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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 JUNE 30, 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: 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.)
4900 HOPYARD ROAD, SUITE 200 PLEASANTON, CALIFORNIA 94566
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (925) 251-0000
---------
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 [ ].
The number of shares of Common Stock of the Registrant, par value $.001 per
share, outstanding at August 11, 2000, was 10,020,057.
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ITEM 1. FINANCIAL STATEMENTS
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
($000'S, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 589 $ 973
Trade accounts receivable, net
of allowance for doubtful accounts
of $1,504 and $1,987 12,746 16,127
Unbilled revenue 427 1,591
Deferred tax asset 1,047 1,712
Income tax receivable 4,130 810
Prepaid expenses and other 1,367 1,166
Net assets of discontinued operations 3,100 4,000
-------- -------------
Total current assets 23,406 26,379
PROPERTY AND EQUIPMENT 6,959 6,736
Less-accumulated depreciation (3,194) (2,720)
-------- -------------
Property and equipment, net 3,765 4,016
GOODWILL 57,848 56,848
Less-accumulated amortization (3,040) (2,284)
-------- -------------
Goodwill, net 54,808 54,564
OTHER 47 49
-------- -------------
TOTAL ASSETS $ 82,026 $ 85,008
======== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 6,517 $ --
Accounts payable 4,526 4,063
Acquisition payable 500 2,000
Restructuring reserve 2,372 1,761
Accrued salaries and other expenses 2,978 8,105
Deferred revenue 389 41
-------- -------------
Total current liabilities 17,282 15,970
LINE OF CREDIT -- 8,579
OTHER LIABILITIES 68 8
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value; 35,000,000
shares authorized; 10,020,057 and 8,642,034
shares issued and outstanding 10 9
Additional paid-in capital 99,293 89,693
Common stock warrants 100 100
Accumulated other comprehensive income (38) 171
Retained earnings (deficit) (34,689) (29,522)
-------- -------------
Total stockholders' equity 64,676 60,451
-------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 82,026 $ 85,008
======== =============
</TABLE>
See notes to condensed consolidated financial statements.
2
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BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($000'S, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ ------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUE $ 18,096 $ 29,511 $ 37,701 $ 55,011
COST OF REVENUE 12,492 20,796 25,744 40,532
------------- ------------- ------------- -------------
GROSS PROFIT 5,604 8,715 11,957 14,479
OPERATING EXPENSES:
Selling, general and administrative expenses 8,629 6,804 15,062 12,360
Restructuring charge 2,525 -- 2,525 --
Stock compensation expense -- 67 -- 468
Goodwill amortization 388 349 756 688
Depreciation and amortization 464 414 937 698
------------- ------------- ------------- -------------
Total operating expenses 12,006 7,634 19,280 14,214
INCOME (LOSS) FROM OPERATIONS (6,402) 1,081 (7,323) 265
OTHER INCOME (EXPENSE) (2) 3 (4) (32)
INTEREST EXPENSE (138) (99) (268) (78)
------------- ------------- ------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES (6,542) 985 (7,595) 155
INCOME TAX PROVISION (CREDIT) (2,271) 556 (2,651) 558
------------- ------------- ------------- -------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (4,271) 429 (4,944) (403)
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations,
net of tax -- (93) -- 149
Loss on disposal of discontinued operations,
net of tax (223) -- (223) --
------------- ------------- ------------- -------------
Total discontinued operations (223) (93) (223) 149
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (4,494) $ 336 $ (5,167) $ (254)
============= ============= ============= =============
NET INCOME (LOSS) PER SHARE: BASIC AND DILUTED
Continuing operations $ (0.46) $ 0.05 $ (0.55) $ (0.05)
Discontinued operations (0.02) (0.01) (0.02) 0.02
------------- ------------- ------------- -------------
Net income (loss) $ (0.48) $ 0.04 $ (0.57) $ (0.03)
============= ============= ============= =============
SHARES OUTSTANDING: BASIC AND DILUTED 9,403,010 8,723,584 9,104,394 8,682,809
============= ============= ============= =============
</TABLE>
See notes to condensed consolidated financial statements.
3
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BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($000'S)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
JUNE 30, JUNE 30,
2000 1999
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (5,167) $ (254)
Adjustments to reconcile net loss to net cash
used in operating activities:
(Income) loss from discontinued operations 223 (149)
Depreciation and amortization 1,693 1,386
Change in allowance for doubtful accounts (483) 292
Compensation expense on issuance of common stock -- 468
Deferred taxes 665 223
Cash provided by (used in) operating activities:
Trade accounts receivable 3,864 (4,504)
Unbilled revenue 1,164 (2,139)
Prepaid expenses and other (199) (1,134)
Accounts payable 463 1,197
Restructuring reserve 611 (979)
Accrued salaries and other expenses (4,326) 3,650
Income taxes receivable/payable (3,320) 167
Deferred revenue 348 (1,114)
---------- ----------
Net cash used in operating activities (4,464) (2,890)
INVESTING ACTIVITIES:
Payments for acquisitions (3,386)
Additions of property and equipment, net of
disposals (959) (1,136)
---------- ----------
Net cash used by investing activities (959) (4,522)
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 7,175 --
Costs associated with common stock transactions (74) --
Borrowings (repayments) under line of credit (2,062) 8,640
Net payments on capital lease obligations -- (71)
---------- ----------
Net cash provided by financing activities 5,039 8,569
NET (DECREASE) INCREASE IN CASH (384) 1,157
CASH:
Beginning of period 973 3,672
---------- ----------
End of period $ 589 $ 4,829
========== ==========
SUPPLEMENTAL DISCLOSURE:
Noncash issuance of common stock at fair value
in connection with prior acquisition $ 2,500 $ 1,575
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
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BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information and the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included in the financial statements. Operating results for the three and
six month periods ended June 30, 2000, are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. The
balance sheet at December 31, 1999, has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. For additional information,
refer to financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1999.
The preparation of the condensed financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date
of the condensed financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
these estimates.
2. RESTRUCTURING
On June 20, 2000, the Company announced that revenue and earnings for the
second quarter and the remainder of the calendar year will be lower than
expected and that the Company is realigning its operations to improve
operating margins by reducing expenses associated with underutilized office
space and personnel.
As a result of the realignment, the Company recorded a restructuring charge
of $2.5 million in the second quarter. Of the total charge, approximately
$1.0 million was reserved for ongoing lease obligations for facilities that
were closed and $0.5 million was recorded to write-down related fixed
assets. The remainder of the charge relates to the severance of
approximately 90 employees, or 15% of the Company's workforce. Approximately
$2.0 million of the charge applies to obligations to be funded by cash
disbursements, of which approximately $375,000 was disbursed for severance
and $45,000 was disbursed for rents during the second quarter. The remaining
charge relates to longer term severance obligations and related costs
amounting to $0.6 million to be paid over the next year and $1.0 million of
rents, net of sublease income, to be paid related to leases which expire
through April 2003.
Remaining amounts accrued of $0.8 million related to the restructuring
charge recorded in the fourth quarter of 1998 relate primarily to ongoing
severance obligations to be paid through April 2001.
3. CREDIT FACILITIES
Effective March 31, 2000, the Company established a AU$3 million ($1.8
million U.S. dollars) credit facility (the "Australian Credit Facility")
with Macquarie Bank Limited (the "Bank"). Under the terms of the agreement,
the Australian Credit Facility will be used for working capital needs and
other general corporate purposes. Borrowings under the Australian Credit
Facility bear an interest rate calculated as the aggregate of the 30 day
Macquarie Bank Bill Rate plus 3.0%. The Company's Australian subsidiary will
pay a commitment fee on unused amounts of the Australian Credit Facility
amounting to 1.0% per annum calculated daily and payable monthly based on
the difference between AU$3.0 million and borrowings outstanding.
The Australian Facility is secured by liens on substantially all of the
assets of the Company's Australian subsidiary and guaranteed by the Company.
Borrowings under the Australian Facility are limited to 60% of outstanding
customer accounts receivable less than 90 days old plus 40% of unbilled
revenue. The Australian Facility requires that both the Company and its
Australian subsidiary comply with various financial covenants and reporting
requirements. This Australian Facility matures on December 31, 2004. As of
June 30, 2000 and August 11, 2000, the Company had no borrowings outstanding
under the Australian Facility.
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Borrowings outstanding under the Company's credit facility with Comerica
Bank amounted to $6.5 million at June 30, 2000, which approximated total
availability under the facility at that date. As of, and during the quarter
ended June 30, 2000, the Company was not in compliance with a certain
financial covenant. Comerica Bank has agreed to waive the default.
4. INCOME TAXES
The provision for income taxes for the quarter and six months ended June 30,
2000 is based on an estimated effective tax rate of 39%, adjusted for
non-deductible goodwill amortization and other permanent items.
5. COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income," requires companies to report
and display comprehensive income and its components in the financial
statements. Comprehensive income includes all changes in equity during a
period except those resulting from investment by owners and distributions to
owners. Comprehensive income approximates net (loss) income reported for all
periods presented.
6. ACQUISITION PAYABLES
On June 23, 2000, the Company issued 668,468 shares of common stock to the
prior owners of Integrated Systems Consulting (ISC) as payment for the
remaining amount due of $2.5 million in connection with the 1999 acquisition
of ISC. Acquisition payable of $0.5 million is due in connection with the
1998 acquisition of PROSAP Australia Pty.
7. RECENT SALES OF UNREGISTERED SECURITIES
On March 10, 2000, pursuant to an agreement with Strong River Investments,
Inc. and Montrose Investments Ltd. (collectively, the "Purchasers"), the
Company sold to the Purchasers 709,555 shares of the Company's common stock
(the "Shares") for $7.5 million, or $10.57 per share (the "Transaction").
Net proceeds to the Company amounted to $7.175 million after related
issuance costs. Proceeds were applied to the Company's borrowings under its
Credit Facility. In connection the purchase of the Shares, the Company
issued two warrants to the Purchasers. One warrant has a five-year term
during which the Purchasers may purchase up to 157,500 shares of the
Company's common stock at a price of $12.00 per share. The second warrant
covers an adjustable amount of shares of the Company's common stock at an
adjustable exercise price, based on the market price of the Company's common
stock during three (3) separate periods of thirty-one (31) trading days
commencing 270 calendar days after the date of the Transaction. The Company
also issued to Wharton Capital Partners Ltd. ("Wharton"), as compensation
for Wharton's services in completing the Transaction, a warrant which has a
five-year term during which Wharton may purchase up to 45,000 shares of the
Company's common stock at a price of $12.00 per share. The Company
anticipates registering the Shares sold to the Purchaser in August 2000. The
Company and the Purchaser further agreed that the Company will sell and the
Purchaser will purchase up to an additional $7.5 million worth of the
Company's common stock six months following the Transaction subject to
certain conditions which are unlikely to be fulfilled during that period.
One of the entities constituting the Purchaser has exercised a warrant
received in connection with the transaction. Based on the formula set forth
in the warrant and the Company's current stock price, the holder of the
warrant is upon exerise entitled to purchase 930,054 shares of the Company's
common stock at a price of $.001 per share. Also, the Company could be
obligated under certain circumstances to issue additional shares to the
Purchasers which would have a materially dilutive effect.
8. CONTINGENT LIABILITY
Under the terms of the acquisition of Cogent Technologies, LLC , the Company
is required, as additional consideration for the acquisition, to make an
additional cash payment of up to $0.5 million and issue additional shares of
the Company's common stock to the prior owners based upon an earn-out
calculation. Amounts potentially due under the terms of the earnout
agreement are currently in dispute between the Company and the prior owners.
The additional purchase consideration will be recorded as goodwill if paid.
9. SUBSEQUENT EVENTS
On July 20, 2000, the Company signed a letter of intent to sell its Controls
Business for approximately $2.5 million, while retaining net assets of
approximately $0.6 million. The sale of the Controls Business is expected to
close in the third quarter. Due to the status of the transaction and the
proximity of the expected closing, the Company recorded a second quarter
charge of $0.4 million ($0.2 million, net of tax) to reduce its investment,
net of remaining reserves for operating losses of $0.5 million, in its
Controls Business from $3.5 million to $3.1 million at June 30, 2000.
6
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The Company has also entered into preliminary discussions with a prospective
buyer of its Australian operation. Any potential transaction is subject to
due diligence procedures to be performed by both the Company and the buyer,
adjustments related to negotiations surrounding the disposition of assets
and liabilities and approval of the Board of Directors of both companies. If
a sale occurs, the Company anticipates it will record a material charge in
the range of $US10-15 million to write-down goodwill associated with its
initial acquisition of the Australian operation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION - BrightStar Information Technology Group, Inc. ("BrightStar"
or the "Company") is a leading e-business solutions and application service
provider (ASP) to Global 2000 companies and public sector organizations.
BrightStar's rapidly deployed solutions for e-commerce, supply chain
management (SCM), customer relationship management (CRM), enterprise
resource planning (ERP), corporate portal and application outsourcing help
companies transform themselves into successful e-businesses and achieve a
competitive advantage by delivering superior service to their customers
while improving operational efficiencies.
Services are generally performed at clients' locations and also at the
Company's facilities. 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
Company's 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 effect of changes in estimates to
complete fixed fee contracts; 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 consists primarily 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, and (v) recruiting.
RESULTS OF OPERATIONS
Revenue for the second quarter of 2000 decreased $11.4 million or 38.7% from
the second quarter of 1999. Revenue for the six months ended June 30, 2000
decreased $17.3 million or 31.5% compared to the six months ended June 30,
1999. The decrease in revenue for the three and six month periods is a
result of the Company's efforts to reorganize its service offerings
consistent with its focus on becoming an e-business and application service
provider, transition of, and turnover within its sales force in the fourth
quarter of 1999 and continuing through the second quarter of 2000 and the
ongoing effect of reduced demand for IT services in the ERP segment of the
Company's business. Due to the completion of several large engagements
during the second quarter and early in the third quarter, revenue may
continue to decrease through the second half of 2000.
Gross profit as a percentage of revenue for the three months ended June 30,
2000 and 1999, was 31.0% and 29.5%, respectively. Gross profit for the six
months ended June 30, 2000 and 1999, was 31.7% and 26.3%, respectively. The
improvement in gross profit percentage resulted from the 1999 completion of
two fixed bid engagements which had an adverse effect on margins in 1999,
combined with improved utilization of revenue generating personnel and
slightly higher average billing rates. The Company expects continued
improvement in gross profit percentages through the second half of 2000,
primarily as a result of improved utilization from its restructuring
efforts.
The increase in selling, general and administrative expenses reflect the
Company's ongoing investment in building its internal infrastructure and
field sales force, which continued through May 2000. During the second
quarter, the Company incurred
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substantial expense associated with higher than normal turnover in its
field sales force and administrative and support staffs. Additionally, in
the second quarter of 2000 the Company recorded $0.7 million of bad debt
expense associated with a major client who declared Chapter 11 bankruptcy
in July 2000. The Company expects to significantly reduce its selling,
general and administrative expenses in the second half of 2000 as a result
of its restructuring effects.
During the second quarter, the Company recorded a restructuring charge of
$2.5 million associated with the realignment of its business. The
restructuring included the closing of both sales and operations facilities
and the termination of approximately 90 employees or 15% of the Company's
workforce. The restructuring effort is expected to increase utilization and
operating margins in the second half of 2000.
Stock compensation is a non-cash expense item related to the issuance of
stock to certain Founders as a part of the Company's IPO in 1998. This
amount was amortized over a period of 12 months through April 1999.
Goodwill amortization relates to goodwill acquired in conjunction with the
IPO and subsequent acquisitions.
Income taxes are based on the Company's estimated annual tax rate of 39%,
adjusted for non-deductible goodwill amortization and other items.
LIQUIDITY AND CAPITAL RESOURCES
Effective March 31, 2000, the Company established a AU$3 million ($1.8
million U.S. dollars) credit facility (the "Australian Credit Facility")
with Macquarie Bank Limited. Under the terms of the agreement, the
Australian Credit Facility will be used for working capital needs and other
general corporate purposes. Borrowings under the Australian Credit Facility
bear an interest rate calculated as the aggregate of the 30 day Macquarie
Bank Bill Rate (the"Rate") plus 3.00 percent. The Company's Australian
subsidiary will pay a commitment fee on unused amounts of the Australian
Credit Facility amounting to 1.0% per annum calculated daily and payable
monthly based on the difference between the AU$3.0 million and borrowings
outstanding.
The Australian Facility is secured by liens on substantially all of the
assets of the Company's Australian subsidiary and is guaranteed by the
Company. Borrowings under the Australian Facility are limited to 60% of
outstanding customer accounts receivable less than 90 days old plus 40% of
unbilled revenue. The Australian Facility requires that both the Company and
its Australian subsidiary comply with various financial covenants and
reporting requirements. This Australian Facility matures on December 31,
2004. As of June 30 and August 11, 2000 the Company had no borrowings
outstanding under the Australian Facility. Borrowings outstanding under the
Company's credit facility with Comerica Bank amounted to $6.5 million at
June 30, 2000 and $7.0 million at August 11, 2000.
On March 10, 2000, pursuant to an agreement with Strong River Investments,
Inc. and Montrose Investments Ltd. (collectively the "Purchasers"), the
Company sold to the Purchasers 709,555 shares of the Company's common stock
for $7.5 million or $10.57 per share. Net proceeds to the Company amounted
to $7.2 million after related issuance costs. During the first quarter of
2000, the Company repaid $4.4 million of amounts due under its Credit
Facility, financed $2.4 million of additional working capital requirements
and $0.4 million of equipment additions using proceeds from the issuance of
stock.
The Company is required to make payments in 2000 amounting to $0.5 million
related to the PROSAP acquisition. In addition, the Company expects to make
payments of up to $0.5 million and issue additional shares of the Company's
common stock to the prior owners of Cogent related to earn out agreements.
The Company relies primarily on the timeliness and amount of accounts
receivable collections to fund cash disbursements. As a result of continued
losses and negative cash flows, the Company has experienced a significant
decline in available liquidity, which could have an adverse impact on the
ability of the Company to meet current vendor obligations and its
obligations in the future and to continue as a going concern. The Company
intends to improve its liquidity as follows:
o Substantial reductions in operating costs resulting from the
implementation of its restructuring plan in the second quarter of
2000.
o Anticipated proceeds from the sale of its Controls Business of
approximately $2.5 million, plus realization of
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existing net assets of approximately $0.6 million. The sale of
the Controls Business is expected to close in the third quarter
of 2000.
o Additionally, the Company believes that it can secure financing
in addition to its current credit facility with Comerica Bank.
The Company believes that it has taken the actions necessary to restore
profitability and positive cash flows from operations in the third quarter of
2000, which, combined with anticipated proceeds from the sale of its Controls
Business and financing in addition to its current credit facility will be
adequate to fund its operations over the next year. There can be no assurance
that the Company's efforts to reduce operating costs will result in operating
profits or positive cash flows from operations, that the Company's collection
efforts with respect to its accounts receivable will be sufficient to fund cash
disbursements, that the Company will successfully complete the sale of its
Controls Business, or that the Company will be able to secure additional
financing, or assurance as to the cost or other terms, or dilutive effect of any
additional financing which may be available.
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 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
Market risk represents the risk of loss that may impact the financial
position, results of operations or cash flows of the Company due to adverse
changes in market prices and rates. The Company is exposed to market risk
because of changes in foreign currency exchange rates as measured against the
U.S. dollar and currencies of the Company's subsidiaries and operations in
Australia.
Foreign Currency Exchange Rate Risk. The Company has a wholly owned
subsidiary in Australia. Revenues from these operations are denominated in
Australian Dollars respectively, thereby potentially affecting the Company's
financial position, results of operations and cash flows due to fluctuations in
exchange rates. The Company does not anticipate that near-term changes in
exchange rates will have a material impact on future earnings, fair values or
cash flows of the Company. There can be no assurance that a sudden and
significant decline in the value of the Australian Dollar will not have a
material adverse effect on the Company's financial condition and results of
operations.
The Company's line of credit bears interest at variable rates; therefore,
the Company's results of operations would only be affected by interest rate
changes to the line of credit. An immediate 10 percent change in interest rates
would not have a material effect on the Company's results of operations over
the next fiscal year.
PART II - OTHER INFORMATION
ITEM 1. Legal proceedings
The Company is not involved in any legal proceedings that the Company
believes could have a material adverse effect on the Company.
ITEM 3. Defaults upon Senior Securities
See Note 2 to the Condensed Consolidated Financial Statements.
ITEM 4. Submission of matters to a vote of Stockholders
(a) The Annual Meeting of Stockholders of the Company was held on
June 22, 2000.
(b) The following directors were elected at the Annual Meeting of Stockholders:
George M. Siegel
Jennifer T. Barrett
Michael A. Ober
Donald W. Rowley
Joseph A. Wagda
(c) 1. Set forth below is the tabulation of the votes on each nominee for
election as a director:
<TABLE>
<CAPTION>
Name For Against Votes Abstained
---- --- ------- --------------
<S> <C> <C> <C>
George M. Siegel 7,221,239 511,011 -
Jennifer T. Barrett 7,221,239 511,011 -
Michael A. Ober 6,498,709 1,233,541 -
Donald W. Rowley 7,221,231 511,011 -
Joseph A. Wagda 7,221,231 511,011 -
</TABLE>
2. Set forth below is the tabulation of the votes for the proposal to approve
the Company's 2000 Long-Term Incentive Plan:
<TABLE>
<S> <C>
For 1,784,197
Against 1,498,635
Abstained and unvoted 4,449,418
</TABLE>
3. Set forth below is the tabulation of the votes for the proposal to ratify
Grant Thornton LLP as the Company's independent accountant for the fiscal
year ending December 31, 2000.
<TABLE>
<S> <C>
For 7,621,895
Against 62,164
Abstained 48,191
</TABLE>
(d) none
ITEM 6. Exhibits and reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
9
<PAGE> 10
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 there
unto duly authorized.
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
Date: August 14, 2000. BY: /s/ Michael A. Ober
---------------------------------------
Michael A. Ober
Chief Executive Officer
BY: /s/ Donald W. Rowley
---------------------------------------
Donald W. Rowley
Chief Financial Officer
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
