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EXHIBIT 99.1
THE WEATHERSBY GROUP, INC.
FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1999, AND
INDEPENDENT AUDITORS' REPORT
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THE WEATHERSBY GROUP, INC.
TABLE OF CONTENTS
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PAGE
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INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1999:
Balance Sheet 2
Statement of Income 3
Statement of Shareholder's Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6-8
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
The Weathersby Group, Inc.
Bethesda, MD
We have audited the accompanying balance sheet of The Weathersby Group, Inc.
(the Company) as of December 31, 1999, and the related statement of income,
shareholder's equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1999, and the
results of its operations and its cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
June 8, 2000
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THE WEATHERSBY GROUP, INC.
BALANCE SHEET
DECEMBER 31, 1999
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ASSETS
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CURRENT ASSETS:
Cash and cash equivalents .................. $ 359,388
Accounts receivable ........................ 2,389,072
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Total current assets ..... 2,748,460
PROPERTY AND EQUIPMENT - Net ................... 67,748
OTHER ASSETS ................................... 15,980
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TOTAL ASSETS ................................... $2,832,188
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LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Trade accounts payable ..................... $ 783,437
Accrued expenses ........................... 567,914
Deferred revenue ........................... 80,583
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Total current liabilities 1,431,934
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SHAREHOLDER'S EQUITY
Common stock; $.01 par value; 10,000
shares authorized; 100 outstanding ......... 1
Additional paid-in-capital ................. 999
Retained earnings .......................... 1,399,254
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Total shareholder's equity 1,400,254
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TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY ..... $2,832,188
==========
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See notes to financial statements.
2
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THE WEATHERSBY GROUP, INC.
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
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SERVICE REVENUES ............................. $11,121,562
OPERATING EXPENSES:
Cost of services ......................... 7,936,847
Selling, general, and administrative ..... 2,393,383
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Total operating expenses ......... 10,330,230
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INCOME FROM OPERATIONS ....................... 791,332
OTHER INCOME:
Interest income .......................... 5,891
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NET INCOME ................................... $ 797,223
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See notes to financial statements.
3
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THE WEATHERSBY GROUP, INC.
STATEMENT OF SHAREHOLDER'S EQUITY
YEAR ENDED DECEMBER 31, 1999
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ADDITIONAL
COMMON PAID-IN- RETAINED
STOCK CAPITAL EARNINGS TOTAL
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BALANCE, JANUARY 1, 1999 ..... $ 1 $ 999 $ 602,031 $ 603,031
Net income ............... -- -- 797,223 797,223
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BALANCE, DECEMBER 31, 1999 ... $ 1 $ 999 $1,399,254 $1,400,254
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See notes to financial statements.
4
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THE WEATHERSBY GROUP, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 797,223
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .......................................... 51,057
Changes in:
Accounts receivable ............................... (1,133,816)
Other assets ...................................... (13,182)
Trade accounts payable and accrued expenses ....... 440,832
Deferred revenue .................................. (61,462)
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Net cash provided by operating activities 80,652
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment ..................... (79,637)
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Net cash used in investing activities ... (79,637)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments made on shareholder's loan ....................... (85,841)
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Net cash used in financing activities ... (85,841)
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NET DECREASE IN CASH .......................................... (84,826)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR .................. 444,214
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CASH AND CASH EQUIVALENTS, END OF YEAR ........................ $ 359,388
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See notes to financial statements.
5
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THE WEATHERSBY GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
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1. ORGANIZATION
NATURE OF OPERATIONS - The Weathersby Group, Inc., (the "Company") was
formed in 1990 as a marketing management consulting firm specializing in
highly competitive, technology-driven industries. Primary services include
providing marketing management services to wireless and wireline
communications carriers, internet companies, software companies, hardware
companies, financial services companies, and energy companies. A majority
of the company's revenues come from three primary markets - Washington
D.C., Boston, and New York - in addition to serving clients throughout the
U.S.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION - The Company enters into time-and-materials contracts
with its customers. Under a time-and-materials contract, the customer pays
a negotiated hourly rate for all services performed plus expenses incurred.
Time-and-materials service revenues and related time-and-materials service
costs are recorded in the period in which the service is performed.
CASH AND CASH EQUIVALENTS - Cash includes cash on hand, cash in bank, and
investments in money market accounts and is stated at cost, which
approximates market.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is based on the
estimated useful lives of the assets and is computed using the
straight-line method. Computer equipment is depreciated over three to five
years, and furniture and fixtures are depreciated over five to seven years.
Maintenance and repairs are charged to expense as incurred. The cost and
accumulated depreciation applicable to assets retired are removed from the
accounts and the gain or loss on disposition is recognized in income.
DEFERRED REVENUE - Revenues received in advance are deferred and recognized
in the period in which services are performed.
ADVERTISING COSTS - Advertising costs are expensed as incurred. Advertising
expense charged to operations totaled $114,396 for the year ended December
31, 1999.
INCOME TAXES - The Company has elected to be treated as a Subchapter S
Corporation under the Internal Revenue Code and thus is treated
substantially as a partnership for income tax purposes. Accordingly, the
individual stockholder is responsible for the corporate taxable income or
loss for federal and state income tax reporting purposes.
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
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and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
3. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
Billed ................................. $ 1,631,788
Unbilled ............................... 757,284
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$ 2,389,072
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4. PROPERTY AND EQUIPMENT
Computer equipment ..................... $ 125,483
Furniture and fixtures ................. 111,816
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237,299
Less: Accumulated depreciation ........ (169,551)
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$ 67,748
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Depreciation expense was $51,057 for the year ended December 31, 1999.
5. LINE OF CREDIT
The Company maintains a revolving credit agreement with a bank that
provides for borrowings up to $250,000 at the prime rate (8.50% at December
31, 1999) plus 1%; the Company did not have outstanding borrowings at
December 31, 1999.
Borrowings under the agreement are collateralized by virtually all of the
Company's assets. In addition, the Company's stockholder personally
guaranteed any amounts borrowed up to the borrowing limit.
6. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) retirement/savings plan for all full time
employees. The Company made contributions of $8,427 for the year ended
December 31, 1999.
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7. OPERATING LEASES
The Company leases office facilities under noncancelable operating leases
expiring at various dates through February 2004. Total rental expense was
$132,759 for 1999. As of January 1, 2000, the future minimum payments under
operating leases are as follows:
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2000 ............................................ $ 133,384
2001 ............................................ 138,271
2002 ............................................ 118,275
2003 ............................................ 109,999
2004 ............................................ 18,642
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$ 518,571
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8. MAJOR CUSTOMERS AND SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
Major customers in terms of significance to the Company's revenues (i.e. in
excess of 10% of revenues) for the year ended December 31, 1999 and
accounts receivable as of December 31, 1999 are approximately as follows:
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ACCOUNTS
REVENUES RECEIVABLE
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Customer A ................... $2,181,000 $ 467,000
Customer B ................... 1,422,000 266,000
Customer C ................... 1,149,000 189,000
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The Company generally does not require collateral or other security on
their accounts receivable. The credit risk on these accounts is controlled
through credit approvals, limits and monitoring procedures.
9. RELATED PARTY TRANSACTIONS
During the year ended December 31, 1997, the Company borrowed approximately
$136,000 from the stockholder. The loan was repaid in installments with the
final installment of approximately $86,000 being repaid during the fiscal
year 1999. The loan did not bear interest.
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