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Filed pursuant to Rule 424(b)(3)
Registration No. 333-09313
P R O S P E C T U S
3,428,695 Shares of Common Stock
DIGITAL SOLUTIONS, INC.
This Prospectus covers 3,428,695 shares of common stock, $.001 par
value (the "Shares") of Digital Solutions, Inc. (the "Company"), which Shares
are presently issued and outstanding and held by certain shareholders (the
"Selling Security Holders") or shall be issued by the Company upon exercise of
outstanding Common Stock purchase warrants and Non-Executive Director Stock
Options including (i) 2,438,802 Shares issued and outstanding; (ii) 252,013
Shares issuable pursuant to the exercise of outstanding Common Stock purchase
warrants issued to certain selling agents (the "Selling Agent Warrants"); (iii)
197,500 Shares issuable pursuant to the exercise of outstanding Common Stock
purchase warrants (the "Private Placement Warrants") issued in connection with
a private placement completed in January 1995 (the "Private Placement"); (iv)
25,380 Shares issuable upon conversion of 12% Contingent Convertible
Subordinated Promissory Notes (the "Notes") issued in connection
with the Private Placement (v) 15,000 Shares issuable pursuant to the exercise
of outstanding Common Stock purchase warrants issued in consideration
for services rendered to the Company (the "Service Warrants"); and (vi) up to
500,000 Shares issuable upon exercise of options granted pursuant to the 1990
Non-Executive Director Stock Option Plan (the "Directors' Plan").
The Shares are traded in the over-the-counter market and are included
in the SmallCap Market of the Nasdaq Stock Market ("NASDAQ") under the symbol
"DGSI". On October 3, 1996, the closing bid and asked prices for the Common
Stock as reported by NASDAQ were $5.9375 and $6.00, respectively.
The Shares may be issued by the Company upon exercise of the Selling
Agent Warrants and the Private Placement Warrants and upon exercise of options
granted under the Directors' Plan. The Shares may be sold from time to time by
the Selling Security Holders, or by their transferees. No underwriting
arrangements have been entered into by the Selling Security Holders. The
distribution of the Shares by the Selling Security Holders may be effected in
one or more transactions that may take place on the over the counter market,
including ordinary brokers transactions, privately negotiated transactions or
through sales to one or more dealers for resale of the Shares as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Security Holders in connection with such sales. The Selling Security Holders and
intermediaries through whom such Shares are sold may be deemed "underwriters"
within the meaning of the Act, with respect to the Shares offered.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is October 10, 1996
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AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy and information
statements and other information filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected
and copies at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional
Offices of the Commission: New York Regional Office, 7 World Trade Center, 13th
Floor, New York, New York 10048; and Chicago Regional Office, Everett McKinley
Dirkson Building, 210 South Dearborn Street, Room 1204, Chicago, Illinois 60604.
Copies of such material may be obtained from the public reference section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. The Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1995.
2. The Company's Registration Statement on Form 8-A filed April
27, 1990.
3. The Company's Form 8-K dated November 28, 1994.
4. The Company's Forms 10-Q for the quarters ended December 31,
1995, March 31, 1996, and June 30, 1996.
Each document filed subsequent to the date of this Prospectus pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this offering shall be deemed to be incorporated by reference in
this Prospectus and shall be part hereof from the date of filing of such
document.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any document described above (other than exhibits). Requests
for such copies should be directed to Digital Solutions, Inc., 4041 Hadley Road,
South Plainfield, New Jersey 07080, telephone (908) 561-1200.
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PROSPECTUS SUMMARY
The following summary is intended to set forth certain pertinent facts
and highlights from material contained in the body of this Prospectus. The
summary is qualified in its entirety by the detailed information and financial
statements appearing elsewhere in this Prospectus, the Company's annual report
on Form 10-K for the Fiscal year ended September 30, 1995 (the "Form 10-K") and
the Company's quarterly reports on Form 10-Q for the quarters ended December 31,
1995, March 31, 1996, and June 30, 1996 (the "Forms 10Q").
THE COMPANY
Digital Solutions, Inc. ("DSI" or "the Company"), was founded in 1969
as a payroll service company and has evolved into a leading provider of human
resource management services to a wide variety of industries in 40 states.
DSI currently offers three general categories of services: (1)
professional employer organization ("PEO") services, also known as employee
leasing (2) employer administrative services, such as payroll processing,
personnel and administration, benefits administration and tax filing; and, (3)
contract staffing, or the placement of temporary and permanent employees. DSI
currently furnishes payroll, employee leasing and contract staffing services to
over 1,300 client organizations with approximately 5,100 worksite leasing and
staffing employees, and believes that it currently ranks, in terms of revenues
and worksite employee base, as one of the largest professional employer
organizations in the United States. In addition, DSI places temporary help in
hospitals and clinics throughout the United States through its Houston, Texas
and Clearwater, Florida offices. The Company has three hubs operating in South
Plainfield, New Jersey; Houston, Texas; and Clearwater, Florida and seven sales
service centers in New York, New York; Ridgedale, Mississippi; Dallas, El Paso
and Houston, Texas; Clearwater, Florida; and South Plainfield, New Jersey.
Essentially, the Company provides services that function as the
personnel department for small to medium sized companies. The Company believes
that by offering services which relieve small and medium size businesses of the
ever increasing burden of employee related record keeping, payroll processing,
benefits administration, employment of temporary and permanent specialized
employees and other human resource functions, the Company will position itself
to take advantage of a major growth opportunity during this decade and the next.
Recognizing the desire by many small businesses to be relieved not only
of the human resource administrative functions, but also of the responsibility
to manage employees and oversee operational tasks ancillary to their core
business, the Company has formulated a strategy of emphasizing PEO ("employee
leasing") and "outsourcing" services. In employee leasing, a service provider
becomes an employer of the client company's employees and leases these employees
to the client to perform their intended functions at the worksite. In
outsourcing, the service provider is not only responsible for human resource
administration but also assumes ultimate responsibility for management of the
employees and their job functions. For example, a provider of outsourcing
services could be engaged
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by a hospital or clinic to manage the maintenance and operation of the facility.
The medical staff would still be responsible for the medical functions but the
physical plant would be managed by the provider.
Over the period 1990-1992, the PEO industry grew at an annual rate of
16.2%, according to an industry report, and has produced a relatively high
growth path since 1984. DSI is focusing its future growth on the PEO and
outsourcing industry. The Company's expansion program will focus on internal
growth through the cross marketing of its PEO services to its entire client base
and the acquisition of compatible businesses strategically situated in new areas
or with a client base serviceable from existing facilities. While DSI continues
to sell stand-alone employer services, such as payroll and tax filing, it will
emphasize the PEO component of its service offerings. In addition, the PEO
industry is characterized by relatively small and regionalized providers which
offer a limited range of services to their clients. Accordingly, the Company
believes opportunities exist for the acquisition of well situated independent
PEO companies whose business may be integrated into the Company operations.
On November 21, 1994, the Company acquired certain business assets of
Staff-Rx, Inc. and its subsidiaries, (collectively "Staff-Rx"). Staff Rx is
engaged in the contract staffing business and places permanent and temporary
medical personnel in hospitals, clinics and other medical facilities. The
Company believes that the Staff-Rx customer base is well suited for employee
leasing and intends to vigorously pursue this area. Staff-Rx has offices in
Houston, Texas; Clearwater, Florida; and Dallas, Texas and conducts business in
approximately 35 states. The assets acquired included the customer accounts of
Staff-Rx, all books and records, and all owned and leased fixed assets utilized
by Staff-Rx in its business operations and the right to use the names
SkillMaster, Staff-Rx, RADS and Primedical. Certain Shareholders and key
managerial personnel of Staff-Rx also entered into noncompetition agreements
with the Company that contain certain restrictive covenants during the term of
the agreement prohibiting competitive conduct. In exchange for the assets and
the noncompetition agreements, the Company paid to Staff-Rx (i) $200,000 in
cash; (ii) a convertible promissory note in the principal amount of $1,300,000;
(iii) an earnout payment based on a formula payable during the two year period
commencing October 3, 1994; and (iv) a profit payment also based on a formula
for the same period. The Company also paid approximately $266,000 representing
expenses incurred by Staff-Rx in operating the business from October 3, 1994 to
the closing.
In May, 1995, the Company consummated the acquisition, through its
subsidiary, DSI Staff Connxions-Southwest, Inc., of certain employee leasing
assets and related liabilities of Turnkey Services Inc., a Texas corporation
("Turnkey") with operations in Texas and New Mexico. Additionally, certain
principals of Turnkey entered into non-competition agreements with the Company.
The Company acquired the Turnkey assets for an aggregate purchase price of
$950,000, payable through a combination of $783,750 in cash and 68,205 Shares.
This Prospectus covers the 68,205 Shares issued as part of the consideration of
the purchase price of Turnkey.
For an additional description of the Staff-Rx and Turnkey
acquisitions, see "General Business Developments During the Last Fiscal Year"
in the Form 10-K incorporated herein by reference.
The Company was organized under the laws of the State of New Jersey on
November 25, 1969 and maintains executive offices at 4041 Hadley Road, South
Plainfield, New Jersey 07080 where its telephone number is (908) 561-1200.
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THE OFFERING
Common Stock Outstanding prior to
Offering (1)..................... 18,761,166
Risk Factors .................... This Offering involves a high degree of risk. See "Risk
Factors."
Use of Proceeds ................. All of the proceeds of this offering will be paid to the
respective Selling Security Holders and none of the
proceeds will be received by the Company.
Nasdaq SmallCap
Market Symbol.................... DGSI
(1) Does not include: (i) 1,000,000 Shares reserved under the Company's
Stock Option Plan, (ii) 5,000,000 Shares reserved under the Company's
Senior Management Plan, (iii) 500,000 Shares reserved under the
Company's Non-Executive Director Plan and (iv) up to approximately
1,225,524 Shares reserved for issuance upon exercise of outstanding
warrants.
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RISK FACTORS
An investment in the securities offered hereby involves a high degree
of risk. The following factors, in addition to those discussed elsewhere in this
memorandum, should be considered carefully in evaluating the Company and its
business. An investment in the Securities is suitable only for those investors
who can bear the risk of loss of their entire investment.
1. Recent Losses. The Company experienced a net loss of $695,000 for
the fiscal year ending September 30, 1992. The Company realized a net profit for
the fiscal year ended September 30, 1993 of $301,000 and a net profit of
$720,000 for the fiscal year ended September 30, 1994. However, due to fourth
quarter charges in excess of $3,500,000, the Company incurred a net loss for the
fiscal year ended September 30, 1995 of $3,316,000. The Company expects to
realize net profits of approximately $200,000 for the year ending September 30,
1996. There can be no assurance the Company will be able to operate profitably
in the future. See also "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" in the Form 10-K and the Forms 10-Q
incorporated by reference herein. See also "Recent Developments-Quarterly Loss".
2. Need for Additional Funds. There can be no assurance that the
Company's current financial resources will be sufficient to maintain its
operations or finance further Company development. Historically, the Company's
cash flow from operations has been insufficient to maintain and/or expand
operations. No assurance can be given that funds for the Company's requirements
will be available or, if available, will be on commercially reasonable terms
satisfactory to the Company. The final terms of such offering may result in
additional dilution to the shareholders of the Company.
3. Security Interests; Restrictive Covenants. The Company has granted
security interests with respect to substantially all of its assets to secure
certain of its indebtedness. In the event of a default by the Company on its
secured obligations, a secured creditor could declare the Company's indebtedness
to be immediately due and payable and foreclose on the assets securing the
defaulted indebtedness. Moreover, to the extent that all of the Company's assets
continue to be pledged to secure outstanding indebtedness, such assets will not
be available to secure additional indebtedness. The Company's loan agreement
with its institutional lender restricts the ability of the Company to incur
additional indebtedness. The terms of such agreement may limit the ability of
the Company to obtain additional financing on terms favorable to the Company or
at all. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" in the Form 10-K and the Forms 10-Q incorporated herein
by reference.
4. Potential Acquisitions. The Company may at times become involved in
discussions with potential acquisition candidates. However, there can be no
assurance that the Company will identify and/or consummate an acquisition, or
that such acquisitions, if completed, will be profitable. In addition, should
the Company consummate an acquisition, such acquisition could
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have an adverse effect on the Company's liquidity and earnings. Further, there
can be no assurance that any financing received by the Company, if any, together
with cash flow, will be sufficient to finance such acquisitions. In the event
the Company consummates an acquisition, or obtains additional capital through
the sale of debt or equity to finance such acquisition, current shareholders may
experience dilution in their shareholder's equity.
5. Management of Growth. The Company completed two acquisitions during
the past fiscal year and intends to continue to pursue a strategy of acquiring
compatible businesses in the future, although it does not believe it is solely
dependent upon acquisitions for future growth. The Company's growth is making
significant demands on the Company's management, operations and resources,
including working capital. To manage growth effectively, the Company will be
required to continue to improve its operational, financial and managerial
systems, procedures and controls, hire and train new employees while managing
its current operations and employees. Historically, the Company's cash flow from
operations has been insufficient to maintain and/or expand operations and there
can be no assurance sufficient capital will be available in the future. Further,
there can be no assurance the Company will be able to effectively manage its
growth and the failure to do so would have a material adverse effect on the
Company.
6. Concentration of Customer Base.. Although the Company has expanded
its services to a number of industries, the Company's payroll service business
continues to rely to a material extent on the construction industry. During the
last fiscal year, construction related business accounted for approximately 18%
of the Company's total gross margin. Accordingly, the continued slowdown in
construction activities has affected, and may continue to affect the Company's
revenues and profitability. The Company believes its reliance on the
construction business will continue to decline as its customer base expands and
becomes more diversified. In addition, substantially all of the Staff-Rx
customer base is in the healthcare business. See "Business - Customers" in the
Form 10-K incorporated herein by reference.
7. Competition. The payroll, temporary employee placement and the
employee leasing industries are characterized by vigorous competition. The
principal competitive factors are price and service. The Company believes that
its major competitors with respect to its payroll and accounting services are
Automatic Data Processing, Inc., Ceridian Corp. and Paychex, Inc. and with
respect to employee placement (including temporary placements and employee
leasing), Butler Arde, Tech Aid, Inc., Comp Health, Staff Leasing, Inc. and
Administaff, Inc. These companies have greater financial and marketing resources
than the Company. The Company competes with numerous companies in the employee
leasing area. The Company also competes with manual payroll systems and
computerized payroll services including banks, and smaller independent
companies. There are no assurances that the Company in its existing or future
lines of business will be able to compete effectively against its competitors in
these industries.
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8. Need for Temporary Personnel. The Company's subsidiaries, DSI
Contract Staffing, Inc., and Staff Rx are temporary employment agencies which
depend on a pool of qualified temporary employees willing to accept assignments
for the Company's clients. The business of these subsidiaries is materially
dependent upon the continued availability of such qualified temporary personnel,
but there can be no assurance that such personnel will be available to the
Company in the future. The inability of the Company to secure temporary
personnel would have a material adverse effect on the Company's business.
9. Potential Liability. Through its Staff Rx subsidiary, the Company
engages in the business of contract staffing of temporary and permanent
healthcare professionals. The placement of such employees increases potential
liability of the Company for negligence and professional malpractice of such
employees. Although Staff Rx is covered by such liability insurance as the
Company deems reasonable under the circumstances, there can be no assurance that
any potential liability will be fully covered by insurance. Any significant
adverse claim which is not covered by insurance may have a material adverse
effect on the Company.
10. Effect of Healthcare Proposal. The Clinton Administration and
Congress have proposed certain changes to the nation's healthcare system. Since
the form of proposal which may be eventually adopted, if any, is not known at
this time, there can be no assurance that the proposal adopted would not have a
material adverse effect on the business of the Company.
11. Restrictions on Payment of Dividends. The Company has not paid any
dividends on its Common Stock since its inception and does not contemplate or
anticipate paying any dividends on its Common Stock in the foreseeable future.
Earnings, if any, will be retained and used to finance the development and
expansion of the Company's business. The Company may not pay dividends on its
Common Stock unless the Company has earnings or capital surplus. Therefore,
there can be no assurance whether or to what extent dividends will be paid on
the Shares. See "DIVIDEND POLICY" and the financial statements and notes
contained in the Form 10-K and Forms 10-Q incorporated herein by reference.
12. Rule 144 Sales; Selling Security Holders Registration. Of the
18,761,166 issued and outstanding shares of the Company's Common Stock prior to
this Offering, approximately 4,679,481 shares may be deemed "restricted shares"
and, in the future, may be sold in compliance with Rule 144 under the Act. Rule
144 provides that a person holding restricted securities which have been
outstanding for a period of two years after the later of the issuance by the
Company or sale by an affiliate of the Company, may sell in brokerage
transactions an amount equal to 1% of the Company's outstanding Common Stock
every three months. A person who is a "non-affiliate" of the Company and who has
held restricted securities for over three years is not subject to the aforesaid
volume limitations as long as the other conditions of the Rule are met. Possible
or actual sales of the Company's Common Stock by certain of the Company's
present shareholders under Rule 144 may, in the future, have a depressing effect
on the price of the Company's Common Stock in the open market. In addition, the
Company has previously registered 6,500,000 shares reserved under its stock
option plans and approximately 6,700,000 shares on behalf of selling
stockholders. The sale of these shares may have a
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depressive effect on the market for the Company's Common Stock. See "DESCRIPTION
OF SECURITIES."
13. Possible Restriction on Market Making Activities. This Prospectus
covers the sale of securities by Selling Security Holders. Certain market
makers of the Company's securities will be Selling Security Holders under the
Prospectus, and such market makers may be required to cease market makig
activity for the period commencing nine business days prior to the commencement
of the distribution of securities offered hereby and ending after the
distribution is completed. The cessation of market making activities by these
market makers may have a depressive effect on the market for the Company's
securities.
14. Authorization and Discretionary Issuance of Preferred Stock;
Possible Anti-takeover Effects. The Company's Certificate of Incorporation
authorizes the issuance of "blank check" preferred stock with such designations,
rights and preferences as may be determined from time to time by the Board of
Directors up to an aggregate of 5,000,000 shares of Preferred Stock.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue preferred stock with dividend, liquidation, conversion, voting or other
rights which would adversely affect the voting power or other rights of the
holders of the Company's Common Stock. In the event of issuance, the preferred
stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company, which
could have the effect of discouraging bids for the Company and thereby prevent
stockholders from receiving the maximum value for their shares. The Company has
no present intention to issue any additional shares of its preferred stock in
order to discourage or delay a change of control of the Company. However, there
can be no assurance that preferred stock of the Company will not be issued at
some time in the future. See "DESCRIPTION OF SECURITIES--Preferred Stock."
15. Possible Volatility of Stock Price. The market price for the
Company's Common Stock has experienced wide fluctuations which have not
necessarily been related to the performance of the Company. Factors such as the
Company's operating results, announcements of material events by the Company or
its competitors, as well as the general state of the securities markets and the
economy, may have a significant impact on the market price of the Company's
Common Stock. See "Market Information" in the Form 10-K.
RECENT DEVELOPMENTS
PRIVATE PLACEMENT
The Company offered and sold, in a private placement to "accredited
investors", 2,293,929 Shares, at prices ranging from $1.20 to 4.00 per Share,
for aggregate gross proceeds of approximately $5,100,000 during the period
commencing November 1995 to June 15, 1996 (the "November 1995 Offering"). The
Company paid selling commissions of 8% of the
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purchase price of the Shares sold in the November 1995 Offering and issued
Selling Agent Warrants equal to 10% of the Shares sold by all selling agents
authorized to accept such commissions. The Company issued 252,013 Selling Agent
Warrants in the November 1995 Offering, of which 100,000 Selling Agent Warrants
were issued to an investor purchasing 600,000 Shares in the November 1995
Offering. In addition, the Company paid the selling agents a nonaccountable
expense allowance of 1% of the aggregate offering price of the Shares sold by
such selling agent. This Prospectus covers the Shares sold in the November 1995
Offering and the Shares issuable upon exercise of the Selling Agent Warrants.
TERMINATION OF FLORIDA ACQUISITION
On March 4, 1996, the Company announced that it had terminated, by
mutual agreement, its agreement in principal to purchase the assets of a Florida
based PEO. The decision to terminate the acquisition does not reflect a change
in the Company's business strategy. The Company will continue to pursue a
strategy of expansion based on the acquisition of other PEOs.
MANAGEMENT CHANGES
The Company's Board of Directors, at its regularly scheduled meeting
following the Company's annual meeting of Shareholders, elected George J.
Eklund, the Company's President, as Chief Executive Officer. Mr. Eklund will
continue to serve as President. Raymond J. Skiptunis, the Company's former Chief
Executive Officer, was elected to serve as Corporate Development Officer, a
newly created office, where he will concentrate on financing and acquisition
activities.
AMENDMENT OF DIRECTORS' PLAN
The 1990 Non-Executive Director Stock Option Plan was amended by the
Board of Directors and approved by the shareholders at the Company's 1996 annual
meeting. The proposal (i) reduced the number of options granted to non-executive
directors upon joining the Board to 5,000 options (ii) reduced the number of
options granted for each year of service to 5,000 options and (iii) authorized
each non-executive director to purchase shares of the Company's Common Stock
during the initial year of service at an exercise price equal to 80% of the
current market of the stock the time of purchase up to an aggregate purchase
price of $50,000. The shares of Common Stock reserved for issuance under the
Directors' Plan are covered by this Prospectus.
QUARTERLY LOSS
On October 9, 1996, the Company announced that it expects to report a
net loss for the quarterly period ended September 30, 1996, of approximately
$600,000 on more than $27 million in revenues. Included in the quarterly
results, the Company will be reporting a one-time charge in excess of $200,000
for severance payments. The Company expects net income for the year ended
September 30, 1996, of approximately $200,000 compared to a $3.3 million net
loss reported in the prior fiscal year. Revenues for fiscal year 1996 will be
approximately $101 million, or a 36 percent increase over fiscal year 1995. The
Company also announced that to improve its profit performance in fiscal 1997,
the Company has reduced the number of its employees by 12 percent and has
replaced the entire management team in its Jackson, Mississippi office.
PROPOSED ACQUISITION
Also on October 9, 1996, the Company announced that it had signed a
letter of intent to acquire the assets of a PEO company headquartered in the
State of Texas. The acquisition is expected to add approximately $15 million to
the Company's annual revenues. The acquisition is subject to due diligence and
negotiation and execution of a final agreement. There can be no assurance that
the acquisition will be consummated. The Company also stated that it will
continue to pursue other acquisitions that meet its growth and geographic
criteria.
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SELLING SECURITY HOLDERS AND
TRANSACTIONS WITH SELLING SECURITY HOLDERS
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
Dominick & Joan Quartiere
159-32 91 St
Howard Beach, NY 11414 50,192 36,667 13,525 *
John J. Marcello
16 Rockne Street
Staten Island, NY 10314 28,333 28,333 0 *
Susan Athwal
521 Hemlock Hill Dr.
Toms River, NJ 08753 380,000 61,000 319,000 *
Ed & Sara Braunstein JTWS
74 RT 9 North
Englishtown, NJ 07726 120,000 49,119 70,881 *
Russell Cender
271 Graybar Drive
Bridgewater, NJ 08807 25,000 20,000 5,000 *
Mark Quartiere
159-32 91st Street
Howard Beach, NY 11414 60,500 44,440 16,060 *
Louis Sansalone
708 Pine Street
Roselle Park, NJ 07204 151,113 130,797 20,316 *
Alan Rosengarten
1 Patricia Street
Plainview, NY 11803 83,928 83,928 0 *
Theodore Schwartz
620 Lower Landing Road
Blackwood, NJ 08012 20,000 20,000 0 *
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SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
Mark Scott
2485 Oldfield Road
Atlanta, GA 30327 30,000 30,000 0 *
Gilbert Bachman
129 Valley Road
Atlanta, GA 30305 5,000 5,000 0 *
Anthony B. Fair
P.O. Box 39
Statesboro, GA 30459 15,288 15,288 0 *
Nanji K. Singadia
155 Shadow Lake Dr.
Lilburn, GA 30247 12,500 12,500 0 *
Charles L. Strickland
9550 Red Bird Lane
Alpharetta, GA 30202 12,500 12,500 0 *
Harris Foundation
2 North LaSalle Street
Suite 400
Chicago, IL 60602 55,000 35,000 20,000 *
Irving Harris Foundation A
2 North LaSalle Street
Suite 400
Chicago, IL 60602 20,000 20,000 0 *
Irving Harris
Foundation B
2 North LaSalle Street
Suite 400
Chicago, IL 60602 20,000 20,000 0 *
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SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
Steve Barnes MD
P.O. Box 190
Juliette, GA 31046 10,000 10,000 0 *
Robert W. Slade
116 Turner Drive
Mahomet, IL 61853 15,000 15,000 0 *
Donohue Bunch
486 Countryside
Naples, FL 33942 24,000 24,000 0 *
Sean Flanagan (2)
7 Edward Avenue
Spotswood, NJ 08884 13,334 13,334 0 *
Carlos Vrrutia
10 The Bishops Ave.
London N2 OAN UK 25,000 25,000 0 *
Peter G. King
P.O. Box 2191
Rancho Sante Fe, CA
92067 10,000 10,000 0 *
Thaddeus Kabat Jr.
1105 Hidden Oaks Dr.
Bedford, TX 76022 25,000 25,000 0 *
Preston Phillips
5507 Moss Glenn Lane
Houston, TX 77088 10,000 10,000 0 *
Leanne Pitman
3017 Glenridge
Stratford Dr
Atlanta, GA 30342 10,000 10,000 0 *
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SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (3) OFFERING OFFERING
Daryl Leehaug
9425 Fox Run Court
Frankfurt, IL 60423 10,000 10,000 0 *
Donald W. Kappauf (2)
1044 Tullo Farm Road
Bridgewater, NJ 446,998 44,000 402,998 2.1%
Michael Gernant
4014 Farhills Drive
Champaign, IL 61821 20,000 20,000 0 *
Central Illinois
Tile Co. Profit Sharing Plan
FBO/ William L. Schlueter
3302 N. Maltis
Champaign, IL 61821 43,333 43,333 0 *
The Infinity Fund, L.P.
3 Piedmont Center
Ste 210
Atlanta, GA 30305 737,533 600,000 37,533 *
Lyonshare Venture
Capital
P.O. Box 247
2521 Vestal Parkway E.
Vestal, NY 13851 12,000 16,000 0 *
Richard M. Wilson
1140 Tennyson Place
Atlanta, GA 30319-1985 5,000 5,000 0 *
Larry Winter
28 Bayowski Road
W. Orange, NJ 07052 9,500 7,500 2,000 *
Debra G. Orr
7675 Ball Mill Road
Dunwoody, GA 30350 10,000 10,000 0 *
15
16
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
James P. Lister
13 Greenhill Drive
Simpsonville, SC
29681 10,000 10,000 0 *
Jack T. Hammer
7133 Bay Drive
Penthouse, #4
Miami Beach, FL 35,000 35,000 0 *
Kenneth P. DePersio
2306 Brian Hill
Champaign, IL 61821 10,000 10,000 0 *
Milton Koffman
c/o Public Loan Co., Inc.
300 Plaza Drive
Vestal, NY 13850 5,000 5,000 0 *
Endrun Investments Limited
P.O. Box N341, 2nd Floor
Charlotte House
Charlotte Street
Nassau N.P. Bahamas 50,000 50,000 0 *
The Sachs Company
1346 South Third St.
Louisville, KY 40208 75,000 75,000 0 *
LMWW Custodian
FBO Oscar S. Bryant
Jr. Individual IRA
c/o The Sachs Company
1346 South Third St.
Louisville, KY 40208 10,000 10,000 0 *
Mary S. Sachs
1346 South Third St.
Louisville, KY 40208 10,000 10,000 0 *
16
17
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (7) OFFERING OFFERING
Wm. M. Schreiber MD
50 River Hill Road
Louisville, KY 40207 5,000 5,000 0 *
RNS Partners, Ltd.
c/o Riverdale Family Dental
3725 Henry Hudson Pkwy.
Bronx, NY 10463 30,000 30,000 0 *
Lawrence Antonucci
96 Columbia Turnpike
Convent Station
Morris Township, NJ 07960 15,000 15,000 0 *
Arden Brown
5761 NW 32 Terrace
Boca Raton, FL 33496 325,000 212,857 102,143 *
Mario DeMarchi
122 Old Clinton Road
Flemington, NJ 10,000 10,000 0 *
Michael Cantor
98 Lake Drive
Palm Beach Shores, Fl 33404 8,333 8,333 0 *
Mark Lapolla
P.O. Box 576
Jackson, WY 83001 25,000 25,000 0 *
Jerry Scott
5829 Sky Park Drive
Plano, Texas 75093 10,000 10,000 0 *
17
18
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
Gilbert Bachman
129 Valley Road
Atlanta, GA 30305 10,000 10,000 0 *
Franklin Morrow
200 East 61st Street
New York, New York 10021 10,000 10,000 0 *
Nancy G. Kennedy
35 Northwood Avenue
Atlanta, GA 30309 15,000 15,000 0 *
Delaware Charter Trust Co.
TTEE for William T.
Kennedy Defined Benefit
Pension Plan DTD 12/5/63
33 Northwood Avenue
Atlanta, GA 30309-1528 10,000 10,000 0 *
William E. Dudziak
2430 NE 35 Street
Lighthouse Point, FL 33064 10,000 10,000 0 *
Ira S. Nathan
2550 Palmer Court
Riverwoods, IL 60015 15,000 15,000 0 *
James M. Albergotti III
1165 Putter Path
Orangeburg, SC 29115 10,000 10,000 0 *
Stanton Weissenborn
21 Holton Lane
Essex Fells, NJ 07021 97,000 10,000 82,000 *
18
19
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
James C. Hellauer
1741 Thomas Road
Wayne, PA 19087 10,000 10,000 0 *
Robert A. Neff
265 Arreton Road
Princeton, NY 08540 10,000 10,000 0 *
Paine Webber, Inc. C/F
David J.S. Nicholson
(IRA)
10 E. 50th Street, 22nd Floor
New York, New York 10022 10,000 10,000 0 *
DWR C/F
Dan McCarthy
FBO Dan McCarthy
Money Purchase Plan
DTD 3/18/92
78 Lloyd Road
Montclair, NJ 07042-1729 71,000 10,000 61,000 *
JMS Inc. Cust. FBO
Anthony A. Anzalone
125 Main Street, Apt. 3T
Port Washington, NY 11050 10,000 10,000 0 *
John Trevor Colvin &
Gail Suzanne Colvin
909 Pinehurst
Chapel Hill, NC 27514 10,000 10,000 0 *
19
20
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
Donald & Co. Securities,
Inc. (4)
788 Shrewsbury Avenue
Tinton Falls, NJ 07724 39,867 39,867 0 *
Raymond M. Skiptunis (5)
c/o Donald & Co.
Securities, Inc.
788 Shrewsbury Avenue
Tinton Falls, NJ 07724 36,533 36,533 0 *
Ralph B. Marra
c/o Donald & Co.
Securities, Inc.
788 Shrewsbury Avenue
Tinton Falls, NJ 07724 11,667 1,667 10,000 *
Todd L. Barlow
c/o Donald & Co.
Securities, Inc.
788 Shrewsbury Avenue
Tinton Falls, NJ 07724 11,667 1,667 10,000 *
The Volume Investor, Inc. (4)
Three Piedmont Center
Suite 210
Atlanta, GA 30305 41,279 41,279 0 *
20
21
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
Warren R. Albergotti
c/o The Volume Invester
Three Piedmont Center
Suite 210
Atlanta, GA 30307 6,000 6,000 0 *
Argent Securities, Inc. (4)
3340 Peachtree Road
Suite 450
Atlanta, GA 30305 9,000 9,000 0 *
Steven Mallia
c/o Spelman & Co., Inc.
7373 North Scottsdale Road
Scottsdale, Arizona 85253 7,900 7,900 0 *
Howard Falco
c/o Spelman & Co., Inc.
7373 North Scottsdale Road
Scottsdale, Arizona 85253 2,100 2,100 0 *
Janney Montgomery Scott
Inc.(4)
26 Broadway
New York, NY 10004 6,000 6,000 0 0
The Infinity Fund, L.P. (6)
3 Piedmont Center
Ste 210
Atlanta, GA 30305 737,533 100,000 37,533 *
21
22
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (1) OFFERING OFFERING
Hamilton Bailey
21 Circle Dr.
Plandome Manor, NY 11030 5,000 5,000 0 *
Arden Brown
5761 NW 32 Terrace
Boca Raton, FL 33496 325,000 10,000 102,143 *
Seymour Chanenson Trust
2922 MacHeath Cr.
Flossmoor, IL 60422 2,500 2,500 0 *
Dr. George B. DeGuire Jr.
35-27 80 St.
Jackson Hts., NY 11372 2,500 2,500 0 *
Shatha Denno &
Jerjis Denno JTWOS
107 Cobblestone Ct.
San Antonio, TX 78213 10,000 10,000 0 *
Helen K. Dieckmann
(8)(9)(10)
37 Overlook Trail
Morris Plains, NJ 07950 234,493 10,000 219,493 1.2%
Senator John H. Ewing
(9)(11)
P.O. Box 352
Bedminster, NJ 07921 48,500 2,500 46,000 *
John H. Ewing, Jr. (12)
P.O. Box 23871
Chattanooga, TN 37422 15,500 2,500 13,000 *
Marilyn E. Florez Trustee (2)
for Gladys M. Noll
134 Kingsberry Dr.
Somerset, NJ 08873 8,670 2,500 6,190 *
22
23
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (7) OFFERING OFFERING
Dr. Joseph Greensher &
Marilyn Greensher
20 Hickory Dr.
Roslyn, NY 11576 2,500 2,500 0 *
James C. Hellauer
1741 Thomas Road
Wayne, PA 19087 2,500 2,500 0 *
David R. Hondula
268 White Oak Ridge Rd.
Bridgewater, NJ 08807 2,500 2,500 0 *
Katie and Adam Bridge
Partners, L.P. (13)
90 Park Avenue
New York, NY 10016 100,000 100,000 0 *
Stephen T. Levine (2)
P.O. Box 6425
E. Brunswick, NJ 08816 2,500 2,500 0 *
Patrick E. Mannion
855 Brown Rd.
Bridgewater, NJ 08807 2,500 2,500 0 *
Money Purchase 201,
Trustees of Bradford Black
231 E. Milton
Alliance, OH 44601 2,500 2,500 0 *
Stephen A. Pfouts
4 Brookmere Estates
Greensburg, PA 15601 10,000 10,000 0 *
Louis Sansalone
708 Pine Street
Roselle Park, NJ 07204 2,500 2,500 0 *
23
24
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (7) OFFERING OFFERING
J.W. Schaefer
115 Century Ln.
Watchung, NJ 07060 2,500 2,500 0 *
Warren Siebold
16032 E. Luxoca Dr.
Aurora, CO 80013 5,000 5,000 0 *
Jack W. Wallace
3003 Cascade Dr.
Valparaiso, IN 46383 5,000 5,000 0 *
Stanton F. Weissenborn IRA
JMS Inc. Custodian FBO
Trust 74002452
21 Holton Ln.
Essex Fells, NJ 07021 97,000 5,000 82,000 *
Richard D. Wellbrock (14)
27 Tall Timbers
Watchung, NJ 07060 46,290 15,190 31,100 *
Robert M. Wellbrock (14)
Trustee
27 Tall Timbers
Watchung, NJ 07060 42,690 15,190 27,500 *
24
25
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (15) OFFERING OFFERING
Karl W. Dieckmann 234,493 5,000 219,493 1.2%
(8)(9)(10)
c/o Digital Solutions, Inc.
4041 Hadley Road
South Plainfield, NJ 07080
William J. Marino (9)(16) 41,667 5,000 36,667 *
c/o Blue Cross & Blue Shield
of NJ
3 Penn Plaza E., PP-16A
Newark, NJ 07105
Senator John H. Ewing 53,500 40,000 13,500 *
(9)(11)
P.O. Box 352
Bedminster, NJ 07921
Steven B. Sands (9)(13) 120,000 25,000 95,000 *
c/o Sands Brothers & Co.
90 Park Avenue
New York, New York 10016
25
26
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (17) OFFERING OFFERING
George J. Eklund (9)(18)(19) 158,334 33,334 125,000 *
c/o Digital Solutions, Inc.
4041 Hadley Road
South Plainfield, New Jersey
07080
Louis J. Monari (18)(20) 51,000 10,000 41,000 *
c/o Digital Solutions, Inc.
4041 Hadley Road
South Plainfield, New Jersey
07080
Kenneth P. Brice (18)(21)
c/o Digital Solutions, Inc.
4041 Hadley Road
South Plainfield, New Jersey
07080 55,834 13,334 42,000 *
26
27
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (22) OFFERING OFFERING
Victor J. DiGioia, Esq.
369 Lexington Avenue
New York, NY 10017 5,000 5,000 0 *
Stanley R. Goldstein, Esq.
369 Lexington Avenue
New York, NY 10017 5,000 5,000 0 *
Charles P. Axelrod, Esq.
369 Lexington Avenue
New York, NY 10017 5,000 5,000 0 *
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (23) OFFERING OFFERING
Dean G. Walberg (2)(24)
2 North Point Drive
Suite 110
Houston, TX 77060 70,000 20,000 50,000 *
SHARES PERCENTAGE
BENEFICIALLY SHARES OF SHARES
OWNED SHARES OWNED OWNED
NAME AND ADDRESS OF PRIOR TO OFFERED AFTER AFTER
SECURITY HOLDER OFFERING (25) OFFERING OFFERING
TDO, Inc.
221 North Kansas Street
El Paso, TX 79901 68,205 68,205 0 *
27
28
- --------------------------
1. Represents Shares issued in the November 1995 Offering.
2. Sean Flanagan, Donald W. Kappauf, Marilyn E. Florez, Stephen T. Levine,
and Dean G. Walberg are employees of the Company.
3. Represents Shares underlying the Selling Agent Warrants.
4. Donald & Co. Securities, Inc., The Volume Investor, Inc., Argent
Securities, Inc., and Janney Montgomery Scott Inc. are market makers in
the Company's Common Stock and their holdings of Common Stock fluctuate
from time to time.
5. Raymond M. Skiptunis is an employee of Donald & Co. Securities, Inc.,
and the son of Raymond J. Skiptunis, an officer and director of the
Company. Raymond J. Skiptunis disclaims beneficial interest in the
Shares held by his son.
6. Represents Shares underlying Selling Agent Warrants issued in
connection with the purchase of 600,000 Shares in the November 1995
Offering.
7. Represents Shares underlying the Private Placement Warrants.
8. Helen K. Dieckmann is the wife of Karl W. Dieckmann, Chairman of the
Board of the Company. Includes shares held by each of Mr. and Mrs.
Dieckmann, each of whom disclaims beneficial interest in the Shares
held by their spouse.
9. Senator John Ewing, Karl W. Dieckmann, William J. Marino, Steven B.
Sands, and George J. Eklund are directors of the Company. Mr. Dieckmann
is the Chairman of the Board.
10. Excludes a non-vested option to purchase 5,000 Shares held by Mr.
Dieckmann.
11. Includes (i) vested options to purchase 35,000 Shares; and (ii)
warrants to purchase 2,500 Shares. Excludes non-vested options to
purchase 5,000 Shares.
12. John H. Ewing, Jr. is the son of Senator John Ewing, a director of the
Company; Senator Ewing disclaims any beneficial ownership in the Shares
held by John H. Ewing, Jr.
13. Stephen B. Sands, a director of the Company, is an executive officer
and director of the corporate general partner of Katie and Adam Bridge
Partners, L.P. and thus may be deemed a "beneficial owner" of
securities of the Company held by Katie and Adam Bridge Partners, L.P.
Accordingly, Mr. Sands's beneficial ownership of Shares thus includes
warrants to purchase 100,000 shares of Common Stock held by Katie and
Adam
28
29
Bridge Partners, L.P. and options to purchase 20,000 Shares held by Mr.
Sands individually. Excludes non-vested options to purchase 5,000
Shares held by Mr. Sands individually. The number of Shares
beneficially owned by Katie and Adam Bridge Partners, L.P. excludes
Shares held by Mr. Sands individually.
14. Shares being registered under the Prospectus include (i) 12,690
Shares issuable upon the conversion of $25,000 principal amount of
Notes and (ii) 2,500 Shares issuable upon exercizing the Private
Placement Warrants held by each of Richard D. and Robert M. Wellbrock,
Trustee.
15. Represents Shares issuable upon exercise of options granted under the
Directors' Plan, including options which have not yet vested.
16. Excludes a non-vested option to purchase 5,000 Shares.
17. Represents Shares issued in lieu of a cash bonus which was earned by
these employees.
18. George J. Eklund is President and Chief Executive Officer of the
Company. Louis J. Monari, and Kenneth P. Brice are vice-presidents of
the Company. Mr. Eklund is also a director of the Company.
19. Includes vested options to purchase 125,000 Shares. Excludes non-vested
options to purchase 75,000 Shares.
20. Includes vested options to purchase 20,000 Shares. Excludes non-vested
options to purchase 30,000 Shares.
21. Includes vested options to purchase 42,500 Shares. Excludes non-vested
options to purchase 32,500 Shares.
22. Represents Shares underlying Service Warrants issued in consideration
for legal services rendered to the Company.
23. Represents Shares issued in consideration for consulting services
rendered in connection with the Company's acquisition of Turnkey and
MLB Medical Staffing, Inc.
24. Includes vested options to purchase 30,000 Shares.
25. Represents Shares issued in connection with the acquisition of certain
assets of Turnkey, the seller, now known as TDO, Inc.
29
30
DESCRIPTION OF SECURITIES
The Company's authorized capitalization consists of 40,000,000 shares
of Common Stock, par value $.001 per share and 5,000,000 shares of Preferred
Stock, par value $.10 per share, which may be issued in one or more series. The
following summary description of the Common Stock and Preferred Stock is
qualified in its entirety by reference to the Company's Articles of
Incorporation.
Common Stock
Each share of Common Stock entitles its holder to one non-cumulative
vote per share and, subject to the preferential rights of the Preferred
Stockholders, the holders of more than fifty percent (50%) of the shares voting
for the election of directors can elect all the directors if they choose to do
so, and in such event the holders of the remaining shares will not be able to
elect a single director. Holders of shares of Common Stock are entitled to
receive such dividends as the Board of Directors may, from time to time, declare
out of Company funds legally available for the payment of dividends. Upon any
liquidation, dissolution or winding up of the Company, holders of shares of
Common Stock are entitled to receive pro rata all of the assets of the Company
available for distribution to shareholders after the satisfaction of the
liquidation preference of the Preferred Stockholders.
Shareholders do not have any pre-emptive rights to subscribe for or
purchase any stock, warrants or other securities of the Company. The Common
Stock is not convertible or redeemable. Neither the Company's Certificate of
Incorporation nor its By-laws provide for pre-emptive rights.
Preferred Stock
The Preferred Stock may be issued in one or more series, to be
determined and to bear such title or designation as may be fixed by resolution
of the Board of Directors prior to the issuance of any shares thereof. Each
series of the Preferred Stock will have such voting powers (including, if
determined by the Board of Directors, no voting rights), preferences, and other
rights as determined by the Board of Directors, with such qualifications,
limitations or restrictions as may be stated in the resolutions of the Board of
Directors adopted prior to the issuance of any shares of such series of
Preferred Stock.
Purchasers of the Shares offered hereby should be aware that the
holders of any series of the Preferred Stock which may be issued in the future
could have voting rights, rights to receive dividends or rights to distribution
in liquidation superior to those of holders of the Common Stock, thereby
diluting or negating the voting rights, dividend rights or liquidation rights of
the holders of the Common Stock.
30
31
Because the terms of each series of Preferred Stock may be fixed by the
Company's Board of Directors without shareholder action, the Preferred Stock
could be issued with terms calculated to defeat a proposed takeover of the
Company, or to make the removal of the Company's management more difficult.
Under certain circumstances, this could have the effect of decreasing the market
price of the Common Stock. Management of the Company is not aware of any such
threatened transaction to obtain control of the Company.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Security
Holders, or by their transferees. No underwriting arrangements have been entered
into by the Selling Security Holders. The distribution of the Shares by the
Selling Security Holders may be effected in one or more transactions that may
take place on the over the counter market, including ordinary brokers
transactions, privately negotiated transactions or through sales to one or more
dealers for resale of the Shares as principals, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. Usual and customary or specifically negotiated brokerage fees
or commissions may be paid by the Selling Security Holders in connection with
such sales. The Selling Security Holders and intermediaries through whom such
Shares are sold may be deemed "underwriters" within the meaning of the Act, with
respect to the Shares offered.
Donald & Co. Securities, Inc., The Volume Investor, Inc., Argent
Securities, Inc., and Janney Montgomery Scott Inc. (collectively, the
"Broker-Dealers") are Selling Security Holders. The Broker-Dealers are
registered broker dealers and are market-makers in the Common Stock. Under
certain circumstances Rule 10b-6 promulgated under the Securities Exchange Act
of 1934 may preclude the Broker-Dealers from making a market in any of the
Company's securities for up to nine business days prior to the sale of their
Shares pursuant to this Prospectus and continuing until they have completed the
distribution of their Shares. The cessation of market making activities by the
Broker-Dealers during the distribution of the Shares offered hereby may have a
material adverse effect on the market, including price, for the Common Stock.
REPORTS TO SHAREHOLDERS
The Company distributes annual reports to its stockholders, including
financial statements examined and reported on by independent public accountants,
and will provide such other reports as management may deem necessary or
appropriate to keep stockholders informed of the Company's operations.
LEGAL MATTERS
The legality of the offering of the Shares will be passed upon for the
Company by Goldstein & DiGioia, LLP, 369 Lexington Avenue, New York, New York
l00l7.
31
32
EXPERTS
The financial statements of the Company for the fiscal years ending as
of September 30, 1995 and 1994 and for each of the three year periods ending
September 30, 1995 have been included in the Company's Form 10-K for the fiscal
year ended September 30, 1995, and incorporated herein and in the Registration
Statement by reference, in reliance upon the report of Arthur Andersen LLP,
independent public accountants, appearing in the Form 10-K, and upon the
authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement under the Act with the
Securities and Exchange Commission (the "Commission"), with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement. For further information
with respect to the Company and such securities, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith. Each
statement made in this Prospectus referring to a document filed as an exhibit to
the Registration Statement is qualified by reference to the exhibit for a
complete statement of its terms and conditions. The Registration Statement,
including exhibits thereto, may be inspected without charge to anyone at the
office of the Commission, and copies of all or any part thereof may be obtained
from the Commission's principal office in Washington, D.C. upon payment of the
Commission's charge for copying.
32
