SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 3
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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
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(October 17, 1995)
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COMFORCE Corporation
(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
On September 11, 1995, COMFORCE Corporation (formerly known as
the Lori Corporation) ("COMFORCE" or the "Registrant"), signed
a stock purchase agreement to participate in the acquisition
of one hundred percent of the capital stock of COMFORCE
Global, Inc., formerly Spectrum Global Services, Inc. d/b/a
YIELD Global, a wholly owned subsidiary of Spectrum
Information Technologies, Inc.
On October 17, 1995, COMFORCE completed the acquisition of one
hundred percent of the capital stock of COMFORCE Global, Inc.
for consideration consisting of cash of approximately
$6,000,000.
On December 28, 1995, the Registrant filed Amendment No.1 to
its Form 8-K dated October 17, 1995 to file 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. On Feburary
6, 1996, the Registrant filed Amendment No. 2 to said Form 8-K
to amend the financial statements and related pro forma
financial information required pursuant to Items 7(a)(4) and
7(b) of Form 8-K. The Registrant hereby files this Amendment
No. 3 to further amend the financial statements and the pro
forma financial information required pursuant to Items 7(a)(4)
and 7(b) of Form 8-K
(a) Financial Statements of Business Acquired
COMFORCE Global, Inc.(formerly Spectrum Global Services,
Inc.) Financial Statements as of September 30, 1995 and
December 31, 1994
(b) Pro Forma Financial Information
Pro forma Consolidated Balance Sheet as of September 30,
1995 (Unaudited).
Pro forma Consolidated Statements of Operations for the
nine month period ended September 30, 1995 (Unaudited)
and the year ended December 31, 1994 (Unaudited).
Item 7(a) Financial Statements of Business Acquired
COMFORCE GLOBAL, INC.
(FORMERLY SPECTRUM GLOBAL SERVICES, INC.)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
Comforce Corporation
Index to Financial Statements
Page(s)
Report of Independent Accountants 1
Financial Statements:
Balance Sheets as of September 30, 1995 and December 31, 1994 2
Statements of Operations and Retained Earnings
(accumulated deficit) for the nine month period
ended September 30, 1995 and the year ended December 31, 1994 3
Statements of Cash Flows for the nine month period ended
September 30, 1995 and the year ended December 31, 1994 4
Notes to Financial Statements 5-8
Report of Independent Accountants
To the Board of Directors of COMFORCE Global, Inc.:
We have audited the accompanying balance sheets of COMFORCE Global, Inc.
(formerly Spectrum Global Services, Inc., the "Company") as of September 30,
1995 and December 31, 1994, and the related statements of operations and
retained earnings (accumulated deficit) and cash flows for the nine month period
ended September 30, 1995 and the year ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of COMFORCE Global, Inc. as of
September 30, 1995 and December 31, 1994, and the results of its operations and
its cash flows for the nine month period ended September 30, 1995 and the year
ended December 31, 1994, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Melville, New York
December 1, 1995.
COMFORCE Global, Inc.
Balance Sheets
as of September 30, 1995 and December 31, 1994
September 30, December 31,
ASSETS: 1995 1994
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Current assets:
Cash and cash equivalents $ 1,186,868 $ 426,334
Accounts receivable 1,602,659 1,456,583
Unbilled accounts receivable 279,626 158,793
Prepaid expenses and other assets 23,173 32,664
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Total current assets 3,092,326 2,074,374
Property and equipment, net 93,708 55,877
Intangible assets 2,149,661 2,272,890
Other assets 14,491 25,477
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Total assets $ 5,350,186 $ 4,428,618
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LIABILITIES AND STOCKHOLDERS'EQUITY(DEFICIENCY):
Current liabilities (deficiency):
Accounts payable $ 42,792 $ 27,714
Accrued liabilities 423,580 229,703
Income taxes payable 24,453
Accounts payable - parent 978,855 178,106
Accounts payable - affiliates 30,980 30,086
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Total current liabilities 1,476,207 490,062
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Stockholders' equity (deficiency):
Capital stock 1 1
Additional paid-in capital 3,919,999 3,919,999
Retained earnings (accumulated deficit (46,021) 18,556
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Total stockholders' equity 3,873,979 3,938,556
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Total liabilities and
stockholders' equity (deficiency) $ 5,350,186 $ 4,428,618
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The accompanying notes are an integral part of the financial statements.
COMFORCE Global, Inc.
Statements of Operations and Retained Earnings (Accumulated Deficit)
Nine month
period ended Year ended
September 30, December 31,
1995 1994
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Sales $ 9,007,461 $ 8,244,721
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Direct costs and expenses:
Cost of sales 6,764,942 6,417,395
Operating expenses 1,159,168 1,133,298
Overhead charges from parent (Note 9) 1,139,560 803,280
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Total direct costs and expenses 9,063,670 8,353,973
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(56,209) (109,252)
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Other income (expense):
Interest income 6,632 8,975
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Other income (expense) 6,632 8,975
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Loss before provision for income taxes (49,577) (100,277)
Income tax provision 15,000 14,740
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Net loss (64,577) (115,017)
Retained earnings, beginning of year 18,556 133,573
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Retained earnings(accumulated deficit),
end of period $ (46,021) $ 18,556
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The accompanying notes are an integral part of the financial statements.
COMFORCE Global, Inc.
Statements of Cash Flows
Nine month
period ended Year ended
September 30, December 31,
1995 1994
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Cash flows from operating activities:
Net (loss) income $ (64,577) $ (115,017)
Adjustments to reconcile net income to cash
flows provided by operating activities:
Depreciation 18,836 10,173
Amortization 123,229 164,305
Changes in operating assets and liabilities:
Accounts receivable (146,076) (256,348)
Unbilled accounts receivable (120,833) (158,793)
Prepaid expenses 9,491 (9,186)
Deposits 10,986 (24,360)
Accounts payable 15,078 22,645
Accrued liabilities 193,877 139,216
Accounts payable - parent 800,749 178,106
Income taxes payable (24,453) (18,657)
Accounts payable - affiliate 894 30,086
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Net cash provided by (used in)
operating activities 817,201 (37,830)
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Cash flows from investing activities:
Purchase of property and equipment (56,667) (54,318)
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Net cash used in investing activities (56,667) (54,318)
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Net increase (decrease) in cash
and cash equivalents 760,534 (92,148)
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Cash and cash equivalents, beginning of year 426,334 518,482
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Cash and cash equivalents, end of period $ 1,186,868 $ 426,334
============ ============
Cash paid for:
Income taxes $ 35,371 $ 51,884
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The accompanying notes are an integral part of the financial statements.
COMFORCE Global, Inc.
Notes to Combined Financial Statements
1. Description of Business:
Comforce Global, Inc. (formerly Spectrum Global Services, Inc.) (the
"Company"), a Delaware Corporation, became a wholly owned subsidiary of Spectrum
Information Technologies, Inc. through an acquisition of the Company's assets on
October 31, 1993. On October 17, 1995, 100% of the stock of Spectrum Global
Services, Inc. was sold to The Lori Corporation (now know as COMFORCE
Corporation) ("Lori"), at which time the Company changed its name to COMFORCE
Global, Inc.. The Company provides telecommunications and computing staffing and
consulting services worldwide.
2. Summary of Significant Accounting Policies:
Revenue Recognition
Revenue for providing staffing services is recognized at the time such services
are rendered.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid short-term investments with an
original maturity of three months or less. Cash equivalents consists primarily
of money market funds.
Accounts Receivable and Unbilled Accounts Receivable
Accounts receivable consists of those amounts due to the Company for staffing
services rendered to various customers. Accrued revenue consists of revenues
earned and recoverable costs for which billings have not yet been presented to
the customers as of the balance sheet dates.
Property and Equipment
Property and equipment are stated 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 and amortization of assets are provided using the straight-line
method over the estimated useful life of the asset.
Intangibles
Goodwill is amortized over 15 years on a straight line basis.
Notes to Combined Financial Statements, Continued
Income Taxes
Effective January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). SFAS No. 109 requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse. A
valuation allowance is recorded to reduce deferred tax assets to their expected
realizable value. The cumulative effect of implementing SFAS No.
109 as of January 1, 1994 was not significant.
3. Purchase of Assets:
On October 31, 1993, Spectrum Information Technologies, Inc. purchased the
assets and assumed the liabilities of the Company (then known as
Yield Industries, Inc.) and Wintec Corporation ("Wintec"). Subsequent to
this, the name was changed to Spectrum Global Services, Inc. The acquisition has
been accounted for as a purchase. The fair value of the assets acquired,
including goodwill, was $4,120,000 and liabilities assumed totaled $199,000.
Goodwill of approximately $2,465,000 is being amortized over 15 years on a
straight-line basis.
4. Property and Equipment:
Property and equipment are summarized as follows:
Life of
equipment 1995 1994
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Office equipment 3-5 years $ 61,311 $ 37,211
Furniture and fixtures 5-years 65,144 32,577
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126,455 69,788
Less, accumulated depreciation 32,747 13,911
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$ 93,708 $ 55,877
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Notes to Combined Financial Statements, Continued
5. Income Taxes:
The provision for income taxes of $15,000 for the nine months ended September
30, 1995 and $14,740 for the year ended December 31, 1994 reflects minimum state
and local income taxes as the Company has state net operating losses on separate
Company returns. The Company files its federal income tax return as part of its
parent's consolidated return. Due to significant losses of the parent, the
Company has provided a full valuation on the potential future benefit from its
federal net operating losses. Net losses for financial reporting purposes do not
differ significantly from net losses for income tax purposes.
6. Concentration of Credit Risk:
The Company's accounts receivable as of September 30, 1995 and December 31, 1994
consist primarily of amounts due from telecommunication companies. As a result,
the collectibility of these receivables is dependent, to an extent, upon the
economic condition of the telecommunications industry. At September 30, 1995 and
December 31, 1994, the Company had four customers with accounts receivable
balances that aggregated 48% and 46%, respectively, of the Company's total
accounts receivable. Percentages of total revenues from significant customers
for the nine month period ended September 30, 1995 and the year ended December
31, 1994 are summarized as follows:
September 30, December 31,
1995 1994
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Customer 1 19.2% 19.9%
Customer 2 12.9% 12.8%
Customer 3 10.5% 9.9%
The Company maintains cash in bank accounts which at times may exceed federally
insured limits. The Company has not experienced any losses in such accounts and
believes they are not exposed to any significant credit risk on their cash
balances. The Company believes it mitigates such risk by investing its cash
through major financial institutions.
7. Accrued Expenses:
Accrued expenses consist of the following:
1995 1994
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Payroll and payroll taxes $ 274,864 $ 143,449
Workers' compensation 70,000 70,000
Professional fees 42,408 7,531
Vacation 27,595 8,723
Other 8,713
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$ 423,580 $ 229,703
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Notes to Combined Financial Statements, Continued
8. Commitments and Contingencies:
Leases
At September 30, 1995, future minimum annual rental commitments under
noncancelable operating leases are as follows:
1996 $ 57,388
1997 58,583
1998 60,703
1999 62,913
2000 54,111
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$ 293,698
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Total rent expense for the nine month period ended September 30, 1995 and the
year ended December 31, 1994 was $25,627 and $46,498, respectively.
9. Charges From Parent:
For the nine months ended September 30, 1995 and the year ended December 31,
1994, approximately $1,139,560 and $803,280, respectively, was charged to the
Company by its parent, Spectrum Information Technologies, Inc. as a management
charge which reflects an allocation of corporate overhead. Management expects
that such charges will no longer continue as a result of the sale of the Company
to Lori. Such charges may not represent expenses that would have
been incurred had the Company operated as a stand-alone entity. In addition, the
Company was charged by its parent company for insurance, rent, payroll,
professional fees, and other miscellaneous office expenses. Such charges
amounted to $236,808 and $506,113 for the nine month period ended September 30,
1995 and for the year ended December 31, 1994, respectively, and are included in
general and administrative expenses. The Company purchased furniture and
equipment and was charged miscellaneous office expenses from its affiliates.
Such charges amount to $1,014 and $29,967 in 1995 and 1994, respectively.
10. Other Matters:
On January 26, 1995, Spectrum Information Technologies, Inc., filed petition for
relief under Chapter 11 of the Bankruptcy Code (the Company was not included in
such filing). The sale of the stock of the Company to Lori on October 17, 1995
was formally approved by the bankruptcy court.
Item 7(b) Pro Forma Financial Information
The following unaudited pro forma consolidated balance sheet at September 30,
1995 presents the financial position of COMFORCE Corporation (formerly The Lori
Corporation) ("Lori" or the "Company") at September 30, 1995 as if the
acquisition of COMFORCE Global, Inc. (formerly Spectrum Global Services, Inc.)
("COMFORCE Global") and the related private placement of Lori common shares
(proceeds used to finance the acquisition) had been consummated as of September
30, 1995. The unaudited pro forma consolidated statements of operations for the
nine months ended September 30, 1995 and the year ended December 31,1994,
present the Company's results of operations as if the acquisition of COMFORCE
Global and the related private placement of Lori common shares had been
consummated as of January 1, 1994.
COMFORCE Corporation
(formerly The Lori Corporation)
PRO FORMA BALANCE SHEET
September 30, 1995
(Unaudited in thousands)
COMFORCE Pro Forma Pro Forma
Historical Global Adjustments Consolidated
---------- ------- ----------- ------------
Current assets ............................................... $ (6,498)(B)
Cash ...................................................... $ 2 $ 1,187 5,700 (A) $ 391
Accounts receivable ....................................... 1,882 1,882
Assets of discontinued operations held for disposal ....... 4,488 4,488
Other current assets ...................................... 35 23 58
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4,525 3,092 6,819
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Property, plant and equipment, net ........................... 94 94
(7,991)(C)
Investment in Yield .......................................... 753 7,238 (B)
Other noncurrent assets ...................................... 14 14
Goodwill, net ................................................ 2,150 2,652 (C) 4,208
------- ------- ------- -------
Total assets ............................................ $ 5,278 $ 5,350 $ 1,101 $11,729
======= ======= ======= =======
Current liabilities
Notes payable ............................................. $ 2,586 $(2,086)(E) $ 500
Accounts payable .......................................... 736 $ 43 (541)(E) 238
Accrued liabilities ....................................... 476 424 (125)(E) 775
Due from ARTRA ............................................ (76) 76 (E)
Due to related parties .................................... 1,009 (1,009)(C)
Obligations expected to be settled
by the issuance of common stock ........................ 3,000 (3,000)(D)
Liabilities of discontinued operations held for disposal .. 4,517 4,517
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Total current liabilities ..................... 11,239 1,476 6,030
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Other noncurrent liabilities ................................. 955 (955)(E) --
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Commitments and contingencies
Shareholders' Equity (Deficit)
Preferred stock ............................................ 19,515 (19,515)(F) --
1 (F)
32 (D)
4 (B)
Common stock ............................................... 36 19 (A) 92
19,514 (F)
2,968 (D)
3,631 (E)
736 (B)
(4,376)(C)
Additional paid-in capital ................................. 66,123 3,920 5,681 (A) 98,197
Accumulated deficit ........................................ (92,590) (46) 46 (C) (92,590)
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(6,916) 3,874 6,155
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$ 5,278 $ 5,350 $ 1,101 $11,729
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Pro forma adjustments to the unaudited consolidated balance sheet consist of:
(A) Record private placement of 1.9 million Lori common shares at $3.00 per
share to fund COMFORCE Global acquisition.
(B) Record acquisition of COMFORCE Global and reflect related acquisition
costs. Cash transferred to seller at closing of $5,788,000 and fees and
associated closing costs of $1,450,000.
(C) Eliminate investment in COMFORCE Global and adjust goodwill arising
from the acquisition. Obligations due to related parties were excluded
as they were not assumed by the purchaser.
(D) Issue Lori common stock to settle obligations accrued in July 1995
pertaining to the 35% interest in the Company issued to certain
individuals to manage the Company's entry into
and development of the telecommunications and computer technical
staffing services business.
(E) Lori liabilities to be assumed by ARTRA GROUP Incorporated ("ARTRA").
(F) Exchange ARTRA's preferred stock for 100,000 common shares.
COMFORCE Corporation
(formerly The Lori Corporation)
Pro Forma Statement Of Operations
For the Nine Months ended September 30, 1995
(Unaudited in thousands, except per share data)
COMFORCE Pro Forma Pro Forma
Historical Global Adjustments Consolidated
---------- ------- ----------- ------------
Net sales ......................................... $ -- $ 9,007 $ 9,007
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Costs and expenses:
Cost of goods sold ............................. -- 6,765 6,765
Selling, general and administrative ............ 3,265 1,017 4,282
Spectrum corporate administrative costs (C)..... -- 1,140 1,140
Depreciation and amortization .................. -- 142 $ 98 (A) 240
------- ------- ------- -------
3,265 9,064 98 12,427
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Operating loss .................................... (3,265) (57) (98) (3,420)
------- ------- ------- -------
Other income (expense):
Interest expense, net .......................... (410) 7 410 (B) 7
-------- ------- ------- -------
(410) 7 410 7
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Loss from continuing operations before income taxes (3,675) (50) 312 (3,413)
Provision for income taxes ........................ -- (15) (125) (140)
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Loss from continuing operations ................... $(3,675) $ (65) $ 187 $(3,553)
======= ====== ======= =======
Loss per share from continuing operations $ (1.14) $ (.40)
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Weighted average shares outstanding 3,321 8,791
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Pro forma adjustments to the unaudited consolidated statement of operations:
(A) Amortization of goodwill arising from the COMFORCE Global acquisition.
(B) Reverse interest expense on notes and other liabilities assumed by
ARTRA. The interest adjustment in 1995 was for interest on notes
directly related to Lori activities and were incurred in
1995. These liabilities were not outstanding during 1994 and,
accordingly, a similiar interest adjustment is not required.
(C) Corporate administrative charges from COMFORCE Global's former parent,
Spectrum Information Technologies, Inc. The amount of these
administrative charges may not be representative of costs to be
incurred by COMFORCE Global on a stand alone basis.
(D) Pro forma weighted average shares outstanding includes Lori shares
issued in the private placement that funded the COMFORCE Global
transaction, Lori shares issued for fees and costs associated with the
COMFORCE Global acquisition and Lori shares issued to settle
obligations accrued at September 30, 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.
COMFORCE Corporation
(formerly The Lori Corporation)
Pro Forma Statement Of Operations
For the year ended December 31, 1994
(Unaudited in thousands, except per share data)
COMFORCE Pro Forma Pro Forma
Historical Global Adjustments Consolidated
---------- ------- ----------- ------------
Net sales ......................................... $ -- $ 8,245 $ 8,245
------- ------- -------
Costs and expenses:
Cost of goods sold ............................. -- 6,418 6,418
Selling, general and administrative ............ 966 959 1,925
Spectrum corporate administrative costs (B)..... -- 803 803
Depreciation and amortization .................. -- 174 $ 66 (A) 240
------- ------- ------- -------
966 8,354 66 9,386
------- ------- ------- -------
Operating loss .................................... (966) (109) (66) (1,141)
------- ------- ------- -------
Other income (expense):
Interest expense, net .......................... (1,316) 9 (1,307)
------- ------- ------- -------
(1,316) 9 (1,307)
------- ------- ------- -------
Loss from continuing operations before income taxes (2,282) (100) (66) (2,448)
Provision for income taxes ........................ -- (15) 26 11
------- ------- ------- -------
Loss from continuing operations ................... $(2,282) $ (115) $ (40) $(2,437)
======= ======= ======= =======
Loss per share from continuing operations $ (.71) $ (.28)
======= =======
Weighted average shares outstanding 3,195 8,765
======= =======
Pro forma adjustments to the unaudited consolidated statement of operations:
(A) Amortization of goodwill arising from the COMFORCE Global acquisition.
(B) Corporate administrative charges from COMFORCE Global's former parent,
Spectrum Information Technologies, Inc. The amount of these
administrative charges may not be representative of costs to be
incurred by COMFORCE Global on a stand alone basis.
(C) Pro forma weighted average shares outstanding includes Lori shares
issued in the private placement that funded the COMFORCE Global
transaction, Lori shares issued for fees and costs associated with the
COMFORCE Global acquisition and Lori shares issued to settle
obligations accrued at September 30, 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.
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 thereunder duly authorized.
COMFORCE CORPORATION
--------------------
Registrant
Dated: September 24, 1996 Andrew Reiben
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Director of Finance/Chief Accounting Officer