<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. to Current Report
Pursuant to Section 13 or 15 (d) of the
Securities and Exchange Act of 1934
Date of Report November 13, 1998
TSI INTERNATIONAL SOFTWARE LTD.
Delaware 0-22667 06-1132156
- ------------------------------ ----------- ------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
45 Danbury Road
Wilton, Connecticut 06897
- --------------------------------------- -----------
(address of principal executive offices (zip code)
Registrant's telephone number, including area code 203-761-8600
------------------
The undersigned registrant hereby amends the following items, financial
statements, exhibits, or other portions of its current report on Form 8-K,
originally filed with the Securities and Exchange Commission on November 30,
1998 (the "Form 8-K") as set forth in the pages attached.
<PAGE>
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements:
The following financial statements of the business acquired are attached
hereto:
<TABLE>
<CAPTION>
<S> <C>
Index to Financial Statement of Software Consulting Partners, Inc. F-1
Report of Independent Accountants F-2
Statement of Assets to be Acquired and Liabilities to be
Assumed as of June 30, 1998 and September 30, 1998 (unaudited) F-3
Statement of Direct Revenues and Direct Operating Expenses for the year
Ended June 30, 1998 and through the nine month period
Ended September 30, 1998 (unaudited) F-4
Notes to Financial Statements F-5
(b) Pro Forma Financial Information:
The following unaudited pro forma consolidated condensed financial
statements are attached hereto:
Unaudited pro forma condensed consolidated financial information F16
Unaudited pro forma condensed consolidated balance sheet
As of September 30, 1998 F17
Unaudited pro forma condensed consolidated statements of earnings
for the Fiscal year ended December 31, 1997 and the nine-month period
Ended September 30, 1998 F-18
Notes to unaudited pro forma condensed consolidated
financial information F-19
(b) Exhibits:
</TABLE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Software Consulting Partners, Inc.
Report of Independent Auditors F-2
Statement of Assets to be Acquired and Liabilities to be
Assumed as of June 30, 1998 and September 30, 1998 (unaudited) F-3
Statement of Direct Revenues and Direct Operating Expenses for the year
Ended June 30, 1998 and the three month period
Ended September 30, 1998 (unaudited) F-4
Notes to Financial Statements F-5
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Software Consulting Partners, Inc.
Media, Pennsylvania
We have audited the accompanying statement of assets to be acquired and
liabilities to be assumed of Software Consulting Partners, Inc. as of June 30,
1998 and the related statement of revenue and direct operating expenses for the
year ended June 30, 1998. These financial statements are the responsibility of
Software Consulting Partner, Inc.'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 audits 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 our audit provides a reasonable basis for our opinion.
In our opinion, the accompanying statement of assets to be acquired and
liabilities to be assumed and the related statement of revenues and direct
operating expenses present fairly, in all material respects, the assets to be
acquired and liabilities to be assumed of the Software Consulting Partners, Inc.
as of June 30, 1998, and its revenues and direct operating expenses for the year
then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared for the purpose of
substantially complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the report on Form 8-K of TSI International
Software, LTD, as described in Note 1 and are not intended to be a complete
presentation of the financial position, results of operations and cash flows of
the Software Consulting Partners, Inc.
COGEN SKLAR LLP
Bala Cynwyd, Pennsylvania
January 12, 1999
<PAGE>
SOFTWARE CONSULTING PARTNERS, INC.
STATEMENT OF ASSETS TO BE ACQUIRED AND LIABILITIES TO BE ASSUMED
<TABLE>
<CAPTION>
September 30
June 30, 1998
ASSETS 1998 (Unaudited)
---------- -------------
<S> <C> <C>
CURRENT ASSETS
Marketable securities $ 5,421 $ 5,421
Accounts receivable (net of allowance for
Doubtful accounts of $300,000 and
$400,000, respectively) 1,565,042 994,277
Employee advances 29,891 1,975
Unbilled revenue 24,195 142,625
Prepaid expenses 41,754 12,738
---------- ----------
1,666,303 1,157,036
---------- ----------
INVESTMENT AFFILIATE 862 52,732
---------- ----------
PROPERTY AND EQUIPMENT Net 281,773 252,613
---------- ----------
OTHER ASSETS
Organization costs (net of accumulated
Amortization of $1,784
and $1,901, respectively) 561 444
Security Deposits 10,058 13,166
---------- ----------
10,619 13,610
---------- ----------
TOTAL ASSETS $1,959,557 $1,475,991
========== ==========
LIABILITIES
CURRENT LIABILITIES
Cash overdraft $ 225,835 $ 171,581
Line of credit 850,000 1,500,000
Current portion of long-term debt 400,000 393,333
Accounts payable 758,807 732,162
Payroll taxes payable and other payables 122,529 76,349
Accrued payroll 170,000 188,591
Loan payable affiliate 388,814 503,376
Accrued expenses - 508,893
---------- ----------
TOTAL LIABILITIES 2,915,985 4,074,285
---------- ----------
NET LIABILITIES $ 956,428 $2,598,294
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
SOFTWARE CONSULTING PARTNERS, INC.
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
Three Months Ended
Year Ended September 30, 1998
June 30, 1998 (Unaudited)
------------- --------------------
<S> <C> <C>
REVENUES $ 8,082,923 $ 1,896,943
----------- -----------
DIRECT OPERATING EXPENSES
Cost of revenue 5,659,174 2,090,200
Selling general and administrative 3,431,509 1,127,784
----------- -----------
TOTAL DIRECT OPERATING EXPENSES 9,090,683 3,217,984
----------- -----------
EXCESS OF REVENUES OVER DIRECT
OPERATING EXPENSES $(1,007,760) $(1,321,041)
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
SOFTWARE CONSULTING PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 AND SEPTEMBER 30, 1998 (UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
- ------------------
The company, which incorporated in August 1994, specializes in implementing
application software and offers knowledge transfer through presentations,
workshops and classrooms and computer-based training.
Basis of Accounting
- -------------------
On November 13, 1998 subject to certain conditions TSI International Software
Ltd. (TSI) will issue shares of its common stock for all of the issued and
outstanding stock of the company. As part of this acquisition TSI will acquire
substantially all of the assets of the company and assume certain stated
liabilities. The accompanying financial statements present the assets to be
acquired and liabilities to be assumed and the direct revenues and direct
operating expenses of the company based upon the structure of the transaction as
described in the Agreement; this transaction is herein referred to as the
"Acquisition."
The financial statements have been prepared to substantially comply with the
rules and regulations of the Securities and Exchange Commission for business
combinations accounted for as a purchase and are not intended to be a complete
presentation of the financial position, results of operations and cash flows of
the company.
Revenue Recognition
- -------------------
Consulting and training revenue is recognized as services are performed.
Marketable Securities
- ---------------------
The company's investments in marketable equity securities are classified as
available for sale and recorded at market value. Unrealized holding gains
(losses) on such securities are recorded as a separate component of
stockholders' equity.
Depreciation
- ------------
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets. For financial reporting purposes, the cost of
leasehold improvements is depreciated over the lesser of the length of the
related leases or the estimated useful lives of the assets. For income tax
purposes, the cost of leasehold improvements is depreciated over the income tax
lives of the assets. Depreciation is computed on the straight line and
accelerated methods for both financial reporting and income tax purposes.
Estimates
- ---------
The preparation of financial statements is in conformity with generally accepted
accounting principles requires the use of estimates based on management's
knowledge and experience. Accordingly, actual results could differ from those
estimates.
<PAGE>
NOTE 2 MARKETABLE SECURITIES
Following is a summary of investment securities classified as available for
sale:
<TABLE>
<CAPTION>
Gross Gross
Market Amortized Unrealized Unrealized
(Fair) Value Cost Holding Gains Holding Losses
------------ --------- ------------- --------------
<S> <C> <C> <C> <C>
June 30, 1998 and
September 30, 1998
(unaudited)
Equity securities $5,421 $1,288 $4,133 $ -
============ ========= ============= ==============
</TABLE>
NOTE 3 INVESTMENT AFFILIATE
Balance represents company's investment in its newly formed wholly owned
Netherland subsidiary carried at cost.
NOTE 4 PROPERTY AND EQUIPMENT
Property and equipment consist of the following
<TABLE>
<CAPTION>
September 30,
June 30, 1998
1998 (Unaudited)
-------- --------------
<S> <C> <C>
Furniture and fixtures $ 96,900 $ 93,580
Computer and equipment 323,512 328,344
Leasehold Improvements 76,436 76,436
-------- --------
496,848 498,360
Less: Accumulated depreciation 215,075 245,747
-------- --------
$281,773 $252,613
======== ========
</TABLE>
NOTE 5 LINE OF CREDIT
The company has a line of credit with a bank for $1,500,000, with interest
payable at the bank prime rate plus 1.25% expiring December 31, 1998.
Outstanding borrowings under the line were $850,000 and $1,500,000 as of June
30, 1998 and September 30, 1998. This line is guaranteed by the stockholder of
the company and an affiliate, in which the stockholder of the company is a
partner. All assets of the company and the affiliate are pledged as collateral
for this line of credit.
The company's line of credit agreement includes various covenants, including
minimum tangible net worth financial statement ratios and negative covenants.
<PAGE>
At June 30, 1998 and September 30, 1998 the company did not meet the covenants
and, consequently, the loans have been classified as current.
NOTE 6 LONG-TERM DEBT
Long-term debt consist of the following:
<TABLE>
<CAPTION>
September 30,
June 30, 1998
1998 (Unaudited)
-------- --------------
<S> <C> <C>
Note payable to bank in monthly installments
Of $6,667, plus interest at prime plus 1.76%
Through August 2003. $400,000 $393,333
Less: current portion 400,000 393,333
-------- --------
$ - $ -
======== ========
</TABLE>
The minimum annual repayment requirements on long-term debt as of June 30, 1998
are as follows:
<TABLE>
<CAPTION>
YEARS ENDING JUNE 30, AMOUNT
---------------------- --------
<S> <C>
1999 $ 73,333
2000 80,000
2001 80,000
2002 80,000
2003 80,000
2004 6,667
--------
$400,000
========
</TABLE>
The company's bank loan agreement includes various covenants, including
maintenance of working capital and other financial statement ratios and a
prohibition against incurring further indebtedness, paying dividends, changes in
capital stock, and the transfer, sale or lease of significant assets.
Additionally, the stockholders have personally guaranteed substantially all
indebtedness.
At June 30, 1998 and September 30, 1998 the company did not meet the covenants
for maintenance of working capital and other financial statement ratios and,
consequently the loan has been classified as current.
<PAGE>
NOTE 7 LOAN PAYABLE AFFILIATE
Balance represents amounts advanced from an affiliated company which are payable
on demand.
NOTE 8 OPERATING LEASES
For the years ended June 30, 1998 total rental expenses under leases amounted to
$222,093. At June 30, 1998, the company was obligated under various non-
cancelable operating lease arrangements for office facilities and equipment as
follows:
<TABLE>
<CAPTION>
YEARS ENDING JUNE 30, AMOUNT
----------------------- ---------
<S> <C>
1999 $365,781
2000 405,612
2001 332,284
2002 258,312
2003 266,160
2004 135,048
----------
$1,763,197
==========
</TABLE>
The company also leases space on a month to month basis.
NOTE 9 MAJOR CUSTOMER
For three months ended September 30, 1998 and for the year ended June 30, 1998
approximately 22% and 18% of the company's revenue was derived from one
customer.
<PAGE>
Item 7 (b) Pro Forma Financial Information
Unaudited Pro Forma Condensed Consolidated Financial Information
The following unaudited pro forma condensed consolidated financial information
(the pro forma financial information) set for the below is presented to reflect
the pro forma effects of the acquisition by TSI International Software (TSI) of
certain assets and liabilities of Software Consulting Partners, Inc. (SCP).
The unaudited pro forma financial information is based on, and should be read
together with: the historical financial statements of TSI as of and for the year
ended December 31, 1997; the unaudited financial statements of TSI as of and for
the nine month period ended September 30, 1998; and the historical financial
statements of SCP as of and for the year ended June 30, 1998 and the unaudited
financial statements of SCP as of and for the three months ended September 30,
1998. The unaudited pro forma condensed consolidated information is based on
certain assumptions and includes the adjustments described herein and in the
notes to the pro forma financial information.
The unaudited pro forma condensed consolidated balance sheet was prepared based
on the assumption that the SCP acquisition had taken place on September 30,
1998. The unaudited condensed consolidated statements of earnings for the year
ended December 31, 1997 and for the nine months ended September 30, 1998 were
prepared based on the assumption that the SCP
acquisition had taken place on January 1, 1997. For accounting purposes, the SCP
acquisition will be treated as a purchase.
It should be understood that the unaudited pro forma financial statements do not
necessarily reflect the actual consolidated financial position or results of
operations of the combined entities since, among other factors, actual expenses
related to or following the acquisition may be different than amounts assumed or
estimated. The pro forma financial information is provided for illustrative
purposes only and may not necessarily be indicative of the financial results
that would have occurred had the acquisitions been effective on the dates
indicated, and should not be viewed as indicative of results of operations or
financial position of future periods.
<PAGE>
TSI International Software, Inc. and Software Consulting Partners, Inc.
unaudited Pro Forma Condensed Consolidated Balance Sheet for the period ended
September 30, 1998 (in thousands except shares and per share data):
<TABLE>
<CAPTION>
Proforma Balance Sheet TSI/SCP 9/30/98 9/30/98 9/30/98 Consolidated
TSI SCP Adjustments
<S> <C> <C> <C> <C>
Assets
Current
Cash 26209 -172 -2396 23641
Investments in Marketable Securities 24474 5 - 24479
Accounts Receivable less Allowances 13561 994 - 14555
Current portion in contracts rec. net of
unearned income 479 143 - 622
Prepaid expenses and other current assets 1107 14 - 1121
------- ------- -----
Total Current Assets 65830 984 64418
------- ------- -----
Long Term Furniture, Fixtures and Equipment 2291 253 -104 2440
Investment in Contracts Long Term 210 - - 210
Other Assets 251 67 290 608
Goodwill - - 5458 5458
------- ------- -----
TOTAL ASSETS 68582 1304 73134
======= ======= =====
Liabilities and Stockholders Equity
Current
Accounts Payable 1215 732 1846 3793
Short term Debt-line of credit - 1500 -1500 0
Current Portion long-term debt - 393 -393 0
Loan Payable affiliate - 503 -503 0
Accrued Expenses 3498 774 - 4272
Current Portion Def. Maintenance Revenue 7015 - - 7015
------- ------- -----
Total Current Liabilities 11728 3902 15080
------- ------- -----
Long Term
Long Term Debt - - - -
Other long term liabilities 22 - - 22
Deferred Maintenance Rev. less current
Portion 335 - - 335
------- ------- -----
Total Liabilities 12085 3902 15437
------- ------- -----
Net Liabilities 0
Stockholders Equity
Common Stock (.01 par value) 110 - 110
Additional Paid in Capital 60325 1200 61525
Accumulated Deficit -3589 - -3589
Cumulative foreign currency tran. Adj. -349 - -349
Treasury Stock - - -
------- -----
Total Stockholders Equity 56497 57697
------- -----
Total liabilities and Stockholders Equity 68582 73134
======= =====
</TABLE>
<PAGE>
TSI International Software, Inc. and Software Consulting Partners, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Earnings for the year
ended December 31, 1997 (in thousands except shares and per share data):
<TABLE>
<CAPTION>
1997 1997
TSI SCP Adjustments Consolidated
<S> <C> <C> <C> <C> <C>
Revenues
Software licensing 14603 - - 14603
Service, maintenance and other 12067 6514 - 18581
----- ----- ----- ------------
Total Revenues 26670 6514 - 33184
Cost of Sales 3268 4785 - 8053
Gross Profit 23402 1729 - 25131
Operating Expenses 21348 2670 - 24018
Goodwill Amortization - - -1819 -1819
Borrowing Expenses -186 -15 4 -197
Interest Income 688 - -24 664
Income before Taxes 2556 -956 -1839 -239
Taxes 76 - - 76
Net Income 2480 -956 -1839 -315
Net Income per share Basic 0.42 -0.05
Diluted 0.29 -0.04
Average Shares Outstanding Basic 5917 5951
Diluted 8567 8601
</TABLE>
<PAGE>
TSI International Software, Inc. and Software Consulting Partners, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Earnings for the nine
months ended September 30, 1998 (in thousands except shares and per share data):
<TABLE>
<CAPTION>
9/30/98 9/30/98
TSI SCP Adjustments Consolidated
------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues
Software licensing 19870 - - 19870
Service, maintenance and other 10575 6353 - 16928
------- ------- ----- -----
Total Revenues 30445 6353 36798
Cost of Sales 3736 5108 - 8844
Gross Profit 26709 1245 - 27954
Operating Expenses 23546 2679 - 26025
Goodwill Amortization - - -1364 -1364
Borrowing Expenses - -98 98 0
Interest Income 1370 - -81 1289
Income before Taxes 4533 -1532 -1347 1754
Taxes 565 - - 565
Net Income 3968 -1532 -1347 1089
Net Income per share Basic 0.38 0.11
Diluted 0.33 0.10
Average Shares Outstanding Basic 10406 10440
Diluted 12128 12162
</TABLE>
TSI International Software and Software Consulting Partners
Notes To Unaudited Pro Forma Condensed Financial Information
(dollar amounts in thousands)
1. The unaudited pro forma condensed consolidated financial statements have
been prepared by combining the historical consolidated financial statements
of TSI with the historical financial information related to the acquired
assets and liabilities of SCP. The unaudited pro forma condensed consolidated
financial statements as of and for the nine months ended September 30, 1998
have been prepared by combining the unaudited historical financial
information of TSI and the acquired SCP business as of and for the nine
months ended September 30, 1998. The unaudited proforma condensed
consolidated statement of earnings for the year ended December 31, 1997 has
been prepared by combining the audited statement of income of TSI for the
year ended December 31, 1997 with the unaudited statement of revenues and
direct operating expenses of the acquired SCP business for the year ended
December 31, 1997.
2. The SCP acquisition is being accounted for using the purchase method of
accounting. For purposes of the pro forma financial statements, the estimated
excess of acquisition costs over the fair value of net assets acquired
(goodwill) is $5,458,000 consisting of the contractual assumption of certain
SCP liabilities, the issuance of stock at a
<PAGE>
market value of 1.2 million, and the costs of the acquisition. The excess of
liabilities plus expenses less assets assumed results in goodwill which will
be amortized by TSI on a straight line basis over 3 years. The pro forma
balance sheet has been adjusted to reflect goodwill as if the purchase
accrued on September 30, 1998. The proforma statements of earnings have been
adjusted to reflect goodwill amortization expense of $1,819,000 for the year
ended December 31, 1998 and $1,364,000 for the nine months ended September
30, 1998 assuming the purchase was made on January 1, 1997.
The agreement allows for additional payments to be made under an earnout
agreement based on meeting certain, profitability, retention and productivity
goals, for the twelve month period ending December 31, 1999. This amount, not
to exceed 1.2 million, to be paid in additional shares of TSI common stock.
In addition, any amounts paid will result in an increase in goodwill at the
time of such payment.
The pro forma balance sheet includes adjustments to reflect
(a) the payment of SCP bank borrowings and amounts due to affiliates;
(b) the adjustment to fair value of certain furniture, fixtures, and
equipment acquired;
(c) the estimated net deferred income tax assets arising from the purchase;
(d) the accrual for additional SCP liabilities which were incurred subsequent
to September 30, 1998 but prior to the date of acquisition, and assumed
by TSI; and
(e) the issuance of TSI common stock with a value of $1,200,000
The pro forma statements of earnings include the following adjustments:
(a) To reflect the increase in amortization expense due to the amortization
of goodwill on a straight-line basis over 3 years; and
(b) To reflect the decrease in interest expense and decrease in interest
income resulting from the payment of SCP bank borrowings and amounts due
to affiliates.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TSI International Software LTD.
Date January 27, 1999 Ira A. Gerard
<PAGE>
Item 7b Exhibits
a) The following exhibits are filed herewith:
23.01 - Consent of Cogen Sklar LLP, Software Consulting Partners, Independent
Accountants
<PAGE>
Exhibit 23.01
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 12, 1999 accompanying the financial
statements of Software Consulting Partners, Inc. included in the Form 8-K of TSI
International Software, LTD. We consent to the use of the aforementioned report
in the Form 8-K of TSI International Software, LTD.
COGEN SKLAR LLP
Bala Cynwyd, Pennsylvania
January 28, 1999
