<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q/A
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2000
OR
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-22945
THE A CONSULTING TEAM, INC.
---------------------------
(Exact name of Registrant as specified in its charter)
New York 13-3169913
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
200 Park Avenue South
New York, New York 10003
------------------------
(Address of principal executive offices)
(212) 979-8228
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No __
As of May 10, 2000, there were 5,612,142 shares
of Common Stock, with $.01 par value per share, outstanding.
<PAGE>
THE A CONSULTING TEAM, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
<S> <C> <C>
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements (unaudited) 2
Condensed Consolidated Balance Sheets 2
as of March 31, 2000 and December 31, 1999
Condensed Consolidated Statements of Operations 3
for the three months ended March 31, 2000 and 1999
Condensed Consolidated Statements of Cash Flows 4
for the three months ended March 31, 2000 and 1999
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operation 7
Item 3. Quantitative and Qualitative Disclosure of Market Risk 12
Part II.Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit 27 Financial Data Schedule 15
</TABLE>
1
<PAGE>
Part I. Financial Information
Item 1. Consolidated Financial Statements
THE A CONSULTING TEAM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------------ -------------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,561,820 $ 5,082,519
Accounts receivable 12,851,318 11,234,140
Unbilled receivables 1,158,533 121,545
Notes receivable 203,638 -
Prepaid or refundable income taxes 1,640,357 564,491
Prepaid expenses and other current assets 251,440 164,603
Total current assets 18,667,106 17,167,298
Investment at cost 300,000 300,000
Property and equipment, at cost, less accumulated
depreciation and amortization 7,283,773 7,086,342
Intangibles (net) 3,606,089 3,749,630
Deposits 275,208 279,184
------------------ -------------------
Total assets $ 30,132,176 $ 28,582,454
================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Loan payable - bank $ 1,825,000 $ 325,000
Accounts payable and accrued expenses 5,221,445 4,670,460
Deferred revenue 163,442 97,536
Capital lease obligation 296,855 307,950
Current portion of long-term debt 10,992 14,966
------------------ -------------------
Total current liabilities 7,517,734 5,415,912
Capital lease obligation 576,605 560,755
Other long-term liabilities 82,531 89,329
Commitments
Shareholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized; no shares issued or outstanding - -
Common stock, $.01 par value; 10,000,000 shares authorized;
5,612,142 (2000) and 5,485,000 (1999) issued and outstanding 56,120 54,850
Additional paid-in capital 21,940,488 21,051,758
Retained earnings (41,302) 1,409,850
------------------ -------------------
Total shareholders' equity 21,955,306 22,516,458
------------------ -------------------
Total liabilities and shareholders' equity $ 30,132,176 $ 28,582,454
================== ===================
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
THE A CONSULTING TEAM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
2000 1999
------------------ ------------------
(unaudited) (unaudited)
<S> <C> <C>
Revenues $ 13,150,662 $ 12,552,329
Cost of revenues 9,231,100 8,212,589
------------------ ------------------
Gross profit 3,919,562 4,339,740
Operating expenses:
Selling, general & administrative 6,452,333 3,427,116
------------------ ------------------
Total operating expenses 6,452,333 3,427,116
------------------ ------------------
Income (loss) from operations (2,532,771) 912,624
Interest income,net 6,619 203,864
------------------ ------------------
Income (loss) before income taxes (2,526,152) 1,116,488
Income taxes (1,075,000) 481,000
------------------ ------------------
Net income (loss) $ (1,451,152) $ 635,488
================== ==================
Net income (loss) per share - basic and dilutive $ (0.26) $ 0.12
================== ==================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
THE A CONSULTING TEAM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------
2000 1999
------------------ ------------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,451,152) $ 635,488
Adjustments to reconcile net income (loss) to net cash
used in operating activities
Depreciation and amortization 569,828 177,482
Deferred income taxes - (194,000)
Changes in operating assets and liabilities:
Accounts receivable (1,617,178) (2,335,862)
Unbilled receivables (1,036,988) -
Prepaid or refundable income taxes (1,075,866) 670,203
Prepaid expenses and other current assets (86,837) 20,871
Accounts payable and accrued expenses 550,985 893,465
Deferred revenue 65,906 -
Other liabilities (6,798) -
------------------ ------------------
Net cash used in operating activities (4,088,100) (132,353)
Cash flows from investing activities:
Purchase of property and equipment (623,718) (1,023,031)
Investments and advances (203,638) -
Deposits 3,976 (18,163)
------------------ ------------------
Net cash used in investing activities (823,380) (1,041,194)
Cash flows from financing activities:
Proceeds from sale of common stock 890,000 -
Proceeds from loan payable 1,500,000 -
Repayment of long-term debt (3,974) (3,669)
Net change in capital lease obligation 4,755 -
------------------ ------------------
Net cash provided by (used in) financing activities 2,390,781 (3,669)
------------------ ------------------
Net increase (decrease) in cash and cash equivalents (2,520,699) (1,177,216)
Cash and cash equivalents at beginning of period 5,082,519 13,003,038
------------------ ------------------
Cash and cash equivalents at end of period $ 2,561,820 $ 11,825,822
================== ==================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 3,333 $ 577
================== ==================
Cash paid during the year for income taxes $ - $ 4,797
================== ==================
Supplemental disclosure of non-cash investing
and financing activity:
Capital lease obligation $ 4,755 $ -
================== ==================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
THE A CONSULTING TEAM, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) GENERAL:
These financial statements should be read in conjunction with The A
Consulting Team, Inc. (the "Company") Form 10-K for the year ended December 31,
1999 filed with the SEC, and the accompanying financial statements and related
notes thereto. The accounting policies used in preparing these financial
statements are the same as those described in the Company's Form 10-K for the
year ended December 31, 1999.
2) INTERIM FINANCIAL STATEMENTS:
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all the adjustments (consisting only
of normal recurring accruals) necessary to present fairly the consolidated
financial position as of March 31, 2000, the consolidated results of operations
for the three months ended March 31, 2000 and 1999, and cash flows for the three
months ended March 31, 2000 and 1999, respectively.
The condensed consolidated balance sheet at December 31, 1999 has been
derived from the audited financial statements at that date, but does not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the audited consolidated financial statements and footnotes thereto included in
the Form 10-K filed by the Company for the year ended December 31, 1999.
The consolidated results of operations for the three months ended March
31, 2000 are not necessarily indicative of the results to be expected for any
other interim period or for the full year.
3) INCOME PER SHARE:
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share" ("SFAS 128"), which was required to be
adopted on December 31, 1997. Under the new requirements for calculating primary
(basic) earnings per share, the dilutive effect of stock options is excluded.
Options outstanding during the three months ended March 31, 2000 were not
included in the computation of diluted net loss per share because the effect
would be antidilutive.
Options to purchase 407,324 shares of common stock at $7.50 per share for
the three months ended March 31, 1999, were outstanding, but were not included
in the computation of diluted earnings per share, because the options' exercise
price was greater than the average market price of the common shares and,
therefore, the effect would be antidilutive.
5
<PAGE>
The following table sets forth the computation of basic and diluted earnings per
share for the three months ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
Numerator:
Net income (loss) $ (1,451,152) $ 635,488
--------------- ---------------
Numerator for basic and diluted earnings per share $ (1,451,152) $ 635,488
=============== ===============
Denominator:
Denominator for basic earnings per
share - weighted-average shares 5,500,401 5,485,000
Effect of dilutive securities:
Employee stock options - 5,349
--------------- ---------------
Denominator for diluted earnings per
share - adjusted weighted-average shares 5,500,401 5,490,349
=============== ===============
Basic and Diluted earnings per share $ (0.26) $ 0.12
=============== ===============
</TABLE>
4) INCOME TAXES:
The Company accounts for income taxes using the liability method in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109"). Deferred income taxes reflect the net effects of
temporary differences between the carrying amounts of the assets and liabilities
for financial purposes and the amount used for income tax purposes.
5) CONCENTRATION OF CREDIT RISK:
Sales to two customers represented approximately 24% of the Company's
revenue for the three months ended March 31, 2000. Sales to two customers for
the same period in 1999 represented approximately 46% of the Company's revenue.
6) ACQUISITION:
On October 2, 1998, the Company made an investment in web integrator T3
Media, Inc. ("T3 Media") of $3 million, in return for non-voting convertible
preferred stock. On June 23, 1999, the Company increased its ownership interest
in T3 Media to approximately 51% by an additional investment in T3 Media's
common stock of $370,000 and conversion of the preferred stock to common stock.
The acquisition of T3 Media was accounted for using the purchase method of
accounting. Accordingly, the results of operations of T3 Media are included in
the Company's consolidated results of operations from the date of acquisition.
The excess of the purchase price over the preliminarily estimate of fair value
of the net identifiable assets acquired totaled $4.0 million and has been
recorded as intangibles.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis of significant factors affecting the
Company's operating results and liquidity and capital resources should be read
in conjunction with the accompanying financial statements and related notes.
Overview
Since 1983, TACT has provided IT services and solutions to Fortune 1000
and other large organizations. In 1997, TACT became a public company (Nasdaq:
TACX). Headquartered in New York, the TACT growth strategy includes opening
Solution Branches (sm) in strategic locations throughout the United States.
Currently, there are Solution Branches in New York, Clark, NJ, Stamford, CT,
Chicago, and Atlanta. TACT's presence in major metropolitan business centers
allows the use of regional resources, ensures face-to-face relationships and
accountability with clients, and keeps a finger on the pulse of local market
needs. Proven performance and public presence gives clients the confidence to
rely on TACT as a trusted long-term business partner.
TACT is an end-to-end e-Services provider. The Company delivers e-Services
solutions from web strategy and design through web development and integration,
to web application hosting. Its clients include a broad range of Fortune 1000
companies and other large organizations. TACT also provides the same markets
with enterprise-wide Information Technology consulting, software and training
services and solutions. Over 87% of the Company's consulting services revenues
were generated from the hourly billing of its consultants' services to its
clients under time and materials engagements, with the remainder generated under
fixed-price engagements.
TACT's primary focus is helping clients support their new business
imperatives by assisting these clients in the transition of their information
technologies from traditional mainframe and client/server environments to the
Internet and the Web. TACT offers to its clients the full scope of the
web-enabling process, and TACT provides partial or total solutions--from
strategy and design, to development, through conversions and integration, and
ending with application hosting and enterprise-scale deployment. TACT expertise
leverages clients' existing systems and data stores to significant business
advantage: TACT plays an integral role in taking clients "from bricks and mortar
to clicks and mortar."
For each client that engages TACT to assist in implementing e-commerce or
web-based initiatives, TACT uses a comprehensive, flexible methodology to
analyze the client's current IT assets. The analysis reveals how much of the IT
asset portfolio is ready for the Web, and what is required to web-enable
selected portfolio elements. With this information, TACT devises and executes a
customized web solution strategy that will ultimately enable the client to reach
their business objectives of reduced costs, increased sales and profits, and
improved customer services.
TACT also provides clients with enterprise-wide information technology
consulting, training services and software products. TACT solutions cover the
entire spectrum of IT needs, including applications, data, and infrastructure.
TACT provides complete project life-cycle services--from application and system
design, through development and implementation, to documentation and training.
Strategic alliances with leading software vendors ensure that TACT solutions are
dependable and within the mainstream of industry trends. These partnerships
allow TACT to provide a wide variety of business technology solutions such as
enterprise reporting applications, data warehousing, systems strategies, data
and database conversions, and application development services.
The Company establishes standard-billing guidelines for consulting
services based on the type of service offered. Actual billing rates are
established on a project-by-project basis and may vary from the standard
guidelines. The Company typically bills its clients for time and materials
services on a semi-monthly basis. Arrangements for fixed-price engagements are
made on a case-by-case basis. Consulting services revenues generated under time
and materials engagements are recognized as those services are provided, whereas
consulting services revenues generated under fixed-price engagements are
recognized according to the percentage of completion method.
7
<PAGE>
The Company's most significant operating cost is its personnel cost, which
is included in cost of revenues. As a result, the Company's financial
performance is primarily based upon billing margin (billable hourly rate less
the consultant's hourly cost) and consultant utilization rates (number of days
worked by a consultant during a semi-monthly billing cycle divided by the number
of billing days in that cycle). During the period presented, the Company has
been able to increase its billing margins by increasing its hourly billing rates
and through achieving a higher margin on a number of projects related to Year
2000 services. These increases, however, were partially offset by increases in
consultants' and employees' salaries and wages and reduction in the consultant
utilization rate. Because most of the Company's engagements are on a time and
materials basis, the Company generally has been able to pass on to its clients
most of the increases in cost of services. Accordingly, such increases have
historically not had a significant impact on the Company's financial results.
Further, most of the Company's engagements allow for periodic price adjustments
to address, among other things, increases in consultant costs. TACT also
actively manages its personnel utilization rates by constantly monitoring
project requirements and timetables. As projects are completed, consultants are
re-deployed either to new projects at the current client site or to new projects
at another client site, or are encouraged to participate in TACT's training
programs in order to expand their technical skill sets.
Historically, the Company has also generated revenues by selling software
licenses and providing training services. In addition to initial software
license fees, the Company also derives revenues from the annual renewal of
software licenses. Revenues from the sale of software licenses are recognized
upon delivery of the software to a customer, because future obligations
associated with such revenue are insignificant. Training service revenues are
recognized as the services are provided. During 1999, the Company began a
significant transition to providing e-Services solutions. As a result, less
emphasis was placed on software sales, resulting in a significant reduction in
software sales in the second half of the year. Software sales are expected to
continue to decrease in year 2000 and beyond and will only be ancillary to
providing e-Services solutions to customers.
The Company's revenue growth has been driven by three primary factors:
increasing the number of consultants on billing, managing the business to attain
higher average billing rates through the delivery of higher value-added services
to the Company's clients, and carefully managing consultant utilization rates.
The Company also has been successful in expanding existing client relationships
as well as establishing new client relationships. Such relationships are
established and maintained through the Company's local Solution Branch (sm)
offices.
Considering the Company's limited experience with opening Solution
Branches, the Company cannot predict when Solution Branches will contribute to
the Company's net income. To date, new branches are taking between 12-24 months
before showing a break-even operation. The Company incurs costs regardless of
when break-even occurs.
On October 2, 1998, the Company made an investment in Web integrator, T3
Media of $3 million, in return for non-voting convertible preferred stock. On
June 23, 1999, the Company converted its preferred stock into a 30% common stock
ownership interest and increased its ownership interest in T3 Media to
approximately 51% by an additional investment in T3 Media's common stock of
$370,000. The acquisition of T3 Media was accounted for using the purchase
method of accounting. Accordingly, the results of operations of T3 Media are
included in the Company's consolidated results of operations from the date of
acquisition. The excess of the purchase price over the estimated fair value of
the net identifiable assets acquired totaled $4.0 million and has been recorded
as intangibles.
In 1999, the Company made a minority investment in LightPC. In addition to
services that can be provided to business customers, LightPC is a pioneer in the
field of consumer-oriented ASP's. The company is a privately held company based
in New York, NY, with its development team located in New York and Israel, and
it will provide to the Internet consumer market on-line access to computer
applications and software. LightPC's strategy expands the services previously
provided by the ASP industry, which traditionally were confined to the hosting
of business applications. LightPC will serve the growing demand of Internet
users for access to consumer applications such as word processing, business
suites, tax preparation applications and others and will enable consumers and
businesses to make use of programs while they are connected to the World Wide
Web through LightPC. However, while LightPC has executed while they are
connected to the World Wide Web through LightPC. However, while LightPC has
executed
8
<PAGE>
a number of business development agreements with a number of prominent
technology companies, LightPC is in the preliminary start-up stage of its
existence, and there is no guarantee that the Company's investment in this
enterprise will provide any returns to the Company at any time, or if at all.
Recent Announcement of Proposed Formation of an Incubator
On March 29, 2000, the Company announced the proposed formation of an
incubator accelerating the development of promising foreign technology startups
focused on the B2B and broadband market. Initially, the incubator is targeting
technology startups based in Israel. TACT's visibility in the Israeli startup
community is enhanced by its recent Israeli investors and by its management
team. The incubator will provide its incubated companies capital and facilities
in addition to web services, access to clients, people and strategic alliances.
Results of Operations
The following tables set forth the percentage of revenues of certain items
included in the Company's Statements of Operations:
Three Months Ended
March 31,
-----------------------
2000 1999
-------- ---------
REVENUES 100.0 % 100.0 %
Cost of revenues 70.2 65.4
-------- ---------
Gross profit 29.8 34.6
Operating expenses:
Selling, general and administrative expenses 49.1 27.3
-------- ---------
Income (loss) from operations (19.3) 7.3
-------- ---------
Net income (loss) (11.0) 5.1
======== =========
Comparison of the Three Months Ended March 31, 2000 to the Three Months
Ended March 31, 1999
Revenues. Revenues of the Company increased by $598,000, or 4.8%, from
$12.6 million for the three months ended March 31, 1999 ("1999") to $13.2
million for the three months ended March 31, 2000 ("2000"). This increase
largely resulted from increased e-Services revenues and a greater number of
consultants, offset by lower utilization rates and a slight decrease in the
average billing rate.
Gross Profit. Gross profit for the first quarter decreased 9.7 % from $4.3
million in 1999 to $3.9 million in 2000. As a percentage of total revenues,
gross profit was 29.8% versus 34.6% for the three months ended March 31, 2000
and 1999, respectively. Gross margin was adversely affected by the shift away
from higher margin software business and a different mix of consulting projects.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $3.0 million, or 88.3%, from $3.4 million
for the three months ended March 31, 1999 to $6.5 million for the same period in
2000. Expressed as a percentage of total revenues, selling, general and
administrative expenses increased, representing 49.1% of total three months
ended March 31, 2000 revenues as compared to 27.1% of total revenues for the
same period in 1999. The inclusion of T3 Media adds about 2 percentage points
($1.4 million) to the amount from last year. The increase related to the TACT
operations is attributable to increased salary expense associated with
e-Services personnel ($0.2 million), expenses associated with the start-up of
the incubator ($0.2 million), expenses associated with internally incubated
products ($0.5 million), increased salary expense for marketing and sales
functions ($0.3 million), increased occupancy costs, including the amortization
of furniture, equipment and leaseholds ($0.5 million), and the amortization of
goodwill associated with acquisitions ($0.1 million). These expenses are
reflective of transitioning to being an end-to-end e-Services provider,
broadening its customer base, and increasing its geographic presence.
9
<PAGE>
Net Income (Loss). As a result of the above factors, the Company had a net
loss of $1.5 million in 2000 compared to net income of $636,000 in 1999.
Liquidity and Capital Resources
Before the Company's initial public offering, its operations and
geographic expansion were funded by cash flow generated from operations,
borrowings under the Company's credit line and borrowings from the principal
shareholder. The Company sold 1,935,000 shares of Common Stock in the Company's
initial public offering, generating net proceeds to the Company of approximately
$21.1 million. The uses of these funds were as follows: a distribution of $2.0
million (the "Distribution") was paid to the sole shareholder of the Company
prior to the initial public offering, $1.9 million was paid to Citibank, N.A. to
repay its line of credit, and $17.2 million was made available to fund current
operations.
The Company has a line of credit of $2.1 million, with $1.5 million
outstanding at March 31, 2000. The Company's principal shareholder guarantees
the line of credit. The line of credit bears interest at a variable rate based
on prime plus 1%. The rate was 10.0% at March 31, 2000. The Company's
subsidiary, T3 Media, has entered into a series of capital lease obligations to
finance its expansion plans, covering leasehold improvements, furniture and
computer-related equipment. The amount outstanding under such leases was
$873,000 at March 31, 2000.
The Company's cash balances were $2.6 million at March 31, 2000, and $5.1
million at December 31, 1999. Net cash used in operating activities in 2000 was
$4.1 and $132,000 in 1999. In accordance with investment guidelines approved by
the Company's Board of Directors, cash balances in excess of those required to
fund operations have been invested in short-term commercial paper with a credit
rating no lower than A1, P1.
The Company's accounts receivable, less allowance for doubtful accounts,
at March 31, 2000 and December 31, 1999 were $12.9 million and $11.2 million
respectively, representing 89 and 84 days of sales outstanding, respectively.
The Company does not anticipate any difficulty in collecting amounts due.
For the three months ended March 31, 2000, the Company had revenues from
two customers which represented 24% of revenues. For the same period in 1999,
the Company had revenues from two customers, which represented 46% of revenues.
Besides these customers, no other customer represented greater than 10% of the
Company's revenues.
Net cash used in investing activities was approximately $823,000 and $1.0
million for the three months ended March 31, 2000 and 1999, respectively. In
each of these periods, this primarily represented additions to property and
equipment, as the Company continued to enhance its computing network and
infrastructure, and a short-term loan to an affiliated company in 2000.
Net cash provided by financing activities includes $1.5 million borrowing
on its credit line and the purchase of 127,142 shares of common stock by a group
of investors totaling $890,000 at March 31, 2000. This investment is part of an
agreement to purchase 392,855 shares of common stock at a purchase price of
$7.00 per share by April 22, 2000 ("first closing date"). The remaining 265,713
shares of common stock were purchased by the first closing date, with the
Company receiving an additional $1.9 million. The purchasers also received a
60-day option to purchase up to an additional 607,143 shares at $7.00 per share
and a two-year option to purchase up to 1,000,000 shares at $13.00 per share.
In management's opinion, cash flows from operations and borrowing capacity
combined with cash on hand will provide adequate flexibility for funding the
Company's working capital obligations and expansion plans.
Growth of E-Commerce Business
Revenues derived from the Company's end-to-end e-Services solutions
totaled to $5.2 million in the first quarter of 2000, compared to $3.2 million
in the fourth quarter of last year.
10
<PAGE>
Impact of Year 2000 in the First Quarter of 2000
In prior periods, TACT discussed the nature of its plans related to Year 2000
compliance. As result of those planning efforts, TACT experienced no significant
disruptions in mission critical information technology and non-information
technology systems and believes those systems successfully responded to the year
2000 date change. TACT will continue to monitor the situation throughout the
year to ensure that any latent year 2000 issues are addressed properly.
Inflation
The Company has not suffered material adverse affects from inflation in
the past. However, a substantial increase in the inflation rate in the future
may adversely affect customers' purchasing decisions, may increase the costs of
borrowing, or may have an adverse impact on the Company's margins and overall
cost structure.
Forward Looking Statements
Statements included in this Management's Discussion and Analysis and
elsewhere in this document that do not relate to present or historical
conditions are "forward-looking statements" within the meaning of that term in
Section 27A of the Securities Act of 1933, as amended, and in Section 21F of the
Securities Exchange Act of 1934, as amended. Additional oral or written
forward-looking statements may be made by the Company from time to time, and
such statements may be included in documents that are filed with the Securities
and Exchange Commission ("SEC"). Such forward-looking statements involve risk
and uncertainties that could cause results or outcomes to differ materially from
those expressed in such forward-looking statements. Forward-looking statements
may include, without limitation, statements made pursuant to the safe harbor
provision of the Private Securities Litigation Reform Act of 1995. Words such as
"believes," "forecasts," "intends," "possible," "expects," "estimates,"
"anticipates," or "plans" and similar expressions are intended to identify
forward-looking statements. The Company cautions readers that results predicted
by forward-looking statements, including, without limitation, those relating to
the Company's future business prospects, revenues, working capital, liquidity,
capital needs, interest costs, and income are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
indicated in the forward-looking statements, due to the following factors, among
other risks and factors identified from time to time in the Company's filings
with the SEC. Among the important factors on which such statements are based are
assumptions concerning the anticipated growth of the information technology
industry, the continued needs of current and prospective customers for the
Company's services, the availability of qualified professional staff, and price
and wage inflation.
11
<PAGE>
Item 3. Quantitative and Qualitative Disclosure of Market Risk
The Company has not entered into market risk sensitive transactions
required to be disclosed under this item.
Part II. Other Information
Item 1. Legal proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
There were no Changes in Securities.
Use of Proceeds From Registered Securities
The effective date of the Company's registration statement on Form SB-2
was August 8, 1997. The Commission file number is 333-29233. Between the
effective date and March 31, 2000, the expenses incurred in connection with the
issuance and distribution of the securities registered were as follows:
<TABLE>
<CAPTION>
As Previously Reported on
Form 10-K Additional Expenses Expenses Incurred to
Direct or Indirect Payments to for the Period Ending Incurred Through Date as of
Others: December 31, 1998 March 31, 2000 March 31, 2000
- -------------------------------- --------------------------- ----------------------- ------------------------
- -------------------------------- --------------------------- ----------------------- ------------------------
<S> <C> <C> <C>
Underwriting discounts and
commissions $1,512,000 $ - $1,512,000
Other expenses 518,300 - 518,300
-------------------------- ---------------------- -----------------------
-------------------------- ---------------------- -----------------------
Total Expenses 2,030,300 - 2,030,300
-------------------------- ---------------------- -----------------------
-------------------------- ---------------------- -----------------------
Net offering proceeds after
total expenses $21,071,000 $ - $21,071,000
========================== ====================== =======================
</TABLE>
Between the effective date and March 31, 2000, net offering proceeds of
$16,032,000 were used for the following purposes:
<TABLE>
<CAPTION>
As Previously Reported on
Form 10-K for the Period Use of Proceeds
Direct or Indirect Ending Changes in Through
Payments Others: December 31, 1999 Use of Proceeds March 31, 2000
- -------------------------------- --------------------------- ---------------------- ----------------------
- -------------------------------- --------------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Repayment of loans to
shareholder $ 1,045,000 $ - $ 1,045,000
Distribution of S
Corporation earnings to
shareholder 2,007,000 - 2,007,000
Repayment of debt 1,940,000 - 1,940,000
Working capital and
general corporate
purposes 11,040,000 - 15,290,000
--------------------------- --------------------- ---------------------
--------------------------- --------------------- ---------------------
Total use of proceeds $ 16,032,000 $ - $20,282,000
=========================== ===================== =====================
</TABLE>
The use of proceeds does not represent a material change in the use of
proceeds described in the prospectus filed with the SEC on August 8, 1997. There
have been no other changes to the information
12
<PAGE>
provided by the Company on Form SR for the period ended April 30, 1997, on Form
10-Q for the period ended September 30, 1997, on Form 10-K for the period ended
December 31, 1997, on Form 10-Q for the periods ended March 31, 1998, June 30,
1998, and September 30, 1998, on Form 10-K for the period ended December 31,
1998, on Form 10-Q for the periods ended March 31, 1999, June 30, 1999, and
September 30, 1999, and on Form 10-K for the period ended December 31, 1999.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation of the Registrant, incorporated by
reference to Exhibit 3.2 to the Registration Statement on Form SB-2 as
previously filed with the Commission on August 6, 1997.
3.3 Amended and Restated By-Laws of the Registrant, incorporated by
reference to Exhibit 3.3 to the Registration Statement on Form SB-2 as
previously filed with the Commission on August 6, 1997.
27 Financial Data Schedule: Information Provided Pursuant to Article 5 of
Regulation S-X.
(b) Reports on Form 8-K
A report on Form 8-K was filed under Item 5 during the quarter for which this
report on 10-Q is filed. The Form 8-K was filed with the SEC on March 23, 2000
and reported the investment on March 20, 2000. A group of investors, which
included Dr. Yossi Vardi, DS Polaris on behalf of certain funds, SFK Group and
Arison Group, purchased an aggregate 392,857 shares of Common Stock at $7.00 per
share for a total of $2.75 million payable pursuant to a 30-day promissory
obligation. The closing price of TACT's Common Stock on March 17, 2000 was
$5.1875 per share. The purchasers also received a 60-day option to purchase up
to an additional 607,143 shares at $7.00 per share and a two-year option to
purchase up to 1,000,000 shares at $13.00 per share, which was not exercised.
The report on Form 8-K is incorporated by reference.
13
<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.
THE A CONSULTING TEAM, INC.
May 22, 2000 By: /s/ Shmuel BenTov
- ------------- -------------------------------------
Date Shmuel BenTov, President
and Chief Executive Officer
May 22, 2000 By: /s/ Frank T Thoelen
- ------------- -------------------------------------
Date Frank T Thoelen, Secretary-Treasurer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,561,820
<SECURITIES> 300,000
<RECEIVABLES> 13,147,343
<ALLOWANCES> 296,025
<INVENTORY> 0
<CURRENT-ASSETS> 18,667,106
<PP&E> 9,599,219
<DEPRECIATION> 2,315,446
<TOTAL-ASSETS> 30,132,176
<CURRENT-LIABILITIES> 7,517,734
<BONDS> 0
0
0
<COMMON> 56,120
<OTHER-SE> 21,899,186
<TOTAL-LIABILITY-AND-EQUITY> 30,132,176
<SALES> 13,150,662
<TOTAL-REVENUES> 12,150,662
<CGS> 9,231,100
<TOTAL-COSTS> 6,452,333
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,333
<INCOME-PRETAX> (2,526,152)
<INCOME-TAX> (1,075,000)
<INCOME-CONTINUING> (1,451,152)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,451,152)
<EPS-BASIC> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
