<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 29, 1998
------------------------------------------------
Date of Report (Date of earliest event reported)
PRT GROUP INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-23315 13-3914972
- ---------------------------- ------------------------ -------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
342 Madison Avenue, 11th Floor, New York, New York 10173
- -------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(212) 922-0800
--------------------------------------------------
Registrant's telephone number, including area code
Not Applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
On January 31, 1998, PRT Group Inc. (the "Company") consummated the
purchase of substantially all of the assets of Advanced Computing
Techniques, Inc. ("ACT"), a Connecticut corporation. The audited
consolidated balance sheets of ACT as of December 31, 1996 and 1997, and
the related audited consolidated statements of operations, stockholders'
equity and cash flows for each of the two years in the period ended
December 31, 1997, are incorporated herein by reference to Exhibit 99.3
hereto.
(b) Pro Forma Condensed Consolidated Balance Sheet and Statement of
Operations
On July 1, 1997, the Company consummated the purchase of all of the issued
and outstanding capital stock of Computer Management Resources, Inc.
("CMR") and on January 31, 1998, the Company consummated the purchase of
substantially all the assets of Advanced Computer Techniques, Inc.
("ACT"). The unaudited pro forma condensed consolidated balance sheet at
December 31, 1997 and the condensed consolidated statement of operations
for the year ended December 31, 1997, gives effect to the CMR and ACT
acquisitions as if they occurred as of January 1, 1997.
(c) Exhibits.
99.3 The audited financial statements of Advanced Computer
Techniques, Inc. as of December 31, 1997 and 1996 and the
related audited statements of operations, stockholders' equity
and cash flows for the years ended December 31, 1997 and 1996,
with report of independent auditors, thereon.
99.4 The unaudited pro-forma condensed consolidated balance sheet
as of December 31, 1997 and statements of operations for the
year ended December 31, 1997.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 30, 1998
PRT GROUP INC.
By: /s/ LOWELL W. ROBINSON
-------------------------------------
Name: Lowell W. Robinson
Title: Chief Financial Officer
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
99.3 The audited financial statements of Advanced Computer
Techniques, Inc. for the years ended December 31, 1997 and
1996, with report of independent auditors, thereon.
99.4 The unaudited pro-forma condensed consolidated balance sheet
and statements of operations for the year ended December 31,
1997.
</TABLE>
<PAGE> 1
EXHIBIT 99.3
Advanced Computing Techniques, Inc.
Financial Statements
Years ended December 31, 1997 and 1996
with Report of Independent Auditors
Contents
Report of Independent Auditors............................................... 1
Balance Sheets............................................................... 2
Statements of Operations..................................................... 3
Statements of Stockholders' Equity........................................... 4
Statements of Cash Flows..................................................... 5
Notes to Financial Statements................................................ 6
<PAGE> 2
Report of Independent Auditors
Board of Directors and Stockholders
Advanced Computing Techniques, Inc.
We have audited the accompanying balance sheets of Advanced Computing
Techniques, Inc. as of December 31, 1997 and 1996, and the related statements of
operations, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advanced Computing Techniques,
Inc. at December 31, 1997 and 1996, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
March 2, 1998
1
<PAGE> 3
Advanced Computing Techniques, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 31
1997 1996
------------------------
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 109,202 $ 19,943
Accounts receivable 2,205,728 1,169,692
Prepaid expenses and other current assets 14,199 2,950
------------------------
Total current assets 2,329,129 1,192,585
Fixed assets, net 287,482 93,131
Other assets 14,646 9,518
------------------------
Total assets $2,631,257 $1,295,234
========================
Liabilities and stockholders' equity
Current liabilities:
Accrued compensation $ 345,499 $ 185,164
Accounts payable and other accrued expenses 355,708 278,022
Borrowings under line of credit 323,705 115,521
Due to stockholders 22,500 22,500
Current portion of long-term debt 34,000 --
Deferred revenue 291,143 57,678
------------------------
Total current liabilities 1,372,555 658,885
Long-term debt, net of current portion 127,500 --
------------------------
Total liabilities 1,500,055 658,885
Commitments
Stockholders' equity:
Common stock, no par value; authorized--5,000
shares;
issued and outstanding--300 shares 1,000 1,000
Retained earnings 1,130,202 635,349
------------------------
Total stockholders' equity 1,131,202 636,349
------------------------
Total liabilities and stockholders' equity $2,631,257 $1,295,234
========================
</TABLE>
See accompanying notes.
2
<PAGE> 4
Advanced Computing Techniques, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1997 1996
----------------------------
<S> <C> <C>
Revenues $ 13,750,881 $ 8,295,895
Cost of revenues 9,222,374 5,936,759
----------------------------
Gross profit 4,528,507 2,359,136
Selling, general and administrative expenses 4,018,096 2,454,988
----------------------------
Income (loss) from operations 510,411 (95,852)
Interest expense (11,730) (9,002)
----------------------------
Income (loss) before income taxes 498,681 (104,854)
Income tax expense (benefit) 3,828 (2,340)
----------------------------
Net income (loss) $ 494,853 $ (102,514)
============================
</TABLE>
See accompanying notes.
3
<PAGE> 5
Advanced Computing Techniques, Inc.
Statements of Stockholders' Equity
Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock
--------------- Retained
Shares Amount Earnings Total
--------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 300 $1,000 $ 737,863 $ 738,863
Net loss -- -- (102,514) (102,514)
-------------------------------------------
Balance at December 31, 1996 300 1,000 635,349 636,349
Net income -- -- 494,853 494,853
-------------------------------------------
Balance at December 31, 1997 300 $1,000 $ 1,130,202 $1,131,202
===========================================
</TABLE>
See accompanying notes.
4
<PAGE> 6
Advanced Computing Techniques, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1997 1996
--------------------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 494,853 $ (102,514)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 47,970 27,977
Deferred income taxes -- (3,883)
Change in operating assets and liabilities:
Accounts receivable (1,036,036) (244,573)
Prepaid expenses and other current assets (11,249) (1,700)
Other assets (5,128) (21)
Accrued compensation 160,335 66,756
Accounts payable and other accrued
expenses 77,686 137,570
Deferred revenue 233,465 57,678
--------------------------
Net cash used in operating activities (38,104) (62,710)
--------------------------
Cash flows from investing activities
Purchases of fixed assets (242,321) (50,929)
--------------------------
Net cash used in investing activities (242,321) (50,929)
--------------------------
Cash flows from financing activities
Proceeds from long-term debt 170,000 --
Repayment of long-term debt (8,500) --
Borrowings under line of credit 208,184 115,521
--------------------------
Net cash provided by financing activities 369,684 115,521
--------------------------
Net increase in cash and cash equivalents 89,259 1,882
Cash and cash equivalents--beginning of year 19,943 18,061
--------------------------
Cash and cash equivalents--end of year $ 109,202 $ 19,943
==========================
Supplemental disclosure of cash flow
information
Interest paid $ 12,000 $ 9,000
==========================
Income taxes paid $ 5,000 $ --
==========================
</TABLE>
See accompanying notes.
5
<PAGE> 7
Advanced Computing Techniques, Inc.
Notes to Financial Statements
December 31, 1997
1. Description of Business
Advanced Computing Techniques, Inc. ("ACT" or the "Company") was incorporated in
the State of Connecticut in December 1991. ACT is a provider of information
technology services.
2. Summary of Significant Accounting Policies
Revenue Recognition
Revenue from time and materials contracts are recognized during the period in
which the related services are provided. Revenue from fixed price contracts are
recognized using the percentage-of-completion method. Cash payments received but
unearned as of December 31, 1997 and 1996 are recorded as deferred revenue.
Cash and Equivalents
ACT considers all highly liquid short-term investments purchased with a maturity
of three months or less to be cash equivalents. At December 31, 1997, ACT has
substantially all of its cash in one financial institution.
Fixed Assets
Fixed assets are stated at cost and depreciation on furniture, fixtures and
equipment is calculated on the straight-line method over the estimated useful
lives of the assets ranging from three to seven years. Equipment held under
capital leases and leasehold improvements are amortized using the straight-line
method over the shorter of the lease term or estimated useful life of the asset.
Income Taxes
The Company, with the consent of its stockholders, has elected to be taxed as an
S corporation pursuant to the Internal Revenue Code and certain state tax laws.
As such, the Company has not been subject to federal and certain state income
taxes and the stockholders have included the Company's taxable income or loss in
their individual income tax returns. Income taxes in 1997 and 1996 primarily
represent minimum state and local income taxes.
6
<PAGE> 8
Advanced Computing Techniques, Inc.
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash and equivalents and accounts receivable.
Concentrations of credit risk with respect to accounts receivables are limited
due to the creditworthiness of customers comprising the Company's customer base.
Management regularly monitors the creditworthiness of its customers and believes
that it has adequately provided for any exposure to potential credit losses.
3. Fixed Assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
December 31
1997 1996
-------------------------
<S> <C> <C>
Furniture and fixtures $103,518 $ 39,896
Equipment 289,389 117,681
Leasehold improvements 6,991 --
-------------------------
399,898 157,577
Less accumulated depreciation
and amortization 112,416 64,446
-------------------------
$287,482 $ 93,131
=========================
</TABLE>
7
<PAGE> 9
Advanced Computing Techniques, Inc.
Notes to Financial Statements (continued)
4. Borrowings Under Line of Credit
During 1997, the Company obtained a $1,000,000 credit facility with a bank,
expiring in August 1998 and bearing interest at the bank's prime rate (8.5% at
December 31, 1997) plus 1.0%. Borrowings on the credit facility are based on 80%
of eligible U.S. accounts receivable, as defined, and are collateralized by a
security interest in substantially all of the Company's assets. The credit
facility contains financial covenants relating to ACT's minimum tangible net
worth and working capital. As of December 31, 1997, there was $323,705
outstanding under the line.
5. Long-Term Debt
During 1997, the Company obtained a $170,000 term loan from a bank. The term
loan requires monthly principal payments of $2,833, plus interest, through
August 2002 on the outstanding balance at a rate of 9% per annum. The term loan
is collateralized by substantially all of the Company's assets.
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1998 $ 34,000
1999 34,000
2000 34,000
2001 34,000
2002 25,500
---------------
$161,500
===============
</TABLE>
6. Commitments
Future minimum lease payments relating to office space under noncancelable
operating leases as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $186,000
1999 189,000
2000 191,000
2001 48,000
---------------
$614,000
===============
</TABLE>
Rent expense was approximately $217,000 and $123,000 for the years ended
December 31, 1997 and 1996, respectively.
8
<PAGE> 10
Advanced Computing Techniques, Inc.
Notes to Financial Statements (continued)
7. Pension Plan
The Company maintains a salary reduction profit sharing plan under the
provisions of Section 401(k) of the Internal Revenue Code. The plan covers
substantially all full-time employees. Employees may elect to defer up to a
maximum of 15% of their pay, not to exceed $9,500 for 1997 or 1996. The employer
is obligated to make a matching contribution for the employee of 1% of the first
4% of the employees' annual contribution. Employer contributions to the Plan for
1997 and 1996 were $30,042 and $23,882, respectively.
8. Profit Sharing Plan
The Company has a profit sharing plan that covers substantially all full-time
employees. Contributions to the plan are discretionary and based on an
integrated formula, as defined. For 1997 and 1996, contributions to the Plan
charged to operations were $100,000 and $5,000, respectively.
9. Stockholders Agreements
All the stockholders are also partners in a related partnership that owns life
insurance policies on each stockholder. The agreement obligates the partnership,
upon the death or retirement of any stockholder, to purchase the deceased or
retired stockholder' stock in the Company. The purchase price is established by
a formula and is partially insured. Furthermore, the shareholders of the Company
entered into agreements in December 1997 providing for certain deferred
compensation benefits upon termination of employment, as defined.
10. Subsequent Event
Effective January 31, 1998, PRT Group Inc. purchased substantially all of the
assets of the Company for approximately $12.8 million, subject to certain
purchase price adjustments, as defined. On such date, ACT ceased to operate as a
separate entity.
9
<PAGE> 1
EXHIBIT 99.4
PRT GROUP INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma condensed consolidated financial
statements of PRT Group Inc. and Subsidiaries (the "Company") give effect to the
acquisition on July 1, 1997 of all of the issued and outstanding capital stock
of Computer Management Resources, Inc. ("CMR") for cash of $2,864,000, a
$2,000,000 promissory note and 119,181 shares of the Company's Common Stock
valued at $12 per share and the acquisition of substantially all the assets of
Advanced Computer Technologies ("ACT") for approximately $13.1 million in cash
on January 31, 1998. The pro forma information is based on the historical
financial statements of the Company, CMR and ACT giving effect to the
aforementioned acquisitions under the purchase method of accounting and the
assumptions and adjustments in the accompanying notes to the pro forma condensed
consolidated financial statements.
The allocation of the ACT purchase price has not been finally determined.
Accordingly, the accounts reflected in the pro forma condensed consolidated
financial statements may differ from the amounts that would have been determined
if the final purchase price allocation had been known.
The unaudited pro forma condensed consolidated statements of operations
for the year ended December 31, 1997 give effect to the CMR and ACT acquisitions
as if they had occurred as of January 1, 1997. The unaudited pro forma condensed
consolidated balance sheets as of December 31, 1997 gives effect to the
acquisition of ACT as if it had been consummated on December 31, 1997. The
Company's historical balance sheet includes the acquisition of CMR.
The pro forma condensed consolidated financial statements have been
prepared by the Company's management. The pro forma condensed consolidated
financial statements may not be indicative of the results that actually would
have occurred if the acquisitions had been consummated on the dates indicated or
which may be achieved in the future. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes of ACT included herein and the consolidated
financial statements and notes of PRT Group Inc. included in the Company's
Annual Report on Form 10K for the year ended December 31, 1997.
<PAGE> 2
PRT GROUP INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Year Ended December 31, 1997
($ In thousands)
<TABLE>
<CAPTION>
Company CMR ACT
Year Ended Six Months Ended Year Ended
Dec 31, 1997 June 30, 1997 Adjustments Proforma Dec 31, 199 Adjustments Proforma
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 59,816 4,265 64,081 13,751 77,832
Cost of Revenues 40,898 3,185 0 44,083 9,222 53,305
------------------------------------------------------------------------------------------
Gross Profit 18,918 1,080 0 19,998 4,529 24,527
Selling, general and administrative
expenses 19,332 1,350 153 (a) 20,835 4,018 596 (a) 25,449
------------------------------------------------------------------------------------------
Income (loss) from operations (414) (270) (153) (837) 511 (596) (922)
Other income (expenses):
Interest Expense (577) (4) (97)(b) (678) (12) (690)
Interest Income 613 3 0 616 616
------------------------------------------------------------------------------------------
Income (loss) before income taxes (378) (271) (250) (899) 499 (596) (996)
Income tax expense (benefit) 175 (110) (149)(c) (84) 4 (49)(c) (129)
------------------------------------------------------------------------------------------
Net Income (loss) (553) (161) (101) (815) 495 (547) (867)
==========================================================================================
Basic net loss per share (0.04) (0.06)
========== ==========
Weighted Average number
of shares used in
computing basic net
loss per share 14,728,087 14,728,087
========== ==========
</TABLE>
<PAGE> 3
PRT GROUP INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1997
($ In thousands)
<TABLE>
<CAPTION>
Assets Company ACT Adjustments Pro-forma
----------------------------------------------
<S> <C> <C> <C> <C>
Current assets
Cash and equivalents 29,499 109 (13,058) 16,550
Marketable debt securities 14,622 - 14,622
Accounts receivable, net 14,493 2,206 16,699
Deferred income taxes 11 - 11
Prepaid expenses and other current assets 1,604 14 1,618
----------------------------------------------
Total current assets 60,229 2,329 (13,058) 49,500
Fixed assets, net 8,738 287 9,025
Goodwill, net 6,615 - 11,927 18,542
Other assets 332 15 347
----------------------------------------------
Total assets 75,914 2,631 (1,131) 77,414
==============================================
Current liabilities
Borrowings under line of credit - 324 324
Current portion of long term debt - 34 34
Due to stockholders - 22 22
Accrued compensation 3,479 345 3,824
Accounts payable and other accrued expenses 4,411 356 4,767
Current portion of capital leases obligations 400 - 400
Deferred revenue 753 291 1,044
----------------------------------------------
Total current liabilities 9,043 1,372 - 10,415
Note payable 2,000 - 2,000
Long-term debt, net of current portion - 128 128
Deferred income taxes 44 - 44
Capital lease obligations, net of current portion 738 - 738
----------------------------------------------
11,825 1,500 - 13,325
Stockholders' equity
Common stock 18 1 (1) 18
Additional paid in capital 86,324 - - 86,324
Retained earnings (deficit) (21,853) 1,130 (1,130) (21,853)
Treasury stock (400) - - (400)
----------------------------------------------
Total stockholders' equity 64,089 1,131 (1,131) 64,089
Total liabilities and stockholders' equity 75,914 2,631 (1,131) 77,414
==============================================
</TABLE>
<PAGE> 4
PRT GROUP INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
For purposes of determining the pro forma effect of the acquisitions on
the Company's pro forma condensed consolidated statements of operations for the
year ended December 31, 1997 and the pro forma condensed consolidated balance
sheet as of December 31, 1997, the following pro forma adjustments have been
made (in thousands):
<TABLE>
<CAPTION>
Year Ended
Dec. 31, 1997
-------------
<S> <C>
(a) Increase in amortization from the increase in
goodwill amortized on a straight-line basis
over twenty years:
CMR $ 153
===
ACT $ 596
===
(b) Increase in interest expense from issuance of
$2,000,000 promissory note
CMR $ 97
==
(c) Adjustment of tax provision:
Adjustment to historical tax provision
(benefit) due to adjustments (a) and (b):
CMR $ (149)
=====
ACT $ (49)
====
(d) Cash paid for acquisition $13,058
ACT net assets acquired 1,131
-----
Goodwill $11,927
=======
</TABLE>
The historical net income per share is based on the weighted average
number of common shares outstanding during the respective periods. The pro forma
net income per share gives effect to the issuance of 119,181 shares of the
Company's Common Stock as of January 1, 1997 in connection with the acquisition
of CMR.
