Exhibit 99.1
Unaudited Pro Forma Consolidated Financial Statements
of TechTeam Global, Inc. and Subsidiaries
of TechTeam Global, Inc. and Subsidiaries
On June 3, 2010, TechTeam Global, Inc. (the “Company”) agreed to sell its Government Solutions business unit (“Government Solutions”) to Jacobs Engineering Group Inc. pursuant to a Stock Purchase Agreement. The Stock Purchase Agreement was amended by the parties thereto on September 14, 2010. In accordance with the terms and conditions of the Stock Purchase Agreement, as amended, the Company will receive a cash payment of $43 million adjusted for the retention of certain liabilities and a closing net tangible book value adjustment. Of the $43 million cash payment to be made at closing, $8.60 million will be funded into an escrow account to secure any indemnification claims and $2.77 million will be funded into escrow to secure the payment of any closing net tangible book value adjustment.
The following unaudited pro forma consolidated financial statements illustrate the effects of the sale of Government Solutions. The unaudited pro forma consolidated balance sheet as of June 30, 2010 gives effect to the sale as if it occurred as of that date. The unaudited pro forma consolidated statements of operations give effect to the sale as if it occurred on January 1 for each period presented.
The unaudited pro forma consolidated financial statements have been derived from, and should be read in conjunction with, the Company’s historical consolidated financial statements, including the notes thereto, in the Company’s Annual Report filed onForm 10-K for the year ended December 31, 2009 and the Company’s Quarterly Report filed onForm 10-Q for the quarter ended June 30, 2010 and the unaudited financial statements of Government Solutions included as Exhibit G to this proxy statement supplement. The unaudited pro forma consolidated financial statements are not necessarily indicative of the financial position or results of operations that would have been achieved had Government Solutions been sold on the dates indicated, or that may be expected to occur in the future as a result of the sale.
The pro forma adjustments are described in the accompanying notes and are based upon information and assumptions available at the time of filing this proxy statement supplement.
The unaudited pro forma consolidated financial statements are prepared in accordance with Article 11 ofRegulation S-X.
F-1
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2010
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2010
| Sale of Business | ||||||||||||||||
| Company | Business | Pro Forma | Pro Forma As | |||||||||||||
| (In thousands) | Historical (a) | Historical (b) | Adjustments | Adjusted | ||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
| Cash and cash equivalents | $ | 14,846 | $ | — | $ | 30,085 | (c) | $ | 44,931 | |||||||
| Accounts receivable (net of allowance) | 38,383 | (15,931 | ) | — | 22,452 | |||||||||||
| Prepaid expenses and other current assets | 4,159 | (995 | ) | — | 3,164 | |||||||||||
Total current assets | 57,388 | (16,926 | ) | 30,085 | 70,547 | |||||||||||
| Property, equipment and software, net | 5,280 | (517 | ) | — | 4,763 | |||||||||||
| Goodwill and other intangible assets, net | 46,278 | (37,755 | ) | — | 8,523 | |||||||||||
| Deferred income taxes | 4,216 | (2,833 | ) | — | 1,383 | |||||||||||
| Other assets | 989 | (296 | ) | 10,038 | (d) | 10,731 | ||||||||||
Total assets | $ | 114,151 | $ | (58,327 | ) | $ | 40,123 | $ | 95,947 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
| Current portion of long-term debt | $ | 4,065 | $ | (23 | ) | $ | — | $ | 4,042 | |||||||
| Accounts payable | 5,026 | (1,798 | ) | — | 3,228 | |||||||||||
| Accrued payroll and related taxes | 9,500 | (2,441 | ) | — | 7,059 | |||||||||||
| Accrued expenses | 1,996 | (1,440 | ) | — | 556 | |||||||||||
| Other current liabilities | 2,015 | (817 | ) | — | 1,198 | |||||||||||
Total current liabilities | 22,602 | (6,519 | ) | — | 16,083 | |||||||||||
Long-term liabilities | ||||||||||||||||
| Long-term debt, less current portion | 10,790 | (5 | ) | — | 10,785 | |||||||||||
| Other long-term liabilities | 1,174 | (106 | ) | — | 1,068 | |||||||||||
Total long-term liabilities | 11,964 | (111 | ) | — | 11,853 | |||||||||||
Shareholders’ equity | ||||||||||||||||
| Preferred stock, 5,000,000 shares authorized, no shares issued | — | — | — | — | ||||||||||||
| Common stock, $0.01 par value, 45,000,000 shares authorized, 11,200,053 shares issued and outstanding at June 30, 2010 | 112 | — | — | 112 | ||||||||||||
| Additional paid-in capital | 80,765 | — | 440 | (e) | 81,205 | |||||||||||
| Retained earnings | 212 | — | (12,014 | )(f) | (11,802 | ) | ||||||||||
| Accumulated other comprehensive loss | (1,504 | ) | — | — | (1,504 | ) | ||||||||||
Total shareholders’ equity | 79,585 | — | (11,574 | ) | 68,011 | |||||||||||
Total liabilities and shareholders’ equity | $ | 114,151 | $ | (6,630 | ) | $ | (11,574 | ) | $ | 95,947 | ||||||
F-2
The unaudited pro forma consolidated balance sheet as of June 30, 2010 reflects the following adjustments:
| (a) | As reported in the Company’s unaudited Quarterly Report onForm 10-Q for the six months ended June 30, 2010. |
| (b) | Assets to be sold and liabilities to be assumed by the buyer under the Stock Purchase Agreement, as amended. Amounts were derived from Government Solutions’ unaudited balance sheet as of June 30, 2010. |
| (c) | Amount reflects the estimated proceeds to be received as a result of the closing of the sale of Government Solutions as follows (in thousands): |
| Purchase price | $ | 45,000 | ||
| Less: Retention bonus obligation (1) | (2,000 | ) | ||
| Less: Success fees | (850 | ) | ||
| Less: Insurance obligation (2) | (235 | ) | ||
| Less: Estimated legal and other | (460 | ) | ||
| Net purchase price | 41,455 | |||
| Estimated escrow | (10,038 | ) | ||
| Estimated net tangible book value adjustment | (1,332 | ) | ||
| Tax effect of the loss on sale (3) | - | |||
| Net proceeds | $ | 30,085 | ||
| (1) | Pursuant to the Stock Purchase Agreement, as amended, this amount reflects the payment of certain executive management retention bonuses. | |
| (2) | Pursuant to the Stock Purchase Agreement, as amended, the Company will be partially responsible for payment of certain insurance coverage including professional liability, employment practices liability, directors and officers liability and fiduciary liability. | |
| (3) | The proposed transaction will create a capital loss which cannot be utilized for tax purposes. |
| (d) | Amount reflects proceeds that will be deposited into an escrow account at the closing. $8.60 million of the escrow amount is required by the Stock Purchase Agreement to secure any indemnification claims and $2.77 million of the escrow amount is required to secure payment of any closing net tangible book value adjustment less an estimated net tangible book value adjustment of $1.33 million. |
| (e) | Amount reflects estimated expense for unvested stock options and restricted stock for certain Government Solutions employee, which stock options and restricted stock will vest upon the sale of Government Solutions. |
F-3
| (f) | Amount reflects the estimated loss on the sale of Government Solutions calculated as follows (in thousands): |
| Purchase price | $ | 45,000 | ||
| Less: Retention bonus obligation (1) | (2,000 | ) | ||
| Less: Success fees | (850 | ) | ||
| Less: Insurance obligation (2) | (235 | ) | ||
| Less: Estimated legal and other | (460 | ) | ||
| Less: Stock based compensation (3) | (440 | ) | ||
| Net purchase price | 41,015 | |||
| Carrying value of Government Solutions | (51,697 | ) | ||
| Loss on sale of Government Solutions | (10,682 | ) | ||
| Estimated net tangible book value adjustment | (1,332 | ) | ||
| Tax effect of the loss on sale (4) | - | |||
| Net loss on sale of Government Solutions | $ | (12,014 | ) | |
| (1) | Pursuant to the Stock Purchase Agreement, as amended, this amount reflects the payment of certain executive management retention bonuses. | |
| (2) | Pursuant to the Stock Purchase Agreement, as amended, the Company will be partially responsible for payment of certain insurance coverage including professional liability, employment practices liability, directors and officers liability and fiduciary liability. | |
| (3) | Estimated expense for unvested stock options and restricted stock for certain Government Solutions employees, which options and restricted stock will vest upon the sale of Government Solutions. | |
| (4) | The proposed transaction will create a capital loss which cannot be utilized for tax purposes. |
F-4
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2010
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2010
| Sale of Business | ||||||||||||||||
| Company | Business | Pro Forma | Pro Forma | |||||||||||||
| (In thousands, except per share data) | Historical (a) | Historical (b) | Adjustments | As Adjusted | ||||||||||||
Revenue | ||||||||||||||||
| Commercial | ||||||||||||||||
| IT Outsourcing Services | $ | 51,706 | $ | — | $ | — | $ | 51,706 | ||||||||
| IT Consulting and Systems Integration | 5,855 | — | — | 5,855 | ||||||||||||
| Other Services | 6,986 | — | — | 6,986 | ||||||||||||
| Total Commercial | 64,547 | — | — | 64,547 | ||||||||||||
| Government Technology Services | 30,244 | (30,244 | ) | — | — | |||||||||||
Total revenue | 94,791 | (30,244 | ) | — | 64,547 | |||||||||||
Cost of revenue | ||||||||||||||||
| Commercial | ||||||||||||||||
| IT Outsourcing Services | 39,791 | — | — | 39,791 | ||||||||||||
| IT Consulting and Systems Integration | 4,702 | — | — | 4,702 | ||||||||||||
| Other Services | 5,282 | — | — | 5,282 | ||||||||||||
| Total Commercial | 49,775 | — | — | 49,775 | ||||||||||||
| Government Technology Services | 23,485 | (23,485 | ) | — | — | |||||||||||
Total cost of revenue | 73,260 | (23,485 | ) | — | 49,775 | |||||||||||
Gross profit | ||||||||||||||||
| Commercial | 14,772 | — | — | 14,772 | ||||||||||||
| Government Technology Services | 6,759 | (6,759 | ) | — | — | |||||||||||
Total gross profit | 21,531 | (6,759 | ) | — | 14,772 | |||||||||||
| Selling, general and administrative expense | 21,442 | (8,543 | ) | 1,880 | (d) | 14,779 | ||||||||||
| Restructuring charges, net | 3,140 | (139 | ) | — | 3,001 | |||||||||||
Operating (loss) income | (3,051 | ) | 1,923 | (1,880 | ) | (3,008 | ) | |||||||||
| Net interest expense | (389 | ) | 303 | (c) | — | (86 | ) | |||||||||
| Foreign currency transaction gain | 351 | — | — | 351 | ||||||||||||
(Loss) income before income taxes | (3,089 | ) | 2,226 | (1,880 | ) | (2,743 | ) | |||||||||
| Income tax (benefit) provision | (574 | ) | 863 | (658 | )(e) | (369 | ) | |||||||||
Net (loss) income | $ | (2,515 | ) | $ | 1,363 | $ | (1,222 | ) | $ | (2,374 | ) | |||||
Basic loss per common share | $ | (0.24 | ) | $ | (0.22 | ) | ||||||||||
Diluted loss per common share | $ | (0.24 | ) | $ | (0.22 | ) | ||||||||||
Weighted average number of common shares and common share equivalents outstanding | ||||||||||||||||
| Basic—common | 10,687 | 10,687 | ||||||||||||||
| Diluted—common | 10,687 | 10,687 | ||||||||||||||
F-5
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2009
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2009
| Sale of Business | ||||||||||||||||
| Company | Business | Pro Forma | Pro Forma | |||||||||||||
| (In thousands, except per share data) | Historical (a) | Historical (b) | Adjustments | As Adjusted | ||||||||||||
Revenue | ||||||||||||||||
| Commercial | ||||||||||||||||
| IT Outsourcing Services | $ | 54,278 | $ | — | $ | — | $ | 54,278 | ||||||||
| IT Consulting and Systems Integration | 7,069 | — | — | 7,069 | ||||||||||||
| Other Services | 8,240 | — | — | 8,240 | ||||||||||||
| Total Commercial | 69,587 | — | — | 69,587 | ||||||||||||
| Government Technology Services | 40,845 | (40,845 | ) | — | — | |||||||||||
Total revenue | 110,432 | (40,845 | ) | — | 69,587 | |||||||||||
Cost of revenue | ||||||||||||||||
| Commercial | ||||||||||||||||
| IT Outsourcing Services | 42,065 | — | — | 42,065 | ||||||||||||
| IT Consulting and Systems Integration | 5,629 | — | — | 5,629 | ||||||||||||
| Other Services | 6,148 | — | — | 6,148 | ||||||||||||
| Total Commercial | 53,842 | — | — | 53,842 | ||||||||||||
| Government Technology Services | 29,316 | (29,316 | ) | — | — | |||||||||||
Total cost of revenue | 83,158 | (29,316 | ) | — | 53,842 | |||||||||||
Gross profit | ||||||||||||||||
| Commercial | 15,745 | — | — | 15,745 | ||||||||||||
| Government Technology Services | 11,529 | (11,529 | ) | — | — | |||||||||||
Total gross profit | 27,274 | (11,529 | ) | — | 15,745 | |||||||||||
| Selling, general and administrative expense | 22,042 | (8,033 | ) | 1,450 | (d) | 15,459 | ||||||||||
| Restructuring charges, net | (699 | ) | — | — | (699 | ) | ||||||||||
Operating (loss) income | 5,931 | (3,496 | ) | (1,450 | ) | 985 | ||||||||||
| Net interest expense | (604 | ) | 550 | (c) | — | (54 | ) | |||||||||
| Foreign currency transaction loss | (648 | ) | — | — | (648 | ) | ||||||||||
(Loss) income before income taxes | 4,679 | (2,946 | ) | (1,450 | ) | 283 | ||||||||||
| Income tax (benefit) provision | 1,739 | (1,139 | ) | (508 | )(e) | 92 | ||||||||||
Net (loss) income | $ | 2,940 | $ | (1,807 | ) | $ | (942 | ) | $ | 191 | ||||||
Basic earnings per common share | $ | 0.28 | $ | 0.02 | ||||||||||||
Diluted earnings per common share | $ | 0.28 | $ | 0.02 | ||||||||||||
Weighted average number of common shares and common share equivalents outstanding | ||||||||||||||||
| Basic—common | 10,599 | 10,599 | ||||||||||||||
| Diluted—common | 10,624 | 10,624 | ||||||||||||||
F-6
The unaudited pro forma consolidated statements of operations for the six months ended June 30, 2010 and June 30, 2009 reflect the following adjustments:
| (a) | As reported in the Company’s unaudited Quarterly Report onForm 10-Q for the six months ended June 30, 2010. |
| (b) | Elimination of operating results of Government Solutions and subsidiaries. These amounts represent the unaudited statements of operations for Government Solutions for the six months ended June 30, 2010 and June 30, 2009. |
| (c) | Interest on a loan related to the acquisition of New Vectors during 2007. The loan balance is maintained by the retained business. |
| (d) | Amounts reflect corporate overhead allocations originally charged to Government Solutions operating results identified under Note (a) that would continue to be recorded as an expense of the retained business. |
| (e) | Reflects the tax effect of the corporate overhead that would be absorbed by the retained business at statutory rates for Federal and State tax purposes for the six months ended June 30, 2010 and June 30, 2009. |
F-7
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2009
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2009
| Sale of Business | ||||||||||||||||
| Company | Business | Pro Forma | Pro Forma | |||||||||||||
| (In thousands, except per share data) | Historical (a) | Historical (b) | Adjustments | As Adjusted | ||||||||||||
Revenue | ||||||||||||||||
| Commercial | ||||||||||||||||
| IT Outsourcing Services | $ | 106,229 | $ | — | $ | — | $ | 106,229 | ||||||||
| IT Consulting and Systems Integration | 12,755 | — | — | 12,755 | ||||||||||||
| Other Services | 15,817 | — | — | 15,817 | ||||||||||||
| Total Commercial | 134,801 | — | — | 134,801 | ||||||||||||
| Government Technology Services | 76,440 | (76,440 | ) | — | — | |||||||||||
Total revenue | 211,241 | (76,440 | ) | — | 134,801 | |||||||||||
| �� | ||||||||||||||||
Cost of revenue | ||||||||||||||||
| Commercial | ||||||||||||||||
| IT Outsourcing Services | 82,899 | — | — | 82,899 | ||||||||||||
| IT Consulting and Systems Integration | 9,890 | — | — | 9,890 | ||||||||||||
| Other Services | 11,963 | — | — | 11,963 | ||||||||||||
| Total Commercial | 104,752 | — | — | 104,752 | ||||||||||||
| Government Technology Services | 56,003 | (56,003 | ) | — | — | |||||||||||
Total cost of revenue | 160,755 | (56,003 | ) | — | 104,752 | |||||||||||
Gross profit | ||||||||||||||||
| Commercial | 30,049 | — | — | 30,049 | ||||||||||||
| Government Technology Services | 20,437 | (20,437 | ) | — | — | |||||||||||
Total gross profit | 50,486 | (20,437 | ) | — | 30,049 | |||||||||||
| Selling, general and administrative expense | 42,823 | (15,984 | ) | 2,841 | (d) | 29,680 | ||||||||||
| Impairment charges | 27,453 | (21,284 | ) | — | 6,169 | |||||||||||
| Restructuring charges, net | 411 | — | — | 411 | ||||||||||||
Operating (loss) income | (20,201 | ) | 16,831 | (2,841 | ) | (6,211 | ) | |||||||||
| Net interest expense | (1,018 | ) | 992 | (c) | — | (26 | ) | |||||||||
| Foreign currency transaction loss | (675 | ) | — | — | (675 | ) | ||||||||||
(Loss) income before income taxes | (21,894 | ) | 17,823 | (2,841 | ) | (6,912 | ) | |||||||||
| Income tax (benefit) provision | (3,261 | ) | 3,785 | (1,025 | )(e) | (501 | ) | |||||||||
Net (loss) income | $ | (18,633 | ) | $ | 14,038 | $ | (1,816 | ) | $ | (6,411 | ) | |||||
Basic loss per common share | $ | (1.75 | ) | $ | (.60 | ) | ||||||||||
Diluted loss per common share | $ | (1.75 | ) | $ | (.60 | ) | ||||||||||
Weighted average number of common shares and common share equivalents outstanding | ||||||||||||||||
| Basic—common | 10,618 | 10,618 | ||||||||||||||
| Diluted—common | 10,618 | 10,618 | ||||||||||||||
F-8
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2008
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2008
| Sale of Business | ||||||||||||||||
| Company | Business | Pro Forma | Pro Forma | |||||||||||||
| (In thousands, except per share data) | Historical (a) | Historical (b) | Adjustments | As Adjusted | ||||||||||||
Revenue | ||||||||||||||||
| Commercial | ||||||||||||||||
| IT Outsourcing Services | $ | 120,166 | $ | — | $ | — | $ | 120,166 | ||||||||
| IT Consulting and Systems Integration | 27,064 | — | — | 27,064 | ||||||||||||
| Other Services | 24,110 | — | — | 24,110 | ||||||||||||
| Total Commercial | 171,340 | — | — | 171,340 | ||||||||||||
| Government Technology Services | 88,615 | (88,615 | ) | — | — | |||||||||||
Total revenue | 259,955 | (88,615 | ) | — | 171,340 | |||||||||||
Cost of revenue | ||||||||||||||||
| Commercial | ||||||||||||||||
| IT Outsourcing Services | 95,816 | — | — | 95,816 | ||||||||||||
| IT Consulting and Systems Integration | 20,637 | — | — | 20,637 | ||||||||||||
| Other Services | 18,683 | — | — | 18,683 | ||||||||||||
| Total Commercial | 135,136 | — | — | 135,136 | ||||||||||||
| Government Technology Services | 64,383 | (64,383 | ) | — | — | |||||||||||
Total cost of revenue | 199,519 | (64,383 | ) | — | 135,136 | |||||||||||
Gross profit | ||||||||||||||||
| Commercial | 36,204 | — | — | 36,204 | ||||||||||||
| Government Technology Services | 24,232 | (24,232 | ) | — | — | |||||||||||
Total gross profit | 60,436 | (24,232 | ) | — | 36,204 | |||||||||||
| Selling, general and administrative expense | 46,920 | (15,970 | ) | 2,541 | (d) | 33,491 | ||||||||||
| Restructuring charges, net | 5,719 | (789 | ) | — | 4,930 | |||||||||||
Operating (loss) income | 7,797 | (7,473 | ) | (2,541 | ) | (2,217 | ) | |||||||||
| Net interest expense | (1,712 | ) | 1,536 | (c) | — | (176 | ) | |||||||||
| Foreign currency transaction gain | 910 | — | 910 | |||||||||||||
| Other income, net | 155 | — | 155 | |||||||||||||
(Loss) income before income taxes | 7,150 | (5,937 | ) | (2,541 | ) | (1,328 | ) | |||||||||
| Income tax (benefit) provision | 4,182 | (2,284 | ) | (933 | )(e) | 965 | ||||||||||
Net (loss) income | $ | 2,968 | $ | (3,653 | ) | $ | (1,608 | ) | $ | (2,293 | ) | |||||
Basic (loss) earnings per common share | $ | 0.28 | $ | (0.22 | ) | |||||||||||
Diluted (loss) earnings per common share | $ | 0.28 | $ | (0.22 | ) | |||||||||||
Weighted average number of common shares and common share equivalents outstanding | ||||||||||||||||
| Basic—common | 10,529 | 10,529 | ||||||||||||||
| Diluted—common | 10,555 | 10,555 | ||||||||||||||
F-9
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2007
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2007
| Sale of Business | ||||||||||||||||
| Company | Business | Pro Forma | Pro Forma | |||||||||||||
| (In thousands, except per share data) | Historical (a) | Historical (b) | Adjustments | As Adjusted | ||||||||||||
Revenue | ||||||||||||||||
| Commercial | ||||||||||||||||
| IT Outsourcing Services | $ | 104,659 | $ | — | $ | — | $ | 104,659 | ||||||||
| IT Consulting and Systems Integration | 28,064 | — | — | 28,064 | ||||||||||||
| Other Services | 20,219 | — | — | 20,219 | ||||||||||||
| Total Commercial | 152,942 | — | — | 152,942 | ||||||||||||
| Government Technology Services | 69,254 | (69,254 | ) | — | — | |||||||||||
Total revenue | 222,196 | (69,254 | ) | — | 152,942 | |||||||||||
Cost of revenue | ||||||||||||||||
| Commercial | ||||||||||||||||
| IT Outsourcing Services | 84,732 | — | — | 84,732 | ||||||||||||
| IT Consulting and Systems Integration | 21,877 | — | — | 21,877 | ||||||||||||
| Other Services | 15,430 | — | — | 15,430 | ||||||||||||
| Total Commercial | 122,039 | — | — | 122,039 | ||||||||||||
| Government Technology Services | 50,387 | (50,387 | ) | — | — | |||||||||||
Total cost of revenue | 172,426 | (50,387 | ) | — | 122,039 | |||||||||||
Gross profit | ||||||||||||||||
| Commercial | 30,903 | — | — | 30,903 | ||||||||||||
| Government Technology Services | 18,867 | (18,867 | ) | — | — | |||||||||||
Total gross profit | 49,770 | (18,867 | ) | — | 30,903 | |||||||||||
| Selling, general and administrative expense | 39,475 | (12,185 | ) | 702 | (d) | 27,992 | ||||||||||
Operating (loss) income | 10,295 | (6,682 | ) | (702 | ) | 2,911 | ||||||||||
| Net interest expense | (572 | ) | 934 | (c) | — | 362 | ||||||||||
| Foreign currency transaction loss | (84 | ) | — | — | (84 | ) | ||||||||||
(Loss) income before income taxes | 9,639 | (5,748 | ) | (702 | ) | 3,189 | ||||||||||
| Income tax (benefit) provision | 3,343 | (2,235 | ) | (259 | ) (e) | 849 | ||||||||||
Net (loss) income | $ | 6,296 | $ | (3,513 | ) | $ | (443 | ) | $ | 2,340 | ||||||
Basic earnings per common share | $ | 0.61 | $ | 0.23 | ||||||||||||
Diluted earnings per common share | $ | 0.60 | $ | 0.22 | ||||||||||||
Weighted average number of common shares and common share equivalents outstanding | ||||||||||||||||
| Basic—common | 10,355 | 10,355 | ||||||||||||||
| Diluted—common | 10,506 | 10,506 | ||||||||||||||
F-10
The unaudited pro forma consolidated statements of operations for the twelve months ended December 31, 2009, 2008 and 2007 reflect the following adjustments:
| (a) | As reported in the Company’s Annual Report onForm 10-K for the year ended December 31, 2009. |
| (b) | Elimination of operating results of Government Solutions and subsidiaries. These amounts represent the unaudited statements of operations for Government Solutions for the twelve months ended December 31, 2009, 2008 and 2007. |
| (c) | Interest on a loan related to the acquisition of New Vectors during 2007. The loan balance is maintained by the retained business. |
| (d) | Amounts reflect corporate overhead allocations originally charged to Government Solutions operating results identified under Note (a) that would continue to be recorded as an expense of the retained business. |
| (e) | Reflects the tax effect of the corporate overhead that would be absorbed by the retained business at statutory rates for Federal and State tax purposes for the twelve months ended December 31, 2009, 2008 and 2007. |
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