<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 16, 1996
ACCUSTAFF INCORPORATED
(Exact name of registrant as specified in its charter)
FLORIDA 0-24484 59-3116655
- --------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
6440 ATLANTIC BOULEVARD, JACKSONVILLE, FL 32211
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 725-5574
--------------
N/A
-----------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 5. OTHER EVENTS.
On August 26, 1996 AccuStaff Incorporated ("AccuStaff") announced that it
entered into a definitive agreement to merge with Career Horizons, Inc.
("Career") (the "Merger"). As part of the process of completing that
transaction and in accordance with the Securities Act of 1933 (the "1933
Act"), AccuStaff is required to prepare and file with the Securities and
Exchange Commission a registration statement on Form S-4 registering the
AccuStaff common stock to be issued to the holders of Career common stock in
the Merger. As part of such registration statement, AccuStaff is required to
file certain financial statements of businesses that AccuStaff has previously
acquired which have not previously been filed by AccuStaff because the
acquired companies were not "significant subsidiaries" as defined by the rules
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act") and
thus, were not required to be filed by AccuStaff under the Exchange Act but
are now required to be filed because AccuStaff is filing a registration
statement under the 1993 Act. In addition the Company is required to file
certain pro forma financial information as of and for the six months ended June
30, 1996 which is filed herewith. The purpose of this Current Report on Form
8-K is to place such financial statements on file with the Securities and
Exchange Commission so that they may be incorporated by reference into
AccuStaff's registration statement on Form S-4 relating to the Merger. A brief
description of and the required financial statements with respect to each
acquisition appear below.
ACQUIRED COMPANY AUDITS
(A) ACQUISITION OF HNS SOFTWARE, INC.
On March 12, 1996, AccuStaff acquired the assets and business
operations of HNS Software, Inc. an Atlanta, Georgia based information
technology staffing company.
Report of Independent Accountants.................................. 6
Balance Sheet as of December 31, 1995.............................. 7
Statement of Income for the Year Ended December 31, 1995........... 8
Statement of Changes in Stockholders' Equity for the Year Ended
December 31, 1995................................................. 9
Statement of Cash Flows for the Year Ended December 31, 1995....... 10
Notes to Financial Statements...................................... 11
(B) ACQUISITION OF OPENWARE TECHNOLOGIES, INC.
On June 21, 1996, AccuStaff acquired 100% of the stock of Openware
Technologies, Inc., a Jacksonville, Florida based information
technology staffing company.
Report of Independent Accountants.................................. 15
Balance Sheet as of December 31, 1995.............................. 16
Statement of Operations for the Year Ended December 31, 1995....... 17
Statement of Changes in Stockholders' Equity for the Year Ended
December 31, 1995................................................. 18
Statement of Cash Flows for the Year Ended December 31, 1995....... 19
Notes to Financial Statements...................................... 20
2
<PAGE>
(C) ACQUISITION OF STAFFWARE, INC.
On September 3, 1996, AccuStaff acquired all of the stock of
Staffware, Inc. a Houston, Texas based information technology
staffing company.
Report of Independent Accountants.................................. 25
Balance Sheet as of December 31, 1996.............................. 26
Statements of Income for the Year Ended December 31, 1995.......... 27
Statement of Changes in Stockholders' Equity for the Year
Ended December 31, 1995............................................ 28
Statement of Cash Flows for the Year Ended December 31, 1995....... 29
Notes to Financial Statements...................................... 30
(D) ACQUISITION OF DATACORP BUSINESS SYSTEMS, INC.
On August 23, 1996, AccuStaff acquired the stock of DataCorp
Business Systems, Inc. a Cleveland, Ohio based information
technology staffing company.
Report of Independent Accountants.................................. 33
Balance Sheet as of December 31, 1995.............................. 34
Statement of Income for the Year Ended December 31, 1995........... 35
Statement of Changes in Stockholders' Equity for the Year
Ended December 31, 1995.......................................... 36
Statement of Cash Flows for the Year Ended December 31, 1995....... 37
Notes to Financial Statements...................................... 38
(E) ACQUISITION OF CAREER ENHANCEMENT INTERNATIONAL, INC.
On December 18, 1995, AccuStaff acquired the assets and business
operations of Career Enhancement International, Inc., a Winter
Park, Florida based information technology staffing company.
Independent Auditor's Report ...................................... 43
Balance Sheet as of December 31, 1995.............................. 44
Statements of Income for the Year Ended December 31, 1995.......... 45
Statement of Changes in Stockholder's Equity for the Year
Ended December 31, 1995.......................................... 46
Statement of Cash Flows for the Year Ended December 31, 1995....... 47
Notes to Financial Statements...................................... 48
(F) ACQUISITION OF PERSPECTIVE TECHNOLOGY CORPORATION
On August 15, 1996, AccuStaff acquired all of the stock of
Perspective Technologies, Inc. a northern Virginia based
information technology staffing company.
Independent Auditors' Report....................................... 50
Balance Sheet as of December 31, 1995.............................. 51
Statement of Income for the Year Ended December 31, 1995........... 53
Statement of Changes in Stockholders' Equity for the Year Ended
December 31, 1995................................................. 54
Statement of Cash Flows for the Year Ended December 31, 1995....... 55
Notes to Financial Statements...................................... 56
(G) UNAUDITED INTERIM FINANCIAL INFORMATION OF INSIGNIFICANT SUBSIDIARIES
Balance Sheet as of June 30, 1996 (Unaudited)...................... 59
Statement of Income for the Six Months Ended
June 30, 1996 (Unaudited)........................................ 60
Statement of Cash Flows for the Six Months Ended
June 30, 1996 (Unaudited)........................................ 61
Unaudited Pro Forma Information
Introduction to Unaudited Pro Forma Financial Information.......... 62
Pro Forma Combined Balance Sheets as of June 30, 1996 (Unaudited).. 64
Notes to Pro Forma Combined Balance Sheet (Unaudited).............. 65
Pro Forma Combined Statement of Income for the Six Months Ended
June 30, 1996 (Unaudited)......................................... 66
Pro Forma Combined Statement of Income for the Year Ended
December 31, 1995 (Unaudited)..................................... 67
Notes to Unaudited Pro Forma Combined Statements of
Income (Unaudited)................................................ 68
3
<PAGE>
EXHIBITS:
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Coopers & Lybrand L.L.P.
23.4 Consent of Coopers & Lybrand L.L.P.
23.5 Consent of Dennis I. Berner, C.P.A.
23.6 Consent of Beers & Cutler PLLC.
4
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ACCUSTAFF INCORPORATED
By: /s/ Derek E. Dewan
-------------------------------
Derek E. Dewan
President and Chief Executive
Officer
Dated: September 16, 1996
-----------------------
5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
AccuStaff Incorporated:
We have audited the accompanying balance sheet of HNS Software, Inc. as of
December 31, 1995, and the related statements of income, stockholders' equity,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of HNS Software, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
Jacksonville, Florida
April 12, 1996
6
<PAGE>
HNS SOFTWARE, INC.
BALANCE SHEET
December 31, 1995
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Accounts receivable, net of allowance for doubtful accounts $1,094,206
Prepaid expenses 21,374
----------
Total current assets 1,115,580
Furniture, equipment and leasehold improvements, net 18,752
----------
Total assets $1,134,332
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Draw on line of credit $ 82,477
Accounts payable and accrued expenses 100,696
Accrued payroll and related taxes 341,180
Distributions payable 85,916
Notes payable to affiliate 100,000
----------
Total current liabilities 710,269
----------
Commitments (Note 6)
Stockholders' equity:
Common stock, $.10 par value; 15,000 shares authorized;
6,000 shares issued and outstanding 600
Additional contributed capital 422,400
Retained earnings 221,063
----------
644,063
Less: Treasury stock (220,000)
----------
Total stockholders' equity 424,063
----------
Total liabilities and stockholders' equity $1,134,332
==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
7
<PAGE>
HNS SOFTWARE, INC.
STATEMENT OF INCOME
for the year ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Revenue $11,066,733
Cost of revenue 9,138,373
-----------
Gross profit 1,928,360
-----------
Operating expenses:
General and administrative 1,548,548
Depreciation 43,830
-----------
Total operating expenses 1,592,378
-----------
Income from operations 335,982
-----------
Other income (expense):
Other (1,062)
Interest income 19,844
Interest expense (13,999)
-----------
Total other income 4,783
-----------
Income before provision for income taxes 340,765
-----------
Provision for income taxes:
Current 7,628
Deferred 0
-----------
Total provision for income taxes 7,628
-----------
Net income $ 333,137
===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
8
<PAGE>
HNS SOFTWARE, INC.
Statement of Stockholders' Equity
for the year ended December 31, 1995
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDITIONAL
ISSUED CONTRIB- TOTAL
AND OUT- UTED RETAINED TREASURY STOCKHOLDERS'
STANDING AMOUNT CAPITAL EARNINGS STOCK EQUITY
-------- ------ ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 6,000 $600 $422,400 $ 5,550 $ 0 $428,550
Distribution 0 0 0 (117,624) 0 (117,624)
Purchase of treasury
stock 0 0 0 0 (220,000) (220,000)
Net income 0 0 0 333,137 0 333,137
----- ---- -------- -------- --------- --------
Balance, December 31,
1995 6,000 $600 $422,400 $221,063 $(220,000) $424,063
===== ==== ======== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
9
<PAGE>
HNS SOFTWARE, INC.
STATEMENT OF CASH FLOWS
for the years ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Cash flows provided by (used in) operating activities:
Net income $ 333,137
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 43,830
Loss on disposed assets 1,062
Changes in assets and liabilities:
Accounts receivable (455,561)
Notes receivable and prepaid expenses 92,463
Accounts payable and other accrued expenses 137,994
Accrued distribution (85,916)
Accrued payroll and related taxes 26,839
---------
Net cash provided by investing activity 93,848
---------
Cash flows from investing activity:
Purchase of furniture, equipment and leasehold improvements (47,021)
---------
Net cash used in investing activity (47,021)
---------
Cash flows from financing activities:
Draw on line of credit 82,477
Payment on notes payable to affiliate (200,000)
Purchase of treasury stock (220,000)
Distributions to stockholders (31,708)
---------
Net cash used in financing activities (369,231)
---------
Net decrease in cash (322,404)
Cash, beginning of year 322,404
---------
Cash, end of year $ 0
=========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 13,999
=========
Income taxes paid $ 7,628
=========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
10
<PAGE>
HNS SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
1.DESCRIPTION OF BUSINESS:
HNS Software, Inc. (the Company) provides clerical, professional and
technical computer staffing services to a wide range of business entities
on a temporary basis in the Atlanta, Georgia area.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
MANAGEMENT'S USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of certain assets and liabilities and disclosure of contingent
assets and liabilities at the dates of the financial statements and the
reported amounts of certain revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
FURNITURE, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS - Furniture, equipment,
and leasehold improvements are stated at cost. Depreciation of furniture
and equipment is computed on accelerated methods over the estimated useful
life from 5 to 7 years. Amortization of leasehold improvements is provided
on the straight-line method over the lessor of the lease term or estimated
useful lives of the assets.
REVENUE RECOGNITION - Revenue is recognized as income at the time the
staffing services are provided.
ADVERTISING COSTS - Advertising costs are expensed as incurred.
INCOME TAXES - HNS Software, Inc. has elected to be treated as an S
corporation effective July 1, 1995, with the income from July 1, 1995
through December 31, 1995 being reportable directly by its stockholders.
Accordingly, the provision for income taxes is attributable to the period
through June 30, 1995, during which the Company was a C Corporation, and
has applied Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes (SFAS No. 109). SFAS No. 109 requires recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse. There were no
deferred tax assets or liabilities as of June 30, 1995 or December 31,
1995.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3.FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Furniture, equipment and leasehold improvements consist of the following:
<TABLE>
<S> <C>
Furniture and equipment $65,284
Leasehold improvements 14,363
-------
79,647
Accumulated deprecia-
tion (60,895)
-------
$18,752
=======
</TABLE>
4.LINE OF CREDIT:
A line of credit is available up to $500,000 and bears interest at prime
(which was 8% at December 31, 1995) maturing June 21, 1996. The line of
credit is collateralized by accounts receivable of HNS Software, Inc. and
is personally guaranteed by several of the officers and stockholders of the
Company. The unused line of credit at December 31, 1995 was $417,523.
5. NOTE PAYABLE TO AFFILIATE/NOTE RECEIVABLE FROM STOCKHOLDER:
Note payable to affiliate has an outstanding balance of $100,000 at
December 31, 1995, which bears interest at prime plus .5%. The note is
unsecured and is payable on demand.
The Company also had a note receivable from a stockholder in the amount of
$150,000 outstanding at December 31, 1994, which was repaid during the
year.
Total interest expense relating to notes payable to affiliate was
approximately $14,000 for the year ended December 31, 1995.
6.COMMITMENTS:
The Company leases office space under a noncancelable operating lease
expiring August 31, 2000. Rent expense under this lease was $42,265 for the
year ended December 31, 1995.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. COMMITMENTS, CONTINUED:
Future minimum rental payments required under this noncancelable operating
lease are:
1996 $ 44,954
1997 44,954
1998 44,954
1999 44,954
2000 29,969
--------
$209,785
========
7. TAXES:
HNS Services, Inc. was taxed as a C Corporation through June 30, 1995. The
analysis of the provision for income taxes through June 30, 1995 is as
follows:
Current:
Federal $5,313
State 2,315
------
Provision for income taxes $7,628
======
8. SIGNIFICANT CUSTOMER INFORMATION:
The Company had two customers which comprised approximately 30% of revenue
for the year ended December 31, 1995 and 25% of accounts receivable at
December 31, 1995. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral.
9. FINANCIAL INSTRUMENTS FAIR VALUE DISCLOSURE:
The following summary disclosure is made in accordance with the provisions
of SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
which requires the disclosure of fair value information about both on- and
off-balance sheet financial instruments where it is practicable to estimate
the value. Fair value is defined in SFAS No. 107 as the amount at which an
instrument could be exchanged in a current transaction between willing
parties, other than in a forced liquidation or sale. It is not the
Company's intent to enter into such exchanges.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. FINANCIAL INSTRUMENTS FAIR VALUE DISCLOSURE, CONTINUED:
The following method and assumptions were used in estimating the fair value
of financial instruments:
Note Payable to Affiliate--The fair value of the note payable to
affiliate is based on rates available to the Company for debt with
similar terms and maturities.
Because SFAS No. 107 excludes certain financial instruments and all non-
financial instruments from its disclosure requirements, any aggregation of
the fair value amounts presented would not represent the underlying value
to the Company.
December 31, 1995
-----------------------------
Carrying Estimated
Amount Fair Value
-------- ----------
Notes payable to affiliate $100,000 $100,000
10. TREASURY STOCK:
The Company repurchased 1,000 shares of common stock from a former
stockholder during 1995. The cost per share was $220.
11. CONCENTRATIONS OF CREDIT RISK:
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and trade accounts receivable. The
Company places its cash with what it believes to be high quality
institutions. At times such investments may be in excess of the FDIC
insurance limit. The Company routinely assesses the financial strength of
its customers and, as a consequence, believes that its trade accounts
receivable credit risk exposure is limited.
12. SUBSEQUENT SALE OF THE BUSINESS:
Effective March 11, 1996, AccuStaff Incorporated acquired substantially all
of the assets of the Company and entered into an employment contract with
two of the Companies' stockholders and non-compete agreements with the
Companies' former stockholders and operating management.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Openware Technologies, Inc.
We have audited the accompanying balance sheet of Openware Technologies, Inc.
as of December 31, 1995, and the related statements of operations,
shareholders' deficit, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Openware Technologies, Inc.
as of December 31, 1995, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
Jacksonville, Florida /s/ Coopers & Lybrand L.L.P.
June 19, 1996
15
<PAGE>
OPENWARE TECHNOLOGIES, INC.
BALANCE SHEET
as of December 31, 1995
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash $ 65,787
Accounts receivable (less allowance for doubtful accounts of
$150,000) 1,468,680
Deferred tax asset 476,300
Other current assets 73,219
----------
Total current assets 2,083,986
Property and equipment, at cost less accumulated depreciation 251,408
Other assets 85,900
----------
Total assets $2,421,294
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 536,246
Line of credit with bank 320,571
Current maturity of notes payable and capital lease obligations 275,188
Accrued expenses 354,880
Unearned maintenance fees 1,279,143
----------
Total current liabilities 2,766,028
Accrued interest payable 1,155,450
Total liabilities 3,921,478
----------
Series A preferred stock ($.01 par value; 770,300 shares
authorized, issued and outstanding; $10 per share
liquidation price) 7,703,000
----------
Shareholders' deficit:
Common stock ($0.025 par value; 10,000,000 shares authorized;
4,000,000 shares issued and outstanding) 100,000
Accumulated deficit (9,303,184)
----------
Total shareholders' deficit (9,203,184)
----------
Total liabilities and shareholders' deficit $2,421,294
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
OPENWARE TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
for the year ended December 31, 1995
<TABLE>
<S> <C>
Software and licensing fees $2,829,349
Maintenance fees 2,280,059
Consulting and training fees 1,354,926
----------
Total fees and income 6,464,334
Cost of sales 2,226,367
----------
Gross profit $4,237,967
----------
Operating expenses:
Sales and marketing 2,033,102
Product development 1,875,979
General and administrative 1,808,781
----------
Total operating expenses 5,717,862
----------
Loss from operations (1,479,895)
----------
Other (income) expense:
Interest expense 67,707
Other, net (35,185)
----------
32,522
----------
Loss before income taxes (1,512,417)
Benefit for income taxes (606,500)
----------
Net loss $ (905,917)
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
OPENWARE TECHNOLOGIES, INC.
STATEMENT OF SHAREHOLDERS' DEFICIT
for the year ended December 31, 1995
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------ ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT DEFICIT DEFICIT
--------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1995 4,000,000 $100,000 $(8,397,267) $(8,297,267)
Net loss 0 0 (905,917) (905,917)
--------- -------- ----------- -----------
Balance, December 31, 1995 4,000,000 $100,000 $(9,303,184) $(9,203,184)
========= ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
OPENWARE TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
for the year ended December 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $(905,917)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 156,576
Deferred income taxes (511,500)
Changes in operating assets and liabilities:
Decrease in accounts receivable 700,721
Decrease in other current assets 36,379
Increase in accounts payable 71,159
Decrease in income taxes payable (75,300)
Decrease in accrued expenses (68,089)
Increase in unearned maintenance fees 45,723
Decrease in other assets 5,466
---------
Net cash used in operating activities (544,782)
---------
Cash flows from investing activities:
Purchase of property and equipment (27,135)
---------
Net cash used in investing activities (27,135)
---------
Cash flows from financing activities:
Proceeds from line of credit with bank 572,000
Payments on line of credit with bank (251,429)
Payments of notes payable and capital lease obligations (92,889)
---------
Net cash provided by financing activities 227,682
---------
Net decrease in cash (344,235)
Cash at beginning of period 410,022
---------
Cash at end of period $ 65,787
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for interest $ 67,706
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
OPENWARE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1.ORGANIZATION - Openware Technologies, Inc. (the "Company") develops, markets
and supports computer productivity packages used in various computer platforms
and performs conversion services. The Company sells software and performs
services internationally through its own sales force and through international
distributors. In June 1996, the Company reached an agreement to sell all of
its outstanding common and preferred stock to another company.
In conjunction with the acquisition of the Company, the preferred
stockholders have agreed to forego their right to receive dividends for
periods subsequent to December 31, 1994.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost.
Depreciation is provided on the straight-line method over the estimated
useful lives of the related assets. The estimated useful lives of the
Company's property and equipment range from five to seven years.
OTHER ASSETS - Included in other assets is $183,520 of purchased software
costs and $132,515 of capitalized acquisition costs at December 31, 1995.
The assets are recorded at cost and are being amortized over a three and
five year period, respectively, using the straight-line method.
Amortization expense related to these items for the year ended December 31,
1995 amounted to $82,576.
RESEARCH AND DEVELOPMENT EXPENSES - The Company expenses research and
development expenses as they are incurred. Research and development costs
were $1,030,061 for the year ending December 31, 1995 and are included in
product development expenses.
REVENUE RECOGNITION - The Company recognizes licensing fee revenue to
comply with provisions of Statement of Position (SOP) 91-1. This SOP
generally requires revenue recognition on delivery of the software. Support
or maintenance fees are recognized over the term of the maintenance
contract, and revenue from service transactions is recognized as the
services are performed.
INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standard (SFAS) No. 109, Accounting for
Income Taxes. SFAS No. 109 requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts of assets and
liabilities for tax return and financial reporting purposes.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. PREFERRED STOCK:
Subsequent to the close of business on June 30, 1993, the Company sold
770,300 shares of Series A Preferred Stock, $.01 par value, at a price of
$10 per share. The stock carries no voting rights, is not convertible and
has a $10 per share liquidation price. Interest accrues at a rate of 10%
per annum which is not payable prior to the third anniversary of the
issuance date, and thereafter is payable quarterly in arrears beginning
September 30, 1996. The stock is redeemable at the Company's option at any
time with 30 days notice. The redemption amount is equal to the liquidation
price plus all accrued but unpaid interest (whether or not declared). If
not previously redeemed, mandatory redemption will occur on a pro rata
basis on June 30, 1998, 1999 and 2000.
Accrued interest at December 31, 1994 was $1,155,450. No interest has been
accrued for the year ended December 31, 1995 as discussed in Note 9.
4. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1995 consists of the following:
<TABLE>
<S> <C>
Computer $232,129
Furniture and fixtures 53,162
Office equipment 14,044
Equipment under capital lease 105,084
--------
Total 404,419
Less accumulated depreciation and amortization 153,011
--------
Property and equipment, net $251,408
========
</TABLE>
Depreciation expense was $74,000 in 1995. Amortization of equipment under
capital leases is included in depreciation expense.
5. LEASES:
The Company has noncancellable operating leases for office equipment and
space at its office facility. Future minimum annual lease payments are as
follows:
<TABLE>
<S> <C>
Year ending December 31:
1996 $109,931
1997 110,778
1998 76,357
1999 9,600
2000 6,400
</TABLE>
Rent expense of $237,450 was charged to operations for the year ended
December 31, 1995.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS:
Notes payable and capital lease obligations consist of the following:
<TABLE>
<S> <C>
Working capital line of credit with bank, at prime rate plus 1% $320,571
Promissory notes payable to former shareholders with interest
at 12%. Principal and interest due in varying amounts through
September 1996 228,771
Obligation under capital lease, discounted based on 10% incre-
mental borrowing rate. Principal and interest due monthly as
per payment schedule, due in full on July 15, 1996 46,417
--------
Long-term debt 595,759
Less current portion (595,759)
--------
Noncurrent portion $ 0
========
</TABLE>
On June 28, 1995, the Company obtained a $600,000 working capital line of
credit collateralized by the Company's assets. This credit facility expires
June 30, 1996 and contains certain restrictive covenants including
maintaining a minimum tangible net worth and a tangible net worth ratio of
not more than 3.5 to 1.00. The Company is in violation of these covenants
as of December 31, 1995.
Interest expense related to notes payable and capital lease obligations in
the amount of $67,706 was charged to operations for the year ended December
31, 1995.
7. EMPLOYEE BENEFIT PLANS:
The Company has a defined contribution 401(k) plan covering substantially
all employees of the Company who meet minimum age and length of service
requirements. Participants may elect to contribute up to 20% of their
compensation to this plan (up to the statutory maximum amount). The Company
can make discretionary contributions to the plan determined solely by the
Board of Directors. The Company made contributions totaling $3,070 to the
plan in 1995.
During 1994, the Company established a non-qualified stock option plan (the
Plan ). Under the terms of the Plan, options to purchase a maximum of
400,000 shares of the $.25 par value common stock may be granted to certain
employees, at prices not less than the fair market value of the optioned
stock at the date of grant. An option granted under the Plan expires no
later than ten years after the date granted. Generally, if an optionee's
employment is terminated for any reason other than death, disability, or
retirement, the option shall terminate 30 days after termination.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. EMPLOYEE BENEFIT PLANS, CONTINUED:
Stock option activity is shown below:
<TABLE>
<CAPTION>
SHARES
---------
<S> <C>
Outstanding, January 1, 1995 196,000
Granted 0
Exercised 0
Cancelled or surrendered (156,000)
---------
Outstanding, December 31, 1995 40,000
=========
Currently exercisable 8,000
=========
All options were issued with an exercise price of $1.00. Proceeds from
exercise of stock options are credited to common stock for the amount of
par value and any excess is credited to additional paid-in capital. The
Plan includes a buyout provision which allows the Company to purchase an
option previously granted for cash or stock, upon the optionee's approval.
Should a buyout occur, compensation will result and will be measured at the
amount of cash paid by the Company. There is no provision in the Plan to
repurchase shares once exercised.
8. INCOME TAXES:
The benefit for income taxes consists of the following:
Federal $ (95,000)
State 0
---------
(95,000)
---------
Deferred portion:
Federal (432,300)
State (79,200)
---------
(511,500)
=========
Total benefit for income taxes $(606,500)
=========
Deferred tax assets are as follows at December 31, 1995:
Depreciation/amortization $ 42,900
Net operating loss carryforwards 433,400
---------
Net deferred tax asset 476,300
Valuation allowance 0
---------
Net deferred tax asset after valuation allowance $ 476,300
=========
</TABLE>
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8.INCOME TAXES, CONTINUED:
The Company has recorded a deferred tax asset of $476,300, primarily
related to the benefit of $1,152,000 in loss carryforwards which expire in
2009. Realization is dependent on generating sufficient taxable income
prior to expiration of the loss carryforwards. Although realization is not
assured, management believes it is more likely than not that all of the
deferred tax asset will be realized. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are
reduced.
For the year ended December 31, 1995, the Company's effective income tax
rate differed from the statutory federal income tax rate due primarily to
state income taxes.
9.CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS:
Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist primarily of cash and accounts
receivable. The Company maintains its cash in what it believes to be high
quality financial institutions. At times, such cash may be in excess of the
FDIC insurance limit.
Concentrations of credit risk with respect to accounts receivable, which
are generally not collateralized, are limited due to the large number of
customers comprising the Company's customer base and their geographic
dispersion. The Company establishes an allowance for doubtful accounts
based upon factors surrounding the credit risk of specific customers,
historical trends, and other information.
As of December 31, 1995 the carrying amount of certain financial
instruments, including cash, trade accounts receivable, accounts payable,
line of credit with bank, and notes payable and capital base obligations
approximated fair value because of their current maturities.
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
AccuStaff Incorporated:
We have audited the accompanying balance sheet of Staffware, Inc. as of December
31, 1995,and the related statements of income, changes in stockholders' equity,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Staffware, Inc. as of December
31, 1995, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Houston, Texas
September 12, 1996
25
<PAGE>
STAFFWARE, INC.
BALANCE SHEET
December 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 68,260
Accounts receivable, net of allowance for
doubtful accounts of $10,000 1,931,439
Prepaid expenses and other current assets 63,368
----------
Total current assets 2,063,067
Furniture and equipment, net 81,966
----------
Total assets $2,145,033
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit line $ 315,000
Accounts payable and accrued expenses 434,268
----------
Total current liabilities 749,268
----------
Commitments (Note 5)
Stockholders' equity:
Common stock, $0.10 par value; 100,000
shares authorized; 225,100 shares issued and
outstanding 22,510
Additional paid-in capital 11,738
Retained earnings 1,509,938
----------
1,544,186
Less treasury stock, 14,438 shares, at cost (148,421)
----------
Total stockholders' equity 1,395,765
----------
Total liabilities and stockholders' equity $2,145,033
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
STAFFWARE, INC.
STATEMENT OF INCOME
for the year ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Sale of services $11,821,029
Cost of services 9,509,509
-----------
Gross profit 2,311,520
-----------
Operating expenses:
General and administrative 2,028,158
Depreciation 13,516
-----------
Total operating expenses 2,041,674
-----------
Income from operations 269,846
-----------
Other income (expense):
Interest expense, net (33,669)
Other, net 8,970
-----------
(24,699)
-----------
Net income $ 245,147
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
STAFFWARE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock Total
------------------- Additional Stock
Par Paid-in Retained Treasury holders'
Shares Value Capital Earnings Stock Equity
------- --------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1995 225,000 $ 22,510 $ 11,738 $ 1,264,791 $ (148,421) $ 1,150,618
Net income 245,147 245,147
------- --------- ---------- ----------- ---------- -----------
Balance as of December 31, 1995 225,000 $ 22,510 $ 11,738 $ 1,509,938 $ (148,421) $ 1,395,765
======= ========= ========== =========== ========== ===========
</TABLE>
The accompanying notes are an intergral part of these financial statements.
28
<PAGE>
STAFFWARE, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Cash flows used in operating activities:
Net income $ 245,147
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation 13,516
Gain on sale of furniture and equipment (9,300)
Changes in operating assets and liabilities:
Increase in accounts receivable (374,385)
Decrease in prepaid expenses and other current assets 16,008
Increase in accounts payable and accrued expenses 33,729
-----------
Total adjustments (320,432)
-----------
Net cash used in operating activities (75,285)
-----------
Cash flows from investing activity:
Purchase of furniture and equipment (69,507)
Proceeds from sale of furniture and equipment 2,900
-----------
Net cash used in investing activity (66,607)
-----------
Cash flows from financing activities:
Net borrowings under revolving line of credit agreement 15,000
-----------
Net cash provided by financing activities 15,000
-----------
Net decrease in cash and cash equivalents (126,892)
Cash and cash equivalents at beginning of year 195,152
-----------
Cash and cash equivalents at end of year $ 68,260
===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 35,628
===========
Income taxes paid $ --
===========
</TABLE>
The accompanying notes are an integral part of these financial statement.
29
<PAGE>
STAFFWARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS:
Staffware, Inc. ("the Company") provides temporary clerical, professional
and technical computer staffing services to a wide range of business
entities in the Houston, Texas area.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of certain assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of certain assets
and liabilities at the date of the financial statements and the reported
amounts of certain revenues and expenses during the reporting period. Actual
results could differ from those estimates.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost. Expenditures for renewals and
betterments are capitalized while repairs and maintenance are charged to
expense as incurred. The cost and related accumulated depreciation of assets
sold or otherwise disposed of are removed from the accounts and any gain or
loss is reflected in the statement of income. Assets are depreciated over
their estimated useful lives using the straight-line method for financial
reporting purposes.
REVENUE RECOGNITION
Temporary service fees are recognized as a sale of services at the time
the services are performed. Permanent placement fees are recognized when
employment begins.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
INCOME TAXES
The Company and its shareholder have elected to have income and expenses
treated under Subchapter S of the Internal Revenue Code, whereby income and
expenses for federal income tax purposes are reported by the shareholder
individually. Therefore, no provision is made at the corporate level for
federal income taxes.
Texas franchise tax based on taxable income of the Company is reported by
the Company in the year the income is earned.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. FURNITURE AND EQUIPMENT:
Furniture and equipment consists of the following as of December 31, 1995:
Furniture $ 38,182
Computer equipment 160,605
Equipment 73,188
-----------
271,975
Less accumulated depreciation (190,009)
-----------
Furniture and equipment, net $ 81,966
===========
4. REVOLVING LINE OF CREDIT:
The Company has available a line of credit in the amount of $1,000,000,
bearing interest at prime (8 1/2% as of December 31, 1995); maturing August
31, 1996. The revolving line of credit is collateralized by accounts
receivable and is personally guaranteed by several of the officers and
stockholders of the Company. The unused line of credit as of December 31,
1995 amounted to $685,000.
5. COMMITMENTS:
The Company leases office space under a noncancelable operating lease. Rent
expense under this lease amounted to approximately $49,000 for the year ended
December 31, 1995. On January 31, 1996, the Company entered into a new lease
for office space which calls for escalating monthly rental payments and
expires in 2001.
Future minimum rental payments required under the new noncancelable operating
office lease are as follows:
1996 $ 55,384
1997 84,396
1998 86,376
1999 88,356
2000 90,328
2001 30,328
----------
$ 435,168
==========
The Company's accounts receivable are pledged as collateral on two personal
lines of credit for up to $150,000 for two directors of the Company. The
outstanding balance on the lines of credit as of December 31, 1995 amounted
to $82,600.
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. SIGNIFICANT CUSTOMER INFORMATION:
The Company had two customers which comprised approximately 30% of revenue
for the year ended December 31, 1995 and 25% of accounts receivable as of
December 31, 1995. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable and
accounts payable approximate fair values due to the short-term nature of
these instruments. The estimated fair values of these instruments have been
determined by the Company using available market information and appropriate
valuation methodologies.
8. CONCENTRATIONS OF CREDIT RISK:
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company places its cash with what it believes to be high
quality institutions. At times such instruments may be in excess of the FDIC
insurance limit. The Company routinely assesses the financial strength of
its customers and, as a consequence, believes that its accounts receivable
credit risk exposure is limited.
9. SUBSEQUENT SALE OF THE BUSINESS:
In August, 1996, AccuStaff Incorporated ("Accustaff") acquired
substantially all of the assets of the Company. Simultaneous with the
acquisition, AccuStaff entered into an employment contract with two of the
Company's stockholders, and non-compete agreements with the Company's other
stockholders and operating management.
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors,
AccuStaff Incorporated:
We have audited the accompanying balance sheet of DataCorp Business Systems,
Inc. as of December 31, 1995, and the related statements of income,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DataCorp Business Systems, Inc.
as of December 31, 1995, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Cleveland, Ohio
September 12, 1996
33
<PAGE>
DATACORP BUSINESS SYSTEMS, INC.
BALANCE SHEET
December 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $ 81,567
Accounts receivable, net of allowance for
doubtful accounts of $15,250 962,100
Other current assets 19,820
----------
Total current assets 1,063,487
Furniture, equipment, and leasehold
improvements, net 69,148
Other assets 2,081
----------
Total assets $1,134,716
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Deferred tax liability $ 117,000
Draw on line of credit 238,000
Accounts payable and accrued expenses 507,623
Accrued payroll and related taxes 34,046
Income taxes payable 3,764
----------
Total current liabilities 900,433
----------
Commitments (Note 5)
Stockholders' equity:
Common stock 200,500
Class A voting, $0 par value; 1,000 shares
authorized; 500 shares issued and outstanding
Class B non-voting, $0 par value; 1,000 shares
authorized; 500 shares issued and outstanding
Additional contributed capital 210,593
Accumulated deficit (176,810)
----------
Total stockholders' equity 234,283
----------
Total liabilities and stockholders' equity $1,134,716
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
DATACORP BUSINESS SYSTEMS, INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Revenue $ 7,046,835
Cost of revenue 5,678,342
-----------
Gross profit 1,368,493
-----------
Operating expenses:
General and administrative 1,044,715
Depreciation 38,400
-----------
Total operating expenses 1,083,115
-----------
Income from operations 285,378
-----------
Other income (expense):
Interest expense (15,825)
Other expense (8,057)
Interest income 1,664
-----------
Total other income (expense) (22,218)
-----------
Income before provision for income taxes 263,160
-----------
Provision for income taxes:
Current 138,558
Deferred 117,000
-----------
255,558
-----------
Net income $ 7,602
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
DATACORP BUSINESS SYSTEMS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock
-------------------------------------
Class A Class B
Voting Nonvoting Total
Issued Issued Additional Stock-
and Out- and Out- Contributed Accumulated holders'
standing standing Amount Capital Deficit Equity
-------- --------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 500 500 $ 200,500 $ 210,593 $ (184,412) $ 226,681
Net income -- -- -- -- 7,602 7,602
-------- --------- ---------- --------- ---------- ---------
Balance, December 31, 1995 500 500 $ 200,500 $ 210,593 $ (176,810) $ 234,283
======== ========= ========== ========= ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
DATACORP BUSINESS SYSTEMS, INC.
STATEMENT OF CASH FLOWS
for the year ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Cash flow provided by (used in) operating activities:
Net income $ 7,602
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 38,400
Deferred taxes 117,000
Changes in assets and liabilities:
Accounts receivable, net (402,614)
Other assets (12,031)
Accounts payable and other accrued expenses 352,548
Accrued payroll and related taxes (34,557)
Income taxes payable (20,660)
------------
Net cash provided by operating activities 45,688
------------
Cash flows from investing activity:
Purchase of furniture, equipment and leasehold improvements (13,944)
------------
Net cash used in investing activity (13,944)
------------
Cash flows from financing activities:
Draw on line of credit 99,000
Payment on notes payable to affiliate (51,385)
------------
Net cash provided by financing activities 47,615
------------
Net increase in cash 79,359
Cash, beginning of year 2,208
------------
Cash, end of year $ 81,567
============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 14,922
============
Income taxes paid $ 131,139
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
DATACORP BUSINESS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS:
DataCorp Business Systems, Inc. (the Company) provides clerical,
professional and technical computer staffing services to a wide range of
business entities on a temporary basis in the Cleveland, Ohio area.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
MANAGEMENT'S USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of
certain assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported
amounts of certain revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
FURNITURE, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS - Furniture, equipment, and
leasehold improvements are stated at cost. Depreciation of furniture and
equipment is computed on accelerated methods over the estimated useful life
from 3 to 10 years. Amortization of leasehold improvements is provided on
the straight-line method over the lessor of the lease term or estimated
useful lives of the assets.
REVENUE RECOGNITION - Revenue is recognized as income at the time the
staffing services are provided.
ADVERTISING COSTS - Advertising costs are expensed as incurred.
EARNINGS PER SHARE - Earnings per share is not presented for the Company as
it is a nonpublic Company and management believes such presentation would
not be meaningful.
DEFERRED TAXES - Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting For Income Taxes," requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under
this method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. If any tax benefits are recognized,
they would be reduced by a valuation allowance to the extent it is more
likely than not the benefits may not be realized.
38
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Furniture, equipment and leasehold improvements consist of the
following:
Furniture and equipment $ 403,406
Computer equipment 30,317
-----------
433,723
Accumulated depreciation (364,575)
-----------
$ 69,148
===========
4. LINE OF CREDIT:
A line of credit is available up to $500,000 and bears interest at the bank's
index plus .25% (9% at December 31, 1995) which matured on August 31, 1996.
The line of credit was collateralized by substantially all of the assets of
DataCorp Business Systems, Inc. and was personally guaranteed by a
shareholder of the Company. The unused line of credit at December 31, 1995
was $262,000.
5. COMMITMENTS:
The Company leases office space and equipment under operating leases. The
leases expire at various dates through March 15, 2000. Rent expense for these
lease obligations was $103,929 for the year ended December 31, 1995.
Future minimum rental payments required under this noncancelable operating
lease are:
1996 $ 109,142
1997 97,394
1998 77,082
1999 58,421
2000 216
----------
$ 342,255
==========
Additionally, the Company entered into two employment agreements dated
February 7, 1995 with its Chief Executive Officer and its President. These
were terminated in conjunction with the sale of the Company. See Note 12.
39
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accrued expenses as of December 31, 1995 are as follows:
<TABLE>
<S> <C>
Accounts payable $ 55,844
Accrued vacation 77,325
Accrued bonuses 317,895
Accrued other 56,559
-------
$507,623
========
</TABLE>
7. INCOME TAXES:
The analysis of the provision for income taxes for the year ended December
31, 1995 is as follows:
<TABLE>
<S> <C>
Current:
Federal $111,305
State 27,253
--------
138,558
--------
Deferred:
Federal 92,000
State 25,000
--------
117,000
--------
Income tax expense $255,558
========
</TABLE>
The deferred tax liability on the balance sheet results from a change in
accounting method from cash to accrual basis for tax purposes. The
difference between the actual income tax provision and the tax provision
computed by applying the statutory federal income tax rate to income before
taxes is attributable to the following:
<TABLE>
<CAPTION>
1995
---------------
Amount %
------ ----
<S> <C> <C>
Tax computed using the federal statutory
rate $ 89,500 34.0%
State income taxes, net of federal income
tax effect 14,500 5.5
Permanent differences and other 11,158 4.2
Change in accounting method for income tax
purposes 140,400 53.4
------- ----
$255,558 97.1%
======== ====
</TABLE>
40
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. SIGNIFICANT CUSTOMER INFORMATION:
The Company had two customers which comprised approximately 30% of revenue
for the year ended December 31, 1995 and 25% of accounts receivable at December
31, 1995. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral.
9. DEFINED CONTRIBUTION PENSION PLAN:
The Company has a defined contribution pension plan which covers all
full-time employees who have completed three months of service and have attained
the age of twenty and one-half. Employer matching contributions to the plan are
at the discretion of management. There were $53,613 of employer contributions
made in 1995.
10. FINANCIAL INSTRUMENTS FAIR VALUE DISCLOSURE:
The following summary disclosure is made in accordance with the provisions
of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," which
requires the disclosure of fair value information about both on- and off-balance
sheet financial instruments where it is practicable to estimate the value. Fair
value is defined in SFAS No. 107 as the amount at which an instrument could be
exchanged in a current transaction between willing parties, other than in a
forced liquidation or sale. It is not the Company's intent to enter into such
exchanges.
The following method and assumptions were used in estimating the fair value of
financial instruments:
Cash - The fair value of cash approximates fair market.
Line of Credit - The fair value of the line of credit is based on rates
available to the Company for debt with similar terms and maturities.
DECEMBER 31, 1995
-------------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------------- --------------
Cash $ 81,567 $ 81,567
Line of credit 238,000 238,000
Because SFAS No. 107 excludes certain financial instruments and all
non-financial instruments from its disclosure requirements, any aggregation of
the fair value amounts presented would not represent the underlying value to the
Company.
41
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. CONCENTRATIONS OF CREDIT RISK:
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and trade accounts receivable. The
Company places its cash with what it believes to be high quality
institutions. At times such investments may be in excess of the FDIC
insurance limit. The Company routinely assesses the financial strength of
its customers and, as a consequence, believes that its trade accounts
receivable credit risk exposure is limited.
12. SUBSEQUENT SALE OF THE BUSINESS:
Effective August 18, 1996, the stockholders of the Company (the "Sellers")
entered into a Stock Purchase Agreement (the "transaction") with AccuStaff
Incorporated (the "Buyer"), a public registrant headquartered in
Jacksonville, Florida. The Buyer is a national provider of strategic
staffing and outsourcing services to businesses, professional and service
organizations and governmental agencies. The Sellers sold all outstanding
common shares of the Company to the Buyer on the closing date of August 23,
1996, (the "closing date").
In conjunction with the transaction, certain previous agreements were
terminated at the effective date of the transaction. Two previous
employment agreements between the Company and its Chief Executive Officer
and its President (each Sellers) were terminated. Two new employment
agreements, including noncompetition covenants, were entered into with the
Company's President and a shareholder who is also the son of the Company's
Chief Executive Officer. These employment agreements are for the term from
August 19, 1996 through August 22, 1999. The noncompetitive covenants are
for the period commencing on August 23, 1996 and ending at the later of (i)
three years from the date of August 23, 1996 or (ii) one year after the
above mentioned individuals cease to be employed by the Company.
Additionally, a non-qualified deferred compensation arrangement benefiting
the Chief Executive Officer of the Company was terminated at the effective
date of the transaction.
42
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
Board of Directors
Career Enhancement International, Inc.
Winter Park, Florida
I have audited the accompanying balance sheet of Career Enhancement
International, Inc. as of December 31, 1995, and the related statements of
income and changes in stockholder's equity and of cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Career Enhancement
International, Inc. as of December 31, 1995, and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
As discussed in note 6 to the financial statements, the Company is
anticipating ceasing operations in 1996 and liquidating in 1997. No
adjustments that may be necessary as a result of the anticipated liquidation
have been made in the accompanying financial statements.
Winter Park, Florida /s/ Dennis I. Berner
January 26, 1996
43
<PAGE>
CAREER ENHANCEMENT INTERNATIONAL, INC.
BALANCE SHEET
December 31, 1995
ASSETS
<TABLE>
<S> <C> <C>
Current assets:
Accounts receivable, net of allowance for doubtful accounts
of $58,752 $879,132
--------
Total current assets 879,132
Fixed Assets
Furniture and equipment $ 23,836
Less accumulated depreciation (5,490) 18,346
-------- --------
Total Assets $897,478
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 53,295
Accounts payable 82,646
Payroll taxes payable 61,306
--------
Total current liabilities 197,247
--------
Commitments and Contingencies
Stockholder's Equity
Common stock--par value $1.00 per share;
1,000 shares authorized, 100 issued and outstanding $ 100
Additional paid in capital 4,900
Retained earnings 695,231 700,231
------- --------
Total liabilities and stockholder's equity $897,478
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
CAREER ENHANCEMENT INTERNATIONAL, INC.
STATEMENT OF INCOME
for the year ended December 31, 1995
<TABLE>
<S> <C>
Professional Fee Revenue $5,387,787
Cost of revenues 3,903,252
----------
Gross profit 1,484,535
Selling, General and Administrative
Advertising 7,769
Bad debts 58,752
Depreciation 3,471
Insurance 26,226
Miscellaneous 15,082
Office supplies and expenses 20,592
Professional fees 42,860
Rent 14,595
Salaries-officer 140,000
Salaries-sales and administrative 492,143
Taxes 34,997
Telephone 45,437
Travel and entertainment 38,777
----------
Total selling, general and administrative 940,701
----------
Net income from operations 543,834
Other income-interest 2,812
----------
Net income $ 546,646
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
CAREER ENHANCEMENT INTERNATIONAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
for the year ended December 31, 1995
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID IN RETAINED
STOCK CAPITAL EARNINGS
------ ---------- --------
<S> <C> <C> <C>
Beginning balances--January 1,
1995 $5,000 $ -- $199,125
Prior period adjustments (4,900) 4,900 20,740
Net income for the year -- -- 546,646
Dividends -- -- (71,280)
------ ------ --------
Ending balances--December 31, 1995 $ 100 $4,900 $695,231
====== ====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
CAREER ENHANCEMENT INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
for the year ended December 31, 1995
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 546,646
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation $ 3,471
Bad debts 58,752
Increase in accounts receivable (691,340)
Decrease in loans to shareholders 1,020
Decrease in employee advances 1,500
Increase in accounts payable 80,788
Decrease in accrued salaries (34,787)
Increase in payroll taxes payable 35,709 (544,887)
-------- ---------
Net cash provided by operating activities 1,759
Cash flows from investing activities:
Acquisition of fixed assets (3,986)
---------
Net cash used in investing activities (3,986)
---------
Cash flows from financing activities:
Dividends paid (71,280)
---------
Net cash used in financing activities (71,280)
---------
Net decrease in cash (73,507)
Cash-January 1, 1995 20,212
---------
Cash overdraft--December 31, 1995 $ (53,295)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
CAREER ENHANCEMENT INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION
Career Enhancement International, Inc. (Company), was incorporated in Florida
on August 15, 1992. The Company provides software engineering and management
information system personnel nationally on a temporary and permanent basis.
The Company operates from an office located in Winter Park, Florida.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
- -------------------
Revenues are recognized in the period in which services are provided.
Furniture and equipment
- -----------------------
Furniture and equipment consists of office furniture and equipment and is
stated at cost. Depreciation is provided using the straight-line method over
the estimated useful lives of the underlying assets. The estimated useful
lives of the furniture and equipment are 5-7 years.
Income taxes
- ------------
The Company, with consent of its stockholder, has elected under the Internal
Revenue Code to be taxed as an S corporation. In lieu of corporation income
taxes, the stockholder is taxed on his proportionate share of the Company's
taxable income. Therefore, no provision or liability for federal income taxes
has been included in these financial statements.
Estimates
- ---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
NOTE 3--CREDIT CONCENTRATION
The Company provides services to companies throughout the United States. Trade
credit is extended to these companies in the normal course of business.
48
<PAGE>
CAREER ENHANCEMENT INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4--COMMITMENTS AND CONTINGENCIES
The Company has a $100,000 line of credit arrangement with Barnett Bank
bearing interest at Barnett Bank's prime rate plus 1%. The line of credit is
secured by all accounts and contract rights of the Company and is personally
guaranteed by the stockholder. There were no amounts drawn against the line of
credit during the year and no amounts were outstanding at December 31, 1995.
The agreement has no specific maturity date.
During 1995, the Company was obligated under several operating leases for its
location and equipment. As a result of the sale of its operations as discussed
in note 6, these leases were assigned to the buyer. No future liability is
anticipated under these leases.
NOTE 5--PRIOR PERIOD ADJUSTMENTS
Prior period adjustments to retained earnings consist of corrections of errors
in previously issued unaudited financial statements as follows:
Unrecorded accounts receivable at December 31, 1994 $40,633
Unrecorded accounts payable and accrued ex-
penses at December 31, 1994 (37,724)
Unrecorded fixed assets at December 31, 1994 net of
accumulated depreciation 17,831
-------
$20,740
=======
Adjustments made to common stock and additional paid in capital are to correct
the par value of the issued common stock.
NOTE 6--SUBSEQUENT EVENTS
In January, 1996, the Company sold its customer base and operations, and fixed
assets effective January 1, 1996. The Company retained accounts receivable in
existence at December 31, 1995 and retained responsibility for accounts
payable, accrued expenses and other liabilities as of December 31, 1995.
Management intends to maintain the corporation in existence for a period of
time sufficient to collect all outstanding accounts receivable and to pay all
outstanding liabilities. Upon final disposition of these items, management
intends to liquidate the corporation. Liquidation is expected during early
1997. The accompanying financial statements do not reflect any adjustments
that may be necessary as a result of the anticipated liquidation.
49
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Perspective Technology Corporation
Vienna, Virginia
We have audited the accompanying balance sheet of Perspective Technology
Corporation as of December 31, 1995, and the related statements of income,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Perspective Technology
Corporation as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Beers & Cutler PLLC
February 20, 1996
50
<PAGE>
PERSPECTIVE TECHNOLOGY CORPORATION
BALANCE SHEET
DECEMBER 31, 1995
Assets
<TABLE>
<S> <C>
Current Assets
Cash and cash equivalents $ 194,653
Accounts receivable 1,332,009
Advances to stockholders 250
Prepaid expenses 17,578
Other 7,512
----------
Total current assets 1,552,002
----------
Property and Equipment, at cost
Furniture and equipment 192,663
Leasehold improvements 43,448
Less accumulated depreciation and amortization (59,040)
----------
177,071
----------
Total assets $1,729,073
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
<PAGE>
BALANCE SHEET
DECEMBER 31, 1995
Liabilities and Stockholders' Equity
<TABLE>
<S> <C>
Current Liabilities
Salaries payable $ 51,127
Accounts payable 21,892
Benefits payable 4,750
Note payable 101,725
Client advances 24,797
----------
Total liabilities 204,291
----------
Stockholders' Equity
Common stock, $.01 par value; 1,000 shares authorized,
266 shares issued and outstanding 3
Additional paid-in capital 187,675
Retained earnings 1,337,104
----------
Total stockholders' equity 1,524,782
----------
Total liabilities and stockholders' equity $1,729,073
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
PERSPECTIVE TECHNOLOGY CORPORATION
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Gross Revenues $5,644,119
Interest and Other Income 40,644
----------
Total revenues 5,684,763
----------
Stockholder Compensation 450,575
Employee Compensation 2,735,380
Occupancy Costs 62,018
Recruiting 129,528
Office Operating Expenses 70,582
Professional Activities 58,038
Marketing 26,739
General Business Expenses 137,340
----------
Total expenses 3,670,200
----------
Net income $2,014,563
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE>
PERSPECTIVE TECHNOLOGY CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
------ ---------- -----------
<S> <C> <C> <C>
Balance, January 1, 1995 $ 3 $ 65,238 $ 1,538,090
Net Income -- -- 2,014,563
Purchase of 100 Shares of Stock (1) (1,499) (401,950)
Issuance of 33 Shares of Stock 1 123,936
Distributions -- -- (1,813,599)
------ --------- -----------
Balance, December 31, 1995 $ 3 $ 187,675 $ 1,337,104
=== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
PERSPECTIVE TECHNOLOGY CORPORATION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash Flows from Operating Activities
Net income $ 2,014,563
Reconciliation adjustments:
Depreciation and amortization 30,764
Loss on disposition of fixed assets 341
Changes in:
Accounts receivable (628,970)
Other current assets (2,385)
Prepaid expenses 3,253
Advances to stockholders (172)
Accounts payable 7,794
Benefits payable 4,750
Client advances 24,797
Accrued payroll and taxes 51,127
-----------
Net cash provided by operating activities 1,505,862
-----------
Cash Flows from Investing Activities
Acquisition of fixed assets (67,867)
Payment for leasehold improvements (43,448)
-----------
Net cash used in investing activities (111,315)
-----------
Cash Flows from Financing Activities
Sale of stock 123,936
Repurchase of stock (200,000)
Payments on note payable (101,725)
Distributions to stockholders (1,813,599)
-----------
Net cash used in financing activities (1,991,388)
-----------
Net Decrease in Cash (596,841)
Cash and Cash Equivalents, beginning of year 791,494
-----------
Cash and Cash Equivalents, end of year $ 194,653
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
PERSPECTIVE TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. Organization
------------
Perspective Technology Corporation (the Corporation) was founded in 1989 as an
"S" Corporation in the Commonwealth of Virginia, and remains an SBA registered
small business, located in Vienna, Virginia. The Corporation specializes in
providing professional services in the Washington, D.C. metropolitan area to
both commercial and government clients in the areas of information strategy
planning, functional and technical analysis, business and data modeling,
requirements definition, hardware/software evaluation and selection, and
application design.
2. Summary of Significant Accounting Policies
------------------------------------------
Cash and Cash Equivalents--The term cash and cash equivalents, as used in the
accompanying financial statements, includes currency on hand, demand deposits
with financial institutions, and short-term, highly liquid investments
purchased with a maturity of three months or less.
The Corporation places its cash and cash equivalents with high credit quality
financial institutions. At times throughout the year such balances may be in
excess of FDIC insurance limits.
Depreciation and Amortization--The Corporation depreciates furniture and
equipment on a straight-line basis over estimated useful lives of the assets
ranging from 5 to 10 years. Leasehold improvements are amortized over the life
of the lease.
Income Taxes--The Corporation has elected to report for federal and state
income tax purposes as an S corporation. Accordingly, no provision for income
taxes has been reflected in the financial statements because the stockholders
of an S corporation are taxed on their proportionate share of the
Corporation's taxable income.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues, expenses and the disclosure of contingent assets and liabilities.
3. Stockholders' Equity
--------------------
Acquisition of Stock--The Company accepted an offer to purchase 100 shares of
its capital stock from a stockholder effective June 15, 1995 at $4,034.50 per
share. Under the terms of the buyout agreement, the Company paid $200,000 of
the purchase price on delivery of the shares and the balance in six equal
installments, each due, without interest on the fifteenth of the month,
beginning October 1995. The balance of the note payable at December 31, 1995
is $101,725.
56
<PAGE>
PERSPECTIVE TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
3. Stockholders' Equity--Continued
--------------------------------
In addition to the purchase price, the Company and departing stockholder have
entered into a contract whereby the departing stockholder will provide
consulting services to the Company through March 31, 1996 for consideration of
$75,000. Under the terms of the consulting agreement, upon delivery of the
services, the Company will pay fees in six equal installments; each due, on
the eleventh of the month beginning October 1995.
Sale of Stock--The Company sold 33 shares of its capital stock to a current
stockholder effective June 15, 1995 at $3,755.64 per share.
Subsequent Events--The Company sold 33 shares of its capital stock to an
employee effective January 1, 1996 at $3,749.37 per share.
4. Employee Benefit Plans
----------------------
The Corporation maintains a qualified defined contribution plan under section
401(k) of the Internal Revenue Code. Under the plan, employees may elect to
defer a portion of their salary, subject to Internal Revenue Service Limits.
The Company makes a matching contribution for each plan participant amounting
to 25% of the first 5% contributed by the employee. The contribution amounted
to $21,985 during 1995.
The Corporation also maintains a non-qualified revenue sharing plan for the
benefit of employees who are employed by the Corporation by June 1 of each
year. The stockholders annually establish a gross revenue amount, which if
exceeded by actual results, will result in a bonus to eligible employees.
Revenue sharing bonuses to employees during 1995 amounted to $132,882.
5. Commitments
-----------
The Company leases office space under an operating lease. The lease term began
September 1, 1995 and is for five years. Minimum annual rental commitments for
the ensuing five years are as follows:
<TABLE>
<S> <C>
1996 $ 74,518
1997 76,753
1998 79,056
1999 81,428
2000 55,360
---------
$ 367,115
=========
</TABLE>
57
<PAGE>
PERSPECTIVE TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
6. Major Customers
---------------
The Company's revenues include $2,432,358 from one major customer and
approximately $613,000 each from three additional customers.
7. Fair Value of Financial Instruments
-----------------------------------
The Corporation has the following financial instruments: cash and short term
investments, accounts receivable, accounts payable and a note payable. The
carrying value approximates the fair values for all financial instruments.
58
<PAGE>
AccuStaff Incorporated
Combined Balance Sheet of Insignificant Subsidiaries
as of June 30, 1996
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 889,913
Accounts receivable, net 5,274,523
Prepaid expenses 61,572
Other current assets 138,286
----------
Total current assets 6,364,294
Furniture and equipment, net 362,301
Other assets 80,284
----------
Total assets $6,806,879
==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, current portion $ 660,000
Accrued payroll and related taxes 1,301,708
Accounts payable and accrued expenses 621,822
----------
Total current liabilities 2,583,530
----------
Stockholders' equity:
Common stock 223,013
Additional paid in capital 410,006
Retained earnings 3,727,877
Treasury stock (137,547)
----------
Total stockholders' equity 4,223,349
----------
Total liabilities and stockholders' equity $6,806,879
==========
59
<PAGE>
AccuStaff Incorporated
Combined Statement of Income of Insignificant Subsidiaries
for the six months ended June 30, 1996
(Unaudited)
Revenue $19,629,117
Cost of revenue 12,744,272
-----------
Gross profit 6,884,845
-----------
Operating expenses:
General and administrative 4,129,575
Depreciation and amortization 71,207
-----------
Total operating expenses 4,200,782
-----------
Income from operations 2,684,063
-----------
Other income (expense)
Interest income 600
Interest expense (52,214)
-----------
Total other income (expense) (51,614)
-----------
Income before provision for income taxes 2,632,449
Provision for income taxes 1,052,979
-----------
Net income $ 1,579,470
===========
60
<PAGE>
AccuStaff Incorporated
Combined Statement of Cash Flows of Insignificant Subsidiaries
for the six months ended June 30, 1996
(Unaudited)
Cash flows from operating activities:
Net income $1,579,470
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 120,000
Changes in operating assets and liabilities:
Increase in accounts receivable (1,588,800)
Increase in prepaid expenses and other current assets (73,330)
Increase in other assets (78,203)
Increase in accrued payroll and related taxes 776,827
Increase in accounts payable and accrued expenses (52,563)
Other, net 16,149
-----------
Net cash provided by oeprating activities 699,550
-----------
Cash flows from investing activities:
Purchase of property and equipment (154,117)
-----------
Net cash used in investing activities (154,117)
-----------
Net increase in cash 545,433
Cash at beginning of period 410,267
-----------
Cash at end of period $ 955,700
===========
61
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Management believes that the assumptions used in preparing the unaudited
pro forma combined financial statements contained herein provide a reasonable
basis on which to present the pro forma financial data. The unaudited pro forma
combined financial statements are provided for informational purposes only and
should not be construed to be indicative of the combined results of operations
or combined financial position of AccuStaff Incorporated and subsidiaries (the
"Company") had the transactions described below been consummated on or as of the
dates assumed, and are not intended to project the Company's results of
operations or financial position for any future period or as of any future date.
The historical consolidated financial statements of AccuStaff have been
restated to give effect to the mergers of PTA International and The McKinley
Group, Inc. which have been accounted for under the pooling-of-interests method
of accounting.
The following unaudited pro forma combined balance sheet as of June 30,
1996 has been prepared to reflect the financial position of the Company as if
the following acquisitions had occurred on June 30, 1996: (i) Alta Technical
Services, Inc., effective July 14, 1996; (ii) CAD Design, Inc., effective July
1, 1996; (ii) In-House Counsel, Inc., effective July 7, 1996; (iii) TRAK
Services, Inc., effective July 28, 1996; (iv) Perspective Technology, Inc.,
effective August 11, 1996; (v) Datacorp Business Systems, Inc., effective August
18, 1996; and (vi) Staffware, Inc., effective August 31, 1996 (collectively
"Acquisitions Subsequent to June 30, 1996").
The following unaudited pro forma combined statements of income for the
year ended December 31, 1995 and the six months ended June 30, 1996 have been
prepared to reflect the operations of the Company as if the following had
occurred on January 2, 1995:
(i) the acquisitions of Matthews Professional Employment Specialists
Incorporated, effective July 2, 1995; Special Counsel International, Inc.,
and its affiliate, effective July 30, 1995; Bogard Tempts, Inc., effective
July 30, 1995; Computer Professionals, Inc., effective October 29, 1995;
Advance/Possis Technical Services, Inc., effective November 30, 1995;
Contemporary Personnel Services, Inc., effective January 2, 1995, Dupay
Enterprises, Inc. d/b/a ASOSA Personnel, effective January 2, 1995,
LawStaf, Inc., effective May 1, 1995 and Attorneys Per Diem, effective May
1, 1995, HR Management Services, Inc., effective November 6, 1995
(collectively "1995 Other Acquisitions"); and
(ii) Goldfarb-Wasson Associates, Inc. d/b/a GW Consulting and GW Temporaries,
Inc., effective January 3, 1996; Excelt Temporary Services, Inc.; Excel
Services of Atlanta, Inc.; Excel Services of Cobb County, Inc.; and Excel
Services of D.C., Inc., effective January 31, 1996; Additional Technical
Support, Inc. and affiliated, effective February 22, 1996; Accounting Pros,
Inc. and Accounting Pros Philadelphia, Inc. effective January 2, 1996,
Tekna, Inc., effective January 1, 1996, Career Enhancement International,
Inc., effective January 5, 1996, Advantage Personnel Services, Inc and
Advantage Temporaries of Pleasanton, inc., effective January 28, 1996, and
HNS Software, Inc., effective March 11, 1996; Alternative Temps, Inc.,
effective April 27, 1996; TempsAmerica, Inc. and affiliated companies,
effective May 19, 1996; Project Professionals, Inc., effective May 19,
1996; Louge and Rice, Inc. and affiliated companies, effective May 26,
1996; Contact Recruiters, Inc. and Ovation Technologies, Inc., effective
May 31, 1996; Openware Technologies, Inc., effective June 16, 1996; Alta
Technical Services, Inc., effective July 14, 1996; CAD Design, Inc.,
effective June 30, 1996; In-House Counsel, Inc., effective July 7, 1996;
TRAK Services, Inc., effective July 28, 1996; Perspective Technology, Inc.,
effective August 11, 1996, Datacorp Business Systems, Inc., effective
August 18, 1996; and Staffware, Inc., effective August 31, 1996
(collectively "1996 Other Acquisitions").
On October 26, 1995, the Board of Directors of the Company authorized a
two-for-one stock split. The stock split was effected as a 100% stock dividend
and was paid on November 27, 1995 to shareholders of record on November 9, 1995.
Additionally, on March 6, 1996, the Board of Directors of the Company authorized
a three-for-one stock split. The stock split was effected as a 200% stock
dividend and was paid on March 27, 1996 to shareholders of record on March 20,
1996. The pro forma financial statements and earnings per share data for the
periods presented herein are computed after giving effect to both the two-for-
one and three-for-one stock splits.
62
<PAGE>
1996 OTHER ACQUISITIONS
The 1996 Other Acquisitions were treated as purchases for financial
reporting purposes, except for the acquisition of Staffware which
was accounted for under the pooling of interests method of accounting. The
Company paid in the aggregate $160.9 million in cash, issued .4 million shares
of Common Stock, and issued, in the aggregate, notes payable of $14.8 million
payable from April, 1996 to March, 1999. Certain of the 1996 Other Acquisition
agreements provide for additional purchase price consideration upon attainment
of certain earnings targets at the end of periods ranging from one to three
years. Any additional consideration paid will be recorded as additional purchase
price.
1995 OTHER ACQUISITIONS
The 1995 Other Acquisitions were treated as purchases for financial
reporting purposes. The Company paid in the aggregate $53.9 million in cash and
issued, in the aggregate, notes payable of $14.8 million payable from April,
1995 to April, 1998. Certain of the 1995 Other Acquisition agreements provide
for additional purchase price consideration upon attainment of certain earnings
targets at the end of periods ranging from one to six years. To date an
aggregate of $8.3 million of additional consideration has been paid on the 1995
Other Acquisitions, which has been recorded as additional purchase price.
The unaudited pro forma combined financial statements are derived, in part,
from historical financial statements and should be read in conjunction with
those financial statements and the notes thereto. The unaudited pro forma
combined financial statements are not necessarily indicative of the results that
would have occurred if the assumed transactions had occurred on the dates
indicated or the expected financial position or results of operations in the
future. The unaudited pro forma combined financial statements should be read in
conjunction with the separate historical financial statements of AccuStaff
Incorporated and in conjunction with the related assumptions and notes to these
unaudited pro forma combined financial statements.
63
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEETS
as of June 30, 1996
(Unaudited) (in thousands)
<TABLE>
<CAPTION>
Acquisitions
Subsequent
to June 30,
ASSETS AccuStaff 1996 Adjustments Pro Forma
------ --------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............................ $ 167,529 $ 1,529 $ (32,674)(a)(b) $ 136,384
Accounts receivable, net............................ 104,263 6,439 (1,503)(a) 109,199
Prepaid expenses.................................... 10,082 290 (96)(a) 10,276
Deferred Income taxes............................... 157 - - 157
----------- --------- ---------- ----------
Total current assets........................... 282,031 8,258 (34,273) 256,016
Furniture, equipment, and leasehold improvements, net... 10,769 1,023 - 11,792
Goodwill, net........................................... 196,746 31,924(b) 228,670
Other assets............................................ 2,828 80 - 2,908
----------- --------- ---------- ----------
Total assets................................... $492,374 $9,361 $ (2,349) $499,386
=========== ========= ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable; current portion...................... $ 8,671 $ 670 $ (165)(a)(b) $ 9,176
Accounts payable and accrued expenses............... 12,128 741 (377)(a) 12,492
Accrued payroll and related taxes................... 20,092 1,605 (354)(a) 21,343
Convertible subordinated debentures................. 1,000 - - 1,000
----------- --------- ---------- ----------
Total current liabilities...................... 41,891 3,016 (896) 44,011
Notes payable, long term portion........................ 7,442 325 2,845(b) 10,612
Deferred income taxes................................... 972 - - 972
----------- --------- ---------- ----------
Total liabilities.............................. 50,305 3,341 1,949 55,595
----------- --------- ---------- ----------
Commitments
Stockholders' equity:
Preferred stock
Common stock......................................... 655 235 (231)(b)(c) 659
Additional contributed capital....................... 413,474 133 (259)(b)(c) 413,348
Retained earnings.................................... 27,986 5,652 (3,808)(b) 29,830
----------- --------- ---------- ----------
442,115 6,020 (4,298) 443,837
Less: Deferred stock compensation.............. (46) - - (46)
----------- --------- ---------- ----------
Total stockholders' equity...................... 442,069 6,020 (4,298) 443,791
----------- --------- ---------- ----------
Total liabilities and stockholders' equity...... $492,374 $9,361 $(2,349) $499,386
=========== ========= ========== ==========
</TABLE>
64
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
BASIS OF RECORDING THE TRANSACTIONS - The accompanying pro forma combined
balance sheet as of June 30, 1996 was prepared to reflect the financial position
of the Company as if the Acquisitions Subsequent to June 30, 1996 had occurred
on June 30, 1996. The acquisition of Staffware, Inc. has been accounted for
using the pooling of interests method of accounting while the other acquisitions
have been accounted for using the purchase method of accounting. The Company's
historical balance sheet as of June 30, 1996 includes the assets and liabilities
of all acquisitions completed prior to such date.
BALANCE SHEET ADJUSTMENTS - The following pro forma adjustments were made:
(a) This adjustment reflects the reduction of certain assets not
acquired and liabilities not assumed from the Acquisitions Subsequent to
June 30, 1996 by the Company. The assets not acquired were: cash of $596,
accounts receivable of $1,503, and prepaid expenses of $96. The liabilities
not assumed were: current portions of notes payable of $165, accounts
payable and accrued expenses of $377, and accrued payroll and related taxes
of $354, and long term notes payable of $325.
(b) This adjustment reflects the recording of the purchases of the
Acquisitions Subsequent to June 30, 1996 of $35,248, in the aggregate,
comprised of $32,078 in cash and $3,170 in notes payable, in addition to
the recording of goodwill associated with the purchase and the
consolidating elimination entries.
(c) This adjustment reflects the necessary equity reclassification for
Staffware, Inc., which was accounted for under the pooling of interests
method of accounting.
65
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED) (in thousands)
HISTORICAL
<TABLE>
<CAPTION>
1996
AccuStaff Other Pro Forma
Incorporated Acquisitions Adjustments Pro Forma
<S> <C> <C> <C> <C>
Revenue $ 334,461 $ 75,599 $ - $ 410,060
Cost of revenue 264,521 56,761 - 321,282
---------- ---------- ---------- ----------
Gross profit 69,940 18,838 - 88,778
---------- ---------- ---------- ----------
Operating expenses:
General and administrative 43,519 19,940 (8,453)(a) 55,006
Depreciation and amortization 4,178 170 1,356 (b) 5,704
---------- ---------- ---------- ----------
Total operating expenses 47,697 20,110 (7,097) 60,710
---------- ---------- ---------- ----------
Income (loss) from operations 22,243 (1,272) 7,097 28,068
---------- ---------- --------- ----------
Other Income (expense
Interest income 1,417 10 - 1,427
Interest expense (1,910) (277) (2,776)(e) (4,963)
Acquisition expense (2,800) - - (2,800)
Other - 128 - 128
---------- ---------- ---------- ----------
Total other income (expense) (3,293) (139) (2,776) (6,208)
---------- ---------- ---------- ----------
Income (loss) before provision for 18,950 (1,411) 4,321 21,860
income taxes
Provision (benefit) for income taxes (g) 8,178 (564) 1,728(f) 9,342
---------- ---------- ---------- ----------
Net income (loss) $ 10,772 $ (847) $ 2,593 $ 12,518
---------- ---------- ---------- ----------
Earnings per share of common and common $ 0.17 $ 0.20
stock equivalents ========== ==========
Weighted average number of shares 62,175 62,608
outstanding ========== ==========
</TABLE>
66
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)(in thousands)
<TABLE>
<CAPTION>
Historical
-------------------------------------------------------------
1995 and 1996 Combined
AccuStaff Other Pro Forma AccuStaff
Incorporated Acquisitions Adjustments Incorporated
------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Revenue $316,847 $427,249 $ - $744,096
Cost of revenue 256,844 331,616 - 588,460
-------- -------- ---------- --------
Gross profit 60,003 95,633 - 155,636
-------- -------- ---------- --------
Operating expenses:
General and administrative 38,695 76,341 (11,437)(a) 103,599
Depreciation and amortization 2,301 1,873 6,779 (b) 10,953
-------- -------- ---------- --------
Total operating expenses 40,996 78,214 (4,658) 114,552
-------- -------- ---------- --------
Income from operations 19,007 17,419 4,658 41,084
-------- -------- ---------- --------
Other Income (expense)
Interest income 821 476 (1,297)(d) -
Interest expense (862) (2,392) (12,662)(e) (15,916)
Other 146 (10,857) 10,711 (c) -
-------- -------- ---------- --------
Total other income (expense) 105 (12,773) (3,248) (15,916)
-------- -------- ---------- --------
Income before provision for
income taxes 19,112 4,646 1,410 25,168
Provision for income taxes (g) 7,354 1,869 581 (f) 9,804
-------- -------- ---------- --------
Net income $ 11,758 $ 2,777 $ 829 $ 15,364
======== ======== ========== ========
Earnings per share of common and common
stock equivalents $ 0.27 $ 0.35
======== ========
Weighted average number of shares
outstanding 43,386 43,818
======== ========
</TABLE>
67
<PAGE>
ACCUSTAFF INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED
STATEMENTS OF INCOME
BASIS OF RECORDING THE TRANSACTIONS - The accompanying pro forma combined
income statements for the year ended December 31, 1995 and the six months ended
June 30, 1996 have been prepared to reflect the operations of the Company as if
the following had occurred on January 2, 1995 (the beginning of the periods);
(i) the acquisition of the 1996 Other Acquisitions; and (ii) the acquisition of
the 1995 Other Acquisitions.
STATEMENT OF INCOME ADJUSTMENTS - The following pro forma adjustments were
made to the historical statements of the Company:
(a) This adjustment primarily reflects the contractual reduction in
officer compensation relating to the 1996 and 1995 Other Acquisitions as
the result of negotiated employment agreements, which provides for
substantially the same management duties or responsibilities, offset by
increases in officers incentive compensation per employment agreements of
AccuStaff Incorporated.
(b) This adjustment reflects the increase in amortization expense
related to the goodwill recorded under the purchase method of accounting
for the 1996 and 1995 Other Acquisitions in the amount of $6,779 for the
year ended December 31, 1995 and $1,356 for the six months ended June 30,
1996.
(c) This adjustment relates to contract termination fees which were
paid to the managers and officers of Computer Professionals required by the
purchase of the Company by AccuStaff Incorporated.
(d) This adjustment reflects the elimination of interest income for
the cash available to be used and the subsequent interest income foregone,
in connection with the purchase of the 1995 Other Acquisitions.
(e) This adjustment reflects the increase in interest expense for cash
required to be borrowed at an interest rate of 6.5% and for the additional
bank debt and notes payable at interest rates ranging from 6.5% to 8%
related to the purchase of the 1995 and 1996 Other Acquisitions.
(f) This adjustment reflects the increase to income tax expense based
on the pro forma adjustments to income before provision for income taxes
based on the Company's effective tax rate of approximately 40%.
(g) The provision for income taxes includes the provision which was
recorded on a pro forma basis for all companies acquired at the Company's
effective tax rate of 40%.
68
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Coopers & Lybrand L.L.P.
23.4 Consent of Coopers & Lybrand L.L.P.
23.5 Consent of Dennis I Berner, C.P.A.
23.6 Consent of Beers & Cutler PLLC.
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF COOPERS & LYBRAND L.L.P
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
AccuStaff Incorporated on Form S-8 (Reg. Nos. 33-88262 and 333-06899) of our
report dated April 12, 1996, on our audit of the financial statements of HNS
Software, Inc. as of December 31, 1995 and for the year then ended, which report
is included in this Report on Form 8-K.
/s/ COOPERS & LYBRAND L.L.P.
Jacksonville, Florida
September 16, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF COOPERS & LYBRAND L.L.P
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
AccuStaff Incorporated on Form S-8 (Reg. Nos. 33-88262 and 333-06899) of our
report dated September 12, 1996, on our audit of the financial statements of
Staffware, Inc. as of December 31, 1995 and for the year then ended, which
report is included in this Report on Form 8-K.
/s/ COOPERS & LYBRAND L.L.P.
Houston, Texas
September 16, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF COOPERS & LYBRAND L.L.P
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
AccuStaff Incorporated on Form S-8 (Reg. Nos. 33-88262 and 333-06899) of our
report dated September 12, 1996, on our audit of the financial statements of
DataCorp Business Systems, Inc. as of December 31, 1995 and for the year then
ended, which report is included in this Report on Form 8-K.
/s/ COOPERS & LYBRAND L.L.P.
Cleveland, Ohio
September 16, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF COOPERS & LYBRAND L.L.P
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
AccuStaff Incorporated on Form S-8 (Reg. Nos. 33-88262 and 333-06899) of our
report dated June 19, 1996, on our audit of the financial statements of
Openware Technologies, Inc. as of December 31, 1995 and for the year then ended,
which report is included in this Report on Form 8-K.
/s/ COOPERS & LYBRAND L.L.P.
Jacksonville, Florida
September 16, 1996
<PAGE>
EXHIBIT 23.5
CONSENT OF DENNIS I. BERNER
Consent of Independent Accountants
I consent to the incorporation by reference in the registration statements of
AccuStaff Incorporated on Form S-8 (Reg. Nos. 33-88262 and 333-06899) of our
report dated January 26, 1996, on my audit of the financial statements of
Career Enhancement International, Inc. as of December 31, 1995 and for the
year then ended, which report is included in this Report on Form 8-K.
/s/ DENNIS I. BERNER
Winter Park, Florida
September 16, 1996
<PAGE>
EXHIBIT 23.6
CONSENT OF BEERS & CUTLER PLLC
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
AccuStaff Incorporated on Form S-8 (Reg. Nos. 33-88262 and 333-06899) of our
report dated February 20, 1996, on our audit of the financial statements of
Perspective Technology Corporation as of December 31, 1995 and for the year then
ended, which report is included in this Report on Form 8-K.
Washington, D.C. /s/ BEERS & CUTLER PLLC
September 13, 1996
