Inphonic (INPC) 8-K/A Results of Operations and Financial Condition

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 26, 2005

INPHONIC, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-51023	52-2199384
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1010 Wisconsin Avenue, Suite 600, Washington, DC	20007
(Address of principal executive offices)	(ZIP Code)

Registrant’s telephone number, including area code: (202) 333-0001

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 – Financial Information

Item 2.02. Completion of Acquisition or Disposition of Assets.

On April 26, 2005, InPhonic, Inc. (“the Company”) completed the acquisition of certain assets and liabilities of VMC Satellite, Inc. (“VMC”) through CAIS Acquisition II, LLC (“CAIS II”), a wholly-owned subsidiary of the Company, pursuant to the terms and conditions of the Asset Purchase Agreement dated April 26, 2005 between VMC, InPhonic, CAIS II and the selling stockholder (“Asset Purchase Agreement”). A Current Report on Form 8-K was filed May 2, 2005 to report this transaction.

The Company is currently in discussions with VMC, which may result in the Company issuing additional shares of the Company’s common stock to VMC.

Section 9 – Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(a)    Financial Statements of Business Acquired.
Audited Balance Sheet of VMC as of December 31, 2004 and the related Statements of Income, Stockholder’s Equity and Cash Flows for the year ended December 31, 2004.
Report of Independent Auditors	F-1
Balance Sheets	F-2
Statement of Income	F-3
Statement of Stockholder’s Equity	F-4
Statement of Cash Flows	F-5
Notes to Financials Statements	F-6
(b)    Pro Forma Financial Information.
Unaudited Pro Forma Condensed Consolidated Balance Sheet of the Company as of March 31, 2005	PF-2
Unaudited Pro Forma Condensed Consolidated Statement of Operations of the Company for the year ended December 31, 2004	PF-3
Unaudited Pro Forma Condensed Consolidated Statement of Operations of the Company for the period ended March 31, 2005	PF-4
Notes to Pro Forma Condensed Consolidated Financial Information (unaudited)	PF-5

(c) Exhibits.

2.1†*	Asset Purchase Agreement, dated April 26, 2005, between VMC, InPhonic, CAIS II and the selling stockholder.
23.1	Consent of the Reznick Group, P.C.

† Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Securities and Exchange Commission.

* Previously filed with the Securities and Exchange Commission as an Exhibit to the registrant’s Current Report on Form 8-K filed on May 2, 2005 and incorporated by reference herein.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

INPHONIC, INC.
/s/ Lawrence S. Winkler
Name:	Lawrence S. Winkler
Title:	Chief Financial Officer, Executive Vice President and Treasurer

Date: July 12, 2005

INDEPENDENT AUDITORS’ REPORT

To the Stockholder

VMC Satellite, Inc.

We have audited the accompanying balance sheet of VMC Satellite, Inc. as of December 31, 2004, and the related statements of Income, stockholder’s equity, and cash flows, for the year 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 audit.

We conducted our audit 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 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 VMC Satellite, Inc. as of December 31, 2004, and the results of its operations, changes in stockholder’s equity, and cash flows, for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Reznick Group, P.C.

Bethesda, Maryland

April 1, 2005, except Note H for which the date is April 26, 2005

F-1

VMC Satellite, Inc.

Balance Sheet

December 31, 2004

ASSETS
Current assets
Cash and cash equivalents	$	1,693,240
Accounts receivable, other		19,111
Accounts receivable, trade		607,748
Prepaid expenses		8,389
Deferred costs		223,305
Total current assets		2,551,793
Property and equipment, net		91,000
Total assets	$	2,642,793
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
Accounts payable	$	333,849
Accrued payroll		35,774
Allowance for certificate refunds		17,356
Reserve for chargebacks		117,449
Total liabilities		504,428
Commitment and contingencies
Stockholder’s equity
Common stock, $0.10 par value; authorized 5,000 shares; issued and outstanding 1,000 shares		100
Additional paid in capital		49,900
Retained earnings		2,088,365
Total stockholder’s equity		2,138,365
Total liabilities and stockholder’s equity	$	2,642,793

See notes to financial statements.

F-2

VMC Satellite, Inc.

Statement of Income

For the Year Ended December 31, 2004

Revenues	$	10,110,697
Operating expenses
Sales and marketing, excluding depreciation		3,557,246
General and administrative, excluding depreciation		3,042,344
Depreciation		60,164
Total operating expenses		6,659,754
Net income	$	3,450,943

See notes to financial statements.

F-3

VMC Satellite, Inc.

Statement of Stockholder’s Equity

For the Year Ended December 31, 2004

	Common Stock			Additional paid-in capital		Retained Earnings			Total
	Shares	Amount
Balance, December 31, 2003	1,000	$	100	$	49,900	$	1,411,344		$	1,461,344
Distributions	—		—		—		(2,773,922	)		(2,773,922	)
Net income	—		—		—		3,450,943			3,450,943
Balance, December 31, 2004	1,000	$	100	$	49,900	$	2,088,365		$	2,138,365

See notes to financial statements.

F-4

VMC Satellite, Inc.

Statement of Cash Flows

For the year ended December 31, 2004

Cash flows from operating activities
Net income/(loss)	$	3,450,943
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		60,164
Changes in operating assets and liabilities
Increase in accounts receivable, employees		(2,311	)
Increase in accounts receivable, trade		(187,864	)
Increase in prepaid expenses		(245	)
Increase in deferred costs		(165,279	)
Increase in accounts payable		87,182
Decrease in accrued payroll		(6,942	)
Decrease in allowance for certificate refunds		(1,364	)
Increase in reserve for future chargebacks		57,161
Net cash provided by operating activities		3,291,445
Cash flows from investing activities
Purchases of property and equipment		(22,516	)
Net cash used in investing activities		(22,516	)
Cash flows from financing activities
Distributions to stockholder		(2,773,922	)
Net cash used in financing activities		(2,773,922	)
Net increase in cash		495,007
Cash and cash equivalents, beginning of year		1,198,233
Cash and cash equivalents, ending of year	$	1,693,240

See notes to the financial statements

F-5

VMC Satellite, Inc.

Notes to Financial Statements

For the year ended December 31, 2004

NOTE A – BUSINESS DESCRIPTION

VMC Satellite, Inc. (the “Company”) was organized as a corporation in the State of Virginia on May 2, 2001. The Company is principally engaged in internet sales as an authorized retailer of satellite service activation for DISH Network, which is owned by Echostar Satellite, LLC (“Echostar”). Since inception, the Company developed and implemented systems to process orders placed via the Internet. The Company also engages in sales through a network of approximately 160,000 affiliates.

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Presentation

The Company prepares its financial statements on the accrual basis of accounting in accordance with generally accepted accounting principals. Revenue is recognized in the period in which it is earned and expenses are recognized in the period in which the related liability is incurred.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

The most significant of such estimates is the reserve for chargebacks resulting from future deactivations. Management has derived its estimate of the reserves by analysis of sales subject to chargeback and actual chargebacks over the most recent two year period. Actual results may differ from those estimates.

Cash Equivalents

All highly liquid debt instruments with an original maturity of three months or less are considered to be cash equivalents.

Accounts Receivables

Substantially all accounts receivable are due from Echostar. Management considers receivables to be fully collectible; accordingly, no allowance for doubtful accounts has been provided. If amounts become uncollectible, they are charged to operations in the period in which that determination is made.

Fair Value of Financial Instruments

The carrying amount of cash equivalents and other current assets and liabilities approximate fair value because of the short-term nature of these amounts.

Deferred Costs

Pursuant to the Company’s agreement with Echostar, the Company is required to purchase certificates evidencing activation rights in advance of its resale to customers. The Company records certificates that it holds for sale to customers as deferred costs. The cost of these certificates is determined based on the Company’s recent cost of $15 per certificate.

F-6

VMC Satellite, Inc.

Notes to Financial Statements

For the year ended December 31, 2004

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs are charged to expense as incurred. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and the related gain or loss, if any, is reflected in the year of disposal.

Revenue Recognition

Sales consist principally of sales of DISH Network activation and related services through the Company’s website or through its network of affiliates. The Company principally acts as an agent for DISH Network and does not generally own or sell hardware or become involved in installation or service activities. Accordingly, the Company records as revenue only the amount paid by the customer for activation and certain commissions, bonuses, and residuals paid by DISH Network.

Revenue from customers includes sales of certificates evidencing activation rights net of certificate costs. The Company offers a 10 day written refund policy on unused certificates but typically will refund unused certificates for up to four months. The Company records an allowance for refunds based on its actual refund experience. The allowance for certificate refunds was $17,356 at December 31, 2004.

Revenues from DISH Network include certain commissions, bonuses and residuals, some of which are subject to chargeback if the customer deactivates during a period specified in the agreement with Echostar.

The Company has analyzed the financial reporting criteria for sales subject to chargeback and determined that it meets the criteria for recognizing revenue immediately with an allowance for chargebacks. This determination is based on management’s judgment that it can reasonably estimate chargebacks. The reserve for chargebacks is estimated at 6% of the total revenue from those components subject to chargeback for the last six month period less the actual chargebacks on these sales. As a result, as of December 31, 2004, the Company recorded a reserve for chargebacks in the amount of $117,449. If the Company determines that it cannot accurately predict future deactivations, the Company will be required to defer 100% of its sales commissions which are subject to chargeback until the expiration of the chargeback period.

Advertising

The Company expenses advertising costs as they are incurred. The Company’s advertising consists principally of search engine marketing, and was $2,028,439 during 2004.

F-7

VMC Satellite, Inc.

Notes to Financial Statements

For the year ended December 31, 2004

Income Tax Status

The stockholder elected to have the Company taxed as an S Corporation effective as of June 1, 2001. Accordingly, the taxable income of the Company is included in the individual income tax return of the stockholder and no provision or liability for federal or state income taxes has been included in the financial statements.

NOTE C – PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 2004:

Car	$	66,958
Phone system		180,446
Office furniture & equipment		9,605
Computer equipment		40,292
Total cost		297,301
Less accumulated depreciation		(206,301	)
Property and equipment, net	$	91,000

NOTE D – SALES AFFILIATES

The Company has entered into thousands of referral and affiliate agreements to compensate these independent contractors for sales referred to the Company that result in an installation. Commissions are generally paid to affiliates on the 15^th day of the month following the installation. Commissions paid to affiliates for the year ended December 31, 2004, amount to $1,528,807.

NOTE E – RELATED PARTY TRANSACTIONS

The owner and CEO provides certain administrative services to the Company and received no payroll based compensation for services provided to the Company for the year ended December 31, 2004. For the year ended December 31, 2004, the shareholder received distributions totaling $2,773,922.

NOTE F – CONCENTRATIONS

Credit Risk

The Company maintains its cash account with a bank and cash balances are insured by the Federal Deposit Insurance Corporation up to $100,000. As of December 31, 2004, the uninsured portion of the cash balances held at the bank was $1,658,687.

Product and Supplier Risk

The Company generates substantially all of its revenue from the sale of activation and service for the DISH Network under various agreements with Echostar. Any reduction in the market for DISH Network or Echostar’s ability to provide services would result in a significant adverse effect on the Company’s business.

NOTE G – COMMITMENT AND CONTINGENCIES

Office Lease

The Company entered into an agreement to lease office space on October 1, 2003, and the term is for 4 years. The lease is cancelable at the option of the Company with six months written notice. The terms of the lease include base

F-8

VMC Satellite, Inc.

Notes to Financial Statements

For the year ended December 31, 2004

rent, which is $8,144 per month, adjusted annually at an increase of 3% per year and additional rent for the Company’s pro-rata share of utilities and pro-rata share of the increase in insurance, real estate taxes, and Landlord’s mortgage interest to the extent it exceeds 5.20 percent APR. The rent expense for the year ended December 31, 2004 totaled $98,709.

Litigation Matters

In connection with a suit filed in December 2002 against the Company by an ISP provider, the Company agreed to pay $8,000 upon receipt of proper documentation of the claim. The ISP service provider has not provided the documentation or contacted the Company since August 2004.

In December 2002, the Company was sued for breech of contract by an online marketing service provider. The suit claims $55,000 plus interest, fees and costs. The Company has retained legal counsel and the claim is still outstanding at December 31, 2004.

NOTE H – SUBSEQUENT EVENT

On April 26, 2005, the Company completed the sale of substantially all of the non-current and intangible assets of the Company to a publicly traded company. The aggregate consideration paid at closing was approximately $4.3 million in cash and common stock valued at approximately $5.1 million. In addition, the Company may earn an additional consideration if certain targets are met.

F-9

InPhonic, Inc.

Unaudited Pro Forma Condensed Consolidated Financial Information

Introduction

On April 26, 2005, InPhonic, Inc. (“the Company”) completed the acquisition of certain assets and liabilities of VMC Satellite, Inc., (“VMC”) through CAIS Acquisition II, LLC (“CAIS II”), a wholly-owned subsidiary of the Company, pursuant to the terms and conditions of the Asset Purchase Agreement dated April 26, 2005 between VMC, InPhonic, CAIS II and the selling stockholder (“Asset Purchase Agreement”). The aggregate consideration paid at closing for the net assets acquired was approximately $4.3 million in cash and shares of InPhonic common stock having a fair market value as of April 26, 2005 equal to approximately $5.1 million. In addition, the Company has agreed to pay up to an aggregate of $5.1 million in cash and 334,288 shares of InPhonic’s common stock if VMC attains certain EBITDA benchmarks between April 26, 2005 and April 30, 2007. The purchase price of approximately $9.4 million has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair values.

The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2004, and period ended March 31, 2005 have been prepared to give effect to the acquisition as if it had occurred on January 1, 2004 and January 1, 2005, respectively. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2005 has been prepared to give effect to the acquisition as if it had occurred as of March 31, 2005.

The historical consolidated financial statements of VMC have been prepared in accordance with U.S. generally accepted accounting principles.

The unaudited pro forma adjustments are based on preliminary estimates, available information and certain assumptions and may be revised as additional information becomes available. The unaudited pro forma condensed consolidated financial information is not intended to represent what the Company’s financial position or results of operations would have been for any future period. Since the Company and VMC were not under common control or management for any period presented, the unaudited pro forma condensed consolidated financial results may not be comparable to, or indicative of, future performance.

This unaudited pro forma condensed consolidated financial information should be read in conjunction with the historical financial statements of the Company and VMC. The Company’s historical consolidated financial statements can be found in the Company’s Annual Report on Form 10-K filed on March 10, 2005.

The unaudited pro forma condensed consolidated financial information reflects the Accounting Policies that the Company expects to adopt for the acquired business, however, such policies have not been finalized and are subject to change.

PF-1

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2005

(In thousands)

	Historical
	InPhonic			VMC Satellite, Inc		Pro forma Acquisition Adjustment			Pro forma Inphonic
Assets
Current assets:
Cash and cash equivalents	$	84,776		$	1,896	$	(1,896	)(a)	$	80,822
							(3,954	)(a)
Short-term investments		4,967			—		—			4,967
Accounts receivable, net		29,014			506		(506	)(a)		29,014
Inventory, net		15,989			—		—			15,989
Prepaid expenses		2,050			8		(8	)(a)		2,050
Deferred costs and other current assets		2,588			305		(305	)(a)		2,922
							334	(a)
Total current assets		139,384			2,715		(6,335	)		135,764
Restricted cash and cash equivalent		500			—		—			500
Property and equipment, net		6,790			106		(106	)(a)		6,901
							111	(a)
Goodwill		22,791			—		2,167	(a)		24,958
Intangible assets, net		5,745			—		6,650	(a)		12,395
Deposits and other assets		1,785			—		130	(a)		1,915
Total assets	$	176,995		$	2,821	$	2,617		$	182,433
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		20,309			257		(257	)(a)		20,309
Accrued expenses and other liabilities		25,478			184		(184	)(a)		25,828
							350	(a)
Short term capital lease		238			—		—			238
Deferred revenue		14,426			—		—			14,426
Total current liabilities		60,451			441		(91	)		60,801
Long term capital lease		222			—		—			222
Total liabilities		60,673			441		(91	)		61,023
Common stock		331			—		2	(a)		333
Additional paid-in capital		249,448			50		(50	)(a)		254,534
							5,086	(a)
Accumulated deficit		(133,457	)		2,330		(2,330	)(a)		(133,457	)
Total stockholders’ equity		116,322			2,380		2,708			121,410
Total liabilities and stockholders’ equity	$	176,995		$	2,821	$	2,617		$	182,433

See accompanying notes to the unaudited pro forma condensed consolidated financial statements

PF-2

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2004

(In thousands, except share and per share amounts)

		Historical
	��	InPhonic			VMC Satellite, Inc		Pro forma Acquisition Adjustment			Pro forma Inphonic
Revenues:
Activations and services			165,401			10,110					175,511
Equipment			38,799			—					38,799
Total revenues			204,200			10,110		—			214,310
Cost of revenues, excluding depreciation and amortization
Activation and services			24,338			—		—			24,338
Equipment			91,566					—			91,566
Total cost of revenues			115,904			—		—			115,904
Operating expenses:
General and administrative expenses, excluding depreciation and amortization			43,795			3,042		200	(c)		47,037
Sales and marketing expenses, excluding depreciation and amortization			47,527			3,557					51,084
Depreciation and amortization			6,444			60		1,234	(b)		7,738
Investment write-off			150			—					150
Total operating expenses			97,916			6,659		1,434			106,009
Loss from operations			(9,620	)		3,451		(1,434	)		(7,603	)
Other income (expense):
Interest income			536			—					536
Interest expense			(1,155	)		—					(1,155	)
Total other expense			(619	)		—		—			(619	)
Net income / (loss)			(10,239	)		3,451		(1,434	)		(8,222	)
Preferred stock dividends and accretion to preferred redemption value			(22,049	)		—					(22,049	)
Net income / (loss) attributable to common stockholders			(32,288	)		3,451		(1,434	)		(30,271	)
Basic and diluted net loss per share		$	(2.29	)	$	—	$	—		$	(2.12	)
Basic and diluted weighted average shares outstanding			14,074,505			—		195,798	(d)		14,270,303

See accompanying notes to the unaudited pro forma condensed consolidated financial statements

PF-3

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE PERIOD ENDED MARCH 31, 2005

(In thousands, except share and per share amounts)

	Historical					Pro forma Acquisition Adjustment		Pro forma Inphonic
	InPhonic			VMC Satellite, Inc
Revenues:
Activations and services		57,242			2,587				59,829
Equipment		19,365			—				19,365
Total revenues		76,607			2,587	—			79,194
Cost of revenues, excluding depreciation and amortization
Activation and services		5,337			—	—			5,337
Equipment		40,097			—	—			40,097
Total cost of revenues		45,434			—	—			45,434
Operating expenses:
General and administrative expenses, excluding depreciation and amortization		18,109			745	50	(c)		18,904
Sales and marketing expenses, excluding depreciation and amortization		18,406			1,093				19,499
Depreciation and amortization		1,777			16	309	(b)		2,102
Restructuring costs		149			—				149
Total operating expenses		38,441			1,854	359			40,654
Loss from operations		(7,268	)		733	(359	)		(6,894	)
Other income (expense):
Interest income		482			—				482
Interest expense		(208	)		—				(6,273	)
Income tax expense									—
Total other expense		274			—	—			(5,930	)
Net income / (loss)		(6,994	)		733	(359	)		(12,824	)
Net income / (loss) attributable to common stockholders		(6,994	)		733	(359	)		(12,824	)
Basic and diluted net loss per share	$	(0.21	)	$	—			$	(0.39	)
Basic and diluted weighted average shares outstanding		32,901,398			—	195,798	(d)		33,097,196

See accompanying notes to the unaudited pro forma condensed consolidated financial statements

PF-4

InPhonic, Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

Note 1 – Pro Forma Adjustments and Assumptions

The shares issued in the acquisition have been valued in accordance with Emerging Issue Task Force Issue No. 99-12,Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination(“EITF 99-12”). In accordance with EITF 99-12, InPhonic has established that the first date on which the number of InPhonic shares became fixed was April 26, 2005. EITF 99-12 precludes the use of any share prices subsequent to the consummation date of a transaction, and accordingly, InPhonic has valued the transaction using the average closing price of InPhonic’s shares for the two days prior to, two days subsequent to and including the closing date of April 26, 2005. The total purchase price of approximately $9.4 million has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair values on the assumed acquisition date.

The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:

(a) To allocate the purchase price to the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed, including goodwill, and to exclude certain assets and liabilities that were not included in the business combination.

These adjustments are for pro forma presentation purposes only. Fair values are based on financial information as of the April 26, 2005, the acquisition date.

Purchase price:
Cash consideration paid at closing	$	3,954
Purchase price paid at closing in shares of Inphonic common stock		5,088
Estimated acquisition costs and expenses		350
Total consideration	$	9,392

Purchase price allocation:
Tangible net assets acquired	$	575
Affiliate relationships		1,740
Non-compete agreement		310
Technology		90
Domain names		210
Supplier relationship		3,890
Trade name		410
Goodwill		2,167
Total consideration	$	9,392

Tangible assets were valued at their respective carrying amounts as management believes that these amounts approximate their current fair values. The valuation of the identifiable intangible assets acquired was based on a preliminary valuation by an independent appraiser and consists of developed technology, trade names and website domains. Identifiable intangible assets are amortized using estimated useful lives ranging from 2 to 7 years.

PF-5

The excess of the purchase price over the value of the tangible and identifiable intangible assets acquired and liabilities assumed has been recorded as goodwill. The carrying value of this goodwill will be subject to periodic impairment assessment.

(b) To reflect the amortization expense related to identifiable intangible assets associated with the acquisition of VMC.

(c) To adjust for additional administrative expenses due to the acquisition of VMC.

(d) To reflect the impact of the issuance of 195,798 shares of InPhonic common stock as consideration in the business combination.

Basic and diluted loss per share is calculated by dividing the net loss for the period by the weighted average common shares outstanding for the period inclusive of the 195,798 shares issued as consideration in the VMC acquisition. Diluted earnings per share excludes weighted average potential common shares subject to repurchase agreements and employee stock options, as their inclusion would have been anti-dilutive.

PF-6

INDEX TO EXHIBITS

Exhibit No.	Description
Exhibit 2.1†*	Asset Purchase Agreement, dated as of April 27, 2005 between VMC, InPhonic, CAIS II and the selling stockholder.
Exhibit 23.1	Consent of the Reznick Group, P.C.

† Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Securities and Exchange Commission.

* Previously filed with the SEC as an exhibit to the Registrant’s current report on Form 8-K filed on May 2, 2005 and incorporated by reference herein.