business, results of operations or financial condition |
| The Company is not aware of any changes that may be made during reauthorization that will have a material financial impact on the Company |
| However, there has been recent negative publicity regarding for profit post secondary schools that may impact reauthorization and there can be no assurance of the impact of the new regulations or requirements from reauthorization |
| If the Company does not meet financial responsibility standards, the Company’s Campuses may lose eligibility to participate in federal student financial aid programs |
| To participate in the federal student financial aid programs, an institution must either satisfy numeric standards of financial responsibility, or post a letter of credit in favor of the ED and possibly accept other conditions on its participation in the federal student financial aid programs |
| Currently, none of the Campuses are required to post a letter of credit in favor of the ED or accept other conditions on its participation in the federal student financial aid programs due to failure to satisfy the numeric standards of financial responsibility |
| The Company cannot assure you that the Company or the Company’s Campuses will satisfy the numeric standards in the future |
| The Campuses may lose eligibility to participate in federal student financial aid programs if their student loan default rates are too high |
| An institution may lose its eligibility to participate in some or all of the federal student financial aid programs if defaults by its students on their federal student loans exceed specified rates |
| If any of the Company’s Campuses, depending on its size, loses eligibility to participate in federal student financial aid programs because of high student loan default rates, it could have a material adverse effect on the Company’s business, results of operations or financial condition |
| Campuses may lose eligibility to participate in federal student financial paid programs if the percentage of their revenue derived from those programs is too high |
| A proprietary institution loses its eligibility to participate in the federal student financial aid programs if it derives more than 90prca of its revenue from these programs in any fiscal year (the “90/10” Regulation) |
| If any of the Company’s Campuses, depending on its size, loses eligibility to participate in federal student financial aid programs, it could have a material adverse effect on the Company’s business, results of operations or financial condition |
| The Company received approximately dlra66cmam495cmam000 from federal student financial aid programs during 2005, representing 80dtta2prca of the total cash received on FFEL eligible programs |
| Individual campuses 90/10 rates ranged from a low of 69dtta9prca to a high of 87dtta4 % in 2005 |
| Part I - Page 8 ______________________________________________________________________ If the Company fails to demonstrate “administrative capability” to the ED, the Company’s business could suffer |
| ED regulations specify extensive criteria an institution must satisfy to establish that it has the requisite “administrative capability” to participate in federal student financial aid programs |
| These criteria require, among other things, that the institution: ¨ comply with all applicable federal student financial aid regulations; ¨ have capable and sufficient personnel to administer the federal student financial aid programs; ¨ provide financial aid counseling to its students; and ¨ submit all reports and financial statements required by the regulations |
| If an institution fails to satisfy any of these criteria, the ED may: ¨ require the repayment of federal student financial aid funds; ¨ transfer the institution from the “advance” system of payment of federal student financial aid funds to the “reimbursement” system of payment or cash monitoring; ¨ place the institution on provisional certification status; or ¨ commence a proceeding to impose a fine or to limit, suspend or terminate the participation of the institution in federal student financial aid programs |
| Should one or more of the Company’s Campuses be limited in their access to, or lose, federal student financial aid funds due to their failure to demonstrate administrative capability, the Company’s business could be materially adversely affected |
| If the company fails to meet programmatic accreditation regulations, the Company could lose its eligibility to enroll students in these programs |
| The company has several programs that require additional regulation by specific state boards or national organizations |
| The Vocational Nursing, Respiratory Therapy, Surgical Technologist and Radiography programs must follow rules and guidelines of the State Boards of Nursing, Commission on Accreditation of Allied Health Education Programs, Joint Review Committee on Education in Radiologic Technology and the Committee on Accreditation for Respiratory Care |
| If these programs do not adhere to these more stringent rules the programs could lose their eligibility to enroll students |
| Regulatory agencies or third parties may commence investigation, bring claims or institute litigation against the Company |
| Because the Company operates in a highly regulated industry, the Company may be subject from time to time to investigations, claims of non-compliance, or law suits by governmental agencies, or third parties, which may allege statutory violation, regulatory infractions, or common law causes of action |
| If the results of the investigations are unfavorable to the Company or if the Company were unable to successfully defend against third-party lawsuits, the Company may be required to pay monetary damages or be subject to fines, penalties, injunctions or other censure that could have a material adverse effect on the Company’s business |
| Even if the Company adequately addresses the issues raised by an agency investigation or successfully defend a third-party lawsuit, the Company may have to devote significant money and management resources to address these issues, which could harm the Company’s business |
| If regulators do not approve the Company’s acquisitions, the ability of the acquired institution to participate in federal student financial aid programs would be limited |
| When the Company acquires an institution, ED and most applicable state agencies and accrediting agencies consider that a change of ownership or control of the institution has occurred |
| A change of ownership or control of an institution under the standards of ED may result in the temporary suspension of the institutionapstas participation in the federal student financial aid programs until the ED issues a temporary certification document |
| If the Company were unable to reestablish the state authorization, accreditation or ED certification of an institution the Company acquired, depending on the size of that acquisition, could have a material adverse effect on the Company’s business, results of operations or financial condition |
| If regulators do not approve transactions involving a change of control, the institutions acquired may lose their ability to participate in federal student financial aid programs |
| If the Company or any of the Company’s Campuses experience a change of control under the standards of applicable state agencies or accrediting agencies or the ED, the Company or the affected Campuses must seek the approval of the relevant agencies |
| The failure of any of the Company’s Campuses to reestablish its state authorization, accreditation or ED certification would result in a suspension or loss of federal student financial aid funding, which could have a material adverse effect on the Company’s business, results of operations or financial condition |
| Part I - Page 9 ______________________________________________________________________ If there is a change in ownership, the Company may lose its ability to participate in federal student financial aid programs |
| The ED, applicable state education agencies or applicable accrediting agencies may consider other transactions or events to constitute a change of control of the Company |
| Some of these transactions or events, such as a significant acquisition or disposition of the Company’s common stock, may be beyond the Company’s control and the Company could lose its ability to participate in federal student financial aid and programs |
| If the Company’s Campuses do not maintain their state authorizations and accreditations, they may not operate or participate in federal student financial aid programs |
| An institution that grants degrees, diplomas or certificates must be authorized by the relevant agencies of the state in which it is located and, in some cases, other states |
| Requirements for authorization vary substantially among the states |
| State authorization and accreditation by an accrediting agency recognized by the ED are also required for an institution to participate in the federal student financial aid programs |
| Loss of state authorization or accreditation by any of the Company’s Campuses, depending on the size of the Campus, could have a material adverse effect on the Company’s business, results of operations or financial condition |
| Failure to effectively manage the Company’s growth could harm the Company’s business |
| The Company expects to acquire new Campuses as a component of its strategy for growth |
| The Company regularly engages in evaluations of possible acquisition candidates, including evaluations relating to acquisitions that may be material in size and/or scope |
| There can be no assurance that the Company will continue to be able to identify educational institutions that provide suitable acquisition opportunities or to acquire any such institutions on favorable terms |
| Furthermore, there can be no assurance that any acquired institutions can be successfully integrated into the Companyapstas operations or be operated profitably |
| Acquisitions involve a number of special risks and challenges, including the diversion of managementapstas attention, assimilation of the operations and personnel of acquired companies, adverse short-term effects on reported operating results, possible loss of key employees and difficulty of presenting a unified corporate image |
| Continued growth through acquisition may also subject the Company to unanticipated business or regulatory uncertainties or liabilities |
| Opening new Campuses and adding new services could be difficult for the Company |
| The Company expects to develop, open and operate new Campuses, most likely as additional locations of existing Campuses |
| Establishing additional locations would pose unique challenges and require the Company to make investments in management, capital expenditures, marketing expenses and other resources |
| Because the Company has not yet established any new additional locations, there can be no certainty as to the Companyapstas ability to be successful in any such endeavor |
| Any failure of the Company to effectively manage the operations of newly established Campuses could have a material adverse effect on the Companyapstas business, results of operations and financial condition |
| Failure to keep pace with changing market needs and technology could harm the Company’s business |
| Prospective employers of the Company’s graduates increasingly demand that their entry-level employees possess appropriate technological skills |
| Educational programs at the Company’s Campuses must keep pace with these evolving requirements |
| If the Company cannot respond to changes in industry requirements, it could have a material adverse effect on the Company’s business, results of operations or financial condition |
| Competitors with greater resources could harm the Company’s business |
| The postsecondary education market is highly competitive |
| The Company’s Campuses compete with traditional public and private two-year and four-year colleges and universities and other proprietary schools, including those that offer distance learning programs |
| Some public and private colleges and universities, as well as other private career-oriented schools, may offer programs similar to those of the Company’s Campuses |
| Although tuition at private nonprofit institutions is, on average, higher than tuition at the Company’s Campuses, some public institutions are able to charge lower tuition than the Company’s Campuses, due in part to government subsidies, government and foundation grants, tax-deductible contributions and other financial sources not available to proprietary schools |
| Some of the Company’s competitors in both the public and private sectors have substantially greater financial and other resources than the Company |
| Competitors with greater resources could harm our business |
| The post-secondary education market is highly fragmented and competitive |
| The Company’s campuses compete for students with traditional public and private two-year and four-year colleges and universities and other proprietary schools |
| Public institutions often receive government subsidies, government and foundation grants, tax-deductible contributions and other financial resources generally not available to proprietary schools |
| Public institutions can offer lower tuition prices |
| The Company’s competitors in both the public and private sectors may have greater financial and other resources |
| Part I - Page 10 ______________________________________________________________________ Our success depends upon our ability to recruit and retain key personnel |
| The Company’s success depends upon our ability to attract and retain highly qualified faculty, campus administrators and corporate management |
| The Company may have difficulty locating, hiring and retaining qualified personnel |
| The loss of services of key personnel, or failure to attract and retain other qualified and experienced personnel could cause our business to suffer |
| We may be unable to operate one or more of our Campuses due to a natural disaster |
| The Company has three campuses in Florida |
| The Company has four campuses located in southern California |
| One or more of these campuses may be unable to operate for an extended period of time in the event of a hurricane, earthquake or other natural disaster that does substantial damage to the area in which the campus is located |
| The failure of one or more of our campuses to operate for a substantial period of time could have a material adverse effect on our results of operations |
| Failure to obtain additional capital in the future could reduce the Company’s ability to grow |
| No assurance can be given that the Company will be able to obtain adequate funding to complete any potential acquisition or new Campus opening or that such an acquisition or opening will succeed in enhancing the Companyapstas business and will not ultimately have a material adverse effect on the Companyapstas business, results of operations and financial condition |
| A number of the Company’s shares of common stock will be eligible for future sale, which may cause the Company’s stock price to decline |
| The exercise of substantial amounts of options or registration of common stock or the perception that such sales might occur could cause the market price of the Company’s Common Stock to decline |
| On December 31, 2005, the Company had 5cmam462cmam084 shares of the Company’s Common Stock outstanding |
| As of December 31, 2005, options to purchase 608cmam968 shares of the Company’s Common Stock were outstanding and were exercisable as of such date at an average exercise price of dlra11dtta30 |
| This concentration of stock options, relative to the amount of Common Stock outstanding, if exercised, will have a dilutive effect on the Company’s earnings per share which could adversely affect the market price of the Company’s Common Stock |
| From time to time, the Company may issue additional options to the Company’s employees under the Company’s existing stock option plan and under any new plans the Company may adopt |
| A number of the Company’s shares of common stock have been registered and are eligible for future sale which could impact the Company’s stock price |
| The Company filed a Registration Statement on Form S-3 to register 1cmam286cmam765 shares of common stock |
| The Registration Statement was effective March 26, 2004 |
| The Company received no funds as a result of the registration |
| The Company registered the 1cmam286cmam765 shares of Common Stock that were issued to Cahill-Warnock pursuant to the exercise of the warrants and new debentures that were cancelled, effective February 19, 2003 |
| This concentration of stock relative to the amount of Common Stock outstanding, if sold could have a material impact on the market price of the Company’s Common Stock |
| If the Company fails to maintain an effective system of internal controls, the Company may not be able to accurately report financial results or prevent fraud |
| As a result, current and potential stockholders could lose confidence in the Company’s financial reporting, which would harm the Company’s business and the trading price of the Company’s stock |
| Effective internal controls are necessary for the Company to provide reliable financial reports and effectively prevent fraud |
| If we cannot provide reliable financial reports or prevent fraud, the Company’s operating results could be harmed |
| Inferior internal controls could also cause investors to lose confidence in the Company’s reported financial information, which could have a negative effect on the trading price of the Company’s stock |