UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K/A
Amendment
No. 2
(Mark
one)
|
x
|
Annual
report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934 for the fiscal year ended December 31,
2006
|
|
o
|
Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
|
Commission
file number 001-15169
PERFICIENT,
INC.
(Exact
Name of Registrant as Specified in Its Charter)
(State
or other jurisdiction
of
incorporation
or organization)
|
No.
74-2853258
(I.R.S.
Employer Identification No.)
|
1120
South Capital of Texas Highway, Building 3, Suite 220
Austin,
Texas 78746
(Address
of principal executive offices)
(512)
531-6000
(Registrant's
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the
Act:
Common
Stock, $0.001 par value
(Title
of
Class)
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act. Yes o No þ
Indicate
by check mark if the registrant is not required to file reports pursuant
to
Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes þ No o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (Sec.229.405 of this chapter) is not contained herein, and
will
not be contained, to the best of registrant's knowledge, in definitive proxy
or
information statements incorporated by reference in Part III of this Form
10-K
or any amendment to this Form 10-K. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.
Large
accelerated
filer
o
|
Accelerated
filerþ
|
Non-accelerated
filer
o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes
o Noþ
The
aggregate market value of the voting stock held by non-affiliates of the
Company
was approximately $275.5 million on June 30, 2006 based on the last
reported sale price of the Company's common stock on the NASDAQ National
Market
on June 30, 2006.
As
of
February 26, 2007, there were 27,288,210 shares of Common Stock
outstanding.
Portions
of the definitive proxy statement in connection with the 2007 Annual Meeting
of
Stockholders, which will be filed with the Securities and Exchange Commission
no
later than April 30, 2007, are incorporated by reference in Part III of this
Form 10-K.
Perficient,
Inc.
Form
10-K/A
Introductory
Note
This
Amendment No. 2 to annual report on Form 10-K/A (“Form 10-K/A”) is
being filed to amend our annual report on Form 10-K for the year ended December
31, 2006, which was originally filed on March 5, 2007 and amended on March
7,
2007 (Original Form 10-K). Accordingly, pursuant to rule 12b-15 under the
Securities Exchange Act of 1934, as amended, this Form 10-K/A contains the
complete text of Items 7, 8 and 9A of Part II, Item 5 of Part IV and currently
dated certificates are included as exhibits. Unaffected items have not been
repeated in this Amendment No. 2.
In
August
2007, it was determined that certain previously reported payments associated
with our business acquisitions were incorrectly included as a component of
cash
flows provided by operating activities in the Company’s Consolidated Statements
of Cash Flows. As a result, we have restated our Consolidated Statement of
Cash
Flows for the years ended December 31, 2006 and 2005 to reclassify such payments
from cash flows provided by operating activities to cash flows used in investing
activities. We have also revised our Notes to Consolidated Financial Statements
as necessary to reflect the adjustments.
The
restatement adjustments had no impact on the previously issued Consolidated
Balance Sheets, Consolidated Statements of Income and Consolidated Statements
of
Stockholders' Equity.
This
amendment does not reflect events
occurring after the filing of the Original Form 10-K, and does not modify
or
update the disclosures therein in any way other than as required to reflect
the
adjustments described above. Such events include among others, the events
described in our quarterly report on Form 10-Q for the quarter ended March
31,
2007, the quarterly report on Form 10-Q for the quarter and year-to-date
period
ended June 30, 2007, and the events described in our current reports on Form
8-K
filed after the filing of the original Form 10-K. We will file with the
Securities and Exchange Commission an amendment to our quarterly report on
Form
10-Q for the quarter ended March 31, 2007 to reflect changes therein required
as
a consequence of the adjustments described above.
TABLE
OF CONTENTS
PART II
|
Item
7.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
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1
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Item
8.
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Financial
Statements and Supplementary Data.
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11
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Item
9A.
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Controls
and Procedures.
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35
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|
|
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PART
IV
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Item
15.
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Exhibits
and Financial Statement Schedules.
|
38
|
|
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Signatures
|
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39
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
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You
should read the following summary together with the more detailed business
information and consolidated financial statements and related notes that
appear
elsewhere in this annual report and in the documents that we incorporate
by
reference into this annual report. This annual report may contain certain
“forward-looking” information within the meaning of the Private Securities
Litigation Reform Act of 1995. This information involves risks and
uncertainties. Our actual results may differ materially from the results
discussed in the forward-looking statements. Factors that might cause such
a
difference include, but are not limited to, those discussed in “Risk
Factors.”
Overview
We
are an
information technology consulting firm serving Global 2000 and large enterprise
companies throughout the United States and Canada. We help clients gain
competitive advantage by using Internet-based technologies to make their
businesses more responsive to market opportunities and threats, strengthen
relationships with customers, suppliers and partners, improve productivity
and
reduce information technology costs. Our solutions enable these benefits
by
integrating, automating and extending business processes, technology
infrastructure and software applications end-to-end within an organization
and
with key partners, suppliers and customers. This provides real-time access
to
critical business applications and information and a scalable, reliable,
secure
and cost-effective technology infrastructure.
Services
Revenues
Services
revenues are derived from professional services performed developing,
implementing, integrating, automating and extending business processes, and
technology infrastructure and software applications. Most of our projects
are
performed on a time and materials basis, and a smaller amount of revenues
is
derived from projects performed on a fixed fee basis. Fixed fee engagements
represented approximately 9% of our services revenues for the year ended
December 31, 2006. For time and material projects, revenues is recognized
and
billed by multiplying the number of hours our professionals expend in the
performance of the project by the established billing rates. For fixed fee
projects, revenues are generally recognized using the proportionate performance
method. Revenues on uncompleted projects are recognized on a
contract-by-contract basis in the period in which the portion of the fixed
fee
is complete. Amounts invoiced to clients in excess of revenues recognized
are
classified as deferred revenues. The Company's average bill rates increased
slightly in 2006. The Company is anticipating modest additional increases
in
2007. On most projects, we are also reimbursed for out-of-pocket expenses
such
as airfare, lodging and meals. These reimbursements are included as a component
of revenues. The aggregate amount of reimbursed expenses will fluctuate
depending on the location of our customers, the total number of our projects
that require travel, and whether our arrangements with our clients provide
for
the reimbursement of travel and other project related expenses.
Software
Revenues
Software
revenues are derived from sales of third-party software. Revenues from sales
of
third-party software are recorded on a gross basis provided we act as a
principal in the transaction. In the event we do not meet the requirements
to be
considered a principal in the software sale transaction and act as an agent,
the
revenues are recorded on a net basis. Software revenues are expected to
fluctuate from quarter-to-quarter depending on our customers' demand for
software products.
Cost
of revenues
Cost
of
revenues consists primarily of cash and non-cash compensation and benefits
associated with our technology professionals and subcontractors. Non-cash
compensation includes stock compensation expenses arising from restricted
stock
and option grants to employees. Cost of revenues also includes third-party
software costs, reimbursable expenses and other unreimbursed project related
expenses. Project related expenses will fluctuate generally depending on
outside
factors including the cost and frequency of travel and the location of our
customers. Cost of revenues does not include depreciation of assets used
in the
production of revenues.
Gross
Margins
Our
gross
margins for services are affected by the utilization rates of our professionals,
defined as the percentage of our professionals' time billed to customers
divided
by the total available hours in the respective period, the salaries we pay
our
consulting professionals and the average billing rate we receive from our
customers. If a project ends earlier than scheduled or we retain professionals
in advance of receiving project assignments, or if demand for our services
declines, our utilization rate will decline and adversely affect our gross
margins. Subject to fluctuations resulting from our acquisitions, we expect
these key metrics of our services business to remain relatively constant
for the
foreseeable future assuming there are no further declines in the demand for
information technology software and services. Gross margin percentages of
third
party software sales are typically lower than gross margin percentages for
services and the mix of services and software for a particular period can
significantly impact total combined gross margin percentage for such period.
In
addition, gross margin for software sales can fluctuate due to pricing and
other
competitive pressures.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses (“SG&A”) consist of salaries, bonuses,
non-cash compensation, office costs, recruiting, professional fees, sales
and
marketing activities, training, and other miscellaneous expenses. Non-cash
compensation includes stock compensation expenses related to restricted stock
and option grants to employees and non-employee directors. We work to minimize
selling costs by focusing on repeat business with existing customers and
by
accessing sales leads generated by our software business partners, most notably
IBM, whose products we use to design and implement solutions for our clients.
These partnerships enable us to reduce our selling costs and sales cycle
times
and increase win rates through leveraging our partners' marketing efforts
and
endorsements. A substantial portion of our SG&A costs are relatively fixed.
As a result, we expect SG&A costs as a percentage of revenue to decline as
we continue to increase revenues in 2007.
Plans
for Growth and Acquisitions
Our
goal
is to continue to build one of the leading independent information technology
consulting firms in North America by expanding our relationships with existing
and new clients, leveraging our operations to expand nationally and continuing
to make disciplined acquisitions. We believe the United States represents
an
attractive market for growth, primarily through acquisitions. As demand for
our
services grows, we believe we will attempt to increase the number of
professionals in our 15 North American offices and to add new offices throughout
the United States, both organically and through acquisitions. In addition,
we
believe our track record for identifying acquisitions and our ability to
integrate acquired businesses helps us complete acquisitions efficiently
and
productively, while continuing to offer quality services to our clients,
including new clients resulting from the acquisitions.
Consistent
with our strategy of growth through disciplined acquisitions, we consummated
six
acquisitions since January 1, 2005, including one in February
2007.
Results
of Operations
The
following table summarizes our results of operations as a percentage of total
revenues:
Revenues:
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Services
revenues
|
|
|
85.6 |
% |
|
|
86.3 |
% |
|
|
73.6 |
% |
Software
revenues
|
|
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9.0
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|
|
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9.7
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|
|
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22.4
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Reimbursed
expenses
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|
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5.4
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|
|
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4.0
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|
|
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4.0
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|
Total
revenues
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
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|
Cost
of revenues (exclusive of depreciation and amortization, shown
separately
below):
|
|
|
|
|
|
|
|
|
|
|
|
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Project
personnel costs
|
|
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52.3
|
|
|
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52.7
|
|
|
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44.3
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|
Software
costs
|
|
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7.5
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|
|
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8.0
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|
|
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19.3
|
|
Reimbursable
expenses
|
|
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5.4
|
|
|
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4.0
|
|
|
|
4.0
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|
Other
project related expenses
|
|
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1.3
|
|
|
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1.9
|
|
|
|
0.5
|
|
Total
cost of revenues
|
|
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66.5
|
|
|
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66.6
|
|
|
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68.1
|
|
Services
gross margin
|
|
|
37.4
|
|
|
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36.7
|
|
|
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39.2
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|
Software
gross margin
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|
|
16.1
|
|
|
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17.8
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|
|
|
13.9
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|
Total
gross margin
|
|
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35.3
|
|
|
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34.8
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|
|
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33.3
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|
Selling,
general and administrative
|
|
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20.1
|
|
|
|
18.5
|
|
|
|
18.8
|
|
Depreciation
and amortization
|
|
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2.7
|
|
|
|
2.3
|
|
|
|
2.1
|
|
Income
from operations
|
|
|
10.7
|
|
|
|
12.6
|
|
|
|
11.0
|
|
Interest
expense, net
|
|
|
(0.2 |
) |
|
|
(0.7 |
) |
|
|
(0.2 |
) |
Income
before income taxes
|
|
|
10.5
|
|
|
|
11.9
|
|
|
|
10.8
|
|
Provision
for income taxes
|
|
|
4.5
|
|
|
|
4.6
|
|
|
|
4.3
|
|
Net
income
|
|
|
6.0 |
% |
|
|
7.3 |
% |
|
|
6.5 |
% |
Year
Ended December 31, 2006 Compared to Year Ended December 31,
2005
Revenues.
Total revenues increased 66% to $160.9 million for the year ended December
31,
2006 from $97.0 million for the year ended December 31, 2005. Services revenues
increased 65% to $137.7 million in 2006 from $83.7 million in 2005. These
increases were attributable to increased demand for the Company's services
and
to the acquisitions of Bay Street Solutions Inc. (“Bay Street”), Insolexen Corp.
(“Insolexen”), and the Energy, Government and General Business (“EGG”) division
of Digital Consulting & Software Services, Inc. in 2006 and the full year
impact of the acquisitions of iPath and Vivare in 2005. Services revenue
increased 23% due to organic services revenue growth for the year ended December
31, 2006 compared to 14% for the year ended December 31, 2005. The Company
calculates organic services revenue growth by measuring the trailing four
quarters sequential quarterly services revenue growth for businesses that
have
been owned for at least two quarters.
Additionally,
the increase in services revenues resulted from increases in the number of
projects. The average utilization rate of our professionals, excluding
subcontractors, remained consistent at 83% for the years ended December 31,
2006
and 2005. The Company believes utilization rates will be similar in 2007.
Software revenues increased 54% to $14.4 million in 2006 from $9.4 million
in
2004 mainly due to acquisitions and corresponding services revenue growth.
Reimbursable expenses increased 127% to $8.8 million in 2006 from $3.9 million
in 2005 due to acquisitions and an increased number of projects requiring
consultant travel. We do not realize any profit on reimbursable
expenses.
Cost
of revenues. Cost of revenues increased 66% to $107.2 million for the year
ended December 31, 2006 from $64.6 million for the year ended December 31,
2005.
The increase in cost of revenues is attributable to an increase in the number
of
professionals as a result of organic growth in addition to the acquisitions
of
Bay Street, Insolexen, and EGG, an increase in bonus costs associated with
strong operating performance, and stock compensation expense. The average
number
of professionals performing services, including subcontractors, increased
to 686
for the year ended December 31, 2006 from 431 for the year ended December
31,
2005. Stock compensation expense included in cost of revenues for the year
ended
December 31, 2006 was nearly $1 million. No stock compensation expense was
recognized in cost of revenues prior to January 1, 2006. The increase in
stock
compensation expense is the result of our adoption of Statement of Financial
Accounting Standards No. 123 (revised) (“SFAS 123R”), Share Based
Payment, on January 1, 2006. Costs associated with software
sales increased 57% to $12.1 million in 2006 from $7.7 million in 2005 in
connection with the increased software revenues in 2006 compared to
2005.
Gross
Margin. Gross margin increased 66% to $53.8 million for the year ended
December 31, 2006 from $32.4 million for the year ended December 31, 2005.
Gross
margin as a percentage of revenues remained consistent at 33.4% for the years
ended December 31, 2006 and 2005. Services gross margin increased to 37.4%
in
2006 from 36.7% in 2005 primarily due to an increase in
average billing rates and improved project pricing. This increase was partially
offset by $1 million of non-cash stock compensation expense recognized in
cost
of revenues during the year ended December 31, 2006, as discussed above.
Excluding stock compensation expense, gross margin increased to 34% for the
year
ended December 31, 2006 from 33% for the year ended December 31, 2005. Software
gross margin decreased to 16.1% in 2006 from 17.7% in 2005 primarily as a
result
of fluctuations in selling prices to customers due to fluctuations in vendor
pricing based on market conditions at the time of the sales.
Selling,
General and Administrative. Selling, general and administrative expenses
increased 80% to $32.3 million for the year ended December 31, 2006 from
$17.9
million for the year ended December 31, 2005 due primarily to an increase
in
bonus costs associated with strong operating performance of $3.5 million.
We
also experienced increases in sales related costs of $3.2 million, management
personnel, support personnel and facilities related to our investment in
our
infrastructure, including improvements related to Sarbanes-Oxley of $2.3
million. The acquisitions of Bay Street, Insolexen, and EGG during 2006 also
contributed to the increase. Stock compensation expense included in selling,
general and administrative expenses for the year ended December 31, 2006
was
$2.1 million compared to $264,000 for the year ended December 31, 2005. The
increase in stock compensation expense is the result of our adoption of SFAS
123R on January 1, 2006. Selling, general and administrative expenses as
a
percentage of revenues, excluding stock compensation, increased to 19% for
the
year ended December 31, 2006 from 18% for the year ended December 31, 2005
due
primarily to higher bonus and recruiting, partially offset by lower office
costs, salaries, and professional fees. Stock compensation expense, as a
percentage of services revenues, increased to 1.6% for the year ended December
31, 2006 compared to 0.3% for the year ended December 31,
2005.
Depreciation. Depreciation expense increased 54% to $948,000 during 2006
from approximately $615,000 during 2005. The increase in depreciation expense
is
due to the addition of software programs, servers, and other computer equipment
to enhance our technology infrastructure and support our growth, both organic
and acquisition-related. Depreciation expense as a percentage of total revenues
was 0.6% for the years ended December 31, 2006 and 2005.
Intangibles
Amortization. Intangibles amortization expenses increased 115% to $3.5
million for the year ended December 31, 2006 from approximately $1.6 million
for
the year ended December 31, 2005. The increase in amortization expense reflects
the acquisition of intangibles acquired from Bay Street, Insolexen, and EGG
and
full year amortization of intangible assets acquired for iPath and
Vivare.
Interest
Expense. Interest expense decreased 23% to $509,000 for the year ended
December 31, 2006 compared to approximately $658,000 during the year ended
December 31, 2005. This decrease is primarily due to a lower average amount
of
debt outstanding during 2006 compared to 2005. As of December 31, 2006, there
was approximately $1.3 million outstanding on the acquisition line of credit
and
no amounts outstanding on the accounts receivable line of credit. Our
outstanding borrowings on the acquisition line of credit had an average interest
rate of 7.0% for the year ended December 31, 2006 while the average interest
rate on our accounts receivable line of credit borrowings for the year ended
December 31, 2006 was 7.96%. During 2006, we drew down $34.9 million on the
accounts receivable line of credit and repaid $38.9 million.
Provision
for Income Taxes. We accrue a provision for federal, state and foreign
income tax at the applicable statutory rates adjusted for non-deductible
expenses. Our effective tax rate increased to 43.2% for the year ended December
31, 2006 from 38.5% for the year ended December 31, 2005 as a result of
non-deductible stock compensation related to incentive stock options included
in
our statement of operations in 2006 as a result of the adoption of SFAS 123R
on
January 1, 2006 and certain non-deductible compensation required by Section
162(m) of the Internal Revenue Code, which imposes a limitation on the
deductibility of certain compensation in excess of $1 million paid to covered
employees .
Year
Ended December 31, 2005 Compared to Year Ended December 31,
2004
Revenues.
Total revenues increased 65% to $97.0 million for the year ended December
31,
2005 from $58.8 million for the year ended December 31, 2004. Services revenues
increased 93% to $83.7 million in 2005 from $43.3 million in 2004. These
increases were attributable to increased demand for the Company's services
and
to the acquisitions of iPath Solutions, Ltd. (“iPath”) and Vivare, LP (“Vivare”)
in 2005 and the full year impact of the acquisitions of Genisys Consulting,
Inc.
(“Genisys”), Meritage Technologies, Inc. (“Meritage”) and ZettaWorks LLC
(“Zettaworks”) in 2004.
Additionally,
the increase in services revenues resulted from increases in average project
size and quantity of projects. The average utilization rate of our
professionals, excluding subcontractors, remained relatively stable at 83%
for
the year ended December 31, 2005. For the years ended December 31, 2005 and
2004, 9% and 17%, respectively, of our revenues was derived from sales to
IBM.
While the dollar amount of revenues from IBM has remained relatively constant
over the past two years, the percentage of total revenues from IBM has decreased
as a result of the Company's growth and corresponding customer diversification.
Software revenues decreased 29% to $9.4 million in 2005 from $13.2 million
in
2004 due to lower client demand in the fourth quarter of 2005 compared to
2004.
Software revenues are generated from the sale of third party software except
for
approximately $282,000 from the sale of internally developed software recognized
in 2005. Reimbursable expenses increased 65% to $3.9 million in 2005 from
$2.3
million in 2004.
Cost
of revenues. Cost of revenues increased 61% to $64.6 million for the year
ended December 31, 2005 from $40.0 million for the year ended December 31,
2004.
The increase in cost of revenues is attributable to an increase in the number
of
professionals due to hiring and the acquisitions of ZettaWorks, iPath, and
Vivare. The average number of professionals performing services, including
subcontractors, increased to 431 for the year ended December 31, 2005 from
220
for the year ended December 31, 2004. In addition, the Company changed its
internal policy for the carry-over of billable employee's accrued vacation
hours
which we had allowed as of December 31, 2004, but discontinued this policy
and
allowed no more vacation hour carry-overs as of December 31, 2005. As a result,
the Company had approximately $237,000 of billable employee's accrued vacation
expense as of December 31, 2004 which was forfeited during 2005. Costs
associated with software sales decreased 32% to $7.7 million in 2005 from
$11.3
million in 2004 in connection with the decreased software revenues in 2005
compared to 2004.
Gross
Margin. Gross margin increased 72% to $32.4 million for the year ended
December 31, 2005 from $18.8 million for the year ended December 31, 2004.
Gross
margin as a percentage of total revenues increased to 33.4% in 2005 from
32.0%
in 2004. The increase in gross margin as a percentage of total revenues is
due
to a mix of improved software margins off-set by lower services margins.
Services gross margin decreased slightly to 36.7% in 2005 from 39.2% in 2004
primarily due to lower gross margins on consulting services contracts acquired
in the acquisitions of ZettaWorks and iPath. These businesses are national
practices rather than local practices and, as a result, they incur a greater
amount of unreimbursed travel expenses for delivery of services outside of
their
local geographic market. Unreimbursed expenses negatively impact our services
gross margins. Services gross margins have also been impacted by the acquisition
of Vivare which has slightly lower services gross margins than our historical
average. Software gross margin increased to 17.7% in 2005 from 13.9% in 2004
primarily as a result of fluctuations in selling prices to customers based
on
fluctuations in vendor pricing based on market conditions at the time of
the
sales and from the sale of internally developed software representing software
revenues of approximately $282,000 for which there was no associated cost
of
revenues.
Selling,
General and Administrative. Selling, general and administrative expenses
increased 62% to $17.9 million for the year ended December 31, 2005 from
$11.1
million for the year ended December 31, 2004 due primarily to increases in
the
cost of compliance with the Sarbanes-Oxley Act of 2002, professional service
fees associated with external audits, and additions of sales personnel,
management personnel, support personnel and facilities related to the
acquisitions of iPath and Vivare in 2005 and the full year impact of the
acquisitions of Genisys, Meritage and Zettaworks in 2004. However, selling,
general and administrative expenses as a percentage of total revenues decreased
to 18.5% for the year ended December 31, 2005 from 18.8% for the year ended
December 31, 2004. The decrease in selling, general and administrative expenses
as a percentage of services revenues is the result of operational efficiencies
and economies of scale as the Company has grown. However, these cost
efficiencies have been off-set by the cost of compliance with the Sarbanes-Oxley
Act of 2002 and regular external audit costs which resulted in total costs
to
the Company during 2005 of approximately $837,000 compared to approximately
$145,000 in 2004. In addition, the Company changed its internal policy for
the
carry-over of selling, general and administrative employee's accrued vacation
hours which we had allowed as of December 31, 2004, but discontinued this
policy
and allowed no more vacation hour carry-overs as of December 31, 2005. As
a
result, the Company had approximately $48,000 of selling, general and
administrative employee's accrued vacation expense as of December 31, 2004
which
was forfeited during 2005. Also, during 2005, the Company reduced its allowance
for doubtful accounts by approximately $104,000 as a result of improved
collections on accounts receivable. Finally, during 2005, the Company realized
approximately $300,000 in reduced organizational meeting expenses as compared
to
2004.
Depreciation.
Depreciation expense increased 20% to approximately $615,000 during 2005
from
approximately $512,000 during 2004. The increase is due to a general increase
in
purchases of fixed assets to accommodate growth.
Intangibles
Amortization. Intangibles amortization expenses, arising from acquisitions,
increased 131% to approximately $1.6 million for the year ended December
31,
2005 from approximately $0.7 million for the year ended December 31, 2004.
The
increase in amortization expense is the result of increased acquisition
activity.
Interest
Expense. Interest expense increased 380% to approximately $659,000 for the
year ended December 31, 2005 compared to approximately $137,000 during the
year
ended December 31, 2004. This increase in interest expense is due to the
interest expense related to the acquisition line of credit which was drawn
down
in connection with the acquisitions of Meritage in June 2004 and ZettaWorks
in
December 2004, and on draws on the accounts receivable line of credit in
connection with the acquisitions of iPath and Vivare. As of December 31,
2005,
there was approximately $2.7 million outstanding on the acquisition line
of
credit and approximately $4.0 million outstanding on the accounts receivable
line of credit. During 2005, we drew down $12 million on the accounts receivable
line of credit and repaid $8 million.
Provision
for Income Taxes. We accrue a provision for federal, state and foreign
income tax at the applicable statutory rates adjusted for non-deductible
expenses. Our effective tax rate decreased slightly to 38.5% for the year
ended
December 31, 2005 from 39.2% for the year ended December 31, 2004 as a result
of
a decrease in certain non-deductible expenses. We had deferred tax assets
resulting from net operating and capital losses of acquired companies amounting
to approximately $2.8 million for which we had a valuation allowance of
approximately $2.3 million. We had additional deferred tax assets of
approximately $0.4 million from temporary differences between book and tax
valuations. These combined deferred tax assets of $0.9 million were off-set
by
deferred tax liabilities of $0.7 million related to identifiable intangibles,
goodwill, and cash to accrual adjustments. Any reversal of the valuation
allowance on the deferred tax assets will be adjusted against goodwill and
will
not have an impact on our statement of operations. All of the net operating
and
capital losses relate to acquired entities, and as such are subject to annual
limitations on usage under the “change in control” provisions of the Internal
Revenues Code.
Liquidity
and Capital Resources
In August 2007, it was determined that the Consolidated Statement of Cash
Flows
should be restated to properly reflect certain transactions related to our
business acquisitions that were incorrectly classified as operating cash
flows. As a result of these errors and as more fully discussed in the
Introductory Note to this Amendment No. 2, certain financial and other
information contained herein have been restated to reflect adjustments described
in Note 2 to the accompanying consolidated financial statements. Please
read Note 2 for a discussion of the adjustments. The discussion of
liquidity and capital resources below is based on the restated Consolidated
Statements of Cash Flows.
Selected
measures of liquidity and capital resources are as follows (in
millions):
|
|
As
of December 31,
|
|
|
|
2006
|
|
|
2005
|
|
Cash
and cash equivalents
|
|
$ |
4.5
|
|
|
$ |
5.1
|
|
Working
capital
|
|
|
24.9
|
|
|
|
17.1
|
|
Net
Cash Provided By Operating Activities
We
expect
to fund our operations from cash generated from operations and short-term
borrowings as necessary from our credit facility. We believe that these capital
resources will be sufficient to meet our needs for at least the next twelve
months. Net cash generated by operations for the year ended December 31,
2006
was $13.1 million compared to $9.2 million for the year ended December 31,
2005.
The primary components of operating cash flows for the year ended December
31,
2006 were net income after adding back non-cash expenses of $17.1 million
offset
by increases to accounts receivable of $5.8 million, decreases to accounts
payable of $1.3 million, and decreases to other liabilities of $0.7 million.
The
increase in operating cash flow is due primarily to an increase in non-cash
stock compensation of $2.9 million and intangibles amortization of $1.8
million. The increase in accounts receivable is primarily related to
acquisitions. No significant changes occurred in the average days sales
outstanding.
Net
Cash Used in Investing Activities
For
the
year ended December 31, 2006, we used approximately $17.2 million in cash,
net
of cash acquired, primarily to acquire Bay Street, Insolexen, and EGG. In
addition, we used approximately $1.5 million during 2006 to purchase equipment
fixed assets and used approximately $136,000 for software capitalized for
internal use to expand our information management systems. For the year ended
December 31, 2005, we used approximately $11.2 million in cash, net of cash
acquired, primarily to acquire iPath and Vivare. In addition, during 2005
we
used approximately $691,000 to purchase equipment fixed assets and used
approximately $599,000 for software capitalized for internal use to expand
our
information management systems.
Net
Cash from Financing Activities
Our
financing activities consisted primarily of net payments totaling $4.0 million
on our accounts receivable line of credit and $1.3 million of payments on
long
term debt. During 2006, we received $4.2 million from exercises of stock
options
and warrants and sales of stock through the Company's Employee Stock Purchase
Program. In addition, we realized tax benefits on stock option exercises
of $6.6
million during 2006. Prior to the adoption of Statement of Financial Accounting
Standards No. 123R (As Amended), Share Based
Payment (“SFAS 123R”) in 2006, the tax benefit on stock option
exercises was classified as an activity in operating cash flows.
Availability
of Funds from Bank Line of Credit Facilities
We
have a
$51.3 million credit facility with Silicon Valley Bank and Key Bank
National Association (“Key Bank”) comprising a $25 million accounts
receivable line of credit and a $26.3 million acquisition line of credit.
Borrowings under the accounts receivable line of credit bear interest at
the
bank's prime rate, or 8.25%, as of December 31, 2006. As of
December 31, 2006, there were no amounts outstanding under the accounts
receivable line of credit and $25 million of available borrowing capacity,
excluding $450,000 reserved for two outstanding letters of credit to secure
facility leases. In January 2007, the letters of credit decreased $50,000.
This accounts receivable line of credit matures in June 2008.
Our
$26.3 million term acquisition line of credit with Silicon Valley Bank and
Key Bank provides an additional source of financing for certain qualified
acquisitions. As of December 31, 2006 the balance outstanding under this
acquisition line of credit was $1.3 million. Borrowings under this
acquisition line of credit bear interest equal to the four year U.S. Treasury
note yield plus 3% based on the spot rate on the day the draw is processed
(7.69% at December 31, 2006). Borrowings under this acquisition line are
repayable in thirty-six equal monthly installments, after the initial interest
only period which continues through June 29, 2007. Draws under this acquisition
line may be made through June 29, 2008. We currently have $25 million of
available borrowing capacity under this acquisition line of credit.
As
of
December 31, 2006, we were in compliance with all covenants under our credit
facility and we expect to be in compliance during the next twelve months.
Substantially all of our assets are pledged to secure the credit
facility.
There
were no material changes outside the ordinary course of our business in lease
obligations or other contractual obligations in 2006. We believe that the
current available funds, access to capital from our credit facilities, possible
capital from registered placements of equity through the shelf registration,
and
cash flows generated from operations will be sufficient to meet our working
capital requirements and meet our capital needs to finance acquisitions for
the
next twelve months.
We
have
filed a shelf registration statement with the Securities and Exchange Commission
to allow for offers and sales of our common stock from time to time.
Approximately 5 million shares of common stock may be sold under this
registration statement if we choose to do so.
Contractual
Obligations
In
connection with certain of our acquisitions, we were required to
establish various letters of credit totaling $450,000 to serve as
collateral to secure facility leases. The letters of credit reduce the
borrowings available under our accounts receivable line of credit. In January
2007, the letters of credit decreased $50,000.
In
connection with the acquisition of Javelin, we issued $1.5 million in notes,
which have been fully repaid since April 2006.
We
have
incurred commitments to make future payments under contracts such as leases
and
certain long-term liabilities. Maturities, including estimated interest,
under
these contracts are set forth in the following table as of December 31, 2006
(in
thousands):
|
|
Payments
Due by Period
|
|
Contractual
Obligations
|
|
Total
|
|
|
Less
Than
1
Year
|
|
|
1-3
Years
|
|
|
3-5
Years
|
|
|
More
Than
5
Years
|
|
Long-term
debt obligations, including estimated interest
|
|
$ |
1,390
|
|
|
$ |
1,251
|
|
|
$ |
139
|
|
|
$ |
--
|
|
|
$ |
--
|
|
Operating
lease obligations
|
|
|
4,683
|
|
|
|
1,355
|
|
|
|
2,148
|
|
|
|
1,119
|
|
|
|
61
|
|
Total
|
|
$ |
6,073
|
|
|
$ |
2,606
|
|
|
$ |
2,287
|
|
|
$ |
1,119
|
|
|
$ |
61
|
|
See
Note
10 - "Income Taxes" in Notes to Consolidated Financial Statements for
information related to the Company's obligations for taxes.
If
our
capital is insufficient to fund our activities in either the short or long
term,
we may need to raise additional funds. In the ordinary course of business,
we
may engage in discussions with various persons in connection with additional
financing. If we raise additional funds through the issuance of equity
securities, our existing stockholders' percentage ownership will be diluted.
These equity securities may also have rights superior to our common stock.
Additional debt or equity financing may not be available when needed or on
satisfactory terms. If adequate funds are not available on acceptable terms,
we
may be unable to expand our services, respond to competition, pursue acquisition
opportunities or continue our operations.
Subsequent
Event
On
February 20, 2007, the Company consummated the acquisition of E-Tech
Solutions. The Company paid approximately $12.2 million consisting of
approximately $6.1 million in cash and $6.1 million worth of the Company's
common stock, subject to certain post-closing adjustments. As required, we
will use the closing price of the Company's common stock at or near the close
date in reporting the value of the stock consideration paid in the acquisition,
which was $20.34. The Company issued 306,248 shares of its common stock in
connection with the acquisition.
Critical
Accounting Policies
The
Company's accounting policies are described in Note 3 to the Consolidated
Financial Statements. The Company believes its most critical accounting policies
include revenue recognition, estimating the allowance for doubtful accounts,
accounting for goodwill and intangible assets, purchase accounting allocation,
accounting for stock-based compensation, deferred income taxes and estimating
the related valuation allowances.
Revenue
Recognition and Allowance for Doubtful Accounts
Consulting
revenues are comprised of revenues from professional services fees recognized
primarily on a time and materials basis as performed. For fixed fee engagements,
revenues is recognized using the proportionate performance method based on
the
ratio of hours expended to total estimated hours. Revenues on uncompleted
projects are recognized on a contract-by-contract basis in the period in
which
the portion of the fixed fee is complete. Billings in excess of costs plus
earnings are classified as deferred revenues. Our normal payment terms are
net
30 days. Reimbursements for out-of-pocket expenses are included in gross
revenues. Revenues from the sale of third-party software are recorded on
a gross
basis provided that we act as the principal in the transaction. In the event
we
do not meet the requirements to be considered the principal in the software
sale
transaction, we record the revenues on a net basis. There is no effect on
net
income between recording the software sales on a gross basis versus a net
basis.
Revenues
are recognized when the following criteria are met: (1) persuasive evidence
of the customer arrangement exists, (2) fees are fixed and determinable,
(3) delivery and acceptance has occurred, and (4) collectibility is
deemed probable. We consider a non-cancelable fully executed agreement or
client
purchase order to be persuasive evidence of an arrangement. We consider delivery
to have occurred upon the rendering of services or delivery of software to
the
client. We consider the fee to be fixed or determinable if the fee is not
subject to adjustment, or if we have not granted extended payment terms to
the
client. We consider collection to be probable if our internal credit analysis
indicates that the client will be able to pay amounts as they become due
under
the arrangement.
For
our
sales arrangements that contain multiple revenue elements, such as software
licenses, professional services and software maintenance, we first determine
whether the arrangement is within the scope of Emerging Issues Task Force
("EITF") EITF No. 00-21 ("EITF 00-21"), "Revenue Arrangements with Multiple
Deliverables" or Statement of Position ("SOP") 97-2 ("SOP 97-2"), "Software
Revenue Recognition". Under EITF 00-21, separate contracts to provide services
or for the sale of software to the same client must be evaluated as a multiple
element arrangement if they are entered into in the same time frame. We
recognize revenue on arrangements with multiple deliverables as separate
units
of accounting only if certain criteria are met. In general, a deliverable
meets
the separation criteria if the deliverable has standalone value to the client
and if there is objective and reliable evidence of the fair value of all
remaining undelivered elements in the arrangement. We allocate the total
arrangement consideration to each separate unit of accounting based on the
relative fair value of each separate unit of accounting. The amount of
arrangement consideration that is allocated to a delivered unit of accounting
is
limited to the amount that is not contingent upon the delivery of another
separate unit of accounting. All deliverables of the Company's multiple element
arrangements meet these criteria.
We
follow
very specific and detailed guidelines, discussed above, in determining revenues;
however, certain judgments and estimates are made and used to determine revenues
recognized in any accounting period. Material differences may result in the
amount and timing of revenues recognized for any period if different conditions
were to prevail.
Revenues
from internally developed software are allocated to maintenance and support
and
are recognized ratably over the maintenance term (typically one
year).
Revenues
allocated to training and consulting service elements is recognized as the
services are performed. Our consulting services are not essential to the
functionality of our products as such services are available from other
vendors.
Our
allowance for doubtful accounts is based upon specific identification of
likely
and probable losses. Each accounting period, we evaluate accounts receivable
for
risk associated with a client's inability to make contractual payments or
unresolved issues with the adequacy of our services. Billed and unbilled
receivables that are specifically identified as being at risk are provided
for
with a charge to revenue in the period the risk is identified. We use
considerable judgment in assessing the ultimate realization of these
receivables, including reviewing the financial stability of the client,
evaluating the successful mitigation of service delivery disputes, and gauging
current market conditions. If our evaluation of service delivery issues or
a
client's ability to pay is incorrect, we may incur future reductions to
revenue.
Goodwill,
Other Intangible Assets and Impairment of Long-Lived Assets
Business
acquisitions typically result in goodwill and other intangible assets, and
the
recorded values of those assets may become impaired in the future. The
determination of the value of such intangible assets requires us to make
estimates and assumptions that affect our consolidated financial statements.
The
Company follows Statement of Financial Accounting Standards (“SFAS”) No.
142, Goodwill and Other Intangible Assets. In accordance
with SFAS No. 142, we assess our goodwill on October 1 of each year or more
frequently if events or changes in circumstances indicate that goodwill might
be
impaired. Our judgments regarding the existence of impairment indicators
and
future cash flows related to intangible assets are based on operational
performance of the businesses, market conditions and other factors. Future
events could cause us to conclude that impairment indicators exist and that
goodwill is impaired. Any resulting impairment loss could have an adverse
impact
on our results of operations by decreasing net income. Management assessed
goodwill for impairment at October 1, 2006. This analysis indicated that
there
was no impairment of the carrying values of goodwill.
We
evaluate long-lived tangible assets and intangible assets other than goodwill
in
accordance with SFAS No. 144, Accounting for the Impairment of
Long-Lived Assets. Long-lived assets held and used 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, we compare 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.
Purchase
Price Allocation
We
allocate the purchase price of our acquisitions to the assets and liabilities
acquired, including identifiable intangible assets, based on their respective
fair values at the date of acquisition. Some of the items, including accounts
receivable, property and equipment, other intangible assets, certain accrued
liabilities, and other reserves require a high degree of management judgment.
Certain estimates may change as additional information becomes available.
Goodwill is assigned at the enterprise level and is deductible for tax purposes
for certain types of acquisitions. The purchase price is allocated to
intangibles based on management's estimate and an independent valuation.
Management finalizes the purchase price allocation within twelve months of
the
acquisition date as certain initial accounting estimates are
resolved.
Accounting
for Stock-Based Compensation
We
adopted SFAS No. 123R, Share-Based Payment, on January 1, 2006, using
the modified prospective application transition method. SFAS No. 123R requires
that the costs of employee share-based payments be measured at fair value
on the
awards' grant date and recognized in the financial statements over the requisite
service period.
The
Company estimates the fair value of stock option awards on the date of grant
utilizing a modified Black-Scholes option pricing model. The Black-Scholes
option valuation model was developed for use in estimating the fair value
of
short-term traded options that have no vesting restrictions and are fully
transferable. However, certain assumptions used in the Black-Scholes model,
such
as expected term, can be adjusted to incorporate the unique characteristics
of
the Company's stock option awards. Option valuation models require the input
of
somewhat subjective assumptions including expected stock price volatility
and
expected term. The Company believes it is unlikely that materially different
estimates for the assumptions used in estimating the fair value of stock
options
granted would be made based on the conditions suggested by actual historical
experience and other data available at the time estimates were made. Restricted
stock awards are valued at the price of our common stock on the date of the
grant.
Prior
to
January 1, 2006, the Company accounted for share-based compensation using
the intrinsic value method prescribed by Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees , and
related interpretations and elected the disclosure option of SFAS No. 123
as
amended by SFAS No. 148, Accounting for Stock-Based Compensation
- Transition and Disclosure . SFAS No. 123 required that companies either
recognize compensation expense for grants of stock, stock options and other
equity instruments based on fair value, or provide pro forma disclosure of
net
income and earnings per share in the notes to the financial statements.
Accordingly, the Company measured compensation expense for stock options
as the
excess, if any, of the estimated fair market value of the Company's stock
at the
date of grant over the exercise price. The Company provided pro forma effects
of
this measurement in a footnote to its financial statements.
Income
Taxes
To
record
income tax expense, we are required to estimate our income taxes in each
of the
jurisdictions in which we operate. In addition, income tax expense at interim
reporting dates requires us to estimate our expected effective tax rate for
the
entire year. This involves estimating our actual current tax liability together
with assessing temporary differences that result in deferred tax assets and
liabilities and expected future tax rates.
Management believes that our net deferred tax asset should continue to be
reduced by a valuation allowance to an amount we believe is more likely than
not
to be realized. Future operating results and projections could alter this
conclusion, potentially resulting in an increase or decrease in the valuation
allowance. Since the valuation allowance relates solely to net operating
and
capital losses from acquired companies which are subject to usage limitations,
any decrease in the valuation allowance will be applied first to reduce goodwill
and then to reduce other acquisition related non-current intangible assets
to
zero. Any remaining decrease in the valuation allowance would be recognized
as a
reduction of income tax expense.
Recent
Accounting Pronouncements
In
September 2006, the SEC issued Staff Accounting Bulletin 108 (“SAB 108”), which
expresses the Staff's views regarding the process of quantifying financial
statement misstatements. The bulletin was effective at fiscal year end 2006.
The
implementation of this bulletin had no impact on the Company's results of
operations, cash flows or financial position.
In
September 2006, the FASB issued Statement No. 157, Fair Value
Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a
framework for measuring fair value in GAAP, and expands disclosures about
fair
value measurements. SFAS 157 will be applied prospectively and will be effective
for periods beginning after November 15, 2007. The Company is currently
evaluating the effect, if any, of SFAS 157 on the Company's consolidated
financial statements.
In
June
2006, the FASB issued FASB Interpretation ("FIN") No. 48, Accounting for
Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109
("FIN 48"). FIN 48 prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position
taken
or expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, treatment of interest and penalties, and
disclosure of such positions. FIN 48 will be applied prospectively and will
be
effective for fiscal years beginning after December 31, 2006. The Company
will
adopt the provisions of FIN 48 in the first quarter of 2007 as required.
The
adoption of FIN 48 is not expected to have a material effect on the Company's
consolidated financial statements.
In
June
2006, the EITF ratified EITF Issue 06-3, How Taxes Collected From Customers
and Remitted to Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross versus Net Presentation) . A consensus was
reached that entities may adopt a policy of presenting taxes in the income
statement on either a gross or net basis. An entity should disclose its policy
of presenting taxes and the amount of any taxes presented on a gross basis
should be disclosed, if significant. The guidance is effective for periods
beginning after December 15, 2006. We present revenues net of taxes. EITF
06-3
will not impact the method for recording these sales taxes in our consolidated
financial statements.
Off-Balance
Sheet Arrangements
The
Company currently has no off-balance sheet arrangements, except operating
lease
commitments as disclosed in Footnote 11 to the consolidated financial
statements.
Item
8. Financial Statements and Supplementary
Data.
PERFICIENT,
INC.
CONSOLIDATED
BALANCE SHEETS
AS
OF DECEMBER 31, 2006 AND 2005
|
|
December
31,
|
|
|
|
2006
|
|
|
2005
|
|
ASSETS
|
|
(In
thousands, except share data)
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
4,549
|
|
|
$ |
5,096
|
|
Accounts
receivable, net of allowance for doubtful accounts of $707 in 2006
and
$367 in 2005
|
|
|
38,600
|
|
|
|
23,251
|
|
Prepaid
expenses
|
|
|
1,171
|
|
|
|
887
|
|
Other
current assets
|
|
|
2,799
|
|
|
|
1,530
|
|
Total
current assets
|
|
|
47,119
|
|
|
|
30,764
|
|
Property
and equipment, net
|
|
|
1,806
|
|
|
|
960
|
|
Goodwill
|
|
|
69,170
|
|
|
|
46,263
|
|
Intangible
assets, net
|
|
|
11,886
|
|
|
|
5,768
|
|
Other
non-current assets
|
|
|
1,019
|
|
|
|
1,180
|
|
Total
assets
|
|
$ |
131,000
|
|
|
$ |
84,935
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
5,025
|
|
|
$ |
3,774
|
|
Current
portion of long-term debt
|
|
|
1,201
|
|
|
|
1,337
|
|
Other
current liabilities
|
|
|
16,034
|
|
|
|
8,331
|
|
Note
payable to related parties
|
|
|
--
|
|
|
|
244
|
|
Total
current liabilities
|
|
|
22,260
|
|
|
|
13,686
|
|
Long-term
debt, less current portion
|
|
|
137
|
|
|
|
5,338
|
|
Deferred
income taxes
|
|
|
1,251
|
|
|
|
--
|
|
Total
liabilities
|
|
|
23,648
|
|
|
|
19,024
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (see Note 6 and 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Common
stock ($0.001 par value per share; 50,000,000 shares authorized
and
26,699,974 shares issued and outstanding as of December 31, 2006;
23,294,509 shares issued and outstanding as of December 31, 2005)
|
|
|
27
|
|
|
|
23
|
|
Additional
paid-in capital
|
|
|
147,028
|
|
|
|
115,120
|
|
Accumulated
other comprehensive loss
|
|
|
(125 |
) |
|
|
(87 |
) |
Accumulated
deficit
|
|
|
(39,578 |
) |
|
|
(49,145 |
) |
Total
stockholders' equity
|
|
|
107,352
|
|
|
|
65,911
|
|
Total
liabilities and stockholders' equity
|
|
$ |
131,000
|
|
|
$ |
84,935
|
|
See
accompanying notes to consolidated financial statements.
PERFICIENT, INC.
CONSOLIDATED
STATEMENTS OF INCOME
FOR
THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Revenues
|
|
(In
thousands, except share data)
|
|
Services
|
|
$ |
137,722
|
|
|
$ |
83,740
|
|
|
$ |
43,331
|
|
Software
|
|
|
14,435
|
|
|
|
9,387
|
|
|
|
13,170
|
|
Reimbursable
expenses
|
|
|
8,769
|
|
|
|
3,870
|
|
|
|
2,347
|
|
Total
revenues
|
|
|
160,926
|
|
|
|
96,997
|
|
|
|
58,848
|
|
Cost
of revenues (exclusive of depreciation and amortization, shown
separately
below):
|
|
|
|
|
|
|
|
|
|
|
|
|
Project
personnel costs
|
|
|
84,161
|
|
|
|
51,140
|
|
|
|
26,073
|
|
Software
costs
|
|
|
12,118
|
|
|
|
7,723
|
|
|
|
11,341
|
|
Reimbursable
expenses
|
|
|
8,769
|
|
|
|
3,870
|
|
|
|
2,347
|
|
Other
project related expenses
|
|
|
2,122
|
|
|
|
1,846
|
|
|
|
267
|
|
Total
cost of revenues
|
|
|
107,170
|
|
|
|
64,579
|
|
|
|
40,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
|
53,756
|
|
|
|
32,418
|
|
|
|
18,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
32,268
|
|
|
|
17,917
|
|
|
|
11,068
|
|
Depreciation
|
|
|
948
|
|
|
|
615
|
|
|
|
512
|
|
Amortization
of intangible assets
|
|
|
3,458
|
|
|
|
1,611
|
|
|
|
697
|
|
Income
from operations
|
|
|
17,082
|
|
|
|
12,275
|
|
|
|
6,543
|
|
Interest
income
|
|
|
102
|
|
|
|
15
|
|
|
|
3
|
|
Interest
expense
|
|
|
(509 |
) |
|
|
(658 |
) |
|
|
(137 |
) |
Other
income
|
|
|
174
|
|
|
|
43
|
|
|
|
32
|
|
Income
before income taxes
|
|
|
16,849
|
|
|
|
11,675
|
|
|
|
6,441
|
|
Provision
for income taxes
|
|
|
7,282
|
|
|
|
4,498
|
|
|
|
2,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
9,567
|
|
|
$ |
7,177
|
|
|
$ |
3,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income per share
|
|
$ |
0.38
|
|
|
$ |
0.33
|
|
|
$ |
0.22
|
|
Diluted
net income per share
|
|
$ |
0.35
|
|
|
$ |
0.28
|
|
|
$ |
0.19
|
|
Shares
used in computing basic net income per share
|
|
|
25,033,337
|
|
|
|
22,005,154
|
|
|
|
17,648,575
|
|
Shares
used in computing diluted net income per share
|
|
|
27,587,449
|
|
|
|
25,242,496
|
|
|
|
20,680,507
|
|
See
accompanying notes to consolidated financial statements.
PERFICIENT, INC.
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(In
thousands)
|
|
Common
Stock
Shares
|
|
|
Common
Stock
Amount
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders'
Equity
|
|
Balance
at January 1, 2004
|
|
|
14,039
|
|
|
$ |
14
|
|
|
$ |
76,289
|
|
|
$ |
(52 |
) |
|
$ |
(60,235 |
) |
|
$ |
16,016
|
|
Warrants
exercised
|
|
|
1,277
|
|
|
|
1
|
|
|
|
2,539
|
|
|
|
--
|
|
|
|
--
|
|
|
|
2,540
|
|
Stock
options exercised
|
|
|
492
|
|
|
|
1
|
|
|
|
656
|
|
|
|
--
|
|
|
|
--
|
|
|
|
657
|
|
Issuance
of stock for Genisys, Meritage, and ZettaWorks
acquisitions
|
|
|
4,049
|
|
|
|
4
|
|
|
|
18,770
|
|
|
|
--
|
|
|
|
--
|
|
|
|
18,774
|
|
Issuance
of stock for private placement
|
|
|
800
|
|
|
|
1
|
|
|
|
2,359
|
|
|
|
--
|
|
|
|
--
|
|
|
|
2,360
|
|
Tax
benefit of stock option exercises
|
|
|
--
|
|
|
|
--
|
|
|
|
342
|
|
|
|
--
|
|
|
|
--
|
|
|
|
342
|
|
Stock
compensation
|
|
|
--
|
|
|
|
--
|
|
|
|
27
|
|
|
|
--
|
|
|
|
--
|
|
|
|
27
|
|
Foreign
currency translation adjustment
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(6 |
) |
|
|
--
|
|
|
|
(6 |
) |
Net
income
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
3,913
|
|
|
|
3,913
|
|
Total
comprehensive income
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
3,907
|
|
Balance
at December 31, 2004
|
|
|
20,657
|
|
|
|
21
|
|
|
|
100,982
|
|
|
|
(58 |
) |
|
|
(56,322 |
) |
|
|
44,623
|
|
Warrants
exercised
|
|
|
88
|
|
|
|
--
|
|
|
|
157
|
|
|
|
--
|
|
|
|
--
|
|
|
|
157
|
|
Stock
options exercised
|
|
|
1,354
|
|
|
|
1
|
|
|
|
2,703
|
|
|
|
--
|
|
|
|
--
|
|
|
|
2,704
|
|
Issuance
of stock for iPath and Vivare acquisitions
|
|
|
1,196
|
|
|
|
1
|
|
|
|
8,708
|
|
|
|
--
|
|
|
|
--
|
|
|
|
8,709
|
|
Tax
benefit of stock option exercises
|
|
|
--
|
|
|
|
--
|
|
|
|
2,306
|
|
|
|
--
|
|
|
|
--
|
|
|
|
2,306
|
|
Stock
compensation
|
|
|
--
|
|
|
|
--
|
|
|
|
264
|
|
|
|
--
|
|
|
|
--
|
|
|
|
264
|
|
Foreign
currency translation adjustment
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(29 |
) |
|
|
--
|
|
|
|
(29 |
) |
Net
income
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
7,177
|
|
|
|
7,177
|
|
Total
comprehensive income
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
7,148
|
|
Balance
at December 31, 2005
|
|
|
23,295
|
|
|
|
23
|
|
|
|
115,120
|
|
|
|
(87 |
) |
|
|
(49,145 |
) |
|
|
65,911
|
|
Issuance
of stock for Bay Street, Insolexen, and EGG
acquisitions
|
|
|
1,499
|
|
|
|
2
|
|
|
|
17,989
|
|
|
|
--
|
|
|
|
--
|
|
|
|
17,991
|
|
Warrants
exercised
|
|
|
145
|
|
|
|
--
|
|
|
|
146
|
|
|
|
--
|
|
|
|
--
|
|
|
|
146
|
|
Stock
options exercised
|
|
|
1,672
|
|
|
|
2
|
|
|
|
4,001
|
|
|
|
--
|
|
|
|
--
|
|
|
|
4,003
|
|
Purchases
of stock from Employee Stock
Purchase
Plan
|
|
|
6
|
|
|
|
--
|
|
|
|
86
|
|
|
|
--
|
|
|
|
--
|
|
|
|
86
|
|
Tax
benefit of stock option exercises
|
|
|
--
|
|
|
|
--
|
|
|
|
6,554
|
|
|
|
--
|
|
|
|
--
|
|
|
|
6,554
|
|
Stock
compensation
|
|
|
--
|
|
|
|
--
|
|
|
|
3,132
|
|
|
|
--
|
|
|
|
--
|
|
|
|
3,132
|
|
Vested
stock compensation
|
|
|
83
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Foreign
currency translation adjustment
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(38 |
) |
|
|
--
|
|
|
|
(38 |
) |
Net
income
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
9,567
|
|
|
|
9,567
|
|
Total
comprehensive income
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
9,529
|
|
Balance
at December 31, 2006
|
|
|
26,700
|
|
|
$ |
27
|
|
|
$ |
147,028
|
|
|
$ |
(125 |
) |
|
$ |
(39,578 |
) |
|
$ |
107,352
|
|
See
accompanying notes to consolidated financial
statements.
PERFICIENT, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(As
Restated)
|
|
|
(As
Restated)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
(In
thousands)
|
|
|
|
|
Net
income
|
|
$ |
9,567
|
|
|
$ |
7,177
|
|
|
$ |
3,913
|
|
Adjustments
to reconcile net income to net cash provided by
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
948
|
|
|
|
615
|
|
|
|
512
|
|
Amortization
of intangibles
|
|
|
3,458
|
|
|
|
1,611
|
|
|
|
697
|
|
Non-cash
stock compensation
|
|
|
3,132
|
|
|
|
264
|
|
|
|
27
|
|
Non-cash
interest expense
|
|
|
6
|
|
|
|
24
|
|
|
|
--
|
|
Tax
benefit on stock option exercises
|
|
|
--
|
|
|
|
2,306
|
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(5,771 |
) |
|
|
148
|
|
|
|
(8,120 |
) |
Other
assets
|
|
|
(152 |
) |
|
|
(1,866 |
) |
|
|
76
|
|
Accounts
payable
|
|
|
1,251
|
|
|
|
(3,155 |
) |
|
|
5,297
|
|
Other
liabilities
|
|
|
708
|
|
|
|
2,090
|
|
|
|
1,294
|
|
Net
cash provided by operating activities
|
|
|
13,147
|
|
|
|
9,214
|
|
|
|
4,038
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(1,518 |
) |
|
|
(691 |
) |
|
|
(430 |
) |
Capitalization
of software developed for internal use
|
|
|
(136 |
) |
|
|
(599 |
) |
|
|
--
|
|
Purchase
of businesses, net of cash acquired
|
|
|
(17,210 |
) |
|
|
(11,231 |
) |
|
|
(10,734 |
) |
Payments
on Javelin notes
|
|
|
(250 |
) |
|
|
(250 |
) |
|
|
--
|
|
Net
cash used in investing activities
|
|
|
(19,114 |
) |
|
|
(12,771 |
) |
|
|
(11,164 |
) |
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from revolving line of credit
|
|
|
34,900
|
|
|
|
12,000
|
|
|
|
4,000
|
|
Payments
on revolving line of credit
|
|
|
(38,900 |
) |
|
|
(8,000 |
) |
|
|
--
|
|
Payments
on long-term debt
|
|
|
(1,338 |
) |
|
|
(1,135 |
) |
|
|
(522 |
) |
Deferred
offering costs
|
|
|
--
|
|
|
|
(942 |
) |
|
|
--
|
|
Tax
benefit on stock option exercises
|
|
|
6,554
|
|
|
|
--
|
|
|
|
--
|
|
Proceeds
from the exercise of stock options and Employee Stock Purchase
Plan
|
|
|
4,089
|
|
|
|
2,704
|
|
|
|
657
|
|
Proceeds
from the exercise of warrants
|
|
|
146
|
|
|
|
157
|
|
|
|
2,540
|
|
Proceeds
from stock issuances, net
|
|
|
--
|
|
|
|
--
|
|
|
|
2,373
|
|
Net
cash provided by financing activities
|
|
|
5,451
|
|
|
|
4,784
|
|
|
|
9,048
|
|
Effect
of exchange rate on cash and cash equivalents
|
|
|
(31 |
) |
|
|
(37 |
) |
|
|
(6 |
) |
Change
in cash and cash equivalents
|
|
|
(547 |
) |
|
|
1,190
|
|
|
|
1,916
|
|
Cash
and cash equivalents at beginning of period
|
|
|
5,096
|
|
|
|
3,906
|
|
|
|
1,990
|
|
Cash
and cash equivalents at end of period
|
|
$ |
4,549
|
|
|
$ |
5,096
|
|
|
$ |
3,906
|
|
Supplemental
disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
540
|
|
|
$ |
594
|
|
|
$ |
141
|
|
Cash
paid for income taxes
|
|
$ |
3,156
|
|
|
$ |
3,684
|
|
|
$ |
2,256
|
|
Non-cash
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock and options issued in purchase of businesses
|
|
$ |
17,991
|
|
|
$ |
8,709
|
|
|
$ |
18,774
|
|
Change
in goodwill
|
|
$ |
318
|
|
|
$ |
670
|
|
|
$ |
644
|
|
See
accompanying notes to consolidated financial statements.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Description of Business and Principles of Consolidation
Perficient, Inc.
(the “Company”) is an information technology consulting firm. The Company helps
its clients use Internet-based technologies to make their businesses more
responsive to market opportunities and threats, strengthen relationships
with
customers, suppliers and partners, improve productivity and reduce information
technology costs. The Company designs, builds and delivers solutions using
a
core set of middleware software products developed by third party vendors.
The
Company's solutions enable its clients to operate a real-time enterprise
that
adapts business processes and the systems that support them to the changing
demands of an increasingly global, Internet-driven and competitive
marketplace.
The
Company is incorporated in Delaware. The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All
material intercompany accounts and transactions have been eliminated in
consolidation.
2.
Restatement of Financial Information
The
Company is restating
its financial statements to present the changes from certain misclassifications
in the Consolidated Statement of Cash Flows primarily related to certain
previously reported payments associated with its business
acquisitions. This includes an adjustment from cash flows provided by
operating activities to cash flows used in investing activities for payments
made related to prior acquisitions. There is no change to the total
change in cash and cash equivalents in the affected
periods. Additionally, the restatement does not affect the previously
reported consolidated income statements, consolidated balance sheets or
consolidated statements of stockholders’ equity amounts, including earnings per
share.
The effect of the restatement on specific line items in the Consolidated
Statements of Cash Flows is as follows:
|
|
Year
Ended,
|
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
|
As
previously reported
|
|
|
As
restated
|
|
|
As
previously reported
|
|
|
As
restated
|
|
|
|
(In
thousands)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
$ |
(2,824 |
) |
|
$ |
708
|
|
|
$ |
563
|
|
|
$ |
2,090
|
|
Net
cash provided by operating activities
|
|
|
9,615
|
|
|
|
13,147
|
|
|
|
7,687
|
|
|
|
9,214
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of businesses, net of cash acquired
|
|
|
(13,678 |
) |
|
|
(17,210 |
) |
|
|
(9,704 |
) |
|
|
(11,231 |
) |
Net
cash used in investing activities
|
|
|
(15,582 |
) |
|
|
(19,114 |
) |
|
|
(11,244 |
) |
|
|
(12,771 |
) |
3.
Summary of Significant Accounting Policies
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 reported amounts of assets and liabilities
and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates, and
such
differences could be material to the financial statements.
Reclassification
The
Company has reclassified the presentation of certain prior period information
to
conform to the 2006 presentation.
Revenue
Recognition
Revenues
are primarily derived from professional services provided on a time and
materials basis. For time and material contracts, revenues 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, revenues
is
generally recognized using the proportionate performance method based on
the
ratio of hours expended to total estimated hours. Revenues on uncompleted
projects are recognized on a contract-by-contract basis in the period in
which
the portion of the fixed fee is complete. 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 revenues. Revenues from
software sales are recorded on a gross basis based on the Company's role
as
principal in the transaction. The Company is considered a “principal” if the
Company is the primary obligator and bears the associated credit risk in
the
transaction. In the event the Company does not meet the requirements to be
considered a principal in the software sale transaction and acts as an agent,
the revenues would be recorded on a net basis.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Revenues
are recognized when the following criteria are met: (1) persuasive evidence
of the customer arrangement exists, (2) fees are fixed and determinable,
(3) delivery and acceptance has occurred, and (4) collectibility is
deemed probable. The Company's policy for revenue recognition in instances
where
multiple deliverables are sold contemporaneously to the same counterparty
is in
accordance with Emerging Issues Task Force ("EITF") Issue No. 00-21, Revenue
Arrangements with Multiple Deliverables, and SEC Staff Accounting Bulletin
No.
104, Revenue Recognition. Specifically, if the Company enters into contracts
for
the sale of services and software, then the Company evaluates whether it
has
objective fair value evidence for each deliverable in the transaction. If
the
Company has objective fair value evidence for each deliverable of the
transaction, then it accounts for each deliverable in the transaction
separately, based on the relevant revenue recognition policies. All deliverables
of the Company's multiple element arrangements meet these criteria. We follow
very specific and detailed guidelines, discussed above, in determining revenues;
however, certain judgments and estimates are made and used to determine revenues
recognized in any accounting period. Material differences may result in the
amount and timing of revenues recognized for any period if different conditions
were to prevail.
Revenues
from internally developed software are allocated to maintenance and support
and
are recognized ratably over the maintenance term (typically one
year).
Revenues
allocated to training and consulting service elements is recognized as the
services are performed. Our consulting services are not essential to the
functionality of our products as such services are available from other
vendors.
Cash
and Cash Equivalents
Cash
equivalents consist primarily of cash deposits and investments with original
maturities of ninety days or less when purchased.
Accounts
Receivable and Allowance for Doubtful Accounts
Accounts
receivable are recorded at the invoiced amount. The allowance for doubtful
accounts is the Company's best estimate of the amount of uncollectible amounts
in its existing accounts receivable. Management analyzes historical collection
trends and changes in its customer payment patterns, customer concentration,
and
credit worthiness when evaluating the adequacy of its allowance for doubtful
accounts. The Company includes any receivables balances that are determined
to
be uncollectible in its overall allowance for doubtful accounts. The Company
reviews its allowance for doubtful accounts monthly. Account balances are
charged off against the allowance when the Company believes that it is probable
the receivable will not be recovered.
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 one to five years). Leasehold improvements are amortized over
the shorter of the life of the lease or the estimated useful life of the
assets.
Intangible
Assets
Goodwill
represents the excess purchase price over the fair value of net assets acquired,
or net liabilities assumed, in a business combination. In accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and
Other Intangible Assets, the Company performs an annual impairment test of
goodwill. The Company evaluates goodwill at the enterprise level as of October
1
each year or more frequently if events or changes in circumstances indicate
that
goodwill might be impaired. As required by SFAS No.142, the impairment test
is
accomplished using a two-stepped approach. The first step screens for impairment
and, when impairment is indicated, a second step is employed to measure the
impairment. The Company also reviewed other factors to determine the likelihood
of impairment. No impairment was indicated using data as of October 1,
2006.
Other
intangible assets include customer relationships, customer backlog, non-compete
arrangements and internally developed software, and are being amortized over
the
assets' estimated useful lives using the straight-line method. Estimated
useful
lives range from nine months to eight years. Amortization of customer
relationships, customer backlog, non-compete arrangements and internally
developed software are considered operating expenses and are included in
“Amortization of intangible assets” in the accompanying consolidated Statements
of Income. The Company periodically reviews the estimated useful lives of
its
identifiable intangible assets, taking into consideration any events or
circumstances that might result in a lack of recoverability or revised useful
life.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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.
Deferred
Offering Costs
Costs
incurred related to equity offerings under effective registration statements
are
deferred until the offering occurs or management does not intend to complete
the
offering. At the time that the issuance of new equity occurs, these costs
are
netted against the proceeds received. These costs are expensed if the offering
does not occur. Approximately $943,000 of these costs were recorded as part
of
Other Non-Current Assets on the Balance Sheet as of December 31,
2006.
Income
Taxes
The
Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. This Statement prescribes the use of the
liability method whereby deferred tax asset and liability account balances
are
determined based on differences between financial reporting and tax bases
of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. Deferred
tax assets are subject to tests of recoverability. A valuation allowance
is
provided for such deferred tax assets to the extent realization is not judged
to
be more likely than not.
Earnings
Per Share
Basic
earnings per share is computed by dividing net income available to common
stockholders by the weighted-average number of common shares outstanding
during
the period. Diluted earnings per share includes the weighted average number
of
common shares outstanding and the number of equivalent shares which would
be
issued related to the stock options and warrants using the treasury method,
contingently issuance shares, and convertible preferred stock using the
if-converted method, unless such additional equivalent shares are
anti-dilutive.
Stock-Based
Compensation
Effective
January 1, 2006, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 123R (As Amended), Share Based
Payment (“SFAS 123R”), using the modified prospective
application transition method. Under this method, compensation cost for the
portion of awards for which the requisite service has not yet been rendered
that
are outstanding as of the adoption date is recognized over the remaining
service
period. The compensation cost for that portion of awards is based on the
grant-date fair value of those awards as calculated for pro forma disclosures
under SFAS No. 123. All new awards and awards that are modified,
repurchased, or cancelled after the adoption date are accounted for under
the
provisions of SFAS No. 123R. Prior periods are not restated under this
transition method. The Company recognizes share-based compensation ratably
using
the straight-line attribution method over the requisite service period. In
addition, pursuant to SFAS No. 123R, the Company is required to estimate
the amount of expected forfeitures when calculating share-based compensation,
instead of accounting for forfeitures as they occur, which was the Company's
practice prior to the adoption of SFAS No. 123R.
Fair
Value of Financial Instruments
Cash
equivalents, accounts receivable, accounts payable, other accrued liabilities,
and debt are stated at amounts which approximate fair value due to the near
term
maturities of these instruments and the variable interest rates on the Company's
accounts receivable line of credit.
Recently
Issued Accounting Standards
In
September 2006, the SEC issued Staff Accounting Bulletin 108 (“SAB 108”), which
expresses the Staff's views regarding the process of quantifying financial
statement misstatements. The bulletin was effective at fiscal year end 2006.
The
implementation of this bulletin had no impact on the Company's results of
operations, cash flows or financial position.
In
September 2006, the FASB issued Statement No. 157, Fair Value
Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. SFAS 157 will
be
applied prospectively and will be effective for periods beginning after November
15, 2007. The Company is currently evaluating the effect, if any, of SFAS
157 on
the Company's consolidated financial statements.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In
June
2006, the FASB issued FASB Interpretation ("FIN") No. 48, Accounting for
Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109
("FIN 48"). FIN 48 prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position
taken
or expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, treatment of interest and penalties, and
disclosure of such positions. FIN 48 will be applied prospectively and will
be
effective for fiscal years beginning after December 31, 2006. The Company
will
adopt the provisions of FIN 48 in the first quarter of 2007 as required.
The
Company is still evaluating the effect of adopting FIN 48 and does not expect
it
to have a material effect on the Company's consolidated financial
statements.
In
June
2006, the Emerging Issues Task Force ("EITF") ratified EITF Issue 06-3, How
Taxes Collected From Customers and Remitted to Governmental Authorities Should
Be Presented in the Income Statement (That Is, Gross versus Net
Presentation) . A consensus was reached that entities may adopt a policy of
presenting taxes in the income statement on either a gross or net basis.
An
entity should disclose its policy of presenting taxes and the amount of any
taxes presented on a gross basis should be disclosed, if significant. The
guidance is effective for periods beginning after December 15, 2006. We present
revenues net of taxes. EITF 06-3 will not impact the method for recording
these
sales taxes in our consolidated financial statements.
4.
Net Income Per Share
The
following table presents the calculation of basic and diluted net income
per
share (in thousands, except per share information):
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Net
income
|
|
$ |
9,567
|
|
|
$ |
7,177
|
|
|
$ |
3,913
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares of common stock outstanding
|
|
|
23,783
|
|
|
|
20,868
|
|
|
|
16,964
|
|
Weighted-average
shares of common stock subject to contingency (i.e. restricted
stock)
|
|
|
1,250
|
|
|
|
1,137
|
|
|
|
685
|
|
Shares
used in computing basic net income per share
|
|
|
25,033
|
|
|
|
22,005
|
|
|
|
17,649
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
2,281
|
|
|
|
3,088
|
|
|
|
2,836
|
|
Warrants
|
|
|
74
|
|
|
|
149
|
|
|
|
196
|
|
Restricted
stock subject to vesting
|
|
|
199
|
|
|
|
--
|
|
|
|
--
|
|
Shares
used in computing diluted net income per share
|
|
|
27,587
|
|
|
|
25,242
|
|
|
|
20,681
|
|
Basic
net income per share
|
|
$ |
0.38
|
|
|
$ |
0.33
|
|
|
$ |
0.22
|
|
Diluted
net income per share
|
|
$ |
0.35
|
|
|
$ |
0.28
|
|
|
$ |
0.19
|
|
5.
Concentration of Credit Risk and Significant Customers
Cash
and
accounts receivable potentially expose the Company to concentrations of credit
risk. 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. A substantial portion of the services the Company provides
are
built on IBM WebSphere (R) platforms
and a significant number of its clients are identified through joint selling
opportunities conducted with IBM and through sales leads obtained from the
relationship with IBM. Revenues from IBM accounted for approximately 8%,
9%, and
17% of total revenues for 2006, 2005 and 2004, respectively, and accounts
receivable from IBM accounted for approximately 9% of total accounts receivable
as of December 31, 2006 and 2005. While the dollar amount of revenues from
IBM has remained relatively constant over the past three years, the percentage
of total revenues from IBM has decreased as a result of the Company's growth
and
corresponding customer diversification. The loss of the Company's relationship
with IBM or a significant reduction in the services the Company provides
for IBM
would result in significantly decreased revenues. Due to the Company's
significant fixed operating expenses, the loss of sales to IBM or any
significant customer could result in the Company's inability to generate
net
income or positive cash flow from operations for some time in the
future.
6.
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.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 approximately $0.5 million, $0.5
million, and $0.3 million during 2006, 2005 and 2004, respectively, which
vest
over a three year period of service.
7.
Intangible Assets
Intangible
Assets with Indefinite Lives
The
changes in the carrying amount of goodwill for the year ended December 31,
2006
are as follows (in thousands):
|
|
Goodwill
|
|
Balance
at December 31, 2004
|
|
$
|
32,818
|
|
Acquisitions
consummated during 2005 (Note 14)
|
|
|
14,115
|
|
Utilization
of net operating loss carryforwards, forfeiture of restricted stock
used
for
acquisition
purchase consideration and changes in estimated acquisition transaction
costs
|
|
|
(670
|
)
|
Balance
at December 31, 2005
|
|
|
46,263
|
|
Acquisitions
consummated during 2006 (Note 14)
|
|
|
22,589
|
|
Utilization
of net operating loss carryforwards and adjustment to goodwill
related to
deferred taxes associated with acquisitions
|
|
|
318
|
|
Balance
at December 31, 2006
|
|
$
|
69,170
|
|
Intangible
Assets with Definite Lives
Following
is a summary of the Company's intangible assets that are subject to amortization
(in thousands):
|
|
Year
ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
Gross
Carrying Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
|
Gross
Carrying Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
relationships
|
|
$ |
12,860
|
|
|
$ |
(2,808 |
) |
|
$ |
10,052
|
|
|
$ |
4,820
|
|
|
$ |
(1,122 |
) |
|
$ |
3,698
|
|
Non-compete
agreements
|
|
|
2,393
|
|
|
|
(1,094 |
) |
|
|
1,299
|
|
|
|
2,073
|
|
|
|
(621 |
) |
|
|
1,452
|
|
Customer
backlog
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
130
|
|
|
|
(57 |
) |
|
|
73
|
|
Internally
developed software
|
|
|
755
|
|
|
|
(220 |
) |
|
|
535
|
|
|
|
599
|
|
|
|
(54 |
) |
|
|
545
|
|
Total
|
|
$ |
16,008
|
|
|
$ |
(4,122 |
) |
|
$ |
11,886
|
|
|
$ |
7,622
|
|
|
$ |
(1,854 |
) |
|
$ |
5,768
|
|
The
estimated useful lives of acquired identifiable intangible assets are as
follows:
Customer
relationships
|
3
- 8 years
|
Non-compete
agreements
|
2
- 5 years
|
Customer
backlog
|
4
months to 1 year
|
Internally
developed software
|
5
years
|
The
weighted average amortization periods for customer relationships and non-compete
agreements are 6 years and 5 years, respectively. Total amortization expense
for
the years ended December 31, 2006, 2005, and 2004 was approximately $3.5
million, $1.6 million, and $0.7 million respectively.
Estimated
annual amortization expense for the next five years ended December 31 is
as
follows (in thousands):
2007
|
|
$
|
2,882
|
|
2008
|
|
|
2,689
|
|
2009
|
|
|
2,308
|
|
2010
|
|
|
1,748
|
|
2011
|
|
|
1,619
|
|
Thereafter
|
|
|
641
|
|
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8.
Equity Based Compensation
Stock
Option Plans
In
May 1999, the Company's Board of Directors and stockholders approved the
1999 Stock Option/Stock Issuance Plan (the “1999 Plan”). The 1999 Plan contains
programs for (i) the discretionary granting of stock options to employees,
non-employee board members and consultants for the purchase of shares of
the
Company's commons stock, (ii) the discretionary issuance of common stock
directly to eligible individuals, and (iii) the automatic issuance of stock
options to non-employee board members. The Compensation Committee of the
Board
of Directors administers the 1999 Plan, and determines the exercise price
and
vesting period for each grant. Options granted under the 1999 Plan have a
maximum term of 10 years. In the event that the Company is acquired,
whether by merger or asset sale or board-approved sale by the stockholders
of
more than 50% of the Company's voting stock, each outstanding option under
the
discretionary option grant program which is not to be assumed by the successor
corporation or otherwise continued will automatically accelerate in full,
and
all unvested shares under the discretionary option grant and stock issuance
programs will immediately vest, except to the extent the Company's repurchase
rights with respect to those shares are to be assigned to the successor
corporation or otherwise continued in effect. The Compensation Committee
may
grant options under the discretionary option grant program that will accelerate
in the acquisition even if the options are assumed or that will accelerate
if
the optionee's service is subsequently terminated.
The
Compensation Committee may grant options and issue shares that accelerate
in
connection with a hostile change in control effected through a successful
tender
offer for more than 50% of the Company's outstanding voting stock or by proxy
contest for the election of board members, or the options and shares may
accelerate upon a subsequent termination of the individual's
service.
On
December 15, 2004, the Company granted restricted stock awards of 262,500
shares
of common stock under the 1999 Stock Option/Stock Issuance Plan. This equity
grant vests over seven years, with an original vesting schedule that was
back-loaded but was converted to pro-rata or straight-line vesting over the
seven year period due to the achievement of certain performance targets and
compensation committee approval. On December 28, 2005, the Company granted
restricted stock awards of approximately 323,000 shares of common stock under
the 1999 Stock Option/Stock Issuance Plan. This equity grant vests over six
years, with an original vesting schedule that was back-end loaded but was
converted to pro-rata or straight-line vesting over the six year period due
to
the achievement of certain performance targets and compensation committee
approval. On December 21, 2006, the Company granted restricted stock awards
of
approximately 843,000 shares of common stock under the 1999 Stock Option/Stock
Issuance Plan. This equity grant vests ratably over five years.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
A
summary
of changes in common stock options during 2006, 2005 and 2004 is as follows
(in
thousands, except exercise price information):
|
Shares
|
|
|
Range
of Exercise Prices
|
|
|
Weighted-Average
Exercise Price
|
|
Aggregate
Intrinsic Value
|
Options
outstanding at January 1, 2004
|
5,726
|
|
$
|
0.02
- $26.00
|
|
$
|
2.42
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
granted
|
1,459
|
|
$
|
3.00
- $ 6.31
|
|
$
|
4.67
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercised
|
(492)
|
|
$
|
0.03
- $ 4.50
|
|
$
|
1.34
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
canceled
|
(254)
|
|
$
|
0.50
- $13.25
|
|
$
|
3.37
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding at December 31, 2004
|
6,439
|
|
$
|
0.02
- $26.00
|
|
$
|
2.97
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
granted
|
415
|
|
$
|
7.34
- $ 9.19
|
|
$
|
7.81
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercised
|
(1,354)
|
|
$
|
0.03
- $ 8.10
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
canceled
|
(232)
|
|
$
|
0.03
- $16.00
|
|
$
|
5.37
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding at December 31, 2005
|
5,268
|
|
$
|
0.02
- $16.94
|
|
$
|
3.53
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
granted
|
--
|
|
|
--
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercised
|
(1,672)
|
|
$
|
0.02
- $12.13
|
|
$
|
2.40
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
canceled
|
(44)
|
|
$
|
1.01
- $13.25
|
|
$
|
5.41
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding at December 31, 2006
|
3,552
|
|
$
|
0.02
- $16.94
|
|
$
|
4.03
|
|
43,975
|
|
|
|
|
|
|
|
|
|
|
Options
vested, December 31, 2004
|
3,227
|
|
$
|
0.02
- $16.94
|
|
$
|
2.85
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
vested, December 31, 2005
|
3,305
|
|
$
|
0.02
- $16.94
|
|
$
|
3.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
vested or expected to vest, December 31, 2006
|
2,347
|
|
$
|
0.02
- $16.94
|
|
$
|
3.62
|
|
41,400
|
The
total
aggregate intrinsic value of options exercised during the years ended
December 31, 2006, 2005, and 2004, was $18.6 million, $8.4 million,
and $1.5 million, respectively. The total fair value of restricted shares
vesting during the year ended December 31, 2006 was $1.4 million. For
the years ended December 31, 2005 and 2004, the total fair value of restricted
shares vesting during the year was $0.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Restricted
stock activity for the year ended December 31, 2006 was as follows (in
thousands, except fair value information):
|
|
Shares
|
|
|
Weighted-Average
Grant
Date Fair
Value
|
|
Restricted
stock awards outstanding at January 1, 2006
|
|
|
614
|
|
|
$ |
7.69
|
|
Awards
granted
|
|
|
911
|
|
|
|
15.61
|
|
Awards
released
|
|
|
(83 |
) |
|
|
7.62
|
|
Awards
canceled
|
|
|
(13 |
) |
|
|
8.04
|
|
Restricted
stock awards outstanding at December 31, 2006
|
|
|
1,429
|
|
|
$ |
12.74
|
|
The
following is additional information related to stock options outstanding
at
December 31, 2006 (in thousands, except exercise price
information):
|
|
Options
Outstanding
|
|
Options
Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
Weighted
|
|
|
|
|
Average
|
|
Remaining
|
|
|
|
Average
|
Range
of Exercise
|
|
|
|
Exercise
|
|
Contractual
|
|
|
|
Exercise
|
Prices
|
|
Options
|
|
Price
|
|
Life
(Years)
|
|
Options
|
|
Price
|
$0.02
- $1.15
|
|
468
|
|
$0.62
|
|
4.94
|
|
468
|
|
$0.62
|
$1.21
- $2.28
|
|
1,101
|
|
$2.09
|
|
6.53
|
|
808
|
|
$2.02
|
$2.77
- $3.75
|
|
796
|
|
$3.42
|
|
5.5
|
|
578
|
|
$3.54
|
$4.40
- $6.31
|
|
733
|
|
$6.04
|
|
7.61
|
|
182
|
|
$5.51
|
$6.97
- $16.94
|
|
454
|
|
$10.10
|
|
6.22
|
|
311
|
|
$11.30
|
$0.02
- $16.94
|
|
3,552
|
|
$4.03
|
|
6.27
|
|
2,347
|
|
$3.62
|
The
fair
value of options was calculated at the date of grant using the Black-Scholes
pricing model with the following weighted-average assumptions for the year
ended
December 31, 2005 and 2004, as follows, with a weighted-average life of
options of 5 years used for each of the years presented:
Year
End
December
31,
|
|
Risk-Free
Interest
Rate
|
|
Dividend
Yield
|
|
Volatility
Factor
|
|
2004
|
|
|
3.61%
|
|
|
0%
|
|
|
1.388
|
|
2005
|
|
|
3.72%
|
|
|
0%
|
|
|
1.405
|
|
No
stock
options were granted in 2006.
At
December 31, 2006, 2005 and 2004, the weighted-average remaining
contractual life of outstanding options was 6.27, 7.17, and 7.89 years,
respectively. The weighted-average grant-date fair value per share of options
granted during 2005 and 2004 at market prices was approximately $7.81 and
$4.67,
respectively. There were no option grants at below or above market prices
during
2005 and 2004. No option grants occurred in 2006.
The
Company recognized $3.1 million and $0.3 million of stock compensation expense
during 2006 and 2005, respectively. Tax benefits recognized on stock option
exercises were $0.8 million and $0.2 million during 2006 and 2005. For the
year
ended December 31, 2004, stock compensation expense and the related tax benefits
recognized on stock option exercises were immaterial. As of December 31,
2006,
there was $19.7 million of total unrecognized compensation cost related to
non-vested share-based awards. This cost is expected to be recognized over
a
weighted-average period of 2.8 years. Our estimated forfeiture rate for the
year
ended December 31, 2006 of approximately 12% for share based awards was based
on
historical forfeiture experience to anticipate actual forfeitures in the
future.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Prior
to
the adoption of SFAS No. 123R, the Company accounted for employee stock-based
compensation using the intrinsic value method prescribed by APB 25. As presented
below, the Company applied the disclosure provisions of SFAS 123, as amended
by
SFAS 148, Accounting for Stock-Based Compensation - Transition and
Disclosure, as if the fair value method had been applied. If
this method had been used, the Company's net income and net income per share
for
the years ended December 31, 2005 and 2004 would have been adjusted to the
pro
forma amounts below (in thousands except per share data):
|
|
Year
ended December 31,
|
|
|
|
2005
|
|
|
2004
|
|
Net
income -- as reported
|
|
$ |
7,177
|
|
|
$ |
3,913
|
|
Total
stock-based compensation costs, net of tax, included in the determination
of net income as reported
|
|
|
162
|
|
|
|
27
|
|
The
stock-based employee compensation cost, net of tax, that would
have been
included in the determination of net income if the fair value based
method
had been applied to all awards
|
|
|
(2,609 |
) |
|
|
(1,016 |
) |
Pro
forma net income
|
|
$ |
4,730
|
|
|
$ |
2,924
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share
|
|
|
|
|
|
|
|
|
Basic
- as reported
|
|
$ |
0.33
|
|
|
$ |
0.22
|
|
Basic
- pro forma
|
|
$ |
0.23
|
|
|
$ |
0.17
|
|
|
|
|
|
|
|
|
|
|
Diluted
- as reported
|
|
$ |
0.28
|
|
|
$ |
0.19
|
|
Diluted
- pro forma
|
|
$ |
0.20
|
|
|
$ |
0.14
|
|
At
December 31, 2006, 3.6 million shares were reserved for future issuance
upon exercise of outstanding options and 8,575 shares were reserved for future
issuance upon exercise of outstanding warrants. At December 31, 2006, there
were
1.4 million shares of restricted stock outstanding under the 1999 Plan and
classified as equity.
The
following table summarizes information regarding warrants outstanding and
exercisable as of December 31, 2006 (in thousands, except exercise price
information):
Warrants
Outstanding and Exercisable
|
Exercise
Price
|
Warrants
|
$1.98
|
9
|
$1.98
|
9
|
The
majority of the outstanding warrants expire in December 2011.
Employee
Stock Purchase Plan
In
2005,
the Compensation Committee approved the Employee Stock Purchase Plan (the
“ESPP”) to be available to employees starting January 1, 2006. The ESPP is a
broadly-based stock purchase plan in which any eligible employee may elect
to
participate by authorizing the Company to make payroll deductions in a specific
amount or designated percentage to pay the exercise price of an option. In
no
event will an employee be granted an option under the ESPP that would permit
the
purchase of Common Stock with a fair market value in excess of $25,000 in
any
calendar year and the Compensation Committee of the Company has set the current
annual participation limit at $12,500. For the year ended December 31, 2006,
approximately 6,000 shares had been purchased under the ESPP.
There
are four three-month offering periods in each calendar year beginning on
January
1, April 1, July 1, and October 1, respectively. The exercise price of options
granted under the ESPP is an amount equal to 95% of the fair market value
of the
Common Stock on the date of exercise (occurring on, respectively, March 31,
June
30, September 30, and December 31). The ESPP is designed to comply with Section
423 of the Code and thus is eligible for the favorable tax treatment afforded
by
Section 423.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9.
Line of Credit and Long Term Debt
On
June 29, 2006, the Company entered into an Amended and Restated Loan and
Security Agreement with Silicon Valley Bank and KeyBank National Association.
The amended agreement increased the total size of the Company's senior bank
credit facilities from $28.5 million to $51.3 million by increasing the
accounts receivable line of credit from $15 million to $25 million and
increasing the acquisition term line of credit from $13.5 million to
$26.3 million.
The
accounts receivable line of credit, which expires in June 2009, provides
for a borrowing capacity equal to all eligible accounts receivable, including
80% of unbilled revenues, subject to certain borrowing base calculations
as
defined in the agreement, but in no event more than $25 million. Borrowings
under this line of credit bear interest at the bank's prime rate (8.25% at
December 31, 2006). As of December 31, 2006, there were no amounts outstanding
under the accounts receivable line of credit and $25 million of available
borrowing capacity, excluding $450,000 reserved for two outstanding letters
of credit to secure facility leases. In January 2007, the letters of
credit decreased $50,000.
The
Company's $26.3 million term acquisition line of credit provides an additional
source of financing for certain qualified acquisitions. As of December 31,
2006,
the balance outstanding under this acquisition line of credit was approximately
$1.3 million. Borrowings under this acquisition line of credit bear interest
equal to the four year U.S. Treasury note yield plus 3% based on the spot
rate
on the day the draw is processed (7.69% at December 31, 2006). Borrowings
under
this acquisition line are repayable in thirty-six equal monthly installments
after the initial interest only period which continues through June 29, 2007.
Draws under this acquisition line may be made through June 29, 2008. As of
December 31, 2006, the balance outstanding under this acquisition line of
credit
of $1.3 million had an average interest rate of 7.00%. The
Company currently has approximately $25.0 million of available borrowing
capacity under this acquisition line of credit.
The
Company is required to comply with various financial covenants under the
$51.3
million credit facility. Specifically, the Company is required to maintain
a
ratio of after tax earnings before interest, depreciation and amortization,
and
other non-cash charges, including but not limited to stock and stock option
compensation expense on trailing three months annualized, to current maturities
of long-term debt and capital leases plus interest of at least 1.50 to 1.00,
a
ratio of cash plus eligible accounts receivable including 80% of unbilled
revenues less principal amount of all outstanding advances on accounts
receivable line of credit to advances under the term acquisition line of
credit
of at least 0.75 to 1.00, and a maximum ratio of all outstanding advances
under
the entire credit facility to earnings before taxes, interest, depreciation,
amortization and other non-cash charges, including but not limited to, stock
and
stock option compensation expense including pro forma adjustments for
acquisitions on a trailing twelve month basis of no more than 2.50 to 1.00.
As
of December 31, 2006, the Company was in compliance with all covenants under
this facility. This credit facility is secured by substantially all assets
of
the Company.
Notes
payable to related party at December 31, 2005 consisted of non
interest-bearing notes issued to the shareholders of Javelin
Solutions, Inc. (“Javelin”) in April 2002 in connection with the
Company's acquisition of Javelin. The note was fully repaid in
2006.
Future
minimum term debt repayments as of December 31, 2006 are as follows (in
thousands):
|
|
Debt
Payments
|
|
2007
|
|
$
|
1,201
|
|
2008
|
|
|
137
|
|
Present
value of debt commitments
|
|
|
1,338
|
|
Less
current portion
|
|
|
1,201
|
|
Long
term portion
|
|
$
|
137
|
|
10.
Income Taxes
As
of
December 31, 2006, the Company had U.S. Federal tax net operating loss
carry forwards of approximately $6.3 million that will begin to expire in
2020 if not utilized. The Company has established a valuation allowance against
these net operating loss carry forwards of $2.0 million.
Utilization
of net operating losses may be subject to an annual limitation due to the
“change in ownership” provisions of the Internal Revenues Code of 1986. The
annual limitation may result in the expiration of net operating losses before
utilization.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Significant
components of the provision for income taxes attributable to continuing
operations are as follows (in thousands):
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
1,138
|
|
|
$ |
1,148
|
|
|
$ |
1,412
|
|
Foreign
|
|
|
102
|
|
|
|
223
|
|
|
|
255
|
|
State
|
|
|
260
|
|
|
|
241
|
|
|
|
235
|
|
Total
current
|
|
|
1,500
|
|
|
|
1,612
|
|
|
|
1,902
|
|
Tax
benefit on acquired net operating loss carryforward
|
|
|
246
|
|
|
|
353
|
|
|
|
312
|
|
Tax
benefit from stock options
|
|
|
6,554
|
|
|
|
2,306
|
|
|
|
342
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(902 |
) |
|
|
201
|
|
|
|
(26 |
) |
Foreign
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
State
|
|
|
(116 |
) |
|
|
26
|
|
|
|
(2 |
) |
Total
deferred
|
|
|
(1,018 |
) |
|
|
227
|
|
|
|
(28 |
) |
Total
provision for income taxes
|
|
$ |
7,282
|
|
|
$ |
4,498
|
|
|
$ |
2,528
|
|
The
components of pretax income for the years ended December 31, 2006, 2005 and
2004
are as follows (in thousands):
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Domestic
|
|
$ |
16,565
|
|
|
$ |
11,267
|
|
|
$ |
5,804
|
|
Foreign
|
|
|
284
|
|
|
|
408
|
|
|
|
637
|
|
Total
|
|
$ |
16,849
|
|
|
$ |
11,675
|
|
|
$ |
6,441
|
|
Foreign
operations include Canada and the United Kingdom for the years ended December
31, 2004 and 2005. In 2006, foreign operations only included Canada. As of
December 31, 2006, the Company's location in the United Kingdom was
dormant.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Deferred
income taxes reflect the net tax effects of temporary differences between
the
carrying amounts of assets and liabilities for financial reporting purposes
and
the amounts used for income tax purposes. Significant components of the
Company's deferred taxes as of December 31, 2006 and 2005 are as
follows:
|
|
December
31,
|
|
|
|
2006
|
|
|
2005
|
|
Deferred
tax assets:
|
|
(In
thousands)
|
|
Current
deferred tax assets:
|
|
|
|
|
|
|
Accrued
liabilities
|
|
$ |
298
|
|
|
$ |
140
|
|
Net
operating losses
|
|
|
243
|
|
|
|
246
|
|
Bad
debt reserve
|
|
|
268
|
|
|
|
110
|
|
|
|
|
809
|
|
|
|
496
|
|
Valuation
allowance
|
|
|
(457 |
) |
|
|
(361 |
) |
Net
current deferred tax assets
|
|
$ |
352
|
|
|
$ |
135
|
|
Non-current
deferred tax assets:
|
|
|
|
|
|
|
|
|
Net
operating losses
|
|
$ |
2,339
|
|
|
$ |
2,577
|
|
Fixed
assets
|
|
|
53
|
|
|
|
49
|
|
Deferred
compensation
|
|
|
435
|
|
|
|
102
|
|
|
|
|
2,827
|
|
|
|
2,728
|
|
Valuation
allowance
|
|
|
(1,599 |
) |
|
|
(1,984 |
) |
Net
non-current deferred tax assets
|
|
$ |
1,228
|
|
|
$ |
744
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
Current
deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Deferred
income
|
|
$ |
308
|
|
|
$ |
93
|
|
Non-current
deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Deferred
income
|
|
$ |
431
|
|
|
$ |
94
|
|
Foreign
withholding tax on undistributed earnings
|
|
|
65
|
|
|
|
45
|
|
Intangibles
|
|
|
1,983
|
|
|
|
461
|
|
Total
non-current deferred tax liabilities
|
|
$ |
2,479
|
|
|
$ |
600
|
|
Net
current deferred tax asset
|
|
$ |
44
|
|
|
$ |
42
|
|
Net
non-current deferred tax asset (liability)
|
|
$ |
(1,251 |
) |
|
$ |
144
|
|
The
Company has established a valuation allowance to offset a portion of the
Company's deferred tax assets due to uncertainties regarding the realization
of
deferred tax assets based on the Company's earnings history and limitations
on
the utilization of acquired net operating losses. The valuation allowance
decreased by approximately $0.3 million during 2006 and decreased by
approximately $0.7 million during 2005. These decreases are primarily due
to the
benefit of acquired net operating loss carryforwards. As of December 31,
2006,
all of the valuation allowance relates to acquired entities, and as such,
if
realized, will reduce goodwill or other non-current assets prior to resulting
in
an income tax benefit.
Changes
to the valuation allowance are summarized as follows for the years presented
(in
thousands):
|
|
Year
ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Balance,
beginning of year
|
|
$ |
2,345
|
|
|
$ |
3,027
|
|
|
$ |
1,057
|
|
Benefit
realized
|
|
|
(289 |
) |
|
|
(446 |
) |
|
|
--
|
|
Additions
resulting from purchase accounting
|
|
|
--
|
|
|
|
--
|
|
|
|
1,970
|
|
Write-offs
|
|
|
--
|
|
|
|
(236 |
) |
|
|
--
|
|
Balance,
end of year
|
|
$ |
2,056
|
|
|
$ |
2,345
|
|
|
$ |
3,027
|
|
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
During
2005, the Company determined that its undistributed earnings of foreign
subsidiaries were no longer permanently reinvested. All of the undistributed
earnings were deemed to have been repatriated during 2005 under U.S. tax
law,
and current federal and state taxes on the deemed repatriated amounts (less
applicable foreign tax credits) are included in the respective current
provisions. Upon actual repatriation of these earnings, in the form of dividends
or otherwise, the Company will be subject to withholding taxes payable to
the
various foreign countries. A deferred tax liability has been recorded to
reflect
the foreign withholding tax. The foreign entities have minimal temporary
items
and thus no deferred taxes have been provided thereon.
The
federal corporate statutory rate is reconciled to the Company's effective
income
tax rate as follows:
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Federal
corporate statutory rate
|
|
|
34.3 |
% |
|
|
34.0 |
% |
|
|
34.0 |
% |
State
taxes, net of federal benefit
|
|
|
4.6
|
|
|
|
4.3
|
|
|
|
2.8
|
|
Intangibles
amortization
|
|
|
--
|
|
|
|
--
|
|
|
|
0.7
|
|
Effect
of foreign operations
|
|
|
--
|
|
|
|
0.1
|
|
|
|
0.6
|
|
Stock
compensation
|
|
|
2.1
|
|
|
|
--
|
|
|
|
--
|
|
Other
|
|
|
2.2
|
|
|
|
0.1
|
|
|
|
1.1
|
|
Effective
income tax rate
|
|
|
43.2 |
% |
|
|
38.5 |
% |
|
|
39.2 |
% |
The
effective income tax rate increased to 43.2% for the year ended December
31,
2006 from 38.5% for the year ended December 31, 2005 as a result of
non-deductible stock compensation related to incentive stock options included
in
the Company's statement of operations in 2006 as a result of the adoption
of
SFAS 123R on January 1, 2006 and certain non-deductible compensation required
by
Section 162(m) of the Internal Revenue Code, which imposes a limitation on
the
deductibility of certain compensation in excess of $1 million paid to covered
employees .
11.
Commitments and Contingencies
The
Company leases its office facilities and certain equipment under various
operating lease agreements, as amended. The Company has the option to extend
the
term of certain of its office facilities leases. Future minimum commitments
under these lease agreements as of December 31, 2006 are as follows (in
thousands):
|
|
Operating
Leases
|
|
2007
|
|
$
|
1,355
|
|
2008
|
|
|
1,128
|
|
2009
|
|
|
1,020
|
|
2010
|
|
|
768
|
|
2011
|
|
|
351
|
|
Thereafter
|
|
|
61
|
|
Total
minimum lease payments
|
|
$
|
4,683
|
|
Rent
expense for the years ended December 31, 2006, 2005 and 2004 was
approximately $1.7 million, $1.5 million and $1.4 million
respectively.
In
connection with certain of its acquisitions, the Company was required to
establish various letters of credit totaling $450,000 with Silicon
Valley Bank to serve as collateral for certain office space leases. These
letters of credit reduce the borrowings available under the Company's line
of
credit with Silicon Valley Bank. In January 2007, these letters of credit
decreased $50,000. One letter of credit for $200,000 will remain in effect
through October 2009, and the other letter of credit for $250,000 will remain
in
effect through June 2007.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12.
Balance Sheet Components
|
|
December
31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In
thousands)
|
|
Accounts
receivable:
|
|
|
|
|
|
|
Accounts
receivable
|
|
$ |
29,461
|
|
|
$ |
17,037
|
|
Unbilled
revenues
|
|
|
9,846
|
|
|
|
6,581
|
|
Allowance
for doubtful accounts
|
|
|
(707 |
) |
|
|
(367 |
) |
Total
|
|
$ |
38,600
|
|
|
$ |
23,251
|
|
|
|
|
|
|
|
|
|
|
Other
current assets:
|
|
|
|
|
|
|
|
|
Income
tax receivable
|
|
$ |
2,150
|
|
|
$ |
1,367
|
|
Other
current assets
|
|
|
649
|
|
|
|
163
|
|
Total
|
|
$ |
2,799
|
|
|
$ |
1,530
|
|
|
|
|
|
|
|
|
|
|
Other
current liabilities:
|
|
|
|
|
|
|
|
|
Accrued
bonus
|
|
$ |
9,851
|
|
|
$ |
3,525
|
|
Accrued
subcontractor fees
|
|
|
1,803
|
|
|
|
1,842
|
|
Deferred
revenues
|
|
|
1,318
|
|
|
|
1,084
|
|
Payroll
related costs
|
|
|
1,258
|
|
|
|
503
|
|
Sales
and use taxes
|
|
|
326
|
|
|
|
150
|
|
Accrued
acquisition costs related to Insolexen and EGG
|
|
|
563
|
|
|
|
--
|
|
Other
accrued expenses
|
|
|
915
|
|
|
|
1,227
|
|
Total
|
|
$ |
16,034
|
|
|
$ |
8,331
|
|
Property
and Equipment:
|
|
|
|
|
|
|
Hardware (useful
life of 2 years)
|
|
$ |
3,933
|
|
|
$ |
2,708
|
|
Furniture
and fixtures (useful life of 5 years)
|
|
|
980
|
|
|
|
781
|
|
Leasehold
improvements (useful life of 3 years)
|
|
|
275
|
|
|
|
150
|
|
Software (useful
life of 1 year)
|
|
|
702
|
|
|
|
474
|
|
Accumulated
depreciation and amortization
|
|
|
(4,084 |
) |
|
|
(3,153 |
) |
Property
and equipment, net
|
|
$ |
1,806
|
|
|
$ |
960
|
|
13.
Allowance for Doubtful Accounts
Activity
in the allowance for doubtful accounts is summarized as follows for the years
presented (in thousands):
|
|
Year
ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Balance,
beginning of year
|
|
$ |
367
|
|
|
$ |
654
|
|
|
$ |
623
|
|
Charged
to expense
|
|
|
264
|
|
|
|
32
|
|
|
|
33
|
|
Additions
resulting from purchase accounting
|
|
|
371
|
|
|
|
24
|
|
|
|
--
|
|
Uncollected
balances written off, net of recoveries
|
|
|
(295 |
) |
|
|
(343 |
) |
|
|
(2 |
) |
Balance,
end of year
|
|
$ |
707
|
|
|
$ |
367
|
|
|
$ |
654
|
|
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
14.
Business Combinations
Acquisition
of iPath Solutions, Ltd.
On
June 10, 2005, the Company acquired iPath Solutions, Ltd. (“iPath”), a
privately held technology consulting company, for $9.9 million. The
purchase price consists of $3.9 million in cash, $900,000 of
liabilities repaid on behalf of iPath, transaction costs of $600,000, and
623,803 shares of the Company's common stock valued at approximately $7.24
per
share (approximately $4.5 million worth of Company's common stock). The
total purchase price has been allocated to the assets acquired, including
identifiable intangible assets, based on their respective fair values at
the
date of acquisition. Goodwill is assigned at the enterprise level. The purchase
price was allocated to intangibles based on management's estimate and an
independent valuation. The results of the iPath operations have been included
in
the Company's consolidated financial statements since June 10,
2005.
The
purchase price allocation is as follows (in millions):
Intangibles:
|
|
|
|
Customer
relationships
|
|
$
|
0.7
|
|
Customer
backlog
|
|
|
0.2
|
|
Non-compete
agreements
|
|
|
0.1
|
|
|
|
|
|
|
Goodwill
|
|
|
7.3
|
|
|
|
|
|
|
Tangible
assets and liabilities acquired:
|
|
|
|
|
Accounts
receivable
|
|
|
1.6
|
|
Property
and equipment
|
|
|
0.1
|
|
Accrued
expenses
|
|
|
(0.1
|
)
|
Net
assets acquired
|
|
$
|
9.9
|
|
The
Company estimates that the intangible assets acquired have useful lives of
six
months to five years.
Acquisition
of Vivare, LP
On
September 2, 2005, the Company acquired Vivare, LP (“Vivare”), a privately
held technology consulting company, for $9.8 million. The purchase price
consists of $4.9 million in cash, transaction costs of approximately
$500,000, and 618,500 shares of the Company's common stock valued at
approximately $7.03 per share (approximately $4.4 million worth of
Company's common stock). The total purchase price has been allocated to the
assets acquired, including identifiable intangible assets, based on their
respective fair values at the date of acquisition. Goodwill is assigned at
the
enterprise level. The purchase price was allocated to intangibles based on
management's estimate and an independent valuation. The results of Vivare's
operations have been included in the Company's consolidated financial statements
since September 2, 2005.
The
purchase price allocation is as follows (in millions):
Intangibles:
|
|
|
|
Customer
relationships
|
|
$
|
1.0
|
|
Customer
backlog
|
|
|
0.1
|
|
Non-compete
agreements
|
|
|
0.1
|
|
|
|
|
|
|
Goodwill
|
|
|
6.8
|
|
|
|
|
|
|
Tangible
assets acquired:
|
|
|
|
|
Accounts
receivable
|
|
|
1.7
|
|
Property
and equipment
|
|
|
0.1
|
|
Net
assets acquired
|
|
$
|
9.8
|
|
The
Company estimates that the intangible assets acquired have useful lives of
nine
months to six years.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Acquisition
of Bay Street Solutions, Inc.
On
April
7, 2006, the Company acquired Bay Street Solutions, Inc. (“Bay Street”), a
national customer relationship management consulting firm, for approximately
$9.8 million. The purchase price consists of approximately $4.1 million in
cash, transaction costs of $636,000, and 464,569 shares of the Company's
common
stock valued at approximately $12.18 per share (approximately $5.7 million
worth
of the Company's common stock) less the value of those shares subject to
a lapse
acceleration right of approximately $630,000, as determined by a third party
valuation firm. The total purchase price has been allocated to the assets
acquired, including identifiable intangible assets, based on their respective
fair values at the date of acquisition. Goodwill is assigned at the enterprise
level. The purchase price was allocated to intangibles based on management's
estimate and an independent valuation. Management expects to finalize the
purchase price allocation within twelve months of the acquisition date as
certain initial accounting estimates are resolved. The results of Bay Street's
operations have been included in the Company's consolidated financial statements
since April 7, 2006.
The
preliminary purchase price allocation is as follows (in millions):
Intangibles:
|
|
|
|
Customer
relationships
|
|
$
|
1.6
|
|
Customer
backlog
|
|
|
0.2
|
|
Non-compete
agreements
|
|
|
0.1
|
|
|
|
|
|
|
Goodwill
|
|
|
6.4
|
|
|
|
|
|
|
Tangible
assets acquired:
|
|
|
|
|
Accounts
receivable
|
|
|
2.4
|
|
Other
assets
|
|
|
0.6
|
|
Property
and equipment
|
|
|
0.1
|
|
Accrued
expenses
|
|
|
(1.6
|
)
|
Net
assets acquired
|
|
$
|
9.8
|
|
The
Company estimates that the intangible assets acquired have useful lives of
four
months to six years.
Acquisition
of Insolexen, Corp.
On
May
31, 2006, the Company acquired Insolexen, Corp. (“Insolexen”), a business
integration consulting firm, for approximately $15.1 million. The purchase
price
consists of approximately $7.7 million in cash, transaction costs of
$695,000, and 522,944 shares of the Company's common stock valued at
approximately $13.72 per share (approximately $7.2 million worth of the
Company's common stock) less the value of those shares subject to a lapse
acceleration right of approximately $613,000, as determined by a third party
valuation firm. The total purchase price has been allocated to the assets
acquired, including identifiable intangible assets, based on their respective
fair values at the date of acquisition. Goodwill is assigned at the enterprise
level. The purchase price was allocated to intangibles based on management's
estimate and an independent valuation. Management expects to finalize the
purchase price allocation within twelve months of the acquisition date as
certain initial accounting estimates are resolved. The results of Insolexen's
operations have been included in the Company's consolidated financial statements
since May 31, 2006.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The
preliminary purchase price allocation is as follows (in millions):
|
|
|
|
Intangibles:
|
|
|
|
Customer
relationships
|
|
$
|
2.8
|
|
Customer
backlog
|
|
|
0.4
|
|
Non-compete
agreements
|
|
|
0.1
|
|
|
|
|
|
|
Goodwill
|
|
|
10.5
|
|
|
|
|
|
|
Tangible
assets and liabilities acquired:
|
|
|
|
|
Accounts
receivable
|
|
|
3.9
|
|
Other
assets
|
|
|
2.1
|
|
Accrued
expenses
|
|
|
(4.7
|
)
|
Net
assets acquired
|
|
$
|
15.1
|
|
The
Company estimates that the intangible assets acquired have useful lives of
seven
months to six years.
Acquisition
of the Energy, Government and General Business (EGG) division of Digital
Consulting & Software Services, Inc.
On
July
21, 2006, the Company acquired the Energy, Government and General Business
(“EGG”) division of Digital Consulting & Software Services, Inc., a systems
integration consulting business, for approximately $13.1 million. The purchase
price consists of approximately $6.4 million in cash, transaction costs of
approximately $275,000, and 511,382 shares of the Company's common stock
valued
at approximately $12.71 per share (approximately $6.5 million worth of the
Company's common stock) less the value of those shares subject to a lapse
acceleration right of approximately $92,000, as determined by a third party
valuation firm. The total purchase price has been allocated to the assets
acquired, including identifiable intangible assets, based on their respective
fair values at the date of acquisition. Goodwill is assigned at the enterprise
level. The purchase price was allocated to intangibles based on management's
estimate and an independent valuation. Management expects to finalize the
purchase price allocation within twelve months of the acquisition date as
certain initial accounting estimates are resolved. The results of EGG's
operations have been included in the Company's consolidated financial statements
since July 21, 2006.
The
preliminary purchase price allocation is as follows (in millions):
|
|
|
|
Intangibles:
|
|
|
|
Customer
relationships
|
|
$
|
3.7
|
|
Customer
backlog
|
|
|
0.5
|
|
Non-compete
agreements
|
|
|
0.1
|
|
|
|
|
|
|
Goodwill
|
|
|
6.3
|
|
|
|
|
|
|
Tangible
assets and liabilities acquired:
|
|
|
|
|
Accounts
receivable
|
|
|
3.7
|
|
Other
assets
|
|
|
0.4
|
|
Accrued
expenses
|
|
|
(1.6
|
)
|
Net
assets acquired
|
|
$
|
13.1
|
|
The
Company estimates that the intangible assets acquired have useful lives of
five
months to six years.
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Pro-forma
Results of Operations
The
following presents the unaudited pro forma combined results of operations
of the
Company with iPath, Vivare, Bay Street, Insolexen, and EGG for the years
ended
December 31, 2006 and 2005, after giving effect to certain pro forma adjustments
related to the amortization of acquired intangible assets and assuming these
companies were acquired as of the beginning of each period presented. These
unaudited pro forma results are not necessarily indicative of the actual
consolidated results of operations had the acquisitions actually occurred
on
January 1, 2005 and January 1, 2006 or of future results of operations of
the
consolidated entities (in thousands, except per share
information):
|
|
December
31,
|
|
|
|
2006
|
|
|
2005
|
|
Revenues
|
|
$ |
181,953
|
|
|
$ |
148,833
|
|
Net
income
|
|
$ |
9,132
|
|
|
$ |
8,464
|
|
Basic
income per share
|
|
$ |
0.36
|
|
|
$ |
0.35
|
|
Diluted
income per share
|
|
$ |
0.32
|
|
|
$ |
0.31
|
|
15.
Quarterly Financial Results (Unaudited)
The
following tables set forth certain unaudited supplemental quarterly financial
information for the years ended December 31, 2006 and 2005. The quarterly
operating results are not necessarily indicative of future results of
operations. The financial data presented is not directly comparable between
periods as a result of the adoption of Statement of Financial Accounting
Standards No. 123R (As Amended), Share Based Payment (“SFAS 123R”)
in the first quarter of 2006 and three acquisitions in 2006 and two
acquisitions in 2005 (in thousands, except per share data):
|
|
Three
Months Ended,
|
|
|
March
31,
2006
|
|
|
June
30,
2006
|
|
|
September
30,
2006
|
|
|
December
31,
2006
|
|
|
(Unaudited)
|
Revenues:
|
|
|
Services
|
|
$ |
25,606
|
|
|
$ |
32,751
|
|
|
$ |
40,219
|
|
|
$ |
39,145
|
|
Software
|
|
|
2,682
|
|
|
|
2,587
|
|
|
|
1,532
|
|
|
|
7,635
|
|
Reimbursable
expenses
|
|
|
1,356
|
|
|
|
2,172
|
|
|
|
2,543
|
|
|
|
2,698
|
|
Total
revenues
|
|
$ |
29,644
|
|
|
$ |
37,510
|
|
|
$ |
44,294
|
|
|
$ |
49,478
|
|
Gross
margin
|
|
$ |
9,288
|
|
|
$ |
13,178
|
|
|
$ |
15,854
|
|
|
|
15,437
|
|
Income
from operations
|
|
$ |
3,057
|
|
|
$ |
4,027
|
|
|
$ |
4,840
|
|
|
$ |
5,159
|
|
Income
before income taxes
|
|
$ |
3,034
|
|
|
$ |
3,900
|
|
|
$ |
4,675
|
|
|
$ |
5,241
|
|
Net
income
|
|
$ |
1,705
|
|
|
$ |
2,255
|
|
|
$ |
2,834
|
|
|
$ |
2,774
|
|
Basic
net income per share
|
|
$ |
0.07
|
|
|
$ |
0.09
|
|
|
$ |
0.11
|
|
|
$ |
0.10
|
|
Diluted
net income per share
|
|
$ |
0.07
|
|
|
$ |
0.08
|
|
|
$ |
0.10
|
|
|
$ |
0.10
|
|
|
|
|
|
|
|
Three
Months Ended,
|
|
|
|
March
31,
2005
|
|
June
30,
2005
|
|
September
30,
2005
|
|
December
31,
2005
|
|
|
|
(Unaudited)
|
|
Revenues:
|
|
|
Services
|
|
$ |
17,657
|
|
|
$ |
19,234
|
|
|
$ |
23,157
|
|
|
$ |
23,691
|
|
Software
|
|
|
1,407
|
|
|
|
1,393
|
|
|
|
1,918
|
|
|
|
4,669
|
|
Reimbursable
expenses
|
|
|
660
|
|
|
|
1,034
|
|
|
|
1,048
|
|
|
|
1,129
|
|
Total
revenues
|
|
$ |
19,724
|
|
|
$ |
21,661
|
|
|
$ |
26,123
|
|
|
$ |
29,489
|
|
Gross
margin
|
|
$ |
6,720
|
|
|
$ |
7,283
|
|
|
$ |
9,298
|
|
|
|
9,117
|
|
Income
from operations
|
|
$ |
2,532
|
|
|
$ |
2,756
|
|
|
$ |
3,555
|
|
|
$ |
3,432
|
|
Income
before income taxes
|
|
$ |
2,420
|
|
|
$ |
2,650
|
|
|
$ |
3,359
|
|
|
$ |
3,245
|
|
Net
income
|
|
$ |
1,488
|
|
|
$ |
1,627
|
|
|
$ |
2,066
|
|
|
$ |
1,996
|
|
Basic
net income per share
|
|
$ |
0.07
|
|
|
$ |
0.08
|
|
|
$ |
0.09
|
|
|
$ |
0.09
|
|
Diluted
net income per share
|
|
$ |
0.06
|
|
|
$ |
0.07
|
|
|
$ |
0.08
|
|
|
$ |
0.08
|
|
PERFICIENT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16.
Subsequent Event
On
February 20, 2007, the Company consummated the acquisition of E-Tech
Solutions. The Company paid approximately $12.2 million consisting of
approximately $6.1 million in cash and $6.1 million worth of the Company's
common stock, subject to certain post-closing adjustments. As required,
the Company will use the closing price of the its common stock at or near
the
close date in reporting the value of the stock consideration paid in the
acquisition, which was $20.34. The Company issued 306,248 shares of its common
stock in connection with the acquisition.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Board
of Directors and Stockholders
Perficient,
Inc.
Austin,
Texas
We
have
audited the accompanying consolidated balance sheets of Perficient, Inc.
as of
December 31, 2006 and 2005 and the related consolidated statements of income,
stockholders' equity and comprehensive income, and cash flows for each of
the
three years in the period ended December 31, 2006. 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 the standards of the Public Company
Accounting Oversight Board (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, 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 consolidated financial statements referred to above present
fairly,
in all material respects, the financial position of Perficient, Inc. at December
31, 2006 and 2005, and the results of its operations and its cash flows for
each
of the three years in the period ended December 31, 2006
, in conformity with accounting principles generally
accepted in the United States of America.
As
discussed in Note 1 to the consolidated financial statements, effective
January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123(R), Share-Based Payment
.
We
also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Perficient, Inc.'s
internal control over financial reporting as of December 31, 2006, based
on
criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) and our report dated March 1, 2007 expressed
an
unqualified opinion thereon.
/s/
BDO Seidman, LLP
Houston,
Texas
March
1,
2007, except Note 2
as
to
which date is August 13, 2007
Item
9A. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
We
have
established disclosure controls and procedures to ensure that material
information relating to the Company, including its consolidated subsidiaries,
is
made known to the officers who certify the Company's financial reports and
to
other members of senior management and the Board of Directors.
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the Company's reports under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to management, including the principal executive officer
and
principal financial officer of the Company, as appropriate, to allow timely
decisions regarding required disclosure. The Company's management, with the
participation of the Company's principal executive officer and principal
financial officer, has evaluated the effectiveness of the Company's disclosure
controls and procedures as of the end of the fiscal year covered by this
Annual
Report on Form 10-K/A. As described below under Management's Annual Report
on
Internal Control Over Financial Reporting, the Company has determined that
its
disclosure controls and procedures were effective.
Management's
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act
Rules
13a-15(f). In fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs
of
control procedures. The objectives of internal control include providing
management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition, and that
transactions are executed in accordance with management's authorization and
recorded properly to permit the preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United
States
of America. Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer,
we
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on our assessment under those criteria, management concluded
that the Company's internal control over financial reporting was effective
as of
December 31, 2006.
The Company acquired Bay Street, Insolexen, and EGG in April, May, and July
of
2006, respectively. As permitted by SEC guidance, management excluded these
acquired companies from its assessment of the effectiveness of the Company's
internal control over financial reporting as of December 31, 2006. In total,
Bay
Street, Insolexen, and EGG represented 29% and 17% of the Company's total
assets
and total revenues, respectively, as of and for the year ended December 31,
2006. Excluding identifiable intangible assets and goodwill recorded in the
business combination, Bay Street, Insolexen, and EGG represented 6% of the
Company's total assets as of December 31, 2006.
Our
management's assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2006 has been audited by BDO Seidman,
LLP, an independent registered public accounting firm, as stated in their
report
which is included herein.
Changes
in Internal Control Over Financial Reporting
During
the quarter ended December 31, 2006, we continued our remediation efforts
from
the prior quarters in order to fully remediate our previously reported material
weakness. This includes performing the following:
|
·
|
Verified
employee security access to our automated general ledger system
is
appropriate related to the employee's responsibilities and further
strengthened our controls surrounding general ledger access granted
to our
new accounting personnel;
|
|
|
|
|
·
|
Established
certain spreadsheet controls including required detail review of
key
spreadsheets, limited access to key spreadsheets on a central server
and
assignment of appropriate rights, a controlled process for requesting
changes to a spreadsheet, and a process to back up spreadsheets
on a
regular basis so that complete and accurate information is available
for
financial reporting;
|
|
|
|
|
·
|
Activated
certain additional application and prevent controls with the assistance
of
our general ledger software provider and our internal technology
personnel; and
|
|
|
|
|
·
|
Engaged
a third party to assist with project management and strategic oversight
of
our remediation of the 2005 significant deficiencies and material
weakness
and the 2006 control review process.
|
In
addition, during the year ended December 31, 2006, we have hired several
new
employees to further diversify accounting responsibilities, most notably
the
addition of a new Chief Financial Officer, but also including various senior
and
staff accountants.
The
cumulative impact of these activities established during 2006 occurred and
management obtained sufficient evidence of the operating effectiveness of
such
additional controls during the year ended December 31, 2006. Accordingly,
management has concluded that our previously reported material weakness caused
principally by inadequate staffing levels has been remediated.
As
discussed in Note 2 to the Notes to Consolidated Financial Statements, in
August
2007, it was determined that certain previously reported payments associated
with our business acquisitions were incorrectly included as a component of
cash
flows from operating activities instead of from investing activities in the
Company’s Consolidated Statement of Cash Flows. These errors were promptly
brought to the attention of our audit committee and former auditors as we
worked
to resolve such errors with our current auditors. As a result of correcting
these misclassifications, in the annual report of Form 10-K/A, we have restated
our Consolidated Statements of Cash Flows for the years ended December 31,
2006
and 2005. We have also revised our Notes to Consolidated Financial Statements
as
necessary to reflect these errors.
These
errors resulted from a significant deficiency in the procedures to reconcile
and
review the impact of acquisitions on the Consolidated Statement of Cash Flows.
The controls in place regarding reconciliation and review of cash flows related
to acquisition activity represent a very narrow subset of the Company’s
financial closing and disclosure controls and an even narrower element of
the
Company’s overall financial control structure. The Company does not believe that
this restatement resulted from a breakdown in its general controls; rather
represents an isolated classification error for specific types of acquisition
payments. In light of these reclassification errors identified, we
have implemented new procedures for reconciling and reviewing the Consolidated
Statement of Cash Flows related to business acquisitions. Management
believes that controls are now in place to ensure similar errors do not occur
again.
In
connection with the restatement and the filing of this Form 10-K/A, the Company
re-evaluated, with the participation of management, including the Company’s
Chief Executive Officer and Chief Financial Officer, the effectiveness of
the
design and operation of the Company’s disclosure controls and procedures as of
December 31, 2006. The Company considered that the restatement of
financial statements in prior filings made with the SEC may be an indicator
of
the existence of weaknesses in the design or operation of internal control
over
financial reporting. Based on such evaluation, the Chief Executive
Officer and the Chief Financial Officer concluded that the Company’s original
conclusions with respect to the effectiveness of disclosure controls and
procedures remain appropriate and that the disclosure controls and procedures
were effective at a reasonable assurance level as of December 31, 2006. In
arriving at such conclusion, management considered the facts and circumstances
that resulted in the reclassifications in the statements of cash flows,
including considerations with respect to its internal controls over financial
reporting. Management determined that the reclassifications were not the
result
of a material weakness within internal control over financial
reporting.
In
concluding that the Company’s disclosure controls and procedures were effective
as of December 31, 2006, management considered, among other things, the
circumstances that resulted in the restatement of its previously issued
financial statements as more fully described in Note 2, Restatement of Financial
Information, to the consolidated financial statements included within this
Form
10-K/A.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders
Perficient,
Inc.
Austin,
Texas
We
have
audited management's assessment, included in the accompanying Management's
Report on Internal Control over Financial Reporting, that Perficient, Inc.
(“the
Company”) maintained effective internal control over financial reporting as of
December 31, 2006, based on the criteria established in Internal
Control-Integrated Framework, issued by the Committee of Sponsoring
Organizations, or COSO, of the Treadway Commission. The Company's management
is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the Company's internal
control
over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing
such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
company's internal control over financial reporting is a process designed
to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control
over
financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets
of
the Company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts
and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Company's assets that could have
a
material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
As
indicated in the accompanying Management's Report on Internal Control Over
Financial Reporting, the scope of management's assessment of the effectiveness
of internal control over financial reporting includes all of the Company's
consolidated operations, except for the acquired operations of Bay Street
Solutions, Inc., Insolexen Corporation, and the Energy, Government and General
Business (“EGG”) division of Digital Consulting & Software Services, Inc.
(collectively the “Acquired Companies”), each of which the Company acquired
during 2006. The Acquired Companies represented 29% of the Company's total
assets as of December 31, 2006, and 17% of the Company's revenues for the
year
ended December 31, 2006. Our audit of internal control over financial reporting
of the Company also excluded an evaluation of the internal control over
financial reporting of the Acquired Companies' operations.
In
our
opinion, management's assessment that Perficient, Inc. maintained effective
internal control over financial reporting as of December 31, 2006 is fairly
stated in all material respects, based on the criteria established in Internal
Control-Integrated Framework issued by COSO. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2006, based on the criteria established in Internal
Control-Integrated Framework issued by COSO.
We
have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Perficient,
Inc. as of December 31, 2006 and 2005, and the related consolidated statements
of income, stockholders' equity, and cash flows for each of the three years
in
the period ended December 31, 2006. Our report on these financial
statements dated, March 1, 2007, expressed an unqualified opinion
thereon.
/s/
BDO Seidman, LLP
Houston,
Texas
March
1, 2007, except Note 2
as
to
which date is August 13, 2007
Item
15. Exhibits, Financial Statement
Schedules.
(a)
1.
|
Financial
Statements
|
The
following consolidated statements are included within Item 8 under the following
captions:
Index
|
|
|
Page
|
|
Consolidated
Balance Sheets
|
|
|
11
|
|
Consolidated
Statements of Income
|
|
|
12
|
|
Consolidated
Statements of Changes in Stockholders' Equity
|
|
|
13
|
|
Consolidated
Statements of Cash Flows
|
|
|
14
|
|
Notes
to Consolidated Financial Statements
|
|
|
15-33
|
|
Report
of Independent Registered Public Accounting Firm
|
|
|
34
|
|
2.
|
Financial
Statement Schedules
|
No financial statement schedules are required to be filed by Items 8 and
15(d)
because they are not required or are not applicable, or the required information
is set forth in the applicable financial statements or notes
thereto.
See Index to Exhibits on page 40.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of
1934, the Registrant has duly caused this report to be signed on its behalf
by
the undersigned, thereunto duly authorized.
|
|
|
|
PERFICIENT,
INC.
|
|
|
|
Date:
August 13, 2007
|
By:
|
/s/ John
T. McDonald
|
|
John
T. McDonald
|
|
Chief
Executive Officer (Principal Executive
Officer)
|
|
|
|
Date:
August 13, 2007
|
By:
|
/s/ Paul
E. Martin
|
|
Paul
E. Martin
|
|
Chief
Financial Officer (Principal Financial
Officer)
|
Date:
August 13, 2007
|
By:
|
/s/ Richard
T. Kalbfleish
|
|
Richard
T. Kalbfleish
|
|
Vice
President of Finance and Administration (Principal Accounting
Officer)
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the registrant and in
the
capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/
John T. McDonald
|
|
|
Chief
Executive Officer and
|
|
|
August
13, 2007
|
|
John
T. McDonald
|
|
|
Chairman
of the Board (Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
/s/
Ralph C. Derrickson*
|
|
|
Director
|
|
|
August
13, 2007
|
|
Ralph
C. Derrickson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Max D. Hopper*
|
|
|
Director
|
|
|
August
13, 2007
|
|
Max
D. Hopper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Kenneth R. Johnsen*
|
|
|
Director
|
|
|
August
13, 2007
|
|
Kenneth
R. Johnsen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
David S. Lundeen*
|
|
|
Director
|
|
|
August
13, 2007
|
|
David
S. Lundeen
|
|
|
|
|
|
|
|
*BY:
/s/ Paul E. Martin
|
Paul
E. Martin
|
Attorney-in-Fact
INDEX
TO EXHIBITS
Exhibit
Number
|
Description
|
2.1
|
Asset
Purchase Agreement, dated as of June 10, 2005, by and among
Perficient, Inc., Perficient iPath, Inc. and iPath Solutions, Ltd.,
previously filed with the Securities and Exchange Commission as
an Exhibit
to our Current Report on Form 8-K filed on June 15, 2005 and incorporated
herein by reference
|
|
|
2.2
|
Asset
Purchase Agreement, dated as of September 2, 2005, by and among
Perficient, Inc., Perficient Vivare, Inc., Vivare, LP and the other
signatories thereto, previously filed with the Securities and Exchange
Commission as an Exhibit to our Current Report on Form 8-K filed
on
September 9, 2005 and incorporated herein by reference
|
|
|
2.3
|
Agreement
and Plan of Merger, dated as of April 6, 2006, by and among Perficient,
Inc., PFT MergeCo, Inc., Bay Street Solutions, Inc. and the other
signatories thereto, previously filed with the Securities and Exchange
Commission as an Exhibit to our Current Report on Form 8-K filed
on April
12, 2006 and incorporated herein by reference
|
|
|
2.4
|
Agreement
and Plan of Merger, dated as of May 31, 2006, by and among Perficient,
Inc., PFT MergeCo II, Inc., Insolexen, Corp., HSU Investors, LLC,
Hari
Madamalla, Steve Haglund and Uday Yallapragada, previously filed
with the
Securities and Exchange Commission as an Exhibit to our Current
Report on
Form 8-K filed on June 5, 2006 and incorporated herein by
reference
|
|
|
2.5
|
Asset
Purchase Agreement, dated as of July 20, 2006, by and among Perficient,
Inc., Perficient DCSS, Inc. and Digital Consulting & Software
Services, Inc., previously filed with the Securities and Exchange
Commission as an Exhibit to our Current Report on Form 8-K filed
on July
26, 2006 and incorporated herein by reference
|
|
|
3.1
|
Certificate
of Incorporation of Perficient, Inc., previously filed with the
Securities
and Exchange Commission as an Exhibit to our Registration Statement
on
Form SB-2 (File No. 333-78337) declared effective on July 28, 1999
by the
Securities and Exchange Commission and incorporated herein by
reference
|
|
|
3.2
|
Certificate
of Amendment to Certificate of Incorporation of Perficient, Inc.,
previously filed with the Securities and Exchange Commission as
an Exhibit
to our Form 8-A filed with the Securities and Exchange Commission
pursuant
to Section 12(g) of the Securities Exchange Act of 1934 on February
15,
2005 and incorporated herein by reference
|
|
|
3.3
|
Certificate
of Amendment to Certificate of Incorporation of Perficient, Inc.,
previously filed with the Securities and Exchange Commission as
an Exhibit
to our Registration Statement on Form S-8 (File No. 333-130624)
filed on
December 22, 2005 and incorporated herein by reference
|
|
|
3.4
|
Bylaws
of Perficient, Inc., previously filed with the Securities and Exchange
Commission as an Exhibit to our Registration Statement on Form
SB-2 (File
No. 333-78337) declared effective on July 28, 1999 by the Securities
and
Exchange Commission and incorporated herein by
reference
|
|
|
4.1
|
Specimen
Certificate for shares of common stock, previously filed with the
Securities and Exchange Commission as an Exhibit to our Registration
Statement on Form SB-2 (File No. 333-78337) declared effective
on July 28,
1999 by the Securities and Exchange Commission and incorporated
herein by
reference
|
|
|
4.2
|
Warrant
granted to Gilford Securities Incorporated, previously filed with
the
Securities and Exchange Commission as an Exhibit to our Registration
Statement on Form SB-2 (File No. 333-78337) declared effective
on July 28,
1999 by the Securities and Exchange Commission and incorporated
herein by
reference
|
Exhibit
Number
|
Description
|
4.3
|
Form
of Common Stock Purchase Warrant, previously filed with the Securities
and
Exchange Commission as an Exhibit to our Current Report on Form
8-K filed
on January 17, 2002 and incorporated herein by
reference
|
|
|
4.4
|
Form
of Warrant, previously filed with the Securities and Exchange Commission
as an Exhibit to our Registration Statement on Form S-3 (File No.
333-117216) and incorporated by reference herein
|
|
|
10.1
|
Perficient,
Inc. Amended and Restated 1999 Stock Option/Stock Issuance Plan,
previously filed with the Securities and Exchange Commission as
an Exhibit
to our annual report on Form 10-K for the year ended December 31,
2005 and
incorporated by reference herein
|
|
|
10.2
|
Form
of Stock Option Agreement, previously filed with the Securities
and
Exchange Commission as an Exhibit to our Annual Report on Form
10-KSB for
the fiscal year ended December 31, 2004 and incorporated herein
by
reference
|
|
|
10.3
|
Perficient,
Inc. Employee Stock Purchase Plan, previously filed with the Securities
and Exchange Commission as Appendix A to the Registrant's Schedule
14A
(File No. 001-15169) on October 13, 2005 and incorporated herein
by
reference
|
|
|
10.4
|
Form
of Restricted Stock Agreement, previously filed with the Securities
and
Exchange Commission as an Exhibit to our annual report on Form
10-K for
the year ended December 31, 2005 and incorporated by reference
herein
|
|
|
10.5
|
Form
of Indemnity Agreement between Perficient, Inc. and each of our
directors
and officers, previously filed with the Securities and Exchange
Commission
as an Exhibit to our Registration Statement on Form SB-2 (File
No.
333-78337) declared effective on July 28, 1999 by the Securities
and
Exchange Commission and incorporated herein by
reference
|
|
|
10.6
|
Offer
Letter, dated July 20, 2006, by and between Perficient, Inc. and
Mr. Paul
E. Martin, previously filed with the Securities and Exchange Commission
as
an Exhibit to our Current Report on Form 8-K filed on July 26,
2006 and
incorporated herein by reference
|
|
|
10.7
|
Offer
Letter Amendment, dated August 31, 2006, by and between Perficient,
Inc.
and Mr. Paul E. Martin, previously filed with the Securities and
Exchange
Commission as an Exhibit to our Current Report on Form 8-K filed
on
September 1, 2006 and incorporated herein by reference
|
|
|
10.8†
|
Employment
Agreement between Perficient, Inc. and John T. McDonald dated March
28,
2006, and effective as of January 1, 2006, previously filed with
the
Securities and Exchange Commission as an Exhibit to our annual
report on
Form 10-K for the year ended December 31, 2005 and incorporated
by
reference herein
|
|
|
10.9†
|
Employment
Agreement between Perficient, Inc. and Jeffrey Davis dated August
3, 2006,
and effective as of July 1, 2006 filed with the Securities and
Exchange
Commission as an Exhibit to our Quarterly Report on Form 10-Q filed
on
August 9, 2006 and incorporated herein by reference
|
|
|
10.10
|
Amended
and Restated Loan and Security Agreement by and among Silicon Valley
Bank,
KeyBank National Association, Perficient, Inc., Perficient Canada
Corp.,
Perficient Genisys, Inc., Perficient Meritage, Inc. and Perficient
Zettaworks, Inc. dated effective as of June 3, 2005, previously
filed with
the Securities and Exchange Commission as an Exhibit to our annual
report
on Form 10-K for the year ended December 31, 2005 and incorporated
herein
by reference
|
|
|
10.11
|
Amendment
to Amended and Restated Loan and Security Agreement, dated as of
June 29,
2006, by and among Silicon Valley Bank, KeyBank National Association,
Perficient, Inc., Perficient Genisys, Inc., Perficient Canada Corp.,
Perficient Meritage, Inc., Perficient Zettaworks, Inc., Perficient
iPath,
Inc., Perficient Vivare, Inc., Perficient Bay Street, LLC and Perficient
Insolexen, LLC, previously filed with the Securities and Exchange
Commission as an Exhibit to our Current Report on Form 8-K filed
on July
5, 2006 and incorporated herein by
reference
|
Exhibit
Number
|
Description
|
10.12
|
Lease
by and between Cornerstone Opportunity Ventures, LLC and Perficient,
Inc.,
previously filed with the Securities and Exchange Commission as
an Exhibit
to our annual report on Form 10-K for the year ended December 31,
2005 and
incorporated by reference herein
|
|
|
10.13
|
First
Amended and Restated Investor Rights Agreements dated as of June
26, 2002
by and between Perficient, Inc. and the Investors listed on Exhibits
A and
B thereto, previously filed with the Securities and Exchange Commission
as
an Exhibit to our Current Report on Form 8-K filed on July 18,
2002 and
incorporated by reference herein
|
|
|
10.14
|
Securities
Purchase Agreement, dated as of June 16, 2004, by and among Perficient,
Inc., Tate Capital Partners Fund, LLC, Pandora Select Partners,
LP, and
Sigma Opportunity Fund, LLC, previously filed with the Securities
and
Exchange Commission as an Exhibit to our Current Report on Form
8-K filed
on June 23, 2004 and incorporated by reference herein
|
|
|
14.1
|
Corporate
Code of Business Conduct and Ethics, previously filed with the
Securities
and Exchange Commission on Form 10-KSB/A for the year ended December
31,
2003 and incorporated by reference herein
|
|
|
14.2
|
Financial
Code of Ethics, previously filed with the Securities and Exchange
Commission on Form 10-KSB/A for the year ended December 31, 2003
and
incorporated by reference herein
|
|
|
21.1
|
Subsidiaries
(included as an exhibit to our Annual Report on Form 10-K filed
on March
5, 2007)
|
|
|
23.1*
|
Consent
of BDO Seidman, LLP
|
|
|
24.1
|
Power
of Attorney (included on the signature page to our Annual Report
on Form
10-K filed on March 5, 2007)
|
|
|
31.1*
|
Certification
by the Chief Executive Officer of Perficient, Inc. as required
by Section
302 of the Sarbanes-Oxley Act of 2002
|
|
|
31.2*
|
Certification
by the Chief Financial Officer of Perficient, Inc. as required
by Section
302 of the Sarbanes-Oxley Act of 2002
|
|
|
32.1*
|
Certification
by the Chief Executive Officer and Chief Financial Officer of Perficient,
Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section
906 of the Sarbanes-Oxley Act of
2002
|
†
|
Identifies
an Exhibit that consists of or includes a management contract or
compensatory plan or arrangement.
|