<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 1, 1999
Braun Consulting, Inc.
----------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 1-15213 36-3702425
------------------------------- --------------- ------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
</TABLE>
<TABLE>
<S> <C>
30 West Monroe, Suite 300, Chicago, Illinois 60603
- -------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number including area code: (312) 984-7000
<PAGE>
The undersigned Registrant hereby amends the following items,
financial statements, exhibits, or other portions of its Current Report on Form
8-K, dated December 1, 1999 and filed with the Securities and Exchange
Commission on December 16, 1999, as set forth in the pages attached hereto.
Item 7. Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
The independent auditors' report and the following financial
statements of Emerging Technologies Consultants, Inc. ("ETCI") are
attached:
Balance Sheets as of December 31, 1998 and September 30, 1999.
Statements of Income for the year ended December 31, 1998 and for
the nine months ended September 30, 1999.
Statements of Stockholders' Equity for the year ended December 31,
1998 and for the nine months ended September 30, 1999.
Statements of Cash Flows for the year ended December 31, 1998 and
for the nine months ended September 30, 1999.
Notes to financial statements.
(b) Pro Forma Financial Information.
The following unaudited pro forma consolidated financial information
of Braun Consulting, Inc. and ETCI are attached:
Unaudited Pro Forma Consolidated Balance Sheet as of September 30,
1999.
Unaudited Pro Forma Consolidated Statement of Income for the year
ended December 31, 1998.
Unaudited Pro Forma Consolidated Statement of Income for the nine
months ended September 30, 1999.
Note to Unaudited Pro Forma Consolidated Finanical Information.
(c) Exhibits.
2.1 Merger Agreement dated as of December 1, 1999 by and among
Braun Consulting, Inc., ETCI Acquisition, Inc., Emerging
Technologies Consultants, Inc. and Helene O. Amster and John D.
Vairo (incorporated by reference to Exhibit 2.1 to the
Registrant's Form 8-K filed December 16, 1999).
99.1 Press Release dated December 3, 1999 (incorporated by reference
to Exhibit 99.1 to the Registrant's Form 8-K filed
December 16, 1999).
2
<PAGE>
Item 7(a)
Independent Auditors' Report
The Board of Directors and Stockholders of
Emerging Technologies Consultants, Inc.:
We have audited the accompanying balance sheets of Emerging
Technologies Consultants, Inc. (the "Company") as of December 31, 1998 and
September 30, 1999 and the related statements of income, stockholders' equity
and cash flows for the year ended December 31, 1998 and the nine months ended
September 30, 1999. 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 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, such financial statements present fairly, in all
material respects, the financial position of Emerging Technologies Consultants,
Inc. as of December 31, 1998 and September 30, 1999 and the results of its
operations and its cash flows for the year ended December 31, 1998 and the nine
months ended September 30, 1999, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Chicago, Illinois
January 10, 2000
3
<PAGE>
EMERGING TECHNOLOGIES CONSULTANTS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
(In thousands, except share data)
ASSETS
<S> <C> <C>
Current assets:
Cash................................................................................ $ 45 $ 99
Accounts receivable................................................................. 335 754
Prepaid expenses and other current assets........................................... 6 152
----- -------
Total current assets............................................................. 386 1,005
Equipment, furniture and software-net (Note 3)........................................ 92 240
Deposits.............................................................................. 6 19
----- -------
Total assets..................................................................... $ 484 $ 1,264
===== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... 49 78
Accrued liabilities................................................................. 22 84
Notes payable (Note 3).............................................................. 158 182
Current portion of capital lease obligations (Note 5)............................... 29 19
----- -------
Total current liabilities........................................................ 258 363
Notes payable-stockholders (Note 4)................................................... 52 52
Long-term obligations, net of current maturities (Note 4)............................. - 50
Capital lease obligations, net of current portion (Note 5)............................ 6 -
Stockholders' equity:
Common stock, Class A voting, $.0001 par value in 1998 and in 1999;
authorized, 10,000,000 shares in 1998 and 1999; issued and
outstanding, 10,000,000 in 1998 and 1999.......................................... 1 1
Common stock, Class B non-voting, no par value; authorized, 700,000
shares in 1999; issued and outstanding, 89,750 in 1999............................ - 729
Unearned deferred compensation (Note 8)............................................. - (326)
Retained earnings................................................................... 167 395
----- -------
Total stockholders' equity....................................................... 168 799
----- -------
Total liabilities and stockholders' equity....................................... $ 484 $ 1,264
===== =======
</TABLE>
See notes to financial statements.
4
<PAGE>
EMERGING TECHNOLOGIES CONSULTANTS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
1998 1999
------------ -------------
(In thousands)
<S> <C> <C>
Consulting services revenues................ $ 2,770 $ 3,436
Costs and expenses:
Project personnel and expenses............. 2,106 2,161
Selling and marketing expenses............. 7 52
General and administrative expenses........ 510 618
Stock compensation......................... - 358
------- -------
Total costs and expenses.................. 2,623 3,189
------- -------
Operating income............................ 147 247
Interest expense-net........................ 33 19
------- -------
Net income.................................. $ 114 $ 228
======= =======
</TABLE>
See notes to financial statements.
5
<PAGE>
EMERGING TECHNOLOGIES CONSULTANTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Common Unearned
Class A Class B Stock, Stock, Deferred Retained
Shares Shares Class A Class B Compensation Earnings Total
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998................ 10,000,000 - $ 1 - - $ 53 $ 54
Net income........................... - - - - - 114 114
---------- ------ --- ----- ----- ----- -----
BALANCE, DECEMBER 31, 1998.............. 10,000,000 - 1 - - 167 168
Issuance of stock options............ - - - $ 684 $(684) - -
Exercise of stock options............ - 89,750 - 45 - - 45
Amortization of deferred
compensation expense............... - - - - 358 - 358
Net income........................... - - - - - 228 228
---------- ------ --- ----- ----- ----- -----
BALANCE, SEPTEMBER 30, 1999............. 10,000,000 89,750 $ 1 $ 729 $(326) $ 395 $ 799
========== ====== === ===== ===== ===== =====
</TABLE>
See notes to financial statements.
6
<PAGE>
EMERGING TECHNOLOGIES CONSULTANTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
1998 1999
------------ -------------
<S> <C> <C>
(In thousands)
Cash flows from operating activities:
Net income................................................................................. $ 114 $ 228
Adjustments to reconcile net income to net cash flows from operating activities:
Compensation expense related to stock options.......................................... - 358
Depreciation and amortization.......................................................... 18 39
Changes in assets and liabilities:
Accounts receivable................................................................ 47 (419)
Prepaid expenses and other current assets.......................................... 14 (146)
Deposits........................................................................... (1) (13)
Accounts payable................................................................... (15) 29
Accrued liabilities................................................................ (47) 62
----- -----
Net cash flows from operating activities......................................... 130 138
Cash flows from investing activities:
Purchase of equipment, furniture and software.............................................. (27) (179)
----- -----
Net cash flows from investing activities......................................... (27) (179)
Cash flows from financing activities:
Borrowings................................................................................. 50 100
Repayments of debt......................................................................... (86) (26)
Principal payments of capital lease obligations............................................ (22) (24)
Exercise of stock options.................................................................. - 45
----- -----
Net cash flows from financing activities......................................... (58) 95
----- -----
Net increase in cash.......................................................................... 45 54
Cash, beginning of period..................................................................... - 45
----- -----
Cash, end of period........................................................................... $ 45 $ 99
===== =====
Supplemental disclosure of cash flow information:
Interest paid.............................................................................. $ 27 $ 21
===== =====
Supplemental disclosure of non-cash investing and financing activities:
Capital lease equipment additions and obligations incurred................................. $ 26 $ 8
===== =====
</TABLE>
See notes to financial statements.
7
<PAGE>
Emerging Technologies Consultants, Inc.
Notes To Financial Statements
Year Ended December 31, 1998 and
Nine Months Ended September 30, 1999
(In thousands, except share data)
1. DESCRIPTION OF BUSINESS
Emerging Technologies Consultants, Inc. (the "Company" or "ETCI") provides
software consulting and training services to businesses.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management's 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 periods. Actual results could differ from those estimates.
Equipment, Furniture and Software-Equipment and furniture are stated at cost
less accumulated depreciation. Depreciation is provided over the estimated
useful lives of the related assets using the double-declining balance method.
Software is stated at cost less accumulated amortization. Equipment under
capital leases is depreciated over the estimated useful lives of the related
assets. The estimated useful lives are:
<TABLE>
<CAPTION>
<S> <C>
Computer and office equipment 3-5 years
Office furniture 7 years
Software 3 years
</TABLE>
Long-Lived Assets-The Company periodically assesses the recoverability of its
long-lived assets based on its expectations of future profitability and
undiscounted cash flow of the related operations. These factors, along with
management's plans with respect to the operations, are considered in assessing
the recoverability of long-lived assets. If the Company determines, based on
such measures, that the carrying amount is impaired, the long-lived assets will
be written down to their recoverable value with a corresponding charge to
income. Recoverable value is calculated as the amount of estimated future cash
flows (discounted at a rate commensurate with the risk involved) for the
remaining amortization period. During the periods presented, no such impairment
was incurred.
Revenue Recognition-The Company maintains agreements with consulting clients
that establish service fees on a fixed-price basis. Revenue is recognized as
services are performed. Out-of-pocket expenses, included in project personnel
and expenses, are net of client expense reimbursements in the accompanying
statements of income. Advance payments on future services are recognized as
deferred revenue.
8
<PAGE>
Stock-Based Compensation-The Company accounts for stock-based compensation
arrangements in accordance with the provision of Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and complies
with the disclosure provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation" as included in
Note 8. Under APB Opinion No. 25, compensation expense is based on the
difference, if any, on the date of the grant, between the fair value of the
Company's stock and the exercise price.
Income Taxes-The Company, with the consent of its stockholders, has elected
to be taxed as an S corporation for federal and state income tax reporting
purposes, which provides that taxable income or loss of the Company is generally
passed through to the individual stockholders. Accordingly, no provision for
such income taxes has been recorded in the accompanying financial statements.
Recent Accounting Pronouncement-In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 is effective for all fiscal quarters of all
fiscal years beginning after June 15, 2000 (January 1, 2001 for the Company).
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities.
SFAS No. 133 requires the recognition of all derivatives as either assets or
liabilities in the statement of financial position and the measurement of those
instruments at fair value. The Company expects that the adoption of
SFAS No. 133 will not have a material impact on its financial position or its
results of operations.
3. EQUIPMENT, FURNITURE AND SOFTWARE
Equipment, furniture and software, and the related accumulated depreciation
and amortization consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
<S> <C> <C>
Computer and office equipment..................... $ 170 $ 345
Office furniture.................................. - 9
Software.......................................... - 3
----- -----
170 357
Accumulated depreciation and amortization......... (78) (117)
----- -----
Total........................................... $ 92 $ 240
===== =====
</TABLE>
4. NOTES PAYABLE
In 1997, the Company entered into a revolving line of credit agreement in the
amount of $400 and was subsequently increased to $750 in 1999 with a maturity
date of January 31, 2002. Borrowings under this line of credit bear interest at
0.25% above the prime rate (8.3% at September 30, 1999). The line of credit is
collateralized by substantially all of the assets of the Company and is secured
by personal guarantees by the Company's officers. The amount drawn on the line
was $158 and $150 as of December 31, 1998 and September 30, 1999, respectively.
9
<PAGE>
In February 1999, the Company obtained a $100 term loan. Under the terms of
the loan, the Company is required to make monthly payments of approximately $3,
at a stated interest rate of 7.25%, through February 2002. The current portion
of the term loan at September 30, 1999 was $32.
Notes payable to stockholders represent non-interest bearing advances from
the principal stockholders and are due on December 31, 2000.
5. LEASE COMMITMENTS
The Company leases office facilities under operating lease agreements. In
addition, the Company leases computer and office equipment under capital leases.
Future minimum lease payments under all non-cancelable operating and
capital leases as of September 30, 1999 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
Year Ending September 30, LEASES LEASES
<S> <C> <C>
2000............................................... $ 230 $ 21
2001............................................... 258 -
2002............................................... 249 -
2003............................................... 50 -
----- ----
Total minimum payments............................. $ 787 21
=====
Less: Amount representing interest................ (2)
----
Present value of capital lease obligations......... 19
Current portion.................................... 19
----
Less: Lease obligations, long term................. $ -
====
</TABLE>
Equipment recorded under capital leases is included in equipment, furniture
and software as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 SEPTEMBER 30, 1999
<S> <C> <C>
Computers and equipment............... $ 51 $ 59
Accumulated depreciation.............. (15) (28)
----- -----
Total........................... $ 36 $ 31
===== =====
</TABLE>
Rent expense for the office facilities was $40 and $69 for the year ended
December 31, 1998 and the nine months ended September 30, 1999, respectively.
10
<PAGE>
6. EMPLOYEE BENEFIT PLAN
During 1997, the Company adopted a 401(k) plan covering substantially all
employees. The maximum allowable employee contribution is based upon applicable
Internal Revenue Service regulations. Employer contributions are funded annually
and are at the sole discretion of the Board of Directors. Employer contributions
to the plan for the year ended December 31, 1998 and for the nine months ended
September 30, 1999 amounted to $34 and $42, respectively.
7. COMMON STOCK
In connection with the adoption of the Company's non-qualified stock option
employee benefit plan dated May 28, 1999 (the "Plan"), the Company authorized
issuing common voting Class A stock in the amount of 10,000,000 shares and
common non-voting Class B stock in the amount of 700,000 shares. In addition,
the shareholders exchanged their existing shares of common voting stock on a
100-for-1 basis (the "Exchange") for common voting Class A stock. The common
non-voting Class B shares are designated to be issued to employees under the
Plan. All common voting Class A shares and related par value per share included
in the financial statements have been adjusted to reflect the effects of the
Exchange.
8. STOCK OPTION COMPENSATION PLAN
In May 1999, the Company initiated a Non-Qualified Stock Option Plan (the
"Plan"). Under the Plan, certain employees were given the right to acquire
shares of common non-voting Class B stock of the Company. The number of shares,
exercise price of shares and vesting conditions were determined by the Company's
officers. Since June 1999, the Company granted options to certain employees and
the option exercise price per share was less than the fair market value at the
date of grant, thus creating unearned deferred compensation. The difference
between the fair market value and the option price was recorded as unearned
deferred compensation and is being charged to income over the vesting periods of
the options. Through September 30, 1999, $358 was charged to income. The shares
available for future grants at September 30, 1999 were 385,000.
The following summarizes changes in stock options under the Plan for the
nine months ended September 30, 1999:
<TABLE>
<CAPTION>
Exercise
Price per
Shares Share
<S> <C> <C>
Options outstanding, January 1, 1999................................. - -
Options granted...................................................... 315,000 $ 0.50
Options exercised.................................................... (89,750) 0.50
-------
Options outstanding, September 30, 1999.............................. 225,250 $ 0.50
=======
</TABLE>
Options exercisable at September 30, 1999 were 37,000.
11
<PAGE>
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation,"
was issued and is effective for financial statements for fiscal years beginning
after December 15, 1995. As permitted by SFAS No. 123, the Company will continue
to measure the Plan's cost in accordance with APB Opinion No. 25. Had
compensation cost for the Company's Plan been determined consistent with the
fair value method prescribed by SFAS No. 123, the impact on the Company's net
income would have been as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999:
<S> <C>
Net income:
As reported................ $ 228
Pro forma.................. 212
</TABLE>
The effects of applying SFAS No. 123 in this disclosure may not be
indicative of effects on reported net income for future years.
The fair value of options granted under the Plan for the nine months ended
September 30, 1999, in complying with SFAS No. 123, was estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted-
average assumptions used: no dividend yield, risk free interest rate of 5.6%,
and expected lives of 4 years. As the Company's stock is not publicly traded,
the effects of volatility have been ignored given the uncertainty of future
stock prices as allowed by the provisions of SFAS No. 123.
9. SEGMENT REPORTING AND SIGNIFICANT CUSTOMERS
The Company engages in business activities in one operating segment which
provides software consulting and training services to businesses. Senior
management is provided information about the revenues generated in key client
industries and service areas. The resources needed to deliver the Company's
services are not separately reported by industry or service area. The Company's
services are delivered to clients primarily in the United States and the
Company's assets are located in the United States.
Two customers accounted for 43.1% and 15.3% of total revenues for the year
ended December 31, 1998. Two customers accounted for 20.9% and 15.3% of total
revenues for the nine months ended September 30, 1999.
10. SUBSEQUENT EVENT
On December 2, 1999, pursuant to a Merger Agreement dated as of December 1,
1999 by and among Braun Consulting, Inc., ETCI Acquisition, Inc., a wholly owned
subsidiary of Braun Consulting, Inc., Emerging Technologies Consultants, Inc.
and Helene O. Amster and John D. Vairo, ETCI Acquisition, Inc. merged with and
into ETCI, with ETCI surviving the merger as a wholly owned subsidiary of Braun
Consulting, Inc. In connection with the merger, the stockholders of ETCI
received an aggregate of approximately $27,000 in cash and common stock of Braun
Consulting, Inc.
12
<PAGE>
Item 7(b)
Braun Consulting, Inc.
Unaudited Pro Forma Consolidated Financial Information
The following unaudited pro forma consolidated balance sheet as of
September 30, 1999 gives effect to the merger of Emerging Technologies
Consultants, Inc. ("ETCI") with Braun Consulting, Inc. ("Braun Consulting") in a
transaction accounted for as a purchase business combination in accordance with
Accounting Principle Board Opinion No. 16 ("Business Combination") as if it had
occurred on September 30, 1999.
The following unaudited pro forma consolidated statements of income for the
year ended December 31, 1998 and nine months ended September 30, 1999 give
effect to the merger of ETCI with Braun Consulting as if it had occurred on
January 1, 1998. The unaudited pro forma information is based on the historical
financial statements of Braun Consulting and ETCI giving effect to the
transaction under the purchase method of accounting as well as assumptions and
adjustments as indicated in the notes below.
The unaudited pro forma consolidated financial information is presented for
illustrative purposes only and is not necessarily indicative of the consolidated
financial position or the consolidated results of operations that actually would
have been achieved had the transaction been in effect during the periods
presented and should not be construed as representative of future operations.
13
<PAGE>
Braun Consulting, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
(In thousands)
<TABLE>
<CAPTION>
As of September 30, 1999
-------------------------------------------------------------
Historical
Braun Historical Pro Forma Pro Forma
ASSETS Consulting ETCI Adjustments Total
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 4,403 $ 99 $ 4,502
Marketable securities........................... 18,135 - $ (9,169)(A) 8,966
Accounts receivable-net......................... 9,382 754 10,136
Accounts receivable-employees................... 54 - 54
Receivable from Wincite-current portion......... 114 - 114
Income taxes receivable......................... - - -
Deferred tax asset.............................. - - 1,080 (A) 1,080
Prepaid expenses and other current assets....... 861 152 1,013
-------- ------- -------- --------
Total current assets.......................... 32,949 1,005 (8,089) 25,865
Equipment, furniture and software-net............... 2,811 240 3,051
Deposits............................................ - 19 19
Intangibles-net..................................... 42 - 26,121 (A) 26,163
-------- ------- -------- --------
Total assets.................................. $ 35,802 $ 1,264 $ 18,032 $ 55,098
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable................................... $ 550 $ 182 $ 732
Accounts payable................................ 1,502 78 1,580
Accrued offering expenses....................... 1,000 - 1,000
Accrued compensation............................ 2,030 - 2,030
Accrued merger costs............................ - - $ 331 (A) 331
Income taxes payable............................ 438 - 438
Other accrued liabilities....................... 674 84 758
Unearned revenue................................ 695 - 695
Current portion of capital lease
obligations.................................... - 19 19
-------- ------- -------- --------
Total current liabilities..................... 6,889 363 331 7,583
Deferred income taxes............................... 558 - 558
Notes payable-stockholders.......................... - 52 52
Capital lease obligations, net of current portion... - 50 50
Stockholders' equity:
Common stock.................................... 16 730 (729)(A) 17
Additional paid-in-capital...................... 28,425 18,499 (A) 46,924
Unearned deferred compensation.................. (624) (326) 326 (A) (624)
Retained earnings............................... 538 395 (395)(A) 538
-------- ------- -------- --------
Total stockholders' equity...................... 28,355 799 17,701 46,855
-------- ------- -------- --------
Total liabilities and stockholders' equity...... $ 35,802 $ 1,264 $ 18,032 $ 55,098
======== ======= ======== ========
</TABLE>
See note to Pro Forma Consolidated Financial Information.
14
<PAGE>
Braun Consulting, Inc.
Unaudited Pro Forma Consolidated Statement of Income
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
------------------------------------------------------
Historical
Braun Historical Pro Forma Pro Forma
Consulting ETCI Adjustments Total
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Consulting services................................ $26,907 $2,770 $29,677
Product sales...................................... 955 - 955
-------- ------ -------
Total revenue.................................... 27,862 2,770 30,632
Costs and expenses:
Project personnel and expenses..................... 15,879 2,106 17,985
Cost of products sold.............................. 884 - 884
Selling and marketing expenses..................... 2,303 7 2,310
General and administrative expenses................ 7,777 510 8,287
Amortization of intangible assets.................. - $ 8,628 (B) 8,628
Stock compensation................................. 271 - 271
Merger costs....................................... - - -
-------- ------ ------- -------
Total costs and expenses......................... 27,114 2,623 8,628 38,365
Operating income (loss)................................ 748 147 (8,628) (7,733)
Interest income........................................ 16 - 16
Interest expense....................................... 137 33 170
-------- ------ ------- -------
Income (loss) from continuing operations............... 627 114 (8,628) (7,887)
Income from discontinued operations.................... 153 - 153
-------- ------ ------- -------
Income before provision for income taxes............... 780 114 (8,628) (7,734)
Benefit for income taxes............................... (3) - (3)
-------- ------ ------- -------
Net income (loss)...................................... $ 783 $ 114 $(8,628) $(7,731)
======== ====== ======= =======
Pro forma: (E)
Income (loss) before provision for income taxes.... $ 780 $ 114 $(8,628) $(7,734)
Pro forma provision for income taxes............... 457 46 503
-------- ------ ------- -------
Pro forma net income (loss)........................ $ 323 $ 68 $(8,628) $(8,237)
======== ====== ======= =======
Earnings (loss) per share-basic:
Income (loss) before provision for income taxes.... $ 0.07 $ (0.64)
Pro forma net income (loss) (E).................... 0.03 (0.68)
Earnings (loss) per share-diluted: (F)
Income (loss) before provision for income taxes.... $ 0.06 $ (0.64)
Pro forma net income (loss) (E).................... 0.03 (0.68)
Weighted average shares: (F)
Basic.............................................. 11,572,451 11,572,451
Diluted............................................ 12,570,533 12,570,533
</TABLE>
See note to Pro Forma Consolidated Financial Information.
15
<PAGE>
Braun Consulting, Inc.
Unaudited Pro Forma Consolidated Statement of Income
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
---------------------------------------------------
Historical
Braun Historical Pro Forma Pro Forma
Consulting ETCI Adjustments Total
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Consulting services.................................. $31,791 $3,436 $35,227
Product sales........................................ 794 - 794
------- ------ -------
Total revenue................................... 32,585 3,436 36,021
Costs and expenses
Project personnel and expenses....................... 17,278 2,161 19,439
Cost of products sold................................ 653 - 653
Selling and marketing expenses....................... 2,942 52 2,994
General and administrative expenses.................. 7,874 618 8,492
Amortization of intangible assets.................... - - $ 6,471 (C) 6,471
Stock compensation................................... 440 358 (358) (D) 440
Merger costs......................................... 170 - 170
------- ------ ------- -------
Total costs and expenses........................ 29,357 3,189 6,113 38,659
Operating income (loss)................................... 3,228 247 (6,113) (2,638)
Interest income........................................... 160 1 161
Interest expense.......................................... 129 20 149
------- ------ ------- -------
Income (loss) before provision for income taxes........... 3,259 228 (6,113) (2,626)
Provision for income taxes................................ 448 - 448
------- ------ ------- -------
Net income (loss)......................................... $ 2,811 $ 228 $(6,113) $(3,074)
======= ====== ======= =======
Pro forma: (E)
Income (loss) before provision for income taxes...... $ 3,259 $ 228 $(6,113) $(2,626)
Pro forma provision for income taxes................. 1,467 91 1,558
------- ------ ------- -------
Pro forma net income (loss).......................... $ 1,792 $ 137 $(6,113) $(4,184)
======= ====== ======= =======
Earnings (loss) per share-basic:
Income (loss) before provision for income taxes...... $ 0.25 $ (0.19)
Pro forma net income (loss) (E)...................... 0.14 (0.31)
Earnings (loss) per share-diluted: (F)
Income (loss) before provision for income taxes...... $ 0.23 $ (0.19)
Pro forma net income (loss) (E)...................... 0.13 (0.31)
Weighted average shares: (F)
Basic................................................ 13,054,800 13,054,800
Diluted.............................................. 14,098,190 14,098,190
</TABLE>
See note to Pro Forma Consolidated Financial Information.
16
<PAGE>
Braun Consulting, Inc.
Note to Unaudited Pro Forma Consolidated Financial Information
(In thousands, except share amounts)
1. PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
On December 2, 1999, Braun Consulting, Inc. acquired ETCI for a total
consideration of approximately $27,000, comprising $8,500 in cash, 493,333
shares of Braun Consulting's common stock valued at $18,500 and other
acquisition costs and benefits aggregating approximately $1,000. The acquisition
has been accounted for as a purchase business combination and, accordingly, the
purchase price has been preliminarily allocated to the tangible and identifiable
intangible assets acquired and liabilities assumed on the basis of their
estimated fair values on the acquisition date. Intangible assets acquired in the
ETCI acquisition consist primarily of goodwill, as well as sales backlog, CRM
software and non-compete agreements.
The following adjustments have been reflected in the unaudited pro forma
consolidated balance sheet and consolidated statements of income:
(A) Represents estimated purchase accounting entries as if the ETCI acquisition
occurred on September 30, 1999 and the elimination of ETCI's historical
stockholders' equity.
(B) Represents 12 months of amortization expense of the intangible assets
resulting from the purchase business combination of ETCI, at estimated
useful lives between 1 and 3 years using the straight-line method.
(C) Represents 9 months of amortization expense of the intangible assets
resulting from the purchase business combination of ETCI, at estimated
useful lives between 1 and 3 years using the straight-line method.
(D) Represents the elimination of stock compensation expense assuming the ETCI
acquisition occurred on January 1, 1998.
(E) For the periods indicated, ETCI operated as an S corporation and was not
subject to federal and certain state income taxes. Prior to the termination
of Braun Consulting's status as an S corporation on July 28, 1999, Braun
Consulting was treated as an S corporation for federal and certain state
income tax purposes. The pro forma information is presented to show what
the significant effects on the historical information might have been had
Braun Consulting and ETCI been treated as a C corporation for tax purposes
throughout the year ended December 31, 1998 and nine months ended September
30, 1999.
(F) The pro forma combined company is in a net loss position for both periods
presented. Therefore, common stock equivalents are not considered in
dilutive earnings per share-diluted since their effect is anti-dilutive.
17
<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 hereto duly authorized
BRAUN CONSULTING, INC.
----------------------
(Registrant)
Date: February 14, 2000 By: /s/ John C. Burke
------------------------------
John C. Burke
Chief Financial Officer
18
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 (A) Merger Agreement dated as of December 1, 1999 by and among
Braun Consulting, Inc., ETCI Acquisition, Inc., Emerging
Technologies Consultants, Inc. and Helene O. Amster and
John D. Vairo
99.1 (A) Press Release dated December 3, 1999
- -------------
(A) Incorporated by reference to the identically numbered exhibit to
Registrant's Current Report on Form 8-K filed December 16, 1999.
19
