ITEM 3. LITIGATION
Douglas Ferraro vs. Edward
Thalheimer, Chita Rivera Thalheimer and The Tutoring Center, Inc.
("TTCI"), filed in Los Angeles Superior Court on November 8,
2001 (Case No. BC261420). Douglas Ferraro ("Ferraro") entered into a
license agreement with TTCI but did not open a location. He claimed that TTCI
made misrepresentations in offering and selling the franchise, that TTCI
breached the franchise agreement and that TTCI had failed to register to offer
and sell franchises. Ferraro sued for fraud, breach of written contract,
declaratory relief, rescission, unfair business practices and breach of oral
contract. In approximately September 2002, TTCI entered into a settlement
agreement with Ferraro and without admitting liability, settled all claims out
of court and paid him $200,000 in settlement of all claims.
Department of Corporations,
Desist and Refrain Order (June 28, 2002). On June 28, 2002, the California
Department of Corporations (the "DOC") issued a Desist and Refrain
Order against our affiliate, TTCI and our president Dr. Edward Thalheimer,
alleging that Dr. Thalheimer and TTCI offered and sold unregistered franchises
in California. Pursuant to the order, TTCI and Dr. Thalheimer were ordered to
desist and refrain from any further offer or sale of franchises until a
registration had been obtained. On August 2, 2005, we received a franchise
registration permit from the DOC authorizing the sale of franchises in California.
Other than these two actions,
no litigation is required to be disclosed in this Disclosure Document.