<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
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: 000-23889
-------------------------------
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 76-0553110
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10375 RICHMOND AVENUE, SUITE 1620
HOUSTON, TEXAS 77042
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 361-2500
-------------------------------
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 preceeding 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 [ ].
The number of shares of Common Stock of the Registrant, par value $.001
per share, outstanding at September 30, 1998, was 7,746,299. The number of
shares of Restricted Common Stock of the Registrant, par value $.001 per share,
outstanding at September 30, 1998, was 242,760.
* The Registrant became subject to the reporting requirements of Section 13
of the Securities Exchange Act of 1934 on April 16, 1998.
================================================================================
<PAGE> 2
ITEM 1. FINANCIAL STATEMENTS
GENERAL INFORMATION - The December 31, 1997 financial statements of BrightStar
Information Technology Group, Inc. (the "Company" or "BrightStar") are the
historical financial statements of Brian R. Blackmarr and Associates, Inc.
("Blackmarr"), which became a wholly owned subsidiary of BrightStar in April
1998, and has been identified as the "accounting acquirer" for BrightStar's
financial reporting purposes in connection with the purchase acquisitions
described in Notes 1 and 2 to the following financial statements. The September
30, 1998 financial statements are the combined results of Brightstar after
giving effect to the acquisition of Founding Companies; prior to April 1998
financial information versus financial performance is for Blackmarr only.
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
ASSETS 1997 1998
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,994 $ 6,485,383
Trade accounts receivable, net of allowance for doubtful accounts
of $451,534 and $673,448, respectively 4,202,180 22,123,957
Accounts receivable - employees 3,355 67,109
Income tax refund receivable 37,515 --
Unbilled revenue 652,711 2,646,347
Deferred tax asset 161,564 161,564
Prepaid expenses and other current assets -- 1,624,857
------------ ------------
Total current assets 5,060,319 33,109,217
PROPERTY AND EQUIPMENT - Net 276,753 3,506,730
GOODWILL -- 58,994,583
DEFERRED TAX ASSET 31,541 --
OTHER ASSETS 56,759 1,005,989
------------ ------------
TOTAL $ 5,425,372 $ 96,616,519
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 423,143 $ 4,625,212
Line of credit 847,764 --
Current maturities of notes payable 213,185 199,908
Current maturities of capital lease obligations 64,322 416,154
Accrued salaries and other accrued expenses 2,610,929 9,960,106
Income taxes payable -- 1,314,191
Deferred revenue 621,329 1,907,675
------------ ------------
Total current liabilities 4,780,672 18,423,246
COMMITMENTS AND CONTINGENCIES
Long-term notes payable, net -- 61,414
Long-term capital leases, net -- 170,868
Long-term deferred taxes -- 697,683
Other non-current liabilities -- 125,157
STOCKHOLDERS' EQUITY:
Common stock, no par value - 13,068 no par value shares issued and outstanding
in 1997; and 7,955,952, .001 par value, shares issued and outstanding in 1998 318,068 7,956
Stock warrants -- 450,000
Additional paid-in capital -- 83,016,905
Common stock payable -- 5,299,819
Deferred compensation -- (4,423,460)
Retained earnings 326,632 (7,204,019)
Cumulative translation adjustment -- (9,050)
------------ ------------
Total stockholders' equity 644,700 77,138,151
------------ ------------
TOTAL $ 5,425,372 $ 96,616,519
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
-2-
<PAGE> 3
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1997 1998 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 10,091,242 $ 50,403,609 $ 3,693,171 $ 26,737,895
COST OF REVENUES 7,966,517 36,375,879 3,061,609 19,504,780
------------ ------------ ------------ ------------
Gross profit 2,124,725 14,027,730 631,562 7,233,115
OPERATING EXPENSES:
Selling, general and administrative 1,209,862 9,933,840 708,460 5,336,979
Stock compensation expense 305,000 3,159,614 -- 1,895,718
In process research & development -- 3,000,000 -- --
Depreciation and amortization 109,868 1,079,832 42,901 643,597
------------ ------------ ------------ ------------
Total operating expenses 1,624,730 17,173,286 751,361 7,876,294
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 499,995 (3,145,556) (119,799) (643,179)
OTHER INCOME NET 26,105 229,291 1,500 94,572
INTEREST EXPENSE 76,193 68,467 25,531 6,726
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 449,907 (2,984,732) (143,830) (555,333)
INCOME TAX EXPENSE (Benefit) 6,466 1,255,896 (46,461) 563,427
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 443,441 $ (4,240,628) $ (97,369) $ (1,118,760)
============ ============ ============ ============
Shares outstanding (Note 4):
Basic 933,086 5,552,696 1,012,306 8,442,305
============ ============ ============ ============
Diluted 933,086 5,572,954 1,012,306 8,456,920
============ ============ ============ ============
Earnings (loss) per share (Note 4):
Basic $ 0.48 $ (0.76) $ (0.10) $ (0.13)
============ ============ ============ ============
Diluted $ 0.48 $ (0.76) $ (0.10) $ (0.13)
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statement
-3-
<PAGE> 4
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
ended September 30, Ended September 30,
1998 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss (1,118,760) (4,240,628)
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:
Cumulative translation adjustment (6,423) (9,050)
Depreciation and amortization 643,597 1,079,832
Additions (reductions) to allowance for doubtful accounts 245,699 446,546
In process research and development expense -- 3,000,000
Compensation expense on issuance of common stock 1,895,718 3,159,614
Cash provided by (used in) operating working capital:
Trade accounts receivable (3,004,041) (6,144,259)
Accounts receivable - employee (43,494) (40,139)
Income tax refund receivable -- 37,515
Unbilled revenue (1,258,454) 101,889
Prepaid and other assets (1,203,177) (824,943)
Accounts payable (383,984) 183,361
Accrued salaries and other accrued expenses 434,167 (5,311,504)
Income taxes payable 242,293 1,279,101
------------ ------------
Net cash used in operating activities (3,556,859) (7,282,665)
------------ ------------
INVESTING ACTIVITIES:
Cash paid to acquire founding companies -- (41,890,581)
Cash paid for acquisitions (1,157,183) (1,157,183)
Additions of property and equipment (468,176) (709,874)
------------ ------------
Net cash used in financing activities (1,625,359) (43,757,638)
------------ ------------
FINANCING ACTIVITIES:
Borrowings under (payments on) line of credit 0 (175,000)
Proceeds from (payments on) capital lease obligations (82,535) (181,545)
Payments on short-term debt and notes payable 133,670 (1,210,638)
Net proceeds from issuance of common stock -- 59,089,875
------------ ------------
Net cash provided by financing activities 51,135 57,522,692
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (5,131,083) 6,482,389
CASH AND CASH EQUIVALENTS:
Beginning of period 11,616,466 2,994
------------ ------------
End of period $ 6,485,383 $ 6,485,383
============ ============
SUPPLEMENTAL INFORMATION:
Interest paid $ 20,587 $ 82,328
============ ============
Property and equipment financed through capital leases -- $ 253,888
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
-4-
<PAGE> 5
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
BrightStar Information Technology Group, Inc. (the "Company" or
"BrightStar") was formed to create a international provider of information
technology consulting services. BrightStar has conducted no operations
prior to April 16, 1998, and acquired the Founding Companies concurrently
with and as a condition to the closing of its initial public offering on
April 16, 1998.
Concurrent with and as a condition to the closing of the offering,
BrightStar acquired all of the outstanding capital stock or substantially
all the net assets of Brian R. Blackmarr and Associates, Inc.
("Blackmarr"), Integrated Controls, Inc., Mindworks Professionals
Education Group, Inc., Software Innovators, Inc., Zelo Group, Inc.,
Software Consulting Services America, LLC and SCS Unit Trust (the
"Founding Companies"). The acquisitions will be accounted for using the
purchase method of accounting, with Blackmarr being treated as the
accounting acquirer, in accordance with Staff Accounting Bulletin No. 97
("SAB 97").
The accompanying historical condensed consolidated financial statements
include only the historical financial information for Blackmarr, the
accounting acquirer, prior to the IPO, which elected to change its fiscal
year-end from September 30 to December 31 and the "Founding Companies"
from May 1, 1998 through September 30, 1998. These financial statements
have not been audited. In the opinion of the Company's management, the
financial statements reflect all adjustments necessary to present fairly
the results of operations for the three and nine month periods ended
September 30, 1998 and 1997, the Company's financial position at December
31, 1997 and September 30, 1998, and the cash flows for the three and nine
month periods ended September 30, 1998. These adjustments are of a normal
recurring nature.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted from the interim financial
statements presented in the Quarterly Report on Form 10-Q. Therefore,
these financial statements should be read in conjunction with the
Company's registration statement on Form S-1.
The operating results of the Company for the three and nine month period
ended September 30, 1998, are not necessarily indicative of the results
that may be expected for the Company for the entire year.
2. ACQUISITION OF FOUNDING COMPANIES
The following unaudited pro forma information gives effect to (i) the
acquisitions (the "Acquisitions") by BrightStar of the outstanding capital
stock or substantially all the net assets of the Founding Companies and
(ii) a share exchange with BIT Investors, LLC ("BITI") and senior
management of BrightStar for all outstanding common stock of BIT Group
Services, Inc. ("BITG") and (iii) the closing of BrightStar's initial
public offering and the application of the net proceeds therefrom. The
unaudited pro forma information listed below gives effect to the
acquisitions, the share exchange and the offering as if they had occurred
on January 1, 1998, and the acquisitions completed during the quarter as
if they had occurred at the beginning of the period presented.
-5-
<PAGE> 6
The Company believes the combination of the Founding Companies and other
acquisitions will provide opportunities to improve operating margins and
increase profitability, including the consolidation of certain duplicative
administrative functions. The pro forma financial information herein
reflects neither expected savings nor margin improvements but does reflect
management's estimate of certain incremental corporate general and
administrative costs.
On August 31, 1998 the Company completed the acquisition of Total Business
Quality Associates, Inc. (TBQ), a provider of SAP consulting and
implementing services.
Effective September 30, 1998 the Company completed the acquisition of
Prosap Australia Pty. LTD (Prosap). Prosap is a SAP certified National
Implementation Partner located in Sydney, Australia.
During the quarter the Company entered into a joint venture with ST
Computer Systems & Services Limited located in Singapore. The joint
venture will provide consulting and implementation services to clients in
that region.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that management deems appropriate, but
which may be revised as additional information becomes available. The pro
forma financial information does not purport to represent what the
Company's results of operations would actually have been if such
transactions had in fact occurred on the dates assumed and is not
necessarily representative of the Company's financial position or results
of operations for any future period. Since the acquired companies were not
under common control or management, historical combined pro forma results
may not be comparable to, or indicative of, future performance.
<TABLE>
<CAPTION>
THREE MONTH PERIOD
ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT
PRO FORMA PER SHARE
--------------------------------------------------------------------
DATA)
<S> <C>
Revenues $29,601
Net income $ 1,157
Net income per share - diluted $ 0.14
</TABLE>
The computation of pro forma net income per share of common stock
presented above is based on 8,456,320 fully diluted shares of common stock
outstanding as of September 30, 1998.
-6-
<PAGE> 7
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTH PERIOD
ENDED SEPTEMBER 30,
1998
-----------
<S> <C>
REVENUES $29,601,320
COST OF REVENUES 21,416,869
Gross profit 8,184,451
OPERATING EXPENSES:
Selling, general and administrative 5,567,483
Stock compensation expense --
In process research & development --
Depreciation and amortization 707,227
-----------
Total operating expenses 6,274,710
-----------
INCOME FROM OPERATIONS 1,909,741
OTHER INCOME 81,647
INTEREST EXPENSE --
-----------
INCOME (LOSS) BEFORE INCOME TAXES 1,991,388
INCOME TAX EXPENSE 834,585
-----------
NET INCOME (LOSS) $ 1,156,803
===========
Shares outstanding:
Basic 8,442,035
Diluted 8,456,320
Earnings per share
Basic $ 0.14
Diluted $ 0.14
</TABLE>
-7-
<PAGE> 8
3. COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income," became effective as of the
first quarter of 1998. This statement requires companies to report and
display comprehensive income and its components (revenues, expenses, gains
and losses). Comprehensive income includes all changes in equity during a
period except those resulting from investment by owners and distributions
to owners. For the Company, comprehensive income was $(1,125,184) and
$(4,249,879) for the three and nine months ended in 1998, respectively,
due to the effect of the cumulative foreign currency translation
adjustment, and is the same as net income reported in the 1997 periods.
4. EARNINGS PER SHARE
Earnings per share is based on the weighted average number of common stock
and common stock equivalents outstanding during each period. The weighted
average shares used to calculate earnings per share on the historical
statement of operations has been determined by converting the number of
outstanding shares of Blackmarr during the periods presented, based upon
the ratio of 77 to 1, which was the ratio received as a result of the
offering.
5. CREDIT FACILITY
In connection with Brightstar's initial public offering of common stock,
Banque Paribas issued a commitment to provide a credit facility for
Brightstar in April 1998. The commitment was renewed on August 14, 1998
and remained effective through September 30, 1998. The Company has secured
an interim credit facility from Banque Paribas (Paribas) in the amount of
$10.0 million as Paribas continues its syndication efforts to deliver a
$30.0 million facility. Upon successful completion of the Paribas
syndication, a $30.0 million credit facility will be available to
Brightstar. Under the terms of the Banque Paribas agreement, the Credit
Facility will be available to support working capital needs, to issue
letters of credit, to refinance Founding Company indebtedness, if
necessary, and for general corporate purposes; and the Credit Facility
will be secured by liens on substantially all of the Company's assets
(including accounts receivable) and a pledge of the Company's equity
interest in each of its subsidiaries. The Credit Facility will require the
Company to comply with various loan covenants, including (i) maintenance
of certain financial ratios, (ii) restrictions on additional indebtedness
and (iii) restrictions on liens, guarantees and payments of dividends. The
Company anticipates that the Credit Facility will be available for
advances and repayments through November 1999, subject to extension upon
successful syndication of the Credit Facility, and that all outstanding
principal and accrued and unpaid interest under the Credit Facility will
be due on such date. The Credit Facility contains provisions requiring
mandatory prepayment of outstanding borrowings from the issuance of debt
or equity securities for cash, excluding certain equity issued in
connection with future acquisitions, and cash realized in connection with
permitted asset sales outside of the ordinary course of business.
6. SUBSEQUENT EVENTS
The Company is undertaking an effort to streamline its operations and more
closely integrate its individual subsidiaries and business lines. As a
result, the Company anticipates taking a one-time restructuring charge in
the fourth quarter estimated to be between $2 million and $3 million. The
Company believes these actions will provide for a more focused management
structure and provide incremental operating efficiencies over the long
term.
-8-
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION - BrightStar was organized in July 1997 and completed its
public offering April 16, 1998. BrightStar was formed to provide
enterprise-wide business and technology solutions to Fortune 1000
companies and other large organizations. BrightStar provides these
services to a diverse client base including but not limited to retail,
industrial, petrochemical, manufacturing and distribution.
The Company's services and products include ERP software implementation,
consulting, software application development, systems integration and
outsourcing, training as well as upgrades and support related to software
products. The services are generally performed at clients' locations and
at the Company's facilities. In providing ERP implementation and other IT
services, the Company may assume responsibility for project management and
bill the client on a time and material or fixed fee basis.
Revenue is recognized as services are rendered. The timing of revenue is
difficult to forecast because the Company's sales cycle for certain of its
services can be relatively long and is subject to a number of
uncertainties, including clients' budgetary constraints, the timing of
clients' budget cycles, clients' internal approval processes and general
economic conditions. In addition, as is customary in the industry, the
Company's engagements, generally, are terminable without a client penalty.
The Companies' revenue and results of operations may fluctuate
significantly from quarter to quarter or year to year because of a number
of factors, including, but not limited to, the rate of hiring and the
productivity of revenue generating personnel; the availability of
qualified IT professionals; the significance of client engagements
commenced and completed during a quarter; the number of business days in
the quarter; changes in the relative mix of the Company's services;
changes in the pricing of the Company's services; the timing and the rate
of entrance into new geographic or IT specialty markets; departures or
temporary absences of key revenue-generating personnel; the structure and
timing of acquisitions; changes in the demand for IT services; and general
economic factors.
Cost of revenue primarily consists of salaries (including non-billable and
training time) and benefits for consultants. The Company generally strives
to maintain its gross profit margins by offsetting increases in salaries
and benefits with increases in billing rates.
Selling, general and administrative expenses primarily consist of costs
associated with (i) corporate overhead, (ii) sales and account management,
(iii) telecommunications, (iv) human resources, (v) recruiting and
training and (vi) other administrative expenditures.
In July of 1996, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin No. 97 ("SAB 97") relating to business
combinations immediately prior to an initial public offering. SAB 97
requires that these combinations be accounted for using the purchase
method of accounting and requires that one of the companies be designated
as the accounting acquirer. Accordingly, for financial statement purposes,
BR Blackmarr and Associates, Inc. ("BRBA") has been designated as the
acquiring company because its current shareholders, in the aggregate,
acquired more common stock than the former shareholders of any of the
other Founding Companies in conjunction with the acquisitions. The excess
of the aggregate purchase price paid for the Founding Companies other that
BRBA over the fair value of the net assets to be acquired by BrightStar is
recorded as goodwill.
-9-
<PAGE> 10
RESULTS OF OPERATIONS
Financial results for the quarter and nine months ended September 30, 1998
contain the operations of the seven Founding Companies from the date of
the IPO, and other acquisitions from their dates of acquisition. Financial
results for the period and nine months ended September 30, 1997 contain
only the operations of Blackmarr the accounting acquirer, for the period
prior to the IPO. Consequently, the primary reason for variances between
periods is the combined operations of the Founding Companies from their
dates of acquisition.
RESULTS OF OPERATIONS
Specific events which occurred during 1998 are as follows:
REVENUE - increased primarily due to new ERP contracts and additional
custom application development projects. Revenues from Training and
Education remained relatively constant during the period.
COST OF REVENUES - increased in proportion to the additional ERP and
custom application development revenue.
SELLING, GENERAL AND ADMINISTRATIVE - remained relatively constant during
the period. The Company has a sufficient amount of administrative
personnel to support its current operations. The Company continues to
invest in its infrastructure and internal reporting systems in order to
support its growth .
STOCK COMPENSATION EXPENSE - is a non-cash expense item related to the
issuance of stock to certain Founders as a part of the IPO. This amount is
being amortized over a 12 month period.
IN PROCESS RESEARCH AND DEVELOPMENT - is a one-time non-cash expense
related to the research and development costs attributable to the Founding
companies at the time of the IPO.
DEPRECIATION AND AMORTIZATION - remained relatively constant during the
period.
LIQUIDITY AND CAPITAL RESOURCES
BrightStar is a company that conducts all of its operations through its
subsidiaries. Accordingly, the Company's principal sources of liquidity
are the cash flows of its subsidiaries, the cash available from the
Credit Facility and the unallocated net proceeds from the Company's
public offering.
As of September 30, 1998, and as a result of the successful completion of
a public offering on April 16, 1998, BrightStar had $ 6.4 million in cash
and cash equivalents and no borrowings outstanding from commercial lenders
other than $.7 million of capital lease obligations. Subsequent to
September 30, 1998 the Company was obligated to pay $4.1 million in cash
and issued notes payable of approximately $4.7 million in connection with
the acquisition of Prosap.
-10-
<PAGE> 11
The Company expects to install or upgrade its accounting and management
information systems and to install an internal network and communications
system to facilitate exchange of information among the Founding Companies.
Management presently anticipates that expenditures for these items will
total approximately $500,000 over the next year; however, no assurance can
be made with respect to the actual timing and amount of such expenditures.
The Company is undertaking an effort to streamline its operations and more
closely integrate its individual subsidiaries and business lines. As a
result, the Company anticipates taking a one-time restructuring charge in
the fourth quarter estimated to be between $2 million and $3 million. The
Company believes these actions will provide for a more focused management
structure and provide incremental operating efficiencies over the long
term.
The Company intends to continue to pursue acquisition opportunities. The
timing, size or success of any acquisition effort and the associated
potential capital commitments are unpredictable. The Company expects to
fund future acquisitions through the issuance of additional equity, as
well as through a combination of working capital, cash flow from
operations and borrowings, including borrowings under the Credit Facility.
The Company believes that cash flow from operations, borrowings under the
Credit Facility and the unallocated net proceeds of the offering will be
sufficient to fund its requirements for the foreseeable future.
INFLATION - Due to the relatively low levels of inflation experienced in
the last three years, inflation did not have a significant effect on the
results of operations of any of the Founding Companies in those periods.
YEAR 2000 COMPLIANCE - All of the Company's management information and
other date-referenced systems, including computer software and hardware,
are Year 2000 compliant. There are no internal matters, therefore, that
will affect the Company's ability to process systems date-referenced
information when the Year 2000 arrives. The Company does not know the
extent to which the current preparedness of its external business
associates could adversely affect the Company's business transactions.
There can be no assurance that such business associates will be compliant.
NEW ACCOUNTING STANDARDS - SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," will become effective in 1998. This
statement establishes standards for defining and reporting business
segments. The Company is currently determining its reportable segments.
The adoption of SFAS No. 131 will not affect the Company's consolidated
financial position, results of operations or cash flows.
FORWARD-LOOKING INFORMATION - Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") includes
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. All statements, other than statements of historical facts, included
in this MD&A regarding the Company's financial position, business strategy
and plans and objectives of management of the Company for future
operations are forward-looking statements. These forward-looking
statements rely on a number of assumptions concerning future events and
are subject to a number of uncertainties and other factors, many of which
are outside of the Company's control, that could cause actual results to
materially differ from such statements. While the Company believes that
the assumptions concerning future events are reasonable, it cautions that
there are inherent difficulties in predicting certain important factors,
especially the timing and magnitude of technological advances; the
performance of recently acquired businesses; the prospects for future
acquisitions; the possibility that a current customer could be acquired or
otherwise be affected by a future event that would diminish their
information technology requirements; the competition in the information
technology industry and the impact of such competition on pricing,
revenues and margins; the degree to which business entities continue to
outsource
-11-
<PAGE> 12
information technology and business processes; uncertainties surrounding
budget reductions or changes in funding priorities or existing government
programs and the cost of attracting and retaining highly skilled
personnel.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not applicable to the Registrant.
PART II - OTHER INFORMATION
None.
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
This item is not applicable to the Registrant.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
The sole stockholder of the Company held a special meeting on January 26,
1998, to consider action with respect to an amendment to the certificate
of incorporation of the Company, creating two million shares of a new
class of capital stock designated as Restricted Common Stock. The sole
stockholder of the Company held a special meeting on February 27, 1998, to
approve and ratify the long-term incentive plan adopted by the Company's
board of directors. Both actions were approved by the sole stockholder.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
-12-
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
BRIGHTSTAR INFORMATION
TECHNOLOGY GROUP, INC.
By: /s/ MARSHALL G. WEBB
---------------------------------------
Marshall G. Webb
Chief Executive Officer
By: /s/ MICHAEL A. OBER
---------------------------------------
Michael A. Ober
President and Chief Operating Officer
By: /s/ DANIEL M. COFALL
---------------------------------------
Daniel M. Cofall
Chief Financial Officer
By: /s/ PATRICK R. QUINN
---------------------------------------
Patrick R. Quinn
Chief Accounting Officer
-13-
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