UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
(AMENDMENT NO. 1 TO)
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(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, 1999.
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: 000-24391
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TECHNISOURCE, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2786227
- -------------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1901 W. CYPRESS CREEK ROAD, SUITE 202, FORT LAUDERDALE, FL 33309
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(954) 493-8601
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)
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. [X] Yes [ ] No
The number of shares outstanding of common stock as of October 31, 1999
was 10,385,000.
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
EXPLANATORY NOTE
This Amendment No.1 to the Form 10-Q is a Part I filing solely to
correct certain information that was omitted during the Edgar conversion and
filing process. Accordingly, Part II has been omitted and is incorporated herein
by reference.
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
PAGE
----
Condensed Consolidated Balance Sheets as of September 30, 1999
(Unaudited) and December 31, 1998............................. 1
Condensed Consolidated Statements of Income for the Three and
Nine Months Ended September 30, 1999 and 1998 (Unaudited)...... 2
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1999 and 1998 (Unaudited)........... 3
Notes to Condensed Consolidated Financial Statements
(Unaudited).................................................... 4-8
Signatures ............................................................. 9
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS 1
TECHNISOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
(unaudited)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,779,690 $ 17,545,183
Trade accounts receivable, less allowance for doubtful
accounts of $358,933 at September 30, 1999
and December 31, 1998 21,457,605 15,772,435
Due from shareholders and employees 138,878 120,597
Prepaid expenses and other current assets 792,710 326,255
Deferred tax asset, current 258,643 258,643
------------ ------------
Total current assets 38,427,526 34,023,113
Property and equipment, net 2,542,189 2,559,790
Other assets 540,167 159,195
Deferred tax asset, noncurrent 87,991 87,991
------------ ------------
Total assets $ 41,597,873 $ 36,830,089
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 841,683 $ 723,643
Income tax payable 586,630 624,378
Accrued liabilities 3,607,577 1,879,194
Deferred tax liability, current 6,065 6,065
------------ ------------
Total current liabilities 5,041,955 3,233,280
Deferred tax liability, noncurrent 142,269 142,269
------------ ------------
Total liabilities 5,184,224 3,375,549
Shareholders' equity:
Common stock, $.01 par value, 50,000,000 shares authorized,
10,385,000 and 10,385,000 outstanding as of September 30,
1999 and December 31, 1998, respectively 103,850 103,850
Additional paid-in capital 30,096,956 30,057,853
Retained earnings 6,362,843 3,292,837
Less: Treasury Stock, 25,000 and 0 shares as of
September 30, 1999 and December 31, 1998, respectively (150,000) --
------------ ------------
Total shareholders' equity 36,413,649 33,454,540
------------ ------------
Total liabilities and shareholders' equity $ 41,597,873 $ 36,830,089
============ ============
</TABLE>
See notes to condensed consolidated financial statements
1
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- --------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Staffing revenues $ 30,557,261 $ 27,149,018 $ 92,167,871 $ 74,413,321
Hardware revenues 7,167,087 382,667 19,386,550 1,053,819
------------- ------------- ------------- -------------
Total revenues 37,724,348 27,531,685 111,554,421 75,467,140
Staffing cost of revenues 22,507,103 20,056,639 68,501,579 55,375,699
Hardware cost of revenues 6,593,950 315,020 17,658,227 786,872
------------- ------------- ------------- -------------
Total cost of revenues 29,101,053 20,371,659 86,159,806 56,162,571
Gross profit 8,623,295 7,160,026 25,394,615 19,304,569
Selling, general and
administrative expenses 7,462,096 5,077,640 20,922,114 14,264,741
------------- ------------- ------------- -------------
Operating income 1,161,199 2,082,386 4,472,501 5,039,828
Other income (expense):
Interest and other income 224,769 239,859 644,420 243,583
Interest expense (247) -- (247) (125,163)
------------- ------------- ------------- -------------
Income before taxes 1,385,721 2,322,245 5,116,674 5,158,248
Provision for income taxes 554,287 923,158 2,046,668 774,032
------------- ------------- ------------- -------------
Net income $ 831,434 $ 1,399,087 $ 3,070,006 $ 4,384,216
============= ============= ============= =============
Pro forma information
Income before taxes, as
reported $ -- $ -- $ -- $ 5,158,248
Pro forma income tax
provision -- -- -- 2,070,564
------------- ------------- ------------- -------------
Pro forma net income $ -- $ -- $ -- $ 3,087,684
============= ============= ============= =============
Net income per share - basic $ 0.08 $ 0.14 $ 0.30 $ 0.37
============= ============= ============= =============
Net income per share - diluted $ 0.08 $ 0.13 $ 0.29 $ 0.37
============= ============= ============= =============
Weighted average common shares
outstanding - basic 10,360,000 10,352,889 10,371,388 8,319,852
============= ============= ============= =============
Weighted average common shares
outstanding - diluted 10,491,918 10,519,737 10,524,464 8,462,268
============= ============= ============= =============
</TABLE>
See notes to condensed consolidated financial statements
2
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
------------------------------
1999 1998
------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,070,006 $ 4,384,216
Adjustment to reconcile net earnings to net cash used in
operating activities:
Depreciation and amortization 1,024,932 348,259
Income tax benefit from exercise of options 332,308
Deferred taxes, net (432,352)
Deferred compensation 96,876 32,293
Changes in assets and liabilities:
Increase in accounts receivable (5,685,170) (4,915,607)
Increase in due from shareholders and emplo (18,281) (80,057)
Increase in prepaid expenses and other asse (858,677) (258,479)
Increase (decrease) in accounts payable 118,040 (137,601)
Increase in accrued liabilities 1,740,694 660,273
Decrease in income taxes payable (37,748) (104,145)
------------ ------------
Net cash used in operating activities (549,328) (170,892)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (996,081) (1,283,056)
------------ ------------
Net cash used in investing activities (996,081) (1,283,056)
Cash flows from financing activities:
Paydown on note payable (10,000)
Paydown on line of credit (223,460)
Proceeds from public offering of common stock, net 30,781,854
Proceeds from issuance of common stock 10,676
Distribution to shareholders (70,084) (9,769,875)
Payments to acquire treasury stock (150,000) --
Overdraft -- (588,106)
------------ ------------
Net cash (used in) provided by financing activities (220,084) 20,201,089
Net (decrease) increase in cash (1,765,493) 18,747,141
------------ ------------
Cash and cash equivalents, beginning of period 17,545,183 469,973
------------ ------------
Cash and cash equivalents, end of period $ 15,779,690 $ 19,217,114
------------ ------------
Supplemental disclosure of cash flow information:
Interest paid $ 247 $ 125,163
------------ ------------
Income taxes paid $ 2,084,416 $ 978,221
------------ ------------
</TABLE>
Noncash financing activities:
Shareholder obligations of $127,857 and $9,769,875 were incurred during the nine
months ended September 30, 1999 and 1998, respectively, for undistributed
earnings to the former S corporation shareholders.
See notes to condensed consolidated financial statements
3
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. General
ORGANIZATION AND DESCRIPTION OF BUSINESS
Technisource, Inc. was incorporated in Florida on March 25, 1987.
Technisource of Florida, Inc. and Technisource Midwest, Inc. were incorporated
in Florida on March 22, 1994, to offer information technology staffing services
("IT Services") and to administer payroll and human resources activities for the
Company. In connection with the initial public offering completed June 30, 1998,
all outstanding shares of capital stock of Technisource of Florida, Inc. were
contributed to Technisource, Inc. and Technisource Midwest, Inc. was dissolved.
The accompanying unaudited condensed consolidated financial statements
include Technisource, Inc. and Subsidiaries (the "Company"). The subsidiaries
include Technisource of Florida, Inc. and Technisource Midwest, Inc.
The Company is an information technology ("IT") staffing services firm,
providing IT professionals principally on a time and materials basis to
organizations with complex IT needs. As of September 30, 1999, the Company had
26 branch office locations.
INITIAL PUBLIC OFFERING
The Company completed an initial public offering ("IPO") of common
stock on June 30, 1998. The Company sold 3,100,000 shares of its common stock,
par value $0.01 per share. The Company realized $30.6 million from the offering,
net of expenses. The Company distributed approximately $10.7 million of
accumulated S Corporation earnings to the former S Corporation shareholders.
INTERIM FINANCIAL DATA
The interim financial data as of September 30, 1999, and for the three
and nine months ended September 30, 1999, and 1998 is unaudited and has been
prepared in accordance with generally accepted accounting principles for interim
financial reporting purposes and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Certain information and footnote disclosure normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules and
regulations. The information reflects all adjustments, consisting only of normal
recurring entries, that, in the opinion of management, are necessary to present
fairly the financial position and results of operations or cash flows of the
Company for the periods indicated. Results of operations and cash flows for the
interim periods are not necessarily indicative of the results of operations or
cash flows for the full fiscal year. These condensed consolidated financial
statements should be read in conjunction with the Company's Financial Statements
and the notes thereto for the year ended December 31, 1998, included in the
Company's annual report on Form 10-K.
4
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
RECLASSIFICATIONS
Certain reported amounts for 1998 have been reclassified to conform to
the 1999 presentation.
2. Summary of Significant Accounting Policies
CASH AND CASH EQUIVALENTS
For purposes of the condensed consolidated statements of cash flows,
the Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. Cash equivalents
approximated $15,780,000 and $17,545,183 at September 30, 1999, and December 31,
1998, respectively and consisted of a money market account.
BUSINESS RISKS AND CONCENTRATION
The Company's operations depend upon, among other things, the Company's
ability to attract, develop and retain a sufficient number of highly skilled
professional employees. The IT service industry is highly competitive and served
by numerous national, regional, and local firms, all of which are either
existing or potential competitors of the Company. Many of these competitors have
substantially greater financial, technical and marketing resources and greater
name recognition than the Company.
The Company provides IT professional services to customers located in
the United States and Canada. The Company's revenue is generated from a limited
number of clients in specific industries. Future operations may be affected by
the Company's ability to retain these clients and the cyclical and economic
factors that could have an impact on those industries. Financial instruments,
which potentially expose the Company to concentrations of credit risk, consist
primarily of accounts receivable. Additionally, the Company maintained
approximately $15.8 million at September 30, 1999 in one financial institution,
which is in excess of the FDIC insured limits.
3. Contingent Liability
The Company is currently undergoing a review by the Department of
Labor. While it is not possible to predict with certainty the outcome of this
review, Management believes the ultimate outcome of the review will not have an
material adverse effect on the Company's results of operations or financial
position.
5
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
4. Line of Credit
On March 9, 1999, the Company established a line of credit with
NationsBank, N.A. that provides for maximum borrowings of up to $25 million, $10
million of which may be used for acquisitions and $15 million of which may be
used for working capital. Interest is payable monthly at a variable rate of
LIBOR plus 1.4%. The line of credit expires April 30, 2002. There were no
borrowings outstanding at September 30, 1999.
5. S Corporation Distribution and Termination of S Corporation Election
The Company's S Corporation status for federal income tax purposes
terminated on June 24, 1998, in connection with the IPO and the Company
converted to C Corporation status and made a final distribution (the
"Distribution") to its existing shareholders in an aggregate amount representing
substantially all of the Company's undistributed S Corporation earnings through
the closing of the IPO of approximately $10.7 million. Purchasers of the
Company's Common Stock in the IPO did not receive any portion of the
Distribution.
6. Pro forma Earnings per Share
Basic earnings per share is computed by dividing net income
attributable to common shares by the weighted average number of common shares
outstanding. Diluted net income per share is computed by dividing net income
attributable to common shares by the weighted average number of common shares
outstanding and dilutive potential common shares.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic:
Weighted average common shares
outstanding 10,360,000 10,352,889 10,371,388 8,319,852
========== ========== ========== ==========
Diluted:
Weighted average common shares
outstanding 10,360,000 10,352,889 10,371,388 8,319,852
Dilutive effect of options 131,918 166,848 153,076 142,416
---------- ---------- ---------- ----------
Total 10,491,918 10,519,737 10,524,464 8,462,268
========== ========== ========== ==========
</TABLE>
Options to purchase 667,697 shares of common stock at a range of $6.41
to $14.94 per share for the nine months ended September 30, 1999, and options to
purchase 994,074 shares of common stock at a range of $4.90 to $14.94 per share
for the three months ended September 30, 1999, were excluded from the diluted
net income per share calculation for the period because the exercise price of
the options was greater than the average market price of the common shares for
the periods. The stock options expire by the year 2009.
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
7. Income Taxes
Historically, the Company elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code which provide that, in lieu of
corporate federal and some state income taxes, the shareholders are taxed on
their proportionate share of the Company's taxable income. In connection with
the IPO, the Company's election to be treated as an S Corporation was
terminated. As a result of the Company's Subchapter S election, the accompanying
condensed consolidated statements of income do not include an income tax
provision for federal and most state income taxes during the periods of the S
Corporation election. The provision for income taxes for periods prior to the
conversion related to certain states that do not recognize S Corporation status.
The provision for income taxes for the period following the conversion reflects
the estimated current provision for federal and state income taxes. Pro forma
net income is based on the assumption that the Company's S Corporation status
was terminated at the beginning of each period and reflects a pro forma income
tax provision based on applicable tax rates as if the Company was a C
Corporation taxpayer for all periods presented.
8. Stock Repurchase Plan
On April 22, 1999, the Company's Board of Directors approved a Stock
Repurchase Plan pursuant to which the Company can repurchase up to $1 million of
the Company's common stock on the open market. As of September 30, 1999, the
Company had repurchased 25,000 shares of its common stock at an aggregate cost
to the Company of $150,000.
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
9. Reportable Segment
The Company operates in two business segments: IT Staffing and Computer
Hardware Sales. The segment information set forth below is based on the nature
of the services offered. The chief operating decision-makers evaluate each
segment's performance based primarily on their revenues, gross margin and
operating income. The accounting policies of the operating segments are the same
as those of the entire Company.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS THREE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1999 1998 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues(1)
IT Staffing $ 30,557,261 $ 92,167,871 $ 27,149,018 $ 74,413,321
Hardware Sales 7,167,087 19,386,550 382,667 1,053,819
------------ ------------ ------------ ------------
$ 37,724,348 $111,554,421 $ 27,531,685 $ 75,467,140
------------ ------------ ------------ ------------
Income Before Taxes(2)
IT Staffing $ 1,149,236 $ 4,364,195 $ 2,337,440 $ 5,068,868
Hardware Sales 236,485 752,479 (15,195) 89,380
------------ ------------ ------------ ------------
$ 1,385,721 $ 5,116,674 $ 2,322,245 $ 5,158,248
============ ============ ============ ============
</TABLE>
- ----------
(1) Two of the Company's clients accounted for approximately 21.00% and 31.73%,
respectively, of the Company's IT Staffing revenue. In addition, two of the
Company's clients accounted for approximately 15.9% and 54.9%, respectively,
of the Company's hardware sales for the period ended September 30, 1999 and
1998.
(2) Since all expenses have not been allocated to the hardware sales segment,
this basis is not necessarily a measure completed in accordance with
generally accepted accounting principles and may not be comparable to other
companies. Additionally, the Company does not allocate assets, depreciation
expense or capital additions to the hardware segment.
8
<PAGE>
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.
TECHNISOURCE INC.
Dated: November 19, 1999
By:
James F. Robertson
Executive Vice President, Chief
Operating Officer and Director
By:
John A. Morton
Vice-President, Chief Financial
Officer and Director
9
