EX-99.2 4 a06-20854_1ex99d2.htm EX-99

Exhibit 99.2

COMPUTER HORIZONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

 

June 30, 2006

 

 

 

 

 

 

 

 

 

Company

 

 

 

Company

 

Sale of RGII

 

Pro Forma

 

Pro Forma

 

 

 

Historical (1)

 

(2)

 

Adjustments (3)

 

Combined

 

ASSETS

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,224

 

$

 

 

$

13,281

(a),(b)

$

49,505

 

Cash in escrow

 

$

—

 

$

—

 

$

1,000

(b)

$

1,000

 

Accounts receivable, net

 

50,784

 

(8,920

)

 

 

41,864

 

Refundable income taxes

 

6,704

 

(149

)

149

(c)

6,704

 

Other Receivables

 

2,591

 

—

 

 

 

2,591

 

Prepaid expenses and other

 

3,422

 

(239

)

 

 

3,183

 

TOTAL CURRENT ASSETS

 

99,725

 

(9,308

)

14,430

 

104,847

 

PROPERTY AND EQUIPMENT

 

46,837

 

(2,821

)

 

 

44,016

 

Less accumulated depreciation

 

(42,469

)

1,768

 

 

 

(40,701

)

TOTAL PROPERTY AND EQUIPMENT, NET

 

4,368

 

(1,053

)

—

 

3,315

 

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS - NET:

 

 

 

 

 

 

 

 

 

Goodwill

 

10,034

 

(10,034

)

 

 

—

 

Intangibles

 

1,472

 

(1,472

)

 

 

—

 

Deferred income taxes

 

1,484

 

28

 

(28

)(c)

1,484

 

Other

 

3,260

 

(633

)

 

 

2,627

 

TOTAL OTHER ASSETS

 

16,250

 

(12,111

)

(28

)

4,111

 

TOTAL ASSETS

 

$

120,343

 

$

(22,472

)

14,402

 

$

112,273

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

22,637

 

$

(345

)

$

 

 

$

22,292

 

Accrued payroll, payroll taxes and benefits

 

11,070

 

(1,939

)

 

 

9,131

 

Income taxes payable

 

1,150

 

—

 

 

 

1,150

 

Restructuring reserve

 

643

 

—

 

 

 

643

 

Deferred Compensation

 

577

 

—

 

 

 

577

 

Deferred income taxes

 

1,511

 

—

 

 

 

1,511

 

Other accrued expenses

 

4,136

 

(874

)

 

 

3,262

 

TOTAL CURRENT LIABILITIES

 

41,724

 

(3,158

)

—

 

38,566

 

 

 

 

 

 

 

 

 

 

 

OTHER LIABILITIES:

 

 

 

 

 

 

 

 

 

Deferred compensation

 

1,652

 

—

 

 

 

1,652

 

Change of control payable

 

2,316

 

—

 

 

 

2,316

 

Other

 

223

 

(95

)

 

 

128

 

TOTAL LIABILITIES

 

45,915

 

(3,253

)

—

 

42,662

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

 

Preferred stock, $.10 par; authorized and unissued 200,000 shares, including 50,000 Series A

 

 

 

—

 

 

 

—

 

Common stock, $.10 par; authorized 100,000,000 shares; issued 33,158,105 shares at June 30, 2006 and December 31, 2005

 

3,315

 

—

 

 

 

3,315

 

Additional paid in capital

 

146,638

 

(25,339

)

 

 

121,299

 

Accumulated other comprehensive loss

 

(136

)

—

 

 

 

(136

)

Retained earnings

 

(73,785

)

6,120

 

14,402

(d)

(53,263

)

 

 

76,032

 

(19,219

)

14,402

 

71,215

 

Less sharesheld in treasury, at cost; 254,914 and 1,118,014 shares at June 30, 2006 and December 31, 2005, respectively

 

(1,604

)

 

 

 

 

(1,604

)

TOTAL SHAREHOLDERS’ EQUITY

 

74,428

 

(19,219

)

14,402

 

69,611

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

120,343

 

$

(22,472

)

$

14,402

 

$

112,273

 

 

(1)      As reported in Computer Horizons Corp. unaudited Quarterly Report on Form 10-Q for the six months ended June 30, 2006.

(2)      Derived from Computer Horizons unaudited financial information as of June 30, 2006

(3)    Loss on sale of RG II excluded



COMPUTER HORIZONS CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share data)

 

 

 

Six Months Ended

 

 

 

June 30, 2006

 

 

 

Company

 

 

 

 

 

Company

 

 

 

Historical

 

Sale of

 

Pro Forma

 

Pro Forma

 

 

 

(1)

 

RGII (2)

 

Adjustments

 

Consolidated

 

REVENUES:

 

 

 

 

 

 

 

 

 

Commercial

 

$

91,482

 

$

 

 

$

 

 

$

91,482

 

Federal

 

19,952

 

(19,952

)

 

 

—

 

Chimes

 

15,497

 

 

 

 

 

15,497

 

Total

 

126,931

 

(19,952

)

—

 

106,979

 

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

Direct costs

 

83,608

 

(10,983

)

 

 

72,625

 

Selling, general & administrative

 

41,577

 

(8,021

)

766

(e)

34,322

 

Amortization of intangibles

 

466

 

(466

)

 

 

—

 

Special charges / (credits)

 

213

 

—

 

 

 

213

 

Goodwill impairment

 

15,000

 

(15,000

)

 

 

—

 

Total Costs

 

140,864

 

(34,470

)

766

 

107,160

 

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) FROM OPERATIONS

 

(13,933

)

14,518

 

(766

)

(181

)

 

 

 

 

 

 

 

 

 

 

OTHER INCOME/(EXPENSE):

 

 

 

 

 

 

 

 

 

Interest income

 

851

 

(7

)

 

 

844

 

Interest expense

 

(71

)

7

 

 

 

(64

)

 

 

780

 

—

 

—

 

780

 

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) BEFORE INCOME TAXES

 

(13,153

)

14,518

 

(766

)

599

 

 

 

 

 

 

 

 

 

 

 

INCOME (TAXES)/BENEFIT

 

(140

)

69

 

—

 

(71

)

 

 

 

 

 

 

 

 

 

 

NET INCOME/(LOSS)

 

$

(13,293

)

14,587

 

(766

)

$

528

 

 

 

 

 

 

 

 

 

 

 

EARNINGS/(LOSS) PER SHARE - BASIC

 

$

(0.41

)

 

 

 

 

$

0.02

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC

 

32,280,000

 

 

 

 

 

32,280,000

 

 

 

 

 

 

 

 

 

 

 

EARNINGS/(LOSS) PER SHARE-DILUTED

 

$

(0.41

)

 

 

 

 

$

0.02

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED

 

32,280,000

 

 

 

 

 

32,591,000

 

 

(1)     As reported in Computer Horizons unaudited quarterly report on Form 10-Q for the six months ended June 30, 2006.

(2)     Derived from Computer Horizons unaudited financial information for the six months ended June 30, 2006



 

 

 

Six Months Ended

 

 

 

June 30, 2005

 

 

 

 

 

 

 

 

 

Company Pro

 

 

 

Company

 

Sale of

 

Pro Forma

 

Forma

 

 

 

Historical (1)

 

RGII (2)

 

Adjustments

 

Consolidated

 

REVENUES:

 

 

 

 

 

 

 

 

 

Commercial

 

$

99,321

 

$

 

 

$

 

 

$

99,321

 

Federal

 

22,943

 

(22,943

)

 

 

—

 

Chimes

 

13,375

 

 

 

 

 

13,375

 

Total

 

135,639

 

(22,943

)

—

 

112,696

 

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

Direct costs

 

93,351

 

(12,249

)

 

 

81,102

 

Selling, general & administrative

 

42,185

 

(9,090

)

640

(e)

33,735

 

Amortization of intangibles

 

614

 

(536

)

 

 

78

 

Special charges / (credits)

 

(790

)

—

 

 

 

(790

)

Goodwill impairment

 

—

 

—

 

 

 

—

 

Total Costs

 

135,360

 

(21,875

)

640

 

114,125

 

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) FROM OPERATIONS

 

279

 

(1,068

)

(640

)

(1,429

)

 

 

 

 

 

 

 

 

 

 

OTHER INCOME/(EXPENSE):

 

 

 

 

 

 

 

 

 

Interest income

 

314

 

(35

)

 

 

279

 

Interest expense

 

(19

)

17

 

 

 

(2

)

 

 

295

 

(18

)

—

 

277

 

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) BEFORE INCOME TAXES

 

574

 

(1,086

)

(640

)

(1,152

)

 

 

 

 

 

 

 

 

 

 

INCOME (TAXES)/BENEFIT

 

(200

)

48.4

 

221

(f)

505

 

 

 

 

 

 

 

 

 

 

 

NET INCOME/(LOSS)

 

$

374

 

(602

)

(419

)

$

(647

)

 

 

 

 

 

 

 

 

 

 

EARNINGS/(LOSS) PER SHARE - BASIC

 

$

0.01

 

 

 

 

 

$

(0.02

)

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC

 

31,232,000

 

 

 

 

 

31,232,000

 

 

 

 

 

 

 

 

 

 

 

EARNINGS/(LOSS) PER SHARE-DILUTED

 

$

0.01

 

 

 

 

 

$

(0.02

)

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED

 

31,488,000

 

 

 

 

 

31,232,000

 

 

(1)     As reported in Computer Horizons unaudited quarterly report on Form 10-Q for the six months ended June 30, 2005.

(2)     Derived from Computer Horizons unaudited financial information for the six months ended June 30, 2005.



 

 

 

Twelve Months Ended

 

 

 

December 31, 2005

 

 

 

 

 

 

 

 

 

Company Pro

 

 

 

Company

 

Sale of RGII

 

Pro Forma

 

Forma

 

 

 

Historical (1)

 

(2)

 

Adjustments

 

Consolidated

 

REVENUES:

 

 

 

 

 

 

 

 

 

Commercial

 

$

195,435

 

$

 

 

$

 

 

$

195,435

 

Federal

 

44,980

 

(44,980

)

 

 

—

 

Chimes

 

28,421

 

 

 

 

 

28,421

 

Total

 

268,836

 

(44,980

)

—

 

223,856

 

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

Direct costs

 

184,159

 

(24,572

)

 

 

159,587

 

Selling, general & administrative

 

88,341

 

(17,805

)

1,366

(e)

71,902

 

Amortization of intangibles

 

1,080

 

(1,001

)

 

 

79

 

Special charges / (credits)

 

21,150

 

(618

)

 

 

20,532

 

Goodwill impairment

 

—

 

 

 

—

 

—

 

Total Costs

 

294,730

 

(43,996

)

1,366

 

252,100

 

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) FROM OPERATIONS

 

(25,894

)

(984

)

(1,366

)

(28,244

)

 

 

 

 

 

 

 

 

 

 

OTHER INCOME/(EXPENSE):

 

 

 

 

 

 

 

 

 

Net (loss)/gain on investments

 

(1,180

)

—

 

 

 

(1,180

)

Interest income

 

849

 

(36

)

 

 

813

 

Interest expense

 

(27

)

21

 

 

 

(6

)

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST

 

(26,252

)

(999

)

(1,366

)

(28,617

)

 

 

 

 

 

 

 

 

 

 

INCOME (TAXES)/BENEFIT

 

(20,168

)

1,907

 

1,131

(f)

(17,130

)

 

 

 

 

 

 

 

 

 

 

NET INCOME/(LOSS)

 

$

(46,420

)

908

 

(235

)

$

(45,747

)

 

 

 

 

 

 

 

 

 

 

EARNINGS/(LOSS) PER SHARE - BASIC

 

$

(1.48

)

 

 

 

 

$

(1.46

)

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC

 

31,399,000

 

 

 

 

 

31,399,000

 

 

 

 

 

 

 

 

 

 

 

EARNINGS/(LOSS) PER SHARE-DILUTED

 

$

(1.48

)

 

 

 

 

(1.46

)

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED

 

31,399,000

 

 

 

 

 

31,399,000

 

 

(1)     As reported in Computer Horizons audited annual report on Form 10-K for the twelve months ended December 31, 2005.

(2)     Derived from Computer Horizons audited financial information for the twelve months ended December 31, 2005.



 

 

 

Twelve Months Ended

 

 

 

December 31, 2004

 

 

 

 

 

 

 

 

 

Company Pro

 

 

 

Company

 

Sale of RGII

 

Pro Forma

 

Forma

 

 

 

Historical (1)

 

(2)

 

Adjustments

 

Consolidated

 

REVENUES:

 

 

 

 

 

 

 

 

 

Commercial

 

191,096

 

$

 

 

$

 

 

$

191,096

 

Federal

 

48,339

 

(48,339

)

 

 

—

 

Chimes

 

23,092

 

 

 

 

 

23,092

 

Total

 

262,527

 

(48,339

)

—

 

214,188

 

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

Direct costs

 

180,606

 

(26,118

)

 

 

154,488

 

Selling, general & administrative

 

85,141

 

(17,546

)

1,482

(e)

69,077

 

Amortization of intangibles

 

1,695

 

(1,506

)

 

 

189

 

Restructuring Charges

 

2,859

 

—

 

 

 

2,859

 

Special charges / (credits)

 

(939

)

—

 

 

 

(939

)

Goodwill impairment

 

20,306

 

—

 

 

 

20,306

 

Write- off of assets

 

910

 

—

 

 

 

910

 

Total Costs

 

290,578

 

(45,170

)

1,482

 

246,890

 

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) FROM OPERATIONS

 

(28,051

)

(3,169

)

(1,482

)

(32,702

)

 

 

 

 

 

 

 

 

 

 

OTHER INCOME/(EXPENSE):

 

 

 

 

 

 

 

 

 

Interest income

 

337

 

(16

)

 

 

321

 

Interest expense

 

(103

)

21

 

 

 

(82

)

 

 

234

 

5

 

—

 

239

 

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) BEFORE INCOME TAXES

 

(27,817

)

(3,164

)

(1,482

)

(32,463

)

 

 

 

 

 

 

 

 

 

 

INCOME (TAXES)/BENEFIT

 

(2,690

)

2,695

 

(3,483

)(f)

(3,478

)

 

 

 

 

 

 

 

 

 

 

Loss before cumulative effect of miniority interest

 

(25,127

)

(5,859

)

2,001

 

(28,985

)

 

 

 

 

 

 

 

 

 

 

Minority Interest

 

(45

)

—

 

 

 

(45

)

 

 

 

 

 

 

 

 

 

 

NET INCOME/(LOSS)

 

$

(25,172

)

(5,859

)

2,001

 

$

(29,030

)

 

 

 

 

 

 

 

 

 

 

EARNINGS/(LOSS) PER SHARE - BASIC

 

$

(0.82

)

 

 

 

 

$

(0.94

)

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC

 

30,870,000

 

 

 

 

 

30,870,000

 

 

 

 

 

 

 

 

 

 

 

EARNINGS/(LOSS) PER SHARE-DILUTED

 

$

(0.82

)

 

 

 

 

$

(0.94

)

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED

 

30,870,000

 

 

 

 

 

30,870,000

 

 

(1) As reported in Computer Horizons audited annual report on Form 10-K for the twelve months ended December 31, 2004.

(2) Derived from Computer Horizons audited financial information for the twelve months ended December 31, 2004.



 

 

 

Twelve Months Ended

 

 

 

December 31, 2003

 

 

 

 

 

 

 

 

 

Company Pro

 

 

 

Company

 

Sale of

 

Pro Forma

 

Forma

 

 

 

Historical (1)

 

RGII (2)

 

Adjustments

 

  Consolidated  

 

REVENUES:

 

 

 

 

 

 

 

 

 

Commercial

 

$

206,972

 

$

 

 

$

 

 

$

206,972

 

Federal

 

18,220

 

(18,220

)

 

 

—

 

Chimes

 

20,018

 

 

 

 

 

20,018

 

Total

 

245,210

 

(18,220

)

—

 

226,990

 

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

Direct costs

 

173,198

 

(10,318

)

 

 

162,880

 

Selling, general & administrative

 

80,634

 

(6,947

)

747

(e)

74,434

 

Amortization of intangibles

 

1,084

 

(1,021

)

 

 

63

 

Special charges / (credits)

 

10,113

 

—

 

 

 

10,113

 

Restructuring Charges

 

3,278

 

—

 

 

 

3,278

 

Total Costs

 

268,307

 

(18,286

)

747

 

250,768

 

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) FROM OPERATIONS

 

(23,097

)

66

 

(747

)

(23,778

)

 

 

 

 

 

 

 

 

 

 

OTHER INCOME/(EXPENSE):

 

 

 

 

 

 

 

 

 

Gain/(loss) on sale of assets

 

(424

)

 

 

 

 

(424

)

Net (loss)/gain on investments

 

(432

)

 

 

 

 

(432

)

Interest income

 

529

 

(12

)

 

 

517

 

Interest expense

 

(51

)

11

 

 

 

(40

)

 

 

(378

)

(1

)

—

 

(379

)

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) BEFORE INCOME TAXES

 

(23,475

)

65

 

(747

)

(24,157

)

 

 

 

 

 

 

 

 

 

 

INCOME (TAXES)/BENEFIT

 

(6,409

)

(62

)

(231

)(f)

(6,702

)

 

 

 

 

 

 

 

 

 

 

Loss before cumulative effect of miniority interest

 

(17,066

)

127

 

(516

)

(17,455

)

 

 

 

 

 

 

 

 

 

 

Minority Interest

 

(89

)

—

 

 

 

(89

)

 

 

 

 

 

 

 

 

 

 

NET INCOME/(LOSS)

 

$

(17,155

)

127

 

(516

)

$

(17,544

)

 

 

 

 

 

 

 

 

 

 

EARNINGS/(LOSS) PER SHARE - BASIC

 

$

(0.56

)

 

 

 

 

$

(0.58

)

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC

 

30,455,000

 

 

 

 

 

30,455,000

 

 

 

 

 

 

 

 

 

 

 

EARNINGS/(LOSS) PER SHARE-DILUTED

 

$

(0.56

)

 

 

 

 

$

(0.58

)

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED

 

30,455,000

 

 

 

 

 

30,455,000

 

 

(1) As reported in Computer Horizons audited annual report on Form 10-K for the twelve months ended December 31, 2003.

(2) Derived from Computer Horizons audited financial information for the twelve months ended December 31, 2003.



NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Pro forma adjustments reflect only those adjustments which are supportable and directly attributable to the transaction and do not include the impact of contingencies.  Pro forma adjustments include the following ($ in thousands):

(a) To record cash proceeds consisting of $15.250 million consideration less $1 million placed in escrow, net of transaction costs of $969K.  The effect of the net asset adjustment of approximately $1.2 million outlined in exhibit 99.1 was not included in the pro forma financial statements because this adjustment reflects the net asset change from 6/30/06 to 9/29/06. 

(b) To record cash receipts placed in escrow. 

(c) To add back certain assets of Computer Horizons Corp. (“CHC”) which will be retained by CHC.

(d) Adjustment to Equity of $14,402,000 consists of net assets CHC sold to NetStar-1 of $19,219,000, and the pro-forma estimated loss as of June 30, 2006 on sale of RGII of $4,938,000.  Due to various changes in the Balance Sheet from June 30th to September 29th, the currently anticipated loss approximates $4.6 million.

(e) To add back previously allocated corporate general expenses and remove RGII specific legal expense incurred at corporate on behalf of RGII as follows:

 

Corporate

 

RGII Legal

 

Total

 

 

 

Allocation

 

Expense

 

Adjustment

 

Twelve Months Ended:

 

 

 

 

 

 

 

31-Dec-05

 

$

1,809

 

$

443

 

$

1,366

 

31-Dec-04

 

1,767

 

285

 

1,482

 

31-Dec-03

 

747

 

—

 

747

 

 

 

 

 

 

 

 

 

Six Months Ended:

 

 

 

 

 

 

 

30-Jun-06

 

811

 

46

 

766

 

30-Jun-05

 

835

 

195

 

640

 

 

(f) Adjustments represent the impact to the consolidated provision for the sale of stock for RGII and AIM.  The consolidated provision was recalculated based upon the pro forma income before income taxes as presented above.  The pro forma income was determined as if RGII and AIM were no longer part of the consolidated group.  When preparing the pro forma provision calculation, the Company assumed that all permanent and temporary tax differences (including tax benefits), as originally stated in the provision from December 31, 2003 to June 30, 2006, would have remained with RGII and AIM.  Note that for the most part, RGII and AIM, were operated as a stand alone operation even within the consolidated group - except for the various pro forma adjustments.

Other assumptions made with respect to the calculation of the provision:

1. As of Dec 31, 2005, the stand alone operations of RGII and AIM would not have been required to create a valuation allowance as RGII and AIM had cumulative income for the past three years, as outlined within Accounting for Income Taxes, Financial Accounting Standard 109.  This is a different result with respect to the remaining operations as the Company did record a full valuation allowance at this time.



2. As of June 30, 2006, RGII would have reached a point of cumulative loss and therefore, under the guidelines outlined with Accounting for Income Taxes, Financial Accounting Standard 109, would be required to create a valuation allowance against its deferred tax assets.

Note that as of June 30, 2006, the Company is presenting the pro forma balance sheet as if all tax accounts for RGII and AIM were transferred to the parent as per the terms of the Stock Purchase Agreement, thus leaving no tax obligations, tax receivables or deferred taxes on the balance sheet of RGII and AIM.