-----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, DQGd4sUDBaGWrIlE2lFwpDbH4+TpMGOVMtwOBfhAVOqYhVJvAnn7ijJ/33QIGvNT a47gmprehks2WhbzdQnK6w== 0000950170-99-001428.txt : 19990914 0000950170-99-001428.hdr.sgml : 19990914 ACCESSION NUMBER: 0000950170-99-001428 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990706 ITEM INFORMATION: FILED AS OF DATE: 19990913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANSWERTHINK CONSULTING GROUP INC CENTRAL INDEX KEY: 0001057379 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 650750100 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 333-48123 FILM NUMBER: 99710410 BUSINESS ADDRESS: STREET 1: 1001 BRICKELL BAY DRIVE STREET 2: SUITE 3000 CITY: MIAMI STATE: FL ZIP: 33131 BUSINESS PHONE: 3053758005 MAIL ADDRESS: STREET 1: 1001 BRICKELL BAY DRIVE STREET 2: SUITE 3000 CITY: MIAMI STATE: FL ZIP: 33131 8-K/A 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 6, 1999 ANSWERTHINK CONSULTING GROUP, INC. ------------------------------------------------------ (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) FLORIDA ---------------------------------------------- (STATE OR OTHER JURISDICTION OF INCORPORATION) 0-24343 65-0750100 ------------------------ --------------------------------------- (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER) 1001 BRICKELL BAY DRIVE, SUITE 3000 MIAMI, FLORIDA 33131 ----------------------------------- ---------- (ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE) OFFICES) (305) 375-8005 ------------------------------------------------- (COMPANY'S TELEPHONE NUMBER, INCLUDING AREA CODE) NOT APPLICABLE ------------------------------------------------------------- (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) ================================================================================ Item 7 of the Current Report on Form 8-K, as originally filed on July 21, 1999, is hereby amended and restated in its entirety as follows: ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED The financial statements of CFT Consulting, Inc. required by this item are included as Exhibit 99.1 to this Current Report on Form 8-K/A and incorporated herein by reference. (b) PRO FORMA FINANCIAL INFORMATION The pro forma financial information required by this item is included as Exhibit 99.2 to this Current Report on Form 8-K/A and incorporated herein by reference. (c) EXHIBITS See Exhibit Index attached hereto. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ANSWERTHINK CONSULTING GROUP, INC. Date: September 13, 1999 By: /s/ John F. Brennan --------------------------------- John F. Brennan Executive Vice President and Chief Financial Officer 3 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------ ----------- *2.1 Merger Agreement by and among AnswerThink Consulting Group, Inc., CFT Consulting, Inc., CFT Acquisition, Inc. and the Shareholders of CFT, dated as of July 6, 1999 23 Consent of Eaton Honick Pellegrino & McFarland, P.A. 99.1 Financial Statements of CFT Consulting, Inc. 99.2 Pro Forma Financial Information * Previously Filed 4 EX-23 2 EXHIBIT 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (no. 333-69951) of AnswerThink Consulting Group, Inc. of our report dated May 21, 1999, relating to the financial statements of CFT Consulting, Inc. which appear in this Current Report on Form 8-K dated September 13, 1999. /s/ Eaton Honick Pellegrino & McFarland, P.A. Sarosota, Florida September 13, 1999 EX-99.1 3 EXHIBIT 99.1 INDEX TO FINANCIAL STATEMENTS CFT CONSULTING, INC.
TABLE OF CONTENTS INDEPENDENT AUDITORS' REPORT...................................................................................1 FINANCIAL STATEMENTS Balance Sheets as of December 31, 1998 and June 30, 1999 (Unaudited)...........................................2 Statements of Operations for the Year Ended December 31, 1998 and for the Six Months Ended June 30, 1998 (Unaudited) and 1999 (Unaudited)........................................4 Statement of Changes in Stockholders' Equity for the Year Ended December 31, 1998...............................................................................5 Statement of Changes in Stockholders' Equity for the Six Months Ended June 30, 1999 (Unaudited).................................................................6 Statements of Cash Flows for the Year Ended December 31, 1998 and for the Six Months Ended June 30, 1998 (Unaudited) and 1999 (Unaudited)........................................7 Notes to Financial Statements .................................................................................9
INDEPENDENT AUDITORS' REPORT Board of Directors CFT Consulting, Inc. Sarasota, Florida We have audited the accompanying balance sheet of CFT Consulting, Inc. as of December 31, 1998, and the related statement of operations, changes in stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CFT Consulting, Inc. as of December 31, 1998, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Eaton Honick Pellegrino & McFarland, P.A. Sarasota, Florida May 21, 1999 CFT CONSULTING, INC. Balance Sheets
JUNE 30, 1999 DECEMBER 31, 1998 (UNAUDITED) ----------------- ------------------ ASSETS Current Assets Cash & cash equivalents $ 71,211 $ 514,311 Marketable securities 670 670 Accounts receivable net of allowance for doubtful accounts 2,285,999 3,467,115 Advance - employees 6,909 - Notes receivable - employees 14,524 77,692 Deferred tax asset 44,000 56,700 ----------------- ------------------ Total Current Assets 2,423,313 4,116,488 Property and Equipment, net of accumulated depreciation 456,671 473,226 Other Assets Deposits 20,651 26,151 Deferred tax asset 35,700 51,500 Organizational costs, net of amortization - - ----------------- ------------------ Total Other Assets 56,351 77,651 ----------------- ------------------ TOTAL ASSETS $ 2,936,335 $ 4,667,365 ================= ==================
See accompanying notes and accountant's report - 2 - CFT CONSULTING, INC. Balance Sheets (Continued)
JUNE 30, 1999 DECEMBER 31, 1998 (UNAUDITED) ----------------- ------------------ LIABILITIES Current Liabilities Accounts payable $ 431,327 $ 757,003 Accrued expenses 81,247 931,742 Accrued interest 19,223 - Deposits 8,296 8,296 Deferred tax liability 293,000 252,000 Shareholder loan - short-term 440,523 440,511 Current portion - capital lease obligation 83,503 74,158 Short-term borrowings 1,026,285 765,562 Income tax payable 152,830 469,343 ----------------- ------------------ Total Current Liabilities 2,536,234 3,698,615 Long-Term Liabilities Capital lease obligations, net of current portion 99,086 68,964 Notes payable, net of current portion 4,555 - Deferred tax liability 11,600 21,000 ----------------- ------------------ Total Long-Term Liabilities 115,241 89,964 ----------------- ------------------ Total Liabilities 2,651,475 3,788,579 EQUITY Stockholders' Equity 284,860 878,786 ----------------- ------------------ TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 2,936,335 $ 4,667,365 ================= ==================
See accompanying notes and accountant's report - 3 - CFT CONSULTING, INC. Statements of Operations
FOR THE SIX FOR THE SIX FOR THE MONTHS ENDED MONTHS ENDED YEAR ENDED JUNE 30, 1998 JUNE 30, 1999 DECEMBER 31, 1998 (UNAUDITED) (UNAUDITED) ----------------- ----------- ----------- REVENUE Revenue $ 9,248,029 $ 4,836,390 $ 8,791,929 EXPENSES Operating expenses 9,643,796 4,419,669 7,722,895 ------------- ---------------- --------------- Income (loss) from operations (395,767) 416,721 1,069,034 OTHER INCOME AND EXPENSES Interest income 6,774 3,430 3,333 Interest expense (81,241) (41,248) (51,060) Other income 1,377 - 25,461 Loss on disposal of equipment (17,301) (1,452) (58,586) ------------- ---------------- --------------- Total other income and expense (90,391) (39,270) (80,852) ------------- ---------------- --------------- Income (loss) before income taxes (486,158) 377,451 988,182 Income tax benefit (expense) 64,839 150,000 (438,571) ------------- ---------------- --------------- NET INCOME (LOSS) $ (421,319) $ 527,451 $ 549,611 ============= ================ ===============
See accompanying notes and accountant's report - 4 - CFT CONSULTING, INC. Statement of Changes in Stockholders' Equity For the Year Ended December 31, 1998
COMMON ACCUMULATED ADDITIONAL STOCK DEFICIT PAID-IN CAPITAL TOTAL ---------- ---------- --------------- ---------- Balance at December 31, 1997 $ 2,132 $ (204,798) $ 529,749 $ 327,083 Stock issuance to ESOP 83 - 279,917 280,000 Stock options issuance - - 99,096 99,096 Net loss - (421,319) - (421,319) ---------- ---------- ---------- ---------- Balance at December 31, 1998 $ 2,215 $ (626,117) $ 908,762 $ 284,860 ========== ========== ========== ==========
See accompanying notes and accountant's report - 5 - CFT CONSULTING, INC. Statement of Changes in Stockholders' Equity For the Six Months Ended June 30, 1999 (Unaudited)
COMMON ACCUMULATED ADDITIONAL STOCK DEFICIT PAID-IN CAPITAL TOTAL ---------- ------------ --------------- ------------ Balance at December 31, 1998 $ 2,215 $ (626,117) $ 908,762 $ 284,860 Stock options issuance - - 44,315 44,315 Net income - 549,611 - 549,611 ---------- ------------ ------------ ------------ Balance at June 30, 1999 $ 2,215 $ (76,506) $ 953,077 $ 878,786 ========== ============ ============ ============
See accompanying notes and accountant's report - 6 - CFT CONSULTING, INC. Statements of Cash Flows For the Year Ended December 31, 1998
FOR THE SIX FOR THE SIX FOR THE MONTHS ENDED MONTHS ENDED YEAR ENDED JUNE 30, 1998 JUNE 30, 1999 DECEMBER 31, 1998 (UNAUDITED) (UNAUDITED) ----------------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (421,319) $ 527,451 $ 549,611 Adjustments to reconcile net income (loss) to net cash provided by (used in) operations: Amortization 215 108 - Depreciation 171,076 76,280 133,541 Deferred taxes (301,000) (150,000) (60,100) Loss on disposal of equipment 17,301 1,452 58,586 Common stock issued to ESOP 279,999 - - Stock options issuance 99,096 - 44,314 (Increase) decrease in operating assets: Accounts receivable (447,057) (447,562) (1,181,115) Employee advances 3,091 5,000 6,909 Deposits (10,458) - (5,500) Increase (decrease) in operating liabilities: Accounts payable 120,052 (16,069) 325,676 Accrued expenses 38,433 - 831,272 Accrued income taxes 64,508 (88,322) 316,513 Deposits - 8,400 - --------------- ---------------- -------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (386,063) (83,262) 1,019,707 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (295,316) (40,284) (208,682) Proceeds from: Note receivable issuance (4,524) - (63,168) --------------- ---------------- -------------- NET CASH USED IN INVESTING ACTIVITIES (299,840) (40,284) (271,850)
See accompanying notes and accountant's report - 7 - CFT CONSULTING, INC. Statements of Cash Flows (Continued)
FOR THE SIX FOR THE SIX FOR THE MONTHS ENDED MONTHS ENDED YEAR ENDED JUNE 30, 1998 JUNE 30, 1999 DECEMBER 31, 1998 (UNAUDITED) (UNAUDITED) ----------------- ----------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on long-term debt (519,087) (387,723) (265,278) Fixed assets acquired by capital lease obligations 122,972 - - Repayments of capital lease obligations (55,924) (12,504) (39,467) Shareholder loan payments (1,444) (7,501) (12) Proceeds from: Bank loans 950,000 330,073 - --------------- ----------------- -------------- Net cash provided by (used in) financing activities 496,517 (77,655) (304,757) Net increase in cash (189,386) (201,201) 443,100 Cash and cash equivalents at beginning of year 260,597 260,597 71,211 --------------- ----------------- -------------- Cash and cash equivalents at end of year $ 71,211 $ 59,396 $ 514,311 =============== ================= ============== SUPPLEMENTARY INFORMATION Interest paid during the period $ 50,559 $ 41,248 $ - =============== ================= ============== Income taxes paid during the period $ 171,654 $ - $ - =============== ================= ==============
See accompanying notes and accountant's report - 8 - CFT CONSULTING, INC. NOTES TO FINANCIAL STATEMENTS For Year Ended December 31, 1998 NOTE A - ORGANIZATION CFT Consulting, Inc. (CFT) was incorporated in the state of Florida on April 7, 1995. CFT provides computer consulting to a variety of customers nationwide. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. BASIS OF PRESENTATION The accompanying financial statements are prepared using the accrual basis of accounting that recognizes revenues when earned and expenses when incurred. 2. INTERIM FINANCIAL STATEMENTS The financial statements for the six month periods ended June 30, 1999 and 1998, and all related footnote information for these periods, are unaudited, and reflect all normal and recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, operating results and cash flows for the interim period. The results of operation for the six months ended June 30, 1999 are not necessarily indicative of the results to be achieved for the entire fiscal year ending December 31, 1999. 3. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less. 4. ALLOWANCE FOR DOUBTFUL ACCOUNTS The allowance for doubtful accounts is based on management's evaluation of outstanding accounts receivable at the end of year. 5. INVESTMENT SECURITIES Management determines the appropriate classification of investment securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. The classification of those securities and the related accounting policies are as follows: Trading securities: Trading securities are held for resale in anticipation of short-term (generally 90 days or less) fluctuations in market prices. Trading securities are stated at fair value. Realized and unrealized gains and losses are included in income. - 9 - CFT CONSULTING, INC. NOTES TO FINANCIAL STATEMENTS For Year Ended December 31, 1998 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Available-for-sale securities: Available-for-sale securities consist of marketable equity securities not classified as trading securities. Available-for-sale securities are stated at fair value, and unrealized holding gains and losses, net of the related deferred tax effect, are reported as a separate component of stockholders' equity. Dividends on marketable equity securities are recognized in income when declared. Realized gains and losses are included in income. Realized gains and losses are determined on the basis of the actual cost of the securities sold. 6. PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation is provided by utilizing the double declining and straight-line methods over the estimated useful lives ranging from three to thirty-nine years. 7. ORGANIZATIONAL COSTS Organizational costs were recorded at their estimated fair market value on the date that they were expended. Amortization is provided using the straight-line method over an estimated useful life of five years. 8. INCOME TAXES Deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. - 10 - CFT CONSULTING, INC. NOTES TO FINANCIAL STATEMENTS For Year Ended December 31, 1998 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 9. FINANCIAL INSTRUMENTS The following methods and assumptions were used by CFT to estimate the fair values of financial instruments as disclosed herein: Cash and equivalents: The carrying amount approximates fair value because of the short period to maturity of the instruments. Investments securities: The carrying amounts approximate fair value, which is based on quoted market prices. 10. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. NOTE C - ACCOUNTS RECEIVABLE
JUNE 30, 1999 DECEMBER 31, 1998 (UNAUDITED) ----------------- ----------- Accounts receivable for CFT $ 2,406,582 $ 3,824,021 Less allowance for doubtful accounts 120,583 356,906 ------------- ------------- $ 2,285,999 $ 3,467,115 ============= ============= NOTE D - INVESTMENT SECURITIES JUNE 30, 1999 DECEMBER 31, 1998 (UNAUDITED) ----------------- ----------- Available-for-sale securities: Marketable equity securities, at cost $ 670 $ 670 Unrealized gains (losses) - - ------------- ------------- Marketable equity securities, at fair market value $ 670 $ 670 ============= =============
- 11 - CFT CONSULTING, INC. NOTES TO FINANCIAL STATEMENTS For Year Ended December 31, 1998 NOTE E - NOTES RECEIVABLE Note receivable from an employee due in 11 monthly installments of $500 along with a lump sum payment of $3,000 due July 1, 1999. The remaining principal to be paid from bonuses in December 1999 $10,000 Note receivable from an employee due in monthly installments of $2,000 beginning September 1998 until balance is paid 4,524 --------- $ 14,524 ========= NOTE F - PROPERTY AND EQUIPMENT A summary of property and equipment is as follows:
JUNE 30, 1999 DECEMBER 31, 1998 (UNAUDITED) ----------------- ------------- Automobiles $ 18,500 $ 18,500 Computers equipment 378,253 530,219 Furniture and equipment 341,853 294,906 Leasehold improvements 46,202 50,476 Software 43,417 46,532 ------------- ------------- 828,225 940,633 Less: Accumulated depreciation 371,554 467,407 ------------- ------------- $ 456,671 $ 473,226 ============= =============
NOTE G - ORGANIZATIONAL COSTS
JUNE 30, 1999 DECEMBER 31, 1998 (UNAUDITED) ----------------- ------------- Organizational costs $ 1,600 $ 1,600 Less: Accumulated amortization 1,600 1,600 ------------- ------------- $ - $ - ============= =============
- 12 - CFT CONSULTING, INC. NOTES TO FINANCIAL STATEMENTS For Year Ended December 31, 1998 NOTE H - SHORT-TERM BORROWINGS Short-term borrowings for CFT consisted of the following:
JUNE 30, 1999 DECEMBER 31, 1998 (UNAUDITED) ----------------- ------------- Note to bank, interest at prime plus .5%, payable quarterly, principal balance due December 31, 1999, collateralized by all assets of CFT and is guaranteed by CFT's shareholders. $ 500,000 $ 250,000 Note payable, interest at 8.25%, principal balance due April 6, 1999, collateralized by all assets of CFT and is guaranteed by CFT's shareholders. 2,613 - Line of credit, interest at prime plus .5%, payable monthly principal balance due on demand, collateralized by all assets of CFT and is guaranteed by CFT's shareholders. 50,000 - Line of credit, interest at prime plus .5%, payable monthly principal balance due on demand collateralized by all assets of CFT and is guaranteed by CFT's shareholders. 450,000 500,000 ------------ ------------- 1,002,613 750,000 Current portion of long-term debt 23,672 15,562 ------------ ------------- $ 1,026,285 $ 765,562 ============ =============
NOTE I - LONG-TERM DEBT Long-term debt for CFT consisted of the following:
JUNE 30, 1999 DECEMBER 31, 1998 (UNAUDITED) ----------------- ------------- Note to bank, interest at prime plus .5%, payable monthly plus interest, principal balance due February 2, 2000 collateralized by all the assets of CFT. $ 28,227 $ 15,562 Less current maturities 23,672 15,562 ------------ ------------- $ 4,555 $ - ============ ============= Aggregate maturities required on long-term debt are as follows: For the year ending December 31, 2000 $ 4,555 $ - ============ =============
- 13 - CFT CONSULTING, INC. NOTES TO FINANCIAL STATEMENTS For Year Ended December 31, 1998 NOTE J - INCOME TAX MATTERS Effective January 1, 1997 the shareholders of CFT elected to revoke CFT's tax status as an S corporation and to be taxed as a C corporation. This election resulted in the need to account for both accrued and deferred income taxes at the corporate level. The net deferred tax asset (liability) of CFT consisted of the following components as of December 31, 1998: Deferred tax assets relating to: Accounts payable $ 15,000 Accrued vacation 29,000 Stock option compensation 35,700 Deferred tax liabilities relating to: Accounts receivable (293,000) Property and equipment (11,600) ----------- Net deferred tax liability $ (224,900) The components giving rise to the net deferred tax asset (liability) described above have been included in the accompanying balance sheet of CFT as of December 31, 1998 as follows: Current assets $ 44,000 Other assets 35,700 Current liability (293,000) Other liability (11,600) ----------- $(224,900) =========== Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences are expected to be available to reduce taxable income. The provision for income taxes for the year ended December 31, 1998, for CFT consisted of the following: Current income taxes $ 236,161 Deferred income taxes (343,645) ------------ Total income taxes $ (107,484) ============ Cash payments for income taxes amounted to $83,331 for the year ended December 31, 1998. Income taxes were underpaid by approximately $152,830 at December 31, 1998. The underpayments are included in the accompanying balance sheet as a payable. - 14 - CFT CONSULTING, INC. NOTES TO FINANCIAL STATEMENTS For Year Ended December 31, 1998 NOTE K - TRANSACTIONS WITH RELATED PARTIES 1. NOTE PAYABLE At December 31, 1998 the amount due to shareholders and included in notes payable was $440,523 with accrued interest of $19,223. The principal is due on demand. Interest is accrued at 8%. 2. PROPERTY RENTAL CFT conducts its operations in leased facilities under a non-cancelable operating lease from TSA Licensing, Inc, a related party. The lease expires December 31, 2004. The rent is $12,500 per month for the period March 1, 1997, to December 31, 2004. In addition, CFT is responsible for property taxes, insurance, and general maintenance. Total rent paid was $150,000 for the year ended December 31, 1998. Future minimum lease payments required under the operating lease for the years ending December 31, are as follows: 1999 166,800 2000 166,800 2001 178,250 2002 178,250 2003 189,757 2004 189,757 ------------- Total $ 1,069,614 NOTE L - CAPITAL LEASES CFT leases various leasehold improvements and equipment under capital leases. The capital leases in effect as of December 31, 1998, are scheduled to expire beginning in 2000 through 2003. At the expiration of the lease terms, CFT may exercise options to purchase the equipment for fair market value or a bargain value. Amortization of the leased property is computed by the straight-line or declining balance methods and has been included in depreciation. Based on items leased as of December 31, 1998, monthly lease payments are approximately $7,921. As of December 31, 1998, the gross amount of assets recorded under capital leases totaled $284,234. Accumulated amortization related to those assets totaled $95,778 as of December 31, 1998. - 15 - CFT CONSULTING, INC. NOTES TO FINANCIAL STATEMENTS For Year Ended December 31, 1998 NOTE L - CAPITAL LEASES - CONTINUED The following leases have been determined to be capital leases to CFT and have been recorded as such in the financial statements: DESCRIPTION CURRENT LONG-TERM - ----------- ------- --------- WINR Business Credit, lease term 36 months, with monthly lease payments of $1,420, ending February 2000. $ 15,920 $ 3,724 WINR Business Credit, lease term 36 months, with monthly lease payments of $2,407, ending February, 2000. 26,371 5,575 WINR Business Credit, lease term 36 months, with monthly lease payments of $1,399, ending July, 2001 13,029 24,083 WINR Business Credit, lease term 60 months, with monthly lease payments of $1,456, ending October, 2003 15,274 63,089 WINR Business Credit, lease term 36 months, with monthly lease payments of $1,239, ending February, 2000. 12,909 2,615 ----------- ----------- $ 83,503 $ 99,086 =========== =========== The following is a schedule of minimum lease payments, including interest and principal for the fiscal year ending December 31, 1999 $ 81,787 2000 42,612 2001 27,257 2002 17,466 2003 13,467 ----------- Total $ 182,589 - 16 - CFT CONSULTING, INC. NOTES TO FINANCIAL STATEMENTS For Year Ended December 31, 1998 NOTE M - EMPLOYEE STOCK OWNERSHIP PLAN CFT has an Employee Stock Ownership Plan (ESOP) covering substantially all employees. CFT may contribute amounts as determined by the Board of Directors. At December 31, 1998 a total of 1,289,894 shares of CFT's common class A stock had been allocated to the plan. Any contributions of cash or company stock to the ESOP are reported as compensation expense equal to the amount of the contribution. Cash dividends paid on allocated shares of company stock are charged to retained earnings. Contributions for each year are allocated in the proportion that each such Participant's covered compensation bears to the total covered compensation of all such Participants for the year. The contribution expense was $280,000 for the year ended December 31, 1998. NOTE N - CONCENTRATIONS OF RISK CFT maintains cash accounts in a commercial bank. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000 per bank. The bank balances of CFT Consulting, Inc. are categorized at December 31, 1998 as follows: Amount insured by FDIC $ 100,000 Unisured 173,063 ----------- Total $ 273,063 =========== NOTE O - CAPITAL STOCK On November 8, 1997, the board of directors approved a new capital structure for CFT. The board also approved a six thousand to one stock split for all currently outstanding shares. The capital stock of the corporation at December 31, 1998, was as follows: CFT Consulting, Inc., Class A, voting common stock, .000167 par value, authorized 50,000,000 shares, issued and outstanding 13,289,894 shares $ 2,215 CFT Consulting, Inc., Class B, non-voting common stock, $1 par value, authorized 10,000,000 shares, issued and outstanding 0 shares - CFT Consulting, Inc., Class C, convertible voting and participating preferred stock, par value, authorized 10,000,000 shares, issued and outstanding 0 shares - -------------- $ 2,215 ============== - 17 - CFT CONSULTING, INC. NOTES TO FINANCIAL STATEMENTS For Year Ended December 31, 1998 NOTE P - STOCK OPTION PLAN On November 21, 1997, CFT adopted a stock option plan for officers and key employees. A maximum of 5,000,000 shares of common stock may be issued under the plan. The option price, number of shares and grant date are determined at the discretion of the stock option committee. The stock sold pursuant to granted options will be Class B, non-voting common stock having a $1 par value. The options may not be exercised until the officer or key employee has remained in the continuous employ of the corporation for a period of four years from the date such option was granted. Options granted under the plan are exercisable for a period not to exceed five years from the option grant date. 1,318,698 stock options were issued and outstanding at December 31, 1998. Compensation expense for the stock option plan was determined based on the fair value of the options at the grant date consistent with the methodology prescribed under STATEMENT OF FINANCIAL STANDARDS NO. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION." The fair value of the options granted during 1998 was estimated using the minimum value method, using the following assumptions: Risk-free interest rate 7.5% Expected life (years) 4 Expected volatility None Expected dividends None A summary of the status of CFT's stock option plan as of December 31, 1998 is presented below:
NUMBER WEIGHTED-AVERAGE OF SHARES EXERCISE PRICE --------- ----------------- Granted 1,464,698 $ .15 Exercised - - Canceled (146,000) .38 --------------- ---------------- Outstanding at December 31, 1998 1,318,698 .13 Exercisable at December 31, 1998 - Available for issuance at December 31, 1998 3,681,302
EXERCISE OUTSTANDING PRICE SHARES $ .05 775,698 .10 175,000 .25 304,500 .50 53,500 .75 10,000 --------------- 1,318,698 - 18 - CFT CONSULTING, INC. NOTES TO FINANCIAL STATEMENTS For Year Ended December 31, 1998 NOTE Q - SUBSEQUENT EVENTS As of the report date 1,446,198 stock options had been granted to employees. NOTE R - EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITOR'S REPORT On July 6, 1999, the Company was acquired by AnswerThink Consulting Group, Inc. (AnswerThink). Under the terms of the transaction, AnswerThink acquired all of the outstanding stock of the Company in exchange for cash and AnswerThink stock. - 19 - EX-99.2 4 EXHIBIT 99.2 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following Unaudited Pro Forma Consolidated Balance Sheet of Answerthink Consulting Group, Inc. (the "Company") at July 2, 1999 has been prepared to give effect to the July 6, 1999 acquisition of CFT Consulting, Inc., as if it had occurred on July 2, 1999. The following Unaudited Pro Forma Consolidated Statement of Operations of the Company for the year ended January 1, 1999, gives effect to (i) the acquisition of Legacy Technology, Inc. ("Legacy") on May 20, 1998 (ii) the acquisition of Infinity Consulting Group, Inc. ("Infinity") on September 30, 1998, (iii) the acquisition of CFT Consulting, Inc. ("CFT") on July 6, 1999, (iv) the Conversion (the "Conversion") into a total of 7,160,104 shares of Common Stock of all of the Company's outstanding shares of Class A Convertible Preferred Stock and Class B Convertible Preferred Stock concurrent with the Company's initial public offering and (v) the sale of 3,324,500 shares of Common Stock by the Company's initial public offering and the application of the net proceeds therefrom, as if such transactions had occurred as of January 3, 1998. The following Unaudited Pro Forma Consolidated Statement of Operations of the Company for the six months ended July 2, 1999, gives effect to the CFT acquisition, as if such transaction had occurred as of January 3, 1998. Under the terms of certain earn-out provisions contained in their respective purchase agreements, the sellers of Infinity Consulting Group, Inc. and CFT Consulting, Inc. may be entitled to additional consideration. The maximum amount that can be earned by the sellers of Infinity Consulting Group, Inc. and CFT Consulting, Inc. which has not already been recorded in the Company's financial statements, is $1.6 million and $10.2 million, respectively. The additional goodwill recorded by the Company in connection with the maximum amount of additional goodwill which could be recorded by the Company in connection with the acquisition of Infinity Consulting Group, Inc. and CFT Consulting, Inc. would increase the Company's annual amortization expense by approximately $787,000. The Unaudited Pro Forma Consolidated Financial Information is intended for informational purposes only and is not necessarily indicative of the results that would have occurred if the transactions had occurred on the dates indicated or which may be realized in the future. The Unaudited Pro Forma Consolidated Financial Information should be read in conjunction with the historical financial statements of the companies acquired and the Consolidated Financial Statements included in the Company's Form 8-K, filed on August 12, 1999, which present the retroactive effect of the February 26, 1999 business combination of AnswerThink Consulting Group, Inc. and triSpan, Inc., which was accounted for under the pooling-of-interests method of accounting. 1 ANSWERTHINK CONSULTING GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET JULY 2, 1999
HISTORICAL ------------------------- CFT THE CFT ACQUISITION COMPANY ACQUISITION ADJUSTMENTS (A) (B) (C) PRO FORMA ------------ ----------- ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 12,034,567 $ 514,311 $ (6,056,072) $ 6,492,806 Short-term investments 500,000 670 -- 500,670 Accounts receivable and unbilled revenue, net 45,782,096 3,467,115 -- 49,249,211 Prepaid expenses and other current assets 1,443,124 134,392 -- 1,577,516 ------------ ----------- ------------ ------------ Total current assets 59,759,787 4,116,488 (6,056,072) 57,820,203 Property and equipment, net 4,306,956 473,226 -- 4,780,182 Other assets 3,380,732 77,651 -- 3,458,383 Goodwill, net 31,497,468 -- 14,156,860 45,654,328 ------------ ----------- ------------ ------------ Total assets $ 98,944,943 $ 4,667,365 $ 8,100,788 $111,713,096 ------------ ----------- ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,632,212 $ 757,003 $ -- $ 3,389,215 Accrued expenses and other liabilities 14,676,676 1,825,504 -- 16,502,180 Income taxes payable 2,916,050 -- -- 2,916,050 Current portion of notes payable 1,896,000 1,206,072 (1,206,072) 1,896,000 ------------ ------------ ------------ ------------ Total current liabilities 22,120,938 3,788,579 (1,206,072) 24,703,445 ------------ ------------ ------------ ------------ Total liabilities 22,120,938 3,788,579 (1,206,072) 24,703,445 ------------ ------------ ------------ ------------ Shareholders' equity Common stock 34,746 2,215 (1,816) 35,145 Additional paid-in capital 118,392,594 953,077 9,232,170 128,577,841 Unearned compensation (1,129,935) -- -- (1,129,935) Retained earnings (accumulated deficit) (40,473,400) (76,506) 76,506 (40,473,400) ------------ ------------ ------------ ------------ Total shareholders' equity 76,824,005 878,786 9,306,860 87,009,651 ------------ ------------ ------------ ------------ Total liabilities and shareholders' equity $ 98,944,943 $ 4,667,365 $ 8,100,788 $111,713,096 ============ ============ ============ ============
See accompanying notes to Unaudited Pro Forma Consolidated Balance Sheet 2 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET A. Represents the historical consolidated balance sheet of the Company as of July 2, 1999. B. Represents the historical balance sheet of CFT Consulting, Inc. as of June 30, 1999. Certain amounts have been reclassified to conform with the Company's presentation. C. Represents the adjustments to record the purchase price of the CFT Acquisition. The purchase price consisted primarily of $4.8 million in cash, the repayment of $1.2 million of outstanding notes payable and the issuance of 398,920 shares of the Company's common stock, valued at approximately $8.8 million. In addition, the Company recorded an adjustment of $1.4 million to equity for the conversion of CFT's stock options to AnswerThink's stock options. 3 ANSWERTHINK CONSULTING GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JANUARY 1, 1999
HISTORICAL ------------------------------ PREVIOUSLY PREVIOUSLY THE REPORTED CFT REPORTED COMPANY ACQUISITIONS ACQUISITION ACQUISITIONS (A) (B) (C) ADJUSTMENTS ------------- ------------- ------------- ------------- Net revenues $ 118,155,676 $ 8,653,768 $ 9,248,029 $ -- Costs and expenses: Project personnel 71,889,880 5,904,208 4,682,517 -- and expenses Selling, general and 38,515,933 912,967 4,977,203 588,955(D) administrative Compensation related to vesting of restricted 40,843,400 -- -- -- shares ------------- ------------- ------------- ------------- Total costs and operating expenses 151,249,213 6,817,175 9,659,720 588,955 ------------- ------------- ------------- ------------- Income (loss) from (33,093,537) 1,836,593 (411,691) (588,955) operations Other income (expense): Litigation settlement 2,500,000 -- -- -- Interest income (expense), net (739,003) 17,018 (74,467) (71,567)(F) ------------- ------------- ------------- ------------- Income (loss) before income taxes (31,332,540) 1,853,611 (486,158) (660,522) Income tax benefit (expense) (324,820) -- 64,839 (741,444)(I) ------------- ------------- ------------- ------------- Net income (loss) $ (31,657,360) $ 1,853,611 $ (421,319) $ (1,401,966) Net loss per common share-basic and $ (1.62) diluted Weighted average common shares 19,602,520 outstanding
CFT ACQUISITION OFFERING PRO FORMA ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED ------------- ------------- ------------- ------------- Net revenues $ -- $ 136,057,473 $ -- $ 136,057,473 Costs and expenses: Project personnel -- 82,476,605 -- 82,476,605 and expenses Selling, general and 943,791(E) 45,938,849 -- 45,938,849 administrative Compensation related to vesting of restricted -- 40,843,400 -- 40,843,400 shares ------------- ------------- ------------- ------------- Total costs and operating expenses 943,791 169,258,854 -- 169,258,854 ------------- ------------- ------------- ------------- Income (loss) from (943,791) (33,201,381) -- (33,201,381) operations Other income (expense): Litigation settlement -- 2,500,000 -- 2,500,000 Interest income (expense), net (259,561)(G) (1,127,580) 672,239(H) (455,341) ------------- ------------- ------------- ------------- Income (loss) before income taxes (1,203,352) (31,828,961) 672,239 (31,156,722) Income tax benefit (expense) -- (1,001,425) -- (1,001,425) ------------- ------------- ------------- ------------- Net income (loss) $ (1,203,352) $ (32,830,386) $ 672,239 $ (32,158,147) Net loss per common share-basic and $ (1.42) $ (1.36) diluted Weighted average common shares 23,113,874 23,583,595(J) outstanding
See accompanying notes to Unaudited Pro Forma Consolidated Statement of Operations 4 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS A. Represents the historical consolidated statement of operations of the Company for the year ended January 1, 1999. B. Represents the historical statement of operations of Previously Reported Acquisitions (Legacy Technology, Inc. ("Legacy") from January 1, 1998 through May 20, 1998 and Infinity Consulting Group, Inc. ("Infinity") from January 1, 1998 through September 30, 1998). C. Represents the historical statement of operations of CFT Consulting, Inc. for the year ended December 31, 1998. Certain amounts have been reclassified to conform with the Company's presentation. D. Adjusts goodwill amortization expense, totaling $315,622, to reflect the allocation of the purchase prices for the Previously Reported Acquisitions using 15-year lives. In addition, includes adjustments to goodwill amortization expense to reflect contingent consideration earned by Delphi Partners, Inc., totaling $2.8 million paid in April 1999, and Legacy Technology, Inc., totaling $1.3 million paid in June 1999. E. Adjusts goodwill amortization expense to reflect the allocation of the purchase price for the CFT Acquisition for the year ended January 1, 1999, using a 15-year life. On July 6, 1999, the Company acquired CFT Consulting, Inc. for $4.8 million in cash, 398,920 shares of the Company's common stock valued at $8.8 million and contingent consideration up to $8.6 million upon the achievement of certain revenue targets related to the performance of CFT through the period ending December 31, 1999 and $1.6 million upon the achievement of other revenue targets related to the performance of CFT during the 12-month period ended July 6, 2000. This acquisition resulted in total goodwill (excluding contingent consideration) of approximately $14.2 million. F. Adjustment to interest expense as if debt incurred in connection with the Legacy Acquisition was outstanding from January 1, 1998 through May 20, 1998. G. Adjustment to net interest expense assuming the cash payment in connection with the CFT Acquisition would have increased outstanding debt, thus increasing interest expense for the period from January 1, 1998 through June 2, 1998 and would have decreased cash balances, thus decreasing interest income for the period from June 3, 1998 through January 1, 1999. The interest rates assumed for purposes of the pro forma adjustment was 8.5% for debt and 3.25% on cash balances. H. Upon the closing of the Offering, the Company retired all outstanding debt except certain notes payable to shareholders totaling $4.1 million. Interest expense has been adjusted to reflect the use of a portion of the Offering proceeds to retire the debt. I. Adjustment to provide for income tax expense for the Previously Reported Acquisitions at a tax rate of 40%. J. Pro forma loss per share has been calculated based upon 23,583,595 shares outstanding. This represents the sum of the total shares outstanding on a pro forma basis prior to the Offering (23,113,874 shares) and the weighted average effect of the number of shares required to be sold in the Offering (626,295 shares) to repay debt and amounts due to shareholders ($14.7 million). 5 ANSWERTHINK CONSULTING GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JULY 2, 1999
HISTORICAL ------------------------ PREVIOUSLY THE CFT CFT REPORTED COMPANY ACQUISITION ACQUISITION ACQUISITIONS (A) (B) ADJUSTMENTS ADJUSTMENTS PRO FORMA ------------ ----------- ----------- ----------- ------------ Net revenues $ 94,313,595 $ 8,791,929 $ -- $ -- $103,105,524 Costs and expenses: Project personnel and expenses 55,999,110 5,138,504 -- -- 61,137,614 Selling, general and 26,119,027 2,617,516 463,562(C) 82,778(D) 29,282,883 administrative Merger related expenses 2,500,000 -- -- -- 2,500,000 ------------ ----------- ----------- ----------- ------------ Total costs and operating expenses 84,618,137 7,756,020 463,562 82,778 92,920,497 ------------ ----------- ----------- ----------- ------------ Income (loss) from operations 9,695,458 1,035,909 (463,562) (82,778) 10,185,027 Other income (expense): Interest income (expense), net (62,643) (47,727) (78,000)(E) -- (188,370) ------------ ----------- ----------- ----------- ------------ Income (loss) before income taxes 9,632,815 988,182 (541,562) (82,778) 9,996,657 Income tax expense (4,917,279) (438,571) -- -- (5,355,850) ------------ ----------- ----------- ----------- ------------ Income (loss) before extraordinary 4,715,536 549,611 (541,562) (82,778) 4,640,807 item Extraordinary loss on early 2,112,591 -- -- -- 2,112,591 extinguishment of debt ------------ ----------- ----------- ------------ ----------- Net income (loss) $ 2,602,945 $ 549,611 $ (541,562) $ (82,778) $ 2,528,216 ============ =========== ============ ============= =========== Basic net income (loss) per common share: Income before extraordinary item $ 0.18 $ 0.17 Extraordinary loss on early extinguishment of debt $ (0.08) $ (0.08) Net income per common share $ 0.10 $ 0.09 Weighted average common shares outstanding 26,757,194 27,156,114(F) Diluted net income (loss) per common share: Income before extraordinary item $ 0.13 $ 0.13 Extraordinary loss on early extinguishment of debt $ (0.06) $ (0.06) Net income per common share $ 0.07 $ 0.07 Weighted average common and common equivalent shares outstanding 35,668,695 36,067,615(F)
See accompanying notes to Unaudited Pro Forma Consolidated Statement of Operations 6 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS A. Represents the historical consolidated statement of operations of the Company for the six months ended July 2, 1999. B. Represents the historical statement of operations of CFT Consulting, Inc. for the six months ended June 30, 1999. Certain amounts have been reclassified to conform with the Company's presentation. C. Adjusts goodwill amortization expense to reflect the allocation of the purchase price for the CFT Acquisition for the six months ended July 2, 1999, using a 15-year life. D. Adjusts goodwill amortization expense to reflect contingent consideration earned by Delphi Partners, Inc., totaling $2.8 million paid in April 1999, and Legacy Technology, Inc., totaling $1.3 million paid in June 1999. E. Adjustment to net interest expense assuming the cash payment in connection with the CFT Acquisition would have decreased cash balances, thus decreasing interest income for the period from January 2, 1999 through July 2, 1999. The interest rate assumed for purposes of the pro forma adjustment was 3.25%. F. Pro forma basic and diluted income per share has been calculated based upon 27,156,114 and 36,067,615 shares, respectively, outstanding. This represents the sum of the total shares outstanding on a pro forma basis. 7 -----END PRIVACY-ENHANCED MESSAGE-----