<PAGE> 1
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) JULY 1, 1996
DATA PROCESSING RESOURCES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 0-27612 95-3931443
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) file number) Identification No.)
4400 MACARTHUR BOULEVARD, SUITE 610
NEWPORT BEACH, CA 92660
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 553-1102
NOT APPLICABLE
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The annual audited financial statements of ADD Consulting,
Inc. ("ADD"), prepared in accordance with Regulation S-X,
consisting of the balance sheets as of December 31, 1995 and
1994 and the statements of income, shareholders' equity and
cash flows for the years ended December 31, 1995 and 1994
together with the corresponding Report of Independent Public
Accountants and the annual audited financial statements of
AD&D Acquisition, Inc., the predecessor corporation of ADD,
prepared in accordance with Regulation S-X consisting of the
balance sheet as of December 31, 1993 and the statement of
operations and cash flows for the ten months ended December
31, 1993 together with the corresponding Report of
Independent Public Accountants filed with this report are
listed in the Index to Financial Statements on page F-1 of
this report.
(b) PRO FORMA FINANCIAL INFORMATION.
The pro forma financial statements for the consolidated
companies filed with this report are listed in the Index to
the Financial Statements on page F-1 of this report.
(c) EXHIBITS.
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit No. Document
----------- --------
<S> <C>
*2.1 Agreement of Purchase and Sale of Assets dated
July 1, 1996, by and among Data Processing
Resources Corporation, ADD Consulting, Inc. and
Gerald R. Ladd
*2.2 Registration Rights Agreement dated July 1, 1996,
by and between Data Processing Resources Corporation
and ADD Consulting, Inc.
*99.1 Text of Press Release dated July 2, 1996
</TABLE>
- ----------------
* Exhibits previously filed on July 16, 1996 with Registrant's Current Report
on Form 8-K dated July 1, 1996, incorporated herein by reference under Exhibit
Number indicated.
<PAGE> 3
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF REGISTRANT (UNAUDITED)
- ---------------------------------------------------------------------
Pro forma Consolidated Balance Sheet as of April 30, 1996 (Unaudited) F-2
Pro forma Consolidated Statements of Income for the Nine Months ended
April 30, 1996 and for the Year ended July 31, 1995 (Unaudited) F-3 to F-4
Notes to Pro forma Consolidated Financial Statements (Unaudited) F-5 to F-6
HISTORICAL FINANCIAL STATEMENTS OF ADD CONSULTING, INC.
- -------------------------------------------------------
Report of Independent Public Accountants F-7
Balance Sheets as of December 31, 1995 and 1994 F-8 to F-9
Statements of Income for the Years ended December 31, 1995 and 1994 F-10
Statements of Shareholders' Equity for the Years ended December 31, 1995 and 1994 F-11
Statements of Cash Flows for the Years ended December 31, 1995 and 1994 F-12
Notes to Financial Statements F-13 to F-17
HISTORICAL FINANCIAL STATEMENTS OF AD&D ACQUISITION, INC.
- ---------------------------------------------------------
Report of Independent Public Accountants F-18
Balance Sheet as of December 31, 1993 F-19 to F-20
Statement of Operations for the Ten Months ended December 31, 1993 F-21
Statement of Cash Flows for the Ten Months ended December 31, 1993 F-22
Notes to Financial Statements F-23 to F-25
</TABLE>
F-1
<PAGE> 4
DATA PROCESSING RESOURCES CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
DPRC ADD
AS OF AS OF
APRIL 30, APRIL 30, PRO FORMA
1996 1996 ADJUSTMENTS PRO FORMA
---------- ---------- ------------ -----------
ASSETS (Note 2)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $29,379,000 $ 64,000 $ (64,000) b
(8,785,000) a $20,594,000
Accounts receivable, net 7,719,000 1,691,000 (9,000) b 9,401,000
Other current assets 489,000 129,000 (164,000) b 454,000
----------- ---------- ----------- -----------
Total current assets 37,587,000 1,884,000 (9,022,000) 30,449,000
Property:
Furniture and fixtures 170,000 70,000 (33,000) b 207,000
Equipment 794,000 301,000 (273,000) b 822,000
----------- ---------- ----------- -----------
964,000 371,000 (306,000) 1,029,000
Less accumulated depreciation (334,000) (44,000) 44,000 b (334,000)
----------- ---------- ----------- -----------
Property, net 630,000 327,000 (262,000) 695,000
Other assets 36,000 36,000
Intangible Assets -- 828,000 (828,000) b
12,138,000 a 12,138,000
----------- ---------- ----------- -----------
$38,253,000 $3,039,000 $ 2,026,000 $43,318,000
=========== ========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $ 2,944,000 $ 929,000 $ 371,000 b $ 4,244,000
Income taxes payable 114,000 326,000 (326,000) b 114,000
Line of credit -- 415,000 (415,000) b --
----------- ---------- ----------- -----------
Total current liabilities 3,058,000 1,670,000 (370,000) 4,358,000
SHAREHOLDERS' EQUITY:
Common stock 34,472,000 306,000 (306,000) b
3,765,000 a 38,237,000
Additional paid-in-capital 1,580,000 -- -- 1,580,000
Accumulated equity (deficit) (857,000) 1,063,000 (1,063,000) b (857,000)
----------- ---------- ----------- -----------
Total shareholders' equity 35,195,000 1,369,000 2,396,000 38,960,000
----------- ---------- ----------- -----------
$38,253,000 $3,039,000 $ 2,026,000 $43,318,000
=========== ========== =========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
F-2
<PAGE> 5
DATA PROCESSING RESOURCES CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED APRIL 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
DPRC ADD
NINE MONTHS ENDED NINE MONTHS ENDED PRO FORMA
APRIL 30, 1996 APRIL 30, 1996 ADJUSTMENTS PRO FORMA
----------------- ----------------- ----------- -----------
(Note 2)
<S> <C> <C> <C>
Revenues $42,015,000 $10,036,000 $ -- $52,051,000
Costs and expenses:
Cost of professional services 33,248,000 7,150,000 -- 40,398,000
Selling, general and administrative
expenses 4,841,000 2,289,000 (158,000)c 6,972,000
----------- ----------- --------- -----------
Total costs and expenses 38,089,000 9,439,000 (158,000) 47,370,000
----------- ----------- --------- -----------
Operating income 3,926,000 597,000 158,000 4,681,000
Interest income 137,000 -- (137,000)d --
Interest expense (393,000) (31,000) (192,000)d (616,000)
Write-off of deferred financing fees (1) (140,000) -- -- (140,000)
----------- ----------- --------- -----------
Income before provision for income taxes 3,530,000 566,000 (171,000) 3,925,000
Provision for income taxes (2) 1,412,000 -- 193,000 e 1,605,000
----------- ----------- --------- -----------
Net income $ 2,118,000 $ 566,000 $(364,000) $ 2,320,000
=========== =========== ========= ===========
Net income per share $ 0.38 $ 0.41
=========== ===========
Weighted average common shares used in
the calculation of historical net income
per share 5,512,000 152,000 5,664,000
=========== ========= ===========
SUPPLEMENTAL PRO FORMA (1)
- --------------------------
Pro forma net income $ 2,204,000 $ 566,000 $(364,000) $ 2,406,000
=========== =========== ========= ===========
Pro forma net income per share $ 0.40 $ 0.42
=========== ===========
Weighted average common shares used in
the calculation of pro forma net income
per share 5,512,000 152,000 5,664,000
=========== ========= ===========
</TABLE>
(1) Includes $86,000 for the elimination of write-off of deferred financing
fees (net of tax) associated with the repayment of the long-term debt
concurrent with the company's initial public offering.
(2) ADD has elected, for federal income tax reporting, to include its taxable
income or loss with that of its shareholders (an S Corporation election),
therefore, no provision for income taxes has been made.
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
F-3
<PAGE> 6
DATA PROCESSING RESOURCES CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the Year ended July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
DPRC ADD
Year Ended 12 Months Ended Pro Forma
July 31, 1995 July 31, 1995 Adjustments Pro Forma
------------- --------------- ----------- -----------
(Note 2)
<S> <C> <C> <C> <C>
Revenues $49,558,000 $10,417,000 $ -- $59,975,000
Costs and expenses:
Cost of professional services 40,082,000 7,264,000 -- 47,346,000
Selling, general and administrative
expenses 5,769,000 2,354,000 222,000 c 8,345,000
----------- ---------- --------- -----------
Total costs and expenses 45,851,000 9,618,000 222,000 55,691,000
----------- ---------- --------- -----------
Operating income 3,707,000 799,000 (222,000) 4,284,000
Interest expense (764,000) (57,000) (439,000) d (1,260,000)
----------- ---------- --------- -----------
Income before provision for income
taxes 2,943,000 742,000 661,000 3,024,000
Provision for income taxes (2) 1,205,000 -- 32,000 e 1,237,000
----------- ---------- --------- -----------
Net income $ 1,738,000 $ 742,000 $(693,000) $ 1,787,000
=========== ========== ========= ===========
Net income per share $ 0.35 $ 0.35
=========== ===========
Weighted average common shares used
in the calculation of historical
net income per share 4,926,000 152,000 5,078,000
=========== ========= ===========
SUPPLEMENTAL PRO FORMA (1)
Pro forma operating income $ 4,178,000 $ 799,000 $(222,000) $ 4,755,000
=========== ========== ========= ===========
Pro forma net income $ 2,016,000 $ 742,000 $(693,000) $ 2,065,000
=========== ========== ========= ===========
Pro forma net income per share $ 0.41 $ 0.41
=========== ===========
Weighted average common shares
used in the calculation of pro
forma net income per share 4,926,000 152,000 5,078,000
=========== ========= ===========
</TABLE>
(1) Includes $471,000 ($278,000 net of tax) for elimination of that portion of
the founder compensation which exceeded the pro rata maximum annual
amount under the founder's present agreement with the Company.
(2) ADD has elected, for federal income tax reporting, to include its taxable
income or loss with that of its shareholders (an S Corporation election),
therefore, no provision for income taxes has been made.
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
F-4
<PAGE> 7
DATA PROCESSING RESOURCES CORPORATION
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JULY 31, 1995 AND THE NINE MONTHS ENDED APRIL 30, 1996
(UNAUDITED)
1. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On July 1, 1996, Data Processing Resources Corporation ("DPRC")
acquired two branch facilities and substantially all of the related assets of
the Applications Design and Development division of ADD Consulting, Inc. ("ADD")
through an Agreement of Purchase and Sale of Assets ("the Agreement"). Under
the terms of the Agreement, the purchase price was $12,850,000, consisting of
$8,785,000 in cash, 152,121 shares of DPRC common stock, and a deferred payment
of $300,000. For purposes of this presentation, the shares of common stock were
valued at $3,765,000. Under the Agreement, ADD has certain registration rights
with respect to the 152,121 shares of DPRC common stock it received in the
acquisition.
The unaudited pro forma consolidated balance sheet and statements of
income give effect on a purchase accounting basis to the acquisition of ADD.
The pro forma consolidated balance sheet as of April 30, 1996 has been
prepared by consolidating the balance sheet of DPRC as of April 30, 1996 with
the balance sheet of ADD as of April 30, 1996. The pro forma consolidated
statement of income for the nine months ended April 30, 1996 has been prepared
by consolidating the statement of income of DPRC for the nine months ended
April 30, 1996 with the statement of income of ADD for the nine months ended
April 30, 1996. The pro forma consolidated statement of income for the fiscal
year ended July 31, 1995 has been prepared by consolidating the statement of
income of DPRC for the fiscal year ended July 31, 1995 with the statement of
income of ADD for the twelve months ended July 31, 1995.
The pro forma consolidated balance sheet as of April 30, 1996 assumes
that the acquisition occurred on April 30, 1996. The pro forma consolidated
statements of income for the nine months ended April 30, 1996 and for the
fiscal year ended July 31, 1995 assume that the acquisition occurred on August
1, 1994. The pro forma consolidated balance sheet and statements of income do
not purport to represent the results of operations or financial position of
DPRC had the transaction and events assumed therein occurred on the dates
specified, nor are they necessarily indicative of the results of operations
that may be achieved in the future. The pro forma adjustments are based on
management's preliminary assumptions regarding purchase accounting adjustments.
The actual allocation of the purchase price will be adjusted to the extent that
actual amounts differ from management's estimates in accordance with FAS No.
38, "Accounting for Preacquisition Contingencies of Purchased Enterprises".
The pro forma consolidated financial information is based upon certain
assumptions and adjustments described in the notes to the pro forma
consolidated financial statements. The pro forma consolidated financial
information should be read in conjunction with the historical financial
statements, and related notes, of DPRC contained in DPRC's quarterly report on
Form 10-Q for the quarter ended April 30, 1996 and of DPRC's Registration
Statement on Form S-1, as amended (Registration No. 333-00098).
F-5
<PAGE> 8
DATA PROCESSING RESOURCES CORPORATION
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JULY 31, 1995 AND THE NINE MONTHS ENDED APRIL 30, 1996
(UNAUDITED)
2. PRO FORMA ADJUSTMENTS
The following items describe the pro forma adjustments made to reflect
the acquisition of ADD:
a) To record the allocation of the purchase price and other purchase
accounting adjustments as follows:
<TABLE>
<S> <C>
Cash $ 8,785,000
Common Stock 3,765,000
Deferred Payment 300,000
-----------
Total Purchase Price $12,850,000
Net assets acquired (956,000)
Adjustments to conform accounting policies 169,000
Acquisition costs related to ADD 75,000
-----------
Excess of purchase price over net assets acquired $12,138,000
===========
</TABLE>
The excess of purchase price over net assets acquired was allocated to
intangible assets in the consolidated balance sheet.
b) To eliminate assets and liabilities not purchased in the
acquisition of ADD.
c) To eliminate expenses that are not expected to have continuing
impact on DPRC, including certain redundant personnel costs, excess
owner's compensation and costs of line of business and associated
assets not acquired and to record amortization related to the
intangible assets based on the straight line method over twenty-five
years.
d) To record the reduction in interest income or increase in interest
expense due to the loss of the use of cash used in the acquisition of
ADD.
e) To record the tax effect of the pro forma adjustments and a tax
provision in lieu of tax expense related to the business of ADD.
2. PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING
Pro forma weighted average shares outstanding assumes as outstanding
the 152,121 new shares issued by DPRC required to consummate the acquisition of
ADD.
F-6
<PAGE> 9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ADD Consulting, Inc.:
We have audited the accompanying balance sheets of ADD Consulting, Inc.
(a Nebraska corporation) as of December 31, 1995 and 1994, and the related
statements of income, shareholders' equity and cash flows for the years 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 audits.
We conducted our audits 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 audits provide 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 ADD Consulting, Inc. as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Omaha, Nebraska
February 1, 1996
F-7
<PAGE> 10
ADD CONSULTING, INC.
BALANCE SHEETS--DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 102,293 $ 1,796
Trade receivables-
Billed, net of allowance for doubtful
accounts of $18,000 in 1995 and
$12,000 in 1994 984,535 736,957
Unbilled 278,519 122,801
Shareholder/employee receivable (Note 7) 101,875 18,550
Other current assets 28,283 13,272
---------- ----------
Total current assets 1,495,505 893,376
---------- ----------
PROPERTY AND EQUIPMENT (Note 2) :
Computer equipment and software 124,231 71,726
Office furniture and equipment 87,646 29,191
---------- ----------
211,877 100,917
Less - Accumulated depreciation (29,680) (12,262)
---------- ----------
Net property and equipment 182,197 88,655
---------- ----------
GOODWILL, net of accumulated amortization of
$129,295 in 1995 and $64,495 in 1994 (Note 5) 838,129 902,929
---------- ----------
Total assets $2,515,831 $1,884,960
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-8
<PAGE> 11
ADD CONSULTING, INC.
BALANCE SHEETS--DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Line of credit (Note 4) $ 310,000 $ 155,000
Current maturities of note payable (Note 6) 153,407 423,168
Accounts payable 183,322 206,864
Dividend distributions payable (Note 2) 337,290 187,000
Compensation expense 212,541 143,124
Accrued vacation 86,657 56,592
Accrued payroll taxes 116,170 42,071
Other accrued expenses 27,005 16,373
---------- ----------
Total current liabilities 1,426,392 1,230,192
---------- ----------
NOTE PAYABLE, net of current maturities (Note 6) - 79,891
---------- ----------
Total liabilities 1,426,392 1,310,083
---------- ----------
COMMITMENTS (Note 8)
SHAREHOLDERS' EQUITY (Notes 3, 5, 9 and 10):
Class A Common Stock, voting, $.10 par value,
50,000 shares authorized, 1,000 shares issued
and outstanding 100 100
Class B Common Stock, nonvoting, $.10 par value,
50,000 shares authorized, 1,200 shares issued
and 1,195 shares outstanding 120 120
Additional paid-in capital 219,880 219,880
Retained earnings 870,646 354,777
Less- Treasury stock, 5 shares in 1995, at cost (1,307) -
---------- ----------
Total shareholders' equity 1,089,439 574,877
---------- ----------
Total liabilities and shareholders' equity $2,515,831 $1,844,960
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-9
<PAGE> 12
ADD CONSULTING, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
REVENUES $11,899,096 $7,938,005
PROFESSIONAL SALARIES AND RELATED PERSONNEL COSTS 8,338,533 5,476,272
----------- ----------
Gross margin 3,560,563 2,461,733
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,441,730 1,654,700
RESEARCH AND DEVELOPMENT (NOTE 2) 66,739 -
AMORTIZATION OF GOODWILL 64,800 64,495
----------- ----------
Income from operations 987,294 742,538
INTEREST EXPENSE 50,769 60,661
INTEREST INCOME (1,280) -
----------- ----------
NET INCOME $ 937,805 $ 681,877
=========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-10
<PAGE> 13
ADD CONSULTING, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Class A Class B Additional
Common Common Paid-In Retained Treasury
Stock Stock Capital Earnings Stock Total
------- ------- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $ - $ - $ - $ - $ - $ -
Issuance of 1,000 shares of Class A Common Stock
for contribution of trade receivables ($200 per share) 100 - 199,900 - - 200,000
Stock dividend of 1,000 shares of Class B Common Stock - 100 - (100) - -
Sale of 200 shares of Class B Common Stock for
cash ($100 per share) - 20 19,980 - - 20,000
Dividends paid and accrued - - - (327,000) - (327,000)
Net Income - - - 681,877 - 681,877
---- ---- -------- --------- ------- ----------
BALANCED, December 31, 1994 100 120 219,880 354,777 - 574,877
Purchase of 5 shares of Class B common stock - - - - (1,307) (1,307)
Dividends paid and accrued - - - (421,936) - (421,936)
Net Income - - - 937,805 - 937,805
---- ---- -------- --------- ------- ----------
BALANCED, December 31, 1995 $100 $120 $219,880 $ 870,646 $(1,307) $1,089,439
==== ==== ======== ========= ======= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-11
<PAGE> 14
ADD CONSULTING, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 937,805 $ 681,877
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 82,218 76,757
Changes in assets and liabilities-
Trade receivables, net (403,296) (170,673)
Other current assets (98,336) 6,240
Accounts payable and accrued expenses 160,671 (162,922)
--------- ---------
Net cash provided by operating activities 679,062 431,279
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (110,960) (35,917)
Acquisition of business, net of cash acquired (Note 5) - 68,375
--------- ---------
Net cash provided by (used in) (110,960) 32,458
investing activities --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on note payable (649,652) (396,941)
Issuance of note payable 300,000 -
Net borrowings under the line of credit 155,000 55,000
Sale of common stock - 20,000
Distribution to shareholders (271,646) (140,000)
Purchase of Class B common stock (1,307) -
--------- ---------
Net cash used in financing activities (467,605) (461,941)
--------- ---------
Net increase in cash 100,497 1,796
CASH, beginning of period 1,796 -
--------- ---------
CASH, end of period $ 102,293 $ 1,796
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 49,380 $ 60,661
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In connection with the acquisition described in Note 5, the majority
shareholder contributed $200,000 of trade receivables as consideration
for 1,000 shares of Class A Common Stock.
In connection with the acquisition described in Note 5, the Company issued
a note payable for $900,000 for substantially all of the assets of the
company.
As of December 31, 1995 and 1994, the Company had accrued dividend
distributions payable of $337,290 and $187,000, respectively.
The accompanying notes are an integral part of these statements.
F-12
<PAGE> 15
ADD CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. GENERAL:
ADD Consulting, Inc., (the Company) was formed on October 22, 1993, for the
purpose of acquiring substantially all of the assets, liabilities and
operations of AD&D Acquisition, Inc. The Company did not have substantive
operations prior to the acquisition of AD&D Acquisition, Inc. on January 1,
1994 (Note 5). The Company does business as Applications Design and
Development.
The Company provides experienced and skilled professionals on a contract basis
to serve the needs of the information and data processing community. As the
Company serves a wide range of customers in various industries, there is no
concentration of credit risk within a particular industry. Two major customers
of the Company accounted for approximately 28 percent and 29 percent of
revenues for the years ended December 31, 1995 and 1994, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
Revenue is recognized as services are performed based on units of time incurred
on behalf of clients.
Property and Equipment
Property and equipment are stated at cost. Expenditures for repair and
maintenance are charged to expense as incurred. Depreciation and amortization
are computed using the straight-line method for financial statement purposes.
Accelerated methods are used for income tax purposes. The estimated useful
lives used in computing depreciation and amortization for financial statement
purposes are as follows:
<TABLE>
<S> <C>
Computer equipment and software 7 years
Office furniture and equipment 7 years
</TABLE>
Income Taxes
The Company has elected for federal income tax reporting to include its taxable
income or loss with that of its shareholders (an S corporation election). The
Company files its tax returns on a cash-basis, whereas the accompanying
financial statements are presented on an accrual basis in accordance with
generally accepted accounting principles. The Company intends to pay dividends
to shareholders in lieu of tax payments.
F-13
<PAGE> 16
-2-
Research and Development
Research and development costs are expensed as incurred and consist
primarily of internal software development costs incurred prior to
the achievement of technological feasibility. The Company
capitalizes internal software development costs after the software
products in development reach technological feasibility. There were
no software development costs capitalized during 1995 and 1994.
Use of Estimates in Preparation of Financial Statements
The preparation of the 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.
3. AUTHORIZED SHARES:
During 1994, the Company amended its certificate of incorporation and
authorized 50,000 shares of $.10 par Class A Common Stock (voting)
and 50,000 shares of $.10 par Class B Common Stock (nonvoting).
Previous to the amendment, the Company had one class of $1 par common
stock authorized. As of the amendment date, the previously
outstanding 100 shares of common stock were replaced with 1,000
shares of $.10 par Class A Common Stock. All shares and per share
amounts have been retroactively adjusted to reflect this amendment,
as applicable.
4. LINE OF CREDIT:
The Company has a line-of-credit agreement with a bank that allows
for borrowings, up to $1,000,000, at 1-1/2 percent above the prime
rate (10 percent at December 31, 1995). The weighted average
interest rates for this line-of-credit during 1995 and 1994 were 10.2
percent and 9.1 percent, respectively. There was $310,000 and
$155,000 outstanding against this line at December 31, 1995 and 1994,
respectively. The line of credit expires June 19, 1996, and is
renewable on an annual basis. The line of credit is secured by the
Company's business assets and an assignment of a life insurance
policy on the Company's majority shareholder and is guaranteed by
the majority shareholder of the Company. Interest expense on the
line of credit for the years ended December 31, 1995 and 1994, was
$25,033 and $9,003, respectively.
The available amounts on the line of credit are reduced by the amount
of note payable (see Note 6) and a letter of credit in the amount of
$25,000. The Company must comply with certain covenants including
maintenance of a certain debt to pre-tax earnings ratio. The Company
was in compliance with these covenants at December 31, 1995.
F-14
<PAGE> 17
-3-
5. ACQUISITIONS:
On January 1, 1994, the Company acquired substantially all of the assets and
operations of AD&D Acquisition, Inc. for a $900,000 note payable to the former
owner (Note 6) and assumption of liabilities of approximately $728,000.
The acquisition was recorded using the purchase method of accounting and,
accordingly, the cost in excess of the fair value of the net tangible assets
acquired of approximately $967,400 was allocated primarily to goodwill.
Goodwill is being amortized over a period of 15 years. During the years ended
December 31, 1995 and 1994, amortization expense of $64,800 and $64,495,
respectively, was recorded and is included in the accompanying statements of
income.
The Company's majority shareholder previously held a minority interest in AD&D
Acquisition, Inc. AD&D Acquisition, Inc. distributed accounts receivable with a
fair value of $200,000 to the Company's majority shareholder to redeem the
minority interest prior to the Company's acquisition of AD&D Acquisition, Inc.
ADD Consulting, Inc.'s majority shareholder contributed the $200,000 of trade
receivables to the Company for 1,000 shares (Note 3) of Class A Common Stock
($200 per share).
6. NOTE PAYABLE:
In connection with the acquisition as described in Note 5, the Company issued a
promissory note to the former owner. The principal balance on this note was
paid in full as of December 31, 1995.
During 1995, the Company issued a note payable to the bank which bears interest
at 1-1/2 percent above the prime rate (10 percent at December 31, 1995). The
note is due in monthly installments of $26,470 through June 1996. The note is
secured by the Company's business assets and a life insurance policy on the
Company's majority shareholder.
7. RELATED-PARTY TRANSACTIONS:
During the years ended December 31, 1995 and 1994, the Company provided
consulting services to a company affiliated with the Company's majority
shareholder. These services were billed at cost and approximated $15,000 and
$14,000 during 1995 and 1994, respectively. In addition, during 1995, the
Company purchased travel services of approximately $57,000 from a travel agency
owned by an officer of the Company.
F-15
<PAGE> 18
-4-
As of December 31, 1995 and 1994, the Company had shareholder/employee
receivables as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Note receivable from majority shareholder,
8 percent interest, due March 31, 1996 $ 65,997 $ -
Shareholder/employee advances 35,878 18,550
-------- -------
$101,875 $18,550
======== =======
</TABLE>
8. LEASE AGREEMENTS:
The Company leases office facilities and office furniture and equipment under
operating leases. Total rent expense under operating leases was $90,772 and
$60,715 during the years ended December 31, 1995 and 1994, respectively.
Future minimum lease payments under these agreements for the years ending
December 31 are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1996 $144,403
1997 76,149
1998 45,202
--------
$265,754
========
</TABLE>
9. STOCK RESTRICTION AGREEMENT:
The Company's shareholders have a stock repurchase agreement which restricts
the transfer of the Company's stock upon the sale by or death of the minority
shareholders. Under the agreement, the Company and majority shareholder have
the right to acquire shares of the Company's stock in the event of a pending
sale by the minority shareholders to any persons other than authorized
transferees, as defined.
10. STOCK OPTION PLAN:
During 1994, the Company issued options to purchase 200 shares of the Company's
Class B Common Stock for $100 per share. All options were exercised in 1994
for total proceeds of $20,000. All option shares were granted at an exercise
price equal to the estimated fair market value of the shares at the date of
the grant.
F-16
<PAGE> 19
- 5 -
11. 401(k) RETIREMENT PLAN:
The Company sponsors a 401(k) retirement plan for all eligible employees.
Participants may contribute up to 20 percent of their eligible wages. The
Company matches the contributions at their discretion. During the years ended
December 31, 1995 and 1994, the Company did not make any matching contributions.
12. EVENT (UNAUDITED) SUBSEQUENT TO DATE OF AUDITORS' REPORT:
The Company sold substantially all of its business operations and related
assets to Data Processing Resources Corporation on July 1, 1996. The
accompanying financial statements do not reflect any adjustments with respect
to this transaction.
F-17
<PAGE> 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Boards of Directors of
AD&D Acquisition, Inc.:
We have audited the accompanying balance sheet of AD&D ACQUISITION, INC. (an
Illinois corporation) as of December 31, 1993, and the related statements of
operations and cash flows for the ten months 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 AD&D Acquisition, Inc. as
of December 31, 1993, and the results of its operations and its cash flows for
the ten months then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
May 16, 1994
F-18
<PAGE> 21
AD&D ACQUISITION, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
A S S E T S
<S> <C>
CURRENT ASSETS:
Cash $ 68,376
Receivables--client, including $100,964 billed subsequent
to December 31, 1993, less allowance of $16,076 for
doubtful accounts (Note 1) 682,153
Due from shareholder 23,096
Prepaid expenses and deposits 11,262
--------
Total current assets 784,887
--------
PROPERTY AND EQUIPMENT (Note 1):
Computer equipment and software 48,507
Office furniture and equipment 15,973
--------
64,480
Less-Accumulated depreciation and amortization 27,572
--------
Net property and equipment 36,908
--------
NONCOMPETE AGREEMENT AND OTHER ASSETS, net (Note 3) 6,693
--------
$828,488
========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-19
<PAGE> 22
AD&D ACQUISITION, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES:
Line of Credit (Note 2) $100,000
Accounts payable 32,343
Due to affiliates (Note 4) 3,574
Compensation expense 175,797
Accrued vacation 43,675
Accrued payroll taxes 50,478
Other accrued expenses 49,829
--------
Total current liabilities 455,696
--------
SHAREHOLDERS' EQUITY (Note 6):
Common stock, no par value, 1,000,000 shares authorized,
1,000 shares outstanding 1,000
--------
Accumulated earnings
Balance, beginning of period 149,052
Net income for the period 341,730
Shareholders' distributions (118,990)
--------
Balance, end of period 371,792
--------
Total shareholders' equity 372,792
--------
$828,488
========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-20
<PAGE> 23
AD&D ACQUISITION, INC.
STATEMENT OF OPERATIONS
FOR THE TEN MONTHS ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
REVENUES $4,482,462
PROFESSIONAL SALARIES AND RELATED PERSONNEL COSTS 3,099,064
----------
Gross margin 1,383,398
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 906,825
AMORTIZATION OF NONCOMPETE AGREEMENT 120,880
INTEREST EXPENSE 13,963
----------
NET INCOME FOR THE PERIOD $ 341,730
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-21
<PAGE> 24
AD&D ACQUISITION, INC.
STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income for the period $ 341,730
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 126,167
Changes in assets and liabilities-
Increase in client receivables (246,579)
Increase in prepaid expenses and deposits (2,274)
Increase in due from shareholder (12,681)
Increase in accounts payable and accrued
expenses 109,048
Decrease in due to affiliates (3,528)
----------
Net cash provided by operating activities 311,883
----------
CASH FLOWS FROM INVESTING ACTIVITIES--purchase of
property and equipment (9,177)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable to affiliates (221,000)
Net borrowings under the line of credit (100,000)
Distributions paid to shareholders (118,990)
----------
Net cash used in financing activities (439,990)
----------
Net decrease in cash (137,284)
CASH, beginning of period 205,660
----------
CASH, end of period $ 68,376
==========
SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR:
Interest $ 13,517
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-22
<PAGE> 25
AD&D ACQUISITION, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
AD&D Acquisition, Inc. (the Company) provides experienced and skilled
professionals on a contract basis to serve the needs of the information and
data processing community. As the Company serves a wide range of customers in
various industries, there is no concentration of credit risk within a
particular industry or with any particular customer.
The following is a summary of significant accounting policies:
Revenue Recognition
Revenue is recognized currently as services are performed based on units of
time incurred on behalf of clients.
Property and Equipment
Property and equipment are stated at cost. Expenditures for repair and
maintenance are charged to expense as incurred. Depreciation and amortization
are computed using the straight-line method for financial statement purposes.
Accelerated methods are used for income tax purposes. The estimated useful
lives used in computing depreciation and amortization for financial statements
purposes are as follows:
<TABLE>
<CAPTION>
Asset Description Asset Life
----------------- ----------
<S> <C>
Computer equipment and software 7 years
Officer furniture and equipment 7 years
=======
</TABLE>
Income Taxes
The Company has elected for federal income tax reporting to include its taxable
income or loss with that of its shareholders (an S Corporation election).
There are no significant differences between book and tax reporting for income
and expenses items. The Company pays dividends to shareholders each year in
amounts adequate to satisfy the tax liability for their shares of the Company's
taxable income.
2. LINE OF CREDIT:
The Company has a line-of-credit agreement with a bank that allows for
borrowings, up to $200,000, at the bank's base regional lending rate, 7.0% at
December 31, 1993. The weighted average interest rate for this line of credit
during 1993 was approximately 7 percent. There was $100,000
F-23
<PAGE> 26
-2-
outstanding against this line at December 31, 1993. The line of credit is
secured by substantially all assets of the Company and is guaranteed by the
majority shareholder of the Company.
3. NONCOMPETE AGREEMENT AND OTHER ASSETS:
The Company has a noncompete agreement with the minority shareholder of the
Company and employment agreements with specific employees. The noncompete
agreement had a term of one year following the termination of employment of the
minority shareholder. Effective January 1, 1994, the assets of the Company
were sold (see Note 8) and the noncompete agreement canceled. As a result,
$111,000 of additional amortization expense was recorded in the accompanying
financial statements to reduce the asset related to the noncompete agreement
to zero.
The remaining other asset balance includes employment agreements entered into
with the former employees of Applications Design and Development, a business
acquired during March, 1990. The asset is being amortized on a pro rata basis
as each of the original employees terminates employment with the Company.
4. RELATED-PARTY TRANSACTIONS:
The amount included in the balance sheet caption "due to affiliates" represents
payables and accrued interest to an affiliated company and majority
shareholder. The affiliated company provided accounting services support to
the Company in the ten months ended December 31, 1993, for which it charged
fees of $30,000.
As of the beginning of the period, notes payable consisted of $221,000 of
due-on-demand promissory notes to an affiliated entity. The notes carried
interest rates from 10% to 11%, and the interest was payable annually. The
notes were paid in full during the period ended December 31, 1993.
5. LEASE AGREEMENTS:
The Company leases the office facilities for its corporate headquarters under
an operating lease agreement on a month-to-month basis. The Company also
leases office furniture and equipment under noncancelable operating leases.
Total rent expense under operating leases was approximately $31,000 in the
period ended December 31, 1993.
6. STOCK RESTRICTION AGREEMENT:
The Company's shareholders have a stock repurchase agreement which provides for
the transfer of the Company's stock upon the sale by or death of the minority
shareholder. Under the agreement, the Company and majority shareholder have
the right of first refusal to acquire shares of the Company's stock in the
event of a pending sale by the minority shareholder to any persons other than
authorized transferees, as defined. If the Company and majority shareholder do
not exercise their option to purchase these shares, then the shares may be
sold to a third party at a price not more favorable than that at which the
shares were first offered to the Company and the majority shareholder. In
addition, upon the death of the minority shareholder, the Company and majority
shareholder are required to purchase all the shares of the deceased shareholder.
F-24
<PAGE> 27
-3-
7. SUBSEQUENT EVENT:
Effective January 1, 1994, the net assets of the Company were sold for
$900,000 to a company owned by the minority shareholder. The assets sold
excluded $200,000 of accounts receivable used to redeem the minority
shareholder's interest in the Company. The Company received consideration in
the form of a note receivable for $900,000 payable in 24 monthly installments
of $40,295, including interest at 7.0%. The payments began on March 1, 1994,
and continue through February 1, 1996.
F-25
<PAGE> 28
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.
DATA PROCESSING RESOURCES CORPORATION
Date: August 27, 1996 By: /s/ Michael A. Piraino
-------------------------------------
Michael A. Piraino, Senior Vice President
and Chief Financial Officer (Principal
Financial and Accounting Officer)
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Document
----------- --------
<S> <C>
*2.1 Agreement of Purchase and Sale of Assets dated
July 1, 1996, by and among Data Processing Resources
Corporation, ADD Consulting, Inc. and Gerald R. Ladd
*2.2 Registration Rights Agreement dated July 1, 1996,
by and between Data Processing Resources Corporation
and ADD Consulting, Inc.
*99.1 Text of Press Release dated July 2, 1996
</TABLE>
- ----------------------
* Exhibits previously filed on July 16, 1996 with Registrant's Current Report
on Form 8-K dated July 1, 1996, incorporated herein by reference under Exhibit
Number indicated.
