-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PAi1ATOu2LDeocXpGFVJ8PVvtPe2kUy8G9HkZ8NMcnuzL4fLDpFnx6xv2ZWAU97h 0Q8jlN23RjqArpEeMl3liA== 0001161697-06-000530.txt : 20060522 0001161697-06-000530.hdr.sgml : 20060522 20060522170936 ACCESSION NUMBER: 0001161697-06-000530 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060306 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060522 DATE AS OF CHANGE: 20060522 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYNAMIC LEISURE CORP CENTRAL INDEX KEY: 0000934873 STANDARD INDUSTRIAL CLASSIFICATION: TRANSPORTATION SERVICES [4700] IRS NUMBER: 411508703 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 333-07953 FILM NUMBER: 06859294 BUSINESS ADDRESS: STREET 1: 2203 NORTH LOIS AVENUE STREET 2: SUITE 900 CITY: TAMPA STATE: FL ZIP: 33607 BUSINESS PHONE: 813-877-6300 MAIL ADDRESS: STREET 1: 2203 NORTH LOIS AVENUE STREET 2: SUITE 900 CITY: TAMPA STATE: FL ZIP: 33607 FORMER COMPANY: FORMER CONFORMED NAME: DYNECO CORP DATE OF NAME CHANGE: 19960521 8-K/A 1 dynamic_leisure8-ka.htm FORM 8-K/A1 03-06-06

UNITED STATES

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): March 6, 2006

DYNAMIC LEISURE CORPORATION

Formerly known as

DYNECO CORPORATION

(Exact name of registrant as specified in its charter)

333-07953

(Commission File Number)

 

Minnesota

 

41-1508703

(State or other jurisdiction

of Incorporation)

 

(I.R.S. Employer

Identification No.)

 

2203 North Lois Avenue, Suite 900

Tampa, FL 33607

(Address of principal executive offices)

(813) 877-6300

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)



EXPLANATORY NOTE:

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Dynamic Leisure Corporation (the “Company”) hereby amends its Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 8, 2006, for the purpose of filing the audited financial statements and pro forma financial information required by Item 9.01 of Form 8-K with respect to the Company’s acquisition on March 6, 2006 of Island Resort Tours, Inc. and International Travel and Resorts, Inc., in accordance Regulation S-B and Article 11 of Regulation S-X.

 

ITEM 9.01

Financial Statements and Exhibits

 

(a)

Financial Statements of Businesses Acquired

 

On March 8, 2006, Dynamic Leisure Corporation (“DLC”), f/k/a DynEco Corporation, filed a current report on Form 8-K to report the acquisition of all of the outstanding capital stock of Island Resort Tours, Inc. and International Travel and Resorts, Inc. (“IRT/ITR”) as a result of consummation of a Purchase Agreement dated March 6, 2006 by, between and among DLC and IRT/ITR. Pursuant to the Purchase Agreement, IRT/ITR have become wholly-owned subsidiaries of DLC. The transaction closed and became effective on March 6, 2006. This Form 8-K/A is being filed to provide the financial statements filed as Exhibit 99.1 of this Form 8-K/A.

 

(b)

Pro Forma Financial Information

 

Unaudited pro forma combined condensed financial statements related to Dynamic Leisure Corporation (“DLC”), f/k/a Dyneco Corporation, the acquisition of all the issued and outstanding shares of capital stock of Dynamic Leisure Group, Inc, n/k/a Dynamic Leisure Group North America, Inc., on January 13, 2006, the acquisition of all the issued and outstanding shares of capital stock of Changes in L’Attitudes, Inc. (“CLA”) on February 8, 2006, and the acquisition of all the issued and outstanding shares of capital stock of Island Resort Tours, Inc. and International Travel and Resorts, Inc. on March 6, 2006, are filed as Exhibit 99.2 of this Form 8-K/A.

 

The Unaudited Pro Forma Combined Condensed Balance Sheet, Statement of Income and related notes are presented for illustrative purposes only and are not necessarily indicative of what the actual financial position of the Company would have been had the acquisitions and financings described above occurred on January 1, 2005, nor does it purport to represent the future financial position of the Company. The Unaudited Pro Forma Combined Condensed Balance Sheet, Statement of Income and related notes should be read in conjunction with the Company’s annual report on Form 10-KSB for the annual period ended December 31, 2005. and in conjunction with the Company’s quarterly report on Form 10-QSB for the quarterly period ended March 31, 2006.

 

(d)

Exhibits

 

Exhibit
Number

 

Exhibit Description

 

 

99.1

 

Island Resort Tours, Inc. and International Travel and Resorts, Inc. audited Financial Statements as of, and for the Years Ended, December 31, 2005 and December 31, 2004.

 

 

99.2

 

Unaudited Pro Forma financial information.

- 2 -


SIGNATURE

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.



 

DYNAMIC LEISURE CORPORATION

 

f/k/a DYNECO CORPORATION

 

 

Date: May 22, 2006

By: /s/ Daniel G. Brandano

 

Daniel G. Brandano

 

President

- 3 -

 EX-99 2 ex_99-1.txt AUDITED FINANCIAL STATEMENTS EXHIBIT 99.1 Island Resort Tours, Inc., and International Travel and Resorts, Inc. COMBINED FINANCIAL STATEMENTS Years Ended December 31, 2005 and 2004 INDEX Page(s) ------- Report of Independent Registered Public Accounting Firm ................. 1 Combined Balance Sheets ................................................. 2 Combined Statements of Operations ....................................... 3 Combined Statement of Changes in Stockholder's (Deficit) Equity ......... 4 Combined Statements of Cash Flows ....................................... 5 Notes to Combined Financial Statements .................................. 6 - 13 Report of Independent Registered Public Accounting Firm ________________________________________________________________________________ Board of Directors Island Resort Tours, Inc. and International Travel and Resorts, Inc. New York, New York We have audited the accompanying combined balance sheets of Island Resort Tours, Inc. and International Travel and Resorts, Inc. (the "Companies") as of December 31, 2005 and 2004 and the related combined statements of operations, changes in stockholder's (deficit) equity, and cash flows for the years then ended. These combined financial statements are the responsibility of the management of the Companies. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. The Companies are not required at this time to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companies' internal control over financial reporting. Accordingly, we express no such opinion. 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 evaluating the overall combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Companies as of December 31, 2005 and 2004 and the results of their operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying combined financial statements have been prepared assuming that the Companies will continue as going concerns. As discussed in Note 2, the Companies incurred net losses of $510,961 and $91,061 during the years ended December 31, 2005 and 2004, respectively, have used cash in operations of $252,422 and $504,911 for the years ended December 31, 2005 and 2004, respectively, and has a working capital deficiency of $384,384 and an accumulated deficit of $451,402 at December 31, 2005. These factors, among others, raise substantial doubt about the Companies' ability to continue as going concerns. Management's plans in regard to these matters are also described in Note 2. The combined financial statements do not include any adjustments that might result from the outcome of this uncertainty. Pender Newkirk & Company LLP Certified Public Accountants Tampa, Florida May 1, 2006 -1- Island Resort Tours, Inc. and International Travel and Resorts, Inc. Combined Balance Sheets As of December 31, 2005 and 2004 ASSETS 2005 2004 ---- ---- Current Assets Cash .................................................. $ 201,174 $ 221,879 Short term investments, restricted .................... 83,133 86,495 Accounts Receivable, net of allowance for doubtful accounts of $14,515 at 2005 and 2004 ....... 247,271 250,311 Other current assets .................................. 75,356 119,533 Taxes Receivable ...................................... - 55,000 --------- --------- Total Current Assets ................................ 606,934 733,218 Property and equipment, net ............................. 32,558 35,835 --------- --------- Deposits ................................................ 51,135 51,135 --------- --------- Total Assets ........................................ $ 690,627 $ 820,188 ========= ========= LIABILITIES AND STOCKHOLDER'S (DEFICIT) EQUITY Current Liabilities Accounts payable ...................................... $ 346,212 $ 213,231 Other accrued liabilities ............................. 77,907 66,562 Deferred revenue ...................................... 78,290 82,635 Customer deposits ..................................... 238,454 247,490 Line of credit ........................................ 200,000 - Due to stockholder .................................... 50,000 - Taxes payable ......................................... 455 - --------- --------- Total Current Liabilities ........................... 991,318 609,918 --------- --------- Total Liabilities ................................... $ 991,318 $ 609,918 --------- --------- Commitments and contingencies (see note 6) Stockholder's (Deficit) Equity Common stock .......................................... $ 11,000 $ 11,000 Contributed Capital ................................... 139,711 139,711 Accumulated (Deficit) Retained Earnings ............... (451,402) 59,559 --------- --------- Total Stockholder's (Deficit) Equity ............... (300,691) 210,270 --------- --------- Total Liabilities and Stockholder's (Deficit) Equity $ 690,627 $ 820,188 ========= ========= See accompanying notes to the combined financial statements -2- Island Resort Tours, Inc. and International Travel and Resorts, Inc. Combined Statements of Operations For the Years Ended December 31, 2005 and 2004 Years Ended December 31, ----------------------------- 2005 2004 ---- ---- Total Revenues ............................. $ 2,579,641 $ 3,115,163 Cost of Revenues ........................... 1,518,548 1,370,386 ----------- ----------- Gross Profit ............................... 1,061,093 1,744,777 Operating Expenses General and administrative ............... 1,543,094 1,866,894 Depreciation ............................. 24,922 25,766 ----------- ----------- Total Operating Expenses ............... 1,568,016 1,892,660 ----------- ----------- Loss from Operations ................... (506,923) (147,883) Other (income) expense Interest income .......................... (2,235) (1,296) Interest expense ......................... 7,658 - ----------- ----------- Total Other(Income) Expense ........... 5,423 (1,296) ----------- ----------- Net loss before income taxes ........... (512,346) (146,587) Income tax benefit ..................... (1,385) (55,526) Net Loss ............................... $ (510,961) $ (91,061) =========== =========== See accompanying notes to the combined financial statements -3- Island Resort Tours, Inc. and International Travel and Resorts, Inc. Combined Statement of Changes in Stockholder's (Deficit) Equity For the Years Ended December 31, 2005 and 2004
Retained Earnings Total Common Stock ------------ Stockholders' ------------------- Contributed (Accumulated Equity Shares Amount Capital Deficit) (Deficit) ------ -------- ----------- ------------ ------------- Balance at December 31, 2003 300 $ 11,000 $ 139,711 $ 150,620 $ 301,331 Net loss ................... - - - (91,061) (91,061) ------ -------- --------- --------- --------- Balance at December 31, 2004 300 11,000 139,711 59,559 210,270 Net loss ................... - - - (510,961) (510,961) ------ -------- --------- --------- --------- Balance at December 31, 2005 300 $ 11,000 $ 139,711 $(451,402) $(300,691) ====== ======== ========= ========= ========= See accompanying notes to the combined financial statements -4-
Island Resort Tours, Inc. and International Travel and Resorts, Inc. Combined Statements of Cash Flows For the Years Ended December 31, 2005 and 2004 Year Ended December 31, ----------------------- 2005 2004 ---- ---- Cash Flows from Operating Activities: Net loss ........................................... $(510,961) $ (91,061) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation ................................... 24,922 25,766 Changes in operating assets and liabilities Accounts receivable ............................ 3,040 220,742 Other current assets ........................... 44,177 (45,455) Other assets ................................... - (22,500) Taxes receivable ............................... 55,000 (55,000) Taxes payable .................................. 455 (106,986) Accounts payable ............................... 132,981 (298,654) Other accrued liabilities ...................... 11,345 (64,491) Deferred revenue ............................... (4,345) 46,770 Customer deposits .............................. (9,036) (114,042) --------- --------- Net Cash Used By Operating Activities .......... (252,422) (504,911) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment .............. (21,645) (16,064) Proceeds from short term instrument ................ 3,362 - Investment in short term instrument ................ - (6,415) --------- --------- Net Cash Used In Investing Activities .......... (18,283) (22,479) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit ....................... 200,000 - Stockholder advances ............................... 50,000 - --------- --------- Net Cash Provided by Financing Activities ...... 250,000 - --------- --------- Net Decrease in Cash ................................. (20,705) (527,390) Cash at Beginning of Year ............................ 221,879 749,269 --------- --------- Cash at End of Year .................................. $ 201,174 $ 221,879 ========= ========= SUPPLEMENTAL DISCLOSURESE OF CASH FLOW INFORMATION - -------------------------------------------------- Cash paid during the year for: Interest ....................................... 7,658 - Income taxes ................................... - 136,847 See accompanying notes to the combined financial statements -5- Island Resort Tours, Inc and International Travel and Resorts, Inc NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 2005 and 2004 NOTE 1 NATURE OF BUSINESS Island Resort Tours, Inc.("IRT") and International Travel and Resorts, Inc. ("ITR") (combined to be known as the "Companies") are wholesalers of Caribbean travel primarily through established networks of travel agencies, and a provider of telephone and marketing support to a variety of Caribbean locations. International Travel and Resorts, Inc. was founded in 1975, and is incorporated in the state of New York. Island Resort Tours, Inc. was founded in 1989 and is also incorporated in the state of New York. Both companies are located at 300 East 40th Street, New York, New York. NOTE 2 GOING CONCERN The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the Companies as a going concern. However, the Companies have a net loss of $510,961 and $91,061 and net cash used in operations of $252,422 and $504,911 for the years ended December 31,2005 and December 31,2004, respectively. There is a working capital deficiency of $384,384, accumulated deficit of $451,402, and a stockholders' deficiency of $300,691 at December 31, 2005. These factors raise substantial doubt about the Companies' ability to continue as a going concern. Management believes that its profitability was unusually hindered in 2005 due to severe weather conditions in the Caribbean and Southeast region of the United States, and that with current plans to provide additional product content and expand its customer base that it will be able to provide more profitable operating results. However, because the Companies has had net loss from operations for the last two years, used most of their available credit line and given these financial results along with the Companies' expected cash requirements in 2006, unless the Companies quickly return to profitability, additional capital investment may be necessary to sustain the Company's operations. The financial statements do not contain any adjustments, which might be necessary if the Companies are unable to continue as a going concern. Subsequent to December 31, 2005, on March 6, 2006, the Companies were acquired by Dynamic Leisure Corporation (See Note 13) NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These combined statements as of December 31, 2005 and 2004 and for the years then ended, present the combined results of Island Resort Tours, Inc. and International Travel and Resorts, Inc. Accounting principles generally accepted in the United States of America require that combined financial statements of commonly owned companies within similar industries be combined when such presentation is more meaningful to the users. All significant intercompany accounts and transactions have been eliminated. -6- Island Resort Tours, Inc and International Travel and Resorts, Inc NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 2005 and 2004 Use of Estimates: The preparation of combined financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions about the future outcome of current transactions which may affect the reporting and disclosure of these transactions. Accordingly, actual results could differ from those estimates used in the preparation of these combined financial statements. Cash and Cash Equivalents: For the purpose of the cash flow statement, the Companies consider all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash is maintained with a single financial institution in the United States. Deposits with this bank may exceed the amounts of insurance provided on such deposits. Generally, the deposits may be redeemed on demand and, therefore, bear minimal risk. Short-term Investments, Restricted: The Companies have investments in certificates of deposit as part of an agreement to have a letter of credit issued from the bank. These certificates of deposit are classified as a short-term investment since their six month terms are greater than the three month term used for consideration as a cash equivalent. Accounts Receivable Accounts Receivable result from amounts for either the sale of travel products or agreements with various hotels, for amounts such as co-op advertising support. The Companies regularly evaluate the collectibility of accounts receivable on an individual customer or supplier level, based on factors such as recent payment history and create an allowance as considered necessary. At December 31, 2005 and December 31, 2004 the allowance for doubtful accounts was $14,515. Accounts receivable for co-op advertising is generally also recorded as deferred revenue at its full value until used. Therefore, there is typically no allowance recorded. Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method and is expensed based upon the estimated useful lives of the assets, ranging from three to five years. Expenditures for additions and improvements greater than $1,000 are capitalized, while repairs and maintenance are expensed as incurred. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated deprecation account are relieved, and any gain or loss is included in operations. -7- Island Resort Tours, Inc and International Travel and Resorts, Inc NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 2005 and 2004 Revenue Recognition: The Companies follow the guidance of the Securities and Exchange Commission's Staff Accounting Bulletin No. 104 "Revenue Recognition in Financial Statements" in which we recognize revenue when it is earned and realizable based on the following criteria: persuasive evidence of an arrangement exists, services have been rendered, the price is fixed or determinable and collectibility is reasonably assured. The Company also follows EITF 99-19 "Reporting Revenue Gross as a Principal versus Net as an Agent". Merchant sales transactions are recorded at the gross selling price of travel products such as lodging on the date of customer travel. In a merchant sales transaction, the Companies provide travel products or services to consumers or travel agencies through a network of contractual arrangements with airlines, hotels, and other travel providers. Monies received by customers in advance of travel dates are recorded as a liability (Customer Deposits), until reported as revenue on the actual travel date. The Companies reported all other transactions at net, or the sales price of the product less the Companies' cost. Revenue from airline tickets is recognized when the tickets are issued. Revenue for other services paid as a retainer, fixed dollar, or fixed percentage amount are recognized when the service is provided. Income Taxes: The Companies account for income taxes under the Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("Statement 109"). Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period, which includes the enactment date. Concentration of Credit Risk and Other Concentrations: The Companies' ability to provide airline service availability to it customers at favorable prices is a key component of its ability to provide customers with travel packages and products. Gross bookings from three Airlines, American Airlines, Continental and Delta airline tickets accounted for approximately 54%, 18%, and 13% respectively of all tickets sold in 2005 and 51% 20% and 10% respectively in 2004. The Companies have negotiated rates and products with the airlines, that allow it to price certain products more favorably than some of its competitors. The loss of such contracts could have a negative affect on the Companies' business. -8- Island Resort Tours, Inc and International Travel and Resorts, Inc NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 2005 and 2004 The Companies sell their travel products to travel agencies and also directly to the end user. In 2005, two agencies accounted for more than ten percent of total bookings. Magical Holidays accounted for 24.0% of bookings, while MCM Tour accounted for 17.0% of bookings. In 2004, Magical Holidays and MCM Tour were each responsible for 15.5% of total bookings. The Companies do have geographical risk with destinations since essentially all of its business is travel to the Caribbean region. This concentration potentially exposes the Companies to both political and weather risks of this region. Fair Value of Financial Instruments: Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate the value. For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The Companies' financial instruments include cash, accounts receivable, accounts payable, and accrued liabilities. The fair values of cash, accounts receivable, accounts payable and accrued liabilities approximated carrying values due to the short-term nature of these instruments. Advertising The primary vehicle for advertising the Companies' products has been printed materials such as informational or promotional brochures. Advertising costs are expensed when incurred and amounted to approximately $127,138 and $94,259 for the years ended December 31, 2005 and December 31, 2004, respectively. New Accounting Pronouncements: The Financial Accounting Standards Board has recently issued several new accounting pronouncements, which may apply to the Companies. In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections" ("SFAS 154"). This statement replaces APB Opinion No. 20 "Accounting Changes" and FASB Statement No. 3 "Reporting Accounting Changes in Interim Financial Statements". SFAS 154 applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, -9- Island Resort Tours, Inc and International Travel and Resorts, Inc NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 2005 and 2004 this SFAS requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of equity or net assets for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, this SFAS requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. The Companies adopted this SFAS as of January 1, 2006. There is no current impact on the Companies' financial statements with the adoption of this FASB. NOTE 4 PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31: Estimated Useful Life 2005 2004 in Years --------- --------- ----------- Office furniture and equipment $ 99,086 $ 89,108 3-5 Software ..................... 30,366 18,700 3-5 --------- --------- Total property and equipment . 129,452 107,808 Less accumulated depreciation (96,894) (71,973) --------- --------- Property and equipment, net .. $ 32,558 $ 35,835 ========= ========= Depreciation expense was $24,922 in 2005 and $25,766 in 2004. NOTE 5 LINE OF CREDIT IRT entered into a line of credit agreement with the Bank of New York ("the Bank") on December 5, 2001 for $200,000, which was later increased to $210,000. The agreement was for one year with extensions for a period of one year on the anniversary date unless the Bank elects not to extend the line of credit. The line of credit is collateralized by substantially all of the assets of IRT and a guarantee by the stockholder. As of December 31, 2005 and 2004, the loan balance was $200,000 and zero, respectively. The availability of the credit line was $10,000 and $210,000 for December 31, 2005 and 2004, respectively. The interest rate is variable and at December 31, 2005 was 8.25%. NOTE 6 COMMITMENTS AND CONTINGENCIES Surety Bond IRT had outstanding at December 31, 2004 and 2005, a surety bond for $70,000 related to the Airlines Reporting Corporation to allow the purchase of airline tickets through a computerized ticket system. As part of the letter of credit agreement IRT is required to keep a collateral deposit in the amount of $22,500. The deposit is included in Other Assets - Deposits on the accompanying balance sheets. -10- Island Resort Tours, Inc and International Travel and Resorts, Inc NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 2005 and 2004 Letters of Credit There are two letters of credit outstanding at December 31, 2005 and 2004 totaling $80,000 each year and payable to the Airlines Reporting Corporation to allow the purchase of airline tickets through a computerized ticket system. As part of the letter of credit agreement, certificates of deposit are required with the issuer of the letter of credit for approximately the amount of the letters of credit and are reflected as short-term investments, restricted, on the accompanying balance sheets. Operating Lease: The Companies currently lease office space under a five year extension agreement effective April 2003. The Companies currently pay $11,167 per month. Rent expense for the years ending December 31, 2005 and 2004 were $139,166 and $138,821, respectively. Future lease obligations for 2006, 2007 and 2008 are $135,790 and $138,506 and $46,472, respectively. The Companies currently leases two vehicles, both on which terms will end in 2007. Lease expense related to these vehicles was $19,436 and $22,393 in 2005 and 2004, respectively. Future lease obligations for 2006 and 2007 are $19,345 and $11,044, respectively. NOTE 7 RELATED PARTY TRANSACTIONS As of the end of the year, IRT had outstanding a $50,000 payable to the stockholder of the Companies, classified as a short term liability. There are no contractual terms of a repayment date, and no interest is being accrued or expected to be paid related to the balance. The above related party transaction is not necessarily indicative of the amounts that would have been incurred had comparable transactions been entered into with independent parties. NOTE 8 DEFERRED REVENUE The Companies work close with suppliers that agree contractually to provide advertising or promotional support. The amount of the supplier commitment is recorded in Accounts Receivable and Deferred Revenue and amounted to $78,290 and $82,635 at December 31, 2005 and 2004 respectively. NOTE 9 CUSTOMER DEPOSITS Customer deposits represent money received for hotel bookings, future dates of travel. The Companies recognize the revenue and the related costs of product when the travel occurs. The balances at December 31, 2005 and 2004 were $238,454 and $247,490 respectively. -11- Island Resort Tours, Inc and International Travel and Resorts, Inc NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 2005 and 2004 NOTE 10 COMMON STOCK As of December 31, 2005 and 2004, IRT had 100 shares of no par common stock issued and outstanding. As of December 31, 2005 and 2004, ITR had 200 shares of no par common stock issued and outstanding. NOTE 11 RETIREMENT PLAN During 2005 and 2004, the Companies had a 401K retirement savings plan available to employees. The Companies provided a uniform percentage of the amount of saving by the employee up to three percent of gross salary. The expense related to this match for 2005 and 2004 was $5,253 and $6,073, respectively. NOTE 12 INCOME TAXES The effective tax rate varies from the federal statutory rate as a result of the following items: 2005 2004 ---- ---- Tax benefit computed at the federal statutory rate ...................................... $(174,198) $(49,840) State and local taxes, net of federal benefit (57,485) (16,447) Other ....................................... 14,598 (13,439) Change in valuation allowance ............... 215,700 24,200 --------- -------- Income tax provision/(benefit) .............. $ (1,385) $(55,526) The tax effect of temporary differences at December 31 were as follows: 2005 2004 ---- ---- Asset: Net operating loss carryforward $ 239,900 $ 24,200 Less: Valuation allowance ................... (239,900) (24,200) --------- -------- Deferred tax asset .......................... $ 0.0 $ 0.0 Management has determined it is more likely than not that the above carrryforwards will not be realized, and accordingly a valuation allowance has been established for the full amount of the deferred tax asset. The change in the valuation allowance was an increase of approximately $215,700 in 2005. At December 31, 2005 the Companies had a net operating loss of approximately $534,389 available to offset future taxable income through the year 2025. The utilization of the carryforward is dependent upon the ability to generate sufficient taxable income during the carryforward period. In addition, utilization of the carryforward may be limited due to ownership changes as defined in the Internal Revenue Code. -12- Island Resort Tours, Inc and International Travel and Resorts, Inc NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 2005 and 2004 NOTE 13 SUBSEQUENT EVENTS On March 6, 2006, the Dynamic Leisure Corporation ("Dynamic") purchased all of the issued and outstanding capital stock of Island Resort Tours, Inc. and International Travel and Resorts, Inc., for a purchase price of $4,783,300. The purchase price consists of a combination of cash ($1,500,000), 700,000 shares of Dynamic's common stock ($1,833,300 valued at the average closing price of the Dynamic's common stock for the five days before and five days after the acquisition dates), and a one-year secured Convertible Promissory Note in the principal amount of $1,450,000. The cash portion consists of $500,000 delivered at closing, with the balance to be delivered on or before May 5, 2006, following completion of audits of the financial statements of the Companies for the years ended December 31, 2004 and December 31, 2005. The balance of the cash payment will be reduced by any trade payables in excess of short-term liquid assets. Additional shares of common stock may be issued to the shareholder of the Companies, if as part of any subsequent business acquisitions on or before December 31, 2006, Dynamic issues its common stock to an acquiree/seller at a rate less than $1.50 per share. In such event, additional shares may be issued equivalent to the most favorable rate, but in no event at a rate less than $1.00 per share. Up to an additional 350,000 shares of common stock could be issued as a result of this adjustment provision. The Promissory Note is payable with interest at the rate of 9% per annum and matures on March 6, 2007 (the "Maturity Date"). The Note is convertible into Dynamic's common stock on or before the Maturity Date at a rate of $1.50 per share, and is secured by a lien on the assets of the Companies. The conversion rate may be adjusted downward if Dynamic, in subsequent acquisitions on or before December 31, 2006, provides consideration that includes convertible securities with a conversion rate of less than $1.50 per share. In the event of any such adjustment, the conversion rate will be adjusted to the most favorable rate offered, but no lower than $1.00 per share. Subsequent to the Closing Date, if Dynamic obtains cumulative net external financing of $3,500,000 or more prior to the maturity date, early repayment of 50% of the outstanding balance on the Note may be required by the stockholder. If Dynamic receives in excess of $7,000,000 in cumulative net external financing prior to the maturity date, an early repayment of the full outstanding balance on the Note may be required by the stockholder. Dynamic has agreed to include resale of the shares issued and those issuable upon conversion of the Note in the next registration statement. -13- EX-99 3 ex_99-2.txt UNAUDITED PRO FORMA FINANCIAL INFORMATION EXHIBIT 99.2 UNAUDITED PRO FORMA FINANCIAL INFORMATION Dynamic Leisure Corporation, and Subsidiaries Unaudited Pro Forma Combined Condensed Balance Sheet December 31, 2005
Pro Forma Combined Historical Statements Historical Dynamic Historical Historical Acquisition for Dyneco Leisure Changes IRT-ITR Adjustments Ref Acquisitions ----------- ----------- ---------- ---------- ----------- --- ------------ Cash ............................. $ (232) $ 19,563 $546,725 $201,174 $ (700,000) (e) $ 67,230 Short term investments, restricted ..................... - - 69,548 83,133 - 152,681 Accounts receivable, net ......... - - - 247,271 - 247,271 Prepaid travel ................... - - 142,110 - - 142,110 Other current assets ............. - 19,136 18,467 75,356 - 112,959 ----------- ----------- -------- -------- ----------- ----------- Total Current Assets ........... (232) 38,699 776,850 606,934 (200,000) 722,251 Property and equipment, net ...... 33,418 646,713 54,455 32,558 - 767,144 Other Assets Debt issue costs, net .......... 521 - - - - 521 Deposits ....................... 28,434 1,760 - 51,135 - 81,329 Goodwill ....................... - - - - 6,873,980 (e) 6,873,980 ----------- ----------- -------- -------- ----------- ----------- Total Other Assets ............. 28,955 1,760 - 51,135 6,873,980 6,873,980 ----------- ----------- -------- -------- ----------- ----------- Total Assets ................... $ 62,141 $ 687,172 $831,305 $690,627 $ 6,173,980 $ 8,445,225 =========== =========== ======== ======== =========== =========== Current Liabilities Accounts payable and other accrued expenses ............. 366,575 148,126 57,613 424,119 - 996,433 Deferred revenue ............... - - 594,698 78,290 - 672,988 Customer deposits .............. - - 111,886 238,454 - 350,340 Convertible promissory notes, net of discount .............. 115,380 847,500 - - 2,050,000 (e) 3,012,880 Line of credit ................. - - - 200,000 - 200,000 Warrant liability .............. 240,592 - - - - 240,592 Accrued Interest ............... 59,930 29,360 - - - 89,290 Loans payable .................. 213,640 - - - - 213,640 Other current liabilities ...... - - - 50,455 - 50,455 Notes payable - current ........ 37,216 140,000 - - 1,440,000 (e) 1,617,216 ----------- ----------- -------- -------- ----------- ----------- Total Current Liabilities ...... 1,033,333 1,164,986 764,197 991,318 3,490,000 7,443,834 Loans and Notes payable .......... 134,719 - - - - 134,719 ----------- ----------- -------- -------- ----------- ----------- Total Liabilities .............. 1,168,052 1,164,986 764,197 991,318 3,490,000 7,443,553 Stockholder's Equity Common Stock ................... 11,580 65,666 - - 10,400 (e) 87,646 Paid in Capital ................ 7,543,532 (57,629) 7,500 150,711 2,673,580 (e) 10,317,694 Stock subscription receivable .. - (537) - - - (537) Retained Earnings/ (Accumulated Deficit) ......... (8,661,023) (485,314) 59,608 (451,402) (67,108) (e) (9,538,131) ----------- ----------- -------- -------- ----------- ----------- Total Stockholders' Equity ..... (1,105,911) (477,814) 67,108 (300,691) 2,683,980 866,672 ----------- ----------- -------- -------- ----------- ----------- Total Liabiliites and Stockholders' Equity .......... $ 62,141 $ 687,172 $831,305 $690,627 $ 6,173,980 $ 8,445,225 =========== =========== ======== ======== =========== =========== See accompanying notes to unaudited pro forma combined condensed financial statements. 1
Dynamic Leisure Corporation Unaudited Pro Forma Combined Condensed Statement of Income For the 12 months ended December 31, 2005
Historical Historical Dynamic Historical Historical Acquisitions DynEco (a) Leisure (a) Changes (a) IRT-ITR Adjustments (a) Ref Total ----------- ----------- ---------- ----------- --------------- --- ----------- Revenue ................................ $ - $ - $5,737,408 $ 2,579,641 $ - $ 8,317,049 Cost of revenue ........................ - - 4,701,541 1,518,548 - 6,220,089 ----------- ----------- ---------- ----------- --------- ----------- Gross Profit ........................... - - 1,035,867 1,061,093 - 2,096,960 General and admistrative expenses ...... 497,968 455,954 835,801 1,892,660 - 3,682,383 ----------- ----------- ---------- ----------- --------- ----------- Income (loss) from operations .......... (497,968) (455,954) 200,066 (506,923) - (1,585,423) Other Income/(Expense) Interest income ...................... 1,257 - 15,194 2,235 - 18,686 Interest expense ..................... (199,041) (29,360) - (7,658) (184,500) (c) (329,659) Other Income ......................... 169,287 - - - - 169,287 ----------- ----------- ---------- ----------- --------- ----------- Total Other Income/(Expense) ....... (28,497) (29,360) 15,194 (5,423) (184,500) (141,686) ----------- ----------- ---------- ----------- --------- ----------- Income before taxes ................ (526,465) (485,314) 215,260 (512,346) (184,500) (1,727,109) Provision for income taxes ......... - - - 1,385 - (d) - ----------- ----------- ---------- ----------- --------- ----------- Net income ......................... $ (526,465) $ (485,314) $ 215,260 $ (510,961) $(184,500) $(1,727,109) =========== =========== ========== =========== ========= =========== Net Loss per share - Basic and Diluted . $ (0.47) $ (0.07) $ 0.63 $ (0.73) $ - $ (0.20) =========== =========== ========== =========== ========= =========== Weighted average number of shares outstanding during the period - basic and diliuted ................. 1,125,327 6,566,667 340,000 700,000 - 8,731,994 =========== =========== ========== =========== ========= =========== See accompanying notes to unaudited pro forma combined condensed financial statements. 2
Dynamic Leisure Group, Inc. Notes to Unaudited Pro Forma Combined Condensed Financial Statements (a) The unaudited pro forma combined condensed statement of income reflects the combined historical financial statements of Dynamic Leisure Group, Inc. for the period from May 16, 2005 (inception) to December 31, 2005. The historical financial statements for DynEco Corporation, Changes in L'attitudes ("CLA"), Island Resort Tours, Inc. ("IRT") and International Travel and Resorts, Inc. ("ITR") are for the 12 months ending December 31, 2005. The historical results are presented in the unaudited pro forma income statement as if the acquistions had occurred at the beginning of the period or for Dynamic, at its inception. The financial statements of both DynEco and Dynamic have been adjusted for the subsequent affect of a 1:30 reverse stock split. The pro forma adjustments do not reflect benefits of additional revenue or reduced expenses from the combinations nor acquisition or integration costs subsequent to the acquisitions, which will cause actual earnings results that will vary from the pro forma earnings shown. A final determination of possible required purchase accounting adjustments has not yet been made, which could also affect the pro form earnings presented. (b) The unaudited pro forma combined condensed balance sheet reflects the combined historical financial position of DynEco Corporation, Dynamic Leisure Group, Inc., Changes in L'attitudes, Inc. and Island Resort Tours, Inc and International Travel and Resorts, Inc., as if the acquisitions had occurred on December 31, 2005. Certain reclassifications were made from historical financial reports for comparability and consistency. Dynamic Leisure Group, Inc, was acquired through a share exchange agreement, in which no cash or new additional liabilities were assumed other then those already recorded by Dynamic or DynEco. CLA was acquired for a total purchase price of $2,090,680 consisting of $200,000 in cash, an acquisition payable of 440,000, a convertible note payable of $600,000 and 340,000 shares of common stock, valued at $850,680,000. IRT and ITR were acquired for a total purchase price of $4,783,300 consisting of $500,000 in cash, an acquisition payable of $1,000,000, a convertible note payable of $1,450,000 and 700,000 shares of common stock valued at $1,833,300. (c) Adjustment represents interest income to finance the acquisition of CLA and IRT-ITR, as if amounts due for both convertible notes payable in the amount of $2,05000,000 were outstanding for the entire 12 month period, accruing interest at the 9% annual stated rate. (d) There is no provision or benefit for income taxes recorded, based on the historical operating losses previously reported by DynEco and Dynamic. (e) Under the purchase method of accounting, assets and liabilities are reported at their estimated fair value, which may result in an increase or decrease from previously reported amounts. There are no adjustments presented to the value of existing assets or liabilities of CLA or IRT-ITR, based on an initial valuation that they are already reported at their estimated fair value. However, the analysis of purchase accounting valuations is still continuing and may or may not result in future adjustments. The amount of the CLA and IRT-ITR purchase price that exceeded net assets is presented as goodwill, and prior CLA and IRT-ITR equity that represents the book value of net assets acquired was eliminated. 3 -----END PRIVACY-ENHANCED MESSAGE-----