Attached files
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Valley
Anesthesia
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Educational
Programs, Inc.
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Financial
Statements
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December
31, 2008 and
2007
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VALLEY
ANESTHESIA EDUCATIONAL PROGRAMS, INC.
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Table
of Contents
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December
31, 2008 and 2007
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Page
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Report
of Independent Registered Public Accounting Firm
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1
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Financial
Statements
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Balance
Sheets
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2
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Statements
of Income
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3
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Statements
of Changes in Shareholders’ Equity (Deficit)
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4
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Statements
of Cash Flows
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5
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Notes
to Financial Statements
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6-10
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Report
of Independent Registered
Public
Accounting Firm
To the
Board of Directors and Stockholders
Valley
Anesthesia Educational Programs, Inc.
We have
audited the accompanying balance sheets of Valley Anesthesia Educational
Programs, Inc. (the "Company"), as of December 31, 2008 and 2007, and the
related statements of income, change in shareholders' equity (deficit), and cash
flows for the years then ended. The Company's management is responsible for
these financial statements. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits 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 audits 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 audits
provide 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 December 31,
2008 and 2007 and the results of its operations and its cash flows for the years
then ended, 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
December
31, 2009
1
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VALLEY
ANESTHESIA EDUCATIONAL PROGRAMS, INC.
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Balance
Sheets
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December
31,
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2008
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2007
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ASSETS
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Current
Assets
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Cash
and cash equivalents
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$ | 266,093 | $ | 325,646 | ||||
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Inventory
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3,830 | - | ||||||
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Prepaid
expenses
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5,000 | - | ||||||
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Other
current assets
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2,850 | 2,884 | ||||||
| 277,773 | 328,530 | |||||||
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Fixed
Assets
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Office
equipment
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17,451 | 18,430 | ||||||
| $ | 295,224 | $ | 346,960 | |||||
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LIABILITIES
AND SHAREHOLDERS' EQUITY
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Current
Liabilities
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Accounts
payable
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$ | 9,619 | $ | 11,233 | ||||
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Accrued
expenses
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103,386 | 101,948 | ||||||
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Deferred
revenue
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704,775 | 765,280 | ||||||
| 817,780 | 878,461 | |||||||
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Shareholders'
Equity (Deficit)
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Common
stock
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No
par value; 100 shares authorized, issued and outstanding as
of
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December
31, 2008 and 2007
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1,000 | 1,000 | ||||||
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Retained
earnings (deficit)
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(523,556 | ) | (532,501 | ) | ||||
| (522,556 | ) | (531,501 | ) | |||||
| $ | 295,224 | $ | 346,960 | |||||
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See
notes to financial statements
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2
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VALLEY
ANESTHESIA EDUCATIONAL PROGRAMS, INC.
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Statements
of Income
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For
the Years Ended
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December
31,
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2008
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2007
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Revenue
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$ | 1,885,014 | $ | 1,726,960 | ||||
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Less: Refunds
and NSF checks
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20,441 | 21,419 | ||||||
| 1,864,573 | 1,705,541 | |||||||
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Costs
and Expenses
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Cost
of revenue
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467,280 | 448,736 | ||||||
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Selling
and administrative expenses
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660,118 | 616,745 | ||||||
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Depreciation
and amortization
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10,422 | 7,268 | ||||||
| 1,137,820 | 1,072,749 | |||||||
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Income
from Operations
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726,753 | 632,792 | ||||||
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Other
Income
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Interest
and dividend income
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5,392 | - | ||||||
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Net
Income
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$ | 732,145 | $ | 632,792 | ||||
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Earnings
Per Share - basic and diluted
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$ | 7,321.45 | $ | 6,327.92 | ||||
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Weighted
Average Shares Outstanding - basic and diluted
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100 | 100 | ||||||
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See
notes to financial statements
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3
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VALLEY
ANESTHESIA EDUCATIONAL PROGRAMS, INC.
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Statements
of Changes in Shareholders' Equity
(Deficit)
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Retained
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Common Stock
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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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Deficit
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Balance
- January 1, 2007
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100 | $ | 1,000 | $ | (566,115 | ) | $ | (565,115 | ) | |||||||
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Net
Income
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- | - | 632,792 | 632,792 | ||||||||||||
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Distributions
to Shareholders
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- | - | (599,178 | ) | (599,178 | ) | ||||||||||
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Balance
- December 31, 2007
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100 | 1,000 | (532,501 | ) | (531,501 | ) | ||||||||||
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Net
Income
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- | - | 732,145 | 732,145 | ||||||||||||
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Distributions
to Shareholders
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- | - | (723,200 | ) | (723,200 | ) | ||||||||||
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Balance
- December 31, 2008
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100 | $ | 1,000 | $ | (523,556 | ) | $ | (522,556 | ) | |||||||
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See
notes to financial statements
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4
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VALLEY
ANESTHESIA EDUCATIONAL PROGRAMS, INC.
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Statements
of Cash Flows
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For
the Years Ended
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December
31,
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2008
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2007
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Cash
Flows from Operating Activities
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Net
income
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$ | 732,145 | $ | 632,792 | ||||
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Adjustments
to reconcile net income to net cash
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provided
by operating activities:
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Depreciation
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10,422 | 7,268 | ||||||
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(Increase)
Decrease in:
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Inventory
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(3,830 | ) | 16,128 | |||||
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Prepaid
expenses
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(5,000 | ) | 5,000 | |||||
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Other
current assets
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34 | (2,884 | ) | |||||
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Increase
(Decrease) in:
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Accounts
payable
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(1,614 | ) | 8,929 | |||||
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Accrued
expenses
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1,438 | 3,180 | ||||||
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Deferred
revenue
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(60,505 | ) | 46,135 | |||||
| 673,090 | 716,548 | |||||||
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Cash
Flows Used In Investing Activities
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Purchase
of fixed assets
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(9,443 | ) | (17,473 | ) | ||||
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Cash
Flows Used In Financing Activities
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Distribution
to shareholders
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(723,200 | ) | (599,178 | ) | ||||
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Net
Increase (Decrease) In Cash
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(59,553 | ) | 99,897 | |||||
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Cash and
Cash Equivalents - beginning of year
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325,646 | 225,749 | ||||||
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Cash and
Cash Equivalents - end of year
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$ | 266,093 | $ | 325,646 | ||||
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Supplemental
Disclosure of Cash Flow Information
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Cash
paid during the year for:
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Interest
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$ | - | $ | - | ||||
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Taxes
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$ | - | $ | - | ||||
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See
notes to financial statements
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5
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VALLEY
ANESTHESIA EDUCATIONAL PROGRAMS, INC.
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Notes
to Financial Statements
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December
31, 2008 and 2007
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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 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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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. As of December 31, 2008
and 2007, the Company had $153,064 and $447,159, respectively, over such
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 include 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 amounts of
$20,004 and $5,675 for the years ended December 31, 2008 and 2007
respectively, are expensed as
incurred.
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e.
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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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f.
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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.
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g.
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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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Continued
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6
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h.
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Fair Value
of Financial Instruments - The Company’s financial
instruments consist primarily of cash and cash equivalents, accounts
payable, accrued expense, and deferred revenue which approximate fair
value because of their short
maturities.
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i.
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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
December 31, 2008 and 2007, the Company does not believe that any
impairment has occurred.
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j.
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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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k.
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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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The
Company has elected to defer the application of ASC 740 Accounting for Uncertainty in Income
Taxes. ASC 740 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.
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l.
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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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Continued
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7
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m.
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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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3-
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Fixed
Assets
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The
Company’s fixed assets consist of office equipment at
December 31:
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2008
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2007
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Office
equipment
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$ | 64,420 | $ | 54,977 | ||||
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Less: Accumulated
depreciation
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(46,969 | ) | (36,547 | ) | ||||
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Office
equipment at net book value
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$ | 17,451 | $ | 18,430 | ||||
Depreciation
expense was $10,422 and $7,268 during the years ended December 31, 2008 and
2007, respectively.
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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 each of the years ended
December 31, 2008 and 2007 was
$7,875.
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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’s contributions for the years ended December 31, 2008 and
2007 were $101,601 and $99,099, respectively. Employer
contributions begin vesting at 20% after year two and are fully vested
after six years. Plan expenses for the years ended
December 31, 2008 and 2007 were $1,196 and $2,246,
respectively.
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c.
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Commitment
for Conference Facilities - The Company’s courses are
presented in conference facilities located in hotels in various cities
throughout the continental United States. The Company enters
into contracts with the various hotels well in advance of the upcoming
courses. These contracts provide, among other matters, that the
Company guarantee a stated minimum number of attendees and/or guest rooms,
and may hold the Company to stated percentages of the amounts in the event
of course cancellation.
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5
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Income
Taxes
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The
Company's successor in connection with the sale of its assets and operations as
described in the Subsequent Event footnote, is to be taxed as a C Corporation,
and as such will incur its own income taxes. Had the Company not been
an S Corporation, and had it incurred its own income taxes, the provision for
such would be as follows;
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For the Year Ended December 31, 2008
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Federal
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State
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Total
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Current
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$ | 211,000 | $ | 47,000 | $ | 258,000 | ||||||
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Deferred
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22,000 | 5,000 | 27,000 | |||||||||
| $ | 233,000 | $ | 52,000 | $ | 285,000 | |||||||
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Continued
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8
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For the Year Ended December 31, 2007
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Federal
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State
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Total
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Current
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$ | 217,000 | $ | 48,000 | $ | 265,000 | ||||||
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Deferred
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(15,000 | ) | (3,000 | ) | (18,000 | ) | ||||||
| $ | 202,000 | $ | 45,000 | $ | 247,000 | |||||||
Net
deferred tax assets (liabilities) would have included the following
components;
As at
December 31, 2008
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Deferred Tax Asset (Liability)
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Temporary
Difference
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Federal
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State
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Total
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Inventory
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$ | (4,000 | ) | $ | (1,000 | ) | $ | - | $ | (1,000 | ) | |||||
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Prepaid
expenses
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(5,000 | ) | (2,000 | ) | - | (2,000 | ) | |||||||||
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Accumulated
depreciation
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(17,000 | ) | (6,000 | ) | (1,000 | ) | (7,000 | ) | ||||||||
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Accrued
expenses
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2,000 | 1,000 | - | 1,000 | ||||||||||||
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Deferred
revenues
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705,000 | 240,000 | 49,000 | 289,000 | ||||||||||||
| $ | 681,000 | $ | 232,000 | $ | 48,000 | $ | 280,000 | |||||||||
As at
December 31, 2007
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Deferred Tax Asset (Liability)
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Temporary
Difference
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Federal
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State
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Total
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Accumulated depreciation
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$ | (18,000 | ) | $ | (6,000 | ) | $ | (1,000 | ) | $ | (7,000 | ) | ||||
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Accrued
expenses
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3,000 | 1,000 | - | 1,000 | ||||||||||||
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Deferred
revenues
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765,000 | 260,000 | 53,000 | 313,000 | ||||||||||||
| $ | 750,000 | $ | 255,000 | $ | 52,000 | $ | 307,000 | |||||||||
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.
The
Company did not adopt Accounting Standards Codification ("ASC") 740, for
“Uncertainty in Income Taxes” effective January 1, 2007. Had the
Company adopted ASC 740 on January 1, 2007, there would have been no
unrecognized tax positions that would have been required to have been recognized
at January 1, 2007, December 31, 2007 and 2008.
In
addition to its federal income tax return, the Company was obligated to file in
the following state jurisdictions; Florida, Minnesota, Pennsylvania, Ohio,
Tennessee, Texas, North Carolina, and Iowa. All periods within the
applicable jurisdiction’s statute of limitations remain open to governmental
audit.
Pro forma
net income and net income per share are as follows:
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2008
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2007
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Net
income as reported
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$ | 732,145 | $ | 632,792 | ||||
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Provision
for income taxes
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285,000 | 247,000 | ||||||
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Pro
forma net income
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$ | 447,145 | $ | 385,792 | ||||
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Continued
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9
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Per share
data - basic diluted:
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2008
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2007
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Net
income as reported
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$ | 7,321.45 | $ | 6,327.92 | ||||
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Provision
for income taxes
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2,850.00 | 2,470.00 | ||||||
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Pro
forma net income
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$ | 4,471.45 | $ | 3,857.92 | ||||
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Weighted
average number of shares outstanding - basic and diluted
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100 | 100 | ||||||
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6
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Subsequent
Events
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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 $1,702,883 fair value) c.) receivable for a
earn out provision at its $79,990 present value, and d.) transfer of liabilities
in a net amount of $55,342. Assets sold included the website and
domain, inventory, office machinery, receivables, prepaid but unearned revenues,
trademarks, copyrights, trade names and all other intellectual property
including goodwill.
Subsequent
events have been evaluated for disclosure and recognition through
December 31, 2009.
10