Exhibit 99.1
BANKRUPTCY MANAGEMENT
SOLUTIONS, INC.
Financial Statements
December 31, 2005 and 2004
Page 7 of 30
BANKRUPTCY MANAGEMENT SOLUTIONS, INC.
Index
December 31, 2005 and 2004
- --------------------------------------------------------------------------------
Page(s)
Report of Independent Auditors.................................................9
Financial Statements
Balance Sheets................................................................10
Statements of Operations......................................................11
Statements of Stockholders' Equity (Deficit)..................................12
Statements of Cash Flows......................................................13
Notes to Financial Statements............................................14 - 18
Page 8 of 30
Report of Independent Auditors
To the Board of Directors and Stockholders
Bankruptcy Management Solutions, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' equity and cash flows present fairly, in all material
respects, the financial position of Bankruptcy Management Solutions, Inc. at
December 31, 2005 and December 31, 2004, 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. 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 of these statements 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
/s/ PricewaterhouseCoopers LLP
Irvine, California
March 2, 2006
Page 9 of 30
BANKRUPTCY MANAGEMENT SOLUTIONS, INC.
Balance Sheets
At December 31, 2005 and 2004
- --------------------------------------------------------------------------------
2005 2004
------------- -------------
Assets
Current assets
Cash and cash equivalents .................................... $ 12,676,442 $ 54,946,283
Accounts receivable, trade ................................... 3,901,181 1,780,217
Prepaid expenses and other current assets .................... 407,533 406,420
Income taxes receivable ...................................... -- 10,298
Deferred tax assets .......................................... 116,005 --
------------- -------------
Total current assets ....................................... 17,101,161 57,143,218
------------- -------------
Long-term assets
Property and equipment, net .................................. 2,804,358 3,160,927
Goodwill ..................................................... 1,592,624 1,592,624
Other intangibles, net ....................................... 28,936,105 34,540,788
Deferred financing costs, net ................................ 3,925,299 4,913,575
Deferred tax assets .......................................... 2,236,010 1,875,060
------------- -------------
Total assets ............................................. $ 56,595,557 $ 103,226,192
============= =============
Liabilities and Stockholders' Equity (Deficit)
Current liabilities
Accounts payable ............................................. $ 483,967 $ 625,228
Accrued expenses ............................................. 2,544,606 4,583,659
Income taxes payable ......................................... 1,481,845 --
Dividends payable ............................................ -- 48,046,752
Current portion of long-term debt ............................ 4,200,000 4,200,000
------------- -------------
Total current liabilities .................................. 8,710,418 57,455,639
------------- -------------
Long-term debt, less current portion ............................ 76,582,554 80,807,875
------------- -------------
Commitments ..................................................... -- --
Stockholders' equity
Common stock ................................................. 51,344 51,364
Additional paid in capital ................................... 15,928,519 15,928,539
Accumulated deficit .......................................... (44,677,278) (51,017,225)
------------- -------------
Total stockholders' equity (deficit) ....................... (28,697,415) (35,037,322)
------------- -------------
Total liabilities and stockholders' equity (deficit) ..... $ 56,595,557 $ 103,226,192
============= =============
|
See accompanying notes to financial statements.
Page 10 of 30
BANKRUPTCY MANAGEMENT SOLUTIONS, INC.
Statements of Operations
Years Ended December 31, 2005 and 2004
- --------------------------------------------------------------------------------
2005 2004
------------ ------------
Revenues .................................... $ 38,307,001 $ 19,720,358
Cost of sales ............................... 3,602,308 3,368,439
------------ ------------
Gross profit ................................ 34,704,693 16,351,919
------------ ------------
Other costs and expenses
Selling, general and administrative ...... 6,517,222 5,343,922
Loss on early extinguishment of debt ..... -- 4,040,062
Depreciation and amortization ............ 7,341,432 6,881,844
------------ ------------
Total costs and expenses ............... 13,858,654 16,265,828
------------ ------------
Income from operations ...................... 20,846,039 86,091
Interest expense, net ....................... 10,378,190 5,033,443
------------ ------------
Income (loss) before income taxes ........... 10,467,849 (4,947,352)
Provision (benefit) for income taxes ........ 4,127,902 (1,908,250)
------------ ------------
Net income (loss) ...................... $ 6,339,947 $ (3,039,102)
============ ============
See accompanying notes to financial statements.
Page 11 of 30
BANKRUPTCY MANAGEMENT SOLUTIONS, INC.
Statements of Stockholders' Equity (Deficit)
Years Ended December 31, 2005 and 2004
- --------------------------------------------------------------------------------
Class A Class B Class C Retained Note
Common Stock Common Stock Stock Repurchased Additional Earnings Receivable
-------------------- ------------------------- -------------------- Paid-in (Accumu- From Stock-
Shares Amount Shares Amount Shares Amount Capital lated Deficit) holders Total
---------- --------- ------------ ----------- ----------- -------- ------------ ------------- ------------ -----------
Balance at
December 31, 2003. 2,000 $ 20 4,393,536 $ 43,935 -- $ -- $ 15,871,132 $ 68,629 $ (569,687)$ 15,414,029
Sale of common stock. 82 1 -- -- -- -- 49,999 -- -- 50,000
Sale of common stock. -- -- 741,775 7,418 -- -- 7,418 -- -- 14,836
Repurchase of
common stock ..... -- -- (1,000) (10) -- -- (10) -- -- (20)
Payment of note
receivable ....... -- -- -- -- -- -- -- -- 569,687 569,687
Exchange of
common stock ..... -- -- (4,221,012) (42,210) 4,221,012 42,210 -- -- -- --
Net loss ............ -- -- -- -- -- -- -- (3,039,102) -- (3,039,102)
Dividends declared .. -- -- -- -- -- -- -- (48,046,752) -- (48,046,752)
---------- --------- ------------ ----------- ----------- --------- ------------ ------------ ------------ ------------
Balance at
December 31, 2004. 2,082 21 913,299 9,133 4,221,012 42,210 15,928,539 (51,017,225) -- (35,037,322)
Repurchase of
common stock ..... -- -- (2,000) (20) -- -- (20) -- -- (40)
Net income .......... -- -- -- -- -- -- -- 6,339,947 -- 6,339,947
---------- --------- ------------ ----------- ----------- --------- ------------ ------------ ------------ ------------
Balance at
December 31, 2005. 2,082 $ 21 911,299 $ 9,113 4,221,012 $ 42,210 $ 15,928,519 $(44,677,278) $ -- $(28,697,415)
========== ========= ============ =========== =========== ========= ============ ============ ============ ============
|
See accompanying notes to financial statements.
Page 12 of 30
BANKRUPTCY MANAGEMENT SOLUTIONS, INC.
Statements of Cash Flows
December 31, 2005 and 2004
- --------------------------------------------------------------------------------
2005 2004
------------ ------------
Cash flows from operating activities
Net profit (loss) ............................................................ $ 6,339,947 $ (3,039,102)
Adjustments to reconcile net profit (loss) to net cash provided by
operating activities
Depreciation and amortization ............................................. 8,329,707 7,922,988
Deferred taxes ............................................................ (476,955) (1,914,664)
Increase in debt due to payment in kind interest and original issue
discount accretion ....................................................... 974,679 316,319
Loss on disposal of property and equipment ................................ 11,680 --
Write-off of deferred financing costs and unamortized discount related
to retired debt .......................................................... -- 3,794,095
Changes in operating assets and liabilities
Accounts receivable ..................................................... (2,120,964) (967,791)
Income tax receivable ................................................... 10,298 (10,298)
Prepaid expenses and other current assets ............................... (1,113) (280,583)
Accounts payable ........................................................ (141,261) 400,642
Interest payable ........................................................ 697,897 (80,715)
Accrued expenses and other current liabilities .......................... (2,736,950) 3,452,149
Income taxes payable .................................................... 1,481,845 --
------------ ------------
Net cash provided by operating activities ............................. 12,368,810 9,593,040
------------ ------------
Cash flows from investing activities
Purchases of property and equipment .......................................... (1,399,767) (1,457,074)
Proceeds from disposal of property and equipment ............................. 7,908 --
------------ ------------
Net cash used in investing activities ................................. (1,391,859) (1,457,074)
------------ ------------
Cash flows from financing activities
Payment of dividends ......................................................... (48,046,752) --
Repayment of debt ............................................................ (5,200,000) (1,000,000)
Payment in full of contingent note payable to seller ......................... -- (2,000,000)
Early extinguishment of debt ................................................. -- (31,951,857)
Issuance of debt ............................................................. -- 85,000,000
Increase in deferred financing costs due to new debt ......................... -- (4,913,575)
Issuance of common stock ..................................................... -- 64,836
Purchase of common stock ..................................................... (40) (20)
Payment of subscribed stock receivable ....................................... -- 569,687
------------ ------------
Net cash (used in) provided by financing activities ................... (53,246,792) 45,769,071
------------ ------------
Increase in cash and cash equivalents ................................. (42,269,841) 53,905,037
Cash and cash equivalents
Beginning of year ............................................................ 54,946,283 1,041,246
------------ ------------
End of year .................................................................. $ 12,676,442 $ 54,946,283
============ ============
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest .................................................................. $ 7,773,213 $ 3,723,744
Income taxes .............................................................. 3,119,424 16,660
Noncash financing activity
Dividends declared ........................................................... -- $ 48,046,752
|
See accompanying notes to financial statements.
Page 13 of 30
BANKRUPTCY MANAGEMENT SOLUTIONS, INC.
Notes to Financial Statements
December 31, 2005 and 2004
1. Organization and Summary of Significant Accounting Policies
Description of Business
Bankruptcy Management Solutions, Inc. (the "Company") operated as a
division of a bank from 1984 to 2003. In December 2003 Lincolnshire
Equity Fund II, L.P. joined with the management of Bankruptcy
Management Solutions, Inc. (the "Company") to acquire the business from
JP Morgan Chase for approximately $45 million.
The Company provides technology-based case management solutions to
trustees, law firms, and debtor companies that administer cases in the
federal bankruptcy system.
Basis of Presentation
The accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America.
Cash and Cash Equivalents
The Company classifies cash on hand, deposits in banks, commercial
paper, money market accounts and any other highly liquid investments
with an original maturity of three months or less as cash and cash
equivalents.
Intangible Assets
Intangible assets consist of goodwill, intellectual property, customer
contracts and service agreements. Intellectual property, customer
contracts and service agreements are being amortized on a straight-line
basis over their estimated economic benefit period, ranging from 5 to
15 years.
The Company reviews its goodwill on an annual basis in December and
between annual tests if events or changes in circumstances have
indicated that the assets might be impaired in accordance with the
provisions of Statements of Financial Accounting Standards ("SFAS") No.
142, Goodwill and Intangible Assets.
The Company reviews its other intangibles for impairment whenever
events or changes in circumstances have indicated that the carrying
amount of its assets might not be recoverable.
Revenue Recognition
Revenues are derived through the delivery of bankruptcy management
services to bankruptcy trustees, law firms, and debtor companies. For
its customers, the Company provides hardware, software related
products, and back-office support at no direct charge. For these
services the customers maintain bankruptcy estate deposit accounts at
JP Morgan Chase through a contractual relationship with the Company.
The Company then collects monthly fees based on custodial deposits
maintained by its customers at JP Morgan Chase through a service
agreement with JP Morgan Chase. Revenues are only recognized after the
software related product is installed and deposits are transferred, and
the revenue is earned and estimatable.
Income Taxes
The Company accounts for income taxes using the asset and liability
method to compute the differences between the tax basis of asset and
liabilities and the related financial amounts. Deferred income taxes
are recorded under the asset and liability method of accounting for
income taxes, which requires the recognition of deferred income taxes,
based upon the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences
between the financial statements carrying amounts and the tax basis of
existing assets and liabilities. Valuation allowances are established,
when necessary, to reduce deferred tax assets that are not expected to
be realized.
Use of 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 at the date of the financial statements and reported
amounts of revenues and expenses during the reporting years. Actual
results could differ from those estimates.
Recently Issued Accounting Standards
In December 2004, the FASB issued SFAS No. 123 (revised 2004)
Share-Based Payment or FAS 123R. FAS 123R revises SFAS No. 123
Accounting for Stock-Based Compensation, and supersedes APB No. 25
Accounting for Stock Issued to Employees and related interpretations
and SFAS No. 148 Accounting for Stock-Based Compensation-Transition and
Disclosure. FAS 123R requires compensation cost relating to all
share-based payments to employees to be recognized in the financial
statements based on their fair values in the first interim or annual
Page 14 of 30
reporting period beginning after June 15, 2005. The pro forma
disclosures previously permitted under FAS 123 will no longer be an
alternative to financial statement recognition. As the Company has not
granted any stock options, the Company does not expect adoption of this
statement to have an impact on its financial statements.
In December 2004, the FASB issued SFAS No. 153 Exchanges of Nonmonetary
Assets - an amendment of Accounting Principles Board ("APB") Opinion
No. 29 Accounting for Nonmonetary Transactions. The guidance in APB 29
is based on the principle that exchanges of nonmonetary assets should
be measured based on the fair value of the assets exchanged. The
guidance in that Opinion, however, included certain exceptions to that
principle. SFAS 153 amends APB 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it with
a general exception for exchanges of nonmonetary assets that do not
have commercial substance. A nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. The provisions of SFAS 153
are applicable for nonmonetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005. The adoption of this statement
is not expected to have a material impact on the Company's financial
statements.
In May 2005, the FASB issued Statement of Financial Accounting
Standards No. 154, Accounting Changes and Error Corrections--A
Replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS 154
requires retrospective application to prior periods' financial
statements for changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or the
cumulative effect of the change. SFAS 154 also requires that
retrospective application of a change in accounting principle be
limited to the direct effects of the change. Indirect effects of a
change in accounting principle, such as a change in nondiscretionary
profit-sharing payments resulting from an accounting change, should be
recognized in the period of the accounting change. SFAS 154 also
requires that a change in depreciation, amortization, or depletion
method for long-lived nonfinancial assets be accounted for as a change
in accounting estimate affected by a change in accounting principle.
SFAS 154 is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005. Early adoption
is permitted for accounting changes and corrections of errors made in
fiscal years beginning after the date this Statement is issued.
Management does not believe the adoption of SFAS No. 154 will have a
material impact on the Company's financial position and results of
operations.
Reclassifications
Certain amounts in the prior year have been reclassified to conform to
the current year presentation.
2. Property and Equipment
Property and equipment consist of the followings as of December 31,
2005 and 2004:
2005 2004 Estimated Useful Life
2005 2004 Estimated Useful Life
------------ ------------ -------------------------------------------
Leasehold improvements........................ $ 51,758 $ 10,000 Shorter of 10 years or remainder of lease
Office equipment.............................. 72,321 25,000 5 years
Computer equipment and software............... 5,705,111 4,444,795 3 years
------------ ------------
5,829,190 4,479,795
Accumulated depreciation and amortization..... (3,024,832) (1,318,868)
------------ ------------
$ 2,804,358 $ 3,160,927
============ ============
|
Depreciation expense was $1,736,748 and $1,277,161 for the years ended
December 31, 2005 and 2004, respectively.
3. Intangible Assets
Intangible assets consisted of the following as of December 31, 2005
and 2004:
Estimated Useful Life 2005
----------------------- ---------------------------------------------------
Accumulated
Cost Amortization Net
-------------- --------------- ---------------
Intellectual property............... 5 years $ 21,059,000 $ (8,599,092) $ 12,459,908
Customer lists...................... 15 years 17,522,000 (2,384,938) 15,137,062
Service agreements.................. 8 years 1,798,000 (458,865) 1,339,135
-------------- --------------- ---------------
$ 40,379,000 $ (11,442,895) $ 28,936,105
============== =============== ===============
|
Page 15 of 30
Estimated Useful Life 2004
----------------------- ---------------------------------------------------
Accumulated
Cost Amortization Net
-------------- --------------- ---------------
Intellectual property................ 5 years $ 21,059,000 $ (4,387,292) $ 16,671,708
Customer lists....................... 15 years 17,522,000 (1,216,805) 16,305,195
Service agreements................... 8 years 1,798,000 (234,115) 1,563,885
-------------- --------------- ---------------
$ 40,379,000 $ (5,838,212) $ 34,540,788
============== =============== ===============
|
Amortization expense for the years ended December 31, 2005 and 2004 was
$5,604,683, and for the years ending December 31, is as follows:
2006................................................... $ 5,604,683
2007................................................... 5,604,683
2008................................................... 5,429,191
2009................................................... 1,392,883
2010................................................... 1,392,883
4. Line of Credit and Long-Term Obligations
On December 29, 2004 the Company went through a re-capitalization where
it retired its existing debt of $31,657,331 (net of discount of
$294,526) and assumed new debt of $85,000,000. The Company incurred a
$4,040,062 loss on the early extinguishment of the debt as a result of
the immediate write off of deferred financing costs of $3,499,569
related to the acquisition of the debt, along with prepayment penalties
related to the sub-debt of $245,967 and unamortized discount of
$294,526.
As of December 31, 2005, the Company's credit facility consists of
$52,800,000 of senior term loans, with amortizing principal quarterly
payments of $1,050,000, which began on March 1, 2005, and $27,000,000
in subordinated term loans. Additionally, the Company has available a
$2,500,000 revolving loan. The senior term loans and revolver mature
beginning on December 29, 2009, while the subordinated term loans
mature on December 29, 2012. Interest on the credit facility is
generally based on a spread over the LIBOR rates. The subordinated term
loans also include payment in kind interest at the rate of 3% and 4%.
The credit facility is guaranteed by BMS, LLC and contains financial
covenants related to EBITDA, total debt and interest charges, limits on
capital expenditures, and is collateralized by all assets of the
Company. Principal payments on the senior term loans and the
subordinated loans outstanding at December 31, 2005 are $4,200,000 per
year for the years ending December 31, 2006 through 2008; $3,200,000
for the year ending December 31, 2009; $37,000,000 for the year ending
December 31, 2010; and $27,000,000 thereafter.
As of December 31, 2005, the accrued interest on the long-term debt was
$762,823; no borrowings were outstanding on the revolving loan; and the
Company was in compliance with all covenants.
5. Commitments and Contingencies
The Company has noncancelable operating leases for office space
expiring in April 2010. Additionally, the Company has noncancelable
operating leases for office equipment expiring through July 2009.
Future minimum lease payments during the years ended December 31 are as
follows:
Fiscal year
2006..................................................... $ 275,842
2007..................................................... 280,680
2008..................................................... 288,227
2009..................................................... 294,484
2010..................................................... 98,496
------------
$ 1,237,729
============
Total operating lease expense for the year ended December 31, 2005 was
$233,369.
Page 16 of 30
6. Stockholders' Equity
On December 28, 2004 the stockholders approved an amendment to the
Company's Certificate of Incorporation authorizing 11,020,000 shares of
which (i) 20,000 shares shall be Class A Common Stock, par value $0.01,
(ii) 5,500,000 shares shall be Class B Common Stock, par value $0.01,
and (iii) 5,500,000 shares shall be Class C Common Stock, par value
$0.01. In the event of a liquidation, dissolution or merger of the
company the holders of the Class A Common Stock are entitled to a
preference payment in cash of their original purchase price plus a
cumulative return at a rate of 30% per annum. Further, upon written
notice a holder of Class B Common Stock may convert all or any such
shares in to Class C Common Stock, which resulted in 4,221,012 shares
of Class B common stock converted to Class C common stock.
On December 28, 2004 the Company declared dividends of:
o $9,672.46 per share on all outstanding shares of Class A Common
Stock payable in cash on January 3, 2005 to all stockholders of
record on the close of business on June 15, 2005
o $5.24 per share on all outstanding shares of Class B Common Stock
payable in cash on August 1, 2005 to all stockholders of record
on the close of business on June 15, 2005
o $5.24 per share on all outstanding shares of Class C Common Stock
payable in cash on January 3, 2005 to all stockholders of record
on the close of business on December 31, 2004
o $993,778 to American Capital Financial Services in respect of
warrants if they had been exercised.
7. Employee Benefit Plans
The Company has a defined contribution 401(k) plan covering
substantially all employees. The Company matches 100% of the first 5%
of employee contributions. Contributions were $555,087 and $471,322 for
the years ended December 31, 2005 and 2004, respectively.
8. Income Taxes
At December 31, 2004, the Company had net operating loss carryforwards
for federal income and state franchise tax purposes of approximately
$1,363,000 and $1,705,000, respectively. These carryforwards were
utilized in full in 2005.
Deferred income taxes are recorded under the asset and liability method
of accounting for income taxes, which requires the recognition of
deferred income taxes, based upon the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statements carrying
amounts and the tax basis of existing assets and liabilities.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which the temporary
differences become deductible. Management considers the projected
future taxable income and tax planning strategies in making this
assessment. Based upon the level of historical profitability and
projections for future taxable income, management believes it is more
likely than not the Company will realize the benefits of the deferred
tax assets. Accordingly, no deferred tax asset valuation allowance was
recorded at December 31, 2005.
The components of the income tax provision for the years ended December
31 are as follows:
2005 2004
------------ ------------
Current
Federal ............................. $ 3,689,020 $ 6,414
State ............................... 915,837 --
------------ ------------
4,604,857 6,414
------------ ------------
Deferred
Federal ............................. (376,100) (1,567,867)
State ............................... (100,855) (346,797)
------------ ------------
(476,955) (1,914,664)
------------ ------------
$ 4,127,902 $ (1,908,250)
============ ============
Page 17 of 30
Actual income tax provision differs from the income tax provision
computed by applying the U.S. federal statutory tax rate of 34% to
income before provision for income taxes for operations for the years
ended December 31, 2005 and 2004 as follows:
2005 2004
------------ ------------
Provision at the federal statutory rate ........ $ 3,559,069 $ (1,678,938)
State income taxes, net of federal benefit ..... 537,888 (224,653)
Meals and entertainment ........................ 19,061 17,244
Reversal of payable true up .................... -- (39,553)
True up ........................................ 11,884 17,650
------------ ------------
$ 4,127,902 $ (1,908,250)
============ ============
|
The components of the Company's deferred tax assets (liabilities) at
December 31, 2005 and 2004 are as follows:
2005 2004
------------ ------------
Current deferred tax asset
State taxes .................................... $ 116,005 $ --
------------ ------------
Noncurrent deferred tax asset
Depreciation and amortization .................. 2,236,010 1,221,149
State taxes .................................... -- 68,138
Net operating loss carryforward ................ -- 585,773
------------ ------------
Noncurrent deferred tax asset ............... 2,236,010 1,875,060
------------ ------------
$ 2,352,015 $ 1,875,060
============ ============
|
9. Related Party Transactions
The Company has a management agreement with Lincolnshire Management
Inc., a majority stockholder in the Company. The fees under this
agreement totaled $792,500 and $440,950 for the years ended December
31, 2005 and 2004, respectively. Amounts owed to Lincolnshire
Management Inc. are $46,720 and $10,500 as of December 31, 2005 and
2004, respectively.
The credit and note agreements are with American Capital Financial
Services, Inc. who own approximately 5.5% of the outstanding shares
along with warrants to purchase an additional 2% as of December 31,
2005.
10. Subsequent Events
As of January 1, 2006, the Company incorporated a subsidiary, which is
100% owned by Bankruptcy Management Solutions Inc. The subsidiary has
not commenced operations.
On February 8, 2006, the Company declared dividends of:
o $1.429 per share on all outstanding shares of Class B Common
Stock payable in cash on February 10, 2006 to all stockholders of
record on the close of business on February 9, 2006
o $1.429 per share on all outstanding shares of Class B Common
Stock payable in cash on February 10, 2006 to all stockholders of
record on the close of business on February 9, 2006
o $114,523 to American Capital Financial Services in respect of
warrants if they had been exercised.
Page 18 of 30
