<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
DELSOFT CONSULTING, INC.
CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1999 AND JUNE 30, 1999
<TABLE>
<CAPTION>
September June
ASSETS 30, 1999 30, 1999
------ ----------- -----------
(Unaudited) (See Note 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 56,315 $ 11,139
Accounts receivable, net of allowance for doubtful accounts
of $20,000 890,885 1,376,033
Prepaid and refundable income taxes 85,110 137,567
Other current assets 57,242 50,702
----------- -----------
Total current assets 1,089,552 1,575,441
Equipment and furnishings, net of accumulated depreciation
of $119,972 and $102,555 188,428 205,845
Intangible assets, net of accumulated amortization of $426,566
and $343,701 1,034,487 1,107,023
Noncurrent deferred tax assets, net 128,000 157,200
Other assets 119,021 119,021
----------- -----------
Totals $ 2,559,488 $ 3,164,530
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Note payable to bank $ 95,601 $ 643,412
Current portion of long-term debt 40,690 38,536
Accounts payable 133,497 145,692
Accrued compensation and other liabilities 296,357 284,595
Income taxes payable 17,900
----------- -----------
Total current liabilities 584,045 1,112,235
Long-term debt, net of current portion 54,088 64,588
----------- -----------
Total liabilities 638,133 1,176,823
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value; 100,000,000 shares authorized;
11,159,149 shares issued and outstanding 1,875,652 2,775,652
Retained earnings 76,952 16,742
Unearned compensation (31,249) (804,687)
----------- -----------
Total stockholders' equity 1,921,355 1,987,707
----------- -----------
Totals $ 2,559,488 $ 3,164,530
=========== ===========
</TABLE>
See Notes to Condensed Financial Statements.
-1-
<PAGE>
DELSOFT CONSULTING, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Gross revenue $ 1,778,492 $ 2,298,738
Direct project costs 1,208,192 1,589,456
------------ ------------
Net revenues 570,300 709,282
------------ ------------
Other (income) expenses:
Selling, general and administrative expenses 570,556 664,278
Interest expense 21,750 20,364
Reversal of amortization of unearned compensation (127,500)
Loss from discontinued Canadian operations 79,846
------------ ------------
Totals 464,806 764,488
------------ ------------
Income (loss) before provision (credit) for income taxes 105,494 (55,206)
Provision (credit) for income taxes 45,284 (14,200)
------------ ------------
Net income (loss) $ 60,210 $ (41,006)
============ ============
Basic earnings (loss) per share $.01 $(--)
============ ============
Basic weighted average common shares outstanding 11,159,149 11,159,149
============ ============
</TABLE>
See Notes to Condensed Financial Statements.
-2-
<PAGE>
DELSOFT CONSULTING, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
---------------------------- Total
Number of Retained Unearned Stockholders'
Shares Amount Earnings Compensation Equity
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1999 11,159,149 $ 2,775,652 $ 16,742 $ (804,687) $ 1,987,707
Amortization of unearned compensation 938 938
Effect of cancellation of stock options (900,000) 772,500 (127,500)
Net income 60,210 60,210
----------- ----------- ----------- ----------- -----------
Balance, September 30, 1999 11,159,149 $ 1,875,652 $ 76,952 $ (31,249) $ 1,921,355
=========== =========== =========== =========== ===========
</TABLE>
See Notes to Condensed Financial Statements.
<PAGE>
DELSOFT CONSULTING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Operating activities:
Net income (loss) $ 60,210 $ (41,006)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation of equipment and furnishings 17,417 16,081
Amortization of intangible assets 72,536 72,536
Amortization of unearned compensation 938 33,203
Reversal of amortization of unearned compensation (127,500)
Deferred income taxes 38,000 (22,200)
Changes in operating assets and liabilities:
Accounts receivable 485,148 (260,834)
Prepaid and refundable income taxes 52,457 (91,720)
Other current assets (15,340) (7,564)
Other assets (46,484)
Accounts payable (12,195) (54,852)
Accrued compensation and other liabilities 11,762 (155,788)
Income taxes payable 17,900 (180,346)
--------- ---------
Net cash provided by (used in) operating activities 601,333 (738,974)
--------- ---------
Investing activities - capital expenditures (1,816)
---------
Financing activities:
Net proceeds from (repayments of) line of credit borrowings (547,811) 548,436
Repayments of long-term borrowings (8,346) (8,678)
--------- ---------
Net cash provided by (used in) financing activities (556,157) 539,758
--------- ---------
Net increase (decrease) in cash and cash equivalents 45,176 (201,032)
Cash and cash equivalents, beginning of period 11,139 313,451
--------- ---------
Cash and cash equivalents, end of period $ 56,315 $ 112,419
========= =========
Supplemental disclosure of cash flow data:
Interest paid$ $ 25,353 $ 17,503
========= =========
Income taxes paid (refunded) $ (51,812) $ 280,066
========= =========
</TABLE>
See Notes to Condensed Financial Statements.
-4-
<PAGE>
DELSOFT CONSULTING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Unaudited interim financial statements:
In the opinion of management, the accompanying unaudited
condensed financial statements reflect all adjustments,
consisting of normal recurring accruals, necessary to present
fairly the financial position of Delsoft Consulting, Inc. (the
"Company") as of September 30, 1999, its results of operations
and cash flows for the three months ended September 30, 1999 and
1998 and its changes in stockholders' equity for the three months
ended September 30, 1999. Information included in the condensed
balance sheet as of June 30, 1999 has been derived from, and
certain terms used herein are defined in, the audited financial
statements of the Company as of June 30, 1999 and for the years
ended June 30, 1999 and 1998 (the "Audited Financial Statements")
included in the Company's Annual Report on Form 10-KSB for the
year ended June 30, 1999 that was previously filed with the
United States Securities and Exchange Commission (the "SEC").
Pursuant to the rules and regulations of the SEC, certain
information and disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted from these
financial statements unless significant changes have taken place
since the end of the most recent fiscal year. Accordingly, these
unaudited condensed financial statements should be read in
conjunction with the Audited Financial Statements and the other
information also included in the Form 10-KSB.
The results of the Company's operations for the three months
ended September 30, 1999 are not necessarily indicative of the
results of operations for the full year ending June 30, 2000.
Note 2 - Earnings (loss) per common share:
As further explained in Note 1 to the Audited Financial
Statements, the Company presents basic and, if appropriate,
diluted earnings (loss) per share in accordance with the
provisions of Statement of Financial Accounting Standards No.
128, Earnings per Share ("SFAS 128"). Diluted per share amounts
have not been presented in the accompanying unaudited condensed
statements of operations because: (i) the assumed effects of the
exercise of all of the Company's outstanding stock options and
warrants and the application of the treasury stock method for
the three months ended September 30, 1999 would have had an
insignificant effect on the weighted average number of common
shares outstanding and no effect on earnings per share; and (ii)
the Company had a net loss for the three months ended September
30, 1998 and, accordingly, the assumed effects of the exercise
of all of the Company's outstanding stock options and warrants
and the application of the treasury stock method would have been
anti-dilutive.
Note 3 - Note payable to bank:
At September 30, 1999, the Company had borrowed $95,601 under the
revolving credit agreement that provides it with a $1,250,000
line of credit (see Note 4 of the notes to the Audited Financial
Statements). Interest on outstanding borrowings is payable
monthly at the higher of 1.5% above the prime rate or 7% (an
effective rate of 9.75% at September 30, 1999).
-5-
<PAGE>
DELSOFT CONSULTING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 4 - Long-term debt:
At September 30, 1999, long-term debt consisted of equipment
loans totaling $94,778 which are payable in monthly installments
and bear interest at rates ranging from 7.75% to 8.95%. The loans
were secured by equipment with a net book value that approximated
the total outstanding balance.
Principal payment requirements for long-term obligations in each
of the years subsequent to September 30, 1999 total $40,690 in
2000; $29,536 in 2001; $19,343 in 2002; and $5,209 in 2003.
See Note 5 of the notes to the Audited Financial Statements for
additional information regarding long-term debt.
Note 5 - Income taxes:
The net provision (credit) for income taxes for the three months
ended September 30, 1999 and 1998 consisted of the following
provisions (credits):
1999 1998
-------- --------
Federal:
Current $ 5,900 $ 5,000
Deferred 24,000 (18,900)
-------- --------
Totals 29,900 (13,900)
-------- --------
State:
Current 1,384 3,000
Deferred 14,000 (3,300)
-------- --------
Totals 15,384 (300)
-------- --------
Totals $ 45,284 $(14,200)
======== ========
The provision for income taxes for the three months ended
September 30, 1999 and the credit for income taxes for the three
months ended September 30, 1998 differ from the amounts computed
using the Federal statutory rate of 34% as a result of the
following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Expected provision (credit) at Federal statutory rate 34% (34)%
Effect of:
State income taxes, net of Federal income tax effect 10
Nondeductible expenses 1 7
Other (primarily surtax exemptions) (2) 1
--- ---
Effective tax rate 43% (26)%
== ===
</TABLE>
-6-
<PAGE>
DELSOFT CONSULTING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 5 - Income taxes (concluded):
At September 30, 1999, net noncurrent deferred tax assets were
attributable to the following:
Deferred tax assets:
Provision for doubtful accounts $ 8,000
Unearned compensation 2,500
Amortization of intangible assets 112,700
Other 10,300
---------
Total 133,500
Deferred tax liabilities - depreciation (5,500)
---------
Net noncurrent deferred tax assets $ 128,000
=========
Note 6 - Stock option plan:
Pursuant to the Company's Stock Option Plan (the "Plan"),
incentive and/or nonincentive stock options for the purchase of
up to 2,000,000 shares of the Company's common stock may be
granted by the Board of Directors to key executives, other
members of management, other employees and directors of the
Company, as further explained in Note 10 of the Notes to the
Audited Financial Statements.
In addition to issuing options pursuant to the Plan, the Company
issued options during 1998 for the purchase of 2,500,000 shares
of common stock to certain executive officers that were
exercisable at $.50 per share through February 2008. The options
had a fair market value of $.875 per share on the date they were
granted. Accordingly, the Company charged $937,500 to unearned
compensation and common stock on June 30, 1998 based on the
number of shares that were subject to the options and the excess
of the fair market value over the exercise price for each share
(the balance of the unamortized unearned compensation has been
shown separately as a reduction of stockholders' equity in the
accompanying condensed balance sheets as of September 30, 1999
and June 30, 1999). The unearned compensation was being amortized
from July 1, 1998 on a straight-line basis over the remaining
term of each option.
During the three months ended September 30, 1999, options to
purchase 2,400,000 of the 2,500,000 options issued to the
executive officers in 1998 were canceled. The Company had charged
$900,000 to unearned compensation and common stock upon the
issuance of these options. Of the $900,000 initially charged to
unearned compensation, $127,500 had been amortized and charged to
selling, general and administrative expenses during the year
ended June 30, 1999, including $31,875 (which was less than $.01
per share) during the three months ended September 30, 1998 and
unearned compensation related to these shares totaled $772,500 as
of June 30, 1999.
-7-
<PAGE>
DELSOFT CONSULTING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 6 - Stock option plan (concluded):
The cancellation of the options to purchase 2,400,000 shares has
been accounted for as a change in accounting estimate and,
accordingly, the Company wrote off the related balance of
unearned compensation of $772,500 and reduced common stock by an
equivalent amount effective as of July 1, 1999. In addition, the
accompanying condensed statement of operations for the three
months ended September 30, 1999 includes a credit of $127,500 (or
$.01 per shares) for the reversal of the accumulated amortization
of the unearned compensation related to those shares through June
30, 1999.
As of September 30, 1999, the Company had stock options that
remained outstanding for the purchase of 1,803,500 shares of
common stock that expire at various dates through June 30, 2008
at prices ranging from $.50 to $3.00 per share, of which options
to purchase 861,167 shares were exercisable.
Note 7 - Major customers and concentration of credit risk:
Approximately 68% and 82% of the Company's net revenues were
derived from two customers during the three months ended
September 30, 1999 and 1998, respectively. These customers also
accounted for approximately 64% of the Company's accounts
receivable balance at September 30, 1999. The Company closely
monitors the extension of credit to its customers while
maintaining appropriate allowances for potential credit losses.
Accordingly, management does not believe that the Company was
exposed to significant credit risk at September 30, 1999.
Note 8 - Venture capital agreement:
As of September 30, 1999, the Group had not fulfilled its
commitment to provide the Company with $550,000 of equity
financing pursuant to their October 4, 1996 agreement (see Note
12 of the notes to the Audited Financial Statements).
Note 9 - Discontinued Canadian operations:
As further explained in Note 7 of the notes to the Audited
Financial Statements, the Company ceased its operations in Canada
during March 1999 and transferred all of the remaining Canadian
assets to the United States. The loss of $79,846 from the
Canadian operations for the three months ended September 30, 1999
has been included in the Company's continuing operations in the
accompanying unaudited condensed statement of operations.
* * *
-8-
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the condensed
financial statements and notes thereto appearing elsewhere in this report.
OVERVIEW
DelSoft Consulting, Inc. ("DelSoft" or the "Company") is a rapidly
growing professional services firm that was incorporated in Georgia on July 1,
1996. The Company offers its clients value added services, including intranet,
extranet, and Web site solutions (which collectively commenced in the second
quarter of fiscal 2000), professional services staffing, strategy consulting,
and related services. DelSoft delivers internet solutions designed to improve
clients' business processes including, strategy consulting, analysis and design,
technology development, systems implementation, and systems integration. The
Company also provides consulting services in the areas of ERP/CRM application
development and integration, large scale application development, and Year 2000
solutions. The Company's solutions target a client's specific business functions
enabling the linkage of people, processes, and technologies in the new digital
economy.
DelSoft markets its services and solutions to senior executives in
organizations of both existing and potential clients where technology-enabled
change (primarily Internet centric) can have a significant competitive impact.
DelSoft continues to identify opportunities to become a client's preferred
provider of comprehensive information technology ("IT") services and solutions.
DelSoft's revenues primarily consist of fees from consulting services
engagements, including both time-and-materials and fixed-price engagements.
Revenues from time-and-materials engagements are recognized as services are
provided. Billable rates vary by the service provided and the geographical
region. Historically, a substantial majority of the Company's projects have been
client-managed applications development and Year 2000 remediation related work
performed on a time-and-materials basis. DelSoft intends to increase the
percentage of its projects that are based on internet applications development
on a fixed-price engagement. The pricing, management, and execution of
individual engagements are the responsibility of the consulting office that
performs or coordinates the services.
Cost of revenues include direct costs, such as personnel salaries and
benefits and the cost of any third-party hardware or software included in an
Internet solution, and overhead expenses directly related to the engagement.
DelSoft's most significant cost item is its personnel expense, which consists
primarily of salaries and benefits for the Company's billable personnel. The
number of IT professionals assigned to projects may vary depending on the size
and duration of each engagement. Moreover, projects terminations and completion
and scheduling delays may result in short periods when personnel are not
assigned to active projects. DelSoft manages its personnel costs by closely
monitoring client needs and basing personnel increases on specific project
engagements. While the number of IT professionals may be adjusted to reflect
active projects, the Company continues to process H1-B visas and/or maintains a
database of available professionals to respond to increased demand for the
Company's services on both existing projects and new engagements.
The Company provides its services and solutions primarily to Fortune
1000 companies with significant IT budgets and recurring staffing or software
-9-
<PAGE>
development needs. Substantially all of the Company's clients are large
companies, major systems integrators or governmental agencies.
The key solutions offered by the Company include the following:
(a) INTERNET CENTRIC SERVICES AND SOLUTIONS: Providing professional
services to clients who are creating or weaving the internet with their existing
businesses to achieve e-Business capabilities. The Company expects a significant
portion of its future revenues to be derived from professional services related
to internet consulting, including intranet, extranet, and Web site solutions.
(b) PROFESSIONAL SERVICES STAFFING: Providing highly-skilledsoftware
professionals to augment the internal information management staffs of major
corporations currently represents the majority of the Company's business. The
Company supplies clients' staffing needs from among its diverse supply of
software professionals. The Company is committed to expanding its professional
services staffing operations in conjunction with its solutions business. DelSoft
expects that future revenues will be dependent on the number and scope of client
engagements. Currently, the Company's IT professionals have significant
experience in mainframe, client/server, ERP, and CRM applications development
and systems integration.
(c) SERVICES AND SOLUTIONS FOR THE YEAR 2000 PROBLEM: The Company offers
the NYE 2000(TM) proprietary software toolset. The NYE 2000 software tool may be
used to analyze and convert Natural(TM) source code to be Year 2000 compliant,
and is expected to allow the Company to perform Year 2000 projects more
efficiently. The NYE 2000 software tool allows a user to choose between full
field expansion, windowing, or a combination of both. Customers may license the
toolset and use it in their environment, or the Company will provide the toolset
in conjunction with its delivery of proven methodologies, experienced project
management, and skilled resources with significant Year 2000 project experience.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 1998
REVENUES: The Company's revenues decreased approximately 22%,
from approximately $2.3 million for the first quarter of 1999 to approximately
$1.8 million for the first quarter of 2000. This decrease in revenues was
primarily attributable to a reduction in the total number of IT professionals on
existing client projects, due to the winding down of the number of Year 2000
engagements.
DIRECT PROJECT COSTS. Direct project costs consist primarily of
salaries and employee benefits for billable IT professionals, as well
as the cost of the independent contractors used by the Company.
Direct project costs decreased approximately 25%, from approximately
$1.6 million for the first quarter of 1999 to approximately $1.2 million for the
first quarter of 2000. This decrease is primarily attributable to a reduction in
the total number of IT professionals on existing client projects and is in line
with the reduction of net revenue.
NET REVENUE. Net revenue consists of revenues less directproject costs.
Net revenue decreased approximately 20%, from approximately $710,000 for the
-10-
<PAGE>
three-month period ended September 30, 1998 to approximately $570,000 for the
three-month period ended September 30, 1999. This decrease is primarily
attributable to the reduction in the number of IT professionals utilized by the
Company (including independent contractors).
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses consist of costs associated with the Company's sales and marketing
efforts, executive management, finance and human resource functions, facilities
and telecommunications costs and other general overhead expenses. Selling,
general and administrative expenses decreased approximately 14%, from
approximately $660,000 in the first quarter of 1999 to approximately $570,000 in
the first quarter of 2000. The decrease in selling, general, and administrative
expenses is primarily attributable to a reduction in the infrastructure and
initiatives previously required to implement and support the Company's Year 2000
sales and marketing strategies.
OTHER EXPENSES. During the three months ended September 30, 1999, options
to purchase 2,400,000 shares of common stock to the Company's former President
(See Recent Developments) were canceled. The Company had charged $900,000 to
unearned compensation and common stock upon the issuance of these options. Of
the $900,000 initially charged to unearned compensation, $127,500 had been
amortized and charged to selling, general and administrative expenses during the
year ended June 30, 1999, including $31,875 during the three months ended
September 30, 1998. The Company's condensed statement of operations for the
three months ended September 30, 1999, includes a credit of $127,500 for the
reversal of the accumulated amortization of the unearned compensation related to
those shares through June 30, 1999. In addition, the Company incurred a loss of
approximately $80,000 during the three months ended September 30, 1998, which
was attributable to its Canadian operations which were discontinues during the
year ended June 30, 1999.
NET INCOME (LOSS). As a result of the above, the Company's net income for
the three months ended September 30, 1999, increased approximately 246%, from a
net loss of approximately ($41,000) for the three-month period ending September
30, 1998 to net income of approximately $60,000 for the comparable three-month
period.
RECENT DEVELOPMENTS. During the first quarter of 2000, the Company took
several steps in an effort to grow its business and increase its industry
prominence. Such steps included, naming Brian Koch as its new president,
expanding into e-commerce consulting services, and expanding our sales force
into key markets. Prior to joining DelSoft, Mr. Koch served as Vice President
and Chief Operating Officer for an Internet consulting company, as well as seven
years experience as a Senior Manager with Ernst & Young LLP. With the addition
of Mr. Koch, the Company intends on becoming a full-service e-commerce
consulting organization. DelSoft has also further expanded its geographic reach
with the opening of new sales offices in New York, New York, Dallas, Texas, and
Phoenix, Arizona.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its working capital requirements
through internally generated funds, the sale of shares of its common stock, and
proceeds from short-term bank borrowings.
-11-
<PAGE>
The Company currently has a $1.25 million revolving credit facility with
Emergent Financial Group. The credit facility bears interest at the higher of
1.5% over the prime rate or 7%. Borrowings under the revolving credit facility
are secured by substantially all of the Company's assets. In addition, Jerry
Rosemeyer, Benjamin Giacchino, and Jeffrey A. Rinde each executed a limited
personal guaranty obligating each of them to pay the sum of $100,000 of the
Company's outstanding borrowings when due; provided, however, that if an event
of default and/or a default had not occurred as defined in the Loan Documents
dated February 18, 1997, between the Company and Emergent Financial Group, the
limited personal guaranty expire at the end of six months from its execution.
Accordingly, these guarantees have expired. The facility contains certain
restrictive covenants, including, the maintenance of certain financial ratios
and limitations on payment of dividends and additional borrowings. As of
September 30, 1999, the Company had outstanding borrowings of approximately
$96,000 and working capital of approximately $506,000.
The Company currently anticipates existing sources of liquidity and cash
generated from operations are sufficient to satisfy its cash needs through the
next twelve months. To close the Acquisition or in the future, the Company may
seek to increase the amount of its credit facilities, negotiate additional
credit facilities or issue corporate debt or equity securities. Any debt
incurred or issued by the Company may be secured or unsecured, fixed or variable
rate interest and may be subject to such terms as the board of directors of the
Company deem prudent. The Company expects any proceeds from such additional
credit or sales of securities to be used primarily in the hiring of further IT
professionals and/or the acquisition of other consulting companies.
The Company does not believe that its business is subject to seasonal
trends.
The Company does not believe that inflation had a significant impact on
the Company's results of operations for the periods presented. On an ongoing
basis, the Company attempts to minimize any effects of inflation on its
operating results by controlling operating costs, and, whenever possible,
seeking to insure that billing rates reflect increases in costs due to
inflation.
YEAR 2000
The "Year 2000" issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from the
use of computer programs which have been written using two digits, rather than
four, to define the applicable year of business transactions. The Company has
evaluated, and is continuing to evaluate, the potential cost associated with
becoming Year 2000 compliant. The Company believes that the principal staffing
and financial systems it is using, which are licensed from and maintained by
third-party software development companies, are Year 2000 compliant. In
addition, the Company has requested assurances from major third party vendors
and licensors regarding the year 2000 readiness of their material hardware,
software and services. To date, such third parties have informed us that their
products used are compliant. Based on our assessment, we have determined that a
contingency plan in the event that we are unable to achieve Year 2000 compliance
is unnecessary. Management does not believe that the Year 2000 issue will have a
-12-
<PAGE>
material adverse impact on the Company's financial condition or results of
operation.
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in the section captioned Management's Discussion and
Analysis of Financial Condition and Results of Operations which are not
historical are "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements represent the
Company's present expectations or beliefs concerning future events. The Company
cautions that such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, the
uncertainty as to the Company's future profitability; the uncertainty as to the
demand for information technology services and solutions; industry trends toward
outsourcing information technology services; increasing competition in the
information technology services market; the ability to hire, train and retain
sufficient qualified personnel; the ability to obtain financing on acceptable
terms to finance the Company's growth strategy; and the ability to develop and
implement operational and financial systems to manage the Company's growth.
-13-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, theCompany
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DELSOFT CONSULTING, INC.
By: /s/ Brian Koch
-----------------------
Brian Koch
President
Date: November 15, 1999
In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the Company in the capacities set forth and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Position Date
--------- -------- ----
<S> <C> <C>
/s/ Brian Koch President and Director Date: November 15, 1999
- ------------------------ (principal executive officer)
Brian Koch
/s/ Jeffrey A. Rinde Chief Financial Officer, General Date: November 15, 1999
- ------------------------ Counsel, Secretary and Director
Jeffrey A. Rinde (principal financial and
accounting officer)
/s/ Ben J. Giacchino Director Date: November 15, 1999
- ------------------------
Ben J. Giacchino
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
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