COMFORCE CORP
8-K/A, 1997-02-04
COSTUME JEWELRY & NOVELTIES
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<PAGE>
 
                      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
<PAGE>
 
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.
<PAGE>
 
 
 
 
                         AZATAR COMPUTER SYSTEMS, INC.
 
                                   --------
 
                              FINANCIAL STATEMENTS
 
                FOR THE NINE-MONTH PERIOD ENDED AUGUST 31, 1996
                    AND FOR THE YEAR ENDED NOVEMBER 30, 1995


<PAGE>
 
[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
 
<PAGE>
 
                         AZATAR COMPUTER SYSTEMS, INC.
 
                                 BALANCE SHEETS
 
                     AUGUST 31, 1996 AND NOVEMBER 30, 1995
<TABLE>
<CAPTION>
                                                         AUGUST 31, NOVEMBER 30,
                                                            1996        1995
                                                         ---------- ------------
<S>                                                      <C>        <C>
                         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
                                                         ==========  ==========
</TABLE>
 
 
    The accompanying notes are an integral part of the financial statements.
 
 
<PAGE>
 
                         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
<TABLE>
<CAPTION>
                                                        AUGUST 31,  NOVEMBER 30,
                                                           1996         1995
                                                        ----------  ------------
<S>                                                     <C>         <C>
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
                                                        ==========   ==========
</TABLE>
 
 
 
    The accompanying notes are an integral part of the financial statements.
 
 
<PAGE>
 
                         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
<TABLE>
<CAPTION>
                                                        AUGUST 31, NOVEMBER 30,
                                                           1996        1995
                                                        ---------- ------------
<S>                                                     <C>        <C>
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
                                                         ========    ========
</TABLE>
 
 
    The accompanying notes are an integral part of the financial statements.
 
<PAGE>
 
                         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:
 
<TABLE>
<CAPTION>
                                              LIFE OF   AUGUST 31, NOVEMBER 30,
                                             EQUIPMENT     1996        1995
                                            ----------- ---------- ------------
<S>                                         <C>         <C>        <C>
  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
                                                         ========    ========
</TABLE>
 
<PAGE>
 
                         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:
 
<TABLE>
<CAPTION>
                                                         AUGUST 31, NOVEMBER 30,
                                                            1996        1995
                                                         ---------- ------------
<S>                                                      <C>        <C>
   Customer 1............................................   24.5%       10.5%
   Customer 2............................................   22.1%       11.4%
   Customer 3............................................   15.8%        8.0%
   Customer 4............................................     .2%       20.1%
</TABLE>
 
   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:
 
<TABLE>
<CAPTION>
                                                           RELATED PARTY  OTHER
                                                           ------------- -------
<S>                                                        <C>           <C>
   1996....................................................   $112,940    $17,512
   1997....................................................     85,440     12,624
   1998....................................................     85,440
   1999....................................................     85,440
   2000....................................................     85,440
   Thereafter..............................................     71,200
</TABLE>
 
   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:
 
 
<PAGE>
 
                         AZATAR COMPUTER SYSTEMS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. INCOME TAXES--CONTINUED
 
<TABLE>
<CAPTION>
                                                         AUGUST 31, NOVEMBER 30,
                                                            1996        1995
                                                         ---------- ------------
<S>                                                      <C>        <C>
   Federal...............................................  $189,984    $268,715
   State.................................................    63,999      94,536
                                                           --------    --------
                                                           $253,983    $363,251
                                                           ========    ========
</TABLE>
 
   The provision for income taxes differs from the amount computed using the
United States Federal Income tax rate as follows:
 
<TABLE>
<CAPTION>
                                                         AUGUST 31, NOVEMBER 30,
                                                            1996        1995
                                                         ---------- ------------
<S>                                                      <C>        <C>
   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
                                                           ========    ========
</TABLE>
 
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.
 
<PAGE>
 
     (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.
<TABLE>
<CAPTION>
                                                  FISCAL 1995                               
                           YEAR    ACQUISITION      REVENUE                                 
  ACQUIRED COMPANY        FOUNDED     DATE        (MILLIONS)  HEADQUARTERS     MARKET SERVED     
  ----------------        -------     ----        ----------  ------------     ------------- 
  <S>                     <C>      <C>            <C>         <C>              <C>
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")
 </TABLE>
<PAGE>
 
<TABLE>
<CAPTION> 
                                                  FISCAL 1995                               
                           YEAR    ACQUISITION      REVENUE                                 
  ACQUIRED COMPANY        FOUNDED     DATE        (MILLIONS)  HEADQUARTERS     MARKET SERVED 
  ----------------        -------     ----        ----------  ------------     ------------- 
 <S>                      <C>        <C>          <C>         <C>              <C>
 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
</TABLE>

     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.
<PAGE>
 
                     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.     

        
<PAGE>
 
 

                                               Unaudited Pro Forma Balance Sheet
                                                    As Of September 30, 1996
<TABLE>     
<CAPTION> 

Current Assets:                        COMFORCE    AZATAR    Continental    RHO     Adjustments    Pro Forma
                                       --------    ------    -----------   -----    -----------    ---------
<S>                                    <C>         <C>       <C>          <C>       <C>            <C> 
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
                                       ========    ======    ===========   =====    ===========    ========
</TABLE>      

            See notes to unaudited pro forma financial statements.

<PAGE>
 
<TABLE>     
<CAPTION> 
                                                       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**
                                           ------------       --------       ---------           ------    -----------

<S>                                       <C>                <C>              <C>              <C>          <C> 
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
                                               ========

<CAPTION> 
                                                                               Pro Forma          Pro
                                            AZATAR***       Continental       Adjustments(3)     Forma
                                           ------------     -----------       ------------   --------------     

<S>                                        <C>                <C>           <C>             <C>
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                                                                   ========                      
</TABLE>      

    
  *    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

<PAGE>
 
<TABLE>    
<CAPTION> 
                                                       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
                                            -----------       --------       --------            ------     ----------

<S>                                       <C>                <C>              <C>              <C>          <C> 
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
                                               ========


<CAPTION> 
                                                                                              Pro Forma           Pro
                                                RHO           AZATAR         Continental    Adjustments(3)       Forma  
                                           ------------     ----------       -----------    --------------     ----------

<S>                                        <C>                <C>           <C>           <C>                <C> 
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)
                                                                                                              ========
</TABLE>      

             See notes to unaudited pro forma financial statements

<PAGE>
 
<TABLE>     
<CAPTION> 

                                                       COMFORCE CORPORATION
                                            UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
                                              FOR THE YEAR ENDED DECEMBER 31, 1995(2)


                                             COMFORCE         COMFORCE
                                           Corporation*       Telecom*       Williams*           RRA***    FORCE FIVE*
                                           ------------       --------       ---------           ------    -----------

<S>                                       <C>                <C>              <C>              <C>          <C> 
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
                                               ========


<CAPTION> 
                                                                                              Pro Forma          Pro
                                           RHO**            AZATAR****       Continental*   Adjustments(3)      Forma  
                                           ------------     ----------       ------------   --------------     ----------

<S>                                        <C>                <C>           <C>           <C>                <C> 
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)
                                                                                                              ========
</TABLE>      

    
        *       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

<PAGE>
 


<TABLE>     
<CAPTION> 
                                                       COMFORCE CORPORATION
                                            UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
                                              FOR THE YEAR ENDED DECEMBER 31, 1994(2)

                                             COMFORCE         COMFORCE
                                           Corporation*       Telecom*        Williams           RRA***     FORCE FIVE
                                           ------------       --------       ---------           ------     ----------

<S>                                       <C>                <C>              <C>              <C>          <C> 
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
                                               ========


<CAPTION> 
                                                                                            Pro Forma           Pro
                                           RHO**              AZATAR        Continental   Adjustments(3)        Forma  
                                           ------------       --------      -----------   --------------     ----------

<S>                                        <C>                <C>           <C>           <C>                <C> 
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)
                                                                                                              ========
</TABLE>     

    
        *       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

<PAGE>
 
                             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:     

 
<TABLE>     
<CAPTION> 
                                                           Nine months ended            Year ended      
                                                            September 30,              December 31,       
                                                           -----------------        -----------------   
                                                             1996    1995             1995     1994      
          (in thousands)                                                                               
<S>                                                          <C>     <C>              <C>     <C>       
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)      
</TABLE>       

<PAGE>
 
    
   (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.     

<PAGE>
 
(6)    Pro forma weighted average shares outstanding are calculated as follows:

 
<TABLE>     
<CAPTION> 
                                                                              Nine months ended         Year ended           
                                                                                September 30,          December 31,          
                                                                                --------------         -------------          
                                                                                 1996     1995         1995     1994          
                                                                                 ----     ----         ----     ----          
                                                                                     (In thousands of shares)
<S>                                                                              <C>      <C>          <C>      <C>           
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         
                                                                                 ======  ======       ======   ======          
</TABLE>  


*       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
 
<TABLE> 
<CAPTION> 
                                               Nine Months ended                    Year Ended
                                                  September 30,                     December 31,       
                                                  1996    1995                   1995          1994    
                                                (In thousands)                    (In thousands) 
       <S>                                       <C>       <C>                  <C>           <C>     
        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    
                                                  ====      ====                 ====          ====    
</TABLE>         
 
    
(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.     

<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 hereunto duly authorized.

                                COMFORCE Corporation
                                --------------------
                                (Registrant)



                                By:  /s/ Andrew Reiben
                                   ------------------------------------------
                                Andrew Reiben, Chief Accounting Officer

    
Dated:  February 3, 1997     
<PAGE>
 
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


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