SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 24, 2004
Commission File Number 1-05707
GENERAL EMPLOYMENT ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Illinois 36-6097429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Tower Lane, Suite 2100, Oakbrook Terrace, Illinois 60181
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (630) 954-0400
Item 2.01 Completion of Acquisition or Disposition of Assets.
On September 24, 2004, Triad Personnel Services, Inc., a wholly-
owned subsidiary of General Employment Enterprises, Inc. (the
"Company"), completed a transaction to sell the assets and
business operations of its Pittsburgh, Pennsylvania staffing
business ("GenTech") to Generation Technologies, L.P., a
Pennsylvania limited partnership (the "Buyer"). The assets sold
include GenTech's office furniture and equipment, and accounts
receivable.
Michael P. Verona is a principal of the Buyer. The Company
purchased GenTech in 2001 from a corporation owned by Mr. Verona,
and the Company employed Mr. Verona as the branch manager of
GenTech until September 2004. Prior to the completion of the
2004 transaction, certain disputes had arisen between the Company
and Mr. Verona in connection with his employment and non-
competition agreements.
The Company received a single cash payment of $715,000, subject
to minor post-closing adjustments, in consideration for the sale
of assets and settlement of the employment and non-competition
disputes. The amount of consideration was determined through
negotiations between the Buyer and the Company.
As a result of the transaction, the Company will add
approximately $715,000 to its cash balances, will write off
$1,088,000 of goodwill associated with GenTech, and expects to
record a pretax loss on the disposal of approximately $540,000.
The Company anticipates that the results of GenTech, including
the loss on disposal, will be reflected as discontinued
operations in the statement of consolidated operations to be
contained in its Form 10-KSB for the fiscal year ending September
30, 2004.
Item 9.01 Financial Statements and Exhibits.
Pro forma financial information
On September 24, 2004, the Company completed a transaction to
sell the assets and business operations of its Pittsburgh,
Pennsylvania staffing business, GenTech. The assets sold include
GenTech's office furniture and equipment, and accounts
receivable. The Company received a single cash payment of
$715,000, subject to minor post-closing adjustments, in
consideration for the sale of assets. The following unaudited
pro forma financial statements give effect to the disposal.
The historical information was derived from the Company's
unaudited balance sheet as of June 30, 2004, the Company's
unaudited statement of operations for the nine months ended June
30, 2004, and the Company's audited statement of operations for
the year ended September 30, 2003. The unaudited pro forma
financial information should be read in connection with the
historical financial statements and related notes contained in
the Company's Form 10-QSB quarterly report for the period ended
June 30, 2004 and Form 10-K annual report for the year ended
September 30, 2003.
The unaudited pro forma balance sheet as of June 30, 2004 gives
effect to the disposal as if had occurred on that date. The
unaudited pro forma statements of operations for the nine months
ended June 30, 2004 and for the year ended September 30, 2003
assume that that disposal had occurred on October 1, 2002. The
unaudited pro forma adjustments reflect the receipt of cash
proceeds by the Company and the disposal of GenTech.
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The unaudited pro forma financial information is being provided
for informational purposes only. It is not necessarily
indicative of the results that might have been achieved had the
disposal actually taken place on the assumed earlier dates.
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GENERAL EMPLOYMENT ENTERPRISES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 2004
Less Adjust- Pro
(In Thousands) Historical GenTech ments Forma
ASSETS
Current assets:
Cash and cash equivalents $3,447 $ -- $715 $4,162
Accounts receivable,
less allowances ($302) 1,914 159 -- 1,755
Other current assets 512 3 -- 509
Total current assets 5,873 162 715 6,426
Property and equipment:
Furniture, fixtures and equipment 4,943 77 -- 4,866
Accumulated depreciation and amortization (4,262) (55) -- (4,207)
Net property and equipment 681 22 -- 659
Goodwill 1,088 1,088 -- --
Total assets $7,642 $1,272 $715 $7,085
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued compensation and payroll taxes $1,222 $ -- $ -- $1,222
Other current liabilities 777 -- 25 802
Total current liabilities 1,999 -- 25 2,024
Shareholders' equity:
Preferred stock, authorized -- 100 shares;
issued and outstanding -- none -- -- -- --
Common stock, no-par value; authorized --
20,000 shares; issued and outstanding --
5,136 shares 51 -- -- 51
Capital in excess of stated value of shares 4,774 -- -- 4,774
Retained earnings 818 1,272 690 236
Total shareholders' equity 5,643 1,272 690 5,061
Total liabilities and shareholders' equity $7,642 $1,272 $715 $7,085
See notes to unaudited pro forma consolidated financial statements.
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GENERAL EMPLOYMENT ENTERPRISES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended June 30, 2004
Less Pro
(In Thousands, Except Per Share) Historical GenTech Forma
Net revenues:
Contract services $ 9,854 $ 984 $ 8,870
Placement services 4,346 -- 4,346
Net revenues 14,200 984 13,216
Operating expenses:
Cost of contract services 7,150 710 6,440
Selling 2,718 37 2,681
General and administrative 5,282 329 4,953
Total operating expenses 15,150 1,076 14,074
Loss from operations (950) (92) (858)
Investment income 31 -- 31
Net loss $ (919) $ (92) $ (827)
Average number of shares -
basic and diluted 5,130 5,130
Net loss per share -
basic and diluted $ (.18) $ (.16)
See notes to unaudited pro forma consolidated financial statements.
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GENERAL EMPLOYMENT ENTERPRISES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended September 30, 2003
Less Pro
(In Thousands, Except Per Share) Historical GenTech Forma
Net revenues:
Contract services $13,121 $ 1,644 $11,477
Placement services 5,488 -- 5,488
Net revenues 18,609 1,644 16,965
Operating expenses:
Cost of contract services 9,068 1,193 7,875
Selling 3,710 68 3,642
General and administrative 9,395 479 8,916
Total operating expenses 22,173 1,740 20,433
Loss from operations (3,564) (96) (3,468)
Investment income 58 -- 58
Net loss $(3,506) $ (96) $(3,410)
Average number of shares -
basic and diluted 5,121 5,121
Net loss per share -
basic and diluted $ (.68) $ (.67)
See notes to unaudited pro forma consolidated financial statements.
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Basis of presentation
On September 24, 2004, the Company completed a transaction to
sell the assets and business operations of GenTech. The assets
sold include GenTech's office furniture and equipment, and
accounts receivable. The Company received a single cash payment
of $715,000, subject to minor post-closing adjustments, in
consideration for the sale of assets. The unaudited pro forma
financial statements give effect to the disposal.
The historical information was derived from the Company's
unaudited balance sheet as of June 30, 2004, the Company's
unaudited statement of operations for the nine months ended June
30, 2004, and the Company's audited statement of operations for
the year ended September 30, 2003. The unaudited pro forma
financial information should be read in connection with the
historical financial statements and related notes contained in
the Company's Form 10-QSB quarterly report for the period ended
June 30, 2004 and Form 10-K annual report for the year ended
September 30, 2003.
The unaudited pro forma balance sheet as of June 30, 2004 gives
effect to the disposal as if had occurred on that date. The
unaudited pro forma statements of operations for the nine months
ended June 30, 2004 and for the year ended September 30, 2003
assume that the disposal had occurred on October 1, 2002. The
unaudited pro forma adjustments reflect the receipt of cash
proceeds by the Company and the disposal of GenTech.
The unaudited pro forma financial information is being provided
for informational purposes only. It is not necessarily
indicative of the results that might have been achieved had the
disposal actually taken place on the assumed earlier dates.
Pro forma adjustments
The unaudited pro forma financial statements reflect the
exclusion of the assets, liabilities and results of operations of
GenTech for the periods indicated. The unaudited pro forma
adjustments reflect the $715,000 cash payment received in the
transaction, and estimated expenses of $25,000.
The unaudited pro forma consolidated statements of operations
present the income or loss from continuing operations, and the
loss on disposal has not been reflected in them. The Company
expects to reflect a pretax loss on the disposal of approximately
$540,000 in the statement of consolidated operations to be
contained in its Form 10-KSB for the fiscal year ending September
30, 2004.
No additional adjustments were reflected in the unaudited pro
forma financial statements, such as to reflect investment income
on the proceeds or to reverse previously recorded goodwill
amortization, because the effects would be insignificant.
There were no credits for income taxes as a result of the pretax
loses because the losses must be carried forward for income tax
purposes, and there was not sufficient assurance that future tax
benefits would be realized.
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Exhibits
The following exhibit is filed as a part of this report:
No. Description of Exhibit
2.01 Asset Purchase Agreement among Triad Personnel Services, Inc.,
Michael P. Verona and Generation Technologies, L.P. dated
September 24, 2004.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GENERAL EMPLOYMENT ENTERPRISES, INC.
(Registrant)
Date: September 29, 2004 By: /s/ Kent M. Yauch
Kent M. Yauch
Vice President, Chief Financial
Officer and Treasurer
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