Business Context and Reporting Period
This Form 8-K, dated November 9, 2005, reports a material transaction by Temporary Financial Services, Inc. ("TPFS"). On this date, TPFS entered into a definitive Asset Purchase Agreement to acquire the assets of Command Staffing, LLC ("Command") and Harborview Software, Inc. ("Harborview"). Following the closing, TPFS changed its name to Command Center, Inc. Command operates as a franchisor of temporary staffing stores, while Harborview provides the proprietary software used by these franchisees. The transaction resulted in a change of control, with the members of Command and Harborview acquiring approximately 65% of the outstanding shares.
Key Financial Metrics
The filing includes audited and unaudited financial statements for the acquired entities and a pro forma balance sheet for the combined entity.
Command Staffing, LLC
- Revenue (9 months ended Sept 30, 2005): $1,656,926 (up from $1,047,035 for full year 2004).
- Net Income (9 months ended Sept 30, 2005): $563,145 (compared to a Net Loss of $137,663 for full year 2004).
- Cash Position (Sept 30, 2005): $159.
- Assets (Sept 30, 2005): $1,103,826 (primarily notes receivable from affiliates).
- Liabilities (Sept 30, 2005): $274,803.
Harborview Software, Inc.
- Revenue (9 months ended Sept 30, 2005): $216,017.
- Net Loss (9 months ended Sept 30, 2005): $(414,516) (compared to a Net Loss of $111,179 for full year 2004).
- Cash Position (Sept 30, 2005): $728.
- Assets (Sept 30, 2005): $390,677 (includes $300,000 in capitalized software costs).
- Liabilities (Sept 30, 2005): $652,022 (includes $523,898 in current maturities of long-term debt).
Pro Forma Combined Entity (as of Sept 30, 2005)
- Total Assets: $2,759,850.
- Total Liabilities: $536,612.
- Total Stockholders' Equity: $2,223,238.
- Shares Outstanding: 10,066,013.
Material Changes and Transaction Details
The primary material change is the acquisition of Command and Harborview assets in exchange for equity. TPFS issued 6,554,613 shares of common stock (3,745,493 for Command and 2,809,120 for Harborview). This issuance increased the total outstanding shares from 3,511,400 to 10,066,013. The transaction resulted in a change of control, with the acquiring shareholders (including Glenn Welstad and Ron Junck) controlling 65.1% of the company. Additionally, the Board of Directors was expanded to nine members, and all previous officers resigned to be replaced by new leadership, including Glenn Welstad as President and CEO.
Outlook, Risks, and Contingencies
Future Acquisitions: The agreement reserves up to 13,198,512 shares for a "Second Closing" to acquire assets of approximately 70 temporary staffing stores. This second closing is contingent upon further due diligence and is not guaranteed. If completed, total shares outstanding could reach 23,409,333.
Liquidity Risks: Both acquired entities reported extremely low cash balances as of September 30, 2005 ($159 for Command and $728 for Harborview). Harborview reported significant debt obligations ($523,898 current maturities) and a substantial accumulated deficit.
Related Party Transactions: A significant portion of Command's assets consists of notes receivable from affiliates ($390,565). Harborview has significant related-party debt and receivables. The filing notes that major shareholders have the ability to influence net income and finance operations.
Management Commentary: Management intends to acquire and develop additional company-owned temporary staffing stores following the transaction.
Investor Verification Checklist
- Verify the status and likelihood of the "Second Closing" to acquire 70 additional stores, which would significantly dilute existing shareholders.
- Confirm the collectability of the $390,565 in notes receivable from affiliates held by Command Staffing.
- Assess Harborview's ability to service its $523,898 in current debt maturities given its minimal cash balance and operating losses.
- Review the specific terms of the voting agreement and the new board composition to understand the shift in corporate control.
- Examine the pro forma balance sheet adjustments to ensure the elimination of inter-company advances is accurate.