SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 3, 1996 (May 10, 1996)
COMFORCE Corporation
----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
--------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-6081 36-23262248
---------------------- ---------------------------------
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) 352-3200
<PAGE>
Item 7. Financial Statements and Exhibits
---------------------------------
As reported in the Company's Form 8-K dated May 23, 1996, on
May 10, 1996, the Company, through its subsidiary, COMFORCE
Technical Services, Inc., purchased, pursuant to the Stock
Purchase Agreement with Project Staffing Support Team, Inc.
and Raphael and Stanley Rashkin, the Asset Purchase Agreement
with RRA, Inc. and Raphael and Stanley Rashkin, and the Asset
Purchase Agreement with DataTech Technical Services, Inc. and
Raphael and Stanley Rashkin, respectively, all of the stock of
Project Staffing Support Team, Inc. and substantially all of
the assets of RRA, Inc. and Datatech Technical Services, Inc.
The registrant hereby files this Form 8-K/A, Amendment No. 1
to its Form 8-K dated May 23, 1996 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.
a) Financial Statements of Business Acquired
-----------------------------------------
Combined balance sheets of RRA, Inc. and Affilites ,
Datatech Technical Services, Inc., and Project
Staffing Support Team, Inc. as of December 31, 1995
and 1994, and the related combined statements of
income, changes in shareholder's equity, and cash
flows for the years then ended.
Combined balance sheets of RRA, Inc. and Affilites,
Datatech Technical Services, Inc., and Project
Staffing Support Team, Inc. as of December 31, 1994
and 1993, and the related combined statements of
income, changes in shareholder's equity, and cash
flows for the years then ended.
(b) Pro Forma Financial Information
-------------------------------
Pro forma Consolidated Balance Sheet as of March 31,
1996 (Unaudited).
Pro forma Consolidated Statement of Operations for
the three months ended March 31, 1996 (Unaudited).
Pro forma Consolidated Statement of Operations for
the year ended December 31, 1995 (Unaudited).
<PAGE>
Item 7(a) Financial Statements of Business Acquired
-----------------------------------------
To The Shareholders
RRA, Inc., Datatech Technical Services, Inc.
and Project Staffing Support Team, Inc.
INDEPENDENT AUDITOR'S REPORT
----------------------------
We have audited the accompanying combined balance sheets of RRA, Inc., Datatech
Technical Services, Inc., and Project Staffing Support Team, Inc. as of December
31, 1995 and 1994, and the related combined statements of income, changes in
shareholder's equity, and cash flows for the years then ended. These combined
financial statements are the responsibility of the Companies' 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 RRA, Inc., Datatech Technical
Services, Inc., and Project Staffing Support Team, Inc. as of December 31, 1995
and 1994, and the results of their operations and cash flows for the years then
ended in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic combined
financial statements taken as a whole. The information included in the
accompanying schedules is presented for purposes of additional analysis and is
not a required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
ALEXANDER & DEVOLEY, P.C.
Phoenix, Arizona
February 1, 1996
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED BALANCE SHEET
For the Years Ended December 31, 1995 and 1994
ASSETS
1995 1994
---------- ----------
CURRENT ASSETS:
Cash ...................................... $ 53,662 $ 426,312
Accounts receivable - trade ............... 5,292,779 3,434,704
Other accounts receivable ................. 4,810 10,411
Note receivable - employee, current
portion (Note 2) ........................ 9,440 1,810
Note receivable - related parties,
current portion (Note 2) ................ 237,114 148,050
Prepaid expenses .......................... 49,616 27,284
Investments ............................... 4,925 --
---------- ----------
Total current assets .......................... 5,652,346 4,048,571
---------- ----------
PROPERTY AND EQUIPMENT (NOTE 1):
Office furniture and equipment ............ 438,607 346,395
Leasehold improvements .................... 131,325 114,435
Vehicles .................................. 23,912 215,330
---------- ----------
593,844 676,160
Less accumulated depreciation and
amortization ............................ 329,890 321,003
---------- ----------
263,954 355,157
---------- ----------
OTHER ASSETS:
Refundable deposits ....................... 9,666 50,396
Note receivable - employee, long-
term portion (Note 2) ................... 8,829 7,412
Note receivable - related parties,
long-term portion (Note 2) .............. 216,000 216,000
Deferred loan fee, less amortization
of $3,333 in 1995 and $5,312 in 1994 .... 1,667 2,188
Organizational costs, less accumulated
amortization of $13,121 in 1995 and
$9,841 in 1994 (Note 1) ................. 3,280 6,560
Client lists, less amortization of
$14,625 in 1995 and $8,125 in 1994
(Note 1) ................................ 4,875 11,375
---------- ----------
244,317 293,931
---------- ----------
$6,160,617 $4,697,659
========== ==========
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED BALANCE SHEET
For the Years Ended December 31, 1995 and 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
1995 1994
---------- ----------
CURRENT LIABILITIES:
Bank overdraft ............................ $ 496,879 $ 148,474
Accounts payable .......................... 49,058 42,572
Notes payable (Note 4) .................... 38,183 59,823
Note payable - bank (Note 3) .............. 1,220,000 1,200,000
Note payable - shareholder; due
on demand at 9.5% ....................... 100,000 --
Current portion of long-term debt ......... 6,657 62,978
Accrued expenses:
Wages, vacation, and holiday ............ 756,096 817,041
Payroll taxes and withholdings .......... 182,469 170,283
Gross receipts tax ...................... 78,141 64,565
Self insurance claims (Note 1) .......... 140,000 120,000
Interest ................................ 9,483 10,999
Pension plan contributions (Note 8) ..... 720,000 285,287
---------- ----------
Total current liabilities ................. 3,796,966 2,982,022
---------- ----------
LONG-TERM DEBT (NOTE 5): ........................... -- 73,185
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock (Note 7) ..................... 19,560 19,560
Additional paid-in capital ................ 415,631 387,863
Retained earnings ......................... 1,928,460 1,235,029
---------- ----------
2,363,651 1,642,452
---------- ----------
$6,160,617 $4,697,659
========== ==========
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED STATEMENT OF INCOME
For the Years Ended December 31, 1995 and 1994
1995 1994
------------ ------------
REVENUE .................................... $ 52,011,107 $ 38,559,163
COST OF REVENUE ............................ 47,830,459 35,601,360
------------ ------------
GROSS PROFIT ............................... 4,180,648 2,957,803
GENERAL AND ADMINISTRATIVE EXPENSES ........ 2,991,540 2,287,394
------------ ------------
INCOME FROM OPERATIONS ..................... 1,189,108 670,409
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense ........................ (175,338) (167,780)
Interest income ......................... 37,044 24,993
Gain (Loss) on abandonment and
sale of fixed assets .................. 5,385 (2,067)
------------ ------------
(132,909) (144,854)
------------ ------------
NET INCOME ................................. $ 1,056,199 $ 525,555
============ ============
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 ...................... $ 19,559 $ 325,264 $ 761,374 $ 1,106,197
ISSUANCE OF 100 SHARES OF
COMMON STOCK (NOTE 7) ..................... 1 -- -- 1
CONTRIBUTIONS TO CAPITAL ........................ -- 62,599 -- 62,599
DISTRIBUTIONS TO SHAREHOLDERS ................... -- -- (51,900) (51,900)
NET INCOME - 1994 ............................... -- -- 525,555 525,555
BALANCE, DECEMBER 31, 1994 ...................... 19,560 387,863 1,235,029 1,642,452
REDEMPTION OF STOCK AND
CAPITAL (NOTE 7) ................................ -- (25,000) -- (25,000)
CONTRIBUTIONS TO CAPITAL (NOTE 7) ............... -- 52,768 -- 52,768
DISTRIBUTIONS TO SHAREHOLDERS ................... -- -- (362,768) (362,768)
NET INCOME - 1995 ............................... -- -- 1,056,199 1,056,199
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1995 ...................... $ 19,560 $ 415,631 $ 1,928,460 $ 2,363,651
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1995 and 1994
1995 1994
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers ............. $ 50,152,358 $ 37,544,620
Cash paid to suppliers and employees ..... (50,220,197) (36,842,673)
Interest paid ............................ (176,854) (98,437)
Interest received ........................ 674 3,544
------------ ------------
NET CASH (USED IN) PROVIDED FROM OPERATING
ACTIVITIES ............................... (244,019) 607,054
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ..................... (109,101) (321,652)
Net receipts (advances) on related
party loans ............................... 17,765 (17,845)
Net receipts (advances) on employee loans 2,953 (9,222)
Purchase of investment stock ............. (4,925) --
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES .......... (93,308) (348,719)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft ........................... 348,405 148,474
Net borrowings (payments) under line of
credit agreements ........................ 20,000 (41,660)
Principal payments on notes payable-
other .................................. (21,640) (117,649)
Proceeds from stock issuance or
capital contributions .................. 27,768 62,600
Distributions to shareholders ............ (362,768) (51,900)
Proceeds from long-term debt ............. -- 190,285
Proceeds from sale of fixed assets ....... 87,418
Payments on long-term debt ............... (129,506) (54,122)
Payment of deferred loan fee ............. (5,000) (7,500)
------------ ------------
NET CASH (USED IN) PROVIDED FROM
FINANCING ACTIVITIES ..................... (35,323) 128,528
------------ ------------
NET (DECREASE) INCREASE IN CASH ................ (372,650) 386,863
CASH AT BEGINNING OF YEAR ...................... 426,312 39,449
------------ ------------
CASH AT END OF YEAR ............................ $ 53,662 $ 426,312
============ ============
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995 and 1994
1995 1994
------------ ------------
RECONCILIATION OF NET INCOME TO NET
CASH (USED BY) PROVIDED FROM
OPERATING ACTIVITIES:
NET INCOME ....................................... $ 1,056,199 $ 525,555
----------- -----------
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH (USED BY) PROVIDED FROM OPERATING
ACTIVITIES:
Depreciation and amortization ................ 114,743 133,454
(Gain) Loss on abandonment and sale of
fixed assets .......................... (5,385) 2,067
Increase in accounts receivable .............. (1,858,075) (1,010,999)
Decrease in other receivables ................ 5,601 6,883
Decrease (Increase) in prepaid
expenses and deposits ................. 18,398 (19,887)
(Decrease) Increase in accounts
payable ............................... (3,014) 23,764
Increase in accrued expenses ................. 427,514 946,217
----------- -----------
Total adjustments ....................... (1,300,218) 81,499
----------- -----------
NET CASH (USED BY) PROVIDED FROM OPERATING
ACTIVITIES ................................. $ (244,019) $ 607,054
=========== ===========
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1995 and 1994
(1) SIGNIFICANT ACCOUNTING POLICIES:
Business organization
RRA, Inc. (RRA) was incorporated in 1964 under the laws of the
State of New York. Datatech Technical Services, Inc. (DTS) was
incorporated in 1991 under the laws of the State of Arizona and
commenced operations in 1992. Effective January 1, 1992, certain
customer accounts and property and equipment of RRA were transferred to
DTS in exchange for a down payment of $25,000 and a note for $150,000.
The terms of the note call for 10 equal annual payments to RRA from DTS
of $22,354, which includes principal and interest at 8%. The note
receivable and note payable have been eliminated in combination. DTS
charged RRA $225,350 in 1994 for a management fee. Any income or
expense related to these transactions have been eliminated in
combination. The Companies remain under common management and control.
Ray Rashkin owns 100% of RRA. Stanley Rashkin owns 100% of DTS.
Project Staffing support Team, Inc. (PSST) was incorporated under
the laws of the State of Arizona and commenced operations in 1994. At
inception, PSST was owned in equal shares by Ray Rashkin and Stanley
Rashkin. PSST had no revenue in 1994, and absorbed $41,327 in costs.
In 1995, RRA charged PSST $208,607 for a management fee. Ray
Rashkin redeemed his shares during the year, leaving Stanley Rashkin as
the sole shareholder of PSST (see note 7).
Principles of combination
These combined financial statements include the accounts of RRA,
DTS, and PSST. All significant intercompany transactions and balances
have been eliminated in combination.
Nature of business
The Companies provide highly trained individuals primarily to
large corporate customers that contract with various governmental
entities throughout the United States. The employees are provided on a
temporary or semi-permanent basis. The individuals are employees of the
Companies. The Companies maintain offices in Arizona, New York,
Connecticut, New Mexico, Missouri, Washington, South Carolina, and
California.
The companies have two major contracts that are renewable. One of
the contracts started early in 1994. Management is confident these
contracts will continue. The largest of the two renewed for five years,
and the other contract was extended for the second option year to
January 1997.
<PAGE>
Property and equipment
Property and equipment are stated at cost. Depreciation is
provided using accelerated methods over the estimated useful lives of
the assets. Amortization of leasehold improvements is provided using
the straight-line method over the lesser of the lease term or the
estimated useful lives of the assets. Depreciation expense was $99,442
and $118,362 in 1995 and 1994, respectively.
Organizational costs, client lists and deferred loan fees
Organizational costs for DTS are being amortized on a
straight-line basis over five years. Client lists purchased for $19,500
are being amortized over three years. Deferred loan fees are being
amortized over the term of the revolving line of credit agreement.
Concentration of risks
Periodically during the year, the Companies maintain cash in
financial institutions in excess of the amounts insured by the Federal
government.
Income taxes
The Companies have elected under applicable sections of the
Internal Revenue Code to be treated as "S" Corporations for income tax
purposes. Therefore, any income, loss and tax credits are reportable by
the shareholders on their individual income tax returns. In 1995, the
owners drew approximately $335,000 to pay estimated taxes on the
earnings from these entities, with an additional $70,000 drawn in
January 1996. Certain states in which the Companies do business do not
recognize the "S" Corporation status or they impose minimum taxes.
State income taxes are more of a license cost. They are included in
administrative expenses in the accompanying combined statement of
income. DTS reports to the Internal Revenue Service using the cash
basis of accounting.
Employee benefit plan
The Companies maintain 401(k) plans and Section 125 cafeteria
plans for the benefit of their employees. Employees elect to withhold
specified amounts from their wages to contribute to the plans. The
Companies have a fiduciary responsibility with respect to the plans.
Estimated health self-insurance claims
The Companies maintain a self-insurance plan for those employees
who elect to participate. Under this plan, the Company is responsible
for paying claims up to $40,000 annually per individual. There are
provisions for reinsurance in the plan. The financial statements
include an estimate for claims to be paid under this policy.
<PAGE>
(2) NOTES RECEIVABLE:
Notes receivable - related parties consists of the following:
1995 1994
-------- --------
Note receivable - shareholder,
is an informal, unsecured
agreement due on demand with
interest at 8% ................ $ 6,830 $ 57,604
Note receivable - shareholder,
is an informal, unsecured
agreement due on demand with
interest at 8% ................ 213,737 81,705
Accrued interest on the above . 16,547 8,741
-------- --------
Total shown as a current asset $237,114 $148,050
======== ========
Note receivable - shareholder,
is an unsecured note which
requires monthly interest only
payments at prime plus 1.5%
through 2005 when all principal
and interest is due; 1995 and
1994 include $16,000 in accrued
interest receivable ........... $216,000 $216,000
======== ========
Note receivable - employee consists of the following:
Promissory note from one employee;
payable weekly with interest at
8%; note matures in July 1999;
Upon termination, the note is
immediatly due and payable. $ 7,374 $ 9,222
Promissory note from one employee;
payable weekly with interest at
9.5%; note matures in June 2000;
secured by automobile. 10,895 -
-------- --------
18,269 9,222
Less current portion 9,440 1,810
-------- --------
$ 8,829 $ 7,412
======== ========
(3) NOTE PAYABLE - BANK:
Note payable - bank, consists of a revolving line of credit
agreement which provides for borrowings up to the lesser of $4,000,000
or 80% of acceptable receivables as defined, payable in full May 1,
1996 with interest at prime plus .5%. The interest rate as of December
31, 1995 was 8.75%. The note is collateralized by accounts receivable,
property and fixtures, and inventory, and is personally guaranteed by
the shareholders. The line of credit agreement contains certain
restrictive covenants regarding the financial position of the
Companies. The Companies were in compliance with respect to the
restrictive covenants as of December 31, 1995 and 1994.
<PAGE>
(4) NOTES PAYABLE - OTHER:
Notes payable - other consists of the following:
1995 1994
-------- --------
Unsecured note payable to an
individual, due on demand with
interest payable monthly at
prime plus 1.5%. $ - $ 3,346
Unsecured note payable to an
individual, due on demand with
interest payable monthly at
prime plus 1.5%. - 56,477
-------- --------
$ - $ 59,823
======== ========
A new agreement was entered at the end of 1995 with the party of
the first note mentioned above . The note is due on demand with
interest payable monthly at 11%. The balance on December 31, 1995 was
$38,183.
(5) LONG-TERM DEBT:
1995 1994
-------- --------
6.75% notes payable to Toyota Motor
Credit Corp; aggregate monthly payments
of $5,854, including interest;
original amount of $190,285 beginning
in January 1994; matures in January 1997;
secured by vehicles. $ 6,657 $ 136,163
Less current portion 6,657 62,978
-------- --------
$ - $ 73,185
======== ========
Eleven 1994 Toyota trucks were purchased in 1994 and were leased
individually to a large customer for $550 per month. In 1995, ten of
the vehicles were sold and the notes were paid off. The remaining note
was paid off in January 1996.
<PAGE>
(6) COMMITMENTS:
As of December 31, 1995, the Companies have the following
commitments for operating facilities, which are accounted for as
operating leases:
Approximate
Expiration base monthly
of lease rent
-------------- -----------
Plainview, New York Month-to-month $ 1,000
Tempe, Arizona January, 2000 4,380
Albuquerque, New Mexico October, 1996 1,185
Stamford, Connecticut Month-to-month 145
Greenville, S. Carolina June, 1996 419
Kennewick, Washington October, 1996 705
St. Louis, Missouri December, 1996 554
Carlsbad, New Mexico December, 1996 450
The Companies are responsible for property taxes, insurance and
maintenance on certain leases.
The Companies currently lease their office facilities in Tempe,
Arizona from one of the shareholders. The lease contains a five-year
renewal option. The rent on this office totalled $54,932 in 1995 and
$47,938 in 1994.
The following is a schedule by years of approximate future minimum
rental payments on operating leases. The leases in New York,
Connecticut, and Arizona are included through 2000:
Year ended
December 31,
------------
1996 $ 99,762
1997 66,300
1998 66,300
1999 66,300
2000 66,300
-------
$364,962
=======
Total rent expense was $98,822 for the year ended December 31,
1995, and $94,653 for 1994.
<PAGE>
(7) COMMON STOCK:
Common stock consists of the following:
1995 1994
------- -------
Common stock, RRA, no par;
authorized 200 shares;
issued and outstanding
100 shares ............. $19,558 $19,558
Common stock, DTS, $.01 par;
authorized 100 shares;
issued and outstanding
100 shares ............. 1 1
Common stock, PSST, $.01 par;
authorized 100 shares;
issued and outstanding
100 shares (see below) . 1 1
------- -------
$19,560 $19,560
======= =======
In July 1995, PSST redeemed Ray Rashkin's fifty shares upon his
resignation as president of the corporation. The shares were retired by
the corporation at fifty-percent of the net equity of the corporation
as of June 30, 1995.
This transaction had the effect of lowering the issued and
outstanding shares to fifty. Paid in capital of PSST was reduced by
$25,000. Ray Rashkin used the proceeds from the redemption as
additional paid in capital of RRA, Inc.
(8) MONEY PURCHASE PENSION PLAN:
On June 1, 1993, the Company adopted a pension plan that
contributes 10% to covered employees. This covered initially the
Phoenix based administrative group. In December, 1993, the plan was
amended to include employees at Lawrence Livermore National Laboratory
effective January 1, 1994. In 1995, the administrative group was
removed from the plan on January 1, and employees at Los Alamos were
included as of May 1. The accrual as of December 31, 1995 and 1994 was
$720,000 and $2855,287, respectively. Expense for 1995 and 1994 was
$911,339 and $269,913, respectively.
(9) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
For purposes of the Statement of Cash Flows, management considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Bank overdrafts are included as a financing activity because of
their direct relation to line of credit funding.
Cash paid during the years ended
December 31, 1995 and 1994 was as follows:
1995 1994
---------- ----------
Interest $ 176,854 $ 163,210
========== ==========
<PAGE>
Noncash investing and financing activities
During 1994, the Washington and Texas offices were closed. Assets
with a book value of $2,067 were written off.
A financing arrangement for the purchase of trucks was
entered in 1994. Assets were capitalized and loans were obtained
totalling $190,285 in connection with this transaction.
Common stock and paid in capital for PSST were made in 1994
through adjustments to retained earnings and notes receivable from
related parties. In relation to this, the redemption of stock in 1995
for $25,000 was an adjustment to paid in capital and notes receivable
(see note 7).
In 1995, a truck owned by the company was purchased by an employee
for a note for $12,000. A truck was purchased by a shareholder as a
note receivable for $6829.
(10) LITIGATION, CLAIMS, AND ASSESSMENTS:
DTS complied with a client request to place a former client
employee on the DTS payroll for the purpose of providing payrolling
services. The individual was involved in an accident during his
employment which resulted in the death of the individual, reported
injuries to another individual, and damage to the client's property. A
claim has been made against DTS on the theory that the company is
vicariously liable for the individual's alleged negligence in the
accident.
The injured individual has filed a personal injury lawsuit against
DTS and the client. A recent settlement demand was made for $1.2
million. In addition, the client has informally requested that DTS
settle with it for the property damage that they approximate to be
$1.58 million.
DTS will vigorously defend the current lawsuit and any other legal
action that is taken against it in relation to this occurence.
Due to the facts described above, the amount of possible loss to
DTS cannot be reasonably estimated , although it is possible that a
loss may occur as a result of this legal action. Any potential loss has
not been recorded on the accompanying financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED COST OF REVENUE
For the Years Ended December 31, 1995 and 1994
1995 1994
----------- -----------
Salaries ....................... $38,288,202 $28,451,365
Payroll Taxes .................. 3,335,931 2,493,840
Per Diem ....................... 1,524,415 714,387
Healthcare Benefits ............ 1,173,836 986,378
Other .......................... 57,894 199,329
Subcontractors ................. -- 19,975
Vacation and Holiday Pay ....... 2,276,145 2,231,270
Workman's Compensation Insurance 262,697 234,903
Pension Plan ................... 911,339 269,913
----------- -----------
$47,830,459 $35,601,360
=========== ===========
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED GENERAL AND ADMINISTRATIVE EXPENSES
For the Years Ended December 31, 1995 and 1994
1995 1994
---------- ----------
Salaries:
Officers .................... $ 462,217 $ 326,333
Office ...................... 897,526 619,640
Payroll Taxes .................... 97,141 72,113
Accounting ....................... 23,221 10,850
Advertising ...................... 85,984 37,844
Business Developments ............ 66,241 5,587
Commissions ...................... 85,279 42,150
Depreciation and Amortization .... 114,743 133,454
Insurance ........................ 129,973 105,860
Legal Fees ....................... 82,644 89,082
Licenses and Fees ................ 12,873 3,150
Miscellaneous .................... 59,997 124,164
Office Expense ................... 165,433 117,798
Outside Services ................. 159,348 147,220
Property Taxes ................... 11,221 2,430
Rent ............................. 104,968 96,010
Repairs and Maintenance .......... 25,242 9,821
Telephone ........................ 104,230 90,802
Travel and Subsistence ........... 287,473 237,242
Utilities ........................ 15,786 15,844
---------- ----------
$2,991,540 $2,287,394
========== ==========
<PAGE>
To The Shareholders
RRA, Inc., Datatech Technical Services, Inc.
and Project Staffing Support Team, Inc.
INDEPENDENT AUDITOR'S REPORT
----------------------------
We have audited the accompanying combined balance sheets of RRA, Inc., Datatech
Technical Services, Inc., and Project Staffing Support Team, Inc. as of December
31, 1994 and 1993, and the related combined statements of income, changes in
shareholder's equity, and cash flows for the years then ended. These combined
financial statements are the responsibility of the Companies' 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 RRA, Inc., Datatech Technical
Services, Inc., and Project Staffing Support Team, Inc. as of December 31, 1994
and 1993, and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic combined
financial statements taken as a whole. The information included in the
accompanying schedules is presented for purposes of additional analysis and is
not a required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
ALEXANDER & DEVOLEY, P.C.
Phoenix, Arizona
February 1, 1995
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED BALANCE SHEET
For the Years Ended December 31, 1994 and 1993
Assets
1994 1993
--------- ---------
CURRENT ASSETS:
Cash ...................................... $ 426,312 $ 39,449
Accounts receivable -
Trade, less allowance for doubtful
accounts of $10,000 in 1993 (Note 3) .... 3,434,704 2,423,705
Other accounts receivable ................. 10,411 17,294
Note receivable - employee, current
portion (Note 2) ........................ 1,810 --
Note receivable - related parties,
current portion (Note 2) ................ 148,050 130,205
Prepaid expenses .......................... 27,284 32,724
---------- ----------
Total current assets .................... 4,048,571 2,643,377
---------- ----------
PROPERTY AND EQUIPMENT (NOTE 1):
Office furniture and equipment ............ 346,395 283,571
Leasehold improvements .................... 114,435 92,552
Vehicles .................................. 215,330 2,300
---------- ----------
676,160 378,423
Less accumulated depreciation and
amortization ............................ 321,003 224,490
---------- ----------
355,157 153,933
---------- ----------
OTHER ASSETS:
Refundable deposits ....................... 50,396 25,069
Note receivable - employee, long-
term portion (Note 2) ................... 7,412 --
Note receivable - related parties,
long-term portion (Note 2) .............. 216,000 216,000
Deferred loan fee, less amortization
of $5,312 (Note 1) ...................... 2,188 --
Organizational costs, less accumulated
amortization of $9,841 in 1994 and
$6,560 in 1993 (Note 1) ................. 6,560 9,841
Client lists, less amortization of
$8,125 in 1994 and $1,623 in 1993
(Note 1) ................................ 11,375 17,877
---------- ----------
293,931 268,787
---------- ----------
$4,697,659 $3,066,097
========== ==========
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED BALANCE SHEET
For the Years Ended December 31, 1994 and 1993
LIABILITIES
1994 1993
--------- ---------
CURRENT LIABILITIES:
Bank overdraft ............................ $ 148,474 $ --
Accounts payable .......................... 42,572 18,808
Notes payable (Note 4) .................... 59,823 177,472
Note payable - bank (Note 3) .............. 1,200,000 1,241,660
Current portion of long-term debt ......... 62,978 --
Accrued expenses:
Wages, vacation, and holiday ............ 817,041 213,770
Payroll taxes and withholdings .......... 170,283 205,544
Gross receipts tax ...................... 64,565 57,128
Self insurance claims (Note 1) .......... 120,000 30,000
Interest ................................ 10,999 6,429
Pension plan contributions (Note 8) ..... 285,287 9,089
---------- ----------
Total current liabilities ................. 2,982,022 1,959,900
---------- ----------
LONG-TERM DEBT (NOTE 5): ........................... 73,185 --
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock (Note 7) ..................... 19,560 19,559
Additional paid-in capital ................ 387,863 325,264
Retained earnings ......................... 1,235,029 761,374
---------- ----------
1,642,452 1,106,197
---------- ----------
$4,697,659 $3,066,097
========== ==========
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED STATEMENT OF INCOME
For the Years Ended December 31, 1994 and 1993
1994 1993
------------ ------------
REVENUE .................................... $ 38,559,163 $ 25,016,730
COST OF REVENUE ............................ 35,601,360 23,313,171
------------ ------------
GROSS PROFIT ............................... 2,957,803 1,703,559
GENERAL AND ADMINISTRATIVE EXPENSES ........ 2,287,394 1,487,757
------------ ------------
INCOME FROM OPERATIONS ..................... 670,409 215,802
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense .................. (167,780) (133,311)
Interest income ................... 24,993 23,540
Loss on abandonment and
sale of fixed assets .......... (2,067) --
------------ ------------
(144,854) (109,771)
------------ ------------
NET INCOME ................................. $ 525,555 $ 106,031
============ ============
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 .. $ 19,559 $ 240,264 $ 662,843 $ 922,666
CONTRIBUTION TO CAPITAL ..... -- 85,000 -- 85,000
DISTRIBUTION TO SHAREHOLDER . -- -- (7,500) (7,500)
NET INCOME - 1993 ........... -- -- 106,031 106,031
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1993 .. 19,559 325,264 761,374 1,106,197
ISSUANCE OF 100 SHARES OF
COMMON STOCK (NOTE 7) . 1 -- -- 1
CONTRIBUTIONS TO CAPITAL .... -- 62,599 -- 62,599
DISTRIBUTIONS TO SHAREHOLDERS -- -- (51,900) (51,900)
NET INCOME - 1994 ........... -- -- 525,555 525,555
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1994 .. $ 19,560 $ 387,863 $ 1,235,029 $ 1,642,452
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1994 and 1993
1994 1993
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers ....... $ 37,544,620 $ 25,179,069
Cash paid to suppliers and employees (36,842,673) (24,664,840)
Interest paid ...................... (98,437) (137,683)
Interest received .................. 3,544 51
------------ ------------
NET CASH PROVIDED FROM OPERATING
ACTIVITIES ......................... 607,054 376,597
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............... (321,652) (55,553)
Net advances on related party loans (17,845) (115,820)
Net advances on employee loan ...... (9,222) --
Business list purchase ............. -- (19,500)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES .... (348,719) (190,873)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft ..................... 148,474 --
Net payments under line of credit
agreements ....................... (41,660) (169,856)
Principal payments on notes payable-
other ............................ (117,649) (69,251)
Proceeds from stock issuance or
capital contributions ............ 62,600 85,000
Distributions to shareholders ...... (51,900) (7,500)
Proceeds from long-term debt ....... 190,285 --
Payments on long-term debt ......... (54,122) --
Payment of deferred loan fee ....... (7,500) --
------------ ------------
NET CASH PROVIDED FROM (USED IN)
FINANCING ACTIVITIES ............... 128,528 (161,607)
------------ ------------
NET INCREASE IN CASH ..................... 386,863 24,117
CASH AT BEGINNING OF YEAR ................ 39,449 15,332
------------ ------------
CASH AT END OF YEAR ...................... $ 426,312 $ 39,449
============ ============
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1994 and 1993
1994 1993
------------ ------------
RECONCILIATION OF NET INCOME TO NET
CASH USED IN OPERATING ACTIVITIES:
NET INCOME .............................. $ 525,555 $ 106,031
----------- -----------
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED FROM OPERATING
ACTIVITIES:
Depreciation and amortization .. 128,142 57,819
Amortization of loan fee ....... 5,312 --
Loss on abandonment and sale of
fixed assets ................. 2,067 --
(Increase) decrease in accounts
receivable ................... (1,010,999) 162,339
Decrease in other receivables .. 6,883 7,220
(Increase) decrease in prepaid
expenses and deposits ........ (19,887) 72
(Increase) decrease in accounts
payable ...................... 23,764 (5,801)
Increase in accrued expenses ... 946,217 48,917
----------- -----------
Total adjustments .............. 81,499 270,566
----------- -----------
NET CASH PROVIDED FROM OPERATING
ACTIVITIES ........................ $ 607,054 $ 376,597
=========== ===========
See accompanying notes to financial statements.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1994 and 1993
(1) SIGNIFICANT ACCOUNTING POLICIES:
Business organization
RRA, Inc. (RRA) was incorporated in 1964 under the laws of the
State of New York. Datatech Technical Services, Inc. (DTS) was
incorporated in 1991 under the laws of the State of Arizona and
commenced operations in 1992. Effective January 1, 1992, certain
customer accounts and property and equipment of RRA were transferred to
DTS in exchange for a down payment of $25,000 and a note for $150,000.
The terms of the note call for 10 equal annual payments to RRA from DTS
of $22,354 which includes principal and interest at 8%. The note
receivable and note payable have been eliminated in combination. DTS
charged RRA $225,350 in 1994 and $150,000 in 1993 for a management fee.
Any income or expense related to these transactions have been
eliminated in combination. The Companies remain under common management
and control. Ray Rashkin owns 100% of RRA. Stanley Rashkin owns 100% of
DTS.
Project Staffing support Team, Inc. (PSST) was incorporated under
the laws of the State of Arizona and commenced operations in 1994. PSST
is owned in equal shares by Ray Rashkin and Stanley Rashkin. PSST had
no revenue in 1994, and absorbed $41,327 in costs.
Principles of combination
These combined financial statements include the accounts of RRA,
DTS, and PSST. All significant intercompany transactions and balances
have been eliminated in combination.
Nature of business
The Companies provide highly trained individuals primarily to
large corporate customers that contract with various governmental
entities throughout the United States. The employees are provided on a
temporary or semi-permanent basis. The individuals are employees of the
Companies. The Companies maintain offices in Arizona, New York,
Connecticut and New Mexico.
The companies have two major contracts that are renewable. One of
the contracts started early in 1994. Management is confident these
contracts will continue. The largest of the two renewed for five years,
and the other contract was extended for the first option year to
January 1996.
<PAGE>
Property and equipment
Property and equipment are stated at cost. Depreciation is
provided using accelerated methods over the estimated useful lives of
the assets. Amortization of leasehold improvements is provided using
the straight-line method over the lesser of the lease term or the
estimated useful lives of the assets. Depreciation and amortization
expense was $118,362 and $52,914 in 1994 and 1993, respectively.
Organizational costs, client lists and deferred loan fees
Organizational costs for DTS are being amortized on a
straight-line basis over five years. Client lists purchased for $19,500
are being amortized over three years. Deferred loan fees are being
amortized over the term of the revolving line of credit agreement.
Concentration of risks
Periodically during the year, the Companies maintain cash in
financial institutions in excess of the amounts insured by the Federal
government.
Income taxes
The Companies have elected under applicable sections of the
Internal Revenue Code to be treated as "S" Corporations for income tax
purposes. Therefore, any income, loss and tax credits are reportable by
the shareholders on their individual income tax returns. In 1995, the
owners drew approximately $134,500 to pay the balance of estimated
taxes on the earnings from these entities. Certain states in which the
Companies do business do not recognize the "S" Corporation status or
they impose minimum taxes. State income taxes are more of a license
cost. They are included in administrative expenses in the accompanying
combined statement of income. DTS reports to the Internal Revenue
Service using the cash basis of accounting.
Employee benefit plan
The Companies maintain 401(k) plans and Section 125 cafeteria
plans for the benefit of their employees. Employees elect to withhold
specified amounts from their wages to contribute to the plans. The
Companies have a fiduciary responsibility with respect to the plans.
Estimated health self-insurance claims
The Companies maintain a self-insurance plan for those employees
who elect to participate. Under this plan, the Company is responsible
for paying claims up to $30,000 annually per individual and
approximately $300,000 in claims and premiums on a combined
company-wide basis. There are provisions for reinsurance in the plan.
The financial statements include an estimate for claims to be paid
under this policy.
<PAGE>
(2) NOTES RECEIVABLE:
Notes receivable - related parties consists of the following:
1994 1993
--------- ---------
Note receivable - shareholder,
is an informal, unsecured
agreement due on demand with
interest at 8% $ 57,604 $ 69,685
Note receivable - shareholder,
is an informal, unsecured
agreement due on demand with
interest at 8% 81,705 53,031
Accrued interest on the above 8,741 7,489
--------- ---------
Total shown as a current asset $ 148,050 $ 130,205
========= =========
Note receivable - shareholder,
is an unsecured note which requires
monthly interest only payments at
prime plus 1.5% through 2005 when
all principal and interest is due;
1994 and 1993 include $16,000 in
accrued interest receivable. $ 216,000 $ 216,000
========= =========
Note receivable - employee consists of the following:
1994 1993
--------- ---------
Promissory note from one employee;
payable weekly with interest at
8%; note matures in July 1999. $ 9,222 $ -
Less current portion 1,810 -
--------- ---------
$ 7,412 $ -
========= =========
(3) NOTE PAYABLE - BANK:
Note payable - bank, consists of a revolving line of credit
agreement which provides for borrowings up to the lesser of $3,000,000
or 80% of acceptable receivables as defined, payable in full May 1,
1995 with interest at prime plus .75%. The interest rate as of December
31, 1994 was 8.0%. The note is collateralized by accounts receivable,
property and fixtures, and inventory, and is personally guaranteed by
the shareholders. The line of credit agreement contains certain
restrictive covenants regarding the financial position of the
Companies. The Companies were in compliance with respect to the
restrictive covenants as of December 31, 1994.
<PAGE>
The agreement above replaced a similar agreement with another bank
that matured in April 1994. This agreement, which was in effect at
December 31, 1993, provided borrowings up to $2,000,000 with interest
at prime plus 2%. Collateral, guarantees, and covenants were virtually
the same as mentioned above.
(4) NOTES PAYABLE - OTHER:
Notes payable - other consists of the following:
1994 1993
--------- ---------
Unsecured note payable to an
individual, due on demand with
interest payable monthly at
prime plus 1.5%. $ 3,346 $ 49,995
Unsecured note payable to an
individual, due on demand with
interest payable monthly at
prime plus 1.5%. 56,477 127,477
--------- ---------
$ 59,823 $ 177,472
========= =========
(5) LONG-TERM DEBT:
1994 1993
--------- ---------
6.75% notes payable to Toyota Motor
Credit Corp; aggregate monthly
payments of $5,854, including interest;
original amount of $190,285 beginning
in January 1994; matures in January
1997; secured by vehicles. $ 136,163 $ -
Less current portion 62,978 -
--------- ---------
$ 73,185 $ -
========= =========
Principal maturities are as follows:
1995 $ 67,364
1996 5,821
1997 -
----------
$ 73,185
==========
Eleven 1994 Toyota trucks were purchased and have been leased
individually to a large customer for $550 per month.
<PAGE>
(6) COMMITMENTS:
As of December 31, 1994, the Companies have the following
commitments for operating facilities, which are accounted for as
operating leases:
Approximate
Expiration base monthly
of lease rent
-------------- ------------
Farmingdale, New York Month-to-month $ 1,700
Tempe, Arizona January, 1995 3,572
Albuquerque, New Mexico October, 1996 1,185
Stamford, Connecticut Month-to-month 320
The Companies are responsible for property taxes, insurance and
maintenance on certain leases.
The Companies currently lease their office facilities in Tempe,
Arizona from one of the shareholders. The lease contains two five-year
renewal options which the Company intends to execute. The rent on this
office totalled $47,938 in 1994 and $42,864 in 1993.
The following is a schedule by years of approximate future minimum
rental payments on operating leases. The leases in New York,
Connecticut, and Arizona are included through 1999:
Year ended
December 31,
------------
1995 $ 93,492
1996 91,122
1997 79,272
1998 79,272
1999 79,272
-------
$422,430
=======
Total rent expense was $89,059 for the year ended December 31,
1993, and $94,653 for 1994.
<PAGE>
(7) COMMON STOCK:
Common stock consists of the following:
1994 1993
-------- --------
Common stock, RRA, no par;
authorized 200 shares;
issued and outstanding
100 shares $ 19,558 $ 19,558
Common stock, DTS, $.01 par;
authorized 100 shares;
issued and outstanding
100 shares 1 1
Common stock, PSST, $.01 par;
authorized 100 shares;
issued and outstanding
100 shares 1 -
-------- --------
$ 19,560 $ 19,559
======== ========
(8) MONEY PURCHASE PENSION PLAN:
On June 1, 1993, the Company adopted a pension plan that
contributes 10% to covered employees. This covered initially the
Phoenix based administrative group. The accrual for 1993 was
approximately $9,000. In December, 1993, the plan was amended to
include employees at Lawrence Livermore National Laboratory effective
January 1, 1994. The Lawrence Livermore contract started on January 1,
1994. The accrual for 1994 was approximately $285,000. Expense for 1994
and 1993 was $269,913 and $9,089, respectively.
(9) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
For purposes of the Statement of Cash Flows, management considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Cash paid during the years ended
December 31, 1994 and 1993 was as follows:
1994 1993
---------- ----------
Interest $ 98,437 $ 137,683
========== ==========
<PAGE>
Noncash investing and financing activities
During 1994, the Washington and Texas offices were closed. Assets
with a book value of $2,067 were written off.
A financing arrangement for the purchase of trucks was
entered in 1994. Assets were capitalized and loans were obtained
totalling $190,285 in connection with this transaction.
Common stock and paid in capital for PSST were made in 1994
through adjustments to retained earnings and notes receivable from
related parties.
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED COST OF REVENUE
For the Years Ended December 31, 1994 and 1993
1994 1993
----------- -----------
Salaries ................................... $28,451,365 $18,864,072
Payroll Taxes .............................. 2,493,840 1,642,875
Per Diem ................................... 714,387 878,097
Healthcare Benefits ........................ 986,378 348,047
Other ...................................... 199,329 197,129
Subcontractors ............................. 19,975 2,275
Vacation and Holiday Pay ................... 2,231,270 1,216,704
Workman's Compensation Insurance ........... 234,903 154,883
Pension Plan ............................... 269,913 9,089
----------- -----------
$35,601,360 $23,313,171
=========== ===========
<PAGE>
RRA, INC., DATATECH TECHNICAL SERVICES, INC.
AND PROJECT STAFFING SUPPORT TEAM, INC.
COMBINED GENERAL AND ADMINISTRATIVE EXPENSES
For the Years Ended December 31, 1994 and 1993
1994 1993
----------- -----------
Salaries:
Officers .............................. $ 326,333 $ 179,148
Office ................................ 619,640 468,159
Payroll Taxes .............................. 72,113 54,095
Accounting ................................. 10,850 26,991
Advertising ................................ 37,844 19,738
Business Developments ...................... 5,587 6,608
Commissions ................................ 42,150 27,763
Depreciation and Amortization .............. 128,142 57,819
Insurance .................................. 105,860 65,248
Legal Fees ................................. 89,082 45,291
Licenses and Fees .......................... 8,462 5,182
Miscellaneous .............................. 124,164 57,037
Office Expense ............................. 117,798 73,279
Outside Services ........................... 147,220 81,054
Property Taxes ............................. 2,430 1,855
Rent ....................................... 96,010 89,059
Repairs and Maintenance .................... 9,821 9,321
Telephone .................................. 90,802 82,997
Travel and Subsistence ..................... 237,242 124,032
Utilities .................................. 15,844 13,081
---------- ----------
$2,287,394 $1,487,757
========== ==========
<PAGE>
Item 7(b) Pro Forma Financial Information
-------------------------------
The following unaudited pro forma condensed consolidated balance sheet at March
31, 1996 presents the financial position of the company at March 31, 1996 as if
the acquisition of RRA Inc. and affiliates had been consummated as of March 31,
1996. The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31 ,1995 and for the three months ended March 31 ,1996
presents the company's results of operations as if the acquisitions of COMFORCE
Global, Williams, and RRA Inc. and affiliates had been consummated as of January
1, 1995.
COMFORCE CORPORATION
PRO FORMA BALANCE SHEET
MARCH 31,1996
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical RRA INC Adjustments Consolidated
---------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and equivalents 225 320 (320) (A) 225
Receivables, including $330 of unbilled revenue 2,130 4,473 (4,473) (A) 2,130
Other 54 279 (279) (A) 54
Receivables from ARTRA GROUP incorporated 734 - - 734
Prepaid expenses - 69 - (A) 69
------- ------ ------ ------
3,143 5,141 (5,072) 3,212
------- ------ ------ ------
Property, plant and equipment, net 88 256 - (A) 344
------- ------ ------ ------
Other assets:
Goodwill, net 6,817 - 4,634 (A) 11,451
Other 170 228 (228) (A) 170
------- ------ ------ ------
6,987 228 4,406 11,621
------- ------ ------ ------
10,218 5,625 (666) 15,177
======= ====== ====== ======
Current Liabilities:
Notes payable 500 100 (100) (A) 500
Revolving credit line due bank 1,900 500 (500) (A) 1,900
Accounts payable 188 - - (A) 188
Accrued expenses 781 2,449 (2,449) (A) 781
Income taxes 66 - - 66
Liabilities to be assumed by ARTRA GROUP Incorporated
and net of liabilities of discontinued operations 2,964 - - 2,964
------- ------ ------ ------
6,399 3,049 (3,049) 6,399
------- ------ ------ ------
Obligations expected to be settled by the issuance of
stock 550 - - 550
------- ------ ------ ------
Long term note payable - 58 (58) (A) -
------- ------ ------ ------
Shareholders' Equity:
Series E preferred stock - - 1 (B) 1
Common stock 93 20 (20) (A) 93
Additional paid-in capital 3,076 416 4,542 (A)(B) 8,034
Retained earnings 100 2,082 (2,082) (A) 100
------- ------ ------ ------
3,269 2,518 2,441 8,228
------- ------ ------ ------
10,218 5,625 (666) 15,177
======= ====== ====== ======
</TABLE>
Pro Forma adjustments to the unaudited condensed consolidated balance sheet
consist of:
(A) Record acquisition of RRA Inc. and affilites and related entries and
eliminate RRA Inc. assets and liabilities not purchased or assumed.
(B) Record issuance of Series E preferred shares in conjunction with the RRA
acquisition.
<PAGE>
COMFORCE CORPORATION
Pro Forma Statement Of Operations
For The Three Months Ended March 31, 1996
<TABLE>
<CAPTION>
Pro Forma
Historical(A) Williams(B) RRA INC(B) Adjustments Pro Forma
------- ------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 3,265 $ 654 $ 15,137 $19,056
------- ------- -------- -------
Operating costs and expenses
Cost of revenues 2,452 281 14,060 16,793
Other operating costs and expenses 645 38 786 $ 144 (D) 1,613
------- ------- -------- ------- -------
3,097 319 14,846 144 18,406
------- ------- -------- ------- -------
Operating earnings (loss) 168 335 291 (144) 650
------- ------- -------- ------- -------
Other income net 3 3
Interest and other non-operating expenses (1) (22) (46)(E) (69)
------- ------- -------- ------- -------
2 (22) (46) (66)
------- ------- -------- ------- -------
Earnings(loss) from operations
before income taxes 170 335 269 (190) 584
(Provision) credit for income taxes (70) (265) (107) 76 (366)
------- ------- -------- ------- -------
Income(loss) from operations $ 100 $ 70 $ 162 $ (114) $ 218
======= ======= ======== ======= =======
Income per share from continuing operations $ .01 $ .02
======= =======
Weighted average shares of common stock
and common stock equivalents outstanding (G) 10,884 11,771
======= =======
</TABLE>
<PAGE>
COMFORCE CORPORATION
Pro Forma Statement Of Operations
For The Year Ended December 31,1995
<TABLE>
<CAPTION>
COMFORCE Pro Forma
Historical(A) Global(B) Williams(B) RRA INC(B) Adjustments Pro Forma
------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 2,387 $ 9,568 $ 4,178 $ 52,011 $ 68,144
------- -------- ------- -------- --------
Operating costs and expenses:
Cost of revenues 1,818 7,178 3,022 47,830 59,848
Stock compensation (C) 3,425 3,425
Other operating costs and expenses 823 1,397 450 2,992 $ 590 (D) 6,252
------- -------- ------- -------- -------- --------
6,066 8,575 3,472 50,822 590 69,525
------- -------- ------- -------- -------- --------
Operating earnings (loss) (3,679) 993 706 1,189 (590) (1,381)
------- -------- ------- -------- -------- --------
Spectrum corporate management fees (F) (1,140) (1,140)
Interest and other non-operating expenses (618) 7 (133) 248 (E) (496)
------- -------- ------- -------- -------- --------
(618) (1,133) - (133) 248 (1,636)
------- -------- ------- -------- -------- --------
Earnings(loss) from operations
before income taxes (4,297) (140) 706 1,056 (342) (3,017)
(Provision) credit for income taxes (35) 21 (354) (422) 136 (654)
------- -------- ------- -------- -------- --------
Income(loss) from operations $(4,332) $ (119) $ 352 $ 634 $ (206) $ (3,671)
======= ======== ======= ======== ======== ========
Income(loss) per share from continuing
operations $ (0.95) $ (0.40)
======= ========
Weighted average shares of common stock
and common stock equivalents outstanding (G) 4,596 9,309
======= ========
</TABLE>
(A) Historical data 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 Historical data for the three months ending March 31,
1996 includes COMFORCE Global's operations since January 1, 1996 and
Williams operations since its acquisition on March 3, 1996 through March
31, 1996.
(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 periods presented for Williams is January 1,
1995 through December 31, 1995 and January 1, 1996 through March 3, 1996.
The periods presented for RRA Inc. is January 1, 1995 through December 31,
1995 and January 1, 1996 through March 31, 1996.
(C) Represents a non-recurring compensation charge related to the issuance of
the 35% common stock interest in the Company pursuant to employment or
consulting agreements with 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 out of the Global, Williams and RRA Inc.
acquisitions.
<PAGE>
(E) Reverse interest expense on notes and other liabilities assumed by ARTRA
net of interest expense incurred for the purchase of Williams for the pro
forma year ended December 31, 1995. Record interest expense incurred for
the purchase of Williams for the two months from January 1, 1996 to
February 29, 1996.
(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 and common stock equivalents
includes shares of the Company's common stock issued in the private
placement that funded the COMFORCE Global transaction and private placement
of Series E Preferred Stock issued to fund the RRA acquisition, 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.
<PAGE>
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 thereunder duly authorized.
COMFORCE Corporation
--------------------
(Registrant)
By /s/ Andrew C. Reiben
---------------------------------------------
Andrew C. Reiben, Chief Financial Officer
Dated: May 30, 1996
