<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
FORM 8-K/A NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 8, 1997
TEAM AMERICA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 0-21533 31-1209872
- ----------------------------- ------------------------ -------------------
(State or Other Jurisdiction) (Commission File Number) (IRS Employer
Identification No.)
110 E. Wilson Bridge Road, Worthington Ohio 43085
------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 848-3995
--------------
Not Applicable
- --------------------------------------------------------------------------------
(former name or former address, if changed since last report)
-1-
<PAGE> 2
TEAM AMERICA CORPORATION
FORM 8-K/A
AMENDED REPORT
SEPTEMBER 8, 1997
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
- ---------------------------------------------------------- --------
<S> <C>
Form 8-K Required Information
Item 2. Acquisitions or Disposition of Assets 3
Item 7. Financial Statements and Exhibits 3
Signature 5
Index to Financial Statements 6
Index to Exhibits 34
</TABLE>
-2-
<PAGE> 3
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 8, 1997, TEAM America Corporation, an Ohio corporation ("TEAM
America"), TEAM America Acquisitions, Inc., an Ohio corporation and a wholly
owned subsidiary of TEAM America ("Acquisitions"), and Workforce Strategies,
Inc., a Delaware corporation ("Workforce"), consummated a merger pursuant to an
Agreement and Plan of Merger, dated as of September 5, 1997 (the "Merger
Agreement"), whereby Workforce would be merged with and into Acquisitions,
effective as of October 1, 1997, with Acquisitions being the surviving entity as
a wholly owned subsidiary of TEAM America (the "Merger") under the name TEAM
America of California, Inc. Under the terms of the Merger Agreement, holders of
Workforce common stock, $0.0001 par value (the "Workforce Common Stock"),
received a combination of cash, TEAM America common stock, without par value
(the "TEAM America Common Stock"), and/or options to purchase TEAM America
Common Stock. The total consideration paid to Workforce stockholders in the
Merger consisted of $3,877,755 in cash, 494,521 shares of TEAM America Common
Stock, and options to purchase 176,037 shares of TEAM America Common Stock at a
price of $8.50 per share. The stock price of $8.50 represents the closing price
on September 4, 1997.
The foregoing information concerning the Merger, insofar as it relates to
matters contained in the Merger Agreement, is qualified in its entirety by
reference to the Merger Agreement which is attached as an exhibit to this report
and incorporated herein by reference.
The Merger was accomplished through arms-length negotiations between TEAM
America's management and Workforce's management. There was no material
relationship between Workforce's stockholders and TEAM America or any of TEAM
America's affiliates, any of TEAM America's directors or officers, or any
associate of any such TEAM America director or officer, prior to this
transaction. The Merger was approved by the stockholders of Workforce by action
by consent of S. Cash Nickerson, the holder of approximately 55.9% of the
Workforce Common Stock.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired:
The acquisition of Workforce is considered significant and based on the
requirements of Regulation S-X, audited financial statements for the most
recent fiscal year (December 31, 1996) and unaudited financial statements
as of and for the six months ended June 30, 1997 are included herein.
(1) Audited financial statements of Workforce as of and for the year
ended December 31, 1996.
(2) Unaudited balance sheet of Workforce as of June 30, 1997,
unaudited condensed consolidated statements of income and cash
flows for the six month period ended June 30, 1997 and the
unaudited condensed consolidated statement of stockholders'
deficit for the six month period ended June 30, 1997.
-3-
<PAGE> 4
(b) Pro Forma Financial Information:
Pro Forma combining Financial Statements of TEAM America and Workforce
are included as required by Article 11 of Regulation S-X.
(1) Unaudited pro forma combining statement of operations for the
year ended December 31, 1996 as if the acquisition occurred as of
January 1, 1996.
(2) Unaudited pro forma combining statement of operations for the six
month period ended June 30, 1997 as if the acquisition occurred
as of January 1, 1996.
(3) Unaudited pro forma combining balance sheet as of June 30, 1997
as if the acquisition occurred as of that date.
(c) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -------------------------------------------------------------
<S> <C>
2* Agreement and Plan of Merger, dated as of September 5, 1997,
among TEAM America Corporation, TEAM America Acquisitions,
Inc., and Workforce Strategies, Inc.
99* Press release of TEAM America Corporation issued September 8, 1997,
regarding the consummation of the Acquisition.
</TABLE>
*Previously filed with Form 8-K
-4-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEAM America Corporation
DATED: November 10, 1997 BY: /s/ Michael R. Goodrich
----------------- ----------------------------
Michael R. Goodrich
Chief Financial Officer and
Vice President Finance
-5-
<PAGE> 6
TEAM AMERICA CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ITEM PAGE NO
- ------------------------------------------------------------------------------------- -------
<S> <C>
Audited Financial Statements:
Independent Auditor's Report 8
Balance Sheets of Workforce Strategies, Inc. (Workforce) as of December 31, 9
1996 and 1995.
Statements of Operations and Deficit of Workforce for the Year Ended December 11
31, 1996 and the Seven Months Ended December 31, 1995.
Statements of Stockholders' Deficit of Workforce for the Year Ended
December 31, 1996 and the Seven Months Ended December 31, 1995. 12
Statements of Cash Flows of Workforce for the Year Ended December 31, 1996 and 13
the Seven Months Ended December 31, 1995.
Notes to Financial Statements of Workforce December 31, 1996 and 1995. 15
Unaudited Interim Financial Statements:
Unaudited Balance Sheet of Workforce as of June 30, 1997. 20
Unaudited Statement of Operations of Workforce for the Six Months Ended June 22
30, 1997.
Unaudited Statement of Operations of Workforce for the Six Months Ended June 23
30, 1996.
Unaudited Statement of Stockholders' Deficit of Workforce for the Six Months 24
Ended June 30, 1997.
Unaudited Statement of Cash Flows of Workforce for the Six Months Ended June 25
30, 1997.
Unaudited Statement of Cash Flows of Workforce for the Six Months Ended June 26
30, 1996.
</TABLE>
-6-
<PAGE> 7
TEAM AMERICA CORPORATION
INDEX TO FINANCIAL STATEMENTS
(continued)
<TABLE>
<CAPTION>
ITEM PAGE NO
- ------------------------------------------------------------------------------------- -------
<S> <C>
Unaudited Pro Forma Combining Financial Statements:
Introduction to Pro Forma Combining Financial Statements. 27
Pro Forma Combining Statement of Operations for the Year Ended December 31, 28
1996.
Pro Forma Combining Statement of Operations for the Six Months ended June 30, 29
1997.
Pro Forma Combining Balance Sheet as of June 30, 1997. 30
Notes to Pro Forma Combining Financial Statements. 32
</TABLE>
-7-
<PAGE> 8
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Workforce Strategies, Inc.:
I have audited the accompanying balance sheets of Workforce Strategies, Inc. as
of December 31, 1996 and 1995, and the related statements of operations,
stockholders' deficit and cash flows for the year and seven months then ended.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based
on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Workforce Strategies, Inc. as of
December 31, 1996 and 1995, and the results of their operations and their cash
flows for the year and seven months then ended in conformity with generally
accepted accounting principles.
August 18, 1997. /s/ Henry Vanderzee
-------------------
-8-
<PAGE> 9
WORKFORCE STRATEGIES, INC.
--------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
----------------------
ASSETS 1996 1995
------ -------- --------
<S> <C> <C>
Current assets:
Cash $ -- $ 22,767
Accounts receivable:
Trade, less allowance for doubtful accounts of $18,900 and $7,000 421,677 44,855
Affiliates 172,605 7,605
Prepaid expenses 33,037 7,686
-------- --------
Total current assets 627,319 82,913
-------- --------
Property and equipment, at cost:
Equipment 128,654 40,714
Less accumulated depreciation (43,706) (9,294)
-------- --------
Net property and equipment 84,948 31,420
-------- --------
Other assets:
Deposits 6,904 293
Organizational costs, net of amortization 1,748 2,272
-------- --------
Total other assets 8,652 2,565
-------- --------
Total assets $720,919 $116,898
======== ========
</TABLE>
See accompanying notes.
-9-
<PAGE> 10
WORKFORCE STRATEGIES, INC.
--------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31
------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT 1996 1995
------------------------------------- --------- ---------
<S> <C> <C>
Current liabilities:
Checks issued against future deposits $ 109,343 $ --
Accounts payable 157,441 16,546
Accrued salaries, wages and payroll taxes 600,292 142,435
Accrued expenses 42,834 20,026
Current portion of long-term debt 8,937 3,148
--------- ---------
Total current liabilities 918,847 182,155
--------- ---------
Long-term debt, net of current portion:
Notes payable -- 70,000
Capital lease obligations 28,116 2,055
--------- ---------
Total liabilities 946,963 254,210
--------- ---------
Stockholders' deficit:
Common stock of $.001 par value; authorized 50,000,000 shares, issued and
outstanding 3,000,000 shares in 1996 and
2,000,000 shares in 1995 300 200
Additional paid-in capital 237,005 29,800
Deficit (463,349) (167,312)
--------- ---------
Total stockholders' deficit (226,044) (137,312)
--------- ---------
Total liabilities and stockholders' deficit $ 720,919 $ 116,898
========= =========
</TABLE>
See accompanying notes.
-10-
<PAGE> 11
WORKFORCE STRATEGIES, INC.
--------------------------
STATEMENTS OF OPERATIONS AND DEFICIT
------------------------------------
<TABLE>
<CAPTION>
Seven months
Year ended ended
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
REVENUES $11,297,686 $1,456,884
----------- ----------
DIRECT COSTS:
Salaries, wages and employment taxes of worksite employees 10,366,803 1,202,738
Healthcare and workers' compensation 422,803 27,587
State unemployment tax and other 181,191 97,107
----------- ----------
Total direct costs 10,970,797 1,327,432
----------- ----------
GROSS PROFIT 326,889 129,452
----------- ----------
OPERATING EXPENSES:
General and administrative 572,895 278,012
Provision for doubtful accounts 11,900 7,000
Depreciation and amortization 34,936 9,644
----------- ----------
OPERATING LOSS (292,842) (165,204)
----------- ----------
Other income (expense):
Interest income 520 564
Interest expense (3,715) (2,672)
----------- ----------
(3,195) (2,108)
----------- ----------
NET LOSS (296,037) (167,312)
DEFICIT, beginning of period (167,312) --
----------- ----------
DEFICIT, end of period $ (463,349) $ (167,312)
=========== ==========
</TABLE>
See accompanying notes.
-11-
<PAGE> 12
WORKFORCE STRATEGIES, INC.
--------------------------
STATEMENT OF STOCKHOLDERS' DEFICIT
----------------------------------
YEAR AND SEVEN MONTHS ENDED DECEMBER 31, 1996
---------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Issuance of common stock 2,000,000 $200 $ 29,800 $ -- $ 30,000
Net loss for the seven months
ended December 31, 1995 -- -- -- (167,312) (167,312)
--------- ---- -------- --------- ---------
Balances, December 31, 1995 2,000,000 200 29,800 (167,312) (137,312)
Issuance of common shares 850,000 85 132,915 -- 133,000
Issuance of common shares for
notes payable and accrued
interest 150,000 15 74,290 -- 74,305
Net loss for the year ended
December 31, 1996 -- -- -- (296,037) (296,037)
--------- ---- -------- --------- ---------
Balances, December 31, 1996 3,000,000 $300 $237,005 $(463,349) $(226,044)
========= ==== ======== ========= =========
</TABLE>
See accompanying notes.
-12-
<PAGE> 13
WORKFORCE STRATEGIES, INC.
--------------------------
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Seven months
Year ended ended
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(296,037) $(167,312)
Noncash revenues and expenses included in net income:
Depreciation and amortization 34,936 9,644
Provision for doubtful accounts 11,900 7,000
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable (388,722) (51,855)
(Increase) decrease in prepaid expenses (25,351) (7,686)
Increase (decrease) in accounts payable 250,238 16,546
Increase (decrease) in accrued salaries, wages and
payroll taxes 457,857 142,435
Increase (decrease) in accrued expenses 27,113 20,026
--------- ---------
Net cash flows provided (used) by operating
activities 71,934 (31,202)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to affiliates (165,000) (7,605)
Purchase of property and equipment (50,827) (34,070)
Decrease (increase) in other assets (6,611) (2,915)
--------- ---------
Net cash flows provided (used) by investing
activities (222,438) (44,590)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings -- 70,000
Repayment of long-term debt (5,263) (1,441)
Issuance of common stock 133,000 30,000
--------- ---------
Net cash flows provided (used) by financing
activities 127,737 98,559
--------- ---------
INCREASE (DECREASE) IN CASH (22,767) 22,767
CASH, beginning of period 22,767 --
--------- ---------
CASH, end of period $ -- $ 22,767
========= =========
</TABLE>
See accompanying notes.
-13-
<PAGE> 14
WORKFORCE STRATEGIES, INC.
--------------------------
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Seven months
Year ended ended
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Equipment acquired through capital leases $37,113 $6,644
Issuance of common stock for payment of notes payable and
accrued interest 74,305 --
</TABLE>
See accompanying notes.
-14-
<PAGE> 15
WORKFORCE STRATEGIES, INC.
--------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
- ---------------------------------------
NATURE OF BUSINESS
------------------
Workforce Strategies, Inc. (the "Company") was incorporated in Delaware
on May 22, 1995 and commenced operations on June 1, 1995. The Company is
a professional employer organization ("PEO") which provides small and
medium-sized businesses with an outsourcing solution to certain
complexities and costs related to employment and human resources. The
Company's integrated employment-related services consist of employee
administration, employment regulatory compliance management, workers'
compensation coverage, health care and other employee benefits. The
Company enters into a co-employment relationship with a client company
and leases worksite employees to the client company. The Company assumes
substantial employer responsibilities such as payroll, employee taxes and
reporting, federal and state labor employment law compliance, workers'
compensation, safety and risk management programs, and health benefits.
The client company retains operational control over the leased employees'
responsibilities, duties and performance. The Company is headquartered in
Lafayette, California with offices in Sacramento and San Francisco,
California and Chicago, Illinois.
REVENUE RECOGNITION
-------------------
Revenues and the related costs of wages, salaries, and employment taxes
from professional employer services related to worksite employees are
recognized in the period in which the employee performs the services.
Because the Company is at risk for all of its direct costs, independently
of whether payment is received from its clients, and consistent with
industry practice, all amounts billed to clients for gross salaries and
wages, related employment taxes, and health care and workers'
compensation coverage are recognized as revenue by the Company. The
Company establishes a reserve for doubtful accounts when it determines
that collection from a client is unlikely.
ACCOUNTING ESTIMATES
--------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from these estimates.
-15-
<PAGE> 16
WORKFORCE STRATEGIES, INC.
--------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(Continued)
PROPERTY, EQUIPMENT AND DEPRECIATION
------------------------------------
Property and equipment are recorded at cost and depreciated using federal
income tax lives and methods, which approximate economic lives.
AMORTIZATION
------------
Amortization of organizational costs is calculated using the
straight-line method over five years.
CASH AND CASH EQUIVALENTS
-------------------------
For purposes of the statements of cash flows, the Company considers all
short-term instruments purchased with a maturity of three months or less
to be cash equivalents. There were no cash equivalents at December 31,
1996 and 1995.
INCOME TAXES
------------
Effective December 31, 1996, the Company, with the consent of its
stockholders, has elected under the Internal Revenue Code to be an S
corporation. In lieu of corporation income taxes, the stockholders of an
S corporation are taxed on their proportionate share of the Company's
taxable income (loss). Therefore, no provision or liability for federal
or state income taxes has been included in the financial statements. At
December 31, 1995, the Company has a net operating loss carryforward of
$167,312 available to offset future taxable income. No deferred income
tax benefits have been provided for in the financial statements. If the
Company revokes its S corporation status, it would have approximately
$57,000 of income tax benefits to offset future income taxes. The
carryforward will expire in the year 2010.
-16-
<PAGE> 17
WORKFORCE STRATEGIES, INC.
--------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(Continued)
NOTE 2 - NOTES PAYABLE
- ----------------------
Notes payable consists of:
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
---- -------
<S> <C> <C>
7% Note payable to an individual, principal and
interest shall be paid in two installments on June
15, 1997 and June 15, 1998 $ -- $21,000
7% Note payable to an individual, principal and
interest shall be paid in two installments on June
15, 1997 and June 15, 1998 -- 28,000
7% Note payable to an individual, principal and
interest shall be paid in two installments on June
15, 1997 and June 15, 1998 -- 21,000
---- -------
Less current portion -- 70,000
-- --
---- -------
Notes payable $ -- $70,000
==== =======
</TABLE>
The notes payable to individuals were retired in April, 1996 by the
issuance of 150,000 shares of common stock.
NOTE 3 - CAPITAL LEASE OBLIGATION
- ---------------------------------
The Company has entered into leases for certain equipment and software
under capital lease agreements.
Future minimum lease payments for the years ending December 31 are as
follows:
1997 $ 16,598
1998 14,543
1999 13,132
2000 6,083
2001 5,576
Imputed interest (18,879)
--------
Present value of lease obligations $ 37,053
========
-17-
<PAGE> 18
WORKFORCE STRATEGIES, INC.
--------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(Continued)
NOTE 4 - OPERATING LEASES
- -------------------------
The Company has various leases for office space. The aggregate rent
expense for the periods ended December 31, 1996 and 1995 was $30,540 and
$12,843, respectively. The future minimum rental payments under
noncancellable operating leases are as follows:
Year ending
-----------------
December 31, 1997 $ 76,416
December 31, 1998 76,083
December 31, 1999 78,352
December 31, 2000 6,545
--------
$237,396
========
NOTE 5 - EMPLOYEES' BENEFIT PLAN
- --------------------------------
The Company has a profit-sharing plan (the Plan) qualifying under Section
401(k) of the Internal Revenue Code. The Plan covers substantially all
employees at least 21 years old with at least three months of service.
The Company makes no contributions to the Plan.
NOTE 6 - RELATED PARTIES
- ------------------------
During 1996 and 1995, the Company advanced $165,000 and $7,605 to two
enterprises owned by the Company's majority stockholder. Workforce
Management Services, Inc. (formerly Fasturn, Inc.) and Workforce
Placement Services, LLC. In addition, the Company paid fees to Workforce
Management Service, Inc. in the amount of $33,000 in 1995. At December
31, 1996, the Company owed $6,193 to Workforce Management Services, Inc.
for expenses advanced by them.
NOTE 7 - LITIGATION
- -------------------
The Company is subject to certain legal proceedings, claims and
liabilities which arise in the ordinary course of its business. In the
opinion of management, the amount of ultimate liability with respect to
these actions will not materially affect the financial position of the
Company.
-18-
<PAGE> 19
WORKFORCE STRATEGIES, INC.
--------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(Continued)
NOTE 8 - MAJOR CLIENTS
- ----------------------
During the year ended December 31, 1996 the Company had four major
clients, revenues from each ranged from 11% to 14% of the Company's total
revenues. Billings to these clients totaled $5,540,446 for 1996.
NOTE 9 - SUBSEQUENT EVENTS
- --------------------------
In July, 1997, the Company completed a private offering and received
proceeds of $446,800, of which $347,800 was in cash and $99,000 was for
payment of certain expenses, from the sale of 148,933 shares of common
stock. The Company will use the proceeds for expansion in its market and
target areas and registration of its securities.
In February, 1997, the Company amended and restated its Articles of
Incorporation to increase the authorized number of shares of the
Company's common stock from 10,000 to 50,000,000, and to authorize
10,000,000 shares of preferred stock.
-19-
<PAGE> 20
WORKFORCE STRATEGIES, INC.
--------------------------
BALANCE SHEET
-------------
JUNE 30, 1997
-------------
(unaudited)
<TABLE>
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash in bank $ 62,492
Accounts receivable:
Trade $761,381
Related companies 194,821 956,202
--------
Prepaid expenses 211,965
----------
1,230,659
PROPERTY AND EQUIPMENT, at cost:
Computer equipment and software 101,277
Office equipment 39,731
Furniture and fixtures 38,360
--------
179,368
Less accumulated depreciation 67,090 112,278
--------
OTHER ASSETS:
Deposits 7,966
Organizational costs, net of amortization 1,486 9,452
-------- ----------
TOTAL ASSETS $1,352,389
==========
</TABLE>
-20-
<PAGE> 21
WORKFORCE STRATEGIES, INC.
--------------------------
BALANCE SHEET
-------------
JUNE 30, 1997
-------------
(unaudited)
(Continued)
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Checks issued against future deposits $ 180,040
Accounts payable 281,343
Accrued salaries, wages and payroll taxes 918,951
Accrued workers compensation insurance and employee benefits 36,164
Current portion of capital lease obligations 8,937
----------
Total current liabilities 1,425,435
CAPITAL LEASE OBLIGATIONS, net of current portion 23,123
----------
Total liabilities 1,448,558
STOCKHOLDERS' DEFICIT:
Common stock 309
Additional paid in capital 504,996
Deficit (601,474) (96,169)
-------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $1,352,389
==========
</TABLE>
-21-
<PAGE> 22
WORKFORCE STRATEGIES, INC.
--------------------------
STATEMENT OF OPERATIONS
-----------------------
SIX MONTHS ENDED JUNE 30, 1997
------------------------------
(unaudited)
<TABLE>
<S> <C> <C>
REVENUES $11,436,226
DIRECT COSTS:
Salaries, wages and employment taxes of worksite employees $10,831,544
Health care and workers' compensation 308,593
Other 22,189 11,162,326
----------- -----------
GROSS PROFIT 273,900
EXPENSES:
Administrative and general 385,348
Depreciation and amortization 23,646 408,994
------------- -----------
(135,094)
OTHER INCOME (EXPENSE) -
Other income 1,277
Interest expense (4,308) (3,031)
----------- -----------
NET LOSS $ (138,125)
===========
</TABLE>
-22-
<PAGE> 23
WORKFORCE STRATEGIES, INC.
--------------------------
STATEMENT OF OPERATIONS
-----------------------
SIX MONTHS ENDED JUNE 30, 1996
------------------------------
(unaudited)
<TABLE>
<S> <C> <C>
REVENUES $3,838,256
DIRECT COSTS:
Salaries, wages and employment taxes of worksite employees $3,576,566
Health care and workers' compensation 132,212
Other 3,705 3,712,483
---------- ----------
GROSS PROFIT 125,773
EXPENSES:
Administrative and general 299,222
Depreciation and amortization 9,915 309,137
---------- ----------
OPERATING LOSS (183,364)
OTHER INCOME (EXPENSE) -
Interest expense (1,819)
----------
NET LOSS $ (185,183)
==========
</TABLE>
-23-
<PAGE> 24
WORKFORCE STRATEGIES, INC.
--------------------------
STATEMENT OF STOCKHOLDERS' DEFICIT
----------------------------------
SIX MONTHS ENDED JUNE 30, 1997
------------------------------
(unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1996 3,000,000 $300 $237,005 $(463,349) $(226,044)
Issuance of common shares 89,333 9 267,991 -- 268,000
Net loss -- -- -- (138,125) (138,125)
--------- ---- -------- --------- ---------
Balances, June 30, 1997 3,089,333 $309 $504,996 $(601,474) $ (96,169)
========= ==== ======== ========= =========
</TABLE>
-24-
<PAGE> 25
WORKFORCE STRATEGIES, INC.
--------------------------
STATEMENT OF CASH FLOWS
-----------------------
SIX MONTHS ENDED JUNE 30, 1997
------------------------------
(unaudited)
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(138,125)
Noncash revenues and expenses included in net income:
Depreciation and amortization 23,646
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable (339,704)
(Increase) decrease in prepaid expenses (178,928)
Increase (decrease) in accounts payable 194,599
Increase (decrease) in accrued salaries, wages and payroll
taxes 318,659
Increase (decrease) in accrued expenses (6,670)
---------
Net cash flows provided (used) by operating
activities (126,523)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to affiliates (22,216)
Purchase of property and equipment (50,714)
Decrease (increase) in other assets (1,062)
-------
Net cash flows provided (used) by investing
activities (73,992)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (4,993)
Issuance of common stock 268,000
-------
Net cash flows provided (used) by financing
activities 263,007
---------
INCREASE (DECREASE) IN CASH 62,492
CASH, beginning of period --
---------
CASH, end of period $ 62,492
=========
</TABLE>
-25-
<PAGE> 26
WORKFORCE STRATEGIES, INC.
--------------------------
STATEMENT OF CASH FLOWS
-----------------------
SIX MONTHS ENDED JUNE 30, 1996
------------------------------
(unaudited)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(185,183)
Noncash revenues and expenses included in net income:
Depreciation and amortization 9,915
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable (771)
(Increase) decrease in prepaid expenses (397)
Increase (decrease) in accounts payable 186,089
Increase (decrease) in accrued salaries, wages and payroll
taxes 22,450
Increase (decrease) in accrued expenses (13,521)
---------
Net cash flows provided (used) by operating
activities 18,582
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to affiliates (32,937)
Purchase of property and equipment (10,233)
Decrease (increase) in other assets 293
-------
Net cash flows provided (used) by investing
activities (42,877)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (71,489)
Issuance of common stock 167,305
-------
Net cash flows provided (used) by financing
activities 95,816
---------
INCREASE (DECREASE) IN CASH 71,521
CASH, beginning of period 22,767
---------
CASH, end of period $ 94,288
=========
</TABLE>
-26-
<PAGE> 27
TEAM AMERICA CORPORATION
------------------------
INTRODUCTION TO
---------------
PRO FORMA COMBINING FINANCIAL STATEMENTS
----------------------------------------
(unaudited)
The following unaudited Pro Forma Combining Balance Sheet as of June 30, 1997,
and the unaudited Pro Forma Combining Statements of Operations for the six
months ended June 30, 1997, and for the year ended December 31, 1996, illustrate
the effects of the merger of Workforce Strategies, Inc. (Workforce) with and
into TEAM America of California, Inc. (California), a directly wholly owned
subsidiary of TEAM America Corporation (TEAM America). The Pro Forma Combining
Balance Sheet assumes that the merger occurred on June 30, 1997, and the Pro
Forma Combining Statements of Operations assume that the merger occurred at
January 1, 1996.
The merger of Workforce with and into TEAM America will be accounted for as a
purchase transaction. The costs of the acquisition have been preliminarily
allocated to the assets acquired and liabilities assumed based upon their
respective fair values. Workforce is in its second full year of operations. Its
market position in the Bay Area of California, the Silicon Valley and its recent
expansion into Chicago, Illinois and the experience of the principals in the PEO
industry were key factors in acquiring and valuing Workforce. Its past
performance, including expected results for 1997, were not significant factors
in the valuation process given the short operating history of Workforce and its
weak capital structure.
The Pro Forma Combining Financial Statements are presented for comparative
purposes only and are not intended to be indicative of actual results had the
purchase occurred as of the dates indicated above nor do they purport to
indicate results which may be attained in the future.
The acquisition of Workforce facilitates TEAM America's market expansion
strategy outside of Ohio. The pro forma financial statements do not reflect all
of the Company's anticipated actions to achieve operating synergies. The impact
of such actions which are dependent on future conditions are not entirely
estimable for purposes of the Pro Forma Financial Statements.
The Pro Forma Combining Financial Statements should be read in conjunction with
the historical consolidated financial statements included in TEAM America's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and TEAM
America's Quarterly Report on Form 10-Q for the three and six months ended June
30, 1997. Reference should also be made to the Audited Financial Statements of
Workforce for the years ended December 31, 1996 and 1995 and the Unaudited
Financial Statements of Workforce for the six months ended June 30, 1997 and
1996 (which are included as part of this Form 8-K/A).
-27-
<PAGE> 28
TEAM AMERICA CORPORATION
------------------------
PRO FORMA COMBINING STATEMENT OF OPERATIONS
-------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
(unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma
TEAM Elimin/ Combined
America Workforce Adjust Totals
------- --------- ------- ---------
<S> <C> <C> <C> <C>
REVENUES $95,468 $11,298 $-- $106,766
------- ------- ----- --------
DIRECT COSTS:
Salaries, wages, payroll taxes, workers'
compensation premiums, employee benefits and
other 90,025 10,971 -- 100,996
------- ------- ----- --------
Total direct costs 90,025 10,971 -- 100,996
Gross profit 5,443 327 -- 5,770
EXPENSES:
General and administrative expenses 4,029 585 -- 4,614
Advertising 272 -- -- 272
Depreciation and amortization 125 35 364 (1) 524
------- ------- ----- --------
Total operating expenses 4,426 620 364 5,410
Income (loss) from operations 1,017 (293) (364) 360
OTHER INCOME (EXPENSE), net 65 (3) (185)(2) (123)
------- ------- ----- --------
Income before income taxes 1,082 (296) (549) 237
INCOME TAX EXPENSE (BENEFIT) 458 -- (192)(3) 266
------- ------- ----- --------
NET INCOME (LOSS) $ 624 $ (296) $(357) $ (29)
======= ======= ===== ========
EARNINGS (LOSS) PER SHARE $ .29 N/A N/A $ (.01)
======= ======= ===== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
2,160 N/A N/A 2,655(4)
======= ======= ===== ========
</TABLE>
The accompanying introduction and notes to the unaudited pro forma combining
statements are an integral part of this statement.
-28-
<PAGE> 29
TEAM AMERICA CORPORATION
------------------------
PRO FORMA COMBINING STATEMENT OF OPERATIONS
-------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1997
--------------------------------------
(unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma
TEAM Elimin/ Combined
America Workforce Adjust Totals
------- --------- ------- ---------
<S> <C> <C> <C> <C>
REVENUES $57,355 $11,436 $ -- $68,791
------- ------- ------ -------
DIRECT COSTS:
Salaries, wages, payroll taxes, workers'
compensation premiums, employee benefits and
other 54,143 11,163 -- 65,306
------- ------- ------ -------
Total direct costs 54,143 11,163 -- 65,306
Gross profit 3,212 273 3,485
EXPENSES:
General and administrative expenses 2,309 385 -- 2,694
Advertising 160 -- -- 160
Depreciation and amortization 87 24 182 (1) 293
------- ------- ------ -------
Total operating expenses 2,556 409 182 3,147
Income (loss) from operations 656 (136) (182) 338
OTHER INCOME (EXPENSE), net 292 (3) (93)(2) 196
------- ------- ------ -------
Income (loss) before income taxes 948 (139) (275) 534
INCOME TAX EXPENSE 385 -- (93)(3) 292
------- ------- ------ -------
NET INCOME (LOSS) $ 563 $ (139) $ (182) $ 242
======= ======= ====== =======
EARNINGS PER SHARE $ .17 N/A N/A $ .06
======= ======= ====== =======
WEIGHTED AVERAGE SHARES OUTSTANDING 3,356 N/A N/A 3,851(4)
======= ======= ====== =======
</TABLE>
The accompanying introduction and notes to the unaudited pro forma combining
statements are an integral part of this statement.
-29-
<PAGE> 30
TEAM AMERICA CORPORATION
------------------------
PRO FORMA COMBINING BALANCE SHEET
---------------------------------
AS OF JUNE 30, 1997
-------------------
(unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma
TEAM Elimin/ Combined
America Workforce Adjust Totals
------- --------- ------- ---------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,200 $ 63 $(4,118)(8) $ 5,145
Short-term investments 5,784 5,784
Trade receivables, net 783 761 (667)(5) 877
Related party receivables -- 195 (195)(6) --
Unbilled revenues 3,639 -- 667 (5) 4,306
Other receivables 109 -- -- 109
Prepaid income taxes 41 -- -- 41
Prepaid expenses 303 212 -- 515
Deferred income tax asset 120 -- -- 120
------- ------ ------- -------
Total current assets 19,979 1,231 (4,313) 16,897
------- ------ ------- -------
PROPERTY AND EQUIPMENT, net 607 112 -- 719
OTHER ASSETS:
Goodwill and non-compete agreements, net 672 -- 8,876 (8) 9,548
Cash surrender value of life insurance policies 333 -- -- 333
Mandated benefit/security deposits 140 8 -- 148
Deferred income tax asset 102 -- -- 102
Other assets 65 1 -- 66
------- ------ ------- -------
Total other assets 1,312 9 8,876 10,197
------- ------ ------- -------
Total assets $21,898 $1,352 $ 4,563 $27,813
======= ====== ======= =======
</TABLE>
The accompanying introduction and notes to the unaudited pro forma combining
statements are an integral part of this statement.
-30-
<PAGE> 31
TEAM AMERICA CORPORATION
------------------------
PRO FORMA COMBINING BALANCE SHEET
---------------------------------
AS OF JUNE 30, 1997
-------------------
(unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma
TEAM Elimin/ Combined
America Workforce Adjust Totals
------- --------- ------- ---------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 216 $ 461 $ -- $ 677
Accrued compensation 3,310 919 -- 4,229
Accrued payroll taxes 1,032 -- 1,032
Accrued workers' compensation premiums 1,137 36 -- 1,173
Federal and state income taxes payable -- -- -- --
Other accrued expenses 191 -- -- 191
Client deposits 478 -- -- 478
Capital lease obligation, current portion 6 9 -- 15
------- ------ ------ -------
Total current liabilities 6,370 1,425 -- 7,795
------- ------ ------ -------
CAPITAL LEASE OBLIGATION, net of current portion -- 23 -- 23
DEFERRED RENT 112 -- -- 112
DEFERRED COMPENSATION LIABILITY 332 -- -- 332
------- ------ ------ -------
Total liabilities 6,814 1,448 -- 8,262
------- ------ ------ -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock -- -- -- --
Common stock, no par value 13,995 1 4,466 (7)(8) 18,462
Additional paid-in capital -- 505 (505) --
Excess purchase price (84) -- -- (84)
Retained earnings (deficit) 1,193 (602) 602 1,193
Less - Treasury stock, at cost (20) -- -- (20)
------- ------ ------ -------
Total shareholders' equity (deficit) 15,084 (96) 4,563 19,551
------- ------ ------ -------
Total liabilities and shareholders'
equity (deficit) $21,898 $1,352 $4,563 $27,813
======= ====== ====== =======
</TABLE>
The accompanying introduction and notes to the unaudited pro forma combining
statements are an integral part of this statement.
-31-
<PAGE> 32
TEAM AMERICA CORPORATION
------------------------
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
-------------------------------------------------
NOTE 1
- ------
For the year ended December 31, 1996 depreciation and amortization
expense would increase by $364,000 for amortization of goodwill resulting
from this transaction. For the six months ended June 30, 1997
amortization of goodwill from this transaction was $182,000.
NOTE 2
- ------
Represents interest income foregone on the $4,118,000 of cash used to
acquire Workforce.
NOTE 3
- ------
Represents the tax benefit resulting from foregoing interest income as
well as the benefit the combined organization would have received from
the operating losses generated at Workforce. There is no tax benefit
associated with the goodwill amortization because for tax purposes there
will be no goodwill or other amortizable intangibles recorded.
NOTE 4
- ------
Weighted average shares were increased by 495,000 for the shares issued
to Workforce shareholders in the merger.
NOTE 5
- ------
Reclassification to reflect accrued unbilled revenues.
NOTE 6
- ------
Certain related party loans receivables were eliminated prior to the
consummation of the merger.
-32-
<PAGE> 33
NOTE 7
- ------
Represents the issuance of 494,521 shares at $8.50 and 176,037 options
which were valued at $1.50 shares using the Black-Sholes option pricing
model for accounting purposes.
NOTE 8
- ------
Represents the recognition of the consideration paid and the
corresponding premium.
Consideration
- Cash paid to shareholders $3,878
- Transaction costs paid in cash 240
- Cash 4,118
- Stock and options 4,467
------
Total Consideration 8,585
FMV of net liabilities assumed 291
Premium allocated to Goodwill and non-complete
agreements $8,876
======
-33-
<PAGE> 34
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ------------------------------------------------------------ --------
<S> <C> <C>
2 Agreement and Plan of Merger, dated as of September 5, 1997, *
among TEAM America Corporation, TEAM America Acquisitions,
Inc., and Workforce Strategies, Inc.
2.1 Consent of Independent Public Accountant 35
99 Press release of TEAM America Corporation issued September 8, *
1997, regarding the consummation of the Acquisition.
</TABLE>
*Previously filed on Form 8-K.
-34-
<PAGE> 1
Exhibit 2.1
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors and Stockholders
Workforce Strategies, Inc.
I consent to the inclusion of my report dated August 18, 1997 with respect to
the balance sheets of Workforce Strategies, Inc. as of December 31, 1996 and
1995, and the related statements of income, stockholders' deficit, and cash
flows for the years ended December 31, 1996 and the seven months ended December
31, 1995 which report appears in the Form 8-K/A of TEAM America Corporation
dated September 8, 1997.
November 10, 1997 Henry Vanderzee
