<PAGE> 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): January 8, 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
<PAGE> 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 January 22, 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 LeaseTrend, 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
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Realty Information Group, Inc.
We have audited the accompanying balance sheets of LeaseTrend, 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 LeaseTrend, 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, DC
February 5, 1999
<PAGE> 4
LEASETREND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Revenues.................................................... $2,548,576 $3,444,969
Costs of revenues........................................... 908,258 1,310,994
---------- ----------
Gross margin................................................ 1,640,318 2,133,975
Selling, general and administrative expenses................ 1,749,372 2,432,767
---------- ----------
Loss from operations........................................ (109,054) (298,792)
Other income (expense):
Interest expense.......................................... (369,794) (435,385)
Other income.............................................. 1,303 1,696
---------- ----------
Net loss.................................................... $ (477,545) $ (732,481)
========== ==========
Net loss per share -- basic and diluted..................... $ (562.68) $ (863.06)
========== ==========
Weighted average common shares.............................. 848.7 848.7
========== ==========
</TABLE>
See accompanying notes.
<PAGE> 5
LEASETREND, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash........................................................ $ -- $ 18,266
Accounts receivable, less allowance for doubtful accounts of
$23,100 and $16,900 as of December 31, 1997 and 1998,
respectively.............................................. 20,914 12,316
Prepaid expenses and other current assets................... 7,681 6,786
----------- -----------
Total current assets...................................... 28,595 37,368
Property and equipment:
Furniture and equipment................................... 121,046 152,499
Computer hardware and software............................ 175,500 234,369
----------- -----------
296,546 386,868
Accumulated depreciation.................................... (172,826) (243,901)
----------- -----------
123,720 142,967
Capitalized product development cost, net of accumulated
amortization of $141,230 and $207,960 as of December 31,
1997 and 1998, respectively............................... 177,137 157,867
Goodwill, net of accumulated amortization of $26,730 and
$42,768 as of December 31, 1997 and 1998, respectively.... 133,653 117,615
Deposits and other assets................................... 1,680 2,805
----------- -----------
Total assets.............................................. $ 464,785 $ 458,622
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Bank overdraft.............................................. $ 4,786 $ --
Accounts payable and accrued expenses....................... 259,028 291,958
Deferred revenue............................................ 297,635 560,463
Accrued consulting fees -- related parties.................. 215,007 295,011
Accrued interest -- related parties......................... 616,241 934,850
Notes payable, in default -- related parties................ 1,336,766 1,428,521
Note payable................................................ 121,423 66,401
----------- -----------
Total current liabilities................................. 2,850,886 3,577,204
Stockholders' deficit:
Common stock, no par value; 1,500 shares authorized; 848.7
issued and outstanding as of December 31, 1997 and 1998... -- --
Paid-in capital............................................. 581,862 581,862
Accumulated deficit......................................... (2,967,963) (3,700,444)
----------- -----------
Total stockholders' deficit............................... (2,386,101) (3,118,582)
----------- -----------
Total liabilities and stockholders' deficit............... $ 464,785 $ 458,622
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 6
LEASETREND, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON TOTAL
STOCK PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES CAPITAL DEFICIT DEFICIT
------ -------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996........... 848.7 $581,862 $(2,490,418) $(1,908,556)
Net loss............................... -- -- (477,545) (477,545)
------ -------- ----------- -----------
Balance at December 31, 1997........... 848.7 581,862 (2,967,963) (2,386,101)
Net loss............................... -- -- (732,481) (732,481)
------ -------- ----------- -----------
Balance at December 31, 1998........... 848.7 $581,862 $(3,700,444) $(3,118,582)
====== ======== =========== ===========
</TABLE>
See accompanying notes.
<PAGE> 7
LEASETREND, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Operating activities:
Net loss.................................................... $(477,545) $(732,481)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation.............................................. 60,940 71,075
Amortization.............................................. 73,331 82,767
Provision for losses on accounts receivable............... 16,084 (6,224)
Amortization of debt discount............................. 91,756 91,756
Changes in operating assets and liabilities:
Accounts receivable....................................... (11,640) 14,822
Prepaid expenses and other current assets................. 1,629 895
Other assets.............................................. (121) (1,125)
Bank overdraft............................................ 4,786 (4,786)
Accounts payable and accrued expenses..................... 50,138 32,931
Accrued consulting fees -- related parties................ 80,004 80,004
Accrued interest -- related parties....................... 257,163 318,609
Deferred revenue.......................................... (4,635) 262,828
--------- ---------
Net cash provided by operating activities.............. 141,890 211,071
Investing activities:
Purchase of property and equipment.......................... (78,387) (90,323)
Capitalized product development cost........................ (55,090) (47,460)
--------- ---------
Net cash used in investing activities.................. (133,477) (137,783)
Financing activities:
Payments on note payable.................................... (13,037) (55,022)
--------- ---------
Net cash used in financing activities.................. (13,037) (55,022)
--------- ---------
Net increase (decrease) in cash............................. (4,624) 18,266
Cash at beginning of year................................... 4,624 --
--------- ---------
Cash at end of year......................................... $ -- $ 18,266
========= =========
</TABLE>
See accompanying notes.
<PAGE> 8
LEASETREND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
1. ORGANIZATION
LEASETREND, INC. (the "Company"), incorporated in the state of Ohio on
August 17, 1988, develops and maintains a proprietary database of comprehensive
office, industrial and retail real estate information in eighteen metropolitan
areas primarily in the Midwestern United States and Florida. In addition, the
Company has developed multimedia software products that allow clients to access
the database. The database and software products are distributed to its clients
under license agreements which are typically one year in duration.
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 proprietary
software and database on a straight-line basis over the term of the license
agreement which is typically one year or less.
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 expensed as
incurred. Amortization of capitalized costs is based on the greater of the
amount computed using (a) the ratio of current gross revenues to the sum of
current and anticipated future gross revenues for a product, or (b) the
straight-line method over the remaining estimated economic life of the product,
typically five years, after product release.
GOODWILL
The excess of the $150,000 purchase price over the fair value of net assets
acquired resulting from a purchase in 1996 is being amortized on a straight-line
basis over ten years. The Company continuously evaluates and adjusts, if
necessary, the net realizable value of these assets. (See Note 4).
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
<PAGE> 9
LEASETREND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
INCOME TAXES
The Company is an S corporation for federal income tax purposes under which
income, losses, deductions and credits are allocated to and reported by the
shareholders on their individual income tax returns. Accordingly, no provision
for income tax has been recorded in the financial statements.
LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share." All earnings per share amounts for all periods
have been presented to conform to the Statement 128 requirements. The effect of
the options outstanding are not included as their effect would be anti-dilutive
for all the periods presented.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Such costs included in selling
and marketing expense totaled approximately $21,200 and $48,900 for the years
ended December 31, 1997 and 1998, respectively.
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
<PAGE> 10
LEASETREND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
3. COMMITMENTS
The Company leases office space in various locations 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 expenses. Rent expense for the years
ended December 31, 1997 and 1998 was $94,716 and $109,914, respectively. As of
December 31, 1998, payments due under non-cancelable operating leases are as
follows:
<TABLE>
<S> <C>
1999........................................................ $ 98,400
2000........................................................ 98,400
2001........................................................ 98,400
2002........................................................ 98,400
2003 and thereafter......................................... 20,500
--------
$414,100
========
</TABLE>
4. RELATED PARTY TRANSACTIONS
At December 31, 1997 and 1998, the Company had notes payable to a venture
capital fund (the "Venture Fund") of $1,094,765 and $1,186,521, respectively.
The notes bear interest at 15.15% per annum, 17.15% per annum in the event of
default as defined in the notes. The notes were in default during 1998 and
accrued interest at 17.15%. The notes called for payments of principal and
interest beginning in 1997 through December 1999. During 1997 and 1998, no such
payments of principal or interest were made. As part of this transaction, the
Company entered into a consulting agreement with an affiliate of the Venture
Fund that called for the Company to pay a quarterly fee for consulting services
which has been accrued since the beginning of the agreement. All notes and
accrued consulting fees were paid January 8, 1999. (Note 5)
At the time of the Venture Fund financing, the stockholders of the Company
personally entered into an option agreement with the Venture Fund whereby they
agreed to grant an option to the Venture Fund to purchase an aggregate of 300.27
shares of their personal shares in the Company at $1.00 per share, for total of
$290,000 paid to the stockholders. Seventy-two thousand dollars of this amount
was then loaned by the shareholders back to the Company. The Company recorded a
discount to the debt financing of approximately $459,000 (representing the fair
value allocated to the options) to be amortized as interest expense over the
term of the debt, with a corresponding entry to additional paid-in capital.
The Company had notes payable to stockholders totaling $242,000 as of
December 31, 1997 and 1998. The notes are subordinated in right of payment to
the Venture Fund notes and bear interest at prime plus 1.5%, or 9.25% at
December 31, 1998.
The Company had a note payable to a former partner in a joint venture that
started the Company's Florida operations. The note arose from the purchase by
the Company of the partner's
<PAGE> 11
LEASETREND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
50% interest in the venture. The note bears interest at 8%. As of December 31,
1997 and 1998, the unpaid principal balance on this note was $121,423 and
$66,401, respectively.
5. SUBSEQUENT EVENTS
On January 8, 1999, the Company was acquired by Realty Information Group,
Inc. in exchange for $4.5 million in cash and 566,671 shares of Realty
Information Group, Inc. common stock. All notes payable and related interest of
the Company were repaid from the proceeds on January 8, 1999.
<PAGE> 12
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.
<PAGE> 13
REALTY INFORMATION GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
REALTY PRO FORMA
INFORMATION LEASETREND, JAMISON ADJUSTMENTS PRO FORMA
GROUP, INC. INC. RESEARCH, INC. (SEE NOTE 3) COMBINED
----------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
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
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 14
REALTY INFORMATION GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
REALTY JAMISON PRO FORMA
INFORMATION LEASETREND, RESEARCH, ADJUSTMENTS PRO FORMA
GROUP, INC. INC. INC. (SEE NOTE 3) COMBINED
----------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
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
=========== =========== ======== ============ ===========
</TABLE>
See accompanying notes.
<PAGE> 15
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:
<TABLE>
<CAPTION>
ESTIMATED VALUE
-------------------------------------- ESTIMATED
LTI JRI TOTALS LIFE
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
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
========== =========== ===========
</TABLE>
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.
<PAGE> 16
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.
<PAGE> 17
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.
March 26, 1999 By: /s/ Frank A. Carchedi
--------------------------
Frank A. Carchedi
Chief Financial Officer
