As filed with the Securities and Exchange Commission on August 30, 1996
Registration Statement No. 33-_________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WORKFORCE SYSTEMS CORP.
(Name of Small Business Issuer in its Charter)
Florida 6719 65-0353816
(State or other juris- (Primary Standard (I.R.S. Employer
diction of incorporation Industrial Classifi- Identification No.
or organization) cation) Code Number)
269 Cusick Road, Suite C-2
Alcoa, Tennessee 37701
(423) 681-6034
(Address and telephone
number of principal
executive offices)
Ella Chesnutt
Workforce Systems Corp.
269 Cusick Road, Suite C-2
Alcoa, Tennessee 37701
(423) 681-6034
(Name, address and telephone number of agent for service)
With copies to:
Joel D. Mayersohn, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
New River Center
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale, Florida 33331
(305) 763-1200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
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, check the following box: [X]
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 said Section 8(a),
may determine.
<PAGE>
WORKFORCE SYSTEMS CORP.
Cross Reference Sheet for Prospectus Under Form SB-2
Form SB-2 Item No. and Caption Caption or Location in Prospectus
------------------------------ ---------------------------------
1. Forepart of Registration Cover Page; Cross Reference
Statement and Outside Sheet; Outside Front Cover
Front Cover of Prospectus Page of Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of Prospectus
3. Summary Information and Prospectus Summary; High Risk
Risk Factors Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Cover Page; High Risk Factors
Price
6. Dilution Not Applicable
7. Selling Security Holders Selling Security Holders
8. Plan of Distribution Outside Front Cover Page of
Prospectus; Selling Security
Holders
9. Legal Proceedings Business
10. Directors, Executive Offi-
cers, Promoters and Control
Persons Management
11. Security Ownership of Cer-
tain Beneficial Owners and
Management Principal Stockholders
12. Description of Securities Description of Securities
13. Interest of Named Experts
and Counsel Legal Matters
14. Disclosure of Commission
Position on Indemnifica-
tion for Securities Act
Liabilities Undertakings
15. Organization within Last
Five Years Not Applicable
<PAGE>
Form SB-2 Item No. and Caption Caption or Location in Prospectus
------------------------------ ---------------------------------
16. Description of Business Business
17. Management's Discussion Management's Discussion and
and Analysis and Plan of Analysis of Financial Condition
Operation and Results of Operations
18. Description of Property Business - Properties
19. Certain Relationships and Management-Certain Relationships
Related Transactions and Related Transactions
20. Market for Common Equity Price Range for Common Stock;
and Related Stockholder Description of Securities;
Matters Shares Eligible for Future Sale
21. Executive Compensation Management - Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagree-
ments with Accountants on
Accounting and Financial
Disclosure Not Applicable
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Maximum Maximum
Title of Amount Offering Aggregate Amount
Shares to be to be Price Per of Offering Registration
Registered Registered Share (1) Price (1) Fee
================================================================================
Common Stock,
$.001 par value
per share 392,000 $5.12(2) $2,007,040(2) $692.08
================================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(b).
(2) The maximum price is estimated based on the closing price on August 27,
1996.
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, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
PROSPECTUS
WORKFORCE SYSTEMS CORP.
392,000 SHARES OF COMMON STOCK
This Prospectus covers an aggregate of 392,000 shares of Common Stock, par
value $.001 per share ("Common Stock" or "Shares") of Workforce Systems Corp.
(the "Company" or "Workforce) which are being registered for possible resale by
certain shareholders and warrant holders of the Company (the "Selling Security
Holders"). An aggregate of 222,000 of these shares of Common Stock were acquired
by the holders in private placements during June 1996 at various prices ranging
from $4.125 to $4.80 per share. An aggregate of 100,000 shares of Common Stock
which are covered by this Prospectus underlie warrants (the "Laidlaw Warrants")
granted to Laidlaw Equities, Inc. ("Laidlaw"), the Company's investment banker,
by the Company in July 1996. Finally, this Prospectus also covers 70,000 shares
of Common Stock issued to an individual upon conversation of 70,000 shares of
the Company's Series B $5.00 Cumulative Convertible Preferred Stock (the "Series
B Preferred"). See "Business - Acquisition of Prime Florida and OIS", "Business
- - Engagement of Investment Banking Firm", "Selling Security Holders" and
"Description of Securities."
The Company's Common Stock is traded on a limited basis on the OTC
Bulletin Board under the symbol "WFSC," and on August 27, 1996, the closing bid
price for the Common Stock was $5.12. The Company has applied for inclusion of
its Common Stock on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), but there can be no assurances that such securities
will be accepted for inclusion in the NASDAQ System. Furthermore, there can be
no assurances that a substantial trading market for its Common Stock will
develop or be sustained in the future. See "Price Range of Common Stock."
The Company has been advised by the Selling Security Holders that they may
sell all or a portion of the Shares offered hereby from time to time in the
over-the-counter market, in negotiated transactions, directly or through brokers
or otherwise, and that such shares will be sold at market prices prevailing at
the time of such sales or at negotiated prices. The Company will not receive any
of the proceeds from the sale of the Shares offered hereby except upon exercise
of the Laidlaw Warrants. See "Use of Proceeds." In connection with such sales,
the Selling Security Holders and any brokers participating in such sales may be
deemed to be underwriters within the meaning of the Securities Act of 1933 (the
"Act"). See "Use of Proceeds" and "Selling Security Holders."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. POTENTIAL PURCHASERS SHOULD NOT
INVEST IN THESE SECURITIES UNLESS THEY CAN AFFORD A LOSS OF THEIR ENTIRE
INVESTMENT HEREIN. SEE "HIGH 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 August ____, 1996
1
<PAGE>
All costs, expenses and fees in connection with the registration of the
shares of Common Stock offered hereby will be borne by the Company. Brokerage
commissions, if any, directly attributable to the sale of the Shares will be
borne by the Selling Security Holders.
The Company has informed the Selling Security Holders that the
anti-manipulative rules under the Securities Exchange Act of 1934, Rules 10b-6
and 10b-7, may apply to their sales in the market and has furnished each of the
Selling Security Holders with a copy of these rules. The Company has also
informed the Selling Security Holders of the need for delivery of copies of this
Prospectus in connection with any sale of securities registered hereunder.
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN
THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY, IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and may distribute quarterly reports
containing unaudited summary financial information for each of the first three
quarters of each fiscal year.
The Company has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form SB-2 (herein together with all
amendments and exhibits referred to as the "Registration Statement") under the
Securities Act of 1933. Reports and other information filed by the Company can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at 7 World Trade Center, New York, New York
10048, Room 1204, Everett McKinley Dirksen Building, 219 South Dearborn Street,
Chicago, Illinois 60604, and Suite 500 East, 5757 Wilshire Boulevard, Los
Angeles, California 90036. Copies of such material can be obtained upon written
request addressed to the Commission, Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.
2
<PAGE>
PROSPECTUS SUMMARY
The following is intended to summarize more detailed information and
financial statements and notes thereto which are set forth more fully elsewhere
in this Prospectus or incorporated herein by reference and, accordingly, should
be read in conjunction with such information.
THE COMPANY
The Company was incorporated under the laws of the State of Florida on
August 17, 1992 under the name Wildflower Financial Corp. In July 1994,
following a change in control, the Company changed its name to Workforce Systems
Corp. The Company is a diversified holding company with subsidiaries involved in
manufacturing and industrial fabrication, employee staffing and consumer
products.
Industrial Fabrication & Repair, Inc.("IFR"), founded in 1979, provides
machining, welding, speciality design and fabrications for custom applications
to clientele from various industries including paper, steel mills, rock quarry
operations, coal mining applications and bottling facilities. NHP Manufacturing
Corp. ("NHP"), a subsidiary of IFR founded in 1994, is a contract manufacturer
which is the exclusive manufacturer for the ThawMaster family of thawing trays.
IFR's newly incorporated subsidiary Manufacturer's Requisition Order Corp.
("MRO") is an industrial supply house representing several major lines of power
transmission products, such as gear boxes, bearings and couplings, which are
commonly used in industrial manufacturing and operating facilities.
American Industrial Management, Inc. ("AIM"), founded in 1995, and Outside
Industrial Services, Inc. ("OIS"), founded in 1982, provide light industrial and
light manufacturing staffing on a contract basis to businesses.
Products That Produce, Inc. ("PTP"), founded in 1995, is a consumer
products company whose mission is to identify and market new consumer products
which are both innovative and moderately priced. The first product undertaken by
PTP is MR. FOOD'S ALLOFRESH. The product is being marketed under endorsement by
Art Ginsburg, the nationally syndicated T.V. chef known as "Mr. Food". All
natural, made from minerals, non-toxic and environmentally safe, MR. FOOD'S
ALLOFRESH works to prevent food decay and eliminate bacteria, moisture, mold,
mildew and odors in refrigerators, the kitchen and around the house.
The Company's executive offices are located at 269 Cusick Road, Suite C-2,
Alcoa, Tennessee 37701, telephone 423-681-6034.
3
<PAGE>
THE OFFERING AND OUTSTANDING SECURITIES
Common Stock Outstanding at
July 31, 1996 2,493,934 shares of Common Stock
Common Stock Offered by Selling
Security Holders 392,000 shares of Common Stock (1)
Preferred Stock Outstanding 30 shares of Series A Preferred
July 31, 1996 Stock, 30,000 shares of Series C Preferred
Stock and 1,000,000 shares of Series D
Preferred Stock (2)
Risk Factors Investment in these securities involves a high
degree of risk. See "High Risk Factors."
OTC Bulletin Board Symbol WFSC(2)
- -----------------------
(1) Includes 100,000 shares of Common Stock underlying the Laidlaw Warrants.
(2) The Company has applied for inclusion of its Common Stock on the NASDAQ
Small Cap stock market. There can be no assurances that the Common Stock
will qualify for inclusion at any time in the future. Inclusion on NASDAQ
on NASDAQ does not imply that an established trading market will develop
or be sustained for the Common Stock. See "Description of Securities - OTC
Market."
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
SUMMARY OF SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial information concerning
the Company and is qualified by reference to the audited consolidated financial
statements and notes thereto and unaudited quarterly financial statements
prepared by the Registrant incorporated herein by reference in this Prospectus.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
YEAR FIVE MONTHS YEAR
FOR THE NINE MONTHS ENDED ENDED ENDED
ENDED MARCH 31, JUNE 30, JUNE 30, JANUARY 31,
1996 1995 1995 1994 1994
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues..................$ 3,158,452 $1,585,880 $2,825,030 $585,717 $1,254,428
Net Income................ 451,261 388,840 438,073 60,531 101,762
Earnings per common share
outstanding............ .26 .33 .33 .05 .10
Weighted average
shares outstanding..... 1,598,903 1,011,449 1,144,106 1,081,439 1,081,439
CONSOLIDATED BALANCE SHEET DATA:
At June 30, At March 31,
----------- ------------
1995 1994 1996 1995
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Working capital ................. $ 869,572 $(84,175) $1,746,656 $354,797
Total Assets..................... 7,366,173 528,379 8,326,268 $528,379
Long Term debt, less
current portion................ 720,457 - 647,732 -
Stockholders' equity ............ 4,409,398 327,779 6,611,093 $327,779
</TABLE>
5
<PAGE>
HIGH RISK FACTORS
The shares of Common Stock offered hereby involve a high degree of risk
and is highly speculative in nature. Prospective investors should carefully
consider the following risks and speculative factors, among others, inherent in
and affecting both the business of the Company and the value of the Common
Stock, including, among other matters, the following risk factors:
ADDITIONAL FINANCING REQUIRED AND POSSIBLE LACK OF AVAILABILITY OF FUNDS
The Company has experienced significant growth since June 1994. The
Company will require substantial capital in the future in order to continue this
growth pattern. In July 1996 the Company engaged Laidlaw Equities, Inc., an NASD
member firm, to, among other things, consult with the Company in regards to its
needs for additional financing. While the Company's working capital at March 31,
1996 was $1,746,656, and the Company raised approximately $1,000,000 through a
private placement of its securities in June 1996, the Company's abilities to
sustain its internal growth are limited by continued availability of additional
working capital. It is presently anticipated by management of the Company that
the Company will seek to raise additional capital through a public offering of
its securities during Fiscal 1997. In addition, the Company's inventory,
accounts receivables and a substantial portion of its property, plant and
equipment are unencumbered and, accordingly, would provide additional sources of
internal working capital should the Company elect to enter into asset based
lending arrangements. There are no assurances that such fundings will be
available upon terms acceptable or feasible to the Company or its stockholders.
In such event, the continued growth of the Company would be restrained. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
LIMITED OPERATING HISTORY OF PTP AND MRO
Two of the Company's subsidiaries, PTP and MRO, have only recently
commenced business and have a limited history of operations. PTP, a consumer
products company, has just begun the introduction of its first product, MR.
FOOD'S ALLOFRESH. To assist PTP in developing brand awareness for its product,
PTP has entered into a licensing agreement with Ginsburg Enterprises
Incorporated ("Ginsburg") covering certain marks related to the television
personality known as "Mr. Food." MRO, which is a subsidiary of IFR, is an
industrial supply house which only begun operations within the past few weeks.
IFR has hired additional experienced salesmen (from a competitor of MRO) to
assist in the rapid development of MRO's business. An investor should be aware
of the potential problems, delays and difficulties often experienced by any
relatively new business enterprise. Problems may arise which may be beyond the
6
<PAGE>
control of the management. These may include, but not limited to, unanticipated
problems relating to supplies, marketing and promotional expenses, enforcing
negative publicity, competition, lack of operating experience and need for
additional financing. There can be no assurance that the Company's products or
services can continually to be successfully marketed. See "Business."
UNPROVEN MARKET ACCEPTANCE OF MR. FOOD'S ALLOFRESH
The Company has devoted substantial resources and capital to the
development and introduction of PTP's first product, MR. FOOD'S ALLOFRESH. While
preliminary indications are that the product will receive wide market acceptance
with retailers and the buying public, which should translate into substantial
revenues and earnings for the Company, there are no assurances whatsoever that
the Company is correct. See "Business."
COMPETITION
Competition in all three divisions of the Company's business is intense.
Competitors include international and national companies, many of which have
longer operating histories, and greater financial, marketing, manufacturing and
other resources than the Company. The Company expects it will be subject to
competition from numerous other entities if its operations continue to grow and
the products in which it markets and developments continue to expand. There are
no assurances whatsoever that any of the Company's divisions will ever obtain,
or if obtained, sustain a competitive advantage. See "Business."
RISK OF DEPENDENCE ON KEY PERSONNEL
The Company's day-to-day operations are managed by Lester Gann, as to the
Manufacturing Division, Robert Lovelace and David Debuty, as to the Staffing
Division, and William P. Heath, III and Barry Rothman, as to the Consumer
Products Division. The Company has entered into three year employment agreements
with Messrs. Gann, Lovelace and Debuty and is currently negotiating a one-year
agreement with Mr. Heath. Mr. Rothman is a consultant to the Company and,
accordingly, does not devote his full time and attention to the business and
operations of the Company. The loss of any of the services of any of these
individuals would adversely affect the conduct of the Company's business. The
Company's future success will depend in significant part on its ability to
attract and retain additional skilled personnel in various phases of its
operations. See "Management."
7
<PAGE>
NO DIVIDENDS ANTICIPATED TO BE PAID
The Company has not paid any cash dividends on its Common Stock since its
inception and does not anticipate paying cash dividends on its Common Stock in
the foreseeable future. The future payment of dividends is directly dependent
upon future earnings of the Company, the capital requirements of the Company,
its financial requirements and other factors to be determined by the Company's
Board of Directors. For the foreseeable future, it is anticipated that earnings,
if any, which may be generated from the Company's operations will be used to
finance the growth of the Company, and that cash dividends will not be paid to
common stockholders. See "Dividend Policy."
POSSIBLE RESALES OF SECURITIES BY CURRENT STOCKHOLDERS AND DEPRESSIVE EFFECT ON
MARKET
As of July 31, 1996, there were 1,492,746 shares of the Company's Common
Stock outstanding which were "restricted securities" as that term is defined by
Rule 144 under the Securities Act of 1933 as amended, (the "Securities Act"),
inclusive of 392,000 shares being registered pursuant to this Registration
Statement of which this Prospectus is a part. Such shares will be eligible for
public sale only if registered under the Securities Act or if sold in accordance
with Rule 144. Under Rule 144, a person who has held restricted securities for a
period of two years may sell a limited number of shares to the public in
ordinary brokerage transactions. Sales under Rule 144 may have a depressive
effect on the market price of the Company's Common Stock due to the potential
increased number of publicly held securities. The timing and amount of sales of
Common Stock covered by the Registration Statement of which this Prospectus is a
part, as well as such subsequently filed registration statement, could also have
a depressive effect on the market price of the Company's Common Stock. See
"Shares Eligible for Future Sales."
USE OF PREFERRED STOCK TO RESIST TAKEOVERS; POTENTIAL ADDITIONAL DILUTION
The Company's Articles of Incorporation authorizes 2,000,000 shares of
Preferred Stock, of which 30 shares of Series A Preferred Stock, 30,000 Series C
Preferred Stock and 1,000,000 shares of Series D are presently issued and
outstanding. As provided in the Company's Articles of Incorporation, Preferred
Stock may be issued by resolutions of the Company's Board of Directors from time
to time without any action of the stockholders. Such resolutions may authorize
issuance of the Preferred Stock in one or more series and may fix and determine
dividend and liquidation preferences, voting rights, conversion privileges,
redemption terms and other privileges and rights of the shares of each
authorized series. While the Company includes such Preferred Stock in its
8
<PAGE>
capitalization in order to enhance its financial flexibility, or as with the
Series D Preferred such Preferred Stock could possibly be used by the Company as
a means to preserve control by present management in the event of a potential
hostile takeover of the Company. In addition, the issuance of large blocks of
Preferred Stock could possibly have a dilutive effect with respect to existing
holders of Common Stock of the Company. See "Description of Securities."
LIMITED MARKET FOR THE COMPANY'S COMMON STOCK; POSSIBLE VOLATILITY OF
SECURITIES PRICES
There is currently only a limited trading market for the Common Stock of
the Company. The Common Stock of the Company trades on the OTC Bulletin Board
under the symbol "WFSC," which is a limited market and subject to substantial
restrictions and limitations in comparison to the NASDAQ System. There can be no
assurance that a substantial trading market will develop (or be sustained, if
developed) for the Common Stock or that purchasers will be able to resell their
securities or otherwise liquidate their investment without considerable delay,
if at all. Recent history relating to the market prices of newly public or
recently listed companies indicates that, from time to time, there may be
significant volatility in the market price of the Company's securities because
of factors unrelated, as well as related, to the Company's operating
performance. There can be no assurances that the Company's Common Stock will
ever qualify for inclusion within the NASDAQ System or that more than a limited
market will ever develop for its Common Stock. See "Price Range of Common
Stock."
BROKER-DEALER SALES OF COMMON STOCK AND LIMITATION ON MARKETABILITY
While the Company has applied for the inclusion of its Common Stock on the
NASDAQ System, there can be no assurances that the Company will ultimately
qualify for inclusion within that system. In order for an issuer to be included
in the NASDAQ System, it is required to have total assets of at least
$4,000,000, capital and surplus of at least $2,000,000, a minimum price per
share of not less than $3.00, have publicly held shares with a market value of
at least $1,000,000 as well as certain other criteria. While the Company
believes it currently meets these criteria there can be no assurance that the
Common Stock of the Company will otherwise qualify for inclusion on the NASDAQ
System. Until the Company's shares qualify for inclusion in the NASDAQ system,
the Company's Common Stock will be traded in the over-the-counter markets on the
OTC Bulletin Board. As a result, the Company's Common Stock is covered by a
Securities and Exchange Commission rule that imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in excess of
9
<PAGE>
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their
spouse). For transactions covered by the rule, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, the rule
may affect the ability of broker-dealers to sell the Company's securities and
may also affect the ability of stockholders to sell their shares in the
secondary market. See "Description of Securities."
PRICE RANGE OF COMMON STOCK
On August 26, 1994 the Company's Common Stock began trading on the OTC
Bulletin Board under the symbol WFSC. Prior to such date, there had been no
market for the Company's Common Stock; thereafter, there has been limited
trading. The following table sets forth the high and low bid prices of the
Company's Common Stock for each quarter since the stock began trading on August
26, 1994, and for the interim period from June 30, 1996 (the end of the last
quarter) through August 27, 1996. The following quotations are over-the-market
quotations and, accordingly, reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
Bid Price
-----------------------
High Low
---- ---
August 26, 1994 through September 30, 1994 $ 3.00 $ 2.75
October 1, 1994 through December 31, 1994 $ 4.63 $ 3.00
January 1, 1995 through March 31, 1995 $ 5.67 $ 5.50
April 1, 1995 through June 30, 1995 $ 8.47 $ 8.03
July 1, 1995 through September 30, 1995 $ 8.49 $ 8.14
October 1, 1995 through December 31, 1995 $ 7.61 $ 6.04
January 1, 1996 through March 31, 1996 $ 5.89 $ 5.64
April 1, 1996 through June 30, 1996 $ 6.62 $ 6.37
July 1, 1996 through August 27, 1996 $ 5.49 $ 5.23
On August 27, 1996, the closing bid price for the Common Stock was $ 5.12.
As of July 31, 1996, the approximate number of record holders of the Company's
Common Stock was 70. Management of the Company, however, believes there to be in
excess of 500 beneficial holders of the Company's Common Stock.
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock since its
inception. The Company presently intends to retain future earnings, if any, to
finance the expansion of its business and does not anticipate that any cash
dividends will be paid in the foreseeable future. Future dividend policy will
depend on the Company's earnings, capital requirements, expansion plans,
financial condition and other relevant factors.
10
<PAGE>
The Company presently has issued and outstanding 30 shares of Series A
Preferred and 1,000,000 shares of Series D Preferred Stock issued and
outstanding. Such classes of securities do not pay any dividends. On May 30,
1996 the holder of 70,000 shares of the Company's Series B Preferred Stock
converted such shares into 70,000 shares of the Company's Common Stock pursuant
to the designations, rights and preferences of such series of preferred stock.
See "Selling Security Holders." Prior to such conversion, such 70,000 shares of
Series B Preferred Stock paid annual cumulative dividends of $.43 per share. Any
right to receive dividends was terminated effective with the conversion of such
Series B Preferred. The Company presently has issued and outstanding 30,000
shares of Series C Preferred Stock which pays annual dividends as set by the
Company's Board of Directors. For the calendar year ended December 31, 1995 the
Company paid annual dividends of $30,000 on the Series C Preferred Stock. For
the calendar year ending December 31, 1996, the amount of dividend, if any, on
the Series C Preferred Stock shall only be paid at the discretion of the
Company's Board of Directors. As of the date of this Prospectus, no dividends
have been declared or paid on the Series C Preferred Stock during the calendar
year ending December 31, 1996 and it is not presently anticipated that any
dividends will be declared or paid prior to December 31, 1996.
11
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company at
March 31, 1996.
March 31, 1996
--------------
(unaudited)
Actual
------
Short-term debt $ 250,626
Long-term debt, less current portion(1)...... 647,732
-------
Total debt................................... $ 898,358
Stockholders' equity:
Preferred Stock, $.001 par value,.........
2,000,000 shares authorized; 30
shares of Series A issued and outstanding;
70,000 shares of Series B issued
and outstanding; 30,000 shares of Series C
issued and outstanding.................... 100
Common Stock, $.001 par value per share;
10,000,000 shares authorized;
2,026,248 shares issued and outstanding 2,027
Additional paid-in capital................... 5,864,903
Retained earnings............................ 744,063
-------
Total stockholders' equity................ 6,611,093
---------
Total capitalization...................... $ 7,509,451
===========
(1) See Notes to Consolidated Financial Statements included elsewhere herein
for a description of terms of the Company's notes and long-term
obligations.
12
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
for the accounts of the Selling Security Holders other than upon the exercise of
the Laidlaw Warrants. In the event all of the Laidlaw Warrants are exercised, of
which there are no assurances, the Company would receive an aggregate of
$642,100, which such amount would be used for general working capital purposes.
See "Business - Engagement of Investment Banking Firm" and "Description of
Securities."
SELECTED FINANCIAL DATA
The financial data included in the following table has been selected by
the Company and has been derived from the financial statements for the periods
indicated. The following financial data should be read in conjunction with the
Company's Consolidated Financial Statements and related Notes and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included
elsewhere herein.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
For the Nine Months
Ended March 31, Year Ended Five Months Year Ended
1996 1995 June 30, 1995 June 30, 1994 January 31, 1994
---- ---- ------------- ------------- ----------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues.................$3,158,452 $1,585,880 $2,825,030 $585,717 $1,254,420
Net income............... 451,201 388,840 438,073 60,531 101,762
Earnings per average
common share
outstanding........... .26 .33 .33 .05 .10
Weighted average
shares outstanding.... 1,598,903 1,011,449 1,144,106 1,081,439 1,081,439
CONSOLIDATED BALANCE SHEET INFORMATION:
June 30, March 31,
-------- ---------
1994 1995 1996 1995
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Working capital (deficit) $869,572 $(84,148) $1,746,656 $354,797
Total Assets 7,366,173 528,379 8,326,268 528,379
Long term debt,
less current portion 720,457 - 647,732 -
Stockholder's equity 4,409,398 327,779 6,611,093 327,779
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Fiscal Year End
---------------
The Company reported a significant increase in revenues for the year ended
June 30, 1995 primarily as a result of an expansion of the Company's operations
into the contract manufacturing of the thawing trays under a manufacturing
agreement with Naturale Home Products, Inc. ("Naturale"). For the year ended
June 30, 1995, revenues from OIS accounted for approximately 45% of the total
revenues reported with NHP accounting for approximately 42%. Industrial
Fabrication & Repair, Inc. ("IFR"), which was acquired in May 1995, accounted
for the remaining approximately 13% of revenues reported for the year ended. For
the five months ended June 30, 1994 and the year ended January 31, 1994 the
Company's sole source of revenues came from OIS.
The Company's gross profit as a percentage of revenues increased slightly
to approximately 32% from approximately 30% for the five months ended June 30,
1994 and approximately 27% for the year ended January 31, 1994. NHP and IFR each
reported gross profit as a percentage of revenues of approximately 40% and OIS
reported gross profit as a percentage of revenues of approximately 24%. The
decrease of approximately 6% in OIS' gross profit as a percentage of revenues
resulted from a reduction of personnel being supplied by OIS.
Selling, general and administrative expense (SG&A) as a percentage of
revenues decreased for the year ended June 30, 1995 as compared to the five
months ended June 30, 1994 and the year ended January 31, 1994. Such was a
result of the significant increase in revenues even after the increase in
overhead associated with NHP. Both the Company's net income before extraordinary
items as a percentage of revenues and net income as a percentage of revenues
also increased as a result of the increase in revenues.
Further, as discussed above, revenues from NHP accounted for approximately
42% of the total revenues reported by the Company for the year ended June 30,
1995. These revenues were reported in the second, third and fourth fiscal
quarters following execution of the Naturale Agreement in November 1994 and are
related to the exclusive manufacture of the ThawMaster family of thawing trays.
14
<PAGE>
During the fiscal year ended June 30, 1995 the Company was successful in
significantly expanding the operations of the Company through the acquisitions
of NHP and IFR, thereby removing the Company's prior dependance upon a single
source of revenue. During Fiscal 1996 and beyond management of the Company
intends to continue the expansion of IFR's operations as well as continuing to
further diversify the Company's business.
Nine Months ended March 31, 1996
--------------------------------
The Company reported an approximate 99% increase in revenues for the nine
months ended March 31, 1996 as compared to the nine months ended March 31, 1995
and it reported an approximate 40% increase in revenues for the three months
ended March 31, 1996 as compared to the three months ended March 31, 1995.
Results for the three months and nine months ended March 31,1996 reflect a
change in the dominate revenue base within the Company's consolidated operations
and the attendant reduction in gross profit as a result thereof. Management
believes this shift is temporary as a result of the period between the maturity
of one consumer product (such as ThawMaster) and the introduction of another
(MR. FOOD'S ALLOFRESH). During such three month period, revenues from the
Company's employee staffing division accounted for approximately 15% of the
total revenues reported, with revenues from NHP accounting for approximately
13%; IFR accounting for the approximately 71% of revenues reported; and PTP
accounting for the remaining approximate 1% of revenues reported for the three
months ended. During the comparable three months in Fiscal 1995, revenues from
OIS and NHP, which accounted for 51% and 49%, respectively, were the sole source
of the Company's revenues.
During the nine months ended March 31, 1996 the Company experienced a
significant and continuing decline under a contract with OIS's primary client.
Management had been actively seeking additional contracts or acquisitions to
replace the lost revenues at OIS and in March 1996 the Company acquired 100% of
the issued and outstanding stock of AIM, a small start-up staffing company based
in East Tennessee whose operating officers possess a strong sales background.
AIM, which is also concentrated in the areas of light industrial, light
manufacturing staffing, provides lower cost, less skilled workers which
compliments OIS' niche of providing more skilled, niche employees to its
clients. As a result of this acquisition, the portion of revenues generated by
AIM to the staffing division as a whole have supplanted the decrease in revenues
from OIS thereby maintaining an overall stability in the total revenue base
albeit at the lower gross profit margin typically found in that niche of
15
<PAGE>
employee staffing companies. Further, management believes AIM has significant
revenue potential over the next 24 months (with minimal capital requirements)
which would far exceed historical revenues from OIS' operations. In addition, as
described below, the Company has been able to diversify its operations so that
it is no longer solely dependant upon revenues from OIS.
Revenues from NHP for the three months ended March 31, 1996 continue to
reflect a decrease in the sales of the ThawMaster family of thawing trays as the
product continues to mature in the marketplace. There are no assurances that
sales of this product will return to previous levels.
As set forth above, the Company acquired IFR in May 1995 and, accordingly,
the results of operations for the three months and nine months periods ended
March 31, 1995 do not reflect any revenues from IFR's operations. However, a
comparison of revenues for the three months ended March 31, 1996 to the
immediately preceding quarter ended December 31, 1995 reflect an increase in
revenues from IFR of approximately 7%. Management believes, although there can
be no assurances, that IFR can sustain an annualized growth rate of
approximately 10% during the balance of Fiscal 1996 and beyond through the
acquisition of additional product lines for distribution and expansion of its
historical sales areas.
Finally, the Company has undertaken a new area of expansion through PTP.
PTP's and its first product offering, MR. FOOD'S ALLOFRESH, which is a natural
mineral which when placed in a refrigerated environment, removes both moisture
and odor from the environment as well as neutralizing ethylene gas, the
by-product of food deterioration, thus significantly extending the life of
refrigerated products. The Company has excavated sufficient mineral to produce
approximately 5,000,000 units and has processed and delivered to the package the
initial run of 100,000 units. It is expected that merchandise will be available
for shipment sometime in the first week of June 1996.
MR. FOOD'S ALLOFRESH will be initially introduced over direct response
television. These 60 to 120 second commercials featuring Mr. Food endorsing the
product, followed by the traditional "blue" screen which provides information to
order the product, will be run on nationwide cable as well as certain selected
markets nationwide which will be strategically linked to markets in which Mr.
Food's daily syndicated vignettes have the strongest viewer response. The
product will be sold in three packs for approximately $19.99 (plus shipping and
handling) and a nationwide fulfillment house will be engaged to process the
orders. Following the direct response commercials, MR. FOOD'S ALLOFRESH will be
sold in single units through mass merchandisers, drug and grocery store chains.
16
<PAGE>
The Company has undertaken various steps, including the expansion of the
Company's operations through the organization of NHP in November 1994, the
acquisition of IFR in May 1995, the start-up of PTP in October 1995 and the
acquisition of AIM in March 1996, to reduce is previous dependence upon OIS'
operations as a single source of revenue. While there can be no assurances,
management believes the fundamentals are in place to insure a continued growth
of revenues at significant levels and, coupled with stabilized SG&A expenses
(see below) and significant gross profit potential at PTP, the opportunity to
produce healthy earnings through the next 24 months following the product's
initial introductory time period.
The Company's gross profit as a percentage of revenues decreased
approximately 5% to approximately 38% for the three months ended March 31, 1996
as compared to the comparable quarter in Fiscal 1995; however, it increased
approximately 7% for the nine months ended March, 1996 as compared to the same
nine months in Fiscal 1995. The decrease during the three months ended is
attributable to the dominance IFR played in the overall revenues of the Company
during that quarter. As set forth above, in the event MR. FOOD'S ALLOFRESH,
which the Company projects will have a significant gross profit margin, enjoys
the market success the Company currently predicts, the gross profit as a
percentage of revenues should, although there can be no assurances,
substantially improve during the next 24 months following the product's initial
introductory time period.
Selling, general and administrative expense (SG&A) as a percentage of
revenues for the three months ended March 31, 1996 decreased substantially to
approximately 15% as compared to approximately 21% for the second quarter of
Fiscal 1996 as a result of cost savings instituted by the Company in the
beginning of Fiscal 1996. Giving effect to such consolidation, the Company
currently projects an annualized SG&A savings of approximately $ 180,000.
Management of the Company believes that SG&A as a percentage of revenues will
remain relatively constant even as the Company expands into other aforedescribed
areas.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity has continued to improve since June 30, 1995. At
March 31, 1996 the Company had working capital of approximately $1,746,656 an
increase of approximately 100% from June 30, 1995. As previously disclosed,
under the terms of the exclusive manufacturing agreement with Naturale, the
Company has provided working capital to Naturale in the form of inventory and
receivable financing. Sales of thawing trays to Naturale are designated at March
31, 1996 as related party accounts receivable by virtue of the 15% ownership
17
<PAGE>
interest in Naturale held by the Company at that date. On May 30, 1996 the
Company divested itself of such 15% interest in Naturale, a marketing company,
but retained the exclusive manufacturing rights under the Naturale Agreement.
The Company determined such 15% interest was immaterial to the Company's
financial statements and operations and further conflicted with the
establishment of PTP to market the Company's products. The Company believes all
such receivables, the terms of which are generally 60 to 90 days, are fully
collectable. Inventory at March 31, 1996 is represented approximately 50% by
IFR, with PTP representing approximately 30% and the balance of approximately
20% represented by NHP.
Working capital has been provided from time to time to the Company though
an unsecured loan by its principal shareholder, Yucatan Holding Company
("Yucatan"), which was due in June 1997, subject to extension in the event of
certain occurrences, and is designated on the balance sheet as related party
note payable. In November 1995 Yucatan converted the principal amount of
$936,770 due it by the Company at June 30, 1995 into 170,322 shares of the
Company's restricted Common Stock based upon a conversion price equal to the
closing bid price on the day of conversion.
As the Company expands its operations it will be necessary for the Company
to raise additional capital to fund its operations. In June 1996, the Company
completed a private offering to two institutional investors and two accredited
investors of 222,000 shares of its Common Stock with offering proceeds of
approximately $1,000,000. It is presently anticipated that management will seek
to raise additional capital through a public offering of its securities during
Fiscal 1997. There are no assurances, however, that management will definitively
determine to proceed with such offering or that the Company will be successful
in concluding such an offering. In such event, the continued growth of the
Company would be limited to the internal availability of working capital. The
Company's inventory, accounts receivable and a substantial portion of its
property, plant and equipment are unencumbered and, accordingly, would provide
additional sources of internal working capital should the Company elect to enter
into asset based lending arrangements.
18
<PAGE>
BUSINESS
OVERVIEW
Workforce Systems Corp. (formerly known as Wildflower Financial Corp.), a
Florida corporation (the "Company"), was formed on August 17, 1992 to seek
acquisition possibilities throughout the United States and to make acquisitions
or enter into other business endeavors to the extent its limited assets would
allow. In order to raise the capital necessary to accomplish such goals, the
Company offered 10,000 shares of Common Stock at a purchase price of $6.00 per
share to the public pursuant to a registration statement under the Act, through
its then executive officers on a "best efforts" basis. In June 1993 the Company
completed its initial public offering with the sale of 3,505 shares of Common
Stock, receiving net proceeds, after the costs of the offering, of approximately
$11,371.
Acquisition of Prime Florida and OIS
------------------------------------
Pursuant to its intended business purpose, on June 14, 1994 Mr. F. W.
Miller, the Company's principal shareholder, President and Chairman, sold an
aggregate of 18,200 shares of the Company's restricted Common Stock owned by
him, representing approximately 55% of the Company's then issued and outstanding
stock, in a private transaction exempt from registration under the Act to
Yucatan Holding Company, a Florida corporation ("Yucatan"), for $60,000 (the
"Purchase Price"). Payment of the Purchase Price was tendered in the form of
$5,000 cash at closing together with a $55,000 principal amount installment
promissory note due in full on or before December 31, 1994. Concurrent with the
purchase of the stock by Yucatan, the Company's then current officers and
directors resigned and the Company's current officers and directors were
elected.
Effective June 30, 1994 the Company acquired 51.9% of the issued and
outstanding stock of Outside Industrial Services, Inc., a Tennessee corporation
doing business as Outside Plant Services ("OIS") for 70,000 shares of the
Company's Series B $5.00 Cumulative Convertible Preferred Stock ("Series B
Preferred") from an unaffiliated third-party in a private transaction exempt
from registration under the Act. The designations, rights and preferences of the
Preferred Stock provided that the holder thereof (a) should receive annual
dividends equal to $.43 per share, (b) was entitled to full voting rights, share
for share, with any then outstanding Common Stock as well as with any other
class or series of stock of the Company having general voting power with the
Common Stock concerning any matter being voted upon by the Company's
19
<PAGE>
shareholders, (c) was entitled to convert such shares into shares of the
Company's restricted Common Stock at any time on a one for one basis and (d) was
redeemable at the option of the Company at $4.30 per share. On May 30, 1996 the
holder of the Series B Preferred converted such shares into 70,000 shares of the
Company's Common Stock. See "Selling Security Holders."
Also effective June 30, 1994 the Company acquired all of the issued and
outstanding stock of Prime Florida, Inc., a Florida corporation ("Prime") from
Yucatan, which was an affiliate of the Company, for 750,000 shares of the
Company's restricted Common Stock in a private transaction exempt from
registration under the Act. Prime's sole assets included its rights under the
Management Services Agreement with OIS which entitled Prime to all the cash flow
from OIS, together with a 7.4% interest in OIS.
Giving effect to both the 51.9% interest in OIS the Company acquired from
the unaffiliated third party, together with the 7.4% interest in OIS the Company
acquired through its ownership of Prime, the Company then owned 59.3% of the
issued and outstanding stock of OIS. On November 30, 1994 the Company exchanged
30 shares of its Series A Preferred Stock for 155 shares of the common stock of
OIS thereby completing its plan to acquire at least 80% of OIS which began in
June 1994. Following such share exchange, the Company is the beneficial owner of
approximately 81% of OIS. The designations, rights and preferences of the Series
A Preferred Stock provide that the shares (a) have full voting rights, share for
share, with the then outstanding common stock of the Company as well as any
other series of preferred stock then outstanding, (b) are not convertible into
any other class of equity of the Company, (c) are redeemable at any time at the
Company's option at par value of $.001 per share, (d) pay dividends at the sole
discretion of the Company's Board of Directors, (e) are not transferrable
without the consent of the Company's Board of Directors and (f) in the event of
a liquidation or winding up of the Company, carry a liquidation preference equal
to par value, without interest.
Expansion Into Contract Manufacturing
-------------------------------------
On November 4, 1994 the Company entered into an agreement (the "Naturale
Agreement") with Naturale Home Products, Inc. ("Naturale"), an unaffiliated
third party, whereby the Company was named the exclusive manufacturer through a
then to-be-established wholly-owned subsidiary of the Company for all products
developed and marketed by Naturale, including the ThawMaster(TM) thawing trays,
Naturale's initial product. The material terms of the agreement provided that
the Company at its option could either continue the contract manufacturing then
currently in effect between Naturale and an unaffiliated third party, establish
20
<PAGE>
additional manufacturing facilities operated by the Company or sub-contract the
manufacturing to other third parties.
In addition to the revenue to be generated through the manufacturing and
sale by the Company of the products to Naturale, the Company is entitled to a
royalty of $.30 to $.50 per unit in perpetuity on all products sold by Naturale.
The Company was also granted a 15% equity interest in Naturale on a fully
diluted basis. At the time of the transaction the Company recorded no value on
its balance sheet as to this 15% interest due to the minority position it
represented within Naturale and the immaterial value to the Company. On May 30,
1996 the Company divested itself of such 15% interest in Naturale, a marketing
company, but retained the exclusive manufacturing rights under the Naturale
Agreement. The Company determined such 15% interest was immaterial to the
Company's financial statements and operations and further conflicted with the
establishment of PTP to market the Company's products. The Company granted
Naturale the option of acquiring the manufacturing operations at a price equal
to the investment in the subsidiary, as well as the option to acquire the rights
to the royalty at a price to be negotiated by the parties in the future.
Following the execution of the Naturale Agreement, in 1994 the Company formed
NHP Manufacturing Corp., a Florida corporation ("NHP"), a wholly-owned
subsidiary of the Company, pursuant to the terms of the Naturale Agreement.
Subsequent to the acquisition of IFR (as described below), NHP has become a
subsidiary of IFR.
Soon after the execution of the Naturale Agreement it became evident to
management of the Company that the then current contract manufacturer was unable
to accommodate the production schedule or quality control standards in relation
to the ThawMaster(TM) production. Thereafter the Company determined to
sub-contract out the milling and anodization of the trays to other fabricators
who were unaffiliated third parties and to internally perform the finishing
stages of the thawing trays, including silk screening, assembly, packaging and
shipping. The Company continued to experience quality control problems with the
new fabricators, as well as delays in delivery of milled trays. Further, the
Company determined that by further internalizing the manufacture of the thawing
trays that it would be able to reduce the cost of the product as a result of the
high profit margin being enjoyed by the third-party fabricators. The initial
success of the thawing trays and the potential to internalize the high margin of
third party fabricators created an extraordinary opportunity for the Company to
dramatically increase its asset base, revenue base and successfully diversify it
operations and eliminate its reliance on a single revenue source. Accordingly,
in the Spring of 1995 the Company began to fully internalize the production of
the thawing trays, with the exception of the anodization, through a series of
21
<PAGE>
events which led to the acquisition of IFR as described below. This achieved the
Company's goal with respect to the further internalization of the manufacture of
the thawing trays as well as to diversifying the Company's operations and
revenue base.
Acquisition and Expansion of Industrial Fabrication & Repair
------------------------------------------------------------
On May 22, 1995 the Company acquired 100% of the issued and outstanding
capital stock of Industrial Fabrication & Repair, Inc. ("IFR") from Lester E.
Gann ("Gann") in exchange for 125,925 shares of the Company's restricted Common
Stock (the "IFR Agreement") in a private transactions exempt from registration
under applicable federal and state securities laws as well as being tax-free
pursuant to Section 368 of the Internal Revenue Code. The Company granted Mr.
Gann a 24 month right of first refusal as to the IFR stock purchased by the
Company in the event of a change of control of the Company (as that term is
defined in the Agreement) or if the Company should desire to transfer the IFR
stock to an unaffiliated third party or to sell all or substantially all of
IFR's assets. IFR, a Tennessee corporation based in Knoxville, Tennessee,
provides machining, welding, speciality design and fabrication for custom
applications to clientele from various industries including paper, steel mills,
rock quarry operations, coal mining applications and bottling facilities.
Concurrent with such acquisition, Mr. Gann executed a three year employment
agreement with IFR providing for an annual base salary of $96,000 with
performance bonuses at the discretion of the Board of Directors. See
"Management."
In June 1995 the Company purchased a 35,000 square foot manufacturing
facility in Knoxville, Tennessee from an unaffiliated third party to serve as
the new headquarters for IFR. See "Properties."
In July 1996 IFR expanded its scope of business though the formation of
Manufacturer's Requisition Order Corp., a Florida corporation ("MRO") which is a
wholly-owned subsidiary of IFR. MRO, based in Dalton, Georgia, is an industrial
supply house representing several lines of power transmissions products, such as
gear boxes, bearings and couplings, which are commonly used in industrial
manufacturing and operating facilities. MRO further diversifies IFR's business
base insomuch as historically IFR had been a fabricator and maintenance provider
without the additional competitive advantage of being an authorized factory
distributor for many of the components used in its business.
22
<PAGE>
Formation of Consumer Products Division
---------------------------------------
In October 1995, the Company formed, Products That Produce, Inc., a
Florida corporation ("PTP") which is owned 80% by the Company and 20% by William
P. Heath, III, a then unaffiliated third party who now serves as its president.
PTP's mission is to identify and market new consumer products to both innovative
and moderately priced.
The first product undertaken by PTP is MR. FOOD'S ALLOFRESH. The product
is being marketed under an endorsement by Art Ginsburg, the nationally
syndicated T.V. chef known as Mr. Food. Made nationally from minerals, non-toxic
and environmentally safe, MR. FOOD'S ALLOFRESH works to prevent food decay and
eliminates bacteria, moisture, mold, mildew and odors in refrigerators, kitchen
and around the house. The product had its debut in June of 1996 through a
nationwide direct response television commercial, with this initial introduction
followed by introduction into the retail market place through mass
merchandisers, grocery and drug store chains.
Acquisition of American Industrial Management, Inc.
---------------------------------------------------
In February 1996 the Company acquired 100% of the issued and outstanding
capital stock of American Industrial Management, Inc., a Tennessee corporation
("AIM") from Messrs. Robert Lovelace, David Debuty and Jones Leasing, Inc., its
shareholders, in a private transaction exempt from registration under applicable
federal and state securities laws in exchange for 17,500 shares of the Company's
restricted common stock. AIM, founded in 1995 and based in Knoxville, Tennessee,
provides industrial personnel for light manufacturing and assembly line
operations to businesses located in the East Tennessee area. In the event the
financial statements of AIM, as prepared in accordance with generally accepted
accounting principles applied on a consistent basis reflect a certain
pre-determined average gross profit per month for the immediately preceding
three month period (based upon fiscal quarters for the fiscal year ending June
30) as hereinafter set forth, and Messrs. Lovelace and Debuty are then current
employees of AIM, Messrs. Lovelace and Debuty (who remained operating officers
of AIM) are each entitled to earn additional shares of the Company's restricted
common stock. Specifically, at such time as AIM's financial statements reflect
an average gross profit (as defined in the share exchange agreement) of at least
$50,000 per month for the preceding fiscal quarter, each of Messrs. Lovelace and
Debuty shall be entitled to receive a one time issuance of 50,000 shares of the
Company's restricted common stock; and at such time as AIM's financial
statements reflect an average gross profit (as defined in the share exchange
23
<PAGE>
agreement) of at least $70,000 per month for the preceding fiscal quarter, each
of Messrs. Lovelace and Debuty shall be entitled to receive a one time issuance
of an additional 100,000 shares of the Company's restricted common stock; and at
such time as AIM's financial statements reflect an average gross profit (as
defined in the share exchange agreement) of at least $90,000 per month for the
preceding fiscal quarter, each of Messrs. Lovelace and Debuty shall be entitled
to receive a one time issuance of an additional 122,500 shares of the Company's
restricted common stock. See "Management."
Engagement of Investment Banking Firm
-------------------------------------
As a result of the foregoing acquisitions and internal expansions begun in
June 1994, the Company is now a diverse holding company with subsidiaries
involved in manufacturing, marketing and distribution and employee staffing
services. In order to maximize the individual and joint components of the
Company's business and operations, in July 1996 the Company engaged Laidlaw
Equities, Inc., an NASD member firm ("Laidlaw"), to serve as its exclusive
financial advisor. Under the terms of the investment banking agreement, Laidlaw
will advise the Company with respect to the development of its business plans,
the Company's capital structure and potential financing strategies, identifying
potential acquisition candidates, and analyzing, structuring, negotiating and
assisting the Company to effect proposed transactions.
Pursuant to the investment banking agreement with Laidlaw, the Company
compensates Laidlaw for its services by (a) the payment of a $7,500 monthly
retainer during the 12 months of the agreement (which is renewable quarterly
thereafter),(b) the issuance to Laidlaw or its designees of warrants to acquire
an aggregate of 100,000 shares of the Company's Common Stock (the "Laidlaw
Warrants") and (c) the obligation to pay Laidlaw certain transactional fees
based upon certain future transactions (the "Laidlaw Transactional Fee"). The
Company has also granted Laidlaw a 24 month right of first refusal to act as
manager or placement agent with respect to any proposed public distribution or
private placement of the Company's securities.
The Laidlaw Warrants are exercisable at any time during their five year
period (which commenced on July 22, 1996 and expire on July 21, 2001) as
follows: 35,000 shares at $5.62 per share (being the closing bid price of the
Company's Common Stock on the date of the agreement); and 35,000 shares at $6.46
per share (equal to 115% of the closing bid price of the Company's Common Stock
on the date of the agreement); and 30,000 shares at $7.31 per share (equal to
130% of the closing bid price of the Company's Common Stock on the date of the
agreement).
24
<PAGE>
The Laidlaw Warrants provide that the underlying Common Stock are to be included
in any future registration statements filed by the Company (unless the Company
files on Forms S-4 or S-8 or comparable registration statement); provided,
however, that if the managing underwriter of any future public offering proposed
by the Company advised the Company that the inclusion in any such registration
statement would interfere with the successful marketing (including pricing) of
any securities proposed to be registered by the Company, then the number of
shares of Common Stock proposed to be included in such registration statement
(including the shares of Common Stock underlying the Laidlaw Warrants) shall be
reduced pro rata. The Company has included the 100,000 shares of Common Stock
underlying the Laidlaw Warrants in the registration statement of which this
Prospectus forms a part thereof. There are no assurances, however, that Laidlaw
will ever exercise all or any part of the Laidlaw Warrants. See "Use of
Proceeds" and "Selling Security Holders."
The terms of the investment banking agreement provide that in the event
the Company enters into a definitive agreement for a strategic alliance, merger,
consolidation, reorganization or other business combination (a "Strategic
Transaction") pursuant to which the business of the Company or a subsidiary of
the Company is combined with that of another entity identified by Laidlaw (the
"Candidate"), the Company will pay Laidlaw a transactional fee (the "Laidlaw
Transactional Fee") as follows: (a) for a Strategic Transaction with gross
consideration of less than $7 million, Laidlaw will be entitled to a fee equal
to 7% of the gross consideration; (b) for a Strategic Transaction with gross
consideration of $7 million or more, but less than $10 million, Laidlaw shall be
entitled to a fee equal to the greater of $490,000 or 6% of the gross
consideration; or (c) for a Strategic Transaction with gross consideration equal
to or in excess of $10 million, Laidlaw shall be entitled to a fee equal to the
greater of $600,000 or 5% of the gross consideration. In the event the Company
identifies a Candidate and retains Laidlaw in an advisory role, the Laidlaw
Transactional Fee will be payable as follows: (a) for a Strategic Transaction
with gross consideration of less than $7 million, Laidlaw will be entitled to a
fee equal to 4% of the gross consideration; (b) for a Strategic Transaction with
gross consideration of $7 million or more, but less than $10 million, Laidlaw
shall be entitled to a fee equal to the greater of $280,000 or 3.5% of the gross
consideration; or (c) for a Strategic Transaction with gross consideration equal
to or in excess of $10 million, Laidlaw shall be entitled to a fee equal to the
greater of $350,000 or 3% of the gross consideration. The term "consideration"
means the sum of the aggregate fair market value of any securities issued, and
any cash consideration paid, by the Company or by a Candidate or its security
holders in connection with a Strategic Transaction, plus the amount of any
25
<PAGE>
indebtedness of the Candidate that is assumed, directly or indirectly, by the
Company.
DIVISIONAL OVERVIEW
Following is a detailed discussion of each of the Company's divisions.
Manufacturing Division
- ----------------------
The Manufacturing Division of the Company is comprised of three entities,
Industrial Fabrication & Repair, Inc. ("IFR") and its subsidiaries NHP
Manufacturing Corp. ("NHP") and Manufacturer's Requisition Order Corp. ("MRO").
IFR, a Tennessee corporation formed in 1979 and based in Knoxville,
Tennessee, provides machining, welding, speciality design and fabrication for
custom applications to clientele from various industries including paper, steel
mills, rock quarry operations, coal mining applications and bottling facilities.
IFR maintains clients within the 150 mile radius of Knoxville, Tennessee
including Coca-Cola Co., Pepsico, Kimberly-Clark Corp., American Limestone,
Florida Steel Corp., Vulcan Materials Co., Dixie Cement, Blue Diamond Coal and
Southeast Ecology Group, a division of Westinghouse. For the nine months ended
March 31, 1996, IFR accounted for approximately 64% of the Company's revenues on
a consolidated basis. No single client accounts for more than 10% of IFR's
annual revenues.
IFR provides its clients with custom design plant processing thereby
minimizing downtime and maximizing production capacity. A sample of current or
pending projects undertaken by IFR include designing components to be used to
crush slag in a radioactive waste processing facility to facilitate packing of
the material for shipment and manufacturing systems in steel mills for transfer
of five ton blocks of rebar to facilitate loading and storage.
As discussed above, following the execution of the Naturale Agreement in
November 1994, the Company undertook the establishment of a contract
manufacturing division through a then wholly-owned subsidiary, NHP, a Florida
corporation formed in 1994. Following the acquisition of IFR and the integration
of its operations into the Company, NHP became a subsidiary of IFR. NHP's
current operations are presently limited to the manufacture of the
ThawMaster(TM) family of thawing trays. It is not presently anticipated that
NHP's operations will expand beyond their current base, and, accordingly, NHP is
dependant upon its contract with Naturale. For the nine months ended March 31,
26
<PAGE>
1996 NHP (exclusive from IFR) accounted for approximately 21% of the Company's
revenues on a consolidated basis. The loss or reduction of such revenues could
have a material adverse affect upon the Company until such time as IFR is able
to successfully complete its expansion through its newly formed subsidiary, MRO.
The thawing trays are manufactured from high grade aluminum alloy which is
purchased by NHP either directly from Reynolds Aluminum or on the spot market
from distributors. The price of aluminum, like all commodities, is subject to
price fluctuation from time to time which can either increase or decrease the
manufactured cost of the thawing trays as the aluminum is the most expensive
component of the thawing tray. Historically, the Company has been able to obtain
a sufficient supply of aluminum at a relatively stable price. There can be no
assurances, however, that such will continue to be the case in the future.
NHP owns all inventory of completed thawing trays until such time as the
product is shipped to Naturale's customers, thereby creating a receivable at
Naturale. NHP has a perfected blanket security interest in all of Naturale's
assets, which includes Naturale's receivables.
In July 1996 IFR further expanded its scope of business though the
formation of MRO, a Florida corporation, which is a wholly-owned subsidiary of
IFR. MRO, based in Dalton, Georgia, is an industrial supply house representing
several lines of power transmissions products, such as gear boxes, bearings and
couplings, including lines from Falk, Goodman Material Handling Components,
Nachi, Leeson Electric, Rainbow Chain, Douglas Manufacturing and Superior Idlers
together with a variety of other chain, bearing and idler distributors handling
components which are commonly used in industrial manufacturing and operating
facilities. As discussed below under "Competition", management of the Company
believes the addition of MRO has the potential (although there can be no
assurances) to significantly increase IFR's competitive advantage in the
marketplace.
Competition
-----------
While IFR competes with numerous fabricators in the East Tennessee area,
management of IFR believes it has limited direct competition as a result of the
comprehensive nature of its services. Within the 150 mile radius of its client
base, IFR is one of a select few fabricators which offers a full bevy of
services from concept and design to engineering and prototype to custom systems.
Management believes the recent formation MRO will increase IFR's competitive
advantage by providing IFR's customers with a single source supply for their
production needs. There can be no assurances, however, that IFR in fact
maintains a competitive advantage or that if such competitive advantage exists,
IFR will be able to retain same in the future.
27
<PAGE>
MRO competes with a wide variety of industrial supply houses, the majority
of which are larger, have historical operations and greater resources. There are
no assurances MRO will be able to effectively compete in its market.
Government Regulation and Environmental Compliance
--------------------------------------------------
The operations of the manufacturing division are not subject to any state
or government regulations at the present time, other than normal and customary
rules and regulations, including environmental regulations, to which most
companies are subject. There can be no assurances, however, that future
regulations at the state or federal level, if adopted, will not have a material
adverse effect on the operations of the manufacturing division.
Employees
---------
As of August 31, 1996, the Manufacturing Division had approximately 32
employees, all of which are full time. The Manufacturing Divisions considers its
employee relations to be good.
Staffing Division
- -----------------
The staffing division is comprised of two entities, Outside Industrial
Services, Inc. ("OIS") and American Industrial Management, Inc. ("AIM"). For the
nine months ended March 31, 1996, the staffing division accounted for
approximately 14% of the Company's revenues on a consolidated basis.
OIS, a Tennessee corporation founded in 1982, and AIM, a Tennessee
corporation founded in 1995 and both based and operating in East Tennessee, do
not offer traditional "temporary" services such has providing several employees
on an intermittent, as needed basis. The staffing division's niche market is to
provide specialized labor services on a contract basis to businesses in the
light industrial and light manufacturing areas, augmenting the client's base of
permanent employees. The staffing division supplies personnel with a wide
variety of manufacturing skills to perform skilled and unskilled tasks including
assembly line, janitorial, transportation and maintenance.
The staffing division recruits employees on an as needed basis to fulfill
its existing contracts. Such contracts typically provide for a 30 day
28
<PAGE>
termination by either party. As of the date hereof, AIM as three clients which
account for 36%, 22% and 14% of its current, revenues, respectively. The loss of
one or more of such clients could have a material adverse impact upon AIM's
operations until replacement clients are secured, of which there can be no
assurance.
One contract, which OIS has held with a company continuously since 1982,
presently accounts for 100% of OIS's revenues. During the last portion of
calendar 1995 this client has been subject to certain internal restructuring
which has adversely affected the number of OIS employees being provided to such
company. OIS has experienced this same situation with this client on several
occasions during the 13 years in which it has provided it personnel. In the
past, while the duration of such reduction in staffing as varied, in each
instance the number of personnel have either been returned to the historical
levels or increased. In this instance, however, the number of personnel has
continued to decrease and there are no assurances that the staffing levels at
this client will be returned to historical levels or increased by such client in
the future as they have in the past.
Competition
-----------
The staffing division competes with many large international and national
companies, as well as many smaller regional and local companies, many of whom
have far greater assets and revenue base than the staffing division. There are
no assurances the staffing division will ever maintain a competitive advantage
in its marketplace.
Government Regulation and Insurance
-----------------------------------
In many states, the temporary services industry is regulated; however, the
staffing division is not subject to any specific regulation in the State of
Tennessee where all of its current operations are based. In the event the
staffing division should expand its operations outside the State of Tennessee,
of which there are no present plans, it may become subject to regulation by
other states. There can be no assurance that future regulations in the State of
Tennessee, if adopted, or existing or future regulations in states in which the
staffing division should expand its operations will not have a material effect
on the staffing division's operations.
Employees
---------
As of August 31, 1996, the staffing division had approximately 40
employees providing services under existing contracts. In addition to the
employees it provides its clients under the existing contracts, the staffing
division employs an additional four management and administrative employees. The
staffing division considers its employee relations to be good.
29
<PAGE>
Consumer Products Division
- --------------------------
In October 1995 the Company formed Products That Produce, Inc., a Florida
corporation ("PTP") which is owned 80% by the Company and 20% by William P.
Heath, III. PTP's mission is to identify and market new consumer products that
are both innovative and moderately priced. PTP business plan provides that it
will assist inventors of fresh, innovative consumer products in getting those
products to market through the provision of a wide array of comprehensive
services, including everything from package design, to manufacturing (either
directly or on an exclusive sub-contract basis) to receivables financing. While
there are numerous larger companies and conglomerates which operate in
essentially the same fashion, the Company believes, although there can be no
assurances, that PTP, by virtue of its size and flexibility, will be able to
attract inventors of unique and innovative products and close transactions with
these inventors at greater speed than these larger companies while providing
more attractive packages to the inventors.
The first product to be undertaken by PTP is MR. FOOD'S ALLOFRESH. The
product is being marketed under a license agreement with Ginsburg Enterprises
Incorporated ("Ginsburg") which provides for an endorsement by Art Ginsburg, the
nationally syndicated T.V. chef known as Mr. Food. Pursuant to the terms of the
two year agreement, Ginsburg granted PTP a license to the "Mr. Food" marks in
connection with the marketing and sale of the product. As consideration,
Ginsburg is entitled to a certain royalty payments, specifically (a) 15% of the
sales price for any sales made via direct response television or through
electronic retailers or (b) 5% of the sales price for any other sales.
Made nationally from minerals, non-toxic and environmentally safe, MR.
FOOD'S ALLOFRESH works to prevent food decay and eliminates bacteria, moisture,
mold, mildew and odors in refrigerators, kitchen and around the house.
Pursuant to the Company's prospecting, acquisition of mineral rights and
coordination of the necessary geophysical analysis of the minerals, the Company
has executed a five year exclusive lease, which is renewable at the option of
the Company for an additional five year term, with an unaffiliated third party
which permits the Company to excavate whatever quantities of the minerals as it
deems necessary for an annual base fee of $30,000 for the first 1,000 tons. Such
amount is payable in advance at the beginning of each year of the term of the
lease and no portion is refundable in the event at least 1,000 tons are not
30
<PAGE>
excavated during the subject year. Thereafter, the Company pays a fee of $30 per
ton. Based upon its inspection of the property, including visits by independent
geologists retained by the Company, management of the Company believes there are
sufficient quantities of the minerals readily available to meet whatever
consumer demand may develop for either MR. FOOD'S ALLOFRESH or any variation of
the product which the Company may market in the future.
MR. FOOD'S ALLOFRESH, which is not subject to any special government
approval or regulation, was introduced in late June 1996 through a five week
direct response television campaign. The introduction of MR. FOOD'S ALLOFRESH
into the retail market place through sales to mass merchandises, grocery and
drug store chains commenced in August 1996. While initial interest is strong, as
of the date hereof there is insufficient data to evaluate the potential market
demand for the product.
MR. FOOD'S ALLOFRESH is being marketed to retailers through the engagement
by PTP of 19 independent manufacturer's representative organizations across the
United States. These independent contractors are entitled to commissions ranging
from 7% of the sales price (for first orders) to 10% of the sales price for
reorders, which such amounts are generally payable by PTP within 10 days
following the month in which PTP receives payment from the retailer. The
independent sales representatives are responsible for any expenses they incur in
connection with their sales of MR. FOOD'S ALLOFRESH. The agreements between the
independent sales representatives and PTP may be terminated by 30 days prior
written notice by either party. In the event PTP should determine to terminate
one or more of such independent sales representative, management of the Company
does not believe it would experience any difficulties in engaging replacement
independent sales representatives.
Competition
-----------
PTP competes with many large international and national companies, as well
as many smaller regional and local companies, offering a wide variety of
consumer products, many of whom have far greater assets and operating history
than PTP. There are no assurances that PTP or MR. FOOD'S ALLOFRESH will ever
maintain a competitive advantage in its market place.
Employees
---------
As of the date hereof, PTP has approximately four full time employees in
addition to the 19 independent contractors hereinbefore described. PTP considers
its employee relations to be good.
31
<PAGE>
PROPERTIES
The Company maintains principal executive offices in approximately 850
square feet of commercial office space which are leased from an unaffiliated
third party for approximately $750 per month on an annual basis. The Company's
employee staffing division leases two separate facilities, both located in East
Tennessee. The first space which is comprised of approximately 1,800 square feet
of commercial office space is leased by AIM from an unaffiliated third party
under a five year lease expiring in September 2000 for approximately $1,000 per
month. OIS leases an additional 500 square feet of office space on a month to
month basis for $350 per month from an unaffiliated third party. PTP leases
approximately 700 square feet of commercial office space in Fort Lauderdale,
Florida from an unaffiliated third party under a five year lease expiring in
December 2000 for approximately $700 per month. MRO leases approximately 8,000
square feet of industrial/warehouse space in Dalton, Georgia from an
unaffiliated third party on a month to month basis for approximately $1,000 per
month. All of these locations are presently sufficient for the required purposes
and should the Company wish to relocate any office in the future, management
does not believe it would experience any difficultly in locating and securing
alternative office space at a reasonable rate.
Prior to its acquisition by the Company, IFR's principal offices were
located in a 13,500 square foot office/industrial building in Knoxville,
Tennessee which was leased by IFR from Mr. Gann, IFR's President and then sole
shareholder, on an annual basis at a monthly rental of $3,400. Following the
Company's acquisition of IFR, IFR continues to lease this space from Mr. Gann on
a monthly basis at a rental of $1,400 per month.
In June 1995 following the acquisition of IFR the Company, through a
wholly-owned subsidiary Workforce Properties Corp., acquired fee simple title to
an approximate 35,000 square foot office/industrial building in Knoxville,
Tennessee (the "Manufacturing Facility") from an unrelated third party to
provide sufficient space for both the thawing tray manufacturing as well as an
expansion of IFR's business.
The Manufacturing Facility was encumbered by an existing first mortgage in
the original principal amount of approximately $585,000, with interest at 7 3/4%
over the 110 month term which commenced in June 1993. The first mortgage
provided for an initial monthly payment of $4,800 with a monthly increase of
0.377% during the term of the mortgage and no pre-payment penalty. Upon
maturing, assuming all monthly mortgage payments were then current, the mortgage
would be satisfied in full. The Company assumed the existing first mortgage on
32
<PAGE>
the Manufacturing Facility, with a remaining principal balance of approximately
$ 390,000 pursuant to the original terms and conditions of the first mortgage.
In connection with the purchase of the Manufacturing Facility, the Company
also assumed approximately $101,000 in past due city and county real estate
taxes due on the Manufacturing Facility. Prior to such assumption, the Company
negotiated an arrangement with the City of Knoxville for the payment of the past
due taxes, which approximated $61,000 in the aggregate for the years 1991, 1992,
1993 and 1994, over a period of 24 months by making monthly installments of
$2,538.00. The Company also assumed a similar arrangement the prior owner of the
Manufacturing Facility had negotiated with Knox County for the payment of past
due taxes, which approximated $40,000 for the years 1990, 1991, 1992, 1993 and
1994, over a period of 12 months by making monthly installments of $3,797.72.
The Company has made all of the required tax payments in accordance with the
terms negotiated with each taxing authority, as well as paying all current taxes
on the real property as they become due and payable.
The Manufacturing Facility, which is in good condition, is sufficient for
the Company's present needs and management of the Company believes it is
adequately covered by insurance.
LEGAL PROCEEDINGS
The Company is not involved in any pending litigation.
MANAGEMENT
The following table sets forth the names, ages and positions held with
respect to each Director and Executive Officer of the Company.
Name Age Position
---- --- --------
Ella Boutwell Chesnutt 44 Director, President
Jayme Dorrough 28 Director, Vice President and
Secretary
All officers of the Company will hold office until the next annual meeting
of the Company. There are no arrangements or understanding between any such
officer of the Company and any other person or persons pursuant to which such
officer was or is to be selected as an officer of the Company.
33
<PAGE>
The following sets forth biographical information as to the business
experience of each current Director and Executive Officer of the Company.
ELLA BOUTWELL CHESNUTT. Mrs. Chesnutt has served as a director and
President of the Company since June 14, 1994. She also serves as a director and
President of Workforce Properties Corp. and a director of OIS, AIM, IFR, NHP,
MRO and PTP. Mrs. Chesnutt is also an officer and director of Yucatan Holding
Company, the Company's principal shareholder. Mrs. Chesnutt, who is not an
employee of the Company and has other business interests outside of the Company,
devotes as much time to the affairs of the Company as she deems necessary. Mrs.
Chesnutt joined Marine Sports, Inc., a public company, in October 1991 as
Director of Legal Affairs and Secretary. Thereafter she served as Director of
Legal Affairs (from May 1992 until March 1993) and Vice President of Corporate
Administration (March 1993 until November 1993) of Aspen Marine Group, Inc., a
public company and the parent company of Marine Sports, Inc. Mrs. Chesnutt was a
paralegal experienced in corporate and securities law with emphasis in public
and private offerings. From March 1987 until October 1991 Mrs. Chesnutt was
employed by Atlas, Pearlman & Trop., P.A., Fort Lauderdale, Florida and from
March 1983 until March 1987 she was employed by Broad & Cassel, Miami, Florida.
Mrs. Chesnutt received a B.S. in Business Administration from the University of
South Florida.
JAYME DORROUGH. Mrs. Dorrough has served as a director and Secretary of
the Company since June 14, 1994 and Vice President since July 5, 1994. Mrs.
Dorrough also serves as a director and President of Prime and OIS, and director
of Workforce Properties Corp., AIM, IFR, MRO and PTP. Mrs. Dorrough is also an
officer and director of Yucatan Holding Company, a principal shareholder of the
Company. Mrs. Dorrough, who is not an employee of the Company and has other
business interests outside of the Company, devotes as much time to the affairs
of the Company as she deems necessary. From August 1987 until October 1989, Mrs.
Dorrough was employed by Baker, Worthington, Crossley, Stansberry & Woolf,
Knoxville, Tennessee as an administrative assistant.
Key Employees and Consultants
- -----------------------------
The Company is a diverse holding company with operations in the areas of
manufacturing and industrial fabrication, employee staffing and consumer
products. While not executive officers of the Company, the following officers of
and consultants to the Company's subsidiaries make significant contributions to
the business of the Company.
34
<PAGE>
MANUFACTURING DIVISION
LESTER GANN. Mr. Gann, 52, is President and a director of IFR. He has
also served as a director of MRO since its formation in June 1996 and a director
of NHP since June 1995. Mr. Gann founded IFR in 1979 and has served as its
President and a director continuously since the date of formation. Mr. Gann has
33 years experience in tool and machinery design and power transmission
equipment and has received extensive training from various manufacturers and
distributors of the foregoing equipment. Mr. Gann is responsible for all day to
day operations of the Manufacturing Division.
STAFFING DIVISION
ROBERT LOVELACE. Mr. Lovelace, 50, is President and a director of AIM,
serving in such position since its formation in April 1995. Mr. Lovelace is
responsible for sales and client development for AIM. From June 1992 until
founding AIM in 1995 Mr. Lovelace was employed as a regional sales manager for
Borg Wagner for Wells Fargo Guard Service, Burns Guard Service and Borg Wagner
Facility Staffing. From January 1990 until May 1992 Mr. Lovelace was regional
Vice President for Sears Security Systems residential alarm systems. During his
career, Mr. Lovelace has completed in excess of 20 schools within the Dale
Carnegie & Associates organization covering training and supervisory management
in attitude, communication, human relations, memory training, leadership, public
speaking and business management.
DAVID DEBUTY. Mr. Debuty, 46, is Vice President of AIM. From its form-
ation in April 1995 until its acquisition by the Company in March 1996 he also
served as a director of AIM. Mr. Debuty holds operational responsibilities at
AIM. From April 1995 until February 1990 Mr. Debuty served as Regional Manager
for Burns International with overall responsibilities for company operations
with area offices in Knoxville, Chattanooga and Nashville, Tennessee,
Middlesboro, Kentucky and Asheville, North Carolina.
CONSUMER PRODUCTS DIVISION
WILLIAM P. HEATH, III. Mr. Heath, 63, has been President, a director and
20% shareholder of PTP since its formation. Mr. Heath is responsible for
overseeing the sales force at PTP, as well as personally servicing accounts with
certain key national retail chains. Mr. Heath is also a principal and founder of
International Marketing Associates, Inc., a twenty-one year old manufacturer's
35
<PAGE>
representative sales organization based in Fort Lauderdale, Florida which
specializes in sales of consumer products to mass merchandisers, home and office
superstores and drug and grocery store chains. During its 21 years of
operations, IMA has developed ongoing relationships with mass merchandisers
including Wal-Mart, K-Mart, Target and Meijer, drug chains such as Walgreen,
Eckerd, and CVS, supermarkets including Kroger, Publix, Winn Dixie and
Albertsons, warehouse clubs including Price/Costco, and home and office
superstores including Comp USA, Circuit City, Best Buy, Incredible Universe,
Office Depot, Staples, Home Depot, Toys R Us, Builder's Square, Blockbuster and
Pet Stuff. In addition, IMA has sold merchandise through a variety of mail order
and electronic retailers including QVC, HSN, Q2, Damark and USA Direct.
Management of the Company believes, although there can be no assurances, that
Mr. Heath's extensive experience and ability to immediately bring products to
top level buyers at those stores will be an asset to PTP.
BARRY A. ROTHMAN. Mr. Rothman, 41, is a consultant to the Company and has
served as Director of Marketing for both the Company and PTP since April 1996.
Mr. Rothman has overall operational responsibilities at PTP. From February 1992
until April 1996 Mr. Rothman served as Senior Vice President, Director of
Corporate Communications, of Greenstone Roberts Advertising, Inc. From June 1989
until February 1992 Mr. Rothman was a principal and President of Profile
Communications, Inc., a full service marketing communications firm which was
merged into Greenstone Roberts Advertising in 1992. Mr. Rothman received a B.A.
in Political Science from Union College in 1977.
There is no family relationship between any of the officers, key
employees, consultants and directors.
The Company does not presently maintain audit, compensation or nominating
committees of the Board of Directors.
36
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes all compensation accrued by the Company in
each of the last three fiscal years for the Company's Chief Executive Officer
and each other executive officers serving as such whose annual compensation
exceeded $100,000. Directors of the Company do not receive compensation for
serving in such capacity. Prior to the acquisition of OIS by the Company in June
1994, the Company had no operations. See "Business."
Long - Term
Annual Compensation Compensation Awards
------------------- -------------------
Options
Name and Other Annual Number of All Other
Principal Position Year Salary Bonus Compensation Shares Compensation
- ------------------ ---- ------ ----- ------------ --------- ------------
Ella Chesnutt 1993 (1) (1) (1) (1) (1)
President, 1994 0 0 0 0 0
Director and 1995 0 0 (2) (2) 0
Chief Executive
Officer
Jayme Dorrough 1993 (1) (1) (1) (1) (1)
Vice President 1994 0 0 0 0 0
and Director 1995 0 0 (2) (2) 0
- ------------------------
(1) Mrs. Chesnutt and Mrs. Dorrough, who are not employees of the
Company, began serving as officers and directors of the Company on June 14,1994.
(2) On March 21, 1995 Mrs. Chesnutt and Mrs. Dorrough were each awarded
48,500 shares of Common Stock for services rendered by them in connection with
the Naturale Agreement. The fair market value on the date of issuance was $ 6.57
per share resulting in aggregate value to each of Mrs. Chesnutt and Mrs.
Dorrough of $318,645.
Employment Agreements
- ---------------------
As set forth below, certain of the Company's subsidiaries are parties to
employment agreements with key employees of those subsidiaries.
In May 1995 at the time of the acquisition of IFR, IFR entered into a
three year employment agreement with Lester Gann providing for an annual base
salary of $96,000 with the ability to receive performance based bonuses at the
discretion of the Board of Directors. As of the date hereof, no such performance
bonuses have been awarded. Mr. Gann is also entitled to participate in all
37
<PAGE>
benefit programs of IFR as may be made available to other salaried employees.
Mr. Gann's employment agreement contains customary provisions providing for
confidentiality as well as a 12 month non-compete following the termination of
the agreement.
In conjunction with the acquisition of AIM in March 1996, Messrs. Lovelace
and Debuty each signed three year employment agreements with AIM. Such
agreements provide for an annual base compensation of $66,000 each and provide
for certain additional compensation in the form of an aggregate of the issuance
of each of 27,272 shares of the Company's Common Stock which have been
registered under the Act. Such stock is issued in 24 equal monthly installments
providing each of Messrs. Lovelace and Debuty are still employed by AIM. Their
employment agreements also contain customary provisions providing for
confidentiality as well as a 12 month non-compete following the termination of
the agreements.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Florida Business Corporation Act (the "Corporation Act") provides for
indemnification of directors, employees, officers and agents of Florida
corporations. The Company's Articles of Incorporation (the "Articles") and
bylaws provide that the Company shall indemnify as directors and officers to the
fullest extent permitted by the Corporation Act. Insofar as indemnification for
liabilities arising under the Securities Act of 1993 (the "Act") maybe 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
Commission, such indemnification is against public policy as expressed and the
Act and is therefore unenforceable.
CERTAIN TRANSACTIONS
Effective June 30, 1994 the Company acquired all of the issued and
outstanding capital stock of Prime from Yucatan. Mrs. Chesnutt and Mrs. Dorrough
are the officers and directors of Yucatan and Mrs. Dorrough was the sole
shareholder of Prime.
On June 30, 1994 a company owned by Mrs. Dorrough issued OIS a demand
promissory note in the principal amount of $65,000 bearing interest at 6% per
annum, evidencing certain advances which had been made against management fees
payable by OIS to such company. During the fiscal year ended June 30, 1995 such
note was paid in full.
On March 21, 1995 Mrs. Chesnutt and Mrs. Dorrough were each awarded 48,500
shares of Common Stock for services rendered by them in connection with the
38
<PAGE>
Naturale Agreement. The fair market value on the date of issuance was $ 6.57 per
share resulting in aggregate value to each of Mrs. Chesnutt and Mrs. Dorrough of
$318,645.
From time to time, the Company has borrowed funds from Yucatan Holding
Company, the Company's principal shareholder ("Yucatan"), for working capital
purposes. Pursuant to the terms of certain promissory note in the principal
amount of $936,770 dated June 30, 1995 issued by the Company to Yucatan (the
"June Note"), Yucatan, in its sole discretion, could convert all or a portion of
the principal and accrued unpaid interest pursuant to the June Note into shares
of the Company's Common Stock based upon a conversion ratio to be determined by
the parties at the time of conversion. Subsequent to June 30, 1995, Yucatan
advanced the Company additional funds for working capital and on September 30,
1995 the principal amount due Yucatan by the Company was $1,210,446.
On November 27, 1995, Yucatan converted the face value of the June Note
into shares of the Company's Common Stock based upon conversion ratio equal to
the closing bid price of the Company's common stock as reported on the OTC
Bulletin Board on the date of conversion which was $5.50 per share. Accordingly,
the Company issued Yucatan 170,322 shares of its restricted Common Stock. The
Company remained indebted, on an unsecured basis to Yucatan for advances made
subsequent to June 30, 1995 in the amount of $273,676. Subsequent to November
27, 1995 such amount has been repaid to Yucatan by the Company.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
As of the date hereof there are 2,493,934 shares of Common Stock issued
and outstanding, 30 shares of Series A Preferred Stock issued and outstanding
and 1,000,000 shares of Series D Preferred Stock, all of which are voting
securities of the Company. The 30,000 shares of Series C Preferred Stock which
are issued and outstanding do not have voting rights. See "Description of
Securities." The following table sets forth, as of the close of business on July
30, 1996, (a) the name, address and number of shares of each person known by the
Company to be the beneficial owner of more than 5% of any class of each the
Company's voting securities and (b) the number of shares of each class of voting
securities owned by each director and all officers and directors as a group,
together with their respective percentage holdings of such shares:
39
<PAGE>
Series A Preferred Stock
- ------------------------
Name and Amount of Percentage
Address of Beneficial of
of Beneficial Owner Ownership of Stock Class
------------------- ------------------ -----
Outside Industrial 30 100%
Services, Inc. (1)
269 Cusick Road
Suite C-2
Alcoa, TN 37701
All Officers and
Directors as a
Group (two persons) none n/a
Series D Preferred Stock
- ------------------------
Name and Amount of Percentage
Address of Beneficial of
of Beneficial Owner Ownership of Stock Class
------------------- ------------------ -----
Yucatan Holding 1,000,000 100%
Company (2)
269 Cusick Road
Suite C-2
Alcoa, TN 37701
All Officers and
Directors as a
Group (two persons)(2) 1,000,000 100%
Common Stock
- ------------
Name and Amount of Percentage
Address of Beneficial of
of Beneficial Owner Ownership of Stock Class (4)
------------------- ------------------ ---------
Yucatan Holding 938,522 37.6%
Company (2)
269 Cusick Road
Suite C-2
Alcoa, TN 37701
Ella Boutwell Chesnutt (2) (2)
269 Cusick Road
Suite C-2
Alcoa, TN 37701
40
<PAGE>
Name and Amount of Percentage
Address of Beneficial of
of Beneficial Owner Ownership of Stock Class (4)
------------------- ------------------ ---------
Jayme Dorrough (2) (2)
269 Cusick Road
Suite C-2
Alcoa, TN 37701
Lester E. Gann(3) 125,925 8.3%
3007 West Industrial
Parkway
Knoxville, TN 37921
Cede & Co. 744,888 30.0%
Post Office Box 28
New York, NY 10004
Philadep & Co. 144,636 5.8%
1900 Market Street
Philadelphia, PA 19103
All Officers and
Directors as a
Group (two persons)(2) 938,522 37.6%
- ------------------
(1) Outside Industrial Services, Inc. is a subsidiary of the Company and
Mrs. Chesnutt and Mrs. Dorrough serve as the directors of OIS.
(2) Mrs. Chesnutt and Mrs. Dorrough are the officers and directors of
Yucatan Holding Company.
(3) Mr. Gann is President of IFR. See "Management."
(4) Gives effect to the possible issuance of the Laidlaw Warrants. See
"Business - Engagement of Investment Banking Firm" and "Selling Security
Holders."
SELLING SECURITY HOLDERS
The following table sets forth the name of each Selling Security Holder,
the amount of shares of Common Stock held directly or indirectly by each holder
on August 28, 1996, the amount of shares of Common Stock to be offered by each
such holder, the amount of Common Stock to be owned by each such holder
following sale of such shares of Common Stock and the percentage of shares of
Common Stock to be owned by each such holder following completion of such
offering.
41
<PAGE>
<TABLE>
<CAPTION>
Shares Shares and % to
Name of Selling Number of to be of Class to be Owned
Security Holder Shares Owned Offered After Offering
- --------------- ------------ ------- --------------
<S> <C> <C> <C>
Pequot Scout Fund 80,000 80,000 3.2%(1)
Crestwood Capital Partners, L.P. 42,800 42,800 1.7%(1)
Dr. Aiden O'Rourke 42,000 42,000 1.7%(1)
Ed Hajim 40,000 40,000 1.6%(1)
Crestwood Capital International, Ltd. 17,200 17,200 .6(1)
Susan Dorrough (2) 70,000 70,000 3%(1)
Laidlaw Equities, Inc. (3) 100,000 100,000 4%(1)
Total 392,000 392,000
======= =======
- ----------------
</TABLE>
(1) The Selling Security Holders have not advised the Company of the timing
of their intention to sell the shares of the Company's Common Stock following
the date of this Prospectus.
(2) Such shares underlie the Laidlaw Warrants, which such warrants have not
been exercised as of the date hereof and there are no assurance such warrants
will in fact ever been exercised. See "Business - Engagement of Investment
Banking Firm."
The Company has agreed to pay for all costs and expenses incident to the
issuance, offer, sale and delivery of the Common Stock, including, but not
limited to, all expenses and fees of preparing, filing and printing the
Registration Statement and Prospectus and related exhibits, amendments and
supplements thereto and mailing of such items. The Company will not pay selling
commissions and expenses associated with any such sales by the Selling Security
Holders. The Company has agreed to indemnify the Selling Security Holders
against civil liabilities including liabilities under the Securities Act of
1933. The Selling Security Holders have advised the Company that sales of shares
of their Common Stock may be made from time to time by or for the accounts of
the Selling Security Holders in one or more transactions in the over-the-counter
market, in negotiated transactions or otherwise, at prices related to the
prevailing market prices or at negotiated prices.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized by its Articles of Incorporation to issue
l0,000,000 shares of Common Stock, of which 2,493,934 were issued and
outstanding as of August 28, 1996. The holders of the Company's Common Stock are
entitled to receive dividends at such time and in such amounts as may be
determined by the Company's Board of Directors, and upon liquidation are
entitled to share ratably in the assets of the Company, subject to the rights of
42
<PAGE>
the holders of any shares of preferred stock which may be outstanding, remaining
after the payment of all debts and other liabilities.
All shares of the Company's Common Stock have equal voting rights, each
share being entitled to one vote per share for the election of directors and all
other purposes. Holders of such Common Stock are not entitled to any preemptive
rights to purchase or subscribe for any of the Company's securities. All of the
Company's Common Stock which is issued and outstanding is fully paid and
non-assessable. Stockholders, including the holders of any series of preferred
stock outstanding, do not have cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors are
able to elect 100% of the Company's Directors.
It is not contemplated that any dividends will be paid on the Common
Stock, and the future ability to pay dividends will be dependent upon the
success of the Company's operations and the decision by its Board of Directors
at that time.
PREFERRED STOCK
The Company is authorized to issue 2,000,000 shares of preferred stock,
par value $.0001 per share, issuable in such series and bearing such voting,
dividend, conversion, liquidation and other rights and preferences as the Board
of Directors may determine. As of August 28, 1996 there are 30 shares of Series
A Preferred Stock, 30,000 shares of Series C Preferred Stock issued and
outstanding and 1,000,000 shares of Series D Preferred Stock issued and
outstanding, with 969,970 shares of preferred stock remaining without
designation.
The designations, rights and preferences of the Series A Preferred Stock
provide that the shares (a) have full voting rights, share for share, with the
then outstanding Common Stock of the Company as well as any other series of
preferred stock then outstanding, (b) are not convertible into any other class
of equity of the Company, (c) are redeemable at any time at the Company's option
at par value of $.001 per share, (d) pay dividends at the sole discretion of the
Company's Board of Directors, (e) are not transferable without the consent of
the Company's Board of Directors, and (f) in the event of a liquidation or
winding up of the Company, carry a liquidation preference equal to par value,
without interest.
43
<PAGE>
In connection with the acquisition of OIS (See "Business - Acquisition of
Prime and OIS"), the Company issued 70,000 shares of Series B Preferred Stock in
exchange for 51.9% of OIS. The designations, rights and preferences of the
Series B Preferred provided that the holder thereof (a) should receive annual
dividends equal to $.43 per share, (b) was entitled to full voting rights, share
for share, with any then outstanding Common Stock as well as with any other
class or series of stock of the Company having general voting power with the
Common Stock concerning any matter being voted upon by the Company's
stockholders, (c) was entitled to convert their shares of Series B Preferred
into shares of restricted Common Stock at any time on a one for one basis, and
(d) was redeemable at the option of the Company at $4.30 per share. On May 30,
1996 the holder of the Series B Preferred converted such stock into 70,000
shares of Common Stock which are included in the registration statement of which
this Prospectus forms a part. Subsequent to such conversion, the 70,000 shares
of Series B Preferred have been returned to the status of authorized but
unissued preferred stock without designation.
The designations, rights and preferences of the Series C Preferred Stock
provide that the shares (a) have no voting rights, (b) are not convertible into
any other class of equity of the Company, (c) are redeemable at any time at the
Company's option at an amount equal to the prior year's annual dividend as
previously set by action of the Company's Board of Directors, (d) pay dividends
at the sole discretion of the Company's Board of Directors, (e) are not
transferable without the consent of the Company's Board of Directors and (f) in
the event of a liquidation or winding up of the Company, carry a liquidation
preference equal to par value, without interest. An annual dividend rate of
$36,000 for the calendar year of 1995 was set by the Board of Directors and paid
in accordance therewith. For the calendar year of 1996 the Board of Directors
has determined that dividends, if any, on the Series C Preferred Stock will be
paid at its discretion. As of the date hereof, no dividends have been declared
or paid and it is not anticipated that any will be declared for paid during the
balance of calendar 1996.
The designations, rights and preferences of the Series D Preferred Stock
provide that the shares (a) have full voting rights, share for share, with the
then outstanding Common Stock of the Company as well as any other series of
preferred stock then outstanding, (b) are not convertible into any other class
of equity of the Company, (c) are redeemable at any time at the Company's option
at a price per share to be mutually agreed upon by the Company and the holder at
the time of redemption, (d) do not pay any dividends, and (e) in the event of a
liquidation or winding up of the Company, carry a liquidation preference equal
to par value, without interest.
44
<PAGE>
WARRANTS
In July 1996, in connection with the engagement of Laidlaw as the
Company's investment bankers, the Company granted Laidlaw warrants to acquire
100,000 shares of the Company's Common Stock. The Laidlaw Warrants are
exercisable at any time during their five year period (which commenced on July
22, 1996 and expire on July 21, 2001) as follows: 35,000 shares at $5.62 per
share (being the closing bid price of the Company's Common Stock on the date of
the agreement); and 35,000 shares at $6.46 per share (equal to 115% of the
closing bid price of the Company's Common Stock on the date of the agreement);
and 30,000 shares at $7.31 per share (equal to 130% of the closing bid price of
the Company's Common Stock on the date of the agreement). The Laidlaw Warrants
provide that the underlying Common Stock are to be included in any future
registration statements filed by the Company (unless the Company files on Forms
S-4 or S-8 or comparable registration statement); provided, however, that if the
managing underwriter of any future public offering proposed by the Company
advised the Company that the inclusion in any such registration statement would
interfere with the successful marketing (including pricing) of any securities
proposed to be registered by the Company, then the number of shares of Common
Stock proposed to be included in such registration statement (including the
shares of Common Stock underlying the Laidlaw Warrants) shall be reduced pro
rata. The Company has included the 100,000 shares of Common Stock underlying the
Laidlaw Warrants in the registration statement of which this Prospectus forms a
part thereof. There are no assurances, however, that Laidlaw will ever exercise
all or any part of the Laidlaw Warrants. See "Use of Proceeds" and "Selling
Security Holders."
OVER-THE-COUNTER MARKET
The Company's Common Stock is traded on the OTC Bulletin Board under the
symbol "WFSC." The Company has applied for inclusion of its Common Stock on the
NASDAQ System (Small Cap). On January 24, 1996 the Company received written
comments from the staff of the NASD generally requesting clarification on the
Company's treatment of certain items on the Company's audited financial
statements for the year ended June 30, 1996 which resulted in goodwill. The
Company's auditors have concurred with the Company's treatment of such items.
Following the filing of its annual report on Form 10-KSB for the fiscal year
ended June 30, 1996, the Company intends to complete its application process for
listing on the NASDAQ system. While there can be no assurances the listing will
be granted, management believes that the Company will be able to adequately
respond to the staff's comments in such a fashion so as to complete the listing
45
<PAGE>
process. If for any reason the Common Stock is not accepted for inclusion on the
NASDAQ System, then in such case the Company's Common Stock would be expected to
continue to be traded in the over-the-counter markets through the "pink sheets"
or the NASD's OTC Bulletin Board. In the event the Common Stock were not
included in the NASDAQ System, the Company's Common Stock would be covered by a
Securities and Exchange Commission rule that imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their
spouse). For transactions covered by the rule, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, the rule
may affect the ability of broker-dealers to sell the Company's securities and
also may affect the ability of purchasers in this offering to sell their shares
in the secondary market. The ability of the Company to secure a symbol on the
NASDAQ System does not imply that a meaningful trading market in its Common
Stock will ever develop.
Transfer Agent
The Transfer Agent for the shares of Common Stock is Florida Atlantic
Stock Transfer, Inc., 5701 North Pine Island Road, Suite 325, Tamarac, Florida
33321.
CERTAIN MARKET INFORMATION
As of August 28, 1996, 2,493,934 shares of the Company's Common Stock are
outstanding of which 1,492,746 shares are "restricted securities," as such term
is defined under the Securities Act of 1933, inclusive of the 392,000 shares of
Common Stock to be registered for possible resale pursuant to the Registration
Statement of which this Prospectus is a part.
In general, Rule 144 (as presently in effect), promulgated under the Act,
permits a stockholder of the Company who has beneficially owned restricted
shares of Common Stock for at least two years to sell without registration,
within any three-month period, such number of shares not exceeding the greater
of 1% of the then outstanding shares of Common Stock or, if the Common Stock is
quoted on NASDAQ, the average weekly trading volume over a defined period of
time, assuming compliance by the Company with certain reporting requirements of
Rule 144. Furthermore, if the restricted shares of Common Stock are held for at
least three years by a person not affiliated with the Company (in general, a
46
<PAGE>
person who is not an executive officer, director or principal stockholder of the
Company during the three-month period prior to resale), such restricted shares
can be sold without any volume limitation. Any sales of shares by stockholders
pursuant to Rule 144 may have a depressive effect on the price of the Company's
Common Stock.
LEGAL MATTERS
Legal matters in connection with the securities being offered hereby will
be passed upon for the Company by Atlas, Pearlman & Trop, P.A., 200 East Las
Olas Boulevard, Suite 1900, Fort Lauderdale, Florida 33301.
EXPERTS
The consolidated financial statements of Workforce Systems Corp. at June
30, 1996 and for the year ended June 30, 1995, the five month period ended June
30, 1994 and the year ended January 31, 1994 appearing in this Prospectus and
Registration Statement have been audited by Lyle H. Cooper, independent
certified public accountants, as set forth in their report thereon appearing
elsewhere herein and in the Registration Statement, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, 450
Fifth Street, Washington, D.C., a Registration Statement on Form SB-2 under the
Securities Act of 1933 with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information about the Company
and the securities offered hereby, reference is made to the Registration
Statement and to the exhibits filed as a part thereof. The statements contained
in this Prospectus as to the contents of any contract or other document
identified as exhibits in this Prospectus are not necessarily complete, and in
each instance, reference is made to a copy of such contract or document filed as
an exhibit to the Registration Statement. The Registration Statement, including
exhibits, may be inspected without charge at the principal reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of all or any part thereof may be obtained upon payment of fees
prescribed by the Commission from the Public Reference Section of the Commission
at its principal office in Washington, D.C. set forth above.
47
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Nine Months Ended March 31, 1996
- --------------------------------
Consolidated Balance Sheets at March 31, 1996 (Unaudited) 2
and June 30, 1995 (Audited)
Consolidated Statements of Operations for the three months and nine months ended
March 31, 1996 and 1995 (Unaudited) 4
Consolidated Statements of Cash Flow for the nine months ended March 31, 1996
and 1995 (Unaudited) 5
Consolidated Statements of Stockholders' Equity for the nine month period ended
March 31, 1996 (Unaudited) 6
Notes to the Unaudited Consolidated Financial Statements 7
For the Fiscal Year Ended June 30, 1995 and the five month period ended June 30,
- --------------------------------------------------------------------------------
1994 and the fiscal year ended January 31, 1994
- -----------------------------------------------
Accountants Report 8
Consolidated Balance Sheets 9
Consolidated Statements of Income and Retained Earnings 11
Consolidated Statements of Stockholder's Equity 12
Consolidated Statements of Cash Flows 13
Notes to Financial Statements 14
</TABLE>
<PAGE>
WORKFORCE SYSTEMS CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
---- ----
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 42,889 $ 91,652
Receivables:
Trade accounts receivables, no allowance 401,272 197,438
necessary
Related party trade accounts receivable 298,846 855,432
Related party advances and note receivable -0- 15,915
Interest -0- 1,625
Inventory 1,448,342 769,283
Prepaid expenses 482,750 45,855
Deferred income tax assets 15,000 15,670
----------- -----------
Total Current Assets 2,689,099 1,992,870
PROPERTY, PLANT AND EQUIPMENT
Land 150,000 150,000
Building and improvements 973,454 756,942
Machinery and equipment 1,207,101 1,007,073
Autos and trucks 179,229 136,169
Accumulated depreciation (101,500) (22,766)
----------- -----------
Total Property, Plant and Equipment 2,408,284 2,027,418
OTHER ASSETS
Acquisition costs, net of accumulated amortization
of $107,346 and $33,346, respectively 1,873,256 1,945,256
Goodwill, net of accumulated amortization
of $50,000 and $5,000, respectively 1,355,629 1,400,629
----------- -----------
Total Other Assets 3,228,885 3,345,885
----------- -----------
$ 8,326,268 $ 7,366,173
=========== ===========
</TABLE>
2
<PAGE>
WORKFORCE SYSTEMS CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
---- ----
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts Payable $ 239,108 $ 437,342
Accrued and withheld payroll and payroll
taxes 28,942 111,248
Accrued federal & state income taxes 285,000 243,669
Deferred income tax liability 100,000 70,150
Miscellaneous other liabilities 38,767 10,263
Current portion of long term debt 250,626 250,626
---------- ----------
Total Current Liabilities $ 942,443 $1,123,298
NON CURRENT DEFERRED INCOME TAXES 125,000 176,250
LONG TERM DEBT, less current portion 647,732 720,457
RELATED PARTY NOTE PAYABLE -0- 936,770
STOCKHOLDER'S EQUITY
Preferred stock, $.001 par value, 2,000,000 shares
authorized, 30 shares of Series A issued and
outstanding, 70,000 shares of Series B issued and
outstanding, 30,000 shares of Series C issued and
outstanding 100 100
Common stock, $.001 par value, 10,000,000 shares
authorized, 2,026,248 shares issued and outstanding 2,027 1,504
Paid in capital 5,864,903 4,075,155
Retained earnings 744,063 332,639
---------- ----------
Total Stockholders' Equity 6,611,093 4,409,398
---------- ----------
$8,326,268 $7,366,173
========== ==========
</TABLE>
3
<PAGE>
WORKFORCE SYSTEMS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues earned $ 987,641 $ 706,237 $3,158,452 $1,585,880
Cost of revenues earned 608,820 402,585 1,855,480 992,746
---------- ---------- ---------- ----------
Gross Profit 378,821 303,652 1,302,972 593,134
Selling, general and administrative expenses 155,460 54,339 617,211 117,719
---------- ---------- ---------- ----------
Income from operations 223,361 249,313 685,761 475,415
Income tax provision 72,250 40,000 234,500 86,575
---------- ---------- ---------- ----------
Net Income $ 151,111 $ 209,313 $ 451,261 $ 388,840
========== ========== ========== ==========
Earnings per common and common
equivalent share:
Net income before payment of dividends $ 151,111 $ 209,313 $ 451,261 $ 388,840
Dividends paid 6,840 21,987 39,837 53,786
---------- ---------- ---------- ----------
Net income available $ 144,271 $ 187,326 $ 411,424 $ 335,054
========== ========== ========== ==========
to common shareholders
Earnings Per Share:
Net Income $ .08 $ .19 $ .26 $ .33
Average weighted shares outstanding 1,703,306 1,011,449 1,598,903 1,011,449
</TABLE>
4
<PAGE>
WORKFORCE SYSTEMS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the nine For the nine
months ended months ended
March 31, March 31,
1996 1995
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 451,261 $ 388,840
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization and depreciation 171,024 24,000
Changes in operating assets and liabilities:
(Increase) decrease in receivables 368,667 (650,367)
(Increase) decrease in prepaid expense (436,225) (15,350)
(Increase) decrease in interest receivable 1,625 --
(Increase) in inventory (679,059) (103,099)
(Decrease) in accounts payable (67,649) 210,455
Increase (decrease) in accrued federal & state taxes 60,000 52,719
(Decrease) in accrued payroll & payroll taxes 13,510 12,172
Increase (decrease) in miscellaneous liabilities 17,335 56,150
--------- ---------
Net Cash Provided (Used) by Operating Activities (99,511) (24,480)
NET CASH PROVIDED FROM INVESTING AND
FINANCING ACTIVITIES: 148,274 91,132
Net Increase (Decrease) in Cash and Cash Equivalents ( 48,763) 66,652
Cash and Cash Equivalents, Beginning of Period 91,652 11,346
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD 42,889 77,998
========= =========
</TABLE>
5
<PAGE>
WORKFORCE SYSTEMS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the nine months ended March 31, 1996
(unaudited)
<TABLE>
<CAPTION>
Preferred stock Common stock
$.001 par value $.001 par value
2,000,000 shares 10,000,000 shares
authorized authorized
100,030 2,026,248 Additional Total
shares issued shares issued Paid-In Retained Stockholders'
and outstanding and outstanding Capital Earnings Equity
--------------- --------------- ------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1995 $ 100 $ 1,504 $ 4,075,155 $ 332,639 $ 4,409,398
balance of 522,524 shares
of Common Stock -- 523 1,789,748 -- 1,790,271
Dividends paid -- -- -- (39,837) (39,837)
Net income for the nine months
ended March 31, 1995 -- -- -- 451,261 451,261
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1996 $ 100 $ 2,027 $ 5,864,903 $ 744,063 $ 6,611,093
=========== =========== =========== =========== ===========
</TABLE>
6
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instruction of Form 10-QSB and Article 310 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month and nine month periods
ended March 31, 1996 and 1995 are not necessarily indicative of the results that
may be expected for the year ended June 30, 1996.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10-KSB for
the year ended June 30, 1995 as filed with the Securities and Exchange
Commission.
7
<PAGE>
LYLE H. COOPER
CERTIFIED PUBLIC ACCOUNTANT
9051 EXECUTIVE PARK DRIVE
SUITE 103
KNOXVILLE, TENNESSEE 37923
TELEPHONE: 423-691-8132 TELECOPIER: 423-691-8209
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Workforce Systems Corp.
I have audited the accompanying consolidated balance sheets of Workforce Systems
Corp. (a Florida Corporation) and subsidiaries as of the year ended June 30,
1995 and June 30, 1994, and the related consolidated statements of income,
retained earnings, and cash flows for the year ended June 30, 1995, the five
month period ended June 30, 1994, and the year ended January 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management.
My responsibility is to express an opinion on these consolidated financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis for
my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Workforce Systems
Corp. and subsidiaries as of the year ended June 30, 1995 and June 30, 1994, and
the results of their operations and their cash flows for the year then ended and
the five months ended June 30, 1994, and the year ended January 31, 1994, in
conformity with generally accepted accounting principles.
October 12, 1995
/s/ Lyle H. Cooper
- ----------------------------
Lyle H. Cooper
CERTIFIED PUBLIC ACCOUNTANT
<PAGE>
WORKFORCE SYSTEMS CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, June 30,
1995 1994
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 91,652 $ 11,346
Receivables:
Trade accounts receivable, no allowance necessary 197,438 22,049
Related party trade accounts receivable 855,432 --
Related party advances and note receivable 15,915 65,000
Interest 1,625 1,625
Inventory 769,283 --
Prepaid expenses 45,855 735
Deferred income tax assets 15,670 15,670
----------- -----------
Total Current Assets 1,992,870 116,425
PROPERTY, PLANT AND EQUIPMENT
Land 150,000 --
Building and improvements 756,942 --
Machinery and equipment 1,007,073 12,426
Autos and trucks 136,169 --
Accumulated depreciation (22,766) (10,767)
----------- -----------
Total Property, Plant and Equipment 2,027,418 1,659
OTHER ASSETS
Acquisition cost, net of accumulated amortization
of $ 35,346 and $ 346, respectively 1,945,256 410,295
Goodwill, net of accumulated amortization
of $ 5,000 1,400,629 --
----------- -----------
Total Other Assets 3,345,885 410,295
----------- -----------
$ 7,366,173 $ 528,379
=========== ===========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
June 30, June 30,
1995 1994
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 437,342 $ 22,051
Accrued and withheld payroll taxes, penalty & interest 111,248 98,642
Accrued payroll -- 15,030
Accrued federal & state income taxes 243,669 47,057
Deferred income tax liability 70,150 11,400
Miscellaneous other liabilities 10,263 6,420
Current portion of long term debt 250,626 --
---------- ----------
Total Current Liabilities 1,123,298 200,600
NON CURRENT DEFERRED INCOME TAXES 176,250 --
LONG TERM DEBT, less current portion 720,457 --
RELATED PARTY NOTE PAYABLE 936,770 --
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 2,000,000 shares
authorized, 30 shares of Series A issued and
outstanding, 70,000 shares Series B issued and
outstanding, 30,000 shares Series C issued and
outstanding 100 70
Common stock, $ .001 par value, 10,000,000 shares
authorized, 1,503,724 shares issued and outstanding 1,504 1,011
Paid in capital 4,075,155 352,749
Retained earnings (deficit) 332,639 (26,051)
---------- ----------
Total Stockholders' Equity 4,409,398 327,779
---------- ----------
$7,366,173 $ 528,379
========== ==========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
10
<PAGE>
WORKFORCE SYSTEMS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the year For the five For the year
ended months ended ended
June 30, 1995 June 30, 1994 January 31, 1994
------------- ------------- ----------------
<S> <C> <C> <C>
Revenues earned, net of returns
and allowances $ 2,825,030 $ 585,717 $ 1,254,428
Cost of revenues earned 1,913,317 412,578 914,183
----------- ----------- -----------
Gross profit 911,713 173,139 340,245
Selling, general and administrative expense 279,240 79,731 145,084
----------- ----------- -----------
Income from operations 632,473 93,408 195,161
Income tax provision 239,400 32,877 66,506
----------- ----------- -----------
Income before extraordinary item $ 393,073 $ 60,531 $ 128,655
Extraordinary item - payroll tax penalty and
interest less applicable taxes of $ 3,965 for
the year ended 1/31/94, income (expense) 45,000 -- (26,893)
----------- ----------- -----------
Net income $ 438,073 $ 60,531 $ 101,762
=========== =========== ===========
Earnings per common and common
equivalent share
Net income $ 438,073 $ 60,531 $ 101,762
Less: Dividends paid 79,383 11,430 --
Net income available to common
shareholders $ 358,690 $ 49,101 $ 101,762
=========== =========== ===========
Continuing operations $ .29 $ .05 $ .12
Extraordinary item $ .04 $ -- $ (.02)
Net income $ .33 $ .05 $ .10
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
WORKFORCE SYSTEMS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
as of and for the year ended June 30, 1995, and the five month period ended June 30, 1994,
and for the year ended January 31, 1994
Preferred stock Common stock
$.001 par value $.001 par value,
2,000,000 shares 10,000,000 shares
authorized authorized
100,030 1,503,724 Additional Total
shares issued shares issued Paid-In Retained Stockholders'
and outstanding and outstanding Capital Earnings Equity
--------------- --------------- ------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance, February 1, 1993 -- 1,350 31,750 (165,484) (132,384)
Net income for the year
ended January 31, 1994 -- -- -- 101,762 101,762
----------- ----------- ----------- ----------- -----------
Balance, January 31, 1994 -- 1,350 31,750 (63,722) (30,622)
Issuance of 70,000 shares of preferred
stock pursuant to reverse acquisition 70 -- 3,585 -- 3,655
Issuance of 750,000 shares of common
stock pursuant to reverse acquisition -- 750 -- -- 750
Issuance of 228,334 shares of registered
common stock -- 228 335,438 -- 335,666
Dividends paid -- -- -- (22,860) (22,860)
To reflect reverse acquisition -- (1,317) (18,024) -- (19,341)
Net income for the five months ended
June 30, 1994 -- -- -- 60,531 60,531
----------- ----------- ----------- ----------- -----------
Balance June 30, 1994 70 1,011 352,749 (26,051) 327,779
Issuance of 30 shares of Series A Preferred
and 30,000 shares of Series C Preferred 30 -- -- -- 30
Issuance of 492,285 shares of common stock -- 493 3,722,406 -- 3,722,899
Dividends paid -- -- -- (79,383) (79,383)
Net income for the year ended
June 30, 1995 -- -- -- 438,073 438,073
----------- ----------- ----------- ----------- -----------
Balance June 30, 1995 $ 100 $ 1,504 $ 4,075,155 $ 332,639 $ 4,409,398
=========== =========== =========== === ======== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
12
<PAGE>
WORKFORCE SYSTEMS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the year For the five For the year
ended months ended ended
June 30, 1995 June 30, 1994 January 31, 1994
------------- ------------- ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 438,073 $ 60,531 $ 101,762
Adjustments to reconcile net income to
net cash provided by operating activities
Amortization 40,000 -- --
Depreciation 12,000 -- --
Increase (decrease) in deferred income tax 58,750 (4,270) 52,631
(Increase) decrease in:
Trade account receivable (175,389) 8,728 10,834
Related party trade account receivable (855,432) -- --
Inventory (615,025) -- --
Prepaid expenses (45,120) 2,765 --
Interest receivable -- (1,625) --
Increase (decrease) in:
Accounts payable 415,291 12,051 --
Bank overdraft -- -- (8,646)
Accrued and withheld payroll tax,
penalty and interest 12,606 (24,357) (101,122)
Accrued federal and state tax 196,612 37,147 9,910
Accrued payroll (15,030) (7,846) 8,505
Miscellaneous liabilities 3,843 1,845 (5,717)
----------- ----------- -----------
Net Cash (Used) Provided by Operating Activities (528,821) 84,969 68,157
INVESTING ACTIVITIES:
Related party receivable 49,085 (15,000) (16,922)
Purchase of property and equipment (1,268,428) -- --
Acquisition costs -- (87,000) --
----------- ----------- -----------
Net Cash Used by Investing Activities (1,219,343) (102,000) (16,922)
FINANCING ACTIVITIES:
Proceeds from related party loans 936,770 -- --
Proceeds from long term debt 971,083 -- --
Dividends paid (79,383) (22,860) --
----------- ----------- -----------
Net Cash Provided (Used) by Financing Activities 1,828,470 (22,860) --
----------- ----------- -----------
(Decrease) Increase in Cash and Cash Equivalents 80,306 (39,891) 51,235
Cash and Cash Equivalents, Beginning of Period 11,346 51,237 2
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 91,652 $ 11,346 $ 51,237
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
13
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
GENERAL DEVELOPMENT OF BUSINESS
Workforce Systems Corp. (formerly known as Wildflower Financial Corp.), a
Florida corporation (the "Company") was formed on August 17, 1992, to seek
acquisition possibilities throughout the United States and to make acquisitions
or enter into other business endeavors to the extent its limited assets would
allow. In order to raise the capital necessary to accomplish such goals, the
Company offered 10,000 shares of common stock, par value $ .001 (the "Common
Stock") to the public pursuant to a registration statement under the Securities
Act of 1933, as amended (the "Act"). In June 1993, the Company completed its
initial public offering with the sale of 13,505 shares of Common Stock,
receiving net proceeds, after the costs of the offering, of approximately $
11,371.
ACQUISITION OF PRIME FLORIDA, INC. AND OUTSIDE INDUSTRIAL SERVICES, INC.
Pursuant to its intended business purpose, on June 14, 1994, the Company's
principal shareholder, President and Chairman, sold shares of the Company's
restricted Common Stock owned by him, representing approximately 55 % of the
Company's then issued and outstanding stock, in a private transaction.
Effective June 30, 1994, the Company acquired 51.9 % of the issued and
outstanding stock of Outside Industrial Services, Inc., a Tennessee corporation
doing business as Outside Plant Services, Inc. (OPS) for 70,000 shares of the
Company's Series B $ 5.00 Cumulative Convertible Preferred Stock ("Series B
Preferred Stock") from an unaffiliated third party in a private transaction.
Also, effective June 30, 1994, the Company acquired all of the issued and
outstanding stock of Prime Florida, Inc., a Florida corporation ("Prime") from
Yucatan Holding Company for 750,000 shares of the Company's restricted Common
Stock in a private transaction. Prime's sole assets included its right under the
Management Services Agreement with OPS (as hereinafter described), together with
a 7.4 % interest in OPS.
Giving effect to both the 51.9 % interest in OPS the Company acquired in the
aforedescribed transaction, together with the 7.4 % interest in OPS the Company
acquired through its ownership of Prime, the Company was then the owner of 59.3
% of the issued and outstanding stock of OPS.
14
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On November 30, 1994, the Company exchanged 30 shares of its Series A Preferred
Stock for 155 shares of the common stock of OPS thereby completing its plan to
acquire at least 80 % of OPS which began in June 1994. Following such share
exchange, the Company is the beneficial owner of approximately 81 % of OPS.
OPS was formed in 1982 for the purpose of arranging specialized labor services
to industries in the East Tennessee area. The Company arranges assembly line,
janitorial, transportation and maintenance services at negotiated hourly rates.
The Company's primary contract has run continually since the inception of the
Company; however, is from time to time renewed, usually when the Company is
negotiating labor rate changes.
The Company's primary contract was last renewed July 15, 1994, for one year and
provided for an automatic one year extension until July 15, 1996, unless the
Company was notified by April 15, 1996. The contract automatically renewed under
it terms.
Under the terms of its contract the Company independently hires its own
employees and therefore is responsible for employee taxes and any provided
benefits. Further, in compliance with its contracts the Company maintains
general and automobile liability policies on a negotiated basis and all
statutory workmen's compensation insurance.
Prime, pursuant to the terms of the Management Service Agreement, provides OPS
with the management and technical expertise necessary to manage OPS' business
and be competitive in the marketplace. As compensation thereunder, Prime
receives an amount equal to all net cash flow from the operations of OPS in
excess of $ 30,000 per annum, with such $ 30,000 paid to a minority shareholder
of OPS and treated and recorded as a dividend to such minority shareholder.
The above reverse acquisitions have been accounted for using the purchase method
of accounting.
The management of the Company in accordance with the purchase method of
accounting, comments from the National Association of Securities Dealers, inc.
and Securities and Exchange Commission staff interpretations has elected to
record the issuance of the Company's Common Stock and Series B Preferred Stock
issued in conjunction with the acquisitions of OPS and Prime in an amount
approximating the net book value of the acquired companies.
15
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accordingly, no goodwill has been recorded. Costs associated with acquisitions
at June 30, 1994, which have been recorded at cost in accordance with the
purchase method of accounting in a reverse acquisition, and are to be amortized
over a period of twenty years.
EXPANSION OF OPERATIONS - NHP MANUFACTURING CORP.
On November 4, 1994, the Company entered into an agreement with Naturale Home
Products, Inc. ("Naturale") whereby the Company was named the exclusive
manufacturer through a to-be-established wholly-owned subsidiary of the
registrant for all products developed and marketed by Naturale, including the
Thaw Master (TM) thawing trays. The material terms of the agreement provided
that the Company at its option could either continue the contract manufacturing
currently in effect with an unaffiliated third party on a sub-contract basis,
establish additional manufacturing facilities operated by the Company or
sub-contract the manufacturing to other third parties. The agreement further
provided that the Company would establish a wholly-owned subsidiary and
capitalize such subsidiary with a minimum of $ 350,000 which such funds would be
used to (I) undertake the manufacturing operations, (ii) provide an inventory of
products and (iii) working capital. Pursuant to this agreement, the Company
established NHP Manufacturing Corp., a Florida corporation ("NHP") which is
wholly-owned subsidiary of the Company. At June 30, 1995, the Company had
compiled with the terms of the contract. In connection with the above the
Company issued 170,500 shares of registered stock for consulting and
professional fees.
ACQUISITION OF INDUSTRIAL FABRICATION & REPAIR, INC.
On May 22, 1995, the Company acquired 100 % of the issued and outstanding
capital stock (the "IFR Stock") of Industrial Fabrication & Repair, Inc. ("IFR")
from its sole shareholder who was a non-affiliated third party to the Company in
a private transaction exempt from registration under applicable federal and
state securities laws as well as being tax-free pursuant to Section 368 of the
Internal Revenue Code of 1986, as amended, in exchange for 125,925 shares of the
Company's restricted common stock. The Company granted such exchanging IFR
shareholder a 24 month right of first refusal as to the IFR Stock in the event
of a change of control of the Company (as defined in the Agreement) of if the
Company should desire to transfer the IFR Stock or sell all or substantially all
of IFR's assets.
16
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IFR is an industrial fabrication based in Knoxville, Tennessee that provides
specialized contracting, machinery, tools and design work, and sells power
transmission supplies. The principle followed in determining the amount of
consideration paid by the Company was a multiple of book value of IFR, such book
value having been adjusted to reflect the fair market value of readily
identifiable tangible assets recorded in the books and records of IFR at April
30, 1995. In addition the Company acquired a building and property to house the
expanded operations of IFR through the assumption of debt and cash of
approximately $ 850,000. In conjunction with the above IFR and real property
acquisition the Company issued 183,300 shares of registered stock for consulting
and professional fees.
The IFR acquisition cost was recorded as follows:
Inventory $ 494,070
Equipment 478,678
Autos and trucks 136,169
Leasehold improvements 39,074
Other assets 315,208
Goodwill 323,145
----------------
$ 1,786,344
================
Liabilities $ 669,869
Deferred taxes 235,000
Stock issued 881,475
----------------
$ 1,786,344
================
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries which are more than 50 % owned.
INVENTORIES
Inventories are stated at the lower of cost or market. As part of the purchase
price allocation on the acquisition of IFR the inventory carrying value was
increased by $ 154,258. This amount will be charged to cost of sales as the
inventory is sold.
17
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated over five, seven and
forty years. Depreciation of $ 12,000 was expensed for the year ended June 30,
1995. The balance reflected at June 30, 1994, is estimated salvage value. During
1995, the Company issued 33,350 shares of common stock to contractors in
connection with acquisition, improvement and set up of fixed assets.
INTANGIBLES, ACQUISITION AND ORGANIZATION COSTS
The Company has elected to amortize acquisition, goodwill and start up cost over
a period of 20 years. For the year ended June 30, 1995 and June 30, 1994, the
Company expensed $ 40,000 and $ 346, respectfully, for amortization cost. The
intangibles resulted from the issuance of S8 stock in connection with the
acquisition of OPS, NHP Manufacturing and IFR.
INCOME TAXES
In connection with the acquisition of IFR as previously discussed, the Company
established total deferred income taxes of $ 235,000 to provide for the
difference in book value and tax basis resulting from recording IFR assets at
fair market value. In addition, other minor deferred tax assets and liabilities
are recorded to provide for timing differences.
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share were computed by dividing net
income, adjusted by the dividends paid to a common shareholder of OPS pursuant
to a management agreement and for dividends paid to the other preferred
shareholders, by the number of shares of Common Stock and Common Stock
equivalents outstanding at the end of June 30, 1995.
SERIES C PREFERRED STOCK
The Company issued 30,000 shares of Series C preferred stock to an employee. The
stock is non voting and non convertible. The terms of the stock requires the
payment of an annual dividend of $ 36,000.
18
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 2 - STATEMENTS OF CASH FLOWS SUPPLEMENTARY DISCLOSURES
The Company considers deposits in banks, certificates of deposit and highly
liquid investments with an original maturity of three months or less as cash and
cash equivalents for the purpose of the Statement of Cash Flows.
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
Cash paid (received) for
Year Five Months Year
Ended Ended Ended
June 30, 1995 June 30, 1994 January 31, 1994
------------- ------------- ----------------
Interest $ - $ - $ 9,292
Income taxes $ 38,997 $ - $ -
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the year ended June 30, 1995, the Company issued 358,850 shares of
registered common stock and 133,425 shares of Reg. 144 common stock in
connection with the start up and acquisition of NHP Manufacturing and IFR and in
connection with the acquisition of land and building. The total value of the
stock issued was $ 3,772,899.
During the five month period ended June 30, 1994, the Company issued 228,334
shares of the Company's registered common stock in payment of approximately $
335,666 in acquisition costs in a transaction not affecting cash.
NOTE 3 - NOTE RECEIVABLE
Year Five Months
Ended Ended
June 30, 1995 June 30, 1994
------------ -------------
Note receivable from a related party, interest
at 6%, due on demand, unsecured $ -- $ 65,000
19
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 4 - LONG-TERM DEBT
Long-term debt consisted of the following:
Year
Ended
June 30, 1995
-------------
Demand note payable to stockholder,
interest at 7.4 %, unsecured $ 25,000
Demand note payable to related party,
interest at 6 %, principal payment
of $ 20,000 due December 31, 1993.
Accrued interest payments due June 30, 1993
and December 31, 1993, unsecured. 20,000
Note payable to a bank, interest at 7.75 %,
principal and interest of $ 729 due monthly through
November 1997, secured by a truck. 18,615
Note payable to a bank, interest at 7.75 % principal
and interest of $ 3,425 due monthly through December 1998,
secured by receivables, inventory, equipment, personal
guaranty of stockholder, and a deed of trust on property
owned by the stockholder. 124,748
Note payable to a bank, interest at 10 % principal
and interest of $ 532 due monthly through September
1997, secured by a saw. 12,823
Note payable to a bank, interest at 9.7 %,
principal and interest of $ 663 due monthly
through February 1998, secured by truck 24,475
20
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 4 - LONG-TERM DEBT (CONTINUED)
Note payable to a credit corporation, interest
at 5.9 %, principal and interest of $ 512 due
monthly through November 1995, secured
by a truck. 2,521
Note payable to a credit corporation, interest
at 7.25 %, principal and interest of $ 804 due
monthly through April 1996, secured by a automobile. 7,783
Capital lease payable to a leasing company, interest
at 10 %, principal and interest of $ 2,715 due
monthly through March 2000, secured by
production equipment. 60,000
Capital lease payable to a leasing company, interest
at 10.87 %, principal and interest of $ 3,062 due monthly
through June 2000, secured by production equipment. 175,000
First Mortgage payable to individuals, interest at 7.75 %,
principal and interest of $ 5,400 due monthly through
July 2002, secured by land and building. 398,907
Property taxes payable under agreement with the City
and County for acquisition of land and building,
payments of $ 6,336 through June 1996,
and $ 2,538 from July 1996 to June 1997. 101,211
----------
971,083
Less current portion 250,626
----------
$ 720,457
==========
21
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 4 - LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt are as follows:
Year ending December 31
1995 250,626
1996 158,409
1997 137,656
1998 124,202
Thereafter 300,190
--------------
$ 971,083
==============
NOTE 5 - RELATED PARTY TRANSACTIONS
As discussed in Note 1, NHP Manufacturing was established initially to provide
product to a related company, Naturale Home Products, Inc. in which the Company
owns a 15 % interest.
During the year ended June 30, 1995, NHP Manufacturing sold to Naturale Home
Products approximately $ 1,175,000 of products and OPS provided approximately $
182,000 of labor services, the total related party sales representing
approximately 48 % of the Company's total sales.
In addition to the above, the Company, pursuant to it's contract with Naturale
Home Products, provided working capital and accounts receivable financing for
Naturale Home Products. Such advances were secured by a blanket security
interest in all the assets of Naturale Home Products. At June 30, 1995, Naturale
Home Products was indebted to the Company for the accounts receivable for
approximately $ 855,000.
In conjunction with the manufacturing agreement with Naturale Home Products, the
acquisition of Industrial Fabrication & Repair, Inc. and the acquisition of real
property the Company issued 293,000 shares of registered common stock valued at
$ 2,320,310 to officers and other related parties associated with the Company's
major stockholder as defined under FASB 57 for the year ended June 30, 1995, in
payment of organization, start up and acquisition costs.
During the year ended June 30, 1994, the Company issued 190,000 shares of
registered common stock to a related party, as defined under FASB 57, in payment
of a $ 279,000 acquisition cost.
22
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 5 - RELATED PARTY TRANSACTIONS (CONTINUED)
During the year ended June 30, 1995, funds were transferred between the
Company's major stockholder, other related parties, and the Company as required
for various cash needs by the Company. As of June 30, 1995, the Company is
indebted to the major stockholder on a promissory note dated June 30, 1995, for
$ 936,770, bearing quarterly interest at the prime rate as published in the WALL
STREET JOURNAL. The initial rate of interest is 8.75 %. The note is due on June
30, 1997, and may, at the option of the holder, be converted into common shares
of the Company for any principal or interest payments required under the note.
The conversion ratio is to be established by the Holder and Maker at the time of
conversion.
The note also contains a provision that in the event Maker's common stock is
listed for trading on The Nasdaq SmallCap Market or similar stock exchange (the
"Exchange") on June 30, 1997, and in the opinion of counsel for Maker the
payment of this Note by Maker would adversely affect the continuance of Maker's
listing, in the sole discretion of the Maker, the due date of the Note may be
extended until June 30, 1999; provided written notice of same accompanied by an
opinion of counsel stating that such payment would adversely affect the listing
of Maker's common stock on the Exchange is delivered to Holder on or before June
1, 1997.
NOTE 6 - EXTRAORDINARY ITEM
During calendar 1991, prior management of the Company failed to deposit payroll
taxes on a timely basis. As a result, the Company incurred significant payroll
tax penalty and interest. Current management negotiated a payment plan with the
Internal Revenue Service to satisfy the Company's obligation at the rate of $
2,500 weekly. As of the date of this report, the Company has paid the prior
liability under this agreement.
APB Opinion No. 30, REPORTING THE RESULTS OF OPERATIONS, defines extraordinary
items as events or transactions that meet both of the following criteria:
a. UNUSUAL NATURE - the underlying event or transaction should possess a
high degree of abnormality and be of a type clearly unrelated to, or
only incidentally related to, the ordinary and typical activities of
the entity, taking into account the environment in which the entity
operates. (An event or transaction is not considered to be unusual
merely because it is beyond the control of management.)
23
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 6 - EXTRAORDINARY ITEM (CONTINUED)
b. INFREQUENCY OF OCCURRENCE - the underlying event or transaction should
be of a type that would not reasonably be expected to recur in the
foreseeable future, taking into account the environment in which the
entity operates.
Due the circumstances surrounding this failure, current management believes the
payroll tax interest and penalty should be treated as an extraordinary item. For
the five months ended June 30, 1994, amounts paid were not material and
therefore are not classified as such. The components of this item follows:
Five Months
Ended
June 30, 1994
-------------
Interest $ 9,292
Penalty 21,566
Less tax benefit (3,965)
-------------
$ 26,893
=============
During the year ended June 30, 1995, the Company settled the tax liability with
the Internal Revenue Service resulting in an adjustment of an over accrual of $
45,000 for payroll tax penalties. This adjustment is reflected in income as an
extraordinary item.
NOTE 7 - INCOME TAXES
The Company provides deferred income tax assets and liabilities under FASB 109
for timing differences between book and taxable income. These differences are
not considered material at June 30, 1995.
As previously discussed, the Company established a deferred income tax liability
due to the acquisition of IFR in the amount of $ 235,000 for differences between
the book and tax basis of the acquired assets. The current amount of deferred
taxes was estimated by the Company at $ 58,750. The non current deferred amount
was estimated at $ 176,250.
The tax provision for the years ended June 30, 1995, June 30, 1994 and January
31, 1994, was based on a state statutory rate of 6 % and an average federal
statutory rate of 34 %.
24
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 8 - PREFERRED STOCK
The designations, rights and preferences of the Series A Preferred Stock provide
that the shares (I) have full voting rights, share for share, with the then
outstanding common stock of the Company as well as any other series of preferred
stock then outstanding, (ii) are not convertible into any other class of equity
of the Company, (iii) are redeemable at any time at the Company's option at par
value of $ .001 per share, (iv) pay dividends at the sole discretion of the
Company's Board of Directors, (v) are not transferable without the consent of
the Company's Board of Directors and (vi) in the event of a liquidation or
winding up of the Company, carry a liquidation preference equal to par value,
without interest, and are junior in interest to the Series B $ 5.00 Cumulative
Convertible Preferred Stock of the Company then outstanding.
The designations, rights and preferences of the Series B Preferred Stock
provides that the holders thereof (I) shall receive annual dividends equal to $
.43 per share, (ii) are entitled to full voting rights, share for share, with
any then outstanding common stock as well as with any other class or series of
stock of the Company having general voting power with the common stock
concerning any matter being voted upon by the Company's shareholders, (iii) are
entitled to convert their shares of Preferred Stock into shares of the Company's
restricted common stock at any time on a one for one basis and (iv) are
redeemable at the option of the Company at $ 4.30 per share.
The designations, rights and preferences of the Series C Preferred Stock provide
that the shares (I) have no voting rights, (ii) are not convertible into any
other class of equity of the Company, (iii) are redeemable at any time at the
Company's option at an amount equal to the prior year's
annual dividend as previously set by action of the Company's Board of Directors,
(iv) pay dividends at the sole discretion of the Company's Board of Directors,
(v) are not transferable without the consent of the Company's Board of Directors
and (vi) in the event of a liquidation or winding up of the Company, carry a
liquidation preference equal to par value, without interest, and are junior in
interest to the Series B $ 5.00 Cumulative Convertible Preferred Stock of the
Company then outstanding. An annual dividend rate of $ 36,000 for the balance of
calendar 1994 and for the calendar year of 1995 was set by the Board of
Directors.
25
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended June 30, 1995, and the five month period
ended June 30, 1994, and for the year ended January 31, 1994
NOTE 9 - BUILDING LEASE
As of January 1, 1995, the Company leased its manufacturing and office
facilities for NHP Manufacturing under a lease agreement that requires monthly
rental payments and monthly contributions to operating expenses of $ 3,267 and $
467, respectively. The lease expires on June 30, 1998. The Company has the
option to extend the lease on a month to month basis.
NOTE 10 - ECONOMIC DEPENDENCY
As discussed in Note 5, 48 % of the Company's sales for the year ended June 30,
1995, were to a related party. The major customer of OPS accounts for 36 % of
the Company's sales. The acquisition of IFR should substantially change the
Company's sales dependency upon these two customers.
26
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Articles of Incorporation of the Company provide indemnification of
directors and officers and other corporate agents to the fullest extent
permitted pursuant to the laws of Florida. The Articles of Incorporation also
limit the personal liability of the Company's directors to the fullest extent
permitted by the Florida Business Corporation Act. The Florida Business
Corporation Act contains provisions entitling directors and officers of the
Company to indemnification from judgments, fines, amounts paid in settlement and
reasonable expenses, including attorneys' fees, as the result of an action or
proceeding in which they may be involved by reason of being or having been a
director or officer of the Company, provided said officers or directors acted in
good faith.
Insofar as indemnification or liabilities arising under the Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, or otherwise, the Company 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. In the event that a claim for indemnification against such liabilities
(other than the payment by the Company 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
Company 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 express
in the Act and will be governed by the final adjudication of such issue.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the issuance and resale of the securities offered hereby. The
Company is responsible for the payment of all expenses in connection with the
Offering.
Registration fee $ 700.00*
Blue Sky filing fees and expenses 2,000.00*
Printing and engraving expenses 2,000.00*
Legal fees and expenses 10,000.00*
Accounting fees and expenses 5,000.00*
Miscellaneous 300.00*
Total $25,000.00*
==========
* Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In April 1996 the Company sold an aggregate of 222,000 shares of its
restricted Common Stock to two institutional investors and two accredited
investors in a series of private transactions exempt from registration under the
Securities Act of 1933, as amended pursuant to Regulation D. An aggregate of
180,000 shares were sold at $4.125 per shares and the balance of 42,000 shares
at $4.80 per share. In connection with such sales, not later than 15 days after
the filing of the Company's annual report on Form 10-KSB for the year ended June
30, 1996, the Company agreed to cause a registration statement registering the
shares to be filed with the Securities and Exchange Commission in order to
permit a public distribution of such shares. The Company agreed to pay all costs
of such registration statement, exclusive of fees and expenses of the holder's
counsel or accounts or other professionals, if any. Such shares are included in
this registration statement. See "Selling Security Holders."
ITEM 27. EXHIBITS.
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
2.1 Stock Purchase Agreement dated June 14, 1994 by and between
F. W. Miller, Wildflower Financial Corp. and Yucatan Holding
Company is hereby incorporated by reference to the Report on
II-2
<PAGE>
Form 8-K as filed with the Securities and Exchange Commission
on June 20, 1994
2.2 Agreement dated as of June 30, 1994 by and between Wildflower
Financial Corp., Yucatan Holding Company and Prime Florida,
Inc. is hereby incorporated by reference to the Report on Form
8-K as filed with the Securities and Exchange commission on
July 13, 1994
2.3 Agreement dated as of June 30, 1994 by and between Wildflower
Financial Corp. and a certain shareholder of Outside
Industrial Services, Inc. is hereby incorporated by reference
to the Report on Form 8-K as filed with the Securities and
Exchange commission on July 13, 1994
2.4 Agreement dated November 30, 1994 by and between Workforce
Systems Corp. and Outside Industrial Services, Inc. is hereby
incorporated by reference to the Report on Form 10-QSB for the
quarter ended December 31, 1994 as filed with the Securities
and Exchange commission on February 15, 1995
2.5 Agreement dated May 22, 1995 by and between Workforce Systems
Corp. and Lester E. Gann, the Sole Shareholder of Industrial
Fabrication & Repair, Inc. is hereby incorporated by reference
to the Report on Form 8-K as filed with the Securities and
Exchange commission on May 23, 1995
2.6** Stock Purchase and Exchange Agreement dated February 21, 1996
by and between Workforce Systems Corp., American Industrial
Management, Inc. and the beneficial owners of all of the
issued and outstanding stock of AIM
3.1 Articles of Incorporation are hereby incorporated by reference
to the Registration Statement on Form SB-2 as declared
effective by the Securities and Exchange Commission on January
12, 1993
3.2 Articles of Amendment to the Articles of Incorporation setting
forth the designations, rights and preferences of the Series B
$5.00 Cumulative Convertible Preferred Stock are hereby
II-3
<PAGE>
incorporated by reference to the Report on Form 8-K as filed
with the Securities and Exchange Commission on July 13, 1994
3.3 Articles of Amendment to the Articles of Incorporation
changing the corporation name are hereby incorporated by
reference to the Report on Form 8-K as filed with the
Securities and Exchange Commission on July 11, 1994
3.4 Articles of Amendment to the Articles of Incorporation setting
forth the designations, rights and preferences of the Series A
and Series C Preferred Stock are hereby incorporated by refer
ence to the Report on Form 10-QSB for the quarter ended
December 31, 1994 as filed with the Securities and Exchange
commission on February 15, 1995
3.5** Articles of Amendment to the Articles of Incorporation setting
forth the designations, rights and preferences of the Series D
Preferred Stock
3.6** By-Laws of the Company are hereby incorporated by reference to
the Registration Statement on Form SB-2 as declared effective
by the Securities and Exchange Commission on January 12, 1993.
5** Opinion of Atlas, Pearlman, Trop & Borkson, P.A. as to the
validity of the securities being registered.
10.1** Licensing Agreement dated May 31, 1996 by and between Ginsburg
Enterprises Incorporated and Products That Produce, Inc.
10.2** Agreement dated July 22, 1996 by and between Laidlaw Equities,
Inc. and Workforce Systems Corp.
10.3** Employement Agreement between Industrial Fabrication & Repair,
Inc. and Lester E. Gann
10.4** Employment Agreement between American Industrial Management,
Inc. and Robert Lovelace
II-4
<PAGE>
10.5** Employment Agreement between American Industrial Management,
Inc. and David Debuty
10.6** Form of Subscription Agreements for Crestwood Capital Inter-
national, Ltd., Crestwood Capital Partners, L.P., Peqout Scout
Fund, Mr. Ed Hajim and Dr. Aiden O'Rourke
16.1 Letter from Richard H. Harris & Associates, P.A. regarding
change in certifying accountants is hereby incorporated by
reference to the Report on Form 8-K as filed with the
Securities and Exchange Commission on July 11, 1994
16.2 Letter from Lyle H. Cooper, C.P.A. regarding change in
certifying
accountants is hereby incorporated by reference to the Report
on Form 8-K as filed with the Securities and Exchange
Commission on July 11, 1994
21** Subsidiaries of the Registrant
22 Information regarding the name change of the Company is hereby
incorporated by reference to the Report on Form 8-K as filed
with the Securities and Exchange Commission on July 11, 1994
23(I)** Consent of Lyle H. Cooper
23(ii)** Consent of Atlas, Pearlman, Trop & Borkson (including as part
of Exhibit 3
** To be filed by amendment
ITEM 28. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities 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-5
<PAGE>
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any additional or changed material
information with respect to the plan of distribution.
(2) For determining any liability under the Securities Act of 1933,
as amended, treat each post-effective amendment as a new registration statement
relating to the securities offered, and the offering of the securities at that
time to be the initial bona fide offering.
(3) To file a post-effective amendment to remove any of the
securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), 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-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned in the City of Alcoa,
State of Tennessee, on August 28, 1996.
WORKFORCE SYSTEMS CORP.
By: /s/Ella Boutwell Chesnutt
---------------------------------
Ella Boutwell Chesnutt
Principal Executive Officer
and President
In accordance with the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement was signed by the following persons in
the capacities and on the dates stated.
Signature Title Date
- --------- ----- ----
/s/ Ella Boutwell Chesnutt Director, President August 28,1996
- ---------------------------
Ella Boutwell Chesnutt
/s/ Jayme Dorrough Director, Vice August 28, 1996
- --------------------------- President, Secretary
Jayme Dorrough
II-7
