<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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):
January 3, 2000
PERFICIENT, INC.
(Exact name of Registrant as specified in Charter)
Delaware 001-15169 74-2853258
-------------------------- ------------- ---------------
(State or other Juris- (Commission (IRS Employer
diction of Incorporation) File Number) Identification
No.)
7600-B North Capital of Texas Highway
Suite 220
Austin, Texas 78731
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (512) 306-7337
--------------
Not Applicable
--------------------------------------------------------------
(Former Name and Former Address, if Changed Since Last Report)
<PAGE> 2
This Amendment No. 1 to Form 8-K amends and supplements the Form 8-K dated
January 3, 2000 filed with the Securities and Exchange Commission on January 14,
2000 relating to the acquisition by Perficient, Inc. ("Perficient") of LoreData,
Inc. This Amendment No. 1 contains the information referred to in Item 7 of the
Form 8-K. However, since the initial filing of the Form 8-K on January 14, 2000,
Perficient has entered into a definitive Agreement and Plan of Merger with
Perficient Compete, Inc., Compete, Inc. and the Shareholders of Compete dated
February 16, 2000. Although the merger of Compete with Perficient has not been
consummated, it is substantially likely. Therefore, the pro forma financial
information contained herein, which gives effect to the acquisition of LoreData,
also gives effect to the proposed merger of Compete with Perficient.
Accordingly, this Amendment No. 1 to Form 8-K also includes audited financial
information of Compete.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
See Index to Financial Statements and Pro Forma Financial
Information below.
(b) Pro Forma Financial Information.
See Index to Financial Statements and Pro Forma Financial
Information below.
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
23.3 Consent of Ernst & Young, LLP
</TABLE>
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
PERFICIENT, INC.
Dated: March 17, 2000 By:/s/ John A. Hinners
--------------------
Name: John A. Hinners
Title: Chief Financial Officer
3
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Contents
<S> <C>
FINANCIAL STATEMENTS FOR PERFICIENT, INC.
Report of Independent Auditors............................................................................ F-1
Balance Sheets............................................................................................ F-2
Statements of Operations.................................................................................. F-3
Statements of Stockholders' Equity........................................................................ F-4
Statements of Cash Flows.................................................................................. F-5
Notes to Financial Statements............................................................................. F-6
FINANCIAL STATEMENTS FOR LOREDATA, INC.
Report of Independent Auditors............................................................................ F-17
Balance Sheets............................................................................................ F-18
Statements of Operations.................................................................................. F-19
Statements of Stockholders' Equity........................................................................ F-20
Statements of Cash Flows.................................................................................. F-21
Notes to Financial Statements............................................................................. F-22
FINANCIAL STATEMENTS FOR COMPETE, INC.
Report of Independent Auditors............................................................................ F-27
Balance Sheets............................................................................................ F-28
Statements of Operations.................................................................................. F-30
Statements of Stockholders' Equity........................................................................ F-31
Statements of Cash Flows.................................................................................. F-32
Notes to Financial Statements............................................................................. F-33
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
Balance Sheets............................................................................................ FF-1
Notes to Balance Sheets................................................................................... FF-3
Statements of Operations.................................................................................. FF-4
Notes to Statements of Operations......................................................................... FF-6
Corporative Per Share Data................................................................................ FF-7
</TABLE>
<PAGE> 5
Report of Independent Auditors
The Board of Directors
Perficient, Inc.
We have audited the accompanying balance sheets of Perficient, Inc. (the
"Company"), as of December 31, 1998 and 1999, and the related statements of
operations, stockholders' equity and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Perficient, Inc. at December
31, 1998 and 1999, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States.
Austin, Texas
February 21, 2000
Ernst & Young, LLP
F-1
<PAGE> 6
Perficient, Inc.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1999
-------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $22,996 $5,818,918
Accounts receivable 164,961 563,334
Other assets - 142,422
Income tax receivable - 10,916
-------------------------------
Total current assets 187,957 6,535,590
Computer equipment:
Hardware 46,442 69,442
Software 6,471 41,783
Furniture and fixtures - 3,415
-------------------------------
52,913 114,640
Accumulated depreciation (10,863) (33,813)
-------------------------------
Net property and equipment 42,050 80,827
===============================
Total assets $230,007 $6,616,417
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $18,640 $165,176
Income tax payable 19,219 -
Accrued liabilities 12,639 199,150
-------------------------------
Total current liabilities 50,498 364,326
Deferred income tax 1,350 -
-------------------------------
Total liabilities 51,848 364,326
Commitments and contingencies
Stockholders' equity:
Common Stock, $0.001 par value; 20,000,000
shares authorized; 2,000,000 and
3,503,333 shares issued and outstanding at
December 31, 1998 and 1999, respectively 2,000 3,503
Additional paid-in capital 148,000 7,777,392
Unearned stock compensation, net of $76,000 in
amortization for the
year ended December 31, 1999 - (152,000)
Retained earnings (deficit) 28,159 (1,376,804)
-------------------------------
Total stockholders' equity 178,159 6,252,091
===============================
Total liabilities and stockholders' equity $230,007 $6,616,417
===============================
</TABLE>
See accompanying notes.
F-2
<PAGE> 7
Perficient, Inc.
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1999
----------------------------
<S> <C> <C>
Consulting revenue $825,800 $3,154,936
Cost of consulting revenue 400,977 1,541,389
----------------------------
Gross margin 424,823 1,613,547
Selling, general and administrative 357,014 2,197,560
Stock compensation - 956,000
Interest expense - 13,380
Interest income - (127,518)
----------------------------
Income (loss) before income tax 67,809 (1,425,875)
Income tax benefit (expense) (27,581) 20,912
------------------------------
Net income (loss) $40,228 $(1,404,963)
==============================
------------------------------
Net income (loss) per share - basic and diluted $0.02 $(0.47)
==============================
</TABLE>
See accompanying notes.
F-3
<PAGE> 8
Perficient, Inc.
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
ADDITIONAL UNEARNED RETAINED TOTAL
COMMON STOCK PAID-IN STOCK EARNINGS STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION (DEFICIT) EQUITY
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock at inception 1,000,000 $1,000 $ 49,000 $ - $ - $ 50,000
Net loss - - - - (12,069) (12,069)
-----------------------------------------------------------------------------------
Balance at December 31, 1997 1,000,000 1,000 49,000 - (12,069) 37,931
Issuance of common stock 1,000,000 1,000 99,000 - - 100,000
Net income - - - - 40,228 40,228
-----------------------------------------------------------------------------------
Balance at December 31, 1998 2,000,000 2,000 148,000 - 28,159 178,159
Issuance of common stock 1,503,333 1,503 7,401,392 - - 7,402,895
Unearned compensation - - 228,000 (228,000) - -
Amortization of unearned compensation
- - - 76,000 - 76,000
Net loss - - - - (1,404,963) (1,404,963)
-----------------------------------------------------------------------------------
Balance at December 31, 1999 3,503,333 $3,503 $7,777,392 $(152,000) $(1,376,804) $ 6,252,091
===================================================================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 9
Perficient, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1999
----------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 40,228 $(1,404,963)
Adjustments to reconcile net income (loss) to net
cash used in operating
activities:
Depreciation 10,530 22,950
Non-cash stock compensation - 956,000
Gain from disposal of fixed assets (822) -
Deferred income taxes 8,362 (1,350)
Changes in operating assets and liabilities:
Accounts receivable (164,961) (398,373)
Other assets 911 (142,422)
Income tax receivable - (10,916)
Accounts payable 18,640 146,536
Income tax payable 19,219 (19,219)
Accrued liabilities 12,639 186,511
----------------------------
Net cash used in operating activities (55,254) (665,246)
INVESTING ACTIVITIES
Purchase of property and equipment (47,870) (61,727)
Proceeds from disposal of fixed assets 5,596 -
----------------------------
Net cash used in investing activities (42,274) (61,727)
FINANCING ACTIVITIES
Proceeds from line of credit 35,000 802,673
Payments on line of credit (35,000) (802,673)
Proceeds from stock issuances 100,000 6,522,895
----------------------------
Net cash provided by financing activities 100,000 6,522,895
----------------------------
Increase in cash 2,472 5,795,922
Cash at beginning of year 20,524 22,996
----------------------------
Cash at end of year $ 22,996 $ 5,818,918
============================
Supplemental noncash financing activities:
January 12, 1999 issuance of 500,000 common
shares in exchange for shareholder receivable $ - $ 250,000
============================
</TABLE>
See accompanying notes.
F-5
<PAGE> 10
Perficient, Inc.
Notes to Financial Statements
December 31, 1999
(Information subsequent to December 31, 1999 is unaudited)
1. BUSINESS OVERVIEW
Perficient, Inc. (the "Company") works with Internet software companies by
providing them a professional services organization to implement and integrate
the software products. The Company effectively operates as an internal services
organization. The Company was incorporated on September 17, 1997 in Texas. The
Company began operations in 1997 and is structured as a "C" corporation. On May
3, 1999 the Company reincorporated in Delaware.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Consulting revenues are comprised of revenue from consulting fees recognized on
a time and material basis as performed.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. Advertising cost for the years
ended December 31, 1998 and December 31, 1999 were immaterial to the financial
statements.
F-6
<PAGE> 11
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation on property and
equipment is computed using the straight-line method over the estimated useful
lives, which is three years.
SEGMENTS
The Company considers its business activities as a single segment.
STOCK BASED COMPENSATION
Financial Accounting Standards Board Statement No. 123, Accounting for Stock
Based Compensation (FAS 123), prescribed accounting and reporting standards for
all stock-based compensation plans, including employee stock options. As allowed
by FAS 123, the Company has elected to account for its employee stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, (APB 25).
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued FAS 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by FAS 137 which is effective for fiscal years
beginning after June 15, 2000. This statement requires companies to record
derivatives on the balance sheet as assets or liabilities measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. FAS 133 will be effective for the Company's year
ended December 31, 2001. Management believes that this statement will not have a
material impact on the Company's financial position or results of operations.
F-7
<PAGE> 12
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
101), which provides guidance on the recognition, presentation and disclosure of
revenue in financial statements. The application of SAB 101 did not have a
material impact on the financial statements of the Company.
In March 1999, the FASB issued an exposure draft entitled "Accounting for
Certain Transactions involving Stock Compensation," which is a proposed
interpretation of APB 25. However, the exposure draft has not been finalized.
Once finalized and issued, the current accounting practices for transactions
involving stock compensation may need to change and such changes could affect
the Company's future operating results.
3. NET INCOME (LOSS) PER SHARE
The Company follows the provisions of SFAS No. 128, Earnings Per Share. Basic
net income (loss) per share is computed by dividing net income (loss) available
to common stockholders by the weighted-average number of common shares
outstanding during the period. Net income per share, assuming dilution, includes
the effect of dilutive potential common stock issuable upon exercise of stock
options using the treasury stock method.
Diluted net loss per share has not been presented for the year ended December
31, 1999, as the effect of the assumed exercise of stock options and warrants is
antidilutive due to the Company's net loss. Total common stock equivalents not
included in diluted net loss per share amounted to 251,750 common stock
equivalents.
F-8
<PAGE> 13
3. NET INCOME (LOSS) PER SHARE (CONTINUED)
Computations of the net income (loss) per share for the year ended December 31,
1999 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1999
--------------------------------
<S> <C> <C>
Numerator:
Income (loss) from continuing operations - numerator for basic
earnings per share $ 40,228 $ (1,404,963)
Denominator:
Denominator for basic earnings per share - weighted-average shares
1,750,000 3,000,556
Effect of dilutive securities:
Stock options 124,000 --
--------------------------------
Denominator for diluted earnings per share - adjusted
weighted-average shares and assumed conversions 1,874,000 3,000,556
===============================
Basic earnings per share $ 0.02 $ (0.47)
===============================
Diluted earnings per share $ 0.02 $ (0.47)
===============================
</TABLE>
4. CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Cash and accounts receivable potentially expose the Company to concentrations of
credit risk. Excess cash is placed with highly rated financial institutions. The
Company provides credit, in the normal course of business, to its customers. The
Company performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses. The Company generally requires certain
up-front payments from customers, and customers can be denied access to services
in the event of non-payment. One customer accounted for approximately 100% and
97% of accounts receivable and 91% and 96% of revenues at December 31, 1998 and
1999, and for the years then ended, respectively.
F-9
<PAGE> 14
5. EMPLOYEE BENEFIT PLAN
The Company has a qualified 401(k) profit sharing plan available to full-time
employees who meet the plan's eligibility requirements. This defined
contribution plan permits employees to make contributions up to maximum limits
allowed by Internal Revenue Code. The Company, at its discretion, matches a
portion of the employee's contribution under a predetermined formula based on
the level of contribution and years of vesting services. No contributions were
made to the plan in 1998 or 1999. The Company's related costs for the plan
during 1998 and 1999 were $1,750 and $1,564, respectively.
6. STOCK OPTIONS
Pro forma information regarding net income is required by SFAS 123, Accounting
for Stock Based Compensation, which also requires that the information be
determined as if the Company had accounted for its employee stock options
granted under the fair value method prescribed by SFAS 123. The fair value for
these options was estimated at the date of grant using the Black-Scholes pricing
model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31 1998 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Risk-free interest rate 6.00% 6.00%
Dividend yield 0.00% 0.00%
Weighted-average expected life of options 5 years 5 years
Expected volatility .65 .622
</TABLE>
The Company has granted stock options to various employees under the terms of
the respective employee agreements. The stock options generally vest over three
years. The term of each option is ten years from the date of grant.
At December 31, 1998 the Company did not reserve common stock for future
issuance and no options were designated as being available for future grants. At
December 31, 1999, 2,150,000 shares of common stock were reserved for future
issuance and 1,651,666 options were available for future grants.
F-10
<PAGE> 15
6. STOCK OPTIONS (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma compensation expense and net income (loss) is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1999
---------------------------
<S> <C> <C>
Pro forma compensation expense $ 7,266 $ 63,748
Pro forma net income (loss) $ 32,962 $ (1,468,711)
Pro forma earnings per share - basic
and diluted $ 0.02 $ (0.49)
</TABLE>
A summary of changes in common stock options during 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
RANGE OF AVERAGE
EXERCISE EXERCISE
SHARES PRICES PRICE
------------------------------------
<S> <C> <C> <C>
Options outstanding at December 31, 1997 80,000 $0.05 - 0.60 $ 0.53
====================================
Options vested, December 31, 1997 556 0.05 - 0.60 0.53
====================================
Options granted 249,000 0.05 - 0.50 0.40
Options exercised - - -
Options canceled (56,667) 0.60 0.40
------------------------------------
Options outstanding at December 31, 1998 272,334 0.05 - 0.60 0.40
====================================
Options vested, December 31, 1998 50,222 0.05 - 0.60 0.38
====================================
Options granted 272,000 0.05 - 8.12 4.25
Options exercised (3,333) 0.20 0.20
Options canceled (42,667) 0.20 - 8.12 3.74
====================================
Options outstanding at December 31, 1999 498,334 0.05 - 8.12 2.22
====================================
Options vested, December 31, 1999 197,667 $0.05 - 8.12 1.95
====================================
</TABLE>
F-11
<PAGE> 16
6. STOCK OPTIONS (CONTINUED)
The following summarizes information related to stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- --------------------------------
WEIGHTED
AVERAGE
RANGE OF WEIGHTED REMAINING WEIGHTED
EXERCISE PRICES AVERAGE CONTRACTUAL AVERAGE
OPTIONS EXERCISE PRICE LIFE OPTIONS EXERCISE PRICE
- --------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
$0.05 - $ 0.60 372,334 $0.44 8.69 Years 157,667 $0.42
3.50 16,000 3.50 9.25 Years - -
7.50 - 8.125 110,000 8.06 9.68 Years 40,000 8.00
-------------------------------------------- --------------------------------
$0.05 - $8.125 498,334 $2.22 8.92 Years 197,667 $1.95
=========================== ================================
</TABLE>
At December 31, 1998 and 1999, the weighted-average remaining contractual life
of outstanding options was 9.54 years and 8.92 years, respectively.
The weighted-average grant-date fair value of options granted is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1999
-----------------------------
<S> <C> <C>
Granted at market prices $ 0.40 $ 1.60
Granted at below market prices $ - $ 5.40
</TABLE>
F-12
<PAGE> 17
7. LINE OF CREDIT
On July 1, 1999, the Company entered into an agreement with a bank to borrow up
to $1,000,000 against qualified accounts receivables with full recourse. Under
the contract, the bank shall purchase the accounts receivable under the
following terms: 80% of the balance is remitted at the sale date, the rest is
remitted upon receipt of the balance due from the customer less finance and
administrative fees charged by the bank. The agreement has a one-year term and
borrowings under the agreement bear interest at the banks' prime rate. In
connection with this agreement, the Company issued warrants to the bank to
purchase 3,750 shares at the initial public offering price of $8 per share. As
the effect of the warrants are not material to the financial statements, the
Company has not discounted the line of credit to separately account for the
warrants.
8. INCOME TAXES
As of December 31, 1999, the Company had tax net operating loss carryforwards of
approximately $274,000 that will begin to expire in 2019 if not utilized.
Utilization of net operating losses may be subject to an annual limitation due
to the "change in ownership" provisions of the Internal Revenue Code of 1986.
The annual limitation may result in the expiration of net operating losses
before utilization.
Significant components of the provision for income taxes attributable to
continuing operations are as follows:
<TABLE>
<CAPTION>
1998 1999
---------------------
<S> <C> <C>
Current:
Federal $17,661 $(17,661)
State 1,558 (1,558)
---------------------
Total current 19,219 (19,219)
---------------------
Deferred:
Federal 7,684 (1,583)
State 678 (110)
---------------------
Total deferred 8,362 (1,693)
---------------------
$27,581 $(20,912)
=====================
</TABLE>
F-13
<PAGE> 18
8. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred taxes as of December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
----------------------
<S> <C> <C>
Deferred tax liabilities:
Depreciable assets $(6,292) $ (9,985)
----------------------
Total deferred tax liabilities (6,292) (9,985)
----------------------
Deferred tax assets:
Tax carryforwards - 101,265
Bad debt - 25,181
Stock Compensation - 28,121
Accrued liabilities and other 4,942 17,364
----------------------
Total deferred tax assets 4,942 171,931
Valuation allowance for deferred tax assets - (161,946)
----------------------
Net deferred tax assets 4,942 9,985
----------------------
Net deferred taxes $(1,350) $ -
======================
</TABLE>
The Company has established a valuation allowance equal to the net deferred tax
assets due to uncertainties regarding the realization of deferred tax assets
based on the Company's lack of earnings history. The valuation allowance
increased by approximately $162,000 during 1999.
F-14
<PAGE> 19
8. INCOME TAXES (CONTINUED)
The Company's provision for income taxes differs from the expected tax expense
(benefit) amount computed by applying the statutory federal income tax rate of
34% to income before income taxes as a result of the following:
<TABLE>
<CAPTION>
1998 1999
---------------------
<S> <C> <C>
Tax at statutory rate of 34% $23,057 $(472,897)
State taxes, net of federal benefit 1,653 (14,798)
Stock based compensation - 299,200
Permanent items 2,288 5,638
Change in valuation allowance - 161,945
Other 583 -
---------------------
$27,581 $ (20,912)
=====================
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
The Company leases equipment under an operating lease that expires in 2000.
Future lease commitments are as follows:
<TABLE>
<S> <C>
2000 $ 84,606
2001 116,208
2002 70,878
---------
Total $ 271,692
=========
</TABLE>
In addition, the Company has entered into a sublease with a related party for
office rent. The agreement is month-to-month. For the years ended December 31,
1998 and 1999, the Company recorded rent expense of $16,707 and $88,666,
respectively.
10. YEAR 2000 COMPLIANCE (UNAUDITED)
Prior to January 1, 2000, there was concern regarding the ability of computers
to adequately distinguish 21st century dates from 20th century dates due to the
two-digit field used by many systems. However, the Company has not encountered
any problems with its internal and financial reporting systems and believes that
its systems will continue to be operable beyond the Year 2000.
11. SUBSEQUENT EVENTS
On January 3, 2000, the Company acquired LoreData, Inc., a Connecticut
corporation, and merged LoreData, Inc. into a wholly-owned subsidiary,
Perficient Acquisition Corp., a Delaware corporation. Perficient Acquisition
Corp. is the surviving corporation to the merger and will continue under the
name, "Perficient LoreData, Inc." LoreData, Inc. was a 17 person internet
professional services firm based in New London, CT. The Company acquired
LoreData for an aggregate purchase price of (i) $385,000 in cash that was paid
at closing, (ii) 30,005 shares of common stock, also paid at closing, and (iii)
131,709 shares of common stock that are being held in escrow for disposition by
the escrow agent in accordance with an Escrow Agreement dated as of January 3,
2000.
On January 14, 2000 the Board of Directors authorized an additional 1,100,000
shares of Common Stock to be available under the Company's Stock Option/Stock
Issuance Plan. An additional 50,000 shares of Common Stock were authorized and
added to the Plan on February 14, 2000.
F-15
<PAGE> 20
11. SUBSEQUENT EVENTS (CONTINUED)
On February 7, 2000, the Company completed an $8.1 million private placement of
common stock. The Company intends to use the proceeds from the private placement
to further accelerate its previously announced acquisition program and for other
corporate purposes. A total of 400,000 shares of common stock were issued and
sold by the Company, resulting in gross proceeds to the Company of $5.6 million.
The private placement was priced at $14 per share. Gilford Securities
Incorporated acted as placement agent in connection with the private placement.
On February 16, 2000, the Company entered into an Agreement and Plan of Merger
with Compete Inc. ("Compete"), Perficient Compete, Inc., and the shareholders of
Compete. The aggregate purchase price of Compete consists of (i) $3,500,000 in
cash, (ii) $2,527,500 in promissory notes to be repaid within six months
following the closing, (iii) 2,200,000 shares of common stock, of which
1,100,000 shares are subject to adjustment and (iv) the assumption of Compete,
Inc.'s outstanding employee options. The closing of the acquisition of Compete
is conditioned upon, among other things, obtaining the consent of Perficient's
stockholders. Accordingly, there can be no assurance that the acquisition will
be completed.
F-16
<PAGE> 21
Report of Independent Auditors
The Board of Directors
LoreData, Inc.
We have audited the accompanying balance sheets of LoreData, Inc. (the
"Company"), as of December 31, 1998 and 1999, and the related statements of
operations, stockholders' equity and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of LoreData, Inc. at December 31,
1998 and 1999, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States.
Austin, Texas
February 17, 2000
Ernst & Young, LLP
F-17
<PAGE> 22
LoreData, Inc.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1999
-----------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 17,204 $ -
Accounts receivable 158,012 128,148
-----------------------
Total current assets 175,216 128,148
Property and equipment
Computer equipment 31,410 91,534
Software 7,807 18,439
Furniture and fixtures 2,919 4,819
-----------------------
42,136 114,792
Accumulated depreciation (6,761) (35,535)
-----------------------
Net property and equipment 35,375 79,257
Other assets 1,455 2,729
-----------------------
Total assets $ 212,046 $ 210,134
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,229 $ 33,279
Accrued liabilities 50,103 34,015
Note payable to related party, current portion - 3,922
Obligation under line of credit 30,000 39,854
-----------------------
Total current liabilities 109,332 111,070
Note payable to related party, less current portion - 48,968
-----------------------
Total liabilities 109,332 160,038
Commitments and contingencies
Stockholders' equity:
Common stock, no par value; 20,000 shares authorized; 100
shares issued and outstanding at December 31, 1998 and
1999, respectively 1,000 1,000
Additional paid-in capital 12,668 12,668
Note receivable from stockholder - (53,828)
Retained earnings 89,046 90,256
-----------------------
Total stockholders' equity 102,714 50,096
-----------------------
Total liabilities and stockholders' equity $ 212,046 $ 210,134
=======================
</TABLE>
See accompanying notes.
F-18
<PAGE> 23
LoreData, Inc.
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1999
------------------------
<S> <C> <C>
Total revenue $290,409 $1,348,480
Cost of consulting revenue 151,527 968,584
------------------------
Gross margin 138,882 379,896
Selling, general and administrative 49,586 371,421
Interest expense - 7,265
------------------------
Net income $ 89,296 $ 1,210
========================
</TABLE>
See accompanying notes.
F-19
<PAGE> 24
LoreData, Inc.
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL NOTE RECEIVABLE RETAINED TOTAL
--------------- SUBSCRIPTION PAID-IN FROM EARNINGS STOCKHOLDERS'
SHARES AMOUNT RECEIVABLE CAPITAL STOCKHOLDER (DEFICIT) EQUITY
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 - $1,000 $ (1,000) $ - $ - $ (250) $ (250)
Issuance of common stock 100 - 1,000 - - - 1,000
Capital contribution - - - 12,668 - - 12,668
Net income - - - - - 89,296 89,296
---------------------------------------------------------------------------------------------
Balance at December 31, 1998 100 1,000 - 12,668 - 89,046 102,714
Issuance of stockholder note - - - - (53,828) - (53,828)
Net income - - - - - 1,210 1,210
---------------------------------------------------------------------------------------------
Balance at December 31, 1999 100 $1,000 $ - $ 12,668 $ (53,828) $ 90,256 $ 50,096
=============================================================================================
</TABLE>
See accompanying notes.
F-20
<PAGE> 25
LoreData, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1999
------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 89,296 $ 1,210
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 6,761 28,774
Legal fees paid as consideration for capital 2,668 -
Changes in operating assets and liabilities:
Accounts receivable (158,012) 29,864
Other assets (1,455) (1,274)
Accounts payable 28,979 4,050
Accrued liabilities 50,103 (16,088)
------------------------
Net cash provided by operating activities 18,340 46,536
INVESTING ACTIVITIES
Purchase of property and equipment (42,136) (72,656)
------------------------
Net cash used in investing activities (42,136) (72,656)
FINANCING ACTIVITIES
Proceeds from line of credit 30,000 20,000
Payments on line of credit - (10,146)
Payments on related party note payable - (938)
Proceeds from contributed capital 10,000 -
Proceeds from stock issuance 1,000 -
------------------------
Net cash provided by financing activities 41,000 8,916
------------------------
Change in cash 17,204 (17,204)
Cash at beginning of year - 17,204
========================
Cash at end of year $ 17,204 $ -
========================
Supplemental noncash financing activities:
Issuance of note receivable to stockholder $ - $ 53,828
========================
Issuance of note payable to related party $ - $ 53,828
========================
</TABLE>
See accompanying notes.
F-21
<PAGE> 26
LoreData, Inc.
Notes to Financial Statements
December 31, 1999
1. BUSINESS OVERVIEW
LoreData, Inc. (the "Company") offers Internet systems development, architecture
and implementation services, to companies in a wide array of industries. The
Company was incorporated on December 17, 1997 in Connecticut, at which time it
began operations, and is structured as an "S" corporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE RECOGNITION
Consulting revenues are comprised of revenue from consulting fees recognized on
a time and material basis as performed.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. Advertising cost for the years
ended December 31, 1998 and December 31, 1999 were $13,562 and $14,819,
respectively.
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") 130, Reporting Comprehensive Income,
which requires that an enterprise report, by major components and as a single
total, the change in its net assets during the period from nonowner sources. The
Company adopted SFAS 130 during the year ended December 31, 1998. There was no
accumulated other comprehensive gain or loss during 1998 or 1999.
F-22
<PAGE> 27
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation on property and
equipment is computed using the straight-line method over the estimated useful
lives, which is three to seven years.
INCOME TAXES
The Company has elected to be treated as a Subchapter S corporation under the
Internal Revenue Code of 1986, as amended, whereby federal income taxes are the
responsibility of the individual shareholders. The Company is subject to state
income taxes. Accordingly, the Company provides for state income taxes based on
statutory rates.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Financial Accounting Standards ("FAS") 133,
Accounting for Derivative Instruments and Hedging Activities, as amended by FAS
137 which is effective for fiscal years beginning after June 15, 2000. This
statement requires companies to record derivatives on the balance sheet as
assets or liabilities measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. FAS 133
will be effective for the Company's year ended December 31, 2001. Management
believes that this statement will not have a material impact on the Company's
financial position or results of operations.
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"), which provides guidance on the recognition, presentation and disclosure
of revenue in financial statements. The application of SAB 101 did not have a
material impact on the financial statements of the Company.
F-23
<PAGE> 28
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In March 1999, the FASB issued an exposure draft entitled "Accounting for
Certain Transactions involving Stock Compensation," which is a proposed
interpretation of APB 25. However, the exposure draft has not been finalized.
Once finalized and issued, the current accounting practices for transactions
involving stock compensation may need to change and such changes could affect
the Company's future operating results.
3. CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Cash and accounts receivable potentially expose the Company to concentrations of
credit risk. Excess cash is placed with highly rated financial institutions. The
Company provides credit, in the normal course of business, to its customers. The
Company performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses. One customer accounted for approximately
29% and 44% of accounts receivable and 60% and 53% of revenues at December 31,
1998 and 1999, and for the years then ended, respectively.
4. EMPLOYEE BENEFIT PLAN
On January 1, 1999, the Company adopted a qualified simple profit sharing plan
for all full time employees who received a specified amount in any given year.
Eligible employees may elect to contribute to the plan based up to certain
amounts specified in the plan. The Company, at its discretion, matches 3% of
employee contributions up to $6,000 per year. Employer contributions to the plan
in 1999 were $14,182. No administrative costs were incurred in conjunction with
the plan in 1999.
5. LINE OF CREDIT
The Company has a revolving line of credit with a financial institution that
provides maximum borrowings of $50,000 with interest payable at prime plus 1.5%
(9.25% and 10.00% at December 31, 1998 and 1999, respectively). The line matures
on October 31, 2000 and is guaranteed by the primary stockholder. At December
31, 1998 and 1999, the Company had borrowings against the line of $30,000 and
$39,854, respectively.
F-24
<PAGE> 29
6. COMMITMENTS AND CONTINGENCIES
The Company leases equipment and facilities under operating leases that expire
ratably through 2002. Future lease commitments are as follows:
<TABLE>
<S> <C>
2000 $ 16,226
2001 7,084
2002 1,181
------------
Total $ 24,491
============
</TABLE>
For the years ended December 31, 1998 and 1999, the Company recorded lease
expense of $2,478 and $27,363, respectively. During 1999, approximately $5,000
in lease expense was paid on an operating lease for an automobile used by a
shareholder and officer of the Company.
7. RELATED PARTY TRANSACTIONS
During 1998, the Company paid approximately $141,000 in subcontracted labor fees
to a related-party company which shares common ownership with the Company.
During 1999, the shareholders of the related-party company discontinued
operations and the Company hired certain employees of the related-party.
On September 1, 1999 the Company's shareholders entered into an agreement
whereby one of the shareholders sold 100% of his common stock to the remaining
shareholder for $150,000 in consideration. Consideration consists of a note
payable and guaranteed retainer fees.
In conjunction with this agreement, the Company obligated itself to pay the note
to the former shareholder. The note bears interest of 7% and specifies for
monthly payments of $625 through September 2009. At December 31, 1999 the
remaining note balance was $52,896. Future minimum commitments under this
agreement are as follows:
<TABLE>
<S> <C>
2000 $ 3,922
2001 4,206
2002 4,509
2003 4,836
2004 5,126
</TABLE>
F-25
<PAGE> 30
7. RELATED PARTY TRANSACTIONS (CONTINUED)
In conjunction with the agreement, the Company also issued a note receivable to
the existing shareholder. The note bears 7% interest and is to be paid by the
existing shareholder in monthly installments of $625 through September 2009. At
December 31, 1999 the remaining note balance was $53,828.
During 1999, the Company paid approximately $55,000 to a former shareholder for
consulting services performed on behalf of the Company.
8. YEAR 2000 Compliance (Unaudited)
Prior to January 1, 2000, there was concern regarding the ability of computers
to adequately distinguish 21st century dates from 20th century dates due to the
two-digit field used by many systems. However, the Company has not encountered
any problems with its internal and financial reporting systems and believes that
its systems will continue to be operable beyond the Year 2000.
9. SUBSEQUENT EVENTS
On January 3, 2000, the Company was acquired by way of merger with Perficient
Acquisition Corp., a Delaware corporation. Perficient Acquisition Corp. is the
surviving corporation to the merger and will continue under the name,
"Perficient LoreData, Inc." Perficient acquired LoreData for an aggregate
purchase price of (i) $385,000 in cash that was paid at closing, (ii) 30,005
shares of Perficient common stock, par value $0.001 per share, also paid at
closing, and (iii) 131,709 shares of Perficient common stock that are being held
in escrow for disposition by the escrow agent in accordance with an Escrow
Agreement dated as of January 3, 2000.
F-26
<PAGE> 31
Report of Independent Auditors
The Board of Directors
Compete, Inc.
We have audited the accompanying balance sheets of Compete, Inc. (the
"Company"), as of December 31, 1998 and 1999, and the related statements of
operations, stockholders' equity and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Compete, Inc. at December 31,
1998 and 1999, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States.
Austin, Texas
February 19, 2000
Ernst & Young, LLP
F-27
<PAGE> 32
Compete, Inc.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1999
-----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 84,194 $ 43,172
Accounts receivable, net of allowance for doubtful accounts of
$10,000 and $19,616 in 1998 and 1999 1,035,368 1,149,214
-----------------------------
Total current assets 1,119,562 1,192,386
Property and equipment:
Computer equipment 279,607 360,991
Software 14,183 87,364
Office equipment 58,995 93,248
-----------------------------
352,785 541,603
Accumulated depreciation (167,333) (296,070)
-----------------------------
Net property and equipment 185,452 245,533
Goodwill, net of accumulated amortization of $5,000 and $35,000 at
December 31, 1998 and 1999 85,000 55,000
Other assets 5,391 8,724
-----------------------------
Total assets $ 1,395,405 $ 1,501,643
=============================
</TABLE>
F-28
<PAGE> 33
Compete, Inc.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1999
------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued liabilities $ 251,299 $ 128,968
Accrued payroll 110,794 50,892
Income tax payable 2,175 855
Deferred income tax 9,920 14,375
Deferred revenue 11,950 20,360
Short-term borrowings 315,100 400,000
Note payable to shareholder 54,133 -
Current portion of lease obligation 47,080 99,757
------------------------------
Total current liabilities 802,451 715,207
Lease obligation, net of current portion 79,948 119,515
------------------------------
Total liabilities 882,399 834,722
Stockholders' equity:
Common stock, no par value; 3,000,000 and 3,600,000
shares authorized; 2,700,000 and 2,634,668 shares
issued and outstanding at December 31, 1998 and
1999, respectively
21,300 20,495
Less cost of common stock held in treasury, 300,000
shares in 1998 and 365,332 shares in 1999 (200,300) (243,696)
Additional paid-in capital 2,000 4,595,413
Unearned stock compensation - (4,593,413)
Retained earnings 690,006 888,122
------------------------------
Total stockholders' equity 513,006 666,921
------------------------------
Total liabilities and stockholders' equity $ 1,395,405 $ 1,501,643
==============================
</TABLE>
See accompanying notes.
F-29
<PAGE> 34
Compete, Inc.
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1999
-----------------------------
<S> <C> <C>
Revenue $ 4,181,458 $ 6,643,577
Cost of consulting revenue 2,626,430 4,087,063
-----------------------------
Gross margin 1,555,028 2,556,514
Selling, general and administrative 973,525 2,149,642
Interest and other 13,711 53,694
-----------------------------
Income before income tax 567,792 353,178
Income tax expense (8,710) (3,135)
-----------------------------
Net income $ 559,082 $ 350,043
=============================
</TABLE>
See accompanying notes.
F-30
<PAGE> 35
Compete, Inc.
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNEARNED TOTAL
--------------------- PAID-IN STOCK TREASURY RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION STOCK EARNINGS EQUITY
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997
(Unaudited) 3,000,000 $ 24,000 $ 2,000 $ - $ - $ 203,374 $ 229,374
Purchase of treasury stock (300,000) (2,700) - - (200,300) - (203,000)
Stockholder distribution - - - - - (72,450) (72,450)
Net income - - - - - 559,082 559,082
---------------------------------------------------------------------------------------------
Balance at December 31, 1998 2,700,000 21,300 2,000 - (200,300) 690,006 513,006
Purchase of treasury stock (215,332) (805) - - (144,896) - (145,701)
Net income - - - - - 350,043 350,043
Issuance stock dividend 150,000 - - - 101,500 (101,500) -
Deferred stock compensation - - 4,593,413 (4,593,413) - - -
Stockholder distribution - - - - - (50,427) (50,427)
---------------------------------------------------------------------------------------------
Balance at December 31, 1999 2,634,668 $ 20,495 $ 4,595,413 $ (4,593,413) $(243,696) $ 888,122 $ 666,921
=============================================================================================
</TABLE>
See accompanying notes.
F-31
<PAGE> 36
Compete, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1999
-----------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 559,082 $ 350,043
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 86,878 158,737
Deferred income tax 6,535 4,455
Changes in operating assets and liabilities:
Accounts receivable (676,736) (113,846)
Other assets (986) (3,333)
Accrued liabilities 174,863 (122,331)
Accrued payroll 54,260 (59,902)
Income tax payable 2,175 (1,320)
Deferred revenue 11,950 8,410
-----------------------------
Net cash provided by operating activities 218,021 220,913
INVESTING ACTIVITIES
Purchase of property and equipment (21,014) (24,085)
Acquisition (100,000) -
-----------------------------
Net cash used in investing activities (121,014) (24,085)
FINANCING ACTIVITIES
Proceeds from issuance of debt 1,258,100 1,733,000
Payments on debt (1,033,000) (1,648,100)
Principle payments under capital lease obligations (32,516) (72,489)
Payments of shareholder distribution (72,450) (50,427)
Purchase of treasury stock (148,867) (199,834)
-----------------------------
Net cash provided by financing activities (28,733) (237,850)
-----------------------------
Increase in cash 68,274 (41,022)
Cash at beginning of year 15,920 84,194
-----------------------------
Cash at end of year $ 84,194 $ 43,172
=============================
Supplemental noncash activities:
Purchase of treasury stock with note payable to shareholder
$ 54,133 $ -
=============================
Property and equipment acquired under capital lease obligations
$ 110,952 $ 164,733
=============================
</TABLE>
See accompanying notes.
F-32
<PAGE> 37
Compete, Inc.
Notes to Financial Statements
December 31, 1999
(Information subsequent to December 31, 1999 is unaudited)
1. BUSINESS OVERVIEW
Compete, Inc. ("the Company") offers Internet systems development and
architecture services, implementation services, and education to companies in a
wide array of industries throughout the United States and New Zealand. The
Company was incorporated on October 7, 1994 in Illinois, at which time it began
operations, and is structured as an "S" Corporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Consulting revenues are comprised of revenue from consulting fees and are
recognized on a time and material basis as performed.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. Advertising cost for years
ended December 31, 1998 and December 31, 1999 was $14,375 and $13,321,
respectively.
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") 130, Reporting Comprehensive Income.
The Company adopted SFAS 130 during the year ended December 31, 1998. There was
no impact to the Company as a result of the adoption of SFAS 130, as there was
no difference between net loss and comprehensive loss.
F-33
<PAGE> 38
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL
Goodwill is carried at the lower of unamortized cost or fair value. Management
reviews the valuation and amortization of goodwill on a periodic basis, taking
into consideration any events or circumstances which may result in diminished
fair value. Goodwill is amortized using the straight line method over their
estimated life which has been determined to be three years. During 1998 and
1999, the Company incurred approximately $5,000 and $30,000 in amortization
expense, respectively.
INCOME TAXES
The Company has elected to be treated as a Subchapter S corporation under the
Internal Revenue Code of 1986, as amended, whereby federal income taxes are the
responsibility of the individual shareholders. The Company is subject to state
income taxes. Accordingly, the Company provides for state income taxes based on
statutory rates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation on property and
equipment is computed using the straight-line method over the estimated useful
lives, which is three years.
SEGMENTS
Effective January 1, 1998, the Company adopted the FASB's SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information. The
adoption of SFAS 131 did not have a significant effect on the disclosure of
segment information as the Company continues to consider its business activities
as a single segment.
F-34
<PAGE> 39
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK BASED COMPENSATION
Financial Accounting Standards Board Statement No. 123, Accounting for Stock
Based Compensation ("FAS 123"), prescribed accounting and reporting standards
for all stock-based compensation plans, including employee stock options. As
allowed by FAS 123, the Company has elected to account for its employee
stock-based compensation in accordance with Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees ("APB 25").
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued FAS 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by FAS 137, which is effective for fiscal years
beginning after June 15, 2000. This statement requires companies to record
derivatives on the balance sheet as assets or liabilities measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. FAS 133 will be effective for the Company's year
ended December 31, 2001. Management believes that this statement will not have a
material impact on the Company's financial position or results of operations.
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"), which provides guidance on the recognition, presentation and disclosure
of revenue in financial statements. The application of SAB 101 did not have a
material impact on the financial statements of the Company.
In March 1999, the FASB issued an exposure draft entitled "Accounting for
Certain Transactions involving Stock Compensation," which is a proposed
interpretation of APB 25. However, the exposure draft has not been finalized.
Once finalized and issued, the current accounting practices for transactions
involving stock compensation may need to change and such changes could affect
the Company's future operating results.
F-35
<PAGE> 40
3. CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Cash and accounts receivable potentially expose the Company to concentrations of
credit risk, as defined by SFAS 105, Disclosure of Information about Financial
Instruments with Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risk. Excess cash is placed with highly rated financial
institutions. The Company provides credit, in the normal course of business, to
its customers. The Company performs ongoing credit evaluations of its customers
and maintains allowances for potential credit losses. At December 31, 1998 and
1999, three customers accounted for approximately 60% of revenues and 24% of
accounts receivable, and 57% of revenue and 54% of accounts receivable,
respectively.
4. EMPLOYEE BENEFIT PLAN
During 1998, the Company created a qualified 401(k) profit sharing plan
available to full-time employees who meet the plan's eligibility requirements.
This defined contribution plan permits employees to make contributions up to
maximum limits allowed by Internal Revenue Code. The Company, at its discretion,
matches a portion of the employee's contribution under a predetermined formula
based on the level of contribution and years of vesting service. During 1998 and
1999, the Company made contributions to the plan totaling $9,500 and $26,700,
respectively.
5. STOCK OPTIONS
Pro forma information regarding net income is required by SFAS 123, Accounting
for Stock Based Compensation, which also requires that the information be
determined as if the Company had accounted for its employee stock options
granted under the fair value method prescribed by SFAS 123. The fair value for
these options was estimated at the date of grant using the Black-Scholes pricing
model with the following weighted-average assumptions:
<TABLE>
<S> <C>
Risk-free interest rate 7.00%
Dividend yield 0.00%
Weighted-average expected life of options 2.5 years
Expected volatility .65
</TABLE>
F-36
<PAGE> 41
5. STOCK OPTIONS (CONTINUED)
The Company has granted stock options to various employees under the terms of
the respective employee agreements. The stock options generally vest over
two-to-four years. The term of each option is ten years from the date of grant.
At December 31, 1998, the Company did not reserve common stock for future
issuance and no options were designated as being available for future grants. At
December 31, 1999, 750,000 shares of common stock were reserved for future
issuance and 184,652 options were available for future grants.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma compensation expense and net income is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1999
<S> <C> <C>
Pro forma compensation expense $ 156 $ 210,153
Pro forma net income $ 558,926 $ 139,890
</TABLE>
A summary of changes in common stock options during 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
RANGE OF AVERAGE
EXERCISE EXERCISE
SHARES PRICES PRICES
--------------------------------------
<S> <C> <C> <C>
Options outstanding December 31, 1997 - $ - $ -
--------------------------------------
Options granted 60,000 - 0.02
Options exercised - - -
Options canceled - - -
--------------------------------------
Options outstanding, December 31, 1998 60,000 $ 0.02 $ 0.02
Options granted 505,348 $3.01 - $3.31 3.03
Options exercised - - -
Options canceled - - -
======================================
Options outstanding, December 31, 1999 565,348 $0.02 - $3.31 $ 2.71
======================================
</TABLE>
5. STOCK OPTIONS (CONTINUED)
At December 31, 1998 and 1999, the weighted-average remaining contractual life
of outstanding options was 9.03 years and 9.79 years, respectively. The
weighted-average grant-date fair value of options granted during 1998 and 1999
was approximately $0.02 and $12.12 per share, respectively. No options were
vested as of December 31, 1998 or 1999.
F-37
<PAGE> 42
6. LINE OF CREDIT
During 1998 and 1999, the Company continued to borrow funds under an existing
line of credit agreement with a financial institution. The agreement allowed for
borrowings up to $500,000 and $750,000 at December 31, 1998 and 1999
respectively, which are secured by all assets of the Company. The line of credit
bears interest at the financial institution's prime rate plus one percent, which
was 8.75% at December 1998 and 1999. Interest is due monthly until the line
matures on June 30, 2000. At December 1998 and 1999, the Company had outstanding
balances under the line of credit approximating $315,000 and $400,000
respectively.
7. COMMITMENTS AND CONTINGENCIES
The Company leases its principle office under a noncancelable operating lease
agreement that expires in September 2001. Rental expense for all operating
leases was approximately $61,362 and $125,000 for the years ended December 31,
1998 and 1999, respectively.
F-38
<PAGE> 43
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
As of December 31, 1999, minimum lease payments under all noncancelable lease
agreements were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING LEASES
LEASES
---------------------------------
<S> <C> <C>
2000 $ 128,978 $ 147,321
2001 95,846 121,048
2002 29,721 29,764
2003 4,730 8,169
2004 - 6,127
---------------------------------
Total minimum lease payments $ 259,275 $ 312,429
===========
Less amount representing interest 40,003
------------
Present value of minimum lease payments 219,272
Less current portion 99,757
------------
Long-term capital lease obligation $ 119,515
============
</TABLE>
In December 1999, the Company entered into capital lease agreements for
equipment that was received subsequent to year end. The present value of the
future minimum lease commitment related to these capital leases are
approximately $45,000. The leases will expire in January 2002.
As of December 31, 1998 and 1999, the Company held approximately $129,000 (net
of $41,000 in accumulated depreciation) and $212,000 (net of $122,000 in
accumulated depreciation) in fixed asset acquired under capital leases.
8. ACQUISITION
On November 13, 1998, the Company acquired Visual Software Integrations, Inc.
("VSI") for $100,000. The consideration was allocated between computer equipment
and goodwill. As a condition of the acquisition, the Company entered into
employment agreements with the former owners of VSI which specified bonus
payments contingent
F-39
<PAGE> 44
8. ACQUISITION (CONTINUED)
upon the successful retention of certain former VSI employees. During 1999, the
Company recognized expense of $100,000 relating to these agreements. Should
future retention goals be met, the Company could potentially be liable for an
additional $100,000.
9. INCOME TAXES
The stockholders elected to have the Company treated as a S Corporation under
the Internal Revenue Code. Accordingly, the Company does not pay federal
corporate tax on its income. The Company's stockholders include their pro rata
share of the Company's taxable income in their individual income tax returns. It
is the intent of the Company to provide distribution to its stockholders in
amounts that are at least sufficient to cover the tax effect that results from
the Company's taxable income being included in the stockholders' individual
income tax returns.
The Company is subject to state income taxes in certain states which do not
recognize S Corporation status. The Company accounts for such state income taxes
using the liability method in accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. Under this method, deferred tax
assets and liabilities are determined based upon differences between financial
reporting and tax basis of assets and liabilities. At December 31, 1999 and
1998, deferred taxes resulted primarily from differences between the book basis
and tax basis of accounts receivable, accounts payable, and other accrued
liabilities.
F-40
<PAGE> 45
10. Year 2000 Compliance (Unaudited)
Prior to January 1, 2000, there was concern regarding the ability of computers
to adequately distinguish 21st century dates from 20th century dates due to the
two-digit field used by many systems. However, the Company has not encountered
any problems with its internal and financial reporting systems and believes that
its systems will continue to be operable beyond the Year 2000.
11. SUBSEQUENT EVENTS
ACQUISITION OF COMPETE, INC.
On February 16, 2000, the shareholders of the Company entered into an Agreement
and Plan of Merger with Perficient, Inc. ("Perficient"). The aggregate purchase
price to be paid by Perficient consists of (i) $3,500,000 in cash, (ii)
$2,527,500 in promissory notes to be received within six months following the
closing, (iii) 2,200,000 shares of Perficient common stock, of which 1,100,000
shares are subject to adjustment and iv) the assumption of the Company's
outstanding employee options. The closing of the acquisition of the Company is
conditioned upon, among other things, obtaining the consent of Perficient's
stockholders. Accordingly, there can be no assurance that the acquisition will
be completed.
F-41
<PAGE> 46
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
THE FOLLOWING UNAUDITED PRO FORMA DATA GIVES EFFECT TO THE MERGER AS IF
ALL SUCH TRANSACTIONS HAD BEEN CONSUMMATED ON DECEMBER 31, 1999 IN THE CASE OF
BALANCE SHEET DATA AND JANUARY 1, 1999 WITH RESPECT TO FINANCIAL DATA AND
OPERATIONS DATA. THE PRO FORMA INFORMATION GIVES EFFECT TO THE MERGER UNDER THE
PURCHASE METHOD OF ACCOUNTING AND TO THE ASSUMPTIONS AND ADJUSTMENTS DESCRIBED
IN THE ACCOMPANYING NOTES TO THE PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS.
THE PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS ARE BASED ON THE
HISTORICAL FINANCIAL STATEMENTS OF PERFICIENT, LOREDATA AND COMPETE AND THEIR
RELATED NOTES THERETO INCLUDED ELSEWHERE HEREIN. THESE PRO FORMA STATEMENTS ARE
PRESENTED FOR INFORMATIONAL PURPOSES ONLY AND MAY NOT NECESSARILY BE INDICATIVE
OF THE RESULTS THAT ACTUALLY WOULD HAVE OCCURRED HAD THE MERGER BEEN CONSUMMATED
AT THE DATES INDICATED, NOR ARE THEY NECESSARILY INDICATIVE OF FUTURE OPERATING
RESULTS OR FINANCIAL POSITION.
<TABLE>
<CAPTION>
PERFICIENT INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 1999
Perficient LoreData Compete Adjustments Pro Forma
------------ ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash $5,818,918 $0 $43,172 ($385,000) (a)
(3,500,000) (b)
5,317,000 (c)
(366,638) (d)
(150,000) (e)
(77,000) (f) $6,700,452
Accounts receivable, net 563,334 128,148 1,149,214 -- 1,840,696
Other assets 142,422 -- -- -- 142,422
Income tax receivable 10,916 -- -- -- 10,916
----------------------------------------------------------------------------
Total current assets 6,535,590 128,148 1,192,386 838,362 8,694,486
Property and equipment 114,640 114,792 541,603 (35,535) (g)
(296,070) (h) 439,430
Accumulated depreciation (33,813) (35,535) (296,070) 35,535 (i)
296,070 (j) (33,813)
Goodwill, net -- -- 90,000 58,498,826 (k)
2,352,472 (l)
(90,000) (m)
55,000 (n) 60,906,298
Accumulated amortization -- -- (35,000) 35,000 (o) 0
Other assets -- 2,729 8,724 -- 11,453
----------------------------------------------------------------------------
Total assets $6,616,417 $210,134 $1,501,643 $61,689,660 $70,017,854
============================================================================
Liabilities and stockholders' equity
Liabilities
Current liabilities:
Accounts payable $165,175 $33,279 $164,558 $ -- $363,013
Short term borrowings 0 43,776 400,000 2,415,690 (p)
107,810 (q) 2,971,276
</TABLE>
FF-1
<PAGE> 47
<TABLE>
<S> <C> <C> <C> <C> <C>
Other current liabilities 199,150 34,015 150,649 -- 383,814
----------------------------------------------------------------------------
Total current liabilities 364,326 111,070 715,207 2,527,500 3,718,103
Note payable to related party,
less current portion -- 48,968 -- -- 48,968
Capital lease obligation -- -- 119,515 -- 119,515
----------------------------------------------------------------------------
Total liabilities 364,326 160,038 834,722 2,527,500 3,886,586
Stockholders' equity:
Common Stock 3,503 1,000 20,495 2,200 (r)
162 (s)
(1,000) (t)
(20,495) (u)
400 (v)
17 (w) 6,282
Treasury Stock -- -- (243,696) 243,696 (x) 0
Additional paid-in capital 7,777,392 12,668 4,595,413 52,619,392 (y)
1,940,406 (z)
(12,668) (aa)
(4,595,413) (bb)
5,316,600 (cc) 67,653,790
Note receivable from stockholder -- (53,828) -- 53,828 (dd) 0
Unearned stock compensation (152,000) -- (4,593,413) 4,593,413 (ee) (152,000)
Retained earnings (deficit) (1,376,804) 90,256 888,122 (90,256) (ff)
(888,122) (gg) (1,376,804)
----------------------------------------------------------------------------
Total stockholders' equity 6,252,091 50,096 666,921 59,162,160 66,131,268
----------------------------------------------------------------------------
Total liabilities and stockholders'
equity $6,616,417 $210,134 $1,501,643 $61,689,660 $70,017,854
============================================================================
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet
FF-2
<PAGE> 48
PERFICIENT, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The following pro forma adjustments to the unaudited condensed consolidated
balance sheet assume the mergers had been consummated on December 31, 1999.
The LoreData, Inc. and Compete, Inc. acquisitions will be accounted for using
the purchase method. The cost of the acquisition will be allocated to the fair
value of the assets acquired as of the closing dates, January 3, 2000 for
LoreData, and an assumed Effective Date of February 29, 2000 for Compete, based
upon valuations which are not yet complete. Accordingly, the allocations of the
purchase price may change upon completion of the valuation.
Following are the pro forma adjustments referenced in the unaudited condensed
consolidated balance sheet:
<TABLE>
<CAPTION>
LoreData * Compete
------------- -------------
<S> <C> <C>
The estimated acquisition purchase price and preliminary allocations are as
follows:
Purchase price of acquisition $ 2,402,568 $ 59,165,747
============= =============
Net equity of the Acquisitions at December 31, 1999
(book value of net assets):
Common Stock 1,000 (t) 20,495 (u)
Additional paid in capital 12,668 (aa) 4,595,413 (bb)
Note receivable from stockholder (53,828)(dd) --
Unearned stock compensation -- (4,593,413)(ee)
Treasury stock -- (243,696)(x)
Retained earnings 90,256 (ff) 888,122 (gg)
------------- -------------
50,096 666,921
Eliminate intangible assets previously recorded by:
Goodwill -- (90,000)(m)
Accumulated amortization -- 35,000 (o)
Adjustments to record assets at fair value:
Fixed assets (35,535)(g) (296,070)(h)
Accumulated depreciation 35,535 (i) 296,070 (j)
Goodwill 2,352,472 (l) 58,498,826 (k)
Imputed interest on Note payable to Compete shareholders 55,000 (n)
------------- -------------
$ 2,402,568 $ 59,165,747
============= =============
Record cash, note payable and stock for acquisitions:
Cash $ 385,000 (a) $ 3,500,000 (b)
Cash (Broker fee) -- 366,638 (d)
Cash (estimated transaction costs) 77,000 (f) 150,000 (e)
Short term borrowings -- 2,419,690 (p)
Imputed interest payable -- 107,810 (q)
Additional paid in capital 1,940,406 (z) 52,619,392 (y)
Common Stock issued to shareholders of acquisitions 162 (s) 2,200 (r)
Common Stock issued to brokers -- 17 (w)
------------- -------------
$ 2,402,568 $ 59,165,747
============= =============
Record proceeds of February 7, 2000 private placement, on pro forma basis, to
provide cash to complete acquisitions. Perficient sold 400,000 shares for $14
per share and raised $5.3 million, net of costs.
Cash $-- $ 5,317,000(c)
Common stock -- (400)(v)
Additional paid in capital -- (5,316,600)(cc)
</TABLE>
* The references in this column correspond to the references on the Unaudited
Condensed Consolidated Balance Sheet.
** The note payable to Compete shareholders is non-interest bearing.
Interest is imputed using the Company's cost of capital (8.75% as of
February 29, 2000).
FF-3
<PAGE> 49
PERFICIENT, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<CAPTION>
Perficient, Inc. LoreData, Inc. Compete, Inc. Adjustments Pro Forma
---------------- -------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Consulting revenues $ 3,154,936 $ 1,348,480 $ 6,643,577 $ -- $ 11,146,993
Cost of consulting revenues 1,541,389 968,584 4,087,063 -- 6,597,036
----------- ----------- ----------- ------------ ------------
Gross margin 1,613,547 379,896 2,556,514 0 4,549,957
Selling, general and administrative 2,197,560 371,421 2,149,642 107,810 (a) 4,826,433
Stock compensation 956,000 -- -- 956,000
Intangibles amortization -- -- -- 19,463,672 (b)
784,157 (c) 20,247,829
----------- ----------- ----------- ------------ ------------
Income (loss) from operations (1,540,013) 8,475 406,872 (20,355,639) (21,480,305)
Interest income (expense) 114,138 (7,265) (23,694) 83,179
Income (loss) before income taxes (1,425,875) 1,210 383,178 (20,355,639) (21,397,126)
Other expense -- -- 30,000 -- 30,000
Provision (benefit) for income taxes (20,912) -- 3,135 -- (17,777)
----------- ----------- ----------- ------------ ------------
Net Income (loss) ($1,404,963) $ 1,210 $ 350,043 ($20,355,639) ($21,409,349)
=========== =========== =========== ============ ============
</TABLE>
See notes to unaudited pro forma condensed consolidated statement of operations.
FF-4
<PAGE> 50
<TABLE>
<S> <C> <C> <C> <C> <C>
Supplemental Data:
Net income (loss) per share:
Basic and diluted (1) $ (0.47) $ 12.10 $ 0.13 $ -- $ (4.14)
=========== ======= ========== ============ ============
Shares used in computing net
income (loss) per share (2) 3,000,556 100 2,668,952 -- 5,166,138
=========== ======= ========== ============ ============
Diluted supplemental weighted average
shares outstanding -- 100 2,728,696 -- 5,577,380
=========== ======= ========== ============ ============
Supplemental Data:
Net Income (Loss) as reported $(1,404,963) $ 1,210 $ 350,043 $(20,355,639) $(21,409,349)
Non-cash charges (3) 978,950 28,814 158,737 20,247,829 21,414,330
Provision (benefit) for income taxes(4) (20,912) 0 3,135 (3,135) (20,912)
----------- ------- ---------- ------------ ------------
Supplemental net income before non-cash
charges $ (405,101) $30,024 $ 505,645 $ (104,675) $ 25,853
=========== ======= ========== ============ ============
Supplemental net income before non-cash
charges per share - basic $ (0.14) $300.24 $ 0.19 $ -- $ 0.01
=========== ======= ========== ============ ============
Supplemental net income before non-cash
charges per share - diluted $ -- $300.24 $ 0.19 $ -- $ 0.00
=========== ======= ========== ============ ============
</TABLE>
(1) The computation of net loss and diluted supplemental net loss per share
excludes Perficient Common Stock issuable upon exercise of certain employee
stock options, as their effect is antidilutive.
(2) Pro Forma diluted supplemental shares outstanding include estimate of
1,231,709 shares for contingent consideration issuable to certain selling
shareholders under the terms of the merger agreements.
(3) Non-cash charges include stock compensation, amortization of intangible
assets, including Goodwill, and depreciation expense.
(4) Supplemental net income and supplemental income per share data include a tax
provision at an assumed effective rate of 37% for all periods presented.
This information is not necessarily indicative of the results we would have
obtained had we owned and operated these businesses as of the beginning of the
period discussed. We have based these supplemental adjustments on estimates,
available information we deem appropriate.
FF-5
<PAGE> 51
PERFICIENT, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
As of December 31, 1999
The accompanying Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the year ended December 31, 1999 reflect the pro forma
adjustments described below as if the acquisitions occurred on January 1, 1999.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations combine
the historical results of operations of Perficient with those of LoreData and
Compete. The statements reflect the following adjustments:
(a) Represents imputed interest expense on the 6-month Note Payable to
Compete shareholders. The imputed interest is calculated using
Perficient's cost of capital (our bank's prime rate as of February 29,
2000 or 8.75%, the most recent rate available before the date of this
report). The imputed interest expense is charged to income and
reduces Purchased Goodwill.
<TABLE>
<S> <C>
Imputed interest expense on Note payable to Compete
shareholders $107,810
========
</TABLE>
(b) Represents Goodwill amortization associated with the Compete
Acquisition using an assumed amortization period of 3 years and an assumed
price of Perficient stock of $21.50 per share (closing price on February
29, 2000, the most recent price practicable before the date of this
report. The calculation of Goodwill is as follows:
<TABLE>
<S> <C>
Component of purchase price for Compete, Inc.
Cash $ 3,500,000
Note 2,527,500
Stock (2,200,000 shares) 47,300,000
Assumption of Existing Stock Option Plan * 4,954,972
Transaction Broker Fees: 733,275
Estimated acquisition costs (Legal, accounting, etc.) 150,000
------------
Total purchase price 59,165,747
Less: Net assets of Compete, Inc. (666,921)
Less: Imputed interest on Note payable to Compete shareholders (107,810)
------------
Total Goodwill 58,391,016
------------
Goodwill amortization (using 3 year amortization $ 19,463,672
period) ============
</TABLE>
* Assumes the assumption of current outstanding options of Compete. The
cost is measured by the difference in the aggregate exercise price of
all unvested options and the fmv of Perficient common stock of $21.50
on February 29, 2000 per share, the most recent price practicable
before the date of this report.
(c) Represents Goodwill amortization associated with the LoreData
Acquisition using an assumed amortization period of 3 years and the actual
closing price of price of Perficient stock of $12.00 per share on the
Effective Date of January 3, 2000. The calculation of Goodwill is as
follows:
<TABLE>
<S> <C>
Component of Purchase Price for LoreData, Inc.
Cash $ 385,000
Stock (161,714 shares) 1,940,568
Estimated acquisition costs (Legal, accounting, etc.) 77,000
------------
Total purchase price 2,402,568
Less: Net assets of LoreData, Inc. (50,096)
------------
Total Goodwill 2,352,472
------------
Goodwill amortization (using 3 year amortization $ 784,157
period) ============
</TABLE>
FF-6
<PAGE> 52
COMPARATIVE PER SHARE DATA
COMPARATIVE PER SHARE INFORMATION
We have summarized below the income (loss) from continuing operations before
extraordinary items, cash dividends per common share and the book value per
common share data for Perficient and LoreData and Compete on a historical, pro
forma combined and pro forma equivalent basis. We combined historical
consolidated financial information of Perficient, LoreData and Compete using the
purchase method of accounting for business combinations. Each of Perficient,
LoreData and Compete's fiscal year ends on December 31.
The unaudited "pro forma--combined" and the unaudited "pro forma
equivalent--LoreData and Compete" information assumes that the mergers occurred
on January 1, 1999. The unaudited "pro forma combined" information combines the
financial information of Perficient for the fiscal year ended December 31, 1999,
with the financial information of LoreData and Compete for the fiscal year ended
December 31, 1999.
The unaudited "pro forma equivalent--LoreData and Compete" information was
calculated by multiplying the corresponding pro forma combined data by the
exchange ratio of 1,617:1 for LoreData and .78 for Compete. This information
shows how each share of LoreData and Compete common stock would have
participated in net earnings, cash dividends and book value of Perficient if the
merger had been completed at the beginning of the earliest period presented.
However, these amounts do not necessarily reflect future per share levels of net
earnings, cash dividends or book value of Perficient. The following information
which is unaudited comparative and unaudited pro forma per share data is derived
from the historical and unaudited pro forma combined condensed financial
statements of Perficient and LoreData and Compete.
YOU SHOULD READ THE INFORMATION IN THIS SECTION ALONG WITH PERFICIENT,
LOREDATA AND COMPETE'S HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND
ACCOMPANYING NOTES INCLUDED IN THIS PROXY STATEMENT. YOU SHOULD ALSO READ THE
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS AND ACCOMPANYING
DISCUSSION AND NOTES INCLUDED IN THIS PROXY STATEMENT STARTING ON PAGE 30.
AT OR FOR YEAR ENDED
DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PERFICIENT LOREDATA COMPETE PRO FORMA
--------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
HISTORICAL
Basic earnings per common share from continuing
operations $(0.47) $ 12.10 $0.13 --
Diluted earnings per common share from continuing
operations -- $ 12.10 $0.13 --
Cash dividends declared per common share na na na --
Book value per outstanding common share $ 2.08 $500.96 $0.25 --
PRO FORMA--COMBINED
Basic and diluted earnings per common share from
</TABLE>
FF-7
<PAGE> 53
<TABLE>
<S> <C> <C> <C> <C>
continuing operations -- -- -- $ (4.14)
Cash dividends declared per common share -- -- -- na
Book value per outstanding common share -- -- -- $ 12.80
PRO FORMA EQUIVALENT--LOREDATA AND COMPETE
Basic and diluted earnings per common share from
continuing operations -- $(6,702) $ (3.23) --
Cash dividends declared per common share -- na na --
Book value per outstanding common share -- $20,701 $ 9.98 --
Basic supplemental weighted average
shares outstanding 3,000,556 100 2,668,952 5,166,138
Diluted supplemental weighted average
shares outstanding -- 100 2,728,696 5,577,380
</TABLE>
FF-8
<PAGE> 54
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
23.3 Consent of Ernst & Young, LLP
</TABLE>
5
<PAGE> 1
Exhibit 23.3
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 21, 2000 with respect to Perficient, Inc.,
February 17, 2000 with respect to LoreData, Inc. and February 19, 2000 with
respect to Compete, Inc., in the Current Report on Form 8-K/A.
Ernst & Young, LLP
Austin, Texas
March 17, 2000
6
