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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 31, 1998
--------------
RENAISSANCE WORLDWIDE, INC.
--------------------------------------------------
(Exact name of registrant as specified in charter)
MASSACHUSETTS 0-28192 04-2920563
------------- ------- ----------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
189 Wells Avenue, Newton, MA 02159
- ---------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 527-6886
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This is page 1 of 4 pages.
Exhibit Index appears on page 4.
Item 7. Financial Statements and Exhibits.
On April 15, 1998, the Registrant filed a Current Report on Form 8-K
with the Securities and Exchange Commission (the "Commission") which described
the Registrant's separate acquisitions by merger of Neoglyphics Media
Corporation and Triad Data, Inc. The report indicated that the required
financial statements and the pro forma financial information required by Article
11 of Regulation S-X would be filed by an amendment to such filing. This Report
on Form 8-K/A files such information.
Financial Statements of the Acquired Businesses
(a) The required financial statements for the one year ended
December 31, 1997 and the three months ended March 31, 1998 and
1997 with respect to the acquired businesses are included
herewith.
(b) The required pro forma financial information with respect to the
acquired businesses is included herewith.
(c) Exhibits:
2.1 Agreement and Plan of Merger dated March 31, 1998 among
Renaissance Worldwide, Inc., Neoglyphics Media
Corporation and NGMC Acquisition Corp.*
2.2 Agreement to furnish copies of omitted annexes, schedules
and exhibits to the Neoglyphics Merger Agreement.*
2.3 Agreement and Plan of Merger dated April 2, 1998 among
Renaissance Worldwide, Inc., Triad Data, Inc., TDI
Acquisition Corp. and Harley Lippman.*
2.4 Agreement to furnish copies of omitted annexes, schedules
and exhibits to the Triad Merger Agreement.*
23.1 Consent of Katch, Tyson & Company.
23.2 Consent of Goldstein Golub Kessler & Company, P.C.
- -------------------------
* Previously filed as an identically numbered exhibit to the Registrant's
Current Report on Form 8-K, dated March 31, 1998 and filed with the Securities
and Exchange Commission on April 15, 1998.
-2-
SIGNATURE
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.
RENAISSANCE WORLDWIDE, INC.
By: /s/ Richard L. Bugley
----------------------------------
Name: Richard L. Bugley
Title: Vice President
and General Counsel
Date: June 12, 1998
-3-
INDEX TO FINANCIAL STATEMENTS
NEOGLYPHICS MEDIA CORPORATION
Audited Accountant's Report F-2
Statement of Financial Position F-3
Statement of Income F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-8
TRIAD DATA, INC.
Independent Auditor's Report F-18
Financial Statements:
Balance Sheet F-19
Statement of Income F-20
Statement of Stockholder's Equity F-21
Statement of Cash Flows F-22
Notes to Financial Statements F-23
NEOGLYPHICS MEDIA CORPORATION
Balance Sheet as of March 31, 1998 (unaudited) F-27
Condensed Statement of Operations for the Three
Months Ended March 31, 1998 and 1997 (unaudited) F-28
Statement of Cash Flows for the Three Months Ended
March 31, 1998 and 1997 (unaudited) F-29
Notes to Unaudited Interim Financial Statements F-30
TRIAD DATA, INC.
Balance Sheet as of March 31, 1998 (unaudited) F-31
Condensed Statement of Operations for the Three
Months Ended March 31, 1998 and 1997 (unaudited) F-32
Statement of Cash Flows for the Three Months Ended
March 31, 1998 and 1997 (unaudited) F-33
Notes to Unaudited Interim Financial Statements F-34
PRO FORMA UNAUDITED COMBINED CONDENSED FINANCIAL STATEMENTS
Introduction to Pro Forma Unaudited Combined Condensed
Financial Statements F-35
Pro Forma Unaudited Combined Condensed Balance Sheet F-36
Pro Forma Unaudited Combined Condensed Statement of Operations F-37
Notes to Pro Forma Unaudited Combined Condensed Financial Statements F-38
Neoglyphics Media Corporation
1735 North Paulina Avenue, Suite 200
Chicago, Illinois 60622
INDEPENDENT AUDITOR'S REPORT
----------------------------
We have audited the accompanying statement of financial position of Neoglyphics
Media Corporation as of December 31, 1997, and the related statements of income
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 audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audits 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Neoglyphics Media Corporation
at December 31, 1997, and the results of its operation and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
As described in Note 2 to the financial statements, the Company changed its
method of recognizing revenue under fixed-fee contracts.
Respectfully submitted,
KATCH, TYSON & COMPANY
March 12, 1998
F-2
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
STATEMENT OF FINANCIAL POSITION
-------------------------------
DECEMBER 31, 1997
-----------------
ASSETS
------
CURRENT ASSETS:
Cash (1) $ 101,694
Accounts Receivable (3,5) $ 2,655,542
Less--Allowance for Doubtful Account (1) 56,881 2,598,661
-----------
Costs and Estimated Earnings in Excess of
Billings on Uncompleted Contracts (1,6) 561,536
Due from Affiliate (4) 17,456
Due from Officer 6,355
Prepaid Expenses 79,142
-----------
Total Current Assets $ 3,364,844
PROPERTIES: (1)
Computer Equipment 889,913
Office Furniture and Equipment 258,655
Vehicle 28,701
-----------
Total 1,177,269
Less--Accumulated Depreciation 182,186
Undepreciated Cost 995,083
Unamortized Computer Software 138,054
Unamortized Leasehold Improvements 81,728
-----------
Total Properties 1,214,865
OTHER ASSETS:
Deposits 43,854
Unamortized Software Development Costs (1,7) 52,531
Intangible Assets (1) 43,076
-----------
Total Other Assets 139,461
-----------
Total Assets (8) $ 4,719,170
===========
The accompanying notes are an integral part of this statement.
F-3
EXHIBIT A
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Note Payable--Bank (8) $ 700,000
Current Maturities of
Long-Term Indebtedness (10,11) 13,386
Note Payable--Officer (9) 93,100
Accounts Payable 221,609
Accrued Officers' Salary 189,500
Accrued Payroll and Expenses (9,11) 244,005
Billing in Excess of Costs and Estimated
Earnings on Uncompleted Contracts (1,6) 10,434
Accrued Income Taxes (1) 200,978
Deferred Income Taxes (1,12) 1,038,869
-----------
Total Current Liabilities $ 2,711,881
LONG-TERM INDEBTEDNESS:
Obligation under Capital Lease (10,11) 1,400
Deferred Income Taxes (1,12) 50,832
-----------
Total Long-Term Indebtedness 52,232
-----------
Total Liabilities $ 2,764,113
Commitments and Contingencies (11)
STOCKHOLDERS' EQUITY:
Common Stock--18,000,000 shares
authorized; 16,888,500 shares
issued and outstanding;
no par value (1,14) (increase
of $6,885 from prior year from
exercise of 688,500 stock options) 26,885
Additional Paid in Capital (increase
of $34,874 from prior year from
tax benefit of nonqualified stock
options) 34,874
Retained Earnings:
Balance--Beginning of Year (2) 598,610
Add--Net Income for the Year (Exhibit B) 1,294,688
-----------
Balance--End of Year 1,893,298
-----------
Total Stockholders' Equity 1,955,057
-----------
Total Liabilities and Stockholders' Equity $ 4,719,170
===========
The accompanying notes are an integral part of this statement.
F-4
EXHIBIT B
---------
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
STATEMENT OF INCOME
-------------------
YEAR ENDED DECEMBER 31, 1997
----------------------------
Amount
-----------
Net Sales (1,2,3) $ 9,539,217
Direct Costs 4,461,044
-----------
Gross Profit 5,078,173
- - - - - -
Operating Expenses:
Selling 592,900
General and Administrative 1,831,050
-----------
Total Operating Expenses 2,423,950
-----------
Net Income from Operations 2,654,223
- - - - - -
Other (Income) and Expense:
Interest Expense 38,640
Miscellaneous Income (4,658)
-----------
Total Other (Income) and Expense 33,982
-----------
Net Income before Provision for Income Taxes 2,620,241
-----------
Provision for Income Taxes (1):
Current Income Taxes 235,852
Deferred Income Taxes (12) 1,089,701
-----------
Total Provision for Income Taxes 1,325,553
-----------
Net Income (Exhibit A) $ 1,294,688
===========
The accompanying notes are an integral part of this statement.
F-5
EXHIBIT C
---------
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
STATEMENT OF CASH FLOWS
-----------------------
YEAR ENDED DECEMBER 31, 1997
----------------------------
Cash Flows from Operating Activities:
Net Income $ 1,294,688
- - - - - -
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 196,636
Change in Provision for Bad Debts 21,737
Deferred Income Taxes 1,089,701
Tax Provision on the Exercise of Stock Options 34,874
(Increase) Decrease in Assets:
Accounts Receivable (1,336,168)
Due from Affiliate 5,020
Due from Officer (6,355)
Costs and Estimated Earnings in Excess of
Billings on Uncompleted Contracts (561,536)
Prepaid Expenses (76,294)
Deposits (26,366)
Increase (Decrease) in Liabilities:
Accounts Payable 112,118
Accrued Payroll and Expenses 51,652
Accrued Income Taxes 200,978
Billings in Excess of Costs and Estimated
Earnings on Uncompleted Contracts (94,322)
------------
Total Adjustments (388,325)
------------
Net Cash Provided by Operating Activities 906,363
- - - - - -
Cash Flows from Investing Activities:
Purchase of Properties and Computer Software (887,013)
Software Development Costs (55,621)
Trademarks Costs (12,465)
------------
Net Cash (Used in) Operating Activities (955,099)
- - - - - -
Cash Flow from Financing Activities:
Proceeds from Issuance of Long-Term Debt 5,850
Net Borrowing (Payments) on Line of Credit 268,000
Principal Payments on Long-Term Debt (90,607)
Cash Proceeds from Exercise of Stock Options 6,885
------------
Net Cash Provided by Financing Activities 190,128
------------
The accompanying notes are an integral part of this statement.
F-6
EXHIBIT C
---------
(Continued)
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
STATEMENT OF CASH FLOWS
-----------------------
YEAR ENDED DECEMBER 31, 1997
----------------------------
Net Increase in Cash and Cash Equivalents $ 141,392
Cash and Cash Equivalents--Beginning of Period (39,698)
------------
Cash and Cash Equivalents--End of Period $ 101,694
============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for--Interest $ 27,068
Disclosure of Accounting Policy:
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.
The accompanying notes are an integral part of this statement.
F-7
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
A. Nature of Operations
The Company, which began operations in February, 1995, develops websites under
contractual agreements with various clients located primarily in the United
States.
B. 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 amount of revenue and expenses during the reported
period. Actual results could differ from those estimates.
C. Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
D. Allowance for Doubtful Accounts
The Company maintains reserves for potential credit losses, and such losses have
been within management's expectations.
E. Properties
Properties, which are stated at cost, are being depreciated or amortized over
the estimated useful lives of the assets on the straight-line method. Estimated
useful lives of properties are as follows:
Years
-----
Computer Equipment 5
Office Furniture and Equipment 5-10
Vehicle 5
Computer Software 3
Leasehold Improvements 5
Due to inherent technological change in the computer industry, the period over
which computer equipment and software is being depreciated and amortized may
have to be accelerated. Depreciation and amortization of properties amounts to
$189,611 for the year ended December 31, 1997.
F-8
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------
F. Intangibles
Intangible assets are being amortized over the estimated useful lives of the
assets on the straight-line method. Estimated useful lives of intangibles range
from five to ten years. Amortization of intangibles amounts to $3,935 for the
year ended December 31, 1997.
G. Computer Software Development Costs
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for Costs of Computer Software to be Sold, Leased or Otherwise
Marketed", the Company is required to capitalize certain software development
and production costs once technological feasibility has been achieved. Costs
prior to technological feasibility is achieved, and subsequent to the product
release, are charged to operations as incurred. Capitalized computer software
development costs are reported at the lower of unamortized cost or net
realizable value. Upon initial product release, these costs are amortized based
on the straight-line method over the estimated useful life, not to exceed three
years. Fully amortized computer software costs are removed from the financial
records.
H. Revenue Recognition
Revenue from fixed-fee contracts are recognized on the percentage-of-completion
method measured by the percentage of labor hours incurred to date, to total
labor hours for each contract, as estimated by management. This method is used
because management considers total labor hours to be the best available measure
of progress on contracts. Because of the inherent uncertainties in estimating
hours, it is possible that the Company's estimates of costs and revenue may be
revised prior to contract completion. Changes in estimated profitability and
job performance may result in revisions to costs and income, which are
recognized in the period in which the revisions are determined. If estimated
total costs for a contract indicate a loss, the Company provides currently for
the total anticipated loss on the contract.
Contract costs include all direct labor and those indirect costs related to
contract performance. The asset, "Costs and Estimated Earnings in Excess of
Billings on Uncompleted Contracts," represents revenue recognized in excess of
amounts billed. The liability, "Billings in Excess of Costs and Estimated
Earnings on Uncompleted Contracts," represents billings in excess of revenue
recognized.
F-9
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------
I. Income Taxes
Effective January 1, 1997, the Company terminated its election to be taxed as a
small business corporation. Accordingly, on that date, the Company adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Deferred taxes have resulted from temporary differences between
reporting income for financial reporting purposes and for income tax purposes.
The Company reports income on the cash basis for income tax purposes and,
accordingly, pays taxes based on when income is received and expenses are paid.
The Company depreciates its properties on the straight-line method, capitalizes
software developments cost, recognizes revenue using the percentage of
completion on fixed contracts, and provides for bad debts at the time of sale
for financial reporting purposes. Differences arise as the Company depreciates
its properties on accelerated methods, expenses all software development costs,
recognizes revenue when collected, and expenses bad debts as they occur, for
income tax purposes.
J. Stock Options
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for
Stock-Based Compensation," but applies Accounting Principles Board Opinion No.
25 and related interpretations in accounting for its plans.
K. Research and Development Costs
Research and development costs are charged to operations when incurred and are
included in operating expenses. The amount charged in 1997 was $40,007.
NOTE 2 - CHANGE OF ACCOUNTING PRINCIPLE
- ---------------------------------------
During 1997, the Company adopted the percentage of completion method for
recognizing revenue under fixed-fee contracts. The Company believes this method
accurately reflects periodic results of operations. The effect of this change is
to increase net income for 1997 by $393,515. Retained earnings has been
decreased by $104,756 for the effect of retroactive application of the new
method.
NOTE 3 - CONCENTRATION OF CREDIT RISK
- -------------------------------------
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral. Sales are not concentrated geographically, however,
three customers accounted for 44% of total sales for the year ended December 31,
1997, and four customers accounted for 71% of the accounts receivable balance at
December 31, 1997.
F-10
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
NOTE 4 - RELATED PARTY TRANSACTIONS
- -----------------------------------
The Company is affiliated, through common ownership, with Financial Coordinated
Services, Inc. The only material transactions with its affiliate during the year
ended December 31, 1997 were short-term advances of $90,375.
NOTE 5 - ACCOUNTS RECEIVABLE
- ----------------------------
Accounts receivable are summarized as follows:
Completed Contracts $ 360,018
Contracts in Progress 2,287,580
Server Fees 7,944
-----------
Total $ 2,655,542
===========
NOTE 6 - COSTS AND ESTIMATED EARNINGS ON
- -----------------------------------------
UNCOMPLETED CONTRACTS
---------------------
Uncompleted contracts are summarized as follows:
Cost Incurred $ 380,501
Estimated Earnings 616,986
-----------
Sub-Total 997,487
Less: Billings to Date 446,385
Total $ 551,102
===========
This amount is included on the balance sheet under the following captions:
Costs and Estimated Earnings in Excess of
Billings on Uncompleted Contracts $ 561,536
Billings in Excess of Costs and Estimated
Earnings on Uncompleted Contracts (10,434)
-----------
Total $ 551,102
===========
F-11
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
NOTE 7 - COMPUTER SOFTWARE DEVELOPMENT COSTS
- --------------------------------------------
Computer software development costs were as follows for the year ended December
31, 1997.
Unamortized Balance--Beginning of Year $ -
Current Year Additions 55,621
---------
Net Capitalized Costs 55,621
Less: Amortization 3,090
Adjustments to Carrying Value -
---------
Net Capitalized Computer Software
Development Costs $ 52,531
=========
In management's opinion, the net realizable value of future sales exceeds the
carrying value of unamortized computer software development costs; therefore, no
adjustment to carrying value is required.
Due to inherent technological change in the computer software development
industry, the period over which such capitalized computer software development
costs is being amortized may have to be accelerated.
NOTE 8 - NOTE PAYABLE--BANK
- ---------------------------
The Company has a line-of-credit agreement with American National Bank and Trust
Company of Chicago for $1,500,000 dated December 12, 1997, which is collaterized
by a promissory note and security agreement covering substantially all assets of
the Company. The note bears interest at one point above the bank's base rate,
which was 8.5% at December 31, 1997. The note matures on June 30,
1998.
The Company also has an installment note agreement with American National Bank
and Trust Company of Chicago for an amount up to $300,000. Monthly installments
of principal and interest are based on the amount drawn with a maximum monthly
payment of $6,301. Final payment is due June 30, 2000. The note is collaterized
by substantially all assets of the Company and bears interest at one point above
the bank's base rate, which was at 8.5% at December 31, 1997. No indebtedness
exists on the installment note of December 31, 1997.
NOTE 9 - NOTE PAYABLE--OFFICER
- ------------------------------
The note payable, unsecured, is due on demand. Interest is accrued at an annual
rate of 9% of the outstanding balance. Unpaid interest at December 31, 1997
amounts to $11,308 on this note.
F-12
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
NOTE 10 - LONG-TERM INDEBTEDNESS
- --------------------------------
As of December 31, 1997, the long-term indebtedness consists of the following:
A note payable, secured by a vehicle, payable in
monthly installments of $904, including interest
at an annual rate of 8.5%. The note matures on
December 31, 1998. $ 10,390
Obligation Under Capital Lease (11) 4,396
---------
Total 14,786
Less--Current Maturities of Long-Term Indebtedness 13,386
---------
Long-Term Indebtedness $ 1,400
=========
As of December 31, 1997, long-term indebtedness of $1,400 is to be liquidated in
the year ended December 31, 1999.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
A. Capitalized Lease Obligation
The Company has financed the purchase of certain equipment through a leasing
arrangement. For financial reporting purposes, the asset and liability under
this lease is capitalized at the lower of the present value of the minimum lease
payments or the fair value of the asset. The interest rate on the capitalized
lease is 16.47% and is imputed based on the lower of the Company's incremental
borrowing rate at the inception of the lease or the lessor's implicit rate of
return. The lease, which is noncancelable, expires in June, 1999.
The following is a schedule, by years, of future minimum lease payments under
this capital lease, together with the present value of the total minimum lease
payments, as of December 31, 1997:
1998 $ 3,500
1999 1,458
---------
Total Minimum Lease Payments 4,958
Less--Amount Representing Interest 562
---------
Present Value of Total Minimum Lease Payments $ 4,396
=========
Current Portion $ 2,996
Noncurrent Portion 1,400
---------
Total (10) $ 4,396
=========
F-13
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)
- --------------------------------------------------
B. Operating Leases
Real Property
- -------------
The Company leases its office facilities under noncancelable operating leases
which expire at various dates through the year 2002. The future minimum rental
payments required under these leases which have initial or remaining
noncancelable lease terms in excess of one year as of December 31, 1997, are as
follows:
1998 $ 324,507
1999 68,696
2000 43,968
2001 45,720
2002 47,556
---------
Total $ 530,447
=========
The Company sublets some of its office space to a related party (Note 4) on a
month-to-month basis.
The leases require the Company to pay for insurance and maintenance of
facilities during the terms of the leases.
Rent expense, on real properties, amounts to $271,668 for the year ended
December 31, 1997.
Equipment
- ---------
The Company leases equipment under noncancelable operating leases which expire
in the year 1999. The future minimum rental payments required under these
leases, which have an initial or remaining noncancelable lease terms in excess
of one year as of December 31, 1997, are as follows:
1998 $ 51,466
1999 42,567
---------
Total $ 94,033
=========
Rent expense, on equipment, including month-to-month rentals, amounts to
$115,636 for the year ended December 31, 1997.
F-14
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)
- --------------------------------------------------
C. Self-Insurance
The Company self-insures for health insurance for its employees. The Company
limits its losses through the use of stop-loss policies from reinsurers.
Specific individual losses from claims are limited to $25,000 a year. The
Company's aggregate annual loss limitation is determined by formula. Management
believes they have adequately provided for all claims incurred in the
accompanying financial statement.
D. Product Warranties
The Company generally develops websites for customers under contract, which
usually contain unconditional warranties and support for periods ranging up to
one year. At December 31, 1997 a provision of $9,598 is included in accrued
liabilities for estimated warranty claims based on the Company's experience.
NOTE 12 - INCOME TAXES
- ----------------------
As discussed in Note 1, the Company terminated its election to be taxed as a
small business corporation effective January 1, 1997. On this date, the deferred
tax liability was approximately $302,475, which has been recorded through a
charge to the deferred tax provision.
The statutory income tax rate differed from the effective rate primarily as a
result of the following differences:
Taxes computed at federal statutory rate 34.0%
State income taxes, net of federal benefit 4.5
Effect of terminating S corporation election 11.5
----
Effective rate 50.0%
NOTE 13 - DEFERRED COMPENSATION PLAN
- ------------------------------------
Effective January 1, 1997, the Company established a deferred compensation plan
under Section 401(k) of the Internal Revenue Code, covering substantially all
employees. Under the plan, employees may elect to defer up to 15% of their
salary, subject to the Internal Revenue Code limits. The Company may make a
matching contribution, as well as a discretionary contribution. The Company did
not elect to make any matching contributions or discretionary contribution under
the plan for the year ended December 31, 1997.
NOTE 14 - STOCK OPTION PLAN
- ---------------------------
Effective September 13, 1996, the Company adopted a stock option plan that
provides for incentive stock options (for key employees) and nonqualified stock
options (for key individuals, including nonemployees). The total number of
shares reserved for issuance pursuant to this plan is 1,800,000.
A. Incentive Stock Options
This part of the plan is intended to qualify under Section 422 of the Internal
Revenue Code. Options to purchase common stock are granted at not less than the
estimated fair market value at the date of the grant, and are exercisable during
a ten-year period. No options have been granted as of December 31, 1997.
F-15
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
NOTE 14 - STOCK OPTION PLAN (Continued)
- --------------------------------------
B. Nonqualified Stock Options
As stated in Note 1, the Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123 (SFAS No. 123). If the
Company had elected to recognize compensation cost for the options granted
during 1997, consistent with the method prescribed by SFAS No. 123, net income
would have been decreased by $25,023 for the year ended December 31, 1997.
The weighted-average fair value of the options granted during 1997 was
estimated, using the Black-Scholes option pricing model, using the following
assumptions:
Risk-Free Interest Rate 6.00%
Expected Life 1 to 7 years
Expected Volatility .01%
Expected Dividend Yield None
A summary of option transactions during the year ended December 31, 1997, is as
follows:
Number of Weighted-Average
Options Exercise Price
--------- ----------------
Outstanding at January 1, 1997 - -
Granted 1,652,990 .06
Exercised 688,500 .01
Canceled 4,581 .10
--------- ---
Outstanding at December 31, 1997 959,909 .10
========= ===
A summary of options, outstanding as of December 31, 1997, is as follows:
Weighted-Average
Exercise Number of Shares Remaining Weighted-Average
Price Outstanding Contractual Life Exercise Price
-------- ---------------- ---------------- ----------------
.10 959,909 9.41 .10
F-16
NEOGLYPHICS MEDIA CORPORATION
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997
-----------------
NOTE 15 - SUBSEQUENT EVENTS
- ---------------------------
On January 2, 1998, the Company signed a "master lease" agreement with American
National Bank and Trust Company of Chicago for the lease of various equipment as
needed in the future. On January 20, 1998, the Company financed $95,481 of
equipment purchased in December, 1997, through this master lease agreement. The
lease, which is noncancelable, expires January 20, 2000, and bears interest at
one point above the bank's base rate, which was 8.5% on January 20, 1998. For
financial reporting purposes, the asset and liability under this lease is
capitalized at the lower of present value of the minimum lease payments or the
fair value of the asset.
The following is a schedule, by years, of future minimum lease payments under
this capital lease, together with the present value of the total minimum lease
payments, as of January 20, 1998:
1998 $ 47,823
1999 52,171
2000 5,348
---------
Total Minimum Lease Payments 104,342
Less--Amount Representing Interest 8,861
---------
Present Value of Total Minimum Lease Payments $ 95,481
=========
Current Portion $ 41,110
Noncurrent Portion 54,371
---------
Total $ 95,481
=========
On March 31, 1998, pursuant to an Agreement and Plan of Merger dated March 31,
1998 amongst Renaissance Worldwide, Inc. ("Renaissance") and NGMC Acquisition
Corp., a wholly owned subsidiary of Renaissance, ("NGMC") Renaissance acquired
the Company through the merger of NGMC with and into the Company.
F-17
INDEPENDENT AUDITOR'S REPORT
To the Stockholder
Triad Data, Inc.
We have audited the accompanying balance sheet of Triad Data, Inc. as of
December 31, 1997 and the related statements of income, stockholder'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 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Triad Data, Inc. as of December
31, 1997 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
New York, New York
February 27, 1998
F-18
TRIAD DATA, INC.
BALANCE SHEET
================================================================================
December 31, 1997
- --------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash $ 2,019,210
Accounts receivable (Notes 1, 5 and 6) 9,826,947
Prepaid expenses and other current assets 63,262
- --------------------------------------------------------------------------------
Total current assets 11,909,419
Property and Equipment, at cost, less accumulated depreciation and
amortization of $757,416 (Notes 1 and 2) 1,093,944
Other Assets 64,039
- --------------------------------------------------------------------------------
Total Assets $13,067,402
================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable and accrued expenses (Note 3) $ 2,401,217
Line of credit - bank (Note 5) 5,000,000
Deferred income 404,284
Current maturities of long-term debt (Note 7) 11,549
Deferred income taxes (Note 8) 230,000
- --------------------------------------------------------------------------------
Total current liabilities 8,047,050
Deferred Rent Payable (Note 4) 188,982
Long-term Debt, less current maturities (Note 7) 5,299
- --------------------------------------------------------------------------------
Total liabilities 8,241,331
Commitments (Note 4)
Stockholder's Equity 4,826,071
- --------------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $13,067,402
================================================================================
See Notes to Financial Statements
2
F-19
TRIAD DATA, INC.
STATEMENT OF INCOME
================================================================================
Year ended December 31, 1997
- -------------------------------------------------------------------------------
Fee income (Note 1) $52,036,434
Consulting expenses 39,282,353
- -------------------------------------------------------------------------------
Gross profit 12,754,081
Selling, general and administrative expenses 10,963,859
- -------------------------------------------------------------------------------
Income from operations 1,790,222
Interest expense - net of interest income of $42,608 438,757
- -------------------------------------------------------------------------------
Income before provision for income taxes 1,351,465
Provision for income taxes (Notes 1 and 8) 32,000
- -------------------------------------------------------------------------------
Net income $ 1,319,465
===============================================================================
Pro forma information (unaudited) (Note 10):
Net income as above $ 1,319,465
Pro forma adjustments (529,000)
- -------------------------------------------------------------------------------
Pro forma net income $ 790,465
===============================================================================
Pro forma earnings per share $ 7,905
===============================================================================
Weighted average number of shares outstanding 100
===============================================================================
See Notes to Financial Statements
3
F-20
TRIAD DATA, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
================================================================================
Year ended December 31, 1997
- -------------------------------------------------------------------------------
Common Stock -
$10 Par Value;
Authorized,
Issued and
Outstanding Retained
Total 100 Shares Earnings
- -------------------------------------------------------------------------------
Balance at January 1, 1997 $ 6,431,606 1,000 $ 6,430,606
Net income 1,319,465 1,319,465
Distributions to stockholder (2,925,000) (2,925,000)
- -------------------------------------------------------------------------------
Balance at December 31, 1997 $ 4,826,071 1,000 $ 4,825,071
===============================================================================
See Notes to Financial Statements
4
F-21
TRIAD DATA, INC.
STATEMENT OF CASH FLOWS
================================================================================
Year ended December 31, 1997
- -------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 1,319,465
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 378,794
Changes in operating assets and liabilities:
Increase in accounts receivable (1,056,275)
Decrease in prepaid expenses and other current assets 22,962
Decrease in other assets 3,661
Increase in accounts payable and accrued expenses 754,035
Increase in deferred income 101,454
Increase in deferred rent payable 50,219
- -------------------------------------------------------------------------------
Net cash provided by operating activities 1,574,315
- -------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (804,621)
Loan to stockholder - net of collections 925,000
- -------------------------------------------------------------------------------
Net cash provided by investing activities 120,379
- -------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from line of credit 2,000,000
Distributions to stockholder (2,925,000)
Principal payments on long-term debt (10,941)
- -------------------------------------------------------------------------------
Net cash used in financing activities (935,941)
- -------------------------------------------------------------------------------
Net increase in cash 758,753
Cash at beginning of year 1,260,457
- -------------------------------------------------------------------------------
Cash at end of year $ 2,019,210
===============================================================================
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 482,008
===============================================================================
See Notes to Financial Statements
5
F-22
TRIAD DATA, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. PRINCIPAL Triad Data, Inc. (the "Company") is engaged in the leasing of
BUSINESS computer specialists to various professional and industrial
ACTIVITY AND firms.
SUMMARY OF
SIGNIFICANT The Company maintains its headquarters in New York and has
ACCOUNTING regional offices in Atlanta, Dallas, Austin, Milwaukee,
POLICIES: Madison, Boston and Minneapolis.
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
estimates by management affecting the reported amounts of
assets and liabilities and revenue and expenses and the
disclosure of contingent assets and liabilities. Actual results
could differ from those estimates.
Fee income is recognized as services are performed. Included in
accounts receivable at December 31, 1997 is earned and unbilled
receivables amounting to approximately $552,000.
Depreciation and amortization of property and equipment is
being provided for based upon the provisions of the Internal
Revenue Code. Such depreciation and amortization does not
differ materially from that which would be recorded under
generally accepted accounting principles.
The Company has elected to be treated as a small business
corporation (S Corporation) under the provisions of federal and
New York State income tax laws. Pursuant to this election, no
federal income taxes are payable and New York State income
taxes are payable at reduced rates. The Company is subject to
New York City and various other state income taxes.
In June 1997, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income, and SFAS No.
131, Disclosures about Segments of an Enterprise and Related
Information. In February 1998, the FASB issued SFAS No. 132,
Employer's Disclosures about Pensions and Other Postretirement
Benefits. Adoption of these statements is expected to have no
significant impact on the Company's financial position, results
of operations or cash flows.
2. PROPERTY AND Property and equipment, at cost, consists of the following:
EQUIPMENT:
Recovery
Period
---------------------------------------------------------------
Office equipment $1,091,094 5 to 7 years
Furniture and fixtures 322,780 5 to 7 years
Leasehold improvements 437,486 7 to 39.5 years
---------------------------------------------------------------
1,851,360
Less accumulated depreciation and
amortization 757,416
---------------------------------------------------------------
$1,093,944
===============================================================
6
F-23
TRIAD DATA, INC.
NOTES TO FINANCIAL STATEMENTS
==============================================================================
Office equipment includes assets acquired under capital leases
of approximately $50,000 at December 31, 1997, net of
accumulated depreciation and amortization of approximately
$34,000.
The Company expenses as incurred all costs of publication
advertising. Advertising costs charged to operations in 1997
approximated $469,000.
3. ACCOUNTS Accounts payable and accrued expenses consist of the following:
PAYABLE AND
ACCRUED Trade accounts payable $ 465,337
EXPENSES: 401(k) payable 104,194
Accrued payroll 1,533,698
Accrued expenses 297,988
---------------------------------------------------------------
$2,401,217
===============================================================
4. COMMITMENTS: The Company leases office premises under noncancelable
operating leases which expire on various dates through February
2004. The leases provide for rent escalations based on
increases in real estate taxes and certain other expenses. One
of the leases provides for rent holidays which result in
deferred rent as reflected in the accompanying balance sheet.
Obligations of $188,982 represent accumulated rent expense
charged to operations from the inception of the lease in excess
of the required lease payments through December 31, 1997. Rent
expense charged to operations amounted to approximately
$260,000 for the year ended December 31, 1997.
Minimum rental commitments are as follows:
Year ending December 31,
1998 $ 196,915
1999 213,582
2000 242,715
2001 193,452
2002 183,600
Thereafter 414,897
---------------------------------------------------------------
$1,445,161
===============================================================
5. LINE OF Line of credit - bank represents short-term borrowings under a
CREDIT - $7,000,000 line of credit expiring April 1998. Interest is
BANK: payable at LIBOR or the bank's prime commercial lending rate
(7.94% at December 31, 1997). The line of credit is
collateralized by the Company's accounts receivable. Because
the interest rates adjust with changes in the prime rate, the
fair value of the bank debt is equal to the carrying amount.
7
F-24
TRIAD DATA, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
6. MAJOR During 1997, approximately 27% of the Company's sales was to
CUSTOMERS: one customer. At December 31, 1997, this customer accounted for
approximately 30% of the accounts receivable balances.
7. LONG-TERM The Company leases furniture and fixtures under capital leases
DEBT: which expire during 1999. The leases require monthly payments
of principal and interest, imputed at interest rates ranging
from 9% to 14% per annum.
Future minimum lease payments under capital leases are as
follows:
Year ending December 31,
1998 $12,214
1999 6,096
-------------------------------------------------------------
18,310
Less amount representing interest 1,462
-------------------------------------------------------------
16,848
Less current maturities 11,549
-------------------------------------------------------------
Long-term debt, less current maturities $ 5,299
=============================================================
8. INCOME TAXES: The provision for income taxes consists of local alternative
taxes.
The provision for income taxes differs from the amount
computed using the federal statutory rate of 34% as of result
of the following:
Tax at federal statutory rate 34%
Flow-through of S Corporation taxable income to
stockholder (34)
Local income taxes 2
-------------------------------------------------------------
2%
=============================================================
The deferred income tax liability results from the Company's
filing its income tax returns on the cash basis while using the
accrual method of accounting for financial statement purposes.
The tax effects of temporary differences that give rise to the
net deferred income taxes payable are presented below:
Accounts receivable $279,000
Work-in-process 18,000
Accounts payable and accrued expenses (75,000)
Prepaid expenses and other current assets 8,000
------------------------------------------------------------
Deferred income taxes $230,000
============================================================
8
F-25
TRIAD DATA, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
9. PENSION PLAN: The Company maintains a qualified 401(k) plan covering all
eligible employees. Employer contributions are at the
discretion of the trustee of the Plan. Contributions of $11,921
were made for the year ended December 31, 1997.
10.PRO FORMA The pro forma net income in the accompanying statement of
FINANCIAL income for the year ended December 31, 1997 includes a pro
INFORMATION
(unaudited): forma adjustment for income taxes on a (unaudited):
Corporation basis as indicated below:
Income before provision for income taxes before pro forma
adjustment for income taxes $1,351,465
- -----------------------------------------------------------------------------
Pro forma provision for income taxes:
Federal 431,000
State and local 130,000
- -----------------------------------------------------------------------------
561,000
- -----------------------------------------------------------------------------
Pro forma net income $ 790,465
=============================================================================
The pro forma provision for income taxes differs from the
amount of pro forma income tax determined by applying the
applicable federal statutory rates primarily because of the
effect of state and local income taxes.
9
F-26
Neoglyphics Media Corporation
Balance Sheet
As of March 31, 1998
(Unaudited)
in thousands
------------
ASSETS
------
Current Assets
Cash and cash equivalents ................ $ --
Accounts receivable, net ................. 2,967
Other current assets .................. 19
------
Total current assets .............. 2,986
Fixed assets, net ............................. 1,373
Other assets .................................. 51
------
Total assets ...................... $4,410
------
LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------
Current liabilities:
Notes payable ............................ 1,004
Accounts payable ......................... 118
Accrued salaries and wages ............... 197
Other accrued expenses ................... 449
Deferred income taxes .................... 967
------
Total current liabilities ......... 2,735
Deferred income taxes ......................... 66
Long-term debt ................................ 310
------
Total liabilities ................. 3,111
------
Stockholders' equity
Common stock no par ...................... 27
Additional paid in capital ............... 107
Retained earnings ........................ 1,165
------
Total stockholders' equity....... 1,299
------
Total liabilities and equity..... $4,410
------
The accompanying notes are an integral part of these financial statements
F-27
Neoglyphics Media Corporation
Condensed Statement of Operations
(Unaudited)
Three Months Three Months
------------ ------------
Ended March Ended March
----------- -----------
31, 1997 31, 1998
-------- --------
(in thousands)
Revenue .................................... $ 1,235 $ 3,053
Cost of revenue ............................ 730 1,990
------------------------------
Gross Profit ............................... 505 1,063
Selling, general and administrative expenses 397 1,778
------------------------------
Income (loss) from operations .............. 108 (715)
Interest and other income (expense) net .... (10) (19)
------------------------------
Income before taxes ........................ 98 (734)
Income tax provision ....................... 338 --
------------------------------
Net income (loss) .......................... $ (240) $ (734)
==============================
The accompanying notes are an integral part of these financial statements
F-28
Neoglyphics Media Corporation
Statement of Cash Flows
(Unaudited)
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1998
(in thousands)
Net Loss (240) (734)
Adjustments to reconcile net income (loss) to net
cash used by operating activities
Depreciation and Amortization 15 135
Deferred Taxes 302 (57)
Changes in Working Capital
Accounts Receivable 201 194
Other Current Assets 4 60
Other Assets 70 88
Accounts Payable 87 (104)
Accrued Salary and Wages (361) (239)
Other Accrued Expenses (4) 310
-------------------------------------------
Net cash used in operating activities 74 (347)
-------------------------------------------
Cash flows from investing activities
Purchase of fixed assets (150) (285)
-------------------------------------------
Net cash used in investing activities (150) (285)
-------------------------------------------
Cash flows from Financing activities
Principal payments on line of credit (432) (700)
Proceeds from long term debt -- 296
Proceeds from issuance of note payable 671 934
-------------------------------------------
Net cash provided by financing activities 239 530
-------------------------------------------
Net increase (decrease) in cash and cash equivalents 163 (102)
Cash and cash equivalents, beginning of period -- 102
--------------------------------------------
Cash and cash equivalents, end of period 163 --
--------------------------------------------
The accompanying notes are an integral part of these financial statements
F-29
Neoglyphics Media Corporation
Notes to Unaudited Interim Financial Statements
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Neoglyphics Media Corporation (the "Company") develops websites under
contractual agreements with various clients located in the United States
Interim Financial Statements
The balance sheet at March 31, 1998 and statements of operations and of cash
flows for the three month periods ended March 31, 1997 and March 31, 1998 are
unaudited and, in the opinion of management, include all adjustments (consisting
of normal and recurring adjustments) necessary for a fair presentation of
results for these interim periods. Certain information and footnote disclosures
normally included in the Company's annual consolidated financial statements have
been condensed or omitted. The results of operations for the interim period
ended March 31, 1998 are not necessarily indicative of the results to be
expected for future quarters or the entire year. These interim financial
statements should be read in conjunction with the audited financial statements
for the Company.
Income Taxes
On January 1, 1997, the Company terminated its election to be taxed as a small
business corporation. On this date, the deferred tax liability was approximately
$302,000, which has been recorded through a charge to the deferred tax
provision.
2. SUBSEQUENT EVENTS
On March 31, 1998 Renaissance Worldwide, through a wholly-owned subsidiary,
acquired all of the outstanding stock of the Company. Pursuant to the agreement,
each of the Company's shares was converted into the right to receive .12495
shares of Renaissance Worldwide common stock. Renaissance also assumed
outstanding options for the purchase of the Company's common stock at the same
conversion ratio.
F-30
Triad Data, Inc.
Balance Sheet
As of March 31, 1998
(Unaudited)
(in thousands)
ASSETS
------
Current Assets
Cash and cash equivalents .................... $ 89
Accounts receivable, net ..................... 12,373
Other current assets ......................... 172
-----------
Total current assets ............ 12,634
Fixed assets, net ................................... 1,100
Notes receivable from officers ...................... 157
-----------
Total assets .................... $ 13,891
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Line of credit ............................... 5,000
Accounts payable ............................. 764
Other accrued expenses ....................... 4,843
-----------
Total current liabilities ....... 10,607
Long-term debt ...................................... 17
Deferred Rent ....................................... 145
-----------
Total liabilities ............... 10,769
-----------
Stockholders' equity
Common stock................................. 1
Retained earnings ........................... 3,121
-----------
Total stockholders' equity ...... 3,122
-----------
Total liabilities and equity .... $ 13,891
-----------
The accompanying notes are an integral part of these financial statements
F-31
Triad Data, Inc.
Statement of Operations
Three Months Ended March 31, 1997 and 1998
(Unaudited)
Three Months Ended,
March 31, 1998 March 31, 1997
-------------------------------
(in thousands)
Revenue ...................................... $ 10,916 $ 15,490
Cost of revenue .............................. 7,606 11,948
----------- -----------
Gross Profit ................................. 3,310 3,542
Selling, general and administrative expenses.. 2,450 5,088
----------- -----------
Income (loss) from operations ................ 860 (1,546)
Interest and other income (expense) net ...... (53) (99)
----------- -----------
Income before taxes .......................... 807 (1,645)
Income tax provision ......................... 10 44
----------- -----------
Net income (loss) ............................ $ 797 $ (1,689)
----------- -----------
The accompanying notes are an integral part of these financial statements
F-32
Triad Data, Inc.
Statement of Cash Flows
Three Months Ended March 31, 1997 and 1998
(Unaudited)
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1998
(in thousands)
Net Income (Loss) 797 (1,689)
Adjustments to reconcile net income (loss) to net
cash used by operating activities
Depreciation and Amortization 39 90
Changes in Working Capital
Accounts Receivable (1,533) (2,690)
Other Current Assets (130) (124)
Other Assets 82 64
Accounts Payable (305) 298
Other Accrued Expenses (4) 2,273
Deferred Rent -- (44)
----------------------------------------
Net cash used in operating activities (1,054) (1,822)
----------------------------------------
Cash flows from investing activities
Purchase of fixed assets (486) (96)
Increase in Notes Receivable from Officer (5) (12)
----------------------------------------
Net cash used in investing activities (491) (108)
----------------------------------------
Cash flows from Financing activities
Proceeds from line of credit 3,000 --
Distribution to Shareholder (2,000) --
----------------------------------------
Net cash provided by financing activities 1,000 --
----------------------------------------
Net increase (decrease) in cash and cash equivalents (545) (1,930)
Cash and cash equivalents, beginning of period 1,260 2,019
----------------------------------------
Cash and cash equivalents, end of period 715 89
----------------------------------------
The accompanying notes are an integral part of these financial statements
F-33
Triad Data, Inc.
Notes to Unaudited Interim Financial Statements
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Triad Data, Inc. (the "Company") is engaged in the leasing of computer
specialists to various professionals and industrial firms. The Company maintains
its headquarters in New York and has regional offices in Atlanta, Dallas,
Austin, Milwaukee, Madison, Boston and Minneapolis.
Interim Financial Statements
The condensed balance sheet at March 31, 1998 and condensed statements of
operations and of cash flows for the three month periods ended March 31, 1997
and March 31, 1998 are unaudited and, in the opinion of management, include all
adjustments (consisting of normal and recurring adjustments) necessary for a
fair presentation of results for these interim periods. The results of
operations for the interim period ended March 31, 1998 are not necessarily
indicative of the results to be expected for future quarters or the entire year.
These interim condensed financial statements should be read in conjunction with
the audited financial statements for the Company
2. SUBSEQUENT EVENTS
On April 2, 1998 Renaissance Worldwide, through a wholly-owned subsidiary,
acquired all of the outstanding stock of the Company. Pursuant to the agreement,
each of the Company's shares was converted into the right to receive 24,409.2
shares of Renaissance Worldwide common stock.
F-34
INTRODUCTION TO
PRO FORMA UNAUDITED COMBINED CONDENSED FINANCIAL STATEMENTS
The following pro forma unaudited combined condensed financial statements
give effect to the proposed mergers of Renaissance Worldwide, Inc.
("Renaissance") with Neoglyphics Media Corporation ("Neoglyphics") and Triad
Data, Inc. ("Triad") in transactions to be accounted for as poolings-of-
interests. The pro forma unaudited combined condensed balance sheet presents the
combined financial position of Renaissance, Neoglyphics, and Triad as of March
28, 1998 assuming that the proposed merger had occurred as of that date based
upon the historical balance sheet data of Renaissance, Neoglyphics and Triad at
March 28, 1998. Upon the consummation of the proposed merger, Neoglyphics and
Triad's December 31 year end was conformed to Renaissance's last Saturday in
December year end, beginning in the transition period ending December 28, 1997.
The pro forma unaudited combined condensed statements of operations give effect
to the mergers by combining the results of operations of Renaissance for the
three months ended March 28, 1998 with the results of operations of Neoglyphics
and Triad for the comparable period on a pooling-of-interests basis. The pro
forma unaudited combined condensed statements of operations give effect to the
proposed merger by combining the results of operations of Renaissance for the
years ended June 24, 1995, June 29, 1996, and June 28, 1997, and for the six
months ended December 27, 1997 with the results of operations of Neoglyphics and
Triad for the years ended December 31, 1995, December 31, 1996 and December 31,
1997, and for the six months ended December 31, 1997, respectively, on a
pooling-of-interests basis. The results of operations of Neoglyphics and Triad
for the six months ended December 31, 1997 (reflecting revenue of $34,270,000
and net income of $1,574,000) have therefore been included in two periods, and
have been deducted in determining combined retained earnings at March 28, 1998.
These unaudited pro forma combined condensed financial statements should be read
in conjunction with the historical consolidated financial statements and notes
thereto of Renaissance, Neoglyphics, and Triad.
The accompanying pro forma unaudited combined condensed statements of
operations are not necessarily indicative of future results of operations or of
the results of operations which would have actually occurred had the above
transactions occurred at the beginning of the earliest period presented.
F-35
Renaissance Worldwide, Inc. ("Renaissance")
Neoglyphics Media Corporation ("Neoglyphics")
Triad Data, Inc. ("Triad")
Pro Forma Unaudited Combined Condensed Balance Sheet
March 28, 1998
(In thousands)
Pro Forma
---------
Renaissance Neoglyphics Triad Adjustments Combined
----------- ----------- ----- ----------- ---------
ASSETS
------
Current Assets
Cash and cash equivalents ...................... $ 7,558 $ -- $ 89 $ 7,647
Accounts receivable, net ....................... 160,609 2,967 12,373 175,949
Notes receivable from related parties .......... 1,664 1,664
Deferred income taxes .......................... 2,167 2,167
Other current assets ........................... 14,861 19 172 15,052
------------------------------------------------------------------------
Total current assets .................... 186,859 2,986 12,634 202,479
Fixed assets, net .................................. 27,444 1,373 1,100 29,917
Notes receivable from officers ..................... 109 157 266
Other assets ....................................... 105,177 51 (162)(a) 105,066
Deferred income taxes .............................. 855 855
------------------------------------------------------------------------
Total assets ............................ $ 320,444 $ 4,410 $ 13,891 $ (162) $ 338,583
------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Line of credit ................................. 49,491 1,004 5,000 55,495
Current portion of long-term debt .............. 4,060 4,060
Accounts payable ............................... 8,197 118 764 9,079
Accrued expenses ............................... 43,988 646 4,843 7,085(a) 56,562
Deferred income taxes .......................... 142 967 925(b) 2,034
------------------------------------------------------------------------
Total current liabilities ............... 105,878 2,735 10,607 8,010 127,230
Deferred income taxes .............................. 2,484 66 2,775(b) 5,325
Long-term debt ..................................... 3,720 310 17 4,047
Other liabilities .................................. 219 145 364
------------------------------------------------------------------------
Total liabilities ....................... 112,301 3,111 10,769 10,785 136,966
------------------------------------------------------------------------
Stockholders' equity
Common stock no par ............................ 4,704 27 1 4,732
Additional paid in capital ..................... 173,911 107 174,018
Notes receivable from stockholders ............. (476) (476)
Retained earnings .............................. 29,872 1,165 3,121 (7,247)(a) 23,211
(3,700)(b)
Cumulative translation adjustment .............. 132 132
------------------------------------------------------------------------
Total stockholders' equity ............ 208,143 1,299 3,122 (10,947) 201,617
------------------------------------------------------------------------
Total liabilities and equity .......... $ 320,444 $ 4,410 $ 13,891 $ (162) $ 338,583
------------------------------------------------------------------------
F-36
Renaissance Worldwide, Inc. ("Renaissance")
Neoglyphics Media Corporation ("Neoglyphics")
Triad Data, Inc. ("Triad")
Pro Forma Unaudited Combined Condensed Statement of Operations
(In thousands except per share data)
Year Ended
------------------------------------------
June 24, June 29, June 28,
-------- -------- --------
1995 1996 1997
------ ------ ------
Revenue ............................................. $ 221,957 $ 333,063 $ 489,834
Cost of revenue ..................................... 156,913 232,496 342,422
-------------------------------------------
Gross Profit ........................................ 65,044 100,567 147,412
Selling, general and administrative expenses ........ 50,344 76,794 108,642
Acquisition-related expenses ........................ -- 3,524 8,268
-------------------------------------------
Income (loss) from operations ....................... 14,700 20,249 30,502
Interest and other income (expense) net ............. (804) (773) 3,267
-------------------------------------------
Income before taxes ................................. 13,896 19,476 33,769
Income tax provision ................................ 3,607 7,456 16,595
-------------------------------------------
Net income (loss) ................................... $ 10,289 $ 12,020 $ 17,174
-------------------------------------------
Net income (loss) per share - basic $ 0.25 0.28 $ 0.34
Weighted average common shares outstanding - basic 40,776 42,885 50,494
Net income (loss) per share - diluted $ 0.24 $ 0.26 $ 0.31
Weighted average common and potential common shares 43,013 46,862 54,607
outstanding - diluted
Six Months Three Months Three Months
---------- ------------ ------------
Ended Ended Ended
----- ----- -----
December 27, March 29, March 28,
------------ ----------- --------
1997 1997 1998
------ ------ ------
Revenue ............................................. $ 320,207 $ 127,780 $ 175,364
Cost of revenue ..................................... 215,250 87,188 117,069
------------ ------------ ------------
Gross Profit ........................................ 104,957 40,592 58,295
Selling, general and administrative expenses ........ 82,047 27,497 46,726
Acquisition-related expenses ........................ 17,961 -- --
------------ ------------ ------------
Income (loss) from operations ....................... 4,949 13,095 11,569
Interest and other income (expense) net ............. (690) 291 (849)
------------ ------------ ------------
Income before taxes ................................. 4,259 13,386 10,720
Income tax provision ................................ 8,655 5,575 5,257
------------ ------------ ------------
Net income (loss) ................................... $ (4,396) $ 7,811 $ 5,463
------------ ------------ ------------
Net income (loss) per share - basic $ (0.08) $ 0.15 $ 0.10
Weighted average common shares outstanding - basic 54,537 52,053 55,090
Net income (loss) per share - diluted $ (0.08) $ 0.14 $ 0.09
Weighted average common and potential common shares 54,537 55,212 58,836
outstanding - diluted
F-37
NOTES TO PRO FORMA UNAUDITED COMBINED CONDENSED FINANCIAL STATEMENTS
1. The pro forma unaudited combined condensed financial statements reflect
the issuance of shares of Renaissance's Common Stock for all of the outstanding
shares of Neoglyphics' and Triad's common stock in connection with the proposed
merger based upon the exchange ratio of 0.12495 shares of Renaissance's Common
Stock for each share of Neoglyphics Common Stock and 24,409.20 shares of
Renaissance's Common Stock for each share of Triad Common Stock.
The pro forma unaudited combined condensed balance sheet presents the
combined financial position of Renaissance, Neoglyphics and Triad as of March
28, 1998 assuming that the proposed merger had occurred as of March 28, 1998.
Such pro forma information is based upon the historical consolidated balance
sheet data of Renaissance, Neoglyphics and Triad as of March 28, 1998. The pro
forma unaudited combined condensed statements of operations give effect to the
proposed mergers of Renaissance, Neoglyphics and Triad by combining the results
of operations of Renaissance for the years ended June 24, 1995, June 29, 1996
and June 28, 1997, for the six months ended December 27, 1997 and the three
months ended March 28, 1998 with the results of operations of Neoglyphics and
Triad for the years ended December 31, 1995, December 31, 1996 and December 31,
1997, the six months ended December 31, 1997 and the three months ended March
28, 1998, respectively, on a pooling-of-interests basis.
2. There were no material transactions between Renaissance, Neoglyphics or
Triad during any of the periods presented.
3. Renaissance, Neoglyphics and Triad expect to incur aggregate transaction
costs of approximately $7.2 million associated with the proposed merger,
primarily in the second quarter of 1998. The pro forma combined condensed
balance sheet as of March 28, 1998 has been adjusted to reflect these costs,
which will primarily not be deductible for corporate income tax purposes. These
estimated costs are not reflected in the pro forma unaudited combined condensed
statements of operations data.
4. Prior to its acquisition by Renaissance, Triad was an S Corporation and
as such, the corporate income or loss and credits were passed through to the
stockholder and reported on his personal tax return. Accordingly, the historical
results of operations of Triad have not included any corporate income tax
provisions. Upon acquisition, the S Corporation election ceased and a net
deferred tax liability of $3.7 million will be charged through the income tax
provision in the quarter of acquisition. The pro forma combined condensed
balance sheet as of March 28, 1998 has been adjusted to reflect this cost. This
cost is not reflected in the pro forma unaudited combined condensed statements
of operations data.
5. The table below sets forth the composition of the unaudited pro forma
combined net revenues and net income (loss) for each of the periods shown had
the mergers taken place at the beginning of the period shown (in thousands):
F-38
Year Ended
------------------------------------------
June 24, June 29, June 28,
-------- -------- --------
1995 1996 1997
------ ------ ------
Net Revenues
Renaissance ...................................... $ 200,233 $ 288,882 $ 428,258
Triad ............................................ 21,549 39,670 52,036
Neoglyphics ...................................... 175 4,511 9,540
--------------------------------------------
Combined ......................................... $ 221,957 $ 333,063 $ 489,834
--------------------------------------------
Net Income
Renaissance ...................................... $ 8,800 $ 8,003 $ 14,560
Triad ............................................ 1,580 3,328 1,319
Neoglyphics ...................................... (91) 689 1,295
--------------------------------------------
Combined ......................................... $ 10,289 $ 12,020 $ 17,174
--------------------------------------------
Six Months Three Months Three Months
---------- ------------ ------------
Ended Ended Ended
----- ----- -----
December 28, March 29, March 28,
------------ --------- ---------
1997 1997 1998
------ ------ ------
Net Revenues
Renaissance ...................................... $ 285,937 $ 115,629 $ 156,821
Triad ............................................ 27,945 10,916 15,490
Neoglyphics ...................................... 6,325 1,235 3,053
------------ ------------ ------------
Combined ......................................... $ 320,207 $ 127,780 $ 175,364
------------ ------------ ------------
Net Income
Renaissance ...................................... $ (5,969) $ 7,254 $ 7,886
Triad ............................................ 498 797 (1,689)
Neoglyphics ...................................... 1,075 (240) (734)
------------ ------------ ------------
Combined ......................................... $ (4,396) $ 7,811 $ 5,463
------------ ------------ ------------
Certain reclassifications have been made to the financial statements
of Neoglyphics and Triad to conform to Renaissance's classifications.
8. The unaudited combined net income per share is based on the
weighted average number of shares of common and potential common shares
outstanding of Renaissance, Neoglyphics and Triad for each period, using an
exchange ratio of 0.12495 shares of Renaissance Common Stock for each share of
Neoglyphics Common Stock or each Neoglyphics stock option and 24,409.20 shares
of Renaissance Common Stock for each share of Triad Common Stock.
F-39
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page
- ----------- ---------------------- ----
2.1 Agreement and Plan of Merger dated March 31,
1998 among Renaissance Worldwide, Inc.,
Neoglyphics Media Corporation and NGMC
Acquisition Corp.*
2.2 Agreement to furnish copies of omitted annexes,
schedules and exhibits to the Neoglyphics Merger
Agreement.*
2.3 Agreement and Plan of Merger dated April 2, 1998
among Renaissance Worldwide, Inc., Triad Data, Inc.,
TDI Acquisition Corp. and Harley Lippman.*
2.4 Agreement to furnish copies of omitted annexes,
schedules and exhibits to the Triad Merger Agreement.*
23.1 Consent of Katch, Tyson & Company.
23.2 Consent of Goldstein Golub Kessler & Company, P.C.
- -------------------------
* Previously filed as an identically numbered exhibit to the Registrant's
Current Report on Form 8-K, dated March 31, 1998 and filed with the Securities
and Exchange Commission on April 15, 1998.