ý
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Delaware
|
80-0551965
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
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Large
accelerated Filer o
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Accelerated
filer o
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Non
- accelerated filer o
|
Smaller
reporting company x
|
Item
1. Financial Statements (Unaudited)
|
||
Condensed
Consolidated Balance Sheets as of March 31, 2010 (unaudited) and September
30, 2009
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2
|
|
Condensed
Consolidated Statements of Operations for the Three and Six Months Ended
March 31, 2010 and
2009 (unaudited)
|
3
|
|
Condensed
Consolidated Statement of Stockholders’ Equity for the Six Months Ended
March 31, 2010 (unaudited)
|
4
|
|
Condensed
Consolidated Statements of Cash Flows for the Six Months Ended March 31,
2010 and 2009 (unaudited)
|
5
|
|
Notes
to Condensed Consolidated Financial Statements
|
6
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
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13
|
|
Item
3. Quantitative and Qualitative Disclosures about Market
Risks
|
20
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|
Item
4. Controls and Procedures
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21
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|
PART
II – OTHER INFORMATION
|
||
Item
1. Legal Proceedings
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21
|
|
Item
1A. Risk Factors
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21
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
21
|
|
Item
3. Defaults Upon Senior Securities
|
21
|
|
Item
4. (Removed and Reserved)
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21
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|
Item
5. Other Information
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21
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|
Item
6. Exhibits
|
22
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|
Signatures
|
23
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March
31,
|
September
30,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
|
$
|
81,000
|
$
|
63,000
|
||||
Accounts
receivable – less allowance for doubtful accounts of $323,000
and $188,000, respectively
|
1,017,000
|
996,000
|
||||||
Due
from financial institution
|
468,000
|
130,000
|
||||||
Unbilled
receivables
|
687,000
|
783,000
|
||||||
Prepaid
expenses
|
112,000
|
299,000
|
||||||
Due
from related party
|
21,000
|
21,000
|
||||||
Total
current assets
|
2,386,000
|
2,292,000
|
||||||
Property
and equipment, net
|
115,000
|
141,000
|
||||||
Other
assets
|
21,000
|
21,000
|
||||||
Intangible
assets, net
|
820,000
|
944,000
|
||||||
Goodwill
|
2,327,000
|
2,947,000
|
||||||
Total
assets
|
$
|
5,669,000
|
$
|
6,345,000
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued liabilities
|
$
|
2,151,000
|
$
|
1,579,000
|
||||
Accrued
wages and related obligations-due to related party
|
1,726,000
|
1,801,000
|
||||||
Accrued
wages and related obligations
|
29,000
|
35,000
|
||||||
Current
portion of long-term debt
|
50,000
|
454,000
|
||||||
Current
portion of related party long-term debt
|
259,000
|
811,000
|
||||||
Due
to related party
|
808,000
|
344,000
|
||||||
Total
current liabilities
|
5,023,000
|
5,024,000
|
||||||
Long
term debt, net of current portion
|
-
|
190,000
|
||||||
Related
party long-term debt, net of current portion
|
-
|
580,000
|
||||||
Total
liabilities
|
5,023,000
|
5,794,000
|
||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity:
|
||||||||
Preferred
stock, $0.0001 par value, 5,000,000 shares authorized; zero shares issued
and outstanding
|
-
|
-
|
||||||
Common
stock, $0.0001 par value, 95,000,000 shares authorized; 29,339,000 and
23,689,000 shares issued and outstanding as of March 31, 2010 and
September 30, 2009, respectively
|
3,000
|
2,000
|
||||||
Additional
paid-in capital
|
6,081,000
|
3,397,000
|
||||||
Accumulated
deficit
|
(5,438,000
|
)
|
(2,848,000
|
)
|
||||
Total
stockholders’ equity
|
646,000
|
551,000
|
||||||
Total
liabilities and stockholders’ equity
|
$
|
5,669,000
|
$
|
6,345,000
|
||||
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
|
Ended
|
|||||||||||||||
March
31,
2010
|
March
31,
2009
|
March
31,
2010
|
March
31,
2009
|
|||||||||||||
Revenue
|
$ | 13,522,000 | $ | 12,935,000 | $ | 27,636,000 | $ | 29,590,000 | ||||||||
Direct
cost of producing revenues-purchased from related party
|
12,226,000 | 11,232,000 | 24,913,000 | 25,664,000 | ||||||||||||
Gross
profit
|
1,296,000 | 1,703,000 | 2,723,000 | 3,926,000 | ||||||||||||
Selling,
general and administrative expenses *
|
1,701,000 | 1,818,000 | 3,562,000 | 3,583,000 | ||||||||||||
Depreciation
and amortization
|
82,000 | 103,000 | 166,000 | 215,000 | ||||||||||||
(Loss)
income from continuing operations
|
(487,000 | ) | (218,000 | ) | (1,005,000 | ) | 128,000 | |||||||||
Interest
expense
|
66,000 | 107,000 | 162,000 | 250,000 | ||||||||||||
Loss
on debt extinguishments
|
922,000 | - | 1,423,000 | - | ||||||||||||
Net
loss from continuing operations
|
(1,475,000 | ) | (325,000 | ) | (2,590,000 | ) | (122,000 | ) | ||||||||
Income
(loss) from discontinued operations
|
- | (186,000 | ) | - | (371,000 | ) | ||||||||||
Net
loss
|
$ | (1,475,000 | ) | $ | (511,000 | ) | $ | (2,590,000 | ) | $ | (493,000 | ) | ||||
Net
loss per share from continuing operations:
|
||||||||||||||||
Basic
|
$ | (0.06 | ) | $ | (0.01 | ) | $ | (0.10 | ) | $ | (0.01 | ) | ||||
Diluted
|
$ | (0.06 | ) | $ | (0.01 | ) | $ | (0.10 | ) | $ | (0.01 | ) | ||||
Net
income (loss) per share from discontinued operations:
|
||||||||||||||||
Basic
|
$ | 0.00 | $ | (0.01 | ) | $ | 0.00 | $ | (0.02 | ) | ||||||
Diluted
|
$ | 0.00 | $ | (0.01 | ) | $ | 0.00 | $ | (0.02 | ) | ||||||
Total
net loss per share:
|
||||||||||||||||
Basic
|
$ | (0.06 | ) | $ | (0.02 | ) | $ | (0.10 | ) | $ | (0.02 | ) | ||||
Diluted
|
$ | (0.06 | ) | $ | (0.02 | ) | $ | (0.10 | ) | $ | (0.02 | ) | ||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
26,725,000 | 22,445,000 | 24,746,000 | 22,297,000 | ||||||||||||
Diluted
|
26,725,000 | 22,445,000 | 24,746,000 | 22,297,000 |
*
|
Includes
$35,000 and $75,000 for the three and six months ended March 31, 2010,
respectively and $41,000 and $82,000 for the three and six months ended
March 31, 2009, respectively, in non-cash charges for stock based
compensation.
|
Six
Months Ended
|
||||
March
31, 2010
|
||||
Common
stock – shares:
|
||||
Balance
at beginning of period
|
23,689,000
|
|||
Forfeitures
of restricted stock grants
|
(350,000)
|
|||
Debt
conversions to unregistered common stock
|
6,000,000
|
|||
Balance
at end of period
|
29,339,000
|
|||
Common
stock – par value:
|
||||
Balance
at beginning of period
|
$
|
2,000
|
||
Debt
conversions to unregistered common stock
|
1,000
|
|||
Balance
at end of period
|
$
|
3,000
|
||
Additional
paid-in capital:
|
||||
Balance
at beginning of period
|
$
|
3,397,000
|
||
Debt
conversions to unregistered common stock
|
2,609,000
|
|||
Stock-based
compensation relating to unregistered common stock
|
75,000
|
|||
Balance
at end of period
|
$
|
6,081,000
|
||
Accumulated
deficit:
|
||||
Balance
at beginning of period
|
$
|
(2,848,000
|
)
|
|
Net
loss
|
(2,590,000
|
)
|
||
Balance
at end of period
|
$
|
(5,438,000
|
)
|
|
Total
stockholders’ equity
|
$
|
646,000
|
Six
Months Ended
|
||||||||
March
31, 2010 |
March
31, 2009 |
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (2,590,000 | ) | $ | (493,000 | ) | ||
Less:
net income (loss) from discontinued operations
|
- | (371,000 | ) | |||||
Net
loss from continuing operations
|
$ | (2,590,000 | ) | $ | (122,000 | ) | ||
Adjustments
to reconcile net loss to cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
166,000 | 215,000 | ||||||
Stock-based
compensation
|
75,000 | 82,000 | ||||||
Bad
debt expense
|
135,000 | 76,000 | ||||||
Loss
on debt extinguishments
|
1,423,000 | - | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Trade
accounts receivable including unbilled receivables
|
(103,000 | ) | 623,000 | |||||
Due
from financial institution
|
(338,000 | ) | (75,000 | ) | ||||
Prepaid
expenses
|
187,000 | 83,000 | ||||||
Due
to (from) related party
|
464,000 | 193,000 | ||||||
Other
assets
|
- | 1,000 | ||||||
Accounts
payable and accrued liabilities-due to related parties
|
(75,000 | ) | (606,000 | ) | ||||
Accounts
payable and accrued liabilities-due to unrelated parties
|
711,000 | 172,000 | ||||||
Net
cash provided by operating activities – continuing
operations
|
55,000 | 642,000 | ||||||
Net
cash used in operating activities – discontinued
operations
|
(17,000 | ) | (399,000 | ) | ||||
Net
cash provided by operating activities
|
38,000 | 243,000 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchase
of property and equipment
|
(16,000 | ) | (8,000 | ) | ||||
Net
cash used in investing activities – continuing operations
|
(16,000 | ) | (8,000 | ) | ||||
Net
cash used in investing activities – discontinued
operations
|
- | - | ||||||
Net
cash used in investing activities
|
(16,000 | ) | (8,000 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Principal
payments on long-term debt
|
(4,000 | ) | (66,000 | ) | ||||
Principal
payments on long-term debt – related parties
|
- | (207,000 | ) | |||||
Net
cash used in financing activities – continuing operations
|
(4,000 | ) | (273,000 | ) | ||||
Net
cash used in financing activities – discontinued
operations
|
- | - | ||||||
Net
cash used in financing activities
|
(4,000 | ) | (273,000 | ) | ||||
Change
in cash
|
18,000 | (38,000 | ) | |||||
Cash
at beginning of period
|
63,000 | 69,000 | ||||||
Cash
at end of period
|
$ | 81,000 | $ | 31,000 | ||||
As
of March 31, 2010
|
As
of September 30, 2009
|
|||||||||||||||||||||||
Accumulated
|
Accumulated
|
|||||||||||||||||||||||
Gross
|
Amortization
|
Net
|
Gross
|
Amortization
|
Net
|
|||||||||||||||||||
Customer
lists and relationships
(7
years)
|
$
|
1,821,000
|
$
|
(1,001,000
|
)
|
$
|
820,000
|
$
|
1,821,000
|
$
|
(888,000
|
)
|
$
|
933,000
|
||||||||||
Non-competition
agreements
(3
years)
|
111,000
|
(111,000
|
)
|
-
|
111,000
|
(100,000
|
)
|
11,000
|
||||||||||||||||
Total
|
$
|
1,932,000
|
$
|
(1,112,000
|
)
|
$
|
820,000
|
$
|
1,932,000
|
$
|
(988,000
|
)
|
$
|
944,000
|
||||||||||
Goodwill
(indefinite life)
|
$
|
2,327,000
|
$
|
2,327,000
|
$
|
2,947,000
|
$
|
2,947,000
|
Goodwill
as of September 30, 2009
|
$ | 2,947,000 | ||
ReStaff
purchase price adjustment
|
(620,000 | ) | ||
Goodwill
as of March 31, 2010
|
$ | 2,327,000 |
March
31,
|
September
30,
|
|||||||
2010
|
2009
|
|||||||
Long-term
debt
|
||||||||
16.25%
subordinated note (i)
|
- | $ | 102,000 | |||||
3%
convertible subordinated note (ii)
|
- | 408,000 | ||||||
18%
unsecured note (iii)
|
- | 80,000 | ||||||
Long
term capitalized lease obligation (viii)
|
- | 4,000 | ||||||
Other
debt
|
$ | 50,000 | 50,000 | |||||
Total
|
50,000 | 644,000 | ||||||
Less
current maturities
|
50,000 | 454,000 | ||||||
Non-current
portion
|
- | 190,000 | ||||||
Related
party long-term debt
|
||||||||
13%
unsecured demand note (iv)
|
104,000 | 104,000 | ||||||
18%
unsecured convertible note (v)
|
100,000 | 100,000 | ||||||
Demand
loans (vi)
|
55,000 | 131,000 | ||||||
6%
unsecured note (vii)
|
- | 1,056,000 | ||||||
Total
|
259,000 | 1,391,000 | ||||||
Less
current maturities
|
259,000 | 811,000 | ||||||
Non-current
portion
|
- | 580,000 | ||||||
Total
long-term debt
|
309,000 | 2,035,000 | ||||||
Less
current maturities
|
309,000 | 1,265,000 | ||||||
Total
non-current portion
|
$ | - | $ | 770,000 |
(i)
|
A
$175,000 subordinated note was issued March 31, 2006, originally due
January 30, 2007 and originally having an annual interest rate of 8% with
principal and interest payable in equal monthly installments of
$18,150. The note was secured by office equipment and other
fixed assets. Due to the failure to make timely payments under
the terms of the note, the holder declared the note in technical default,
began assessing interest at a higher rate, imposed late charges and has
since entered into forbearance agreements under which defaults have been
waived and forbearance terms extended. On December 29, 2009,
the obligations under this note were transferred by the holder to TSE and
then settled in full in exchange for shares of the Company’s common stock,
as further described below.
|
(ii)
|
A
$675,000 convertible subordinated note was issued March 31, 2006, bearing
interest at an annual rate of 3% and originally due on March 31,
2012. The note was secured by office equipment and other fixed
assets. On December 29, 2009, the obligations under this note
were transferred by the holder to TSE and then settled in full in exchange
for shares of the Company’s common stock, as further described
below.
|
(iii)
|
An
$80,000 unsecured non-interest bearing note was issued March 31, 2006, and
originally due June 29, 2006. Due to the failure to make timely
payments under the terms of the note, on April 1, 2007, the holder elected
the option of declaring the note in technical default and began charging
interest at a rate of 18% per annum. Since then, the Company
entered into forbearance agreements under which the holder has waived
defaults and effectively extended forbearance terms. On
December 29, 2009, the obligations under this note were transferred by the
holder to TSE and then settled in full in exchange for shares of the
Company’s common stock, as further described
below.
|
|
Concurrent
with the acquisition of the debt described in (i), (ii) and (iii) above,
TSE entered into an exchange agreement with the Company whereby all
obligations associated with the debt, including the outstanding principal
and accrued interest at that date, were satisfied through the issuance of
2,333,333 shares of the Company’s common stock. On the date of
the exchange, there was $590,000 in principal and accrued interest of
$52,000 outstanding on the notes. The Company recorded a loss
of $501,000 on the extinguishment of the debt representing the difference
between the fair value of the shares issued on the date of the exchange
and the remaining principal and accrued interest payable on the
notes. The fair value of the shares issued in the exchange was
determined by reference to the per share closing price of the Company’s
common stock on the date of the exchange, which was $0.49. A
special committee of independent directors of the Company approved
entering into this exchange
agreement.
|
(iv)
|
An
unsecured demand note was issued March 31, 2006 having an original
principal of $150,000 and bearing an annual interest rate of
8%. The Company has entered into various forbearance agreements
under which the holder agreed to waive defaults, refrain from exercising
its rights and remedies against the Company, and effectively extend the
terms of the forbearance until October 31, 2008, in exchange for an
increase in the interest rate to 13% per annum. On October 31,
2008, the Company entered into another forbearance agreement with the
holder of the note effectively extending the terms of the original
forbearance agreement until October 31, 2009. As of the date of
this Form 10-Q, no demand for payment has been received by the Company and
the Company and the holder are currently discussing extending the terms
and conditions for payment on the
note.
|
(v)
|
A
$100,000 unsecured convertible note and 600,000 shares of common stock
were issued on January 31, 2008 to a shareholder and director of the
Company in exchange for another note that had an outstanding principal
balance of $200,000. This $100,000 unsecured convertible note
was originally due October 31, 2008 and bore interest at an annual rate of
12%. It is convertible at any time at the option of the holder
at a specified price of $0.40 per share. Due to the failure to pay the
note at maturity, the interest rate on the note has increased to 18% per
annum.
|
(vi)
|
Demand
loans consist of amounts due to two separate shareholders of the
Company. The amounts are not subject to interest, are
classified as short-term loans and are due and payable upon demand by the
shareholders.
|
(vii)
|
On
February 5, 2010, the Company entered into a Settlement and Release
Agreement with the former owner of ReStaff, whereby all obligations owed
by the Company to ReStaff were released in exchange for a series of
payments totaling $545,000. These obligations included the
remaining principal of $1,056,000 outstanding on this note, $75,000
previously included in demand loans and $34,000 in accrued interest
payable. This debt restructuring was accounted for as a
reduction in the purchase price of ReStaff, with a corresponding
adjustment to goodwill.
|
|
On
February 22, 2010, TSE agreed to assume the obligation to make the series
of payments totaling $545,000 to the former owner of Restaff from the
Company. In exchange for the assumption of this payment
obligation and taking TSE’s lead in negotiating the disputed amount, the
Company agreed to issue 3,666,667 shares of its common
stock. The Company recorded a loss of $922,000 on the
extinguishment of debt, representing the difference between the fair value
of the shares issued on the date of the exchange and
$545,000. The fair value of the shares issued on the date of
the exchange was determined by reference to the per share closing price of
the Company’s common stock on the date of the exchange, which was
$0.40.
|
(viii)
|
In
November 2007, the Company entered into a capital lease agreement to
purchase computer equipment. The original principal of $33,000
was payable over a lease term of 24 months in equal monthly installments
of $1,843.
|
Number
of
Non-Vested
Award
Shares
|
Weighted-Average
Grant-Date Fair Value
|
|||||||
Nonvested
at October 1, 2009
|
974,000 | $ | 0.31 | |||||
Forfeitures
|
(350,000 | ) | $ | 0.30 | ||||
Vested
|
(326,000 | ) | $ | 0.32 | ||||
Nonvested
at March 31, 2010
|
298,000 | $ | 0.33 |
Six
Months Ended
|
Six
Months Ended
|
|||||||
March
31,
|
March
31,
|
|||||||
2010
|
2009
|
|||||||
Cash
paid for interest
|
$
|
123,000
|
$
|
229,000
|
||||
Non-cash
investing and financing activities:
|
||||||||
Stock
based compensation
|
75,000
|
82,000
|
||||||
ReStaff
Acquisition purchase price adjustment and debt reduction
|
620,000
|
|||||||
Debt
converted to restricted common stock at fair value
|
2,610,000
|
-
|
Item 2.
|
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|
|
·
|
We
have financed our growth largely through the issuance of
debt. As of March 31, 2010, we had negative working capital of
($2,637,000). In order to service our debt, maintain our
current level of operations and fund our growth initiatives, we must be
able to generate sufficient amounts of cash flow from our
operations. Our management is engaged in several activities, as
explained further in the “Working Capital” section below, to effectively
accomplish these objectives; however, continued or increased volatility
and disruption in the global capital and credit markets could negatively
impact our business operations and therefore our liquidity and ability to
meet working capital needs.
|
|
·
|
Any
further economic downturn could result in less demand from customers and
lower revenues. Because demand for staffing services is
sensitive to changes in the level of economic activity, our business
suffers during economic downturns. As economic activity slows,
companies tend to reduce their use of temporary employees and recruitment
services before undertaking layoffs of their regular employees, resulting
in decreased demand for our personnel. Conversely, if the
economy improves, demand for temporary staffing and recruitment services
may increase as employers seek to fill open positions using temporary
staffing until permanent employees are hired, resulting in increased
demand for our personnel.
|
|
·
|
A
significant component of our growth to date has come through
acquisitions. Our management continues to invest resources in
activities to seek, complete and integrate acquisitions that grow or
enhance our current service offerings. Additionally, management
seeks acquisitions in desired geographical markets and that have minimal
costs and risks associated with integration. Our management
believes that effectively acquiring businesses with these attributes will
be critical to carrying out our
strategy.
|
|
·
|
As
a result of the current economic situation, our competitors have decreased
their pricing in order to capture market share. This has
resulted in increased competitive pressure in our market, as well as
downward pressure on our gross
margins.
|
|
a)
|
On
December 29, 2009, we entered into an exchange agreement with TSE, whereby
all amounts due to TSE under the terms of notes acquired by TSE from a
third party were settled in full, in exchange for the issuance of shares
of our common stock. On the date of the exchange, there was
$590,000 in principal and accrued interest of $52,000 outstanding on the
notes for which we issued 2,333,333 shares of our common
stock.
|
|
b)
|
In
the first quarter of fiscal 2010, we discontinued the operations
associated with the direct provision of accounting and finance services in
order to focus management’s efforts, as well as our capital, more directly
on our light industrial, and clerical and administrative service
offerings. This discontinued segment of our operations
generated income (losses) from its operations of $1,000 and ($311,000) for
the six months ended March 31, 2010 and 2009,
respectively. This segment has been reported as discontinued
operations in the accompanying financial
statements.
|
|
c)
|
On
February 5, 2010, we entered into a settlement and release agreement with
the former owner of Restaff Services, Inc. or ReStaff, whereby all
obligations we owed to ReStaff were released in exchange for a series of
payments totaling $545,000. These obligations included the
remaining principal of $1,056,000 outstanding on a note, $75,000
previously included in demand loans and $34,000 in accrued interest
payable.
|
|
d)
|
On
February 22, 2010, TSE agreed to assume our obligation to make the
$545,000 series of payments to the former owner of ReStaff under our
February 5, 2010 settlement and release agreement. In exchange
for the assumption of this payment obligation and TSE’s lead in
negotiating the disputed amount, we agreed to issue 3,666,667 shares of
our common stock to TSE. We recorded a loss of $922,000 on the
extinguishment of debt, representing the difference between the fair value
of the shares issued on the date of the exchange and
$545,000. The fair value of the shares issued on the date of
the exchange was determined by reference to the per share closing price of
our common stock on the date of the exchange, which was
$0.40.
|
|
e)
|
On
March 24, 2010, CRD entered into a foreclosure and asset purchase
agreement, or the GT Acquisition Agreement to acquire a portion of the
assets of GT Systems, Inc., a staffing company, and certain of its
affiliates, collectively referred to as the GT Entities, through a private
sale by Rosenthal & Rosenthal, Inc., or Rosenthal. The
transaction closed on April 5, 2010. Pursuant to the GT
Acquisition Agreement, Rosenthal foreclosed on certain assets of the GT
Entities, related to the temporary and permanent placement of employees,
and sold the assets to CRD in a secured creditor’s private sale under
Article 9 of the Uniform Commercial Code for $3,000,000 in cash, or the GT
Purchase Price. In connection with our guarantee of the
obligation of CRD to pay the GT Purchase Price, on April 5, 2010 the
Company issued 4,257,332 shares of the Company’s common stock to
Rosenthal. These shares are held in escrow and are subject to a
stock repurchase agreement, dated April 5, 2010, between Rosenthal and us,
pursuant to which we have the right to repurchase some or all of such
shares as the GT Purchase Price is
paid.
|
|
f)
|
Subsequent
to the completion of our second fiscal quarter of 2010, on May 3, 2010,
CRD entered into an account purchase agreement with TSE. Under
the terms of the account purchase agreement, CRD will sell its receivables
to TSE. The maximum amount of trade receivables that may be
sold is equal to $45,000,000, for which TSE will advance 90% of the
assigned receivables’ value upon sale, and 10% upon final collection,
subject to certain offsets. The risk CRD bears from bad debt
losses on trade receivables sold is retained by CRD, and receivables sold
which become greater than 90 days old can be charged back to CRD by
TSE. Currently, TSE obtains the funds necessary under the
agreement from its current lender, and is passing through the financing
costs associated with these funds to us, although this arrangement is
intended to be temporary and is subject to obtaining our own arrangement
with a financing source.
|
|
g)
|
TSE
has provided further financial accommodations to us by allowing us to
delay from time to time amounts due to TSE under our professional services
arrangement with TSE.
|
|
h)
|
We
are aggressively managing cash and expenses with activities such as
seeking additional efficiencies in our operating offices and corporate
functions (including headcount reductions, if appropriate), improving our
accounts receivable collection efforts, obtaining more favorable vendor
terms, and using our finance and accounting consultants when available to
aid in the necessary obligations associated with being a public reporting
company.
|
Number
|
Description
|
|
2.4
|
Agreement
and Plan of Merger, dated as of February 23, 2010, by and among
Accountabilities, Inc., Corporate Resources Services, Inc. and ACBT Merger
Co., Inc. (incorporated by reference to Exhibit 2.1 to the Form
8-K filed by the Registrant on February 24,
2010)
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant on
February 24, 2010)
|
|
3.2
|
Amended
and Restated By-laws of the Registrant (incorporated by reference to
Exhibit 3.2 to the Form 8-K filed by the Registrant on February 24,
2010)
|
|
10.1+
|
Client
Services Agreement, dated August 1, 2006, by and between Accountabilities,
Inc., a wholly-owned subsidiary of the Company and
TSE-PEO
|
|
10.2
|
Settlement
and Release Agreement, dated February 5, 2010, by and between Rhonda
Faria, ReStaff Services, Inc. and Accountabilities, Inc.
(incorporated by reference to Exhibit 10.51 to the Form 10-Q filed by the
Registrant on February 12, 2010)
|
|
10.3
|
Foreclosure
and Asset Purchase Agreement, dated as of March 24, 2010, by and among
Rosenthal and Rosenthal, Inc., GT Systems Inc., certain of operating
affiliates of GT Systems Inc., Eric Goldstein, Corporate Resource
Development Inc., Corporate Resource Services, Inc. and Tri-State
Employment Services, Inc.
|
|
10.4
|
Consulting
Agreement, dated March 24, 2010, by and between Corporate Resource
Development Inc. and Eric Goldstein.
|
|
10.5
|
Services
Agreement, dated March 29, 2010, by and between Corporate Resource
Development Inc. and Noor Associates, Inc.
|
|
10.6
|
Employment
Agreement, dated March 29, 2010, between Corporate Resource Development
Inc. and Habib Noor.*
|
|
10.7
|
Debt
Assumption Agreement, entered into as of February 22, 2010, by and between
Accountabilities, Inc. and Tri-State Employment Services, Inc.
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the
Registrant on February 24, 2010)
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act
of 2002
|
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of Sarbanes-Oxley Act of 2002
|
+
|
Certain
portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed
with the SEC.
|
*
|
Constitutes
a management contract required to be filed pursuant to Item 6 of Form
10-Q.
|
Corporate
Resource Services, Inc.
|
|||
Date: May
17, 2010
|
By:
|
/s/ Jay H. Schecter | |
Jay H. Schecter | |||
Chief Executive Officer | |||
(Principal Executive and Financial and Accounting Officer) |