SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): November 18, 1998
HALL, KINION & ASSOCIATES, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 000-22869 770337705
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
19925 Stevens Creek Blvd., Suite 180, Cupertino, California 95014
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (408) 863-5600
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(Former name or Former Address, if Changed Since Last Report.)
Item 2. Acquisition or Disposition of Assets
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(a) On November 18, 1998, Hall, Kinion & Associates, Inc., a Delaware
corporation ("Hall Kinion"), Alexander, Boehmer and Tomasco, LLC, a Connecticut
limited liability company ("Huntington"), and Interactive Technology
Consultants, LLC, a Connecticut limited liability company ("ITC") announced that
a wholly-owned subsidiary of Hall Kinion ("Subsidiary") had acquired
substantially all of the assets of Huntington (the "Huntington Asset
Acquisition") and ITC (the "ITC Asset Acquisition") (collectively, the
"Acquisitions"). The Acquisitions were accomplished pursuant to the Huntington
Asset Purchase Agreement and the ITC Asset Purchase Agreement, both dated
November 18, 1998 (the "Agreements"). The transaction will be accounted for
using the purchase method. The source of funds used to acquire these assets was
$5.1 million, cash on hand at Hall Kinion and $3 million line of credit.
Pursuant to the Acquisitions: (i) Subsidiary purchased substantially
all of the assets of Huntington for $1,979,640 in cash and the assumption of
certain liabilities; (ii) Subsidiary purchased substantially all of the assets
of ITC for $6,120,360 in cash and the assumption of certain liabilities; and
(iii) Subsidiary and Hall Kinion agreed to pay Huntington and ITC up to
$3,600,000 over three years (the "Earn-Out Payments"), with the actual amount
of the Earn-Out Payments being contingent upon the achievement of the ITC and
Huntington businesses of certain Earn-Out milestones as set forth in the
Agreements.
(b) Huntington and ITC were historically in the business of placing IT
professionals on a contract and permanent basis, primarily with customers in
high-technology industries. After the Acquisitions, Hall Kinion intends to
continue such businesses.
Acquisitions involve numerous risks including, but not limited to,
difficulties in the assimilation of the operations and products of the acquired
companies, the diversion of management's attention from other business concerns,
and the potential loss of key employees of the acquired companies. Achieving
the anticipated benefits of the Acquisitions will depend in part upon whether
the integration of the companies' businesses and operations are accomplished in
an efficient and effective manner, and there can be no assurance that this will
occur. The difficulties of such integration may be increased by the necessity
of coordinating geographically separated organizations and by the personnel
demands associated with integrating service organizations. The integration of
certain operations in connection with the Acquisitions will require the
dedication of management resources that may distract attention from the day-to-
day business of Hall Kinion. The inability of management to successfully
integrate the operations of the companies or any other company which Hall Kinion
may acquire, could have a material adverse effect on the business and results of
operations of Hall Kinion.
The foregoing description is qualified in its entirety by reference to
the Huntington Asset Purchase Agreement and the ITC Asset Purchase Agreement,
copies of which are attached hereto as Exhibit 2.1 and Exhibit 2.2 respectively
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and incorporated herein by reference.
Item 5. Other Events
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(a) The following disclosure statements contained in Hall Kinion's
Annual Report on Form 10-K405 for the fiscal year ended December 28, 1997, an
amendment to the Annual Report on Form 10-K/A for the fiscal year ended December
28, 1997, and Quarterly Reports on Form 10-Q for the three-month periods ended
March 29, 1998, June 28, 1998 and September 27, 1998, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, regarding Hall
Kinion's Year 2000 readiness each constitute "Year 2000 Readiness Disclosure"
for purposes of the Year 2000 Information and Disclosure Act of 1998 (Public Law
105-271, 112 Stat. 2386, a U.S. statute). These disclosure statements were true
and correct when made but do not necessarily reflect Hall Kinion's current state
of Year 2000 readiness. Complete copies of such reports can be obtained from
Hall Kinion upon request.
Year 2000 Readiness Disclosure contained in Annual Report on Form 10-
K405 for the fiscal year ended December 28, 1997, filed with the Securities and
Exchange Commission on March 27, 1998:
Impact of Year 2000 Issue The Year 2000 issue results from computer
programs written using two digits rather than four to define the applicable
year. Any of the Company's computer programs that have data-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activity.
The Company is in the process of conducting assessments of its
computer information systems and is beginning to take the necessary steps to
determine the nature and extent of the work required to make its systems Year
2000 compliant, where necessary. These steps will require the Company to
modify, upgrade or replace some of its internal financial and operational
systems. The Company continues to evaluate the estimated cost of bringing all
internal systems, equipment and operations into Year 2000 compliance, but has
not finished determining the total cost of these compliance efforts. While
these efforts may involve additional costs, the Company believes, based upon
currently available information, that these costs will not have a material
adverse effect on the business, financial condition or results of
operations of the Company. However, if these efforts are not completed on time,
or if the cost of updating or replacing the Company's information systems, if
necessary, exceeds the current estimates, the Year 2000 issue could have a
material adverse impact on the business, financial condition or results of
operations of the Company.
The Company also intends to determine the extent to which the Company
may be vulnerable to any failures by its major partners and service providers to
remedy their own Year 2000 issues, and is in the process of initiating formal
communications with these parties. At this time the Company is unable to
estimate the nature or extent of any potential adverse impact resulting from the
failure of third parties to achieve Year 2000 compliance; however, there can be
no assurance that these third parties will not experience Year 2000 problems or
that any problems would not have a material effect on the Company's business,
financial condition or results of operations.
Year 2000 Issues The Company is in the process of conducting
assessments of its computer information systems and is beginning to take the
necessary steps to determine the nature and extent of the work required to make
its systems Year 2000 compliant, where necessary. These steps will require the
Company to modify, upgrade or replace some of its internal financial and
operational systems. The Company continues to evaluate the estimated cost of
bringing all internal systems, equipment and operations into Year 2000
compliance, but has not finished determining the total cost of these compliance
efforts. While these efforts may involve additional costs, the Company
believes, based upon currently available information, that these costs will not
have a material adverse effect on the business, financial conditions or results
of operations of the Company. However, if these efforts are not completed on
time, or if the cost of updating or replacing the Company's information systems,
if necessary, exceeds the current estimates, the Year 2000 issue could have a
material adverse impact on the business, financial condition or results of
operations of the Company.
The Company also intends to determine the extent to which it may be
vulnerable to any failures by its major partners and service providers to remedy
their own Year 2000 issues, and is in the process of initiating formal
communications with these parties. At this time the Company is unable to
estimate the nature or extent of any potential adverse impact resulting from the
failure of third parties to achieve Year 2000 compliance; however, there can be
no assurance that these third parties will not experience Year 2000 problems or
that any problems would not have a material effect on the Company's business,
financial condition or results of operations.
Year 2000 Readiness Disclosure contained in an amendment to the Annual
Report on Form 10-K/A for the fiscal year ended December 28, 1997, filed with
the Securities and Exchange Commission on April 27, 1998:
Impact of Year 2000 Issue The Year 2000 issue results from computer
programs written using two digits rather than four to define the applicable
year. Any of the Company's computer programs that have data-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activity.
The Company is in the process of conducting assessments of its
computer information systems and is beginning to take the necessary steps to
determine the nature and extent of the work required to make its systems Year
2000 compliant, where necessary. These steps will require the Company to
modify, upgrade or replace some of its internal financial and operational
systems. The Company continues to evaluate the estimated cost of bringing all
internal systems, equipment and operations into Year 2000 compliance, but has
not finished determining the total cost of these compliance efforts. While
these efforts may involve additional costs, the Company believes, based upon
currently available information, that these costs will not have a material
adverse effect on the business, financial condition or results of operations of
the Company. However, if these efforts are not completed on time, or if the
cost of updating or replacing the Company's information systems, if necessary,
exceeds the current estimates, the Year 2000 issue could have a material adverse
impact on the business, financial condition or results of operations of the
Company.
The Company also intends to determine the extent to which the Company
may be vulnerable to any failures by its major partners and service providers to
remedy their own Year 2000 issues, and is in the process of initiating formal
communications with these parties. At this time the Company is unable to
estimate the nature or extent of any potential adverse impact resulting from the
failure of third parties to achieve Year 2000 compliance; however, there can be
no assurance that these third parties will not experience Year 2000 problems or
that any problems would not have a material effect on the Company's business,
financial condition or results of operations.
Year 2000 Issues The Company is in the process of conducting
assessments of its computer information systems and is beginning to take the
necessary steps to determine the nature and extent of the work required to make
its systems Year 2000 compliant, where necessary. These steps will require the
Company to modify, upgrade or replace some of its internal financial and
operational systems. The Company continues to evaluate the estimated cost of
bringing all internal systems, equipment and operations into Year 2000
compliance, but has not finished determining the total cost of these compliance
efforts. While these efforts may involve additional costs, the Company
believes, based upon currently available information, that these costs will not
have a material adverse effect on the business, financial conditions or results
of operations of the Company. However, if these efforts are not completed on
time, or if the cost of updating or replacing the Company's information systems,
if necessary, exceeds the current estimates, the Year 2000 issue could have a
material adverse impact on the business, financial condition or results of
operations of the Company.
The Company also intends to determine the extent to which it may be
vulnerable to any failures by its major partners and service providers to remedy
their own Year 2000 issues, and is in the process of initiating formal
communications with these parties. At this time the Company is unable to
estimate the nature or extent of any potential adverse impact resulting from the
failure of third parties to achieve Year 2000 compliance; however, there can be
no
assurance that these third parties will not experience Year 2000 problems or
that any problems would not have a material effect on the Company's business,
financial condition or results of operations.
Year 2000 Readiness Disclosure contained in Quarterly Report on Form
10-Q for the three month period ended March 29, 1998, filed with the Securities
and Exchange Commission on May 13, 1998:
Impact of Year 2000 Issue The Year 2000 issue results from computer
programs written using two digits rather than four to define the applicable
year. Any of the Company's computer programs that have data-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activity.
The Company is in the process of conducting assessments of its
computer information systems and is beginning to take the necessary steps to
determine the nature and extent of the work required to make its systems Year
2000 compliant, where necessary. These steps will require the Company to
modify, upgrade or replace some of its internal financial and operational
systems. The Company continues to evaluate the estimated cost of bringing all
internal systems, equipment and operations into Year 2000 compliance, but has
not finished determining the total cost of these compliance efforts. While
these efforts may involve additional costs, the Company believes, based upon
currently available information, that these costs will not have a material
adverse effect on the business, financial condition or results of operations of
the Company. However, if these efforts are not completed on time, or if the
cost of updating or replacing the Company's information systems, if necessary,
exceeds the current estimates, the Year 2000 issue could have a material adverse
impact on the business, financial condition or results of operations of the
Company.
The Company also intends to determine the extent to which the Company
may be vulnerable to any failures by its major partners and service providers to
remedy their own Year 2000 issues, and is in the process of initiating formal
communications with these parties. At this time the Company is unable to
estimate the nature or extent of any potential adverse impact resulting from the
failure of third parties to achieve Year 2000 compliance; however, there can be
no assurance that these third parties will not experience Year 2000 problems or
that any problems would not have a material effect on the Company's business,
financial condition or results of operations.
Year 2000 Issues The Company is in the process of conducting
assessments of its computer information systems and is beginning to take the
necessary steps to determine the nature and extent of the work required to make
its systems Year 2000 compliant, where necessary. These steps will require the
Company to modify, upgrade or replace some of its internal financial and
operational systems. The Company continues to evaluate the estimated cost of
bringing all internal systems, equipment and operations into Year 2000
compliance, but has not finished determining the total cost of these compliance
efforts. While these efforts may
involve additional costs, the Company believes, based upon currently available
information, that these costs will not have a material adverse effect on the
business, financial conditions or results of operations of the Company. However,
if these efforts are not completed on time, or if the cost of updating or
replacing the Company's information systems, if necessary, exceeds the current
estimates, the Year 2000 issue could have a material adverse impact on the
business, financial condition or results of operations of the Company.
The Company also intends to determine the extent to which it may be
vulnerable to any failures by its major partners and service providers to remedy
their own Year 2000 issues, and is in the process of initiating formal
communications with these parties. At this time the Company is unable to
estimate the nature or extent of any potential adverse impact resulting from the
failure of third parties to achieve Year 2000 compliance; however, there can be
no assurance that these third parties will not experience Year 2000 problems or
that any problems would not have a material effect on the Company's business,
financial condition or results of operations.
Year 2000 Readiness Disclosure contained in Quarterly Report on Form
10-Q for the three month period ended June 28, 1998, filed with the Securities
and Exchange Commission on August 4, 1998:
Impact of Year 2000 Issue The Year 2000 issue results from computer
programs written using two digits rather than four to define the applicable
year. Any of the Company's computer programs that have data-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activity.
The Company is in the process of conducting assessments of its
computer information systems and is beginning to take the necessary steps to
determine the nature and extent of the work required to make its systems Year
2000 compliant, where necessary. These steps will require the Company to
modify, upgrade or replace some of its internal financial and operational
systems. The Company continues to evaluate the estimated cost of bringing all
internal systems, equipment and operations into Year 2000 compliance, but has
not finished determining the total cost of these compliance efforts. While
these efforts may involve additional costs, the Company believes, based upon
currently available information, that these costs will not have a material
adverse effect on the business, financial condition or results of operations of
the Company. However, if these efforts are not completed on time, or if the
cost of updating or replacing the Company's information systems, if necessary,
exceeds the current estimates, the Year 2000 issue could have a material adverse
impact on the business, financial condition or results of operations of the
Company.
The Company also intends to determine the extent to which the Company
may be vulnerable to any failures by its major partners and service providers to
remedy their own Year 2000 issues, and is in the process of initiating formal
communications with these parties. At this time the Company is unable to
estimate the nature or extent of any potential adverse impact
resulting from the failure of third parties to achieve Year 2000 compliance;
however, there can be no assurance that these third parties will not experience
Year 2000 problems or that any problems would not have a material effect on the
Company's business, financial condition or results of operations.
Year 2000 Issues The Company is in the process of conducting
assessments of its computer information systems and is beginning to take the
necessary steps to determine the nature and extent of the work required to make
its systems Year 2000 compliant, where necessary. These steps will require the
Company to modify, upgrade or replace some of its internal financial and
operational systems. The Company continues to evaluate the estimated cost of
bringing all internal systems, equipment and operations into Year 2000
compliance, but has not finished determining the total cost of these compliance
efforts. While these efforts may involve additional costs, the Company
believes, based upon currently available information, that these costs will not
have a material adverse effect on the business, financial conditions or results
of operations of the Company. However, if these efforts are not completed on
time, or if the cost of updating or replacing the Company's information systems,
if necessary, exceeds the current estimates, the Year 2000 issue could have a
material adverse impact on the business, financial condition or results of
operations of the Company.
The Company also intends to determine the extent to which it may be
vulnerable to any failures by its major partners and service providers to remedy
their own Year 2000 issues, and is in the process of initiating formal
communications with these parties. At this time the Company is unable to
estimate the nature or extent of any potential adverse impact resulting from the
failure of third parties to achieve Year 2000 compliance; however, there can be
no assurance that these third parties will not experience Year 2000 problems or
that any problems would not have a material effect on the Company's business,
financial condition or results of operations.
Year 2000 Readiness Disclosure contained in Quarterly Report on Form
10-Q for the three month period ended September 27, 1998, filed with the
Securities and Exchange Commission on November 4, 1998:
Impact of Year 2000 Issue The Year 2000 issue results from computer
programs written using two digits rather than four to define the applicable
year. Any of the Company's computer programs that have data-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activity.
The Company is in the process of conducting assessments of its
computer information systems and is beginning to take the necessary steps to
determine the nature and extent of the work required to make its systems Year
2000 compliant, where necessary. These steps will require the Company to
modify, upgrade or replace some of its internal financial and operational
systems. The Company continues to evaluate the estimated cost of bringing all
internal systems, equipment and operations into Year 2000 compliance, but has
not finished
determining the total cost of these compliance efforts. While these efforts may
involve additional costs, the Company believes, based upon currently available
information, that these costs will not have a material adverse effect on the
business, financial condition or results of operations of the Company. However,
if these efforts are not completed on time, or if the cost of updating or
replacing the Company's information systems, if necessary, exceeds the current
estimates, the Year 2000 issue could have a material adverse impact on the
business, financial condition or results of operations of the Company.
The Company also intends to determine the extent to which the Company
may be vulnerable to any failures by its major partners and service providers to
remedy their own Year 2000 issues, and is in the process of initiating formal
communications with these parties. At this time the Company is unable to
estimate the nature or extent of any potential adverse impact resulting from the
failure of third parties to achieve Year 2000 compliance; however, there can be
no assurance that these third parties will not experience Year 2000 problems or
that any problems would not have a material effect on the Company's business,
financial condition or results of operations.
Year 2000 Issues The Company is in the process of conducting
assessments of its computer information systems and is beginning to take the
necessary steps to determine the nature and extent of the work required to make
its systems Year 2000 compliant, where necessary. These steps will require the
Company to modify, upgrade or replace some of its internal financial and
operational systems. The Company continues to evaluate the estimated cost of
bringing all internal systems, equipment and operations into Year 2000
compliance, but has not finished determining the total cost of these compliance
efforts. While these efforts may involve additional costs, the Company
believes, based upon currently available information, that these costs will not
have a material adverse effect on the business, financial conditions or results
of operations of the Company. However, if these efforts are not completed on
time, or if the cost of updating or replacing the Company's information systems,
if necessary, exceeds the current estimates, the Year 2000 issue could have a
material adverse impact on the business, financial condition or results of
operations of the Company.
The Company also intends to determine the extent to which it may be
vulnerable to any failures by its major partners and service providers to remedy
their own Year 2000 issues, and is in the process of initiating formal
communications with these parties. At this time the Company is unable to
estimate the nature or extent of any potential adverse impact resulting from the
failure of third parties to achieve Year 2000 compliance; however, there can be
no assurance that these third parties will not experience Year 2000 problems or
that any problems would not have a material effect on the Company's business,
financial condition or results of operations.
(b). The following Year 2000 Readiness Disclosure statement reflects Hall
Kinion's current state of readiness with respect to Year 2000 issues:
YEAR 2000. A significant amount of the demand the Company has
experienced in recent years for its services may be generated by customers in
the process of developing,
marketing, selling, replacing and upgrading software applications in order to
accommodate the change in date to the Year 2000. Once such customers have
addressed the change in date to the Year 2000, the Company may experience
deceleration in demand from the strong annual growth rates recently experienced
by the IT professional contract and permanent placement staffing industry. The
Company provides IT professionals to its customers on a contract and permanent
placement basis. The Company's IT professionals primarily work on the
development of next generation software products and IT systems of the Company's
customers. The Company does not control the development of software products by
its customers or test such products for Year 2000 compliance issues and there
can be no assurances that such software products do not contain undetected
errors or defects associated with Year 2000 date functions. Although the Company
does not directly develop, market or sell software products, some commentators
have stated that a significant amount of litigation will arise out of Year 2000
compliance issues, and the Company is aware of a growing number of lawsuits
involving software vendors. Because of the unprecedented nature of such
litigation, it is uncertain to what extent the Company may be affected by it.
With respect to the Company's internal information technology systems (including
information technology-based office facilities such as data and voice
communications, and building management and security systems), the Company is
currently evaluating the adoption of standard industry practices, as published
by the British Standards Institute, in preparing for the Year 2000 date change.
The Company's Year 2000 internal readiness program primarily covers: taking
inventory of hardware, software and embedded systems, assessing business and
customer satisfaction risks associated with such systems, creating action plans
to address known risks, executing and monitoring action plans, and contingency
planning. The Company currently is conducting (i) a review of its vendors and
service providers to evaluate Year 2000 readiness and (ii) ongoing risk
analysis. The Company expects to substantially complete Year 2000 readiness
preparations at the end of the first quarter of calendar 1999 with respect to
its core business and software systems and at the end of June 1999 with respect
to its hardware systems. In each case, the Company expects to continue extensive
testing through calendar 1999. Although the Company does not currently believe
that it will incur any material costs or experience material disruptions in its
business associated with preparing its internal systems for the Year 2000, there
can be no assurances that the Company will not experience serious unanticipated
negative consequences and/or material costs caused by undetected errors or
defects in the technology used in its internal systems, which are composed of
third party software, third party hardware that contains embedded software and
the Company's own software products. The most reasonably likely worst case
scenarios would include: (i) corruption of data contained in the Company's
internal information systems, (ii) hardware failure, and (iii) the failure of
infrastructure services provided by government agencies and other third parties
(e.g., electricity, phone service, water transport, internet services, etc.).
The Company is in the process of conducting its contingency planning for high
risk areas at this time and is scheduled to commence contingency planning for
medium to low risk areas in January 1999. The Company expects its contingency
plans to include, among other things, manual "work-arounds" for software and
hardware failures, as well as substitution of systems, if necessary.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits. The following documents are filed as Exhibits to this report:
Exhibit Description
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2.1 Huntington Asset Purchase Agreement between Hall, Kinion &
Associates, Inc., Huntington, Acquisition Corporation,
Alexander, Boehmer and Tomasco, LLC, Raymond Tomasco and
Karen Vacheron Alexander, dated November 18, 1998.
2.2 ITC Asset Purchase Agreement between Hall, Kinion &
Associates, Inc., Interactive Acquisition Corporation,
Interactive Technology Consultants, LLC, Raymond Tomasco,
Karen Vacheron Alexander, and Gary Malbin, dated November 18,
1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Hall Kinion has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HALL, KINION & ASSOCIATES, INC.
Date: December 2, 1998 By: /s/ Martin A. Kropelnicki
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Martin A. Kropelnicki
Chief Financial Officer
(Duly Authorized Officer and Principal Financial
Officer)
EXHIBIT INDEX
Exhibit
Number Description
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2.1 Huntington Asset Purchase Agreement between Hall, Kinion & Associates, Inc.,
Huntington, Acquisition Corporation, Alexander, Boehmer and Tomasco, LLC, Raymond
Tomasco and Karen Vacheron Alexander, dated November 18, 1998.
2.2 ITC Asset Purchase Agreement between Hall, Kinion & Associates, Inc., Interactive
Acquisition Corporation, Interactive Technology Consultants, LLC, Raymond Tomasco,
Karen Vacheron Alexander, and Gary Malbin, dated November 18, 1998.