SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 2-98747-D
OXFORD CAPITAL CORP.
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(Name of small business issuer in its charter)
Nevada 87-0421454
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization
4245 North Central Expressway, Suite 300, Dallas, Texas 75205
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Include Area Code: (214) 520-0100
Securities Registered Pursuant to Section 13 of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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None None
Securities Registered Pursuant to Section 12(g) of the Act:
None
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past twelve (12) months (or
for such shorter period that the registrant was required to file such reports);
and (2) has been subject to such filing requirements for the past ninety (90)
days. Yes No X
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Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The issuer had revenues of $18,913,720 for the fiscal year ended June 30,
1997.
As of October 10, 1997, 11,155,168 shares of Common Stock of the Registrant
were outstanding. Based on the closing price of the Common Stock on September
30, 1997, the aggregate market value of voting stock held by non-affiliates of
the registrant was approximately $4,238,964.
DOCUMENTS INCORPORATED BY REFERENCE
No annual reports to security holders, proxy or information statements, or
prospectus filed pursuant to Rule 424(b) or (c) have been incorporated by
reference in this report.
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TABLE OF CONTENTS
Page
Number
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PART I
Item 1. Description of Business............................. 4
Item 2. Description of Properties........................... 15
Item 3. Legal Proceedings................................... 16
Item 4. Submission of Matters to a Vote of Security Holders. 16
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters............................................. 16
Item 6. Management's Discussion and Analysis................ 17
Item 7. Financial Statements................................ 23
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. 23
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of
the Exchange Act.................................... 24
Item 10. Executive Compensation.............................. 25
Item 11. Security Ownership of Certain Beneficial Owners
and Management...................................... 26
Item 12. Certain Relationships and Related Transactions...... 27
PART IV
Item 13. Exhibits and Reports of Form 8-K.................... 28
SIGNATURES......................................................... 29
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PART I
The statements contained in this Annual Report on Form 10-KSB ("Annual
Report") which are not historical facts, including, but not limited to,
statements found in Item 1. "Business" and in Item 7. "Management's Discussion
and Analysis," are forward-looking statements that involve a number of risks and
uncertainties. All phases of the Company's operations are subject to a number of
uncertainties, risks and other influences. Therefore, the actual results of the
future events described in such forward-looking statements in this Annual
Report, or elsewhere, could differ materially from those stated in such forward-
looking statements. Among the factors that could cause actual results to differ
materially are the risks and uncertainties discussed in this Annual Report,
including, without limitation, the portions referenced above, and the
uncertainties set forth from time to time in the Company's other public reports
and filings and public statements, many of which are beyond the control of the
Company, and any of which, or a combination of which, could materially affect
the results of the Company's operations and whether forward-looking statements
made by the Company ultimately prove to be accurate.
ITEM 1. DESCRIPTION OF BUSINESS
The Company
Oxford Capital Corp., formerly Oxford Investment, Inc. (the "Company"), was
incorporated on May 2, 1985 under the laws of the State of Nevada and was
originally a "blind pool" company. In November, 1985, the Company completed an
initial public offering of 2,500,000 units at a price of $.20 per unit. Each
unit consisted of two shares of common stock and one warrant which authorized
the holder to purchase one share of common stock at a price of $.20.
From 1993 through September of 1996, the Company was engaged in efforts to
identify and acquire or merge with an operating business. In October 1996, the
Company acquired Rx Staffing Inc. ("Rx") and Safety & Fatigue Consultants
International, Inc. ("SFCI") for an aggregate of 27,401,606 shares of the
Company's common stock and 2,329,300 warrants. Subsequently, in October of 1997,
the former shareholders of Rx and SFCI agreed to adjust the acquisition price of
Rx and SFCI by surrendering for cancellation 21,909,116 of the shares issued in
connection with the acquisitions.
Rx was incorporated in December 1995 and, in January of 1996, acquired the
employee leasing operations and other assets of Creative Employment Concepts,
Inc. ("CECI"). Pursuant to the terms of Rx's acquisitions of CECI, Rx agreed to
pay to CECI $6,700 per month until $1,068,000 is paid and, additionally, paid to
a stockholder from cash flow $600,000 pursuant to a covenant not to compete. Rx
is a leading professional employer organization ("PEO") providing small and
medium-sized businesses with an outsourcing solution to the complexities and
costs related to employment and human resources.
SFCI was organized in March of 1996 and is engaged in providing
consultation services and training materials relating to safety and fatigue of
truck drivers.
Since the acquisition of Rx and SFCI, the Company's operations here
consisted principally of the employee leasing operations of Rx. The Company's
integrated employment-related services consists of human resource administration
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employment regulatory compliance management, workers' compensation coverage,
health care and other employee benefits. The Company establishes a co-employer
relationship with its clients and contractually assumes substantial employer
responsibilities with respect to "workaday" employees. The Company believes its
services assist business owners in: (i) managing escalating costs associated
with workers' compensation, health insurance coverage, workplace safety
programs, and employee-related litigation, (ii) providing employers with
administrative assistance, and (iii) reducing the time and effort required by
business owners and executives to deal with the increasingly complex legal and
regulatory environment affecting employment. As of June 30, 1997, the Company
provided professional employer services to approximately 59 client organizations
with nearly 1,000 employees, primarily in Texas.
In addition to its acquisition of Rx and SFCI, the Company has entered into
agreements to acquire, and subsequent to June 30, 1997 has acquired, employee
leasing operations of other entities, including (1) the acquisition on July 31,
1997 of the assets of Insource America, Inc. ("Insource") for $6,187,500; (2)
the acquisition in September of 1997 of the stock of PRC Enterprises, Inc.
("PRC") for $4,500,000; (3) the acquisition in October of 1997 of Crest
Outsourcing, Inc. ("Crest") for 100,000 shares of Series A $10 Convertible
Preferred Stock, 250,000 warrants and a promissory note in the amount of
$250,000; and (4) an agreement to acquire Webster Leasing, Inc. ("Webster") for
772,392 shares of common stock.
Industry Background
According to the U.S. Small Business Administration, there were
approximately 5.1 million businesses in the United States with fewer than 500
employees in 1992. Collectively, these businesses employed an estimated 49
million persons and represented approximately $1.1 trillion in aggregate annual
payroll, implying a potential market for PEO services of $1.3 trillion (assuming
an average mark-up of approximately 20%). The PEO industry began to evolve in
the early 1980's largely in response to the burdens placed on small to
medium-sized employers by an increasingly complex legal and regulatory
environment. While various service providers, such as payroll processing firms,
benefits and safety consultants, and temporary services firms are available to
assist businesses with specific tasks, these organizations do not typically
provide a comprehensive range of services relating to the employer/employee
relationship. PEOs address this market void.
The PEO industry has experienced significant growth in recent years.
Industry sources estimate that gross revenues in the PEO industry grew from $5
billion in 1991 to $13.8 billion in 1995, representing a compounded annual
growth rate of approximately 29%. The Company believes that the increasing
willingness of businesses to outsource non-core activities and functions, the
low market penetration of the PEO industry, and the growth in the number of
small businesses in the United States has contributed to the growing demand for
PEO services. The PEO industry is highly fragmented, with approximately 1,100
PEOs operating in 1995. The Company believes that increasing industry regulatory
complexity and the increasing capital requirements associated with developing
larger service delivery infrastructures and management information systems
should lead to significant consolidation opportunities in the PEO industry.
The Company intends to strengthen its position as an industry leader
by: (i) providing employers with comprehensive outsourcing solutions to their
human resource needs, (ii) targeting medium-sized businesses with 20 to 500
employees, (iii) aggressively managing health care and workers' compensation
costs through the development of vertically integrated managed care systems,
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(iv) developing proprietary information systems to provide a competitive
advantage in managing costs and delivering a full range of high quality
services, (v) increasing penetration of existing markets by hiring additional
sales personnel and increasing sales productivity, and (vi) acquiring
established, quality PEOs in selected markets.
According to estimates by the U.S. Small Business Administration, the
management of an average small to medium-sized business devotes from 7% to 25%
of its time to employee-related matters, leaving management with less time to
focus on its core business. A National Federation of Independent Businesses
survey of small businesses in 1996 showed that six of the top 13 major problem
areas for small businesses are issues that can be addressed by PEOs. These
include (with their rank of importance) cost of health insurance (1), worker's
compensation costs (3), federal paperwork (7), frequent changes in federal tax
laws (9), finding qualified employees (11), and state/local paperwork (13).
An industry analyst's study indicated that 40% of the clients that
outsourced services with a PEO were able to upgrade their employee benefits
offerings and one-fourth of those clients were able to offer health care and
other benefits for the first time.
Principal Services
The Company provides professional employer services through four core
activities: (i) human resource administration, (ii) employer regulatory
compliance management, (iii) workers' compensation cost containment and safety
management, and (iv) employee benefits administration. By engaging the Company
to provide these services, clients are able to concentrate their resources on
their core businesses. In addition, the Company leverages its managed care
expertise by offering certain specialty managed care services on a stand-alone
basis to health and workers' compensation insurance carriers, HMOs, managed care
providers and large self-insured employers.
Human Resource Administration. The Company's human resource services reduce
the employment-related administrative burdens faced by its clients and provide
work-site employees with a wide array of benefits typically offered by large
employers. As a co-employer, the Company is responsible for payroll and
attendant record-keeping, payroll tax deposits, payroll tax reporting, employee
file maintenance, unemployment claims, and monitoring and responding to changing
regulatory requirements. The Company develops and administers customized
personnel policies and procedures for each of its clients, relating to, among
other things, recruiting, performance appraisals, discipline and terminations.
The Company also provides recruiting, orientation, training, counseling,
substance abuse awareness and out placement services for work-site employees.
Employer Regulatory Compliance Management. Under its standard contract, the
Company assumes responsibility for complying with the many employment-related
regulatory requirements. In addition, the Company assists its clients in
understanding and complying with many employment-related requirements for which
the Company does not assume responsibility. Laws and regulations applicable to
employers include state and federal tax laws, immigration laws, discrimination,
sexual harassment and other civil rights laws. When a claim arises, the Company
provides assistance through either its in-house legal department or outside
legal counsel. To respond to such claims in a cost-effective manner, the Company
has entered into a capitalized fee arrangement with a national law firm
specializing in employment and labor issues.
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Workers' Compensation Cost Containment and Safety Management. Workers'
compensation is a state mandated, comprehensive insurance program which requires
employers to fund medical expenses, lost wages and other costs resulting form
work-related injuries and illnesses, regardless of fault and without any
co-payment by the employee. See "Industry Regulation". The Company seeks to
control its workers' compensation costs through comprehensive risk evaluation of
prospective clients, the prevention of workplace injuries, early intervention in
each employee injury, intensive management of the medical costs related to such
injuries and the prompt return of employees to the workplace. The Company seeks
to prevent workplace injuries by implementing a wide variety of training, safety
and mandatory drug-free workplace programs (including pre-employment, random and
post-accident drug testing). Specific components of the Company's proprietary
managed care system include the prompt identification and reporting of injuries,
the use of Company designated health care providers, utilization and fee review,
telephone claims and case management, auditing of bills and other techniques
designed to reduce medical costs. The Company's efforts to quickly return
employees to the workplace involve both rehabilitation services and placement of
employees in transitional, modified duty position until they are able to resume
their former positions.
Employee Benefits and Related Administration. The Company currently offers
an employee benefits package which includes several health care options, such as
preferred provider organizations ("PPOs"), health maintenance organizations
("HMOs") and exclusive provider organizations ("EPOs"). Supplemental benefit
programs offer dental care, vision care, prescription drugs, and employee
assistance plan, mental health benefits and several life and disability
insurance options.
Specialty Managed Care Services
The growth in the Company's core PEO business has provided the Company with
significant expertise and experience in managing a wide range of employee health
care and disability costs. To further capitalize on that expertise, the Company
offers a variety of specialty managed care services (such as employee assistance
programs, behavioral health managed care, comprehensive workers' compensation
managed care services, risk management and loss containment services) on a stand
alone basis to health and workers' compensation insurance carriers, HMOs,
managed care providers and large self insured employers. The Company believes
that the continued expansion of its specialty managed care division will (i)
enhance its leverage in negotiating provider arrangements and create greater
economies of scale, (ii) increase profit margins by using existing service
delivery infrastructures to generate additional revenue, and (iii) benefit the
Company's PEO operations by making the Company's specialty managed care services
more cost effective, innovative and competitive. The Company believes that the
continued evolution of its specialty managed care services could require
structural and organizational modifications to the Company's traditional
relationships with other participants in the health care industry.
PEO Services Agreement
The Company's standard PEO services agreement provides for an initial one
year term, subject to termination by the Company or the client at any time
during the first year upon 30 days prior written notice, and thereafter
annually. Revenues from professional employer services are based on a pricing
model that takes into account the gross pay of each employee and a mark up which
includes the estimated costs of federal and state employment taxes, workers'
compensation, employee benefits and human resource administrative services, as
well as a provision for profit. The specific mark up varies by client based on
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the workers' compensation classification of the work site employees and their
eligibility for health care benefits. Accordingly, the Company's average mark up
percentage will fluctuate based on client mix, which cannot be predicted with
any degree of certainty.
Customers
At June 30, 1997, the Company served approximately 59 PEO client companies
and had 1,000 active work site employees resulting in an average of 22 work site
employees per PEO client. Anchor Food Systems, Inc. (27%) is the only clients
accounting for 10% or more of the Company's revenues during fiscal 1997.
The Company has benefitted from a high level of client retention, resulting
in a significant recurring revenue stream. The client attrition experienced by
the Company is attributable to a variety of factors, including (i) client
non-renewal due to price or service dissatisfaction, (ii) client business
failure or downsizing, (iii) termination by The Company resulting from the
client's inability to make timely payments, and (iv) sale or acquisition of the
client.
Sales and Marketing
The Company markets its services through a direct sales force of five (5)
sales persons. The Company's sales force averages approximately eight years of
experience in fields related to one or more of the Company's core services. The
background of the Company's sales executives includes experience in industries
such as payroll services, health insurance, temporary services and workers'
compensation insurance. The Company's sales materials emphasize its broad range
of high quality services and the resulting benefits to clients and work site
employees. The Company's sales and marketing strategy is to hire additional
sales executives in its existing markets and to increase sales productivity.
The Company generates sales leads from two primary sources: direct sales
efforts and referrals. The Company's sales personnel gather information about
the prospective client and its employees, including job classification, workers'
compensation claims history, health insurance claims history, salary and the
desired level of employee benefits. These various factors are reviewed in the
context of the Company's pricing model and client selection guidelines and a
proposal is prepared or the Company declines the opportunity. This prospective
client screening process plays a vital role in controlling the Company's costs
and limiting exposure to liability. Once a prospective client accepts the
Company's proposal, the client is quickly incorporated into the Company's
system. A Company human resources manager immediately assumes responsibility for
administering the client's personnel and benefits, coordinating the Company's
response for the client's needs including administrative support and responding
to questions or problems encountered by the client.
Information Technology
The Company's integrated state-of-the-art information systems provide a
competitive advantage in managing costs and delivering comprehensive high
quality services. The Company's proprietary systems allow real time reporting of
work site accidents and injuries, enabling the Company to promptly implement its
managed care techniques and thereby better control workers' compensation and
other health care costs.
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In addition, the Company has developed a proprietary software product
installed on PEO clients' computers which enables the clients to directly enter
payroll and other human resource management data, via modem dial-in, and
provides clients with other local reporting capabilities.
Competition
The Company's competitors include (i) traditional in house human resource
departments, (ii) other PEOs and (iii) providers of unbundled employment related
services such as payroll processing firms, temporary employment firms,
commercial insurance brokers, human resource consultants, workers' compensation
insurers, HMOs and other specialty managed care providers. Many of these
companies have greater financial and other resources than the Company, while
others are seeking to enter the professional employer services market.
Competition in the highly fragmented PEO industry is generally on a local
or regional basis. Management believes that the primary elements of competition
are quality of service, choice and quality of benefits, reputation and price.
The Company believes that name recognition, regulatory expertise, financial
resources, risk management and data processing capabilities distinguish leading
PEOs from the rest of the industry.
The Company believes that barriers to entry into the PEO industry are
increasing, including the following: (i) the complexity of the PEO business and
the need for expertise in multiple disciplines; (ii) the three to five years of
experience required to establish experience ratings in key cost areas of
workers' compensation, health insurance and unemployment; and (iii) the need for
sophisticated management information systems to track all aspects of business in
a high growth environment.
Industry Regulation
Overview. The Company's professional employer and specialty managed care
operations are subject to extensive state and federal regulations that include
operating, fiscal, licensing and certification requirements. Adding complexity
to the Company's regulatory environment are (i) uncertainties resulting from the
non-traditional employment relationships created by PEOs; (ii) variations in
state regulatory schemes, and (iii) the ongoing evolution of regulations
regarding health care and workers' compensation.
Many of the federal and state laws and regulations relating to labor, tax
and employment matters applicable to employers were enacted prior to the
development of non-traditional employment relationships and accordingly, do not
specifically address the obligations and responsibilities of PEOs. Both PEOs and
specialty managed care services are regulated primarily at the state level.
Regulatory requirements regarding the Company's business therefore will vary
from state to state. As the Company enters new states it will be faced with new
regulatory and licensing environments. There can be no assurance that the
Company will be able to satisfy the licensing requirements or other applicable
regulations of any particular state in which it is not currently operating.
The application of certain rules and regulations to the Company's PEO
services will depend on whether the Company is considered an employer. The
common law test of the employment relationship is generally used to determine
employer status for benefit plan purposes under the Employee Retirement Income
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Security Act of 1974, as amended ("ERISA"), the workers laws of many states and
various state unemployment laws. This common law test involves an examination of
approximately 20 factors to ascertain whether an employment relationship exists
between a worker and a purported employer. Substantial weight is typically given
to the question of whether the purported employer has the right to direct and
control the details of an individual's work. Other factors include (i) the right
to fire and hire workers, (ii) whether the workers are involved in distinct
occupations or businesses, (iii) whether the kind of occupation involved is
generally performed by employees or by specialists who are independent
contractors, (iv) whether the purported employer provides the instrumentalities,
tools and place of work, (v) the method of payment, (vi) the length of time of
the arrangement, (vii) the level of skill and/or training required, (viii)
whether the work is part of the regular business of the purported employer, (ix)
whether the principal is in business, and (x) whether the parties believe that
they are establishing a master-servant relationship. By contrast, certain
statutes such as those relating to PEO licensing and federal income tax
withholding use differing or more expansive definitions of employer. In
addition, from time to time there have been proposals to enact a statutory
definition of employer.
Regulation in the health care and workers' compensation fields continues to
evolve. Sweeping reforms have been the subject of debate at both the federal and
state government levels. New legislation or new interpretations of current
licensing and regulatory requirements could impose operating or licensing
requirements on the Company which it may not be able to satisfy or which could
have a material adverse effect on the Company's financial condition and results
of operations. Additionally, interpretation of such legislation or regulation by
regulatory agencies with broad discretionary powers could require the Company to
modify its existing operations materially in order to comply with applicable
regulations. Health care reform at the state and federal level seeks solutions
to contain health care costs. These costs comprise a significant portion of the
Company's direct costs, and if the Company is not able to reflect promptly such
increased costs in its service fees, the legislation could have a material
adverse impact on the Company's future operations.
While the Company cannot predict with certainty the development of federal
and state regulations, management will continue to pursue a proactive strategy
of educating administrative authorities as to the advantages of PEOs and
assisting in the development of regulation which appropriately accommodates
their legitimate business function.
PEO Licensing Requirements. A critical aspect of the growth of the PEO
industry has been increasing recognition and acceptance of PEOs by state
authorities. As the concept of PEO services became understood by regulatory
authorities, the regulatory environment began to shift from one of hostility and
skepticism to one of regulatory recognition. During the mid to late 1980's,
legitimate industry participants were challenged to overcome well publicized
failures of financially unsound and, in some cases, unscrupulous operators.
Given this environment, the Company and other industry leaders, in conjunction
with the National Association of Professional Employer Organizations, worked
with relevant government entities to establish a regulatory framework designed
to protect clients and employees and discourage unscrupulous and financially
unsound operators, thereby promoting the legitimacy and further development of
the industry.
While many states do not explicitly regulate PEOs, approximately
one-third of the states, including Texas, have passed laws that have licensing
or registration requirements for PEOs and several additional states are
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considering such regulation. Such laws vary from state to state but generally
provide for monitoring the fiscal responsibility of PEOs. State regulation
assists in screening insufficiently capitalized PEO operations and, in the
Company's view, has the effect of legitimizing the PEO industry generally by
resolving interpretative issues concerning employee status for specific purposes
under applicable state law. However, because existing regulations are relatively
new, there is limited interpretive or enforcement guidance available. The
development of additional regulations and interpretation of existing regulations
can be expected to evolve over time. The Company has actively supported such
regulatory efforts.
In Texas, the Company's PEO operations are licensed under the Texas
Employee Leasing Licensing Act of 1993 (the "Texas Licensing Act"). The Texas
Licensing Act requires PEOs and their controlling persons to be licensed,
mandates reporting requirements and allocates several employer responsibilities.
The Texas Licensing Act also requires licensed PEOs to submit annual financial
statements and maintain a tangible accounting net worth and positive working
capital. The Texas Licensing Act also required PEOs to, among other things; (i)
reserve the right of direction and control over the leased employees, (ii) enter
into a written agreement with the client company, (iii) pay wages to the leased
employees, (iv) pay and collect payroll taxes, (v) maintain authority to hire,
terminate, discipline and reassign employees, (vi) reserve a right to direct and
control the management of safety, risk and hazard control at the work site,
(vii) promulgate and administer employment and safety policies, and (viii)
manage workers' compensation claims.
Federal and State Employment Taxes. The Company assumes the sole
responsibility and liability for payment of federal and state employment taxes
with respect to wages and salaries paid to its employees, including work site
employees. There are essentially three types of federal employment tax
obligations; (i) income tax withholding requirements, (ii) social security
obligations under FICA, and (iii) unemployment obligations under FUTA. Under
these provisions, the employer has the obligation to withhold and remit the
employer portion and, where applicable, the employee portion of these taxes.
To date, the Internal Revenue Service ("IRS") has relied extensively on the
common law test of employment in determining employer status and the resulting
liability for failure to withhold. However, the IRS has formed a Market Segment
Study Group for the stated purpose of examining whether PEOs, such as the
Company, are the employers of the work site employees under the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), applicable to
federal employment taxes and, consequently, whether they are exclusively
responsible for payment of employment taxes on wages and salaries paid to such
employees. Another stated purpose of the Market Segment Study Group is to
determine whether owners of client companies can by employees of PEOs under the
federal employment tax laws.
The interpretive uncertainties raised by the Market Segment Study Group may
impact the Company's ability to report employment taxes on its own account
rather than for the accounts of its clients and would increase administrative
burdens on the Company's payroll service function. In addition, while the
Company believes that it can contractually assume the client company's
withholding obligations, in the event the Company fails to meet these
obligations the client company may be held jointly and severally liable
therefor. The Company's management believes that the economic strength and
reputation of the Company has prevented this potential liability form
discouraging prospective clients.
Workers' Compensation. Workers' compensation is a state mandated,
comprehensive insurance program that requires employers to fund medical
expenses, lost wages and other costs resulting from work related injuries and
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illnesses. In exchange for providing workers' compensation coverage for
employees, employers are not subject to litigation by employees for benefits in
excess of those provided by the relevant state statute. In most states, the
extensive benefits coverage (for both medical costs and lost wages) is provided
through the purchase of commercial insurance from private insurance companies,
participation in state run insurance funds or employer self insurance. Workers'
compensation benefits and arrangements vary on a state by state basis and are
often highly complex. These laws establish the rights of workers to receive
benefits and to appeal benefit denials. Workers' compensation laws also regulate
the methods and procedures which the Company may employ in its workers'
compensation managed care programs. For example, workers' compensation laws
prohibit medical co-payment and deductible payment by employees. In addition,
certain states restrict employers' rights to select health care providers and
establish maximum fee levels for treatment of injured workers.
Provider reimbursement methods also vary from state to state. A majority of
states, including Texas, have adopted fee schedules pursuant to which all health
care providers are uniformly reimbursed. In states without fee schedules, health
care providers are reimbursed based on usual, customary and reasonable fees
charged in the particular state in which the services are provided.
The Company's ability to use comprehensive workers' compensation managed
care techniques in its PEO operations depends on its ability to contract with or
create networks of health care providers. The Company requires that injured
workers use the Company's network of providers. Laws regulating the operation of
managed care provider networks have been adopted by a number of states. These
laws may apply to managed care provider networks having contracts with the
Company or to provider networks which the Company may organize. To the extent
the Company is governed by these regulations, it may be subject to additional
licensing requirements, financial oversight and procedural standards for
beneficiaries and providers.
Other Employer Related Requirements. As an employer, the Company is subject
to a wide variety of federal and state laws and regulations governing
employer-employee relationships, including the Immigration Reform and Control
Act, the Americans with Disabilities Act, The Family Medical Leave Act, the
Occupational Safety and Health Act, wage and hour regulations and comprehensive
state and federal civil rights laws and regulations, including those prohibiting
discrimination and sexual harassment. The definition of employer may be broadly
interpreted under these laws.
Responsibility for complying with various state and federal laws and
regulations is allocated by agreement between the Company and its clients, or in
some cases is the joint responsibility of both. Because the Company acts as a
co-employer with the client company, it is possible that the Company could incur
liability for violations of laws even though the Company is not contractually or
otherwise responsible for the conduct giving rise to such liability. The
Company's standard client agreement generally provides that the client will
indemnify the Company for liability incurred as a result of an act of negligence
of a work site employee under the direction and control of the client or to the
extent the liability is attributable to the client's failure to comply with any
law or regulation for which it has specified contractual responsibility.
However, there can be no assurance that the Company will be able to enforce such
indemnification and the Company may therefore be ultimately responsible for
satisfying the liability in question.
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Business Strategy
The Company intends to strengthen its position as an industry leader by
pursuing the following business strategies:
-- Provide Employers with Comprehensive Outsourcing Solutions to Human
Resource Needs. By offering a broad and increasing range of high quality
services, the Company believes it is attractive to employers who are seeking a
single source solution to their human resource needs. Once a relationship is
established, the Company's direct distribution channels afford access to both
the client and the "workaday" employee. Through these distribution channels, the
Company can add new services and products which provide additional revenue
sources and improve margins. These comprehensive services foster long term
relationships which promote a high level of client loyalty and retention, raise
competitive barriers and generate a recurring revenue stream.
-- Target Medium-Sized Clients. The Company targets and tailors its
services to meet the needs of medium-sized businesses (with 20 to 500
employees). As of June 30, 1997, the Company's PEO clients had an average of
approximately 22 "workaday" employees, compared to an estimated 1994 industry
wide average of 13 "workaday" employees. The Company believes that medium-sized
businesses are more likely than small businesses to (i) desire the wide range of
employee benefits offered by the Company, (ii) recognize the costs of human
resource administration, (iii) have greater employment related regulatory
burdens, and (iv) be financially stable. In addition, the Company believes that
targeting medium-sized clients results in greater marketing efficiency, lower
business turnover due to client business failure, and less exposure to credit
risk.
-- Develop Proprietary Information Systems. The Company continues to
develop its proprietary information systems which enable the Company to
integrate all aspects of the administration of human resources, workers'
compensation and employee benefits, thereby providing a significant competitive
advantage in managing costs and delivering a full range of high quality
services. Benefits of the Company's user friendly systems include real time case
management, provider credentialing, managing insurance claims and the ability to
track outcome data and facilitate provider bench marking.
-- Increase Penetration of Existing Markets. The Company intends to
increase its client base in its existing markets by hiring additional sales
personnel and increasing sales productivity. Emphasis on increasing penetration
in existing regions will allow the Company to enhance its current economies of
scale, principally through its managed care activities, thereby increasing cost
effectiveness and profit margins.
-- Expand Through Acquisitions. The PEO industry is highly fragmented, with
approximately 1,100 PEOs operating in the United States, resulting in
opportunities for consolidation. The Company believes that this industry
consolidation will be driven by increasing industry and regulatory complexity,
increasing capital requirements and the significant economies of scale available
to PEOs with a regional concentration of clients. The Company intends to expand
in current markets and to enter selected new markets by acquiring established
quality PEOs to provide a platform for future regional consolidation. The
Company has identified certain fundamental attributes which characterize
attractive potential new markets such as; (i) proximity to a major metropolitan
area, (ii) regulatory receptivity to PEOs, (iii) prior successful introduction
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of the PEO concept, (iv) favorable economic conditions, (v) high workers'
compensation rates and health care costs, and (vi) a high concentration of small
to medium-sized businesses.
At or subsequent to June 30, 1997, the Company had entered into agreements
to acquire, or had acquired, the stock or operations and assets of the following
PEOs:
(i) On July 31, 1997, the Company acquired substantially all of the assets
and operations of Insource America, Inc. ("Insource") and United Staffing of
Utah, Inc. ("USU") in exchange for a promissory note in the amount of $6,187,500
which is due July 31, 1998 with an installment of $618,750 due January 5, 1998.
Insource and USU provide PEO services to clients in Portland, Oregon, Salt Lake
City, Utah and Missoula, Montana.
(ii) In September of 1997, the Company acquired the stock of PRC
Enterprises, Inc. ("PRC") in exchange for a convertible note in the amount of
$4,500,000 bearing interest at 8% per annum with annual principal installments
due in an amount equal to the greater of 30% of the gross profit of PRC or
$450,000, and the balance being due in September of 2000. PRC provides PEO
services for approximately 1,950 employees in Houston, Texas.
(iii) In October of 1997, the Company acquired the stock of Crest
Outsourcing, Inc. ("Crest") in exchange for 100,000 shares of $10 convertible
preferred stock, 250,000 warrants and a promissory note in the amount of
$250,000 payable, with interest at 6% per annum, over 58 months. Crest provides
PEO services in New Mexico, Arizona, Colorado and California.
(iv) The Company has entered into an agreement to acquire the stock of
Webster Leasing, Inc. ("Webster") in exchange for 772,392 shares of common
stock. Webster provides PEO services in Central Texas.
Safety and Fatigue Consulting
SFCI is a development stage company which has developed a comprehensive
training and consulting program for the transportation industry emphasizing
safety, operations and fatigue training for both management and over the road
staff. SFCI emphasizes fatigue training and sleep disorder testing for client
companies and their staff and has the support of major associations and
insurance companies involved in the trucking industry. SFCI has developed a
pragmatic training and wellness program which the industry can use to reduce the
risk inherent in the trucking and transportation industry. Response to the
preliminary marketing and awareness program provided industry leaders and
regulators has been favorable.
Currently there is virtually no competition. No other entity has a
comprehensive program available and it is not unreasonable to assume that there
will not be any product other than SFCI's available for at least one year due to
practical logistical issues surrounding the human resource and operational
necessities of potential transportation and industrial clients. The SFCI program
was designed with these concerns as paramount so the program can be implemented
without undue cost and disruption to ongoing operations. A second reason for the
lack of competition stems from the industry's reluctance to spend R&D funds to
find the "critical path" technology which SFCI has already incurred, analyzed,
adjusted and enhanced. SFCI's development team's experience in the complex
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implementation of such a program has proven much more difficult and challenging
than the expense which goes with that development process.
SFCI employs a four tier marketing system. Tier ONE is the base training
program consisting of instructor manuals and guides, driver training workbooks,
tests and polls, driver handbooks and guides, a teaching video, certification
documentation and sleep disorder analysis reports for management. This is meant
to be a shelf product for the widest possible distribution and not restricted by
the size of a potential client company, thus allowing for maximum market and
industry penetration. Tier ONE is, by design, meant to satisfy the industry
associations and regulators who have been seeking immediate solutions to this
very high profile problem.
Tier TWO involves the training by SFCI's staff or our contracted training
associates of both instructors and drivers of interested clients for a fee. Pre
scheduled training classes allow companies, both large and small, to have their
staffs trained to teach the course or to send their drivers to one of the
training sessions SFCI conducts. Thus, SFCI can maximize market penetration even
if the client company is too small to have human resource or safety departments
of their own.
Tier THREE is a full consultation analysis of a given client company where
SFCI personnel go into a client company (in most cases larger size companies)
for a daily fee and performs a complete audit of their operations and safety
program to recommend changes and adjustments which might be necessary to achieve
risk reduction.
Tier FOUR includes sleep disorder testing, analysis and treatment. Tier
FOUR services are provided through mobile testing units which have been designed
to allow a driver or worker to be identified as having a sleeping disorder, test
that person in a medically sanctioned setting, treat that person for the
disorder and have them back to work in most cases in as little as seventy-two
hours.
Regulatory issues are currently being driven by the Department of
Transportation's need to address the urgency of accidents caused by fatigue.
Soon such training is expected to be mandatory to retain a Commercial Driver's
License ("CDL"). Management expects the SFCI program to serve as a model for new
regulations expected to be enacted in the near future.
Employees
The Company at June 30, 1997 had approximately thirteen corporate office,
marketing and administrative employees (excluding client employees). The Company
believes that its relations with its employees are good. None of the Company's
corporate office, marketing or administrative employees are covered by
collective bargaining agreements.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's corporate offices are located in 14,586 square feet of leased
office space at 4245 North Central Expressway in Dallas, Texas.
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In connection with the acquisition of various PEO operations subsequent to
June 30, 1997, the Company also leases sales and support officers in
Albuquerque, New Mexico, Portland, Oregon, Salt Lake City, Utah, Houston, Texas
and Waco, Texas.
The Company believes that its facilities are adequate to support the
Company's operations for the foreseeable future. The Company expects to lease
additional facilities in existing and new markets as needed to support future
growth and acquisitions.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings other
than ordinary routine litigation incidental to its business that the Company
believes would not have a material adverse effect on its financial condition or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders through
the solicitation of proxies or otherwise, during the fourth quarter of the
Company's fiscal year ended June 30, 1997.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is for traded on the NASDAQ Electronic Bulletin
Board under the symbol "OXFO". The following table sets forth the high and low
bid price per share for the Company's Common Stock for each quarterly period
within the two most recent fiscal years.
1996 1997
------------------- ------------------
High Low High Low
--------- -------- -------- -------
First Quarter 1/8 1/8 9/16 1/2
Second Quarter 1/8 1/8 9/16 1/2
Third Quarter 1/8 1/8 3/8 3/8
Fourth Quarter 1/2 3/8 3/16 3/16
The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
As of September 30, 1997, there were approximately 250 holders of record of
the Common Stock of the Company.
At September 30, 1997, the bid price of the Common Stock was $0.1875.
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The Company has never declared or paid any cash dividend on its Common
Stock and does not expect to pay any such dividend in the foreseeable future.
Sales of Unregistered Securities
During fiscal 1997, the Company issued unregistered securities in the
following transactions:
(1) The acquisition of 100% of the stock of SFCI from the two shareholders
of SFCI in exchange for 23,293,005 shares of Common Stock and 1,863,440
warrants.
(2) The acquisition of 100% of the stock of Rx from the two shareholders of
Rx in exchange for 4,108,601 shares of Common Stock and 465,860 warrants.
(3) The conversion of loans payable to three investors, including accrued
interest, totaling $189,879 in exchange for 357,286 shares of Common Stock and
75,000 warrants.
(4) The conversion of accounts payable to three persons totaling $757,752
in exchange for warrants to acquire 1,426,490 shares of Common Stock.
(5) The issuance of 150,000 shares of Common Stock and 150,000 warrants as
consideration for making a short term loan to the Company.
No discounts or commissions of any nature were paid in connection with the
issuance of the above securities. The securities were issued in reliance on the
exemption set forth in Section 4(2) of the Securities Act of 1933 based on the
limited number of investors and representations that such investors were
acquiring for investment. The securities bear legends restricting the resale
thereof.
The warrants issued, as described above, are exercisable on the following
terms: (i) 1,164,650 warrants are exercisable at $2 per share until August 31,
1999, (ii) 1,164,650 warrants are exercisable at $3 per share until August 31,
1999, (iii) 1,501,490 warrants are exercisable at $0.5312 per share until August
31, 1998, and (iv) 150,000 warrants are exercisable at $1.50 per share until
September 24, 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The statements contained in this Annual Report on Form 10-KSB ("Annual
Report") which are not historical facts, including, but not limited to,
statements found in Item 1. "Business" and in Item 7. "Management's Discussion
and Analysis," are forward-looking statements that involve a number of risks and
uncertainties. All phases of the Company's operations are subject to a number of
uncertainties, risks and other influences. Therefore, the actual results of the
future events described in such forward-looking statements in this Annual
Report, or elsewhere, could differ materially from those stated in such forward-
looking statements. Among the factors that could cause actual results of differ
materially are the risks and uncertainties discussed in this Annual Report,
including, without limitation, the portions referenced above, and the
uncertainties set forth from time to time in the Company's other public reports
and filings and public statements, many of which are beyond the control of the
Company, and any of which, or a combination of which, could materially affect
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the results of the Company's operations and whether forward-looking statements
made by the Company ultimately prove to be accurate.
Overview
The Company provides small and medium-sized businesses with an outsourcing
solution to the complexities and costs related to employment and human
resources. The Company's integrated employment related services consists of
human resource administration, employment regulatory compliance management,
workers' compensation coverage, health care and other employee benefits. The
Company establishes a co- employer relationship with its clients and
contractually assumes substantial employer responsibilities with respect to work
site employees. In addition, the Company offers certain specialty managed care
services on a stand alone basis to health and workers' compensation insurance
companies, HMOs, managed care providers and large, self insured employers.
Financial Presentation
The Company conducted no operating business form 1993 through September of
1996. In October of 1996, the Company acquired Rx and SFCI in transactions
accounted for as a reverse acquisition. As a result of such transactions, the
financial results for all periods presented reflect the operations and results
of Rx and SFCI for all such periods as if the transactions had occurred at the
beginning of such periods. Effective June 30, 1996, the Company changed its
fiscal year from a calendar year to a fiscal year ended June 30. As a result of
the change in fiscal year, operating results are presented for the twelve months
ended June 30, 1997 and for the six months ended June 30, 1996. Inasmuch as Rx
and SFCI were each formed during the six months ended June 30, 1996, no results
were reportable by Rx and SFCI prior to the six months ended June 30, 1996.
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the foregoing and the Company's Consolidated
Financial Statements and Notes thereto included elsewhere in this Annual Report.
The Company's revenues include all amounts billed to clients for gross
salaries and wages, related employment taxes, and health care and workers'
compensation coverage of work site employees. The Company is obligated to pay
the gross salaries and wages, related employment taxes as well as health care
and workers' compensation costs of its work site employees whether or not the
Company's clients pay the Company on a timely basis, or at all. The Company
believes that including such amounts as revenues appropriately reflects the
responsibility which the Company bears for such amounts and is consistent with
industry practice. In addition, the Company's revenues are subject to
fluctuations as the result of (i) changes in the volume of work site employees
serviced by the Company, (ii) changes in the wage base and employment tax rates
of work site employees, and (iii) changes in the mark up charge by the Company
for its services.
The Company's primary direct costs are (i) salaries, wages, the employer's
portion of social security, Medicare premiums and federal unemployment taxes,
(ii) health care and workers' compensation costs, and (iii) state unemployment
taxes and other direct costs. The Company can significantly impact its gross
profit margin by actively managing the direct costs described in items (ii) and
(iii).
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The Company's health care costs consist of medical insurance premiums,
payments of and reserves for claims subject to deductibles and the costs of
vision care, disability, employee assistance and other similar benefit plans.
The Company's health care benefit plans consist of a mixture of fully insured,
minimum premium arrangements, partially self insured plans and guaranteed cost
programs. Under minimum premium arrangements and partially self insured plans,
liabilities for health care claims are recorded based on the Company's health
care loss history.
Workers' compensation costs include medical costs and indemnity payments
for lost wages, administrative costs and insurance premiums related to the
Company's workers' compensation coverage. The Company is insured under a large
deductible insurance plan. Workers' compensation costs for 1997 also include
reserves for claims which have been incurred but not reported and for
anticipated loss development.
The Company's primary operating expenses are administrative personnel
expenses, other general and administrative expenses, and sales and marketing
expenses. Administrative personnel expenses include compensation, fringe
benefits and other personnel expenses related to internal administrative
employees. Other general and administrative expenses include rent, office
supplies and expenses, legal and accounting fees, insurance and other operation
expenses. Sales and marketing expenses include compensation of sales executives
and the marketing staff, as well as marketing and advertising expenses.
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Results of Operations
The following table sets forth, for the periods indicated, certain
selected income statement data expressed as a percentage of revenues:
Twelve Months Six Months
Ended Ended
June 30, 1997 June 30, 1996
-------------- -------------
Revenues 100.0% 100.0 %
Direct cost 93.9 94.5
-------------- -------------
Gross profit 6.1 5.5
-------------- -------------
Operating expenses:
General and administrative 17.6 6.8
Sales and marketing 2.5 1.1
Asset impairment 4.7 0.0
Total operating expenses 24.8 7.9
-------------- -------------
Operating income (loss) (18.7) (2.4)
Other income (loss) (0.4) 0.0
-------------- -------------
Income (loss) before taxes (19.1) (2.4)
Provision for income taxes 0.0 0.0
-------------- -------------
Net income (loss) (19.1) (2.4)
============== =============
Gross Revenues. Gross revenues from salaries, wages, workers' compensation,
health care and employment taxes of work site employees were $18,913,720 for the
twelve months ended June 30, 1997 compared to $10,217,417 for the six months
ended June 30, 1996, an increase of 85.1%. The increase is gross revenues was
attributable to a full year of operations in fiscal 1997 as compared to only six
months of operations for the period ended June 30, 1996. The increase in
revenues attributable to the longer reporting period in fiscal 1997 was
partially offset by the loss of a client with fifty (50) employees in January
1997. The average number of worksite employees paid per month during fiscal 1997
was 975 as compared to 950 during the six months ended June 30, 1996 while
monthly revenue per worksite employee was $1,616 during fiscal 1997 as compared
to $1,792 during the six months ended June 30, 1996.
Gross Profit. Gross profit was $1,162,335 for the twelve months ended June
30, 1997 compared to $559,263 for the six months ended June 30, 1995, an
increase of 107.8%. Gross profit was 6.14% of revenues for the twelve months
ended June 30, 1997 compared to 5.47% for the six months ended June 30, 1996.
The increase in gross profits was primarily attributable to operating for
12 months in fiscal 1997 and a moderate increase in fees to clients. Monthly
gross mark-up per worksite employee totaled $99 during fiscal 1997 as compared
to $98 during the six months ended June 30, 1996.
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General and Administrative Expense. General and administrative expenses ("G
& A") were $3,328,921 for the twelve months ended June 30, 1997 compared to
$696,786 for the six months ended June 30, 1996, a 377.7% increase. As a
percentage of sales, G & A increased from 6.8% to 17.6%. The increase in G & A
in absolute terms and as a percentage of sales was attributable to the funding
of SFCI.
Sales and Marketing Expense. Sales and marketing costs were $490,629 for
the twelve months ended June 30, 1997 compared to $117,560 for the six months
ended June 30, 1996, an increase of 317.3%. As a percentage of sales, sales and
marketing expense increased from 1.1% to 2.5%. The increase in sales and
marketing expense was attributable to the marketing of SFCI products.
Other Income (Expense). The Company recorded an impairment loss of $881,385
during the fiscal year ended June 30, 1997. The impairment loss represents the
difference in the unamortized cost of goodwill and covenant not to compete
associated with the acquisition of Rx and the estimated fair market value of Rx.
Management determined the fair market value of Rx based on the discounted
present value of expected net cash flow from the operation. The Company reported
other income totaling $175 during fiscal 1997 as compared to other income of
$34,970 during the six months ended June 30, 1996 attributable to the settlement
of a lawsuit. Interest expense for fiscal 1997 totaled $83,313 as compared to
$40,812 for the six months ended June 30, 1996. The increase in interest expense
was attributable to the acquisition of CECI by Rx.
Net Loss. Net loss was $3,621,738 for the twelve months ended June 30, 1997
compared to $260,925 for the six months ended June 30, 1996. Loss per share were
$0.11 for the twelve months ended June 30, 1997 compared to $0.01 for the six
month period ended June 30, 1996.
Liquidity and Capital Resources
The Company had cash and cash equivalents of $437,410 and a deficit in
working capital of $3,688,911 at June 30, 1997 compared to a cash balance of
$4,361 and a deficit in working capital of $1,609,847 at June 30, 1996. The
increase in the Company's working capital deficit was attributable to the loss
incurred during fiscal 1997 and includes $4,037,601 of payroll taxes payable in
July of 1997.
The Company's cash flows from operating activities increased to $1,120,755
in fiscal 1997 as compared to $28,133 for the six months ended June 30, 1996.
The increase in operating cash flows during fiscal 1997 reflects the loss for
the period which was offset by approximately $1,063,000 of non-cash expenses
attributable to depreciation, amortization and impairment of assets, by
increases in payroll taxes payable of approximately $3,868,000 and by changes in
other operating assets.
Cash used in investing activities totaled $414,647 in fiscal 1997 as
compared to $501,576 for the six months ended June 30, 1996. Approximately
$500,000 of the cash used in investing activities in fiscal 1996 and $100,000 of
the used in investing in fiscal 1997 related to payments pursuant to a
non-compete agreement entered into in connection with the acquisition of Rx. The
balance of the funds used in investing activities in fiscal 1997 related to
purchases of furniture and equipment and costs and expenditures incurred in
connection with acquisitions which were pending at June 30, 1997. In addition to
its cash investing activities during fiscal 1997, the Company converted $169,789
of debentures, including accrued interest, into 357,286 shares of common stock
and
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75,000 warrants and converted $757,752 of accounts payable, including $685,630
payable to a company controlled by the Company's chairman, into 1,426,490
warrants.
Cash flows from financing activities totaled $476,643 for the six months
ended June 30, 1996 as compared to cash used in financing activities of $273,059
in fiscal 1997. Cash flows from financing activities during the six months ended
June 30, 1996 consisted of $100,000 of contributed capital arising from the Rx
acquisition and approximately $383,000 arising from increases in the Company's
bank overdraft. The use of cash in financing activities during fiscal 1997
reflects the receipt of a loan in the amount of $150,000 offset by payments of
various long-term obligations ($200,000) and reduction of the bank overdraft
balance ($224,000).
At June 30, 1997, the Company's principal obligations, other than those
relating to meeting its ongoing working capital needs, consisted of a
non-interest bearing note payable in connection with the Company's acquisition
of Rx. The note is unsecured and provides for monthly payments of $6,700 until
$1,068,000 has been paid. The note was originally recorded at a discounted value
of $533,650, reflecting a 12% discount rate. The discounted balance of the note
payable at June 30, 1997 was $419,508.
At June 30, 1997, the Company was also obligated under a lease covering its
principal offices expiring December 31, 2001 and two leases for office equipment
expiring December 31, 1999 and 2000. The Company's lease obligations at June 30,
1997 provided for minimum annual payments of $193,836 for the year ending June
30, 1998 escalating to $222,180 for the year ending June 30, 2001.
In addition to its outstanding obligations at June 30, 1997, the Company
has incurred substantial obligations in connection with acquisitions of PEOs
subsequent to June 30, 1997. Those obligations include (i) $6,187,500 payable on
before July 31, 1998, with a principal payment of $618,750 being due January 5,
1998, in connection with the acquisition of Insource; (ii) $250,000 payable with
interest at 6% in 58 equal monthly installments in connection with the
acquisition of Crest; and (iii) $4,500,000 payable in September of 2000 with
interest at 8%, subject to mandatory annual prepayments of principal and
interest in an amount equal to the greater of 30% of the gross profits of PRC or
$450,000 and also subject to the rights of the holder to convert such note into
common stock of the Company, in connection with the acquisition of PRC.
Additionally, the Company has guaranteed approximately $360,000 of obligations
in connection with the proposed Webster acquisition and guaranteed a note
payable of Crest in the amount of $885,000. In connection with its completed and
pending acquisitions, it can be expected that the Company and/or its newly
acquired subsidiaries will be obligated under various leases and other financing
arrangements accompanying the acquired operations.
The Company incurred substantial operating losses during fiscal 1997 and
the six months ended June 30, 1996. As a result of those losses and the deficit
in the Company's working capital, the Company's auditors have qualified their
opinion regarding the Company's financial statements to reflect doubt as to the
Company's ability to continue as a going concern. In order to address those
issues and to meet the obligations incurred by the Company in connection with
acquisitions undertaken after June 30, 1997, management is working to reduce
expenses, negotiate favorable terms with creditors and to raise additional
capital. Additionally, each of the PEO operations acquired since June 30, 1997
is expected to produce positive operating cash flow which management expects
will be available to partially meet the Company's capital requirements. In order
to meet its working capital needs and to satisfy obligations coming due on or
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before July 31, 1998, management estimates that the Company will require
approximately $5,700,000 of additional third party financing during fiscal 1998.
While various notes issued by the Company may be converted at the holder's
option into common stock and various warrants are outstanding, the exercise of
which would provide in excess of $3 million dollars of capital to the Company,
there can be no assurance that any of such notes or warrants will be converted
or exercised and, based on current market conditions, it is not likely that any
such conversions or exercises will occur. Further, the Company has no
commitments or agreements with third parties to provide any needed capital or
financing and there can be no assurance that the Company will be successful in
its efforts to alleviate its liquidity problems.
Inflation
The Company believes the effects of inflation have not had a significant
impact of its results of operations or financial condition.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements of the Company, together with the
independent auditors' report thereon of Cheshier & Fuller, L.L.P., appears on
pages F-1 through F-29 of this report. See Index to Financial Statements on page
30.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Following the acquisition of Rx and SFCI by the Company, on August 7, 1996,
the Company's Board of Directors selected Thomas Leger & Co., L.L.P. to serve as
its new independent accountants and dismissed D. Brian Macbeth, Certified Public
Accountants, of Spring, Texas which previously served as the independent
accountant for the Company.
D. Brian Macbeth's reports on the financial statements of the Company for
the fiscal years ended December 31, 1994 and 1995 contain no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. In connection with its audits for fiscal
years 1994 and 1995 and through August 7, 1996, there were no disagreements with
D. Brian Macbeth on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of D. Brian Macbeth would have caused him to make
reference thereto in his reports on the financial statements for such years.
The information described above regarding the Company's decision to dismiss
D. Brian Macbeth as its independent accountants and select Thomas Leger & Co.,
L.L.P. as its new independent accountants, along with a letter from D. Brian
Macbeth stating that he agrees with the above information regarding the
Company's change of accountants, was fully disclosed in a Form 8-K filed with
the SEC on August 7, 1996.
Thomas Leger & Co. L.L.P., declined to stand for re-election as the
independent accountants for the Company on October 13, 1997 and the board of
directors appointed Cheshier & Fuller, L.L.P., of Dallas, Texas, as the
Company's new independent accountants.
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Thomas Leger & Co. L.L.P.'s report on the financial statements of the
Company for the period ended June 30, 1996 contains no adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope, or accounting principles. In connection with its audit for the period
ended June 30, 1996 and through October 13, 1997, there were no disagreements
with Thomas Leger & Co. L.L.P. on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Thomas Leger & Co. L.L.P.
would have caused them to make reference thereto in their report on the
financial statements for such period.
The information described above regarding the decision of Thomas Leger &
Co. L.L.P. not to stand for re-election as the Company's independent accountants
and the Company's selection of Cheshier & Fuller, L.L.P. as its new independent
accountants, along with a letter from Thomas Leger & Co. L.L.P. stating that
they agree with the above information regarding the Company's change of
accountants, was fully disclosed in a Form 8-K filed with the SEC on October 13,
1997.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Identification of Directors, Executive Officers and Certain Significant
Employees
The following table sets forth certain information regarding the directors
and executive officers of the Company.
Name Age Position
- ---- --- --------
Robert Cheney.... 56 Chairman, Chief Executive Officer and Director
Rick Tarell...... 46 President, Chief Operating Officer and Director
Jerry Stovall.... 35 Executive Vice President, Chief Financial Officer
and Director
Terms of Office
The directors of the Company hold office until the next annual meeting of
stockholders of the Company or until their successors in office are elected and
duly qualified. All officers serve at the discretion of the Board of Directors
except as set forth in employment agreements.
Business Experience
Robert Cheney has served as Chairman of the Board and Chief Executive
Officer of the Company since January of 1994. Mr. Cheney also served as
President of the Company from January of 1994 until the acquisition of Rx in
September of 1996. Prior to joining the Company, Mr. Cheney served as a
consultant assisting troubled companies in securing debt and equity financing,
acquisitions, turnaround strategies and other managerial functions.
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Rick Tarell has served as President, Chief Operating Officer and a Director
of the Company since the acquisition of Rx in September of 1996. Prior to
joining the Company, Mr. Tarell served as head of operations for the two
predecessor employee leasing companies of Rx.
Jerry Stovall has served as Executive Vice President, Chief Financial
Officer and a Director of the Company since the acquisition of Rx in September
of 1996. Prior to joining the Company, Mr. Stovall was self-employed as a
Certified Public Accountant.
Compliance With Section 16(a) of the Exchange Act
Not applicable.
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation Table
The following table sets forth information as to the compensation paid or
accrued to each officer and director receiving compensation of at least $100,000
and the Chief Executive Officer for the three years ended June 30, 1997:
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------------------
Other Annual All Other
Name and Principal Position Year Salary (2) Bonus Compensation Compensation
- --------------------------- ---- ---------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert Cheney..................... 1997 $ -0- $ -0- $ -0- $ -0-
Chief Executive Officer and..... 1996 -0- -0- -0- -0-
Chairman of the Board (1) 1995 -0- -0- -0- -0-
</TABLE>
- ------------------------
(1) Mr. Cheney also served as President of the Company through September of
1996.
(2) While Mr. Cheney received no salary or other similar compensation from the
Company during the years indicated, a company controlled by Mr. Cheney is
paid consulting fees and reimbursed for expenses incurred in providing
management and administrative services to the Company. During the year
ended June 30, 1997, the Company paid to such firm consulting fees totaling
$194,525 and reimbursed expenses totaling $36,376. See "Certain
Relationships and Related Transactions."
Director's Compensation
No compensation has been paid to any directors for service in such capacity
in the past and no such compensation is presently payable to directors. At such
time as the Board of Directors deems appropriate, the Company intends to adopt
an appropriate policy to compensate non-employee directors in order to attract
and retain the services of qualified non-employee directors.
Employment Agreements
The Company has no employment agreements with any of its officers or
employees.
25
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Common Stock
The following table is furnished as of October 10, 1997 to indicate
beneficial ownership of shares of the Company's Common Stock by (1) each
shareholder of the Company who is known by the Company to be a beneficial owner
of more than 5% of the Company's Common Stock, (2) each director and named
officer of the Company, individually, and (3) all officers and directors of the
Company as a group. The information set out in the following table was supplied
by such persons.
Name and Address of Number of Shares
Beneficial Owner (1) Beneficially Owned(2) Percent
- -------------------- --------------------- -------
Jerry Stovall.............................. 2,164,650 (3) 17.6%
4245 N. Central Expressway, Suite 300
Dallas, Texas 75205
Rick Tarell................................ 2,164,650 (4) 17.6%
4245 N. Central Expressway, Suite 300
Dallas, Texas 75205
Gary Thibodeaux............................ 889,000 8.0%
11201 Short Road
Bentonville, Arkansas 72712
Atlas Overseas Investments Limited......... 750,000 6.7%
P. O. Box N-10144
Bitco Building East
Nassau, Bahamas
Overseas Limited........................... 750,000 6.7%
22 Markham Street
London, England SW3
Penguin Investments Limited................ 700,000 6.3%
P. O. Box N-10144
Bitco Building East
Nassau, Bahamas
Robert Cheney.............................. 1,290,719 (5) 10.4%
All officers and directors
as a group (3 persons)................... 5,620,019 (6) 38.0%
26
<PAGE>
- ------------------------
(1) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to the shares shown opposite the
name of such person or group.
(2) Includes shares of Common Stock not outstanding, but which are subject to
options and warrants exercisable within 60 days of the date of the
information set forth in this table, which are deemed to be outstanding for
the purpose of computing the shares held and percentage of outstanding
Common Stock with respect to the holder of such options. Such shares are
not, however, deemed to be outstanding for the purpose of computing the
percentage of any other person.
(3) Includes 1,164,650 shares of common stock issuable upon exercise of
warrants held by Mr. Stovall.
(4) Includes 1,164,650 shares of common stock issuable upon exercise of
warrants held by Mr. Tarrell.
(5) Consists of 1,290,719 shares of common stock issuable upon exercise of
warrants held by TDF, Ltd., which is controlled by Mr. Cheney and which
warrants may be deemed to be beneficially owned by Mr. Cheney.
(6) Includes 3,620,019 warrants held by officers and directors.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since 1994, TDF, Ltd., a company controlled by the Company's Chairman, has
provided management and administrative services to the Company pursuant to a
consulting agreement. The consulting agreement provides for the payment of
monthly consulting fees and reimbursement of out-of-pocket expenses. The monthly
consulting fee accrued at $17,000 per month through December 31, 1996 at which
time the consulting fee was reduced to $15,000 per month.
Through June 30, 1996, the Company had accrued and unpaid consulting fees
and reimbursable expenses due to TDF, Ltd. totaling $685,630. During fiscal
1997, TDF, Ltd. agreed to convert the amount receivable from the Company at June
30, 1996 into warrants exercisable through August 31, 1998 to purchase 1,290,719
shares of common stock of the Company at $0.5312 per share. During fiscal 1997,
the Company paid consulting fees to TDF, Ltd. totaling $194,525 and reimbursed
expenses totaling $36,376.
All of the above transactions are believed by management to be on terms at
least as favorable to the Company as may have been obtained from unaffiliated
third parties. The Company has no present policy governing related party
transactions but intends to implement a policy such that all future and ongoing
transactions between the Company and its directors, officers, principal
stockholders or affiliates will be on terms no less favorable to the Company
than may be obtained from unaffiliated third parties, and any such transactions
will be approved by a majority of disinterested directors of the Company.
27
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
------- ----------------------
2.1 Share Purchase Agreement dated September 1, 1997 between Oxford
Capital and the Shareholders of PRC Enterprises, Inc. (1)
2.2 Exchange Agreement dated August 20, 1996 between Oxford Capital and Rx
Staffing, Inc. (2)
2.3 Exchange Agreement dated August 20, 1996 between Oxford Capital and
Safety and Fatigue Consultants International, Inc. (2)
3.1* Articles of Incorporation
3.2* Bylaws
9.1 Voting Trust Agreement re: PRC Enterprises (1)
10.1 Promissory Note re: PRC Enterprises acquisition (1)
10.2* Consulting Services Agreement with TDF, Ltd.
16.1 Letter from D. Brian Macbeth re: change of accountants (3)
16.2 Letter from Thomas Leger & Co. L.L.P. re: change of accountants (4)
21.1* Subsidiaries
27.1* Financial Data Schedules
- ------------------------
* Filed herewith
(1) Incorporated by reference to the respective exhibits filed with
Registrant's Current Report on Form 8-K dated September 2, 1997.
(2) Incorporated by reference to the respective exhibits filed with
Registrant's Current Report on Form 8-K dated October 4, 1996.
(3) Incorporated by reference to the respective exhibits filed with
Registrant's Current Report on Form 8-K dated August 7, 1996.
(4) Incorporated by reference to the respective exhibits filed with
Registrant's Current Report on Form 8-K dated October 13, 1997.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1997.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OXFORD CAPITAL CORP.
By: /s/ Robert Cheney
--------------------------------------
Robert Cheney
Chairman and Chief Executive Officer
Dated: October 14 , 1997
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert Cheney Chairman of the Board, Chief October 14, 1997
- ---------------------- Executive Officer (Principal
Robert Cheney Executive Officer) and Director
/s/ Rick Tarell President, Chief Operating October 14, 1997
- ---------------------- Officer and Director
Rick Tarell
/s/ Jerry Stovall Executive Vice President, October 14, 1997
- ---------------------- Chief Financial Officer (Principal
Jerry Stovall Accounting and Financial Officer)
and Director
29
<PAGE>
TABLE OF CONTENTS
Page
----
Report of Independent Auditor........................................... F-1
Consolidated Balance Sheets............................................. F-3
Consolidated Statements of Income....................................... F-5
Consolidated Statements of Changes in Stockholders' Equity.............. F-6
Consolidated Statements of Cash Flows................................... F-7
Notes to Consolidated Financial Statements.............................. F-9
30
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Oxford Capital Corp.
We have audited the accompanying consolidated balance sheets of Oxford Capital
Corp. and Subsidiaries as of June 30, 1997, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year
ended June 30, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
As explained in Note 1 to the consolidated financial statements, the financial
position and results of operations of Oxford Capital Corp. was consolidated with
Rx Staffing Corp. and Safety and Fatigue Consultants International, Inc. as of
June 30, 1996, and for the six months then ended. We audited the balance sheets
of Rx Staffing Corp. and Safety and Fatigue Consultants International, Inc. as
of June 30, 1996, and for the six months then ended. The financial statements of
Oxford Capital Corp. as of and for the six months ended June 30, 1996, and for
the year ended December 31, 1995, were audited by other auditors. Our reports,
dated September 6, 1996, and the other auditor's report dated August 16, 1996,
included an explanatory paragraph describing conditions that raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statement of Oxford Capital Corporation reflected assets of $1,398 and
liabilities of $1,013,039 as of June 30, 1996 and revenues of $34,970 and net
loss of $110,779 for the six months ended June 30, 1996. The other auditor's
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included in such prior period, is based solely on the report of such
other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, such
consolidated financial statements present fairly, in all material aspects, the
financial position of Oxford Capital Corp. and Subsidiaries as of June 30, 1997
and 1996 and the results of its operations and its cash flows for the periods
then ended in conformity with generally accepted accounting principles.
F-1
<PAGE>
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 16 to
the consolidated financial statements, the Company has suffered recurring losses
from operations and has a net capital deficiency, which raise substantial doubt
about its ability to continue as a going concern. Management's plans regarding
those matters also are described in Note 16. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
CHESHIER & FULLER, L.L.P.
Dallas, Texas
September 30, 1997
(except for Note 10 to the
financial statements, as to which
the date is October 6, 1997)
F-2
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1997 and 1996
ASSETS
June 30,
----------------------------
1997 1996
---------- -----------
Current assets
Cash and cash equivalents $ 437,410 $ 4,361
Accrued payroll receivable 415,860 348,128
Accounts receivable - clients,
net of allowance for doubtful
accounts of $66,629 and $0 at
June 30, 1997 and 1996, respectively 141,210 66,834
Inventory - finished goods 53,495 -0-
Prepaid expenses 13,900 -0-
---------- -----------
Total current assets 1,061,875 419,323
Furniture and equipment, net of
accumulated depreciation of $30,385
and $2,246 at June 30, 1997 and 1996,
respectively 179,293 21,018
Other assets
Goodwill, net of accumulated
amortization of $0 and $17,088 at
June 30, 1997 and 1996, respectively -0- 495,562
Covenant not to compete, net of
accumulated amortization of $0 and
$60,000 at June 30, 1997 and 1996,
respectively -0- 540,000
Accounts receivable - related party 46,284 -0-
Accounts receivable - Crest 45,140 -0-
Deferred acquisition costs - Webster 81,991 -0-
Other assets 337 -0-
----------- -----------
TOTAL ASSETS $1,414,920 $ 1,475,903
========== ===========
F-3
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1997 and 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
----------------------------------
1997 1996
----------- -----------
Current liabilities
Bank overdraft $ 159,643 $ 383,598
Accrued payroll payable 287,056 237,375
Accounts payable - trade 90,749 857,609
Accrued expenses 98,174 55,374
Accounts payable - John Eckeberger -0- 157,486
Payroll taxes payable 4,037,601 169,553
Current portion of obligation payable 77,563 168,175
----------- -----------
Total current liabilities 4,750,786 2,029,170
Long-term obligation payable 399,028 508,520
----------- -----------
Total liabilities 5,149,814 2,537,690
----------- -----------
Preferred stock, par value $.001,
1,000,000 shares authorized,
none issued -0- -0-
Common stock, par value $.001,
50,000,000 shares authorized,
33,064,284 shares issued and
outstanding and 5,155,392 issued
and outstanding at June 30,
1997 and 1996, respectively 33,064 5,155
Additional paid-in capital 1,370,475 449,753
Retained deficit (5,138,433) (1,516,695)
----------- -----------
Total stockholders' equity (3,734,894) (1,061,787)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,414,920 $ 1,475,903
=========== ===========
F-4
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Consolidated Statements of Income
For the Year ended June 30, 1997, Six Months Ended
June 30, 1996 and the Year Ended December 31, 1995
June 30, December 31,
----------------------------- ------------
1997 1996 1995
-------------- ------------ ------------
Sales $ 18,913,720 $ 10,217,147 $ -0-
Cost of sales (17,751,385) (9,657,884) -0-
------------- ------------ ----------
Gross profit 1,162,335 559,263 -0-
------------- ------------ ----------
Impairment of long
lived assets (881,385) -0- -0-
General and administrative (3,328,921) (696,786) (392,132)
Selling expenses (490,629) (117,560) -0-
------------- ------------ ----------
Operating loss (3,538,600) (255,083) (392,132)
Other income (expense)
Other income 175 34,970 -0-
Interest expense (83,313) (40,812) (18,000)
------------- ------------ ----------
Net loss before income taxes (3,621,738) (260,925) (410,132)
Provision for income taxes -0- -0- -0-
Net Loss $ (3,621,738) $ (260,925) $ (410,132)
============= ============= ==========
Primary loss per share $ (0.11) $ (0.01) $ (0.08)
============= ============= ==========
Fully diluted loss
per share $ (0.11) $ (0.01) $ (0.08)
============= ============= ==========
Weighted average shares
outstanding 32,882,689 33,035,020 5,412,324
============= ============= ==========
F-5
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the Year Ended June 30, 1997, Six Months Ended June 30, 1996
and the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Additional
Paid-In Retained
Shares Par Value Capital Deficit Total
----------- --------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 5,119,392 $ 5,119 $ 349,789 $ (845,638) $ (490,730)
Issuance of stock in exchange
for extension of note payable
due date 36,000 36 (36) -0-
Issuance of stock in anticipation
of a transaction (returned in 1996) 1,500,000 1,500 (1,500) -0-
Net loss (410,132) (410,132)
----------- -------- --------- ----------- -----------
Balance, December 31, 1995 6,655,392 6,655 348,253 (1,255,770) (900,862)
Return of shares noted above (1,500,000) (1,500) 1,500 -0-
Capital contributions - Rx Staffing
and SFCI 100,000 100,000
Net loss (260,925) (260,925)
----------- -------- --------- ----------- -----------
Balance, June 30, 1996 5,155,392 5,155 449,753 (1,516,695) (1,061,787)
Issuance of stock in exchange
for 100% of equity of SFCI 23,293,005 23,293 (23,293) -0-
Issuance of stock in exchange
for 100% of equity of Rx Staffing 4,108,601 4,109 (4,109) -0-
Capital contributed 1,000 1,000
Conversion of loan payable to stock 357,286 357 189,522 189,879
Issuance of warrants to acquire
common stock in exchange for
accounts payable 757,752 757,752
Issuance of stock as consideration
for making a short-term loan to
the Company 150,000 150 (150) -0-
Net loss (3,621,738) (3,621,738)
----------- -------- ---------- ----------- -----------
Balance, June 30, 1997 33,064,284 $ 33,064 $1,370,475 $(5,138,433) $(3,734,894)
=========== ======== ========== =========== ===========
</TABLE>
F-6
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Year Ended June 30, 1997, Six Months Ended June 30, 1996
and the Year Ended December 31, 1995
<TABLE>
<CAPTION>
June 30,
---------------------------- December 31,
1997 1996 1995
------------ ---------- ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $(3,621,738) $(260,925) $ (410,132)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 182,393 79,334
Impairment loss 881,385
(Increase) decrease in:
Accrued payroll receivable (67,732) (348,128)
Accounts receivable (74,376) (31,804) (35,030)
Accounts receivable - related
party (46,284)
Inventory (53,495)
Prepaid expenses (13,900)
Increase (decrease) in:
Accrued payroll payable 49,681 237,375
Accounts payable - trade (9,108) 101,435 415,264
Accrued expenses 82,680 24,494 30,879
Accounts payable -
John Eckeberger (56,799) 56,799
Payroll taxes payable 3,868,048 169,553
----------- --------- -----------
Net cash provided by (used in)
operating activities 1,120,755 28,133 981
----------- --------- -----------
Cash flows from investing activities
Purchase of covenant not to compete (100,687) (499,313)
Purchase of furniture and equipment (186,491) (2,263)
(Increase) in accounts receivable - Crest (45,140)
(Increase) in deferred acquisition costs (81,991)
(Increase) in other assets (338)
----------- --------- ------------
Net cash provided by (used in)
investing activities (414,647) (501,576)
----------- --------- ------------
Cash flows from financing activities
Proceeds from issuance of promissory note 150,000
Reduction of promissory note (92,917)
Contributed capital 1,000 100,000
Reduction of obligation payable (107,187) (6,955)
Increase (decrease) in bank overdraft (223,955) 383,598
----------- --------- ------------
Net cash provided by (used in)
financing activities (273,059) 476,643
----------- --------- ------------
</TABLE>
F-7
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Year Ended June 30, 1997, Six Months Ended June 30, 1996
and the Year Ended December 31, 1995
June 30, December 31,
--------------------- -------------
1997 1996 1995
-------- -------- -------------
Net increase in cash and cash
equivalents 433,049 3,200 981
Cash and cash equivalents
balance at beginning of period 4,361 1,161 180
-------- -------- ------
Cash and cash equivalents
balance at end of period $437,410 $ 4,361 $1,161
======== ======== ======
Supplemental disclosures of cash
flow information
Interest paid $ 88,580 $ 26,545 $ -0-
======== ======== ======
Income taxes paid $ -0- $ -0- $ -0-
======== ======== ======
Non cash investing activities
Debentures payable converted to
shares of common stock $169,789
========
Accounts payable converted to
warrants to acquire common stock $757,752
========
Common shares issued (1995) and
returned (1996) relative to
potential merger -
1,500,000 shares $ -0- $ -0-
======== ========
Purchase of goodwill by issuance
of long-term debt $512,650
========
Purchase of furniture and
equipment by issuance of
long-term debt $ 21,000
========
F-8
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
Note 1 - Nature of Business and Significant Accounting Policies
Organization
Oxford Capital Corp. (Oxford) was organized under the laws of Nevada in
May, 1985. From 1993 until October, 1996, Oxford was not engaged in an active
trade or business. During October, 1996, Oxford acquired 100% of the issued and
outstanding shares of Rx Staffing Corp. (Rx Staffing) in exchange for 4,108,601
new shares of Oxford and 465,860 warrants of Oxford. At the same time Oxford
acquired 100% of the issued and outstanding shares of Safety and Fatigue
Consultants International, Inc. (SFCI) in exchange for 23,293,005 new shares of
Oxford and 1,863,440 warrants of Oxford. Oxford, Rx Staffing and SFCI will
collectively be referred to as "the Company".
Operations
Rx Staffing was organized during December, 1995, under the laws of the
state of Texas and is engaged in providing employee leasing services primarily
in the state of Texas.
Effective January 1, 1996, Rx Staffing entered into an agreement with
Creative Employment Concepts, Inc. ("CECI") to acquire all the employee leasing
contracts and furniture and equipment in the possession of CECI as of that date
for payments of $6,700 per month until $1,068,000 is paid (discounted to
$533,650 as explained in Note 2). Effective January 1, 1996, Rx Staffing also
entered into an agreement with John T. Eckeberger, a stockholder of CECI,
whereby, for $600,000, Mr. Eckeberger agreed not to compete with the Company for
a period of five years. The final major costs of the January 1, 1996,
acquisition were as follows:
Furniture and Equipment $ 21,000
Goodwill 512,650
Covenant Not To Compete 600,000
-----------
Total Cost $ 1,133,650
===========
The above costs were financed as follows:
Paid to Mr. Eckeberger out of cash flow
through June 30, 1997 $ 600,000
Assumption of long-term debt payable to CECI. 533,650
-----------
Total Cost $ 1,133,650
===========
F-9
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
Note 1 - Nature of Business and Significant Accounting Policies - continued
Operations - continued
During periods prior to the acquisition of Rx Staffing and SFCI, Oxford was
a development stage company. From its inception through June 30, 1996, SFCI was
reflected as a development stage company.
SFCI was organized during March, 1996, under the laws of the state of Texas
and is engaged in providing consultation services and training materials on
safety and fatigue of truck drivers.
Consolidation Policy
The merger of Oxford, Rx Staffing and SFCI was accounted for as a reverse
acquisition similar to a pooling of interests. The activity of all entities have
been retroactively presented. All intercompany profits and transactions have
been eliminated in consolidation, including those transactions entered into
prior to the merger.
Periods Presented
The fiscal reporting period was changed, effective June 30, 1996, from a
calendar year to a fiscal year ended June 30. The reported results of operations
for the six months ended June 30, 1996, are not necessarily indicative of the
results for a full year period.
The financial statements include the activity of Oxford for the year ended
December 31, 1995. The consolidated activity of Oxford, SFCI (from its inception
in March, 1996) and Rx Staffing (from its inception in January, 1996) is
presented from January 1, 1996 through June 30, 1996. The consolidated activity
of Oxford, SFCI and Rx Staffing is presented for the year ended June 30, 1997.
Advertising
The Company follows the policy of charging the costs of advertising to
general and administrative expense as incurred. Advertising expense was $56,059
during the year ended June 30, 1997, and negligible for periods prior to July 1,
1996.
Research and Development Costs
The Company charges research and development costs to general and
administrative expense as incurred. The Company reported research and
development expense of $158,466 and $20,476 during the year ended June 30, 1997,
and six months ended June 30, 1996.
F-10
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
Note 1 - Nature of Business and Significant Accounting Policies - continued
Inventory
Inventory values are stated at the lower of first-in, first-out (FIFO) cost
or market.
Furniture and Equipment
Furniture and equipment are recorded at cost. Maintenance and repairs are
charged to expense as incurred. When assets are sold or retired, the related
cost and any accumulated depreciation are removed from the accounts and any gain
or loss is included in income. Significant additions and betterments are
capitalized.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets of five years.
Depreciation expense was $28,139 and $2,246 for the year ended June 30,
1997, and six months ended June 30, 1996, respectively.
Goodwill
The cost of goodwill is being expensed using the straight-line method over
fifteen years. Amortization of goodwill was $34,176 and $17,088 for the year
ended June 30, 1997, and six months ended June 30, 1996, respectively.
Covenant Not to Compete
The cost of the covenant not to compete is being expensed using the
straight-line method over five years. Amortization of the covenant not to
compete was $120,000 and $60,000 for the year ended June 30, 1997, and six
months ended June 30, 1996, respectively.
Allowance for Bad Debts
The Company provides an allowance for uncollectible accounts based upon
prior experience and management's assessment of the collectibility of existing
specific accounts.
F-11
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
Note 1 - Nature of Business and Significant Accounting Policies - continued
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
Deferred tax assets and deferred tax liabilities, if any, are recognized
for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and their tax bases as well as the effect
of net operating loss carry forwards. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effect of changes in
tax laws and rates on the date of enactment.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers all cash
accounts which are not subject to withdrawal restrictions or penalties and
interest bearing accounts with maturities of 90 days or less to be cash or cash
equivalents.
Fair Value of Financial Instruments
The carrying values of financial instruments reported on the Company's
balance sheet approximate fair value. Fair value is estimated using published
market values for similar types of instruments.
Loss Per Share
Loss per share is calculated by dividing net loss by the average shares of
common stock outstanding during each period presented. Outstanding warrants were
not a factor in computing weighted average shares outstanding either under
primary or fully diluted computations. Because the acquisition of Rx Staffing
and SFCI is accounted for as a reverse acquisition, all share and per share
information have been retroactively applied to give effect for all shares
outstanding immediately after the consolidating transactions.
F-12
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
Note 1 - Nature of Business and Significant Accounting Policies - continued
Revenue Recognition
The Company accounts for revenue and the related direct payroll costs using
the accrual method. Under the accrual method, revenue is recognized as accrued
sales and the related direct payroll costs are accrued as liabilities during the
period in which wages are earned by the worksite employees.
Note 2 - Long-Term Debt
Long-term debt as of June 30, 1996, consist of a non-interest bearing
obligation payable to CECI as consideration for the acquisition explained in
Note 1. The unsecured note is payable $6,700 monthly until $1,068,000 is paid.
The non-interest obligation was discounted at 12% per annum and reflected in the
initial amount of $533,650.
The following are maturities of the note at June 30, 1996, using the 12%
per annum discount.
Year Ending
June 30,
----------
1998 $ 20,480
1999 23,077
2000 26,004
2001 29,302
2002 33,018
Thereafter 287,627
----------
$ 419,508
==========
Note 3 - Income Taxes
Because of tax losses, the Company did not pay income taxes for the year
ended June 30, 1997, the six months ended June 30, 1996, or the year ended
December 31, 1995.
F-13
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
Note 3 - Income Taxes - continued
Reconciliation of income tax expense computed by applying the expected
statutory rates to net loss is as follows:
Six Months Year Ended
Year Ended Ended December 31,
June 30, 1997 June 30, 1996 1996
------------- ------------- -----------
Benefit at expected
statutory rates $1,412,478 $ 37,663 $ 139,444
Fines and penalties (194,820) -0- -0-
Write off of intangible assets (343,740) -0- -0-
Amortization differences (31,200) -0- -0-
Depreciation differences 10,725 -0- -0-
Bad debt differences (25,985) -0- -0-
Net operating loss
carryforward (819,314) (36,643) (137,083)
Other (8,144) (1,020) (2,361)
---------- ------------ ------------
Provision for income tax $ -0- $ -0- $ -0-
========== ============ ============
The net deferred tax benefit and liabilities consisted of the following
components as of June 30, 1997 and 1996:
1997 1996
----------- ----------
Net operating loss carryforward $ 1,278,416 $ 459,102
Write off of intangible assets 390,940 16,000
Allowance for bad debts 25,985 -0-
Other 8,144 -0-
----------- -----------
1,703,485 475,102
Valuation allowance (1,692,760) (475,102)
10,725 -0-
Depreciation (10,725) -0-
$ -0- $ -0-
=========== ===========
F-14
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
Note 3 - Income Taxes - continued
As of June 30, 1997, the Company had tax loss carry forwards of $3,321,403
which begin to expire in 2000. The realization of income tax benefits from this
loss is limited by certain sections of the Internal Revenue Code.
Note 4 - Outstanding Warrants
As of June 30, 1997, outstanding warrants to purchase common stock of
Oxford were as follows:
Share
Number of Exercise
Origin Common Shares Price Expiration Date
------ ------------- -------- ---------------
Merger with 232,930 $2 August 31, 1998
Rx Staffing (Note 1) 232,930 $3 August 31, 1998
Merger with 931,720 $2 August 31, 1998
SFCI (Note 1) 931,720 $3 August 31, 1998
Note payable extension and
conversion to equity
(Note 5) 75,000 $0.5312 August 31, 1998
Accounts payable conversion
to equity (Note 5) 1,426,490 $0.5312 August 31, 1998
Issued in exchange for short-
term loan 150,000 $1.50 September 24, 1998
Note 5 - Debt Converted to Equity
In 1994, by means of a Private Placement, the Company sold 3 of its units
for $50,000 per unit, or an aggregate of $150,000. Each unit consisted of a
$50,000 12% note, due April 1, 1995, 50,000 shares of the common stock, and
25,000 warrants to purchase a like number of shares of common stock at $2.00 per
share, exercisable at any time up to two years from the date of issue. The
repayment of the notes, including accrued interest, had been extended to
December 31, 1995. In consideration for the extension, the note holders received
36,000 shares of the Company's common stock. During the year ended June 30,
1997, the note holders converted their notes payable, including accrued
interest, into 357,286 shares of the Company's common stock. At the same time,
the existing warrants were canceled and new warrants to purchase 75,000 shares
were issued.
F-15
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
Note 5 - Debt Converted to Equity
During the year ended June 30, 1997, the Company issued warrants to acquire
1,426,490 shares of common stock in exchange for unsecured, non interest bearing
debt in the amount of $757,752.
Note 6 - Preferred Stock
On June 26, 1995, the shareholders of the Company approved an amendment to
the articles of incorporation to authorize 1,000,000 shares of preferred stock,
$.001 par value, in one or more series. On establishing a preferred stock
series, the Board of Directors shall assign it a distinctive designation so as
to distinguish it from the shares of all other series and classes and shall fix
the number of shares in each series, and the preferences, rights, and
restrictions thereof.
Note 7 - Related Parties
During the period through December 31, 1996, the Company accrued $17,000
per month for management and administrative services to a corporation owned by
the Chairman of the Board of Directors of Oxford. The Company was also accruing
a liability to the same corporation for all out-of-pocket expenses incurred for
the benefit and operation of the Company. As of January 1, 1997, the agreement
was revised to be $15,000 per month.
Included in accounts payable as of June 30, 1996, is $685,630 owed to the
above corporation. Of the $757,752 in debt converted to equity as explained in
Note 5, $685,630 was debt owed that corporation. As of June 30, 1997, the
Company had an unsecured, non interest bearing receivable of $46,284 due from
the corporation.
General and administrative expenses included, the following amounts
relative to amounts paid the above corporation:
Amount Period Description
------ ------ -----------
$204,000 Year Ended December 31, 1995 Management & Administrative Services
$301,701 Year Ended December 31, 1995 Reimbursed expenses
$102,000 Six Months Ended June 30, 1996 Management & Administrative Services
$116,262 Six Months Ended June 30, 1996 Reimbursed Expenses
$194,525 Year Ended June 30, 1997 Management & Administrative Services
$ 36,376 Year Ended June 30, 1997 Reimbursed expenses
F-16
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
Note 8 - Subsequent Acquisitions
The following acquisitions are for entities engaged in providing employee
leasing services.
On July 31, 1997, the Company acquired substantially all of the assets of
Insource America, Inc., (Insource) and substantially all the assets of United
Staffing of Utah, Inc. (USU), located in Portland, Oregon, Salt Lake City, Utah,
and Missoula, Montana. The assets were acquired by United Staffing Corp., (USC)
a newly formed wholly-owned subsidiary incorporated under the laws of Nevada.
USC issued a promissory note to Insource in the amount of $6,187,500 due and
payable on or before June 30, 1998, with a 10% principal payment due on or
before January 5, 1998. This note is guaranteed by Oxford. Subsequently the note
was extended to July 31, 1998, by agreement between USC and Insource. Insource
owes approximately $5,700,000 in taxes to the IRS and the IRS has levied the
note given by USC to Insource.
On March 13, 1997 the Company agreed to acquire 100% of the shares of
Webster Leasing, Inc. (Webster) in exchange for 772,392 shares of Oxford common
stock. The previous owners of Webster are operating Webster under a management
contract pending completion of the audit of the books and records of Webster. It
is anticipated that the audit will be completed on October 20, 1997, and the
closing of this acquisition will occur at that time. Oxford has guaranteed
certain obligations of Webster in the amount of approximately $360,000.
On February 14, 1997, the Company entered into an agreement to acquire 100%
of the issued and outstanding shares of Crest Outsourcing, Inc. (Crest) in
exchange for 5,333,333 newly issued shares of Oxford common stock and 500,000
newly issued shares of Series A Redeemable Convertible Preferred Stock. On March
1, 1997, Oxford guaranteed a Crest note payable to Continental Casualty Company
in the amount of $885,000.
On September 30, 1997, the Company amended the agreement. Under the amended
agreement, the Company is to issue 100,000 newly issued shares of a Series A $10
Convertible Redeemable Preferred Stock, a note in the amount of $250,000 and
warrants to purchase 250,000 common shares of Oxford. Each preferred stock share
is convertible into 10 shares of common stock and warrants to acquire 10 newly
issued common shares of Oxford at the following exercise prices: 25,000 at $1
per share; 25,000 at $1.50 per share; and 50,000 at 80% of the then market price
of Oxford common stock. The $250,000 note payable bears 6% interest and is
payable over a period of fifty-eight (58) months. The warrants to acquire
250,000 common shares shall be exercisable at $1 per share for a period of three
years.
F-17
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
Note 8 - Subsequent Acquisitions - continued
On September 2, 1997, effective September 1, 1997, the Company acquired
100% of the issued and outstanding shares of PRC Enterprises, Inc. (PRC)
headquartered in Houston, Texas. PRC provides employee leasing services for
approximately 1,950 employees. In exchange for the shares of PRC, the Company
issued a note in the amount of $4,500,000. The note, which is collateralized
with the PRC stock and bears interest of 8%, is due as follows:
(1) Principal and interest are due annually in an amount equal to the
greater of 30% of the gross profits of PRC, as defined, or $450,000.
(2) Any unpaid principal and interest is due three years from the date of
execution.
The PRC note is convertible to shares of Oxford as follows:
(1) The payee is entitled to convert any unpaid principal at the then
market price of the Oxford stock in minimum amounts of $250,000 no
more frequently than once during any one six-month period.
(2) After paying all accrued interest and principal except $1,000,000, the
outstanding $1,000,000 is convertible to shares of Oxford at the then
market price at the option of the Company.
Note 9 - Impairment Loss
Because of the lack of profitability of Rx Staffing, the Company reflected
an impairment loss of $881,385 during the fiscal year ended June 30, 1997. The
impairment loss represents the difference in the unamortized cost of goodwill
and the covenant not to compete associated with the acquisition of Rx Staffing
and the estimated fair market value of Rx Staffing. Management determined the
fair market value of Rx Staffing based on the discounted present value of
expected net cash flow from the operation.
Note 10 - Subsequent Event
On October 6, 1997, the parties from whom Rx Staffing and SFCI were
acquired, as explained in Note 1, agreed to tender 21,909,116 shares of Oxford
to the Company's treasury in order to reduce the number of shares outstanding.
The Company agreed to reduce the exercise price of the warrants to acquire
2,329,300 common shares of Oxford held by the parties from $2 and $3 per share
to $1 and $2 per share, respectively. The expiration date of the warrants was
also extended from August 31, 1998 to August 31, 1999.
F-18
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
Note 11 - Operating Lease Commitments
As of June 30, 1997, the Company is obligated under a lease for office
space which expires December 31, 2001, and two leases for office equipment which
expire December 31, 1999 and 2000. Under the leases the Company is obligated to
pay the following minimum annual rents:
Year Ending
June 30,
-----------
1998 $ 193,836
1999 208,422
2000 216,996
2001 222,180
2002 113,041
----------
$ 954,475
==========
Total rent and lease expense was $180,532, $53,781 and $3,600 for the year
ended June 30, 1997, six months ended June 30, 1996, and year ended December 31,
1996, respectively.
Note 12 - Lines of Business
The Company operates in two lines of business: the providing of employee
leasing services and the providing of consultation services and training
materials on safety and fatigue of truck drivers. Information concerning
operations in these businesses at June 30, 1997 and 1996 and for the year ended
June 30, 1997 and six months ended June 30, 1996, is presented below:
<TABLE>
<CAPTION>
Employee Safety and
Leasing Fatigue Corporate Elimination Consolidated
----------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1997:
Net operating revenues $19,568,781 $ 52,675 $ 9,399 $ (717,135) $18,913,720
Net operating losses 2,346,674 1,034,888 240,176 -0- 3,621,738
Identifiable assets 735,734 74,671 604,515 -0- 1,414,920
Liabilities 5,012,777 25,377 111,660 -0- 5,149,814
Six months ended June 30, 1996:
Net operating revenues $10,214,400 $ 2,747 -0- $ -0- $10,217,147
Net operating losses 99,610 50,536 110,779 -0- 260,925
Identifiable assets 1,496,588 4,917 1,398 (27,000) 1,475,903
Liabilities 1,496,198 55,452 1,013,040 (27,000) 2,537,690
</TABLE>
F-19
<PAGE>
Note 13 - Contingencies
The Company is in a dispute with an insurance company regarding adjustments
of prior year premiums. The Company disputes the methodology used by the
insurance company in computing the premium adjustment. Management also contends
that a portion of the additional cost, if any, should be the obligation of
predecessors. Management believes that the Company's ultimate liability
resulting from this dispute will not materially affect the Company's financial
position.
CECI sold substantially all of its assets to the Company in the transaction
explained in Note 1. John T. Eckeberger also entered into a covenant not to
compete agreement with the Company as explained in Note 1. At the time these
agreements were executed, CECI and Mr. Eckeberger had significant payroll tax
liabilities. There is a risk that this transfer could be challenged by the
Internal Revenue Service. Management of the Company believes that the
consideration given represents fair value for the assets and other consideration
received. No provision has been made in the financial statements for this
contingency.
Note 14 - Threatened and Pending Litigation
In the normal course of business, there are various outstanding contingent
liabilities associated with employee claims. Management has reviewed pending and
threatened litigation with legal counsel and believes that those actions are
without merit or that the ultimate liability, if any, resulting from them will
not materially affect the Company's financial position.
Note 15 - Concentration of Credit Risk
Two customers of Rx Staffing accounted for approximately 32% of the
Company's total revenue from employee leasing services during the year ended
June 30, 1997.
At June 30, 1997, cash deposits at banks exceeded federal insured limits.
Note 16 - Liquidity
The Company incurred losses of $3,621,738, $260,925 and $410,132 during the
year ended June 30, 1997, six months ended June 30, 1996, and year ended
December 31, 1996, respectively. As of June 30, 1997, the Company had a working
capital deficit of $3,688,911 and a deficit stockholders' equity of $3,734,894.
These factors raise substantial doubt about the Company's ability to continue as
a going concern.
Management is working to reduce expenses, negotiate favorable terms with
creditors and to raise additional equity capital. There can be no assurance that
the Company will be successful in its efforts to alleviate its liquidity
problems. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
F-20
AMENDED ARTICLES OF INCORPORATION
OF
OXFORD CAPITAL CORP.
WE THE UNDERSIGNED, natural person of the age of twenty-one (21) years or
more acting as incorporators of a corporation under the Nevada Business
Corporation Act, adopt the following Articles of Incorporation for such
corporation:
ARTICLE I - NAME
The name of the Corporation is Oxford Capital Corp.
ARTICLE II - DURATION
The period of its duration is perpetual.
ARTICLE III - PURPOSES
The purpose or purposes for which the Corporation is engaged are:
(a) To engage in the specific business of making investments, including
investment in, purchase and ownership of any and all kinds of property,
assets or business, whether alone or in conjunction with others. Also, to
acquire, develop, explore and otherwise deal in and with all kinds of real
and personal property and all related activities, and for any and all other
lawful purposes.
(b) To acquire by purchase, exchange, gift, bequest, subscription, or
otherwise; and to hold, own, mortgage, pledge, hypothecate, sell, assign,
transfer, exchange, or otherwise dispose of or deal in or with its own
corporate securities or stock or other securities including, without
limitations, any shares of stock, bonds, debentures, notes, mortgages, or
other obligations, and any certificates, receipts or other instruments
representing rights or interests therein on any property or assets created
or issued by any person, firm, associate, or corporation, or
instrumentalities thereof; to make payment therefore in any lawful manner
or to issue in exchange therefore its unreserved earned surplus for the
purchase of its own shares, and to exercise as owner or holder of any
securities, any and all rights, powers, and privileges in respect thereof.
(c) To do each and everything necessary, suitable, or proper for the
accomplishment of any of the purposes or the attainment of any one or more
of the subjects herein enumerated, or which may, at any time appear
conducive to or expedient for the protection or benefit of this
corporation, and to do said acts as fully and to the same extent as natural
persons might, or could do in any part of the world as principals, agents,
partners, trustees, or otherwise, either alone or in conjunction with any
other person, association, or corporation.
(d) The foregoing clauses shall be construed both as purposes and powers and
shall not be held to limit or restrict in any manner the general powers of
the corporation, and the enjoyment and exercise thereof, as conferred by
<PAGE>
the laws of the State of Nevada; and it is the intention that the purposes
and powers specified in each of the paragraphs of this Article III shall be
regarded as independent purposes and powers.
ARTICLE IV - STOCK
The aggregate number of shares which the Corporation shall have authority
to issue is Fifty Million (50,000,000) of Common Stock having a par value of
($.001) per share. All stock of the corporation shall be of the same class of
common, and shall have the same rights and preference. Fully-paid stock of this
corporation shall not be liable to any further call or assessment.
Article IV is hereby amended by striking 50,000,000 shares and substituting
therefore 5,000,000 shares and by striking $0.001 per shares and substituting
therefore to reflect the 1 for 10 reverse split of the shares.
Paragraph IV is then amended to reinstate the authority of the corporation
to issue 50,000,000 shares and to re-authorize a par value for the common shares
after the reverse split at $0.001.
ARTICLE V - AMENDMENT
These Articles of Incorporation may be amended by the affirmative vote of
"a majority" of the shares entitled to vote on each such amendment.
ARTICLE VI - SHAREHOLDER RIGHTS
The authorized and treasury stock of this corporation may be issued at such
time, upon such terms and conditions and for such consideration as the Board of
Directors shall determine. Shareholders shall not have pre-emptive rights to
acquire unissued shares of the stock of this corporation.
ARTICLE VII - CAPITALIZATION
This corporation will not commence business until consideration of a value
of at least $1,000 has been received for the issuance of said shares.
ARTICLE VIII - INITIAL OFFICE AND AGENT
The Corporation Trust Company of Nevada
One East First Street
Reno, NV 89501
ARTICLE IX - DIRECTORS
The directors are hereby given the authority to do any act on behalf of the
corporation by law and in each instance where the Business Corporation Act
provides that the directors may act in certain instances where the Articles of
2
<PAGE>
Incorporation authorize such action by the directors, the directors are hereby
given authority to act in such instances without specifically numerating such
potential action or instance herein.
The directors are specifically given the authority to mortgage or pledge
any or all assets of the business without stockholders' approval.
The number of directors constituting the initial Board of Directors of this
corporation is three (3). The names and addresses of the persons who are to
serve as Directors until the first annual meeting of stockholders or until their
successors are elected and qualify; are:
NAME ADDRESS
---- -------
R. Gordon Jones 1130 East 7660 So.
Midvale, Utah 84047
Lyle F. Karras 1278 No. Oxford Dr.
Kaysville, Utah 84037
Richard D. Casey 2266 East 11660 So.
Sandy, Utah 84092
ARTICLE X - INCORPORATORS
The name and address of each incorporator is:
NAME ADDRESS
---- -------
Thomas G. Kimble 311 South State, #440
Salt Lake City, Utah 84111
Jody York 311 South State, #440
Salt Lake City, Utah 84111
Vab L. Butler 311 South State, #440
Salt Lake City, Utah 84111
ARTICLE XI
COMMON DIRECTORS - TRANSACTIONS BETWEEN CORPORATIONS
No contract or other transaction between this corporation and any one or
more of its directors or any other corporation, firm, association, or entity in
which one or more of its directors or officers are financially interested, shall
be either void or voidable because of such relationship or interest, or because
such director or directors are present at the meeting of the Board of Directors,
or a committee thereof, which authorizes, approves, or ratified such contract or
transaction, or because his or their votes are counted for such purpose if; (a)
the fact of such relationship of interest is disclosed or known to the Board of
Directors or committee which authorizes, approves, or ratifies the contract or
3
<PAGE>
ratifies the contract or transactions by vote or consent sufficient for the
purpose without counting the votes or consents of such interested director; or
(b) the fact of such relationship or interest is disclosed or known to the
stockholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent, or (c) the contract or
transaction is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or committee thereof which
authorizes, approves, or ratifies such contract or transaction.
Under penalties of perjury, we declare that these Articles of Incorporation
have been examined by us and are, to the best of our knowledge and belief, true,
correct and complete.
Dated this 13th day of September, 1995.
----------------------------------
Robert Cheney
----------------------------------
Karl C. Chiao
----------------------------------
William Jeffcock
4
<PAGE>
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On the _____ day of _____________, 199___, personally appeared before me,
Robert Cheney, Karl C. Chiao, and William Jeffcock who duly acknowledged to be
that they signed the foregoing Articles of Incorporation.
My Commission Expires: ----------------------------------
Notary Public in and for
THE STATE OF TEXAS
- -----------------------------
5
<PAGE>
VERIFICATION OF AMENDMENT
Pursuant to the provision of NRS Sec. 78.390, the undersigned President and
Secretary of the Company hereby certify that the following Amendment to the
Articles of Incorporation was adopted by the shareholder of the Company on
December 17, 1993 by a vote of _____ shares for the Amendment and no shares
against the Amendment. The 9,493,878 shares constitutes 56.87% of the issued and
outstanding shares.
RESOLVED, that the Company amend its Articles of Incorporation to reverse
split its common shares on a 1 for 10 basis; that the Company be authorized
to issue 50,000,000 common shares after the reverse split; reinstate the
authorized capital of 50,000,000 common shares; and that the par value of
common shares after the reverse split be $0.001 per share.
A true and complete copy of Amended Articles of Incorporation are attached
hereto.
-------------------------------
Robert Cheney, President
Attest:
- -----------------------------
Karl C. Chiao, Secretary
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On the ____ day of _______________, 199___, personally appeared before me,
Robert Cheney and Karl C. Chiao who duly acknowledged to me that they signed the
foregoing instrument.
My Commission Expires: --------------------------------
Notary Public in and for
- -------------------------- THE STATE OF TEXAS
6
BYLAWS
OF
OXFORD CAPITAL CORP.
ARTICLE I
OFFICES
1.01 REGISTERED OFFICE AND AGENT
The registered office of the Corporation shall be maintained at The
Corporation Trust Company in Nevada, One East First Street, Reno, Nevada 89501
in the State of Nevada. The registered office or the registered agent, or both,
may be changed by resolution of the Board of Directors, upon filing the
statement required by law.
1.02 PRINCIPAL OFFICE
The principal office of the Corporation shall be at 4245 North Central
Expressway, Suite 300, Dallas, Texas 75205 provided that the Board of Directors
shall have power to change the location of the principal office in its
discretion.
1.03 OTHER OFFICES
The Corporation may also maintain other offices at such places within or
without the State of Nevada as the Board of Directors may from time to time
appoint or as the business of the Corporation may require.
ARTICLE II
SHAREHOLDERS
2.01 PLACE OF MEETING
All meetings of shareholders, both regular and special, shall be held
either at the registered office of the Corporation, or at such other place as
shall be designated in the notice of the meeting.
2.02 ANNUAL MEETING
The annual meeting of shareholders for the election of directors and for
the transaction of all other business which may come before the meeting shall be
held within 180 days after the end of each fiscal year, on the date and at the
hour specified in the notice of meeting as determined by the Board of Directors.
If the election of directors shall not be held on the day above designated
for the annual meeting, the Board of Directors shall cause the election to be
held as soon thereafter as conveniently may be at a special meeting of the
shareholders called for the purpose of holding such election.
<PAGE>
The annual meeting of shareholders may be held for any other purpose in
addition to the election of director which may be specified in a notice of such
meeting. The meeting may be called by resolution of the Board of Directors or by
a writing filed with the secretary signed either by a majority of the directors
or by shareholders owning a majority in amount of the entire capital stock of
the Corporation issued and outstanding and entitled to vote at any such meeting.
2.03 NOTICE OF SHAREHOLDERS' MEETING
A written or printed notice stating the place, day and hour of the meeting,
and in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten (10) nor more than sixty (60)
days before the date of the meeting, either personally or by mail, by or at the
direction of the president, secretary or the officer or person calling the
meeting, to each shareholders of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
share transfer books of the Corporation, with postage thereon prepaid.
2.04 VOTING OF SHARES
Each outstanding share, regardless of class, shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are limited
or denied by the Articles of Incorporation or by law.
Treasury shares, shares of its own stock owned by another corporation the
majority of the voting stock of which is owned or controlled by this
Corporation, and shares of its own stock held by this Corporation in a fiduciary
capacity shall not be voted, directly or indirectly, at any meeting, and shall
not be counted in determining the total number of outstanding shares at any
given time.
A shareholder may vote either in person or by proxy executed in writing by
the shareholder or by his duly authorized attorney-in-fact. No proxy shall be
valid after eleven (11) months from the date of its execution unless otherwise
provided in the proxy. Each proxy shall be revocable unless expressly provided
therein to be irrevocable, and in no event shall it remain irrevocable for a
period of more than eleven (11) months.
At each election for directors, every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has a right to vote, or if authorized by the Articles of
Incorporation, to cumulate his votes by giving one candidate as many votes as
the number of such directors multiplied by the number of his shares shall equal,
or by distributing such votes on the same principal among any number of such
candidates. Any shareholder who intends to cumulate his votes as herein
authorized shall give written notice of such intention to the secretary of the
Corporation on or before the day preceding the election at which such
shareholder intends to cumulate his votes.
2
<PAGE>
2.05 CLOSING TRANSFER BOOKS AND FIXING RECORD DATE
For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the share transfer books shall be closed for a stated period not exceeding
sixty (60) days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting. In lieu of closing the stock transfer books, the ByLaws
or, in the absence of an applicable ByLaw, the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders,
not later than sixty (60) days and, in case of a meeting of shareholders, not
earlier than ten (10) days, prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If the share
transfer books are not closed and no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the Board
of Directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof, except where the determination has been made through the closing of
share transfer books and the stated period of closing has expired.
2.06 QUORUM OF SHAREHOLDERS
Unless otherwise provided in the Articles of Incorporation, the holders of
a majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders, but in no event shall a
quorum consist of the holders of less than one-third (1/3) of the shares
entitled to vote and thus represented at such meeting. The vote of the holders
of a majority of the shares entitled to vote and thus represented at a meeting
at which a quorum is present shall be the act of the shareholders' meeting,
unless the vote of a greater number is required by law, the Articles of
Incorporation or the ByLaws.
2.07 VOTING LISTS
The officer or agent having charge of the share transfer books for the
shares of the Corporation shall make, at least ten (10) days before each meeting
of shareholders, a complete list of the shareholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten (10) days prior to such meeting, shall be kept on file at the registered
office of the Corporation and shall be subject to inspection by any shareholders
at any time during usual business hours. Such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting. The original
share transfer books shall be prima-facie evidence as to who are the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
3
<PAGE>
2.08 ACTION BY CONSENT OF SHAREHOLDERS
In lieu of a formal meeting, action may be taken by written consent of such
number of the shareholders as is required by either State law or the
Corporation's Bylaws for passage of such corporate action.
ARTICLE III
DIRECTORS
3.01 BOARD OF DIRECTORS
The business and affairs of the Corporation shall be managed by a Board of
Directors. Directors need not be residents of the State of Nevada or
shareholders in the Corporation.
3.02 NUMBER AND ELECTION OF DIRECTORS
The number of directors shall be three (3). The number of directors
constituting the board shall be fixed from time to time by the Directors
provided that the number may be increased or decreased from time to time by an
amendment to these ByLaws, but no decrease shall have the effect of shortening
the term of any incumbent director. At each annual election the shareholders
shall elect directors to hold office until the next succeeding annual meeting.
3.03 VACANCIES
Any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of the remaining directors, though less than a quorum of the
Board. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors shall be filled by election at an annual
meeting or at a special meeting of shareholders called for that purpose.
3.04 QUORUM OF DIRECTORS
A majority of the Board of Directors shall constitute a quorum for the
transaction of business. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
3.05 ANNUAL MEETING OF DIRECTORS
Within thirty (30) days after each annual meeting of shareholders, the
Board of Directors elected at such meeting shall hold an annual meeting at which
they shall elect officers and transact such other business as shall come before
the meeting.
4
<PAGE>
3.06 REGULAR MEETING OF DIRECTORS
A regular meeting of the Board of Directors may be held at such time as
shall be determined from time to time by resolution of the Board of Directors.
3.07 SPECIAL MEETINGS OF DIRECTORS
The secretary shall call a special meeting of the Board of Directors
whenever requested to do so by the President or by two directors. Such special
meeting shall be held at the time specified in the notice of meeting.
3.08 PLACE OF DIRECTORS MEETINGS
All meetings of the Board of Directors (annual, regular or special) shall
be held either at the principal office of the Corporation or at such other
place, either within or without the State of Nevada, as shall be specified in
the notice of meeting.
3.09 NOTICE OF DIRECTORS MEETINGS
All meetings of the Board of Directors (annual, regular or special) shall
be held upon five (5) days written notice stating the date, place and hour of
meeting delivered to each director either personally or by mail or at the
direction of the president or the secretary or the officer or person calling the
meeting.
In any case where all of the directors execute a waiver of notice of the
time and place of meeting, no notice thereof shall be required, and any such
meeting (whether annual, regular or special) shall be held at the time and at
the place (either within or without the State of Nevada) specified in the waiver
of notice. Attendance of a director at any meeting shall constitute a waiver of
notice of such meeting, except where the directors attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any annual,
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
3.10 COMPENSATION
Directors, as such, shall not receive any stated salary for their services,
but by resolution of the Board of Directors a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each annual, regular or
special meeting of the Board, provided, that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
3.11 ACTION BY CONSENT OF DIRECTORS
In lieu of a formal meeting, action may be taken by written consent of such
number of the directors as is required by either State law or the Corporation's
Bylaws for passage of such corporate action.
5
<PAGE>
3.12 COMMITEES
The board of directors may, by resolution passed by a majority of the whole
board, designate an executive committee and one or more other committees, each
committee to consist of one or more of the directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee.
Any such committee, to the extent provided in the resolution of the board
of directors, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to making, altering or repealing any bylaw of the
Corporation; electing or appointing any director, or removing any officer or
director; submitting to shareholders any action that requires shareholders'
approval; or amending or repealing any resolution theretofore adopted by the
board which by its terms is amendable or repealable only by the board. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
ARTICLE IV
OFFICERS
4.01 OFFICERS ELECTION
The officers of the Corporation shall consist of a president, one or more
vice presidents, a secretary, and a treasurer. All such officers shall be
elected at the annual meeting of the Board of Directors provided for in Article
III, Section 5. If any office is not filled at such annual meeting, it may be
filled at any subsequent regular or special meeting of the Board. The Board of
Directors at such annual meeting, or at any subsequent regular or special
meeting may also elect or appoint such other officers and assistant officers and
agents as may be deemed necessary. Any two or more offices may be held by the
same person, except the offices of president and secretary.
All officers and assistant officers shall be elected to serve until the
next annual meeting of directors (following the next annual meeting of
shareholders) or until their successors are elected; provided, that any officer
or assistant officer elected or appointed by the Board of Directors may be
removed with or without cause at any regular or special meeting of the Board
whenever in the judgment of the Board of Directors the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Any agent appointed
shall serve for such term, not longer than the next annual meeting of the Board
of Directors, as shall be specified, subject to like right of removal by the
Board of Directors.
4.02 VACANCIES
If any office becomes vacant for any reason, the vacancy may be filled by
the Board of Directors.
6
<PAGE>
4.03 POWER OF OFFICERS
Each officer shall have, subject to these ByLaws, in addition to the duties
and powers specifically set forth herein, such powers and duties as are commonly
incident to his office and such duties and powers as the Board of Directors
shall from time to time designate. All officers shall perform their duties
subject to the directions and under the supervision of the Board of Directors.
The president may secure the fidelity of any and all officers by bond or
otherwise.
4.04 PRESIDENT
The president or such other person as the Board of Directors may appoint,
shall be the chief executive officer of the Corporation. He shall preside at all
meetings of the directors and shareholders. He shall see that all orders and
resolutions of the Board are carried out, subject however, to the right of the
directors to delegate specific powers, except such as may be by statute
exclusively conferred on the president, to any other officers of the
Corporation.
He or any vice president shall execute bonds, mortgages and other
instruments requiring a seal, in the name of the Corporation, and, when
authorized by the Board, he or any vice president may affix the seal to any
instrument requiring the same, and the seal when so affixed shall be attested by
the signature of either the secretary or an assistant secretary. He or any vice
president shall sign certificates of stock.
The president shall be ex-officio a member of all standing committees.
He shall submit a report of the operations of the Corporation for the year
to the directors at their meeting next preceding the annual meeting of the
shareholders and to the shareholders at their annual meeting.
4.05 VICE PRESIDENT
The vice president shall, in the absence or disability of the president,
perform the duties and exercise the powers of the president, and they shall
perform such other duties as the Board of Directors shall prescribe.
4.06. SECRETARY AND ASSISTANT SECRETARIES
The secretary shall attend all meetings of the Board and all meetings of
the shareholders and shall record all votes and the minutes of all proceedings
and shall perform like duties for the standing committees when required. He
shall give or cause to be given notice of all meetings of the shareholders and
all meetings of the Board of Directors and shall perform such other duties as
may be prescribed by the Board. He shall keep in safe custody the seal of the
Corporation, and when authorized by the Board, affix the same to any instrument
requiring it, and when so affixed, it shall be attested by his signature or by
the signature of an assistant secretary.
7
<PAGE>
The assistant secretary shall, in the absence or disability of the
secretary, perform the duties and exercise the powers of the secretary, and they
shall perform such other duties as the Board of Directors shall prescribe.
In the absence of the secretary or an assistant secretary, the minutes of
all meetings of the Board and shareholders shall be recorded by such person as
shall be designated by the president or by the Board of Directors.
4.07 TREASURER AND ASSISTANT TREASURERS
The treasurer shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors.
The treasurer shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements. He
shall keep and maintain the Corporation's books of account and shall render to
the president and directors an account of all of his transactions as treasurer
and of the financial condition of the Corporation and exhibit his books, records
and accounts to the president or directors at any time. He shall disburse funds
for capital expenditures as authorized by the Board of Directors and in
accordance with the orders of the president, and present to the president for
his attention any requests for disbursing funds if in the judgment of the
treasurer any such request is not properly authorized. He shall perform such
other duties as may be directed by the Board of Directors or by the president.
If required by the Board of Directors, he shall give the Corporation a bond
in such sum and with such surety or sureties as shall be satisfactory to the
Board for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
The assistant treasurers in the order of their seniority shall, in the
absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer, and they shall perform such other duties as the Board
of Directors shall prescribe.
ARTICLE V
CERTIFICATES OF STOCK: TRANSFER, ETC.
5.01 CERTIFICATES OF STOCK
The certificates for shares of stock of the Corporation shall be numbered
and shall be entered in the Corporation as they are issued. They shall exhibit
the holder's name and number of shares and shall be signed by the president or a
vice president and the secretary or an assistant secretary or if the Board of
Directors determines, by any one of the afore named officers and shall be sealed
with the seal of the Corporation or a facsimile thereof. If the Corporation has
a transfer agent or a registrar, other than the Corporation itself or an
8
<PAGE>
employee of the Corporation, the signatures of any such officer may be
facsimile. In case any officer or officers who shall have signed or whose
facsimile signature or signatures shall have been used on any such certificate
or certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise, before said certificate or
certificates shall have been issued, such certificate may nevertheless be issued
by the Corporation with the same effect as though the person or persons who
signed such certificates or whose facsimile signature or signatures shall have
been used thereon had been such officer or officers at the date of its issuance.
Certificates shall be in such form as shall in conformity to law be prescribed
from time to time by the Board of Directors.
The Corporation may appoint from time to time transfer agents and
registrars, who shall perform their duties under the supervision of the
secretary.
5.02 TRANSFERS OF SHARES
Upon surrender to the Corporation or the transfer agent of the Corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction upon its books.
5.03 REGISTERED SHAREHOLDERS
The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and, accordingly shall
not be bound to recognize any equitable or other claim to or interest in such
share on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
5.04 LOST CERTIFICATE
The Board of Directors may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost. When
authorizing such issue of a new certificate or certificates, the Board of
Directors in its discretion and as a condition precedent to the issuance
thereof, may require the owner of such lost or destroyed certificate or
certificates or his legal representative to advertise the same in such manner as
it shall require or to give the corporation a bond with surety and in form
satisfactory to the Corporation (which bond shall also name the Corporation's
transfer agents and registrars, if any, as obligees) in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
or other obligees with respect to the certificate alleged to have been lost or
destroyed, or to advertise and also give such bond.
9
<PAGE>
ARTICLE VI
DIVIDEND
6.01 DECLARATION
The Board of Directors may declare at any annual, regular or special
meeting of the Board and the Corporation may pay, dividends on the outstanding
shares in cash, property or in the shares of the Corporation to the extent
permitted by, and subject to the provisions of, the laws of the State of Nevada.
6.02 RESERVES
Before payment of any dividend there may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the directors from
time to time in their absolute discretion think proper as a reserve fund to meet
contingencies or for equalizing dividends or for repairing or maintaining any
property of the Corporation or for such other purpose as the directors shall
think conducive to the interest of the Corporation, and the directors may
abolish any such reserve in the manner in which it was created.
ARTICLE VII
MISCELLANEOUS
7.01 INFORMAL ACTION
Any action required to be taken or which may be taken at a meeting of the
shareholders, directors or members of the executive committee, may be taken
without a meeting if a consent in writing setting forth the action so taken
shall be signed by such number of the shareholders, directors, or members of the
executive committee as is required by law, as the case may be, entitled to vote
with respect to the subject matter thereof, and such consent shall have the same
force and effect as a vote of the shareholders, directors, or members of the
executive committee, as the case may be, at a meeting of said body.
7.02 SEAL
The corporate seal shall be circular in form and shall contain the name of
the Corporation, the year of its incorporation and the words "State of Nevada",
and "CORPORATE SEAL". The seal may be used by causing it or a facsimile to be
impressed or affixed or in any other manner reproduced. The corporate seal may
be altered by order of the Board of Directors at any time.
7.03 CHECKS
All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may from time to time designate.
7.04 FISCAL YEAR
The fiscal year of the Corporation shall begin on the 1st day of July in
each and every year.
10
<PAGE>
7.05 DIRECTORS ANNUAL STATEMENT
The Board of Directors shall present at each annual meeting of shareholders
a full and clear statement of the business and condition of the Corporation.
7.06 AMENDMENTS
These ByLaws may be altered, amended or repealed in whole or in part by the
affirmative vote of the Board of Directors.
ARTICLE VIII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Every person who was or is a party to, or is threatened to be made a party
to, or is involved in any action, suit or proceedings, whether civil, criminal,.
administrative or investigative, by reason of the fact that he or a person to
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a director
or officer of another corporation, or as its representative in a partnership,
joint venture, trust or other enterprise, shall be indemnified and held
harmless, to the fullest extent legally permissible under the laws of the State
of Nevada, against all expenses, liability and loss, including attorney's fees,
judgements, fines and amounts paid or to be paid in settlement, reasonably
incurred or suffered by him in connection therewith, all pursuant to Section
78.151 of the Nevada Revised Statutes. Such right of indemnification shall be a
contract right which may be enforced in any manner desired by such person.
This indemnification is intended to provide at all times the fullest
indemnification permitted by the laws of the State of Nevada and the corporation
may purchase and maintain insurance on behalf of any person who is or was
serving at the request of the corporation as a director or officer of another
corporation, or as its representative in a partnership, joint venture, trust or
other enterprise against any liability asserted against such person and incurred
in any such capacity or arising out of such status, whether or not the
corporation would have the power to indemnify such person.
11
CONSULTING AGREEMENT
This Agreement is made on January 1, 1997, by and between Oxford Capital
Corp., ("Oxford"), a Nevada Corporation, of Dallas, Texas and TDF, Ltd.
Whereas, TDF, Ltd. has a background in and is willing to provide services
to Oxford utilizing their background, knowledge and experience; and
Oxford desires to have services provided by TDF, Ltd.
Therefore, the parties agree as follows:
1. DESCRIPTION OF SERVICES. Beginning on January 1, 1997, TDF, Ltd. will
provide the following services:
a. Such services as requested by the Board of Directors and/or
officers of Oxford from time to time during the period of this
Agreement.
2. PAYMENT. Oxford will pay a fee of $15,000.00 (Fifteen Thousand Dollars)
per month, in arrears, for the services provided by TDF, Ltd.
3. EXPENSES. TDF, Ltd. shall be entitled to reimbursement for all
pre-approved "out-of- pocket" expenses incurred in providing the Services
outlined in this Agreement in accordance with the procedures of Oxford for such
reimbursement.
4. TERM / TERMINATION. This Agreement shall expire on December 31, 1997
unless terminated earlier by the Board of Directors of Oxford or terminated by
mutual consent of TDF, Ltd. and Oxford with thirty (30) days notice.
5. RELATIONSHIP OF PARTIES. It is understood by the parties TDF, Ltd. is an
independent contractor to Oxford, but may be entitled to fringe benefits,
including health insurance benefits and other employee benefits.
6. NOTICES. All notices required or permitted under this Agreement shall be
in writing and shall be deemed to be delivered when delivered in person or
deposited in the United States Mail, postage prepaid addressed as follows:
Oxford: Oxford Capital Corp.
4245 N. Central Expressway
Suite 300
Dallas, Texas 75205
TDF, Ltd.: TDF, Ltd.
4012 Glenwick Lane
Dallas, Texas 75205
<PAGE>
Such addresses may be changed form time to time by either party providing
written notice to the other in the manner set forth above.
7. ENTIRE AGREEMENT. This Agreement contains the entire Agreement of the
parties and there are no other promises or conditions or other agreement whether
oral or written. This Agreement supersedes any prior written or oral Agreements
between the parties.
8. AMENDMENT. This Agreement may be modified or amended when such amendment
is made in writing and is signed by both parties.
9. SEVERABILITY. If any provision of this Agreement shall be deemed to be
invalid or unenforceable for any reason, the remaining provisions shall continue
to be valid and enforceable. If a court finds that a provision of this Agreement
is invalid or unenforceable, but that by limiting such provision it would become
valid and enforceable, such provision shall be deemed to be written, construed
and enforced as so limited.
10. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce and
provision of this Agreement shall not be construed as any waiver of limitation
of that party's right to subsequently compel strict compliance with every
provision of this Agreement.
11. APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of Texas.
Agreed this 31st day of December, 1996.
OXFORD CAPITAL CORP.
By: /s/ Robert E. Cheney
--------------------------------
Robert E. Cheney
TDF, LTD.
By: /s/ Robert E. Cheney
--------------------------------
Robert E. Cheney
vs/lk
2
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Name State of Incorporation
---- ----------------------
Rx Staffing Corp. Texas
Safety & Fatigue Consultants International, Inc. Texas
TRC Enterprises, Inc. Texas
United Staffing Corp. Nevada
Crest Outsourcing, Inc. Nevada
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 457,410
<SECURITIES> 0
<RECEIVABLES> 623,699
<ALLOWANCES> 66,629
<INVENTORY> 53,495
<CURRENT-ASSETS> 1,061,875
<PP&E> 209,678
<DEPRECIATION> 30,385
<TOTAL-ASSETS> 1,414,920
<CURRENT-LIABILITIES> 4,750,786
<BONDS> 399,028
0
0
<COMMON> 33,064
<OTHER-SE> (3,767,958)
<TOTAL-LIABILITY-AND-EQUITY> 1,414,920
<SALES> 18,913,720
<TOTAL-REVENUES> 18,913,720
<CGS> 17,751,385
<TOTAL-COSTS> 17,751,385
<OTHER-EXPENSES> 4,700,935
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83,313
<INCOME-PRETAX> (3,621,738)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,621,738)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,621,738)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
