SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH 1, 2000
TECHNISOURCE, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 000-24391 59-2786227
------- --------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
1901 WEST CYPRESS CREEK ROAD
SUITE 202
FORT LAUDERDALE, FLORIDA 33309
(Address of principal executive offices)
954-493-8601
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OF ASSETS
On March 16, 2000, Technisource, Inc., a Florida corporation (the
"Company") and TSRC.net, Inc., a Florida corporation ("TSRC.net"), and a
wholly-owned subsidiary of the Company filed a report on Form 8-K with respect
to the acquisition by TSRC.net of substantially all of the assets of PRISM
Group, LLC, a California limited liability company ("PRISM Group"), and PRISM
Group Consulting, LLC, a California limited liability company ("PRISM Group
Consulting", together with PRISM Group, "PRISM"). At that time it was
impracticable to provide the financial statements and pro forma financial
information required to be filed therewith relative to PRISM, and the Company
stated in such Form 8-K that it intended to file the required financial
statements and pro forma financial information no later than May 15, 2000. By
this amendment to such Form 8-K, the Company is amending and restating Item 7
thereof to include the required financial statements and pro forma financial
information.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of the business acquired for the periods specified
in Rule 3-05(b) of Regulation S-X:
Audited financial statements of PRISM:
Report of Independent Auditors
Combined Balance Sheets as of December 31, 1999 and 1998
Combined Statements of Income for the years ended December 31,
1999 and 1998
Combined Statements of Members' Equity for the years ended
December 31, 1999 and 1998
Combined Statements of Cash flows for the years ended December
31, 1999 and 1998
Notes to Combined Financial Statements
(b) Pro forma financial information relative to the acquired business
required pursuant to Article 11 of Regulation S-X.
<PAGE>
(c) Exhibits.
2 Asset Purchase Agreement, dated as of March 1, 2000, among PRISM
Group, LLC, PRISM Group Consulting, LLC, Gus Gonzalez and Nancy E.
Agatiello Revocable Inter-Vivos Trust, Barbara S. Berk, Nancy E.
Agatiello and TSRC.net, Inc. (Previously filed).
23.1 Consent of KPMG LLP
<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 hereunto duly authorized.
TECHNISOURCE, INC.
Date: May 12, 2000 By: /s/ Joseph Collard
-------------------------------
Name: Joseph Collard
Title: Chief Executive Officer
<PAGE>
Item 7(a). Financial Statements of Business Acquired
PRISM GROUP COMPANIES
Combined Financial Statements
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Members
PRISM Group Companies
San Francisco, California:
We have audited the accompanying combined balance sheets of PRISM Group LLC and
PRISM Group Consulting LLC (the PRISM Group Companies) as of December 31, 1999
and 1998 and the related combined statements of income, members' equity, and
cash flows for each of the years in the two-year period ended December 31, 1999.
These combined financial statements are the responsibility of the PRISM Group
Companies' management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of PRISM Group
Companies as of December 31, 1999 and 1998 and the results of their operations
and their cash flows for each of the years in the two-year period ended December
31, 1999, in conformity with generally accepted accounting principles.
KPMG LLP
San Francisco, California
April 14, 2000
<PAGE>
PRISM GROUP COMPANIES
Combined Balance Sheets
December 31, 1999 and 1998
ASSETS 1999 1998
---------- ---------
Current assets:
Cash $ 476,934 151,512
Accounts receivable 886,197 597,334
Accrued unbilled income 319,356 245,920
Prepaid expenses 33,014 40,602
---------- ---------
Total current assets 1,715,501 1,035,368
Furniture and equipment, net of
accumulated depreciation (note 3) 40,476 71,242
Deposit 9,665 9,665
---------- ---------
$1,765,642 1,116,275
LIABILITIES AND MEMBERS EQUITY
Current liabilities:
Accounts payable $ 52,613 21,003
Deferred revenue -- 36,542
Accrued wages and commissions 381,297 251,263
Other accrued expenses 6,943 11,053
Employer contribution payable (note 5) -- 65,311
Line of credit (note 3) 971,737 267,434
Notes payable to bank, current portion (note 4) 109,259 88,840
---------- ---------
Total current liabilities 1,521,849 741,446
Notes payable to bank, less current portion -- 109,259
---------- ---------
Total liabilities 1,521,849 850,705
Members equity 243,793 265,570
---------- ---------
$1,765,642 1,116,275
========== =========
See accompanying notes to combined financial statements.
2
<PAGE>
PRISM GROUP COMPANIES
Combined Statements of Income
Years ended December 31, 1999 and 1998
1999 1998
----------- -----------
Revenue temporary staffing $ 8,860,614 7,132,976
Cost of sales temporary staffing 6,551,559 5,616,078
----------- -----------
Gross profit 2,309,055 1,516,898
Permanent placement fee income 964,048 1,120,276
General and administrative expense (2,095,162) (2,032,581)
----------- -----------
Operating income 1,177,941 604,593
Interest expense (51,735) (53,081)
----------- -----------
Net income $ 1,126,206 551,512
=========== ===========
See accompanying notes to combined financial statements.
3
<PAGE>
PRISM GROUP COMPANIES
Combined Statements of Members Equity
Years ended December 31, 1999 and 1998
Members equity, December 31, 1997 $ 255,230
Distributions (541,172)
Net income 551,512
-----------
Members equity, December 31, 1998 265,570
Distributions (1,147,983)
Net income 1,126,206
-----------
Members equity, December 31, 1999 $ 243,793
===========
See accompanying notes to combined financial statements.
4
<PAGE>
PRISM GROUP COMPANIES
Combined Statements of Cash Flows
Years ended December 31, 1999 and 1998
1999 1998
---------- ----------
Cash flows from operating activities:
Net income $1,126,206 551,512
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 48,211 69,281
Changes in assets and liabilities:
Accounts receivable (288,863) (3,309)
Accrued unbilled income (73,436) 47,250
Prepaid expenses 7,588 (37,159)
Accounts payable 31,610 13,032
Deferred revenue (36,542) 36,542
Accrued wages and commissions 130,034 95,220
Other accrued expenses (4,110) 5,051
Employee withholding payable (65,311) (49,008)
---------- ----------
Net cash provided by operating activities 875,387 728,412
---------- ----------
Cash flows used in investing activities--
purchase of furniture and equipment (17,445) (40,378)
---------- ----------
Cash flows from financing activities:
Distributions to members (1,147,983) (541,172)
Proceeds from notes payable to bank -- 7,403
Payments on notes payable to bank (88,840) (96,242)
Proceeds from line of credit 4,074,303 4,047,434
Payments of line of credit (3,370,000) (4,001,101)
---------- ----------
Net cash used in financing activities (532,520) (583,678)
---------- ----------
Net increase in cash 325,422 104,356
Cash, beginning of year 151,512 47,156
---------- ----------
Cash, end of year $ 476,934 151,512
========== ==========
Supplemental disclosures of
cash flow information:
Interest paid $ 46,336 52,927
========== ==========
See accompanying notes to combined financial statements.
5
<PAGE>
PRISM GROUP COMPANIES
Notes to Combined Financial Statements
December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(A) ORGANIZATION AND DESCRIPTION OF BUSINESS AND PRINCIPLES OF
COMBINATION
PRISM Group Companies provides permanent placement and temporary
consultants for companies throughout the greater San Francisco Bay
Area. The combined financial statements of the PRISM Group
Companies (the Company) include the accounts of PRISM Group LLC
(PG) and PRISM Group Consulting LLC (PGC), each of which is owned
and managed by the same two members (note 9).
All material intercompany transactions and balances have been
eliminated in the combination.
PG and PGC are limited liability companies (LLCs). LLCs are formed
in accordance with the laws of the state in which they are
organized. LLCs generally have two or more members; its members
have limited personal liability for the obligations or debts of
the entity and they can elect to be treated as partnerships for
federal income tax purposes. Each of the LLCs was formed as a
California LLC and will cease to exist after December 31, 2005
unless dissolved earlier by the members.
(B) CASH
The Company maintains its cash in large financial institutions and
the cash balances, at times may exceed the federally insured
limits. The Company has not experienced any losses in such
accounts.
(C) FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost. Depreciation on
furniture and equipment is calculated on a basis which
approximates the straight-line method over the estimated useful
lives of the assets, which range from three to seven years.
(D) REVENUE RECOGNITION
The Company derives a substantial portion of its revenue from
information technology staffing services. Revenue is recognized as
services are performed. To the extent revenue is received in
advance of services being rendered, it is deferred and recorded as
a liability.
Permanent placement fees are recorded as revenues on the start
date of the placed person. Such income is refundable in full if
termination occurs within the first 30 days and is partially
refundable from days 31 to 90. Refunds have historically been
insignificant.
(E) COST OF SALES - TEMPORARY STAFFING
Cost of sales - temporary staffing is comprised of the direct
costs of providing the consulting staffing services which includes
the consultants' wages, payroll taxes and employee benefits. Such
costs are recognized as they are incurred.
(CONTINUED)
6
<PAGE>
PRISM GROUP COMPANIES
Notes to Combined Financial Statements
December 31, 1999 and 1998
(F) INCOME TAXES
For income tax purposes, the income or loss incurred by the
Company is reportable in the tax returns of the individual
members. The tax basis of the assets and liabilities in 1999 was
$533,271 and $1,100,423, respectively. The tax basis of the assets
and liabilities in 1998 was $236,492 and $534,394, respectively.
(G) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of accounts receivable, accrued income
receivable, accounts payable, accrued liabilities, accrued wages
and commissions, employee withholding payable, line of credit, and
notes payable to bank approximate their fair value due to the
short-term nature of these instruments.
(H) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(2) FURNITURE AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION
Furniture and equipment consists of the following as of December 31, 1999
and 1998:
1999 1998
--------- ---------
Computer equipment $ 279,399 262,973
Furniture and office equipment 142,446 141,427
--------- ---------
421,845 404,400
Less accumulated depreciation (381,369) (333,158)
--------- ---------
$ 40,476 71,242
========= =========
Depreciation expense for 1999 and 1998 was $48,211 and $69,281,
respectively.
(3) LINE OF CREDIT
The Company established a line of credit with a financial institution
that provides for maximum borrowings of $1,000,000 until September 10,
2000. Interest was payable monthly on the outstanding principal balance
at a variable rate of the bank's base rate plus 0.75%. On March 1, 2000,
the line of credit was repaid and closed in connection with the
acquisition by an affiliate of Technisource, Inc. (Technisource) (note
9).
(CONTINUED)
7
<PAGE>
PRISM GROUP COMPANIES
Notes to Combined Financial Statements
December 31, 1999 and 1998
This line of credit was secured by substantially all of the assets of the
Company and it was personally guaranteed by the members of the Company.
(4) NOTES PAYABLE TO BANK
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Note payable to bank, secured by all assets of the Company and the
personal guarantee of the members, with monthly principal payments
of $2,667, and bearing interest at 1.5% over the bank's prime rate,
through December 12, 2001 $ 20,000 60,000
Note payable to bank, secured by all assets of the Company and the
personal guarantee of the members, with monthly principal payments
of $1,403, and bearing interest at 1.5% over the bank's prime rate,
through June 12, 2001 25,259 42,099
Note payable to bank, secured by all assets of the Company and the
personal guarantee of the members, with monthly principal payments
of $3,333, and bearing interest at 1.5% over the bank's prime rate,
through June 12, 2000 64,000 96,000
--------- ---------
109,259 198,099
Less current maturities (109,259) (88,840)
--------- ---------
$ -- 109,259
========= =========
</TABLE>
On March 1, 2000, all notes payable to bank were repaid in conjunction
with the sale of the Company's assets and certain liabilities to
Technisource (note 9).
(5) EMPLOYEE BENEFIT PLAN
The Company has a contributory 401(k) plan with a profit sharing
provision (the Plan), which covers all employees who have met the Plan's
service requirement. Employees may contribute tax-free a discretionary
amount of their annual earnings not to exceed limitations established by
the Internal Revenue Service. Employer profit sharing contributions are
discretionary. Employer profit sharing contributions to the Plan were $0
and $65,311 in 1999 and 1998, respectively.
(CONTINUED)
8
<PAGE>
PRISM GROUP COMPANIES
Notes to Combined Financial Statements
December 31, 1999 and 1998
(6) LEASE COMMITMENTS
The Company leases office space in San Francisco under a noncancelable
operating lease agreement expiring March 31, 2002. The following is a
schedule by years of future minimum rental payments required under
operating leases that have noncancelable lease terms in excess of one
year as of December 31, 1999:
Year ending December 31:
2000 $127,846
2001 127,846
2002 31,962
--------
$287,654
========
Rent expense for years ended December 31, 1999 and 1998 was $126,144 and
$121,433, respectively.
(CONTINUED)
9
<PAGE>
PRISM GROUP COMPANIES
Notes to Combined Financial Statements
December 31, 1999 and 1998
(7) REPORTABLE SEGMENTS
The Company operates in two business segments: (i) permanent information
technology placement services, and (ii) temporary information technology
staffing services. 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.
YEARS ENDED DECEMBER 31,
------------------------
1999 1998
---------- ----------
Segment net income:
Temporary staffing $1,002,108 367,080
Permanent placements 124,098 184,432
---------- ----------
Total segment net income $1,126,206 551,512
========== ==========
Revenues:
Temporary staffing $8,860,614 7,132,976
Permanent placements 964,048 1,120,276
---------- ----------
Total revenues $9,824,662 8,253,252
========== ==========
Interest expense:
Temporary staffing $ 51,154 53,081
Permanent placements 581 --
---------- ----------
Total interest expense $ 51,735 53,081
========== ==========
Furniture and equipment:
Temporary staffing $ 187,093 176,949
Permanent placements 234,752 227,451
---------- ----------
Total furniture and equipment $ 421,845 404,400
========== ==========
Depreciation expense:
Temporary staffing $ 29,378 42,111
Permanent placements 18,833 27,170
---------- ----------
Total depreciation expense $ 48,211 69,281
========== ==========
(CONTINUED)
10
<PAGE>
PRISM GROUP COMPANIES
Notes to Combined Financial Statements
December 31, 1999 and 1998
(8) BUSINESS AND CREDIT CONCENTRATIONS
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 had substantially greater financial,
technical, and marketing resources and greater name recognition than the
Company.
The Company provides IT staffing services to customers located in the
greater San Francisco Bay area. Future operations may be affected by the
Company's ability to retain these clients and employees 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.
Trade accounts receivable are not normally collateralized. Two customers
(Pacific Gas & Electric and The Gap) individually accounted for 18% of
revenues and the five largest customers (Pacific Gas & Electric, The Gap,
Triton Container, Next Level and Wells Fargo Bank) accounted for 57% of
revenues in 1999.
Historically, the loss of a significant customer has not had a material
adverse effect on the Company's financial condition or results of
operations; however, given the significant amount of revenues derived
from these customers, the loss of any such customer or the
uncollectibility of related receivables could have a material adverse
effect on the Company's future financial condition and results of
operations.
(9) SUBSEQUENT EVENT
On March 1, 2000, substantially all of the assets and certain liabilities
were acquired by an affiliate of Technisource for approximately
$3,750,000 cash and a promissory note in the amount of $1,000,000 which
matures February 28, 2001. The purchase price is subject to adjustment
upon certain conditions pursuant to the purchase agreement.
In connection with the acquisition of the Company, the Company was
required, under the terms of the purchase agreement by and between an
affiliate of Technisource and the Company, to pay off all outstanding
debt. As such, all outstanding debt of the Company was repaid in March
2000 by the Company.
11
<PAGE>
Item 7(b). Pro Forma Financial Information
<PAGE>
Introduction to Unaudited Pro Forma Financial Statements
The following unaudited pro forma combined financial statements give effect to
the acquisition by Technisource, Inc. ("Technisource") of substantially all of
the assets and certain liabilities of Prism Group, LLC, a California limited
liability company ("Prism Group") and Prism Group Consulting, LLC, a California
Limited liability company (Prism Group Consulting"), (collectively "PRISM") on
March 1, 2000 (the "Acquisition"). The Acquisition was accounted for under the
purchase method of accounting.
The unaudited pro forma combined balance sheet gives effect to the Acquisition
as if it had occurred on December 31, 1999. The unaudited pro forma combined
statements of operations give effect to these transactions as if they had
occurred on January 1, 1999. The unaudited pro forma combined statements of
operations reflect the operating results of Technisource and Prism for the year
ended December 31, 1999.
Prior to the Acquisition, PRISM incurred certain overhead costs and other
expenses. Accordingly, the unaudited pro forma combined financial statements
include such overhead costs and other expenses. Technisource has performed a
preliminary analysis of the savings that it expects to realize from reductions
in redundant operations and elimination of certain corporate overhead
allocations. Technisource has not and cannot quantify these savings until
completion of the integration of PRISM.
The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what
Technisource's financial position or results of operations would actually have
been if such acquisition had occurred on those dates and are not necessarily
representative of Technisource's financial position or results of operations for
any future period. Since the companies were not under common control or
management, historical combined results may not be comparable to, or indicative
of, future performance. The unaudited pro forma combined financial statements
should be read in conjunction with other financial statements and notes thereto
included elsewhere herein and in Technisource's Form 10-K for the fiscal year
ended December 31, 1999 on file with the Securities and Exchange Commission.
<PAGE>
Unaudited Pro Forma Combined Balance Sheet
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------------------
HISTORICAL
------------------------- PRO FORMA PRO FORMA
TECHNISOURCE PRISM ADJUSTMENTS COMBINED
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $17,353,780 476,934 -- 17,830,714
Trade accounts receivable, net 18,558,024 1,238,567 -- 19,796,591
Due from shareholders and employees 348,606 -- -- 348,606
Prepaid expenses and
other current assets 613,669 -- -- 613,669
Prepaid income taxes 415,350 -- -- 415,350
Deferred tax asset, current 453,011 -- -- 453,011
----------- --------- --------- ----------
Total current assets 37,742,440 1,715,501 -- 39,457,941
Property and equipment, net 2,353,570 40,476 -- 2,394,046
Other assets 360,340 9,665 -- 370,005
Deferred tax asset, noncurrent 128,148 -- -- 128,148
Goodwill -- -- 4,277,886 4,277,886
----------- --------- --------- ----------
Total assets $40,584,498 1,765,642 4,277,886 46,628,026
=========== ========= ========= ==========
Current liabilities:
Accounts payable $ 369,199 52,613 -- 421,812
Accrued liabilities 3,609,392 388,240 852,675 4,850,307
Line of credit -- 971,737 2,778,263 3,750,000
Notes payable, current -- 109,259 (109,259)
----------- --------- --------- ----------
Total current liabilities 3,978,591 1,521,849 3,521,679 9,022,119
Note payable, long-term -- -- 1,000,000 1,000,000
----------- --------- --------- ----------
Total liabilities 3,978,591 1,521,849 4,521,679 10,022,119
Shareholders equity:
Common stock 103,850 -- -- 103,850
Additional paid-in capital 30,129,248 -- -- 30,129,248
Retained earnings 6,522,809 -- -- 6,522,809
Less: Treasury stock (150,000) -- -- (150,000)
Members Equity -- 243,793 (243,793) --
----------- --------- --------- ----------
Total shareholders equity 36,605,907 243,793 (243,793) 36,605,907
----------- --------- --------- ----------
Total liabilities
and shareholder' equity $40,584,498 1,765,642 4,277,886 46,628,026
=========== ========= ========= ==========
</TABLE>
See accompanying notes to unaudited pro forma combined balance sheet.
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
------------------------------------------------------------
PRO FORMA PRO FORMA
TECHNISOURCE PRISM ADJUSTMENTS COMBINED
------------ --------- -------- -----------
<S> <C> <C> <C> <C>
Revenues:
IT Staffing $120,539,780 9,824,662 -- 130,364,442
Hardware sales 24,114,451 -- -- 24,114,451
------------ --------- -------- -----------
144,654,231 9,824,662 -- 154,478,893
Cost of revenues:
IT Staffing 89,695,848 6,551,559 -- 96,247,407
Hardware sales 21,831,880 -- -- 21,831,880
------------ --------- -------- -----------
Gross profit 33,126,503 3,273,103 -- 36,399,606
Selling, general and
administrative expenses 28,394,562 2,095,162 285,000 30,774,724
------------ --------- -------- -----------
Operating income 4,731,941 1,177,941 (285,000) 5,624,882
Other income (expense):
Interest and other income 895,872 -- (43,777) 852,095
Interest expense (58,898) (51,735) (309,713) (420,346)
------------ --------- -------- -----------
Income before taxes 5,568,915 1,126,206 (638,490) 6,056,631
Provisions for income taxes 2,338,943 -- 204,542 2,543,485
------------ --------- -------- -----------
Net income $ 3,229,972 1,126,206 (843,032) 3,513,146
============ ========= ======== ===========
Net income per share basic $ 0.31 $ 0.34
============ ===========
Net income per share--
diluted $ 0.31 $ 0.33
============ ===========
Weighted average
common shares
outstanding--basic 10,368,542 10,368,542
============ ===========
Weighted average
common shares
outstanding--diluted 10,523,575 10,523,575
============ ===========
</TABLE>
See accompanying notes to unaudited pro forma combined statement of operations.
<PAGE>
NOTE 1 GENERAL
The historical financial statements reflect the financial position
and results of operations of Technisource and PRISM. The periods
included in these pro forma combined financial statements are as of
December 31, 1999 and for year ended December 31, 1999. The audited
historical financial statements of Technisource have been
previously filed on Form 10K and the audited financial statements
of PRISM as of and for the years ended December 31, 1999 and 1998
are included elsewhere in this Form 8-K/A.
NOTE 2 ACQUISITION OF ASSETS
On March 1, 2000 (the "Closing Date"), TSRC.net, Inc., a Florida
corporation ("TSRC.net") and a wholly-owned subsidiary of
Technisource, Inc. (the "Company"), completed the purchase of
substantially all of the assets of PRISM Group, LLC, a California
limited liability company ("PRISM Group") and PRISM Group
Consulting, LLC, a California limited liability company ("PRISM
Group Consulting)", pursuant to the terms of an Asset Purchase
Agreement dated as of March 1, 2000 among PRISM Group, PRISM Group
Consulting, the Gus Gonzalez and Nancy E. Agatiello Revocable
Inter-Vivos Trust, Barbara S. Berk, Nancy Agatiello and TSRC.net
(the "Purchase Agreement"). PRISM Group and PRISM Group Consulting
are referred to herein as "Sellers."
Pursuant to the terms of the Purchase Agreement, the assets
acquired by TSRC.net include: (i) all of Sellers' cash and cash
equivalents; (ii) all of Sellers' receivables existing as of the
Closing Date, including all trade account receivables arising from
the provision of services, sale of inventory, notes receivable and
insurance proceeds receivable; (iii) all of Sellers' furniture,
motor vehicles, computer hardware and software, equipment, supplies
and other fixed assets, (iv) all of Sellers' business as a going
concern; (v) all of Sellers' licenses and permits; (vi) all of
Sellers' contracts; (vii) all of Sellers' insurance policies;
(viii) all of Sellers' franchises and their right, title and
interest in and to the use of their corporate names and derivatives
or combinations of such names and in and to intellectual property,
including all rights to sue for past infringement; (ix) all of
Sellers' causes of action, judgments, claims and demands of
whatever nature; (x) all of Sellers' rights of offset and credits
of all kinds; (xi) all of Sellers' files, papers, books and
records, including customers' lists and all other data relating to
the contracts, assets, businesses or properties being acquired by
TSRC.net; (xii) Sellers' books of account and related accounting
records and Sellers' accounts payable, payroll processing and
general accounting systems; and (xiii) all other assets, businesses
and properties of Sellers.
The purchase price for the assets consisted of cash consideration
of $3,750,000, which will be adjusted by the difference between the
Sellers' adjusted net worth on the Closing Date and $500,000; the
assumption of certain liabilities of Sellers in the amount of
approximately $687,000; and the delivery by TSRC.net of a
promissory note in the principal amount of $1,000,000, which is due
on February 28, 2001 and bears interest at the rate of 6.45 percent
per annum until maturity. As of the Closing Date, the adjustment to
the purchase price will approximate $850,000.
<PAGE>
TECHNISOURCE, INC.
Notes to Unaudited Pro Forma Combined Financial Statements
NOTE 3 UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
The following table summarizes unaudited pro forma combined balance
sheet adjustments:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------------
PRO FORMA
(A) (B) ADJUSTMENTS
----------- --------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ -- -- --
Trade accounts receivable -- -- --
Due from shareholders and employees -- -- --
Prepaid expenses and other current assets -- -- --
Prepaid income taxes -- -- --
Deferred tax asset, current -- -- --
----------- --------- ---------
Total current assets -- -- --
Property and equipment, net -- -- --
Other assets -- -- --
Deferred tax asset, noncurrent -- -- --
Goodwill (1,324,789) 5,602,675 4,277,886
----------- --------- ---------
Total assets $(1,324,789) 5,602,675 4,277,886
=========== ========= =========
Current liabilities:
Accounts payable $ -- -- --
Accrued liabilities -- 852,675 852,675
Line of credit (971,737) 3,750,000 2,778,263
Note payable, current (109,259) -- (109,259)
----------- --------- ---------
Total current liabilities (1,080,996) 4,602,675 3,521,679
Note payable, long-term -- 1,000,000 1,000,000
----------- --------- ---------
Total liabilities (1,080,996) 5,602,675 4,521,679
Shareholders equity:
Common stock $ -- -- --
Additional paid-in capital -- -- --
Retained earnings -- -- --
Less: Treasury stock -- -- --
Members' equity (243,793) -- (243,793)
----------- --------- ---------
Total shareholders equity (243,793) -- (243,793)
----------- --------- ---------
Total liabilities and
shareholders' equity $(1,324,789) 5,602,675 4,277,886
=========== ========= =========
</TABLE>
(A) Reflects the elimination of assets, liabilities and members' equity of
PRISM which were not acquired or assumed by Technisource.
(B) Reflects the payment of $3,750,000, delivery of a promissory note in the
principal amount of $1,000,000, and the estimated purchase price adjustment
of $852,675.
<PAGE>
TECHNISOURCE, INC.
Notes to Unaudited Pro Forma Combined Financial Statements
NOTE 4 UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS
The following table summarizes the unaudited pro forma combined
statement of operations adjustments:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------------
PRO FORMA
(A) (B) (C) (D) ADJUSTMENTS
--------- -------- -------- ------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
IT Staffing $ -- -- -- -- --
Hardware sales -- -- -- -- --
--------- -------- -------- ------- --------
-- -- -- -- --
Cost of revenues:
IT Staffing -- -- -- -- --
Hardware sales -- -- -- -- --
--------- -------- -------- ------- --------
Gross profit -- -- -- -- --
Selling, general and
administrative expenses -- 285,000 -- -- 285,000
--------- -------- -------- ------- --------
Operating income -- (285,000) -- -- (285,000)
Other income (expense):
Interest and other income (43,777) -- -- -- (43,777)
Interest expense (309,713) -- -- -- (309,713)
--------- -------- -------- ------- --------
Income before taxes (353,490) (285,000) -- -- (638,490)
Provisions for income taxes -- -- 473,007 (268,465) 204,542
--------- -------- -------- ------- --------
Net income $(353,490) (285,000) (473,007) 268,465 (843,032)
========= ======== ======== ======= ========
</TABLE>
(A) Reflects the net interest expense impact of the purchase price including
interest expense on the amount financed at prevailing rates, foregone
interest income on the cash portion of purchase price not financed at
prevailing rates and the amortization of debt issue costs, for the
respective periods shown.
(B) Reflects the amortization of goodwill recorded as a result of the
Acquisition over the estimated useful life of 15 years.
(C) Reflects the additional provision for federal and state income taxes at the
effective income tax rate as if PRISM had been taxed as a C corporation
beginning January 1, 1999.
(D) Reflects federal and state income taxes relating to the other statement of
operations adjustments at a combined statutory rate of 42%.
<PAGE>
EXHIBIT INDEX
Exhibit 2.1 Asset Purchase Agreement, dated as of March 1, 2000, among
PRISM Group, LLC, PRISM Group Consulting, LLC, Gus Gonzalez
and Nancy E. Agatiello Revocable Inter-Vivos Trust, Barbara S.
Berk, Nancy E. Agatiello and TSRC.net, Inc. (Previously
filed).
Exhibit 23.1 Consent of Independent Certified Public Accountants
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Technisource, Inc.:
We consent to the incorporation herein by reference in the registration
statement (No. 333-66787) on Form S-8 of Technisource, Inc. of our report dated
April 14, 2000, with respect to the combined balance sheets of the PRISM Group
Companies as of December 31, 1999 and 1998 and the related combined statements
of income, members' equity, and cash flows for each of the years in the two-year
period ended December 31, 1999, which report appears in the Current Report on
Form 8-K/A of Technisource, Inc. dated March 1, 2000.
KPMG LLP
San Francisco, California
May 11, 2000
