<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 11, 2000
-------------
ELITE INFORMATION GROUP, INC.
----------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-20034 41-1522214
---------------------------- ------------------------ -------------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation or Identification No.)
Organization)
5100 West Goldleaf Circle
Los Angeles, California 90056
-----------------------------------------------------------
(Address of Principal Executive Offices
Including Zip Code)
(323) 642-5200
----------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
----------------------------------------------------------
(Former name or address, if changed from last report)
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<PAGE> 2
Filed herewith are the financial statements and pro forma
financial information required to be filed by Item 7 of Form 8-K in
connection with the Company's acquisition, through its wholly-owned
subsidiary, LMI Acquisition Corporation, of all the outstanding capital
stock of Law Manager, Inc., ("LMI"), as reported in the Current Report
on Form 8-K, filed with the Commission on July 21, 2000, to which this
Amendment No. 1 relates:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
Report of Independent Accountants
Balance Sheet of Law Manager, Inc. at December 31, 1999
Statement of Operations of Law Manager, Inc. for the year ended
December 31, 1999
Statement of Changes in Stockholders' Equity of Law Manager, Inc. for
the year ended December 31, 1999
Statement of Cash Flows of Law Manager, Inc. for the year ended
December 31, 1999
Notes to Financial Statements of Law Manager, Inc. for the year
ended December 31, 1999
Balance Sheet of Law Manager, Inc. at March 31, 2000 (Unaudited)
Statement of Operations of Law Manager, Inc. for the three months ended
March 31, 2000 (Unaudited)
Statement of Changes in Stockholders' Equity of Law Manager, Inc. for
the three months ended March 31, 2000 (Unaudited)
Statement of Cash Flows of Law Manager, Inc. for the three months ended
March 31, 2000 (Unaudited)
Notes to Financial Statements of Law Manager, Inc. for the three months
ended March 31, 2000 (Unaudited)
(b) Pro Forma Financial Information
Introduction to Unaudited Pro Forma Condensed Consolidated Financial
Information
Unaudited Pro Forma Condensed Consolidated Balance Sheet of Elite
Information Group, Inc. and Law Manager, Inc. at March 31, 2000
Unaudited Pro Forma Condensed Consolidated Statement of Operations of
Elite Information Group, Inc. and Law Manager, Inc. for the three
months ended March 31, 2000
Unaudited Pro Forma Condensed Consolidated Statement of Operations of
Elite Information Group, Inc. and Law Manager, Inc. for the year ended
December 31, 1999
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Information
(c) Exhibits
Consent of PricewaterhouseCoopers LLP (Page 4 herein)
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<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 25, 2000
ELITE INFORMATION GROUP, INC.
By: /s/ Barry D. Emerson
-----------------------------------------
Barry D. Emerson, Vice President, Treasurer,
Chief Financial Officer
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<PAGE> 4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Registration Statement on Form S-8 (File
Nos. 333-42906, 333-42900, 333-29473, 33-93052, 33-85924, 33-81130, 33-48855,
33-69418) of Elite Information Group, Inc., our report dated June 12, 2000
relating to the financial statements of Law Manager, Inc. which appears in the
Current report on Form 8-K of Elite Information Group, Inc. dated July 11, 2000.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
September 21, 2000
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Law Manager, Inc.:
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in stockholders' equity, and of cash flows present
fairly, in all material respects, the financial position of Law Manager, Inc.
(the Company) at 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. 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
of these statements in accordance with auditing standards generally accepted in
the United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
June 12, 2000
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<PAGE> 5
Law Manager, Inc.
Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Assets
<S> <C>
Current assets:
Cash $ 25,180
Accounts receivable, less an allowance of $146,000 3,067,966
Unbilled receivables 854,902
Other current assets 33,078
----------
Total current assets 3,981,126
Property and equipment, less accumulated depreciation 138,575
Other assets 2,662
----------
Total assets $4,122,363
----------
Liabilities and Stockholders' Equity
Current liabilities:
Capital leases, current portion $ 21,619
Accounts payable 44,703
Accrued expenses 80,891
Sales taxes payable 195,358
Deferred revenue 289,347
----------
Total current liabilities 631,918
Capital leases, net of current portion 27,521
----------
Total liabilities 659,439
----------
Commitments
Common stock, $0.50 par value; 10,000 shares authorized
and 2,000 shares outstanding 1,000
Retained earnings 3,461,924
----------
Total stockholders' equity 3,462,924
----------
Total liabilities and stockholders' equity $4,122,363
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 6
Law Manager, Inc.
Statement of Operations
For The Year Ended December 31, 1999
<TABLE>
<CAPTION>
-------------------------------------------------------
<S> <C>
Revenue:
Software license revenues $ 1,384,959
Service revenues 4,746,013
-----------
Total revenue 6,130,972
-----------
Costs and expenses:
Costs of sales and direct operating 2,615,790
Research and development 299,372
Sales, marketing and administrative 449,943
Bad debt expense 238,180
Depreciation and amortization 58,631
-----------
3,661,916
-----------
Income from operations 2,469,056
Interest income 27,191
Interest expense (2,896)
-----------
Net income $ 2,493,351
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 7
Law Manager, Inc.
Statement of Changes in Stockholders' Equity
For The Year Ended December 31, 1999
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Common Stock Retained
Shares Amount Earnings Total
<S> <C> <C> <C> <C>
December 31, 1998 2,000 $ 1,000 $ 2,394,159 $ 2,395,159
Net income -- -- 2,493,351 2,493,351
Equity distributions -- -- (1,425,586) (1,425,586)
----------- ----------- ----------- -----------
December 31, 1999 2,000 $ 1,000 $ 3,461,924 $ 3,462,924
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 8
Law Manager, Inc.
Statement of Cash Flows
For The Year Ended December 31, 1999
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net income $ 2,493,351
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation and amortization expense 58,631
Bad debt expense 238,180
Change in operating assets and liabilities:
Accounts receivable and unbilled receivables (1,885,133)
Other current assets and other assets (31,921)
Accounts payable 2,501
Accrued expenses (83,471)
Deferred revenue 217,941
Sales taxes 172,524
-----------
Net cash provided by operating activities 1,182,603
-----------
Cash flows from investing activities:
Purchase of property and equipment (61,047)
-----------
Net cash used in investing activities (61,047)
-----------
Cash flows from financing activities:
Shareholder distributions (1,425,586)
Repayment of capital leases (14,130)
-----------
Net cash used in financing activities (1,439,716)
-----------
Net decrease in cash and cash equivalents (318,160)
Cash and cash equivalents, beginning of year 343,340
-----------
Cash and cash equivalents, end of year $ 25,180
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 9
LAW MANAGER, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
1. NATURE OF BUSINESS
Law Manager, Inc. ("LMI" or the "Company") is a leading provider of premier
information systems for the legal industry. With over 15 years of
experience, LMI manages and implements data conversions and applicable
customization.
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 reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original or
remaining maturity of three months or less at the date of purchase to be
cash equivalents. Cash equivalents and marketable securities are stated at
amortized cost plus accrued interest, which approximates fair value. Cash
equivalents and marketable securities consist primarily of money market
instruments and U.S. Treasury bills.
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments that potentially expose the Company to concentrations
of credit risk consist primarily of trade accounts receivable. To minimize
risk, ongoing credit evaluations of customers' financial condition are
performed, although collateral generally is not required. At December 31,
1999, one customer accounted for 24% of gross accounts receivable. For the
year ended December 31, 1999, two customers accounted for 13% and 12% of
total revenue, respectively.
PROPERTY AND EQUIPMENT
Property and Equipment are recorded at cost and depreciated over their
estimated useful lives using the straight-line method. Property and
equipment held under capital leases, which involve a transfer of ownership,
are amortized over the estimated useful life of the asset. Other property
and equipment held under capital leases and leasehold improvements are
amortized over the shorter of the lease term or the estimated useful life
of the related asset. Upon retirement or sale, the cost of assets disposed
of and the related accumulated depreciation is removed from the accounts
and any resulting gain or loss is credited or charged to income. Repairs
and maintenance costs are expensed as incurred.
REVENUE RECOGNITION
The Company's revenue is derived from primarily two sources: (i) software
license revenue, derived primarily from software licenses to end users, and
(ii) service revenue, derived primarily from providing support and
maintenance, education and consulting services to end users.
Revenue from contracts requiring a significant amount of program
modification or customization, installation, system integration and/or
related services are recognized based upon the estimated percentage of
completion. Changes in estimated costs during the course of a contract are
reflected in the period in which the facts become known. Additional
software licenses are generally recognized upon the signing of a contract
and delivery of the product, provided that no uncertainties regarding
customer acceptance exist and collection of the related receivable is
probable. Revenue from support and maintenance is recognized ratably over
the contractual period.
9 of 21
<PAGE> 10
INCOME TAXES
The Company is organized as an S Corporation. As such, the income, losses,
and credits are passed to the shareholders and are included in their
respective personal income tax returns. No federal income taxes are payable
at the corporate level and, therefore, none have been provided for in these
financial statements. For those states and jurisdictions that do not
recognize the S Corporation election, the Corporation provides for income
taxes payable in these areas.
3. PROPERTY AND EQUIPMENT
Property and equipment for the year ended December 31, 1999 consists of the
following:
<TABLE>
<CAPTION>
Estimated
Useful Life 1999
----------- --------
<S> <C> <C>
Computer equipment 3-5 $278,965
Furniture and equipment 7 67,440
Leasehold improvements 3 15,577
--------
361,982
Less accumulated depreciation and amortization (223,407)
--------
$138,575
--------
</TABLE>
Amortization of property and equipment under capital leases totaled
$14,129 for the year ended December 31, 1999.
4. LINE OF CREDIT
In June 1999, the Company entered into an agreement with a bank that
provides for a $150,000 revolving line of credit for working capital
purposes. Borrowings under the revolving line of credit are collateralized
by the assets of the Company. During 1999, no amounts were outstanding
under the line of credit.
5. SAVINGS PLAN
The Company maintains a profit-sharing savings plan that covers
substantially all employees. The Company contributes a maximum of 15% of
the annual salaries and wages of participating employees, subject to
certain limitations. The Plan assets are invested in various mutual funds.
Company contributions for the year ended 1999 totaled approximately
$131,000.
6. COMMITMENTS
The Company leases its office space under a noncancelable operating lease.
Total expense under this operating lease was approximately $50,000 for the
year ended December 31, 1999.
The Company leases certain office equipment under noncancelable capital
leases with three year lease terms and various interest rates ranging from
2% to 4%.
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<PAGE> 11
Future minimum lease payments under capital leases and noncancelable
operating leases at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Operating Capital
Year ending December 31, Leases Leases
<S> <C> <C>
2000 $ 47,652 $ 26,089
2001 24,116
2002 9,063
-------- --------
$ 47,652 59,268
--------
Less portion representing interest 10,128
--------
$ 49,140
--------
</TABLE>
As of December 31, 1999 LMI has recorded a reserve of approximately
$195,000 for sales taxes. This amount consists of estimated sales taxes of
$130,000 due to a number of states and estimated interest and fines for
late filing totaling approximately $65,000.
7. SUBSEQUENT EVENT
On July 11, 2000, the Company completed the sale of all outstanding capital
stock of Law Manager, Inc., subject to future purchase price adjustments,
to Elite Information Group, a publicly traded company.
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<PAGE> 12
Law Manager, Inc.
Balance Sheet
March 31, 2000
<TABLE>
<CAPTION>
Unaudited
-----------------------------------------------------------------------------------------------------
Assets
<S> <C>
Cash $2,096,295
Accounts receivable, less an allowance of $134,000 1,640,800
Unbilled receivables 897,326
Other current assets 21,399
----------
Total current assets 4,655,820
Property and equipment, less accumulated depreciation 128,304
----------
Total assets $4,784,124
----------
Liabilities and Stockholders' Equity
Capital leases, current portion $ 21,619
Accounts payable 42,540
Accrued expenses 108,314
Sales taxes payable 236,776
Deferred revenue 250,774
----------
Total current liabilities 660,023
Capital leases, net of current portion 23,296
----------
Total liabilities 683,319
----------
Commitments
Common stock, $0.50 par value; 10,000 shares
authorized and 2,000 outstanding 1,000
Retained earnings 4,099,805
----------
Total stockholders' equity 4,100,805
----------
Total liabilities and stockholders' equity $4,784,124
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 13
Law Manager, Inc.
Statement of Operations
For The Three Months Ended March 31, 2000
<TABLE>
<CAPTION>
Unaudited
----------------------------------------------------
<S> <C>
Revenue:
Software license revenues $ 83,766
Service revenues 1,483,277
-----------
Total revenue 1,567,043
-----------
Costs and expenses:
Costs of sales and direct operating 509,917
Research and development 74,843
Sales, marketing and administrative 136,164
Bad debt expense 3,012
Depreciation and amortization 14,816
-----------
738,752
-----------
Income from operations 828,291
Interest income 10,347
Interest expense (757)
-----------
Net income $ 837,881
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 14
Law Manager, Inc.
Statement of Changes in Stockholders' Equity
For The Three Months Ended March 31, 2000
<TABLE>
<CAPTION>
Unaudited
------------------------------------------------------------------------------------------
Common Stock Retained
Shares Amount Earnings Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
December 31, 1999 2,000 $ 1,000 $ 3,461,924 $ 3,462,924
Net income -- -- 837,881 837,881
Equity distributions -- -- (200,000) (200,000)
----------- ----------- ----------- -----------
March 31, 2000 2,000 $ 1,000 $ 4,099,805 $ 4,100,805
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14 of 21
<PAGE> 15
Law Manager, Inc.
Statement of Cash Flows
For The Three Months Ended March 31, 2000
<TABLE>
<CAPTION>
Unaudited
-------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net income $ 837,881
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation and amortization expense 14,816
Bad debt expense 3,012
Change in operating assets and liabilities:
Accounts receivable and unbilled receivables 1,381,730
Other current assets and other assets 14,341
Accounts payable (2,163)
Accrued expenses 27,423
Deferred revenue (38,573)
Sales taxes 41,418
-----------
Net cash provided by operating activities 2,279,885
-----------
Cash flows from investing activities:
Purchase of property and equipment (4,545)
-----------
Net cash used in investing activities (4,545)
-----------
Cash flows from financing activities:
Shareholder distributions (200,000)
Repayment of capital leases (4,225)
-----------
Net cash used in financing activities (204,225)
-----------
Net increase in cash and cash equivalents 2,071,115
Cash and cash equivalents, beginning of period 25,180
-----------
Cash and cash equivalents, end of period $ 2,096,295
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 16
LAW MANAGER, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and in accordance with Regulation S-X. Accordingly,
certain information and footnotes required by generally accepted accounting
principles are not included herein. These interim financial statements
should be read in conjunction with the financial statements and notes
thereto for the year ended December 31, 1999, included herein.
The financial statements of the Company include all adjustments of a normal
recurring nature which, in the opinion of management, are necessary for a
fair presentation of financial position as of March 31, 2000 and results of
operations and cash flows for the interim period presented. The results of
operations for the three months ended March 31, 2000 are not necessarily
indicative of the results to be expected for the entire year.
2. LINE OF CREDIT
On June 29, 2000, the Company's $150,000 revolving line of credit expired
and was not renewed.
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<PAGE> 17
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On July 11, 2000, Elite Information Group, Inc. (the "Company"), through its
wholly-owned subsidiary, LMI Acquisition Corporation ("LMAC"), acquired all of
the outstanding capital stock of Law Manager, Inc. ("LMI"), pursuant to a Stock
Purchase Agreement, dated as of July 7, 2000, by and between the Company, LMAC,
LMI and Nicholas Puschak and Davood Tashayyod, as the sole shareholders of LMI.
The aggregate consideration paid by the Company in exchange for all of the
outstanding capital stock of LMI consists of the following: (1) an initial
closing payment of $10,850,000 plus or minus certain working capital payments
and other adjustments to be determined after closing; and (2) payment of an
additional $4,000,000 over a three year period commencing on the first
anniversary of closing (subject to forfeiture or reduction if certain employees
resign or are terminated for cause during the three year period and LMI fails to
meet certain revenue targets). The acquisition is to be accounted for using the
purchase method of accounting. The purchase price will be allocated to the
estimated fair value of assets acquired and liabilities assumed. The estimated
fair value of the assets acquired and liabilities assumed approximated the
historical cost basis, and the preliminary purchase price allocation indicates
goodwill and identifiable intangible assets of approximately $6,260,000, after
write-off of purchased in process research and development costs of
approximately $1,000,000, which the Company estimates will be amortized over an
average life of approximately 10 years. The consideration paid to date by the
Company has been funded by the Company's existing cash reserves. The $4,000,000
additional portion of the purchase price will be accounted for as contingent
purchase consideration upon resolution of the future performance requirements.
The following unaudited pro forma condensed consolidated balance sheet assumes
that the acquisition of LMI was consummated as of March 31, 2000 and presents a
preliminary allocation of the purchase price over historical net book values and
is for illustrative purposes only. Actual fair values will be based on financial
information as of the acquisition date. The following unaudited pro forma
condensed consolidated statement of operations for the year ended December 31,
1999 and the three months ended March 31, 2000 give effect to the acquisition as
if it had occurred on January 1, 1999.
The unaudited pro forma condensed consolidated financial information is not
necessarily indicative of the results that would have occurred if the
acquisition had occurred as of the beginning of the periods presented and should
not be construed as being representative of future operating results or
financial position.
A nonrecurring charge for purchased in process research and development costs
totaling approximately $1,000,000 will be included in the consolidated statement
of operations of the Company during the quarterly period ending September 30,
2000. No income tax benefit will be recorded for this charge. These costs were
not considered in the accompanying unaudited pro forma condensed consolidated
statements of operations for the periods ended December 31, 1999 or March 31,
2000.
17 of 21
<PAGE> 18
ELITE INFORMATION GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELITE
INFORMATION LAW MANAGER, PRO FORMA PRO FORMA
GROUP, INC. INC. ADJUSTMENTS CONSOLIDATED
----------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash 33,582 2,096 (10,850)(1) 24,828
Accounts receivable, net 19,589 1,642 21,231
Unbilled receivables 0 897 897
Deferred income taxes 3,699 0 3,699
Other current assets 663 21 684
------- ------- ------- -------
Total current assets 57,533 4,656 (10,850) 51,339
Property and equipment, net 2,799 128 2,927
Software costs 583 0 583
Intangible assets 3,340 0 6,260(2),(3),(5) 9,600
Other assets 188 0 188
------- ------- ------- -------
Total assets 64,443 4,784 (4,590) 64,637
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Capital leases, current 0 22 22
Accounts payable 5,490 43 5,533
Accrued compensation 2,320 0 2,320
Accrued expenses 3,859 108 511(3) 4,478
Sales tax payable 0 236 236
Income taxes payable 1,828 0 1,828
Deferred revenue 14,674 251 14,925
------- ------- ------- -------
Total current liabilities 28,171 660 511 29,342
Deferred income taxes 804 0 804
Other liabilities 7 0 7
Capital leases, net of current portion 0 23 23
------- ------- ------- -------
Total liabilities 28,982 683 511 30,176
Common stock 94 1 (1)(4) 94
Paid in capital 39,162 0 39,162
Less treasury stock at cost (4,219) 0 (4,219)
Retained earnings 424 4,100 (5,100)(4),(5) (576)
------- ------- ------- -------
Total stockholders' equity 35,461 4,101 (5,101) 34,461
------- ------- ------- -------
Total liabilities and stockholders' equity 64,443 4,784 (4,590) 64,637
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 19
ELITE INFORMATION GROUP, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELITE
INFORMATION LAW MANAGER, PRO FORMA PRO FORMA
GROUP, INC. INC. ADJUSTMENTS CONSOLIDATED
------------------------------------------------------
<S> <C> <C> <C>
Net revenue 13,334 1,567 14,901
------- ------- -------
Operating expenses:
Costs of revenue 7,723 510 8,233
Research & development 1,321 75 1,396
Sales, marketing and administrative 3,933 154 157(6) 4,244
------- ------- ------- -------
Total operating expenses 12,977 739 157 13,873
Operating income 357 828 (157) 1,028
Interest income, net 445 10 (176)(7) 279
------- ------- ------- -------
Income from continuing operations before income taxes 802 838 (333) 1,307
Income tax provision (365) 0 (202)(8) (567)
------- ------- ------- -------
Net income 437 838 (535) 740
======= ======= ======= =======
Net income per share
Basic $ 0.05 $ 0.09
Diluted $ 0.05 $ 0.08
Weighted average shares outstanding
Basic 8,492 8,492
Diluted 8,753 8,753
</TABLE>
The accompanying notes are an integral part of these financial statements.
19 of 21
<PAGE> 20
ELITE INFORMATION GROUP, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELITE
INFORMATION LAW MANAGER, PRO FORMA PRO FORMA
GROUP, INC. INC. ADJUSTMENTS CONSOLIDATED
------------------------------------------------------
<S> <C> <C> <C>
Net revenue 59,266 6,131 65,397
------- ------- -------
Operating expenses:
Costs of revenue 33,943 2,616 36,559
Research & development 4,377 299 4,676
Sales, marketing and administrative 15,319 747 626(6) 16,692
------- ------- ------- -------
Total operating expenses 53,639 3,662 626 57,927
Operating income 5,627 2,469 (626) 7,470
Loss on disposition of non-strategic business unit (295) 0 (295)
Interest income, net 1,154 24 (705)(7) 473
------- ------- ------- -------
Income from continuing operations before income taxes 6,486 2,493 (1,331) 7,648
Income tax provision (2,692) 0 (465)(8) (3,157)
------- ------- ------- -------
Net income 3,794 2,493 (1,796) 4,491
======= ======= ======= =======
Net income per share
Basic $ 0.46 $ 0.54
Diluted $ 0.44 $ 0.52
Weighted average shares outstanding
Basic 8,305 8,305
Diluted 8,584 8,584
</TABLE>
The accompanying notes are an integral part of these financial statements.
20 of 21
<PAGE> 21
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS)
The pro forma adjustments give effect to the acquisition of LMI as if the
transaction was consummated on March 31, 2000. The pro forma balance sheet
adjustments are as follows:
(1) To reflect the $10,850 cash consideration paid for LMI.
(2) To reflect goodwill and other identifiable intangible assets as a result
of the acquisition as follows:
<TABLE>
<CAPTION>
<S> <C>
Initial cash consideration $10,850
Estimated direct acquisition costs 511
Less net assets acquired (4,101)
Less purchased in process research and development costs (1,000)
-------
Estimated goodwill and intangible assets acquired $ 6,260
</TABLE>
(3) To reflect the accrual of the estimated direct acquisition costs of $511.
(4) To eliminate the historical stockholders equity of LMI of $4,101.
(5) To record the reduction in equity as a result of the non-recurring charge
for purchased in-process research and development costs of $1,000.
The pro forma consolidated statement of operations adjustments to give effect to
the acquisition of LMI as if the acquisition occurred on January 1, 1999 are as
follows:
(6) To reflect the amortization of goodwill and intangible assets created as a
result of the acquisition as follows:
<TABLE>
<CAPTION>
Goodwill and Annual Amortization for the three
Intangible Assets Average Lives Amortization months ended March 31, 2000
------------------ ------------- ------------ ---------------------------
<S> <C> <C> <C> <C>
$6,260 10 years $626 $157
</TABLE>
(7) To reflect the reduction of interest income which results from the $10,850
cash consideration paid to LMI using a return on investment of 6.5%.
Interest income reduction
Annual interest for the three months
income reduction ended March 31, 2000
---------------- -------------------------
$705 $176
(8) To record a provision for income taxes for the results of operations of LMI
and the income tax effect of the pro forma adjustments at a rate of 40.0%.
This rate is based upon a Federal statutory rate equal to 34.0%, plus the
estimated effect of state and local income taxes.
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