-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JGL2hZcw4IComHm9pxYZ6LOL5CrO/iHFXAhJ7r6tsAj3p3OkQcZDPcP1Rw+Eg6WV zy9Sn1c1YjIaOomTS927Aw== 0001015402-03-003421.txt : 20030814 0001015402-03-003421.hdr.sgml : 20030814 20030814164703 ACCESSION NUMBER: 0001015402-03-003421 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DA CONSULTING GROUP INC CENTRAL INDEX KEY: 0001051209 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 760418488 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24055 FILM NUMBER: 03848406 BUSINESS ADDRESS: STREET 1: ONE EXETER PLAZA, FOURTH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6173752800 MAIL ADDRESS: STREET 1: ONE EXETER PLAZA STREET 2: FOURTH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 10-Q 1 doc1.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________to _____________ Commission File Number: 00-24055 DA CONSULTING GROUP, INC. (Exact name of registrant as specified in its charter) Texas 76-0418488 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5847 San Felipe, Suite 1100 77057 Houston, Texas (Zip Code) (Address of principal executive offices) (713) 361-3000 (Registrant's telephone number, including area code) Not applicable (Former name, former address and former fiscal year, if changed since last report) 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 [X] NO [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES [X] NO [ ] NUMBER OF SHARES OUTSTANDING OF COMMON STOCK AS OF AUGUST 14, 2003: 8,418,604 ================================================================================ DA CONSULTING GROUP, INC. INDEX PART I FINANCIAL INFORMATION PAGE NO. -------- Item 1. Financial Statements Condensed Consolidated Balance Sheets at June 30, 2003 (unaudited) and December 31, 2002 . . . . . . . . . . . . . . . 3 Condensed Consolidated Statements of Operations for the Three Months ended June 30, 2003 and 2002 (unaudited) . . . . . 4 Condensed Consolidated Statements of Operations for the Six Months ended June 30, 2003 and 2002 (unaudited) . . . . . . 4 Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2003 and 2002 (unaudited) . . . . . . 5 Notes to Unaudited Condensed Consolidated Financial Statements . . . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk. . . . 15 Item 4. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . 15 PART II OTHER INFORMATION Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . 15 Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 16 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2
PART I-FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DA CONSULTING GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) JUNE 30, DECEMBER 31, 2003 2002 ------------ -------------- ASSETS (Unaudited) ------ Current Assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 240 $ 576 Accounts receivable, net. . . . . . . . . . . . . . . . . . . . . . . . 2,219 3,615 Unbilled revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 50 Deferred tax asset. . . . . . . . . . . . . . . . . . . . . . . . . . . - 160 Prepaid expenses and other current assets 501 255 ------------ -------------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 3,052 4,656 Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . 3,080 3,670 Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 204 Deferred tax asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 840 Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 206 ------------ -------------- Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,551 $ 9,576 ============ ============== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities: Revolving line of credit . . . . . . . . . . . . . . . . . . . . . . . $ 1,396 $ 1,335 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,564 1,268 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,201 3,319 ------------ -------------- Total current liabilities. . . . . . . . . . . . . . . . . . . . . . 6,161 5,922 ------------ -------------- Lease abandonment liabilities . . . . . . . . . . . . . . . . . . . . . . 210 396 ------------ -------------- Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . 130 130 ------------ -------------- Commitments and contingencies Shareholders' Equity: Preferred stock, $0.01 par value: 10,000,000 shares authorized. . . . . - - Common stock, $0.01 par value: 40,000,000 shares authorized; 8,571,777 shares issued; 8,418,604 shares outstanding . . . . . . . . . . . . . 85 85 Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . 34,039 34,039 Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . (31,276) (28,145) Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . (1,276) (1,329) Treasury stock, 153,173 shares at cost. . . . . . . . . . . . . . . . . (1,522) (1,522) ------------ -------------- Total shareholders' equity. . . . . . . . . . . . . . . . . . . . . . 50 3,128 ------------ -------------- Total liabilities and shareholders' equity . . . . . . . . . . . . . $ 6,551 $ 9,576 ============ ==============
The accompanying notes are an integral part of the condensed consolidated financial statements. 3
DA CONSULTING GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2003 2002 2003 2002 -------- ------- -------- -------- Revenue . . . . . . . . . . . . . . . . $ 4,806 $5,419 $ 9,666 $12,317 Cost of revenue . . . . . . . . . . . . 3,439 3,405 6,799 7,180 -------- ------- -------- -------- Gross profit. . . . . . . . . . . . . 1,367 2,014 2,867 5,137 Selling and marketing expense . . . . . 604 606 1,234 1,184 Development expense . . . . . . . . . . 33 36 62 81 General and administrative expense. . . 1,818 2,305 3,548 4,426 -------- ------- -------- -------- Operating loss. . . . . . . . . . . . (1,088) (933) (1,977) (554) -------- ------- -------- -------- Interest expense, net . . . . . . . . . (26) (5) (34) (10) Other expense, net. . . . . . . . . . . (24) (2) (57) (55) -------- ------- -------- -------- Total other expense, net. . . . . . . (50) (7) (91) (65) -------- ------- -------- -------- Loss before taxes . . . . . . . . . . (1,138) (940) (2,068) (619) Provision (benefit) for income taxes. . - (192) 1,063 43 -------- ------- -------- -------- Net loss. . . . . . . . . . . . . . . $(1,138) $ (748) $(3,131) $ (662) ======== ======= ======== ======== Basic loss per share. . . . . . . . . . $ (0.14) $(0.09) $ (0.37) $ (0.08) Weighted average shares outstanding . . 8,419 8,419 8,419 8,419 Diluted loss per share. . . . . . . . . $ (0.14) $(0.09) $ (0.37) $ (0.08) Weighted average shares outstanding . . 8,419 8,419 8,419 8,419
The accompanying notes are an integral part of the condensed consolidated financial statements. 4
DA CONSULTING GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) SIX MONTHS ENDED JUNE 30, 2003 2002 -------- -------- Cash flows from operating activities: Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(3,131) $ (662) -------- -------- Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Loss on disposal of equipment. . . . . . . . . . . . . . . . . . . . . . . . 11 25 Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . 625 1,114 Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,063 43 Changes in operating assets and liabilities: Accounts receivable, net and unbilled revenue . . . . . . . . . . . . . . 1,354 1,040 Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . (246) (60) Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) (35) Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . . (116) (1,043) -------- -------- Total adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,681 1,084 -------- -------- Net cash (used in) provided by operating activities. . . . . . . . . . (450) 422 -------- -------- Cash flows provided by investing activities: Proceeds from sale of property and equipment . . . . . . . . . . . . . . . . . 16 20 Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . (16) (4) -------- -------- Net cash provided by investing activities. . . . . . . . . . . . . . . - 16 -------- -------- Cash flows provided by (used in) financing activities: (Repayment) proceeds from revolving line of credit. . . . . . . . . . . . . . 61 (324) -------- -------- Effect of changes in foreign currency exchange rate on cash and cash equivalents 53 190 -------- -------- (Decrease) increase in cash and cash equivalents . . . . . . . . . . . (336) 304 Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 576 373 -------- -------- Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 240 $ 677 ======== ========
The accompanying notes are an integral part of the condensed consolidated financial statements. 5 DA CONSULTING GROUP, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) ORGANIZATION AND BUSINESS DA Consulting Group, Inc. ("DACG " and, together with its subsidiaries, the "Company") is an international provider of employee education and software solutions to companies investing in business information technology. Through its offices in six countries, DACG delivers customized services for documentation and training necessary for implementation of extended enterprise software applications; technical and non-technical employee education and continuous learning programs; e-Learning applications such as computer-based-training; learning management systems; and consulting on human resource management, change management and change communications. The condensed consolidated financial statements include the accounts of DACG and all wholly owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. (2) BASIS OF PRESENTATION The unaudited condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements for the year ended December 31, 2002 included in the Company's Annual Report on Form 10-K. The unaudited condensed consolidated financial statements included herein have been prepared by the Company without an audit pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to such rules and regulations. Operating results for the six months ended June 30, 2003 are not necessarily indicative of the results which will be realized for the year ending December 31, 2003. The unaudited condensed consolidated financial information included herein reflects all adjustments, consisting only of normal recurring adjustments, which are necessary, in the opinion of management, for a fair presentation of the Company's financial position, results of operations and cash flows for the interim periods presented. New Accounting Pronouncements In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS 146), which addresses accounting for restructuring and similar costs. SFAS 146 supersedes previous accounting guidance, principally Emerging Issues Task Force (EITF) Issue No. 94-3. The Company adopted the provisions of SFAS 146 for restructuring activities initiated after December 31, 2002. SFAS 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF No. 94-3, a liability for an exit cost was recognized at the date of a company's commitment to an exit plan. SFAS 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS 146 may affect the timing of recognizing future restructuring costs as well as the amount recognized. Adoption of SFAS 146 in the first quarter of 2003 did not have a material effect on the Company's financial statements. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure (SFAS 148), which amended SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123). The new standard provides alternative methods of transition for a voluntary change to the fair-value-based method of accounting for stock-based employee compensation. Additionally, the statement amends the disclosure requirements of SFAS 123 to require prominent disclosures in the annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This statement is effective for financial statements for fiscal years ending after December 15, 2002. In compliance with SFAS 148, DACG has elected to continue to follow the intrinsic value method in accounting for its stock-based employee compensation arrangement as defined by Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employee, and has made the applicable disclosures to the condensed consolidated financial statements. In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and 6 Hedging Activities, which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement is effective for contracts entered into or modified after June 3, 2003, and for hedging relationships designated after June 30, 2003. We do not expect that the adoption of this Statement will have a material impact on our financial position or results of operations. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS 150). SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of these instruments were previously classified as temporary equity. SFAS 150 will be effective for financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this Statement will not have a material impact on our financial position or results of operations. 3) LIQUIDITY, GOING CONCERN AND MANAGEMENTS PLANS Significant losses were incurred for fiscal years 1999 through 2002. The Company incurred significant losses in the first two quarters of 2003. Revenue in the second quarter of 2003 was short of expectations due to a large project cancellation following the sale of a customer's business and the continued difficult technology market. The Company has reduced both facilities costs and staff. The savings will take effect in the third and fourth quarters of 2003. The Company is discussing possible merger opportunities and equity transactions. Continued losses and the uncertainty of the Company's ability to obtain additional capital raise substantial doubt about the Company's ability to continue as a going concern. To the extent a merger is not completed, the cash generated from the line of credit, possible equity transactions, receivables-based financing and continued operations are insufficient to meet the Company's current working capital needs, the Company will have to raise additional capital. No assurance can be given that additional funding will be available or, if available, will be on terms acceptable to the Company. Uncertainty regarding the amount and timing of any proceeds from the Company's plans to obtain additional capital raises substantial doubt about the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. During the second quarter of 2003 the Company was not able to maintain compliance with its Europe-based financing agreement on a consistent basis. At June 30, 2003 the Company had borrowed $1,396,000 against the credit facility and had $1,544,000 in collateralized receivables. The agreement required collateralization of 200% of receivables or $2,792,000. On July 11, 2003 the Company amended its European credit facility, increasing the line to $1.6 million (1 million pounds), secured by a mortgage deed against all assets of the European Division, guaranteed by the Company and the personal guaranty of the CEO. This cured non-compliance and brought the Company back into compliance with the credit facility. The line expires on October 31, 2003 unless renewed. The line may not exceed 133% of eligible European receivables. At August 12, 2003 the Company had borrowed $1,302,000 against the credit facility and had $1,311,000 in collateralized receivables. At July 31, 2003 the Company had sold $0.2 million U. S. accounts receivables under a receivable based financing agreement representing all eligible U. S. accounts receivable. (4) INCOME TAXES At June 30, 2003 the Company had $12.0 million of net deferred tax assets primarily consisting of net operating loss carryforwards. The benefit from utilization of net operating loss carryforwards could be subject to limitations if significant ownership changes occur in the Company. The Company's ability to realize the entire benefit of its deferred tax asset requires that the Company achieve certain future earnings levels prior to the expiration of its net 7 operating loss carryforwards. The Company has recorded a $12.0 million valuation allowance against deferred tax assets resulting in a net carrying value of zero. (5) DEBT Revolving Line of Credit During the second quarter of 2003 the Company was not able to maintain compliance with its Europe-based financing agreement on a consistent basis. At June 30, 2003 the Company had borrowed $1,396,000 against the credit facility and had $1,544,000 in collateralized receivables. The agreement required collateralization of 200% of receivables or $2,792,000. On July 11, 2003 the Company amended its European credit facility, increasing the line to $1.6 million (1 million pounds), secured by a mortgage deed against all assets of the European Division, guaranteed by the Company and the personal guaranty of the CEO. This cured non-compliance and brought the Company back into compliance with the credit facility. The line expires on October 31, 2003 unless renewed. The line may not exceed 133% of eligible European receivables. At August 12, 2003 the Company had borrowed $1,302,000 against the credit facility and had $1,311,000 in collateralized receivables. Accounts Receivable Financing The Company has an agreement with a bank, which provides for financing of eligible U.S. accounts receivable under a purchase and sale agreement. The maximum funds available under the agreement is $2.5 million. The agreement allows for the bank to request repurchase of an account receivable under certain conditions. The bank has never requested repurchase of an account receivable. At June 30 and July 31, 2003, the Company had sold $0.2 million eligible U.S. accounts receivable pursuant to this agreement. (6) LEASE LIABILITIES The Company has recorded liabilities related to losses on leases abandoned and termination liabilities on leases requiring the leased property be returned to its original condition. During the six months ended June 30, 2003 payments charged to the reserve totaled $0.1 million, and the reserve was reduced by $0.1 million during the first quarter of 2003 resulting in a reduction of general and administrative expenses. The balance remaining at June 30, 2003 was $0.8 million of which $0.2 million is recorded as long-term liability. During the six months ended June 30, 2002 payments against the reserve totaled $0.3 million and the reserve was increased $0.2 million. (7) COMPREHENSIVE LOSS Comprehensive loss is comprised of two components: net loss and other comprehensive income (loss). Other comprehensive income (loss) is comprised of foreign currency translation adjustments from international subsidiaries that under generally accepted accounting principles are recorded as an element of shareholders' equity and are excluded from net loss. The components of comprehensive loss are listed below (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ------------------------------------ 2003 2002 2003 2002 -------- ------ -------- ------ Net loss. . . . . . . . . . . . . . . . $(1,138) $(748) $(3,131) $(662) Other comprehensive income (loss) . . . (21) 178 53 190 -------- ------ -------- ------ Comprehensive loss. . . . . . . . . . . $(1,159) $(570) $(3,078) $(472) ======== ====== ======== ======
(8) LOSS PER SHARE Basic loss per share has been computed based on the weighted average number of common shares outstanding during the applicable period. Diluted earnings per share includes the number of shares issuable upon exercise of stock options, less the number of shares that could have been repurchased with the exercise proceeds, using the treasury stock method. 8 The following table summarizes the Company's computation of loss per share for the periods ended June 30, 2003 and 2002 (in thousands, except per share amounts):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------------------ 2003 2002 2003 2002 -------- ------- -------- ------- Basic loss per share . . . . . . . . . . . . . . . . . . $ (0.14) $(0.09) $ (0.37) $(0.08) ======== ======= ======== ======= Net loss $(1,138) $ (748) $(3,131) $ (662) ======== ======= ======== ======= Weighted average shares outstanding 8,419 8,419 8,419 8,419 Computation of diluted earnings per share: Common shares issuable under outstanding stock options - - - - Less shares assumed repurchased with proceeds from exercise of stock options - - - - -------- ------- -------- ------- Adjusted weighted average shares outstanding 8,419 8,419 8,419 8,419 ======== ======= ======== ======= Diluted loss per share $ (0.14) $(0.09) $ (0.37) $(0.08) ======== ======= ======== =======
Approximately 1,870,000 antidilutive options and 3,000,000 antidilutive warrants were excluded from the calculation of diluted earnings per share for the periods ended June 30, 2003. Approximately 1,480,000 antidilutive options and 3,000,000 antidilutive warrants were excluded from the calculation of diluted earnings per share for the periods ended June 30, 2002. (9) PRO FORMA NET LOSS AND LOSS PER SHARE Had the compensation cost for the Company's stock-based compensation plan been determined consistent with SFAS 123, the Company's net loss per share at June 30, 2003 and 2002 would approximate the pro forma amounts below (in thousands, except per share amounts):
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ------------------ JUNE 30, JUNE 30, ------------------ ------------------ 2003 2002 2003 2002 -------- -------- -------- -------- Net loss, as reported $(1,138) $ (748) $(3,131) $ (662) Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (101) (263) (201) (525) -------- -------- -------- -------- Pro forma $(1,239) $(1,011) $(3,332) $(1,187) Basic and diluted loss per share: As reported $ (0.14) $ (0.09) $ (0.37) $ (0.08) Pro forma (0.15) (0.12) (0.40) (0.14)
9 (10) GEOGRAPHIC FINANCIAL DATA Revenue from the Company's operations are presented below by operating division (in thousands):
EUROPE, MIDDLE EAST AMERICAS & AFRICA ASIA PACIFIC TOTAL ---------- ----------- -------------- -------- THREE MONTHS ENDED JUNE 30, 2003 Revenue $ 1,218 $ 2,573 $ 1,015 $ 4,806 Operating loss . . . . . . . . . $ (98) $ (701) $ (289) (1,088) THREE MONTHS ENDED JUNE 30, 2002 Revenue $ 1,080 $ 2,976 $ 1,363 $ 5,419 Operating loss . . . . . . . . . (254) (641) (38) (933) SIX MONTHS ENDED JUNE 30, 2003 Revenue. . . . . . . . . . . . . $ 2,521 $ 4,660 $ 2,485 $ 9,666 Operating loss . . . . . . . . . (156) (1,720) (101) (1,977) Total assets . . . . . . . . . . 809 4,076 1,666 6,551 SIX MONTHS ENDED JUNE 30, 2002 Revenue. . . . . . . . . . . . . $ 1,786 $ 7,435 $ 3,096 $12,317 Operating income (loss). . . . . (697) (24) 167 (554) Total assets . . . . . . . . . . 6,675 5,774 3,092 15,541
DA CONSULTING GROUP, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company is an international provider of education for employees of companies which are implementing business information technology. The Company provides customized change communications, education and performance support services designed to maximize its clients' returns on their substantial investments in business information technology. Recognizing the global nature of its existing and prospective client base, the Company has built a substantial international presence. The Company is currently organized into three divisions: the Americas Division; the EMEA Division, which includes Europe; and the Asia Pacific Division, which includes its Australia operations. CRITICAL ACCOUNTING POLICIES Income Taxes The Company recognizes deferred income taxes for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are determined based on the difference between the financial statement carrying amount and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance is provided against deferred tax assets which management considers more likely than not will fail to be realized. For the fiscal years 1999 through 2002 the Company incurred significant losses before income taxes. The Company has incurred additional significant losses to date in 2003. At June 30, 2003, the Company had generated net operating loss carryforwards for tax reporting purposes of approximately $35 million recording $12 million of deferred tax assets of which the Company has recorded a valuation allowance against the deferred tax asset generated from the net operating loss carryforwards of approximately $12 million. This resulted in no deferred tax assets from net operating loss carryforwards based upon management's estimate of future taxable income. 10 Long-lived Assets Management reviews 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 a comparison of the carrying amount of an 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 exceeds the fair value of the assets which considers the discounted future net cash flows. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs of disposal. Revenue Recognition The majority of the Company's contracts with clients are based on time and expenses incurred with the remainder of the revenue generated from fixed price contracts. Accordingly, service revenue under both types of contracts is recognized as services are performed and the realization of the revenue is assured. Contract costs include direct labor costs and reimbursable expenses, and those indirect costs related to contract performance such as indirect labor. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Unbilled revenue represents the revenue earned in excess of amounts billed and deferred income represents billings in excess of revenue earned. Revenue includes reimbursable expenses directly incurred in providing services to clients. The Company recognizes product revenue upon shipment to the client if no further services are required. Accounting for Stock Options In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123), which sets forth accounting and disclosure requirements for stock option and other stock-based compensation plans. The statement encourages, but does not require, companies to record stock-based compensation expense using a fair-value method, rather than the intrinsic-value method prescribed by APB Opinion No. 25. The Company has adopted only the disclosure requirements of SFAS 123, as amended by SFAS 148, and has elected to continue to record stock-based compensation expense using the intrinsic-value approach prescribed by APB No. 25. Accordingly, the Company computes compensation cost as the amount by which the intrinsic value of the Company's common stock exceeds the exercise price on the date of grant. The amount of compensation cost, if any, is charged to income over the vesting period. Property and Equipment Property and equipment are stated at cost. Expenditures for substantial renewals and betterments are capitalized, while repairs and maintenance are charged to expense as incurred. Assets are depreciated or amortized using the straight-line method for financial reporting purposes and accelerated methods for tax purposes over their estimated useful lives. Computer equipment is depreciated over a useful life of three to five years. Furniture is depreciated over a seven year useful life. Leasehold improvements are amortized over the term of the lease. In 1999 the Company capitalized $3.3 million in implementation costs related to the Company's primary information system. Purchased software and internal software development costs related to the Company's primary information system are amortized over a seven year period. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30, 2002 Revenue. Revenue decreased by $0.6 million, or 11.3%, from $5.4 million in the second quarter of 2002 to $4.8 million in the second quarter of 2003, reflecting decreases in Europe and Asia and a slight increase in America. Product sales increased from $0.2 million in 2002 to $0.3 million in 2003. Revenue from the Americas Division increased by 12.8% from $1.1 million to $1.2 million; revenue from the EMEA Division decreased by 13.5% from 11 $3.0 million to $2.6 million; and revenue from the Asia Pacific Division decreased by 25.5% from $1.4 million to $1.0 million. The Company ended the second quarter with 198 total employees, down from 233 employees at the end of the same period of the prior year. Billable employees total 153 at June 30, 2003 compared to 180 at June 30, 2002. Gross profit. Gross profit decreased by $0.6 million, or 32.1%, from $2.0 million in the second quarter of 2002 to $1.4 million in the second quarter of 2003 and decreased as a percent of revenue from 37.2% in the second quarter of 2002 to 28.4% in the second quarter of 2003. The decrease in the gross profit margin percentage is primarily attributable to decreased staff utilization and pricing. Selling and marketing expense. Selling and marketing expense remained consistent at $0.6 million for both periods. Dedicated sales and marketing personnel have been reduced at the end of the second quarter 2003 to 16 people as compared to 22 at the end of the second quarter of 2002. The Company will use more consulting staff in the sales and marketing effort in the future. Development expense. Development expense decreased $3,000 or 8.3%, from $36,000 in the second quarter of 2002 to $33,000 in the second quarter of 2003. General and administrative expense. General and administrative expense decreased by $0.5 million, or 21.1%, from $2.3 million in the second quarter of 2002 to $1.8 million in the second quarter of 2003. The decrease in general and administrative cost was primarily due to a decrease in depreciation and facilities costs. Depreciation expense included in general and administrative costs decreased from $0.7 million in the second quarter of 2002 to $0.3 million in the second quarter of 2003. The second quarter of 2002 included a $0.2 million increase for a change in estimated life. Expenses for the second quarter of 2002 included $0.2 million for reserves against leases. General and administrative personnel total 27 at the end of the second quarter of 2003 compared to 30 at the end of the second quarter of 2002. Operating loss. Operating loss increased by $0.2 million from a loss of $0.9 million in the second quarter of 2002 to an operating loss of $1.1 million in the second quarter of 2003. The increased operating loss resulted from decreased sales and gross margins partially offset by a decrease in general and administrative costs. Provision (benefit) for income taxes. The Company did not record an income tax benefit in the second quarter of 2003 related to operating losses based upon management's estimate of future taxable income, against the deferred tax asset generated from the net operating loss carryforwards. Tax benefits were recorded in the second quarter of 2002 related to Europe and Asia using a 30% tax rate. At June 30, 2003 the Company had $12.0 million of net deferred tax assets primarily consisting of net operating loss carryforwards. The benefit from utilization of net operating loss carryforwards could be subject to limitations if significant ownership changes occur in the Company. The Company's ability to realize the entire benefit of its deferred tax asset requires that the Company achieve certain future earnings levels prior to the expiration of its net operating loss carryforwards. The Company has recorded a $12.0 million valuation allowance against deferred tax assets resulting in a net carrying value of zero. Net loss. The Company's net loss increased by $0.4 million from a $0.7 million loss in the second quarter of 2002 to a net loss of $1.1 million in the second quarter of 2003 for reasons discussed above. Loss per share increased from a loss of $0.09 in the second quarter of 2002 to a loss per share of $0.14 in the second quarter of 2003. SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002 Revenue. Revenue decreased by $2.6 million, or 21.5%, from $12.3 million for the six months ended June 30, 2002 to $9.7 million for the six months ended June 30, 2003, reflecting decreases primarily in Europe and Asia and an increase in Americas. Product sales decreased from $0.8 million in 2002 to $0.5 million in 2003. Revenue from the Americas Division increased by 41.1% from $1.8 million to $2.5 million; revenue from the EMEA Division decreased by 37.3% from $7.4 million to $4.7 million; and revenue from the Asia Pacific Division decreased 19.7% from $3.1 million in 2002 to $2.5 million in 2003. The Company ended the six months with 198 total employees, 12 down from 233 employees at the end of the same period of the prior year. Billable headcount has decreased to 153 at June 30, 2003 compared to 180 at June 30, 2002. Gross profit. Gross profit decreased by $2.2 million, or 44.2%, from $5.1 million for the six months ended June 30, 2002 to $2.9 million for the six months ended June 30, 2003 and decreased as a percent of revenue from 41.7% in 2002 to 29.7% in 2003. The decrease in the gross profit margin percentage is primarily attributable to decreased staff utilization and pricing. Selling and marketing expense. Selling and marketing expense was $1.2 million for both six months ended June 30, 2002 and 2003. Dedicated sales and marketing personnel have been reduced at the end of the second quarter 2003 to 16 people as compared to 22 at the end of the second quarter of 2002. The Company will use more consulting staff in the sales and marketing effort in the future. Development expense. Development expense decreased $19,000, or 23.5%, from $81,000 for the six months ended June 30, 2002 to $62,000 for the same period of 2003. Reductions resulted primarily from the reduction of compensation costs. Development costs include 2 people. General and administrative expense. General and administrative expense decreased by $0.9 million, or 19.8%, from $4.4 million for the six months ended June 30, 2002 to $3.5 million for the same period in 2003. The decrease in expense is due primarily to a reduction in headcount in compensation, depreciation and facilities. General and administrative personnel total 27 at the six months ended June 30, 2003 compared to 30 at the end of the same period of 2002. Depreciation expense included in general and administrative costs decreased from $1.1 million in the six months ended June 30, 2002 to $0.6 million for the same period of 2003. The second quarter of 2002 included a $0.2 million increase for a change in estimated life. Expenses for the first six months of 2002 included $0.2 million charge for reserves against leases. Expenses for the first six months of 2003 were reduced by $0.1 million credit related to lease reserves. Operating loss. Operating loss increased by $1.4 million from a loss of $0.6 million for the six months ended June 30, 2002 to an operating loss of $2.0 million for the same period of 2003. The increased operating loss resulted from a decrease in revenue and gross margin only partially offset by a decline in general and administrative expenses. Provision (benefit) for income taxes. The Company did not record an income tax benefit in the second quarter of 2003 related to operating losses based upon management's estimate of future taxable income, against the deferred tax asset generated from the net operating loss carryforwards. Income tax expense in the first quarter of 2003 resulted from reserving previously recorded tax benefits. Tax benefits were recorded in the second quarter of 2002 related to Europe and Asia using a 30% tax rate. At June 30, 2003 the Company had $12.0 million of net deferred tax assets primarily consisting of net operating loss carryforwards. The benefit from utilization of net operating loss carryforwards could be subject to limitations if significant ownership changes occur in the Company. The Company's ability to realize the entire benefit of its deferred tax asset requires that the Company achieve certain future earnings levels prior to the expiration of its net operating loss carryforwards. The Company has recorded a $12.0 million valuation allowance against deferred tax assets resulting in a net carrying value of zero. Net loss. The Company's net loss increased by $2.4 million from a $0.7 million loss for the six months ended June 30, 2002 to a net loss of $3.1 million for the same period in 2003 for reasons discussed above. Loss per share increased from a loss of $0.08 for the six months ended June 30, 2002 to a loss per share of $0.37 for the same period of 2003. LIQUIDITY AND CAPITAL RESOURCES Since its inception, the Company has historically financed its operations and growth with cash flows from the sale of common stock, operations, short-term borrowings under revolving line of credit arrangements and receivables-based financing. 13 The Company's cash and cash equivalents were $0.2 million at June 30, 2003, compared to $0.6 million at December 31, 2002. The Company's working capital deficit was $3.1 million at June 30, 2003 and $1.3 million at December 31, 2002. The Company's operating activities used cash of $0.5 million for the six months ended June 30, 2003, compared to $0.4 million cash provided for the same period in 2002. The decrease resulted from increased losses from operations offset partially by reduced use of funds for the payment of accounts payable and additional funds from receivables. Investing activities used no cash in the six months ended June 30, 2003, compared to cash provided of $16,000 for the six months in 2002 as the Company liquidated older equipment in 2003 which offset $16,000 in capital expenditures. In 2002, $20,000 of capital expenditures were partially offset by $4,000 in equipment sales. The Company anticipates the need to lease or acquire small amounts of computer equipment throughout 2003. Financing activities provided cash of $0.1 million for the six months ended June 30, 2003 by using a line of credit compared to $0.3 million cash used during the six months ended June 30, 2002 used to pay down the line of credit. During the second quarter of 2003 the Company was not able to maintain compliance with its Europe-based financing agreement on a consistent basis. At June 30, 2003 the Company had borrowed $1,396,000 against the credit facility and had $1,544,000 in collateralized receivables. The agreement required collateralization of 200% of receivables or $2,792,000. On July 11, 2003 the Company amended its European credit facility, increasing the line to $1.6 million (1 million pounds), secured by a mortgage deed against all assets of the European Division, guaranteed by the Company and the personal guaranty of the CEO. This cured non-compliance and brought the Company back into compliance with the credit facility. The line expires on October 31, 2003 unless renewed. The line may not exceed 133% of eligible European receivables. At August 12, 2003 the Company had borrowed $1,302,000 against the credit facility and had $1,311,000 in collateralized receivables. The Company has an agreement with a bank, which provides for financing of eligible U.S. accounts receivable under a purchase and sale agreement. The maximum funds available under this agreement is $2.5 million. At June 30 and July 31, 2003, the Company had sold $0.2 million eligible U.S. accounts receivable pursuant to this agreement. Significant losses were incurred for fiscal years 1999 through 2002. The Company incurred significant losses in the first two quarters of 2003. Revenue in the second quarter of 2003 was short of expectations due to a large project cancellation following the sale of a customer' business and the continued difficult technology market. The Company has reduced both facilities costs and staff. Additional cost reductions will take effect in the third quarter of 2003. The Company is discussing possible merger opportunities. Continued losses and the uncertainty of the Company's ability to raise additional capital raise substantial doubt about the Company's ability to continue as a going concern. To the extent the merger is not completed, the cash generated from the line of credit, receivables based financing, and continued operations are insufficient to meet the Company's current working capital needs, the Company will have to raise additional capital. No assurance can be given that additional funding will be available or, if available, will be on terms acceptable to the Company. Uncertainty regarding the amount and timing of any proceeds from the Company's plans to raise additional capital raises substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains certain statements that are not historical facts which constitute forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995 which 14 provides a safe harbor for forward-looking statements. These forward-looking statements are subject to substantial risks and uncertainties that could cause the Company's actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. When used in this Report, the words "anticipate," "believe," "expect" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. Actual future results and trends may differ materially from historical results as a result of certain factors, including but not limited to: dependence on SAP AG and the ERP software market, risks associated with management of a geographically dispersed organization, fluctuating quarterly results, the need to attract and retain professional employees, substantial competition, dependence on key personnel, risks associated with management of growth, rapid technological change, limited protection of proprietary expertise, methodologies and software, and other risks and uncertainties detailed from time to time in the Company's filings with the SEC. The Company is under no duty to update any of the forward-looking statements after the date of this filing to conform such statements to actual results. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company from time to time holds short-term investments which consist of variable rate municipal debt instruments. The Company uses a sensitivity analysis technique to evaluate the hypothetical effect that changes in market interest rates may have on the fair value of the Company's investments. At June 30, 2003, the Company did not hold any short-term investments. Currency exchange rate fluctuations between the U.S. dollar and the Euro, British pound, Canadian dollar, Singapore dollar, and the Australian dollar have an impact on revenue and expenses of the Company's international operations. Dramatic fluctuations could have a negative affect upon the Company's financial condition. ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures - The Corporation's Principal Executive Officer and Principal Financial Officer have reviewed and evaluated the effectiveness of the Corporation's disclosure controls and procedures [as defined in Rules 240.13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the "Exchange Act)] as of a date within ninety days before the filing date of this quarterly report. Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer have concluded that the Corporation's disclosure controls and procedures are effective, providing them with material information relating to the Corporation as required to be disclosed in the reports the Corporation files or submits under the Exchange Act on a timely basis. (b) Changes in internal controls - There were no significant changes in the Corporation's internal controls or in other factors that could significantly affect the Corporation's disclosure controls and procedures subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Corporation's internal controls. DA CONSULTING GROUP, INC. PART II-OTHER INFORMATION ITEM 3. DEFAULTS UPON SENIOR SECURITIES (a) During the second quarter of 2003 the Company has not been able to maintain compliance with its Europe-based financing agreement on a consistent basis. At June 30, 2003 the Company had borrowed $1,396,000 against the credit facility and had $1,544,000 in collateralized receivables. The agreement required collateralized receivables in the amount of $2,792,000. The Company cured the non-compliance subsequent to June 30, 2003. 15 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are included in this form 10-Q: 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Virginia L. Pierpont, President and Chief Executive Officer 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Dennis C. Fairchild, Chief Financial Officer (b) Reports on Form 8-K On May 16, 2003 DA Consulting Group, Inc. (DACG) announced that it is involved in negotiations with another company regarding the possible sale of DACG. DACG's working capital position has been adversely affected by the current business environment. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. DA CONSULTING GROUP, INC. (Registrant) Date: August 14, 2003 By: /s/ Virginia L. Pierpont ------------------------------------------ Virginia L. Pierpont President and Chief Executive Officer (Principal Executive Officer) Date: August 14, 2003 By: /s/ Dennis C. Fairchild ------------------------------------------ Dennis C. Fairchild Chief Financial Officer, Executive Vice President, Secretary and Treasurer (Principal Financial and Accounting Officer) 17 CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Virginia L. Pierpont, Chief Executive Officer of DA Consulting Group, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of DA Consulting Group, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 14, 2003 /s/ Virginia L. Pierpont ------------------------ Virginia L. Pierpont Chief Executive Officer 18 CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Dennis C. Fairchild, Chief Financial Officer of DA Consulting Group, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of DA Consulting Group, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 14, 2003 /s/ Dennis C. Fairchild ----------------------- Dennis C. Fairchild Chief Financial Officer 19 EX-99.1 3 doc2.txt Exhibit 99.1 Certification pursuant to Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -------------------------------------------------------------------- In connection with the Quarterly Report of DA Consulting Group, Inc. (the "COMPANY") on Form 10-Q for the period ended June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "REPORT"), I, Virginia L. Pierpont, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Virginia L. Pierpont --------------------------------------- Virginia L. Pierpont President and Chief Executive Officer (Principal Executive Officer) Date: August 14, 2003 A signed original of this written statement required by Section 906 has been provided to DA Consulting Group, Inc. and will be retained by DA Consulting Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon its request. 20 EX-99.2 4 doc3.txt Exhibit 99.2 Certification pursuant to Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -------------------------------------------------------------------- In connection with the Quarterly Report of DA Consulting Group, Inc. (the "COMPANY") on Form 10-Q for the period ended June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "REPORT"), I, Dennis C. Fairchild, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. - -------------------- /s/ Dennis C. Fairchild -------------------------------------------- Dennis C. Fairchild Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer) Date: August 14, 2003 A signed original of this written statement required by Section 906 has been provided to DA Consulting Group, Inc. and will be retained by DA Consulting Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon its request. 21 -----END PRIVACY-ENHANCED MESSAGE-----