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Exhibit 99.2 - Audited Consolidated Financial Statements
PACIFIC DECISION SCIENCES
CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT
JUNE 30, 2000
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Pacific Decision Sciences Corporation and Subsidiaries
CONTENTS
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INDEPENDENT AUDITORS' REPORT..................................................1
FINANCIAL STATEMENTS
Consolidated Balance Sheet................................................2
Consolidated Statements Of Income And Retained
Earnings..............................................................3
Consolidated Statement Of Cash Flows......................................4
Notes To Consolidated Financial Statements............................5 - 7
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INDEPENDENT AUDITORS' REPORT
Board of Directors
Pacific Decision Sciences Corporation
Santa Anna, California
We have audited the accompanying consolidated balance sheet of Pacific
Decision Sciences Corporation and subsidiaries as of June 30, 2000, and
the related consolidated statements of income, retained earnings and
cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Pacific Decision Sciences Corporation and subsidiaries as of June 30,
2000, and the consolidated results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
September 7, 2000
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PACIFIC DECISION SCIENCES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
JUNE 30, 2000
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,285,066
Accounts receivable 3,976,077
Prepaid income tax 89,400
Inventory 312,976
Deferred income tax asset 116,800
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TOTAL CURRENT ASSETS 5,780,319
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET Security deposits 108,205
OTHER ASSETS 26,410
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$ 5,914,934
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 198,307
Deferred income tax liability 1,589,800
Deferred revenue 325,803
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TOTAL CURRENT LIABILITIES 2,113,910
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STOCKHOLDERS' EQUITY
Common stock:
Authorized, 10,000,000 shares of no par value;
5,719,500 shares issued and outstanding 202,000
Retained earnings 3,599,024
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TOTAL STOCKHOLDERS' EQUITY 3,801,024
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$ 5,914,934
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See the accompanying notes to consolidated financial statements.
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PACIFIC DECISION SCIENCES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<CAPTION>
FOR THE YEAR ENDED JUNE 30, 2000
CONSOLIDATED STATEMENT OF INCOME
<S> <C>
SALES $ 9,997,246
COST OF SALES 2,156,894
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GROSS PROFIT 7,840,352
OPERATING EXPENSES 5,104,829
OTHER INCOME 63,339
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INCOME BEFORE PROVISION FOR INCOME TAXES 2,798,862
PROVISION FOR INCOME TAXES (NOTE 4) 1,417,831
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NET INCOME $ 1,381,031
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CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<S> <C>
BALANCE - BEGINNING OF YEAR, AS PREVIOUSLY
REPORTED $ 2,571,466
PRIOR PERIOD ADJUSTMENT TO RECORD
DEFERRED REVENUE (NOTE 8) (353,473)
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BALANCE - BEGINNING OF YEAR, AS RESTATED 2,217,993
NET INCOME 1,381,031
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BALANCE - END OF YEAR $ 3,599,024
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See the accompanying notes to consolidated financial statements.
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PACIFIC DECISION SCIENCES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
FOR THE YEAR ENDED JUNE 30, 2000
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,381,031
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 36,126
Change in assets and liabilities:
Increase in accounts receivable (1,597,757)
Increase in refundable income taxes (89,400)
Decrease in prepaid expenses 16,243
Decrease in inventory 90,108
Decrease in accounts payable and accrued expenses (503,398)
Decrease in deferred revenue (27,670)
Increase in deferred income taxes 1,206,286
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CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 511,569
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for equipment (22,626)
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INCREASE IN CASH AND CASH EQUIVALENTS 488,943
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 796,123
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CASH AND CASH EQUIVALENTS - END OF YEAR $ 1,285,066
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SUPPLEMENTAL DISCLOSURE OF CASH FROM INFORMATION
Income taxes paid $ 676,554
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See the accompanying notes to consolidated financial statements.
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PACIFIC DECISION SCIENCES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of Pacific Decision Sciences Corporation and its
wholly-owned subsidiaries, Pacific Decision Sciences Europe, Ltd.
and PDSC Asia Pacific PTE, LTD. Significant inter-company
transactions have been eliminated in consolidation.
ESTIMATES AND ASSUMPTIONS
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company considers all temporary cash investments as cash
equivalents. The Company maintains cash and cash equivalents at
financial institutions throughout the world. Bank and brokerage
account balances frequently exceed the insured limits provided by
the applicable governmental and privately funded entities.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company provides an allowance for doubtful accounts equal to
the estimated collection losses which are based on historical
collection experience coupled with a review of the current status
of the existing receivables. At June 30, 2000, the Company determined
that no allowance was necessary.
INVENTORY
Inventory is valued at the lower of cost or market on a first-in,
first-out (FIFO) basis.
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PACIFIC DECISION SCIENCES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DEFERRED REVENUE
Deferred revenue represents fees collected in advance for software
maintenance and other services. Income is recognized over the period
of the maintenance contracts, which is generally one year.
INCOME TAXES
Income taxes are provided for the tax effects of transactions
reported in the financial statements. They consist primarily of
taxes currently due as well as deferred taxes provided for those
items of revenue and expenses which have been recognized for
financial reporting purposes in different periods from those used
for income tax reporting purposes. The deferred tax assets and
liabilities represent future tax consequences of those differences
which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
2. OPERATIONS
The Company, located in Santa Ana, California with offices in the
United Kingdom and Singapore, was formed in 1983 to provide
software development and implementation services to businesses
throughout the United States, United Kingdom and Singapore.
3. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of:
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<S> <C>
Furniture and Fixtures $ 22,676
Equipment 210,628
Leasehold Improvements 8,211
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241,515
Less: Accumulated depreciation 133,310
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$ 108,205
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4. INCOME TAXES
The provision for income taxes consist of the following:
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Current federal and state income taxes
at statutory rates $ 211,545
Deferred income taxes 1,206,286
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$ 1,417,831
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PACIFIC DECISION SCIENCES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. COMMITMENTS
The Company leases its facilities, certain office equipment, and
four vehicles under long-term lease agreements.
At June 30, 2000, minimum lease commitments under all
noncancellable leases are as follows:
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OFFICE
YEAR FACILITY VEHICLES EQUIPMENT TOTAL
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<S> <C> <C> <C> <C>
2001 $ 218,146 $ 30,600 $ 11,832 $ 260,578
2002 200,272 28,970 11,832 241,074
2003 146,864 11,480 1,197 159,541
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Total $ 565,282 $ 71,050 $ 24,861 $ 661,193
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6. CONCENTRATIONS
Two customers accounted for approximately 63% of accounts
receivable and 53% of sales as of and for the year ended June 30,
2000.
7. SUBSEQUENT EVENT
Effective July 1, 2000, the Company implemented a stock option plan
covering full time employees with one year of service. The initial
option price was set at $8 expiring seven years following the grant
date. Vesting occurs over a four year period at 25% per year.
8. PRIOR PERIOD ADJUSTMENT
Retained earnings at the beginning of 2000 has been adjusted to
correct an error made in a prior year relating to the accounting
for revenue on one year maintenance contracts. The error had no
effect on net income for 1999.
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