0001052918-01-500103.txt : 20011009
0001052918-01-500103.hdr.sgml : 20011009
ACCESSION NUMBER: 0001052918-01-500103
CONFORMED SUBMISSION TYPE: SB-2/A
PUBLIC DOCUMENT COUNT: 2
FILED AS OF DATE: 20011003
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: TEMPORARY FINANCIAL SERVICES INC
CENTRAL INDEX KEY: 0001140102
STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199]
IRS NUMBER: 912084501
STATE OF INCORPORATION: WA
FILING VALUES:
FORM TYPE: SB-2/A
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-60326
FILM NUMBER: 1751417
BUSINESS ADDRESS:
STREET 1: 422 W. RIVERSIDE, SUITE 1313
CITY: SPOKANE
STATE: WA
ZIP: 99201
BUSINESS PHONE: 5096248055
SB-2/A
1
tfs10sbrevsept28ver2.txt
TEMPORARY FINANCIAL SERVICES, INC. SB-2/A
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 2001
REGISTRATION NO. 333-60326
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TEMPORARY FINANCIAL SERVICES, INC.
(Name of small business issuer in its charter)
WASHINGTON 7360 91-2084501
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Id. No.)
200 N. MULLAN, SUITE 213, SPOKANE, WA 99206 TELEPHONE:(509) 340-0273
(Address and telephone number of principal executive offices)
200 N. MULLAN, SUITE 213, SPOKANE, WA 99206
(Address of principal place of business or intended principal place of business)
GREGORY B. LIPSKER
601 W. MAIN AVE. SPOKANE, WA 99201
(509) 455-9077 (TELEPHONE) (509) 624-6441 (FACSIMILE)
(Name, address and telephone number of agent for service)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each Dollar Proposed Proposed
class of Shares amount to maximum offering maximum aggregate Amount of
to be registered be registered price per unit offering price registration fee
Common Stock, $4,000,000 $5.00 $4,000,000 $1,000.00
$0.001 par value
Shares Underlying $400,000 $5.00 $400,000 $100.00
Underwriters Warrants
1
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
2
PROSPECTUS
TEMPORARY FINANCIAL SERVICES, INC.
(A Washington Corporation)
$4,000,000
800,000 SHARES AT A PRICE OF $5.00 PER SHARE
This is an initial public offering of up to 800,000 Shares of Temporary
Financial Services, Inc. Common Stock. We will use the proceeds from this
offering for lending, investment, and working capital. Our business plan
will focus on providing accounts receivable financing, investment capital,
and services to businesses in the temporary staffing industry. Before
this Offering, there has been no public market for any of our Shares. Upon
completion of this Offering, we intend to make application to have our
stock quoted on the NASDAQ supervised OTC Bulletin Board, but our stock is
likely to be an illiquid investment.
We are bearing all costs incurred in the registration of these Shares, estimated
at $89,000 if the maximum offering is sold ($29,000 if the minimum offering is
sold). Public Securities has agreed to act as Underwriter in this offering and
will offer the Shares to interested investors on a -"best efforts 200,000 share
minimum, 800,000 share maximum"- basis. See "Plan of Distribution on page 29.
All shares in this offering are offered on the same terms. We will pay the
Underwriter a 10% commission on the gross proceeds from the sale of the Shares.
The Underwriter will receive no commission for shares sold to existing
shareholders if such shares are in excess of the minimum offering amount. The
Underwriter may enter into agreements with other selected dealers who will be
members of the National Association of Securities Dealers, Inc. The underwriter
may offer a selling concession to Selected Dealers for their participation in
the offering. Until the minimum offering amount is reached, all proceeds
from sales of the Shares will be placed in an Impound Account with Sterling
Savings Bank, Spokane, Washington. If the minimum offering amount is not
received by December 31, 2001, all proceeds will be promptly refunded to
investors without deduction for offering costs and without interest. Management
has indicated that it may participate in the offering by purchasing up to
200,000 shares. No commissions will be paid on shares purchased by Management.
THE SHARES OFFERED ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK TO
PUBLIC INVESTORS AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" AT PAGE 5. THE OFFERING PRICE BEARS
NO RELATIONSHIP TO OUR EARNINGS OR BOOK VALUE OR ANY OTHER ESTABLISHED CRITERIA
OF VALUE.
Neither the United States Securities and Exchange Commission nor any State
Securities Agency has approved or disapproved of these securities, nor has any
such regulatory body reviewed this prospectus for accuracy or completeness.
Any representation to the contrary is a criminal offense.
Shares Offering Offering Net Proceeds
Offered Price Commissions Costs to Company
Minimum 200,000 $5.00 $100,000 $30,000 $ 870,000
Maximum 800,000 $5.00 $400,000 $60,000 $3,540,000
October ____, 2001
PROSPECTUS SUMMARY
This summary highlights information contained in this Prospectus. Investors
should read the entire Prospectus, including the financial statements,
carefully. This Prospectus describes risks of investment that should be fully
considered by each investor prior to investing. See "Risk Factors" at Page 6.
3
EXECUTIVE OFFICE
Our executive offices are located at 200 North Mullan, Suite 213, Spokane,
Washington 99206. You may contact us by telephone at (509) 340-0273, by
facsimile at (509) 340-0277, or by E-Mail at TFS@tempfs.com.
BUSINESS OF THE ISSUER
Temporary Financial Services, Inc. is a start-up company engaged in various
aspects of the temporary staffing industry. We lend money to temporary staffing
businesses for accounts receivable financing, we invest growth capital in
temporary staffing businesses, and we provide value added services to temporary
staffing businesses. We intend to fuel long-term growth by expanding our
customer base through existing contacts in the temporary staffing industry. We
cannot provide any assurances that our efforts to expand our customer base and
implement our business plan will be successful. This offering, if successful,
will provide additional capital to fund loans and investments to temporary
staffing businesses, as well as working capital to fund our facilities,
personnel and infrastructure requirements.
The typical target customer for accounts receivable financing will be an
operator of a small temporary staffing business that has a sufficient track
record and/or experience to support the lending or investment decision. We have
established lending criteria designed to minimize the credit risks associated
with our lending activities. These criteria include, among other things,
assessment of the operator's capabilities, minimum business capitalization
requirements, maintenance of an adequate accounts receivable borrowing base, and
a requirement for timely reporting of financial information to demonstrate
ongoing compliance with loan covenants. We use appropriate loan documents to
record the terms of the loan and require security for repayment. Security will
consist of a UCC lien filing on all assets of the borrower, and the use of
personal guarantees and pledges where appropriate. Revenues from accounts
receivable financing will come from an administrative fee and a percentage
charge against the sales of the borrower. The typical temporary staffing
business borrower will receive a weekly advance against the available borrowing
base, net of the administrative fees and loan charges due to us. All collections
of accounts receivable will be deposited into a bank account that we control or
an account subject to a lock box arrangement.
We will make decisions to invest in temporary staffing businesses by
applying criteria similar to the standards we have established for our lending
activities. The quality of the operator will be a significant factor in the
investment analysis, but we will look at all available information for
indications of the likelihood the operator will succeed. Investments will be
made through our wholly-owned subsidiary, Temps Unlimited, Incorporated.
Generally, investments will be structured as minority investments, and will, in
most instances be limited to 20% equity or less. We expect to use up to 20% of
the net proceeds of this offering for investment opportunities, and investments
may comprise up to 20% of our business. In some cases, the investment will
be made to facilitate the start-up of new temporary staffing businesses, and in
other instances, the investment may be made to facilitate expansion of an
existing operation through the opening of additional locations in a given
geographical area. Each investment will be structured to provide a profits
interest in the business, and when appropriate, preferential repayment or
liquidation rights will be negotiated.
4
We may provide additional services to our loan customers and the businesses
we have invested in. These services may include weekly bookkeeping services,
accounts receivable collection assistance, business management advisory
services, and operational assistance. These services will afford us the
opportunity to observe operational issues first hand and may point out business
issues with particular customers while the issues can still be readily
addressed. We believe that this aspect of our business will help to distinguish
us from the competition, and will also allow us to better monitor our loans and
investments. We expect that this will yield better long-term results than if
the value added services were not available. In addition to these services, we
are also considering licensing temporary staffing software that could be made
available to our temporary staffing customers. We may also evaluate facility
purchase or rental and leaseback arrangements when appropriate to a given
operator's circumstances. We expect that other services will also be developed
as our business grows.
Our initial business focus will be directed at the temporary staffing
industry. Our management has many years of experience in this industry, and we
believe that there is sufficient temporary staffing business available to keep
us busy for the foreseeable future. Other opportunities will, however, develop
from time-to-time, and we intend to evaluate these other opportunities as they
arise. Decisions about other opportunities will be made after a thorough
evaluation of the specific opportunity presented. We will review the
prospective fit of the new business opportunity with the existing business
strategy, and we will consider the impact on long-term business prospects before
moving ahead on a new opportunity outside of our temporary staffing industry
core. We have not identified any other business opportunities at this
time.
OFFERING TERMS
Public Securities, Inc. has agreed to act as Underwriter on our offering of
a minimum of 200,000 and a maximum of 800,000 Shares at a price of $5.00 per
Share. The Shares are offered for cash only. See "Plan of Distribution" at
Page 29. We have also agreed to deliver on Underwriter's Warrant for each ten
Shares sold in the public offering, regardless of source. Each Underwriter's
Warrant entitles the Underwriter to purchase one share of our Common Stock at a
Price of $6.00 per share any time following the expiration of twelve months
after the effecting date of offering and prior to the expiration of 60 months
following the effective date. The shares issuable to the Underwriter upon
exercise of the Underwriter's Warrants have been registered in this Offering.
CAPITAL STOCK OUTSTANDING
As of Assuming Minimum Assuming Maximum
Class March 31, 2000 Offering Amount Offering Amount
------------- --------------- --------------- ---------------
Common Shares 350,000 550,000 1,150,000
IMPOUND OF FUNDS
All funds received from the sale of Shares will be held in impound with
Sterling Savings Bank, Spokane, Washington, until the minimum Offering amount of
$1,000,000 has been deposited and collected. If less than $1,000,000 is
received from the sale of Shares by the close of business on December 31, 2001,
the Offering will be terminated and all proceeds will be promptly refunded to
purchasers by the impound agent with interest and without any discount for
Offering expenses.
5
USE OF PROCEEDS
The following table sets forth information concerning the estimated use of
proceeds from the Offering. The exact allocation of net proceeds may be
adjusted in our sole discretion as good business judgment dictates.
Minimum Raised Maximum Raised
--------------------- -------------------------
Gross Offering Proceeds $1,000,000 100.0% $4,000,000 100.0%
=========== ======== =========== ============
Underwriter's Commissions 100,000 10.0% 400,000 10.0%
Underwriter's
Non-accountable Expenses 10,000 1.0% 40,000 1.0%
Offering Costs 9,000 0.9% 9,000 0.2%
Professional Fees 8,000 0.8% 8,000 0.2%
Travel 3,000 0.3% 3,000 0.1%
----------- -------- ----------- ------------
Total Offering Costs $ 130,000 13.0% $ 460,000 11.5%
----------- -------- ----------- ------------
Estimated Net Offering
Proceeds $ 870,000 87.0% $3,540,000 88.5%
Receivable Financing 620,000 62.0% 2,515,000 62.9%
Investment Opportunities 150,000 15.0% 625,000 15.6%
Marketing Costs 5,000 0.5% 25,000 0.6%
Development of Services 10,000 1.0% 10,000 0.2%
Personnel Costs -0- 0.0% 75,000 1.9%
Working Capital 85,000 8.5% 290,000 7.3%
----------- -------- ----------- ------------
Total Uses of Net
Offering Proceeds $ 870,000 87.0% $3,540,000 88.5%
=========== ======== =========== ============
RISK FACTORS
Investing in the company involves a high degree of risk and should only be
considered by individuals who have no need for liquidity and can afford a
complete loss of all monies they invest. SEE "RISK FACTORS" ON PAGE 6.
RISK FACTORS
AN INVESTMENT IN OUR SECURITIES INVOLVES SUBSTANTIAL RISKS. PROSPECTIVE
PURCHASERS SHOULD CONSIDER THE FOLLOWING SIGNIFICANT FACTORS IN CONNECTION WITH
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE MAKING A DECISION TO
PURCHASE THE SECURITIES OFFERED.
GENERAL RISKS OF INVESTING IN THIS OFFERING
THE COMPANY IS NEWLY FORMED WITH LIMITED OPERATING HISTORY. We are a newly
formed company with limited operating history and limited operating results.
Investors cannot look to historical operations as a basis for making an
investment decision.
WE DO NOT HAVE ESTABLISHED CUSTOMER RELATIONSHIPS. As a newly formed business,
we have not yet established relationships with customers, and consequently, we
do not have a source of repeat business. Our success will depend on our ability
to establish relationships with our customers in a competitive market.
6
SUCCESS WILL DEPEND ON THE ABILITIES OF OUR MANAGEMENT. Investors in this
Offering are being asked to purchase the shares in reliance on our managements'
abilities to implement the business plan and make a success of the business. No
assurances can be given that our management team will be able to take the
business opportunity from concept to successful operations.
KNOWLEDGE OF THE TEMPORARY LABOR BUSINESS IS CONCENTRATED IN TWO MEMBERS OF OUR
MANAGEMENT TEAM. Mr. Coghlan and Mr. Enget are the only members of management
with significant experience in the temporary labor industry. The loss of either
Mr. Coghlan's or Mr. Enget's services could affect the ability to implement our
business plan.
CURRENT MANAGEMENT MAY NOT BE IN CONTROL OF THE COMPANY AFTER THIS OFFERING. The
Company currently has 350,000 shares of common stock issued and outstanding.
All officers and directors as a group own 180,500 of the outstanding shares.
If this offering is fully funded, and assuming that officers and directors
do not purchase shares in this offering, all officers and directors as a group
will then own 180,500 shares or 16% of the total shares outstanding. Management
may purchase shares in the offering, but if the offering is fully funded, there
is a possiblity that management will not own a controlling interest in the
Company when the offering is completed. Lack of control could result in
shareholder initiatives that change the management and/or direction of the
Company. If such a change were to occur, the resulting business of the Company
could differ markedly from the business described in this document.
REACHING THE MINIMUM OFFERING AMOUNT IS NOT AN INDICATION OF THE QUALITY OF THIS
INVESTMENT. Shares may be purchased by Management, their affiliates, or by
other persons who may receive fees or other compensation or gain dependent upon
the success of this Offering. These purchases will be counted in determining
whether the required minimum offering amount has been met. Investors should not
consider that the sale of enough Shares to reach the minimum offering amount
indicates that the Shares are a sound investment.
THE MINIMUM OFFERING AMOUNT WAS ARBITRARILY DETERMINED. The minimum offering
Amount was arbitrarily determined, and is NOT designed as a protection to
Investors or to indicate that other unaffiliated investors share their
investment decision. Management and its affiliates have indicated that they may
purchase up to 200,000 shares in the offering. In making an investment decision,
no reliance should be placed by the investor on the amont of the offering sold
prior to the investment decisions. Each investor must make his own investment
decision as to the merits of this Offering.
WE DO NOT HAVE EMPLOYMENT AGREEMENTS WITH OUR KEY PERSONNEL. The Company has
elected to work employees and key personnel under handshake arrangements for
individual services. No employment agreements have been prepared. As a result,
employees and key personnel are free to sever their relationship with the
Company at any time.
INVESTORS IN THIS OFFERING MAY NOT RECEIVE A RETURN ON THEIR INVESTMENT.
Investors in this offering will only receive a return on the investment if the
value of the Company grows and that value growth translates to higher stock
prices, or if the earnings of the Company are paid out as dividends. Since
inception, the Company has not operated at a profit, and no dividends have ever
been paid. Consequently, there is no certaintay that this investment will ever
provide a return to the investors. If the Company does not achieve profitable
operations or growth in value, the investment may eventually be worthless.
7
AN INVESTMENT IN OUR STOCK WILL LEAD TO CONSIDERABLE DILUTION OF YOUR
INVESTMENT. Prior to this offering, the net tangible book value per share of
our company is $2.08. After the offering, if the maximum number of shares
offered are sold, the net tangible book value per share will be $3.71 and
investors in this offering will suffer immediate dilution of $1.29 (26%) per
share. If the minimum number of shares offered in this offering are sold, the
net tangible book value per share will be $2.90 and investors in this offering
will suffer immediate dilution of $2.10 (42%) per share.
THE OFFERING PRICE OF OUR SHARES BEARS NO RELATION TO VALUE. The price at which
our shares are being offered was arbitrarily determined by us and bears no
relationship to our assets, book value, operations, net worth or to any other
recognized criteria of value. In arbitrarily determining the offering price, we
took into consideration such matters as our current financial resources, our
assets, our cash requirements for a one-year period, and the general conditions
of the securities markets. If the securities markets ascribe a lower valuation
to our shares, the stock price will decline and investors in this offering will
see a reduction in the value of their holdings in our shares.
AN INVESTMENT IN OUR SECURITIES WILL BE ILLIQUID. There is presently no market
for the Shares. There can be no assurance that an actively traded market will
exist after completion of this Offering.
MANAGEMENT HAS DISCRETION OF THE USE OF THE OFFERING PROCEEDS. The uses of the
net offering proceeds are set out in this Prospectus under "Uses of Proceeds"
at page 19. The uses indicated are intended to allow the Company to meet the
business objectives established in our business plan. See "Business" at page 12.
We have retained discretion to change our uses of proceeds consistent with
good business practices. This discretion raises additional risks to investors
in this offering. If we change the uses of proceeds, investors will have
invested in a company without the benefit of an opportunity to review those uses
before investment. Any changes we make to the uses of proceeds could affect the
Company's chances for long term success.
AFTER THE OFFERING IS COMPLETED OUR STOCK MAY BE CONSIDERED A "PENNY STOCK."
Following completion of this offering, investors that purchase shares will own
a stock that may be classified a penny stock under the Rules and Regulations of
the Securities and Exchange Commission. Penny stocks are subject to additional
controls that could limit the value of the shares in the secondary trading
markets. For instance, if a broker dealer is the sole market maker in our
shares, that broker dealer must disclose the fact that it has presumed control
over the market and must provide monthly account statements showing the value of
each penny stock held in the customer's account. These requirements may be
considered cumbersome by the broker dealer and could impact the willingness of
the broker dealer to make a market in the shares, or they could affect the value
at which the shares trade. Classification of the shares as penny stocks
increases the risk of an investment in the shares.
WE HAVE SUBSTANTIAL ADDITIONAL AUTHORIZED COMMON STOCK ELIGIBLE FOR FUTURE SALE.
Sales of substantial amounts of common stock eligible for future sales in the
public market or the availability of shares for sale, including shares issuable
upon exercise of the Underwriter's Warrants, could adversely affect the
prevailing market price of our common stock and our ability to raise capital by
an offering of equity securities.
RISKS ASSOCIATED WITH LENDING ACTIVITIES.
WE HAVE LIMITED EXPERIENCE IN ASSESSING BORROWER CREDIT RISK. We do not have
significant experience in performing credit risk assessments of prospective
borrowers. If we incorrectly assess the credit worthiness of a borrower, the
collection of loans made to that borrower could be jeopardized.
8
WE WILL NOT CONTROL THE BUSINESS OF OUR BORROWERS. We intend to finance accounts
receivable for businesses that we do not control. As a result, we will not be
in a position to direct the business practices of the borrowers. If the
borrowers make decisions that we consider inadvisable, or face operational
problems that increase the lending risk, our recourse will be limited to
termination of our lending agreement at a time when termination could further
increase the lending risk. This lack of control could impact the likelihood
that our loans will be repaid.
THE SECURITY FOR OUR LOANS MAY BE INADEQUATE. We will require security, pledge,
and/or personal guaranty agreements on the loans that we make. For most, if not
all of our loans, our primary security will be the accounts receivable of the
borrowers. If borrowers experience a high rate of uncollectible accounts, the
accounts receivable lending base could be inadequate to cover the outstanding
loans in the event of default by the borrower. If the accounts receivable are
inadequate, and other forms of collateral securing the debt are not sufficient,
we could suffer losses on our loan portfolio.
WE MAY MAKE LOANS TO UNSEASONED BORROWERS. We intend to lend to businesses
that are either recently or newly formed, and these borrowers will have limited
or non-existent operating history on which to base the assessment of credit
risk. This factor will increase the likelihood that we will lend to businesses
that will experience operational difficulties in the future, and we could
suffer loan portfolio losses as a result.
COMPETITION WILL IMPACT THE BORROWING CUSTOMERS THAT WE ARE ABLE TO ATTRACT. The
competition for qualified borrowers will be significant. There are many lenders
with more experience and financial resources than us and they will be seeking
the same borrowers that we intend to pursue. If our loan fees and rates are
higher or our services are less comprehensive than the competition, we may
not succeed with the lending activities of our business plan. We may also be
limited to a class of borrower that is less qualified and of higher credit risk
than we might otherwise choose to do business with. These factors will impact
the success of our lending operations.
OUR CAPITAL AVAILABLE FOR LOANS WILL BE LIMITED. Our lending activities will
require significant amounts of capital. If this offering is fully funded, we
intend to commit up to $2,515,000 of the offering proceeds to accounts
receivable financing. While this is a significant portion of our total
capitalization, in our intended business of financing accounts receivable, it is
a very small amount of funds. A typical temporary labor business that we might
lend to could average $15,000 to $50,000 of accounts receivable per week. This
could result in a borrowing need of $60,000 to $200,000 under a revolving
accounts receivable financing arrangement. A large temporary labor office, or a
controlled group of offices, could require substantially more financing. As a
result, the number of borrowers that we can effectively service will be limited
and this will impact our profitability.
WE DO NOT HAVE OTHER SOURCES OF ADDITIONAL CAPITAL FOUR OUR LENDING OPERATIONS.
If our borrowers succeed at growing their temporary labor operations, their
Borrowing needs may increase. The capital we have available for loans is
limited. If our borrowers require increased l ending limits to accommodate
growth, and we are unable to meet their needs, we may lose the business. We
intend to grow our capital base to meet the needs of our borrowers, but no
assurances can be given that additional capital will be available when needed or
if available that the terms will be acceptable.
WE HAVE A NARROW MARKET FOCUS. We intend to focus our accounts receivable
Financing marketing efforts on temporary labor businesses. Our narrow focus on
a single niche market increases the likelihood that our lending business will be
affected by a downturn in the temporary labor industry, should a downturn occur.
9
RISKS ASSOCIATED WITH INVESTING ACTIVITIES.
WE WILL NOT CONTROL THE PORTFOLIO COMPANIES THAT WE INVEST IN. We intend to
invest in temporary labor businesses, and over time build a portfolio of
interests in temporary labor companies. Our investments will generally be
structured as minority interests in the entities that will own and operate the
temporary labor businesses. As a result, we will not be in a position to
control the entities that operate the businesses and we will have only limited
input into business decisions. The success of our investments in these
temporary labor businesses will depend on the business acumen and capabilities
of the majority owners of the portfolio companies. No assurances can be given
that we will select the right opportunities to invest in, or that those
investments we do make will appreciate in value.
WE HAVE LIMITED INVESTMENT EXPERIENCE. Investors in this offering will be
relying on us to select viable investment opportunities that will appreciate in
value. We intend to focus our investing activities on minority interests in
temporary labor businesses. While we have extensive experience in the temporary
labor industry, we do not have significant experience at taking minority
positions in small temporary labor businesses.
INVESTORS IN THIS OFFERING WILL BE RELYING ON MANAGEMENT TO SELECT VIABLE
INVESTMENT OPPORTUNITIES. The business acumen and capabilities of the majority
owners of our investment targets cannot be assessed until the opportunities are
identified. Investors in this offering will be dependent on management to
identify viable investment candidates with majority owners possessing the
business acumen and capabilities to succeed. Most of these business
opportunities have not been identified yet and investors in this offering are
not in a position to judge the investment opportunities for themselves. No
assurances can be given that we will succeed in our efforts to locate viable
investment opportunities or that they will ultimately increase in value.
WE MAY INVEST IN UNSEASONED TARGETS. Many of the businesses that we may choose
to invest in will be start-ups or companies with only limited operating history.
The risks of investing in start-ups and unseasoned companies are higher than if
the investment targets had operating histories on which we could judge their
potential for success.
OUR INVESTMENT TARGETS WILL BE SUBJECT TO POTENTIALLY BURDENSOME GOVERNMENT
REGULATIONS. We will invest in temporary labor businesses. Temporary labor
businesses are subject to a wide range of government regulations, and the
regulations may change from time-to-time to address specific problems or to
meet political agendas. Government regulations could impact the businesses that
we invest in and could negatively affect the value or appreciation of our
investment portfolio. Applicable governmental regulations that could have this
effect include employment laws, employee benefit regulations, occupational
safety and health regulations, health insurance laws, wage and hour
requirements, and worker's compensations laws.
THE BUSINESS OF PLACING TEMPORARY LABORERS CREATES AN ADDITIONAL SET OF BUSINESS
RISKS.. The actions of temporary workers placed by companies that we invest in
could jeopardize our investment. If a temporary worker causes an injury or
property damage at a job site, the company that placed the temporary worker
could be held responsible in some instances. If the company that placed the
temporary worker is held responsible, our investment in that company could be
negatively affected. Insurance may provide coverage for this type of occurrence,
but no assurances can be given that such insurance will be available to us or,
if available, that it will effectively cover any losses we might suffer.
10
THE TEMPORARY LABOR BUSINESS IS HIGHLY COMPETITIVE WITH LOW BARRIERS TO ENTRY.
The temporary labor industry is serviced by a few large temporary staffing
businesses and a very large number of small businesses. The barriers to entry
in the temporary staffing business are minimal and many "mom and pop" type
stores exist. In this environment, it is likely that we will invest in temporary
labor businesses in areas without competition, and within a short time our
portfolio companies will see strong competition from other temporary staffing
businesses. Competition from other businesses, both large and small, will
impact the ability of our portfolio companies to operate profitably.
RISKS ASSOCIATED WITH PROVIDING SERVICES.
OUR ABILITY TO SUCCESSFULLY AND PROFITABLY OFFER SERVICES IS UNCERTAIN. We are
currently in the process of developing services that we intend to provide to
borrowers and companies that we invest in. Our services offerings are not yet
fully developed and there can be no assurances that there will be a market for
our services offerings when development is completed. Even if a market for
our services develops, we can offer no assurances that the services can be
priced competitively, or that they will be profitable.
THE MARKET FOR THE SERVICES WE INTEND TO OFFER IS HIGHLY PRICE SENSITIVE. Our
services offerings, including accounting services, software, management advisory
services, and other business services, will be offered to our customers in a
highly competitive environment. In many instances, we expect that customers will
utilize our loans, possible investment, and services, because we offer a
comprehensive package in a one stop shop. If our products and services are not
priced competitively, our borrowers may look elsewhere for loans and services,
and our business prospects could suffer.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking
statements are contained principally in the sections entitled "Prospectus
Summary," "Management's Discussion and Analysis or Plan of Operation" and
"Business." These statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements to
be materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Forward-looking
statements include, but are not limited to, statements about:
* the capabilities, development and marketing of our products;
* market opportunities caused by rapid growth in the temporary labor
industry;
* generation of returns through investment in business opportunities;
* our plans for future services and for enhancements of our existing services
to loan and investment customers;
* our ability to attract customers; and
* our sources of revenues and anticipated revenues, including the development
and expansion of our services.
In some cases, you can identify forward-looking statements by terms such as
"may", "will," "should," "could," "would," "expects," "plans," "anticipates,"
"believes," "estimates," "projects," "predicts," "potential" and similar
expressions intended to identify forward-looking statements. These statements
reflect our current views with respect to future events and are based on
assumptions and subject to risks and uncertainties. Given these uncertainties,
you should not place undue reliance on these forward-looking statements. We
discuss many of these risks in this prospectus in greater detail under the
heading ""Risk Factors."" Also, these forward-looking statements represent our
estimates and assumptions only as of the date of this prospectus.
11
This prospectus contains statistical data regarding the staffing services
industry that we obtained from private and public industry publications. These
publications generally indicate that they have obtained their information from
sources believed to be reliable, but do not guarantee the accuracy and
completeness of their information. Although we believe that the publications
are reliable, we have not independently verified their data.
You should read this prospectus and the documents that we reference in this
prospectus completely and with the understanding that our actual future results
may be materially different from what we expect. We qualify all of our
forward-looking statements by these cautionary statements.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are
not making an offer of these securities in any state where the offer is not
permitted.
BUSINESS
HISTORY. Temporary Financial Services, Inc. was incorporated under the
laws of the State of Washington on October 11, 2000. We formed the company to
engage in the business of financing accounts receivable for temporary labor
businesses. We also intend to invest in temporary labor businesses and to
provide services to temporary labor businesses. We are aware of a number
of operators in the temporary labor industry that have experience and
operational expertise that are interested in starting up new operations or
expanding existing operations. We intend to offer our accounts receivable
financing, investing, and business services capabilities to these customers.
Initially, we will focus on sales to those potential customers already
known to our management. Later, we will expand our focus to include other
prospects in the temporary labor industry, and we may also look at other
business opportunities as they arise. As of June 30, 2001, we have loans
outstanding in the aggregate amount of $228,067 to a total of three different
temporary labor businesses. Since June 30, 2001, we have entered into an
agreement with one additional borrower. At this time, no other borrowing
customers are being sought, pending completion of this offering.
Our investing activities will be conducted through our wholly owned
subsidiary, Temps Unlimited, Incorporated, which was incorporated under the laws
of the State of Washington on October 31, 2000. Ownership in businesses that
we invest in will generally comprise less than a twenty percent interest in the
business. Initially, we will direct our investing activities to businesses
that provide temporary labor to customers in need of unskilled and
semi-skilled workers. Depending on the availability of investment capital, we
may also elect to consider other alternative investment vehicles in the
temporary labor industry, or in other industries. Since inception, Temps
Unlimited, Inc. has invested in two temporary labor businesses. A total of
$12,000 was invested in Temps Unlimited of Minnesota, LLC doing business as
Staffing on Demand, and $11,250 was invested in Temps Unlimited of Nebraska, LLC
doing business as ValuStaff. In each instance, we received an 18% equity stake
in the business. We are not presently evaluating any other investment
opportunities and expect that further investments will come after this
offering is completed.
INDUSTRY OVERVIEW. The staffing services industry has experienced
significant growth in response to the changing work environment. According to
published industry sources, the total staffing services market in the United
States had revenues of approximately $124.8 billion in 1999 and 139.3 billion in
2000 (the Staffing Industry Report, Vol. XII, No. 12, June 26, 2001).
12
The staffing industry is evolving. Traditionally, employers used staffing
services to manage personnel costs and meet fluctuating staffing requirements.
More recently, however, employers see temporary staffing as a way to reduce
administrative overhead by outsourcing human resources operations that are not
part of the employers' core business competencies. The use of temporary workers
typically shifts employment costs and risks, such as workers' compensation and
unemployment insurance and the possible adverse effects of changing employment
regulations, to temporary staffing companies, which can allocate those costs and
risks over a larger pool of employees and customers. In addition, through the
use of temporary employees, businesses avoid the inconvenience and expense of
hiring and firing regular employees. The American Staffing Association has
estimated that more than 81% of all U.S. businesses utilize staffing services.
See Staffing Facts by the American Staffing Association,
(www.staffingtoday.net/aboutasa/staffingfacts.shtml).
The U.S. remains the largest and most developed staffing services market in
the world. Since 1997, the U.S. staffing market grew at an annual rate of 11.4%.
According to the Staffing Industry Report, U.S. staffing industry revenue for
the industrial sector that will comprise the bulk of our business grew to an
estimated $17.8 billion in 2000. Due to the economic slowdown that began in
late 2000, the industrial sector of the temporary placement industry is expected
to decline to $15.7 billion in 2001, and then recover to $18.1 in 2002. See
Staffing Industry Report of June 26, 2001.
We will direct our business development efforts to the temporary labor
businesses that are active in the industrial sector. According to the Staffing
Industry Report, Vol. XII, No 12, June 26, 2001, the industrial sector of the US
staffing industry will generate revenues of $15.7 billion in the year 2001, and
$18.1 billion in 2002. This sector is believed to be highly fragmented. While
there are a number of large national and international temporary labor
businesses, most have not yet aggressively expanded into the industrial sector
of the temporary labor business. One company that has agressively pursued the
industrial market is Labor Ready. With year 2000 revenues of $976 million,
Labor Ready has an estimated 6 percent market share. We believe that Labor
Ready is one of the largest competitors in this market segment. The remaining
market is serviced by a small number of national firms, many regional,
multi-locational firms, and a large number of local operations with fewer than
five offices. We believe that many of these local operations will require
capital for financing operations and growth, and we intend to focus our
marketing efforts on this type of borrower.
MARKET OPPORTUNITY. The factors that have caused the rapid growth in the
temporary labor industry give rise to several market opportunities that we
intend to pursue. Since inception, we have been refining our business plan to
address these perceived market opportunities. Our business will have three
primary activities: lending money, investing in businesses, and providing
services.
We believe that there are many individuals and small operators that have
experience in the temporary labor industry that are currently looking to open
their own business or expand the business they already have. Our management has
extensive experience in growing a large international temporary labor business,
and in the process many contacts have been established with entrepreneurs that
have expressed interest in owning and operating temporary labor businesses.
While the barriers to entry in the temporary labor business are low, a single
location still requires a level of start-up capital and financial wherewithal
that exceeds the capacity of many entrepreneurs. By serving as a source of
capital, both for accounts receivable financing and seed investing, we will be
offering a chance to these persons and it is our belief that our willingness to
work with this group will build a loyal and capable customer base.
13
Working with new or recently formed businesses increases the risks of our
business plan because we will not have the benefit of evaluating our customers
on the basis of historical information. We intend to offset this risk by
focusing on individuals with whom our management has prior dealings, and who
have demonstrated success in other similar endeavors in a management capacity
for another employer. We believe individuals that demonstrate the ability to
manage a successful temporary labor business as an employee will have a better
than average likelihood of success as a business owner in a similar field.
LENDING MONEY. We intend to dedicate a significant portion of our
energies and capital to accounts receivable financing for businesses engaged in
the temporary labor business. Up to $2,515,000 of the net offering proceeds
from this offering will be committed to this purpose if the offering is fully
funded.
We are new and relatively inexperienced at lending to businesses against
accounts receivable balances. In order to protect our capital base and minimize
the potential for losses from bad loans, we will apply a multi-step evaluation
and monitoring process to all of our borrowers.
At the time a prospective customer applies for a loan, we will perform a
detailed review of a number of lending criteria. We will evaluate the
capitalization of the borrower, we will consider the adequacy of the borrowing
base, and we will review credit information on the borrower and the principal
owners of the borrower. We will also include documentation in the loan file on
the operator's experience, character and references. When multiple borrowers
are being evaluated for a limited amount of loan capital, we will prefer those
operators known to management over those with whom we have not had prior
dealings, all other criteria being equal.
Our definition of the borrowing base refers to the unencumbered assets
owned by the borrower that support the decision to advance credit. Most
temporary labor businesses do not have a significant investment in fixed assets,
since most of the business is in the nature of services provided. As a result,
the borrowing base will primarily consist of the accounts receivable that the
temporary labor business has from its customers. Our focus on evaluation of the
borrowing base will therefore consist primarily of a review of the accounts
receivable aging and credit information on the significant accounts of the
temporary labor business borrower. The borrowing base will be considered
adequate when the evaluation indicates that the collateral is sufficient to
support the loan being offered.
Once the data for evaluating lending criteria is accumulated, we will
submit the loan to the loan committee for consideration and when appropriate,
approval. The loan committee currently consists of John Coghlan, Brad Herr and
Kristie Jesmore. See "Management" at Page 23. The members of the loan
committee do not have prior experience as loan officers or members of a loan
committee. John Coghlan served as a financial officer of a large multinational
temporary labor business and in this capacity, Mr. Coghlan experienced the full
range of cash flow and credit issues facing temporary labor offices. As a
result, Mr. Coghlan is able to relate to and evaluate the borrowers from the
perspective of a temporary labor business.
Once a loan is approved, we will prepare a loan documentation package that
will include all of the loan documents necessary for the loan in question. This
package will generally include the Loan Agreement, a Security Agreement,
Continuing Personal Guarantees, and if applicable, a Pledge Agreement. We will
request personal guarantees and pledge of ownership in the borrower prior to
lending against accounts receivable when the risk assessment indicates that
personal guarantees are warranted.
14
As collateral for the loans we make, we will request a first position security
interest in all of the assets of the borrower. We will also follow the
appropriate procedures to perfect our security interests in assets under
Article 9 of the Uniform Commercial Code, or other applicable secured
transactions laws. In general, a perfected security interest provides
protection to the first to perfect creditor against other creditors of the
borrower. Perfection of a security interest occurs when the proper procedures
are followed as set out in the State laws of the appropriate jurisdiction. When
we are the creditor in the first position with a perfected security interest on
all of a borrower's assets, we will have a right to apply all of those assets
toward our debt (including late fees, default interest charges, and collection
cost), before payment to other creditors, with only limited exceptions (such as
tax liens). This will increase the likelyhood that we will be able to recover
all, or at least some of the amounts due from the debtor.
After a loan is made to a particular borrower, we will perform ongoing
monitoring of the borrower's business to assure that early notice of any
concerns is received. The nature of the accounts receivable financing will
require each borrower to provide weekly sales information to serve as the basis
for future advances. This information will be monitored for inconsistent
results, or other aberrations that indicate potential problems. Additionally,
we will require independent accountants to perform accounting services to most
of our borrowers, and if we are providing accounting services to a borrower, we
will monitor financial health through the accounting cycle.
In the event one of our borrowers experiences financial difficulties and is
unable to repay some or all of the amounts we have loaned, we will take action
to protect our collateral position and obtain repayment through appropriate
means. In instances where a distressed borrower appears to have an otherwise
viable business, we may consider an equity stake offset against the delinquent
balance. In the right circumstances, we believe that taking an equity stake in
lieu of foreclosing on a security interest may be the best way to maximize value
to our shareholders while allowing the business to continue as a customer.
We expect to derive operating revenues from our lending activities through
loan fees and financing charges. Each loan made will require that the borrower
pay a weekly administrative fee. Currently, this fee is a flat amount of $250
per week for the first year and $150 per week thereafter. This
administrative fee may be adjusted based on operational experience and market
factors once the company has more borrowers in its customer base. In addition
to the weekly administrative fee, the company also charges a weekly loan fee
calculated as a percentage of the temporary labor revenues generated by the
temporary labor business borrower from customers on account. The amount of the
loan fee will also depend on the credit worthiness of the borrower, and an
overall assessment of the factors evaluated during the loan approval process.
The weekly administrative and loan fees are the only charges associated with
active and current borrowers under our loan agreements. Our lending
arrangements do not contemplage an interest rat charge for the amount of the
outstanding loan balance.
INVESTING IN BUSINESSES. We also intend to invest in temporary labor
businesses from time-to-time. Our investments will typically be limited to
minority interests in the entity that will own the temporary labor business. In
the proper circumstances, we will evaluate and consider other forms of
ownership, provided the business opportunity is then consistent with the goals
and direction of our operations. Our investments will be made through our
wholly owned subsidiary, Temps Unlimited, Inc.
15
Our business plan for investing in temporary labor businesses is focused on
generating returns through growth in the value of the businesses we invest in
and through near term returns from profits percentage allocations negotiated at
the time the investments are made. We believe that cash flows from operations
of small temporary labor businesses will allow distributions to the business
owners, including Temps Unlimited, Inc., and the cash distributions will provide
us with operating revenues from investing activities. Eventually, additional
investment returns may be generated from sale or other disposition of the
business, either to the other owners, or in a roll-up of small temporary labor
businesses into a larger entity. Exit opportunities for our investments will be
evaluated on a case-by-case basis as the opportunities arise. We know of no
such opportunities at this time, and no assurances can be given that exit
opportunities will arise.
At this time, we have invested in two temporary labor businesses. We own
18% each of Temps Unlimited of Minnesota, LLC and Temps Unlimited of Nebraska,
LLC.
Temps Unlimited of Minnesota, LLC, doing business as Staffing on Demand
("Staffing on Demand"), was formed on March 14, 2001, as a Washington limited
liability company, and operates out of a 1,728 square foot building in St.
Cloud, Minnesota. In addition to our investment in Staffing on Demand, we also
provide loans and accounting services to the business. As of June 30, 2001,
Staffing on Demand had an outstanding accounts receivable financing line of
$4,930. Staffing on Demand commenced operations on June 15, 2001, and in its
initial two weeks of operations averaged $3,100 per week in revenues from
temporary labor placements. Additional detail concerning the business of
Staffing on Demand is included in Note 5 to our Consolidated Financial
Statements (unaudited) at 53 of this Prospectus.
Temps Unlimited of Nebraska, LLC, doing business as ValuStaff
("ValuStaff"), was formed on March 14, 2001, as a Washington limited liability
company, and operates out of a 1500 square foot facility in Omaha, Nebraska. We
also provide loans and accounting services to ValuStaff. As of June 30, 2001,
ValuStaff had an outstanding accounts receivable financing line of $24,983.
ValuStaff opened for business on May 7, 2001, and in its first eight weeks of
operations ValuStaff averaged $7,275 per week in revenues from temporary labor
placements. Additional detail concerning the business of Valustaff is included
in Note 5 to our Consolidated Financial Statements (Unaudited) at 53 of this
Prospectus.
Over the next twelve months, we expect to invest in a number of additional
temporary labor businesses. We have allocated $625,000 if this offering is
fully funded ($150,000 if only the minimum is sold) to investing activities.
We intend to keep the dollar amounts of our investments in individual
locations under $20,000 per location, but we will consider higher investment
limits when circumstances and sound business judgment indicate that a higher
limit may be warranted. We also expect that additional investment capital
may be required on some of our investments from time-to-time in order to support
operations to the breakeven point. This need for additional investment capital
could increase our investment above the target of $20,000 per location. At
this time, we have not established a minimum or maximum dollar investment
limit for an individual location. If this offering is fully funded, we will
have more funds available for investment, and we may accelerate our investing
activities as market conditions allow.
We continue to receive additional requests for business investment, but at
this time, we are deferring further investment evaluations until after the
offering is completed. We have reserved the right to consider investments in
other businesses as opportunities arise, but at this time, we are not
evaluating any other opportunities outside of the temporary labor business.
16
PROVIDING SERVICES. We will offer to also provide accounting, management
advisory and collection services. We are currently providing accounting
services to two temporary labor businesses, and receive monthly fees for these
services. We also intend to expand our services offerings to include management
advisory services, marketing assistance, and accounts receivable collection
services as our customer base builds. If we are able to identify a software
system that streamlines the reporting functions of temporary labor businesses,
we may also seek to become a software distributor or value added reseller for
the software package. At this time, we have not identified a suitable software
package for this purpose. Additional services will be priced on an as used
basis. Our services offerings will continue to develop following completion of
this offering.
The service sector of our business is not expected to be a high priority in
the coming months. It is expected to comprise less than 10% of our revenues.
Our initial limited efforts to develop our services offerings will focus on
providing services to our loan and investment customers. We believe that the
services we offer will differentiate our loan and investment offerings from the
competition, and will also allow us to better monitor our loan and investment
portfolios. When we provide accounting services to a temporary labor business,
we will be privy to operational information that will aid in the continuing
evaluation of the health of that temporary labor business. If the business is
also a loan or investment customer, we will be in a position to monitor the
viability of our loan or investment on a real time basis. We intend to continue
to expand our pool of loan and investment customers, and we believe these
efforts will provide a ready source of prospective customers for our services
offerings. As time and availability of personnel dictate, we may also expand
our services offerings to other businesses in the temporary labor and other
industries.
COMPETITION. We believe that the businesses of lending to, investing in,
and providing services to temporary labor businesses are highly fragmented with
a few large national or international players and many small regional or local
companies. We expect that we will have to aggressively compete for our
customers, and that high levels of competition will serve to keep our pricing
for products and services down.
In the lending business, there are many asset based lenders and accounts
receivable factors that will offer similar products and services to our
customers. We do not expect our competition for loans to come from traditional
lenders such as banks and other financial institutions since our target customer
base is not likely to qualify for traditional sources of lending. The use of
accounts receivable financing and factoring is well known, widespread, and
readily available. A search on the World Wide Web under the key words "accounts
receivable financing" yields a very large number of firms (too numerous to list)
that are skilled at lending to businesses, including temporary labor businesses.
Many of the firms listed are better capitalized, more experienced, and have more
personnel resources than we will have, even if this offering is fully funded.
We are not aware of any specific competitors that are focused almost
exclusively on lending to temporary labor businesses, but many of the
diversified firms will make loans of this nature. We do not believe that we
will experience a shortage of customers interested in our loan offerings, but
our success in providing loans to these customers will depend on our ability to
price our offerings fairly, to competently service the accounts that we do win,
and to manage our loan portfolio to yield a positive return. The large number
of competing firms will make this task difficult.
17
The business of investing in temporary labor businesses faces a situation
similar to the business of lending. The number of firms that make investment
capital available to small start-up businesses, including temporary labor
businesses, is too numerous to mention. The investment firms run the gamut from
individual "angel" investor to very large and professionally managed investment
banking concerns. Many of the investment firms are better capitalized and more
experienced than we are. As a result, when seeking investment capital, our
target customers will be faced with a number of financing options. It is likely
that this will result in a harder negotiation on the terms of the investment and
could impact the return on our investment if we win the business.
Our services offerings will also be faced with high levels of competition.
Accountants and bookkeepers will compete for the accounting services that we
hope to provide to our loan and investment customers. There are many
consultants and management advisory firms that will compete for the right to
advise our prospective customers on business matters. Our intention to offer
accounts receivable collection assistance will also be met with stiff
competition from local collection agencies and from collection agencies with
national presences. As a result, pricing of our services will be held down by
competitive pressures and this could reduce the rate of return an investor in
this offering might otherwise expect.
TARGET CUSTOMERS. We believe that our customer base will come from small
temporary labor businesses that provide unskilled and semi skilled labor to
light industrial and commercial establishments. A typical establishment might
be staffed with two or three employees. The owner/operator and/or employees
will contact local businesses that might be in need of temporary labor,
and will contract for jobs when the need arises. The facility will operate as
a labor hall, where the workers will gather in the morning and will be
dispatched to the available jobs. At the end of the day, the workers will
typically return to the dispatch location for payment. Most of the
temporary labor businesses that we will target will pay their workers the same
day the work is performed. The temporary labor business will typically be paid
by its customers on a monthly basis, so the same day payment to the workers
creates an immediate need for accounts receivable financing. We believe that
our knowledge of the temporary labor industry and our willingness to provide
accounts receivable financing will allow us to competently service this market
segment.
METHODS OF MARKETING. We will initially rely on the contacts of our
Management to generate customers for our business activities. John Coghlan and
Dwight Enget previously worked in the temporary labor industry and both have
Extensive contacts with small temporary labor business operators and
entrepreneurs. We believe that many of these small operators may be interested
in our financing program, possible investment capital, and services. We will
focus our initial efforts on contacting these prospects.
After we have followed up on the initial prospect list, we will expand our
marketing efforts to a wider audience. At this stage, marketing efforts may
include direct mail programs to temporary labor businesses, word of mouth
referral incentives, and advertising campaigns. We intend to prepare more
detailed marketing plans as we work through the initial prospect lists, and will
tailor our marketing materials and marketing efforts based on the feedback that
we receive from our initial efforts.
We believe that the capital that will be available for loans and investment
will be sufficient for approximately eighteen months if this offering is fully
funded (or approximately one year if funded to the minimum level). Our
marketing efforts will be geared to match this availability of funds.
18
We expect that additional funding will be required in the twelve to
eighteen month time frame. If we are unable to obtain the additional capital
that we need, we will adjust our marketing efforts accordingly. If funds are
not available, our business could be adversely affected. When needed, we
will seek additional capital through common equity offerings, debt placement,
preferred stock offerings, and/or other forms of capital infusion.
GOVERNMENTAL REGULATION. Our proposed lines of business will be subject to
government regulation in a number of areas.
Temporary staffing firms are the legal employers of their temporary
workers. To the extent that the Company invests in controlling interests of
temporary staffing businesses, we may be governed by laws regulating the
employer/employee relationship, such as tax withholding or reporting, social
security or retirement, anti-discrimination and workers' compensation. As noted
in the discussion of our proposed business activities, it is our intention to
structure our investments in portfolio companies as minority interests. This
may limit the impact of this form of government regulation on the company.
We also intend to offer accounting services to our loan and investment
customers. These services may entail the filing of payroll tax returns and
other government mandated reports in accordance applicable regulations.
EMPLOYEES. As of June 30, 2001, we had one full time employee working
for the business. Additional services are currently being provided by outside
consultants as needed to implement the early stage business plan. We
anticipate that a second full time employee will be hired once this offering
is completed, and one or two additional part time employees will be
retained to provide support for those customers electing to utilize our
services.
We expect that two full time and two part time employees will be sufficient
to operate the business for the coming twelve months. If the growth in our loan
and investment portfolios exceeds expectations, additional personnel will be
added as necessary to maintain high levels of customer service. Additional
information regarding employees is provided under "Management" at Pages 23 - 25.
FACILITIES. Effective June 1, 2001, we entered into a three year lease
for 1,425 square feet of office space in a professional office building in
Spokane, Washington. We believe that this space will be adequate to meet our
needs for at least the next three years. Prior to June 1, 2001, we shared
offices with our President, Mr. John Coghlan, in a high rise building in
downtown Spokane. We paid Mr. Coghlan $200 per month for the use of the office
space and access to the office equipment. With the move to a larger office in
June, we have acquired our own office furniture and equipment. Additionally,
Mr. Coghlan has moved his personal office into our facility and now pays the
Company $500 per month for use of our offices and equipment and personnel.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Temporary Financial Services, Inc. and its wholly owned subsidiary, Temps
Unlimited, Inc. are engaged in the business of lending to, investing in, and
providing services to temporary labor businesses. We generate revenues from
lending activities through administrative and loan fees. Our investing
activities will yield returns through current distributions of earnings from the
businesses we invest in and through realization of value appreciation when the
investment asset is sold or transferred. We also provide fee based services to
our customers. After payment of operating expenses, we anticipate that profits
and surplus cash flows will be reinvested in the growth of the Company for the
foreseeable future.
19
RESULTS OF OPERATIONS
The Company was organized in October, 2000, and began operations in the
second quarter of 2001. Prior to April 1, 2001, our efforts were focused on
initial fundraising acitivites and the development of our business plan and
operational procedures.
As of June 30, 2001, we had loans outstanding of $228,067, with three
temporary labor businesses. We also hold minority investments in two temporary
labor businesses through Temps Unlimited, Inc., a wholly owned subsidiary
corporation. The investments include $12,000 for 18% of Temps Unlimited of
Minnesota, LLC (dba Staffing on Demand), and $11,250 for 18% of Temps unlimited
of Nebraska,LLC (dba ValuStaff). We also provide accounting services to
Staffing on Demand and Valustaff.
Since we began operations, we have generated $4,354 from loan fees, $4,500
from loan administration fees, and $2,000 from fee based accounting services.
We have also generated dividend income of $7,368 and interest income of $3,457
from investing surplus working capital during the start-up phase of the
business. Total revenues for the six months ended June 30, 2001 were $22,179.
We account for our investments in Staffing on Demand and ValuStaff under
the equity method of accounting. Unrealized profits and losses on the
investments are recorded as income or loss on the books of Temps Unlimited, Inc.
and are then consolidated with the results of Temporary Financial Services, Inc.
During the second quarter, we recorded unrealized losses on investments of
$6,245 from our investment in Staffing on Demand, and $7,875 from our investment
in ValuStaff. During this period, Staffing on Demand was just commencing
operations. Staffing on Demand generated $6,251 in total revenues and incurred
a loss of $34,694. ValuStaff operated for a longer period in the quarter
generating $58,203 in total revenues while posting a loss of $43,751. Both
Staffing on Demand and ValuStaff are in the start-up phase and the losses are
expected. We anticipate that Staffing on Demand and ValuStaff will continue to
grow through the rest of 2001, and will reach breakeven operating levels in
2002.
On a consolidated basis, including the unrealized losses on investments,
Temporary Financial Systems, Inc. incurred total expenses of $46,145, yielding a
net loss of $23,866.76 for the six months ended June 30, 2001.
We believe that the losses incurred to date are consistent with the early
stage development of the company and are in line with the business plan. We
will continue to monitor progress throughout the remainder of 2001 and will
adjust our business plan to address any operational issues as they arise.
LIQUIDITY AND CAPITAL RESOURCES.
At June 30, 2001, we have loans to temporary labor businesses outstanding
in the amount of $228,067. We expect the amount of loaned funds to continue to
increase as the borrowers' businesses grow and their borrowing needs increase.
Cash and cash equivalents at June 30, 2001, amounted to $452,699. These
amounts will be used to fund operations and provide loan capital through the
completion of this offering. We do not anticipate that we will make any
additional investments in temporary labor businesses until this offering is
completed. We believe that our available cash and cash equivalents will be
sufficient to meet the growing borrowing needs of our existing borrowers and up
to three additional borrowers until this offering can be completed.
20
If the minimum offering is funded, an additional $870,000 will be available
for the Company's business purposes. See "Use of Proceeds," below. With the
current cash position and the additional funds from this offering at the minimum
level, we believe we will have sufficient capital to operate for at least a
twelve month period.
If the offering is fully funded, the net offering proceeds of $3,540,000
will be sufficient to allow for accelerated growth of the business and should be
adequate for a two year period.
Pending use of offering proceeds for loans, investments, or operations, we
will place the funds in accessible interest or dividend bearing accounts and
will manage our surplus working capital position to provide current earnings.
USE OF PROCEEDS
The following table sets forth information concerning the estimated use of
proceeds from the Offering. The exact allocation of net proceeds may be
adjusted in our sole discretion as good business judgment dictates.
Minimum Raised Maximum Raised
--------------------- -------------------------
Gross Offering Proceeds $1,000,000 100.0% $4,000,000 100.0%
Offering Costs
Underwriting Commissions* 100,000 10.0% 400,000 10.0%
Underwriter's Non-accountable
Expenses* 10,000 1.0% 40,000 1.0%
Offering Costs 9,000 0.9% 9,000 0.2%
Professional Fees 8,000 0.8% 8,000 0.2%
Travel 3,000 0.3% 3,000 0.1%
---------- -------- ----------- ------------
Estimated Total Offering Costs 130,000 13.0% 460,000 11.5%
Estimated Net Offering Proceeds $ 870,000 87.0% $3,540,000 88.5%
========== ======== =========== ============
Uses of Net Offering Proceeds
Receivable Financing $ 620,000 62.0% $2,515,000 62.9%
Investment Opportunities 150,000 15.0% 625,000 15.6%
Marketing Costs 5,000 0.5% 25,000 0.6%
Development of Services 10,000 1.0% 10,000 0.2%
Personnel Costs -0- 0.0% 75,000 1.9%
Working Capital 85,000 8.5% 290,000 7.3%
---------- -------- ----------- ------------
Total $ 870,000 87.0% $3,540,000 88.5%
========== ======== =========== ============
* Assumes no Shares are sold by Officers and Directors.
The uses of proceeds indicated in the above table are listed in order of
priority from what we consider to be the highest priority expenditures to the
lowest. The amounts indicated do not take into account those expenditures that
will be made from operating revenues following completion of this offering.
DESCRIPTION OF SECURITIES
COMMON STOCK
We are authorized to issue One Hundred Million (100,000,000) Shares of
$0.001 par value Common Stock. There are presently 350,000 Shares issued and
outstanding held by 16 shareholders of record. There are no outstanding options
or rights to acquire our Shares.
21
All Shares of Common Stock are equal to each other with respect to voting,
liquidation, dividend and other rights. Owners of Shares of Common Stock are
entitled to one vote for each Share of Common Stock owned at any Shareholders'
meeting. Holders of Shares of Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors out of funds legally
available therefore; and upon liquidation, are entitled to participate pro rata
in a distribution of assets available for such a distribution to Shareholders.
There are no conversion, preemptive, or other subscription rights or privileges
with respect to any Shares. Our Common Stock does not have cumulative voting
rights which means that the holders of more than fifty percent (50%) of the
Shares voting in an election of directors may elect all of the directors if they
choose to do so. In such event, the holders of the remaining Shares aggregating
less than fifty percent (50%) would not be able to elect any directors.
PREFERRED STOCK
We are authorized to issue Five Million (5,000,000) Shares of Preferred
Stock. There are currently no outstanding Shares of Preferred Stock. The
Preferred Stock is entitled to preference over the Common Stock with respect to
the distribution of our assets in the event of liquidation, dissolution, or
winding-up of our business, whether voluntarily or involuntarily, or in the
event of any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs. The authorized, but unissued Shares of
Preferred Stock, may be divided into and issued in designated series from time
to time by one or more resolutions adopted by the Board of Directors. The
Directors, in their sole discretion, shall have the power to determine the
relative powers, preferences, and rights of each series of Preferred Stock.
While our directors have the sole discretion under our Articles of
Incorporation to establish the powers, preferences, and rights of the Preferred
Stock, and to issue the Preferred Stock once it is created, we represent that we
will offer any Preferred Stock that we create on the same terms to all of our
shareholders unless:
(i) the issuance of the Preferred Stock is first approved by our
Shareholders in a meeting called for this purpose; or
(ii) the issuance of the Preferred Stock is first approved by a majority of
our independent directors who do not have an interest in the transaction and who
have access, at our expense to our legal counsel or independent legal counsel
chosen by our independent directors.
DIVIDENDS
We have never paid dividends and expect, for the foreseeable future, that
we will utilize all available funds for the development of our business.
Accordingly, we have no plans to pay dividends, even if our operations generate
sufficient earnings and cash flows to allow for such a payment.
TRANSFER AGENT
We have retained the services of Atlas Stock Transfer Corporation as our
Transfer Agent and Registrar. Atlas Stock Transfer is located at 5899 South
State Street, Salt Lake City, Utah 84107.
DILUTION
Prior to this Offering, we sold 150,000 Shares of Common Stock at a price
of $1.00 per Share and an additional 200,000 Shares of Common Stock at a price
of $3.00 per Share. As of June 30, 2001, our net tangible book value was
$726,411, or approximately $2.08 per Share of Common Stock. Net tangible book
value per Share represents the amount of our total tangible assets less total
liabilities divided by the number of Shares of Common Stock.
22
After giving effect to the sale of the 800,000 maximum (200,000 minimum)
Shares offered hereby and after deducting the sales agent's commission and
estimated offering expenses, net tangible book value at December 31, 2000, would
be $4,266,411 maximum ($1,596,411 minimum), or approximately $3.71 maximum
($2.90 minimum) per Share of our Common Stock. This represents an immediate
increase in net tangible book value of $1.63 maximum ($0.82 minimum) per Share
of Common Stock to our existing stockholders and an immediate dilution in net
tangible book value of $1.29 (26%) maximum ($2.10 (42%) minimum) per Share
of Common Stock. The following table illustrates this per Share dilution for
both the minimum and maximum offering amounts:
Minimum Maximum
------- -------
Initial public Offering price $ 5.00 $ 5.00
Net tangible book value per Share prior to the Offering $ 2.08 $ 2.08
Increase in net tangible book value per Share attributable
to this Offering $ 0.82 $ 1.63
Net tangible book value per Share after the Offering $ 2.90 $ 3.71
Dilution in Value Per Share to Investors in this Offering $ 2.10 $ 1.29
Dilution of net tangible book value per Share to
new investors 42% 26%
MARKET PRICE OF COMMON EQUITY
The is no market for our Shares and there can be no assurance that a market
will develop after completion of this Offering.
MANAGEMENT
The following sets forth information concerning our Management and key
personnel:
JOHN R. COGHLAN, age 58, is President of the Company and serves as Chairman
of the Board of Directors. Mr. Coghlan graduated from the University of Montana
with a degree in Business Administration and has held the designation of
Certified Public Accountant since 1966. Mr. Coghlan was a founder of Labor
Ready, Inc., a New York Stock Exchange traded company, and served as the Chief
Financial Officer and Director of Labor Ready from 1987 through 1996, when he
retired. Since his retirement, Mr. Coghlan has been employed by Coghlan
Family Corporation, a privately held family business that manages family
investment accounts. From January 1, 1997 through December 31, 2000, Mr.
Coghlan's investing activities on behalf of the Coghlan Family Corporation have
resulted in a 321% increase total assets and a 321% increase in retained
earnings. The returns and investment growth in Coghlan Family Corporation
were generated from various investments in accounts receivable contracts,
marketable securities, money market funds, and various business interests
including an agribusiness, a retirement center and real estate. Coghlan Family
Corporation is 100 % owned by the Coghlan Family LLC. John and Wendy Coghlan,
husband and wife, own minority interests in Coghlan Family LLC and control both
the LLC and the Corporation through the LLC management agreement. The
remaining interests in the Coghlan Family LLC are owned by Mr. Coghlan's
children and grand children.
Labor Ready is an international provider of temporary labor with 816
locations as of December 31, 2000 and annual revenues of $976,000,000 for the
year then ended. Mr. Coghlan will utilize his business experience in the
temporary labor industry, and the contacts that he established during that
period to provide a source of business prospects for the Company. Mr. Coghlan's
investment experience over the past four and one half years will also be
beneficial to the extent that we have surplus cash while we build our customer
base.
23
Prior to founding Labor Ready in 1987, Mr. Coghlan was sole director and
Principal of CDA Securities, a stock brokerage firm located in Spokane
Washington. In 1987, while serving as Principal for CDA Securities, the
Securities & Exchange Commission (SEC) filed a complaint alleging violations of
registration and antifraud regulations. The allegations against Mr. Coghlan
included claims that he charged undisclosed excessive mark-ups and mark-downs of
17% to 33% and made misrepresentations to customers regarding the "market price"
of stock and the existence of a public market. As a result of these
allegations, Mr. Coghlan stipulated to a permanent injunction from further
violations, was fined $17,760 and was suspended from association with any broker
dealer for twelve months. The States of Washington, Alabama, Georgia, and
Ohio brought similar actions and Mr. Coghlan's brokerage license was suspended
in these states. The action by the SEC was resolved in 1988 and the action by
the State of Washington was resolved in 1990. Since these matters were
resolved, Mr. Coghlan has complied with all aspects of the stipulated
settlements.
BRAD E. HERR, age 47, is Secretary and a Director. Mr. Herr is graduated
from the University of Montana with a Bachelor of Science Degree in Business
Accounting in 1977 and a Juris Doctorate in 1983. From 1993 through 1996, Mr.
Herr practiced law in the firm of Brad E. Herr, P.S. In June 1996, Mr. Herr
joined AC Data Systems, Inc. (AC Data) in Post Falls, Idaho. From 1996 through
1998, Mr. Herr held the position of Director of Finance. From 1998 through June
2001, Mr. Herr held the position of Vice-President - Business Development.
AC Data is a privately held manufacturing business engaged in the design,
manufacture and sale of surge suppression products marketed primarily to the
telecommunications industry.
In June, 2001, Mr. Herr left employment at AC Data Systems to pursue other
business opportunities. Mr. Herr is currently employed by Brad E. Herr, P.S., a
professional services corporation that he owns. Brad E. Herr, P.S. provides
professional services to Temporary Financial Services, Inc., Temps Unlimited,
Inc., and other business clients.
Mr. Herr is licensed to practice law in the states of Washington and
Montana. Mr. Herr also maintains inactive status as a Certified Public
Accountant in the State of Montana.
KRISTIE L. JESMORE, age 50, is Treasurer for the Company. Ms. Jesmore
graduated from Eastern Washington University in 1982 with a Bachelor of Science
Degree in Business Administration. From 1987 through September, 2000, Ms.
Jesmore was self-employed providing accounting and administrative services for
small businesses. On September 19, 2000, Ms. Jesmore began working with Coghlan
Family Corporation and John Coghlan on Mr. Coghlan's investment and other
business interests, including Temporary Financial Services, Inc. As our
business has developed, Ms. Jesmore has devoted more of her time to company
activities and effective on July 1, 2001, Ms. Jesmore is now employed by
Temporary Financial Services, Inc. Ms. Jesmore manages the office, maintains
the company's books, and provides accounting services to our customers.
Prior to 1987, Ms. Jesmore was employed in several stock brokerage firms.
In 1987, Ms. Jesmore served as financial principal for Devonshire Securities
during a period that the brokerage was out of compliance with the net capital
requirements applicable to broker-dealers. As a result, it was alleged that Ms.
Jesmore aided and abetted the brokerage firm in the net capital and margin
requirement violations. Ms. Jesmore entered into a consent order that barred
her from association with any broker-dealer in a supervisory or proprietary
capacity for a period of two years.
24
DWIGHT ENGET, age 50, is an independent Director of the Company. Mr. Enget
graduated from Minot State University with a degree in Business Administration.
Mr. Enget was employed by Labor Ready, Inc from 1989 to 1997. Mr. Enget began
his career with Labor Ready as a branch manager and held the position of
Director of Operations for the Western District upon his retirement. Since 1997,
Mr. Enget has been retired.
INDEPENDENT DIRECTORS.
We have agreed to maintain a minimum of two independent directors of the
Company following completion of this offering. For this purpose, independent
directors are individuals that do not have an employment, significant business,
or ownership relationship with the Company. Maintaining at least two
independent directors will provide an independent source for evaluating and
approving or disapproving transactions that may involve the inside officers and
directors. We consider individuals owning less than 5% of the outstanding
shares following completion of this offering to be independent provided they are
not employees and do not have some other business relationship with us that
could affect their independence.
GREGORY B. LIPSKER, age 51, is an independent Director of the Company. Mr.
Lipsker is a practicing attorney in Spokane, Washington. Mr. Lipsker
graduated from the Georgetown University Law Center in 1976. Mr. Lipsker's
practice emphasizes corporate transactions and securities matters. Since 1993
Mr. Lipsker has been the president and a director of Metaline Mining and Leasing
Company, an inactive mining exploration company. From 1993 to 2000 Mr. Lipsker
was the president and a director of Cimarron -Grandview Group, Inc. (now Full
Moon Universe, Inc.) Both companies are reporting companies.
JAMES BAGGETT, age 51, is an independent Director of the Company. Mr.
Baggett currently serves as General Manager of Workers for You, Inc., a newly
formed temporary labor business located in Spokane, Washington. Prior to
joining Workers for You, Inc., from 1998 through June 30, 2001, Mr. Baggett was
employed as a Real Estate Salesperson with Janek Co. From 1995 through 1998,
Mr. Baggett worked for Labor Ready, Inc. as the Branch Manager of the Labor
Ready temporary dispatch office in Spokane Washington.
Mr. Baggett attended one year of college at Spokane Falls Community College with
coursework in business administration, and has continued to broaden his business
training with practical work experience. Mr. Baggett's work experience as a
manager of temporary labor businesses will provide a unique insight into the
kinds of customers that the Company will be targeting.
TRANSACTIONS WITH AFFILIATES AND CONFLICTS OF INTEREST.
In all transactions between the Company and an affiliated party, the
transactions will be presented to the Board of Directors and may only be
approved if a majority of the independent directors who do not have an interest
in the transaction approve of the action. We will pay for legal counsel to the
independent directors if they want to consult with counsel on the matter. We
believe that the requirement for approval of affiliated transactions by
disinterested independent directors will assure that all activities of the
Company are in the best interest of the Company and its shareholders.
25
Shortly after formation, we undertook a private offering of our shares to
officers and directors and others. The shares were offered to officers and
directors for $1.00 per share payable 25% in cash and 75% in the form of a
promissory note. The shares were offered to non-officer/director investors only
for cash, so the sale of shares to officers and directors was on terms more
favorable than those offered to other investors in the initial private offering.
The sale to officers and directors was not approved by at least two independent
directors. Subsequently, the notes have been paid in full with interest. Any
similar transactions in the future will follow the disinterested director or
disinterested shareholder approval procedures called for by our Bylaws.
Through our wholly owned subsidiary, Temps Unlimited, Inc., we intend to
invest in temporary labor businesses. We also expect that there may be
opportunities to invest in more businesses than we will choose to accept. We
may decline an investment because of the timing, other commitments, size,
suitability standards, or any number of other sound business reasons. In such
circumstances, it is possible that some or all of our officers and directors may
choose to make the investment from personal funds. In order to fulfill their
fiduciary responsibilities to the Company and our shareholders, each officer and
director is aware that he or she must make business opportunities that are
consistent with our business plan available to the company first. If we decline
to participate, the individual officers and directors may then participate
individually. Beyond the obligation to present opportunities to the Company
first, there are no restrictions on participation in business opportunities by
our officers and directors.
COMPENSATION
Effective July 1, 2001, Ms. Jesmore receives a salary of $3,000 per month
from the Company. Ms. Jesmore currently handles all of the administrative and
set-up tasks related to establishing loan accounts, monitoring loan activity,
and addressing daily operational matters. Ms. Jesmore receives assistance as
needed on business matters from John Coghlan and Brad Herr.
John Coghlan and Dwight Enget are not currently compensated by the Company for
their activities on our behalf. Brad E. Herr, P.S., a professional services
corporation solely owned by Brad E. Herr, receives payment for professional
services provided to the company as invoiced at the rate of $60 per hour.
At this time, our directors receive no annual compensation or attendance fees
for serving as directors. Reasonable directors' fees may be established for
attendance at meetings once this offering is competed. The Company does not
anticipate payment to officers for serving in that capacity, although corporate
officers may also serve and will be compensated as employees when appropriate.
As of the date of the Prospectus, the only employee of the Company is Ms.
Jesmore.
Following completion of this offering, the Company will hire additional
personnel as required to operate the business effectively. If the offering is
funded at the minimum level, additional personnel will be hired as operating
cash flows allow. We do not anticipate that we will use any of the net offering
proceeds for personnel costs at the minimum funding level. If the offering is
fully funded, we anticipate that we will use up to $75,000 of the net offering
proceeds for personnel costs. We expect that our initial hiring will be for
support staff to perform clerical and bookkeeping duties. Mr. Coghlan has
indicated that he will continue to provide services to the Company as President
and Director on an uncompensated basis through June 30, 2002. At that time, Mr.
Coghlan's salary will be considered in light of the financial condition of the
Company and the progress the Company has made up to that point in time.
26
As the Company grows, and operating cash flows allow, we expect that we will
fill the position of general manager, and add additional support staff as
needed.
At this time, the Company does not provide any non-cash compensation to any of
the officers, directors, or key personnel. Other forms of compensation,
including non-cash consideration, for key employees may be considered once the
Company has achieved breakeven operating levels.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following tables set forth information regarding the number and
percentage of our Shares of Common Stock held by each director, each of the
named executive officers and directors and officers as a group. The table also
sets forth the ownership of any non-management person known to us to own more
than five percent of any class of our voting Shares.
SECURITY OWNERSHIP OF NON-MANAGEMENT OWNERS. The following table sets forth
information about those persons, excluding Management, that we know own more
than 5% of any class of our voting Shares on June 30, 2001:
% of Class % of Class % of Class
Name Number of Shares at 06-30-01 at Minimum at Maximum
------------------------ ---------------- ----------- ---------- ----------
Welstad Family LLC 24,500 7.0% 4.5% 2.1%
1016 S. 28th St.
Tacoma, WA 98409
------------------
Terry Dunne 25,000 7.1% 4.5% 2.2%
601 W. Main Ave.
Spokane, WA 99201
-------------------
Bill Newton 20,000 5.7% 3.6% 1.7%
5300 North Prince Pl.
Jackson Hole, WY 83001
-------------------------
Jerry Smith 20,000 5.7% 3.6% 1.7%
8040 E. Morgan Trail.
Scottsdale, AZ 85258
----------------------
Norm Schroth 20,000 5.7% 3.6% 1.7%
Box 841
Hermiston, OR 97838
SECURITY OWNERSHIP OF MANAGEMENT. The following table sets forth information
concerning the ownership of our Common Shares by all directors and all directors
and officers as a group as of June 30, 2001. The numbers of shares and the
percentages indicated do not take into account the possible purchase of shares
by the named individuals in this offering. The number of shares owned by John
Coghlan include 10,000 shares owned by Coghlan Family LLC and 10,000 shares
owned by Coghlan Family Corporation.
27
% of Class % of Class % of Class
Name Number of Shares at 06-30-01 at Minimum at Maximum
------------------------ ---------------- ----------- ---------- ----------
John R. Coghlan 80,500 23.0% 14.6% 7.0%
200 N. Mullan, Suite 213
Spokane, WA 99206
-------------------
Brad E. Herr 30,000 8.6% 5.5% 2.6%
200 N. Mullan, Suite 213
Spokane, WA 99206
-------------------
Kristie L. Jesmore 25,000 7.1% 4.5% 2.2%
200 N. Mullan, Suite 213
Spokane, WA 99206
-------------------
Dwight Enget 45,000 12.9% 8.2% 3.9%
5510 W. Camelback Road
Glendale, AZ 85031
--------------------
All Officers and Directors 180,500 51.6% 32.8% 15.7%
as a group (4 individuals)
CERTAIN TRANSACTIONS
Temporary Financial Services, Inc. was formed in October, 2000. Since its
inception, we have engaged in a number of transactions with our management in an
effort to establish business operations. These transactions may not be
considered to have been conducted at arms length, although the disinterested
Directors approved the transactions and the terms were considered fair at the
time.
The initial capitalization of the company was derived from a private
placement of 100,000 shares of common stock sold to officers and directors (the
founders' shares) at an offering price of $1.00 per share. In that offering,
John Coghlan, Brad Herr, Kristie Jesmore, and Dwight Enget each purchased 25,000
shares in exchange for $6,250 cash and a promissory note for $18,750 payable in
three annual installments of $6,250 each. The promissory notes are unsecured
obligations of the individual officers and directors bearing interest at 6.3%
per annum. Subsequently, on June 26, 2001, Mr. Coghlan purchased the notes from
the company and the full value for the founders' shares has now been received by
the Company. Brad Herr, Kristie Jesmore and Dwight Enget are now indebted to
Mr. Coghlan under the promissory notes. At the same time that we were
conducting the offering of founders' shares, we also offered 50,000 shares to
unaffiliated investors at $1.00 per share payable in cash at the time of
investment. This offering was fully subscribed in November, 2000.
In December, 2000, we offered an additional 200,000 shares of Common Stock
at an offering price of $3.00 per share. This offering was fully subscribed on
December 31, 2000, and all subscriptions for shares in this private placement
were received by January 2, 2001. In this private placement, John Coghlan
purchased 55,500 shares, Brad Herr purchased 5,000 shares, and Dwight Enget
purchased 20,000 shares. In each case, the full $3.00 per share price was paid
by the officers and directors in cash, on the same terms as offered to other
investors.
28
Following incorporation and initial funding of the business, we operated
out of offices provided by Mr. Coghlan and reimbursed Mr. Coghlan $200 per month
for use of his facilities and office equipment. On June 1, 2001, we rented
office space in a professional office building located at 200 N. Mullan, Suite
213, Spokane, Washington and Mr. Coghlan now shares our offices. Mr. Coghlan
now reimburses the company for his use at the rate of $500 per month. The
amounts of rent we paid Mr. Coghlan prior to June 1, 2001, and the amounts of
rent we now receive from Mr. Coghlan for his personal use of our facilities, are
considered fair value for the facilities provided.
Prior to July 1, 2001, Ms. Kristie Jesmore was employed by the Coghlan
Family Corporation and compensated for the services she performed for Coghlan
Family Corporation and John Coghlan. From October 1, 2000 through June 30,
2001, Mr. Coghlan and Ms. Jesmore were actively involved in establishing and
developing the business plan for Temporary Financial Services, Inc., but no
charges were made to us for the time Ms. Jesmore and Mr. Coghlan spent on
company business. Effective July 1, 2001, Ms. Jesmore is now employed by us.
If her ongoing work with Coghlan Family Corporation and John Coghlan require
that Ms. Jesmore spend time on Mr. Coghlan's personal business, we will be
reimbursed for Ms. Jesmore's time by Mr. Coghlan.
Since May 1, 2001, we have been working with Brad E. Herr, P.S., a
professional service corporation owned by Brad E. Herr. Mr. Herr is paid on a
hourly basis at that rate of $60 per hour for hours actually spent on our
business. Mr. Herr is currently working on general business matters including
business plan development, loan documentation and loan procedures, and other
business matters as requested.
PLAN OF DISTRIBUTION
DESCRIPTION OF OFFERING
We are seeking to raise up to $4,000,000 from an Offering of a minimum of
200,000 Shares and a maximum of 800,000 Shares at a price of $5.00 per Share.
We have entered into an agreement with Public Securities of Spokane, Washington
to act as Underwriter in the offering. Public Securities will offer the shares
on a 200,000 share "best efforts, all or none," basis, and an additional 600,000
shares on a "best efforts" basis. The term "best efforts" means that the
Underwriter is committed to use its best efforts to place the shares for sale to
the public. The phrase "best efforts all or none" means that the Underwriter
will use its best efforts to sell the minimum amount of the offering. If the
Underwriter is unable to sell the minimum amount of the offering by the offering
termination date, then the offering will be considered unsuccessful and all
proceeds will be promptly refunded to investors with interest and without
deduction for offering costs. If the minimum offering amount is sold prior to
the offering termination date, the Underwriter will continue to offer the shares
on a best efforts basis. The Underwriter is paid a commission only on the
shares it actually sells. This is contrasted with a traditional "firm"
underwriting in which the underwriter purchases an amount of shares from a
company, less an underwriting discount, and then resells the shares to the
public.
The offering will terminate on December 31, 2001, and the Underwriter is
required to use its best efforts to sell the shares, up to the maximum
amount being offered, from the effective date of the registration through the
offering termination date.
The Underwriter has agreed with us that no commissions will be due on sales of
shares to existing shareholders of the Company that purchase in the public
offering, to the extent that the existing shareholders purchases cause the total
shares sold in the offering to exceed 200,000 shares. If the offering closes,
29
this provision will have the effect of assuring the Underwriter of commissions
on the first $1,000,000 raised in the offering, regardless of the source of the
purchaser. Management has indicated that it intends to purchase up to 200,000
shares ($1,000,000) in the offering. The amount actually purchased by
management will depend on the level of interest of new investors in the
offering.
We have agreed to pay the Underwriter a commission of 10% on sales of all shares
sold in the offering, except for the excluded sales to existing shareholders as
described above. The Underwriter may elect to use Selected Dealers to assist
with the offering, and may grant the Selected Dealers a selling concession of up
to ____% of the gross offering proceeds. If used, each Selected Dealer must be
a member of the National Association of Securities Dealers, Inc. (NASD).
We have agreed to pay the Underwriter a 1% non-accountable expense allowance to
cover the Underwriter's expenses incurred in connection with the offering. If
the offering does not close, the Underwriter's expenses will be reimbursed on an
accountable basis up to a maximum of $5,000.
We have also agreed to deliver one Underwriter's Warrant for each ten shares
sold in the public offering, regardless of source. Each Underwriter's Warrant
entitles the Underwriter to purchase one share of our Common Stock at a price of
$6.00 per share any time following the expiration of twelve months after the
effective date of the offering and prior to the expiration of 60 months
following the effective date. The shares issuable to the Underwriter upon
exercise of the Underwriter's Warrants have been registered in this Offering.
The Underwriting Warrants include demand and piggyback registration rights that
will require us to maintain the registration of the shares underlying the
Underwriter's Warrants beyond the termination of this offering, or to otherwise
register such shares at a future date. The obligation to maintain the current
registration statement or otherwise to register the shares underlying the
Underwriter's Warrants at a future date, could result in significant expenses to
the Company. Up to 80% of the Underwriter's Warrants may be called by the
Company and redeemed at any time following twelve months from the effective
date of the offering upon payment of $______. If called for redemption, the
Underwriter will then have thirty days in which to exercise the called
Underwriter's Warrants or they will be redeemed and cancelled.
The Underwriter has the right to terminate the Underwriting Agreement in certain
circumstances, including a change in market conditions which lead the
Underwriter to believe that no favorable market exists for our securities. If
the Underwriter terminates its agreement with the Company, we may seek other
persons to assist with the offering, or we may be forced to cancel the offering.
In any case, if the Underwriter terminates the offering prior to completion, we
will be faced with additional expenses and time should we choose to continue.
METHOD OF SUBSCRIPTION
Persons who wish to participate in the offering must deliver to the Impound
Agent a properly completed and executed Subscription Agreement, together with
payment of the aggregate subscription price for the shares of Common Stock
subscribed for in the offering. Payment must be by: check or money order
payable to Sterling Savings Bank as Impound Agent for Temporary Financial
Services, Inc. Wire transfer of funds directly to the Impound Agent is also
permitted.
The completed Subscription Agreement and payment should be delivered to:
Sterling Savings Bank
Spokane, Washington 99201
30
The instructions accompanying the Subscription Agreement should be read
carefully and followed in detail.
Subscriptions for our Common Stock that are received by the Company will be
forwarded to the Impound Agent.
We have the unconditional right to accept or reject any subscription. If we
reject a subscription, the purchase price will be returned promptly, without
interest.
IMPOUND AGREEMENT
All funds received from the sale of Shares will be held in impound with Sterling
Savings Bank, Spokane, Washington, until the minimum offering amount of
$1,000,000 has been deposited and collected. At that time, the impound agent
will distribute the funds to us. If less than $1,000,000 is received from the
sale of Shares by the close of business on December 31, 2001, the Offering will
be terminated and all proceeds will be promptly refunded to purchasers by the
impound agent with interest and without any discount for Offering expenses. In
this event, we will pay all costs associated with the Offering. The foregoing
impound agent is performing a limited function as depository of the funds raised
in this Offering, and such fact should not be construed to mean that such agent
has in any way passed upon the merits or qualifications of this Offering or has
given its approval of or to any person, security or transaction referred to
herein.
CLOSING
We expect to hold an initial closing of this Offering at any time after
subscriptions for the minimum amount have been accepted and funds have cleared.
The final closing is expected to occur on or before December 31, 2001. Interim
closings may occur between the initial closing and the final closing. We are
under no obligation to continue the Offering until the maximum Offering amount
is sold, and may, in our discretion, effect the final closing at any time if
and after the minimum Offering amount has been achieved, or terminate the
Offering prior to any closing.
TERMINATION
The Offering will continue until such time as one of the following occurs:
- December 31, 2001, if the minimum of $1,000,000 is not reached; or
- The maximum of $4,000,000 is raised; or
- We elect to terminate the Offering.
In the event that $1,000,000 has not been deposited into the Escrow Account by
the close of business December 31, 2001 the investors' funds will be returned in
full, with interest and without deduction for Offering expenses.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for any of our Shares
and there can be no assurance that a significant public market for any of our
Shares will be developed or sustained after this offering. Sales of substantial
amounts of our Common Stock in the public market after this Offering, or the
possibility of those sales occurring could adversely affect the prevailing
market price for our Shares and our ability to raise equity capital in the
future.
31
Upon completion of this Offering, there will be 1,150,000 Shares of our Common
Stock outstanding, assuming the maximum Offering is sold. The 800,000 Shares of
Common Stock being offered by this Prospectus will be freely tradable without
restriction under the Securities Act, unless purchased by an affiliate of ours,
as that term is defined under the rules and regulations of the Securities Act,
which will be subject to the resale limitations of Rule 144 under the Securities
Act.
The remaining 350,000 Shares are considered "restricted securities" as defined
in Rule 144. These Shares were issued in private transactions and have not been
registered under the Securities Act and, therefore, may not be sold unless
registered under the Securities Act or sold pursuant to an exemption from
registration, such as the exemption provided by Rule 144.
In general, under Rule 144, beginning 90 days after the completion of this
Offering, a person, or persons whose Shares are aggregated, who has beneficially
owned restricted Shares for at least one year, including the holding period of
any prior owner who is not an affiliate of ours, would be entitled to sell
within any three-month period, a number of Shares that does not exceed the
greater of:
- one percent, or approximately 11,500 Shares following this Offering, of
the number of Shares of our Common Stock then outstanding; or
- the average weekly trading volume of our Common Stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been an affiliate of ours
at any time during the 90 days preceding a sale, and who has beneficially owned
the Shares for at least two years, including the holding period of any prior
owner who is not an affiliate of ours, would be entitled to sell those Shares
under Rule 144(k) without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
STATEMENT AS TO INDEMNIFICATION
Our Articles of Incorporation and Bylaws authorize us to indemnify our Officers,
Directors and Agents for all costs and expenses incurred in defense of any suit
in which they may be named as defendants arising from any action on behalf of or
related to the company. We have also agreed to reciprocal indemnification
provisions with the Underwriter in accordance with the terms of the Underwriting
Agreement.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our Managers, the Underwriter, or persons controlling
us or the Underwriter pursuant to the foregoing provisions, we have been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
LEGAL MATTERS
Legal matters in connection with our Shares to be issued in connection with the
Offering will be passed upon by the law firm of Workland & Witherspoon PLLC,
Spokane, Washington, as our legal counsel.
32
We are not a party to any legal proceedings, nor have any judgments been taken,
nor have any actions or suits been filed or threatened against us or our
Executive Officers or Directors in their capacities as such, nor are the
Executive Officers or Directors aware of any such claims which could give rise
to such litigation.
EXPERTS
Our financial statements as of December 31, 2000 and for the period from
inception (October 4, 2000) through December 31, 2000 included in this
Prospectus have been so included in reliance on the report of LeMaster & Daniels
PLLC, Certified Public Accountants, given on the authority of such firm as
experts in auditing and accounting.
Our interim Financial Statements as of June 30, 2001 and for the periods from
January 1, 2001 through June 30, 2001, and from inception through June 30, 2001,
were prepared by management and have not been audited, reviewed or compiled by
LeMaster & Daniels. The interim financial statements are the representations of
management.
WHERE YOU CAN FIND ADDITIONAL INFORMATION ABOUT US
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to the Shares
offered by this Prospectus. This Prospectus, which forms a part of the
registration statement, does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. For further
information with respect to us and the Shares offered by this Prospectus,
reference is made to the registration statement and the exhibits and schedules
thereto. Statements contained in this Prospectus as to the contents of any
contract or other document filed as an exhibit to the registration statement are
not necessarily complete and are qualified in their entirety by reference to the
exhibits for a complete statement of their terms and conditions. The
registration statement, including all amendments, exhibits and schedules
thereto, may be inspected without charge at the offices of the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street NW, Washington, D.C.
20549. Copies of this material may be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street NW, Washington,
DC. 20549. The Securities and Exchange Commission also maintains a Web site
(http://www.sec.gov) through which the registration statement and other
information can be retrieved.
Upon effectiveness of the registration statement, we will be subject to the
reporting and other requirements of the Securities Exchange Act of 1934 and
intend to furnish our stockholders annual reports containing financial
statements audited by our independent accountants and to make available
quarterly reports containing unaudited financial statements for each of the
first three quarters of each fiscal year.
33
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000 (Audited) 35 through 43
June 30, 2001 (Management prepared, unaudited) 44 through 54
(This space left intentionally blank.)
34
TEMPORARY FINANCIAL SERVICES, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 2000
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 2
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated balance sheet 3
Consolidated statement of income 4
Consolidated statement of stockholders' equity 5
Consolidated statement of cash flows 6
Notes to consolidated financial statements 7-9
35
INDEPENDENT AUDITORS' REPORT
Board of Directors
Temporary Financial Services, Inc. and Subsidiary
Spokane, Washington
We have audited the accompanying consolidated balance sheet of Temporary
Financial Services, Inc. and Subsidiary (a development stage company) as of
December 31, 2000, and the related consolidated statements of income,
stockholders' equity, and cash flows for the period from October 4, 2000
(inception) through December 31, 2000. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Temporary Financial
Services, Inc. and Subsidiary as of December 31, 2000, and the results of their
operations and their cash flows for the period from October 4, 2000 (inception)
through December 31, 2000, in conformity with generally accepted accounting
principles.
/s/ LeMaster & Daniels, PLLC
LeMASTER & DANIELS PLLC
Certified Public Accountants
Spokane, Washington
February 15, 2001
36
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
2000
------------
ASSETS
CURRENT ASSETS:
Cash $ 546,334
Stock subscription and interest receivable 120,800
Prepaid expenses 8,943
------------
$ 676,077
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 100
Due to officer/stockholder 600
Income tax payable 100
------------
Total Current Liabilities 800
STOCKHOLDERS' EQUITY:
Common stock -- 100,000,000 shares,
$.001 par value, authorized;
310,000 shares issued and outstanding 310
Preferred stock -- 5,000,000 shares,
$.001 par value, authorized; none issued -
Additional paid-in capital 629,690
Common stock subscribed 120,000
Notes receivable for stock purchase (75,000)
Earnings accumulated in the development stage 277
------------
Total stockholders' equity 675,277
------------
$ 676,077
============
See accompanying notes to consolidated financial statements.
3
37
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF INCOME
PERIOD FROM
OCTOBER 4, 2000
(INCEPTION)
THROUGH
DECEMBER 31, 2000
-----------------
REVENUE:
Interest income $ 1,543
EXPENSES 1,166
-----------------
INCOME BEFORE INCOME TAX 377
Income tax provision 100
-----------------
NET INCOME $ 277
=================
BASIC EARNINGS PER SHARE $ -
=================
See accompanying notes to consolidated financial statements.
4
38
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM OCTOBER 4, 2000 (INCEPTION)
THROUGH DECEMBER 31, 2000
Notes Earnings
Receivable Accumulated
Common Additional Common for in the
Stock Paid-in Stock Stock Development
Issued Capital Subscribed Purchase Stage Total
--------- ---------- ---------- ---------- ----------- ---------
BALANCES,
OCTOBER 4, 2000
(INCEPTION) - $ - $ - $ - $ - $ -
ADD (DEDUCT):
100,000 common
shares issued
to officers and
consultant at
$1 per share for:
Cash 25 24,975 - - - 25,000
Notes receivable 75 74,925 - (75,000) - -
Common stock
issued for cash:
50,000 shares at
$1 per share 50 49,950 - - - 50,000
160,000 shares
at $3 per share 160 479,840 - - - 480,000
40,000 common
shares subscribed
at $3 per share - - 120,000 - - 120,000
Net income for
the period - - - - 277 277
--------- ---------- ---------- ---------- ----------- ---------
BALANCES,
DECEMBER 31, 2000 $ 310 $ 629,690 $ 120,000 $ (75,000) $ 277 $ 575,277
========= ========== ========== ========== =========== =========
See accompanying notes to consolidated financial statements.
5
39
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM
OCTOBER 4, 2000
(INCEPTION)
THROUGH
DECEMBER 31, 2000
-----------------
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 277
Adjustments to reconcile net income to net cash
used in operating activities:
Increase in interest receivable (800)
Increase in prepaid expenses (8,943)
Increase in accounts payable 700
Increase in income taxes payable 100
-----------------
Total adjustments (8,943)
-----------------
Net cash used in operating activities (8,666)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock for cash 555,000
-----------------
NET INCREASE IN CASH 546,334
CASH, BEGINNING OF PERIOD -
-----------------
CASH, END OF PERIOD $ 546,334
=================
NONCASH FINANCING ACTIVITIES:
The Company issued 75,000 common shares in exchange for notes receivable of
$75,000.
Common stock subscribed (40,000 shares) totalled $120,000 at December 31,
2000.
See accompanying notes to consolidated financial statements.
6
40
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization:
The accompanying financial statements are those of Temporary Financial Services,
Inc., incorporated in Washington State on October 4, 2000, and its wholly-owned
subsidiary, Temps Unlimited, Incorporated, which was incorporated in Washington
State on October 31, 2000 (collectively referred to herein as the Company).
Both companies have established their fiscal year end to be December 31.
The Company had no significant operations from inception to December 31, 2000.
Accordingly, it is considered to be a development stage company. To date the
Company's activities have primarily involved raising of private capital,
development of plans for the Company's operations, and preparation for a
proposed initial public stock offering. The Company expects to evolve from the
development stage to the operating stage in 2001. The Company's operations, once
commenced, are expected to be primarily in (but not limited to) two segments:
financing for the temporary employment services industry and minority or
majority ownership of temporary staffing businesses.
Summary of Significant Accounting Policies:
Principles of consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All material
intercompany accounts and transactions are eliminated in consolidation.
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Cash - Cash consists of demand deposits, including interest-bearing accounts,
held in two local banks. Uninsured deposits totaled approximately $416,000 at
December 31, 2000. At such date the Company had no cash equivalents.
Deferred stock offering costs - Legal fees incurred in connection with the
Company's proposed public stock offering have been deferred and are presented as
prepaid expenses. Such costs, together with any additional costs to be incurred
in connection with the offering, will be deducted from the offering proceeds and
will reduce additional paid-in capital. If the offering is unsuccessful,
offering costs will be charged to expense.
Stock subscriptions receivable - Such amounts are classified as current assets,
as full payment was received on January 2, 2001.
41
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (cont.)
Notes receivable for stock purchase - Notes receivable from officers/directors
and a consultant in connection with the sale and issuance of common stock are
reported as a reduction to stockholders' equity until payment is received. See
note 3.
Income tax - The Company expects to file a consolidated federal income tax
return with its subsidiary. Deferred taxes are provided, when material, on a
liability method whereby deferred tax assets are recognized for deductible
temporary differences and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. There were no
material temporary differences for the period presented, so deferred taxes have
not been recorded in the accompanying financial statements.
Earnings per share - Earnings per common share has been computed on the basis of
the weighted-average number of common shares outstanding during the period
presented.
NOTE 2 - RELATED-PARTY TRANSACTIONS:
An officer/stockholder provided office space and administrative support at no
cost to the Company through December 31, 2000.
Interest income of $800 relating to notes receivable from stock purchases by
officers/directors and a consultant was accrued through December 31, 2000.
NOTE 3 - CAPITAL STOCK:
Shares Issued to Officers/Directors and Consultant:
Upon incorporation, the Company entered into stock subscription agreements with
three officers/directors and a consultant for a total of 100,000 common shares.
Each of the four agreements provided for the sale and issuance of 25,000 shares
at $1 per share. The agreements call for initial payment of $6,250 in cash and
a $18,750 note receivable from each of the individuals. The notes receivable,
totaling $75,000 at December 31, 2000, are unsecured and bear interest at 6.3%.
They are due in equal annual principal payments plus interest over a three-year
period ending in October 2003. The notes receivable are reflected as a reduction
of stockholders' equity, in the accompanying financial statements until
collected.
Private Placements:
Through December 31, 2000, the Company completed two series of unregistered
private placements of common stock. A total of 250,000 shares were subscribed
and, for all but 40,000 shares, payment had been received in full by December
31, 2000. Subscriptions receivable for the remaining 40,000 shares ($120,000)
were collected on January 2, 2001. The gross proceeds, including the
subscriptions subsequently collected, for the two private placements totaled
$650,000.
42
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - CAPITAL STOCK: (cont.)
Preferred Stock:
Shares of the Company's authorized but unissued preferred stock, if issued, are
entitled preference over common shares in distribution of assets upon the
Company's liquidation or dissolution. Preferred shares have no stated dividend
rate.
In 2001 the Company intends to complete an initial public offering of 200,000 to
800,000 shares of its common stock and expects to file a registration statement
with the Securities and Exchange Commission in connection with the offering.
NOTE 4 - PROPOSED INITIAL PUBLIC OFFERING
In 2001 the Company intends to complete an initial public offering of 200,000 to
800,000 shares of its common stock and expects to file a registration statement
with the Securities Exchange Commission in connection with the offering.
(This space left intentionally blank.)
43
TEMPORARY FINANCIAL SERVICES, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2001
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
Page
MANAGEMENT STATEMENT 2
CONSOLIDATED FINANCIAL STATEMENTS (Unaudited):
Consolidated balance sheet 3
Consolidated statement of income 4
Consolidated statement of stockholders' equity 5
Consolidated statement of cash flows 6
Notes to consolidated financial statements 7-9
(This space left intentionally blank.)
44
MANAGEMENT STATEMENT
The accompanying (unaudited) consolidated balance sheet of Temporary Financial
Services, Inc. and Subsidiary (a development stage company) as of June 30, 2001,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the period from January 1, 2001 through December 31, 2001, and
the period from October 4, 2000 through June 30, 2001, were prepared by
Management of the Company.
In the opinion of Management of the Company, all adjustments necessary to a fair
statement of results for the interim periods presented have been made.
Management has elected to include Footnotes with these unaudited interim
financial statements. Audited financial statements as of December 31, 2000 and
for the periods then ended are included in the Prospectus and these interim
financial statements should be read in conjunction with a review of the audited
financial statements.
Management
Temporary Financial Services, Inc.
July 20, 2001
2
45
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET (UNAUDITED) JUNE 30, 2001
ASSETS
CURRENT ASSETS
Cash $ 452,699
Federal income taxes 297
Deferred offering costs 25,109
Loans receivable 228,067
Other current assets 4,776
------------
Total current assets 710,948
OTHER ASSETS
Office furniture net of accumulated depreciation 13,802
Investment in temporary labor offices 9,130
------------
Total other assets 22,932
------------
$ 733,880
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 6,869
Due to officer stockholder 600
------------
Total current liabilities 7,469
STOCKHOLDERS' EQUITY
Common Stock - 100,000,000 shares, $0.001 par
value, authorized 350,000 shares issued and
outstanding 350
Preferred stock - 5,000,000 shares, $0.001 par
value, authorized none issued -
Additional paid in capital 749,650
Earnings accumulated in the development stage (23,589)
------------
Total stockholders' equity 726,411
------------
$ 733,880
============
See accompanying notes to consolidated financial statements.
3
46
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INCEPTION
(OCTOBER 4, 2000)
SIX MONTHS ENDED THROUGH
CONSOLIDATED STATEMENT OF INCOME JUNE 30, 2001 JUNE 30, 2001
(UNAUDITED) ---------------- -----------------
REVENUE:
Loan fees $ 8,854 $ 8,854
Accounting fees 2,000 2,000
Rental Income 500 500
Interest and dividend income 10,825 12,368
---------------- -----------------
22,179 23,722
EXPENSES 32,025 33,191
---------------- -----------------
NET INCOME (LOSS) BEFORE EARNINGS
ON INVESTMENTS (9,846) (9,469)
INCOME (LOSS) ON INVESTMENTS (14,120) (14,120)
---------------- -----------------
INCOME (LOSS) BEFORE INCOME TAX (23,966) (23,589)
Income tax provision (refund) (100) (100)
---------------- -----------------
NET INCOME (LOSS) $ (23,866) $ (23,489)
================ =================
BASIC EARNINGS (LOSS) PER SHARE $ 0.07 $ 0.07
================ =================
See accompanying notes to consolidated financial statements.
4
47
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY INCEPTION (OCTOBER 4, 2000) THROUGH JUNE 30, 2001
(UNAUDITED)
Notes Earnings
Receivable Accumulated
Common Additional Common for in the
Stock Paid-in Stock Stock Development
Issued Capital Subscribed Purchase Stage Total
---------- ---------- ---------- ---------- ---------- ----------
BALANCES ON
OCTOBER 4, 2000
(INCEPTION) - $ - $ - $ - $ - $ -
ADD (DEDUCT):
100,000 common
shares issued
to officers and
consultant at
$1 per share for:
Cash 25 24,975 - - - 25,000
Notes receivable 75 74,925 - (75,000) - -
Common stock
issued for cash:
50,000 shares at
$1 per share 50 49,950 - - - 50,000
160,000 shares at
$3 per share 160 479,840 - - - 480,000
40,000 common
shares subscribed
at $3 per share - - 120,000 - - 120,000
Net income fo
r the period - - - - 277 277
---------- ---------- ---------- ---------- ---------- ----------
BALANCES,
DECEMBER 31, 2000 310 $ 629,690 $ 120,000 $ (75,000) $ 277 $ 675,277
Payment on notes
receivable for
stock purchase - - - 75,000 - 75,000
Payment received
for common
stock subscribed 40 119,960 (120,000) - - -
Net income (loss)
for the period - - - - (23,866) (23,866)
---------- ---------- ---------- ---------- ---------- ----------
BALANCES,
JUNE 30, 2001 350 $ 749,650 $ - $ - $(23,589) $ 726,411
========== ========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
5
48
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INCEPTION
(OCTOBER 4, 2000)
SIX MONTHS ENDED THROUGH
CONSOLIDATED STATEMENT OF CASH FLOWS JUNE 30, 2001 JUNE 30, 2001
(UNAUDITED) ---------------- -----------------
Increase (Decrease) in Cash
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ (23,866) $ (23,589)
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation 166 166
Loss on investments 14,120 14,120
Increase in deferred offering
costs (16,166) (25,109)
Increase in accounts payable 6,769 6,869
Increase in due to shareholder - 600
Decrease in income taxes payable (397) (297)
Increase in other assets (4,776) (4,776)
---------------- -----------------
Total Adjustments (284) (8,427)
---------------- -----------------
Net cash used in operating activities (24,150) (32,016)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans receivable (228,067) (228,067)
Investment in temporary labor offices (23,250) (23,250)
Purchase of office furniture (13,968) (13,968)
Collection of notes receivable 75,000 -
Collection of stock subscriptions 120,800 -
---------------- -----------------
Net cash used in investing activities (69,485) (265,285)
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of stock for cash - 750,000
---------------- -----------------
Net cash from financing activities - 750,000
---------------- -----------------
NET INCREASE (DECREASE) IN CASH (93,635) 452,699
CASH, BEGINNING OF PERIOD 546,334 -
---------------- -----------------
CASH, END OF PERIOD $ 452,699 $ 452,699
================ =================
See accompanying notes to consolidated financial statements.
6
49
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization:
The accompanying financial statements are those of Temporary Financial Services,
Inc., incorporated in Washington State on October 4, 2000, and its wholly-owned
subsidiary, Temps Unlimited, Incorporated, which was incorporated in Washington
State on October 31, 2000 (collectively referred to herein as the Company).
Both companies have established their fiscal year end to be December 31.
The Company had limited operations from inception to June 30, 2001.
Accordingly, it is considered to be a development stage company. To date the
Company's activities have primarily involved raising of private capital,
development of plans for the Company's operations, and preparation for a
proposed initial public stock offering. In the second quarter, 2001, the
Company obtained invested in two temporary labor dispatch businesses, and
commenced lending operations with three customers. The Company also provides
accounting services to two customers. The Company expects to continue its
evolution from the development stage to the operating stage in 2001. The
Company's operations, once commenced, are expected to be focus on primarily in
(but not limited to) two primary market segments: financing for the temporary
employment services industry and minority or majority ownership of temporary
staffing businesses.
Summary of Significant Accounting Policies:
Principles of consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All material
intercompany accounts and transactions are eliminated in consolidation.
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Cash - Cash consists of demand deposits, including interest-bearing accounts,
held in various local banks. Uninsured deposits totaled approximately $452,000
at June 30, 2001. At such date the Company had no cash equivalents.
Deferred stock offering costs - Legal and professional fees incurred in
connection with the Company's proposed public stock offering have been deferred
and are presented as prepaid expenses. Such costs, together with any additional
costs to be incurred in connection with the offering, will be deducted from the
offering proceeds and will reduce additional paid-in capital. If the offering
is unsuccessful, offering costs will be charged to expense.
7
50
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1-ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Summary of Significant Accounting Policies (continued):
Property and equipment - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the useful lives of
the respective assets. The useful lives of the assets range from five to seven
years.
Stock subscriptions receivable - Such amounts are classified as current assets,
as full payment was received on January 2, 2001.
Notes receivable for stock purchase - Notes receivable from officers/directors
and a consultant in connection with the sale and issuance of common stock are
reported as a reduction to stockholders' equity until payment is received. See
note 3.
Income tax - The Company expects to file a consolidated federal income tax
return with its subsidiary. Deferred taxes are provided, when material, on a
liability method whereby deferred tax assets are recognized for deductible
temporary differences and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. There were no
material temporary differences for the period presented, so deferred taxes have
not been recorded in the accompanying financial statements.
Revenue Recognition - The Company generates revenues from loan fees, loan
administration fees and fee based accounting services. The Company recognizes
loan fees at the time the loan amount is advanced to a customer. Loan
administration fees are set at a weekly fixed amount and are recognized as
earned at the end of the week to which the loan administration fee applies. Loan
advances are typically made on a weekly basis, and the amount of the advance is
netted against the applicable loan fees and loan administration fees. Fee based
accounting services are typically charged at a monthly fixed rate, and are
invoiced and recognized as income at the end of the month in which the services
are performed.
Allowance for bad debts - No allowance for bad debts has been established for
the notes receivable outstanding on June 30, 2001.
Earnings per share - Earnings per common share has been computed on the basis of
the weighted-average number of common shares outstanding during the period
presented.
Income recognition - Income is recognized when earned. The Company reports
investments in operating temporary labor businesses on the equity method and
gains and losses incurred by the operating temporary labor businesses will flow
through to the consolidated statement of income in the period in which the gains
and losses are incurred.
8
51
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - RELATED-PARTY TRANSACTIONS:
An officer/stockholder provided office space and administrative support through
an informal arrangement at $200 per month to the Company through May 31, 2001.
On June 1, 2001, the Company leased space in a professional office building at
200 North Mullan, Suite 213, Spokane, Washington. The Company now provides
office space and administrative support to an officer/stockholder and is
reimbursed by the officer/stockholder under an informal arrangement at the rate
of $500 per month.
At inception, three officer/directors and one officer of the Company purchased
100,000 shares of common stock from the Company at a price of $1 per share. The
purchase price was paid $25,000 in cash and $75,000 in promissory notes.
Interest income of $800 relating to notes receivable from stock purchases by
officers/directors and a consultant was accrued through December 31, 2000. The
outstanding balances of the notes and accrued interest were paid on June 26,
2001.
NOTE 3 - CAPITAL STOCK:
Shares Issued to Officers/Directors and Consultant:
Upon incorporation, the Company entered into stock subscription agreements with
three officers/directors and a consultant officer for a total of 100,000 common
shares. Each of the four agreements provided for the sale and issuance of
25,000 shares at $1 per share. The agreements call for initial payment of
$6,250 in cash and a $18,750 note receivable from each of the individuals. The
notes receivable, totaling $75,000 at December 31, 2000, are unsecured and bear
interest at 6.3%. They are due in equal annual principal payments plus interest
over a three-year period ending in October 2003. The notes receivable are
reflected as a reduction of stockholders' equity, in the accompanying financial
statements until collected. The notes and accrued interest were paid on June 26,
2001.
Private Placements:
Through December 31, 2000June 30, 2001, the Company completed two series of
unregistered private placements of common stock. A total of 250,000 shares were
subscribed and, for all but 40,000 shares, payment had been received in full for
the subscriptions were received by January 2, 2001. by December 31, 2000.
Subscriptions receivable for the remaining 40,000 shares ($120,000) were
collected on January 2, 2001. The gross proceeds, including the subscriptions
subsequently collected, for the two private placements totaled $650,000.
Preferred Stock:
Shares of the Company's authorized but unissued preferred stock, if issued, are
entitled preference over common shares in distribution of assets upon the
Company's liquidation or dissolution. Preferred shares have no stated dividend
rate.
9
52
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - PROPOSED INITIAL PUBLIC OFFERING:
In 2001 the Company intends to complete an initial public offering of 200,000 to
800,000 shares of its common stock. A registration Statement has been filed
with the and expects to file a registration statement with the Securities and
Exchange Commission in connection with the offering.
NOTE 5 - INVESTMENTS IN TEMPORARY LABOR OFFICES
In the second quarter of 2001, the Company invested in two start-up temporary
labor dispatch offices. These offices will provide unskilled and semi-skilled
temporary workers to customer businesses as requested. Temps Unlimited, Inc.,
the Company's wholly owned investment subsidiary owns an 18% stake in Temps
Unlimited of Minnesota, LLC, doing business as Staffing on Demand, and an 18%
stake in Temps Unlimited of Nebraska, LLC, doing business as ValuStaff.
Summaries of their operations from inception through June 30, 2001 are set forth
below:
Staffing on
Demand ValuStaff
------------- -----------
Original investment $ 12,000 $ 11,250
Inception date
Sales - inception through June 30, 2001 $ 6,251 $ 58,203
Expenses $ 40,945 $ 101,953
------------- -----------
Net loss $ 34,694 $ 43,750
============= ===========
Temps Unlimited Ownership 18% 18%
Temps Unlimited loss allocation $ 6,245 $ 7,875
Net carrying value of investment $ 5,755 $ 3,375
Total assets $ 42,903 $ 58,279
Total liabilities $ 10,933 $ 39,528
Total equity $ 31,970 $ 18,751
These investments are accounted for under the equity method of accounting. The
net carrying value of each investment is reported on the consolidated balance
sheet under the heading "Investment in temporary labor offices." Unrealized
gains and losses are recognized in the periods in which the underlying
investment asset incurs the gain or loss.
10
53
TEMPORARY FINANCIAL SERVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - FUTURE MINIMUM LEASE PAYMENTS
On June 1, 2001, the Company entered into a three year lease agreement for
office space. The monthly rental rate is $1,187.50 during the first year,
$1,217.19 during the second year, and $1,246.88 during the third year. The
Company is obligated under the lease to make minimum lease payments as follows:
2001 $ 8,312
2002 14,458
2003 14,814
2004 6,234
--------
Total $ 43,818
========
(This space left intentionally blank.)
10
54
REPRESENTATION OF COVER AND CONTENTS
No dealer, salesperson, or other person has been authorized to give any
information or to make any representations not contained in this Prospectus, and
if given or made, the information or representations may not be relied on. You
should rely only on the information contained in this Prospectus. The
information in this Prospectus may be accurate only as of the date of this
Prospectus, regardless of the time of delivery of this Prospectus or of the sale
of any of our Shares. This Prospectus does not constitute an offer to sell or
the solicitation of an offer to buy to any person in any jurisdiction in which
the offer or solicitation would be unlawful.
TABLE OF CONTENTS
Prospectus Summary 2
Risk Factors 5
Disclosure Regarding Forward Looking Statements 9
Business 10
Management's Discussion and Analysis or Plan of Operation 17
Use of Proceeds 19
Description of Securities 20
Dilution 21
Market Price of Common Equity 21
Management 22
Security Ownership of Certain Beneficial Owners and Management 26
Certain Transactions 27
Plan of Distribution 29
Shares Eligible for Future Sale 31
Statement as to Indemnification 32
Legal Matters 32
Experts 33
Where You Can Find Additional Information 33
Index to Consolidated Financial Statements F-0
800,000 SHARES
TEMPORARY FINANCIAL
SERVICES, INC.
COMMON STOCK
PROSPECTUS
PUBLIC SECURITIES, INC.
September ____, 2001
55
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors
We are authorized by our Articles of Incorporation and Bylaws by to
indemnify, agree to indemnify or obligate our company to advance or reimburse
expenses incurred by our Directors, Officers, employees or agents in any
Proceeding (as defined in the Washington Business Corporation Act) to the full
extent of the laws of the State of Washington as may now or hereafter exist.
Section 23B.08.510 of the Business Corporation Act sets out the
corporation's basic authority to indemnify. The section is structured to first
define generally what the corporation may indemnify and then specify exceptions
for which the corporation is not permitted to indemnify.
A corporation may indemnify an individual who has been made a party to
a proceeding because the individual is or was a director, against liability
incurred in the proceeding if:
(a) The individual acted in good faith; and
(b) The individual reasonably believed:
(i) In the case of conduct in the individual's official capacity with
with the corporation, that the individual's conduct was in its
best interests; and
(ii) In all other cases, that the individual's conduct was at least not
opposed to its best interests; and
(c) In the case of any criminal proceeding, the individual had no
reasonable cause to believe the individual's conduct was unlawful.
Section 23B.08.510 defines the "outer limits" for which
indemnification (other than as authorized by shareholder action) is permitted.
If a director's conduct falls outside these limits, the director, however, is
still potentially eligible for court-ordered indemnification under other
provisions. Conduct falling within these broad guidelines is permissive; it
does not entitle directors to indemnification. There is a much more limited
area of mandatory indemnification. We have, however, however, through bylaw
provisions, obligated themselves to indemnify directors to the maximum extent
permitted by law.
The general standards for indemnification are closely related to the
basic statutory provision defining the general standards of director conduct.
The indemnity standards, however, are lower. Section 23B.08.300 (general
standards of conduct) includes a requirement that directors exercise the "care
an ordinarily prudent person in a like position would exercise." This standard
is not contained in the standard for indemnification, which only requires that
directors act" in good faith" and that they "reasonably believe" that their
actions are either in the corporation's best interests or at least not opposed
to those best interests. It is possible that a director who falls below the
standard of conduct prescribed by the Business Corporation Act may meet the
standard for indemnification under Section 23B.08.510. Further, with respect to
the reverse, the courts have stated that it is clear that a director who has met
the standards of conduct would be eligible in virtually every case to be
indemnified under Section 23B.08.510.
56
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by any one of our directors, officers
or controlling persons in the successful defense of any action, suit or
proceeding) is asserted against us by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses payable in connection with the registration of
the Shares is as follows:
SEC Registration $ 1,000
Accounting Fees and Expenses 12,000
Transfer Agent Fees 3,500
Legal Fees and Expenses 25,000
Blue Sky Fees and Expenses 5,000
Misc. 2,500
---------
Total $ 49,000
Item 26. Recent Sales of Unregistered Securities
In October 2000, we offered and sold a total of 50,000 Shares at a of $1.00 per
Share to six individuals, four of whom were officers and directors and two of
whom were consultants. Each of these purchasers was an accredited investor. The
Shares were issued pursuant to a Section 4(2) exemption from registration under
the Act.
Between November 2000 and January 2001 we offered and sold 200,000 shares at a
price of $3.00 per Share to 14 purchasers. Four of the purchasers were Officers
or Directors (and their IRA accounts). Each purchaser was an accredited investor
and each investor was deemed to be sophisticated based on their prior investment
experience and their knowledge of the temporary labor industry. The Shares were
issued pursuant to a Section 4(2) exemption from registration under the Act and
to Rule 506 of Regulation D.
Each of the certificates issued in connection with the above offerings contained
restrictive language on its face and each certificate had a restrictive legend
in substantially the following form:
The Securities represented by this certificate have not been registered under
the Securities Act of 1933 (the "Act") and may not be offered for sale, sold or
otherwise transferred except pursuant to an effective registration statement
under the Act or pursuant to an exemption from registration under the Act, the
availability of which is to be established by opinion of counsel satisfactory to
the Company to the effect that in the opinion of such counsel such registration
in not required
None of the Shares were offered by means of advertising or general solicitation.
No commissions were paid directly or indirectly to any person in connection with
the offer or sale of any of the Shares.
57
Item 27. Exhibits*
(1) (i) Form of Underwriting Agreement **
(ii) Form of Underwriter's Common Stock Purchase Warrant **
(iii) Form of Selected Dealer Agreement **
(3) (i) Articles of Incorporation **
(ii) Bylaws **
(5) Opinion of Counsel **
(10) Fund Impound agreement **
(21) Subsidiaries of the registrant **
(23) (i) Consent of accountants See attached
(ii) Consent of counsel ***
* Omitted exhibits not applicable
** As previously filed
*** See Exhibit (5)
Item 28. Undertakings
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the provisions described above in Item 24, or otherwise, we
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by a director, officer or controlling person in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the Securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
We will provide to the Underwriter, at the closing specified in the Underwriting
Agreement, certificates in such denominations and registered in such names as
required by the Underwriter to permit prompt delivery to each purchaser.
58
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, as amended, we
have duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Spokane, State of
Washington, on the 2nd day of October, 2001.
TEMPORARY FINANCIAL SERVICES, INC.
By: /s/ JOHN COGHLAN
------------------------------------------
President, Chief Executive Officer and
Chief Financial Officer
We, the undersigned directors and officers of Temporary Financial Services,
Inc., do hereby constitute and appoint John Coghlan and Brad Herr, or either of
them , our true and lawful attorney-in-fact and agent, with full power to sign
for us or any of us in our names and in any and all capacities, any and all
amendments (including post-effective amendments) to this Registration Statement,
or any related registration statement that is to be effective upon filing
pursuant to Rule 462 (b) under the Securities Act of 1933, as amended, and to
file the same, with all exhibits thereto and other documents required in
connection therewith, and with full power to do any and all acts and things in
our names and in any and all capacities, which such attorney-in-fact and agent
may deem necessary or advisable to enable Temporary Financial Services, Inc. to
comply with the Securities Act of 1933, as amended, and any rules, regulations,
and requirements of the Securities and Exchange Commission, in connection with
this Registration Statement; and we hereby do ratify and confirm all that the
such attorney-in-fact and agent shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
DATE SIGNATURE CAPACITY
Oct. 2, 2001 /s/ JOHN COGHLAN President, Chief Executive Officer
------------------------ and Chief Financial Officer
Oct. 2, 2001 /s/ BRAD HERR Secretary
------------------------
Oct. 2, 2001 /s/ KRISTIE JESMORE Treasurer
------------------------
EX-23
3
tfsrevisedex-23.txt
TEMPORARY FINANCIAL SERVICES, INC. SB-2/A
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Temporary Financial Services, Inc. and Subsidiary
We hereby consent to the use in this Registration Statement on Form SB-2 of our
report, dated February 15, 2001, relating to the consolidated financial
statements of Temporary Financial Services, Inc. and Subsidiary. We also
consent to the reference to our Firm under the captions "Experts" in the
Prospectus.
/s/ LeMASTER & DANIELS PLLC
Certified Public Accountants
Spokane, Washington
September 26, 2001