1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 2, 1999
REALTY INFORMATION GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-24531
(Commission File No.)
52-2091509
(I.R.S. Employer Identification No.)
7475 Wisconsin Avenue
Bethesda, MD 20814
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 215-8300
2
Item 7. Financial Statements and Exhibits.
Realty Information Group, Inc. (the "Company") filed a Current Report on
Form 8-K with the Commission on February 2, 1999. At Item 7 of the report, the
Company indicated that it would file audited financial statements of the
acquired business and the Company's pro forma financial information at a later
date. That information follows.
(a) Financial Statements of businesses acquired.
Audited Financial Statements of Jamison Research, Inc. as of and for the
years ended December 31, 1998 and December 31, 1997, which include the
following:
(i) Report of Independent Auditors
(ii) Statements of Operations
(iii) Balance Sheets
(iv) Statements of Stockholders' Deficit
(v) Statements of Cash Flows
(vi) Notes to Consolidated Financial Statements
(b) Pro forma financial information.
Unaudited Pro Forma Condensed Consolidated Financial Statements of Realty
Information Group, Inc. as of December 31, 1998, which include the following:
(i) Introduction to Unaudited Pro Forma Condensed Consolidated
Financial Statements
(ii) Unaudited Pro Forma Condensed Consolidated Statement of
Operations
(iii) Unaudited Pro Forma Condensed Consolidated Balance Sheet
(iv) Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
3
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Realty Information Group, Inc.
We have audited the accompanying balance sheets of Jamison Research, Inc. as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with 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 Jamison Research, Inc., at
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Washington, D.C.
February 5, 1999
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JAMISON RESEARCH, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
------------------------
1997 1998
---------- ----------
Revenues.................................................... $3,664,198 $4,577,927
Costs of revenues........................................... 1,378,946 1,658,072
---------- ----------
Gross margin................................................ 2,285,252 2,919,855
Operating expenses:
Compensation to shareholders................................ 570,476 1,190,384
Selling, general and administrative expenses................ 1,681,687 1,887,110
---------- ----------
2,252,163 3,077,494
---------- ----------
Income (loss) from operations............................... 33,089 (157,639)
Other income (expense):
Interest income............................................. 1,755 --
Other income................................................ 5,883 3,974
Interest expenses........................................... (23,758) (13,237)
Other expense............................................... (18,670) --
---------- ----------
Loss before income taxes.................................... (1,701) (166,902)
Benefit (provision) for income taxes........................ (3,700) 47,700
---------- ----------
Net loss.................................................. $ (5,401) $ (119,202)
========== ==========
Net loss per share -- basic and diluted..................... $ (0.60) $ (13.24)
========== ==========
Weighted average common shares.............................. 9,000 9,000
========== ==========
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JAMISON RESEARCH, INC.
BALANCE SHEETS
DECEMBER 31,
---------------------
1997 1998
-------- ---------
ASSETS
Current assets:
Cash........................................................ $118,550 $ 50,548
Accounts receivable, less allowance for doubtful accounts of
$9,700 and $4,000 as of December 31, 1997 and 1998,
respectively.............................................. 84,730 32,426
Refundable income taxes..................................... 5,600 2,800
Prepaid expenses and other current assets................... 19,205 100
Deferred tax asset.......................................... 126,500 171,000
-------- ---------
Total current assets...................................... 354,585 256,874
Property and equipment:
Furniture and equipment..................................... 239,889 271,881
Computer hardware and software.............................. 265,494 302,063
-------- ---------
505,383 573,944
Accumulated depreciation.................................... (280,949) (372,327)
-------- ---------
224,434 201,617
Capitalized product development cost, net of accumulated
amortization of $61,580 and $91,846 as of December 31,
1997 and 1998, respectively............................... 89,750 59,484
Deposits.................................................... 474 474
-------- ---------
Total assets.............................................. $669,243 $ 518,449
======== =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses....................... $217,133 $ 130,319
Accrued income taxes payable................................ 3,200 --
Deferred revenue............................................ 320,385 404,741
Advances from stockholders.................................. 110,672 --
Bank line of credit......................................... -- 114,912
Current portion of long-term debt........................... 29,442 26,114
-------- ---------
Total current liabilities................................. 680,832 676,086
Long-term debt, net of current portion...................... 37,449 10,603
Stockholders' deficit:
Common stock, $0.10 par value; 500,000 shares authorized;
9,000 issued and outstanding as of December 31, 1997 and
1998...................................................... 900 900
Retained deficit............................................ (49,938) (169,140)
-------- ---------
Total stockholders' deficit............................... (49,038) (168,240)
-------- ---------
Total liabilities and stockholders' deficit............... $669,243 $ 518,449
======== =========
See accompanying notes.
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JAMISON RESEARCH, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
COMMON STOCK TOTAL
---------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT DEFICIT DEFICIT
------ ------ --------- -------------
Balance at December 31, 1996................... 9,000 $900 $ (44,537) $ (43,637)
Net loss..................................... -- -- (5,401) (5,401)
----- ---- --------- ---------
Balance at December 31, 1997................... 9,000 900 (49,938) (49,038)
Net loss..................................... -- -- (119,202) (119,202)
----- ---- --------- ---------
Balance at December 31, 1998................... 9,000 $900 $(169,140) $(168,240)
===== ==== ========= =========
See accompanying notes.
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JAMISON RESEARCH, INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
------------------------
1997 1998
---------- ----------
Operating Activities:
Net loss.................................................... $ (5,401) $(119,202)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation.............................................. 113,681 93,991
Amortization.............................................. 30,266 30,266
Gain on sale of asset..................................... -- (2,709)
Provision for losses on accounts receivable............... 9,686 --
Deferred income taxes..................................... 500 (44,500)
Non-cash compensation to stockholders..................... 27,036 --
Changes in operating assets and liabilities:
Accounts receivable....................................... (10,237) 52,304
Prepaid expenses and other current assets................. (19,205) 19,105
Refundable income taxes................................... 3,200 (400)
Accounts payable and accrued expenses..................... 72,274 (86,815)
Deferred revenue.......................................... 44,518 84,356
--------- ---------
Net cash provided by operating activities.............. 266,318 26,396
Investing Activities:
Purchase of property and equipment.......................... (76,772) (71,919)
Proceeds from disposal of property.......................... -- 3,455
--------- ---------
Net cash used in investing activities.................. (76,772) (68,464)
Financing Activities:
Re-payments of advances from stockholders................... (69,418) (110,672)
Proceeds from bank line of credit........................... -- 114,912
Re-payments of long-term debt............................... (64,864) (30,174)
--------- ---------
Net cash used in financing activities.................. (134,282) (25,934)
--------- ---------
Net increase (decrease) in cash and cash equivalents........ 55,264 (68,002)
Cash at beginning of year................................... 63,286 118,550
--------- ---------
Cash at end of year......................................... $ 118,550 $ 50,548
========= =========
See accompanying notes.
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JAMISON RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
1. ORGANIZATION
Jamison Research, Inc. (the "Company") was incorporated in the state of
Georgia on January 19, 1984. The Company develops and maintains a proprietary
database of commercial real estate information in the Atlanta and Dallas
metropolitan areas using proprietary software that permits access to its
database in the form of a multiple listing directory with sorting and reporting
capabilities. The database and software are distributed to its clients
principally under annual license agreements. The Company also provides various
market specific reports using its database of information which are sold on an
individual and subscription basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the 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 at the
date of the financial statements and the associated amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition
The Company recognizes revenue from the sale of licenses to the database on
a straight line basis over the term of the license agreement which is typically
one year or less. Revenue from market specific reports are recognized when
delivered to the customer.
Property and Equipment
Property and equipment, including leasehold improvements, are stated at
cost and depreciated using the straight-line method over estimated useful lives
of three to seven years. Leasehold improvements are amortized over the lesser of
the related lease term or the useful life.
Capitalized Product Development Costs
Initial costs to develop and produce proprietary software and database
products, including direct labor, contractors, and applicable overhead are
capitalized from the time technological feasibility is determined until product
release. Prior to technological feasibility, such costs are classified as
software development and expensed as incurred. Amortization of capitalized costs
is based on the greater of (a) the ratio of current gross revenues to the sum of
current and anticipated gross revenues, or (b) the straight-line method over the
remaining estimated economic life of the product, typically five years, after
product release.
Concentration of Credit Risk
The Company performs ongoing credit evaluations of its customers' financial
condition and generally does not require collateral. The Company maintains
reserves for credit losses, and such losses have been within management's
expectations. The credit risk in accounts receivable is mitigated by the large
customer base and lack of dependence on individual customers. The carrying
amount of the accounts receivable approximates their fair value.
F-6
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JAMISON RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The company provides for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires recognition of deferred tax assets and liabilities for expected future
tax consequences of events that have been included in the financial statements
or income tax returns. Under this method, deferred tax assets and liabilities
are determined based upon the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. The company recognizes revenue
and expenses on a cash basis purpose for tax purposes while using the accrual
method for book purposes.
Loss Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share." Jamison has no dilutive options, warrants or
convertible securities. All earnings per share amounts for all periods have been
presented to conform to the Statement 128 requirements.
Recent Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "Comprehensive Income",
which is required to be adopted for the year ended December 31, 1998. SFAS 130
requires that an enterprise (a) classify items of other comprehensive income by
their nature in the financial statements and (b) display the accumulated balance
of other comprehensive income separately from retained earnings and additional
paid-in capital in the Statements of Stockholders' Deficit. For all periods
presented, the Company had no items of comprehensive income and, accordingly,
the Statement has no effect on the Company.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments
of an Enterprise and Related Information", which is required to be adopted for
the year ended December 31, 1998. SFAS 131 changes the way public companies
report segment information in annual financial statements and also require those
companies to report selected segment information in interim financial reports to
stockholders. The adoption of SFAS 131 did not have any impact on the Company's
financial statements as the Company has determined that it has only one
reportable segment.
In October 1997, the AICPA issued SOP 97-2, Software Revenue Recognition,
which changes the requirements for revenue recognition effective for
transactions that the Company will enter into beginning January 1, 1998. The
implementation of SOP 97-2 is not expected to have a material effect on the
financial statements of the Company. As of January 1, 1998 the Company adopted
AICPA SOP 97-2, Software Revenue Recognition, which was effective for
transactions that the Company entered into in 1998. Prior years were not
restated. The effect of adopting SOP 97-2 was not material in the financial
statements of the Company. In March 1998, AcSEC issued SOP 98-4, which defers
for one year the implementation of certain provision of SOP 97-2. The issuance
of SOP 98-4 had no effect on the Company. In December 1998, the AICPA issued SOP
98-9, which extends the deferral date of implementation of certain provisions of
SOP 97-2 to 2000 for the Company and amends the method of revenue recognition in
some circumstances. The Company does not anticipate the adoption of this SOP
will have a significant effect on its results of operations or financial
position.
F-7
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JAMISON RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. COMMITMENTS
Operating Leases
The Company leases equipment and office space in Atlanta, Georgia and
Dallas, Texas under non-cancelable operating lease agreements. The leases
generally provide for renewal terms and the Company is required to pay a portion
of common area expenses including maintenance, real estate taxes and other
expense. Rent expense for the years ended December 31, 1997 and 1998 was
$128,529 and $235,014, respectively. As of December 31, 1998, payments due under
non-cancelable operating leases are as follows:
1999........................................................ $235,809
2000........................................................ 166,981
2001........................................................ 142,416
2002........................................................ 3,081
2003 and thereafter......................................... 3,081
--------
$551,368
========
Employment Agreements
During 1991 the Company entered in an employment service termination
agreement with a former employee of the Company whereby the Company is required
to pay the former employee up to $25,000 upon a change in ownership of the
Company. As of December 31, 1998, no amount has been recorded in the financial
statements for this contingency.
In December 1997, the Company entered into a one year employment agreement
with an employee of the Company. Pursuant to this agreement, upon the sale of a
majority of the Company's outstanding shares to a third party, the Company is
required to pay the employee 5.25 % of the amount of the sales price exceeding
$7,500,000 less certain expenses. As of December 31, 1998, no amount has been
recorded in the financial statements for this contingency.
4. RELATED PARTY TRANSACTIONS
During 1996 the Company's two stockholders entered into a personal line of
credit agreement with a bank. During 1996 and 1997 the stockholders used the
proceeds from the line of credit agreement to advance the Company cash to
support operations and expansion. As of December 31, 1997 outstanding advances
due to the stockholders were approximately $111,000. The Company repays
principal and interest (approximately 8.25% annually), directly to the bank on
behalf of the stockholders. In December 1998, the Company repaid the advances
with proceeds from the line of credit (Note 5).
In December 1997, the Company transferred title of two vehicles with a net
book value of approximately $27,000 to the stockholders and recorded non-cash
compensation.
The Company paid interest of approximately $23,800 and $13,237 in 1997 and
1998, respectively.
5. LINE OF CREDIT
In December 1998, the Company entered into a $462,000 line of credit
agreement with a financial institution. The line of credit bears interest at the
bank's prime rate plus 1% (8.75% at
F-8
11
JAMISON RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1998) and has a maturity date of November 30, 1999. Borrowings
under the line are secured by the personal assets and guarantee of the Company's
stockholder's and all business assets of the Company. At December 31, 1998, the
Company is in compliance with the terms and covenants of the line of credit
agreement. At December 31, 1998, approximately $115,000 was outstanding under
the line of credit.
6. INCOME TAXES
The Company accounts for taxes under Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS 109). Under SFAS 109,
deferred tax liabilities and assets are determined based on the difference
between financial statement and tax basis of assets and liabilities using
enacted rates expected to be in effect during the year in which the differences
reverse. Deferred taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and tax purposes. These differences relate principally to reporting on
the cash basis for tax purposes. The Company paid no income taxes in 1997 or
1998.
DECEMBER 31,
--------------------
1997 1998
-------- --------
Deferred tax assets:
Accrual to cash adjustments....................... $154,000 $176,000
Capitalized product development cost.............. (33,500) (24,000)
Other liabilities................................. 6,000 19,000
-------- --------
Net deferred tax assets...................... $126,500 $171,000
======== ========
The provision for income taxes at December 31 consisted of the following:
1997 1998
------ --------
Current................................................ $3,200 $ (3,200)
Deferred............................................... 500 (44,500)
------ --------
Total............................................. $3,700 $(47,700)
====== ========
The Company's provision for income taxes resulted in effective tax rates
that varied from the statutory federal income tax rate as follows:
1997 1998
------- --------
Expected federal income tax benefit at 34%............. $ (600) $(56,800)
State income taxes, net of federal benefit............. (100) (7,600)
Expenses not deductible for tax purposes............... 7,100 16,700
Graduated tax rate difference.......................... (2,700) --
------- --------
$ 3,700 $(47,700)
======= ========
7. NON CASH TRANSACTIONS
The Company enters into arrangements with various vendors and service
providers whereby they provide various office equipment, office space and
services in exchange for licenses to access the Company's commercial real estate
database. As a result of these transactions, the Company recorded property and
equipment of approximately $52,000 and $25,500 in 1997 and 1998, with a
F-9
12
JAMISON RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
corresponding credit to deferred revenue to be recognized in accordance with the
Company's revenue recognition policies. Further, the Company recognized service
revenues and expenses of approximately $53,000 and $117,064 in 1997 and 1998.
The value of the licenses has been determined to equal the fair value of the
equipment or services received and office space used.
8. SUBSEQUENT EVENTS
On January 22, 1999, the Company was acquired by Realty Information Group,
Inc., in exchange for $5.28 million in cash and 448,031 shares of Realty
Information Group, Inc. Common stock.
F-10
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REALTY INFORMATION GROUP, INC.
INTRODUCTION TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements give effect to the acquisitions subsequent to December 31, 1998 by
Realty Information Group, Inc. (the "Company") of the common stock of
LeaseTrend, Inc. ("LTI") and Jamison Research, Inc. ("JRI") in exchange for cash
raised by the Company in its initial public offering on July 1, 1998 and common
stock of the Company.
The unaudited pro forma condensed consolidated balance sheet gives effect
to the acquisitions as if they had occurred on December 31, 1998. The unaudited
pro forma condensed consolidated statement of operations gives effect to the
acquisitions as if they had occurred on January 1, 1998.
The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised, as additional information becomes
available. The pro forma financial information does not necessarily represent
what the Company's financial position or results of operations would actually
have been if such transactions in fact had occurred on those dates or the
results of operations for any future period. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the other financial statements and notes thereto filed with the
Commission.
14
REALTY INFORMATION GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
AS OF DECEMBER 31, 1998
REALTY PRO FORMA
INFORMATION LEASETREND, JAMISON ADJUSTMENTS PRO FORMA
GROUP, INC. INC. RESEARCH, INC. (SEE NOTE 3) COMBINED
----------- ----------- -------------- ------------ -----------
Revenues............................... $13,900,165 $3,444,969 $4,577,927 -- $21,923,061
Cost of revenues....................... 4,561,619 1,310,994 1,658,072 $ 680,000(a) 8,210,685
----------- ---------- ---------- ----------- -----------
Gross margin......................... 9,338,546 2,133,975 2,919,855 (680,000) 13,712,376
Operating expenses..................... 12,864,612 2,432,767 3,077,494 2,090,000(a) 20,464,873
----------- ---------- ---------- ----------- -----------
Income (loss) from operations........ (3,526,066) (298,792) (157,639) (2,770,000) (6,752,497)
Other income (expense)................. 340,653 (433,689) (9,263) 198,622(b) 96,323
Benefit from income taxes.............. -- -- 47,700 (47,700)(c) --
----------- ---------- ---------- ----------- -----------
Net loss............................. $(3,185,413) $ (732,481) $ (119,202) $(2,619,078) $(6,656,174)
=========== ========== ========== =========== ===========
Net loss per share -- basic and
diluted.............................. $ (0.44) $ (0.76)
=========== ===========
Weighted average shares outstanding.... 7,213,037 8,771,072
=========== ===========
See accompanying notes.
15
REALTY INFORMATION GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
REALTY JAMISON PRO FORMA
INFORMATION LEASETREND, RESEARCH, ADJUSTMENTS PRO FORMA
GROUP, INC. INC. INC. (SEE NOTE 3) COMBINED
----------- ----------- -------------- ------------ -----------
ASSETS
Cash and cash equivalents.... $19,666,887 $ 18,266 $ 50,548 $(10,071,409)(d) $ 9,664,292
Accounts receivable, net..... 1,245,579 12,316 32,426 -- 1,290,321
Prepaid expenses and other
current assets............. 325,629 6,786 173,900 (173,800)(d) 332,515
----------- ----------- -------- ------------ -----------
Total current
assets........... 21,238,095 37,368 256,874 (10,245,209) 11,287,128
Property and equipment,
net........................ 2,156,928 142,967 201,617 -- 2,501,512
Capitalized product
development costs, net..... 1,856,873 157,867 59,484 2,582,649(d) 4,656,873
Other assets, net............ 2,097,656 117,615 -- 17,582,385(d) 19,797,656
Deposits..................... 192,060 2,805 474 -- 195,339
----------- ----------- -------- ------------ -----------
Total assets....... $27,541,612 $ 458,622 $518,449 $ 9,919,825 $38,438,508
=========== =========== ======== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued
expenses................... $ 2,691,143 $ 291,958 $130,319 -- $ 3,113,420
Deferred revenue............. 1,647,165 560,463 404,741 -- 2,612,369
Accrued fees and
interest-related parties... -- 1,229,861 -- $ (1,229,861)(d) --
Line of credit............... -- -- 114,912 (114,912)(d) --
Subordinated debt to
partner.................... -- -- -- --
Advances from stockholders... -- 1,428,521 -- (1,428,521)(d) --
Current portion of long-term
debt....................... -- 66,401 26,114 (92,515)(d) --
----------- ----------- -------- ------------ -----------
Total current
liabilities...... 4,338,308 3,577,204 676,086 (2,865,809) 5,725,789
Long-term debt, net of
current portion............ -- -- 10,603 (10,603)(d) --
3,286,822(d)
Stockholders' equity......... 23,203,304 (3,118,582) (168,240) 9,509,415(d) 32,712,719
----------- ----------- -------- ------------ -----------
Total liabilities
and stockholders'
equity........... $27,541,612 $ 458,622 $518,449 $ 9,919,825 $38,438,508
=========== =========== ======== ============ ===========
See accompanying notes.
16
REALTY INFORMATION GROUP, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The historical financial statements included in the unaudited pro forma
condensed consolidated balance sheet and statement of operations were derived
from the separate financial statements of the Company and its subsidiaries LTI
and JRI as of December 31, 1998 and for the year then ended. The related audited
historical financial statements are included elsewhere herein and should be read
in conjunction with these unaudited pro forma condensed consolidated financial
statements.
2. ACQUISITION OF LTI AND JRI
On January 8, 1999, the Company acquired all of the common stock of LTI, a
Cincinnati based provider of commercial real estate information, for $4,500,000
in cash and 566,671 shares of the Company's Common Stock. The transaction was
accounted for as a purchase and the consideration was valued for accounting
purposes at approximately $9,200,000 including acquisition expenses. On January
22, 1999, the Company acquired all of the common stock of JRI, an Atlanta based
provider of commercial real estate information, for $5,284,000 in cash and
448,031 shares of the Company's common stock. The transaction was accounted for
as a purchase and the consideration was valued for accounting purposes at
approximately $10,300,000 including acquisition expenses.
The Company will adjust the historical carrying value of the acquired
assets and liabilities of LTI and JRI to fair market value as discussed below.
The allocation amounts and classifications are estimates, based on the current
operations of LTI and JRI and the recorded book values of assets and liabilities
at December 31, 1998. The actual allocations may vary based on the carrying
value of the acquired assets and liabilities at the respective closing dates.
Working capital and property and equipment accounts of LTI and JRI are recorded
at book value, and represent an increase in amounts allocated to the accounts
shown below of approximately $600,000 and $400,000, respectively. The
approximate allocation of purchase price to capitalized product development
costs and intangible assets (including amounts previously capitalized by LTI and
JRI) is as follows:
ESTIMATED VALUE
-------------------------------------- ESTIMATED
LTI JRI TOTALS LIFE
---------- ----------- ----------- ---------
Capitalized product development
Developed software products......... $ 200,000 $ 200,000 $ 400,000 2 years
Proprietary databases............... 1,100,000 1,300,000 2,400,000 5 years
Customer base............................ 8,100,000 8,800,000 16,900,000 10 years
Other intangible assets.................. 400,000 400,000 800,000 2 years
---------- ----------- -----------
Total.......................... $9,800,000 $10,700,000 $20,500,000
========== =========== ===========
Capitalized product development includes those developed software products
and proprietary databases which are expected to produce revenues currently,
until their conversion by the Company into products with a format consistent
with the Company's products. This effort is expected to take up to 2 years. The
underlying proprietary databases are expected to continue in use beyond the
conversion period.
17
REALTY INFORMATION GROUP, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PRO FORMA ADJUSTMENTS
The pro forma adjustments reflect the consolidation of the Company and its
subsidiaries, LTI and JRI. The adjustments are as follows:
Pro forma condensed consolidated statement of operations:
(a) Estimated charges for amortization of the assets noted above,
amounting to $680,000 to cost of sales for product amortization and
$2,090,000 to operating expenses for the year ended December 31, 1998.
(b) Interest expense on borrowings of the subsidiaries of $448,622 is
eliminated as a result of the repayment of all current and long term debt.
Interest income of $250,000 is eliminated as a result of the cash used to
purchase LTI and JRI from the initial public offering proceeds on July 1,
1997.
(c) Tax benefits of JRI are eliminated due to ongoing operating losses
of the Company.
Pro forma condensed combined balance sheet:
(d) - Cash and cash equivalents. Reduction of cash for a total of
$10,071,409 comprised of amounts paid in cash for LTI and JRI
totalling $9,784,000, expenses of $135,780 and repayment of JRI
debt totalling $151,629;
- Prepaid expenses and other current assets. Deferred tax assets
totalling $173,800 are eliminated;
- Capitalized product development costs, net. Allocation of
$2,800,000 of capitalized product development, less amounts
recorded on LTI and JRI of $157,867 and $59,484;
- Other assets, net. Allocation of $17,700,000 for customer base
and other intangible assets of LTI and JRI, less amounts
recorded on LTI of $117,615.
- Accrued fees and interest and short and long term debt. Accrued
fees and interest, advances from stockholders, and current
portion of long term debt of LTI are repaid by the former
shareholders of LTI from the consideration of the acquisition.
Line of credit, current portion of long term debt and long term
debt of JRI are repaid by the Company at closing.
- Stockholders' equity. The deficits of LTI and JRI, totalling
$3,118,582 and $168,240, respectively, are eliminated for a
total increase in stockholders' equity of $3,286,822. The stock
portion of the consideration totalling $9,509,415 for both LTI
and JRI is recorded.
4. PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING
Pro forma weighted average shares include 1,014,702 shares assumed
outstanding for the full year in connection with the LTI and JRI acquisitions
and 543,333 weighted average shares which reflects the assumed effect of using
cash raised in the initial public offering to acquire these entities on January
1, 1998. Stock options and warrants outstanding have been excluded from the
calculation because their effect is anti-dilutive.
18
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 hereunto duly authorized.
REALTY INFORMATION GROUP, INC.
April 6, 1999 By: /s/ Frank A. Carchedi
--------------------------
Frank A. Carchedi
Chief Financial Officer