<PAGE> 1
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): November 1, 1997
EXECUSTAY CORPORATION
---------------------------------------------------
(Exact name of registrant specified in its charter)
Maryland 000-22941 52-2042280
- -------- --------- ----------
(State or other (Commission file number) IRS employer
jurisdiction of incorporation) identification No.)
7595 Rickenbacker Drive, Gaithersburg, Maryland 20879
-----------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (301) 948-4888
---------------
1
<PAGE> 2
The undersigned registrant hereby amends its Current Report on Form
8-K, for an event which occurred on November 1, 1997.
Item 2. Acquisition or Disposition of Assets
This item has not been amended from the registrant's Current Report
on Form 8-K, dated November 1, 1997 and has been included herein for
convenience of reference only.
On November 1, 1997, ExecuStay Corporation of America (the "Buyer"),
a wholly-owned subsidiary of ExecuStay Corporation ("ExecuStay"),
purchased all of the outstanding capital stock of Boland Corporate
Housing, Inc. ("Boland Corporation") from Ellen Boland and William
Boland (together referred to as the "Sellers") pursuant to a Stock
Purchase Agreement (the "Stock Purchase Agreement") among the Buyer,
ExecuStay, the Sellers, and Boland Corporation. As a result of this
acquisition, Buyer obtained all of Boland Corporation's assets and
liabilities, including rights under and to Boland Corporation's
ongoing leases and contracts. Prior to this transaction, ExecuStay
and the Buyer were not affiliated with the Sellers or Boland
Corporation and the Stock Purchase Agreement was negotiated at arms'
length. Boland Corporation's purchase price was determined through
negotiations by the parties. The consideration for acquisition of
Boland Corporation was $8,248,333, consisting of 186,000 unregistered
shares of ExecuStay's common stock and $6,304,752 in cash. The total
purchase price is subject to a post-closing adjustment to be paid no
later than March 1, 1998, and which is based upon Boland
Corporation's 1997 adjusted earnings before interest and taxes and
a final determination of Boland Corporation's tangible net book
value as of the closing date. The cash used in the acquisition came
from cash and investments on hand.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial Statements of Business Acquired
Report of Independent Auditors, dated December 19, 1997.
The audited balance sheets of Boland Corporate Housing,
Inc. as of December 31, 1996 and September 30, 1997 and
the related statements of operations, changes in
stockholder's equity, and cash flows for the year ended
December 31, 1996, and the nine months ended September 30,
1997.
(b) Pro Form Condensed Financial Information
Unaudited pro forma condensed consolidated balance sheet
of ExecuStay Corporation and subsidiaries as if the
acquisition had occurred on September 30, 1997.
Unaudited pro forma condensed consolidated statement of
operations of ExecuStay Corporation and subsidiaries for
the year ended December 31, 1996 and the nine months
ended September 30, 1997 as if the acquisition had been
completed at the beginning of the respective periods.
2
<PAGE> 3
<TABLE>
<CAPTION>
(c) Exhibits
Exhibit No. Description Method of Filing
<S> <C> <C>
2.1 Stock Purchase Agreement by and (1)
between ExecuStay Corporation of
America, ExecuStay Corporation and
Boland Corporate Housing, Inc., Ellen
Boland and William Boland, dated as
of November 1, 1997.
23.1 Consent of Albrecht, Viggiano, Filed herewith
Zureck, & Company, PC.
99.1 Audited Financial Statements of Filed herewith
Boland Corporate Housing, Inc.
for the fiscal year ended
September 30, 1997.
99.2 Unaudited pro forma condensed consolidated Filed herewith
balance sheet of ExecuStay Corporation and
subsidiaries as if the acquisition had occurred
on September 30, l997.
Unaudited pro forma condensed consolidated
statement of operations of ExecuStay
Corporation and subsidiaries
for the year ended December 31, 1996
and nine months end September 30, 1997
as if the acquisition had been completed at
the beginning of the respective periods.
</TABLE>
(1) Incorporated by reference to the Registrant's Current Report of
Form 8-K, dated November 1, 1997.
3
<PAGE> 4
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.
Date: January 13, 1998 ExecuStay Corporation
/s/ GARY R. ABRAHAMS
Gary R. Abrahams
President and Chief Executive Officer
4
<PAGE> 5
INDEX TO EXHIBITS
Exhibits
Number Item
2.1 Stock Purchase Agreement by and between ExecuStay *
Corporation of America, ExecuStay Corporation and
Boland Corporate Housing, Inc., Ellen
Boland and William Boland, dated as of November 1, 1997.
23.1 Consent of Albrecht, Viggiano, Zureck, & Company, PC.
99.1 Audited Financial Statements of Boland Corporate Housing, Inc. for
the fiscal year ended September 30, 1997.
99.2 Unaudited pro forma condensed consolidated balance sheet of
ExecuStay Corporation and subsidiaries as if the acquisition had
occurred on September 30, 1997.
Unaudited pro forma condensed consolidated statement of operations
of ExecuStay Corporation and subsidiaries for the year ended
December 31, 1996 and nine months end September 30, 1997 as if
the acquisition had been completed at the beginning of the
respective periods.
* Incorporated by reference to the Registrant's Current Report of Form
8-K, dated November 1, 1997.
5
<PAGE> 1
Exhibit 23.1
Consent of Albrecht, Viggiano, Zureck & Company, P.C.
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in this Form 8-K.
/s/ ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C.
Albrecht, Viggiano, Zureck & Company, P.C.
1
<PAGE> 1
EXHIBIT 99.1
BOLAND CORPORATE HOUSING, INC.
FINANCIAL STATEMENTS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
---------
<S> <C>
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
FINANCIAL STATEMENTS
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Statements of Changes in Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . F-5
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
</TABLE>
F-1
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
ExecuStay Corporation
Gaithersburg, Maryland
We have audited the accompanying balance sheets of Boland Corporate Housing,
Inc. as of December 31, 1996 and September 30, 1997 and the related statements
of operations, changes in stockholders' equity, and cash flows for the year
ended December 31, 1996, and the nine months ended September 30, 1997. 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 Boland Corporate Housing, Inc.
as of December 31, 1996 and September 30, 1997 and the results of its
operations and its cash flows for the year ended December 31, 1996, and the
nine months ended September 30, 1997, in conformity with generally accepted
accounting principles.
Hauppauge, New York
December 19, 1997
/s/ ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C.
F-2
<PAGE> 4
BOLAND CORPORATE HOUSING, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
----------------- -----------------
<S> <C> <C>
ASSETS
Cash $ 626,365 $ 592,098
Accounts receivable, net 1,082,260 1,984,811
Due from affiliate -0- 48,710
Prepaid expenses 115,290 144,650
Property and equipment, net 42,833 213,552
Other assets 437,379 790,456
----------------- -----------------
Total assets $ 2,304,127 $ 3,774,277
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable to bank $ 161,140 $ 326,150
Accounts payable and accrued liabilities 479,265 737,267
Loan payable to stockholder 1,168,365 1,515,854
Security deposits payable 129,633 180,362
Income taxes payable 16,896 65,321
----------------- -----------------
Total liabilities 1,955,299 2,824,954
----------------- -----------------
Stockholders' equity:
Common stock, $.01 par value;
500 shares authorized, 100 shares issued and outstanding 1 1
Additional paid-in capital 39,999 39,999
Retained earnings 308,828 909,323
----------------- -----------------
Total stockholders' equity 348,828 949,323
----------------- -----------------
Total liabilities and stockholders' equity $ 2,304,127 $ 3,774,277
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 5
BOLAND CORPORATE HOUSING, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
1996 1997
----------------- -----------------
<S> <C> <C>
Revenue:
Interim housing revenue $ 7,689,071 $ 10,631,115
----------------- -----------------
Total revenue 7,689,071 10,631,115
Operating costs and expenses:
Cost of interim housing revenue 6,608,524 8,825,294
Personnel and payroll costs 458,556 513,873
Occupancy costs 12,157 6,168
Other operating costs 370,199 420,469
----------------- -----------------
Total operating costs and expenses 7,449,436 9,765,804
----------------- -----------------
Earnings from operations 239,635 865,311
Other income (expenses):
Consulting and referral fees 100,281 45,225
Interest expense, net of interest income (78,015) (120,045)
Loss on disposal of property and equipment -0- (4,131)
----------------- ------------------
Total other income (expenses) 22,266 (78,951)
----------------- -----------------
Income before provision for income taxes 261,901 786,360
Provision for income taxes 21,384 85,865
----------------- -----------------
Net income $ 240,517 $ 700,495
================= =================
Net income per share $ 2,405 $ 7,005
================= =================
Weighted average shares outstanding 100 100
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 6
BOLAND CORPORATE HOUSING, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 $ 1 $ 39,999 $ 68,311 $ 108,311
Net income 240,517 240,517
----------------- ----------------- ----------------- -----------------
Balance at December 31, 1996 1 39,999 308,828 348,828
Net income 700,495 700,495
Distributions (100,000) (100,000)
----------------- ----------------- ----------------- -----------------
Balance at September 30, 1997 $ 1 $ 39,999 $ 909,323 $ 949,323
================ ================= ================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 7
BOLAND CORPORATE HOUSING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
1996 1997
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 240,517 $ 700,495
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation 34,944 12,808
Loss on disposition of fixed assets -0- 4,131
Provision for doubtful accounts 1 34,000
Changes in assets and liabilities:
Accounts receivable (899,336) (936,551)
Prepaid expenses and other assets (352,936) (382,437)
Accounts payable and accrued liabilities 363,579 258,002
Income taxes payable 6,657 48,425
Security deposits payable 44,842 50,729
----------------- -----------------
Net cash used in operating activities (561,733) (210,398)
----------------- -----------------
Cash flows from investing activities:
Purchases of property and equipment (38,570) (195,705)
Proceeds from sale of equipment -0- 8,047
Increase in due from affiliate -0- (48,710)
----------------- -----------------
Net cash used in investing activities (38,570) (236,368)
----------------- -----------------
Cash flows from financing activities:
Net borrowings on short-term bank notes 75,000 175,000
Payments on long-term bank note (13,320) (9,990)
Net proceeds from stockholder loan 1,143,365 347,489
Net payments to affiliate (269,342) -0-
Distributions to stockholders -0- (100,000)
----------------- -----------------
Net cash provided by financing activities 935,703 412,499
----------------- -----------------
Net increase (decrease) in cash 335,400 (34,267)
Cash at beginning of period 290,965 626,365
----------------- -----------------
Cash at end of period $ 626,365 $ 592,098
================= =================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes $ 14,727 $ 37,440
Interest 79,245 81,999
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 8
BOLAND CORPORATE HOUSING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting principles applied in the preparation
of the financial statements follows:
Formation of Company and Nature of Operations
Boland Corporate Housing, Inc. (the "Company") is in the business of providing
furnished interim housing primarily in the New York metropolitan area. The
Company was incorporated in the state of New York on April 14, 1994 under the
name of The Corporate Housing People East, Inc. In May 1996, the name was
amended to Boland Corporate Housing, Inc.
Interim Reporting
The accompanying financial information as of and for the nine months ended
September 30, 1997 are not necessarily indicative of the results for any other
interim period or for an entire year.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash, accounts
receivable, prepaid expenses, accounts payable and accrued expenses,
approximate fair value due to the relatively short maturity of these
instruments. The carrying value of the bank notes payable approximates fair
value based on the incremental borrowing rates currently available to the
Company for financing with similar terms and maturities.
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation.
Depreciation is computed using the straight-line method over estimated useful
lives of five to seven years. Leasehold improvements are amortized over the
lesser of the estimated useful lives of the related assets or the lease term.
Income Taxes
The Company has elected to be taxed as an S corporation for federal and state
income tax purposes. As a result, no federal income taxes were payable at the
corporate level. The stockholders pay tax on their respective shares of the
Company's taxable income, even if such income is not distributed. The Company
is liable for a New York State differential tax when taxable income exceeds a
certain amount. New York City does not recognize S corporation status. The
Company is therefore liable for New York City general corporation tax.
F-7
<PAGE> 9
BOLAND CORPORATE HOUSING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE B - ACCOUNTS RECEIVABLE, NET
The Company grants credit to corporate and individual customers. Provisions
have been established for uncollectible amounts. Following is a summary of
accounts receivable:
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
----------------- -----------------
<S> <C> <C>
Accounts receivable $ 1,082,261 $ 2,018,811
Reserve for doubtful accounts (1) (34,000)
------------------ -----------------
Accounts receivable, net $ 1,082,260 $ 1,984,811
================= =================
</TABLE>
NOTE C - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment:
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
----------------- -----------------
<S> <C> <C>
Leasehold improvements $ -0- $ 7,596
Computer equipment and software 79,685 224,685
Furniture and equipment 33,929 45,811
----------------- ----------------
113,614 278,092
Less accumulated depreciation 70,781 64,540
----------------- ----------------
$ 42,833 $ 213,552
================= ================
</TABLE>
NOTE D - BANK NOTES
The Company has a revolving line-of-credit and various promissory notes with a
bank.
Under the terms of the current line-of-credit agreement, which expires June 30,
1998, the Company may borrow up to $1,000,000 at the bank's prime rate plus
0.50%. This replaces a previous line-of-credit agreement, which expired on
June 30, 1997, and provided for borrowings up to $150,000 at the bank's prime
rate plus 1.0%. Such borrowings may be converted into short-term loans at the
bank's discretion. At December 31, 1996 and September 30, 1997, the borrowings
outstanding on the line-of-credit amounted to $150,000 and $325,000,
respectively, and were represented by short-term promissory notes.
In addition, the Company has an installment note with the bank.
The following is a summary of the bank notes:
F-8
<PAGE> 10
BOLAND CORPORATE HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE D - BANK NOTES (continued)
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
----------------- -----------------
<S> <C> <C>
$325,000 promissory note dated September 11, 1997,
payable to bank, interest at prime rate plus 0.50%,
with interest payable on September 30, 1997 and the
last day of each month, and the principal due on
December 9, 1997; collateralized by a blanket security
interest on all assets of the Company and personally
guaranteed by Ellen Boland, President and 50% stockholder. $ -0- $ 325,000
$150,000 promissory note dated October 19, 1996, payable
to bank, interest at prime rate plus 1.00%, with interest
payable on October 31, 1996 and the last day of each month,
and the principal due on January 21, 1997; collateralized
by a blanket security interest on all assets of the Company
and personally guaranteed by Ellen Boland, President and 50%
stockholder. 150,000 -0-
$40,000 installment note dated October 5, 1994, payable in
thirty-five monthly installments of $1,110, commencing
November 1, 1994, and continuing on the first day of each month
thereafter, with a final principal installment of $1,150 on
October 2, 1997. Interest is payable on the unpaid principal
balance on each day principal is due at a per annum rate of 1.0%
above the bank's prime rate. The loan is collateralized by a
blanket security interest on all assets of the Company. 11,140 1,150
----------------- -----------------
$ 161,140 $ 326,150
================= =================
</TABLE>
F-9
<PAGE> 11
BOLAND CORPORATE HOUSING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE E - RELATED PARTY TRANSACTIONS
Due from Affiliate
As of September 30, 1997, $48,710 was due to the Company from another entity
under common ownership. During 1996, the affiliated entity shared office
space, payroll and certain other general and administrative costs with the
Company. The Company recorded $500,453 of such allocated expenses in 1996.
There were no such allocated expenses in 1997.
In addition, the Company agreed to rent from the affiliate and such affiliate
agreed to provide to the Company, any and all furniture and televisions that
the Company provided to its customers in the metropolitan area. During 1996,
the Company recorded approximately $379,000 of such expenses. As further
discussed in Note F, these affiliate transactions ceased upon consummation of
the National Business Relationship Agreement with Cort on August 5, 1996.
The Company also paid rent of approximately $147,000 which is included in the
cost of interim housing revenue in 1996 for apartments leased by the affiliated
entity.
Loan Payable to Stockholder
On January 1, 1996, the Company entered into a demand promissory note for
$2,000,000, or so much as is advanced from time to time, with its President and
50% stockholder. Interest is payable at 10% per annum on the unpaid principal
balance. Borrowings outstanding under such note amounted $1,168,365 and
$1,515,854 at December 31, 1996 and September 30, 1997, respectively. The
Company recorded interest expense on such borrowings of $69,413 for the year
ended December 31, 1996, and $105,147 for the nine months ended September 30,
1997. On June 24, 1997, $600,000 became subordinated to the bank notes
described in Note D.
NOTE F - COMMITMENTS AND CONTINGENCIES
Lease
The Company leases the office space at Fifth Avenue, New York, under an
operating lease expiring on August 31, 2002. Minimum future rental payments
are as follows:
<TABLE>
<S> <C>
Year ending December 31, 1997 $ 13,200
1998 53,724
1999 55,336
2000 56,996
2001 58,706
2002 40,064
--------------
$ 278,026
==============
</TABLE>
Rent expense under the above operating lease amounted to $3,227 for the nine
months ended September 30, 1997. As further discussed in Note E, the Company
shared office space with an affiliate before entering into the above lease in
1997. Allocated rent expense for the year ended December 31, 1996 amounted to
$12,157.
F-10
<PAGE> 12
BOLAND CORPORATE HOUSING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE F - COMMITMENTS AND CONTINGENCIES (continued)
National Business Relationship Agreement
On August 5, 1996, the Company entered into a National Business Relationship
Agreement with its stockholders and Cort Furniture Rental Corporation ("Cort"),
whereby the Company agrees to rent from Cort, and Cort agrees to provide to the
Company, any and all furniture and televisions that the Company provides to its
customers in the metropolitan area for five years, at a discounted monthly
rental fee based on Cort's standard pricing at the time of order for such items
for leases of similar duration in the same geographic region.
Consulting Agreement
On August 5, 1996, the Company entered into a Consulting Agreement with its
stockholders and Cort, whereby the Company will provide Cort with consulting
and referral services in the ordinary course of marketing its own products and
services for a period of three years. Under the terms of this agreement,
consulting services were provided over a six-month period which expired in
January 1997. The Company earned consulting fees of $79,448 for the year ended
December 31, 1996 and $16,058 for the nine months ended September 30, 1997.
Referral fees were guaranteed at $50,000 for the first year of the agreement,
which expired on August 4, 1997. The Company earned referral fees of $20,833
for the year ended December 31, 1996 and $29,167 for the nine months ended
September 30, 1997. For each of the remaining two years of the agreement,
referral fees will be paid at a rate of 5% of furniture rentals supplied by
Cort in the metropolitan area in excess of $354,417.
The Consulting Agreement also provides a restrictive covenant applicable to the
Company and its stockholders and broadly provides that they may not be involved
in the rent-to-rent furniture, housewares and accessories rental business or
the sale of previously rented furniture, housewares and accessories in the New
York metropolitan area.
NOTE G - CONCENTRATION OF CREDIT RISK
Cash
The Company places most of its temporary cash investments with one financial
institution and normally exceeds the Federal Deposit Insurance Corporation
limit. The Company has not experienced any loss to date as a result of this
policy.
Major Customers
The Company had two major customers in 1996 and one in 1997. One customer
accounted for approximately 21% and 19% of sales for the year ended December
31, 1996 and the nine months ended September 30,1997, respectively. This
customer accounted for approximately 32% and 31% of accounts receivable as of
December 31, 1996 and September 30, 1997, respectively. A second major
customer accounted for approximately 10% of sales for the year ended December
31, 1996.
F-11
<PAGE> 13
BOLAND CORPORATE HOUSING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE G - CONCENTRATION OF CREDIT RISK (continued)
Major Suppliers
For the year ended December 31, 1996 and the nine months ended September 30,
1997, the Company had one major supplier who accounted for approximately 16%
and 15%, respectively, of total costs of interim housing revenue. A second
major supplier accounted for approximately 11% of the total cost of interim
housing revenue for the nine months ended September 30, 1997. This supplier
accounted for approximately 15% of accounts payable as of September 30, 1997.
No one supplier accounted for more than 10% of accounts payable as December 31,
1996.
NOTE H - SUBSEQUENT EVENTS
On November 1, 1997, all of the outstanding stock of the Company was sold to
ExecuStay Corporation of America (the "Parent Company"). In conjunction with
the purchase of the Company, the Parent Company repaid the stockholder loan and
all indebtedness of the Company to the bank and terminated its line-of-credit
with such bank.
The Company, the Parent Company and four key personnel signed employment
contracts on November 1, 1997. The contract for the Company's president
expires on October 31, 2001, and provides for an annual salary of $110,000,
plus an annual cost of living increase of six percent. The contracts for each
of the other key personnel expire on November 1, 1999, and provide for annual
salaries of $65,000, $58,000 and $50,000, respectively, with annual cost of
living increases.
The Company has also agreed to pay $50,000 signing bonuses to each of the
three key personnel other than the president who entered into employment
contracts with the Parent Company. In November 1997, the Company paid each
vice president $25,000 of such bonus, and has agreed to pay the balance in
1998.
In November 1997, the balance due from the affiliate as of September 30, 1997
in the amount of $48,710 was paid in full.
NOTE I - PRO FORMA INFORMATION
Pro Forma Statement of Income (Unaudited)
On November 1, 1997, the Company terminated its S Corporation status. The
following pro forma presentation reflects additional tax provisions as if the
Company had been a C Corporation. The pro forma income tax provision has been
prepared in accordance with SFAS No. 109. The effective pro forma tax rate of
the Company differs from the federal rate of 34%, primarily because of the
effects of state and local income taxes.
F-12
<PAGE> 14
BOLAND CORPORATE HOUSING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE I - PRO FORMA INFORMATION (continued)
The pro forma additional provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
1996 1997
--------------------- ----------------------
<S> <C> <C>
Federal $ 68,000 $ 228,000
State 25,000 67,000
--------------------- ----------------------
Current 93,000 295,000
Deferred -0- (16,000)
--------------------- ----------------------
Pro forma provision $ 93,000 $ 279,000
===================== ======================
Historical net income $ 240,517 $ 700,495
Additional provision
for income taxes 93,000 279,000
--------------------- ----------------------
Pro forma net income $ 147,517 $ 421,495
===================== ======================
</TABLE>
Pro Forma Net Income Per Share (Unaudited)
Pro forma net income per share is based on the weighted average number of
shares outstanding during the period totaling 100 shares.
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
1996 1997
--------------------- -------------------
<S> <C> <C>
Pro forma net income
per share $ 1,475 $ 4,215
===================== ===================
</TABLE>
Pro Forma Balance Sheet Information (Unaudited)
The following pro forma balance sheet information of the Company reflects a
deferred tax asset and additional income tax liabilities as if the Company was
a C corporation.
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
--------------------- --------------------
<S> <C> <C>
Historical assets $ 2,304,127 $ 3,774,277
Deferred tax asset -0- 16,000
--------------------- --------------------
Pro forma assets $ 2,304,127 $ 3,790,277
===================== ====================
Historical liabilities $ 1,955,299 $ 2,824,954
Income taxes payable 93,000 388,000
--------------------- --------------------
Pro forma liabilities $ 2,048,299 $ 3,212,954
===================== ====================
Historical stockholders' equity $ 348,828 $ 949,323
Effect of additional income
tax liabilities (93,000) (372,000)
--------------------- --------------------
Pro forma stockholders' equity $ 255,828 $ 577,323
===================== ====================
</TABLE>
F-13
<PAGE> 1
EXECUSTAY CORPORATION AND SUBSIDIARIES Exhibit 99.2
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30,1997
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------------------------- -----------------------------------------
Execustay Boland Boland Combined
as of as of Acquisition as of
September 30, 1997 September 30, l997 Adjustments September 30, 1997
<S> <C> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 17,890,658 $ 592,098 $ (8,146,756)(a) $ 10,336,000
ACCOUNTS RECEIVABLE--trade 4,999,681 1,984,811 6,984,492
PREPAID RENT AND OTHER 484,625 144,650 629,275
PROPERTY ON OR HELD FOR LEASE, net 4,751,310 - 4,751,310
PROPERTY AND EQUIPMENT, net 2,091,198 213,552 2,304,750
OTHER ASSETS 3,255,449 839,166 7,283,010 (a),(b) 11,377,625
-------------- ----------- ------------
$ 33,472,921 $ 3,774,277 $ 36,383,452
============== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
BANK LINE OF CREDIT $ - $ - $ -
NOTES PAYABLE TO BANK - 326,150 (326,150)(a) -
CAPITAL LEASE OBLIGATION 1,529,180 - 1,529,180
ACCOUNTS PAYABLE 1,486,598 737,267 2,223,865
ACCRUED AND OTHER LIABILITIES 1,354,123 180,362 1,534,485
DUE TO STOCKHOLDERS 1,000,000 1,515,854 (1,515,854)(a) 1,000,000
CURRENT INCOME TAXES PAYABLE 49,000 65,321 114,321
DEFERRED TAX LIABILITIES 107,000 - (16,000)(b) 91,000
-------------- ----------- ------------
TOTAL LIABILITIES 5,525,901 2,824,954 6,492,851
STOCKHOLDERS' EQUITY
COMMON STOCK 67,975 1 1,859 (a) 69,835
ADDITIONAL PAID IN CAPITAL 27,789,215 39,999 1,901,722 (a) 29,730,936
RETAINED EARNINGS 89,830 909,323 (909,323)(a) 89,830
-------------- ----------- ------------
TOTAL STOCKHOLDERS' EQUITY 27,947,020 949,323 29,890,601
-------------- ----------- ------------
$ 33,472,921 $ 3,774,277 $ 36,383,452
============== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE> 2
EXECUSTAY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the nine months ended September 30,1997
<TABLE>
<CAPTION>
Historical Pro Forma
----------------------------------------- ----------------------------------
Execustay Boland Boland Combined
as of as of Acquisition as of
September 30, 1997 September 30, 1997 Adjustments September 30, 1997
<S> <C> <C> <C> <C>
REVENUE $ 35,253,084 $ 10,631,115 $ 45,884,199
OPERATING COSTS AND EXPENSES
Cost of revenue 23,401,397 8,825,294 32,226,691
Personnel and payroll costs 5,821,419 513,873 6,335,292
Occupancy costs and nonrental
depreciation and amortization 1,166,090 6,168 168,922 (c) 1,341,180
Other operating costs 1,637,939 420,469 2,058,408
------------- ------------- --------------
TOTAL COSTS AND EXPENSES 32,026,845 9,765,804 41,961,571
------------- ------------- --------------
EARNINGS FROM OPERATIONS 3,226,239 865,311 3,922,628
OTHER EXPENSE(INCOME) (41,094) (41,094)
INTEREST EXPENSE 278,188 120,045 398,233
------------- ------------- --------------
EARNINGS BEFORE INCOME TAXES 2,948,051 786,360 3,565,489
INCOME TAX EXPENSE 156,000 85,865 241,865
------------- ------------- --------------
NET INCOME $ 2,792,051 $ 700,495 $ 3,323,624
PRO FORMA DATA
HISTORICAL EARNING BEFORE INCOME TAXES $ 2,948,051 786,360 $ 3,565,489
PROVISION FOR INCOME TAXES 1,179,000 364,865 (117,865) (d) 1,424,000
------------- ------------- --------------
PRO FORMA NET INCOME $ 1,769,051 $ 421,495 $ 2,139,489
------------- ------------- --------------
PRO FORMA INCOME PER SHARE $ 0.41 $ 0.47
------------- --------------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 4,335,855 4,521,855
------------- --------------
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 3
EXECUSTAY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Twelve months ended December 31, 1996
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------------ --------------------------------------------
Execustay Boland Boland Combined
as of as of Acquisition as of
December 31, 1996 December 31, 1996 Adjustments December 31, 1996
<S> <C> <C> <C> <C>
REVENUE $ 29,645,857 $ 7,689,071 $ 37,334,928
OPERATING COSTS AND EXPENSES
Cost of revenue 18,472,252 6,608,524 25,080,776
Personnel and payroll costs 5,596,781 458,556 6,055,337
Occupancy costs and nonrental
depreciation and amortization 994107 12,157 225,229 (c) 1,231,493
Other operating costs 1,616,312 370,199 1,986,511
------------ ----------- ------------
TOTAL COSTS AND EXPENSES 26,679,452 7,449,436 34,354,117
------------ ----------- ------------
EARNINGS FROM OPERATIONS 2,966,405 239,635 2,980,811
OTHER EXPENSE(INCOME) (100,281) (100,281)
INTEREST EXPENSE 307,709 78,015 385,724
------------ ----------- ------------
EARNINGS BEFORE INCOME TAXES 2,658,696 261,901 2,695,368
INCOME TAX EXPENSE 0 21,384 21,384
------------ ----------- ------------
NET INCOME $ 2,658,696 $ 240,517 $ 2,673,984
PRO FORMA DATA
HISTORICAL EARNING BEFORE INCOME TAXE $ 2,658,696 $ 261,901 $ 2,695,368
PROVISION FOR INCOME TAXES 1,063,000 114,384 (99,384)(d) 1,078,000
------------ ----------- ------------
PRO FORMA NET INCOME $ 1,595,696 $ 147,517 $ 1,617,368
------------ ----------- ------------
PRO FORMA INCOME PER SHARE $ 0.40 $ 0.39
------------ ------------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 3,965,000 4,151,000
------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(a) Execustay Corporation's purchase price of Boland Corporate Housing,
Inc.("Boland Corporation") as presented in the proforma balance sheet is
$8,248,333. In accordance with the closing documents, the purchase price
consists of $949,323 of "Tangible Net Book Value" (defined as tangible assets
less liabilities) as of September 30, 1997 and goodwill of $7,199,010 which
will be amortized over a 35 year period. The closing date payment consisted of
$6,304,752 in cash and the issuance of 186,000 shares of Execustay $.01 par
value common stock.
Included in the purchase price is $100,000 for a five year non-compete
agreement entered into with the former shareholders of Boland Corporation. The
cost of the non-compete is being amortized over the life of the agreement.
In addition to the purchase of all the outstanding common stock, Execustay
repaid the stockholder loan and all of the outstanding bank debt of Boland
Corporation.
(b) To record the deferred tax asset, and related adjustment to goodwill.
(c) To record amortization of goodwill and the non-compete agreement.
(d) Execustay's marginal tax rate is 40%.
4
