Attached files
Valley
Anesthesia
Educational
Programs, Inc.
Financial
Statements
August
20, 2009
VALLEY
ANESTHESIA EDUCATIONAL PROGRAMS, INC.
Table
of Contents
August 20,
2009
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Page
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Independent
Auditors’ Report
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1
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Financial
Statements
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Balance
Sheet
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2
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Statement
of Income
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3
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Statement
of Changes in Shareholders’ Equity (Deficit)
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4
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Statement
of Cash Flows
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5
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Notes
to Financial Statements
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6-9
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Independent
Auditors’ Report
To the
Board of Directors and Stockholders
Valley
Anesthesia Educational Programs, Inc.
We have
audited the accompanying balance sheet of Valley Anesthesia Educational
Programs, Inc. (the "Company"), as of August 20, 2009, and the related
statements of operations, change in shareholders' equity, and cash flows for the
period January 1, 2009 through August 20, 2009. The Company's
management is responsible for these financial statements. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing auditing
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of August 20,
2009 and the results of its operations and its cash flows for the period
January 1, 2009 through August 20, 2009, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Raich
Ende Malter & Co. LLP
RAICH
ENDE MALTER & CO. LLP
New York,
New York
July 12,
2010
1
VALLEY
ANESTHESIA EDUCATIONAL PROGRAMS, INC.
Balance
Sheet
August
20, 2009
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ASSETS
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Current
Assets
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Cash
and cash equivalents
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$ | 301,606 | ||
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Accounts
receivable
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21,082 | |||
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Prepaid
expenses
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2,803 | |||
| 325,491 | ||||
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Office
Equipment
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10,873 | |||
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Other
Assets - Security deposits
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12,500 | |||
| 23,373 | ||||
| $ | 348,864 | |||
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LIABILITIES
AND SHAREHOLDERS' EQUITY
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||||
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Current
Liabilities
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Accounts
payable
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$ | 965 | ||
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Accrued
expenses
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17,057 | |||
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Deferred
revenue
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525,955 | |||
| 543,977 | ||||
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Shareholders'
Equity
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Common
stock
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No
par value; 100 shares authorized, issued, and outstanding
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1,000 | |||
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Accumulated
deficit
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(196,113 | ) | ||
| (195,113 | ) | |||
| $ | 348,864 | |||
See
independent auditors' report and notes to financial statements.
2
Statement
of Income
For
the Period Ended August 20, 2009
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Revenue
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$ | 932,573 | ||
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Less: Refunds
and NSF checks
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8,670 | |||
| 923,903 | ||||
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Costs
and Expenses
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Cost
of revenue
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196,502 | |||
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Selling
and administrative expenses
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249,454 | |||
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Depreciation
and amortization
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6,578 | |||
| 452,534 | ||||
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Income
from Operations
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471,369 | |||
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Other
Income
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Interest
and dividend income
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3,674 | |||
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Net
Income
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$ | 475,043 | ||
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Earnings
Per Share - basic and diluted
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$ | 4,750.43 | ||
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Weighted
Average Shares Outstanding - basic and diluted
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100 |
See
independent auditors' report and notes to financial statements.
3
VALLEY
ANESTHESIA EDUCATIONAL PROGRAMS, INC.
Statement
of Changes in Shareholders' Equity (Deficit)
For
the Period Ended August 20, 2009
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Common Stock
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Retained
Earnings
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Total
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Shares
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Amount
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(Deficit)
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Equity
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Balance
- January 1, 2009
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100 | $ | 1,000 | $ | (523,556 | ) | $ | (522,556 | ) | |||||||
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Net
Income
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- | - | 475,043 | 475,043 | ||||||||||||
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Distributions
to Shareholders
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- | - | (147,600 | ) | (147,600 | ) | ||||||||||
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Balance
- August 20, 2009
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100 | $ | 1,000 | $ | (196,113 | ) | $ | (195,113 | ) | |||||||
See
independent auditors' report and notes to financial statements.
4
VALLEY
ANESTHESIA EDUCATIONAL PROGRAMS, INC.
Statement
of Cash Flows
For
the Period Ended August 20, 2009
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Cash
Flows from Operating Activities
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Net
income
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$ | 475,043 | ||
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Adjustments
to reconcile net income to net cash used in operating
activities:
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Depreciation
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6,578 | |||
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(Increase)
decrease in:
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Accounts
receivable
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(21,082 | ) | ||
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Inventory
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3,830 | |||
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Prepaid
expenses
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2,197 | |||
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Other
current assets
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2,850 | |||
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Increase
(decrease) in:
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Accounts
payable
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(8,654 | ) | ||
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Accrued
expenses
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(86,329 | ) | ||
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Deferred
revenue
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(178,820 | ) | ||
| 195,613 | ||||
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Cash
Flows Provided By Investing Activities
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Security
deposits
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(12,500 | ) | ||
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Cash
Flows Used In Financing Activities
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Distribution
to shareholders
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(147,600 | ) | ||
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Net
Increase In Cash
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35,513 | |||
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Cash and
Cash Equivalents - beginning of period
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266,093 | |||
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Cash and
Cash Equivalents - end of period
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$ | 301,606 | ||
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Supplemental
Disclosure of Cash Flow Information
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Cash
paid during the period for:
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Interest
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$ | - | ||
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Taxes
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$ | - | ||
See
independent auditors' report and notes to financial statements.
5
VALLEY
ANESTHESIA EDUCATIONAL PROGRAMS, INC.
Notes
to Financial Statements
August 20,
2009
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1 -
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Organization
and Nature of Business
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Valley
Anesthesia Educational Programs, Inc. (the “Company”) was incorporated on
March 9, 1993 in Iowa and has its corporate offices located in Des Moines,
Iowa. The Company designs and provides comprehensive review and
update courses and study materials to Student Registered Nurse Anesthetists in
preparation for the National Certifying Exam throughout the continental United
States.
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2 -
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Sale
of Assets
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Effective
August 20, 2009, the Company entered into an asset purchase agreement
(“Agreement”) whereby the Company sold all of its operating assets and all of
its operations to Valley Anesthesia, Inc. (“Buyer”), a Delaware
corporation. Consideration received included a.) $2,000,000 in cash,
b.) $2,000,000 note (recorded at fair value of $1,702,883) c.) receivable for an
earn out provision at its present value of $79,990, and d.) transfer of
liabilities in a net amount of $55,342. Assets sold included the
website and domain, inventory, office equipment, receivables, prepaid but
unearned revenues, trademarks, copyrights, trade names and all other
intellectual property including goodwill.
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3 -
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Summary
of Significant Accounting Policies
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This
summary of significant accounting policies of the Company is presented to assist
in understanding the Company’s financial statements. The financial
statements and notes are representations of the Company’s management who are
responsible for their integrity and objectivity. These accounting
policies are in conformity with accounting principles generally accepted in the
United States of America and have been consistently applied in the preparation
of the financial statements.
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a.
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Cash and
Cash Equivalents - The Company considers all short-term
investments, with an original maturity of three months or less, to be cash
equivalents. Accounts at banking institutions may at times
exceed federally insured limits.
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b.
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Revenue
Recognition - The Company derives its revenue
substantially from fees charged for courses and manuals. The
fee is recognized as revenue at the time of the attendance at the course
and when the manual is shipped to customers. The Company
recognizes revenue from the sale of study guides when the study guides are
shipped to customers. All courses and study guides are paid in advance and
the Company refunds only a portion of the fee upon cancellation. Deferred
revenue is recorded when payments are received in advance of the time of
the attendance at the course and when the manual and study guides are
shipped. The Company does not accept returns of manuals and study
guides.
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c.
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Cost of
Revenue - Cost of revenue includes costs of printing,
costs of facilities used for presentation of courses, preparation of
course materials, and other costs.
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d.
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Shipping
and Handling Costs - Costs incurred for shipping and
handling, included in selling and administrative expense in the
approximate amount of $5,449 for the period January 1, 2009 through
August 20, 2009, are expensed as
incurred.
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6
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e.
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Accounts
Receivable - The Company does not have a general
provision for doubtful accounts. Accounts receivable generally
consist of the amount due on the receipt of payment from the company
processing credit card payments from
customers.
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f.
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Inventory - The
Company generally does not maintain an inventory of manuals and study
guides. These materials are ordered from the printing company
as orders from customers are received. Manuals received and not
yet shipped are carried at cost computed on a first-in, first-out
basis.
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g.
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Fixed
Assets - Fixed assets are carried at
cost. Depreciation of office equipment is calculated using the
straight line method over the three year estimated useful lives of the
related assets. Expenditures for repairs and maintenance are
charged to expense as incurred. Depreciation expense was $6,578
during the period January 1, 2009 through August 20,
2009.
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h.
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Estimates - The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting
period. Actual results may differ from those
estimates. Estimates are used in accounting for, among other
things, future cash flows associated with impairment testing for
long-lived assets and
contingencies.
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i.
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Fair Value
of Financial Instruments - The Company’s financial
instruments consist primarily of cash and cash equivalents, accounts
receivable, accounts payable, and accrued expenses which approximate fair
value because of their short
maturities.
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j.
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Impairment
of Long-Lived Assets - In the event that facts and
circumstances indicate that the cost of an asset may be impaired, an
evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset’s carrying amount
to determine if a write-down to market value is required. At
August 20, 2009, the Company does not believe that any impairment has
occurred.
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k.
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Recently
Issued Accounting Pronouncements - In September 2009, the
Company implemented the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”). All of the content
included in the Codification is considered authoritative. The
Codification is not intended to amend GAAP, but codifies previous
accounting literature. The Company has changed the referencing
of authoritative accounting literature to conform to the
Codification.
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In May
2009, the Company adopted ASC 855-10 “Subsequent Events”. The
Codification does not require significant changes regarding recognition or
disclosure of subsequent events, but does require disclosure of the date through
which subsequent events have been evaluated for disclosure and
recognition. The Codification is effective for financial statements
issued after June 15, 2009. The adoption did not have a
significant impact on the Company’s financial statements.
The
Company adopted Accounting Standards Update (“ASU”) 2009-13,
“Multiple-Deliverable Revenue Arrangements a consensus of the FASB Emerging
Issues Task Force”. This ASU establishes a selling price hierarchy
for determining the selling price of a deliverable, inclusive of an estimated
selling price if neither vendor specific objective evidence nor third party
evidence is available. While this ASU was issued in October 2009,
early adoption is permitted.
Management
does not believe that any recently issued, but not yet effective accounting
pronouncements, if adopted, would have a material effect on the accompanying
financial statements.
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l.
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Income
Taxes - The Company has elected to be taxed as an S
Corporation under the Internal Revenue Code and applicable state
statues. Accordingly, no provision has been made for federal or
state taxes.
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7
ASC 740,
Accounting for Uncertainty in
Income Taxes is effective for the Company’s fiscal period beginning
January 1, 2009. ASC 740 clarifies the accounting for
uncertainty in income taxes recognized in a company’s financial
statements.
Although
the Company is considered a pass-through entity for federal and state income tax
purposes, ASC 740 is applicable. The Financial Accounting Standards
Board has deferred guidance on the application of the provisions of ASC 740
as they relate to pass-through entities. However, certain taxing
jurisdictions do not recognize the Company’s income tax status as a pass-through
entity. The Company’s accounting policy for evaluating uncertain tax
positions taken or expected to be taken in income tax filings, should they
arise, is based on its assessment of tax positions that have uncertainty as to
the probability of being sustained upon examination by those
jurisdictions. Therefore, the Company may be subject to income tax
liability-related exposures.
The
Company has determined that there are no unrecognized tax positions pursuant to
ASC 740.
In
addition to its federal income tax return, the Company was obligated to file in
various states. All periods within the applicable jurisdictions’
statutes of limitation remain open to government audit.
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m.
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Earnings
Per Share - Basic earnings per share is computed using
the weighted average number of shares of common stock
outstanding. The Company had no common equivalent shares
outstanding which would have had a dilutive effect on the earnings per
share.
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n.
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Industry
Segment Information - The Company has determined that
they operate under one segment and are not required to report on their
operations by segment.
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4 -
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Commitment
and Contingencies
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a.
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Lease - The
Company rents office space from one of its shareholders on a month to
month basis. The Company pays $656 per month for
rent. Rent expense for the period January 1, 2009 through
August 20, 2009 was $5,250.
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b.
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Retirement
Plan - The Company has a profit sharing plan for certain
eligible employees who work more than 1,000 hours per year. The
Company did not make contributions during the period January 1, 2009
through August 20, 2009. Employer contributions begin
vesting at 20% after year two and are fully vested after six
years.
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c.
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Commitment
for Conference Facilities - The Company’s courses are presented in
conference facilities located in hotels in various cities throughout the
continental United States. The Company enters into contracts with the
various hotels well in advance of the upcoming courses. These contracts
provide, among other matters, that the Company guarantee a stated minimum
number of attendees and/or guest rooms, and may hold the Company to stated
percentages of the amounts in the event of course
cancellation.
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d.
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Employment
Agreement - The Company has an employment agreement with one of its
executives that provides for compensation of approximately $90,000 for
calendar year 2009. This agreement was assigned to the Buyer
(see Note 2).
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5 -
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Income
Taxes
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The
Company's successor in connection with the sale of its assets and operations, as
described in Note 2, is to be taxed as a C Corporation, and as such will
incur its own income taxes. Had the Company not been an S
Corporation, and had it incurred its own income taxes, the provision for such
would be as follows:
8
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For
the period January 1 through August 20, 2009
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Federal
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State
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Total
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Current
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$ | 97,000 | $ | 22,000 | $ | 119,000 | ||||||
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Deferred
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51,000 | 11,000 | 62,000 | |||||||||
| $ | 148,000 | $ | 33,000 | $ | 181,000 | |||||||
Net
deferred tax assets (liabilities) as at August 20, 2009 would have included
the following components:
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Accounts
receivable
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$ | (8,000 | ) | |
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Prepaid
expenses
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(1,000 | ) | ||
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Accrued
expenses
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7,000 | |||
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Deferred
revenue
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203,000 | |||
| $ | 201,000 |
No
valuation allowance has been considered against the deferred tax assets in as
much as the Company would expect to realize the full amount of the deferred tax
assets.
Pro forma
net income and net income per share are as follows:
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Net
income as reported
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$ | 475,043 | ||
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Provision
for income taxes
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181,000 | |||
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Pro
forma net income
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$ | 294,043 |
Per share
data - basic diluted:
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Net
income as reported
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$ | 4,750 | ||
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Provision
for income taxes
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1,810 | |||
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Pro
forma net income
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$ | 2,940 | ||
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Weighted
average number of shares outstanding - basic and diluted
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100 |
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6 -
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Subsequent
Events
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Subsequent
events have been evaluated for disclosure and recognition through July 12,
2010.
9