<PAGE> 1
Registration No.
As filed with the Securities and Exchange Commission on July 31, 1996.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-----------------
DIGITAL SOLUTIONS, INC.
(Exact name of Registrant as specified in charter)
New Jersey 22-1899798
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
4041 Hadley Road
South Plainfield, New Jersey 07080
(908) 561-1200
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-----------------
George J. Eklund
President and Chief Executive Officer
4041 Hadley Road
South Plainfield, New Jersey 07080
(908) 561-1200
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
-----------------
With copies to:
VICTOR J. DiGIOIA, ESQ.
GOLDSTEIN & DiGIOIA, LLP
369 Lexington Avenue
New York, New York 10017
Telephone (212) 599-3322
Facsimile (212) 557-0295
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plan, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
<PAGE> 2
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ___________________.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / _______________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<PAGE> 3
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class of Securities Offering Aggregate Amount of
Being Registered Amount to be Price per Offering Registration
Registered Share(1) Price(1) Fee
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par
value(2)................... 2,193,929 $4.09375 $8,981,397 $3,097
- ---------------------------------------------------------------------------------------------------
Common Stock, $.001 par 349,513 $4.09375 $1,419,896 $ 493
value(3)...................
- ---------------------------------------------------------------------------------------------------
Common Stock, $.001 par 500,000 $4.09375 $2,031,250 $ 706
value(4)...................
- ---------------------------------------------------------------------------------------------------
Total...................... 3,043,442 $4.09375 $12,432,543 $4,296
===================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee,
based on a share price of $4.09375, the average of the closing bid and
asked prices as quoted by the Nasdaq SmallCap Market on July 30, 1996.
(2) Shares of Common Stock to be sold by certain Selling Security Holders.
(3) Shares of Common Stock issuable upon exercise of outstanding Common Stock
Purchase Warrants held by certain Selling Security Holders. Pursuant to
Rule 416, there are also being registered such additional number of shares
of Common Stock as may become issuable pursuant to the anti-dilution
provisions of the Warrants.
(4) Shares of Common Stock issuable upon exercise of options granted pursuant
to the Company's 1990 Non-Executive Director Stock Option Plan, as
amended. Pursuant to Rule 416, there are also being registered such
additional number of shares of Common Stock as may become issuable
pursuant to the anti-dilution provisions of the Warrants.
---------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SECTION 8(a) MAY
DETERMINE.
================================================================================
<PAGE> 4
DIGITAL SOLUTIONS, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Between Registration Statement and Form of Prospectus
<TABLE>
<CAPTION>
Item Number and Heading Caption in Prospectus
----------------------- ---------------------
<S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover of Prospectus..... Outside Front Cover of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus....................... Inside Front and Outside Back Cover Pages of Prospectus
3. Summary Information, Risk Factors,
and Ratio of Earnings to Fixed
Charges.................................... Prospectus Summary; The Company; Risk Factors;
Summary Consolidated Financial Information
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price......... Outside Front Cover Page of Prospectus
6. Dilution................................... Not Applicable
7. Selling Security Holders................. Selling Security Holders
8. Plan of Distribution....................... Inside Front Cover; Plan of Distribution
9. Description of Securities to be
Registered................................. Description of Securities
10. Interests of Names Experts and
Counsel.................................... Not Applicable
11. Material Changes......................... Recent Developments
12. Incorporation of Certain Information
by Reference............................... Incorporation of Certain Information by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
</TABLE>
<PAGE> 5
Subject to completion, July 31, 1996
P R O S P E C T U S
3,043,442 Shares of Common Stock
DIGITAL SOLUTIONS, INC.
This Prospectus covers 3,043,442 shares of common stock, $.001 par
value (the "Shares") of Digital Solutions, Inc. (the "Company"), which Shares
are presently issued and outstanding and held by certain shareholders (the
"Selling Security Holders") or shall be issued by the Company upon exercise of
outstanding Common Stock purchase warrants and Non-Executive Director Stock
Options including (i) 2,193,929 Shares issued and outstanding; (ii) 152,013
Shares issuable pursuant to the exercise of outstanding Common Stock purchase
warrants issued to certain selling agents (the "Selling Agent Warrants"); (iii)
197,500 Shares issuable pursuant to the exercise of outstanding Common Stock
purchase warrants issued in connection with a private placement (the "Private
Placement Warrants"); and (vi) up to 500,000 Shares issuable upon exercise of
options granted pursuant to the 1990 Non-Executive Director Stock Option Plan
(the "Directors' Plan").
The Shares are traded in the over-the-counter market and are included
in the SmallCap Market of the Nasdaq Stock Market ("NASDAQ") under the symbol
"DGSI". On July 30, 1996, the closing bid and asked prices for the Common Stock
as reported by NASDAQ were $4.0625 and 4.125, respectively. See "Price Range of
Common Stock and Certain Market Information."
The Shares may be issued by the Company upon exercise of the Selling
Agent Warrants and the Private Placement Warrants and upon exercise of options
granted under the Directors' Plan. The Shares may be sold from time to time by
the Selling Security Holders, or by their transferees. No underwriting
arrangements have been entered into by the Selling Security Holders. The
distribution of the Shares by the Selling Security Holders may be effected in
one or more transactions that may take place on the over the counter market,
including ordinary brokers transactions, privately negotiated transactions or
through sales to one or more dealers for resale of the Shares as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Security Holders in connection with such sales. The Selling Security Holders and
intermediaries through whom such Shares are sold may be deemed "underwriters"
within the meaning of the Act, with respect to the Shares offered.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July __, 1996
<PAGE> 6
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy and information
statements and other information filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected
and copies at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional
Offices of the Commission: New York Regional Office, 7 World Trade Center, 13th
Floor, New York, New York 10048; and Chicago Regional Office, Everett McKinley
Dirkson Building, 210 South Dearborn Street, Room 1204, Chicago, Illinois 60604.
Copies of such material may be obtained from the public reference section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. The Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1995.
2. The Company's Registration Statement on Form 8-A filed April
27, 1990.
3. The Company's Form 8-K dated November 28, 1994.
4. The Company's Forms 10-Q for the quarters ended December 31,
1995 and March 31, 1996.
Each document filed subsequent to the date of this Prospectus pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this offering shall be deemed to be incorporated by reference in
this Prospectus and shall be part hereof from the date of filing of such
document.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any document described above (other than exhibits). Requests
for such copies should be directed to Digital Solutions, Inc., 4041 Hadley Road,
South Plainfield, New Jersey 07080, telephone (908) 561-1200.
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<PAGE> 7
PROSPECTUS SUMMARY
The following summary is intended to set forth certain pertinent facts
and highlights from material contained in the body of this Prospectus. The
summary is qualified in its entirety by the detailed information and financial
statements appearing elsewhere in this Prospectus, the Company's annual report
on Form 10-K for the Fiscal year ended September 30, 1995 (the "Form 10-K") and
the Company's quarterly reports on Form 10-Q for the quarters ended December 31,
1995 and March 31, 1996 (the "Forms 10Q").
THE COMPANY
Digital Solutions, Inc. ("DSI" or "the Company"), was founded in 1969
as a payroll service company and has evolved into a leading provider of human
resource management services to a wide variety of industries in 40 states.
DSI currently offers three general categories of services: (1)
professional employer organization ("PEO") services, also known as employee
leasing (2) employer administrative services, such as payroll processing,
personnel and administration, benefits administration and tax filing; and, (3)
contract staffing, or the placement of temporary and permanent employees. DSI
currently furnishes payroll, employee leasing and contract staffing services to
over 1,300 client organizations with approximately 5,100 worksite leasing and
staffing employees, and believes that it currently ranks, in terms of revenues
and worksite employee base, as one of the largest professional employer
organizations in the United States. In addition, DSI places temporary help in
hospitals and clinics throughout the United States through its Houston, Texas
and Clearwater, Florida offices. The Company has three hubs operating in South
Plainfield, New Jersey; Houston, Texas; and Clearwater, Florida and seven sales
service centers in New York, New York; Ridgedale, Mississippi; Dallas, El Paso
and Houston, Texas; Clearwater, Florida; and South Plainfield, New Jersey.
Essentially, the Company provides services that function as the
personnel department for small to medium sized companies. The Company believes
that by offering services which relieve small and medium size businesses of the
ever increasing burden of employee related record keeping, payroll processing,
benefits administration, employment of temporary and permanent specialized
employees and other human resource functions, the Company will position itself
to take advantage of a major growth opportunity during this decade and the next.
Recognizing the desire by many small businesses to be relieved not only
of the human resource administrative functions, but also of the responsibility
to manage employees and oversee operational tasks ancillary to their core
business, the Company has formulated a strategy of emphasizing PEO ("employee
leasing") and "outsourcing" services. In employee leasing, a service provider
becomes an employer of the client company's employees and leases these employees
to the client to perform their intended functions at the worksite. In
outsourcing, the service provider is not only responsible for human resource
administration but also assumes ultimate responsibility for management of the
employees and their job functions. For example, a provider of outsourcing
services could be engaged
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<PAGE> 8
by a hospital or clinic to manage the maintenance and operation of the facility.
The medical staff would still be responsible for the medical functions but the
physical plant would be managed by the provider.
Over the period 1990-1992, the PEO industry grew at an annual rate of
16.2%, according to an industry report, and has produced a relatively high
growth path since 1984. DSI is focusing its future growth on the PEO and
outsourcing industry. The Company's expansion program will focus on internal
growth through the cross marketing of its PEO services to its entire client base
and the acquisition of compatible businesses strategically situated in new areas
or with a client base serviceable from existing facilities. While DSI continues
to sell stand-alone employer services, such as payroll and tax filing, it will
emphasize the PEO component of its service offerings. In addition, the PEO
industry is characterized by relatively small and regionalized providers which
offer a limited range of services to their clients. Accordingly, the Company
believes opportunities exist for the acquisition of well situated independent
PEO companies whose business may be integrated into the Company operations.
During the fiscal year ending September 30, 1995, the Company acquired
Staff Rx, Inc. ("Staff Rx") and Turnkey Services, Inc. ("Turnkey"). Staff Rx is
engaged in the contract staffing business and places permanent and temporary
medical personnel in hospitals, clinics and other medical facilities. Staff Rx
has offices in Houston, Texas; Clearwater, Florida; and Dallas, Texas and
conducts business in approximately 35 states. The Company believes that the
Staff Rx customer base is well suited for employee leasing and intends to
vigorously pursue this area. Turnkey has operations in Texas and is engaged in
employee leasing.
The Company was organized under the laws of the State of New Jersey on
November 25, 1969 and maintains executive offices at 4041 Hadley Road, South
Plainfield, New Jersey 07080 where its telephone number is (908) 561-1200.
4
<PAGE> 9
THE OFFERING
Common Stock Outstanding prior to
Offering (1)............................... 18,761,166
Risk Factors .............................. This Offering involves a high
degree of risk. See "Risk Factors."
Use of Proceeds ........................... All of the proceeds of this
offering will be paid to the
respective Selling Security Holders
and none of the proceeds will be
received by the Company.
Nasdaq SmallCap
Market Symbol.......................... DGSI
(1) Does not include: (i) 1,000,000 Shares reserved under the Company's
Stock Option Plan, (ii) 5,000,000 Shares reserved under the Company's
Senior Management Plan, (iii) 500,000 Shares reserved under the
Company's Non-Executive Director Plan and (iv) up to approximately
1,225,524 Shares reserved for issuance upon exercise of outstanding
warrants.
5
<PAGE> 10
RISK FACTORS
An investment in the securities offered hereby involves a high degree
of risk. The following factors, in addition to those discussed elsewhere in this
memorandum, should be considered carefully in evaluating the Company and its
business. An investment in the Securities is suitable only for those investors
who can bear the risk of loss of their entire investment.
1. Recent Losses. The Company experienced a net loss of $695,000 for
the fiscal year ending September 30, 1992. The Company realized a net profit for
the fiscal year ended September 30, 1993 of $301,000 and a net profit of
$720,000 for the fiscal year ended September 30, 1994. However, due to fourth
quarter charges in excess of $3,500,000, the Company incurred a net loss for the
fiscal year ended September 30, 1995 of $3,316,000. The Company realized a net
profit of $392,000 and $319,000 for the quarters ended December 31, 1995 and
March 31, 1996, respectively. There can be no assurance the Company will be able
to operate profitably in the future. See also "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" in the Form 10-K and
the Forms 10-Q incorporated by reference herein.
2. Need for Additional Funds. There can be no assurance that the
Company's current financial resources will be sufficient to maintain its
operations or finance further Company development. Historically, the Company's
cash flow from operations has been insufficient to maintain and/or expand
operations. No assurance can be given that funds for the Company's requirements
will be available or, if available, will be on commercially reasonable terms
satisfactory to the Company. The final terms of such offering may result in
additional dilution to the shareholders of the Company.
3. Security Interests; Restrictive Covenants. The Company has granted
security interests with respect to substantially all of its assets to secure
certain of its indebtedness. In the event of a default by the Company on its
secured obligations, a secured creditor could declare the Company's indebtedness
to be immediately due and payable and foreclose on the assets securing the
defaulted indebtedness. Moreover, to the extent that all of the Company's assets
continue to be pledged to secure outstanding indebtedness, such assets will not
be available to secure additional indebtedness. The Company's loan agreement
with its institutional lender restricts the ability of the Company to incur
additional indebtedness. The terms of such agreement may limit the ability of
the Company to obtain additional financing on terms favorable to the Company or
at all. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" in the Form 10-K and the Forms 10-Q incorporated herein
by reference.
4. Potential Acquisitions. The Company may at times become involved in
discussions with potential acquisition candidates. However, there can be no
assurance that the Company will identify and/or consummate an acquisition, or
that such acquisitions, if completed, will be profitable. In addition, should
the Company consummate an acquisition, such acquisition could
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have an adverse effect on the Company's liquidity and earnings. Further, there
can be no assurance that any financing received by the Company, if any, together
with cash flow, will be sufficient to finance such acquisitions. In the event
the Company consummates an acquisition, or obtains additional capital through
the sale of debt or equity to finance such acquisition, current shareholders may
experience dilution in their shareholder's equity.
5. Management of Growth. The Company completed two acquisitions during
the past fiscal year and intends to continue to pursue a strategy of acquiring
compatible businesses in the future, although it does not believe it is solely
dependent upon acquisitions for future growth. The Company's growth is making
significant demands on the Company's management, operations and resources,
including working capital. To manage growth effectively, the Company will be
required to continue to improve its operational, financial and managerial
systems, procedures and controls, hire and train new employees while managing
its current operations and employees. Historically, the Company's cash flow from
operations has been insufficient to maintain and/or expand operations and there
can be no assurance sufficient capital will be available in the future. Further,
there can be no assurance the Company will be able to effectively manage its
growth and the failure to do so would have a material adverse effect on the
Company.
6. Concentration of Customer Base. Although the Company has expanded
its services to a number of industries, the Company's payroll service business
continues to rely to a material extent on the construction industry. During the
last fiscal year, construction related business accounted for approximately 18%
of the Company's total gross margin. Accordingly, the continued slowdown in
construction activities has affected, and may continue to affect the Company's
revenues and profitability. The Company believes its reliance on the
construction business will continue to decline as its customer base expands and
becomes more diversified. In addition, substantially all of the Staff-Rx
customer base is in the healthcare business. See "BUSINESS - Customers" in the
Form 10-K incorporated herein by reference.
7. Competition. The payroll, temporary employee placement and the
employee leasing industries are characterized by vigorous competition. The
principal competitive factors are price and service. The Company believes that
its major competitors with respect to its payroll and accounting services are
Automatic Data Processing, Inc., Ceridian Corp. and Paychex, Inc. and with
respect to employee placement (including temporary placements and employee
leasing), Butler Arde, Tech Aid, Inc., Comp Health, Staff Leasing, Inc. and
Administaff, Inc. These companies have greater financial and marketing resources
than the Company. The Company competes with numerous companies in the employee
leasing area. The Company also competes with manual payroll systems and
computerized payroll services including banks, and smaller independent
companies. There are no assurances that the Company in its existing or future
lines of business will be able to compete effectively against its competitors in
these industries.
7
<PAGE> 12
8. Need for Temporary Personnel. The Company's subsidiaries, DSI
Contract Staffing, Inc., and Staff Rx are temporary employment agencies which
depend on a pool of qualified temporary employees willing to accept assignments
for the Company's clients. The business of these subsidiaries is materially
dependent upon the continued availability of such qualified temporary personnel,
but there can be no assurance that such personnel will be available to the
Company in the future. The inability of the Company to secure temporary
personnel would have a material adverse effect on the Company's business.
9. Potential Liability. Through its Staff Rx subsidiary, the Company
engages in the business of contract staffing of temporary and permanent
healthcare professionals. The placement of such employees increases potential
liability of the Company for negligence and professional malpractice of such
employees. Although Staff Rx is covered by such liability insurance as the
Company deems reasonable under the circumstances, there can be no assurance that
any potential liability will be fully covered by insurance. Any significant
adverse claim which is not covered by insurance may have a material adverse
effect on the Company.
10. Effect of Healthcare Proposal. The Clinton Administration and
Congress have proposed certain changes to the nation's healthcare system. Since
the form of proposal which may be eventually adopted, if any, is not known at
this time, there can be no assurance that the proposal adopted would not have a
material adverse effect on the business of the Company.
11. Restrictions on Payment of Dividends. The Company has not paid any
dividends on its Common Stock since its inception and does not contemplate or
anticipate paying any dividends on its Common Stock in the foreseeable future.
Earnings, if any, will be retained and used to finance the development and
expansion of the Company's business. The Company may not pay dividends on its
Common Stock unless the Company has earnings or capital surplus. Therefore,
there can be no assurance whether or to what extent dividends will be paid on
the Shares. See "DIVIDEND POLICY" and the financial statements and notes
contained in the Form 10-K and Forms 10-Q incorporated herein by reference.
12. Rule 144 Sales; Selling Security Holders Registration. Of the
18,761,166 issued and outstanding shares of the Company's Common Stock prior to
this Offering, approximately 4,679,481 shares may be deemed "restricted shares"
and, in the future, may be sold in compliance with Rule 144 under the Act. Rule
144 provides that a person holding restricted securities which have been
outstanding for a period of two years after the later of the issuance by the
Company or sale by an affiliate of the Company, may sell in brokerage
transactions an amount equal to 1% of the Company's outstanding Common Stock
every three months. A person who is a "non-affiliate" of the Company and who has
held restricted securities for over three years is not subject to the aforesaid
volume limitations as long as the other conditions of the Rule are met. Possible
or actual sales of the Company's Common Stock by certain of the Company's
present shareholders under Rule 144 may, in the future, have a depressing effect
on the price of the Company's Common Stock in the open market. In addition, the
Company has previously registered 6,500,000 shares reserved under its stock
option plans and approximately 6,700,000 shares on behalf of selling
stockholders. The sale of these shares may have a
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depressive effect on the market for the Company's Common Stock. See "DESCRIPTION
OF SECURITIES."
13. Authorization and Discretionary Issuance of Preferred Stock;
Possible Anti-takeover Effects. The Company's Certificate of Incorporation
authorizes the issuance of "blank check" preferred stock with such designations,
rights and preferences as may be determined from time to time by the Board of
Directors up to an aggregate of 5,000,000 shares of Preferred Stock.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue preferred stock with dividend, liquidation, conversion, voting or other
rights which would adversely affect the voting power or other rights of the
holders of the Company's Common Stock. In the event of issuance, the preferred
stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company, which
could have the effect of discouraging bids for the Company and thereby prevent
stockholders from receiving the maximum value for their shares. The Company has
no present intention to issue any additional shares of its preferred stock in
order to discourage or delay a change of control of the Company. However, there
can be no assurance that preferred stock of the Company will not be issued at
some time in the future. See "DESCRIPTION OF SECURITIES--Preferred Stock."
14. Possible Volatility of Stock Price. The market price for the
Company's Common Stock has experienced wide fluctuations which have not
necessarily been related to the performance of the Company. Factors such as the
Company's operating results, announcements of material events by the Company or
its competitors, as well as the general state of the securities markets and the
economy, may have a significant impact on the market price of the Company's
Common Stock. See "Market Information" in the Form 10-K.
RECENT DEVELOPMENTS
PRIVATE PLACEMENT
The Company offered and sold, in a private placement to "accredited
investors", 2,193,929 Shares, at prices ranging from $1.20 to 4.00 per Share,
for aggregate gross proceeds of approximately $5,100,000 during the period
commencing November 1995 to June 15, 1996 (the "Offering"). The Company paid
selling commissions of 8% of the purchase price of the Shares sold in the
Offering and issued Selling Agent Warrants equal to 10% of the Shares sold by
all selling agents authorized to accept such commissions. The Company issued
152,013 Selling Agent Warrants in the Offering. In addition, the Company paid
the selling agents a nonaccountable expense allowance of 1% of the aggregate
offering price of the Shares sold by such selling agent. This Prospectus covers
the Shares sold in the Offering and the Shares issuable upon exercise of the
Selling Agent Warrants.
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<PAGE> 14
TERMINATION OF FLORIDA ACQUISITION
On March 4, 1996, the Company announced that it had terminated, by
mutual agreement, its agreement in principal to purchase the assets of a Florida
based PEO. The decision to terminate the acquisition does not reflect a change
in the Company's business strategy. The Company will continue to pursue a
strategy of expansion based on the acquisition of other PEOs.
MANAGEMENT CHANGES
The Company's Board of Directors, at its regularly scheduled meeting
following the Company's annual meeting of Shareholders, elected George J.
Eklund, the Company's President, as Chief Executive Officer. Mr. Eklund will
continue to serve as President. Raymond J. Skiptunis, the Company's former Chief
Executive Officer, was elected to serve as Corporate Development Officer, a
newly created office, where he will concentrate on financing and acquisition
activities.
AMENDMENT OF DIRECTORS' PLAN
The 1990 Non-Executive Director Stock Option Plan was amended by the
Board of Directors and approved by the shareholders at the Company's 1996 annual
meeting. The proposal (i) reduced the number of options granted to non-executive
directors upon joining the Board to 5,000 options (ii) reduced the number of
options granted for each year of service to 5,000 options and (iii) authorized
each non-executive director to purchase shares of the Company's Common Stock
during the initial year of service at an exercise price equal to 80% of the
current market of the stock the time of purchase up to an aggregate purchase
price of $50,000. The shares of Common Stock reserved for issuance under the
Directors' Plan are covered by this Prospectus.
10
<PAGE> 15
SELLING SECURITY HOLDERS AND
TRANSACTIONS WITH SELLING SECURITY HOLDERS (1)
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
<S> <C> <C> <C> <C>
Dominick & Joan Quartiere
159-32 91 St.
Howard Beach, NY 11414 36,667
John J. Marcello
16 Rockne Street
Staten Island, NY 10314 28,333
Susan Athwal
521 Hemlock Hill Dr.
Toms River, NJ 08753 61,000
Ed & Sara Braunstein JTWS
74 RT 9 North
Englishtown, NJ 07726 49,119
Russell Cender
271 Graybar Drive
Bridgewater, NJ 08807 20,000
Mark Quartiere
159-32 91st Street
Howard Beach, NY 11414 44,440
Louis Sansalone
708 Pine Street
Roselle Park, NJ 07204 130,797
Alan Rosengarten
1 Patricia Street
Plainview, NY 11803 83,928
Theodore Schwartz
620 Lower Landing Rd.
Blackwood, NJ 08012 20,000
</TABLE>
11
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<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
<S> <C> <C> <C> <C>
Mark Scott
2485 Oldfield Road
Atlanta, GA 30327 30,000
Gilbert Bachman
129 Valley Road
Atlanta, GA 30305 5,000
Anthony B. Fair
P.O. Box 39
Statesboro, GA 30459 15,288
Nanji K. Singadia
155 Shadow Lake Dr.
Lilburn, GA 30247 12,500
Charles L. Strickland
9550 Red Bird Lane
Alpharetta, GA 30202 12,500
Harris Foundation
2 North LaSalle Street
Suite 400
Chicago, IL 60602 35,000
Irving Harris Foundation A
2 North LaSalle Street
Suite 400
Chicago, IL 60602 20,000
Irving Harris
Foundation B
2 North LaSalle Street
Suite 400
Chicago, IL 60602 20,000
Steve Barnes MD
P.O. Box 190
Juliette, GA 31046 10,000
</TABLE>
12
<PAGE> 17
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
<S> <C> <C> <C> <C>
Robert W. Slade
116 Turner Drive
Mahomet, IL 61853 15,000
Donohue Bunch
486 Countryside
Naples, FL 33942 24,000
Sean Flanagan (2)
7 Edward Avenue
Spotswood, NJ 08884 13,334
Carlos Vrrutia
10 The Bishops Ave.
London N2 OAN UK 25,000
Peter G. King
P.O. Box 2191
Rancho Sante Fe, CA
92067 10,000
Thaddeus Kabat Jr.
1105 Hidden Oaks Dr.
Bedford, TX 76022 25,000
Preston Phillips
5507 Moss Glenn Lane
Houston, TX 77088 10,000
Leanne Pitman
3017 Glenridge
Stratford Dr
Atlanta, GA 30342 10,000
Daryl Leehaug
9425 Fox Run Court
Frankfurt, IL 60423 10,000
Donald W. Kappauf (2)
1044 Tullo Farm Road
Bridgewater, NJ 44,000
</TABLE>
13
<PAGE> 18
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
<S> <C> <C> <C> <C>
Michael Gernant
4014 Farhills Drive
Champaign, IL 61821 20,000
Central Illinois
Tile Co. Profit Sharing Plan
FBO/ William L. Schlueter
3302 N. Maltis
Champaign, IL 61821 43,333
The Infinity Fund, L.P.
3 Piedmont Center
Ste 210
Atlanta, GA 30305 600,000
Lyonshare Venture
Capital
P.O. Box 247
2521 Vestal Parkway E.
Vestal, NY 13851 16,000
Richard M. Wilson
1140 Tennyson Place
Atlanta, GA 30319-1985 5,000
Larry Winter
28 Bayowski Road
W. Orange, NJ 07052 7,500
Debra G. Orr
7675 Ball Mill Road
Dunwoody, GA 30350 10,000
James P. Lister
13 Greenhill Drive
Simpsonville, SC
29681 10,000
</TABLE>
14
<PAGE> 19
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
<S> <C> <C> <C> <C>
Jack T. Hammer
7133 Bay Drive
Penthouse, #4
Miami Beach, FL 35,000
Kenneth P. DePersio
2306 Brian Hill
Champaign, IL 61821 10,000
Milton Koffman
c/o Public Loan Co., Inc.
300 Plaza Drive
Vestal, NY 13850 5,000
Endrun Investments Limited
P.O. Box N341, 2nd Floor
Charlotte House
Charlotte Street
Nassau N.P. Bahamas 50,000
The Sachs Company
1346 South Third St.
Louisville, KY 40208 75,000
LMWW Custodian
FBO Oscar S. Bryant
Jr. Individual IRA
c/o The Sachs Company
1346 South Third St.
Louisville, KY 40208 10,000
Mary S. Sachs
1346 South Third St.
Louisville, KY 40208 10,000
Wm. M. Schreiber MD
50 River Hill Road
Louisville, KY 40207 5,000
</TABLE>
15
<PAGE> 20
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
<S> <C> <C> <C> <C>
RNS Partners, Ltd.
c/o Riverdale Family Dental
3725 Henry Hudson Pkwy.
Bronx, NY 10463 30,000
Lawrence Antonucci
96 Columbia Turnpike
Convent Station
Morris Township, NJ 07960 15,000
Arden Brown
5761 NW 32 Terrace
Boca Raton, FL 33496 212,857
Mario DeMarchi
122 Old Clinton Road
Flemington, NJ 10,000
Michael Cantor
98 Lake Drive
Palm Beach Shores, Fl 33404 8,333
Mark Lapolla
P.O. Box 576
Jackson, WY 83001 25,000
Jerry Scott
5829 Sky Park Drive
Plano, Texas 75093 10,000
Gilbert Bachman
129 Valley Road
Atlanta, GA 30305 10,000
Franklin Morrow
200 East 61st Street
New York, New York 10021 10,000
</TABLE>
16
<PAGE> 21
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
<S> <C> <C> <C> <C>
Nancy G. Kennedy
35 Northwood Avenue
Atlanta, GA 30309 15,000
Delaware Charter Trust Co.
TTEE for William T.
Kennedy Defined Benefit
Pension Plan DTD 12/5/63
33 Northwood Avenue
Atlanta, GA 30309-1528 10,000
William E. Dudziak
2430 NE 35 Street
Lighthouse Point, FL 33064 10,000
Ira S. Nathan
2550 Palmer Court
Riverwoods, IL 60015 15,000
James M. Albergotti III
1165 Putter Path
Orangeburg, SC 29115 10,000
Stanton Weissenborn
21 Holton Lane
Essex Fells, NJ 07021 10,000
James C. Hellauer
1741 Thomas Road
Wayne, PA 19087 10,000
Robert A. Neff
265 Arreton Road
Princeton, NY 08540 10,000
Paine Webber, Inc. C/F
David J.S. Nicholson
(IRA)
10 E. 50th Street, 22nd Floor
New York, New York 10022 10,000
</TABLE>
17
<PAGE> 22
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
<S> <C> <C> <C> <C>
DWR C/F
Dan McCarthy
FBO Dan McCarthy
Money Purchase Plan
DTD 3/18/92
78 Lloyd Road
Montclair, NJ 07042-1729 10,000
JMS Inc. Cust. FBO
Anthony A. Anzalone
1801 Market Street
Philadelphia, PA 19103 10,000
John Trevor Colvin &
Gail Suzanne Colvin
909 Pinehurst
Chapel Hill, NC 27514 10,000
</TABLE>
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (3) OFFERING OFFERING
<S> <C> <C> <C> <C>
Donald & Co. Securities, Inc.
788 Shrewsbury Avenue
Tinton Falls, NJ 07724 45,617
Raymond M. Skiptunis (4)
c/o Donald & Co.
Securities, Inc.
788 Shrewsbury Avenue
Tinton Falls, NJ 07724 34,117
The Volume Investor, Inc.
Three Piedmont Center
Suite 210
Atlanta, GA 30305 41,279
</TABLE>
18
<PAGE> 23
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (3) OFFERING OFFERING
<S> <C> <C> <C> <C>
Warren R. Albergotti
c/o The Volume Invester
Three Piedmont Center
Suite 210 6,000
Atlanta, GA 30307
Argent Securities, Inc.
3340 Peachtree Road
Suite 450
Atlanta, GA 30305 9,000
Steven Mallia
c/o Spelman & Co., Inc.
7373 North Scottsdale Road
Scottsdale, Arizona 85253 7,900
Howard Falco
c/o Spelman & Co., Inc.
7373 North Scottsdale Road
Scottsdale, Arizona 85253 2,100
Janney Montgomery
Scott Inc.
1801 Market Street
Philadelphia, PA 19103-1675 6,000
</TABLE>
19
<PAGE> 24
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (5) OFFERING OFFERING
<S> <C> <C> <C> <C>
Hamilton Bailey
21 Circle Dr.
Plandome Manor, NY 11030 5,000
Arden Brown
5761 NW 32 Terrace
Boca Raton, FL 33496 10,000
Seymour Chanenson Trust
2922 MacHeath Cr.
Flossmoor, IL 60422 2,500
Dr. George B. DeGuire Jr.
35-27 80 St.
Jackson Hts., NY 11372 2,500
Shatha Denno &
Jerjis Denno JTWOS
107 Cobblestone Ct.
San Antonio, TX 78213 10,000
Helen K. Dieckmann
(6)(7)(14)
37 Overlook Trail
Morris Plains, NJ 07950 234,493 10,000
Senator John H. Ewing
(7)(15)
P.O. Box 352
Bedminster, NJ 07921 53,500 2,500
John H. Ewing, Jr. (8)
P.O. Box 37421
Chattanooga, TN 37422 2,500
Marilyn E. Florez Trustee (2)
for Gladys M. Noll
134 Kingsberry Dr.
Somerset, NJ 08873 2,500
</TABLE>
20
<PAGE> 25
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (5) OFFERING OFFERING
<S> <C> <C> <C> <C>
Dr. Joseph Greensher &
Marilyn Greensher
20 Hickory Dr.
Roslyn, NY 11576 2,500
James C. Hellauer
1741 Thomas Road
Wayne, PA 19087 2,500
David R. Hondula
268 White Oak Ridge Rd.
Bridgewater, NJ 08807 2,500
Katie and Adam Bridge
Partners, L.P.
90 Park Avenue
New York, NY 10016(17) 100,000 100,000
Stephen T. Levine (2)
P.O. Box 6425
E. Brunswick, NJ 08816 2,500
Patrick E. Mannion
855 Brown Rd.
Bridgewater, NJ 08807 2,500
Money Purchase 201,
Trustees of Bradford Black
231 E. Milton
Alliance, OH 44601 2,500
Stephen A. Pfouts
4 Brookmere Estates
Greensburg, PA 15601 10,000
Louis Sansalone
708 Pine Street
Roselle Park, NJ 07204 2,500
</TABLE>
21
<PAGE> 26
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (5) OFFERING OFFERING
<S> <C> <C> <C> <C>
J.W. Schaefer
115 Century Ln.
Watchung, NJ 07060 2,500
Warren Siebold
16032 E. Loyola Dr.
Aurora, CO 80013 5,000
Jack W. Wallace
3003 Cascade Dr.
Valparaiso, IN 46383 5,000
Stanton F. Weissenborn IRA
JMS Inc. Custodian FBO
Trust 74002452
21 Holton Ln.
Essex Fells, NJ 07021 5,000
Richard D. Wellbrock (9)
27 Tall Timbers
Watchung, NJ 07060 2,500
Robert M. Wellbrock (9)
Trustee
27 Tall Timbers
Watchung, NJ 07060 2,500
</TABLE>
22
<PAGE> 27
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (10) OFFERING OFFERING
<S> <C> <C> <C> <C>
Karl W. Dieckmann (7)(14) 234,493 5,000
c/o Digital Solutions, Inc.
4041 Hadley Road
South Plainfield, NJ 07080
William J. Marino (7)(16) 41,667 5,000
c/o Blue Cross & Blue Shield
of NJ
3 Penn Plaza E., PP-16A
Newark, NJ 07105
Senator John Ewing (7)(15) 53,500 40,000
P.O. Box 352
Bedminster, NJ 07921
Steven B. Sands (7)(17) 120,000 25,000
c/o Sands Brothers & Co.
90 Park Avenue
New York, New York 10016
</TABLE>
23
<PAGE> 28
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (11) OFFERING OFFERING
<S> <C> <C> <C> <C>
George J. Eklund (12)(18) 158,334 33,334
c/o Digital Solutions, Inc.
4041 Hadley Road
South Plainfield, New Jersey
07080
Louis J. Monari (12)(19) 51,000 10,000
c/o Digital Solutions, Inc.
4041 Hadley Road
South Plainfield, New Jersey
07080
Kenneth P. Brice (12)(20) 55,834 13,334
c/o Digital Solutions, Inc.
4041 Hadley Road
South Plainfield, New Jersey
07080
</TABLE>
24
<PAGE> 29
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (13) OFFERING OFFERING
<S> <C> <C> <C> <C>
Victor J. DiGioia, Esq.
369 Lexington Avenue
New York, NY 10017 5,000
Stanley R. Goldstein, Esq.
369 Lexington Avenue
New York, NY 10017 5,000
Charles P. Axelrod, Esq.
369 Lexington Avenue
New York, NY 10017 5,000
</TABLE>
- --------------------------
1. Represents Shares issued in the Offering.
2. Sean Flanagan, Donald W. Kappauf, Marilyn E. Florez, and Stephen T.
Levine are employees of the Company.
3. Represents Shares underlying the Selling Agent Warrants.
4. Raymond M. Skiptunis is an employee of Donald & Co. Securities, Inc., and
the son of Raymond J. Skiptunis, an officer and director of the Company.
Mr. Skiptunis disclaims beneficial interest in the Shares held by his son.
5. Represents Shares underlying the Private Placement Warrants.
6. Helen K. Dieckmann is the wife of Karl W. Dieckmann, a Chairman of the
Board of the Company. Includes shares held by each of Mr. and Mrs.
Dieckmann, each of whom disclaims beneficial interest in the Shares held by
their spouse.
7. Senator John Ewing, Karl W. Dieckmann, William J. Marino and Steven B.
Sands are directors of the Company. Mr. Dieckmann is the Chairman of the
Board.
8. John H. Ewing is the son of Senator John Ewing, a director of the Company;
Senator Ewing disclaims any beneficial ownership in the Shares held by John
H. Ewing.
25
<PAGE> 30
9. Does not include Shares issuable upon the exercise of $25,000 principal
amount of contingent convertible notes held by end of the Wellbrocks. The
holders of the notes and the Company disagree as to the convertibility of
these notes.
10. Represents Shares issuable upon exercise of options granted under the
Directors' Plan, including options which have not yet vested.
11. Represents Shares issued in lieu of a cash bonus which was earned by these
employees.
12. George J. Eklund is President and Chief Executive Officer of the Company.
Louis J. Monari, and Kenneth P. Brice are vice-presidents of the Company.
Mr. Eklund is also a director of the Company.
13. Represents Shares issued in consideration for legal services rendered to
the Company.
14. Excludes a non-vested option to purchase 5,000 Shares.
15. Includes (i) vested options to purchase 35,000 Shares; and (ii) warrants to
purchase 2,500 Shares. Excludes non-vested options to purchase 5,000
Shares.
16. Excludes a non-vested option to purchase 5,000 Shares.
17. Stephen B. Sands, a director of the Company, is an executive officer and
director of the corporate general partner of Katie and Adam Bridge
Partners, L.P. and thus may be deemed a "beneficial owner" of Securities
of the Company held by Katie and Adam Bridge Partners, L.P. Accordingly,
Mr. Sands's beneficial ownership of Shares thus includes warrants to
purchase 100,000 shares of Common Stock held by Katie and Adam Bridge
Partners, L.P. and options to purchase 20,000 Shares held by Mr. Sands
individually. Excludes non-vested options to purchase 5,000 Shares held by
Mr. Sands individually. The number of Shares owned by Katie and Adam
Bridge Partners, L.P. excludes Shares held by Mr. Sands, individually.
18. Includes vested options to purchase 125,000 Shares. Excludes non-vested
options to purchase 75,000 Shares.
19. Includes options to purchase 20,000 Shares. Excludes non-vested options to
purchase 30,000 Shares.
20. Includes vested options to purchase 42,500 Shares. Excludes non-vested
options to purchase 32,500 Shares.
26
<PAGE> 31
DESCRIPTION OF SECURITIES
The Company's authorized capitalization consists of 40,000,000
shares of Common Stock, par value $.001 per share and 5,000,000 shares of
Preferred Stock, par value $.10 per share, which may be issued in one or more
series. The following summary description of the Common Stock and Preferred
Stock is qualified in its entirety by reference to the Company's Articles of
Incorporation.
Common Stock
Each share of Common Stock entitles its holder to one
non-cumulative vote per share and, subject to the preferential rights of the
Preferred Stockholders, the holders of more than fifty percent (50%) of the
shares voting for the election of directors can elect all the directors if they
choose to do so, and in such event the holders of the remaining shares will not
be able to elect a single director. Holders of shares of Common Stock are
entitled to receive such dividends as the Board of Directors may, from time to
time, declare out of Company funds legally available for the payment of
dividends. Upon any liquidation, dissolution or winding up of the Company,
holders of shares of Common Stock are entitled to receive pro rata all of the
assets of the Company available for distribution to shareholders after the
satisfaction of the liquidation preference of the Preferred Stockholders.
Shareholders do not have any pre-emptive rights to subscribe
for or purchase any stock, warrants or other securities of the Company. The
Common Stock is not convertible or redeemable. Neither the Company's Certificate
of Incorporation nor its By-laws provide for pre-emptive rights.
Preferred Stock
The Preferred Stock may be issued in one or more series, to be
determined and to bear such title or designation as may be fixed by resolution
of the Board of Directors prior to the issuance of any shares thereof. Each
series of the Preferred Stock will have such voting powers (including, if
determined by the Board of Directors, no voting rights), preferences, and other
rights as determined by the Board of Directors, with such qualifications,
limitations or restrictions as may be stated in the resolutions of the Board of
Directors adopted prior to the issuance of any shares of such series of
Preferred Stock.
Purchasers of the Shares offered hereby should be aware that
the holders of any series of the Preferred Stock which may be issued in the
future could have voting rights, rights to receive dividends or rights to
distribution in liquidation superior to those of holders of the Common Stock,
thereby diluting or negating the voting rights, dividend rights or liquidation
rights of the holders of the Common Stock.
27
<PAGE> 32
Because the terms of each series of Preferred Stock may be
fixed by the Company's Board of Directors without shareholder action, the
Preferred Stock could be issued with terms calculated to defeat a proposed
takeover of the Company, or to make the removal of the Company's management more
difficult. Under certain circumstances, this could have the effect of decreasing
the market price of the Common Stock. Management of the Company is not aware of
any such threatened transaction to obtain control of the Company.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling
Security Holders, or by their transferees. No underwriting arrangements have
been entered into by the Selling Security Holders. The distribution of the
Shares by the Selling Security Holders may be effected in one or more
transactions that may take place on the over the counter market, including
ordinary brokers transactions, privately negotiated transactions or through
sales to one or more dealers for resale of the Shares as principals, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the Selling Security
Holders in connection with such sales. The Selling Security Holders and
intermediaries through whom such Shares are sold may be deemed "underwriters"
within the meaning of the Act, with respect to the Shares offered.
REPORTS TO SHAREHOLDERS
The Company distributes annual reports to its stockholders,
including financial statements examined and reported on by independent public
accountants, and will provide such other reports as management may deem
necessary or appropriate to keep stockholders informed of the Company's
operations.
LEGAL MATTERS
The legality of the offering of the Shares will be passed upon
for the Company by Goldstein & DiGioia, LLP, 369 Lexington Avenue, New York, New
York l00l7.
EXPERTS
The financial statements of the Company for the fiscal years
ending as of September 30, 1995 and 1994 and for each of the three year periods
ending September 30, 1995 have been included in the Company's Form 10-K for the
fiscal year ended September 30, 1995, and incorporated herein and in the
Registration Statement by reference, in reliance upon the report of Arthur
Andersen LLP, independent public accountants, appearing in the Form 10-K, and
upon the authority of said firm as experts in accounting and auditing.
28
<PAGE> 33
ADDITIONAL INFORMATION
The Company has filed a Registration Statement under the Act
with the Securities and Exchange Commission (the "Commission"), with respect to
the securities offered by this Prospectus. This Prospectus does not contain all
of the information set forth in the Registration Statement. For further
information with respect to the Company and such securities, reference is made
to the Registration Statement and to the exhibits and schedules filed therewith.
Each statement made in this Prospectus referring to a document filed as an
exhibit to the Registration Statement is qualified by reference to the exhibit
for a complete statement of its terms and conditions. The Registration
Statement, including exhibits thereto, may be inspected without charge to anyone
at the office of the Commission, and copies of all or any part thereof may be
obtained from the Commission's principal office in Washington, D.C. upon payment
of the Commission's charge for copying.
29
<PAGE> 34
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses in connection with the issuance and distribution of
the securities being registered herein are estimated.
<TABLE>
<CAPTION>
Amount
Securities and Exchange Commission
<S> <C>
Registration Fee.........................................................................$4,296
Printing and Engraving Expenses.......................................................... _____
Accounting Fees and Expenses.............................................................. _____
Legal Fees and Expenses.................................................................. _____
Blue Sky Fees and Expenses........................................................... ______
Transfer Agent and Registrar Fees................................................. ______
Miscellaneous Fees and Expenses...........................................................______
Total..............................$______
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's By-Laws require the Company to indemnify, to the
full extent authorized by Section 14A:3-5 of the New Jersey Business Corporation
Act, any person with respect to any civil, criminal, administrative or
investigative action or proceeding instituted or threatened by reason of the
fact that he, his testator or intestate is or was a director, officer or
employee of the Company or any predecessor of the Company is or was serving at
the request of the Company or a predecessor of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
Section 14A:3-5 of the New Jersey Business Corporation Act
authorized the indemnification of directors and officers against liability
incurred by reason of being a director or officer and against expenses
(including attorneys fees) in connection with defending any action seeking to
establish such liability, in the case of third-party claims, if the officer or
director acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and if such officer or
director shall not have been adjudged liable for negligence or misconduct,
unless a court otherwise determines. Indemnification is also authorized with
respect to any criminal action or proceeding where the officer or director had
no reasonable cause to believe his conduct was unlawful.
II-1
<PAGE> 35
In accordance with Section 14A:2-7 of the New Jersey Business
Corporation Act, the Company's Certificate of Incorporation eliminates the
personal liability of officers and directors to the Company and to stockholders
for monetary damage for violation of a director's duty owed to the Company or
its Shareholders, under certain circumstances.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is therefore unenforceable.
ITEM 16. EXHIBITS
The exhibits designated with an asterisk (*) are filed herewith
and those designated with two asterisks (**) will be filed by amendment. All
other exhibits have been previously filed with the Commission and, pursuant to
l7 C.F.R. Secs. 20l.24 and 240.l2b-32, are incorporated by reference to the
document referenced in brackets following the descriptions of such exhibits.
Exhibit
No. Description
2.1 Asset Purchase Agreement, dated September 1, 1994, as
amended, between DSI Staff ConnXions, Inc., Digital Solutions,
Inc. and M & B Staff Management, Inc.
2.2 Asset Purchase Agreement dated November 21, 1994, by and
among Registrant, Staff-RX, Inc., RADS Radiography, Inc.,
Skillmaster Management, Inc., Relief Services, Inc., DSI
Staff-Rx, Inc. and DSI Contract Staffing, Inc. (Exhibit 2.2 to
Form 8-K dated November 21, 1994).
2.3 Asset Purchase Agreement between DSI Staff
ConnXions-Southwest, Inc. and The Alternative Source, Inc.
(Exhibit 2.1 to Form 8K dated February 3, 1994).
2.4 Stock Purchase Agreement between MLB Medical Staffing,
Inc. and DSI Contract Staffing, Inc., and Digital Solutions,
Inc. with DBRM Investment Corporation and Rick A. McMinn
(Exhibit 2.2 to Form 8K dated February 3, 1994).
2.5 Stock Purchase Agreement of RAM Technical Services, Inc.,
DSI Contract Staffing, Inc. and Digital Solutions, Inc. with
Rick A. McMinn (Exhibit 2.3 to Form 8K dated February 3,
1994).
4 Form of Common Stock Purchase Warrant (Exhibit 10.9.1 to
Form 10-K for fiscal year ended September 30, 1991).
II-2
<PAGE> 36
5** Opinion of Goldstein & DiGioia, LLP.
10.1 Agreement between Registrant and First Fidelity Bank, N.A.
10.2 Agreement between Registrant and Midlantic Banks, Inc.
dated October 11, 1991.
10.3 Lease dated 10/15/91 for office space at 4041 Hadley
Road, South Plainfield, New Jersey.
10.4 Form of Loan Agreement, August 1991 (Exhibit 10.9 to form
10-K for fiscal year ended September 30, 1991).
16.1 Letter from M. R. Weiser & Co. LLP changing certified
accountant (Exhibit 16.1 to form 8-K/A Amendment No. 1 dated
October 25, 1993).
21 Subsidiaries (Exhibit 21 to Form 10K for fiscal year ended
September 30, 1995).
23.1* Consent of Arthur Andersen LLP.
23.2** Consent of Goldstein & DiGioia, LLP (contained in
Exhibit 5).
99.1 Term Note in the principal amount of $1,300,000, dated
October 3, 1994, of DSI Staff-RX, Inc. and Digital Solutions,
Inc. (Exhibit 99.1 to Form 8-K dated November 21, 1994).
99.2 Stock Pledge Agreement, dated October 3, 1994, among DSI
Contract Staffing, Inc. and Staff-RX, Inc., Skillmaster
Management, Inc., RADS Radiography Service, Inc., and
Primedical Physician Services, Inc. (Exhibit 99.2 to Form 8-K
dated November 21, 1994).
99.3 Security Agreement, dated October 3, 1994, among DSI
Staff Rx, Inc. and Staff- RX, Inc., Skillmaster Management,
Inc., RADS Radiography Service, Inc., and Primedical Physician
Services, Inc. (Exhibit 99.3 to Form 8-K dated November 21,
1994).
99.4 Registration Rights Letter, dated November 21, 1994,
among Digital Solutions, Inc. and Staff-RX, Inc., Skillmaster
Management, Inc., RADS Radiography Service, Inc., and
Primedical Physician Services, Inc. (Exhibit 99.4 to Form 8-K
dated November 21, 1994).
99.5 Asset Purchase Agreement dated May 3, 1995, among Digital
Solutions, Inc., DSI Staff Connxions-Southwest, Inc. and
Turnkey Services, Inc. (Exhibit 2 to
Form 10Q for quarter ended March 31,1995.
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<PAGE> 37
99.6 Amended and Restated Loan and Security Agreement dated
February 27, 1995 and Promissory Note dated February 27, 1995
among the Company, its subsidiaries and United Jersey Bank
(Exhibit 99 to Form 10Q for quarter ended March 31, 1995).
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
A. (1) To file, during any period in which offers or sales are being
made, a post- effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereto) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) (i) For the purpose of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of the Registration Statement as of the time it was declared effective.
(ii) For the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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<PAGE> 38
(5) For purposes of determining any liability under the
Securities Act of 1933, each filing of the Company's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
B. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-5
<PAGE> 39
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on the 30th day of
July, 1996.
DIGITAL SOLUTIONS, INC.
By: /s/George J.Eklund
-------------------------------------
George J. Eklund
President, Chief Executive Officer
and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below substitutes and appoints George J. Eklund and Karl W. Dieckmann,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitute, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
<S> <C> <C>
/s/George J. Eklund President, Chief Executive July 30, 1996
- ------------------------ Officer and Director
George J. Eklund
/s/Raymond J. Skiptunis Corporate Development Officer July 30, 1996
- ------------------------ and Vice-Chairman
Raymond J. Skiptunis
/s/Karl W. Dieckmann Chairman of the Board July 30, 1996
- ------------------------
Karl W. Dieckmann
</TABLE>
II-6
<PAGE> 40
<TABLE>
<CAPTION>
<S> <C> <C>
/s/John H. Ewing Director July 30, 1996
- ------------------------
Senator John H. Ewing
/s/Steven B. Sands Director July 31, 1996
- ------------------------
Steven B. Sands
/s/William J. Marino Director July 30, 1996
- ------------------------
William J. Marino
/s/Kenneth P. Brice Chief Financial Officer and July 30, 1996
- ------------------------ Principal Accounting Officer
Kenneth P. Brice
</TABLE>
II-7
<PAGE> 41
EXHIBIT INDEX
-------------
Exhibit 23.1 Consent of Arthur Andersen LLP
<PAGE> 1
Exhibit 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated December 29, 1995
included in Digital Solutions, Inc.'s Form 10-K for the year ended September 30,
1995 and to all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
---------------------
Arthur Andersen LLP
Roseland, New Jersey
July 30, 1996
