Attached files
file | filename |
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8-K/A - FORM 8-K/A - GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC. | c13418e8vkza.htm |
EX-99.3 - EXHIBIT 99.3 - GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC. | c13418exv99w3.htm |
EX-99.5 - EXHIBIT 99.5 - GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC. | c13418exv99w5.htm |
EX-99.4 - EXHIBIT 99.4 - GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC. | c13418exv99w4.htm |
EX-23.1 - EXHIBIT 23.1 - GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC. | c13418exv23w1.htm |
EX-23.2 - EXHIBIT 23.2 - GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC. | c13418exv23w2.htm |
Exhibit 99.2
SIGNATURE GOVERNMENT SOLUTIONS, LLC
CONDENSED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2010
SIGNATURE GOVERNMENT SOLUTIONS, LLC
CONDENSED BALANCE SHEETS
September 30, 2010 and December 31, 2009
September 30, | December 31, | |||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash |
$ | 579,347 | $ | 30,547 | ||||
Accounts receivable, net of allowance for uncollectible
accounts (2010, $122,169; 2009, $123,752) |
6,557,412 | 5,599,406 | ||||||
Employee notes receivable |
134,628 | 116,750 | ||||||
Due from parent |
2,676,925 | 459,751 | ||||||
Prepaid expenses |
31,427 | 6,812 | ||||||
Total current assets |
9,979,739 | 6,213,266 | ||||||
Equipment and leasehold improvements, less
accumulated depreciation |
87,721 | 109,529 | ||||||
Deposits |
18,667 | 18,667 | ||||||
Total assets |
$ | 10,086,127 | $ | 6,341,462 | ||||
LIABILITIES AND MEMBERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 97,920 | $ | 93,552 | ||||
Accrued expenses |
1,739,095 | 675,495 | ||||||
Total current liabilities |
1,837,015 | 769,047 | ||||||
Members equity |
8,249,112 | 5,572,415 | ||||||
Total liabilities and members equity |
$ | 10,086,127 | $ | 6,341,462 | ||||
See Notes to Condensed Financial Statements
-1-
SIGNATURE GOVERNMENT SOLUTIONS, LLC
CONDENSED STATEMENTS OF INCOME
Nine Months Ended September 30, 2010 and One Month Ended September 30, 2009
Nine Months | One Month | |||||||
Ended | Ended | |||||||
September 30, | September 30, | |||||||
2010 | 2009 | |||||||
(Unaudited) | (Unaudited) | |||||||
Revenue |
$ | 26,946,489 | $ | 2,954,745 | ||||
Cost of revenue |
18,275,294 | 1,951,816 | ||||||
Gross profit |
8,671,195 | 1,002,929 | ||||||
Operating expenses: |
||||||||
Selling, recruiting and promotion |
3,753,771 | 406,677 | ||||||
General and administrative |
975,442 | 107,286 | ||||||
Service fees |
1,216,090 | 141,201 | ||||||
Depreciation |
40,195 | 4,296 | ||||||
5,985,498 | 659,460 | |||||||
Income from operations |
2,685,697 | 343,469 | ||||||
Other expenses |
9,000 | 1,000 | ||||||
Net income |
$ | 2,676,697 | $ | 342,469 | ||||
See Notes to Condensed Financial Statements
-2-
SIGNATURE GOVERNMENT SOLUTIONS, LLC
CONDENSED STATEMENTS OF CHANGES IN MEMBERS EQUITY
Nine Months Ended September 30, 2010 and One Month Ended September 30, 2009
Nine Months | One Month | |||||||
Ended | Ended | |||||||
September 30, | September 30, | |||||||
2010 | 2009 | |||||||
(Unaudited) | (Unaudited) | |||||||
Balance, beginning of period |
$ | 5,572,415 | $ | | ||||
Net assets transferred by parent |
| 4,601,748 | ||||||
Net income |
2,676,697 | 342,469 | ||||||
Balance, end of period |
$ | 8,249,112 | $ | 4,944,217 | ||||
See Notes to Condensed Financial Statements
-3-
SIGNATURE GOVERNMENT SOLUTIONS, LLC
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2010 and One Month Ended September 30, 2009
Nine Months | One Month | |||||||
Ended | Ended | |||||||
September 30, | September 30, | |||||||
2010 | 2009 | |||||||
(Unaudited) | (Unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
Net income |
$ | 2,676,697 | $ | 342,469 | ||||
Adjustments to reconcile net income to net
cash flows from operating activities: |
||||||||
Depreciation |
40,195 | 4,296 | ||||||
Provision for bad debts |
51 | 15,334 | ||||||
Changes in operating assets and liabilities, net of
assets and liabilities transferred from parent in 2009: |
||||||||
Accounts receivable |
(958,057 | ) | (498,350 | ) | ||||
Prepaid expenses |
(24,615 | ) | (8,040 | ) | ||||
Accounts payable |
4,368 | 99,213 | ||||||
Accrued expenses |
1,063,600 | 348,372 | ||||||
Net cash flows from operating activities |
2,802,239 | 303,294 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
Acquisition of equipment and
leasehold improvements |
(18,387 | ) | | |||||
Increase in employee notes receivable |
(17,878 | ) | (13,803 | ) | ||||
Net cash flows from investing activities |
(36,265 | ) | (13,803 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
Net amount borrowed by parent |
(2,217,174 | ) | (94,854 | ) | ||||
Net cash flows from financing activities |
(2,217,174 | ) | (94,854 | ) | ||||
Net increase in cash |
548,800 | 194,637 | ||||||
Cash beginning of period |
30,547 | | ||||||
Cash end of period |
$ | 579,347 | $ | 194,637 | ||||
See Notes to Condensed Financial Statements
-4-
SIGNATURE GOVERNMENT SOLUTIONS, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(UNAUDITED)
NOTE 1 NATURE OF OPERATIONS AND FORMATION
Signature Government Solutions, LLC (SGS) is primarily engaged in providing information
technology services and intelligence analysis to the U.S. Government Intelligence Community.
SGS enters into contracts with other government contractors or third party firms. SGS
employees are hired for long-term contracts, typically ranging from two to five years,
throughout the United States and internationally.
As of September 30, 2010, SGS operated an office in Herndon, Virginia.
Prior to September 1, 2009, SGS operated as a component of Signature Consultants, LLC (SCL).
On September 1, 2009, SCL was reorganized and certain of its assets and liabilities were
transferred, at their respective book values, to three newly formed limited liability
companies, including SGS.
SGS was formed as a wholly-owned subsidiary of SCL.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim condensed financial statements for SGS have been prepared
in accordance with U.S. generally accepted accounting principles (GAAP) for interim
financial reporting. Accordingly, certain information and footnote disclosures normally
included in annual financial statements have been condensed or omitted. In the opinion of
management, the accompanying unaudited interim condensed financial statements reflect all
adjustments (consisting of only normal recurring adjustments) considered necessary for a fair
statement of all periods presented.
The results of SGSs operations for any interim periods are not necessarily indicative of the
results of operations for any other interim period or for a full fiscal year. These unaudited
interim condensed financial statements should be read in conjunction with the SGS financial
statements and footnotes for the period from commencement of operations (September 1, 2009)
through December 31, 2009 and for the period January 1, 2009 through August 31, 2009.
Corporate Overhead Allocations
Certain corporate general and administrative costs of SCL have been allocated to SGS in
accordance with a Services Agreement dated September 1, 2009 between SGS and Signature Servco,
LLC, which is majority-owned by a member of SCL. These charges include personnel costs for
support functions such as accounting and human resources. They also include professional fees,
facilities and other costs. These general and administrative costs are allocated to SGS based
upon relative sales.
-5-
SIGNATURE GOVERNMENT SOLUTIONS, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(UNAUDITED)
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition and Cost of Revenue
Revenue as presented on the condensed unaudited statement of income represents services
rendered to customers less sales adjustments and allowances. Reimbursements, including those
related to travel and out-of-pocket expenses are also included in revenue and equivalent
amounts of reimbursable expenses are included in cost of revenue.
SGS recognizes substantially all revenue at the time services are provided and revenue is
recorded on a time and material basis when collectability is reasonably assured. In most
cases, the consultant is an employee of SGS and all costs of employing the consultant,
including payroll and related taxes, insurance costs and reimbursable expenses, are SGSs
responsibility and are included in cost of revenue.
Cash and Cash Equivalents
For the purpose of the statement of cash flows, SGS considers highly liquid money market
instruments with an original maturity of three months or less to be cash equivalents.
Receivables and Credit Policies
Accounts receivable are un-collateralized customer obligations due under normal trade terms,
generally requiring payment within 30 days from the invoice date. Interest does not accrue on
customer balances that are paid after this date.
The carrying amount of accounts receivable is reduced by a valuation allowance that reflects
managements best estimate of the amounts that will not be collected. Management individually
reviews all accounts receivable balances and based on an assessment of current
creditworthiness, estimates the portion, if any, of the balance that will not be collected. A
provision for bad debt has been recorded based upon the assessment.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost, less accumulated depreciation.
Equipment is depreciated using the straight-line method over the respective estimated useful
lives. Leasehold improvements are depreciated over the lesser of the length of the related
leases or the estimated useful lives of the assets. Expenditures for maintenance and repairs
are charged against operations as incurred.
-6-
SIGNATURE GOVERNMENT SOLUTIONS, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(UNAUDITED)
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Long-Lived Assets
SGS reviews its long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by comparison of the carrying amount of any asset to future
net cash flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value, less costs to sell.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts of SGSs financial instruments, including cash and cash equivalents,
accounts receivable, employee notes receivable, accounts payable and accrued expenses
approximate their fair value due to the short term nature of these assets and liabilities.
Income Taxes
Effective September 1, 2009, SGS files consolidated federal and state tax returns with SCL.
Prior to that time, SGS was a wholly-owned division of SCL. Under the provisions of the
Internal Revenue Code, SCL, as a limited liability company, has chosen to be taxed as a
partnership. Accordingly, items of income, loss, deduction and credits flow through to the
individual owners income tax returns and are not taxed at the respective entity level.
However, certain states in which SCL does business impose state income taxes on statutorily
defined allocated revenues or profits at the entity level instead of at the non-resident
member level. In these cases, payments to states are recognized by SCL as tax expense. SGS
records its share of the consolidated state tax expense on a separate return basis. During the
nine months ended September 30, 2010 and the one month ended September 30, 2009, there were no
taxes imposed by state taxing authorities that were allocated to SGS.
-7-
SIGNATURE GOVERNMENT SOLUTIONS, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(UNAUDITED)
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Advertising
SGS incurred advertising costs in the normal course of its business and expenses them as
incurred. SGS did not incur any advertising expense in either of the nine months ended
September 30, 2010 or the one month ended September 30, 2009.
NOTE 3 EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of the following at September 30, 2010 and
December 31, 2009:
Useful Life | September 30, | December 31, | ||||||||||
(In Years) | 2010 | 2009 | ||||||||||
(Unaudited) | ||||||||||||
Computer equipment |
3 - 5 | $ | 19,044 | $ | 9,199 | |||||||
Office furniture and equipment |
5 - 7 | 116,198 | 107,656 | |||||||||
Computer software |
3 | 8,010 | 8,010 | |||||||||
Leasehold improvements |
5 | 142,073 | 142,073 | |||||||||
Less accumulated depreciation |
285,325 | 266,938 | ||||||||||
197,604 | 157,409 | |||||||||||
$ | 87,721 | $ | 109,529 | |||||||||
NOTE 4 CREDIT FACILITY CONTINGENCY
During 2005, SCL entered into a credit facility (Revolving Line) which was collateralized
by all the assets of SCL.
On September 3, 2009, the Revolving Line was amended to include SGS as a co-borrower.
Consequently, the assets of SGS are also considered collateral for the Revolving Line. On
August 31, 2010, SCL entered into a third amendment to the Revolving Line to increase the
credit facility to $20,000,000 and extend the term to August 31, 2013. At September 30,
2010, the outstanding borrowings on the Revolving Line amounted to $1,054,074.
The Revolving Line, as amended, requires SCL to meet certain financial covenants, imposes
restrictions on securing additional indebtedness and limits the amount of allowable capital
expenditures, distributions, and lease payments.
-8-
SIGNATURE GOVERNMENT SOLUTIONS, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(UNAUDITED)
NOTE 5 RELATED PARTY TRANSACTIONS
SGS receives a number of management services from SCL. Charges for these services for the nine
months ended September 30, 2010 and the one month ended September 30, 2009, which are included
in general and administrative expenses in the accompanying condensed unaudited statements of
income, were $1,216,090 and $141,201, respectively.
Included in accounts payable in the accompanying condensed unaudited balance sheet as of
September 30, 2010 and December 31, 2009 are $24,700 and $42,907, respectively, due to
employees for unpaid expense reimbursements.
SGS loans or borrows funds from SCL for working capital purposes. Net amounts due from SCL as
of September 30, 2010 and December 31, 2009 were $2,676,925 and $459,751, respectively.
NOTE 6 LEASES
SGS leases its office space in Herndon, Virginia under a non-cancelable operating agreement
that expires in February 2011.
Rent expense for the nine months ended September 30, 2010 and the one month ended September
30, 2009 totaled $106,578 and $10,787, respectively.
NOTE 7 CONTINGENCIES
SGS may occasionally be involved in litigation claiming damages for the violation of
non-compete agreements as a result of hiring new sales and recruiting professionals and
consultants. SGSs management believes that the outcome of potential claims, if any, would not
have a material effect on SGSs financial position or results of operations.
NOTE 8 MEMBERS EQUITY
Effective September 1, 2009, SGS became a single member LLC that has one class of members
equity. The profit and losses are allocated to the sole member.
NOTE 9 401(K) PROFIT SHARING PLAN
SGS participates in the SCL 401(K) profit sharing plan that covers all employees that are at
least twenty and one-half years old with entry dates determined by employee classification,
but not later than 30 days after employment. Contributions to the plan are at the discretion
of the Board of Directors. SGS has made no contributions since inception of the plan.
-9-
SIGNATURE GOVERNMENT SOLUTIONS, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(UNAUDITED)
NOTE 10 CONCENTRATIONS
For the nine months ended September, 2010 and the one month ended September 30, 2009, the top
three customers represented approximately 61% and 68%, respectively, of total revenue. In
addition, as of September 30, 2010 and December 31, 2009, approximately 51% and 72%,
respectively, of total accounts receivable were due from three customers.
SGS maintains its cash balances at high quality financial institutions, which may, at times,
exceed federally-insured limits. SGS has not experienced any losses on such accounts.
NOTE 11 EMPLOYMENT AGREEMENTS
SGS enters into employment agreements with key members of its management providing for annual
bonuses based upon net profits, as defined, as well as for payments under a profit sharing
agreement. As of September 30, 2010, SGS has accrued expenses totaling $266,157 and $133,564,
respectively, relating to these annual bonus and profit sharing agreements. As of December 31,
2009, SGS has accrued expenses totaling $149,364 and $85,694, respectively, relating to these
annual bonus and profit sharing agreements.
NOTE 12 SUBSEQUENT EVENTS
On November 4, 2010, SCL executed a Purchase Agreement with an unrelated third-party to sell
100% of its membership interest in SGS.
SGS has evaluated subsequent events through November 30, 2010, which is the date the unaudited
interim condensed financial statements were available to be issued.
-10-