8-K/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

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 17, 2003 (October 17, 2003)

RCG Companies Incorporated

(Exact name of registrant as specified in its charter)

Delaware	1-8662
(State or other jurisdiction of incorporation)	(Commission File Number)

23-2265039

(IRS Employer Identification Number)

6836 Morrison Blvd., Suite 200, Charlotte, NC 28211

(Address of principal executive offices) (Zip Code)

This Amendment No. 2 to the Current Report on Form 8-K originally filed with the Securities and Exchange Commission on October 17, 2003 (the “Initial 8-K”), by RCG Companies Incorporated (“RCG”) in connection with the completed Asset Purchase of VE Holdings, Inc. (“Vacation Express”) and SunTrips Inc. (“SunTrips”), both wholly-owned subsidiaries of MyTravel USA Holdings, Inc. (“MyTravel” or the “Seller”), by FS Tours, Inc. and FS SunTours, Inc., collectively the (“Purchaser” or the “Company”), which are wholly-owned direct subsidiaries of Flightserv, Inc. (“Flightserv”), which is a wholly-owned indirect subsidiary of RCG, is being filed to amend item 7 to include financial information requi red under Items7(a) and 7(b) of Form- 8-K.

Item 7.    FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial statements of business acquired.

          The following financial information is hereby filed pursuant to Item 7(a) of Form 8-K as exhibit 99.2 of this Current report on Form 8-K/A:

          Audited combined financial statements of SunTrips, Inc. and VE Holdings, Inc. (both wholly owned subsidiaries of MyTravel USA Holdings, Inc. (“My Travel”) (“the Combined Companies”) as of September 30, 2003, 2002 and 2001 and for the years ended September 30, 2003, 2002 and 2001.

(b) Pro forma financial information.

          The following financial information is hereby filed pursuant to Item 7(b) of Form 8-K as exhibit 99.3 of this Current report on Form 8-K/A:

          The following unaudited pro forma consolidated financial data of the Company and the Combined Companies are provided below:

1. Introduction to Unaudited Pro Forma Financial Data;
2. Unaudited Pro Forma Balance Sheet Data as of September 30, 2003;
3. Unaudited Pro Forma Statement of Operations Data for the Three Month Period Ended September 30, 2003;
4. Unaudited Pro Forma Statement of Operations Data for the Year Ended June 30, 2003;
5. Notes to Unaudited Pro Forma Unaudited Balance Sheet Data as of September 30, 2003 and Notes to Unaudited Pro Forma Statement of Operations Data for the Three Month Period Ended September 31, 2003 and for the year Ended June 30, 2003.

(c) Exhibits

10.1 Amended and Restated Asset Purchase Agreement dated October 31, 2003, by and among FS Tours, Inc., FS Tours, Inc., VE Holdings, Inc. and SunTrips, Inc. (previously filed).

10.2 Stock Purchase Agreement dated October 31, 2003 (previously filed).

10.3 Common Stock Purchase Warrant Agreement dated October 31, 2003 (previously filed).

99.1 Press release dated November 3, 2003 (previously filed).

99.2 Audited combined financial statements of SunTrips, Inc. and VE Holdings, Inc. (both wholly owned subsidiaries of My Travel USA Holdings, Inc. (“MyTravel”) (the “Combined Companies”) as of September 30, 2003, 2002, and 2001 and for the years ended September 30, 2003, 2002, and 2001.

99.3 Unaudited Pro Forma Consolidated Financial Data of the Company and the Combined Companies

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

RCG Companies Incorporated

/s/s MICHAEL PRUITT

Michael Pruitt

Date: January 16, 2004

By: Chief Executive Officer

EX-99.2

EXHIBIT 99.2

SunTrips, Inc.VE Holdings, Inc.

Table of Contents

	Page No.
Combined Financial Statements
Independent Auditors’ Report	2
Combined Balance Sheets at September 30, 2003, 2002 and 2001	3
Combined Statements of Operations for the years ended September 30, 2003, 2002 and 2001	4
Combined Statements of Cash Flows for the years ended September 30, 2003, 2002 and 2001	5
Notes to Combined Financial Statements	6

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors
RCG Companies Incorporated and Subsidiaries
Charlotte, North Carolina

We have audited the accompanying combined balance sheets of SunTrips, Inc. and VE Holdings, Inc. (collectively the Company) (both wholly owned subsidiaries of MyTravel USA Holdings, Inc. (“MyTravel”)) as of September 30, 2003, 2002 and 2001, and the related combined statements of operations, and cash flows for each of the years in the three-year period ended September 30, 2003 . These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits 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 combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements present fairly, in all material respects, the financial position of SunTrips, Inc. and VE Holdings, Inc. as of September 30, 2003, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, 2003 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the combined financial statements, SunTrips, Inc. and VE Holdings, Inc., regularly engage in numerous transactions with, and have significant amounts receivable from, and payable to, related companies owned directly or indirectly by MyTravel or MyTravel’s parent company. The accompanying combined financial statements have been prepared from the separate records maintained by the Company and may not necessarily be indicative of the financial position or the results of operations that would have resulted had these and other transactions with related parties been consummated with unrelated third parties.

The accompanying combined financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the combined financial statements, the Company has reported continuing losses and has a working capital deficiency and a shareholder’s deficit. As discussed in Note 9, in October 2003, the Company has sold substantially all of its operating assets and the Company will not be conducting business subsequent to the date of sale. Those conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/S/ CRISP HUGHES EVANS LLP
Charlotte, North Carolina

January 14, 2004

SunTrips, Inc.
VE Holdings, Inc.
Combined Balance Sheets

		September 30,			September 30,			September 30,
		2003			2002			2001
ASSETS
Cash and cash equivalents	$	84,460		$	689,857		$	—
Restricted cash		18,618,015			14,351,328			15,157,877
Prepaid expenses and other assets		7,095,887			11,339,160			11,903,835
Total current assets		25,798,362			26,380,345			27,061,712
Property and equipment, net		725,361			1,124,502			1,291,320
Total assets	$	26,523,723		$	27,504,847		$	28,353,032
LIABILITIES AND SHAREHOLDER'S DEFICIENCY
Due to affiliates	$	142,435,690		$	126,459,304		$	105,113,114
Accounts payable and accrued expenses		11,256,901			6,967,273			10,448,279
Bank overdraft		—			—			2,070,402
Unearned income		20,828,673			15,708,694			17,366,810
Total current liabilities		174,521,264			149,135,271			134,998,605
Shareholder's deficiency:
Common stock		43,501			43,501			43,501
Additional paid-in capital		24,249,980			24,249,980			24,249,980
Accumulated deficit		(172,291,022	)		(145,923,905	)		(130,939,054	)
Total shareholder's deficiency		(147,997,541	)		(121,630,424	)		(106,645,573	)
Total liabilities and shareholder's deficiency	$	26,523,723		$	27,504,847		$	28,353,032

The accompanying notes are an integral part of these combined financial statements.

SunTrips, Inc.
VE Holdings, Inc.
Combined Statements of Operations

	For the Years Ended September 30,
		2003			2002			2001
SALES	$	191,259,456		$	182,239,870		$	253,453,461
COST OF SALES		199,532,228			180,011,713			243,985,942
GROSS PROFIT (LOSS)		(8,272,772	)		2,228,157			9,467,519
OPERATING EXPENSES:
Selling and marketing		1,794,567			939,047			3,027,051
Administrative		16,023,782			15,002,282			20,398,640
Depreciation		479,573			462,290			623,117
Total operating expenses		18,297,922			16,403,619			24,048,808
Operating loss		(26,570,694	)		(14,175,462	)		(14,581,289	)
Other Expenses (Income):
Interest income		(187,511	)		(351,514	)		(1,114,362	)
Interest expense		—			1,210,002			6,641,265
Other income		(16,066	)		(49,099	)		—
TOTAL OTHER EXPENSES (INCOME)		(203,577	)		809,389			5,526,903
NET LOSS	$	(26,367,117	)	$	(14,984,851	)	$	(20,108,192	)

The accompanying notes are an integral part of these combined financial statements.

SunTrips, Inc.
VE Holdings, Inc.
Combined Statements of Cash Flows

	For the Years Ended September 30,
	2003			2002			2001
Cash flows from operating activities:
Net loss	$	(26,367,117	)	$	(14,984,851	)	$	(20,108,192	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		479,573			462,290			623,117
Changes in operating assets and liabilities:
Restricted cash		(4,266,687	)		806,549			7,328,251
Prepaid expenses and other assets		4,243,273			564,675			(2,366,800	)
Accounts payable and accrued expenses		4,289,628			(3,481,006	)		(2,108,883	)
Due to affiliates		(489,003	)		3,515,480			5,497,756
Unearned income		5,119,979			(1,658,116	)		(6,211,145	)
Net cash used in operating activities		(16,990,354	)		(14,774,979	)		(17,345,896	)
Cash flows from investing activities:
Purchase of property and equipment		(80,432	)		(295,472	)		(334,637	)
Net cash used in investing activities		(80,432	)		(295,472	)		(334,637	)
Cash flows from financing activities:
Due to affiliates		16,465,389			17,830,710			13,825,069
Bank overdraft	—			(2,070,402		)	2,070,402
Net cash provided by financing activities		16,465,389			15,760,308			15,895,471
Net increase (decrease) in cash and cash equivalents		(605,397	)		689,857			(1,785,062	)
Cash and cash equivalents at beginning of period		689,857			—			1,785,062
Cash and cash equivalents at end of period	$	84,460		$	689,857		$	—
Supplemental cash flow information - Cash paid during the period for:
Interest		—			—			—
Income taxes		—			—			—

The accompanying notes are an integral part of these combined financial statements.

SunTrips, Inc.
VE Holdings, Inc.
Notes to the Combined Financial Statements

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

        The accompanying combined financial statements include the accounts of SunTrips, Inc., a California corporation (“SunTrips”) and VE Holdings, Inc., a Delaware corporation (“Vacation Express”) (collectively the “Company”), both wholly-owned subsidiaries of MyTravel Group USA Holding, Inc. (“My Travel”), a Florida corporation. MyTravel is part of a consolidated group of companies located in various countries with the ultimate parent, MyTravel plc., headquartered in England.

        All significant intercompany accounts and transactions between SunTrips and Vacation Express have been eliminated in the combination.

        The Company regularly engages in numerous transactions with, and has significant amounts receivable from, and payable to, companies within the MyTravel Group. The accompanying combined financial statements have been prepared from the separate records maintained by the Company and may not necessarily be indicative of the financial position or the results of operations that would have resulted had these and other transactions with related parties been consummated with unrelated third parties.

        The accompanying combined financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the combined financial statements, the Company incurred net losses of $26,367,117, $14,984,851, and $20,108,192, respectively, for each of the years in the three-year period ended September 30, 2003, and, as of that date, had a working capital deficiency of $148,722,902 and shareholder’s deficiency of $147,997,541. Those conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. On October 31, 2003, the Company sold to RCG Companies Incorporated, substantially all of its operating assets and liabilities, except for certain excluded items. See Note 9.

        The Company is a charter tour operator which sells leisure tour packages. Vacation Express based in Atlanta, Georgia sells air travel and hotel accommodation packages to Mexico and Caribbean destinations. SunTrips, based in San Jose, California, sells air travel and hotel accommodation packages to Mexico, Dominican Republic, Costa Rica, Hawaii and the Azores. Tour packages are sold directly to the public or through travel agents. The Company requires payment in full prior to passenger departure date. 

        Management has determined that, under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 131, Disclosure about Segments of an Enterprise and related Information, the Company operates in a single operating segment.

CASH AND CASH EQUIVALENTS

        The Company classifies as cash equivalents any investments which can be readily converted to cash and have an original maturity of less than three months. At times cash and cash equivalent balances at a limited number of banks and financial institutions may exceed insurable amounts. The Company believes it mitigates its risks by depositing cash or investing in cash equivalents in major financial institutions.

RESTRICTED CASH

        All cash received from customers in advance of flight departure must be deposited into escrow accounts in accordance with Department of Transportation regulations. Withdrawals from such escrow accounts are allowed in order to make required payments to air carriers at least 15 days in advance of departure. Hotels may be paid from escrow after air carriers have been paid. Remaining funds are released from escrow 48 hours after return date. The Company classifies these escrow accounts as restricted cash. All escrow accounts are maintained in one financial institution and balances exceed insurable limits.

CONCENTRATION OF CREDIT RISK

        Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and restricted cash. The Company places such balances with high credit quality financial institutions.

        The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

• Cash and cash equivalents and restricted cash: The carrying amount reported in the balance sheet approximates fair value.

• Accounts payable and accrued expenses: Due to their short term nature, the carrying amounts reported in the balance sheet for accounts payable and accrued expenses approximate their fair value.

PREPAID EXPENSES AND OTHER ASSETS

        Prepaid expenses and other assets consist primarily of hotel costs and charter flight costs paid prior to departure date. Air carriers must be paid 15 days before the scheduled departure date; prepaid hotel costs arise mainly in connection with group tours. Depending upon the volume and timing of charter flight activity, the amount of prepaid charter flight costs can fluctuate significantly.

PROPERTY AND EQUIPMENT

        Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed on the straight-line basis over the assets’ estimated useful lives. Expenditures for maintenance and repairs are expensed as incurred. Expenditures for improvements which extend the useful life or add value to the asset are capitalized and then expensed over that asset’s remaining useful life.

        Sales and disposals of assets are recorded by removing the related cost and accumulated depreciation amounts with any resulting gain or loss reflected in the statement of operations.

        The carrying value of property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that such amounts may not be recoverable. If such an event occurred, the Company would prepare projections of future results of operations for the remaining useful lives of such assets. If such projections indicated that the expected future net cash flows (undiscounted and without interest) are less than the carrying amounts of the property and equipment, the Company would record an impairment loss in the period such determination is made.

DUE TO AFFILIATES

        Due to affiliates results from transactions between the Company and companies within the MyTravel Group. These transactions consist primarily of transfers to cover working capital deficits or for cash management purposes and expenses for human resource support, information and technology support, and miscellaneous administrative costs, as well as certain operating items such as fuel and advertising. All balances between companies within the MyTravel Group are recorded as current with no formal agreements specifying repayment terms.

UNEARNED INCOME AND REVENUE RECOGNITION

        Revenue from the sale of tour packages to either travel agents or directly to passengers is recognized on the departure date of the trip. Direct air and hotel costs, other related direct costs, and commissions associated with the tour package are also recognized on the departure date. Cash received in advance of the departure date is deposited into escrow accounts and recorded as unearned income.

INTEREST EXPENSE

        The Company only has debt to affiliates and therefore does not have any interest expense to outside parties. There are no specific terms between MyTravel and the Company regarding when interest is charged.

ADVERTISING

        The Company expenses advertising costs as incurred. Advertising expense aggregated $1,461,677, $616,285 and $2,289,118 for the years ended September 30, 2003, 2002 and 2001, respectively.

INCOME TAXES

        All of the Company’s operations are included in the consolidated tax return of MyTravel. For financial statement purposes Income taxes are accounted for as if the Company filed  a separate tax return. Income taxes currently payable are credited to the intercompany account. The measurement of income taxes on such basis includes taxes currently payable or receivable and differences in income for tax and financial statement purposes resulting from temporary differences. 

USE OF ESTIMATES

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

NOTE 2. PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets consist of the following:

		September 30,		September 30,		September 30,
		2003		2002		2001
Prepaid flight costs	$	5,467,772	$	9,054,331	$	7,926,178
Other prepaid costs and assets		1,628,115		2,284,829		3,977,657
	$	7,095,887	$	11,339,160	$	11,903,835

NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

		September 30,			September 30,			September 30,
		2003			2002			2001
Leasehold improvements	$	1,039,106		$	1,035,744		$	1,015,699
Furniture and fixtures and equipment		2,840,002			2,821,144			2,755,628
Computers and software		731,150			672,937			463,025
		4,610,258			4,529,825			4,234,352
Accumulated depreciation		(3,884,897	)		(3,405,323	)		(2,943,032	)
	$	725,361		$	1,124,502		$	1,291,320

NOTE 4. DUE TO AFFILIATES:

Amounts due to entities within the MyTravel Group are summarized as follows:

	September 30,			September 30,			September 30,
	2003			2002			2001
MyTravel	$	129,084,737		$	128,776,604		$	110,648,018
MyTravel Canada Holiday, Inc.		7,284,754			(987,981	)		(1,112,571	)
Travel Services International, Inc.		7,462,053			(422,466	)		—
Other affiliates, net		(1,395,854	)		(906,853	)		(4,422,333	)
	$	142,435,690		$	126,459,304		$	105,113,114

        Amounts charged by affiliates for operating expenses were approximately $2,351,000, $7,158,000, and $3,682,000 for the years ended September 30, 2003, 2002 and 2001, respectively. In addition, The affiliates charged the Company $1,210,002 and $6,641,265 in interest for the years ended September 30, 2002 and 2001, respectively. The Companies within the MyTravel Group no longer charge interest.

NOTE 5. INCOME TAXES

        Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount for tax purposes. In assessing the realization of deferred tax assets, the Company considerations whether it is more likely than not that some portion or all of the deferred tax assets will be realized. Due to recurring losses, the Company would not be entittled to refunds if it filed a seperate return. Accordingly, the Company recorded a full valuation allowance on its deferred tax assets and did not record an income tax benefit against pre tax loss for the years September 30, 2003, 2002 and 2001. All of the Company’s operations are included in the consolidated tax return of MyTravel. The Company has $58 million of the net operating loss carryforwards allocable to the Company.

A summmary of deferred tax assets is as follows:

	September 30,			September 30,			September 30,
	2003			2002			2001
Deferred tax assets principally related to
net operating loss carryforwards	$	30,141,300		$	28,519,999		$	27,172,465
Deferred income tax asset valuation allowance		(30,141,300	)		(28,519,999	)		(27,172,465	)
Net deferred income tax asset	$	—		$	—		$	—

NOTE 6. COMMON STOCK AND PAID IN CAPITAL

The following table summarizes the Company’s stock and paid in capital activity for the years ended September 30, 2003, 2002, and 2001:

						Additional Paid-In Capital
	VE Holdings, Inc. Common Stock		Suntrips, Inc. Common Stock				Accumulated Deficit
	Shares	Amounts		Shares	Amounts			Total
Balance at September 30, 2000	1	$ 1,000		9,380	$ 42,501	$ 24,249,980	$ (110,830,862)	$(86,537,381)
Net loss September 30, 2001	—	—		—	—	—	(20,108,192)	(20,108,192)
Balance at September 30, 2001	1	1,000		9,380	42,501	24,249,980	(130,939,054)	(106,645,573)
Net loss September 30, 2002	—	—		—	—	—	(14,984,851)	(14,984,851)
Balance at September 30, 2002	1	1,000		9,380	42,501	24,249,980	(145,923,905)	(121,630,424)
Net loss September 30, 2003	—	—		—	—	—	(26,367,117)	(26,367,117)
Balance at September 30, 2003	1	$ 1,000		9,380	$ 42,501	$ 24,249,980	$ (172,291,022)	$(147,997,541)

NOTE 7. ADMINISTRATIVE EXPENSES 

Following is a summary of the Company’s administrative expenses:

	Years Ended September 30,
	2003		2002		2001
Compensation expense	$	11,331,911	$	10,772,120	$	13,819,696
Legal and professional fees		188,346		300,275		241,925
Rent expense		839,957		813,507		1,000,195
Insurance		964,618		566,743		978,051
Office and printing expense		1,910,843		1,875,168		3,133,475
Telecommunications		468,455		332,160		762,774
Travel and entertainment		163,963		149,604		214,755
Miscellaneous taxes and licenses		48,192		74,752		101,821
Other		107,497		117,953		145,948
	$	16,023,782	$	15,002,282	$	20,398,640

NOTE 8. COMMITMENTS AND CONTINGENCIES

        During the normal course of business, the Company is subject to various lawsuits, which may or may not have merit. Management intends to vigorously pursue and/or defend such suits, as applicable, and believes that they will not result in any material loss to the Company.

        The Company utilizes three airline carriers to provide charter flights. The loss of any one carrier could have an adverse impact until the carrier is replaced.

        The Company leases office space under non-cancelable office leases. The future minimum lease payments required under these leases at September 30, 2003 are as follows:

Fiscal Year
	2004	$	489,567
	2005		486,073
	2006		510,378
	2007		535,900
	2008		513,656
		$	2,535,574

        The Company utilizes letters of credit to secure certain payment obligations and to meet the requirements of various regulatory agencies. At September 30, 2003 the Company had approximately $3.2 million outstanding letters of credit. In addition, the bank that is used for escrow deposits, requires the Company to maintain $400,000 in compensating cash balances which is included in restricted cash.

NOTE 9. SUBSEQUENT EVENT

        On October 31, 2003, the Company sold to RCG Companies Incorporated substantially all of its operating assets and liabilities, except for certain excluded items (primarily the amounts due to affiliates) for a $10 million non-interest bearing seven-year promissory note, the assumption of a working capital deficit of approximately $2.8 million and a non-cancelable three-year agreement with MyTravel Canada Holidays, Inc. (“MyTravel Canada”), for certain services, including the purchasing of hotel accommodations on an exclusive basis. MyTravel Canada will be paid approximately $4.5 million over three years under this agreement. After imputing interest at 8% on the promissory note and the service agreement the estimated fair value of the total consideration is approximately $13 million.

EX-99.3

EXHIBIT 99.3

INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL DATA

        The following unaudited pro forma consolidated financial data has been derived by the application of pro forma adjustments to the historical consolidated financial statements of RCG Companies Incorporated (“RCG”)for the periods indicated. The adjustments are described in the accompanying notes. The unaudited pro forma financial data give effect to the acquisition:

Acquisition:

        RCG Companies Incorporated signed a definitive agreement to acquire SunTrips, Inc. (“SunTrips”) and VE Holdings, Inc. (“Vacation Express”) (“the Combined Companies”) on October 17, 2003 and closed the transaction on October 31, 2003. Under the terms of the asset purchase agreement, FS Tours, Inc. (“FS Tours”) a wholly-owned indirect subsidiary of Flightserv, which is a wholly-owned subsidiary of RCG, will acquire substantially all of the assets and liabilities of Vacation Express, and FS SunTours, Inc (“FS SunTours”) a wholly-owned subsidiary of Flightserv, will acquire substantially all of the assets and liabilities of SunTrips, except for certain excluded items, for a $10 million non-interest bearing seven-year promissory note from Flightserv secured by certain RCG investment holdings. The agreement requires the Seller to provide additional cash if the working capital deficit of the acquired bu siness exceeds $2 million. Additionally, FS Tours and FS SunTours entered into a three-year agreement with MyTravel Canada Holidays, Inc. (“MyTravel Canada”), a company related to the Seller through common ownership, for certain services, including the purchasing of hotel accommodations for FS Tours and FS SunTours on an exclusive basis. MyTravel Canada will be paid approximately $4.5 million over three years under this agreement.

        In order to fund the acquisition, in October 2003, RCG sold 2,500,000 shares of its restricted common stock and common stock purchase warrants to purchase 2,500,000 shares of RCG’s common stock at an exercise price of $2.44, in exchange for $4,000,000 ($3,707,470, net of expenses). The warrants may be exercised any time on or after the six month anniversary of October 31, 2003 and prior to forty two months after the issuance of the warrants.

Pro Forma Adjustments:
Unaudited Pro Forma Balance Sheet as of September 30, 2003

        The unaudited pro forma balance sheet gives effect to the Combined Companies and the related funding as if the transaction had occurred on September 30, 2003.

Unaudited Pro Forma Statement of Operations for the period July 1, 2003 through September 30, 2003 and for the year ended June 30, 2003

        The unaudited pro forma statement of operations for the period July 1, 2003 through September 30, 2003 gives effect to the Combined Companies and the related funding as if such events occurred at the beginning of the three month period.

        The unaudited pro forma statement of operations for the year ended June 30, 2003 gives effect to the Combined Companies and the related funding as if such events occurred at the beginning of the year. The income statement for the Combined Companies is for the year ended September 30, 2003.

        Management believes that on the basis set forth herein, the Pro Forma Statement reflects a reasonable estimate of the Combined Companies acquisition based on currently available information. The acquisition is accounted for under the purchase method of accounting. The allocation of the purchase price is based upon the estimated fair value of assets acquired and liabilities assumed, and is subject to finalization of defined working capital adjustments. Accordingly, certain of the purchase price allocations reflected in the Pro Forma Statements are preliminary and may be different from the final allocation of the purchase price and any such differences may be material. The pro forma financial data is presented for informational purposes only and does not purport to represent what RCG’s financial position or results of operations would have been had the Combined Companies acquisition in fact occurred on the dates assumed or that may result fro m future operations. The pro forma data should be read in conjunction with RCG’s consolidated financial statements and related notes appearing in our Annual Report on Form 10-K for fiscal 2003 filed with the Securities and Exchange Commission, and the Combined Companies financial statements and related notes thereto appearing in this Current Report in Form 8-K.

Unaudited Pro Forma Balance Sheet Data
September 30, 2003

		RCG CompaniesIncorporated			SunTrips, Inc. VE Holdings, Inc.			Pro formaAdjustments					Total Pro Forma
ASSETS
Cash and cash equivalents	$	2,414,492		$	84,460		$	3,707,470		(A	)	$	6,121,962
								(84,460	)	(B	)
Restricted cash					18,618,015								18,618,015
Accounts receivable, net of allowance for doubtful accounts of $235,529		1,981,720			—								1,981,720
Notes receivable, net of reserve $49,795		49,795			—								49,795
Inventory		153,307			—								153,307
Investments		405,122			—								405,122
Prepaid expenses and other assets		1,744,989			7,095,887								8,840,876
Total current assets		6,749,425			25,798,362			3,623,010					36,170,797
Property and equipment, net		995,190			725,361								1,720,551
Deferred costs and other assets		440,545			—								440,545
Non-current assets of discontinued operations, net		616,197			—								616,197
Goodwill and other intangible assets, net		16,540,825			—			12,979,337		(C	)		29,520,162
Total assets	$	25,342,182		$	26,523,723		$	16,602,347				$	68,468,252
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Due to affiliates	$	105,613		$	142,435,690		$	(142,435,690	)	(B	)	$	105,613
Notes payable and other obligations- current		2,708,720			—		$	1,236,459		(C	)		3,945,179
Accounts payable and accrued expenses		6,121,333			11,256,901								17,378,234
Current liabilities of discontinued operations, net		1,179,952			—								1,179,952
Accrued income taxes payable		305,830			—								305,830
Unearned income		2,205,790			20,828,673			(3,146,311	)	(B	)		19,888,152
Total current liabilities		12,627,238			174,521,264			(144,345,542	)				42,802,960
Notes payable and other long-term obligations		752,080			—			9,242,882		(C	)		9,994,962
Total current liabilities		13,379,318			174,521,264			(135,102,660	)				52,797,922
Minority interest		31,207			—								31,207
Shareholders' equity (deficiency):
Common stock		627,391			43,501			100,000		(A	)		727,391
								(43,501	)	(C	)
Additional paid-in capital		116,127,419			24,249,980			3,607,470		(A	)		119,734,889
								(24,249,980	)	(C	)
Accumulated deficit		(103,914,791	)		(172,291,022	)		145,497,541		(B	)		(103,914,795	)
								26,793,477		(C	)
Accumulated other comprehensive loss		(276,347	)		—								(276,347	)
Treasury stock at cost (131,214 shares)		(632,015	)		—								(632,015	)
Total shareholders' equity (deficiency)		11,931,657			(147,997,514	)		151,705,007					15,639,123
Total liabilities and shareholders' deficiency	$	25,342,182		$	26,523,723		$	16,602,347				$	68,468,252

See notes to unaudited pro forma balance sheet data and statement of operations data.

Unaudited Pro Forma Statement of Operations Data
For the Period July 1, 2003 - September 30, 2003

		RCG CompaniesIncorporated			SunTrips, Inc. VE Holdings, Inc.			Pro formaAdjustments			Total Pro Forma
SALES	$	19,593,087		$	57,285,151			(13,966,091	)(D)	$	62,912,147
COST OF SALES		18,206,625			61,815,311			(13,966,091	)(F)		66,389,201
							333,356		(F)
GROSS PROFIT (LOSS)		1,386,462			(4,530,160	)		(333,356)			(3,477,054	)
OPERATING EXPENSES:
Selling and marketing		72,331			455,317						527,648
Administrative		1,961,305			4,412,740						6,374,045
Depreciation		129,075			142,884						271,959
Total operating expenses		2,162,711			5,010,941			—			7,173,652
Operating loss		(776,249	)		(9,541,101	)		(333,356)			(10,650,706	)
Other Expenses (Income):
Interest income					(41,741	)					(41,741	)
Interest expense		93,225			—			211,665	(E)		304,890
Equity in losses of joint ventures		2,519			—						2,519
Gain on investments		(118,800	)		—						(118,800	)
Other income		(102,775	)		—						(102,775	)
Total other expenses (income)		(125,831	)		(41,741	)		211,665			44,093
LOSS FROM CONTINUING OPERATIONS BEFORE
MINORITY INTEREST		(650,418	)		(9,499,360	)		(545,021	)		(10,694,799	)
Minority interest		136,655			—						136,655
Loss from continuing operations	$	(513,763	)	$	(9,499,360	)	$	(545,021	)	$	(10,558,144	)
Net loss per share:
Loss from continuing operations	$	(0.04	)							$	(0.63	)
Weighted average shares outstanding		14,292,798						2,500,000	(A)		16,792,798
Weighted average shares outstanding, assuming dilution		14,292,798						2,500,000			16,792,798

See notes to unaudited pro forma balance sheet data and statement of operations data.

Unaudited Pro Forma Statement of Operations Data

		12 months ending June 30, 2003RCG Companies Incorporated			12 months ending September 30, 2003 SunTrips, Inc. VE Holdings, Inc.			Pro formaAdjustments				Total Pro Forma
SALES	$	75,824,171		$	191,259,456			(55,684,036)	(D)		$	211,399,591
COST OF SALES		69,829,934			199,532,228			(55,684,036)	(D)			215,011,551
							1,333,425		(F)
GROSS PROFIT (LOSS)		5,994,237			(8,272,772	)		(1,333,425)				(3,611,960	)
OPERATING EXPENSES:
Selling and marketing		206,213			1,794,567							2,000,780
Administrative		8,700,677			16,023,782							24,724,459
Depreciation and amortization		471,176			479,573							950,749
Goodwill impairment		2,020,772			—							2,020,772
Total operating expenses		11,398,838			18,297,922			—				29,696,760
Operating loss		(5,404,601	)		(26,570,694	)		(1,333,425)				(33,308,720	)
Other Expenses (Income):
Interest income					(187,511	)						(187,511	)
Interest expense		464,358			—			813,574	(E)			1,277,932
Equity in losses of joint ventures		(3,494	)		—							(3,494	)
Gain on investments		(277,774	)		—							(277,774	)
Loss on sale of assets		67,355			—							67,355
Other income		(237,535	)		(16,066	)						(253,601	)
Total other expenses (income)		12,910			(203,577	)		813,574				622,907
LOSS FROM CONTINUING OPERATIONS BEFORE
MINORITY INTEREST		(5,417,511	)		(26,367,117	)		(2,146,999	)			(33,931,627	)
Minority interest		1,164,564			—							1,164,564
Loss from continuing operations	$	(4,252,947	)		(26,367,117	)		(2,146,999	)			(32,767,063	)
Net loss per share:
Loss from continuing operations	$	(0.34	)								$	(2.16	)
Weighted average shares outstanding		12,661,743						2,500,000	(A	)		15,161,743
Weighted average shares outstanding, assuming dilution		12,661,743						2,500,000				15,161,743

See notes to unaudited pro forma balance sheet data and statement of operations data.

NOTES TO UNAUDITED PRO FORMA BALANCE SHEET DATA AS OF SEPTEMBER 30, 2003 AND
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2003 AND YEAR ENDED JUNE 30, 2003

Adjustments to the accompanying unaudited pro forma condensed consolidated financial statements are as follows:

(A) Reflects $3,707,470 of funds received by RCG from a private equity financing that closed on October 31, 2003. RCG sold 2,500,000 shares of its restricted common stock and common stock warrants to purchase 2,500,000 shares of RCG’s common stock at an exercise price of $2.44, in exchange for $3,707,470. The warrants may be exercised any time on or after the six month anniversary of October 31, 2003 and prior to forty two months after the issuance of the warrants. The weighted average number of common shares has been calculated as if the issuance occurred at the beginning of the period.

(B) Reflects the elimination of certain assets or liabilities that were not acquired or assumed.

(C) The acquisition is accounted for under the purchase method of accounting. The allocation of the purchase price is based upon the estimated fair value of assets acquired and liabilities assumed, and is subject to finalization of defined working capital adjustments. Accordingly, certain of the purchase price allocations reflected in the Pro Forma Statements are preliminary and may be different from the final allocation of the purchase price and any such differences may be material. This entry reflect recording of the $10 million non-interest bearing seven-year promissory note and a noncancelable three-year agreement with MyTravel Canada Holidays, Inc. (“MyTravel Canada”), for certain services, including the purchasing of hotel accommodations on an exclusive basis. MyTravel Canada will be paid approximately $4.5 million over three years under this agreement. After imputing interest at 8% on the promissory note and the service agreement the estimated fair value of the total consideration is approximately $13 million.

(D) Reflects elimination of sales from Flightserv to Vacation Express and SunTrips.

(E)	Reflects the recording of interest related to the promissory note and the service agreement.
(F)	Reflects amortization of intangible asset.