SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
September 25, 1996 (March 1, 1996)
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COMFORCE Corporation
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(Exact name of registrant as specified in its charter)
Delaware
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State or Other Jurisdiction of Incorporation
1-6081 36-23262248
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Commission File Number I.R.S. Employer
Identification No.
2001 Marcus Avenue, Lake Success, NY 11042
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Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (516) 352-3200
Not Applicable
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Former name, former address and former fiscal year, if changed since last report
Item 7. Financial Statements and Exhibits
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On January 18, 1996, COMFORCE Corporation "COMFORCE" or the
"Registrant") announced it had entered into a letter of intent
to acquire Williams Communication Services ("Williams"), a
privately owned company engaged in the technical staffing,
consulting and outsourcing business. See Registrant's Form 8-K
dated January 18, 1996.
On March 1, 1996, COMFORCE Global, Inc., a wholly-owned
subsidiary of COMFORCE, executed a definitive purchase
agreement (the "Purchase Agreement") and completed the
acquisition of substantially all of the assets of Williams
(except for certain current assets retained by Williams), for
consideration consisting of cash of $2,000,000 and contingent
rights to future payments based on earnings over a four year
period. The Acquisition of Williams was funded principally by
a $2.25 million revolving credit facility established with
Chase Manhattan Bank. See Registrant's Form 8-K dated March 1,
1996.
On May 14, 1996, the Registrant filed Amendment No. 1 to its
Form 8-K dated March 1, 1995 to file the financial statements
as required in accordance with Item 7(a)(4) of Form 8-K and to
file related pro forma financial information as required in
accordance with Item 7(b) of Form 8-K. The Registrant hereby
files this Amendment No. 2 to amend the pro forma financial
information required pursuant to Item 7(b).
a) Financial Statements of Business Acquired
Williams Communication Services Financial Statements
at and for the year ended December 31, 1995.
(b) Pro Forma Financial Information
Pro forma Consolidated Balance Sheet as of December
31, 1995 (Unaudited).
Pro forma Consolidated Statement of Operations for
the year ended December 31, 1995 (Unaudited).
Item 7(a) Financial Statements of Business Acquired
WILLIAMS COMMUNICATION SERVICES, INC.
FINANCIAL STATEMENTS,
TOGETHER WITH REPORT OF INDEPENDENT ACCOUNTANTS
AT AND FOR THE YEAR ENDED DECEMBER 31, 1995
Table of Contents
Pages
Report of Independent Accountants 1
Financial Statements:
Balance Sheet 2
Statement of Operations and Retained Earnings 3
Statement of Cash Flows 4
Notes to Financial Statements 5 - 7
Report of Independent Accountants
To the Shareholder
Williams Communication Services, Inc.
Englewood, Florida
We have audited the accompanying balance sheet of Williams Communication
Services, Inc. as of December 31, 1995 and the related statements of operations
and retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Williams Communication
Services, Inc. as of December 31, 1995 and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Myers, Florida
May 6, 1996
Williams Communication Services, Inc.
Balance Sheet
December 31, 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 0
Accounts receivable 599,607
Unbilled accounts receivable 173,904
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Total current assets 773,511
PROPERTY AND EQUIPMENT, net 25,329
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Total assets $ 798,840
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,500
Accrued liabilities 14,486
Bank overdraft 49,313
Income tax payable 326,475
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Total current liabilities 391,774
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STOCKHOLDERS' EQUITY
Common stock, 1,000 shares,
issued and outstanding, $1 par value 1,000
Retained earnings 406,066
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Total stockholders' equity 407,066
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Total liabilities and stockholders' equity $ 798,840
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The accompanying notes are an integral part of these financial statements.
Williams Communication Services, Inc.
Statement of Operations and Retained Earnings
year ended December 31, 1995
Sales $ 4,177,871
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Direct costs and expenses:
Cost of sales 3,021,251
General and administrative expenses 450,225
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Total direct costs and expenses 3,471,476
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Income before provision for income taxes 706,395
Income tax provision 354,056
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Net income 352,339
Retained earnings, beginning of year 53,727
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Retained earnings, end of year $ 406,066
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The accompanying notes are an integral part of these financial statements.
Williams Communication Services, Inc.
Statement of Cash Flows
year ended December 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 352,339
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 723
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable (293,361)
Unbilled accounts receivable (68,761)
Deposits 3,000
Other assets 240
Increase (decrease) in:
Accounts payable (256)
Accrued liabilities 290,692
Bank overdraft payable 49,313
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Net cash provided by operating activities 333,929
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (25,299)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of stockholder loan (309,500)
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Net decrease in cash and cash equivalents (870)
Cash and cash equivalents at beginning of year 870
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Cash and cash equivalents at end of year $ 0
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 1,586
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Cash paid during the year for income taxes $ 27,580
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The accompanying notes are an integral part of these financial statements.
Williams Communication Services, Inc.
Notes to Financial Statements
1. Description of Business:
Williams Communications Services, Inc. (the Company), a Florida
corporation, provides a wide range of technical and consulting services
to communication clients through the use of personnel who are designers,
drafters, engineers, programmers and other types of technicians. The
personnel are utilized by the clients on a temporary, project, or
peak-period basis.
2. Summary of Significant Accounting Policies:
Revenue Recognition: Revenue is recognized at the time such services are
rendered to the client.
Accounts Receivable and Unbilled Accounts Receivable: Accounts receivable
consists of those amounts due to the Company for services rendered to
various customers.
Unbilled accounts receivable consists of revenues earned and recoverable
costs for which billings have not yet been presented to the customers as
of the balance sheet date.
Property and Equipment: Property and equipment is recorded at cost.
Expenditures for maintenance and repairs are charged to operations as
incurred. Expenditures for betterments and major renewals are
capitalized. The cost of assets sold or retired and the related amounts
of accumulated depreciation are eliminated from the accounts in the year
of disposal, with any resulting profit or loss included in income.
Depreciation of assets have been computed using the straight-line method
over the estimated useful lives of the assets.
Income Taxes: The Company accounts for income taxes under the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS No. 109). Under the asset and liability method of
SFAS No. 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109,
the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.
As of December 31, 1995, deferred tax assets and liabilities are
immaterial in amount, and management has elected not to record them in
the financial statements.
The provision for income taxes does not bear the normal relationship to
net income due to the deductibility of only a portion of the amount of
meals reimbursed to employees.
Notes to Financial Statements, Continued
2. Summary of Significant Accounting Policies, continued
Management's Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles 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 period. Actual
results could differ from those estimates.
3. Property and Equipment:
Property and equipment consisted of the following at December 31, 1995:
Office equipment $ 15,000
Furniture and fixtures 3,342
Vehicle 25,300
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43,642
Less accumulated depreciation (18,313)
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$ 25,329
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4. Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable.
During the normal course of business, the Company extends credit to
customers located throughout the United States. At December 31, 1995, the
Company had approximately 90% or $699,000 of its billed and unbilled
accounts receivable due from two customers. The payment history of each
customer has been considered in determining the need for an allowance for
doubtful accounts. Sales to these customers aggregated approximately
$3,062,000, which represented approximately 74% of total sales for the
year ended December 31, 1995. The Company maintains substantially all of
its cash investments with what it believes to be high quality financial
institutions. The Company's investment policy is to limit concentrations
of credit risk.
5. Income Taxes:
For the year ended December 31, 1995, the provision for income taxes
represents current income taxes. The components of the Company's
provision for income taxes are as follows:
Federal $ 302,556
State 51,500
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$ 354,056
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6. Subsequent Event:
On February 29, 1996, all of the equipment and intangible assets used in
the operation of the Company's business were acquired by Comforce Global,
Inc.
Item 7(b) Pro Forma Financial Information
The following unaudited pro forma condensed consolidated balance sheet at
December 31, 1995 presents the financial position of the Company at December 31,
1995 as if the acquisition of Williams had been consummated as of December 31,
1995. The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1995 presents the Company's results of operations as
if the acquisitions COMFORCE Global and Williams had been consummated as of
January 1, 1995.
COMFORCE Corporation
PRO FORMA BALANCE SHEET
December 31, 1995
(Unaudited in thousands)
Pro Forma Pro Forma
Historical Williams Adjustments Consolidated
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Current assets ...............................................
Cash ...................................................... $ 649 $ (173) $ 476
Receivables, including $151 of unbilled revenue ........... 1,754 $ 774 (774)(A) 1,754
Other current assets ...................................... 61 61
Receivable from ARTRA GROUP Incorporated .................. 1,046 1,046
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3,510 774 3,337
Property, plant and equipment, net ........................... 90 25 (25)(A) 90
Excess of cost over net assets acquired ...................... 4,801 2,073 (A) 6,874
Other noncurrent assets ...................................... 135 135
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Total assets ............................................ $ 8,536 $ 799 $ 1,101 $10,436
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Current liabilities
Notes payable ............................................. $ 500 $ 500
Revolving credit line due a bank .......................... $ 1,900 (B) 1,900
Accounts payable .......................................... 75 $ 52 (52)(A) 75
Accrued expenses .......................................... 719 14 (14)(A) 719
Income taxes .............................................. 214 326 (326)(A) 214
Liabilties to be assumed by ARTRA GROUP Incorporated,
and net liabilities of discontinued operations ......... 3,699 3,699
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Total current liabilities ..................... 5,207 392 1,508 7,107
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Noncurrent liabilities to be assumed by
ARTRA GROUP Incorporated .................................. 541 541
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Obligations expected to be settled by
the issuance of common stock .............................. 550 550
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Commitments and contingencies
Shareholders' Equity (Deficit)
Common stock ............................................... 92 1 (1)(A) 92
Additional paid-in capital ................................. 95,993 95,993
Accumulated deficit ........................................ (93,847) 406 (406)(A) (93,847)
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2,238 407 (407) 2,238
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$ 8,536 $ 799 $ 1,101 $10,436
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Pro forma adjustments to the unaudited condensed consolidated balance sheet
consist of:
(A) Record acquisition of Williams and related entries and eliminate
Williams assets and liabilities not purchased or assumed.
(B) Record borrowings under the revolving credit line used for the
acquisition of Williams.
COMFORCE Corporation
Pro Forma Statement Of Operations
For the Year ended December 31, 1995
(Unaudited in thousands, except per share data)
COMFORCE Pro Forma Pro Forma
Historical (A) GLOBAL (B) Williams (B) Adjustments Consolidated
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Net sales ....................................... $ 2,387 $ 9,568 $ 4,178 $16,133
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Costs and expenses:
Cost of goods sold ........................... 1,818 7,178 3,022 12,018
Stock compensation (C) ....................... 3,425 3,425
Spectrum corporate management fees (F) ....... 1,140 1,140
Selling, general and administrative .......... 823 1,397 450 $ 151 (D) 2,821
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6,066 9,715 3,472 151 19,404
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Operating earnings (loss) ....................... (3,679) (147) 706 (151) (3,271)
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Other income (expense):
Interest and other non-operating expense ..... (618) 7 248 (E) (363)
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(618) 7 248 (363)
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Loss from continuing operations
before income taxes .......................... (4,297) (140) 706 97 (3,634)
(Provision)credit for income taxes .............. (35) 21 (354) (39) (407)
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Loss from continuing operations ................. $(4,332) $ (119) $ 352 $ 58 $(4,041)
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Loss per share from continuing operations ....... $ (.95) $ (.44)
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Weighted average shares outstanding (G) ......... 4,596 9,309
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Pro forma adjustments to the unaudited consolidated statement of operations:
(A) Historical data presented for the year ended December 31, 1995
includes COMFORCE Global's operations since its acquisition on October
17, 1995 through December 31, 1995 and corporate overhead costs for
the entire year ended December 31, 1995.
(B) The pro forma data presented for COMFORCE Global's operations is for
the periods prior to its acquisition on October 17, 1995, or January
1, 1995 through October 16, 1995. The period presented for Williams is
January 1, 1995 through December 31, 1995.
(C) Represents a non-recurring compensation charge related to the issuance
of the 35% common stock interest in the Company to certain individuals
to manage the Company's entry into and development of the
telecommunications and computer technical staffing services business.
(D) Amortization of goodwill arising from the COMFORCE Global and Williams
acquisitions The table below reflects where amortization of goodwill
has been recorded.
1995
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Historical COMFORCE Corp. $ 51,000
Historical Global 142,000
Williams -
Proforma Adjustments 151,000
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Adjusted Proforma $344,000
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(E) Reverse interest expense on notes and other liabilities assumed by
ARTRA, totaling $410,000, net of interest expense on revolving line of
credit used to acquire Williams assuming all $1,900,000 was
outstanding for the year at the interest rat in effect of 8.5%.
(F) Corporate management fees from COMFORCE Global's former parent,
Spectrum Information Technologies,Inc. The amount of these management
fees may not be representative of costs incurred by COMFORCE Global on
a stand alone basis.
(G) Pro forma weighted average shares outstanding includes shares of the
Company's common stock issued in the private placement that funded the
COMFORCE Global transaction, shares issued for fees and costs
associated with the COMFORCE Global acquisition and shares issued to
certain individuals to manage the Company's entry into and development
of the telecommunications and computer technical staffing services
business, as if they had been issued on January 1, 1995. Current
management has questioned its obligation to issue 250,000 of these
shares. However, for purposes of presenting earnings per share data,
these shares are treated as being issued and outstanding pending
resolution of the matter.
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 thereunder duly authorized.
COMFORCE CORPORATION
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Registrant
Dated: Sept. 24, 1996 ANDREW C. REIBEN
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Director of Finance