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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 6, 1999
ANSWERTHINK CONSULTING GROUP, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA
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(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-24343 65-0750100
------------------------ ---------------------------------------
(COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
1001 BRICKELL BAY DRIVE, SUITE 3000
MIAMI, FLORIDA 33131
----------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
(305) 375-8005
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(COMPANY'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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<PAGE>
Item 7 of the Current Report on Form 8-K, as originally filed on July
21, 1999, is hereby amended and restated in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
The financial statements of CFT Consulting, Inc. required by this item
are included as Exhibit 99.1 to this Current Report on Form 8-K/A and
incorporated herein by reference.
(b) PRO FORMA FINANCIAL INFORMATION
The pro forma financial information required by this item is included as
Exhibit 99.2 to this Current Report on Form 8-K/A and incorporated herein by
reference.
(c) EXHIBITS
See Exhibit Index attached hereto.
2
<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.
ANSWERTHINK CONSULTING GROUP, INC.
Date: September 13, 1999 By: /s/ John F. Brennan
---------------------------------
John F. Brennan
Executive Vice President and Chief
Financial Officer
3
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
*2.1 Merger Agreement by and among AnswerThink Consulting Group, Inc.,
CFT Consulting, Inc., CFT Acquisition, Inc. and the Shareholders
of CFT, dated as of July 6, 1999
23 Consent of Eaton Honick Pellegrino & McFarland, P.A.
99.1 Financial Statements of CFT Consulting, Inc.
99.2 Pro Forma Financial Information
* Previously Filed
4
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (no. 333-69951) of AnswerThink Consulting Group, Inc. of
our report dated May 21, 1999, relating to the financial statements of CFT
Consulting, Inc. which appear in this Current Report on Form 8-K dated September
13, 1999.
/s/ Eaton Honick Pellegrino & McFarland, P.A.
Sarosota, Florida
September 13, 1999
EXHIBIT 99.1
INDEX TO FINANCIAL STATEMENTS
CFT CONSULTING, INC.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
INDEPENDENT AUDITORS' REPORT...................................................................................1
FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1998 and June 30, 1999 (Unaudited)...........................................2
Statements of Operations for the Year Ended December 31, 1998 and for
the Six Months Ended June 30, 1998 (Unaudited) and 1999 (Unaudited)........................................4
Statement of Changes in Stockholders' Equity for the
Year Ended December 31, 1998...............................................................................5
Statement of Changes in Stockholders' Equity for the
Six Months Ended June 30, 1999 (Unaudited).................................................................6
Statements of Cash Flows for the Year Ended December 31, 1998 and for
the Six Months Ended June 30, 1998 (Unaudited) and 1999 (Unaudited)........................................7
Notes to Financial Statements .................................................................................9
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
CFT Consulting, Inc.
Sarasota, Florida
We have audited the accompanying balance sheet of CFT Consulting, Inc. as of
December 31, 1998, and the related statement of operations, changes in
stockholders' equity, and cash flows for the year 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 audit.
We conducted our audit 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 audit provides 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 CFT Consulting, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ Eaton Honick Pellegrino & McFarland, P.A.
Sarasota, Florida
May 21, 1999
<PAGE>
CFT CONSULTING, INC.
Balance Sheets
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
----------------- ------------------
<S> <C> <C>
ASSETS
Current Assets
Cash & cash equivalents $ 71,211 $ 514,311
Marketable securities 670 670
Accounts receivable net of allowance
for doubtful accounts 2,285,999 3,467,115
Advance - employees 6,909 -
Notes receivable - employees 14,524 77,692
Deferred tax asset 44,000 56,700
----------------- ------------------
Total Current Assets 2,423,313 4,116,488
Property and Equipment,
net of accumulated depreciation 456,671 473,226
Other Assets
Deposits 20,651 26,151
Deferred tax asset 35,700 51,500
Organizational costs, net of amortization - -
----------------- ------------------
Total Other Assets 56,351 77,651
----------------- ------------------
TOTAL ASSETS $ 2,936,335 $ 4,667,365
================= ==================
</TABLE>
See accompanying notes and accountant's report
- 2 -
<PAGE>
CFT CONSULTING, INC.
Balance Sheets (Continued)
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
----------------- ------------------
<S> <C> <C>
LIABILITIES
Current Liabilities
Accounts payable $ 431,327 $ 757,003
Accrued expenses 81,247 931,742
Accrued interest 19,223 -
Deposits 8,296 8,296
Deferred tax liability 293,000 252,000
Shareholder loan - short-term 440,523 440,511
Current portion - capital lease obligation 83,503 74,158
Short-term borrowings 1,026,285 765,562
Income tax payable 152,830 469,343
----------------- ------------------
Total Current Liabilities 2,536,234 3,698,615
Long-Term Liabilities
Capital lease obligations, net of current portion 99,086 68,964
Notes payable, net of current portion 4,555 -
Deferred tax liability 11,600 21,000
----------------- ------------------
Total Long-Term Liabilities 115,241 89,964
----------------- ------------------
Total Liabilities 2,651,475 3,788,579
EQUITY
Stockholders' Equity 284,860 878,786
----------------- ------------------
TOTAL LIABILITY AND
STOCKHOLDERS' EQUITY $ 2,936,335 $ 4,667,365
================= ==================
</TABLE>
See accompanying notes and accountant's report
- 3 -
<PAGE>
CFT CONSULTING, INC.
Statements of Operations
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX
FOR THE MONTHS ENDED MONTHS ENDED
YEAR ENDED JUNE 30, 1998 JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED) (UNAUDITED)
----------------- ----------- -----------
<S> <C> <C> <C>
REVENUE
Revenue $ 9,248,029 $ 4,836,390 $ 8,791,929
EXPENSES
Operating expenses 9,643,796 4,419,669 7,722,895
------------- ---------------- ---------------
Income (loss) from operations (395,767) 416,721 1,069,034
OTHER INCOME AND EXPENSES
Interest income 6,774 3,430 3,333
Interest expense (81,241) (41,248) (51,060)
Other income 1,377 - 25,461
Loss on disposal of equipment (17,301) (1,452) (58,586)
------------- ---------------- ---------------
Total other income and expense (90,391) (39,270) (80,852)
------------- ---------------- ---------------
Income (loss) before income taxes (486,158) 377,451 988,182
Income tax benefit (expense) 64,839 150,000 (438,571)
------------- ---------------- ---------------
NET INCOME (LOSS) $ (421,319) $ 527,451 $ 549,611
============= ================ ===============
</TABLE>
See accompanying notes and accountant's report
- 4 -
<PAGE>
CFT CONSULTING, INC.
Statement of Changes in Stockholders' Equity
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
COMMON ACCUMULATED ADDITIONAL
STOCK DEFICIT PAID-IN CAPITAL TOTAL
---------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $ 2,132 $ (204,798) $ 529,749 $ 327,083
Stock issuance to ESOP 83 - 279,917 280,000
Stock options issuance - - 99,096 99,096
Net loss - (421,319) - (421,319)
---------- ---------- ---------- ----------
Balance at December 31, 1998 $ 2,215 $ (626,117) $ 908,762 $ 284,860
========== ========== ========== ==========
</TABLE>
See accompanying notes and accountant's report
- 5 -
<PAGE>
CFT CONSULTING, INC.
Statement of Changes in Stockholders' Equity
For the Six Months Ended June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
COMMON ACCUMULATED ADDITIONAL
STOCK DEFICIT PAID-IN CAPITAL TOTAL
---------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $ 2,215 $ (626,117) $ 908,762 $ 284,860
Stock options issuance - - 44,315 44,315
Net income - 549,611 - 549,611
---------- ------------ ------------ ------------
Balance at June 30, 1999 $ 2,215 $ (76,506) $ 953,077 $ 878,786
========== ============ ============ ============
</TABLE>
See accompanying notes and accountant's report
- 6 -
<PAGE>
CFT CONSULTING, INC.
Statements of Cash Flows
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX
FOR THE MONTHS ENDED MONTHS ENDED
YEAR ENDED JUNE 30, 1998 JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED) (UNAUDITED)
----------------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ (421,319) $ 527,451 $ 549,611
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operations:
Amortization 215 108 -
Depreciation 171,076 76,280 133,541
Deferred taxes (301,000) (150,000) (60,100)
Loss on disposal of equipment 17,301 1,452 58,586
Common stock issued to ESOP 279,999 - -
Stock options issuance 99,096 - 44,314
(Increase) decrease in operating assets:
Accounts receivable (447,057) (447,562) (1,181,115)
Employee advances 3,091 5,000 6,909
Deposits (10,458) - (5,500)
Increase (decrease) in operating liabilities:
Accounts payable 120,052 (16,069) 325,676
Accrued expenses 38,433 - 831,272
Accrued income taxes 64,508 (88,322) 316,513
Deposits - 8,400 -
--------------- ---------------- --------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (386,063) (83,262) 1,019,707
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (295,316) (40,284) (208,682)
Proceeds from:
Note receivable issuance (4,524) - (63,168)
--------------- ---------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (299,840) (40,284) (271,850)
</TABLE>
See accompanying notes and accountant's report
- 7 -
<PAGE>
CFT CONSULTING, INC.
Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX
FOR THE MONTHS ENDED MONTHS ENDED
YEAR ENDED JUNE 30, 1998 JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED) (UNAUDITED)
----------------- ----------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (519,087) (387,723) (265,278)
Fixed assets acquired by capital lease obligations 122,972 - -
Repayments of capital lease obligations (55,924) (12,504) (39,467)
Shareholder loan payments (1,444) (7,501) (12)
Proceeds from:
Bank loans 950,000 330,073 -
--------------- ----------------- --------------
Net cash provided by (used in) financing activities 496,517 (77,655) (304,757)
Net increase in cash (189,386) (201,201) 443,100
Cash and cash equivalents at beginning of year 260,597 260,597 71,211
--------------- ----------------- --------------
Cash and cash equivalents at end of year $ 71,211 $ 59,396 $ 514,311
=============== ================= ==============
SUPPLEMENTARY INFORMATION
Interest paid during the period $ 50,559 $ 41,248 $ -
=============== ================= ==============
Income taxes paid during the period $ 171,654 $ - $ -
=============== ================= ==============
</TABLE>
See accompanying notes and accountant's report
- 8 -
<PAGE>
CFT CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
For Year Ended December 31, 1998
NOTE A - ORGANIZATION
CFT Consulting, Inc. (CFT) was incorporated in the state of Florida on April 7,
1995. CFT provides computer consulting to a variety of customers nationwide.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. BASIS OF PRESENTATION
The accompanying financial statements are prepared using the accrual basis
of accounting that recognizes revenues when earned and expenses when
incurred.
2. INTERIM FINANCIAL STATEMENTS
The financial statements for the six month periods ended June 30, 1999 and
1998, and all related footnote information for these periods, are
unaudited, and reflect all normal and recurring adjustments which are, in
the opinion of management, necessary for a fair presentation of the
financial position, operating results and cash flows for the interim
period. The results of operation for the six months ended June 30, 1999 are
not necessarily indicative of the results to be achieved for the entire
fiscal year ending December 31, 1999.
3. CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposit, and all highly liquid debt instruments
with original maturities of three months or less.
4. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is based on management's evaluation of
outstanding accounts receivable at the end of year.
5. INVESTMENT SECURITIES
Management determines the appropriate classification of investment
securities at the time they are acquired and evaluates the appropriateness
of such classifications at each balance sheet date. The classification of
those securities and the related accounting policies are as follows:
Trading securities: Trading securities are held for resale in anticipation
of short-term (generally 90 days or less) fluctuations in market prices.
Trading securities are stated at fair value. Realized and unrealized gains
and losses are included in income.
- 9 -
<PAGE>
CFT CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
For Year Ended December 31, 1998
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Available-for-sale securities: Available-for-sale securities consist of
marketable equity securities not classified as trading securities.
Available-for-sale securities are stated at fair value, and unrealized
holding gains and losses, net of the related deferred tax effect, are
reported as a separate component of stockholders' equity.
Dividends on marketable equity securities are recognized in income when
declared. Realized gains and losses are included in income. Realized gains
and losses are determined on the basis of the actual cost of the securities
sold.
6. PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided by
utilizing the double declining and straight-line methods over the estimated
useful lives ranging from three to thirty-nine years.
7. ORGANIZATIONAL COSTS
Organizational costs were recorded at their estimated fair market value on
the date that they were expended. Amortization is provided using the
straight-line method over an estimated useful life of five years.
8. INCOME TAXES
Deferred income taxes are reported using the liability method. Deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects
of changes in tax laws and rates on the date of enactment.
- 10 -
<PAGE>
CFT CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
For Year Ended December 31, 1998
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
9. FINANCIAL INSTRUMENTS
The following methods and assumptions were used by CFT to estimate the fair
values of financial instruments as disclosed herein:
Cash and equivalents: The carrying amount approximates fair value because
of the short period to maturity of the instruments.
Investments securities: The carrying amounts approximate fair value, which
is based on quoted market prices.
10. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
NOTE C - ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
----------------- -----------
<S> <C> <C>
Accounts receivable for CFT $ 2,406,582 $ 3,824,021
Less allowance for doubtful accounts 120,583 356,906
------------- -------------
$ 2,285,999 $ 3,467,115
============= =============
NOTE D - INVESTMENT SECURITIES
JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
----------------- -----------
Available-for-sale securities:
Marketable equity securities, at cost $ 670 $ 670
Unrealized gains (losses) - -
------------- -------------
Marketable equity securities, at fair market value $ 670 $ 670
============= =============
</TABLE>
- 11 -
<PAGE>
CFT CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
For Year Ended December 31, 1998
NOTE E - NOTES RECEIVABLE
Note receivable from an employee due in 11 monthly
installments of $500 along with a lump sum payment
of $3,000 due July 1, 1999. The remaining principal to
be paid from bonuses in December 1999 $10,000
Note receivable from an employee due in monthly
installments of $2,000 beginning September 1998
until balance is paid 4,524
---------
$ 14,524
=========
NOTE F - PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
----------------- -------------
<S> <C> <C>
Automobiles $ 18,500 $ 18,500
Computers equipment 378,253 530,219
Furniture and equipment 341,853 294,906
Leasehold improvements 46,202 50,476
Software 43,417 46,532
------------- -------------
828,225 940,633
Less: Accumulated depreciation 371,554 467,407
------------- -------------
$ 456,671 $ 473,226
============= =============
</TABLE>
NOTE G - ORGANIZATIONAL COSTS
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
----------------- -------------
<S> <C> <C>
Organizational costs $ 1,600 $ 1,600
Less: Accumulated amortization 1,600 1,600
------------- -------------
$ - $ -
============= =============
</TABLE>
- 12 -
<PAGE>
CFT CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
For Year Ended December 31, 1998
NOTE H - SHORT-TERM BORROWINGS
Short-term borrowings for CFT consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
----------------- -------------
<S> <C> <C>
Note to bank, interest at prime plus .5%, payable quarterly,
principal balance due December 31, 1999, collateralized by
all assets of CFT and is guaranteed by CFT's shareholders. $ 500,000 $ 250,000
Note payable, interest at 8.25%, principal balance due
April 6, 1999, collateralized by all assets of CFT and is
guaranteed by CFT's shareholders. 2,613 -
Line of credit, interest at prime plus .5%, payable monthly
principal balance due on demand, collateralized by
all assets of CFT and is guaranteed by CFT's shareholders. 50,000 -
Line of credit, interest at prime plus .5%, payable monthly
principal balance due on demand collateralized by
all assets of CFT and is guaranteed by CFT's shareholders. 450,000 500,000
------------ -------------
1,002,613 750,000
Current portion of long-term debt 23,672 15,562
------------ -------------
$ 1,026,285 $ 765,562
============ =============
</TABLE>
NOTE I - LONG-TERM DEBT
Long-term debt for CFT consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
----------------- -------------
<S> <C> <C>
Note to bank, interest at prime plus .5%, payable monthly
plus interest, principal balance due February 2, 2000
collateralized by all the assets of CFT. $ 28,227 $ 15,562
Less current maturities 23,672 15,562
------------ -------------
$ 4,555 $ -
============ =============
Aggregate maturities required on long-term debt are as follows:
For the year ending December 31, 2000 $ 4,555 $ -
============ =============
</TABLE>
- 13 -
<PAGE>
CFT CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
For Year Ended December 31, 1998
NOTE J - INCOME TAX MATTERS
Effective January 1, 1997 the shareholders of CFT elected to revoke CFT's tax
status as an S corporation and to be taxed as a C corporation. This election
resulted in the need to account for both accrued and deferred income taxes at
the corporate level.
The net deferred tax asset (liability) of CFT consisted of the following
components as of December 31, 1998:
Deferred tax assets relating to:
Accounts payable $ 15,000
Accrued vacation 29,000
Stock option compensation 35,700
Deferred tax liabilities relating to:
Accounts receivable (293,000)
Property and equipment (11,600)
-----------
Net deferred tax liability $ (224,900)
The components giving rise to the net deferred tax asset (liability) described
above have been included in the accompanying balance sheet of CFT as of December
31, 1998 as follows:
Current assets $ 44,000
Other assets 35,700
Current liability (293,000)
Other liability (11,600)
-----------
$(224,900)
===========
Realization of deferred tax assets is dependent upon sufficient future taxable
income during the period that deductible temporary differences are expected to
be available to reduce taxable income.
The provision for income taxes for the year ended December 31, 1998, for CFT
consisted of the following:
Current income taxes $ 236,161
Deferred income taxes (343,645)
------------
Total income taxes $ (107,484)
============
Cash payments for income taxes amounted to $83,331 for the year ended December
31, 1998. Income taxes were underpaid by approximately $152,830 at December 31,
1998. The underpayments are included in the accompanying balance sheet as a
payable.
- 14 -
<PAGE>
CFT CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
For Year Ended December 31, 1998
NOTE K - TRANSACTIONS WITH RELATED PARTIES
1. NOTE PAYABLE
At December 31, 1998 the amount due to shareholders and included in notes
payable was $440,523 with accrued interest of $19,223. The principal is due
on demand. Interest is accrued at 8%.
2. PROPERTY RENTAL
CFT conducts its operations in leased facilities under a non-cancelable
operating lease from TSA Licensing, Inc, a related party. The lease expires
December 31, 2004. The rent is $12,500 per month for the period March 1,
1997, to December 31, 2004. In addition, CFT is responsible for property
taxes, insurance, and general maintenance. Total rent paid was $150,000 for
the year ended December 31, 1998.
Future minimum lease payments required under the operating lease for the
years ending December 31, are as follows:
1999 166,800
2000 166,800
2001 178,250
2002 178,250
2003 189,757
2004 189,757
-------------
Total $ 1,069,614
NOTE L - CAPITAL LEASES
CFT leases various leasehold improvements and equipment under capital leases.
The capital leases in effect as of December 31, 1998, are scheduled to expire
beginning in 2000 through 2003. At the expiration of the lease terms, CFT may
exercise options to purchase the equipment for fair market value or a bargain
value. Amortization of the leased property is computed by the straight-line or
declining balance methods and has been included in depreciation. Based on items
leased as of December 31, 1998, monthly lease payments are approximately $7,921.
As of December 31, 1998, the gross amount of assets recorded under capital
leases totaled $284,234. Accumulated amortization related to those assets
totaled $95,778 as of December 31, 1998.
- 15 -
<PAGE>
CFT CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
For Year Ended December 31, 1998
NOTE L - CAPITAL LEASES - CONTINUED
The following leases have been determined to be capital leases to CFT and have
been recorded as such in the financial statements:
DESCRIPTION CURRENT LONG-TERM
- ----------- ------- ---------
WINR Business Credit, lease term 36
months, with monthly lease payments
of $1,420, ending February 2000. $ 15,920 $ 3,724
WINR Business Credit, lease term 36
months, with monthly lease payments
of $2,407, ending February, 2000. 26,371 5,575
WINR Business Credit, lease term 36
months, with monthly lease payments
of $1,399, ending July, 2001 13,029 24,083
WINR Business Credit, lease term 60
months, with monthly lease payments
of $1,456, ending October, 2003 15,274 63,089
WINR Business Credit, lease term 36
months, with monthly lease payments
of $1,239, ending February, 2000. 12,909 2,615
----------- -----------
$ 83,503 $ 99,086
=========== ===========
The following is a schedule of minimum lease payments, including interest and
principal for the fiscal year ending December 31,
1999 $ 81,787
2000 42,612
2001 27,257
2002 17,466
2003 13,467
-----------
Total $ 182,589
- 16 -
<PAGE>
CFT CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
For Year Ended December 31, 1998
NOTE M - EMPLOYEE STOCK OWNERSHIP PLAN
CFT has an Employee Stock Ownership Plan (ESOP) covering substantially all
employees. CFT may contribute amounts as determined by the Board of Directors.
At December 31, 1998 a total of 1,289,894 shares of CFT's common class A stock
had been allocated to the plan. Any contributions of cash or company stock to
the ESOP are reported as compensation expense equal to the amount of the
contribution. Cash dividends paid on allocated shares of company stock are
charged to retained earnings. Contributions for each year are allocated in the
proportion that each such Participant's covered compensation bears to the total
covered compensation of all such Participants for the year. The contribution
expense was $280,000 for the year ended December 31, 1998.
NOTE N - CONCENTRATIONS OF RISK
CFT maintains cash accounts in a commercial bank. Accounts are guaranteed by the
Federal Deposit Insurance Corporation (FDIC) up to $100,000 per bank. The bank
balances of CFT Consulting, Inc. are categorized at December 31, 1998 as
follows:
Amount insured by FDIC $ 100,000
Unisured 173,063
-----------
Total $ 273,063
===========
NOTE O - CAPITAL STOCK
On November 8, 1997, the board of directors approved a new capital structure for
CFT. The board also approved a six thousand to one stock split for all currently
outstanding shares.
The capital stock of the corporation at December 31, 1998, was as follows:
CFT Consulting, Inc., Class A, voting common stock,
.000167 par value, authorized 50,000,000 shares,
issued and outstanding 13,289,894 shares $ 2,215
CFT Consulting, Inc., Class B, non-voting common
stock, $1 par value, authorized 10,000,000 shares,
issued and outstanding 0 shares -
CFT Consulting, Inc., Class C, convertible voting and
participating preferred stock, par value, authorized
10,000,000 shares, issued and outstanding 0 shares -
--------------
$ 2,215
==============
- 17 -
<PAGE>
CFT CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
For Year Ended December 31, 1998
NOTE P - STOCK OPTION PLAN
On November 21, 1997, CFT adopted a stock option plan for officers and key
employees. A maximum of 5,000,000 shares of common stock may be issued under the
plan. The option price, number of shares and grant date are determined at the
discretion of the stock option committee. The stock sold pursuant to granted
options will be Class B, non-voting common stock having a $1 par value. The
options may not be exercised until the officer or key employee has remained in
the continuous employ of the corporation for a period of four years from the
date such option was granted. Options granted under the plan are exercisable for
a period not to exceed five years from the option grant date. 1,318,698 stock
options were issued and outstanding at December 31, 1998.
Compensation expense for the stock option plan was determined based on the fair
value of the options at the grant date consistent with the methodology
prescribed under STATEMENT OF FINANCIAL STANDARDS NO. 123, "ACCOUNTING FOR
STOCK-BASED COMPENSATION." The fair value of the options granted during 1998 was
estimated using the minimum value method, using the following assumptions:
Risk-free interest rate 7.5%
Expected life (years) 4
Expected volatility None
Expected dividends None
A summary of the status of CFT's stock option plan as of December 31, 1998 is
presented below:
<TABLE>
<CAPTION>
NUMBER WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE
--------- -----------------
<S> <C> <C>
Granted 1,464,698 $ .15
Exercised - -
Canceled (146,000) .38
--------------- ----------------
Outstanding at December 31, 1998 1,318,698 .13
Exercisable at December 31, 1998 -
Available for issuance at December 31, 1998 3,681,302
</TABLE>
EXERCISE OUTSTANDING
PRICE SHARES
$ .05 775,698
.10 175,000
.25 304,500
.50 53,500
.75 10,000
---------------
1,318,698
- 18 -
<PAGE>
CFT CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS
For Year Ended December 31, 1998
NOTE Q - SUBSEQUENT EVENTS
As of the report date 1,446,198 stock options had been granted to employees.
NOTE R - EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITOR'S
REPORT
On July 6, 1999, the Company was acquired by AnswerThink Consulting Group, Inc.
(AnswerThink). Under the terms of the transaction, AnswerThink acquired all of
the outstanding stock of the Company in exchange for cash and AnswerThink stock.
- 19 -
EXHIBIT 99.2
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Balance Sheet of Answerthink
Consulting Group, Inc. (the "Company") at July 2, 1999 has been prepared to give
effect to the July 6, 1999 acquisition of CFT Consulting, Inc., as if it had
occurred on July 2, 1999.
The following Unaudited Pro Forma Consolidated Statement of Operations of the
Company for the year ended January 1, 1999, gives effect to (i) the acquisition
of Legacy Technology, Inc. ("Legacy") on May 20, 1998 (ii) the acquisition of
Infinity Consulting Group, Inc. ("Infinity") on September 30, 1998, (iii) the
acquisition of CFT Consulting, Inc. ("CFT") on July 6, 1999, (iv) the Conversion
(the "Conversion") into a total of 7,160,104 shares of Common Stock of all of
the Company's outstanding shares of Class A Convertible Preferred Stock and
Class B Convertible Preferred Stock concurrent with the Company's initial public
offering and (v) the sale of 3,324,500 shares of Common Stock by the Company's
initial public offering and the application of the net proceeds therefrom, as if
such transactions had occurred as of January 3, 1998. The following Unaudited
Pro Forma Consolidated Statement of Operations of the Company for the six months
ended July 2, 1999, gives effect to the CFT acquisition, as if such transaction
had occurred as of January 3, 1998.
Under the terms of certain earn-out provisions contained in their respective
purchase agreements, the sellers of Infinity Consulting Group, Inc. and CFT
Consulting, Inc. may be entitled to additional consideration. The maximum amount
that can be earned by the sellers of Infinity Consulting Group, Inc. and CFT
Consulting, Inc. which has not already been recorded in the Company's financial
statements, is $1.6 million and $10.2 million, respectively. The additional
goodwill recorded by the Company in connection with the maximum amount of
additional goodwill which could be recorded by the Company in connection with
the acquisition of Infinity Consulting Group, Inc. and CFT Consulting, Inc.
would increase the Company's annual amortization expense by approximately
$787,000.
The Unaudited Pro Forma Consolidated Financial Information is intended for
informational purposes only and is not necessarily indicative of the results
that would have occurred if the transactions had occurred on the dates indicated
or which may be realized in the future. The Unaudited Pro Forma Consolidated
Financial Information should be read in conjunction with the historical
financial statements of the companies acquired and the Consolidated Financial
Statements included in the Company's Form 8-K, filed on August 12, 1999, which
present the retroactive effect of the February 26, 1999 business combination of
AnswerThink Consulting Group, Inc. and triSpan, Inc., which was accounted for
under the pooling-of-interests method of accounting.
1
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JULY 2, 1999
<TABLE>
<CAPTION>
HISTORICAL
------------------------- CFT
THE CFT ACQUISITION
COMPANY ACQUISITION ADJUSTMENTS
(A) (B) (C) PRO FORMA
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,034,567 $ 514,311 $ (6,056,072) $ 6,492,806
Short-term investments 500,000 670 -- 500,670
Accounts receivable and unbilled revenue, net 45,782,096 3,467,115 -- 49,249,211
Prepaid expenses and other current assets 1,443,124 134,392 -- 1,577,516
------------ ----------- ------------ ------------
Total current assets 59,759,787 4,116,488 (6,056,072) 57,820,203
Property and equipment, net 4,306,956 473,226 -- 4,780,182
Other assets 3,380,732 77,651 -- 3,458,383
Goodwill, net 31,497,468 -- 14,156,860 45,654,328
------------ ----------- ------------ ------------
Total assets $ 98,944,943 $ 4,667,365 $ 8,100,788 $111,713,096
------------ ----------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,632,212 $ 757,003 $ -- $ 3,389,215
Accrued expenses and other liabilities 14,676,676 1,825,504 -- 16,502,180
Income taxes payable 2,916,050 -- -- 2,916,050
Current portion of notes payable 1,896,000 1,206,072 (1,206,072) 1,896,000
------------ ------------ ------------ ------------
Total current liabilities 22,120,938 3,788,579 (1,206,072) 24,703,445
------------ ------------ ------------ ------------
Total liabilities 22,120,938 3,788,579 (1,206,072) 24,703,445
------------ ------------ ------------ ------------
Shareholders' equity
Common stock 34,746 2,215 (1,816) 35,145
Additional paid-in capital 118,392,594 953,077 9,232,170 128,577,841
Unearned compensation (1,129,935) -- -- (1,129,935)
Retained earnings (accumulated deficit) (40,473,400) (76,506) 76,506 (40,473,400)
------------ ------------ ------------ ------------
Total shareholders' equity 76,824,005 878,786 9,306,860 87,009,651
------------ ------------ ------------ ------------
Total liabilities and shareholders' equity $ 98,944,943 $ 4,667,365 $ 8,100,788 $111,713,096
============ ============ ============ ============
</TABLE>
See accompanying notes to Unaudited Pro Forma Consolidated Balance Sheet
2
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
A. Represents the historical consolidated balance sheet of the Company as of
July 2, 1999.
B. Represents the historical balance sheet of CFT Consulting, Inc. as of June
30, 1999. Certain amounts have been reclassified to conform with the
Company's presentation.
C. Represents the adjustments to record the purchase price of the CFT
Acquisition. The purchase price consisted primarily of $4.8 million in cash,
the repayment of $1.2 million of outstanding notes payable and the issuance
of 398,920 shares of the Company's common stock, valued at approximately
$8.8 million. In addition, the Company recorded an adjustment of $1.4
million to equity for the conversion of CFT's stock options to AnswerThink's
stock options.
3
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 1, 1999
<TABLE>
<CAPTION>
HISTORICAL
------------------------------
PREVIOUSLY PREVIOUSLY
THE REPORTED CFT REPORTED
COMPANY ACQUISITIONS ACQUISITION ACQUISITIONS
(A) (B) (C) ADJUSTMENTS
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net revenues $ 118,155,676 $ 8,653,768 $ 9,248,029 $ --
Costs and expenses:
Project personnel 71,889,880 5,904,208 4,682,517 --
and expenses
Selling, general and 38,515,933 912,967 4,977,203 588,955(D)
administrative
Compensation
related to vesting
of restricted 40,843,400 -- -- --
shares
------------- ------------- ------------- -------------
Total costs and
operating
expenses 151,249,213 6,817,175 9,659,720 588,955
------------- ------------- ------------- -------------
Income (loss) from (33,093,537) 1,836,593 (411,691) (588,955)
operations
Other income
(expense):
Litigation settlement 2,500,000 -- -- --
Interest income
(expense), net (739,003) 17,018 (74,467) (71,567)(F)
------------- ------------- ------------- -------------
Income (loss) before
income taxes (31,332,540) 1,853,611 (486,158) (660,522)
Income tax benefit
(expense) (324,820) -- 64,839 (741,444)(I)
------------- ------------- ------------- -------------
Net income (loss) $ (31,657,360) $ 1,853,611 $ (421,319) $ (1,401,966)
Net loss per common
share-basic and $ (1.62)
diluted
Weighted average
common shares 19,602,520
outstanding
</TABLE>
<TABLE>
<CAPTION>
CFT
ACQUISITION OFFERING PRO FORMA
ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net revenues $ -- $ 136,057,473 $ -- $ 136,057,473
Costs and expenses:
Project personnel -- 82,476,605 -- 82,476,605
and expenses
Selling, general and 943,791(E) 45,938,849 -- 45,938,849
administrative
Compensation
related to vesting
of restricted -- 40,843,400 -- 40,843,400
shares
------------- ------------- ------------- -------------
Total costs and
operating
expenses 943,791 169,258,854 -- 169,258,854
------------- ------------- ------------- -------------
Income (loss) from (943,791) (33,201,381) -- (33,201,381)
operations
Other income
(expense):
Litigation settlement -- 2,500,000 -- 2,500,000
Interest income
(expense), net (259,561)(G) (1,127,580) 672,239(H) (455,341)
------------- ------------- ------------- -------------
Income (loss) before
income taxes (1,203,352) (31,828,961) 672,239 (31,156,722)
Income tax benefit
(expense) -- (1,001,425) -- (1,001,425)
------------- ------------- ------------- -------------
Net income (loss) $ (1,203,352) $ (32,830,386) $ 672,239 $ (32,158,147)
Net loss per common
share-basic and $ (1.42) $ (1.36)
diluted
Weighted average
common shares 23,113,874 23,583,595(J)
outstanding
</TABLE>
See accompanying notes to Unaudited Pro Forma Consolidated Statement of
Operations
4
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
A. Represents the historical consolidated statement of operations of the
Company for the year ended January 1, 1999.
B. Represents the historical statement of operations of Previously Reported
Acquisitions (Legacy Technology, Inc. ("Legacy") from January 1, 1998
through May 20, 1998 and Infinity Consulting Group, Inc. ("Infinity") from
January 1, 1998 through September 30, 1998).
C. Represents the historical statement of operations of CFT Consulting, Inc.
for the year ended December 31, 1998. Certain amounts have been reclassified
to conform with the Company's presentation.
D. Adjusts goodwill amortization expense, totaling $315,622, to reflect the
allocation of the purchase prices for the Previously Reported Acquisitions
using 15-year lives. In addition, includes adjustments to goodwill
amortization expense to reflect contingent consideration earned by Delphi
Partners, Inc., totaling $2.8 million paid in April 1999, and Legacy
Technology, Inc., totaling $1.3 million paid in June 1999.
E. Adjusts goodwill amortization expense to reflect the allocation of the
purchase price for the CFT Acquisition for the year ended January 1, 1999,
using a 15-year life. On July 6, 1999, the Company acquired CFT Consulting,
Inc. for $4.8 million in cash, 398,920 shares of the Company's common stock
valued at $8.8 million and contingent consideration up to $8.6 million upon
the achievement of certain revenue targets related to the performance of CFT
through the period ending December 31, 1999 and $1.6 million upon the
achievement of other revenue targets related to the performance of CFT
during the 12-month period ended July 6, 2000. This acquisition resulted in
total goodwill (excluding contingent consideration) of approximately $14.2
million.
F. Adjustment to interest expense as if debt incurred in connection with the
Legacy Acquisition was outstanding from January 1, 1998 through May 20,
1998.
G. Adjustment to net interest expense assuming the cash payment in connection
with the CFT Acquisition would have increased outstanding debt, thus
increasing interest expense for the period from January 1, 1998 through June
2, 1998 and would have decreased cash balances, thus decreasing interest
income for the period from June 3, 1998 through January 1, 1999. The
interest rates assumed for purposes of the pro forma adjustment was 8.5% for
debt and 3.25% on cash balances.
H. Upon the closing of the Offering, the Company retired all outstanding debt
except certain notes payable to shareholders totaling $4.1 million. Interest
expense has been adjusted to reflect the use of a portion of the Offering
proceeds to retire the debt.
I. Adjustment to provide for income tax expense for the Previously Reported
Acquisitions at a tax rate of 40%.
J. Pro forma loss per share has been calculated based upon 23,583,595 shares
outstanding. This represents the sum of the total shares outstanding on a
pro forma basis prior to the Offering (23,113,874 shares) and the weighted
average effect of the number of shares required to be sold in the Offering
(626,295 shares) to repay debt and amounts due to shareholders ($14.7
million).
5
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 2, 1999
<TABLE>
<CAPTION>
HISTORICAL
------------------------ PREVIOUSLY
THE CFT CFT REPORTED
COMPANY ACQUISITION ACQUISITION ACQUISITIONS
(A) (B) ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 94,313,595 $ 8,791,929 $ -- $ -- $103,105,524
Costs and expenses:
Project personnel and expenses 55,999,110 5,138,504 -- -- 61,137,614
Selling, general and 26,119,027 2,617,516 463,562(C) 82,778(D) 29,282,883
administrative
Merger related expenses 2,500,000 -- -- -- 2,500,000
------------ ----------- ----------- ----------- ------------
Total costs and operating expenses 84,618,137 7,756,020 463,562 82,778 92,920,497
------------ ----------- ----------- ----------- ------------
Income (loss) from operations 9,695,458 1,035,909 (463,562) (82,778) 10,185,027
Other income (expense):
Interest income (expense), net (62,643) (47,727) (78,000)(E) -- (188,370)
------------ ----------- ----------- ----------- ------------
Income (loss) before income taxes 9,632,815 988,182 (541,562) (82,778) 9,996,657
Income tax expense (4,917,279) (438,571) -- -- (5,355,850)
------------ ----------- ----------- ----------- ------------
Income (loss) before extraordinary 4,715,536 549,611 (541,562) (82,778) 4,640,807
item
Extraordinary loss on early 2,112,591 -- -- -- 2,112,591
extinguishment of debt ------------ ----------- ----------- ------------ -----------
Net income (loss) $ 2,602,945 $ 549,611 $ (541,562) $ (82,778) $ 2,528,216
============ =========== ============ ============= ===========
Basic net income (loss) per common share:
Income before extraordinary
item $ 0.18 $ 0.17
Extraordinary loss on early
extinguishment of debt $ (0.08) $ (0.08)
Net income per common share $ 0.10 $ 0.09
Weighted average common shares
outstanding 26,757,194 27,156,114(F)
Diluted net income (loss) per common share:
Income before extraordinary
item $ 0.13 $ 0.13
Extraordinary loss on early
extinguishment of debt $ (0.06) $ (0.06)
Net income per common share $ 0.07 $ 0.07
Weighted average common and common
equivalent shares outstanding 35,668,695 36,067,615(F)
</TABLE>
See accompanying notes to Unaudited Pro Forma Consolidated Statement of
Operations
6
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
A. Represents the historical consolidated statement of operations of the
Company for the six months ended July 2, 1999.
B. Represents the historical statement of operations of CFT Consulting, Inc.
for the six months ended June 30, 1999. Certain amounts have been
reclassified to conform with the Company's presentation.
C. Adjusts goodwill amortization expense to reflect the allocation of the
purchase price for the CFT Acquisition for the six months ended July 2,
1999, using a 15-year life.
D. Adjusts goodwill amortization expense to reflect contingent consideration
earned by Delphi Partners, Inc., totaling $2.8 million paid in April 1999,
and Legacy Technology, Inc., totaling $1.3 million paid in June 1999.
E. Adjustment to net interest expense assuming the cash payment in connection
with the CFT Acquisition would have decreased cash balances, thus decreasing
interest income for the period from January 2, 1999 through July 2, 1999.
The interest rate assumed for purposes of the pro forma adjustment was
3.25%.
F. Pro forma basic and diluted income per share has been calculated based upon
27,156,114 and 36,067,615 shares, respectively, outstanding. This represents
the sum of the total shares outstanding on a pro forma basis.
7
