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YTB Intl Press Releases >
Form 8-K/A for REZCONNECT TECHNOLOGIES INC
Form 8-K/A for REZCONNECT TECHNOLOGIES INC
Feb 23, 2005 -- Financial Statements and Exhibits
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pro Forma Income Statements of Business Acquired
REZCONNECT TECHNOLOGIES, INC.
PRO FORMA FINANCIAL INFORMATION
YEAR ENDED DECEMBER 31, 2004
(UNAUDITED)
REZCONNECT TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004
(UNAUDITED)
INTRODUCTION TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On December 8, 2004, Rezconnect Technologies, Inc. (the "Company") acquired 100% of the outstanding common shares from the stockholders of YourTravelBiz.com, Inc. ("YTB") in a business combination structured as a statutory merger. This acquisition was effected through an exchange of equity interests at a recorded cost of $15,257,445 to the Company. Rezconnect Technologies, Inc. was identified as the acquiring entity. The Company exchanged 7,430,000 shares of its common stock and 4,092,376 shares of its Series B convertible preferred stock for all of the outstanding common stock of YTB.
The following unaudited pro forma consolidated statement of operations for the year ended December 31, 2004 gives effect to the Company's acquisition of YTB and reflects the results of YTB's operations as if the acquisition had occurred and been completed as of January 1, 2004.
The acquisition of YTB was accounted for by the Company under the "purchase method", as prescribed by Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations. The total cost of this acquisition exceeded the fair value of the net assets acquired and liabilities assumed by $15,936,118, which was recorded as "goodwill". In accordance with SFAS No. 142, goodwill resulting from this acquisition has been recognized as an asset, but will not be amortized for financial reporting purposes. Instead, the recorded value of goodwill will be tested for impairment on an annual basis.
Following is a summary of the allocated cost of the Company's acquisition of
YTB:
Asset
(Liability)
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Property and equipment $ 73,121
Computer software 9,097
Short-term debt (102,342)
Accounts payable and accrued expenses (658,549)
Goodwill 15,936,118
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Allocation of total cost of acquisition $ 15,257,445
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The unaudited pro forma consolidated statement of operations for the year ended December 31, 2004 does not represent the results of operations of the Company for any future date or period. Actual future results could be materially different from these pro forma results. This unaudited pro forma financial statement should be read in conjunction with the audited financial statements of the Company and management's related discussion and analysis of financial condition and results of operations included in Form 10-K for the year ended December 31, 2004.
See notes to pro forma financial statements
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REZCONNECT TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2004
(UNAUDITED)
Rezconnect
Technologies, YourTravel- Pro forma Pro forma
Inc. Biz.com, Inc. Adjustments Consolidated
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REVENUE
Franchise fees $ 97,506 $ - $ - $ 97,506
Franchise service and other fees 716,801 - - 716,801
Travel products and services 2,056,617 - - 2,056,617
Online travel income 507,508 - - 507,508
Advertising and other 2,571 - - 2,571
New RTA sales 231,347 3,296,701 3,528,048
Monthly membership and maintenance fees 248,092 3,535,302 3,783,394
Printing and administrative service fees 54,569 777,614 832,183
-------------- --------------- ------------- ------------
3,915,011 7,609,617 - 11,524,628
Less: returns and allowances 29,810 424,795 454,605
-------------- --------------- ------------- ------------
TOTAL REVENUE 3,885,201 7,184,822 - 11,070,023
OPERATING EXPENSES
Commissions 1,669,723 4,984,429 6,654,152
Cost of travel services and products 930,519 - - 930,519
Depreciation and amortization 44,502 92,660 (75,637)(a) 61,525
Franchise services and products 153,035 - - 153,035
Marketing and selling 96,595 - - 96,595
General and administrative 1,246,399 2,756,542 4,002,941
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TOTAL OPERATING EXPENSES 4,140,773 7,833,631 (75,637) 11,898,767
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LOSS FROM OPERATIONS (255,572) (648,809) 75,637 (828,744)
OTHER INCOME (EXPENSES)
Loss from sales of short-term investments (8,458) - - (8,458)
Interest and dividend income 38,096 7,261 45,357
Interest expense (22,596) (50,562) (73,158)
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TOTAL OTHER INCOME (EXPENSES) 7,042 (43,301) - (36,259)
-------------- --------------- ------------- ------------
NET LOSS $ (248,530) $ (692,110) $ 75,637 $ (865,003)
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NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (865,003)
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LOSS PER SHARE:
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING 12,135,602
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BASIC AND DILUTED LOSS PER SHARE $ (0.07)
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REZCONNECT TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
YEAR ENDED DECEMBER 31, 2004
(UNAUDITED)
The accounts of YourTravelBiz.com, Inc. ("YTB") include its income and expense activity for the period January 1, 2004 through December 7, 2004. The activity of YTB from the date of acquisition (December 8, 2004) through December 31, 2004 is included in the pro forma results of operations of Rezconnect Technologies, Inc.
1. The following pro forma adjustments summarize the adjustments made to the pro forma statements of operations for the year ended December 31, 2004:
(a) The depreciation and amortization adjustments reflect these expenses as if the acquisition of property and equipment had occurred and been completed as of January 1, 2004. Depreciation and amortization are computed by use of the straight-line method over the following estimated useful lives of the related assets:
Vehicles 5 years
Equipment 5 to 7 years
Furniture and fixtures 7 years
Computer software 3 years
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Allocation of the purchase price of the property and equipment acquired is as follows:
Allocated Allocated
Asset Percentage Amount
Vehicles 59% $ 48,508
Equipment 20% 16,444
Furniture and fixtures 10% 8,222
Computer software 11% 9,044
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Total 100% $ 82,218
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Charges to depreciation and amortization expense as if the acquisition of YourTravelBiz.com, Inc. had occurred and been completed as of January 1, 2004 are as follows:
Estimated Depreciation/
Useful Life Amortization
Asset (years) Expense
Vehicles 5 $ 9,702
Equipment 5 to 7 3,131
Furniture and fixtures 7 1,175
Computer software 3 3,015
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Total $ 17,023
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See notes to pro forma financial statements
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REZCONNECT TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
YEAR ENDED DECEMBER 31, 2004
(UNAUDITED)
(a) Depreciation and amortization adjustments (continued)
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Depreciation and amortization expense as if the acquisition
of YourTravelBiz.com, Inc. had occurred and been completed
as of January 1, 2004 (as calculated on the preceding page) $ 17,023
Amount recorded by YourTravelBiz.com, Inc. 92,660
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Total depreciation and amortization adjustments $ (75,637)
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The negative depreciation and amortization adjustment calculated above occurred as the result of pre-merger accelerated depreciation methods used by YourTravelBiz.com, Inc. The pro forma depreciation and amortization is calculated by use of the straight-line method for all assets acquired.
(b) Revenue adjustments
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Following is a composition of the total revenue of
YourTravelBiz.com, Inc. for the period December 8, 2004 to
December 31, 2004 that is included in the pro forma results of
operations of Rezconnect Technologies, Inc.:
New RTA sales $ 231,347
Monthly membership and maintenance fees 248,092
Printing and administrative service fees 54,569
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534,008
Less: returns and allowances (29,810)
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Total revenue adjustments $ 504,198
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(c) Operating expense adjustments
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Following represents operating expenses (other than depreciation
and amortization) of YourTravelBiz.com, Inc. for the period
December 8, 2004 to December 31, 2004 that are included in the pro
forma results of operations of Rezconnect Technologies, Inc.:
Commissions $ 349,784
General and administrative 193,898
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Total other operating expense adjustments $ 543,682
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See notes to pro forma financial statements
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REZCONNECT TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
YEAR ENDED DECEMBER 31, 2004
(UNAUDITED)
(d) Other income and expense adjustments
The following represents other (nonoperational) items of income and expense of YourTravelBiz.com, Inc. for the period December 8, 2004 to December 31, 2004 that are included in the pro forma results of operations of Rezconnect Technologies, Inc.:
Investment income $ 509
Interest expense (3,548)
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Total other income and expense adjustments $ (3,039)
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2. Recurring expenses
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Commission expenses are incurred and paid monthly to sales representatives based on a pre-determined formula based on a percentage of sales.
The Company assumed a lease of its acquiree for copy machines under non-cancelable operating leases expiring in various periods through December 31, 2006. The lease payments are approximately $659.50 per month.
3. Income taxes
As a result of the Company's and the acquiree's year 2004 operating losses and loss carryforwards available in 2004, there is no provision for current income taxes. In addition, Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, requires a valuation allowance to reduce any deferred tax assets to their net realizable amounts if, based on the weight of evidence, it is more likely than not that all or some portion of such deferred tax assets will not be realized. As of December 31, 2004, the Company is uncertain if it will realize any future tax benefit of its deferred tax assets. Accordingly, a full valuation allowance has been established as a reserve against the Company's deferred tax assets and, therefore, no deferred income tax credits have been recognized in the pro forma statements of operations for the year ended December 31, 2004.
See notes to pro forma financial statements
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REZCONNECT TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
YEAR ENDED DECEMBER 31, 2004
(UNAUDITED)
4. Earnings (loss) per share
Basic earnings (loss) per share is based on the weighted-average number of common shares outstanding. Diluted earnings (loss) per common share assumes that outstanding common shares are increased by common shares issuable upon the exercise of stock options and by the conversion of preferred stock where their exercise or conversion would be dilutive. For the year ended December 31, 2004, the effects any assumed exercise of stock options on the 2004 loss per share would be anti-dilutive and, therefore, are not included in the calculation of the Company's loss per common share for the year ended December 31, 2004.
However, the 4,092,376 shares of the Company's Series B convertible preferred stock that were issued on December 8, 2004 (and subsequently converted into common shares on January 9, 2005) were considered to be common stock equivalents on the date of original issuance. Accordingly, all 4,092,376 shares of the Company's Series B convertible preferred stock have been included in the calculation of the Company's loss per common share for the year ended December 31, 2004.
See notes to pro forma financial statements
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