SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 22, 2003
Age Research Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-26285 87-0419387
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
31103 Rancho Viejo Road, #2102, San Juan Capistrano, Ca 92675
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 800-597-1970
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(Former Name or Former Address, if Changed Since Last Report)
The Registrant hereby amends Item 7 of its Form 8-K Report for June 3, 2003 as
follows:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business acquired
Exhibit 1. The audited financial statements of THE VARSITY GROUP, INC.,
for the years ending December 31, 2002 and 2001.
(b) Pro forma Financial Statements information
Exhibit 2. The unaudited pro forma combined financial statements of Age
Research, Inc. and Varsity for the year ended December 31, 2002 and the quarter
ending June 30, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: October 8, 2003 Age Research, Inc.
By: /s/ Richard F. Holt
------------------------------------
Richard F. Holt
2
EXHIBIT 1
HAROLD Y. SPECTOR, CPA SPECTOR & WONG, LLP 80 SOUTH LAKE AVENUE
CAROL S. WONG, CPA Certified Public Accountants SUITE 723
1- (888) 584-5577 PASADENA, CA 91101
FAX (626) 584-6447
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Board of Directors and stockholders
of The Varsity Group, Inc.
We have audited the accompanying balance sheets of The Varsity Group Inc. (a
Missouri corporation), as of December 31, 2002 and 2001, and the related
statements of operations, changes in stockholders' deficit, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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 Varsity Group, Inc. as of
December 31, 2002 and 2001, 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.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company's operating losses and a net capital
deficiency raise substantial doubt about its ability to continue as a going
concern. Management's plans regarding those matters are also described in Note
3. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/Spector & Wong, LLP
Pasadena, California
October 1, 2003
3
THE VARSITY GROUP, INC.
BALANCE SHEETS
December 31,
ASSETS 2002 2001
- --------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 287,128 $ 192,804
Restricted cash 219,416 155,612
Accounts receivable 1,349,507 1,665,391
Loan to employee 2,600 12,850
Receivable-officer 58,862 58,862
Prepaid expenses -- 10,294
----------- -----------
Total Current Assets 1,917,513 2,095,813
----------- -----------
Property and Equipment, net of accumulated depreciation
of $213,639 and $146,570 183,292 145,853
----------- -----------
Other Assets
Receivable from others 20,000 20,000
Refundable Deposits 121,669 121,669
----------- -----------
Total Other Assets 141,669 141,669
----------- -----------
TOTAL ASSETS $ 2,242,474 $ 2,383,335
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 651,706 $ 160,389
Accrued expenses 931,698 907,023
Accrued compensation and related taxes 1,589,467 1,879,903
Prefunded payroll 525,877 --
Line of Credit 49,510 --
Officers' Loan 56,287 --
----------- -----------
Total Current Liabilities 3,804,545 2,947,315
----------- -----------
Stockholders' Deficit
Common Stock, $1 par value, 30,000 shares authorized,
402 shares issued and 200 shares outstanding 402 402
Paid-in Capital 49,521 49,521
Accumulated Deficit (1,611,792) (613,701)
Treasury stock - 202 shares at cost (202) (202)
----------- -----------
Total Shareholders' Deficit (1,562,071) (563,980)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,242,474 $ 2,383,335
=========== ===========
4
See Notes to Financial Statements
THE VARSITY GROUP, INC.
STATEMENTS OF OPERATIONS
For years ended December 31, 2002 2001
- ---------------------------------------------------------------------------------------------
Revenues $ 59,009,084 $ 64,158,599
Cost and Expenses
Cost of Revenues 57,919,999 62,829,578
Selling, General and Administrative Expenses 2,308,405 1,740,405
------------ ------------
Total cost and expenses 60,228,404 64,569,983
Operating (loss) (1,219,320) (411,384)
------------ ------------
Other Income (Expenses)
Recovery of Bad Debt 152,500 --
Other Income 67,751 30,621
Interest Income 3,765 11,306
Interest Expenses (2,787) (459)
------------ ------------
Total Other Income (Expenses) 221,229 41,468
------------ ------------
Net (loss) $ (998,091) $ (369,916)
============ ============
Net (loss) per share-Basic and Diluted $ (4,990) $ (1,850)
============ ============
Weighted Average Number of Shares 200 200
5
See Notes to Financial Statements
THE VARSITY GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR YEARS ENDED DECEMBER 31, 2002 AND 2001
Common Stock
----------------------------- Paid-in Accumulated Treasury
Shares Amount Capital Deficit Stock Total
- ------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 402 $ 402 $ 49,521 $ (243,785) $ (202) $ (194,064)
Net (loss) (369,916) (369,916)
-------------------------------------------------------------------------------------
Balance at December 31, 2001 402 402 49,521 (613,701) (202) (563,980)
Net (loss) (998,091) (998,091)
-------------------------------------------------------------------------------------
Balance at December 31, 2002 402 $ 402 $ 49,521 $ (1,611,792) $ (202) $ (1,562,071)
=====================================================================================
6
See Notes to Financial Statements
THE VARSITY GROUP, INC.
STATEMENTS OF CASH FLOWS
For years ended December 31, 2002 2001
- --------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) $ (998,091) $(369,916)
Adjustments to reoncile net (loss) to net cash provided by
operating activities:
Depreciation 67,069 58,525
Bad debts 106,754 143,441
Decrease (Increase) in:
Restricted cash (63,804) (155,612)
Accounts receivable 209,130 (247,871)
Prepaid expenses 10,294 (95,189)
Increase (Decrease) in:
Accounts payable and accrued expenses 225,556 958,699
Prefunded payroll 525,877 -
--------------- --------------
Net cash flows provided by operating activities 82,785 292,077
--------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES
Loan to employee 10,250 -
Receivable - officer - (21,511)
Purchase of property and equipment (104,508) (95,355)
--------------- --------------
Net cash flows (used in) investing activities (94,258) (116,866)
--------------- --------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from line of credit 49,510 -
Proceeds from Officers' Loan 56,287 -
--------------- --------------
Net cash flows provided by financing activities 105,797 -
--------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 94,324 175,211
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 192,804 17,593
--------------- --------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 287,128 $ 192,804
=============== ==============
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 2,787 $ 459
=============== ==============
7
See Notes to Financial Statements
THE VARSITY GROUP, INC.
STATEMENTS OF CASH FLOWS
NOTE 1 - NATURE OF BUSINESS
The Varsity Group, Inc. (the "Company) is a professional employer organization
("PEO"), which provides professional employer services for small to medium-sized
businesses nationwide. The company provides a broad range of services, including
human resources consulting, payroll administration, risk management, benefits
administration, and unemployment services to their clients. Additionally, the
Company offers health and dental, insurance, defined contribution retirement
plan, and cafeteria plan benefits to clients.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES The preparation of the accompanying financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make certain estimates and assumptions that directly
affect the results of reported assets, liabilities, revenue, and expenses.
Actual results may differ from these estimates.
REVENUE RECOGNITION The accompanying financial statements have been prepared on
the accrual basis of accounting, and accordingly, revenues and direct costs are
recorded in the period in which the work-site employee works. Management fee is
recorded when the service has been rendered.
The Company adopted Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"). The adoption of SAB 101 did not have a
material impact on the Company's operating results or financial positions.
ALLOWANCE FOR DOUBTFUL ACCOUNTS The Company provides an allowance for doubtful
accounts equal to the estimated losses that will be incurred in the collection
of receivables. These estimated losses are based on historical experience in
addition to a review of current year status. For the years ended December 31,
2002 and 2001, management believes all accounts are collectible; therefore, an
allowance for doubtful accounts has not been provided. During 2002 and 2001
uncollectible accounts of $106,754 and 143,441, respectively, have been charged
to operations.
In prior years, the Company incurred a bad debt loss of approximately $331,000.
The amount is currently being collected and will be recognized as other income.
For the year ended December 31, 2002, the Company had collected $152,500.
CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents. Cash and cash
equivalents include prefunded payroll amounts of $525,877 received from
customers.
RESTRICTED CASH Restricted cash includes deposits restricted by agreement with
the insurance company providing worker's compensation insurance. Deposits of
$219,416 and $155,612 are restricted at December 31, 2002 and 2001,
respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of the financial
instruments approximates fair value due to the short-term maturities of these
instruments.
PROPERTY AND EQUIPMENT Property and equipment are valued at cost. Maintenance
and repair costs are charged to expenses as incurred. Depreciation is computed
on the straight-line and accelerated methods based on the estimated useful lives
of the assets, generally 3 to 39 years. Depreciation expense for years ended
8
THE VARSITY GROUP, INC.
STATEMENTS OF CASH FLOWS
December 31, 2002 and 2001 was $67,069 and 58,525, respectively.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The components of property and equipment were as follows:
December 31
2002 2001
----------------- --------------
Computer Equipment $ 158,063 $ 134,713
Computer Software 39,311 32,951
Furniture and Fixtures 126,952 74,851
Office Equipment 57,714 43,329
Leasehold Improvements 14,891 6,579
----------------- --------------
396,931 292,423
Less: Accumulated Depreciation (213,639) (146,570)
----------------- --------------
$ 183,292 $ 145,853
================= ==============
ADVERTISING COSTS All advertising costs are expensed as incurred. Advertising
expense for the years ended December 31, 2002 and 2001 was $13,040 and $15,566,
respectively.
MAJOR CUSTOMERS For the years ended December 31, 2002 and 2001, two customers
comprised 40% and 33% respectively, of the Company's sales.
CONCENTRATION OF CREDIT RISK The Company maintains cash deposits in several
banks. Cash in these accounts at times exceeded the federally insured limits of
up to $100,000. The risk is managed by maintaining all deposits in a high
quality institution.
INCOME TAXES The stockholders of the Company have elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code. No provision for
federal income taxes has been recorded in these financial statements because the
stockholders are personally liable for such taxes on their individual income tax
returns.
DERIVATIVES In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as
amended by SFAS No. 138, which was issued in June 2000. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments. The Company
currently does not use derivative financial products for hedging or speculative
purposes and as a result, does not anticipate any impact on the Company's
financial statements.
LOSS PER COMMON SHARE The Company accounts for income (loss) per share in
accordance with SFAS No. 128, "Earnings Per Share." SFAS No. 128 requires that
presentation of basic and diluted earnings per share for entities with complex
capital structures. Basic earnings per share includes no dilution and is
computed by dividing net income (loss) available to common stockholders by the
weighted average number of common stock outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities that could
share in the earnings of an entity. Diluted net loss per common share does not
differ from basic net loss per common share due to the lack of dilutive items in
the Company.
RECLASSIFICATION Certain reclassifications have been made for comparative
purposes to conform with the presentation in the current year financial
statement. Such reclassification had no effect on net income as previously
reported.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS In June 2002, the FASB issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities." The standard
requires companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment to an
exit or disposal plan. Examples of costs covered by the standard include lease
termination costs and certain employee severance costs that are associated with
a restructuring, discontinued operation, plant closing, or other exit or
disposal activity. Previous accounting guidance provided by EITF Issue No. 94-3,
9
THE VARSITY GROUP, INC.
STATEMENTS OF CASH FLOWS
"Liability Recognition for Certain employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring) is
replaced by this Statement. SFAS No. 146 is to be applied prospectively to exit
or disposal activities initiated after December 31, 2002. Management does not
anticipate that the adoption of this Statement will have a significant effect on
the Company's financial statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This Statement updates, clarifies and simplifies existing
accounting pronouncements. The provisions of this Statement related to the
rescission of Statement No. 4 are to be applied for fiscal years beginning after
May 15, 2002. Any gain or loss on extinguishment of debt that was classified as
an extraordinary item in prior periods presented that does not meet the criteria
in Opinion No. 30 for classification as an extraordinary item should be
reclassified. Provisions of the Statement related to the amendment of Statement
No. 13 should be applied for transactions occurring after May 15, 2002, and all
other provisions should be applied for financial statements issued on or after
May 15, 2002. Management does not anticipate that the adoption of this Statement
will have a significant effect on the Company's financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS
No. 123, "Accounting for Stock-Based Compensation," to provide alternative
methods of transition to SFAS No. 123's fair value method of accounting for
stock-based employee compensation. SFAS No. 148 also amends the disclosure
provisions of SFAS No. 123 and APB Opinion No. 28, "Interim Financial
Reporting," to require disclosure in the summary of significant accounting
policies of the effects of an entity's accounting policy with respect to
stock-based employee compensation on reported net income and earnings per share
in annual and interim financial statements. While SFAS No. 148 does not amend
SFAS No. 123 to require companies to account for employee stock options using
the fair value method, the disclosure provisions of SFAS No. 148 are applicable
to all companies with stock-based employee compensation, regardless of whether
they account for that compensation using the fair value method of SFAS No. 123
or the intrinsic value method of APB Opinion 25.
In March 2002, the EITF discussed again Issue 00-18, "Accounting
Recognition for Certain Transactions involving Equity Instruments Granted to
Other Than Employees". The issues are (a) the grantor's accounting for a
contingent obligation to issue equity instruments (subject to vesting
requirements) when a grantee performance commitment exists but the equity
instrument has not yet been issued, (b) the grantee's accounting for the
contingent right to receive an equity instrument when a grantee performance
commitment exists prior to the receipt (vesting) of the equity instrument, and
(c) for equity instruments that are fully vested and nonforfeitable on the date
the parties enter into an agreement, the manner in which the issuer should
recognize the fair value of equity instruments. However, the EITF did not reach
a consensus on any of these issues, and further discussion of Issue 00-18 is
expected at a future meeting. The Company is currently evaluating the impact of
Issue 00-18.
NOTE 3- GOING CONCERN
The Company has incurred substantial losses, has accumulated deficit, and needs
additional working capital. Those matters raise substantial doubt about the
Company's ability to continue as a going concern. Management of the Company is
developing a plan to reduce operating expenses and obtain an infusion of capital
through either public or private investment. The ability of the Company to
continue as a going concern is dependent on management's successful reduction of
operating expenses and successful capital infusion. The financial statements do
not include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
NOTE 4 - RELATED PARTY TRANSACTIONS
Advances made to a shareholder of the Company were $58,862 as of December 31,
2002 and 2001. There are no formalized repayment terms or due dates, however,
the Company believes that full collectibility of these balances will be realized
in the ordinary course of business.
Advances made by a shareholder of the Company totalling $56,287 at December 31,
2002 are recorded as notes payable to officer on the balance sheet. There is no
formalized repayment terms or due dates related to the advances.
10
THE VARSITY GROUP, INC.
STATEMENTS OF CASH FLOWS
NOTE 5 - LINE OF CREDIT
The Company had a line of credit with a bank in the amount of $50,000. The line
carries an interest rate of bank's prime rate (4.25% at December 31, 2002), and
requires monthly interest payments. The line is unsecured. The outstanding
borrowing against on this line as of December 31, 2002 was $49,510. On September
10, 2003, the balance is in default.
NOTE 6 - OPERATING LEASES
The Company occupies office facilities and leases automobiles under operating
leases which expire in various years through 2005. Rent expense was $140,185 and
$90,856 and automobile lease expense was $16,320 and $20,457 in 2002 and 2001,
respectively. Future minimum annual payments under non-cancelable operating
leases as of December 31, 2002 are as follows:
Year ending
December 31, Amount
--------------
2003 $ 145,372
2004 132,046
2005 77,583
--------------
$ 355,001
==============
NOTE 7 - NET (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
For years ended December 31,
2002 2001
--------------- ----------------
Numerator:
Net (loss) $ (998,091) $ (369,916)
--------------- ----------------
Denominator:
Weighted Average of Common Shares 200 200
--------------- ----------------
Per share of common stock:
Net (loss) per share-basic and diluted $ (4,990) $ (1,850)
=============== ================
11
THE VARSITY GROUP, INC.
STATEMENTS OF CASH FLOWS
NOTE 8 - CONTINGENT LIABILITIES
THE COMPANY HAS SECURED A LETTER OF CREDIT IN THE AMOUNT OF $450,000, PERSONALLY
GUARANTEED BY THE SHAREHOLDERS, IN CONNECTION WITH INSURANCE COVERAGE. AS OF
DECEMBER 31, 2002, THE LETTER OF CREDIT HAD NOT BEEN DRAWN UPON, AND THE COMPANY
DOES NOT EXPECT DRAWS AGAINST THE LETTER OF CREDIT IN THE FORESEEABLE FUTURE.
The Company has a self-insurance program for medical and dental coverage for its
internal and worksite employees. The Company attempts to limit its losses
through the use of stop-loss insurance policies. Although the Company feels
adequate insurance coverage is in place and liabilities of future claims are
adequately accrued, actual results could differ from these estimates.
During the year ended December 31, 2002, the Company entered into a purchase
agreement with an unrelated business entity in the amount of $150,000. The terms
of the purchase agreement include $75,000 to be paid upon the execution of the
purchase agreement and $75,000 to be paid in equal instalments over the next six
quarters. The Company determined that the asset has recognized significant
depreciation and therefore has suspended payments. The opposing party has
initiated the litigation process to recover the balance of the agreement. The
Company is vigorously defending their position and management believes they will
prevail.
The Company is involved in various litigations arising in the ordinary course of
business. Outside counsel for the Company has advised that an opinion cannot be
offered as to the probable outcome of the litigation. In the opinion of
management, the outcome of litigation will not materially affect the Company's
financial position, based on the merits of their position, and the underlying
levels of insurance in force.
NOTE 9 - SUBSEQUENT EVENT
On May 22, 2003, the Company enter into an acquisition agreement with Age
Research, Inc. ("Buyer"). The Company shall sell and transfer to Buyer all of
the Company's issued and outstanding common stock in exchange of 9,343,920 post
reverse split shares of the common stock of the Buyer. The acquisition will be
accounted for as a purchase. As of the report date, the acquisition is not
completed yet.
12
THE VARSITY GROUP, INC.
STATEMENTS OF CASH FLOWS
AGE RESEARCH, INC. AND SUBSIDIARY EXHIBIT 2
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 2002
- -----------------
ASSETS "AGER" "VARS" Adjustments Pro Forma
------ ------ ------ ----------- ---------
Cash $ 310 $ 423,914 $ 424,224
Accounts receivable 752 846,231 846,983
Loan receivable from officers - 2,575 2,575
Prepaid expenses and other current assets - 121,669 121,669
------------------------------- ----------------
Total current assets 1,062 1,394,389 $1,395,451
Property and equipment, net - 183,292 (33,292) (1) 150,000
Goodwill - - 1,487,406 (1) 1,487,406
------------------------------- ----------------
TOTAL ASSETS $ 1,062 $ 1,577,681 $3,032,857
=============================== ================
LIABILITIES AND
SHAREHOLDERS' DEFICIT
Accounts payable $ 6,678 $ 439,468 $ 446,145
Accrued expenses 1,751 931,698 933,450
Accrued payrolls and related taxes - 1,517,679 1,517,679
Short-term notes payable - 49,510 49,510
Notes payable to officers 8,500 - 8,500
------------------------------- ----------------
Total current liabilities 16,929 2,938,356 2,955,284
Shareholders' capital 805,023 49,721 43,718 (1) 898,462
Accumulated deficit (820,890) (1,410,395) 1,410,395 (1) (820,890)
------------------------------- ----------------
(15,866) (1,360,674) 77,573
$ 1,062 $ 1,577,681 $3,032,857
=============================== ================
See notes to pro forma condensed consolidated financial statements (unaudited)
AGE RESEARCH, INC. AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 2002
- ------------------------------------
"AGER" "VARS" Adjustments Pro Forma
Revenues $ 7,894 $ 59,009,084 $ 59,016,978
Cost and expenses:
Cost of revenues 1,211 57,666,185 57,667,396
Selling, general and administrative 17,059 2,352,767 2,369,825
--------------------------------- -----------------
18,269 60,018,952 60,037,222
Operating (loss) (10,375) (1,009,868) (1,020,243)
Other income (expenses) (458) 222,350 221,892
--------------------------------- -----------------
(Loss) before income taxes (10,833) (787,518) (798,351)
Income taxes 800 - 800
--------------------------------- -----------------
Net (loss) $ (11,633) $ (787,518) $ (797,551)
================================= =================
Net (loss) per share-basic and diluted $ (0.01) $ (0.07)
================ =================
Weighted average number of shares(2) 1,939,551 11,283,471
See notes to pro forma condensed consolidated financial statements (unaudited)
NOTE 1 - BASIS OF PRESENTATION
On May 22, 2003, Age Research, Inc. ("the Company" or "AGER") announced to
acquire all the issued and outstanding shares of common stock of The Varsity
Group, Inc. ("VARS") in exchange for 9,343,920 post split shares of the
Company's common stock. The acquisition will be accounted for as a purchase,
with the assets acquired and liabilities assumed recorded at fair values, and
the results of VARS operations included in the Company's consolidated financial
statements from the date of acquisition.
In connection with the acquisition, the Board of Directors authorized a reverse
split of 1 for 35 shares of stock prior to the closing date of acquisition and
increase the capitalization to 750,000,000 shares.
The accompanying condensed consolidated financial statements illustrate the
effect of the acquisition ("Pro Forma") on the Company's financial position and
results of operations. The condensed consolidated balance sheet as of December
31, 2002 is based on the historical balance sheets of the Company and VARS as of
that date and assumes the acquisition took place on that date. The condensed
consolidated statements of operations for the year then ended are based on the
historical statements of operations of the Company and VARS for those periods.
The pro forma condensed consolidated statements of operations assume the
acquisition took place on January 1, 2002.
The pro forma condensed consolidated financial statements may not be indicative
of the actual results of the acquisition. In particular, the pro forma condensed
consolidated financial statements are based on management's current estimated of
the allocation of the purchase price, the actual allocation of which may differ.
The accompanying condensed consolidated pro forma financial statements should be
read in connection with the historical financial statements of the Company and
VARS.
NOTE 2 - PRO FORMA ADJUSTMENTS
The pro forma adjustments to the unaudited condensed consolidated balance sheet
are as follows:
(1) To reflect the acquisition of The Varsity Group, Inc. and the
allocation of the purchase price on the basis of the fair values of
the assets acquired and liabilities assumed.
The total purchase cost is as follows:
Value of 9,343,920 common stock issued at $0.01 per share $ 93,439
---------------
Total purchase cost 93,439
Allocation of purchase price:
Stockholders' deficit of VARS 1,360,674
Decrease in property and equipment 33,292
---------------
Cost in excess of net assets acquired-Goodwill $1,487,406
===============
NOTE 2 - PRO FORMA ADJUSTMENTS (CONTINUED)
The pro forma adjustments to the condensed consolidated statements of operations
are as follows:
(2) To adjust retroactively to reflect the reverse split of 1 for 35
shares of common stock in connection with the acquisition.
See notes to pro forma condensed consolidated financial statements (unaudited)
AGE RESEARCH, INC. AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, 2003
- -------------
ASSETS "AGER" "VARS" Adjustments Pro Forma
------ ------ ------ ----------- ---------
Cash $ 455 $ 229,756 $ 230,211
Accounts receivable 1,043 1,883,845 1,884,888
Prepaid expenses and other current assets - 309,786 309,786
------------------------------- ----------------
Total current assets 1,498 2,423,387 2,424,885
Property and equipment, net - 157,945 (7,945) (1) 150,000
Goodwill - - 1,661,305 (1) 1,661,305
------------------------------- ----------------
TOTAL ASSETS $ 1,498 $ 2,581,332 $4,236,190
=============================== ================
LIABILITIES AND
SHAREHOLDERS' DEFICIT
Accounts payable $ 4,187 $ 440,500 $ 444,687
Accrued expenses 4,214 1,414,189 1,418,403
Accrued payrolls and related taxes - 1,616,137 1,616,137
Short-term notes payable - 499,140 499,140
Notes payable to officers 13,700 171,287 184,987
------------------------------- ----------------
Total current liabilities 22,101 4,141,253 4,163,354
Shareholders' capital 878,262 49,721 43,718 (1) 971,701
Accumulated deficit (898,865) (1,609,642) 1,609,642 (1) (898,865)
------------------------------- ----------------
(20,603) (1,559,921) 72,836
$ 1,498 $ 2,581,332 $4,236,190
=============================== ================
See notes to pro forma condensed consolidated financial statements (unaudited)
AGE RESEARCH, INC. AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2003
- --------------------------------------
AGER VARS Adjustments Pro Forma
Revenues $ 3,913 $ 25,209,900 $ 25,213,813
Cost and expenses:
Cost of revenues 532 24,705,602 24,706,134
Selling, general and administrative 80,328 833,172 913,500
--------------------------------- -----------------
80,860 25,538,774 25,619,634
--------------------------------- -----------------
Operating (loss) (76,947) (328,874) (405,821)
Other income (expenses)
Other income and Interest income 97 130,253 130,350
Interest expenses (325) (626) (951)
--------------------------------- -----------------
Total other income (expenses) (228) 129,627 129,399
--------------------------------- -----------------
(Loss) before income taxes (77,175) (199,247) (276,422)
Income taxes 800 - 800
--------------------------------- -----------------
Net (loss) $ (77,975) $ (199,247) $ (275,622)
================================= =================
Net (loss) per share-basic and diluted $ (0.04) $ (0.02)
================ =================
Weighted average number of shares (2) 2,088,361 11,432,281
See notes to pro forma condensed consolidated financial statements (unaudited)
AGE RESEARCH, INC. AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2003
- --------------------------------------
NOTE 1 - BASIS OF PRESENTATION
On May 22, 2003, Age Research, Inc. ("the Company" or "AGER") announced to
acquire all the issued and outstanding shares of common stock of The Varsity
Group, Inc. ("VARS") in exchange for 9,343,920 post split shares of the
Company's common stock. The acquisition will be accounted for as a purchase,
with the assets acquired and liabilities assumed recorded at fair values, and
the results of VARS operations included in the Company's consolidated financial
statements from the date of acquisition.
In connection with the acquisition, the Board of Directors authorized a reverse
split of 1 for 35 shares of stock prior to the closing date of acquisition and
increase the capitalization to 750,000,000 shares.
The accompanying condensed consolidated financial statements illustrate the
effect of the acquisition ("Pro Forma") on the Company's financial position and
results of operations. The condensed consolidated balance sheet as of June 30,
2003 is based on the historical balance sheets of the Company and VARS as of
that date and assumes the acquisition took place on that date. The condensed
consolidated statements of operations for the six months then ended are based on
the historical statements of operations of the Company and VARS for those
periods. The pro forma condensed consolidated statements of operations assume
the acquisition took place on January 1, 2003.
The pro forma condensed consolidated financial statements may not be indicative
of the actual results of the acquisition. In particular, the pro forma condensed
consolidated financial statements are based on management's current estimated of
the allocation of the purchase price, the actual allocation of which may differ.
The accompanying condensed consolidated pro forma financial statements should be
read in connection with the historical financial statements of the Company and
VARS.
NOTE 2 - PRO FORMA ADJUSTMENTS
The pro forma adjustments to the unaudited condensed consolidated balance sheet
are as follows:
(3) To reflect the acquisition of The Varsity Group, Inc. and the
allocation of the purchase price on the basis of the fair values of
the assets acquired and liabilities assumed.
The total purchase cost is as follows:
Value of 9,343,920 common stock issued at $0.01 per share $ 93,439
---------------
Total purchase cost 93,439
Allocation of purchase price:
Stockholders' deficit of VARS 1,559,921
Decrease in property and equipment 7,945
---------------
Cost in excess of net assets acquired-Goodwill $1,661,305
===============
See notes to pro forma condensed consolidated financial statements (unaudited)
AGE RESEARCH, INC. AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2003
- --------------------------------------
NOTE 2 - PRO FORMA ADJUSTMENTS (CONTINUED)
The pro forma adjustments to the condensed consolidated statements of operations
are as follows:
(4) To adjust retroactively to reflect the reverse split of 1 for 35
shares of common stock in connection with the acquisition.
See notes to pro forma condensed consolidated financial statements (unaudited)