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): FEBRUARY 3, 1997
(NOVEMBER 1, 1996)
COMFORCE CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-6081 36-2262248
- ------------------------------- ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
2001 MARCUS AVENUE, LAKE SUCCESS, NY 11042
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (516) 328-7300
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- ------------------------------------------
As reported in the Company's Form 8-K dated November 8, 1996, on November
1, 1996, COMFORCE IT Acquisition Corp., a wholly-owned subsidiary of COMFORCE
Corporation (the "Company"), merged with AZATAR Computer Systems, Inc.
("AZATAR") pursuant to the terms of an Agreement and Plan of Reorganization
entered into by such parties and W. Mark Holbrook, formerly the controlling
stockholder of AZATAR (the "Merger Agreement").
The registrant hereby files this Form 8-K/A, Amendment No. 2 to its Form 8-
K dated November 8, 1996 as amended by Form 8-K/A, Amendment No. 1 filed
January 18, 1997, to amend the financial statements included under paragraph (b)
of this Item.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Balance sheets of AZATAR as of November 30, 1995 and August 31, 1996 and the
related statements of operations and retained earnings and statements of cash
flows for the year ended November 30, 1995 and the nine month period ended
August 31, 1996.
AZATAR COMPUTER SYSTEMS, INC.
--------
FINANCIAL STATEMENTS
FOR THE NINE-MONTH PERIOD ENDED AUGUST 31, 1996
AND FOR THE YEAR ENDED NOVEMBER 30, 1995
[LETTERHEAD OF COOPERS & LYBRAND]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Azatar Computer Systems, Inc.
We have audited the accompanying balance sheets of Azatar Computer Systems,
Inc. as of August 31, 1996 and November 30, 1995, and the related statements
of operations and retained earnings, and cash flows for the nine-month period
ended August 31, 1996 and for the year ended November 30, 1995. 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 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 Azatar Computer Systems, Inc.
as of August 31, 1996 and November 30, 1995, and the results of its operations
and its cash flows for the nine-month period ended August 31, 1996 and for the
year ended November 30, 1995, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand LLP
Rochester, New York
November 6, 1996
AZATAR COMPUTER SYSTEMS, INC.
BALANCE SHEETS
AUGUST 31, 1996 AND NOVEMBER 30, 1995
AUGUST 31, NOVEMBER 30,
1996 1995
---------- ------------
ASSETS
Current assets:
Cash.................................................. $ 738,837 $ 880,100
Accounts receivable................................... 1,501,948 1,166,339
Due from related party................................ 321,941 369,205
Prepaid expenses...................................... 8,399 16,520
---------- ----------
2,571,125 2,432,164
Equipment and leasehold improvements, net............... 232,653 215,038
Other assets............................................ 31,856 33,841
---------- ----------
$2,835,634 $2,681,043
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 34,788 $ 8,424
Accrued payroll and payroll taxes..................... 118,993 178,067
Other accrued expenses................................ 22,771 39,021
Due to related party.................................. 24,000
Accrued federal and state income taxes................ 601,263 755,867
Interest payable...................................... 112,000 83,000
---------- ----------
Total current liabilities........................... 889,815 1,088,379
---------- ----------
Stockholder's equity:
Common stock, No par value, 200 Shares authorized
and 100 Shares issued and outstanding................ 500 500
Retained earnings..................................... 1,945,319 1,592,164
---------- ----------
Total stockholder's equity.......................... 1,945,819 1,592,664
---------- ----------
$2,835,634 $2,681,043
========== ==========
The accompanying notes are an integral part of the financial statements.
AZATAR COMPUTER SYSTEMS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE NINE-MONTH PERIOD ENDED AUGUST 31, 1996
AND FOR THE YEAR ENDED NOVEMBER 30, 1995
AUGUST 31, NOVEMBER 30,
1996 1995
---------- ------------
Revenue:
Contract Income...................................... $5,562,451 $6,833,671
Placement Income..................................... 218,703 237,804
---------- ----------
Total revenue...................................... 5,781,154 7,071,475
---------- ----------
Direct costs and expenses:
Employee payroll and benefits........................ 3,954,973 4,947,219
Outside services..................................... 663,633 631,237
General and administrative........................... 556,141 569,933
Depreciation and amortization........................ 24,537 28,229
---------- ----------
Total direct costs and expenses.................... 5,199,284 6,176,618
---------- ----------
581,870 894,857
---------- ----------
Other income (expense)................................. 10,216 (3,732)
Interest income........................................ 44,150 48,246
Interest expense....................................... (29,098) (40,504)
---------- ----------
Income before provision for income taxes............... 607,138 898,867
---------- ----------
Income tax provision................................... 253,983 363,251
---------- ----------
Net Income........................................... 353,155 535,616
Retained earnings--beginning of period................. 1,592,164 1,056,548
---------- ----------
Retained earnings--end of period....................... $1,945,319 $1,592,164
========== ==========
The accompanying notes are an integral part of the financial statements.
AZATAR COMPUTER SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIOD ENDED AUGUST 31, 1996
AND FOR THE YEAR ENDED NOVEMBER 30, 1995
AUGUST 31, NOVEMBER 30,
1996 1995
---------- ------------
Reconciliation of net income to net cash provided by
(used in) operating activities:
Net income.......................................... $353,155 $535,616
-------- --------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization..................... 24,537 28,229
Increase in accounts receivable................... (335,609) (330,305)
Decrease (increase) in prepaid expenses........... 8,121 (10,276)
Decrease (increase) in other assets............... 1,985 (5,002)
Increase in accounts payable...................... 26,364 339
Increase (decrease) in accrued payroll and payroll
taxes............................................ (59,074) 59,319
Increase (decrease) in other accrued expenses..... (16,250) 6,747
Increase (decrease) in due to related party....... (24,000) 24,000
Increase (decrease) in federal and state income
taxes............................................ (154,604) 323,738
Increase in interest payable...................... 29,000 38,000
-------- --------
Total adjustments............................... (499,530) 134,789
-------- --------
Net cash provided by (used in) operating
activities..................................... (146,375) 670,405
-------- --------
Cash flows provided by (used in) investing activities:
Capital expenditures................................ (42,152) (35,468)
Net receipts (advances) on related party loans...... 47,264 (23,233)
-------- --------
Net cash provided by (used in) investing
activities..................................... 5,112 (58,701)
-------- --------
Cash flows used in financing activities:
Repayment of line-of-credit......................... (150,000)
-------- --------
Net cash used in financing activities......... (150,000)
-------- --------
Net increase (decrease) in cash....................... (141,263) 461,704
Cash--beginning of period............................. 880,100 418,396
-------- --------
Cash--end of period................................... $738,837 $880,100
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for taxes................. $350,600 $ 31,500
======== ========
The accompanying notes are an integral part of the financial statements.
AZATAR COMPUTER SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE-MONTH PERIOD ENDED AUGUST 31, 1996 AND FOR THE YEAR ENDED
NOVEMBER 30, 1995
1. DESCRIPTION OF BUSINESS
Azatar Computer Systems, Inc. (Azatar) provides computer programming
services, programmers/operators and analysts, to businesses primarily located
in Central/Western New York State. The employees are provided on a temporary
or semi-permanent basis. Azatar maintains offices in Rochester and Syracuse,
New York.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION: Revenue for providing programming services is
recognized at the time such services are rendered.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS: Equipment and leasehold improvements
are stated at cost less accumulated depreciation and amortization.
Expenditures for maintenance and repairs are charged to operations as
incurred. Expenses for betterments and major renewals are capitalized.
Depreciation and amortization of assets are provided using the straight-line
method over the estimated useful life of the asset.
RESTATEMENT: The financial statements as of November 30, 1996 and December
1, 1994, have been restated to reflect the Federal and State income taxes and
certain other items applicable to those time periods.
RECLASSIFICATION: Certain amounts in the financial statements have been
reclassified to conform to the presentation format for the nine-months ended
August 31, 1996.
INCOME TAXES: Azatar recognizes 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 when necessary to reduce tax assets to their
expected realizable value. At August 31, 1996 and November 30, 1995, there
were deferred tax assets of approximately $4,700 and $6,600, respectively,
included in other assets.
USE OF ESTIMATES: The preparation of the 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 are summarized as follows:
LIFE OF AUGUST 31, NOVEMBER 30,
EQUIPMENT 1996 1995
----------- ---------- ------------
Furniture and fixtures................... 7 years $199,980 $190,505
Equipment................................ 5 years 126,440 115,405
Vehicles................................. 5 years 34,411 34,411
Leasehold improvements................... 31-39 years 190,045 168,403
----------- -------- --------
550,876 508,724
Less: Accumulated depreciation and
amortization............................ 318,223 293,686
-------- --------
$232,653 $215,038
======== ========
AZATAR COMPUTER SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY AND EQUIPMENT--CONTINUED
Depreciation and amortization charged to operations amounted to $24,537 and
$28,229 for the nine-months ended August 31, 1996 and for the year ended
November 30, 1995, respectively.
4. CONCENTRATION OF CREDIT RISK
Azatar's trade accounts receivable as of August 31, 1996 and November 30,
1995, consist primarily of amounts due from major companies requiring the use
of information technology contract consultants. As a result, the
collectibility is spread across various industries and is not dependent on any
particular industry sector. At August 31, 1996 and November 30, 1995, Azatar
had five customers with trade accounts receivable balances that aggregated 59%
and 65%, respectively, of Azatar's total accounts receivable.
Percentages of total revenues from significant customers for the nine-month
period ended August 31, 1996 and the year ended November 30, 1995 are
summarized as follows:
AUGUST 31, NOVEMBER 30,
1996 1995
---------- ------------
Customer 1............................................ 24.5% 10.5%
Customer 2............................................ 22.1% 11.4%
Customer 3............................................ 15.8% 8.0%
Customer 4............................................ .2% 20.1%
Azatar maintains cash in bank accounts which at times may exceed federally
insured limits. Azatar has not experienced any losses in such accounts and
believes they are not exposed to any significant credit risk on their cash
balances. Azatar believes it mitigates such risk by investing its cash through
major financial institutions.
5. COMMITMENTS
At November 30, 1995, future maximum annual rental commitments for real
property under noncancelable leases, certain of which are with a related
party, for each of the years ended November 30, are as follows:
RELATED PARTY OTHER
------------- -------
1996.................................................... $112,940 $17,512
1997.................................................... 85,440 12,624
1998.................................................... 85,440
1999.................................................... 85,440
2000.................................................... 85,440
Thereafter.............................................. 71,200
Total rent expense for the nine-month period ended August 31, 1996 and the
year ended November 30, 1995 was approximately $99,400 and $132,200,
respectively, which included approximately $86,500 and $115,400 of payments to
a related party for the respective time periods.
6. INCOME TAXES
Income tax expense for the nine months ended August 31, 1996 and the year
ended November 30, 1995, is comprised of the following:
AZATAR COMPUTER SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. INCOME TAXES--CONTINUED
AUGUST 31, NOVEMBER 30,
1996 1995
---------- ------------
Federal............................................... $189,984 $268,715
State................................................. 63,999 94,536
-------- --------
$253,983 $363,251
======== ========
The provision for income taxes differs from the amount computed using the
United States Federal Income tax rate as follows:
AUGUST 31, NOVEMBER 30,
1996 1995
---------- ------------
Expected tax at United States income tax rates........ $206,427 $305,615
State income tax effect............................... 47,556 57,636
-------- --------
Total provision for taxes........................... $253,983 $363,251
======== ========
7. RELATED PARTY TRANSACTIONS
Azatar purchases computer equipment and computer programming services from a
related party. Equipment purchases from the related party totaled $9,575 and
$7,769, for the nine-month period ended August 31, 1996 and the year ended
November 30, 1995, respectively.
Computer programming services purchased from a related party were $92,650
and $81,000 for the nine-month period ended August 31, 1996 and for the year
ended November 30, 1995, respectively.
Azatar held various loans due from related parties that totaled $321,941 and
$369,205 at August 31, 1996 and November 30, 1995, respectively. The loans
were at interest rates ranging from 6% to 9% and were repaid during November
1996.
8. EMPLOYEE BENEFIT PLAN
Azatar maintains a retirement plan under Section 401(k) of the Internal
Revenue Code. Eligible employees may contribute up to six percent of their
earnings. Azatar will match employees' contributions at a rate of twenty
percent of the employee contribution. For the nine-month period ended August
31, 1996 and the year ended November 30, 1995, Azatar made contributions to
the plan of $20,745 and $22,227, respectively.
9. SUBSEQUENT EVENTS
Effective November 3, 1996, Azatar merged into a subsidiary of Comforce
Corporation.
(b) PRO FORMA FINANCIAL INFORMATION.
In October 1995, the Company acquired all of the capital stock of Spectrum
Global Services, Inc. (formerly d/b/a YIELD Global and subsequently renamed
COMFORCE Telecom, Inc.) ("COMFORCE Telecom"), which was engaged in the
telecommunications technical staffing business. In September 1995, the Company
discontinued its then existing jewelry business. As shown in the table below,
the Company acquired five additional technical staffing businesses in 1996 and
has entered into a definitive agreement to acquire RHO Company Incorporated
("RHO"). Since September 30, 1996, the recent acquisitions have been funded
principally from proceeds received by the Company from its sale of 3,250 shares
of Series F Preferred Stock and 460,000 shares of Common Stock and related
payment rights and its issuance of 111,111 shares of Common Stock upon the
exercise of a warrant. The agreement to acquire RHO requires that the
transaction be closed by February 28, 1997.
FISCAL 1995
YEAR ACQUISITION REVENUE
ACQUIRED COMPANY FOUNDED DATE (MILLIONS) HEADQUARTERS MARKET SERVED
---------------- ------- ---- ---------- ------------ -------------
COMFORCE Telecom 1987 October 1995 $11.4 Lake Success, Telecommunications
NY
Williams 1991 March 1996 $4.2 Englewood, Telecommunications
Communications FL
Services, Inc.
("Williams")
RRA, Inc., Project 1964 May 1996 $52.0 Tempe, AZ Technical Services
Staffing Support Team,
Inc. and DataTech
Technical Services, Inc.
(collectively, "RRA")
Force Five, Inc. 1993 August 1996 $7.1 Dallas, TX Information Technology
("Force Five")
AZATAR Computer 1980 November $7.1 Rochester, Information Technology
Systems, Inc. 1996 NY
("AZATAR")
FISCAL 1995
YEAR ACQUISITION REVENUE
ACQUIRED COMPANY FOUNDED DATE (MILLIONS) HEADQUARTERS MARKET SERVED
---------------- ------- ---- ---------- ------------ -------------
Continental Field
Service Corporation and 1965 November $9.9 Elmsford, NY Telecommunications
Progressive Telecom, 1996
Inc. (collectively,
"Continental")
RHO 1971 Proposed to $83.6 Redmond, Technical Services and
be WA Information Technology
February 1997
The following information reflects (i) the treatment of the operation of
the Company's jewelry business prior to September 1995 as a discontinued
operation and (ii) the acquisition of COMFORCE Telecom in 1995, the other five
acquisitions completed in 1996, and the proposed acquisition of RHO as if such
acquisitions had occurred on January 1, 1995 (other than unaudited pro forma
balance sheet data at September 30, 1996, which has been prepared as if all such
acquisitions were consummated as of such date).
The pro forma data is being presented to show the effect of all such
transactions since the presentation of pro forma information as to the
transaction described in this Report would not otherwise be meaningful.
The following pro forma data is filed herewith:
Pro forma balance sheet as of September 30, 1996.
Pro forma statements of income for the years ended December 31, 1994 and 1995
and the nine month periods ended September 30, 1995 and 1996.
COMFORCE Corporation and Subsidiaries
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements reflect (i) the
treatment of the operation of the Company's jewelry business prior to September
1995 as a discontinued operation and (ii) the acquisitions of business operating
in the staffing industry, including COMFORCE Telecom, Inc., in 1995, the
Acquisition of Williams Communications Services, Inc., RRA, Inc., Force Five,
Inc., Continental Field Services Corp., and AZATAR Computer Systems, Inc.,
completed in 1996, and the proposed acquisition of RHO Company Incorporated as
if such acquisitions had occurred on January 1, 1994 (other than the unaudited
pro forma balance sheet at September 30, 1996, which has been prepared as if all
such acquisitions were consummated as of such date and accounted for by the
purchase method). Prior to its acquisition by the Company, each of these
acquired businesses operated as a separate independent entity. Since the
unaudited pro forma financial statements set forth below show the combined
financial condition and operating results of these recently acquired businesses
during periods when they were not under common control or management, the
information presented may not be indicative of the results which would have
actually been obtained had such acquisitions been completed on the dates
indicated, or of the Company's future financial or operating results.
Unaudited Pro Forma Balance Sheet
As Of September 30, 1996
Current Assets: COMFORCE AZATAR Continental RHO Adjustments Pro Forma
-------- ------ ----------- ----- ----------- ---------
Cash and cash equivalents 952 739 476 69 672 B 2,908
Restricted cash and equivalents 50 394 444
Accounts receivable, net 10,081 1,502 1,611 8,362 (3,113) A 18,443
Prepaid expenses 86 8 60 377 531
Due from related party 322 (322) A --
Officer loans 367 367
Deferred income taxes 54 54
Other assets 325 328
-------- ------ ----------- ----- ----------- --------
Total current assets 11,915 2,571 2,150 9,202 (2,763) 23,075
-------- ------ ----------- ----- ----------- --------
Property and equipment, net of
accumulated depreciation 492 233 63 640 1,428
Intangible assets, net of
accumulated amortization 14,036 13 23,152 F 37,201
Mortgage receivable 331 (331) A --
Other assets 231 32 39 51 (71) A 282
-------- ------ ----------- ----- ----------- --------
Total assets 26,674 2,836 2,583 9,906 19,987 61,986
======== ====== =========== ===== =========== ========
Current liabilities:
Borrowings under revolving line
of credit 3,250 5,664 8,914
Current portion of long-term debt 395 (395) A --
Accounts payable 283 35 116 168 (151) A 451
Accrued expenses 2,785 23 171 553 (194) A 3,338
Accrued payroll and payroll taxes 119 143 2,090 (262) A 2,090
Income taxes 694 601 (601) A 694
Notes payable 13 (13) A --
Accrued interest 112 114 (226) A --
Liabilities to be assumed by ARTRA
GROUP Incorporated 350 350
-------- ------ ----------- ----- ----------- --------
Total current liabilities 7,362 890 443 8,984 (1,842) 15,837
-------- ------ ----------- ----- ----------- --------
Obligations to be settled by the
issuance of Common Stock 541 (541) C --
Deferred income tax 55 55
Long-term debt 9,360 (9,360) A --
Borrowings for the purchase of RHO 15,000 B 15,000
Commitments and contingencies
Stockholders equity:
Series E convertible preferred stock 1 (1) D --
Series D Senior convertible preferred
stock 1 1
Series F Senior convertible preferred
stock 1 B 1
Common Stock 98 1 37 50 (52) E 134
Additional paid-in capital 17,902 12,342 G 30,244
Other capital 2,180 (2,180) A --
Deferred stock option charge net (1,983) 1,983 A --
Retained earnings, since January 1,
1996 714 714
Retained earnings (deficit) 1,945 2,169 (8,685) 4,571 A --
Treasury stock (66) 66 A --
-------- ------ ----------- ----- ----------- --------
Total stockholders equity 18,716 1,946 2,140 (8,438) 16,730 31,094
-------- ------ ----------- ----- ----------- --------
Total liabilities and stockholders
equity 26,674 2,836 2,583 9,906 19,987 61,986
======== ====== =========== ===== =========== ========
See notes to unaudited pro forma financial statements.
COMFORCE CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996(2)
COMFORCE FORCE
Corporation* Williams* RRA* FIVE* RHO**
------------ -------- --------- ------ -----------
Revenues $33,514 $657 $22,799 $4,589 $63,556
Cost of revenues 28,690 499 20,959 3,454 56,656
-------- -------- -------- -------- --------
Gross profit 4,824 158 1,840 1,144 6,900
Operating expenses:
Selling, general and administrative 2,891 64 1,375 1,274 5,321
Depreciation and amortization 343 1 34 14 226
-------- -------- -------- -------- --------
Income (loss) from operations 1,590 93 431 (144) 1,353
Other (income) expenses:
Other (29) 197
Interest 102 34 7 984
-------- -------- -------- -------- --------
73 - 34 7 1,181
-------- -------- -------- -------- --------
Income (loss) before income taxes 1,517 93 397 (151) 172
Provision (credit) for income taxes 610 39 - (49) -
-------- -------- -------- -------- --------
Net income (loss) 907 $54 $397 $(102) $172
======== ======== ======== ========
Dividends on preferred stock (193)
Dividends on Common Stock equivalents 18
--------
Income available for Common Stock $732
========
Income per share $0.06
========
Weighted average shares outstanding
and common stock equivalents 12,661
========
Pro Forma Pro
AZATAR*** Continental Adjustments(3) Forma
------------ ----------- ------------ --------------
Revenues $5,781 $7,377 $138,282
Cost of revenues 4,619 6,259 121,136
-------- -------- -------- --------
Gross profit 1,162 1,118 17,146
Operating expenses:
Selling, general and administrative 555 802 (404) 11,878
Depreciation and amortization 25 13 558 1,214
-------- -------- -------- --------
Income (loss) from operations 582 303 (154) 4,054
Other (income) expenses:
Other (54) (23) (197) (106)
Interest 29 5 443 1,604
-------- -------- -------- --------
(25) (18) 246 1,498
-------- -------- -------- --------
Income (loss) before income taxes 607 321 (400) 2,556
Provision (credit) for income taxes 254 - 364 1,218
-------- -------- -------- --------
Net income (loss) $353 $321 $(764) 1,338
======== ======== ========
Dividends on preferred stock (323) (7)
Dividends on Common Stock equivalents 26
--------
Income available for Common Stock $1,041
========
Income per share $0.07
========
Weighted average shares outstanding 14,067 (6)
and common stock equivalents ========
* The financial statements of these companies for the nine month period
ended September 30, 1996 have been audited by Coopers & Lybrand L.L.P.,
which financial statements are included in this Prospectus.
** The financial statements of this company for the nine month period ended
September 30, 1996 have been audited by Arthur Andersen L.L.P., which
financial statements are included in this Prospectus.
*** The financial statements of this company for the nine months ended August
31, 1996 have been audited by Coopers & Lybrand L.L.P., which financial
statements are included in this Prospectus.
See notes to unaudited pro forma financial statements
COMFORCE CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1995(2)
COMFORCE COMFORCE
Corporation Telecom Williams RRA FORCE FIVE
----------- -------- -------- ------ ----------
Revenues $9,007 $2,975 $37,441 $4,941
Cost of revenues 6,765 2,120 34,559 3,761
-------- -------- -------- -------- --------
Gross profit 2,242 855 2,882 1,180
Operating Expenses:
Selling, general and administrative 265 1,017 418 2,016 849
Depreciation and amortization 142 - 86 14
Non-recurring items:
Stock Compensation 3,000 (4)
Management fees to former parent
company 1,140 (5)
-------- -------- -------- -------- --------
Income (loss) from operations (3,265) (57) 437 780 317
Other (income) expenses:
Other (7) (36)
Interest expense 410 1 115 36
-------- -------- -------- -------- --------
410 (7) 1 115 -
-------- -------- -------- -------- --------
Income (loss) before income taxes (3,675) (50) 436 665 317
Provision (credit) for income taxes - 15 203 - 98
-------- -------- -------- -------- --------
Net income (loss) (3,675) $(65) $233 $665 $219
======== ======== ======== ========
Dividends on preferred stock -
--------
Income available for common stock $(3,675)
========
Loss per share from operations $(1.11)
========
Weighted average shares outstanding 3,321
========
Pro Forma Pro
RHO AZATAR Continental Adjustments(3) Forma
------------ ---------- ----------- -------------- ----------
Revenues $62,833 $5,071 $7,371 $129,639
Cost of revenues 56,481 4,196 6,098 113,980
-------- -------- -------- --------
Gross profit 6,352 875 1,273 15,659
Operating Expenses:
Selling, general and administrative 4,465 359 744 10,133
Depreciation and amortization 178 21 29 $725 1,195
Non-recurring items:
Stock Compensation 3,000
Management fees to former parent
company 1,140
-------- -------- -------- -------- --------
Income (loss) from operations 1,709 495 500 (725) 191
Other (income) expenses:
Other (30) (48) (121)
Interest expense 1,249 28 24 (428) 1,435
-------- -------- -------- -------- --------
1,249 (2) (24) (428) 1,314
-------- -------- -------- -------- --------
Income (loss) before income taxes 460 497 524 (297) (1,123)
Provision (credit) for income taxes - 201 - 317 834
-------- -------- -------- -------- --------
Net income (loss) $460 $296 $524 $(614) (1,957)
======== ======== ======== ========
Dividends on preferred stock (148)(7)
--------
Income available for common stock $(2,105)
========
Loss per share from operations $(0.22)
========
Weighted average shares outstanding 9,741 (6)
========
See notes to unaudited pro forma financial statements
COMFORCE CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995(2)
COMFORCE COMFORCE
Corporation* Telecom* Williams* RRA*** FORCE FIVE*
------------ -------- --------- ------ -----------
Revenues $2,387 $9,007 $4,178 $52,011 $7,067
Cost of revenues 1,818 6,765 3,022 47,830 5,287
-------- -------- -------- -------- --------
Gross profit 569 2,242 1,156 4,181 1,780
Operating expenses:
Selling, general and administrative 765 1,017 449 2,877 1,373
Depreciation and amortization 58 142 1 115 19
Non-recurring expenses:
Stock compensation 3,425 (4)
Management fees to former parent
company 1,140 (5)
-------- -------- -------- -------- --------
Income (loss) from operations (3,679) (57) 706 1,189 388
Other (income) expenses:
Other 33 (7) (42) (36)
Interest 585 175 48
-------- -------- -------- -------- --------
618 (7) - 133 12
-------- -------- -------- -------- --------
Income (loss) before income taxes (4,297) (50) 706 1,056 376
Provision (credit) for income taxes 35 15 354 - 120
-------- -------- -------- -------- --------
Net income (loss) $(4,332) $(65) $352 $1,056 $256
======== ======== ======== ========
Dividends on preferred stock 0
Income available for common stock $(4,332)
--------
Loss per share $(0.95)
========
Weighted average shares outstanding 4,596
========
Pro Forma Pro
RHO** AZATAR**** Continental* Adjustments(3) Forma
------------ ---------- ------------ -------------- ----------
Revenues $83,631 $7,071 $9,850 $175,202
Cost of revenues 74,978 5,578 8,125 153,493
-------- -------- -------- --------
Gross profit 8,653 1,493 1,635 21,709
Operating expenses:
Selling, general and administrative 6,283 571 1,126 14,461
Depreciation and amortization 227 28 39 989 1,618
Non-recurring expenses:
Stock compensation 3,425
Management fees to former parent
company 1,140
-------- -------- -------- -------- --------
Income (loss) from operations 2,143 894 470 (989) 1,065
Other (income) expenses:
Other (44) (80) (176)
Interest 1,643 40 60 179 2,730
-------- -------- -------- -------- --------
1,643 (4) (20) 179 2,554
-------- -------- -------- -------- --------
Income (loss) before income taxes 500 898 490 (1,168) (1,489)
Provision (credit) for income taxes - 363 - (54) 833
-------- -------- -------- -------- --------
Net income (loss) $500 $535 $490 $(1,114) (2,322)
======== ======== ======== ========
Dividends on preferred stock (197)(7)
--------
Income available for common stock (2,529)
========
Loss per share $(0.26)
========
Weighted average shares outstanding 9,876 (6)
========
* The financial statements of these companies have been audited
for the periods referenced in footnote 2 by Coopers & Lybrand
L.L.P., which financial statements are included in this
Prospectus.
** The financial statements of this company for the year ended
December 31, 1995 have been audited by Arthur Andersen L.L.P.,
which financial statements are included in this Prospectus.
*** The financial statements of this company for the year ended
December 31, 1995 have been audited by Alexander & Devoley,
P.C., which financial statements are included in this
Prospectus.
**** The financial statements of this company for the year ended
November 30, 1995 have been audited by Coopers & Lybrand L.L.P.,
which financial statements are included in this Prospectus.
See notes to unaudited pro forma financial statements
COMFORCE CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994(2)
COMFORCE COMFORCE
Corporation* Telecom* Williams RRA*** FORCE FIVE
------------ -------- --------- ------ ----------
Revenues $8,245 $2,930 $38,559 $3,234
Cost of revenues 6,417 2,107 35,601 2,485
-------- -------- -------- --------
Gross profit 1,828 823 2,958 749
Operating expenses:
Selling, general and administrative 966 959 582 2,156 625
Depreciation and amortization 175 15 133 5
Non-recurring charges:
Management fees to former parent
company 803 (4)
-------- -------- -------- -------- --------
(966) (109) 226 669 119
Income (loss) from operations
Other (income) expense (9) (25)
Interest expense 1,316 26 168 16
-------- -------- -------- -------- --------
1,316 (9) 26 143 16
-------- -------- -------- -------- --------
Income (loss) before income taxes (2,282) (100) 200 526 103
Provision (credit) for income taxes 15 78 - 48
-------- -------- -------- -------- --------
Net income (loss) (2,282) $(115) $122 $526 $55
======== ======== ======== ========
Dividends on preferred stock -
Dividends on common stock equivalents -
--------
$(2,282)
========
Income (loss) per share operations $(0.72)
========
Weighted average shares outstanding 3,195
========
Pro Forma Pro
RHO** AZATAR Continental Adjustments(3) Forma
------------ -------- ----------- -------------- ----------
Revenues $76,170 $4,923 $8,386 $142,447
Cost of revenues 69,157 3,982 7,181 126,930
-------- -------- -------- --------
Gross profit 7,013 941 1,205 15,517
Operating expenses:
Selling, general and administrative 5,066 423 1,347 12,124
Depreciation and amortization 200 24 74 967 1,593
Non-recurring charges:
Management fees to former parent
company 803
-------- -------- -------- -------- --------
1,747 494 (216) (967) 997
Income (loss) from operations
Other (income) expense (20) (74) (128)
Interest expense 1,435 39 3 460 3,463
-------- -------- -------- -------- --------
1,435 19 (71) 460 3,335
-------- -------- -------- -------- --------
Income (loss) before income taxes 312 475 (145) 1,427 (2,338)
Provision (credit) for income taxes - 242 - (383) -
-------- -------- -------- -------- --------
Net income (loss) $312 $233 $(145) $(1,044) $(2,338)
======== ======== ======== ========
Dividends on preferred stock (197) (7)
Dividends on common stock equivalents -
--------
$(2,535)
========
Income (loss) per share operations $ (0.26)
========
Weighted average shares outstanding 9,615 (6)
========
* The financial statements of these companies for the year ended
December 31, 1994 have been audited by Coopers & Lybrand L.L.P.,
which financial statements are included in this Prospectus.
** The financial statements of this company for the year ended
December 31, 1994 have been audited by Benson & McLaughlin,
which financial statements are included in this Prospectus.
*** The financial statements of this company for the year ended
December 31, 1995, have been audited by Alexander & Devoley,
P.C., which financial statements are included in this
Prospectus.
See notes to unaudited pro forma financial statements
COMFORCE Corporation
Notes to Unaudited Pro Forma Financial Statements
(1) The pro forma adjustments of the unaudited pro forma balance sheet consist
of:
(A) Record acquisition by AZATAR, Continental, and Rhotech and related
entries and the elimination of AZATAR, Continental and Rhotech assets and
liabilities not purchased or assumed. (B) Record proceeds from the debt
financing of 15,000,000, proceeds from the sale of 3,250 Shares of preferred
stock Series F, proceeds from the sale of 460,000 shares of common stock and
related payment right, and proceeds from the exercise of warrants amounting to
$7,142,000 less payments for the purchase of AZATAR, Continental, and Rhotech of
$20,255,000, and less cash not included as purchased assets of $1,215,000. (C)
Record the settlement of obligations to be settled by the issuance of common
stock. (D) Record the conversion of 8,871 shares of Series E preferred stock to
887,100 shares of common stock. (E) To record the net change on common stock
outstanding. (F) Record the purchase price of AZATAR, Continental and RHO over
the net assets acquired over intangibles, primarily goodwill. (G) to record the
transaction described in (A) through (D) above as follows: (i) proceeds from the
sale of Series F Preferred, sale of 460,000 shares of common stock, and the
issuance of 111,111 warrants, (ii) shares issued in connection with the
acquisition of AZATAR and Continental with values of $4,120,000 and $575,000,
respectively, (iii) value of shares issued to settle obligations to be settled
by common stock of $541,000 (iv) less par value of common or preferred stock
sold or issued upon conversion of Preferred Stock, or issued in settlement of
obligations equal to $27,000.
(2) The unaudited pro forma statements of operations include the statements of
operations for the companies listed for the periods prior to their
acquisition by COMFORCE. The unaudited pro forma statement of operations
for the period ended September 30, 1996 presents the financial statements
of COMFORCE, AZATAR, Continental and RHO for their respective 1996 nine
month periods and the results of operations for companies acquired during
the nine month period ended September 30, 1996 as follows: Williams
Communications Services, Inc. (Williams) (January 1 through March 3, 1996),
RRA, Inc. (RRA) (January 1 through May 10, 1996) and Force Five, Inc.,
(Force five) (January 1 through July 31, 1996). The financial statements
for the year ended December 31, 1995 includes the annual 1995 results of
operations of each entity, except for COMFORCE Telecom, Inc. which reflects
results of operations for the period January 1 through September 30, 1995
prior to its acquisition on October 16, 1995. The financial statements for
all companies for the nine month period ended September 30, 1995 and
year ended December 31, 1994 present the nine and twelve month results of
operations of the respective companies. All periods presented exclude the
revenues and expenses related to the jewelry business of COMFORCE which was
discontinued in September 1995. The pro forma results of operations are
presented as if these companies were acquired on January 1, 1994 and do not
purport to be an indication of the results of operation had these
acquisitions been made as of that date or of results which may occur in the
future.
(3) Pro forma adjustments include the following:
Nine months ended Year ended
September 30, December 31,
----------------- -----------------
1996 1995 1995 1994
(in thousands)
Non-recurring officer compensation 601 --
Additional amortization of intangibles (a) (558) (725) (989) (967)
(Increase) decrease in interest expense (b) (443) 428 (179) (460)
(Increase) decrease in provision for income taxes (c) (364) (317) (54) 383
---- ----- ----- ----
Total pro forma adjustments $(764) $(614) $(1,114) $(1,044)
(a) Amortization of intangibles assumes all of the acquisitions and proposed
acquisitions occurred on January 1, 1994. The table below reflects the
amortization of intangibles with lives ranging from 5 to 40 years:
Nine months ended Year ended
September 30, December 31,
----------------- --------------
1996 1995 1995 1994
---- ---- ---- ----
(in thousands)
Pro forma amortization
Telecom $ 182 $ 182 $ 243 $ 243
Williams 39 39 52 52
RRA 123 123 164 164
Force Five 39 39 52 52
Continental 94 94 125 125
AZATAR 97 97 129 129
RHO 277 277 370 370
Less: historical amortization (293) (126) (146) (168)
------ ----- ------ ------
Pro forma adjustment $ 558 $ 725 $ 989 $ 967
====== ===== ====== ======
(b) Interest expense relates to the elimination of interest expense on notes
and other liabilities assumed by ARTRA totaling $410,000 for September
and December 1995, the elimination of interest expense on debt due to
RHO shareholders which was not assumed, interest expense on the
$15,000,000 debt financing for RHO at an interest rate of 8%, interest
expense on the line of credit used to purchase Williams and Force Five
(assuming all $3,350,000 was outstanding for 1994 and 1995 at an interest
rate of 8.5%) and interest expense for 1996 on the line of credit used to
purchase Williams and Force Five (assuming that $3,350,000 was
outstanding from January 1, 1996 to March 3, 1996 and $1,450,000 was
outstanding from March 3, 1996 to July 31, 1996). The interest expense
eliminated in 1995 was for interest and notes directly related to The
Lori Corporation activities and was incurred in 1996.
(c) The proforma adjustment for income taxes reflects the tax effect of the
proforma adjustment (excluding non-deductible amortization), the tax
effect of S Corporation earnings treated as C Corporation earnings and
the tax benefit of losses by other entities within the pro forma combined
group.
(4) 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 staffing business.
(5) Represent a non-recurring management fee paid by Telecom to its former
parent company prior to its acquisition by the Company.
(6) Pro forma weighted average shares outstanding are calculated as follows:
Nine months ended Year ended
September 30, December 31,
-------------- -------------
1996 1995 1995 1994
---- ---- ---- ----
(In thousands of shares)
Historical weighted average shares outstanding 12,900 3,321 4,596 3,195
Shares issued as compensation * 3,091 2,464 3,091
Shares issued-Telecom acquisition * 2,562 2,049 2,562
Shares issued-Force Five acquisition * 27 27 27
Shares issued-AZATAR acquisition 243 243 243 243
Shares issued-Continental acquisition 37 37 37 37
Common shares sold to fund Continental acquisition (a) 460 460 460 460
Common stock equivalents Series E preferred * ** ** **
Common stock equivalents on Series D and F Preferred Stock ** ** ** **
Warrants issued in connection with the Continental acquisition 111 ** ** **
Warrants issued in connection with the Telecom acquisition * ** ** **
Shares issued to certain shareholders * ** ** **
Contingent shares:
AZATAR (b) 84 ** ** **
RHO (c) 232 ** ** **
------ ------ ------ ------
TOTAL PRO FORMA SHARES 14,067 9,741 9,876 9,615
====== ====== ====== ======
* Included in historical weighted average shares outstanding.
** Excluded as the effect would be anti-dilutive.
(a) In December 1996, the Company sold 460,000 shares of its Common Stock,
together with a related payment right, for $3.5 million. This payment
right requires the Company to make a payment to the investors equal to
the amount, if any, by which $10.00 per share exceeds the average
closing bid price for the five trading days prior to a specified date
(not later than May 1, 1997).
(b) AZATAR's contingent purchase price of $1,200,000 is payable in stock at
a rate of $400,000 per year for a three year period, if certain earnings
criteria are met. The stock price is based on the average stock price
for the last ten days in each year such shares are earned. The per share
price at December 31, 1996 of $14.25 has been utilized to calculate
contingent shares for pro forma purposes. Such shares actually earned
may differ from these calculations.
(c) RHO's contingent purchase price of up to $3,300,000 is payable in stock
if certain earnings criteria are being met. The conversion price to
calculate shares to be issued is based upon the price of the Company's
common stock at the closing of the acquisition. The per share price at
December 31, 1996 of $14.25 has been utilized to calculate contingent
shares for pro forma purposes. Such shares actually earned and the price
per share may differ from this calculation.
(7) The following summarizes the pro forma dividends on Preferred Stock
Nine Months ended Year Ended
September 30, December 31,
1996 1995 1995 1994
(In thousands) (In thousands)
Series D Preferred Stock 175 * * *
Series E Preferred Stock 26 26 35 35
Series F Preferred Stock (a) 122 122 162 162
---- ---- ---- ----
323 148 197 197
==== ==== ==== ====
(a) Certain discounts upon conversion of Series F Preferred Stock aggregating
approximately $665,000 will be recorded as an additional dividend attributable
to holders of Preferred Stock in the fourth quarter of 1996.
* Series D not deemed issued in prior periods as proceeds were utilized in
1996 for working capital requirements.
SIGNATURE
---------
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 hereunto duly authorized.
COMFORCE Corporation
--------------------
(Registrant)
By: /s/ Andrew Reiben
------------------------------------------
Andrew Reiben, Chief Accounting Officer
Dated: February 3, 1997
COMFORCE Corporation
2001 Marcus Avenue
Lake Success, NY 11042
February 3, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-1004
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
transmitting herewith the attached Form 8-K/A, Amendment No. 2 to Form 8-K dated
November 8, 1996.
Very truly yours,
COMFORCE Corporation
/s/ Andrew Reiben
- -------------------------------
Andrew Reiben
Chief Accounting Officer
Enclosures