EXHIBIT 7.2
PRO FORMA FINANCIAL INFORMATION
THE A CONSULTING TEAM, INC.
PRO FORMA UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following pro forma unaudited consolidated balance sheet has been
prepared by taking the June 30, 2002 balance sheets of The A Consulting
team, Inc. (the "Company") (TACT) and International Object Technology,
Inc. (IOT) and giving effect to the acquisition of the outstanding
common stock of International Object Technology, Inc. as if it had
occurred on June 30, 2002. The pro forma consolidated condensed balance
sheet has been prepared for information purposes only and does not
purport to be indicative of the financial condition that necessarily
would have resulted had this transaction taken place as of June 30,
2002.
The following pro forma unaudited consolidated condensed statements of
operations for the year ended December 31, 2001 and the six months
ended June 30, 2002, gives effect to the Company's acquisition of IOT
as if it had occurred at the beginning of the respective periods. The
revenues and results of operations included in the following pro forma
unaudited consolidated condensed statement of operations are not
considered necessarily indicative of the results of operations for the
periods specified had the transaction actually been completed at the
beginning of the periods.
These financial statements should be read in conjunction with the notes
to the pro forma unaudited consolidated condensed financial statements,
which follow, the financial statements of the Company and related notes
thereto (as previously filed), and the financial statements of IOT and
related notes thereto, included herewith.
27
THE A CONSULTING TEAM, INC.
PROFORMA UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEET
FOR THE SIX MONTHS ENDED JUNE 30, 2002
Pro Forma
TACT IOT Adjustments
June 30, 2002 June 30, 2002 Increase/ Pro Forma
Historical Historical (Decrease) Combined
------------ ------------ ------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,415,370 $ 159,516 $ (120,000) f $ 1,454,886
Accounts receivable 4,198,414 648,524 - 4,846,938
Prepaid software licenses - 30,000 - 30,000
Work in progress - 818 - 818
Prepaid or refundable income taxes - - - -
Prepaid Expenses and other current assets 134,375 7,999 - 142,374
------------ ------------ ------------ ------------
Total Current Assets 5,748,159 846,857 (120,000) 6,475,016
Investments at cost 518,059 - - 518,059
Property and equipment, at cost, less accumulated -
depreciation and amortization 1,590,420 33,845 - 1,624,265
Goodwill - - 979,192 979,192
Intangibles - 11,292 312,000 b 323,292
Deposits 75,326 - - 75,326
------------ ------------ ------------ ------------
Total Assets $ 7,931,964 $ 891,994 $ 1,171,192 $ 9,995,150
============ ============ ============ ============
Liabilities and Shareholders' Equity
Current Liabilities:
Loan payable - banks/shareholder $ 1,628,183 $ 49,950 $ - $ 1,678,133
Accounts payable and accrued expenses 1,297,601 503,713 270,000 a/d 1,949,314
(122,000)e -
Note Payable(Short-Term)-Deferred Cash Payment - - 350,000 a 350,000
Other current liabilities 290,517 - - 290,517
Current portion of long-term debt 11,955 - - 11,955
------------ ------------ ------------ ------------
Total current liabilities 3,228,256 553,663 498,000 4,279,919
Deferred taxes payable - long term - 7,000 - 7,000
Note Payable(Long-Term)-Deferred Cash Payment 46,693 - 300,000 a 305,759
(40,934)a
Shareholder Loan, Net of Current Maturities - 230,457 (120,000)f 110,457
------------ ------------ ------------ ------------
Total Liabilities 3,274,949 791,120 637,066 4,703,135
Commitments - - - -
Shareholders' equity: -
Preferred stock - - - -
Common stock 71,169 75,661 12,700 a 83,869
(75,661)c -
Additional paid-in capital 33,086,689 - 622,300 a 33,708,989
Retained earnings, accumulated deficit (28,500,843) 25,213 (25,213)c (28,500,843)
------------ ------------ ------------ ------------
Total shareholders' equity 4,657,015 100,874 534,126 5,292,015
------------ ------------ ------------ ------------
Total liabilities and shareholders' equity $ 7,931,964 $ 891,994 $ 1,171,192 $ 9,995,150
============ ============ ============ ============
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THE A CONSULTING TEAM, INC.
PROFORMA UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
TACT IOT PRO FORMA PRO
HISTORICAL HISTORICAL ADJUSTMENTS FORMA
YEAR ENDED YEAR ENDED INCREASE/ YEAR ENDED
DECEMBER 31, 2001 DECEMBER 31, 2001 DECREASE DECEMBER 31, 2001
-------------------- ----------------- ------------ -----------------
Revenues $ 36,226,716 $ 8,156,626 $ - $ 44,383,342
Cost of revenues 27,357,278 6,192,279 - 33,549,557
--------------- ----------- --------- ------------
Gross Profit 8,869,438 1,964,347 10,833,785
-
Operating Expenses: -
Selling, general & administrative 11,531,291 1,774,812 (69,680) aa 13,236,423
Provision for doubtful accounts 942,507 22,528 - 965,035
Depreciation 1,157,219 - - 1,157,219
Amortization - - 104,000 bb 104,000
Impairment of assets & restructuring charges 8,710,690 - - 8,710,690
--------------- ----------- --------- ------------
22,341,707 1,797,340 34,320 24,173,367
--------------- ----------- --------- ------------
Income (loss) from operations (13,472,269) 167,007 (34,320) (13,339,582)
--------------- ----------- --------- ------------
Interest expense, net (399,018) (25,003) (17,487) cc (441,508)
--------------- ----------- --------- ------------
Income (loss) before income taxes (13,871,287) 142,004 (51,807) (13,781,090)
Provision (Benefit) for income taxes 28,628 205,000 (189,000) dd/ee 44,628
--------------- ----------- --------- ------------
Income (loss) before extraordinary item (13,899,915) (62,996) 137,193 (13,825,718)
Extraordinary item net of income tax effect 249,230 - - 249,230
--------------- ----------- --------- ------------
Net income (loss) $ (13,650,685) $ (62,996) $ 137,193 $(13,576,488)
=============== =========== ========= ============
Net income (loss) earning per share:
Loss before extraordinary item $ (1.95) $ (0.01) - $ (1.65)
Extraordinary item 0.03 - - 0.03
--------------- ----------- --------- ------------
Net income (loss) earning per share $ $ (1.92) $ (0.01) $ - $ (1.62)
=============== =========== ========= ============
Weighted-average number of common
shares outstanding
Basic 7,116,871 1,270,000 8,386,871
=============== ========= ============
Diluted 7,116,871 1,270,000 8,386,871
=============== ========= ============
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THE A CONSULTING TEAM, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
TACT IOT PRO FORMA PRO
HISTORICAL HISTORICAL ADJUSTMENTS FORMA
SIX MONTHS ENDED SIX MONTHS ENDED INCREASE/ SIX MONTHS ENDED
JUNE 30, 2002 JUNE 30, 2002 DECREASE JUNE 30, 2002
------------------ ----------------- ------------- -----------------
Revenues $ 12,104,066 $ 2,815,408 $ - $ 14,919,474
Cost of revenues 8,541,337 2,163,494 - 10,704,831
------------ ----------- --------- ------------
Gross Profit 3,562,729 651,914 - 4,214,643
-
Operating Expenses: -
Selling, general & administrative 2,969,498 711,108 8,000 aa 3,688,606
Provision for doubtful accounts - - - -
Depreciation 429,922 7,969 - 437,891
Amortization - - 52,000 bb 52,000
Impairment of assets & restructuring charges - - - -
------------ ----------- --------- ------------
3,399,420 719,077 60,000 4,178,497
------------ ----------- --------- ------------
Income (loss) from operations 163,309 (67,163) (60,000) 36,146
------------ ----------- --------- ------------
Interest expense, net (78,863) (13,307) (8,742)cc (100,912)
------------ ----------- --------- ------------
Income (loss) before income taxes 84,446 (80,470) (68,742) (64,766)
Provision (Benefit) for income taxes (404,772) (4,977) 17,000 ee (392,749)
------------ ----------- --------- ------------
Income (loss) before extraordinary item 489,218 (75,493) (85,742) 327,983
Extraordinary item net of income tax effect 48,715 - - 48,715
------------ ----------- --------- ------------
Net income (loss) $ 537,933 $ (75,493) $ (85,742) $ 376,698
============ =========== ========= ============
Net income (loss) earning per share:
Basic $ 0.08 $ - $ - $ 0.04
============ =========== ========= ============
Diluted $ 0.07 $ - $ - $ 0.04
============ =========== ========= ============
Weighted-average number of common
shares outstanding
Basic 7,116,871 1,270,000 8,386,871
============ ========= ============
Diluted 7,193,357 1,270,000 8,463,357
============ ========= ============
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THE A CONSULTING TEAM INC.
NOTES TO THE PRO FORMA UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The accompanying pro forma unaudited consolidated condensed balance sheets and
statements of operations as of December 31, 2001 and June 30, 2002, present the
financial position and results of operations of The A Consulting Team, Inc. (the
"Company") giving effect to the acquisition on July 19, 2002 of all of the
common stock of International Object Technology, Inc. ("IOT").
On July 19, 2002, the Company, acquired all of the common stock of International
Object Technology, Inc. for a combination of deferred cash consideration of
$650,000, and 1,270,000 shares of TACT unregistered common stock valued at
$635,000.
The pro forma unaudited consolidated condensed financial statements reflect the
deferred cash payments of $650,000 net of discount of $40,934 and issuance of
1,270,000 shares of unregistered common stock valued at $635,000. Per the Stock
Purchase Agreement, the terms of payment are as follows; $140,000 is payable 45
days after closing and $510,000 of deferred cash payments are payable through
January 2, 2005.In addition, 1,270,000 shares of the Company's common stock were
issued on the Closing Date, and $270,000 was allocated to acquisition costs
The adjustments below were prepared based on estimates or approximations. It is
possible that the actual amounts recorded may have an impact on the results of
operations and the balance sheet different from that reflected in the
accompanying pro forma unaudited consolidated condensed financial statements. It
is therefore possible that the entries below will not be the amounts actually
recorded at the closing date.
31
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
BALANCE SHEET AT DECEMBER 31, 2001 AND JUNE 30, 2002:
(a) To record the acquisition of all the issued and outstanding common stock of
IOT for a purchase price of $1,244,066 plus acquisition costs of $270,000.
Purchase price, paid in deferred cash payments $ 650,000
Net present value discount on deferred cash payments (40,934)
Purchase price paid in Company common stock 635,000
Acquisition costs (cash) 270,000
------------
Total purchase price $ 1,514,066
============
Financed by:
Cash - acquisition costs $ 270,000
Short-term note payable 140,000
Long-term note payable 510,000
Net present value discount on deferred cash payments (40,934)
Common stock (1,270,000 shares at .50 per share) 635,000
------------
Total purchase price $ 1,514,066
============
(b) To allocate excess purchase price to goodwill and other intangibles which
will be amortized over a three year period
Goodwill $979,192
Identifiable intangibles - Employee agreements $312,000
(c) To eliminate equity and retained earnings of IOT
(d) To eliminate federal deferred tax liability due to assumed use of TACT
federal NOL by IOT
Federal deferred tax liability $122,000
32
(e) To record cash payment for shareholder loan upon closing
Shareholder Loan $120,000
Cash $120,000
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 AND THE SIX MONTHS
ENDED JUNE 30, 2002:
Year Ended Six Months Ended
December 31, June 30,
2001 2002
------------ ----------------
(aa ) To record additional salaries per new employee $ (69,680) $ 8,000
agreements
(bb ) To record amortization of purchase price allocated $ 104,000 $ 52,000
to employee agreements
(cc ) To record discounts on deferred cash payments $ (17,487) $ (8,742)
(dd ) To record tax provision on IOT as if it were a
"C" Corporation as the beginning of the respective
periods $ (157,000) $ -
(ee ) To eliminate federal tax of IOT due to assumed
use of TACT NOL by IOT $ (32,000) $ 17,000
33