Securities and Exchange Commission

Washington, DC 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) June 16, 2004

 

PERFICIENT, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

(State or Other Jurisdiction of Incorporation)

 

001-15169

 

74-2853258

(Commission File Number)

 

(IRS Employer Identification No.)

 

 

 

1120 South Capital of Texas Highway, Suite 220,
Building 3, Austin, TX

 

78746

(Address of Principal Executive Offices)

 

(Zip Code)

 

 

(512) 531-6000

Registrant’s telephone number, including area code

 

(Former Name or Former Address, if Changed Since Last Report)

 

 



 

ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS

 

On April 16, 2004, Perficient, Inc. (the “Company”) filed a current report on Form 8-K reporting that on April 2, 2004, the Company consummated the acquisition by way of merger of Genisys Consulting, Inc. (“Genisys”), an Illinois corporation, with and into our wholly-owned subsidiary, Perficient Genisys, Inc., a Delaware corporation.  Perficient Genisys, Inc. is the surviving corporation to the merger. The Company paid approximately $7.9 million consisting of approximately $1.5 million in cash and 1.7 million shares of the Company’s common stock, subject to certain post-closing adjustments.  The shares of common stock issued in connection with the merger were ascribed a value of $3.77 per share, which was the average closing price of the Company’s common stock for the 30 consecutive trading days ending on April 1, 2004.  The common stock issued in connection with the merger included approximately 0.8 million shares which are restricted through April 1, 2007, and another 0.4 million shares held in escrow until April 1, 2005.  Approximately $0.5 million in transaction costs have been incurred in relation to the acquisition. Prior to the acquisition, the assets of Genisys were used to provide information technology consulting services to its customers.  The Company intends to continue such use for the assets of Genisys. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Genisys Merger Agreement, a copy of which is included herein as Exhibit 10.1.

 

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS

 

In this Report on Form 8-K/A we are providing the following financial information:

 

(a) Audited Financial Statements of Genisys Consulting, Inc. for the years ended December 31, 2002 and 2003 and unaudited financial statements for three months ended March 31, 2003 and 2004;

 

(b) Unaudited Pro Forma Condensed Balance Sheet information of the Company as of March 31, 2004, and Unaudited Pro Forma Statement of Operations of the Company for the year ended December 31, 2003 and three months ended March 31, 2004;

 

The Company has recorded total consideration for the Genisys Consulting, Inc. acquisition of $8.8 million, which includes transaction costs and stock options issued in exchange for common stock of Genisys. This consideration has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed according to their respective fair values, with the excess purchase consideration being allocated to goodwill at the closing of the transaction. The acquisition was completed on April 2, 2004.

 

The unaudited pro forma condensed income statement of the Company for the year ended December 31, 2003, and the three months ended March 31, 2004, give effect to (i) the acquisition of Genisys Consulting, Inc. applying the purchase method of accounting and (ii) certain adjustments that are directly attributable to the acquisition as if the transaction was consummated as of the beginning of the respective periods.

 

In the opinion of the Company, all adjustments and/or disclosures necessary for a fair presentation of the pro forma data have been made. These unaudited pro forma statements of operations are presented for illustrative purposes only and are not necessarily indicative of the operating results that would have been achieved had the acquisition occurred as of the dates indicated or of the results that may be obtained in the future.

 

These unaudited pro forma condensed income statement and notes thereto should be read in conjunction with the Genisys Consulting, Inc. financial statements and the notes thereto as of and for the years ended December 31, 2002 and 2003 included in this Report on Form 8-K/A; the Company’s financial statements and the notes thereto as of and for the year ended December 31, 2003, included in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003, as amended by Amendment No. 1 on Form 10-KSB/A, which are incorporated herein by reference; and the Company’s consolidated financial statements and the notes thereto as of and for the three month period ended March 31, 2004, included in the Company’s Quarterly Report on Form 10-QSB which are incorporated herein by reference.

 

(c) Exhibits

 

EXHIBIT NO.

 

DESCRIPTION

 

 

 

Exhibit 10.1. +

 

Agreement and Plan of Merger, dated as of April 2, 2004, by and among Perficient, Inc., Perficient Genisys, Inc., Genisys Consulting, Inc., and certain shareholders of Genisys Consulting, Inc.

 

 

 

Exhibit 23.1.

 

Consent of Ernst and Young LLP.

 

 

 

Exhibit 99.1. +

 

Perficient, Inc. Press Release issued on April 5, 2004 regarding the acquisition of Genisys Consulting, Inc.

 


+                                         Previously filed with the Securities and Exchange Commission as an Exhibit to the Company’s Current Report on Form 8-K filed on April 16, 2004 and incorporated herein by reference.

 

2



 

SIGNATURES

 

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.

 

 

PERFICIENT, INC.

Dated June 16, 2004

 

 

 

 

/s/ Michael D. Hill

 

 

Michael D. Hill

 

Chief Financial Officer

 

3



 

GENISYS CONSULTING, INC.

 

INDEX TO FINANCIAL STATEMENTS

 

Report of Independent Auditors

 

Balance Sheets at December 31, 2002 and 2003 and March 31, 2004 (unaudited)

 

Statements of Operations for the years ended December 31, 2002 and 2003, and for the three months ended March 31, 2003 (unaudited) and 2004 (unaudited)

 

Statements of Changes in Stockholders’ Equity for the years ended December 31, 2002 and 2003

 

Statements of Cash Flows for the years ended December 31, 2002 and 2003, and for the three months ended March 31, 2003 (unaudited) and 2004 (unaudited)

 

Notes to Financial Statements

 

 

F-1



 

REPORT OF INDEPENDENT AUDITORS

 

Board of Directors and Stockholders

Genisys Consulting, Inc.

 

We have audited the accompanying balance sheets of Genisys Consulting, Inc. as of December 31, 2002 and 2003, and the related statements of operations, changes in stockholders’ equity, and cash flows for the years 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 audits in accordance with auditing standards generally accepted in the United States. 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 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 Genisys Consulting, Inc. at December 31, 2002 and 2003, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

 

/s/ Ernst & Young LLP

 

 

 

 

 

Austin, Texas

 

June 10, 2004

 

 

F-2



 

GENISYS CONSULTING, INC.

 

BALANCE SHEETS

 

 

 

December 31,

 

March 31,

 

 

 

2002

 

2003

 

2004

 

 

 

 

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash

 

$

4,300

 

$

4,392

 

$

230,033

 

Accounts receivable

 

835,172

 

1,390,333

 

1,178,193

 

Other current assets

 

63,995

 

65,777

 

2,602

 

Total current assets

 

903,467

 

1,460,502

 

1,410,828

 

Property and equipment:

 

 

 

 

 

 

 

Computer Hardware

 

203,486

 

234,566

 

239,138

 

Furniture and fixtures

 

94,865

 

94,865

 

94,865

 

Accumulated depreciation

 

(204,694

)

(248,378

)

(258,714

)

Net property and equipment

 

93,657

 

81,053

 

75,289

 

 

 

 

 

 

 

 

 

Total assets

 

$

997,124

 

$

1,541,555

 

$

1,486,117

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

65,146

 

$

51,915

 

$

9,750

 

Current portion of note payable to former shareholder

 

198,770

 

297,991

 

 

Other current liabilities

 

172,954

 

128,241

 

163,177

 

Total current liabilities

 

436,870

 

478,147

 

172,927

 

Note Payable to former shareholder, net of current portion

 

297,991

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Common stock, no par value; 5,000,000 shares authorized; 480,816 shares issued and outstanding at December 31, 2002 and 2003, and March 31, 2004

 

873,163

 

873,163

 

873,163

 

Treasury stock, 100,000 shares of common stock, at cost

 

(1,200,000

)

(1,200,000

)

(1,200,000

)

Stockholder receivables

 

(408,845

)

(333,680

)

(329,490

)

Retained earnings

 

997,945

 

1,723,925

 

1,969,517

 

Total stockholders’ equity

 

262,263

 

1,063,408

 

1,313,190

 

Total liabilities and stockholders’ equity

 

$

997,124

 

$

1,541,555

 

$

1,486,117

 

 

See accompanying notes.

 

F-3



 

GENISYS CONSULTING, INC.

 

STATEMENTS OF OPERATIONS

 

 

 

Year Ended December 31,

 

Three Months Ended
March 31,

 

 

 

2002

 

2003

 

2003

 

2004

 

 

 

 

 

 

 

(unaudited)

 

(unaudited)

 

Revenue:

 

 

 

 

 

 

 

 

 

Services

 

$

7,976,732

 

$

9,520,474

 

$

1,954,134

 

$

2,656,359

 

Reimbursable expenses

 

10,072

 

42,032

 

3,098

 

23,288

 

Total revenue

 

7,986,804

 

9,562,506

 

1,957,232

 

2,679,647

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

Project personnel costs

 

5,346,267

 

5,521,638

 

1,149,803

 

1,784,907

 

Reimbursable expenses

 

15,833

 

45,690

 

8,399

 

12,010

 

Total cost of revenue

 

5,362,100

 

5,567,328

 

1,158,202

 

1,796,917

 

Gross margin

 

2,624,704

 

3,995,178

 

799,030

 

882,730

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

2,589,890

 

2,842,410

 

658,221

 

636,939

 

Depreciation

 

41,734

 

43,685

 

12,154

 

10,336

 

Total operating expenses

 

2,631,624

 

2,886,095

 

670,375

 

647,275

 

Income (loss) from operations

 

(6,920

)

1,109,083

 

128,655

 

235,455

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

18,142

 

18,255

 

4,327

 

10,977

 

Interest expense

 

(32,912

)

(22,010

)

(5,930

)

(1,764

)

Other, net

 

907

 

1,468

 

1,467

 

924

 

Net Income (loss)

 

$

(20,783

)

$

1,106,796

 

$

128,519

 

$

245,592

 

 

See accompanying notes.

 

F-4



 

GENISYS CONSULTING, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

 

 


Common Stock

 

Stockholder
Receivables

 

Treasury
Stock

 

Retained
Earnings

 

Total
Stockholders’
Equity

 

Shares

 

Amount

Balance at January 1, 2002

 

200

 

$

1,500

 

$

 

$

(1,200,000

)

$

1,018,728

 

$

(179,772

)

Stock split 2,000 for 1

 

400,000

 

 

 

 

 

 

Issuance of common stock to employees

 

80,616

 

871,663

 

(420,065

)

 

 

451,598

 

Collections on stockholders’ receivables

 

 

 

11,220

 

 

 

11,220

 

Net loss

 

 

 

 

 

(20,783

)

(20,783

)

Balance at December 31, 2002

 

480,816

 

$

873,163

 

$

(408,845

)

$

(1,200,000

)

$

997,945

 

$

262,263

 

Distributions to common stockholders

 

 

 

 

 

(380,816

)

(380,816

)

Collections on stockholder receivables

 

 

 

75,165

 

 

 

75,165

 

Net income

 

 

 

 

 

1,106,796

 

1,106,796

 

Balance at December 31, 2003

 

480,816

 

$

873,163

 

$

(333,680

)

$

(1,200,000

)

$

1,723,925

 

$

1,063,408

 

 

See accompanying notes.

 

F-5



 

GENISYS CONSULTING, INC.

 

STATEMENTS OF CASH FLOWS

 

 

 

Year Ended December 31,

 

Three Months Ended
March 31,

 

 

 

2002

 

2003

 

2003

 

2004

 

 

 

 

 

 

 

(unaudited)

 

(unaudited)

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(20,783

)

$

1,106,796

 

$

128,519

 

$

245,592

 

Adjustments to reconcile net income (loss) to net cash provided by operations:

 

 

 

 

 

 

 

 

 

Depreciation

 

41,734

 

43,685

 

12,154

 

10,336

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

15,322

 

(555,161

)

(144,625

)

212,140

 

Other assets

 

(9,907

)

(1,782

)

44,628

 

63,175

 

Accounts payable

 

40,451

 

(13,231

)

(47,070

)

(42,165

)

Other liabilities

 

46,562

 

(44,714

)

(56,415

)

34,936

 

Net cash provided by operating activities

 

113,379

 

535,593

 

(62,809

)

524,014

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

(33,987

)

(31,081

)

 

(4,572

)

Net cash used in investing activities

 

(33,987

)

(31,081

)

 

(4,572

)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Payments on note payable to former stockholder

 

(542,290

)

(198,769

)

(34,412

)

(297,991

)

Proceeds from draws on line of credit

 

 

 

150,000

 

 

Proceeds from issuance of common stock

 

451,598

 

 

 

 

Distribution to common stock stockholders

 

 

(380,816

)

 

 

Proceeds from repayment of stockholder loans

 

11,220

 

75,165

 

3,983

 

4,190

 

Net cash used in financing activities

 

(79,472

)

(504,420

)

119,571

 

293,801

 

(Decrease) increase in cash and cash equivalents

 

(80

)

92

 

56,762

 

225,641

 

Cash and cash equivalents at beginning of period

 

4,380

 

4,300

 

4,300

 

4,392

 

Cash and cash equivalents at end of period

 

$

4,300

 

$

4,392

 

$

61,062

 

$

230,033

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

 

Interest paid

 

$

32,912

 

$

22,010

 

$

5,930

 

$

1,764

 

Non cash investing and financing activities:

 

 

 

 

 

 

 

 

 

Issuance of common stock for stockholder receivables

 

$

420,065

 

$

 

$

 

$

 

 

See accompanying notes.

 

F-6



 

GENISYS CONSULTING, INC.

 

NOTES TO FINANCIAL STATEMENTS

 

December 31, 2003

 

1. Business Overview

 

Genisys Consulting, Inc. (the “Company”) provides information technology solutions to large and major midsize companies. The Company enables its clients and partners to optimize profitability and strengthen customer relationships through reliable, quick-to-market technology solutions. The Company provides a broad range of end-to-end business and technology solutions serving the financial services, healthcare, technology and energy industries.

 

The Company was incorporated in March 1990 in the state of Illinois.

 

2. Summary of Significant Accounting Policies

 

Interim Financial Statements (unaudited)

 

In the opinion of management, the unaudited interim financial statements at March 31, 2004 and for the three months ended March 31, 2003 and 2004 include all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Company’s financial position at March 31, 2004, and results of operations and cash flows for the three months ended March 31, 2003 and 2004. Results for the three months ended March 31, 2004 are not necessarily indicative of the results to be expected for the entire year.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates, and such differences could be material to the financial statements.

 

Revenue Recognition

 

Revenues are primarily derived from professional services provided on a time and materials basis, with the remaining revenue derived from fixed fee engagements. For time and material contracts, revenue is recognized and billed by multiplying the number of hours expended in the performance of the contract by the established billing rates. For fixed fee projects, revenue is generally recognized using the proportionate performance method based on the ratio of hours expended to total estimated hours. Provisions for estimated losses on uncompleted contracts are made on a contract-by-contract basis and are recognized in the period in which such losses are determined. Billings in excess of costs plus earnings are classified as deferred revenues. On many projects the Company is also reimbursed for out-of-pocket expenses such as airfare, lodging and meals. These reimbursements are included as a component of revenue.

 

Cash Equivalents

 

Cash equivalents consist primarily of cash deposits and investments with original maturities of ninety days or less when purchased.

 

Property and Equipment

 

Property and equipment are recorded at cost. Depreciation of property and equipment is computed using the straight-line method over the useful lives of the assets (generally 2 to 5 years). Leasehold improvements are amortized over the shorter of the life of the lease or the estimated useful life of the assets.

 

F-7



 

Impairment of Long-Lived Assets

 

Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that their net book value may not be entirely recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets and is recorded in the period in which the determination was made.

 

Income Taxes

 

The Company is an “S” Corporation for purposes of federal and state income taxes. Accordingly, no provision for U.S. federal and state income taxes is recorded in these financial statements.  Prior to February 2002, the Company was a “C” corporation.

 

Fair Value of Financial Instruments

 

Cash equivalents, accounts receivable, accounts payable, other accrued liabilities, and debt are stated at cost which approximates fair value due to the short-term maturity of these instruments.

 

Recently Issued Accounting Standards

 

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46 (“FIN 46”), Consolidation of Variable Interest Entities. FIN 46 requires that if an entity has a controlling financial interest in a variable interest entity, the assets, liabilities and results of activities of the variable interest entity should be included in the consolidated financial statements of the entity. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after December 15, 2003. Management does not believe that the adoption of FIN 46 will have a material impact on the Company’s consolidated results of operations or financial position.

 

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150 establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The provisions of SFAS No. 150 are effective for financial instruments entered into or modified after May 31, 2003, and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. The changes that resulted from the issuance of SFAS No. 150 did not have a material effect on the Company’s consolidated results of operations or financial position.

 

F-8



 

3. Concentration of Credit Risk and Significant Customers

 

Cash and accounts receivable potentially expose the Company to concentrations of credit risk. Excess cash is placed with highly rated financial institutions. The Company provides credit, in the normal course of business, to its customers. The Company generally does not require collateral or up front payments. The Company performs periodic credit evaluations of its customers and maintains allowances for potential credit losses. Customers can be denied access to services in the event of non-payment. In the event that the Company loses a customer, the Company’s revenue could decrease significantly and, as with the loss of any significant customer, management may need to counteract this type of revenue decrease by reducing headcount to align with the lower demand for the Company’s services. Due to the Company’s significant fixed operating expenses, the loss of sales to a customer could result in the Company’s inability to generate net income for some time in the future.

 

4. Employee Benefit Plan

 

The Company has a qualified 401(k) profit sharing plan available to full-time employees who meet the plan’s eligibility requirements. This defined contribution plan permits employees to make contributions up to maximum limits allowed by the Internal Revenue Code. The Company, at its discretion, matches a portion of the employee’s contribution under a predetermined formula based on the level of contribution and years of vesting services. The Company made matching contributions equal to 25% of the first 6% of employee contributions totaling $68,000 and $42,000 during 2002 and 2003, respectively, and $-0- and $14,000 for the three months ended March 31, 2003 and March 31, 2004, respectively.  These matching contributions vest over a five year period of service.

 

5. Line of Credit

 

During 2002 and 2003, the Company had a line of credit facility providing for a borrowing capacity of up to $300,000 or 80% of eligible receivables. Borrowings under this line of credit carry an interest rate of 4.25% and mature on March 31, 2004. The Company is required to maintain certain financial covenants under this arrangement. The line of credit is collateralized by substantially all the assets of the Company. No amounts were outstanding under the line of credit as of December 31, 2002 and 2003, and March 31, 2004.

 

6. Note Payable to Former Shareholder

 

During 2001 the Company purchased common stock from a shareholder for approximately $1.2 million. In consideration for purchase of common stock, the company issued two notes payable for a combined total of approximately $1.2 million. Both notes carried an interest rate of prime adjusted monthly.  The first note for $175,000 was repaid in early 2002.  The second note for $1,025,000 is payable in monthly installments through 2004. This second note is subordinate to the Company’s line of credit arrangement discussed above in Note 6. Future payments under this note as of December 31, 2003 are $ 297,991 and were paid in full as of March 3, 2004.

 

F-9



 

7. Commitments And Contingencies

 

The Company leases its office facilities and certain equipment under various operating and capital lease agreements. The Company has the option to extend the term of certain of its office facilities leases. Future minimum commitments under these lease agreements are as follows:

 

 

 

Operating
Leases

 

2004

 

$

181,012

 

2005

 

163,818

 

2006

 

153,303

 

2007

 

76,650

 

Total minimum lease payments

 

$

574,783

 

 

Rent expense for the years ended December 31, 2002 and 2003 was $151,000 and $167,000, respectively.

 

8. Related Party Transaction

 

During 2002, the Company sold 37,725 shares of common stock in exchange for shareholder notes receivable for an aggregate amount of $420,065.  These notes had no specified term, but required interest to be paid monthly at prime adjusted monthly over the life of the loans.  The shares of Company stock purchased with the notes secured the notes and these shareholders pledged all owner distributions to the Company on until these notes were paid in full. The notes receivable were collected in full as of April 2, 2004 in conjunction with the sale of the Company explained in Note 9 below.

 

9. Subsequent Event (Unaudited)

 

On April 2, 2004, the Company was sold to Perficient, Inc. by way of merger into Perficient’s wholly-owned subsidiary, Perficient Genisys, Inc., a Delaware corporation.  Perficient Genisys, Inc. is the surviving corporation to the merger.  Perficient paid approximately $7.9 million consisting of approximately $1.5 million in cash and 1.7 million shares of Perficient’s common stock, subject to certain post-closing adjustments.  The common stock issued in connection with the merger included approximately 0.8 million shares which are restricted from sale through April 1, 2007, and another 0.4 million shares held in escrow until April 1, 2005.

 

F-10



 

PERFICIENT, INC.

 

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

The following unaudited pro forma condensed combined financial statements give effect to the acquisition by Perficient, Inc. of Genisys Consulting, Inc.  This acquisition will be accounted for as a purchase business combination. These unedited pro forma condensed combined financial statements have been prepared from the historical consolidated financial statements of Perficient, Inc. and Genisys Consulting, Inc. and should be read in conjunction therewith.

 

On April 2, 2004, Perficient, Inc. (the “Company”) consummated the acquisition by way of merger of Genisys Consulting, Inc. (“Genisys”), an Illinois corporation, with and into our wholly-owned subsidiary, Perficient Genisys, Inc., a Delaware corporation.  Perficient Genisys, Inc. is the surviving corporation to the merger. The Company paid approximately $7.9 million consisting of approximately $1.5 million in cash and 1,687,439 shares of the Company’s common stock, excluding transaction costs and stock options issued in exchange for common stock of Genisys.  The shares of common stock issued in connection with the merger were ascribed a value of $3.77 per share, which was the average closing price of the Company’s common stock for the 30 consecutive trading days ending on April 1, 2004.  The common stock issued in connection with the merger included 825,459 shares, which are restricted through April 1, 2007, and another 352,055 shares held in escrow until April 1, 2005.  Approximately $0.5 million in transaction costs have been incurred in relation to the acquisition. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Genisys Merger Agreement, a copy of which is included herein as Exhibit 10.1.

 

The following pro forma condensed combined financial statements are presented to illustrate the effects of the merger on the historical financial position and operating results of the Company and Genisys. The unaudited pro forma condensed combined balance sheet as of March 31, 2004 gives effect to the merger as if it had occurred on that date, and combines the respective balance sheets at that date. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2003 and for the three months ended March 31, 2004 give effect to the merger as if it occurred at the beginning of the periods presented and combines the respective statements of operations for the Company and Genisys for the respective periods.

 

The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the merger had been consummated on the indicated dates, nor is it necessarily indicative of future operating results. The pro forma adjustments are based on information available at the time of this filing. Changes in the ultimate purchase price based on future operating performance are not reflected in these pro forma financial statements.  The issuance of additional consideration will affect the amount of goodwill ultimately recorded.

 

PF-1



 

PERFICIENT, INC.

 

INDEX TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

 

Page

 

 

Pro forma Condensed Combined Balance Sheet as of March 31, 2004

PF-3

Pro forma Condensed Combined Statement of Operations for the three month period ended March 31, 2004

PF-4

Pro forma Condensed Combined Statement of Operations for the year ended December 31, 2003

PF-5

 

 

Notes to pro forma Condensed Combined Financial Statements

PF-6

 

PF-2



 

PERFICIENT, INC.

 

PRO FORMA CONDENSED COMBINED BALANCE SHEET

(Unaudited)

 

 

 

As of March 31, 2004

 

 

 

Perficient

 

Genisys

 

Pro Forma
Adjustments

 

 

 

Pro Forma
Combined

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

4,075,929

 

$

230,033

 

$

(1,501,214

)

Note 2

 

$

2,804,748

 

Accounts receivable, net

 

6,673,514

 

1,178,193

 

7,851,707

 

 

 

 

 

Other current assets

 

324,203

 

2,602

 

 

 

 

 

326,805

 

Total current assets

 

11,073,646

 

1,410,828

 

(1,501,214

)

 

 

10,983,260

 

Property and equipment, net

 

619,964

 

75,289

 

 

 

 

695,253

 

Intangibles, net

 

11,643,834

 

 

8,861,150

 

Note 2

 

20,504,984

 

Other noncurrent assets

 

46,066

 

 

 

 

 

46,066

 

Total assets

 

$

23,383,510

 

$

1,486,117

 

$

7,359,936

 

 

 

$

32,229,563

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

372,319

 

$

9,750

 

$

 

 

 

$

382,069

 

Current portion of note payable to related party

 

310,559

 

 

 

 

 

310,559

 

Other current liabilities

 

3,315,592

 

163,177

 

919,088

 

Note 2

 

4,397,857

 

Total current liabilities

 

3,998,470

 

172,927

 

919,088

 

 

 

5,090,485

 

Deferred tax liabilities

 

971,487

 

 

 

 

 

Note 2

 

971,487

 

Note payable to related party, net of current portion

 

444,490

 

 

 

 

 

 

 

444,490

 

Total liabilities

 

4,442,960

 

172,927

 

1,890,575

 

 

 

6,506,462

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

15,213

 

873,163

 

(873,163

)

Note 3

 

15,213

 

Additional paid-in capital

 

78,618,401

 

6,782,551

 

 

 

Note 5

 

85,400,952

 

Deferred stock compensation

 

(14,154

)

 

(14,154

)

 

 

 

 

Stockholder notes receivable

 

 

(329,490

)

329,490

 

Note 3

 

 

Accumulated other comprehensive loss

 

(64,106

)

 

 

 

 

 

(64,106

)

Treasury stock

 

 

(1,200,000

)

1,200,000

 

Note 3

 

 

Retained earnings (deficit)

 

(59,614,804

)

1,969,517

 

(1,969,517

)

Note 3

 

(59,614,804

)

Total stockholders' equity

 

18,940,550

 

1,313,190

 

5,469,361

 

 

 

25,723,101

 

Total liabilities and stockholders' equity

 

$

23,383,510

 

$

1,486,117

 

$

7,359,936

 

 

 

$

32,229,563

 

 

The accompanying notes are an integral part of these pro forma condensed combined financial statements.

 

PF-3



 

PERFICIENT, INC.

 

PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

For the three months ended March 31, 2004

 

 

 

Perficient

 

Genisys

 

Pro Forma
Adjustments

 

Pro Forma
Combined

 

Revenue

 

 

 

 

 

 

 

 

 

Services

 

$

6,663,786

 

$

2,656,359

 

$

 

$

9,320,145

 

Software

 

1,330,476

 

 

 

1,330,476

 

Reimbursed expenses

 

378,165

 

23,288

 

 

401,453

 

Total revenue

 

8,372,427

 

2,679,647

 

 

11,052,074

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

 

 

 

 

 

 

 

Project personnel costs

 

3,695,143

 

1,784,907

 

 

5,480,050

 

Software costs

 

1,153,353

 

 

 

1,153,353

 

Reimbursable expenses

 

378,165

 

12,010

 

 

390,175

 

Other project related costs

 

110,273

 

 

 

110,273

 

Cost of revenue

 

5,336,934

 

1,796,917

 

 

7,133,851

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

3,035,493

 

882,730

 

 

3,918,223

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

1,840,203

 

636,939

 

 

2,477,142

 

Stock compensation

 

12,468

 

 

 

12,468

 

Depreciation

 

101,122

 

10,336

 

 

111,458

 

Intangibles amortization

 

50,001

 

 

51,875

   Note 2

101,876

 

Income (loss) from operations

 

1,031,699

 

235,455

 

(51,875

)

1,215,279

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

(14,273

)

9,213

 

 

(5,060

)

Other income

 

2,092

 

924

 

 

3,016

 

Income (loss) before income taxes

 

1,019,518

 

245,592

 

(51,875

)

1,213,235

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

399,000

 

 

73,749

   Note 2

474,743

 

Net income (loss)

 

$

620,518

 

$

245,592

 

$

(125,624

)

$

738,492

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

 

 

$

(0.25

)

$

0.05

 

Diluted

 

$

0.04

 

 

 

$

(0.07

)

$

0.04

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

14,500,158

 

 

 

509,925

 

15,010,083

 

Diluted

 

17,634,229

 

 

 

1,687,439

 

19,321,668

 

 

The accompanying notes are an integral part of these pro forma condensed combined financial statements.

 

PF-4



 

PERFICIENT, INC.

 

PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

For the year ended December 31, 2003

 

 

 

Perficient

 

Genisys

 

Pro Forma
Adjustments

 

Pro Forma
Combined

 

Revenue

 

 

 

 

 

 

 

 

 

Services

 

$

24,534,617

 

$

9,520,474

 

$

 

$

34,055,091

 

Software

 

3,786,864

 

 

 

3,786,864

 

Reimbursed expenses

 

1,870,441

 

42,032

 

 

1,912,473

 

Total revenue

 

30,191,922

 

9,562,506

 

 

39,754,428

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

 

 

 

 

 

 

 

Project personnel costs

 

13,411,762

 

5,521,638

 

18,933,400

 

 

 

Software costs

 

3,080,894

 

 

 

3,080,894

 

Reimbursable expenses

 

1,870,441

 

45,690

 

 

1,916,131

 

Other project related costs

 

453,412

 

 

 

453,412

 

Cost of revenue

 

18,816,509

 

5,567,328

 

 

24,383,837

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

11,375,413

 

3,995,178

 

 

15,370,591

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

7,857,081

 

2,842,410

 

 

10,699,491

 

Stock compensation

 

135,927

 

 

 

135,927

 

Depreciation

 

670,436

 

43,685

 

 

714,121

 

Intangibles amortization

 

610,421

 

 

407,500

   Note 2

1,017,921

 

Income (loss) from operations

 

2,101,548

 

1,109,083

 

(407,500

)

2,803,131

 

 

 

 

 

 

 

 

 

 

 

Acquisition related expenses

 

 

 

 

 

 

Interest income (expense)

 

(282,652

)

(3,755

)

 

(286,407

)

Other income (expense)

 

(13,459

)

1,468

 

 

(11,991

)

Income (loss) before income taxes

 

1,805,437

 

1,106,796

 

(407,500

)

2,504,733

 

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

755,405

 

 

294,723

   Note 2

1,050,128

 

Net income (loss)

 

$

1,050,032

 

$

1,106,796

 

$

(702,223

)

$

1,454,605

 

 

 

 

 

 

 

 

 

 

 

Accretion of dividends on preferred stock

 

(157,632

)

 

 

 

(157,632

)

Net income available to common stockholders

 

$

892,400

 

$

1,106,796

 

$

(702,223

)

$

1,296,973

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.08

 

 

 

$

(1.38

)

$

0.11

 

Diluted

 

$

0.07

 

 

 

$

(0.42

)

$

0.09

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing net income per share: income per share:

 

 

 

 

 

 

 

 

 

Basic

 

10,818,417

 

 

 

509,925

 

11,328,342

 

Diluted

 

15,306,151

 

 

 

1,687,439

 

16,993,590

 

 

The accompanying notes are an integral part of these pro forma consolidated financial statements.

 

PF-5



 

PERFICIENT, INC.

 

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

Note 1 — General

 

The Company has recorded total consideration of approximately $8.4 million, including approximately $0.5 million in transaction costs for the Genisys Consulting, Inc. acquisition. This consideration has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed according to their respective fair values, with the excess purchase consideration being allocated to goodwill at the closing of the transaction. The acquisition was completed on April 2, 2004.

 

The following table shows the components of total consideration:

 

The consideration paid is as follows:

 

 

 

Cash

 

$

1,501,214

 

Common stock

 

6,369,545

 

Issuance of stock options in exchange for common stock of Genisys

 

413,006

 

Acquisition costs

 

522,304

 

 

 

 

 

Total consideration

 

$

8,806,069

 

 

In accordance with SFAS 141, Business Combinations, the total purchase consideration of approximately $8.4 million, including transaction costs of approximately  $0.5 million, has been allocated to the assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective fair values at the date of acquisition. Such allocation resulted in goodwill of approximately $6.0 million. Goodwill is not expected to be deductible for income tax purposes.

 

PF-6



 

Note 2 — Pro Forma Adjustments

 

The following unaudited condensed consolidated balance sheet data presents the fair value of the assets acquired and liabilities assumed. The allocation of the purchase price is based on a comprehensive evaluation of tangible and intangible assets acquired and liabilities assumed. The fair values of the intangible assets acquired are based on an independent appraisal. The excess of purchase price over the fair value of net assets acquired reflects the benefits from expansion of the Company’s existing line of business and expected benefits resulting from consolidation and economies of scale. Such balance sheet information includes accruals related to employee severance, relocation and exit costs, as estimated on the date of acquisition:

 

 

Customer Relationships (8 year useful life)

 

$

1,100,000

 

Non-Compete (5 year useful life)

 

350,000

 

Backlog (9 month useful life)

 

200,000

 

Total intangible assets

 

1,650,000

 

Goodwill

 

7,421,325

 

Total intangible assets acquired

 

9,074,325

 

 

 

 

 

Less fair value of liabilities in excess of net intangible assets acquired

 

(268,256

)

 

 

 

 

Net assets acquired

 

$

8,806,069

 

 

Based on an independent appraisal, the Company believes that the intangible assets acquired from Genisys Consulting, Inc. have useful lives of nine months to eight years. In addition, the Company intends to continue to expand the combined company’s existing lines of business, and take advantage of synergies that exist between the Company and Genisys Consulting to further strengthen existing lines of business. The Company believes that it will benefit from the acquisition for a period of at least eight years and, therefore, considers the amortization periods appropriate. Using this information, the Company has made an allocation of the purchase consideration, including allocation to tangible assets and liabilities, identifiable intangible assets and goodwill.

 

The preceding unaudited pro forma condensed combined financial statements do not include any pro forma adjustments for the following:

 

                  Any operating efficiencies and cost savings that may be achieved with respect to the combined companies.

 

                  Upon closing of the acquisition, the combined companies may incur integration-related expenses as a result of the elimination of duplicate facilities and functions, operational realignment and related workforce reductions. Such Genisys Consulting costs would generally be recognized as a liability assumed as of the acquisition date, resulting in additional goodwill, while the Company’s related costs would be recognized as an expense through the statements of operations.

 

PF-7



 

 Note 3 — To record elimination of Genisys stockholders’ equity.

 

 Note 4 — Amortization of acquired intangibles based on the estimated economic life as outlined in Note 2 above, and pro forma tax expense that is attributable to net income of Genisys at the Company’s effective tax rate of 41.8% and 39.1% for the year ended December 31, 2003, and for the three month period ended March 31, 2004, respectively.

 

Note 5 — Issuance of 1,687,439 shares of common stock in conjunction with the merger.

 

PF-8