UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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 26, 2002
----------
CRD Holdings, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 033-26616 75-2256798
- ---------------------------- ----------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5808 SEPULVEDA BLVD., SUITE 502
VAN NUYS, CALIFORNIA 91411
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (818) 909-7425
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired PAGE
(i) Balance Sheets as of December 31, 2001 and
and June 30, 2002 (unaudited) F-2
(ii) Statements of Operations for the period
August 16, 2001 (inception) to December 31,
2001 and for the six months ended June 30,
2002 (unaudited) F-3
(iii) Statements of Shareholders' Equity for the
period from August 16, 2001 (inception) to
June 30, 2001 F-4
(iv) Statements of Cash Flows for the period from
August 16, 2001 (inception) to December 2001
and for the six months ended June 30, 2002
(unaudited) F-5
2
(c) Exhibits.
The following is a list of exhibits filed as part of this
Current Report on Form 8-K:
Exhibit No. Description
----------- -----------
2.1 Form 8-K, dated as of June 19, 2002.*
2.2 Agreement & Plan of Merger, dated June 12, 2002, by
and among MAII Holdings, Inc., a Texas corporation,
Car Rental Direct, Inc., a Nevada corporation, Gump &
Company, Inc., a Delaware corporation, CRD
Acquisition, Inc., a Nevada corporation, and certain
holders of the outstanding capital stock of Gump.*
* Previously Filed
3
CAR RENTAL DIRECT.COM, INC.
CONTENTS
DECEMBER 31, 2001 AND JUNE 30, 2002 (UNAUDITED)
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
FINANCIAL STATEMENTS
Balance Sheets F-2
Statements of Operations F-3
Statements of Shareholder's Deficit F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-11
4
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Car Rental Direct, Inc.
Van Nuys, California
We have audited the accompanying balance sheets of Car Rental Direct, Inc. as
December 31, 2001, and the related statements of operations, shareholders'
equity, and cash flows for the period from August 16, 2001 (inception) to
December 31, 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Car Rental Direct, Inc. as of
December 31, 2001 and the results of its operations and its cash flows for the
period from August 16, 2001 (inception) to December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
April 3, 2002
F-1
CAR RENTAL DIRECT, INC.
BALANCE SHEETS
JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001
2002 2001
------------ ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including $2,000,000 of restricted cash ................. $ 2,207,710 $ 193,328
Accounts receivable, net of allowance for doubtful accounts of $467,343 and $373,609 1,043,612 693,960
Other receivables, net of allowance for doubtful accounts of $323,682 and $0 ....... 2,155,695 1,129,837
Revenue generating equipment ....................................................... 18,803,088 11,428,698
Prepaid expenses and other current assets .......................................... 156,216 39,879
------------ ------------
Total current assets ......................................................... 24,366,321 13,485,702
Property and Equipment, net ............................................................ 646,854 507,053
Goodwill ............................................................................... 12,230,023 11,535,155
Deposits ............................................................................... 362,704 319,671
------------ ------------
Total assets ................................................................. $ 37,605,902 $ 25,847,581
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Lines of credit .................................................................... $ 16,558,024 $ 9,392,866
Current portion of capital lease obligations ....................................... 23,706 23,706
Accounts payable and accrued expenses .............................................. 2,033,197 1,631,344
Notes payable ...................................................................... 191,517 --
Loan from parent ................................................................... 7,815,860 3,444,364
Loan from officer .................................................................. 225,000 --
------------ ------------
Total current liabilities .................................................... 26,847,304 14,492,280
Capital lease obligations, net of current portion ...................................... 41,792 53,445
------------ ------------
Total liabilities ........................................................... 26,889,096 14,545,725
------------ ------------
Commitments:
Shareholders' Equity
Preferred stock, $0.01 par value, $10,000,000 shares authorized, no shaares issued
or outstanding -- --
Common stock, $0.001 par value, 40,000,000 shares authorized; 8,583,500 and
8,250,000 shares issued and outstanding, respectively .......................... 8,583 8,250
Additional paid-in capital .......................................................... 12,250,471 12,250,804
Accumulated deficit .. .............................................................. (1,542,248) (957,198)
------------ ------------
Total shareholders' equity .................................................. 10,716,806 11,301,856
------------ ------------
Total liabilities and shareholders' equity .................................. $ 37,605,902 $ 25,847,581
============ ============
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
F-2
CAR RENTAL DIRECT, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED),
AND FOR THE PERIOD FROM AUGUST 16, 2001 (inception) TO DECEMBER 31, 2001
For the
Period from
For the August 16, 2001
Six Months Ended (inception) to
June 30, December 31,
2002 2001
---------------- ----------------
(unaudited)
Net revenue ............................................. $ 11,808,343 $ 3,490,182
Cost of revenues ........................................ 7,783,770 2,579,491
---------------- ----------------
Gross profit ............................................ 4,024,573 910,691
Costs and expenses:
Salaries and benefits ................................. 2,424,914 1,121,154
Selling, general and
administrative ..................................... 2,184,709 707,808
---------------- ----------------
Operating loss .................................... (585,050) (918,271)
Provision for income taxes .............................. -- 38,927
---------------- ----------------
Net loss ................................................ $ (585,050) $ (957,198)
================ ================
Net loss per share (basic) .............................. $ (0.07) $ (0.12)
================ ================
Net loss per share (diluted) ............................ $ (0.07) $ (0.12)
================ ================
Weighted average number of common shares (in thousands)
(basic) ................................................. 8,270 8,250
================ ================
Weighted average number of common shares (in thousands)
(diluted) ............................................... 8,270 8,250
================ ================
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
F-3
CAR RENTAL DIRECT, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM AUGUST 16, 2001 (inception) TO JUNE 30, 2002
Common Stock Additional
---------------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
------------ ------------ ------------ ------------ ------------
BALANCE, AUGUST 16,
2001 (INCEPTION) -- $ -- $ -- $ -- $ --
Issuance of founders' shares 8,250,000 8,250 (8,250) -- --
Contributed capital -- -- 12,259,054 -- 12,259,054
NET LOSS -- -- -- (957,198) (957,198)
------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER
31, 2001 8,250,000 8,250 12,250,804 (957,198) 11,301,856
Merger with CRD HOLDINGS,
Inc. (unaudited) 333,500 333 (333) -- --
NET LOSS (UNAUDITED) -- -- -- (585,050) (585,050)
------------ ------------ ------------ ------------ ------------
BALANCE, JUNE 30,
2002 (UNAUDITED) 8,583,500 8,583 12,250,471 (1,542,248) 10,716,806
============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-4
CAR RENTAL DIRECT, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
AND FOR THE PERIOD FROM AUGUST 16, 2001 (inception) TO DECEMBER 31, 2001
2002 2001
------------ ------------
(unaudited)
Cash flows from operating activities:
Net loss ............................................................. $ (585,050) $ (957,198)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Provision for doubtful accounts ..................................... 356,261 373,609
Depreciation and amortization ....................................... 1,912,954 525,049
(Increase) decrease in:
Accounts receivable ............................................. (382,231) (600,734)
Other receivables ............................................... (540,138) (2,019,825)
Prepaid expenses and other current assets ....................... (116,337) 26,551
Deposits ........................................................ (43,033) (20,618)
(Increase) decrease in:
Accounts payable and accrued expenses ............................ 257,639 110,622
------------ ------------
Net cash provided by (used in) operating activities ...................... 860,065 (2,562,544)
Cash flows from investing activities:
Property and equipment purchases .................................... (211,554) (143,099)
Sale of revenue generating equipment ................................ 4,526,813 --
Purchase of revenue generating equipment ............................ (3,336,180) --
Loan from parent .................................................... 2,157,572 4,552,275
Loan from officer ................................................... 225,000 --
------------ ------------
Net cash provided by investing activities ................................. 3,361,651 4,409,176
Cash flows from financing activities:
Payments on line of credit .......................................... (2,253,927) (2,002,048)
Proceeds from notes payable ......................................... 80,000 --
Payments on notes payable ........................................... (21,754) --
Payments on capital lease obligations ............................... (11,653) (16,101)
------------ ------------
Net cash used in financing activities ................................... (2,207,334) (2,018,149)
------------ ------------
Net increase (decrease) in cash and cash equivalents ..................... 2,014,382 (175,517)
Cash and cash equivalents at beginning of period .......................... 193,328 364,845
------------ ------------
Cash and cash equivalents at end of period ................................ $ 2,207,710 $ 193,328
============ ============
Supplemental schedule of noncash investing and financing activities-
revenue generating equipment financed through line of credit ........... $ 11,082,370 $ 1,287,169
revenue generating equipment financed with working capital provided by
a parent ............................................................. $ 2,213,924 $ --
vehicles sold with payment terms ....................................... $ 676,131 $ 1,106,113
SEE NOTES TO THE FINANCIAL STATEMENTS.
F-5
NOTE 1 - ORGANIZATION AND LINE OF BUSINESS
Car Rental Direct, Inc. (the "Company"), was incorporated in the State
of Nevada on September 22, 1999 and is a rental car company that specializes in
renting cars to customers whose personal or corporate vehicle is out of service
for an extended period of time. The Company currently owns and operates 28 daily
rental locations, four satellite locations, and one wholesale used car facility
in California, Arizona and Nevada. The Company facilities are located within
strip malls as well as in free-standing buildings, hotels and car dealerships.
The Company has 170 employees and owns and operates a fleet of approximately
2,300 cars.
The Company uses a wide variety of makes and models of cars for daily
rental purposes, nearly all of which are current year or the previous year's
models. CRD rents cars on a daily, weekend, weekly or monthly basis, with rental
charges computed on a limited or unlimited mileage rate, or on a time rate plus
a mileage charge. The Company's rates vary at different locations depending on
local market, competitive and cost factors, and virtually all rentals are made
utilizing rate plans under which the customer is responsible for gasoline used
during the rental.
NOTE 2 - TRANSACTIONS
On August 16, 2001, the Company entered into an Agreement and Plan of
Merger (the "Agreement"), by and among MAII Holdings, Inc. ("MAII"), a Texas
corporation, MAII Acquisition, Inc. ('Acquisition Corp"), a Nevada corporation
and wholly owned subsidiary of the MAII, and GenesisIntermedia.com, Inc., a
Delaware corporation ("Genesis") and the parent of the Company. Under the terms
of the Agreement, on August 23, 2001 the Company merged into Acquisition Corp.
and became a wholly owned subsidiary of MAII. As part of the merger, MAII
Acquisition, Inc. changed its name to Car Rental Direct, Inc.. In terms of
disclosures related to the filing of this form 8-K, the Company's inception date
has been reset to August 16, 2001, the date of the merger.
The consideration paid by the Company for the acquisition of the
Company was $12,259,054. The consideration was determined by arms-length
negotiations between the parties to the Agreement and Plan of Merger and was
funded from available cash contributed to Acquisition Corp. by MAII.
On May 1, 2002, the Company entered into an agreement ("Asset Purchase
Agreement") to acquire substantially all of the operating assets of a Discount
Rent-A-Car franchisee ("Seller"). The closing is subject to the obtaining of
certain assignments and other conditions. In conjunction with the Asset Purchase
Agreement, the Company has entered into an operating agreement ("Operating
Agreement") with Seller to operate the Seller's business. The Operating
Agreement is effective May 1,2002 and will be terminated upon the closing or
termination of the Asset Purchase Agreement. As of August 26, 2002, the closing
of this acquisition has not yet occurred and the assets and liabilities of the
Seller have not been transferred to the Company. Upon closing of the Asset
Purchase Agreement, the Company expects that between 305 and 405 vehicles will
be transferred to the Company.
On June 12, 2002, CRD Holdings, Inc. ("CRD") acquired 100%, or 260,000
shares, of the outstanding common stock of the Company from the Company's
parent, MAII, in exchange for an aggregate of 8,250,000 shares of newly issued
common stock. For accounting purposes, the transaction has been treated as a
recapitalization of CRD, with the Company as the accounting acquirer (reverse
acquisition), and has been accounted for in a manner similar to a pooling of
interests. The operations of the Company have been included with those of CRD
from the acquisition date. CRD had minimal assets and liabilities at the date of
the acquisition and did not have significant operations prior to the
acquisition. Therefore, no pro forma information is presented. CRD has changed
its year-end to December 31, as part of the merger with the Company.
In connection with the transaction, CRD also amended and restated its
Certificate of Incorporation to: (i) increase the number of authorized shares of
CRD's Common Stock from 20,000,000 to 40,000,000 and to decrease the par value
of CRD's Common Stock from $0.01 per share to $0.001 per share; and (ii)
increase the number of authorized shares of CRD's Preferred Stock from 2,000,000
to 10,000,000, with no change in par value.
F-6
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers cash on hand, deposits in banks, and all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents. The carrying amounts of these assets approximate fair
value due to the short maturity of the investments. On April 19, 2002, the
Company increased its line of credit with a lender and was required to reserve
$2 million as part of the new credit facility. The $2 million used for the
reserve was provided by MAII, the Company's parent and majority shareholder, and
is included on the balance sheet in loan from parent at June 30, 2002. The $2
million reserve is invested in a one month recuring certificate of deposit.
Revenue Recognition
Revenue consists primarily of fees from vehicle rentals and the sale of
related rental products. The Company recognizes revenue over the period in which
the vehicles are rented and recognizes revenue on the sale of the vehicles upon
execution of a bill of sale.
Revenue Generating Equipment
Revenue generating equipment consists of rental vehicles that are
stated at cost, less accumulated depreciation. The straight-line method is used
to depreciate revenue generating equipment to estimated residual values over
periods typically ranging from 44 months to 60 months. However, for the six
month ended June 30, 2002, for certain vehicles purchased from a manufacturer
that as filed for bankruptcy protection, depreciation was accelerated to 33
months to account for the decline in value of those vehicles. In accordance with
industry practice, depreciation expense includes gains and losses on revenue
generating vehicle sales in the ordinary course of business and is included as a
component of cost of revenues in the accompanying statements of operations. At
June 30, 2002, revenue generating equipment was $18,803,088 (unaudited), net of
accumulated depreciation of $3,624,037 (unaudited), compared to revenue
generating equipment of $11,428,698, net of accumulated depreciation of
$4,404,605 at December 31, 2001. Depreciation expense for the six months ended
June 30, 2002 was $1,841,201 (unaudited) and $490,995 for the period from August
16, 2001 (inception) to December 31, 2001.
Property and Equipment
Property and equipment are stated at cost. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful lives as follows:
Computers and software 5 years
Furniture and fixtures 7 years
Building improvements 7 years
Expenditures for maintenance and repairs are charged to operations as
incurred while renewals and betterments are capitalized. Gains or losses on the
sale of property and equipment are reflected in the statements of operations.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of the assets to future net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount exceeds the fair value of the assets. To date, no such
impairment has occurred.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the Company's
financial instruments, including cash and cash equivalents, accounts receivable,
other receivables, and accounts payable and accrued expenses, the carrying
amounts approximate fair value due to their short maturities. The amounts shown
for lines of credit and capital lease obligations also approximate fair value
because current interest rates offered to the Company for debt of similar
maturities are substantially the same or the difference is immaterial.
Self-Insurance Liability
The Company retains up to $35,000 of risk per claim, plus claims
handling expense for its automobile collision liability risks. Costs in excess
of this retained risk per claim are insured under various contracts with
insurance carriers. The ultimate costs of these retained insurance risks are
estimated by management, are based upon historical claims experience, and are
adjusted for current trends and changes in claims handling procedures.
F-7
Income Taxes
The Company accounts for income taxes under the asset and liability
method which requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred income taxes
are recognized for the tax consequences in future years of differences between
the tax bases of assets and liabilities and their financial reporting amounts at
each period-end based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
Earnings (Loss) Per Share
The Company calculates earnings (loss) per share in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." Basic earnings (loss) per share is computed by dividing income (loss)
available to common shareholders by the weighted-average number of common shares
outstanding. Diluted earnings (loss) per share is computed similar to basic
earnings (loss) per share except that the denominator is increased to include
the number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive.
As of June 30, 2002 and December 31, 2001, there were no securities
outstanding that would have an impact on diluted earnings (loss) per share.
Estimates
The preparation of financial statements 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 the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Change in Accounting Principle
In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other
Intangible Assets," which is effective for fiscal years beginning after December
15, 2001. SFAS 142 prohibits the amortization of goodwill and intangible assets
with indefinite useful lives but requires that these assets be reviewed for
impairment at least annually or on an interim basis if an event occurs or
circumstances change that could indicate that their value has diminished or been
impaired. Other intangible assets will continue to be amortized over their
estimated useful lives. Pursuant to SFAS 142, amortization of goodwill and
assembled workforce intangible assets recorded in business combinations prior to
June 30, 2001 ceased effective January 1, 2002. Goodwill resulting from business
combinations completed after June 30, 2001 will not be amortized. The Company
will test goodwill and intangible assets with indefinite lives for impairment
during the fiscal year beginning January 1, 2002 and any resulting impairment
charge will be reflected as a cumulative effect of a change in accounting
principle.
Recent Accounting Pronouncements
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145 updates, clarifies, and simplifies existing
accounting pronouncements. This statement rescinds SFAS No. 4, which required
all gains and losses from extinguishment of debt to be aggregated and, if
material, classified as an extraordinary item, net of related income tax effect.
As a result, the criteria in APB No. 30 will now be used to classify those gains
and losses. SFAS No. 64 amended SFAS No. 4 and is no longer necessary as SFAS
No. 4 has been rescinded. SFAS No. 44 has been rescinded as it is no longer
necessary. SFAS No. 145 amends SFAS No. 13 to require that certain lease
modifications that have economic effects similar to sale-leaseback transactions
be accounted for in the same manner as sale-lease transactions. This statement
also makes technical corrections to existing pronouncements. While those
corrections are not substantive in nature, in some instances, they may change
accounting practice. The Company does not expect adoption of SFAS No. 145 to
have a material impact, if any, on its financial position or results of
operations.
F-8
In June 2002, the FASB issued SFAS No. 146 " Accounting for Costs
Associated with Exit or Disposal Activities." This Statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." This Statement
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Under Issue 94-3 a
liability for an exit cost as defined was recognized at the date of an entity's
commitment to an exit plan. The Company does not expect adoption of SFAS No. 146
to have a material impact, if any, on its financial position or results of
operations.
4. CASH AND CASH EQUIVALENTS
The Company maintains a significant portion of its cash balances with
certain financial institutions. These deposit accounts are insured by the
Federal Deposit Insurance Corporation up to a limit of $100,000 per bank. As of
June 30, 2002 and December 31, 2001, the uninsured portions of cash held at the
banks aggregated to $2,000,000 (unaudited) and $0, respectively. At June 30,
2002, the Company had approximately $2,000,000 invested in a one month recuring
certificate of deposit.
5. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 2002 (Unaudited) and December 31,
2001 consisted of the following:
2002 2001
----------- ----------
(unaudited)
Computers and software $ 489,266 $ 242,230
Furniture and fixtures 195,824 121,230
Building improvements 202,476 177,647
----------- ----------
887,566 541,107
Less accumulated depreciation and amortization 240,712 34,054
----------- ----------
TOTAL $ 646,854 $ 507,053
=========== ===========
Depreciation and amortization expense for the six months ended June 30,
2002 and for the period from August 16, 2001 (inception) to December 31, 2001
was $71,754 (unaudited) and $34,054, respectively.
6. LINES OF CREDIT
In January 2002, the Company discovered an additional $798,269 of lines
of credit outstanding in connection with the acquisition of the Company from
Genesisintermedia.com, Inc., which in turn increased goodwill.
On April 19, 2002, the Company increased its line of credit with a
lender from $10 million to $18 million. Cash of $2 million was restricted for
use as collateral for this line of credit.
As of June 30, 2002 and December 31, 2001, the Company's outstanding
lines of credit were $16,558,024 (unaudited) and $9,392,866, respectively.
Interest expense for the six months ended June 30, 2002 was $379,199 (unaudited)
compared to $289,026 for the period from August 16, 2001 (inception) to December
31, 2001. The lines of credit expire between August 2002 and June 2005.
7. NOTES PAYABLE
At June 30, 2002 and December 31, 2001, notes payable was $191,517
(unaudited) and $0, respectively. The balance at June 30, 2002 is comprised of a
promissory note in the amount of $80,000, bearing no interest, due on demand and
a promissory note with an outstanding balance of $111,517 which bears interest
at 10% per annum, with monthly payments of $22,864 to be paid over a period of
six months, starting on June 1, 2002.
8 - COMMITMENTS
F-9
Leases
The Company leases its office facilities and car rental lots under
various operating lease agreements with third parties. In addition, the Company
also leases certain computer equipment and software under capital leases. The
leases have initial terms of between 18 months and five years and require fixed
monthly payments.
Future minimum lease payments under capital and operating leases as of
June 30, 2002 (unaudited) and December 31, 2001 for the 12 months ended 2002,
2003, 2004, 2005 and 2006, were as follows:
Year Ending Operating Operating Capital
December 31, Leases Leases Leases
- ------------ ----------- ----------- -----------
(unaudited)
2002 $ 835,519 $ 492,501 $ 33,706
2003 604,251 410,160 33,706
2004 472,653 288,957 26,151
2005 360,846 280,697 --
2006 185,362 183,329 --
----------- ----------- -----------
$ 2,458,631 $ 1,655,644 93,563
=========== ===========
Less amount representing interest 16,412
-----------
77,151
Less current portion 23,706
-----------
LONG-TERM PORTION $ 53,445
===========
The Company entered into additional operating leases during May and
June 2002. Accordingly, in the preceding table, future minimum lease payments
were revised to reflect those additional obligations.
Rent expense was $414,910 (unaudited) and $239,748 for the six months
ended June 30, 2002 and for the period from August 16, 2001 (inception) to
December 31, 2001, respectively.
Leased capital assets included in property and equipment at June 30,
2002 and December 31, 2001 consisted of the following:
2002 2001
----------- -----------
(unaudited)
Furniture and fixtures $ 110,011 $ 110,011
Less accumulated depreciation and amortization 55,057 43,404
----------- -----------
TOTAL $ 54,954 $ 66,607
=========== ===========
9. RELATED PARTY TRANSACTIONS
Loans from Parent & Officer
Loans from parent represents money lent to the Company from MAII to
purchase revenue generating equipment and for other working capital. At June 30,
2002 and December 31, 2001, loans from parent was $7,815,860 (unaudited) and
$3,444,364, respectively. At June 30, 2002 and December 31, 2001, loans from
officer was $225,000 (unaudited) and $0, respectively. Loans from parent and
officer bear no interest and are due on demand.
F-10
10. INCOME TAXES
The provision for (benefit from) income taxes differs from the amount
that would result from applying the federal statutory rate for the years ended
December 31, 2001 was as follows:
2001
--------
Statutory regular federal income
benefit rate 34.0%
State income taxes, net of federal
benefit 7.0
Change in valuation allowance (45.2%)
--------
TOTAL (4.2%)
========
The components of the deferred income tax assets (liabilities) for the
period August 16, 2001 (inception) to December 31, 2001 were as
follows:
2001
--------
Federal net operating loss carryforward $323,759
State operating loss carryforward 91,343
Insurance reserve 172,791
Bad debts 160,054
--------
747,947
Valuation allowance 747,947
--------
TOTAL $ --
========
The valuation allowance increased by approximately $748,000 during the year
ended December 31, 2001. As of December 31, 2001, the Company had net operating
loss carryforwards for federal and state income tax purposes of approximately
$748,000 and $748,000, respectively. The net operating loss carryforwards begin
expiring in 2011 and 2021, respectively. The utilization of net operating loss
carryforwards may be limited due to the ownership change under the provisions of
Internal Revenue Code Section 382 and similar state provisions.
11. SHAREHOLDERS' EQUITY
On August 16, 2001, the Company entered into an Agreement and Plan of
Merger (the "Agreement"), by and among MAII Holdings, Inc. ("MAII"), a Texas
corporation, MAII Acquisition, Inc. ('Acquisition Corp"), a Nevada corporation
and wholly owned subsidiary of the MAII, and GenesisIntermedia.com, Inc., a
Delaware corporation ("Genesis") and the parent of the Company. Under the terms
of the Agreement, on August 23, 2001 the Company merged into Acquisition Corp.
and became a wholly owned subsidiary of MAII. As part of the merger, MAII
Acquisition, Inc. changed its name to Car Rental Direct, Inc.. In terms of
disclosures related to the filing of this form 8-K, the Company's inception date
has been reset to August 16, 2001, the date of the merger.
The consideration paid by the Company for the acquisition of the
Company was $12,259,054. The consideration was determined by arms-length
negotiations between the parties to the Agreement and Plan of Merger and was
funded from available cash contributed to Acquisition Corp. by MAII.
On June 12, 2002, CRD Holdings, Inc. ("CRD") acquired 100%, or 260,000
shares, of the outstanding common stock of the Company from the Company's
parent, MAII, in exchange for an aggregate of 8,250,000 shares of newly issued
common stock. For accounting purposes, the transaction has been treated as a
recapitalization of CRD, with the Company as the accounting acquirer (reverse
acquisition), and has been accounted for in a manner similar to a pooling of
interests. The operations of the Company have been included with those of CRD
from the acquisition date. CRD had minimal assets and liabilities at the date of
the acquisition and did not have significant operations prior to the
acquisition. Therefore, no pro forma information is presented. CRD has changed
its year-end to December 31, as part of the merger with the Company.
In connection with the transaction, CRD also amended and restated its
Certificate of Incorporation to: (i) increase the number of authorized shares of
CRD's Common Stock from 20,000,000 to 40,000,000 and to decrease the par value
of CRD's Common Stock from $0.01 per share to $0.001 per share; and (ii)
increase the number of authorized shares of CRD's Preferred Stock from 2,000,000
to 10,000,000, with no change in par value.
F-11
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.
CRD HOLDINGS, INC.
Date: August 26, 2002 By: /s/ DWAYNE J. CHOMYK
-----------------------------------
Dwayne J. Chomyk
Vice President of Finance and Administration
(duly authorized officer)
5
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------
2.1 Form 8-K, dated as of June 19, 2002.*
2.2 Agreement & Plan of Merger, dated June 12, 2002, by and among MAII
Holdings, Inc., a Texas corporation, Car Rental Direct, Inc., a Nevada
corporation, Gump & Company, Inc., a Delaware corporation, CRD
Acquisition, Inc., a Nevada corporation, and certain holders of the
outstanding capital stock of Gump.*
- ----------
* Previously filed.
6