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) August 20, 1999
---------------
INTELLIGENT LIFE CORPORATION
------------------------------------------------------------------
(exact name of registrant as specified in chapter)
Florida 0-25681 65-0423422
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
11811 U.S. Highway One
Suite 101
North Palm Beach, Florida 33408
- --------------------------------------------------------------------------------
(zip code)
Registrant's telephone number, including area code: (561) 627-7330
---------------
Not Applicable
--------------
(Former name or former address, if changed since last report)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
The undersigned registrant hereby amends its Form 8-K dated August 20,
1999 by adding Items 7 (a) and 7 (b).
(a) Financial Statements of Business Acquired
The following financial statements of Professional Direct Agency, Inc. are filed
herewith:
Independent Auditors' Report
Balance Sheets at June 30, 1999 and 1998
Statements of Operations for the year ended June 30, 1999 and for
the Period from June 5, 1998 (inception) to June 30, 1998
Statements of Stockholders' Deficit for the year ended June 30,
1999 and for the Period from June 5, 1998 (inception) to June 30,
1998
Statements of Cash Flows for the year ended June 30, 1999 and for
the Period from June 5, 1998 (inception) to June 30, 1998
Notes to Financial Statements
Independent Auditors' Report
The Board of Directors
Professional Direct Agency, Inc.:
We have audited the accompanying balance sheets of Professional Direct Agency,
Inc., as of June 30, 1999 and 1998, and the related statements of operations,
stockholders' deficit, and cash flows for the year ended June 30, 1999 and for
the period from June 5, 1998 (inception) to June 30, 1998. 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 generally accepted auditing
standards. 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 Professional Direct Agency,
Inc. as of June 30, 1999 and June 30, 1998, and the results of its operations
and its cash flows for the year ended June 30, 1999 and for the period from June
5, 1998 (inception) to June 30, 1998 in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Atlanta, Georgia
September 27, 1999
PROFESSIONAL DIRECT AGENCY, INC.
Balance Sheets
June 30, 1999 and June 30, 1998
Assets 1999 1998
------------ -----------
Current assets:
Cash $ 423,273 $ --
Commissions receivable 20,698 --
Prepaid expenses 7,220 --
------------- ----------
Total current assets 451,191 --
Property and equipment, net 395,650 --
Restricted cash under operating lease agreement 129,421 --
------------ ----------
Total assets $ 976,262 $ --
============ ==========
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 109,534 $ --
Accrued expenses 268,603 --
Deferred lease incentive 154,747 --
Current portion of capital lease obligations 12,116 --
------------ ----------
Total current liabilities 545,000 --
Loan payable 3,057,917 76,599
Long term portion of capital lease obligations 30,998 --
------------ ----------
Total liabilities 3,633,915 76,599
------------ ----------
Stockholders' deficit:
Common stock, no par value. Authorized 1,740 shares;
issued and outstanding 200 shares in 1999 and
2 shares in 1998 200,000 2,000
Additional paid-in capital 277,334 --
Accumulated deficit (3,134,987) (78,599)
------------ ----------
Total stockholders' deficit (2,657,653) (76,599)
Commitments and contingencies
------------ ----------
Total liabilities and stockholders' deficit $ 976,262 $ --
============ ==========
See accompanying notes to financial statements.
PROFESSIONAL DIRECT AGENCY, INC.
Statements of Operations
Year ended June 30, 1999 and for the Period from June 5, 1998 (inception) to
June 30, 1998
1999 1998
------------- -----------
Revenue:
Commission income $ 47,068 $ --
Marketing income 1,133 --
------------- -----------
Total revenue 48,201 --
------------- -----------
Cost of operations:
Sales and marketing 1,824,873 --
General and administrative expenses 990,294 78,599
Depreciation and amortization 119,115 --
------------- -----------
Total cost of operations 2,934,282 78,599
------------- -----------
Operating loss (2,886,081) (78,599)
Interest income 6,700 --
Interest expense (177,007) --
------------- -----------
Net loss $ (3,056,388) $ (78,599)
============= ===========
See accompanying notes to financial statements.
PROFESSIONAL DIRECT AGENCY, INC.
Statements of Stockholders' Deficit
Year ended June 30, 1999 and for the Period from June 5, 1998 (inception)
to June 30, 1998
Common stock Additional Total
------------------------ paid-in Accumulated stockholders'
Shares Amount capital deficit deficit
------------------------ --------- -------------- ---------------
Balances at June 5, 1998 (inception) -- $ -- $ -- $ -- $ --
Issuance of common stock 2 2,000 -- -- 2,000
Net loss -- -- -- (78,599) (78,599)
------- ---------- --------- ------------ -------------
Balances at June 30, 1998 2 2,000 -- (78,599) (76,599)
Issuance of common stock 198 198,000 -- -- 198,000
Issuance of warrants in connection
with borrowings under loan agreement -- -- 277,334 -- 277,334
Net loss -- -- -- (3,056,388) (3,056,388)
------- ---------- --------- ------------ -------------
Balance at June 30, 1999 200 $ 200,000 $277,334 $(3,134,987) $ (2,657,653)
======= ========== ========= ============ =============
See accompanying notes to financial statements.
PROFESSIONAL DIRECT AGENCY, INC.
Statements of Cash Flows
Year ended June 30, 1999 and for the Period from June 5, 1998
(inception) to June 30, 1998
1999 1998
------------ -------------
Cash flows from operating activities:
Net loss $(3,056,388) $ (78,599)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 119,115 --
Amortization of warrants 8,533 --
Changes in assets and liabilities:
Commissions receivable (20,698) --
Prepaid expenses (7,220) --
Other assets (129,421) --
Accounts payable 109,534 --
Accrued expenses 268,603 --
Deferred lease incentive (59,520) --
------------ ------------
Net cash used in operating activities (2,767,462) (78,599)
------------ ------------
Cash flows used in investing activities - purchases of
fixed assets (252,584) --
------------ ------------
Cash flows from financing activities:
Capital contributions 198,000 2,000
Borrowings under loan agreement 3,250,119 76,599
Repayment of capital lease obligation (4,800) --
------------ ------------
Net cash provided by financing activities 3,443,319 $ 78,599
------------ ------------
Net increase in cash 423,273 --
Cash at beginning of period -- --
------------ ------------
Cash at end of period $ 423,273 $ --
============ ============
Supplemental disclosure of cash paid during the period for interest $ 2,267 $ --
============ ============
Supplemental schedule of non cash investing and financing activities:
Telephone equipment acquired through
capital lease obligations $ 47,914 $ --
============ ============
Leasehold improvements paid by landlord 214,267 $ --
============ ============
Issuance of warrants in connection with borrowings under
loan agreement $ 277,334 $ --
============ ============
See accompanying notes to financial statements.
Professional Direct Agency, Inc.
Notes to Financial Statements
Year Ended June 30, 1999 and for the Period from June 5, 1998 (Inception) to
June 30, 1998
(1) Description of Business
Professional Direct Agency, Inc. (the "Company") was incorporated under
the laws of the State of Ohio on June 5, 1998.
The Company was created to sell and deliver insurance products to the
consumer. Initially, the Company began as an in-bound, direct response
agency that markets insurance products via the telephone and Internet.
The Company has since expanded into additional outlets for product
delivery and operates as a fulfillment center for banks and insurance
companies.
(2) Summary of Significant Accounting Policies
(a) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, 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. Actual results could
differ from those estimates.
(b) Property and Equipment
Property and equipment are recorded at cost. Depreciation is
computed using the straight-line method over the useful lives of the
assets which is currently estimated to be three years. Leasehold
improvements are amortized over the shorter of their estimated
useful life or the lease term.
(c) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(d) Revenue Recognition
The Company generates revenue primarily from commissions earned
under General Agent's agreements the Company has with various
insurance companies. Revenue is recognized when the insurance policy
is activated by the insurance company.
(e) Advertising Costs
Advertising costs are expensed as incurred. In 1999, the Company
incurred advertising expense of approximately $1,825,000, which is
included in sales and marketing expense. The Company incurred no
advertising costs during the period from June 5, 1998 (inception) to
June 30, 1998.
(f) Fair Value of Financial Instruments
The Company uses financial instruments in the normal course of its
business. The carrying values of commissions receivable, accounts
payable, and accrued expenses approximate fair value due to the
short-term maturities of these assets and liabilities. The Company
estimates that the carrying value of the Company's loan payable and
capital lease obligations approximates fair value based on the
current rates offered to the Company for debt of the same remaining
maturities.
(g) Comprehensive Income
No statements of comprehensive income have been included in the
accompanying financial statements since comprehensive loss and net
loss presented in the accompanying statements of operations would be
the same.
(3) Restricted Cash
The Company has $129,421 classified as restricted stock under an
operating lease agreement at June 30, 1999 relating to an escrow account
established under the terms of the Company's office lease.
(4) Property and Equipment
Property and equipment consisted of the following at June 30, 1999:
Computer equipment and software $ 96,926
Furniture and fixtures 102,630
Leasehold improvements 214,267
Equipment held under capital lease 100,942
-----------------
514,765
Accumulated depreciation and amortization (119,115)
-----------------
$ 395,650
=================
(5) Loan Payable
On April 30, 1999, the Company entered into a "Loan and Warrant Purchase
Agreement" (Agreement) with an insurance company (Lender). Under the
terms of the Agreement, the Company can borrow up to $4,050,000. The loan
bears interest at 10% and is payable quarterly. The first principal
payment is due and payable on March 31, 2003 and is equal to one-eighth
of the outstanding principal amount. Thereafter, principal payments are
due in quarterly installments commencing June 30, 2003 and continuing to
the maturity date of December 31, 2005. The Agreement contains certain
affirmative covenants; as of June 30, 1999, the Company was not in
default of these covenants. The loan is
secured by all accounts, all contract rights, all general intangibles,
all property and equipment, and all cash accounts of the Company.
In connection with the loan, the Company issued the Lender a detachable
warrant to purchase not less than 1,540 common shares at an aggregate
exercise price of not less than $1,800,000 or $1,169 per common share.
The warrant expires March 31, 2006 and is exercisable at any time on or
before the expiration date; however, the warrant may not be exercised
before the earlier of (i) the second anniversary of the date of the loan
or (ii) the acceleration of the loan upon the occurrence of an event of
default. The warrant may become immediately exercisable prior to the
second anniversary upon: (i) an Initial Public Offering; (ii) a change of
control; (iii) a disposition; or (iv) a non-surviving combination. The
fair value of the warrant at the date of issuance was $277,334. The
resulting loan discount is being amortized using the interest method from
the issuance date of the loan through the maturity date of March 31,
2006.
On June 5, 1998, the Company entered into a "Reimbursement Agreement"
with the Lender. Under the terms of the Reimbursement Agreement, the
Company can borrow up to $1,800,000 to fund the working capital needs of
the Company. The Company has to repay the amount borrowed seven days
after it has received sufficient capital to pay its expenses on an
ongoing basis. This Reimbursement Agreement was replaced by the Agreement
discussed above.
(6) Lease Incentives
As part of the operating lease agreement for the Company's offices, the
Landlord agreed to pay for certain leasehold improvements on behalf of
the Company totaling $214,267. Accordingly, the Company has capitalized
these costs and has recorded a deferred lease incentive which the Company
is amortizing over the period of the lease term.
(7) Leases
The Company has an operating lease for its principal office facilities
which expires in June 2001. The Company also has a capital lease for
equipment. Future minimum lease payments under these leases as of June
30, 1999 are as follows:
Capital Operating
Lease Lease
--------- -----------
Year ending June 30:
2000 $ 12,116 72,488
2001 12,116 74,662
2002 12,116 --
2003 12,116 --
2004 4,039 --
-------- ----------
Total minimum lease payments 52,503 $ 147,150
==========
Less amount representing interest (9,389)
-------
Present value of minimum lease payments 43,114
Less current portion of capital lease obligations (12,116)
-------
Long-term portion of capital
lease obligations $ 30,998
=======
Total rent expense was approximately $3,415 and $4,569 for the year
ended June 30, 1999 and for the period from June 5 (inception) to June
30, 1998, respectively, net of amortization of $59,520 deferred lease
incentive in 1999.
(8) Income Taxes
The Company has incurred net operating losses since inception.
Accordingly, the Company has not reflected any benefit of such net
operating loss carryforwards in the accompanying financial statements.
As of June 30, 1999, the Company has net operating loss carryforwards
of approximately $3,135,000, which will be available to offset taxable
earnings during the carryforward period. If not used, these
carryforwards begin to expire in 2018. In addition, changes in
ownership could put limitations on the availability of the net
operating loss carryforward.
(9) Employee Benefit Plan
The Company has a 401(k) Plan that covers all employees who are at
least 18 years old. Employees are eligible to make voluntary
contributions to the Plan of up to 15% of their earnings. The Company
may make discretionary matching contributions under the Plan. In
addition, the Company makes Qualified Non-Elective contributions equal
to 3% of the total compensation of all participants eligible to share
in the allocations. The Company's matching contribution totaled
$10,596 for the year ended June 30, 1999.
(10) Customer Concentration
During the year ended June 30, 1999, approximately 86% of the
Company's revenues were derived from three insurance companies.
(11) Subsequent Event
On August 20, 1999, the Company was acquired by Intelligent Life
Corporation for $290,000 in cash and a $4,350,000 five-year
convertible subordinated note to the insurance company.
(b) Pro Forma Financial Information
The following unaudited pro forma combined condensed financial
statements are filed herewith:
Unaudited Pro Forma Combined Condensed Balance Sheet at June 30,
1999
Unaudited Pro Forma Combined Condensed Statement of Operations
for the Year Ended December 31, 1998
Unaudited Pro Forma Combined Condensed Statement of Operations for
the Six Months Ended June 30, 1999
Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
On August 20, 1999, Intelligent Life Corporation ("ILIF") acquired
Professional Direct Agency, Inc. ("Pivot") for approximately $4,744,000
including acquisition costs. The total consideration paid by ILIF
consisted of $290,000 in cash paid to Pivot's shareholders and a
$4,350,000 five-year convertible subordinated note payable to The Midland
Life Insurance Company, a note holder of Pivot. The acquisition was
accounted for under the purchase method of accounting.
The Unaudited Pro Forma Combined Condensed Balance Sheet as of June 30,
1999 gives effect to the acquisition of Pivot as if it had occurred on
that date. The Unaudited Pro Forma Combined Condensed Statement of
Operations for the year ended December 31, 1998 gives effect to the
acquisition as if it had occurred on January 1, 1998 and is based on the
historical results of operations of ILIF for the year ended December 31,
1998 and for Pivot for the twelve months ended June 30, 1999 (Pivot began
operations on June 5, 1998). The Unaudited Pro Forma Combined Condensed
Statement of Operations for the six months ended June 30, 1999 gives
effect to the acquisition as if it had occurred on January 1, 1998 and is
based on the historical results of operations of ILIF and Pivot for the
six months ended June 30, 1999. The Unaudited Pro Forma Combined
Condensed Balance Sheet and Statements of Operations and the accompanying
notes should be read in conjunction with, and are qualified by, the
historical financial statements of Pivot and the notes thereto included
in this filing and by the historical financial statements of ILIF and the
notes thereto included in ILIF's Transition Report on Form 10-K for the
transition period from July 1, 1998 to December 31, 1998.
The unaudited pro forma financial information has been prepared by ILIF
and all calculations are based on assumptions deemed appropriate by ILIF.
These assumptions are set forth in the Notes to Unaudited Pro Forma
Combined Condensed Financial Statements.
The unaudited pro forma financial information is intended for
informational purposes only and is not necessarily indicative of the
future financial position or future results of operations of the
consolidated company after the acquisition of Pivot, or of the financial
position or results of operations of the consolidated company that would
have actually occurred had the acquisition of Pivot been effected on
January 1, 1998.
Intelligent Life Corporation
Unaudited Pro Forma Combined Condensed Balance Sheet
June 30, 1999
Pro Forma
---------------------------------
Intelligent Life
Corporation Pivot Adjustments Combined
----------- ----- ----------- --------
Assets
Cash and cash equivalents $39,397,886 $ 423,273 (A) $ (290,000) $39,531,159
Accounts receivable, net 1,040,888 20,698 1,061,586
Other current assets 750,711 7,220 757,931
----------- ---------- -----------
Total current assets 41,189,485 451,191 41,350,676
Furniture, fixtures and equipment, net 1,328,461 395,650 1,724,111
Restricted cash under operating lease agreement - 129,421 129,421
Goodwill and intangible assets, net 83,498 - (D) 4,343,927 4,427,425
----------- ---------- ----------- -----------
Total assets $42,601,444 $ 976,262 $ 4,053,927 $47,631,633
=========== ========== =========== ===========
Liabilities and Stockholders' Equity (Deficit)
Accounts payable $ 1,514,697 $ 109,534 $ $ 1,624,231
Accrued stock compensation expense 488,072 - 488,072
Other accrued expenses 995,729 268,603 (B) 104,191 1,368,523
Deferred revenue 554,203 - 554,203
Deferred lease incentive - 154,747 154,747
Current portion of capital lease obligations 201,857 12,116 213,973
Other current liabilities 109,644 - - 109,644
----------- ---------- ----------- -----------
Total current liabilities 3,864,202 545,000 104,191 4,513,393
Loan payable - 3,057,917 (A) 4,350,000 4,350,000
(C) (3,057,917)
Long-term portion of capital lease obligations 353,744 30,998 - 384,742
----------- ---------- ----------- -----------
Total liabilities 4,217,946 3,633,915 1,396,274 9,248,135
Stockholders' equity (deficit) 38,383,498 (2,657,653) (C) 2,657,653 38,383,498
----------- ---------- ----------- -----------
Total liabilities and stockholders' equity (deficit) $42,601,444 $ 976,262 $ 4,053,927 $47,631,633
=========== ========== =========== ===========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
15
Intelligent Life Corporation
Unaudited Pro Forma Combined Condensed Statement of Operations
Year Ended December 31, 1998
Pro Forma
--------------------------------
Intelligent Life
Corporation Pivot Adjustments Combined
----------- ----- ----------- --------
Revenue:
Online publishing $ 2,582,444 $ - $ - $ 2,582,444
Print publishing and licensing 3,039,085 - 3,039,085
Other - 48,201 48,201
------------- ------------ -------------
Total revenue 5,621,529 48,201 5,669,730
------------- ------------ -------------
Cost of operations:
Online publishing 1,519,755 - 1,519,755
Print publishing and licensing 2,104,960 - 2,104,960
Sales 1,365,110 - 1,365,110
Marketing 432,427 1,824,873 2,257,300
Product research 1,638,592 - 1,638,592
General and administrative expenses 1,839,594 990,294 2,829,888
Depreciation and amortization 140,069 119,115 259,184
Goodwill amortization - - (B) 1,447,976 1,447,976
Noncash stock based compensation 757,563 - - 757,563
------------- ------------ ------------- -------------
9,798,070 2,934,282 1,447,976 14,180,328
------------- ------------ ------------- -------------
Loss from operations (4,176,541) (2,886,081) (1,447,976) (8,510,598)
------------- ------------ ------------- -------------
Other income (expense):
Interest income 36,006 6,700 42,706
Interest expense (18,649) (177,007)(A) 166,208 (464,448)
(C) (435,000)
Other 185,588 - - 185,588
------------- ------------ ------------- -------------
202,945 (170,307) (268,792) (236,154)
------------- ------------ ------------- -------------
Loss before income taxes (3,973,596) (3,056,388) (1,716,768) (8,746,752)
Income taxes - - - -
------------- ------------ ------------- -------------
Net loss (3,973,596) (3,056,388) (1,716,768) (8,746,752)
Accretion of Convertible Series A and
Series B preferred stock to redemption value (4,438,141) - - (4,438,141)
------------- ------------ ------------- -------------
Net loss applicable to common stock $ (8,411,737) $ (3,056,388) $ (1,716,768) $ (13,184,893)
============= ============ ============= =============
Basic and diluted net loss per share $ (2.14) $ (3.36)
============= =============
Weighted average shares outstanding used in
basic and diluted per-share calculation 3,925,597 3,925,597
============= =============
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
16
Intelligent Life Corporation
Unaudited Pro Forma Combined Condensed Statement of Operations
Six Months Ended June 30, 1999
Pro Forma
------------------------------------
Intelligent Life
Corporation Pivot Adjustments Combined
----------- ----- ----------- --------
Revenue:
Online publishing $ 3,295,685 $ - $ - $ 3,295,685
Print publishing and licensing 1,742,536 - 1,742,536
Other - 37,567 37,567
------------ ----------- ------------
Total revenue 5,038,221 37,567 5,075,788
------------ ----------- ------------
Cost of operations:
Online publishing 1,616,998 - 1,616,998
Print publishing and licensing 1,190,970 - 1,190,970
Sales 1,283,392 - 1,283,392
Marketing 2,700,755 1,227,380 3,928,135
Product research 1,227,978 - 1,227,978
General and administrative expenses 1,738,107 679,366 2,417,473
Depreciation and amortization 176,535 65,979 242,514
Goodwill amortization - - (B) 723,988 723,988
Noncash stock based compensation 2,618,867 - - 2,618,867
------------ ----------- ------------ ------------
12,553,602 1,972,725 723,988 15,250,318
------------ ----------- ------------ ------------
Loss from operations (7,515,381) (1,935,991) (723,988) 10,174,527
------------ ----------- ------------ ------------
Other income (expense):
Interest income 249,450 4,521 253,971
Interest expense (40,023) (118,429) (A) 116,162 (259,790)
(C) (217,500)
Noncash financing charge (2,656,000) - (2,656,000)
Other 10,457 - - 10,457
------------ ----------- ------------ ------------
(2,436,116) (113,075) (101,338) (2,651,362)
------------ ----------- ------------ ------------
Loss before income taxes (9,951,497) (2,049,066) (825,326) (12,825,889)
Income taxes - - - -
------------ ----------- ------------ ------------
Net loss (9,951,497) (2,049,066) (825,326) (12,825,889)
Accretion of Convertible Series A and
Series B preferred stock to redemption
value (2,281,000) - - (2,281,000)
------------ ----------- ------------ ------------
Net loss applicable to common stock $(12,232,497) $(2,049,066) $ (825,326) $(15,106,889)
============ =========== ============ ============
Basic and diluted net loss per share $ (1.84) $ (2.27)
============ ============
Weighted average shares outstanding used in
basic and diluted per-share calculation 6,661,558 6,661,558
============ ============
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
17
Intelligent Life Corporation
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
Note 1 - Basis of Presentation
The Unaudited Pro Forma Combined Condensed Balance Sheet as of June 30,
1999 has been prepared to reflect the acquisition of Professional Direct Agency,
Inc. ("Pivot") by Intelligent Life Corporation ("ILIF") as if the acquisition
had occurred on June 30, 1999. The Unaudited Pro Forma Combined Condensed
Statement of Operations for the year ended December 31, 1998 gives effect to the
acquisition as if it had occurred on January 1, 1998 and is based on the
historical results of operations of ILIF for the twelve months ended December
31, 1998 and the historical results of operations of Pivot for the twelve months
ended June 30, 1999 (Pivot began operations on June 5, 1998). If the operations
of Pivot were to be brought to within 93 days of ILIF's fiscal year, less than
twelve months of Pivot's results of operations would be included in the
Unaudited Pro Forma Combined Condensed Statement of Operations. The following
information is provided based on Pivot's historical results of operations for
the period from June 5, 1998 (inception) through March 31, 1999 and ILIF's
historical results of operations for the twelve months ended December 31, 1998.
Total revenue $ 5,629,111
Cost of operations 13,291,503
Loss from operations (7,662,392)
Net loss (7,892,434)
Net loss applicable to common stock (12,330,575)
Basic and diluted loss per share $ (3.14)
Weighted average shares outstanding 3,925,597
There were no significant differences in the accounting policies of ILIF
and Pivot for the periods presented.
Note 2 - Purchase Accounting
On August 20, 1999, Intelligent Life Corporation ("ILIF") acquired
Professional Direct Agency, Inc. ("Pivot") for approximately $4,744,000
including acquisition costs. The total consideration paid by ILIF consisted of
$290,000 in cash paid to the Pivot shareholders and a $4,350,000 five-year
convertible subordinated note payable to The Midland Life Insurance Company, a
note and warrant holder of Pivot. The acquisition was accounted for under the
purchase method of accounting. The net assets acquired were assumed to be at
fair market value. The excess of the purchase price over the fair value of the
net assets acquired was recorded as goodwill and will be amortized over three
years, the expected benefit period. The pro forma adjustments to the Unaudited
Pro Forma Combined Condensed Statements of Operations reflect amortization of
goodwill for the periods presented assuming the acquisition occurred at January
1, 1998. The value of goodwill at January 1, 1998 would have been approximately
$4,344,000.
Note 3 - Pro Forma Adjustments
The following adjustments were made to the historical balance sheets to
arrive at the Unaudited Pro Forma Combined Condensed Balance Sheet at June 30,
1999:
18
(A) Record the payment of cash and the issuance of the convertible subordinated
note payable to the former Pivot shareholders and to the note and warrant
holder.
(B) Record acquisition related expenses.
(C) Eliminate Pivot's stockholders' equity accounts and the loan payable to
the former note and warrant holder.
(D) Record excess of purchase price over the fair value of the net assets
acquired as goodwill.
The following adjustments were made to the historical statements of
operations to arrive at the Unaudited Pro Forma Combined Condensed Statements of
Operations for the year ended December 31, 1998 and for the six months ended
June 30, 1999:
(A) Eliminate interest expense on the loan payable to the former note and
warrant holder.
(B) Goodwill amortization.
(C) Interest expense on convertible subordinated note payable to the former
note and warrant holder.
19
(c) Exhibits
2.1 Stock Purchase Agreement, dated August 20, 1999, by and between
Intelligent Life Corporation, the shareholders of Professional
Direct Agency, Inc. and The Midland Life Insurance Company. *
99.1 Text of Press Release of Intelligent Life Corporation dated
August 23, 1999. *
- --------------------------------------------------------------------------------
* Previously filed with Form 8-K dated August 20, 1999.
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.
INTELLIGENT LIFE CORPORATION
/s/ Robert J. DeFranco
----------------------
Date: November 2, 1999 Robert J. DeFranco
Vice President - Finance and Chief Accounting
Officer
20