SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission file number 33-53250-A
Workforce Systems Corp.
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(Exact name of small business issuer as specified in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
65-0353816
--------------------------------
(IRS Employer Identification No.)
8870 Cedar Springs Lane, Suite 5, Knoxville, TN 37923
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(Address of principal executive offices)
423-769-2380
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes(x) No( ).
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. As of May 15, 1997 the
registrant had issued and outstanding 1,794,144 shares of common stock.
Transitional Small Business Disclosure Format (check one);
Yes ( ) No (x)
<PAGE>
The Registrant hereby amends the items and financial statements of its
Quarterly Report on Form 10-QSB for the quarter ended March 31, 1997 as set
forth below:
LIST OF ITEMS AMENDED
PART I - FINANCIAL INFORMATION
Item Page Number
- ---- -----------
1. Consolidated Balance Sheets at March 31, 1997
(Unaudited) and June 30, 1996 (Audited) 3
Consolidated Statements of Operations for the three
months and nine months ended March 31, 1997 and 1996
(Unaudited) 5
Consolidated Statements of Cash Flows for the nine
months ended March 31, 1997 (Unaudited)
and 1996 (Unaudited) 6
Consolidated Statements of Stockholders' Equity for the
three month period ended March 31, 1997 (Unaudited) 7
Notes to the Unaudited Consolidated Financial Statements 8
2. Management's Discussion and Analysis of Financial Condition
and Results of Operation 10
TEXT OF ITEMS AMENDED
Each of the above listed Items is hereby amended by deleting each Item in
its entirety and replacing it with the Items attached hereto and filed herewith.
On August 30, 1996, the Company filed a registration statement on Form
SB-2 under the Securities Act of 1933, as amended, with the Securities and
Exchange Commission (the "SEC"). The SEC issued comments on the filing by letter
dated November 4, 1996. On January 14, 1997 the Company responded to the SEC and
amended the SB-2 filing. The SEC issued additional comments by letter dated
February 14, 1997. As a result of these comments, the Company made certain
expense charges to its financial statements for the year ended June 30, 1996
which are reflected in the Consolidated Balance Sheets at June 30, 1996. On June
12, 1997 the SEC issued additional comments. As a result of these comments and
the prior period adjustments, the Company has changed its policy of
capitalization of costs associated with the identification, start-up and
development or expansion of new products or companies and general business
services related to the foregoing. Accordingly, the purpose of this amendment is
1
<PAGE>
for the Company to amend its Consolidated Balance Sheets at June 30, 1996 and
amend its Consolidated Balance Sheets, Consolidated Statements of Changes in
Stockholder's Equity, Consolidated Statements of Cash Flow, Consolidated
Statements of Operations and associated Notes to Unaudited Consolidated
Financial Statements as of March 31, 1997 and for the three and nine month
periods then ended. In addition, this amendment applies proforma effect to the
Consolidated Statements of Operations and Consolidated Statements of Cash Flow
for the three months and nine months ended March 31,1996 as hereinafter
described in Notes to Unaudited Consolidated Financial Statements.
2
<PAGE>
PART I - FINANCIAL INFORMATION
WORKFORCE SYSTEMS CORP.
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 98,765 $ 938,487
Receivables:
Trade accounts receivables, no allowance necessary 607,505 633,188
Inventory 1,825,575 1,412,896
Prepaid expenses 775,000 711,510
----------- -----------
Total Current Assets 3,306,845 3,696,081
PROPERTY, PLANT AND EQUIPMENT
Land 156,503 156,503
Building and improvements 1,380,442 1,380,442
Machinery and equipment 1,395,706 1,125,901
Autos and trucks 146,428 146,428
Accumulated depreciation (157,856) (132,856)
----------- -----------
Total Property, Plant and Equipment 2,921,223 2,676,418
OTHER ASSETS
Intangibles, net of accumulated amortization
of $ 90,281 and $75,281, respectively 1,277,637 1,330,348
$ 7,505,705 $ 7,702,847
=========== ===========
</TABLE>
3
<PAGE>
WORKFORCE SYSTEMS CORP.
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
----------- -----------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 322,195 $ 390,895
Accrued expenses 129,853 113,507
Accrued federal & state income taxes -0- 132,359
Deferred income tax liability -0- 65,000
Current portion of long term debt 275,000 254,159
----------- -----------
Total Current Liabilities $ 727,048 $ 955,920
NON CURRENT DEFERRED INCOME TAXES 125,000 125,541
LONG TERM DEBT, less current portion 499,555 539,207
RELATED PARTY NOTE PAYABLE -0- 132,667
STOCKHOLDER'S EQUITY
Series A Preferred Stock, $.001 par value, 30 shares
authorized, 30 shares issued and outstanding -0- -0-
Series C Preferred Stock, $.001 par value, 30,000 shares
authorized, 30,000 shares issued and outstanding 30 30
Series D Preferred Stock, $.001 par value, 1,000,000 shares
authorized, 1,000,000 shares issued and outstanding 1,000 1,000
Common stock, $.001 par value, 25,000,000 shares
authorized, shares and 2,752,426
shares issued and outstanding 2,752 2,421
Paid in capital 9,169,181 8,569,011
Retained earnings (3,018,861) (2,622,950)
----------- -----------
Total Stockholders' Equity 6,154,102 5,949,512
----------- -----------
$ 7,505,705 $ 7,702,847
=========== ===========
</TABLE>
4
<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,
1997 1996 1997 1996
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues earned $ 1,238,055 $ 987,641 $ 3,586,837 $ 3,158,452
Cost of revenues earned 731,022 608,820 2,091,983 1,855,480
----------- ----------- ----------- -----------
Gross Profit 507,033 378,821 1,494,854 1,302,972
Selling, general and administrative expenses 358,465 155,460 809,552 617,211
Other expenses:
Acquisition and start-up expense
see attached notes 1,238,713 2,268,198 1,238,713 2,268,198
----------- ----------- ----------- -----------
Net (Loss) Income before taxes (1,090,145) (2,044,837) (553,411) (1,582,437)
Income tax provision (benefit) (335,000) (599,614) (157,500) (365,114)
----------- ----------- ----------- -----------
Net Income ($ 755,145) ($1,445,223) ($ 395,911) ($1,217,323)
=========== =========== =========== ===========
Earnings per common and common equivalent share:
Net income before payment of dividends ($ 755,145) ($1,445,223) ($ 395,911) ($1,217,323)
Dividends paid -- 6,840 -- 39,837
----------- ----------- ----------- -----------
Net income available to common shareholders ($ 755,145) ($1,452,063) ($ 395,911) ($1,257,160)
=========== =========== =========== ===========
Earnings Per Share:
Net Income $ (.31) $ (.85) $ (.16) $ (.79)
Average weighted shares outstanding 2,430,850 1,703,306 2,430,850 1,598,903
</TABLE>
5
<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,
1997 1996
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income ($ 395,911) ($1,217,323)
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Amortization and depreciation 170,000 171,024
Acquisition and start-up costs 0 1,279,692
Changes in operating assets and liabilities:
(Increase) decrease in receivables 25,683 370,292
(Increase) decrease in prepaid expense (63,490) (436,225)
(Increase) decrease in inventory (412,679) (679,059)
(Decrease) in accounts payable (68,700) (67,649)
Increase (decrease) in income tax accounts (197,900) 60,000
Increase (decrease) in miscellaneous liabilities 16,346 30,845
----------- -----------
Net Cash Provided (Used) by Operating Activities (926,651) (488,403)
NET CASH USED IN INVESTING ACTIVITIES:
Purchase of fixed assets (362,094) (302,069)
NET CASH PROVIDED BY FINANCING ACTIVITIES:
Issuance of common stock 467,834 854,271
Decrease in long-term debt (18,811) (72,725)
Dividends paid 0 (39,837)
----------- -----------
449,023 741,709
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (839,722) (48,763)
Cash and Cash Equivalents, Beginning of Period 938,487 91,652
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 98,765 $ 42,889
=========== ===========
</TABLE>
6
<PAGE>
WORKFORCE SYSTEMS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the nine months ended March 31, 1997
(unaudited)
<TABLE>
<CAPTION>
Preferred stock Common stock
$.001 par value $.001 par value
2,000,000 shares 10,000,000 shares
authorized authorized
1,030,030 2,670,836 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, 1996 $ 1,030 $ 2,421 $8,569,011 $(2,622,950) $5,949,512
Issuance of shares of common
stock 331 600,170 600,501
Net income for the nine months
ended March 31, 1997 (395,911) $ (395,911)
-------- --------- ---------- ----------- ----------
Balance, March 31, 1997 $ 1,030 $ 2,752 $9,169,181 $(3,018,861) $6,154,102
======== ========= ========== =========== ==========
</TABLE>
7
<PAGE>
WORKFORCE SYSTEMS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1997
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, 1997 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1997.
On August 30, 1996, the Company filed a registration statement on Form
SB-2 under the Securities Act of 1933, as amended, with the Securities and
Exchange Commission (the "SEC"). The SEC issued comments on the filing by letter
dated November 4, 1996. On January 14, 1997 the Company responded to the SEC and
amended the SB-2 filing. The SEC issued additional comments by letter dated
February 14, 1997. As a result of these comments, the Company made certain
expense charges to its financial statements for the year ended June 30, 1996
which are reflected in the Consolidated Balance Sheets at June 30, 1996
presented herein. On June 12, 1997 the SEC issued additional comments. As a
result of these comments and prior period adjustments, the Company has changed
its policy of capitalization of costs associated with the identification,
start-up and development or expansion of new products or companies and general
business services related to the foregoing. Accordingly, the purpose of this
amendment is for the Company to amend its Consolidated Balance Sheets at June
30, 1996 and amend its Consolidated Balance Sheets, Consolidated Statements of
Changes in Stockholder's Equity, Consolidated Statements of Cash Flow,
Consolidated Statements of Operations and associated Notes to Unaudited
Consolidated Financial Statements as of March 31, 1997 and for the period three
and nine month periods then ended. Specifically:
Three Months and Nine Months Ended March 31, 1997 and 1996
- ----------------------------------------------------------
Pursuant to the SEC's comments and the hereinafter described changes for
the year ended June 30, 1996, the Company has changed its policy of
capitalization of costs associated with the identification, start-up and
development or expansion of new products or companies and general business
services related to the foregoing and, accordingly, has charged to expense all
such items incurred during the subject nine month period in the third quarter
ended March 31, 1997 which consist of (a) start-up costs totaling $737,713
representing cash payments to unrelated parties related to the Company's
consumer products division in the amount of $559,713 as well as the distribution
subsidiary of the manufacturing division in the amount of $178,000 and (b)
8
<PAGE>
acquisition costs, including identification and development of new products or
companies and general business services related to the foregoing of $501,000
representing the value of 228,000 shares of common stock paid to unrelated
parties for services to be rendered through calendar year 1997 related to the
exploration and ongoing due diligence related to potential additional
acquistions and expansions of the Company's business as well as services
attributable to the unsuccessful acquisition of Star Hosiery, Inc.
Pursuant to the above referenced change in policy, the Company has elected
to present the comparative three and nine month periods ended March 31, 1996
giving effect to the following other expenses set forth below under the
subheading "Fiscal Year Ended June 30, 1996" as if they had been applied for the
quarter ended March 31, 1996 to provide the reader with appropriate comparable
financial information, even though such items were not expensed until the fourth
quarter of Fiscal 1996 ended June 30, 1996.
Fiscal Year Ended June 30, 1996
- -------------------------------
Acquisition costs totaling $76,890 have been charged to expense for the
year ended June 30, 1996 and represents the value of 17,000 shares of common
stock and cash paid to unrelated parties pursuant to the acquisition of American
Industrial Management, Inc. The acquisition has been accounted for based on the
purchase method of accounting.
Mineral exploration costs totaling $700,000 have been charged to expense
for the year ended June 30, 1996. The mineral exploration costs was incurred in
connection with the successful prospecting, acquisition of mineral rights and
geophysical analysis of the mineral used in Mr. Food's AlloFresh and was paid to
a related party as defined under FASB 57 with the issuance of 140,000 shares of
common stock.
Startup costs totaling $1,091,308 have been charged to expense for the
year ended June 30, 1996. Startup costs represent pre-operating expenses
incurred in the development of Mr. Food's AlloFresh under the Company's Consumer
Products Division. As a result of the formation of Products That Produce, Inc.,
141,000 shares of stock were issued to unrelated parties. The remaining $386,308
in startup costs represents operating expenses incurred during the startup
phase.
Web development costs totaling $400,000 have been charged to expense for
the year ended June 30, 1996. The costs were incurred in connection with certain
contracts to acquire equipment and to develop and maintain Internet web sites
ultimately as an Internet provider to market its consumer products and, through
its Manufacturing Division, its inventory of refurbished gear boxes and other
power transmission components internationally. The web development was paid for
with the issuance of 80,000 shares of stock to an unrelated party.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10-KSB/A
for the year ended June 30, 1996 as filed with the Securities and Exchange
Commission.
9
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Pursuant to the SEC's comments and the changes for the year ended June 30,
1996 as described in the Notes to Unaudited Consolidated Financial Statements
appearing elsewhere herein, the Company has changed its policy of capitalization
of costs associated with the identification, start-up and development or
expansion of new products or companies and general business services related to
the foregoing and, accordingly, has restated its Fiscal 1996 financial
statements to reflect the expense of such costs in the year ended June 30, 1996
and has charged to expense all such items incurred to date in Fiscal 1997 in the
third quarter ended March 31, 1997. Pursuant to this change in policy, the
Company has further elected to present the comparative three and nine month
periods ended March 31, 1996, giving effect to the following Other Expenses as
described in the Notes to Unaudited Consolidated Financial Statements appearing
elsewhere herein, as if such items had been expensed in the quarter ended March
31, 1996 to provide the reader with appropriate comparable financial
information, even though such items were not expensed until the fourth quarter
ended June 30, 1996.
During the three months ended March 31, 1997, such expenses, which are
reflected on the Company's Consolidated Statement of Operations under "Other
Expenses," represented (a) start-up costs totaling $737,713 representing cash
payments to unrelated parties related to the Company's consumer products
division in the amount of $559,713 as well as the distribution subsidiary in the
manufacturing division in the amount of $178,000 and (b) acquisition costs,
including identification and development of new products or companies and
general business services related to the foregoing of $501,000 representing the
value of 228,000 shares of common stock paid to unrelated parties for services
to be rendered through calendar year 1997 related to the exploration and ongoing
due diligence related to potential additional acquistions and expansions of the
Company's business as well as services attributable to the unsuccessful
acquisition of Star Hosiery, Inc. For Fiscal 1996, such Other Expenses
represented (a) acquisition costs totaling $76,890, (b) mineral exploration
costs totaling $700,000, (c) start-up costs totaling $1,091,308 and (d) web
development costs totaling $400,000, all as more fully set forth in the Notes to
Unaudited Consolidated Financial Statements appearing elsewhere herein.
Management of the Company elected to make the above referenced change in
policy as a result of the SEC's comments. Generally accepted accounting
principles provide for the amortization of pre-opening and start-up costs over a
period of a facility in use, or a product produced, over the estimated useful
life thereof. The Company's policy had been to apply this treatment to costs
incurred in connection with the Company's expansion. In response to the SEC's
comments, the Company has elected to change its policy and incur these expenses
immediately as opposed to an amortization of such amounts against future
revenues or acquisitions, or until recoverability is impaired. According, the
immediate realization of such expenses may, although there can be no assurances,
result in higher margins or profitability in future periods.
10
<PAGE>
Results of Operations
Consolidated revenues for three months ended March 31, 1997 ("Third
Quarter Fiscal 1997") increased approximately $ 250,414 or approximately 25%
from the three months ended March 31, 1996 ("Third Quarter Fiscal 1996"). Gross
profit increased modestly in Third Quarter Fiscal 1997 as compared to Third
Quarter Fiscal 1996. Selling, general and administrative expenses (SG&A)
increased approximately $203,005 or 131% in Third Quarter Fiscal 1997 from Third
Quarter Fiscal 1996 as a result of the continued expansion of the Manufacturing
Division which commenced in the fourth quarter of Fiscal 1996. Other expenses
charged as a result of the Company's change in accounting policy decreased
approximately $1,029,485 in Third Quarter Fiscal 1997 from Third Quarter
Fiscal 1996 as a result of the completion of the Company's efforts in the
development of Mr. Food's AlloFresh and a completion of the Company's
diversification plans away from its previous dependence upon single source of
revenue as described in the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30 1994. Net (Loss) before taxes decreased approximately
$954,692 as a result of the aforedescribed decrease in Other Expenses.
Consolidated revenues for nine months ended March 31, 1997 ("Fiscal 1997
To Date") increased approximately $428,000 or approximately 14% from the nine
months ended March 31, 1996 ("Fiscal 1996 To Date"). Gross profit in Fiscal 1997
To Date remained relatively constant as compared to Fiscal 1996 To Date. SG&A
increased approximately $192,341 or approximately 131% in Fiscal 1997 To Date
from Fiscal 1996 To Date as a result of the continued expansion of the
Manufacturing Division. Net (Loss) before taxes decreased approximatley
$1,029,026 in Fiscal 1997 To Date from Fiscal 1996 To Date as a result of the
aforedescribed decrease in Other Expenses.
Following you will find a separate discussion regarding the results of
operations for each of the Manufacturing Division, Staffing Division and
Consumer Products Division.
Manufacturing Division
Revenues from the Manufacturing Division were approximately $935,400 for
Third Quarter Fiscal 1997 versus revenues of approximately $701,000 for the
comparable period in Fiscal 1996. Revenues from the Manufacturing Division were
approximately $2,555,430 for Fiscal 1997 To Date versus revenues of
approximately $2,148,225 for the comparable period in Fiscal 1996. The
Manufacting Divison reported a net loss before taxes of $44,432 for the Third
Quarter of Fiscal 1997 versus net income before taxes of $123,361 for the Third
Quarter Fiscal 1996 as a result of the aforedescribed Other Expense related to
the start-up of the Manufacturing Division's distribution company, Maintenance
Requisition Order Corp. ("MRO"). For the nine months ended March 31, 1997 the
net income before taxes of the Manufactuing Division decreased approximately
10% as a result of the Other Expense stated above.
The increase in revenues at the Manufacturing Division is a result of the
expansion of that division which began in Fiscal 1997 through a broadening of
the core operations to include both a diversification of the fabrication work to
include more CNC and other higher margin fabrication work as well as the sale as
an authorized distributor of power transmission components to pre-existing
customers and to various new industrial clients with the opening of the new
Dalton, Georgia location of MRO. The increase in SG&A expenses for the three
months and nine months ended March 31, 1997 from the comparable periods in
Fiscal 1996 reflects increased sales and marketing efforts. For the balance of
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<PAGE>
Fiscal 1997 and beyond, management of the Company anticipates, as a result of
the aggressive growth posture of the Manufacturing Division, that SG&A will
continue to increase as the revenues base increases. For the balance of Fiscal
1997, based upon information available to date, management of the Company
believes the Manufacturing Division will continue to increase revenues based
upon its current plans of operations.
Staffing Division
Revenues from the Staffing Division were approximately $ 277,000 for Third
Quarter Fiscal 1997 versus revenues of approximately $148,000 for the comparable
period in Fiscal 1996. Revenues from the Staffing Division were approximately
$700,555 for Fiscal 1997 To Date versus revenues of approximately $495,000 for
the comparable period in Fiscal 1996. The Staffing Divsion reported net income
before taxes of approximatley $10,000 for Third Quarter Fiscal 1997 versus a net
loss before taxes of approximatley $30,000 for Third Quarter Fiscal 1996, and
net income before taxes of approxaimtley $20,000 for Fiscal 1997 To Date versus
a net loss before taxes of approximatley $20,000 for Fiscal 1996 To Date, both
as a result of the increase in revenues attributable to lower margin accounts
and the effect of the expensing of the aforedescribed other costs as set forth
in Notes to Unaudited Consolidated Financial Statements appearing elsewhere
herein.
For the balance of Fiscal 1997 management of the Company believes the
Staffing Division will continue to increase revenues based upon their current
plans of operations.
Consumer Products Division
Revenues from the Consumer Products Division were approximately $25,000
for Third Quarter Fiscal 1997 versus revenues of approximately $128,000 for the
comparable period in Fiscal 1996. Revenues from the Consumer Products Division
were approximately $330,070 for Fiscal 1997 To Date versus revenues of
approximately $504,000 for the comparable period in Fiscal 1996. Net (Loss)
before taxes decreased approximatley $1,600,000 in Third Quarter Fiscal 1997
versus Third Quarter Fiscal 1996 as well as in Fiscal 1997 To Date from Fiscal
1996 To Date as a result of the substantial completion of the development of Mr.
Food's AlloFresh.
The foregoing results are consistent with those disclosed in prior periods
and reflect decrease in revenues which results from the maturity of one product
(the ThawMaster family of thawing trays) and the infancy in the life span of
that division's newest product, Mr. Food's AlloFresh, for which introduction at
the retail level was commenced in the beginning of Fiscal 1997.
As hereinafter described in Liquidity and Capital Resources, should the
Company conclude its acquisition of Federal, such acquisition would have a
material impact on the Company's revenues which could be reflected as early as
the fourth quarter of Fiscal 1997. There can be no assurances, however, that
such acquisition will ultimately be consummated.
12
<PAGE>
Liquidity and Capital Resources
The Company's working capital at March 31, 1997 was $2,579,797, a decrease
of approximately $160,000 from June 30, 1996. This decrease in working capital
is primarily the result of the acquisition of additional property, plant and
equipment related to the growth of the Manufacturing Division as well as
additional costs incurred by the Consumer Products Division with respect to
its newest product, Mr. Food's AlloFresh. At the present time the Company's
operations are sufficient to satisfy its cash needs. Currently, the Company has
no external sources of working capital; however, 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 an asset based
lending arrangement. At the present time, the Company has no material
commitments for any additional capital expenditures.
As previously disclosed, the Company has signed a letter of intent to
acquire 100% of the issued and outstanding capital stock of Federal Supply, Inc.
and Federal Fabrication, Inc. (collectively, "Federal") which together serve as
a fabricator and distributor of custom-designed fire sprinkler systems and
components in exchange for 110,000 shares of the Company's restricted common
stock. Based upon the Company's due diligence to date, while there can be no
assurances, such due diligence reflects that Federal's existing receivable
factoring arrangements and internal sources of working capital are sufficient to
satisfy Federal's cash needs. Accordingly, assuming the conclusion of such
acquisition, of which there can be no assurance, it presently appears to
management of the Company based upon information known to date that no
additional working capital is required by Federal to continue its operations on
the basis now conducted.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Workforce Systems Corp,
a Florida corporation
Date: June 17, 1997 By: /s/ Ella Boutwell Chesnutt
----------------------------------
Ella Boutwell Chesnutt,
Chairman
14
