SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED:) NOVEMBER 18, 1999
COMMISSION FILE NUMBER 0-28840
IMRGLOBAL CORP.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
FLORIDA 59-2911475
- ------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
100 SOUTH MISSOURI AVENUE
CLEARWATER, FLORIDA 33756
-----------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
(727) 467-8000
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired:
December 31, 1998 Audited Financial Statements of Orion
Consulting, Inc. are attached hereto.
(b) Financial Statements of Business Acquired:
December 31, 1998 Audited Financial Statements of Fusion Systems
Japan Co., Ltd. are attached hereto.
(c) Pro Forma Financial Information:
December 31, 1998 and September 30, 1999 Pro Forma Consolidated
Financial Statements (Unaudited) of IMRglobal Corp. are attached
hereto.
2
<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.
IMRGLOBAL CORP.
Date NOVEMBER 18, 1999 /s/ SATISH K. SANAN
- ----------------------- ---------------------------
Satish K. Sanan
Chief Executive Officer
Date NOVEMBER 18, 1999 /s/ ROBERT M. MOLSICK
- ---------------------- ----------------------------
Robert M. Molsick
Chief Financial Officer
3
<PAGE>
IMRGLOBAL CORP.
INDEX TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AUDITED FINANCIAL STATEMENTS OF ORION CONSULTING, INC.
Report of Independent Public Accountants.......................... F-3
Statement of Operations........................................... F-4
Balance Sheet..................................................... F-5
Statement of Cash Flows........................................... F-6
Statement of Shareholders' Equity................................. F-7
Notes to Financial Statements..................................... F-8
DECEMBER 31, 1998 AUDITED FINANCIAL STATEMENTS OF FUSION SYSTEMS
JAPAN CO., LTD
Report of Independent Public Accountants.......................... F-14
Statement of Operations........................................... F-15
Balance Sheet..................................................... F-16
Statement of Cash Flows........................................... F-18
Statement of Shareholders' Equity................................. F-19
Notes to Financial Statements..................................... F-20
DECEMBER 31, 1998 IMRGLOBAL CORP.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Pro Forma Consolidated Statements of Income....................... F-30
SEPTEMBER 30, 1999 IMRGLOBAL CORP.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Pro Forma Consolidated Statements of Income....................... F-31
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.................... F-32
F-1
<PAGE>
ORION CONSULTING, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Orion Consulting, Inc.:
We have audited the accompanying balance sheet of Orion Consulting, Inc. (an
Ohio corporation) as of December 31, 1998, and the related statements of
operations, shareholders' 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 Orion 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.
Arthur Andersen LLP
Cleveland Ohio
January 22, 1999
F-3
<PAGE>
ORION CONSULTING, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
Gross revenue ............................................... $ 23,212,531
Adjustments ................................................. (627,761)
------------
Net revenue ........................................ 22,584,770
------------
Operating expenses:
Compensation ............................................. 16,829,354
Payroll taxes ............................................ 773,689
Employee benefits ........................................ 851,500
Rent ..................................................... 761,648
Insurance ................................................ 75,314
Telephone ................................................ 275,554
Royalties ................................................ 314,119
Promotion and advertising ................................ 303,002
Travel and entertainment ................................. 439,102
Deprecation .............................................. 156,192
Other .................................................... 3,252,903
------------
Total operating expenses .................................... 24,032,377
------------
Operating loss .............................................. (1,447,607)
------------
Other income (expense):
Interest income, net ..................................... 59,458
Other expense, net ....................................... (29,490)
------------
Total other income ..................................... 29,968
------------
Net loss .................................................... $ (1,417,639)
============
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE>
ORION CONSULTING, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current assets:
Cash ........................................................ $ 3,083
Cash - restricted (Note 3) .................................. 334,868
Accounts receivable, less allowance for doubtful
accounts of $1,487,891 at December 31, 1998 .............. 6,957,741
Work in process, net (Note 2) ............................... 2,461,870
Notes and interest receivable from shareholders (Note 4) .... 480,189
Prepaid expenses and other current assets ................... 845,836
------------
Total current assets .................................. 11,083,587
------------
Property and equipment, at cost:
Computer equipment and software ............................. 599,179
Furniture and fixtures ...................................... 386,100
Office equipment ............................................ 74,254
------------
1,059,533
Less accumulated depreciation ............................... (413,411)
------------
646,122
------------
Total assets .......................................... $ 11,729,709
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................ $ 419,108
Funds held in escrow (Note 3) ............................... 334,868
Accrued compensation, profit sharing and benefits (Note 5) .. 9,850,195
Accrued other expenses ...................................... 472,850
Deferred revenue ............................................ 428,811
Note and interest payable to shareholder (Note 6) ........... 212,837
------------
Total current liabilities ............................. 11,718,669
Shareholders' equity:
Common stock, no par value, 10,000,000 shares authorized,
5,374,200 outstanding at December 31, 1998, stated at .... 1,595,000
Additional paid-in capital .................................. 244,000
Retained deficit ............................................ (1,827,960)
------------
Total shareholders' equity ............................ 11,040
------------
Total liabilities and shareholders' equity ............ $ 11,729,709
============
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE>
ORION CONSULTING, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
Cash flows from operating activities:
Net loss ................................................... $(1,417,639)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation ......................................... 156,192
Noncash stock compensation ........................... 1,524,000
Loss on disposal of equipment ........................ 82,547
Changes in operating assets and liabilities:
Accounts receivable ............................... (3,257,194)
Work in process ................................... (447,307)
Prepaids and other current assets ................. (751,995)
Accounts payable .................................. 148,966
Accrued expenses .................................. 4,191,449
Deferred revenue .................................. 188,719
-----------
Net cash provided by operating activities ......... 417,738
-----------
Cash flows from investing activities:
Net additions to property and equipment .................... (433,985)
-----------
Net cash used for investing activities ............... (433,985)
-----------
Net change in cash ............................................ (16,247)
Cash at beginning of year ..................................... 19,330
-----------
Cash at end of year ........................................... $ 3,083
===========
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE>
<TABLE>
<CAPTION>
ORION CONSULTING, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
ADDITIONAL LESS
COMMON PAID-IN RETAINED DEFERRED
STOCK CAPITAL EARNINGS COMPENSATION TOTAL
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997... $ 1,595,000 $ 244,000 $ (410,321) $(1,524,000) $ (95,321)
Net loss ................... -- -- (1,417,639) -- (1,417,639)
Compensation expense ....... -- -- -- 1,524,000 1,524,000
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998... $ 1,595,000 $ 244,000 $(1,827,960) $ -- $ 11,040
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-7
<PAGE>
ORION CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION AND BUSINESS:
Orion Consulting, Inc. (the Company), is a management consulting firm
that provides a wide range of information technology consulting and strategic
and operations management consulting services to a broad range of clients,
primarily in the healthcare industry throughout the United States. Historically,
consulting services have been provided through Orion while technology-based
services have been provided through ORION Dhrystone Software, Inc. (Orion
Dhrystone), a majority owned subsidiary. On November 30, 1997, the Company
acquired the minority interest in Orion Dhrystone in a stock for stock
transaction which was accounted for as a purchase.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PROPERTY AND EQUIPMENT--Property and equipment are stated at cost.
Expenditures for major renewals and improvements that extend the useful life of
property and equipment are capitalized. Expenditures for maintenance and repairs
are charged to expense as incurred.
Effective January 1, 1998, the Company changed its method of
depreciation for property and equipment from an accelerated method to the
straight-line method. This change was applied on a prospective basis to the net
book value of the assets over their remaining useful lives. Depreciation is
based upon useful lives of three years for software, five years for office and
computer equipment and seven years for furniture and fixtures. The Company
believes that the straight-line method more appropriately measures the economic
benefits received from these assets. The current year impact of this change is
immaterial to the Company's operating results.
In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of (SFAS 121), the Company periodically reviews whether the
long-lived assets used in its operations might be impaired for future use or
whether events or changes in circumstances might indicate that the carrying
amount of such assets might not be recoverable. It is the belief of management
that none of the Company's long-lived assets are impaired and that the carrying
value of such assets are recoverable.
INCOME TAXES--The Company has elected to be treated as an S Corporation
and, therefore, the taxable income of the Company is included in the individual
tax returns of the owners. Accordingly, no provision for federal or state income
taxes has been made in the accompanying financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS--Management believes the fair value
of financial instruments and related party notes approximate their carrying
amounts.
F-8
<PAGE>
ORION CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
REVENUE RECOGNITION--The Company's revenue is primarily derived from
fees for professional services performed on a time and materials basis. The
Company recognizes revenue for these services as the services are provided.
Certain fees are realized on a contingency basis, generally based upon revenues
or costs recovered for clients or upon the outcome of litigation. Fee revenue
for recovery projects is recognized monthly based upon the terms of the client
engagements. Fee revenue for litigation work is recognized when the project
outcome is known and the fees are realizable. Fee revenue associated with the
licensing of certain proprietary software is recognized when the license
agreement commences or renews.
The timing of billings for services performed may vary, based on the
terms of the engagements, and may differ from the period of revenue recognition.
Revenue earned in excess of billings is included in Work in Process. Deferred
revenue represents billings and/or revenue adjustments in excess of the service
performed.
Management reviews the status of its contracts periodically and adjusts
revenues to reflect expected earnings on work completed. Provisions for
estimated losses on contracts are recorded as adjustments to revenue in the
period in which they become known. Work in Process is included in the balance
sheet net of the related provisions of approximately $878,000 at December 31,
1998.
STOCK-BASED COMPENSATION--The Company follows the provisions of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25), for stock issued under its Restricted Stock Bonus Plan and
for stock rights issued under its Restricted Stock Grant Plan for Full Time
Employees. For stock issued to non-employees, the Company follows the provisions
of Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123).
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 amounts reported in the financial
statements and results of operations for the periods reported. Actual results
could differ from these estimates.
3. RESTRICTED CASH:
As of December 31, 1998, the Company acts as a trustee for certain of
its clients. As such, the Company had cash of $334,868 recorded on its balance
sheet to pay various obligations of the client. This amount is offset by a
related liability.
4. NOTES RECEIVABLE FROM SHAREHOLDERS:
At December 31, 1998, the Company is the holder of two notes, payable on
demand, from shareholders. The notes bear interest at a rate of 7% per annum due
concurrently with the payment of principal.
F-9
<PAGE>
ORION CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
5. ACCRUED COMPENSATION, PROFIT SHARING AND BENEFITS:
Accrued compensation, profit sharing and benefits consists of the
following:
DECEMBER 31,
1998
-----------
Performance bonuses payable to shareholders .............. $9,204,492
Accrued profit sharing ................................... 289,440
Other accrued compensation and benefits .................. 356,263
----------
Total accrued compensation, profit sharing and benefits.. $9,850,195
==========
6. NOTE PAYABLE TO SHAREHOLDER:
During 1997, the Company entered into a promissory note agreement with a
shareholder. The note is payable on demand and bears interest at the rate of 7%
per annum.
7. RESTRICTED STOCK PLANS:
Effective November 15, 1997, the Company adopted its Restricted Stock
Bonus Plan (Stock Bonus Plan). Pursuant to the Stock Bonus Plan, the Company
distributed, subject to certain conditions and restrictions regarding vesting
and transferability, 2,527,200 shares of its common stock to key employees.
Compensation expense for the year ended December 31, 1998 contains a charge of
approximately $1,524,000 related to this stock grant.
The Company also adopted its Restricted Stock Grant Plan for Full Time
Employees (Stock Grant Plan) effective November 15, 1997. The Stock Grant Plan
provides for full-time employees, other than employees who are eligible for
stock under the Stock Bonus Plan, with at least one year of service to receive
discretionary grants of stock. These stock rights are convertible to common
stock of the Company upon either (i) registration of the subject shares under
the Securities Act of 1933, or (ii) the Company's election as a C Corporation.
Pursuant to this Stock Grant Plan, rights to approximately 196,000 shares were
granted during 1997.
Effective April 30, 1998, the Company amended the Stock Bonus Plan and
Stock Grant Plan, primarily with regard to their vesting and transferability
provisions. The amended plans provide for immediate vesting of the subject
shares. Accordingly, the Company recorded a one-time, non-cash stock
compensation charge of $1,524,000 in second quarter 1998 related to the stock
distribution.
F-10
<PAGE>
ORION CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
8. STOCK TRANSFER RESTRICTION AGREEMENT:
Shareholders, other than shareholders of ten percent or more of the
Company's common stock, have entered into an agreement, as amended by the
Amended and Restated Share Purchase Agreement effective May 16, 1998, to
restrict the ability of these shareholders to transfer their shares of stock.
The agreement grants these shareholders the rights of first refusal to purchase
stock from other shareholders that are party to the agreement. This agreement
remains in effect until (i) terminated by mutual written agreement of the
shareholder parties, or (ii) by cessation of the Company's business, or (iii)
three years after the shares of the Company are subject to an effective
Securities and Exchange Commission registration statement and are listed on a
public stock exchange, or (iv) upon issuance of the Company's financial
statements for a fiscal year showing $50.0 million or more of net revenue, or
(v) the issuance of the Company's financial statements for a fiscal year showing
net income, excluding extraordinary, non-recurring items, of $15.0 million or
more, whichever shall first occur.
9. EMPLOYEE 401(K) AND PROFIT SHARING PLAN:
The Company has an Employee Profit Sharing and Savings Trust and Plan
(the Plan) covering substantially all employees. The Plan qualifies under
Section 401(k) of the Internal Revenue Code. Eligible employees may contribute
up to the maximum allowable under tax regulations. The Company matches 25
percent of a participant's contribution up to a maximum of five percent of the
participant's compensation. Amounts expensed and reflected in the accompanying
statements of operations were approximately $110,000 for the year ended December
31, 1998.
The Company may also make discretionary profit sharing contributions to
the Plan. These contributions are accrued during the year and funded in the
subsequent year. Profit sharing expense was approximately $289,000 for the year
ended December 31, 1998.
10. COMMITMENTS
The Company leases office space and certain office equipment under
various operating leases, the majority of which contain clauses permitting
cancellation upon certain conditions. Rent expense of approximately $762,000 for
the year ended December 31, 1998 included about $675,000 of office space rental.
Future minimum office space lease payments under these operating leases are as
follows:
1999 ...................................... $ 669,097
2000 ...................................... 560,812
2001 ...................................... 547,906
2002 ...................................... 533,172
2003 ...................................... 395,507
Thereafter................................. 1,362,067
----------
$4,068,561
==========
F-11
<PAGE>
ORION CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
11. LINE OF CREDIT:
During the year ended December 31, 1998, the Company obtained a line of
credit with a bank with a borrowing limit of $3,000,000, which expires on August
31, 2001. Interest on borrowings is payable at the bank's prime lending rate
less 1/8%. Borrowings are secured by the Company's accounts receivable. The
Company had no borrowings under this line of credit as of December 31, 1998.
The line of credit agreement contains various covenants which require
the Company to, among other things, maintain certain levels and ratios of
financial conditions. The Company was in compliance with all covenants as of
December 31, 1998.
12. MAJOR CUSTOMERS DURING THE YEAR ENDED DECEMBER 31, 1998:
During the year ended December 31, 1998, the Company derived
approximately 33 percent of its net revenues from two customers, with each
customer providing over six percent of the Company's net revenues. While
management expects the Company's reliance on these clients will diminish over
time, the loss of one of these customers could have an adverse impact on the
Company's financial condition and results of operations.
F-12
<PAGE>
FUSION SYSTEMS JAPAN CO., LTD.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
F-13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Fusion Systems Japan Co., Ltd.
We have audited the consolidated balance sheet of Fusion Systems Japan Co., Ltd.
as of December 31, 1998, and the related consolidated statements of income,
shareholders' equity, and cash flows for the nine-month period then ended, all
expressed in Japanese yen. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 consolidated financial position of Fusion Systems
Japan Co., Ltd. at December 31, 1998, and the consolidated results of its
operations and its cash flows for the nine-month period then ended in conformity
with accounting principles generally accepted in the United States of America.
Ernst & Young
Tokyo, Japan
November 12, 1999
F-14
<PAGE>
FUSION SYSTEMS JAPAN CO., LTD.
CONSOLIDATED STATEMENT OF INCOME
NINE-MONTH PERIOD ENDED DECEMBER 31, 1998
(THOUSANDS OF
YEN)
---------------
Net revenue (Note 2) ................................ /yen/1,757,034
Cost of revenue ..................................... (831,540)
--------------
Gross profit ........................................ 925,494
Selling, general and administrative expenses (Note 3) (372,655)
--------------
Operating profit .................................... 552,839
Other income (expense):
Interest expense .................................. (9,362)
Other income (expense), net ....................... (3,929)
--------------
Income before income tax ............................ 539,548
Provision for income taxes (Notes 2 and 9) .......... (305,324)
--------------
Net income .......................................... /yen/ 234,224
--------------
See accompanying notes.
F-15
<PAGE>
FUSION SYSTEMS JAPAN CO., LTD.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(THOUSANDS OF
YEN)
-------------
ASSETS
Current assets:
Cash and cash equivalents (Note 2) .................. /yen/ 567,342
Accounts receivable (Notes 3 and 13) ................ 527,278
Unbilled work-in-process (Note 2) ................... 50,116
Deferred income taxes (Notes 2 and 9) ............... 66,327
Prepaid expenses and other current assets ........... 88,185
--------------
Total current assets .......................... 1,299,248
Property and equipment, net of accumulated depreciation
(Notes 2 and 4) ..................................... 116,912
Investments and other assets ........................... 187,053
-------------
TOTAL ASSETS .................................. /yen/1,603,213
==============
See accompanying notes.
F-16
<PAGE>
FUSION SYSTEMS JAPAN CO., LTD.
CONSOLIDATED BALANCE SHEET (CONTINUED)
DECEMBER 31, 1998
(THOUSANDS OF
YEN)
--------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable(Note 2) ........................... /yen/ 37,233
Accrued compensation (Note 5) ...................... 149,244
Deferred revenue (Note 2) ......................... 220,880
Other current liabilities (Notes 6 and 7) .......... 822,529
-------------
TOTAL CURRENT LIABILITIES ................ 1,229,886
Long-term debt (Note 8) ............................... 127,259
Deferred tax liability (Note 2 and 9) ................. 114
-------------
TOTAL LIABILITIES ........................ 1,357,259
Shareholders' equity:
Common stock, /yen/50,000 par value:
Authorized shares - 800
Issued and outstanding shares - 405.66 .......... 20,283
Additional paid-in capital ......................... 121,719
Retained earnings (Note 10) ........................ 106,729
Accumulated other comprehensive expense (Note 2) ... (2,777)
-------------
TOTAL SHAREHOLDERS' EQUITY ............... 245,954
--------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY /yen/1,603,213
==============
See accompanying notes.
F-17
<PAGE>
<TABLE>
<CAPTION>
FUSION SYSTEMS JAPAN CO., LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE-MONTH PERIOD ENDED DECEMBER 31, 1998
(THOUSANDS OF
YEN)
-------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net income ........................................................ /yen/234,224
Adjustments to reconcile net income to net cash provided
by/(used in) operating activities:
Depreciation and amortization ............................... 36,814
Accrual for stock appreciation rights ....................... 3,637
Deferred income taxes ....................................... (66,214)
Changes in current assets and liabilities:
Accounts receivable ...................................... 69,426
Unbilled services ........................................ (25,094)
Other current assets ..................................... (61,433)
Other assets ............................................. 44,369
Accounts payable ......................................... (9,394)
Other current liabilities ................................ 566,932
Deferred revenue ......................................... 18,074
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................ 811,341
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment ......................... (32,341)
Purchase of intangible assets ..................................... (2,000)
------------
NET CASH (USED IN) INVESTING ACTIVITIES ..................... (34,341)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term borrowings ................................. (277,581)
Proceeds from long-term borrowings ................................ 19,273
Issue of stock .................................................... 11,245
------------
NET CASH PROVIDED (USED IN) FINANCING ACTIVITIES ............ (247,063)
------------
Effect of exchange rate changes ...................................... (3,276)
------------
Net increase in cash and cash equivalents ............................ 526,661
Cash and cash equivalents, beginning of year ......................... 40,681
------------
Cash and cash equivalents, end of year ............................... /yen/567,342
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the nine-month period for:
Interest ....................................................... /yen/ 3,929
=============
Income tax ..................................................... /yen/ 46,520
=============
</TABLE>
See accompanying notes.
F-18
<PAGE>
<TABLE>
<CAPTION>
FUSION SYSTEMS JAPAN CO., LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NINE-MONTH PERIOD ENDED DECEMBER 31, 1998
(IN THOUSANDS OF YEN, EXCEPT SHARE DATA)
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
---------------------- PAID-IN RETAINED COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL
------ ----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1998 .... 388.14 /yen/19,407 /yen/111,350 /yen/(127,495) /yen/ 499 /yen/ 3,761
Issue of stock ............. 17.52 876 10,369 -- -- 11,245
Net income ................. -- -- -- 234,224 -- 234,224
Translation adjustment ..... -- -- -- -- (3,276) (3,276)
------ ----------- ------------ ------------- ------------ ------------
Balance, December 31, 1998.. 405.66 /yen/20,283 /yen/121,719 /yen/ 106,729 /yen/(2,777) /yen/245,954
====== =========== ============ ============ =========== ============
</TABLE>
See accompanying notes.
F-19
<PAGE>
FUSION SYSTEMS JAPAN CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. BACKGROUND
Fusion Systems Japan Co., Ltd. ("Fusion - Japan") was established as a Japanese
Corporation in the year 1992. During 1997, the company established a wholly
owned subsidiary as a corporation in the United States of America (collectively
referred to in the financial statements as "the Company")
The Company is principally engaged in the business of developing software
products and providing IT consulting services and generates a substantial
portion of its revenues from the sale of its Software product "FOX", an
automated system for use in the Securities business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENTS
The Company maintains its records and prepare its financial statements in
Japanese yen. The Company's books of account reflect accounting principles
customarily followed by commercial enterprises in Japan. The accompanying
financial statements differ from those issued for domestic purposes in Japan.
They reflect certain adjustments, not recorded on the Company's books of
account, which, in the opinion of management, are appropriate to present the
Company's financial position, results of operations and cash flows in accordance
with accounting principles generally accepted in the United States of America.
The principal adjustments are: (1) revenue recognition under contract
accounting, (2) accrued liabilities and (3) accounting for deferred income
taxes.
CONSOLIDATION
The consolidated financial Statements include the accounts of Fusion - Japan and
its wholly owned subsidiary FSJ Inc. All significant inter-company balances and
transactions have been eliminated in consolidation
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 the estimates.
F-20
<PAGE>
FUSION SYSTEMS JAPAN CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Fixed-price contract revenue is recognized using the percentage of completion
method of accounting, under which the sales value of performance, including
earnings thereon, is recognized on the basis of the percentage that each
contract's cost to date bears to the total estimated cost. Any anticipated
losses upon contract completion are accrued currently. Service revenues from
time and materials services are recognized as the services are provided.
Maintenance revenues are recognized over the period of the maintenance
contracts.
Unbilled work-in-process represents revenue on contracts to be billed in
subsequent periods in accordance with the terms of the contract. Deferred
revenue represents advance collections in accordance with the terms of the
contracts.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments, generally with
original maturities of three months or less, that are readily convertible to
known amounts of cash and are so near maturity that they present insignificant
risk of changes in value because of changes in interest rates.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line and declining balance method
and is charged to income over the estimated useful life of the respective
assets.
FINANCIAL INSTRUMENTS
The carrying amounts for cash and cash equivalents, accounts receivable,
investments, accounts payable, and long term debts approximate fair values as of
the balance sheet date.
COMPREHENSIVE INCOME
During 1998, the Company adopted Statement of Financial Accounting Standard No.
130 "Reporting Comprehensive Income." The balance of accumulated comprehensive
expense relates to foreign currency translation adjustments.
F-21
<PAGE>
FUSION SYSTEMS JAPAN CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
During June, 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" which is
effective for the Company on January 1, 2000. This statement establishes
measurement and disclosure criteria for certain derivative and hedging
instruments including foreign exchange forward contracts. The effect of adopting
the standard is currently being evaluated, but not expected to have a material
effect on the Company's financial position or overall trends in result of
operations.
3. ACCOUNTS RECEIVABLE
(Thousands of yen)
Accounts receivable, trade ..................... /yen/569,790
Reserve for doubtful accounts .................. (42,512)
------------
/yen/527,278
============
During the period, the company provided (Y)38,162 thousand for additional
doubtful accounts.
4. PROPERTY AND EQUIPMENT
The major classifications of property and equipment at December 31, 1998 are
summarized as follows:
Estimated
Useful Life
(YEARS) (THOUSANDS OF YEN)
Building & improvements................ 5 /yen/ 909
Computer equipment.................. 5-6 73,082
Computer software................... 3-5 69,860
Office furniture & equipment....... 3-15 63,421
-------------
207,272
Less: Accumulated depreciation and amortization....... 90,360
-------------
/yen/ 116,912
=============
Depreciation and amortization of property and equipment was /yen/34,035 thousand
for the nine-month period ended December 31, 1998.
F-22
<PAGE>
FUSION SYSTEMS JAPAN CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
5. STOCK APPRECIATION RIGHTS
During September 1996, the Company introduced a Stock Appreciation plan ("Plan")
for the benefit of certain qualifying employees of the Company with an objective
to provide the qualifying employees financial benefits linked with the
appreciation of the Company's common stock without, however, transferring to the
Participants the ownership of actual common stock shares. The appreciation under
the Plan is based on the net book value of the Company unless an outside company
acquires the Company or the Company executes an Initial Public Offering. The
Units of Stock granted under this scheme vest after an expiry of five years from
the date of grant and the employee will be eligible to receive in cash, the
amount of appreciation calculated in accordance with the plan.
The Company has applied the provisions of FAS 123 and has recognized the
appreciation value for the aggregates units issued under the plan by a charge to
income during each period. As at December 31, 1998, the accrued Stock
Appreciation Right costs amounted to approximately /yen/3,637 thousand.
On March 24, 1999, 100% of the outstanding stock of the Company were acquired by
IMRglobal Corp. (See Note 14). In accordance with the plan, the liability under
the said Plan increased to /yen/190,083 thousand based on the consideration paid
to the stockholders.
6. OTHER CURRENT LIABILITIES
(Thousands of yen)
Income taxes............................... /yen/ 344,299
Consumption tax............................ 80,126
Deposits held.............................. 30,885
Benefits payable........................... 293,526
Current portion of long-term debt.......... 56,656
Deferred income taxes...................... 9,157
Others..................................... 7,880
--------------
/yen/ 822,529
==============
F-23
<PAGE>
FUSION SYSTEMS JAPAN CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
7. RELATED PARTIES
DEPOSIT HELD FROM OFFICER OF THE COMPANY
Deposits held as of December 31, 1998 includes a deposit received from an
officer of /yen/23,545 thousand, an advance against issue of stock. The amounts
advanced to the Company did not carry any interest or repayment stipulations.
The Company repaid the entire amount in July 1999.
8. LONG TERM DEBT
Terms of Loan (Thousands of yen)
------------------------------------------------
Secured loan from bank:
Due in 1999 at interest rate 2.125% ......... /yen/ 5,000
Due in 2004 at interest rate 2.125% ......... 22,860
Promissory notes due serially through 2002...... 156,055
-------------
183,915
Less: Current portion of the long-term debt..... 56,656
-------------
Long-term debt, net of current portion ......... /yen/ 127,259
=============
As of December 31, 1998, the Company was in compliance with the financial
covenants of its debt agreements. Deposits paid to the landlord is pledged as
collateral for the secured loan of /yen/5,000 thousand. Other secured loan of
/yen/22,860 thousand is guaranteed by Tokyo Guarantee Corporation.
Maturities of long-term debt are as follows:
(Thousands of yen)
1999..................................... /yen/ 56,656
2000..................................... 51,656
2001..................................... 51,431
2002..................................... 18,448
After 2002.............................. 5,724
-------------
/yen/ 183,915
=============
F-24
<PAGE>
FUSION SYSTEMS JAPAN CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
9. INCOME TAXES
The provision for income taxes for the period is as follows:
(Thousands of yen)
Income before income taxes................. /yen/ 539,548
Provision for income taxes:
Current:
Japan............................... /yen/ 361,750
Foreign............................. 2,812
Deferred:
Japan............................... (66,327)
Foreign............................. 7,089
-------------
Total provision for income taxes.......... /yen/ 305,324
-------------
Effective income tax rate................. 57%
=============
Effective March 31, 1998, separate new tax legislation was enacted in Japan
reducing the Company's statutory income tax rate from 47% to 42% for fiscal
years ending after March 31, 1999. Deferred income tax balances have been
adjusted to reflect the revised rates, which increased the 1998 income taxes by
/yen/6,792 thousand.
Taxes on income applicable to the Company would normally result in a statutory
tax rate of approximately 47% for the period ended December 31, 1998. A major
reconciling items of the statutory income tax rate to the effective income tax
rate are provision of the valuation allowance and an effect from the change in
enacted tax rate.
Net deferred tax asset/ (liability) is as follows:
(Thousands of yen)
Deferred tax assets................................. /yen/ 227,062
Deferred tax liabilities............................ (9,271)
-------------
Net deferred tax assets before valuation allowance.. 217,791
Valuation allowance................................. 160,735
=============
Deferred tax asset, net of valuation allowance..... /yen/ 57,056
=============
The net change in the valuation allowance for deferred tax assets were increase
of /yen/31,269 thousand for the nine-month period ended December 31, 1998.
F-25
<PAGE>
FUSION SYSTEMS JAPAN CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
10. FOREIGN EXCHANGE
The foreign exchange gain for the period ended December 31, 1998 was
approximately /yen/ 3,699 thousand.
11. SHAREHOLDERS' EQUITY
Under the Commercial Code of Japan, amounts equal to at least 10% of cash
dividends paid and other cash appropriations must be transferred to the legal
reserve until the reserve equals 25% of the amount of common stock. This reserve
is not available for dividends but may be used to reduce a deficit as determined
by the shareholders or may be capitalized by resolution of the Board of
Directors. At December 31, 1998, there is no amount of retained earnings which
the Company has designated as a legal reserve.
12. LEASES
The Company leases Office facilities under operating lease agreements. Rental
expenses under these leases for the nine-month period ended December 31, 1998
were approximately /yen/61,761 thousand. Future minimum lease payments as of
December 31, 1998 for leases in excess of one year are approximately as follows:
(Thousands of yen)
1999.............................. /yen/ 24,757
2000.............................. 24,757
2001.............................. 24,532
2002.............................. 8,510
-------------
Total minimum payments............ /yen/ 82,556
=============
13. RISK CONCENTRATION
Financial instruments which potentially subject the Company to concentrations of
credit risk are primarily accounts receivable. As the Company's sales depend on
several major customers in one industry segment, accounts receivable are
concentrated with these major customers. The Company's three largest customers
which individually account for more than 10% of the Company's revenue as a
percentage of consolidated sales were 50% for the nine-month period ended
December 31, 1998. The Company does not require collateral or other security
from their customers. The Company maintains an allowance for losses based upon
the expected collectibility of accounts receivable.
The Company derives a significant portion of its revenues from its operations in
Japan. Revenues from Japan for this period accounted for 90% of its total
revenue. The Company's continued success would largely depend on its success in
the Japanese markets.
F-26
<PAGE>
FUSION SYSTEMS JAPAN CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
14. SUBSEQUENT EVENTS
On March 26, 1999, IMRglobal and the stockholders of the Company executed an
acquisition agreement enabling IMRglobal to acquire 100% of the outstanding
stock of the Company. The Company's shareholders received 3,735,536 shares of
IMRglobal's common stock in exchange for their holding of the common stock of
the Company.
On October 25, 1999, IMRglobal and the former stockholders of the Company
executed an amendment to the Acquisition Agreement dated March 26, 1999 for a
cash payment of $22.4 million in exchange for approximately 1.5 million shares
of IMRglobal stock issued in the original transaction. The cash price was based
on a revision to the merger agreement from an all-stock transaction to a
combination of cash (39%) and stock (61%). The cash price was adjusted for the
dollar to yen exchange rate that existed at March 26, 1999.
YEAR 2000 (UNAUDITED)
Many existing computer systems run software programs permitting only two-digit
entries to reference the year in the date field (e.g., 1998 is read as "98") and
therefore cannot properly process dates in the next century. Software programs
that use the two-digit year date field to perform computations or
decision-making functions may fail due to an inability to correctly interpret
dates in the 21st century. For example, many software systems will misinterpret
"00" to mean the year 1900 rather than 2000.
The Company's state of readiness
As of December 31, 1998, the Company has completed its process of assessing the
impact the Year 2000 will have on its information technology and non-information
technology systems, relationships with its third-party vendors and relationships
with its clients. As a result of its assessments, the Company believes that the
Year 2000 will not give rise to any event that will have a material adverse
effect on the Company's results of operations and financial condition.
The Company has not identified any other IT or non-IT system that is subject to
a material risk of disruption due to the Year 2000.
The Company has assessed whether a system failure experienced by any of the
Company's third-party vendors would negatively impact the Company's operations
or financial condition and has determined that a Year 2000 system failure
experienced by the Company's vendors would not have a material affect on the
Company's results of operations and financial condition.
F-27
<PAGE>
IMRGLOBAL CORP.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
F-28
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The accompanying unaudited pro forma consolidated statements of income
of IMRglobal Corp. for the year ended December 31, 1998 and the nine months
ended September 30, 1999 include the historical and pro forma effects of the
acquisitions of Fusion Systems Japan Co., Ltd. ("Fusion") in March 1999 and
Orion Consulting, Inc. ("Orion") in June 1999. The unaudited pro forma
consolidated statements of income for the fiscal year ended December 31, 1998
gives effect to the Fusion and Orion acquisitions as if they occurred on January
1, 1998. The unaudited pro forma consolidated statements of income for the nine
months ended September 30, 1999 gives effect to the Fusion and Orion
acquisitions as if they occurred on January 1, 1999. The Fusion and Orion
acquisitions were accounted for under the purchase method of accounting.
The Pro Forma Consolidated Financial Statements have been prepared
based on the historical financial statements of IMRglobal, Fusion and Orion for
the periods stated above. Such pro forma statements may not be indicative of the
results that would have occurred if the acquisitions had been consummated on the
dates indicated, or of the operating results that may be achieved in the future.
The pro forma statements should be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 1998, which
are contained in IMR's Annual Report on Form 10-K as filed with the Securities
and Exchange Commission and as amended by Form 8-K filed on November 15, 1999.
F-29
<PAGE>
<TABLE>
<CAPTION>
IMRGLOBAL CORP.
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED AND IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA
IMRGLOBAL FUSION ORION ADJUSTMENTS COMBINED
--------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue ................................... $ 170,318 $ 15,308 $ 22,585 $ 208,211
Cost of revenue ........................... 90,075 7,522 12,863 110,460
--------- --------- --------- ---------
Gross profit ........................ 80,243 7,786 9,722 97,751
Selling, general and administrative expense 34,754 3,951 11,170 49,875
Research and development .................. 6,247 190 -- 6,437
Goodwill and intangible amortization ...... 2,074 2 -- $ 4,645(A) 6,721
Acquired in-process research & development 8,200 -- -- -- (E) 8,200
Acquisition costs ......................... 145 -- -- -- 145
--------- --------- --------- --------- ---------
Income (loss) from operations ....... 28,823 3,643 (1,448) (4,645) 26,373
Other income (expense):
Interest expense ....................... (234) (24) (30) -- (288)
Interest income and other .............. 4,594 (45) 60 -- 4,609
--------- --------- --------- --------- ---------
Total other income .................. 4,360 (69) 30 -- 4,321
--------- --------- --------- --------- ---------
Income (loss) before provision
for income taxes and minority interest . 33,183 3,574 (1,418) (4,645) 30,694
Provision for income taxes ................ 13,270 2,073 -- (567)(B) 13,775
(1,001)(C)
--------- --------- --------- --------- ---------
Income (loss) before minority interest .... 19,913 1,501 (1,418) (3,077) 16,919
Minority interest in net income ........... (33) -- -- (33)
--------- --------- --------- --------- ---------
Net income (loss) ................... $ 19,880 $ 1,501 $ (1,418) $ (3,077) $ 16,886
========= ========= ========= ========= =========
Net earnings (loss) per share:
Basic .................................. $ 0.69 $ 0.48
========= =========
Diluted ................................ $ 0.57 $ 0.40
========= =========
Shares outstanding:
Basic .................................. 28,752 35,516(D)
========= =========
Diluted ................................ 35,064 41,828(D)
========= =========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
statements of income.
F-30
<PAGE>
<TABLE>
<CAPTION>
IMRGLOBAL CORP.
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED AND IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA
IMRGLOBAL FUSION ORION ADJUSTMENTS COMBINED
--------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue ................................... $ 177,000 $ 4,267 $ 13,406 $ 194,673
Cost of revenue ........................... 97,173 1,121 5,315 103,609
--------- --------- --------- ---------
Gross profit ......................... 79,827 3,146 8,091 91,064
Selling, general and administrative expense 39,997 779 4,911 45,687
Research and development .................. 4,730 51 -- 4,781
Goodwill and intangible amortization ...... 4,755 -- -- $ 1,581(A) 6,336
Acquired in-process research & development 3,410 -- -- -- 3,410(E)
Acquisition costs ......................... 1,936 -- -- -- 1,936
--------- --------- --------- --------- ---------
Income from operations ............... 24,999 2,316 3,180 (1,581) 28,914
Other income (expense):
Interest expense ....................... (6) (65) -- -- (71)
Interest income and other .............. 4,022 (201) 31 -- 3,852
--------- --------- --------- --------- ---------
Total other income ................... 4,016 (266) 31 -- 3,781
--------- --------- --------- --------- ---------
Income (loss) before provision
for income taxes and minority interest . 29,015 2,050 3,211 (1,581) 32,695
Provision for income taxes ................ 11,587 820 -- 1,284 (B) 13,418
(273)(C) --
--------- --------- --------- --------- ---------
Net income ........................... $ 17,428 $ 1,230 $ 3,211 $ (2,592) $ 19,277
========= ========= ========= ========= =========
Net earnings per share:
Basic .................................. $ 0.50 $ 0.51
========= =========
Diluted ................................ $ 0.44 $ 0.45
========= =========
Shares outstanding:
Basic .................................. 34,923 37,914(D)
========= =========
Diluted ................................ 39,486 42,477(D)
========= =========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
statements of income.
F-31
<PAGE>
IMRGLOBAL CORP.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
The accompanying unaudited pro forma statements of income for the year
ended December 31, 1998 and the nine months ended September 30, 1999, present
the separate historical results of operations for IMRglobal, Fusion and Orion as
adjusted for certain pro forma adjustments described below:
(A) This adjustment represents the additional amortization expense
that would have been incurred had Fusion and Orion been acquired
at the beginning of the period. For purposes of this pro forma
presentation, it is estimated that the excess of the purchase
price over the net tangible assets acquired will be allocated to
acquired technology (5year lives) and goodwill (20 year lives).
The estimated composite amortization life used is 18 years. The
Company is currently investigating the appropriate amortization
periods for the intangible assets.
(B) This adjustment represents U.S. federal and state income tax
expense for Orion. Prior to the acquisition by IMRglobal, Orion
was taxed as an S-Corporation under the provisions of the
Internal Revenue Code whereby taxable income is generally
reported by the Orion shareholders on their individual income tax
returns. In connection with Orion's merger with IMRglobal, the
S-Corporation election was terminated.
(C) This adjustment represents the deferred income tax impact of
deductible amortization expense related to the Fusion
acquisition.
(D) The basic and diluted shares outstanding have been adjusted for
the 3.7 million shares of IMRglobal issued in the Fusion
acquisition and the 3.0 million shares of IMRglobal issued in the
Orion acquisition.
(E) IMRglobal allocated the purchase price of Fusion based on the
fair value of assets acquired and liabilities assumed.
Accordingly, $3.4 million of the purchase price was allocated to
acquired in-process research and development ("IPRD"). This
amount was charged against operations for the nine months ended
September 30, 1999. As IPRD expense is considered a one-time
charge, IPRD expense is not reflected in the pro forma
consolidated statements of income for the year ended December 31,
1998.
IMRglobal's September 30, 1999 balance sheet includes the consolidated
balance sheets of IMRglobal, Fusion and Orion. This balance sheet is presented
in Form 10-Q filed on November 15, 1999 with the Securities and Exchange
Commission.
F-32
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
NUMBER -----------
- -------
23.1 Consent of Ernst & Young
23.2 Consent of Arthur Andersen, LLP
EXHIBIT NUMBER 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 333-86823, Form S-8 No. 333-24027 and Form S-8 No. 333-86753) of
IMRglobal Corp. and pertaining to the Information Management Resources, Inc.
Employee Stock Purchase Plan of our report dated November 12, 1999, with respect
to the consolidated financial statements of Fusion Systems Japan Co., Ltd.
included in this Current Report (Form 8-K), for the nine month period ended
December 31, 1998, filed with the Securities and Exchange Commission.
ERNST & YOUNG
Tokyo, Japan
November 17, 1999.
EXHIBIT NUMBER 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated January 22, 1999, relating to the financial statements of Orion
Consulting, Inc. as of December 31, 1998 and for the year then ended, included
in this current report on Form 8-K and to the incorporation by reference of this
same report into the previously filed registration statements on Form S-3 (No.
333-86823) and Forms S-8 (No. 333-24027 and No. 333-86753) of IMRglobal Corp.
and to all references to our Firm included in these filings.
ARTHUR ANDERSEN, LLP
Cleveland, Ohio
November 18, 1999.
