================================================================================
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
DECEMBER 12, 1996
(Date of Report)
COTELLIGENT GROUP, INC.
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
The registrant hereby amends Form 8-K dated October 8, 1996 as set
forth in the pages attached hereto. The filing of this report occurs
within 60 days after the date of application for extension of time to
file.
DELAWARE 0-25372 94-3173918
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
101 California Street, Suite 2050
San Francisco, California 94111
(address of principal executive offices) (Zip Code)
(415) 439-6400
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
COTELLIGENT GROUP, INC. FORM 8-K/A
INDEX
<CAPTION>
Page
<S> <C>
COTELLIGENT GROUP, INC.
Restated and Pro Forma Consolidated Statement of Operations for the Year Ended
March 31, 1996 (Unaudited).................................................................. 4
Restated Consolidated Statement of Operations for the Year Ended March 31, 1995 (Unaudited)..... 5
Restated Consolidated Statement of Operations for the Year Ended March 31, 1994 (Unaudited)...... 6
Notes to Restated and Pro Forma Consolidated Statements of Operations............................ 7
JASTECH, INC.
Report of Price Waterhouse LLP, Independent Accountants........................................... 8
Combined Balance Sheet at December 31, 1994 and 1995 and June 30, 1996 (Unaudited)................ 9
Combined Statement of Operations for the Years Ended December 31, 1994 and 1995 and for the Six
Months Ended June 30, 1995 and 1996 (Unaudited)................................................ 10
Combined Statement of Stockholder's Equity (Deficit) for the Years Ended December 31, 1994 and
1995 and for the Six Months Ended June 30, 1996 (Unaudited)................................... 11
Combined Statement of Cash Flows for the Years Ended December 31, 1995 and 1994 and for the Six
Months Ended June 30, 1996 and 1995 (Unaudited)................................................ 12
Notes to Combined Financial Statements............................................................. 13
Signatures......................................................................................... 18
</TABLE>
2
<PAGE>
COTELLIGENT GROUP, INC.
RESTATED AND PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Cotelligent Group, Inc. ("Cotelligent" or the "Company") was formed to
acquire, own and operate software professional service businesses
specializing in computer consulting and contract programming. On February 20,
1996, Cotelligent merged with four companies: Financial Data Systems, Inc.
("FDSI"), BFR Co., Inc. ("BFR"), Data Arts & Sciences, Inc. ("DASI") and
Chamberlain Associates, Inc. ("CAI"), collectively the Founding Companies.
All outstanding shares of the Founding Companies' capital stock was converted
into shares of Cotelligent's Common Stock concurrently with the consummation
of an initial public offering (the "Offering") of Cotelligent Common Stock.
Additionally , on June 28, 1996 Cotelligent acquired ESP Software
Services, Inc. ("ESP") and INNOVA Solutions Inc. ("ISI") and on September 30,
1996 Cotelligent acquired JasTech, Inc. and JasTech of Florida, Inc., ("JTI")
(collectively the "Pooled Companies") in business combinations accounted for
under the pooling-of-interests method. Accordingly, the historical financial
statements of Cotelligent have been restated in accordance with generally
accepted accounting principles to present the financial data as if Cotelligent
and the Pooled Companies had always been members of the same operating group.
The accompanying Restated and Pro Forma Consolidated Statement of
Operations for the year ended March 31, 1996 reflects the business combinations
with ESP, ISI and JTI and also gives effect to the acquisitions of the Founding
Companies as if they were made on April 1, 1995. Additionally, the restated and
pro forma consolidated statement reflects adjustments for the acquisitions of
the Pooled Companies and the Founding Companies including compensation
differentials to employees and former owners of the Founding Companies and the
Pooled Companies, the planned termination of contributions to retirement plans,
incremental selling, general and administrative costs of the corporate
activities of Cotelligent, one-time, non-recurring acquisition costs related to
the Pooled Companies and adjustments to reflect income taxes as if the entities
were combined and subject to the effective federal and state statutory rates for
the combined entity throughout the periods presented.
The accompanying Restated Consolidated Statement of Operations for the
years ended March 31, 1995 and 1994, give effect to the business combinations
with ESP, ISI and JTI which have been accounted for as poolings-of-interest.
Pro forma adjustments are based upon historical information,
preliminary estimates and certain assumptions management deems appropriate. The
pro forma consolidated statement of operations presented herein are not
necessarily indicative of the results Cotelligent would have obtained had such
events occurred at the beginning of the period, as assumed, or of the future
results of Cotelligent. The Restated and Pro Forma Consolidated Statement of
Operations should be read in conjunction with the other financial statements and
notes thereto appearing elsewhere in this report.
As the acquisition of JTI was consummated September 30, 1996, the
financial statements for the most recent quarter ended September 30, 1996 have
not been included in this report as they have been provided in a previous filing
on Form 10-Q with a filing date of November 14, 1996.
3
<PAGE>
COTELLIGENT GROUP, INC.
RESTATED AND PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended March 31, 1996
(In Thousands Except Share and Per Share Amounts)
<TABLE>
Founding
Companies
April 1,
Restated 1995-
Cotelligent Feb. 19, Pro Forma
Group, Inc. JasTech, Inc. 1996 Adjustments Pro Forma
------------- ---------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues................. $ 24,407 $ 8,698 $ 55,745 $ $ 88,850
Cost of services......... 16,902 6,718 42,361 (298) (a) 65,683
---------- ------------- ------------ ------------ --------------
Gross margin.......... 7,505 1,980 13,384 298 23,167
Selling, general and
administrative
expenses.............. 6,343 1,763 10,374 (925) (b) 17,555
------------- ------------- ------------- ------------- -------------
Operating income......... 1,162 217 3,010 1,223 5,612
Other expense (income):
Interest expense
(income), net......... 80 49 421 (202) (c) 348
Other expense
(income)............. (7) (34) (36) -- (77)
------------- ------------- ------------ ------------ -------------
Total other
expense (income)...... 73 15 385 (202) 271
------------- ------------- ------------ ------------ -------------
Income before income
taxes................... 1,089 202 2,625 1,425 5,341
Provision (benefit)
for income taxes .... 127 72 1,952 (15) (d) 2,136
---------- -------------- ------------ ------------ -------------
Net income ...............$ 962 $ 130 $ 673 $ 14,440 $ 3,205
============ ============== ============ ============ =============
Earnings per share....... $ .50
=============
Weighted average
shares outstanding 6,377,799 (e)
=============
<FN>
The accompanying notes are an integral part of these
financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
COTELLIGENT GROUP, INC.
RESTATED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended March 31, 1995
(In Thousands)
<CAPTION>
Restated
Cotelligent As Restated for Pooled
Group, Inc. JasTech, Inc. Companies
------------------ -------------------- ------------------------
<S> <C> <C> <C>
Revenues........................ $ 9.810 $ 7,670 $ 17,480
Cost of services................ 6,383 5,780 12,163
------------------ -------------------- ------------------------
Gross margin................... 3,427 1,890 5,317
Selling, general and
administrative expenses........ 4,001 1,798 5,799
------------------ -------------------- ------------------------
Operating income (loss)........... (574) 92
Other expense (income):
Interest expense, net.......... 22 54 76
Other expense (income)......... (7) (5) (12)
------------------ -------------------- ------------------------
Total other expense....... 15 49 64
------------------ -------------------- ------------------------
Income (loss) before income taxes (589) 43 (546)
Provision (benefit) for income
taxes.................. (90) 13 (77)
================== ==================== ========================
Net income (loss)................. $ (499) 30 $ (469)
================== ==================== ========================
<FN>
The accompanying notes are an integral part of these
financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
COTELLIGENT GROUP, INC.
RESTATED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended March 31, 1994
(In Thousands)
<CAPTION>
Restated
Cotelligent As Restated for
Group, Inc. JasTech Inc. Pooled Companies
------------------ -------------------- ----------------------
<S> <C> <C> <C>
Revenues........................ $ 9.241 $ 6,673 $ 15,914
Cost of services................ 5,229 5,020 10,249
------------------ -------------------- ----------------------
Gross margin................. 4,012 1,653 5,665
Selling, general and
administrative expenses...... 3,441 1,580 5,021
------------------ -------------------- ----------------------
Operating income................ 571 73 644
Other expense (income):
Interest expense, net........ 17 53 70
Other expense (income)....... 0 (11) (11)
------------------ -------------------- ----------------------
Total other expense..... 17 42 59
------------------ -------------------- ----------------------
Income before income taxes...... 554 31 585
Provision (benefit) for income
taxes.................. 155 7 162
------------------ -------------------- ---------------------
Net income ..................... $ 399 $ 24 $ 423
================== ==================== ======================
<FN>
The accompanying notes are an integral part of these
financial statements.
</FN>
</TABLE>
6
<PAGE>
COTELLIGENT GROUP, INC.
NOTES TO RESTATED AND PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Note 1 - Unaudited Pro Forma Adjustments
Pro forma data reflects adjustments for the following.
a) Reduction in compensation to former owners and employees as a result
of the renegotiation of executive compensation arrangements and the
termination of contributions to employee benefit plans made in conjunction
with the acquisition of the Founding Companies;
b) Reduction in compensation to former owners and employees of the Founding
Companies and the Pooled Companies as a result of the renegotiation of
executive compensation arrangements ($1,353), termination of contributions
to employee benefit plans ($76), reduction in professional services in
support of an examination by the taxing authorities ($199) offset by
increased expenses for corporate operating activities ($703);
c) Reduction in interest expense as a result of termination of an employee
stock ownership plan ($147) and the payoff of debt to a former
stockholder of ESP ($55);
d) Income taxes as if the entities were combined and subject to the
effective federal and state statutory rates throughout the periods
presented (40%);
e) Historical weighted average shares and earnings per share have not
been presented because they are not considered meaningful as a result
of the acquisitions of the Founding Companies and the Offering.
Earnings per share have been presented on a pro forma basis only for
the year ended March 31, 1996. Pro forma weighted average shares
outstanding used to determine pro forma earnings per share were
calculated based on the following: (i) shares issued by Cotelligent
prior to the Offering, shares issued to the stockholders of the Founding
Companies in connection with the acquisition of the Founding Companies
and shares sold in the Offering to pay the cash portion of the
consideration of the Founding Companies were considered outstanding
for the entire period, (ii) additional shares sold to the public in
the Offering, (iii) shares issued to acquire the Pooled Companies and
(iv) dilution attributable to options to purchase common stock in
applying the treasury method.
7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholder
of JasTech, Inc. and JasTech of Florida, Inc.
In our opinion, the accompanying combined balance sheet and the related
combined statements of operations, of stockholder's equity (deficit) and of cash
flows present fairly, in all material respects, the financial position of
Jastech, Inc. at December 31, 1994 and 1995, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1, on September 30, 1996, JasTech, Inc. entered into
and completed an agreement and plan of reorganization and merger with
Cotelligent Group, Inc.
Price Waterhouse LLP
Minneapolis, Minnesota
October 11, 1996
8
<PAGE>
JASTECH, INC.
<TABLE>
COMBINED BALANCE SHEET
(In Thousands, Except Share Amounts)
<CAPTION>
(Unaudited)
December 31, June 30,
------------------------------- ---------------
1994 1995 1996
------------- ------------- ---------------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash.................................................................. $ 34 $ 3 $ 20
Accounts receivable, less allowance for doubtful accounts of $40
at December 1994 and 1995 and $50 at June 30, 1996, respectively.. 1,135 1,514 1,703
Prepaid expenses and other current assets ............................ 6 19 93
------------- ------------- ---------------
Total current assets............................................... 1,175 1,536 1,816
Deferred income taxes................................................. 165 120 -
Property and equipment, net........................................... 46 57 53
Other assets.......................................................... 4 8 3
============= ============= ===============
Total assets....................................................... $ 1,390 $ 1,721 $ 1,872
============= ============= ===============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Bank line of credit.................................................. $ 590 $ 624 $ 600
Current portion of capital lease obligation.......................... 3 6 6
Accounts payable - trade............................................. 73 205 254
Book overdraft....................................................... 53 151 139
Related party payable................................................ 265 244 -
Accrued compensation and payroll taxes............................... 443 393 523
Other liabilities.................................................... 21 28 19
------------- ------------- ---------------
Total current liabilities......................................... 1,448 1,651 1,541
Capital lease obligation................................................ 7 6 4
Stockholder's equity (deficit):
Common stock Jastech Inc. - shares authorized: 1,000, no par
value, issued and outstanding 25 shares........................... - - -
Common stock Jastech of Florida, Inc. - shares authorized: 10,000,
$1.00 par value, issued and outstanding 1,000 shares................. 1 1 1
Additional Paid-In-Capital........................................... 2 2 2
Retained earnings (deficit).......................................... (68) 61 324
------------- ------------- ---------------
Total stockholders equity (deficit)............................... (65) 64 327
============= ============= ===============
Total liabilities and stockholder's equity (deficit).............. $ 1,390 $ 1,721 $ 1,872
============= ============= ===============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
9
<PAGE>
<TABLE>
JASTECH, INC.
COMBINED STATEMENT OF OPERATIONS
(In Thousands)
<CAPTION>
(Unaudited)
For the Year Ended For the Six Months Ended
December 31, June 30,
--------------------------------------- -------------------------------------------
1994 1995 1995 1996
-------------------- --------------- -------------------- -----------------
<S> <C> <C> <C> <C>
Revenues.............................. $ 7,670 $ 8,698 $ 4,223 $ 5,236
Cost of services...................... 5,780 6,718 3,343 3,974
-------------------- --------------- -------------------- --------------------
Gross margin.................... 1,890 1,980 880 1,262
Selling, general and
administrative expenses............ 1,798 1,763 737 1,137
-------------------- --------------- -------------------- --------------------
Operating income...................... 92 217 143 125
Other (income) expense:
Interest income.................... - (1) (1) (1)
Interest expense................... 54 50 24 21
Other income....................... (5) (34) (12) (282)
-------------------- --------------- ---------------- --------------------
Total other (income)expense..... 49 15 11 (262)
-------------------- --------------- ---------------- --------------------
Income before provision for
income taxes....................... 43 202 132 387
Provision for income taxes............ 13 72 47 120
-------------------- --------------- ---------------- --------------------
Net income............................ $ 30 $ 130 $ 85 267
==================== =============== ================ ====================
Unaudited Pro Forma information:
Income before provision for
income taxes ...................... $ 387
Pro Forma provision for
income taxes....................... 151
------------------
Pro Forma net income
(see Note 6) ...................... $ 236
==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
<TABLE>
JASTECH, INC.
COMBINED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
(In Thousands, Except Share Amounts)
<CAPTION>
Jastech Inc. Jastech of Florida, Inc. Additional
Common Stock Common Stock Retained Paid-In
Shares Amount Shares Amount Earnings Capital Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993....... 25 $ - - $ - $ (98) $ 2 $ (96)
Shares Issued................... - - 1,000 1 - - 1
Net income...................... - - - - 30 - 30
-------- ------- --------- ------ ------- ------ --------
Balance at December 31, 1994....... 25 - 1,000 1 (68) 2 (65)
Dividends Paid.................. - - - - (1) - (1)
Net Income...................... - - - - 130 - 130
-------- ------- --------- ------ ------- ------ --------
Balance at December 31, 1995....... 25 - 1,000 1 61 2 64
Dividends Paid - - - - (4) - (4)
Net Income...................... - - - - 267 - 267
-------- ------- --------- ------ ------- ------ --------
Balance at June 30, 1996
(Unaudited)..................... 25 $ - 1,000 $ 1 $ 324 $ 2 $ 327
======== ======= ========= ======= ======= ====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
<TABLE>
JASTECH, INC.
COMBINED STATEMENT OF CASH FLOWS
(In Thousands)
<CAPTION>
For the Year Ended (Unaudited)
December 31, For the Six Months Ended June 30,
-------------------------------- ----------------------------------
1994 1995 1995 1996
---------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 30 $ 130 $ 85 $ 267
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization.................... 26 20 10 10
Gain on disposal of property and equipment (5) - - (272)
Change in Deferred income taxes, net - 45 - 120
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable.... (270) (379) 235 (190)
(Increase) decrease in prepaids and
other current assets....................... 16 (13) (13) (74)
Increase (decrease) in accounts payable and
accrued liabilities.......................... 259 60 150 170
Income taxes payable 10 6 34 -
Other assets 4 (2) - 5
-------------- -------------- -------------- --------------
Net cash provided by (used in) operating
activities............................. 70 (133) 501 36
-------------- -------------- -------------- --------------
Cash flows from investing activities:
Proceeds on the sale of assets 8 - - 275
Purchases of property and equipment................ (5) (24) (16) (8)
-------------- -------------- -------------- --------------
Net cash (used in) investing activities... 3 (24) (16) 267
-------------- -------------- -------------- --------------
Cash flows from financing activities:
Issuance of stock.................................. 1 - - -
Net repayments from (advances to) related parties.. - - - (244)
Dividends to stockholder............................... - (1) - (4)
Payments on capital lease obligations.............. - (5) (2) (2)
Net borrowing (repayments) on bank line of credit. (140) 34 (345) (24)
-------------- -------------- -------------- --------------
Net cash provided by (used in)financing
activities.......................... (139) 28 (347) (274)
-------------- -------------- -------------- --------------
Net increase (decrease) in cash........................ (66) (129) 138 29
Cash (overdraft)at beginning of period................. 47 (19) (19) (148)
============== ============== ============== ==============
Cash (overdraft)at end of period....................... $ (19) $(148) $ 119 $ (119)
============== ============== ============== ==============
Supplemental disclosures of cash flow information:
Interest paid...................................... $ 54 $ 50 $ 24 $ 19
Income taxes paid.................................. $ 13 $ 64 $ 39 $ -
Non cash transactions Investing and financing
activities..........................
Capital lease obligations incurred............ $ 10 $ 8 $ 8 $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
JASTECH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Amounts)
Note 1 - Business Organization
JasTech, Inc. and JasTech of Florida, Inc. are professional services firms
that provide information systems analysis, programming and support to various
industries. JasTech, Inc. and JasTech of Florida, Inc. are herein collectively
referred to as "JasTech" or the "Company." JasTech, Inc. was incorporated in
December 1984 and JasTech of Florida, Inc. was incorporated in December 1993.
Substantially all of the Company's operations are in Ohio and Florida.
On September 30, 1996, JasTech entered into and completed an agreement and
plan of reorganization and merger with Cotelligent Group Inc. ("Cotelligent"),
whereby the Company exchanged all of its outstanding stock for common stock of
Cotelligent. The business combination will be accounted for under the
pooling-of-interests method of accounting.
Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Basis of Combination
The accompanying financial statements combine the accounts of JasTec, Inc.
and JasTech of Florida, Inc. as both entities are controlled under common
ownership.
Property and Equipment
Property and equipment are stated at historical cost. Depreciation,
including amortization of capital leases, is provided over the estimated useful
lives of the respective assets on a straight line basis. The useful lives vary
from five to seven years. Leasehold improvements are depreciated over the
shorter of the remaining lease term or estimated useful life.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade accounts receivable.
Receivables arising from services provided to clients are not collateralized and
accordingly, the Company performs ongoing credit evaluations of its clients to
reduce the risk of loss.
Revenue Recognition
Revenue is recognized as services are performed.
13
<PAGE>
JASTECH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Amounts)
Fair Value of Financial Instruments
The fair value of debt is considered to approximate carrying value as the
interest rates approximate those currently available.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). The asset and liability approach used in SFAS 109 requires the recognition
of deferred tax assets and liabilities for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities.
Effective January 1, 1996, JasTech of Florida, Inc. elected to be taxed as
an S corporation for federal and state income tax purposes. Accordingly, any tax
liabilities subsequent to this date and prior to the merger with Cotelligent,
are the responsibility of the stockholder of JasTech of Florida, Inc.
Effective September 30, 1996, JasTech of Florida, Inc.'s S corporation
status terminated as a result of the merger with Cotelligent.
Earnings Per Share
Historical earnings per share has not been presented because it is not
considered to be meaningful as a result of the merger with Cotelligent as
discussed in Note 1.
Unaudited Interim Financial Statements
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of the financial condition of the Company as of June 30, 1996 and the results of
operations and cash flows for the six months ended June 30, 1995 and 1996, as
presented in the accompanying unaudited interim financial statements.
Note 3 - Property and Equipment
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1994 1995
--------------- ----------------
<S> <C> <C>
Office equipment and computer............................. $ 96 $ 127
Furniture and fixtures.................................... 79 80
--------------- ----------------
175 207
Less: Accumulated depreciation............................ 129 150
=============== ================
$ 46 $ 57
=============== ================
</TABLE>
Depreciation and amortization expense for the years ended 1994 and 1995 was
$26 and $20, respectively.
14
<PAGE>
JASTECH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Amounts)
Note 4 - Credit Facilities
<TABLE>
Short-Term Debt
Short-term debt consists of the following.
<CAPTION>
December 31,
---------------
1994 1995
---- ----
<S> <C> <C>
Revolving lines of credit $590 $624
Current portion of capital lease obligation 3 6
</TABLE>
The Company has two line of credit agreements with two separate banks
providing for borrowings up to a maximum of $900 and $300. Borrowings bear
interest at the prime rate plus 0.50% and 1.25% per annum (9.00% and 9.75% at
December 31, 1995, respectively), payable quarterly and monthly, respectively.
The agreements, which expire April 30, 1997 and May 31, 1997, respectively, are
secured by accounts receivable and fixed assets of the Company. The line is
personally guaranteed by the shareholder of the company.
The lines of credit contain various covenants that include among other
things, restrictions on debt and distributions, expenditures and the maintenance
of certain financial ratios. The Company was in default of these covenants at
December 31, 1995, the latest measurement period. As a result of the merger with
Cotelligent, one of the lines of credit was paid off, while the other has been
allowed to continue until JasTech can begin participating in Cotelligent's
banking relationship.
Long-Term Debt
Long-term debt consists of a capital lease obligation, net of the current
portion.
Note 5 - Lease Commitments
Operating Leases
Future minimum lease payments for the Company's operating leases are as
follows.
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<C> <C>
1996 ........................................ $ 94
1997 ........................................ 89
1998 ........................................ 89
========
$ 272
========
</TABLE>
Total lease expense recorded by the Company was $101 and $123 for
the years ended December 31, 1994 and 1995, respectively.
15
<PAGE>
JASTECH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Amounts)
Capital Leases
Future minimum lease payments for the Company's capital leases are as
follows.
<TABLE>
<CAPTION>
Year Ending
December 31,
<C> <C>
1996................................................ $ 7
1997................................................ 7
----------
14
Less: Amounts representing interest................. (2)
----------
Present value of minimum lease payments............. $ 12
==========
</TABLE>
The Company leases certain equipment under a lease arrangement, which has
been accounted for as a capital lease. Assets under capital lease with a cost of
$18 and net book value of $15 at December 31, 1995 are included in the property,
and equipment in the accompanying balance sheet.
Note 6 -Income Taxes
The provision for income taxes is as follows.
<TABLE>
<CAPTION>
December 31,
1994 1995
<S> <C> <C>
Current
Federal........................ $ 13 $ 117
Deferred
Federal........................ - (45)
-------- ---------
Total provision for taxes........ $ 13 $ 72
======== =========
</TABLE>
Deferred tax assets are comprised of accrued liabilities, primarily
related to deferred compensation, of $165 and $120 at December 31, 1994
and 1995.
The Company's effective income tax rate varied from the federal
statutory tax date as follows.
<TABLE>
<CAPTION>
Ended December 31,
1994 1995
<S> <C> <C>
US federal statutory rate........ 25.0% 34.0%
Other............................ 5.2% 1.1%
========= ==========
Effective tax rate............... 30.2% 35.1%
========= ===========
</TABLE>
As discussed in Note 1, JasTech of Florida, Inc. elected to be taxed as an
S Corporation effective January 1, 1996. Accordingly, the unaudited pro forma
income tax information presented on the Statement of Operations is presented in
accordance with Statement of Financial Accounting Standards No.109 ("SFAS 109")
as if JasTech of Florida, Inc. had been subject to federal income taxes for the
interim period presented.
16
<PAGE>
JASTECH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Amounts)
Note 7 - Employee Benefit Plans
The Company maintains a salary reduction plan (401(k)) for the benefit of
all employees after six months of continuous service. Contributions to the plan
are at the discretion of the employee with no employer matching.
Note 8 - Related Parties
Related Party Transactions
The Company currently leases office space in Boca Raton, Florida from the
shareholder of the Company. The Company leases the space on a month to month
basis. Rent expense associated with this lease amounted to $22 for each of the
two years ended December 31, 1994 and 1995.
The Company rented certain equipment from an affiliate of the shareholder
during 1994 and 1995. Total payments made on such equipment were $16 for each of
the years ended December 31, 1994 and 1995.
Deferred Compensation Plan
The Company was paying a former employee termination benefits amounting to
$3 per month starting in January 1992 continuing through June 2002 in accordance
with a separation agreement. During July 1996 the Company cashed out the
agreement for the present value resulting in the payment of $235.
Note 9 - Significant Clients
During 1995 and 1994, three major clients generated revenues that exceeded
10% of total revenues. The percentage of net revenues from these clients is as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------ ------------------------
1994 1995
----------------------- -----------------------
<S> <C> <C>
Client A 11.8% 14.9%
Client B 15.2% 10.1%
Client C - * 14.5%
* Amount did not exceed 10%
</TABLE>
Note 10 - Subsequent Events
On January 2, 1996, JasTech entered into an agreement to sell to an
unrelated third party substantially all of its assets and businesses associated
with its branch operations located in Charlotte, North Carolina for a sales
price of $275. A gain of $272 was recognized on the sale.
17
<PAGE>
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.
COTELLIGENT GROUP, INC.
/s/ CURTIS J. PARKER
December 12, 1996 ----------------------
Date Curtis J. Parker
Vice President
and Chief Accounting Officer
18
<PAGE>
