x
|
ANNUAL REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
80-0551965
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
Large accelerated filer
¨
|
Accelerated filer ¨
|
|
Non-accelerated filer
¨
|
Smaller Reporting Company
x
|
PART
I
|
1
|
|||
ITEM
1.
|
BUSINESS
|
1
|
||
ITEM
1A.
|
RISK
FACTORS
|
4
|
||
ITEM
2.
|
PROPERTIES
|
8
|
||
ITEM
3.
|
LEGAL
PROCEEDINGS
|
8
|
||
ITEM
4.
|
[REMOVED
AND RESERVED]
|
9
|
||
PART
II
|
10
|
|||
ITEM
5.
|
MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF
EQUITY SECURITIES
|
10
|
||
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
10
|
||
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
10
|
||
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
20
|
||
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
20
|
||
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
20
|
||
ITEM
9A.
|
CONTROLS
AND PROCEDURES
|
20
|
||
ITEM
9B.
|
OTHER
INFORMATION.
|
21
|
||
PART III
|
22
|
|||
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
22
|
||
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
23
|
||
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
25
|
||
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
26
|
||
ITEM
14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
28
|
||
PART IV
|
29
|
|||
ITEM
15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
|
29
|
||
|
|
|||
INDEX
TO FINANCIAL STATEMENTS
|
F-1
|
ITEM
1.
|
BUSINESS
|
|
·
|
traditional
and Internet-based staffing firms and their specialized
divisions;
|
|
·
|
the
in-house resources of our clients;
and
|
|
·
|
independent
contractors.
|
|
·
|
In
February 2007, Accountabilities acquired substantially all of the business
and assets of ReStaff Services, Inc., a staffing company (“ReStaff”), for
a total adjusted purchase price of
$2,928,000.
|
|
·
|
In
fiscal 2009, Tri-State Employment Services, Inc. (“TSE”), together with
its affiliates, obtained control of us through beneficial ownership of in
excess of a majority of our outstanding shares of common stock through a
series of stock purchases. As of the date hereof, TSE and its
affiliated entities and persons own approximately 74.3% of our outstanding
shares of common stock.
|
|
·
|
In
the third quarter of 2009 and first quarter of 2010, we discontinued our
CPA Partner on Premise Program and Direct Professional Accounting Service
Offerings, respectively, both of which related to the provision of
accounting related services. We made these decisions in order to focus
more extensively on our light industrial related service offerings and
after reviewing the historical operating losses of these
operations.
|
|
·
|
As
indicated above under the heading “Holding Company Reorganization,” on
February 23 2010, we completed a holding company reorganization by merging
Accountabilities, formerly our parent company, into our wholly-owned
subsidiary. As a result of the reorganization, the former
holders of Accountabilities’ common stock now own shares of our common
stock, and immediately following the reorganization, our capitalization
and consolidated assets, liabilities and stockholders’ equity were the
same as the capitalization and consolidated assets, liabilities and
stockholders’ equity of Accountabilities immediately prior to the
reorganization.
|
|
·
|
In
April 2010, CRD, our newly formed, wholly owned subsidiary, acquired a
portion of the assets of GT Systems, Inc. (“GT Systems”) related to the
temporary and permanent placement of employees (the “GT Systems
Acquisition”). The purchase price for this acquisition was
$3,000,000 (the “GT Purchase Price”), which is being paid over a
three-year period by CRD. CRD’s obligation to make the required
payments is guaranteed by us, and is secured by a pledge of 4,257,332
shares of our common stock to the payee. These shares are not
treated as outstanding for our financial statements, and are not included
in the number of our shares of common stock outstanding on the cover page
of this Annual Report on Form I0-K. TSE is also a guarantor of
CRD’s obligation to pay the GT Purchase Price. In connection
with the acquisition, CRD entered into a consulting agreement with the
former owner of GT Systems, which agreement was amended and restated as
part of the ICG Acquisition (as defined below). The consulting
agreement and its amendment and restatement are more fully described in
Notes 3 and 14 to the Consolidated Financial
Statements.
|
|
·
|
In
August 2010, we acquired Tri-Overload Staffing Inc. (“Tri-Overload”)
(renamed Insurance Overload Services, Inc. as part of the acquisition), an
entity engaged in the business of providing temporary and permanent
employment services and related support services to the insurance industry
(the “Tri-Overload Acquisition”). The purchase price for this
entity was $6,200,000, which was paid through the issuance of 8,589,637
shares of our common stock to a related party. The number of
shares issued was based upon a negotiated $0.7218 price per share for our
common stock that was determined using historical market
prices.
|
ITEM
1A.
|
RISK
FACTORS
|
|
·
|
Our
inability to identify suitable acquisition
candidates;
|
|
·
|
We
may not be able to compete successfully for available acquisition
candidates, complete future acquisitions or investments or accurately
estimate their financial effect on our
business;
|
|
·
|
Future
acquisitions, investments or joint ventures may require us to issue
additional common stock or debt, spend significant cash amounts and could
have a material adverse effect on our operating
results;
|
|
·
|
We
may have trouble integrating acquired businesses and retaining its
personnel, including in connection with our more recent acquisitions,
which could have a material adverse effect on our operating
results;
|
|
·
|
Acquisitions,
investments or joint ventures may disrupt business and distract management
from its other responsibilities;
|
|
·
|
If
our acquisitions or investments fail, our business could be
harmed.
|
|
·
|
claims
of discrimination and harassment (including sexual harassment
claims);
|
|
·
|
violations
of wage and hour laws;
|
|
·
|
criminal
activity;
|
|
·
|
claims
relating to actions by customers including property damage and personal
injury, misuse of proprietary information and misappropriation of assets;
and
|
|
·
|
immigration
related claims.
|
ITEM
2.
|
PROPERTIES
|
ITEM
3.
|
LEGAL
PROCEEDINGS
|
ITEM
4.
|
[REMOVED
AND RESERVED]
|
ITEM
5.
|
MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF
EQUITY SECURITIES
|
Low
|
High
|
|||||||
Fiscal Year Ended September 30,
2010
|
||||||||
First
Quarter
|
$ | 0.24 | $ | 0.50 | ||||
Second
Quarter
|
0.30 | 0.75 | ||||||
Third
Quarter
|
0.62 | 1.50 | ||||||
Fourth
Quarter
|
0.63 | 1.24 | ||||||
Fiscal Year Ended September 30,
2009
|
||||||||
First
Quarter
|
$ | 0.06 | $ | 0.25 | ||||
Second
Quarter
|
0.06 | 0.20 | ||||||
Third
Quarter
|
0.15 | 0.20 | ||||||
Fourth
Quarter
|
0.12 | 0.52 |
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
|
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 (losses) from its operations of $0 and ($311,000) for the years
ended September 30, 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. (“ReStaff”), whereby all
obligations 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
outstanding 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 the GT Acquisition Agreement to acquire a
portion of the assets of the GT Entities, through a private sale by
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 to
be paid in installments over three years. In connection with
our guarantee of the obligation of CRD to pay the 3,000,000 purchase price
in installments over a period of three years, the Company issued 4,257,332
shares of the Company’s common stock to Rosenthal on April 5,
2010. 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)
|
On
May 3, 2010, CRD entered into an account purchase agreement with
TSE. Under the terms of the account purchase agreement, CRD
sold its accounts receivables to TSE. The maximum amount of
accounts receivables that may be sold under the agreement was $45,000,000,
for which TSE advanced 90% of the assigned accounts receivables’ value
upon sale, and 10% upon final collection, subject to certain
offsets. The risk CRD bears from bad debt losses on accounts
receivables sold is retained by CRD, and accounts receivables sold which
became greater than 90 days were eligible to be charged back to CRD by
TSE. TSE obtained the funds necessary under this agreement from
its lender, and passed through the financing costs associated with these
funds to CRD. This arrangement was terminated on November 2,
2010.
|
|
g)
|
In
connection with the GT Systems Acquisition, TSE provided the initial down
payment of $750,000. In July and October 2010, CRD made the first 2
installment payments of $250,000 each on the acquisition
debt.
|
|
h)
|
TSE
and affiliates have provided further financial accommodations to us by
allowing us to delay from time to time amounts due under our professional
services arrangement.
|
|
i)
|
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.
|
September 30,
|
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 | |||||||
CRD
Acquisition (v)
|
2,000,000 |
-
|
||||||
Long
term capitalized lease obligation (iv)
|
4,000 | |||||||
Tri-Overload
Acquisition (xi)
|
427,000 | 726,000 | ||||||
Other
debt
|
50,000 | 50,000 | ||||||
Total
|
2,478,000 | 1,370,000 | ||||||
Less
current maturities
|
1,478,000 | 777,000 | ||||||
Non-current
portion
|
1,000,000 | 593,000 | ||||||
Related
party long-term debt
|
||||||||
13%
unsecured demand note (vi)
|
104,000 | 104,000 | ||||||
18%
unsecured convertible note (vii)
|
100,000 | 100,000 | ||||||
CRD
Acquisition (x)
|
750,000 |
-
|
||||||
Demand
loans (viii)
|
55,000 | 131,000 | ||||||
6%
unsecured note (ix)
|
-
|
1,056,000 | ||||||
Total
|
1,009,000 | 1,391,000 | ||||||
Less
current maturities
|
1009,000 | 811,000 | ||||||
Non-current
portion
|
-
|
580,000 | ||||||
Total
long-term debt
|
3,487,000 | 2,761,000 | ||||||
Less
current maturities
|
2,487,000 | 1,588,000 | ||||||
Total
non-current portion
|
$ | 1,000,000 | $ | 1,173,000 |
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
ITEM
9A.
|
CONTROLS
AND PROCEDURES
|
|
1.
|
Hire
experienced personnel to staff the accounting and finance department at
the Company.
|
|
2.
|
Develop
or revise, depending on the circumstances, detailed accounting procedural
manuals that define the roles and responsibilities of all personnel
involved in the accounting process.
|
|
3.
|
Develop
or address, depending on the circumstances, detailed financial reporting
procedures to ensure that each subsidiary provides timely, complete and
accurate information to the Company’s headquarters for the preparation of
financial reports which include all necessary
disclosures.
|
|
4.
|
Provide
sufficient training to accounting and financial reporting personnel so
that each person understands his or her role in the accounting and
financial reporting process. Such training will include
explanations about the reasons for each accounting and financial reporting
procedure to provide an understanding of the need for the
procedure(s).
|
|
5.
|
Develop
or improve, depending on the circumstances, processes and procedures used
to evaluate the competency of accounting and financial reporting
personnel. Such evaluation processes and procedures are to
include supervisory and management
personnel.
|
ITEM
9B.
|
OTHER
INFORMATION.
|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
Name
|
Age
|
Title
|
||
Jay
H. Schecter
|
57
|
Chief
Executive Officer, Secretary and Director
|
||
John
Messina
|
43
|
President,
Treasurer and Director
|
||
Mark
S. Levine
|
49
|
Chief
Operating Officer (Accountabilities)
|
||
Norman
Goldstein
|
69
|
Director
|
||
Robert
Cassera
|
48
|
Director
|
||
Joseph
Cassera
|
51
|
Director
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
Name and
Principal Position
|
Fiscal
Year
|
Salary ($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings ($)
|
All Other
Compensation
($)
|
Total
($)
|
|||||||||||||||||||||||||
Jay
Schecter,
|
2010
|
- | - | - | - | - | - | - | - | |||||||||||||||||||||||||
Chief
Executive Officer (1)
|
2009
|
$ | - | - | $ | - | - | - | - | $ | - | $ | ||||||||||||||||||||||
Mark
S. Levine
|
2010
|
$ | 187,523 | - | $ | - | - | - | - | $ | 9,600 | $ | 197,123 | |||||||||||||||||||||
Chief
Operating Officer of Accountabilities
|
2009
|
$ | 176,881 | - | $ | 52,390 | (2) | - | - | - | $ | 9,600 | $ | 238,871 |
|
(1)
|
Mr.
Schecter was appointed Chief Executive Officer in March
2009. Mr. Schecter does not receive a salary from us, but
is instead compensated by TSE as part of his responsibilities to
it.
|
|
(2)
|
Represents
the grant date fair value computed in accordance with FASB ASC Topic
718. The determination of this value assumes stock vests over
the full vesting period and which is based upon the market price of the
stock awarded as discounted by 35% to reflect (a) certain sale
restrictions and lack of liquidity and (b) recent private placement
valuations of similarly restricted
securities.
|
|
(3)
|
Represents
automobile lease payments.
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||||||||||||||||||||||||
Name
|
Date
of
Grant
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
|
Market
Value of
Shares
or Units of
Stock
That Have Not
Vested
($)
(3)
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)
|
||||||||||||||||||||||||||||
Jay
Schecter
|
1/31/08
|
-
|
-
|
-
|
-
|
-
|
6,667
|
(1)
|
$
|
5,667
|
-
|
—
|
||||||||||||||||||||||||||
Mark
Levine
|
01/30/07
|
-
|
-
|
-
|
-
|
-
|
200,000
|
(2)
|
$
|
170,000
|
-
|
-
|
||||||||||||||||||||||||||
1/31/08
|
-
|
-
|
-
|
-
|
-
|
66,667
|
(1)
|
$
|
56,667
|
(1)
|
Represents
an award of restricted stock that vests in equal annual installments, with
the final installment to vest on January 31, 2011.
|
(2)
|
Represents
an award of restricted stock that vests in equal annual installments on
January 30, 2011 and 2012.
|
(3)
|
Value
determined by multiplying the number of shares that had not vested as of
such date by the closing price per share as reported by the
Over-the-Counter quotation system on September 30,
2010.
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
|
Amount and
|
Percentage
|
||||||
|
Nature of
|
Of
|
||||||
|
Beneficial
|
Outstanding
|
||||||
Name
|
Ownership
|
Shares(1)
|
||||||
Norman
Goldstein
|
970,000 | (2) | 2.5 | |||||
Jay
Schecter
|
20,000 | * | ||||||
John
Messina
|
220,000 | * | ||||||
Mark
Levine
|
762,500 | 2 | ||||||
Joseph
Cassera
|
0 | - | ||||||
Robert
Cassera
|
27,221,404 | (3) | 71.6 | |||||
All
Executive Officers and Directors as a Group (6 persons)
|
29,193,904 | 76.3 | ||||||
Tri-State
Employment Services, Inc. and related entities and persons
|
28,271,932 | (4) | 74.3 | |||||
Kathy
Raymond
|
2,633,334 | (5) | 6.9 |
*
|
Less
than 1%
|
(1)
|
Percentages
are based on the 38,029,000 shares outstanding as of December 15, 2010,
but exclude the 4,257,332 shares held in escrow to secure CRD's payment
obligations to Rosenthal in connection with the GT
Acquisition. The 4,257,332 shares are neither treated as
outstanding for our financial statements, nor included in the number of
our shares of common stock outstanding on the cover page of this Annual
Report on Form I0-K. Additionally, with respect to the
determination of the percentage of outstanding shares owned by Norman
Goldstein and all of our executive officers and directors as a group, the
250,000 shares of stock issuable upon the conversion of Mr. Goldstein's
convertible note are deemed
outstanding.
|
(2)
|
Includes
250,000 shares issuable upon conversion of convertible
note. The remaining 720,000 shares are owned by NGA, Inc. a
corporation of which Mr. Goldstein is the sole
shareholder.
|
(3)
|
Shares
are owned through Tri-State Employment Services, Inc. and TS Staffing
Corp., which amounts are included in the ownership reflected in the amount
of shares owned by Tri-State Employment Services, Inc.
below.
|
(4)
|
Based
upon Amendment No. 3 to the Schedule 13D filed with the SEC on October 14,
2010 by Robert Cassera, an individual, John P. Messina, Sr., an individual
(“Messina”), Thomas Cassera, an individual (“TC”), Peter Ursino and his
wife, Maria Ursino, individuals (collectively “Ursino”), John Trippiedi
and his wife, Yolanda Trippiedi, individuals (collectively “Trippiedi”),
Jay Schecter (“Schecter”), an individual, Jason Scheff (“Scheff”), an
individual, Paul Capozio and his wife, Linda Capozio, individuals
(collectively, “Capozio”), TSE and TS Staffing. Includes
18,631,767 shares beneficially owned by TSE and 8,589,637 shares owned by
TS Staffing. Robert Cassera has sole voting and dispositive
power of the shares owned by TSE and TS Staffing by reason of his direct
ownership and control of such entities, and these shares represent the
number of shares reported as owned by Robert Cassera in the table
above. Includes 220,000 shares beneficially owned by Messina,
over which Messina has sole voting and dispositive power, and such shares
represent the number of shares reported as owned by Messina in the table
above. Includes 490,600 shares beneficially owned by TC, over
which TC has sole voting and dispositive power. Includes 30,000
shares beneficially owned by Ursino, over which Maria Ursino and
Peter Ursino each share voting and dispositive power. Includes
12,000 shares beneficially owned by Trippiedi, over which John and Yolanda
Trippiedi each share voting and dispositive power. 8,000 of the
shares beneficially owned by Trippiedi are owned of record by two accounts
of which Trippiedi is custodian created pursuant to the Uniform Gift to
Minors Act for the benefit of Trippiedi’s two
children. Includes 20,000 shares beneficially owned by
Schecter, over which Schecter has sole voting and dispositive power, and
such shares represent the number of shares reported as beneficially owned
by Schecter in the table above. Includes 88,317 shares
beneficially owned by Scheff, over which Scheff has sole voting and
dispositive power. Includes 189,611 shares beneficially owned
by Capozio, over which Paul Capozio and Linda Capozio each share voting
and dispositive power. The business address of each of the
reporting persons is 160 Broadway, 15th Floor, New York, New York
10038.
|
(5)
|
Represents
2,423,334 shares owned by Pylon Management, Inc., 150,000 shares owned by
Washington Capital, LLC, 50,000 shares owned by Kathy Raymond, and 10,000
shares owned by Thomas Dietz. Pylon Management, Inc. and
Washington Capital, LLC are owned by Ms. Raymond, and Thomas Dietz is the
son of Kathy Raymond. The address of Pylon Management, Inc. is 800 West
Main Street, Suite 204, Freehold, NJ 07728. The address of
Washington Capital, LLC is P.O. Box 110, Marlboro, NJ
07746.
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
ITEM
14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
2010
|
2009
|
|||||||
Audit
Fees
|
$ | 183,500 | $ | 123,000 | ||||
Audit-Related
Fees
|
40,000 | -0- | ||||||
Tax
Fees
|
59,000 | 39,000 | ||||||
All
Other Fees
|
-0- | -0- | ||||||
Totals
|
$ | 282,500 | $ | 162,000 |
ITEM
15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
|
Number
|
Description
|
||
2.1
|
Asset
Purchase Agreement between Accountabilities, Inc. and Stratus Services
Group, Inc. (1)
|
||
2.2
|
Asset
Purchase Agreement between Accountabilities, Inc. and US Temp Services,
Inc. (2)
|
||
2.3
|
Asset
Purchase Agreement between Accountabilities, Inc. and ReStaff Services,
Inc. (2)
|
||
2.4
|
Agreement
and Plan of Merger dated as of February 23, 2010 by and among
Accountabilities, Inc. Corporate Resource Services, Inc. and ACBT Merger
Co., Inc. (3)
|
||
2.5
|
Agreement
and Plan of Merger dated as of August 27, 2010 by and among TS Staffing
Corp., Tri-Overload Staffing Inc., Corporate Resource Services, Inc. and
Insurance Overload Acquisition Corp. (4)
|
||
2.6
|
Foreclosure
and Asset Purchase Agreement dated as of March 24, 2010 by and among
Rosenthal and Rosenthal, Inc., GT Systems Inc., certain operating
affiliates of GT Systems Inc., Eric Goldstein, Corporate Resource
Development Inc., Corporate Resource Services, Inc. and Tri-State
Employment Services, Inc. (5)
|
||
3.1
|
Amended
and Restated Certificate of Incorporation of the
Registrant. (6)
|
||
3.2
|
Amended
and Restated By-Laws of the Registrant. (6)
|
||
10.1
|
Convertible
Note issued by Accountabilities, Inc. to North Atlantic Resources LTD in
principal amount of $250,000. (1)
|
||
10.2
|
Form
of Warrant issued to purchase shares of Accountabilities, Inc. common
stock. (1)
|
||
10.3
|
Employment
Agreement between Humana Trans Services Holding Corp.
and
Allan Hartley. (1)*
|
||
10.4
|
Employment
Agreement between Accountabilities, Inc. and Mark Levine. (1)
*
|
||
10.5
|
Employment
Agreement between Accountabilities, Inc. and Stephen DelVecchia.
(1)*
|
||
10.6
|
Convertible
Subordinated Note dated March 31, 2006 issued by Accountabilities, Inc. to
Bernard Freedman and Alice Freedman Living Trust in principal amount of
$675,000. (1)
|
||
10.7
|
Demand
Note dated March 31, 2006 issued by Accountabilities, Inc. to Washington
Capital, LLC in the principal amount of $150,000. (1)
|
||
10.8
|
Subordinated
Note dated March 31, 2006 issued by Accountabilities, Inc. to Bernard
Freedman and Alice Freedman Living Trust in the principal amount of
$175,000. (1)
|
||
10.9
|
Promissory
Note dated March 31, 2006 issued by Accountabilities, Inc. to Stratus
Services Group, Inc. in the principal amount of $80,000.
(1)
|
||
10.10
|
Consulting
Agreement dated March 31, 2006 between Accountabilities, Inc. and William
Thomas. (1)
|
||
10.11
|
Consulting
Agreement dated March 31, 2006 between Accountabilities, Inc. and Jerry
Schumacher. (1)
|
||
10.12
|
Consulting
Agreement dated March 31, 2006 between Accountabilities, Inc. and
Washington Capital, LLC. (1)
|
||
10.13
|
Convertible
Note dated April 1, 2006 issued by Accountabilities, Inc. to NGA, Inc. in
the principal amount of $300,000. (1)
|
||
10.14
|
Promissory
Note dated February 26, 2007 issued by Accountabilities, Inc. to ReStaff
Services, Inc. in the principal amount of $300,000. (1)
|
||
10.15
|
Promissory
Note dated February 26, 2007 issued by Accountabilities, Inc. to ReStaff
Services, Inc. in the principal amount of $2,900,000. (1)
|
||
10.16
|
Interim
Financing Agreement dated February 23, 2007 between Accountabilities, Inc.
and TSE-PEO, Inc. (1)
|
||
10.17
|
Stock
Purchase Agreement dated November 27, 2006 between Accountabilities, Inc.
and Tri-State Employment Services, Inc. (1)
|
||
10.18
|
Agreement
dated August 1, 2006 between Accountabilities, inc. and Tri-State
Employment Services, Inc. (1)
|
||
10.19
|
Account
Transfer Agreement dated as of March 1, 2007 between Accountabilities,
Inc. and Wells Fargo. (1)
|
10.20
|
Finder’s
Fee Agreement dated February 26, 2007 between Accountabilities, Inc. and
Pylon Management, Inc. (1)
|
||
10.21
|
Accountabilities,
Inc. Equity Incentive Plan. (6) **
|
||
10.22
|
Temporary
Forbearance Agreement dated October 31, 2007 between Accountabilities,
Inc. and Washington Capital, LLC. (7)
|
||
10.23
|
Temporary
Forbearance Agreement dated October 31, 2007 between Accountabilities,
Inc. and Bernard Freedman. (7)
|
||
10.24
|
Temporary
Forbearance Agreement dated October 31, 2007 between Accountabilities,
Inc. and Bernard Freedman. (7)
|
||
10.25
|
Temporary
Forbearance Agreement dated October 31, 2007 between Accountabilities,
Inc. and NGA, Inc. (7)
|
||
10.26
|
Exchange
Agreement dated January 22, 2008 between Accountabilities, Inc. and North
Atlantic Resources LTD. (7)
|
||
10.27
|
Warrant
dated January 22, 2008 issued to North Atlantic Resources LTD. (7)
|
||
10.28
|
Form
of Warrant issued in connection with January 2008 private placement. (7)
|
||
10.29
|
|
Stock
Purchase Agreement dated March 5, 2008 between Accountabilities, Inc. and
Tri-State Employment, Inc. (8)
|
|
10.30
|
Exchange
Agreement dated January 31, 2008 between Accountabilities, Inc. and NGA,
Inc. (8)
|
||
10.31
|
Convertible
Note dated January 31, 2008 issued to NGA, Inc. in the principal amount of
$100,000. (8)
|
||
10.32
|
Stock
Purchase Agreement dated March 5, 2008 between Accountabilities, Inc. and
Keystone Capital Resources, LLC. (8)
|
||
10.33
|
Form
of Stock Purchase Agreement executed in conjunction with sale of 1,107,500
shares of Accountabilities, Inc. common stock for $0.20 per share. (8)
|
||
10.34
|
Form
of Stock Purchase Agreement executed in conjunction with sale of 100,540
shares of Accountabilities, Inc. common stock for $0.35 per share and
warrants to purchase up to 9,800 shares of Accountabilities, Inc. common
stock at an exercise price of $0.50 per share. (8)
|
||
10.35
|
Form
of warrant issued in connection with private placement of 100,540 shares
of Accountabilities, Inc. common stock. (8)
|
||
10.36
|
Convertible
Note Purchase Agreement between Accountabilities, Inc. and North Atlantic
Resources LTD, Inc. dated August 6, 2007. (9)
|
||
10.37
|
Exchange
Agreement dated February 28, 2008 between Accountabilities, Inc. and
ReStaff Services, Inc. (10)
|
||
10.38
|
Promissory
Note dated February 28, 2008 issued by Accountabilities, Inc. to ReStaff
Services, Inc. in principal amount of $100,000. (10)
|
||
10.39
|
Promissory
Note dated February 28, 2008 issued by Accountabilities, Inc. to ReStaff
Services, Inc. in principal amount of $1,700,000. (10)
|
||
10.40
|
Clarification
Addendum to the Asset Purchase Agreement between Accountabilities, Inc.
and ReStaff Services, Inc. (10)
|
||
10.41
|
Termination
of Asset Purchase Agreement; Transfer of Hyperion Energy Common Stock.
(10)
|
||
10.42
|
Promissory
Note dated May 15, 2008 issued by Tri-State Employment Services, Inc. to
Accountabilities, Inc. in the principal amount of $200,000. (11)
|
||
10.43
|
Stock
Purchase Agreement dated May 15, 2008 between Accountabilities, Inc. and
Tri-State Employment Services, Inc. (11)
|
||
10.44
|
Form
of Stock Purchase Agreement utilized in connection with May, 2008 private
placement. (11)
|
||
10.45
|
Temporary
Forbearance Agreement dated October 31, 2008 between Accountabilities,
Inc. and Bernard Freedman. (12)
|
||
10.46
|
Temporary
Forbearance Agreement dated October 31, 2008 between Accountabilities,
Inc. and Bernard Freedman. (12)
|
||
10.47
|
Temporary
Forbearance Agreement dated October 31, 2008 between Accountabilities,
Inc. and Washington Capital, LLC. (12)
|
||
10.48
|
Promissory
Note dated March 1, 2009 issued by Accountabilities, Inc. to ReStaff
Services, Inc. in the principal amount of $1,201,097. (13)
|
||
10.49
|
Debt
Assumption Agreement entered into as of February 22, 2010 by and between
Accountabilities, Inc. and Tri-State Employment Services, Inc.
(14)
|
||
10.50
|
Exchange
Agreement dated as of December 29, 2009 between Accountabilities, Inc. and
Tri-State Employment Services, Inc. (15)
|
||
10.51
|
Settlement
and Release Agreement dated as of February 5, 2010 between
Accountabilities, Inc. and Rhonda Faria. (16)
|
||
10.52
|
Consulting
Agreement dated March 24, 2010 by and between Corporate Resource
Development Inc. and Eric Goldstein.
(17)
|
10.53
|
Services
Agreement dated March 29, 2010 by and between Corporate Resource
Development Inc. and Noor Associates, Inc. (18)
|
||
10.54
|
Employment
Agreement dated March 29, 2010 between Corporate Resource Development Inc.
and Habib Noor.* (19)
|
||
10.55
|
Registration
Rights Agreement dated as of August 27, 2010 by and between Corporate
Resource Services, Inc. and TS Staffing Corp. (20)
|
||
10.56
|
Account
Purchase Agreement dated as of August 27, 2010 between Wells Fargo Bank,
National Association and Insurance Overload Acquisition Corp.
(21)
|
||
10.57
|
Form
of Continuing Guaranty made by Corporate Resource Services, Inc. and its
affiliates in favor of Wells Fargo Bank, National Association.
(22)
|
||
10.58
|
Master
Services Agreement (PEO Services) dated August 27, 2010 by and between
Corporate Resource Services, Inc. and TSE-PEO, Inc.
(23)
|
||
10.59
|
Master
Services Agreement (PEO Services) dated August 27, 2010 by and between
Corporate Resource Services, Inc. and TS Employment, Inc.
(24)
|
||
Account
Purchase Agreement dated as of November 2, 2010, between Wells Fargo Bank,
National Association and Corporate Resource Development Inc.
(25)
|
|||
21.1
|
Subsidiaries
of Corporate Resource Services, Inc. (filed herewith)
|
||
31.1
|
Certification
of Principal Executive Officer and Principal Financial
Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
(filed herewith)
|
||
32.1
|
Certification
of Principal Executive Officer and Principal Financial
Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
(filed herewith)
|
||
*
|
Constitutes
a management contract required to be filed pursuant to Item 14(c) of Form
10-K.
|
||
**
|
Constitutes
a compensation plan required to be filed pursuant to Item 14(c) of Form
10-K.
|
||
Footnote 1 |
Incorporated
by reference to similarly numbered Exhibit filed with Amendment No. 2 to
the Registration Statement on Form S-4 of Hyperion Energy Inc. as filed
with the Securities and Exchange Commission on November 27,
2007.
|
||
Footnote 2 |
Incorporated
by reference to similarly numbered Exhibit to the Form 10-12G of the
Registrant filed with the Securities and Exchange Commission on January
22, 2008.
|
||
Footnote 3 |
Incorporated
by reference to Exhibit 2.1 to the Form 8-K12G3 of the Registrant filed
with the Securities and Exchange Commission on February 24,
2010.
|
||
Footnote 4 |
Incorporated
by reference to Exhibit 2.1 to the Form 8-K of the Registrant filed with
the Securities and Exchange Commission on September 1,
2010.
|
||
Footnote 5 |
Incorporated
by reference to Exhibit 10.3 of the Form 10-Q of the Registrant filed with
the Securities and Exchange Commission on May 18, 2010.
|
||
Footnote 6 |
Incorporated
by reference to similarly numbered Exhibit to the Form 8-K12G3 of the
Registrant filed with the Securities and Exchange Commission on February
24, 2010.
|
||
Footnote 7 |
|
Incorporated
by reference to similarly numbered Exhibit to the Form 10-12G/A of the
Registrant filed with the Securities and Exchange Commission on March 5,
2008.
|
|
Footnote 8 |
Incorporated
by reference to similarly numbered Exhibit to the Form 10-12G/A of the
Registrant filed with the Securities and Exchange Commission on March 27,
2008.
|
||
Footnote 9 |
Incorporated
by reference to similarly numbered Exhibit to the Form 10-12G/A of the
Registrant filed with the Securities and Exchange Commission on April 15,
2008.
|
||
Footnote 10 |
Incorporated
by reference to similarly numbered Exhibit to the Form 10-Q of the
Registrant filed with the Securities and Exchange Commission on May 15,
2008.
|
||
Footnote 11 |
Incorporated
by reference to similarly numbered Exhibit to the Form 10-Q of the
Registrant filed with the Securities and Exchange Commission on August 14,
2008.
|
Footnote 12
|
Incorporated
by reference to similarly numbered Exhibit to the Form 10-Q of the
Registrant filed with the Securities and Exchange Commission on February
17, 2009.
|
|
Footnote 13
|
Incorporated
by reference to similarly numbered Exhibit to the Form 10-Q of the
Registrant filed with the Securities and Exchange Commission on August 19,
2009.
|
|
Footnote
14
|
Incorporated
by reference to Exhibit 10.1 of the Form 8-K12G3 of the Registrant filed
with the Securities and Exchange Commission on February 24,
2010.
|
|
Footnote
15
|
Incorporated
by reference to Exhibit 10.1 of the Form 8-K of the Registrant filed with
the Securities and Exchange Commission on January 5,
2010.
|
|
Footnote
16
|
Incorporated
by reference to similarly numbered Exhibit to the Form 10-Q of the
Registrant filed with the Securities and Exchange Commission on February
12, 2010.
|
|
Footnote
17
|
Incorporated
by reference to Exhibit 10.4 of the Form 10-Q of the Registrant filed with
the Securities and Exchange Commission on May 18, 2010.
|
|
Footnote
18
|
Incorporated
by reference to Exhibit 10.5 of the Form 10-Q of the Registrant filed with
the Securities and Exchange Commission on May 18, 2010.
|
|
Footnote
19
|
Incorporated
by reference to Exhibit 10.6 of the Form 10-Q of the Registrant filed with
the Securities and Exchange Commission on May 18, 2010.
|
|
Footnote 20
|
Incorporated
by reference to Exhibit 10.1 of the Form 8-K of the Registrant filed with
the Securities and Exchange Commission on September 1,
2010.
|
|
Footnote 21
|
Incorporated
by reference to Exhibit 10.2 of the Form 8-K of the Registrant filed with
the Securities and Exchange Commission on September 1,
2010.
|
|
Footnote 22
|
Incorporated
by reference to Exhibit 10.3 of the Form 8-K of the Registrant filed with
the Securities and Exchange Commission on September 1,
2010.
|
|
Footnote 23
|
Incorporated
by reference to Exhibit 10.1 of the Form 8-K of the Registrant filed with
the Securities and Exchange Commission on September 2,
2010.
|
|
Footnote 24
|
Incorporated
by reference to Exhibit 10.2 of the Form 8-K of the Registrant filed with
the Securities and Exchange Commission on September 2,
2010.
|
|
Footnote 25
|
Incorporated
by reference to Exhibit 10.1 of the Form 8-K of the Registrant filed with
the Securities and Exchange Commission on November 5,
2010.
|
ACCOUNTABILITIES,
INC.
|
|||
By:
|
/s/ Jay H.
Schecter
|
||
Jay
H. Schecter
|
|||
Chief
Executive Officer
(Principal
Executive and Principal Financial Officer)
|
|||
Date: January
11, 2011
|
Signature
|
Title
|
Date
|
||
/s/ Jay H. Schecter
|
Chief
Executive Officer and Director
|
January
11, 2011
|
||
Jay
H. Schecter
|
(Principal
Executive Officer and Principal
Financial Officer) |
|||
/s/ John Messina
|
President,
Treasurer and Director
|
January
11, 2011
|
||
John
Messina
|
||||
/s/ Norman Goldstein
|
Director
|
January
11, 2011
|
||
Norman
Goldstein
|
||||
/s/ Robert Cassera
|
Director
|
January
11, 2011
|
||
Robert
Cassera
|
||||
/s/ Joseph Cassera
|
Director
|
January
11, 2011
|
||
Joseph
Cassera
|
|
Page
|
||
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
Consolidated
Balance Sheets as of September 30, 2010 and 2009
|
F-3
|
|
Consolidated
Statements of Operations for the Years Ended September 30, 2010 and
2009
|
F-4
|
|
Consolidated
Statements of Cash Flows for the for the Years Ended September 30, 2010
and 2009
|
F-5
|
|
Consolidated
Statement of Stockholders’ Equity for the Years Ended September 30, 2010
and 2009
|
F-6
|
|
Notes
to Consolidated Financial Statements
|
F-7
|
September 30,
|
||||||||
2010
|
2009
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 254,000 | $ | 30,000 | ||||
Accounts
receivable
|
269,000 | 1,123,000 | ||||||
Due
from financial institution, net of allowance for charge
backs
|
||||||||
of
$468,000 and $200,000, respectively
|
1,556,000 | 379,000 | ||||||
Unbilled
receivables
|
2,767,000 | 1,122,000 | ||||||
Prepaid
expenses
|
169,000 | 373,000 | ||||||
Total
current assets
|
5,015,000 | 3,027,000 | ||||||
Property
and equipment, net
|
1,078,000 | 503,000 | ||||||
Other
assets
|
567,000 | 57,000 | ||||||
Intangible
assets, net
|
2,946,000 | 1,260,000 | ||||||
Goodwill
|
3,623,000 | 4,243,000 | ||||||
Total
assets
|
$ | 13,229,000 | $ | 9,090,000 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued liabilities
|
$ | 3,968,000 | $ | 3,491,000 | ||||
Accrued
wages and related obligations - due to related party
|
3,340,000 | 1,868,000 | ||||||
Current
portion of long-term debt
|
1,478,000 | 777,000 | ||||||
Current
portion of related party long-term debt
|
1,009,000 | 811,000 | ||||||
Due
to related party
|
1,994,000 | 805,000 | ||||||
Total
current liabilities
|
11,789,000 | 7,752,000 | ||||||
Long-term
debt, net of current portion
|
1,000,000 | 593,000 | ||||||
Deferred
rent
|
97,000 | - | ||||||
Related
party long-term debt, net of current portion
|
- | 580,000 | ||||||
Total
liabilities
|
12,886,000 | 8,925,000 | ||||||
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;
|
||||||||
42,186,000
and 23,689,000 shares issued; 37,929,000 and 23,689,000
|
||||||||
shares
outstanding, respectively
|
4,000 | 3,000 | ||||||
Additional
paid-in capital
|
6,134,000 | 3,396,000 | ||||||
Accumulated
deficit
|
(5,795,000 | ) | (3,234,000 | ) | ||||
Total
stockholders’ equity
|
343,000 | 165,000 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 13,229,000 | $ | 9,090,000 |
Years Ended
|
||||||||
September 30,
|
September 30,
|
|||||||
2010
|
2009
|
|||||||
Revenue
|
$ | 120,891,000 | $ | 63,744,000 | ||||
Direct
cost of producing revenues
|
18,338,000 | 5,740,000 | ||||||
Direct
cost of producing revenues purchased from related parties
|
80,658,000 | 49,665,000 | ||||||
Gross
profit
|
21,895,000 | 8,339,000 | ||||||
Selling,
general and administrative expenses *
|
6,796,000 | 4,102,000 | ||||||
Selling,
general and administrative expenses - related parties
|
14,685,000 | 4,020,000 | ||||||
Depreciation
and amortization
|
756,000 | 460,000 | ||||||
Other
(income)
|
(556,000 | ) | - | |||||
Income
(Loss) from continuing operations
|
214,000 | (243,000 | ) | |||||
Lease
termination expense
|
- | 477,000 | ||||||
Interest
expense
|
661,000 | 464,000 | ||||||
Loss
on impairment of fixed assets
|
- | 95,000 | ||||||
Acquisition
expenses
|
691,000 | - | ||||||
Loss
on debt extinguishments – Related Party
|
1,423,000 | - | ||||||
Net
loss from continuing operations
|
(2,561,000 | ) | (1,279,000 | ) | ||||
Income
from discontinued operations
|
- | 14,000 | ||||||
Net
loss
|
$ | (2,561,000 | ) | $ | (1,265,000 | ) | ||
Net
loss per share from continuing operations:
|
||||||||
Basic
and diluted
|
$ | (0.08 | ) | $ | (0.05 | ) | ||
Net
loss per share from discontinued operations:
|
||||||||
Basic
and diluted
|
$ | - | $ | - | ||||
Total
net loss per share:
|
||||||||
Basic
and diluted
|
$ | (0.08 | ) | $ | (0.05 | ) | ||
Weighted
average shares outstanding:
|
||||||||
Basic
and diluted
|
32,286,000 | 24,229,000 |
Years Ended
|
||||||||
September 30,
|
September 30,
|
|||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (2,561,000 | ) | $ | (1,265,000 | ) | ||
Less:
net income from discontinued operations
|
- | 14,000 | ||||||
Net
loss from continuing operations
|
(2,561,000 | ) | (1,279,000 | ) | ||||
Adjustments
to reconcile net loss to cash (used in) provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
756,000 | 459,000 | ||||||
Bad
debt expense
|
555,000 | 211,000 | ||||||
Stock-based
compensation
|
129,000 | 161,000 | ||||||
Loss
on impairment of fixed assets
|
- | 95,000 | ||||||
Loss
on debt extinguishments
|
1,423,000 | - | ||||||
Changes
in operating assets and liabilities, net of effect of
acquisitions:
|
||||||||
Trade
accounts receivable including unbilled receivables
|
(791,000 | ) | 113,000 | |||||
Due
from financial institution
|
(1,732,000 | ) | (193,000 | ) | ||||
Prepaid
expenses
|
204,000 | (50,000 | ) | |||||
Due
to/from related party
|
1,188,000 | 138,000 | ||||||
Other
assets
|
(510,000 | ) | (39,000 | ) | ||||
Accounts
payable and accrued liabilities – related parties
|
1,472,000 | (27,000 | ) | |||||
Accounts
payable and accrued liabilities – third parties
|
606,000 | 841,000 | ||||||
Deferred
rent
|
97,000 | - | ||||||
Net
cash provided by operating activities-continuing
operations
|
836,000 | 430,000 | ||||||
Net
cash (used in) provided by operating activities- discontinued
operations
|
(17,000 | ) | 14,000 | |||||
Net
cash provided by operating activities
|
819,000 | 444,000 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchase
of property and equipment
|
(17,000 | ) | (11,000 | ) | ||||
Net
cash used in investing activities
|
(17,000 | ) | (11,000 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Principal
payments on long-term debt
|
(578,000 | ) | (83,000 | ) | ||||
Principal
payments on long-term debt – related parties
|
- | (313,000 | ) | |||||
Payments
on Insurance Overload Services, Inc. credit facilities
|
- | (76,000 | ) | |||||
Net
cash (used in) provided by financing activities-continuing
operations
|
(578,000 | ) | (472,000 | ) | ||||
Change
in cash
|
224,000 | (39,000 | ) | |||||
Cash
at beginning of period
|
30,000 | 69,000 | ||||||
Cash
at end of period
|
$ | 254,000 | $ | 30,000 |
Additional
|
||||||||||||||||||||
Common Stock
|
Paid-In
|
Accumulated
|
Stockholders'
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||||||||||||
Balances
as of September 30, 2008
|
23,792,000 | $ | 2,000 | $ | 3,236,000 | $ | (1,969,000 | ) | $ | 1,269,000 | ||||||||||
Forfeitures
of restricted stock grants
|
(103,000 | ) | ||||||||||||||||||
Stock-based
compensation expense
|
161,000 | 161,000 | ||||||||||||||||||
Issuance
of unregistered common stock for
|
||||||||||||||||||||
Tri-Overload
acquisition
|
8,590,000 | 1,000 | (1,000 | ) | - | |||||||||||||||
Net
loss for the year ended September 30, 2009
|
(1,265,000 | ) | (1,265,000 | ) | ||||||||||||||||
Balances
as of September 30, 2009
|
32,279,000 | 3,000 | 3,396,000 | (3,234,000 | ) | 165,000 | ||||||||||||||
Stock
based compensation expense
|
129,000 | 129,000 | ||||||||||||||||||
Note
conversion to unregistered common stock
|
2,333,000 | - | 1,143,000 | - | 1,143,000 | |||||||||||||||
Issuance
of unregistered common stock for
|
||||||||||||||||||||
assumption of note - related
party
|
3,667,000 | 1,000 | 1,466,000 | - | 1,467,000 | |||||||||||||||
Issuance
of unregistered shares as collateral
|
4,257,000 | - | - | - | - | |||||||||||||||
Forfeiture
of restricted stock grants
|
(350,000 | ) | - | - | - | - | ||||||||||||||
Net
loss for the year ended September 30, 2010
|
(2,561,000 | ) | (2,561,000 | ) | ||||||||||||||||
Balances
as of September 30, 2010
|
42,186,000 | $ | 4,000 | $ | 6,134,000 | $ | (5,795,000 | ) | $ | 343,000 |
1.
|
Description
of the Company and its Business
|
2.
|
Summary
of Significant Accounting Policies
|
Furniture
and Fixtures
|
3
years
|
|
Office
Equipment
|
3
years
|
|
Computer
Equipment
|
5
years
|
|
Software
|
3
years
|
|
Leasehold
Improvements
|
Term
of
lease
|
2010
|
2009
|
|||||||
Warrants
|
166,000 | 166,000 | ||||||
Convertible
debt
|
250,000 | 522,000 | ||||||
Non-vested
shares
|
297,000 | 973,000 | ||||||
713,000 | 1,661,000 |
3.
|
Acquisitions
|
Backlog
|
$ | 195,000 | ||
Sales
representative network
|
2,055,000 | |||
PP&E
|
750,000 | |||
Total
Purchase Price
|
$ | 3,000,000 |
Included in the
Financial Statements
Presented
CRD's Acquisition
of Certain Systems
Assets of
GT Systems
April 5, 2010 -
September 30, 2010
|
Supplemental
Pro forma
Consolidated
October 1, 2009 -
September 30, 2010
|
|||||||
Revenue
|
$
|
36,456,000
|
$
|
156,955,000
|
||||
Net
(loss) income from continuing operations
|
$
|
(321,000
|
) |
$
|
196,000
|
For the year ended September 30, 2010
|
||||||||||||
Corporate
|
Tri-
|
|||||||||||
Resource
|
Overload
|
|||||||||||
Services
|
Staffing Inc
|
Combined
|
||||||||||
Total
Revenues
|
$ | 94,014,000 | $ | 26,877,000 | $ | 120,891,000 | ||||||
Direct
Cost of Services
|
78,371,000 | 20,625,000 | 98,996,000 | |||||||||
Gross
Profit
|
15,643,000 | 6,252,000 | 21,895,000 | |||||||||
Operating
Expenses
|
16,440,000 | 5,241,000 | 21,681,000 | |||||||||
(Loss)
income from operations
|
(797,000 | ) | 1,011,000 | 214,000 | ||||||||
Interest
and other expenses
|
2,435,000 | 340,000 | 2,775,000 | |||||||||
Net
(loss) income - continuing operations
|
$ | (3,232,000 | ) | $ | 671,000 | $ | (2,561,000 | ) | ||||
Net
(loss) income
|
$ | (3,232,000 | ) | $ | 671,000 | $ | (2,561,000 | ) | ||||
Basic
and diluted loss per common share - continuing operations
|
$ | (0.10 | ) | $ | (0.08 | ) | ||||||
Total
net loss per share
|
$ | (0.10 | ) | $ | (0.08 | ) | ||||||
Weighted
average basic and diluted common shares outstanding
|
32,286,000 | 32,286,000 |
For the year ended September 30, 2009
|
||||||||||||
Corporate
|
Tri-
|
|||||||||||
Resource
|
Overload
|
|||||||||||
Services
|
Staffing Inc
|
Combined
|
||||||||||
Total
Revenues
|
$ | 57,923,000 | $ | 5,821,000 | $ | 63,744,000 | ||||||
Direct
Cost of Services
|
50,451,000 | 4,954,000 | 55,405,000 | |||||||||
Gross
Profit
|
7,472,000 | 867,000 | 8,339,000 | |||||||||
Operating
Expenses
|
7,813,000 | 741,000 | 8,554,000 | |||||||||
(Loss)
income from operations
|
(341,000 | ) | 126,000 | (215,000 | ) | |||||||
Interest
and other expenses
|
524,000 | 512,000 | 1,036,000 | |||||||||
Net
loss - continuing operations
|
$ | (865,000 | ) | $ | (386,000 | ) | $ | (1,251,000 | ) | |||
Net
loss
|
$ | (879,000 | ) | $ | (386,000 | ) | $ | (1,265,000 | ) | |||
Basic
and diluted loss per common share - continuing operations
|
$ | (.04 | ) | $ | (.05 | ) | ||||||
Total
net loss per share
|
$ | (.04 | ) | $ | (.05 | ) | ||||||
Weighted
average basic and diluted common shares outstanding
|
22,511,000 | 24,253,000 |
Corporate Resource
Services
|
Tri-Overload
Staffing Inc.
|
Combined
|
||||||||||
Current
assets
|
$ | 3,971,000 | $ | 1,044,000 | $ | 5,015,000 | ||||||
Total
assets
|
$ | 10,377,000 | $ | 2,852,000 | $ | 13,229,000 | ||||||
Current
liabilities
|
$ | 9,222,000 | $ | 2,567,000 | $ | 11,789,000 | ||||||
Long-term
debt
|
$ | 1,097,000 | $ | - | $ | 1,097,000 | ||||||
Stockholders’
equity
|
$ | 58,000 | $ | 285,000 | $ | 343,000 |
Corporate Resource
Services
|
Tri-Overload
Staffing Inc.
|
Combined
|
||||||||||
Current
assets
|
$ | 2,292,000 | $ | 735,000 | $ | 3,027,000 | ||||||
Total
assets
|
$ | 6,344,000 | $ | 2,746,000 | $ | 9,090,000 | ||||||
Current
liabilities
|
$ | 5,024,000 | $ | 2,728,000 | $ | 7,752,000 | ||||||
Long-term
debt
|
$ | 770,000 | $ | 403,000 | $ | 1,173,000 | ||||||
Stockholders’
equity (deficit)
|
$ | 551,000 | $ | (386,000 | ) | $ | 165,000 |
Property
and equipment
|
$ | 5,000 | ||
Non-competition
agreement
|
81,000 | |||
Accounts
receivable
|
200,000 | |||
Customer
lists and relationships
|
1,199,000 | |||
Goodwill
|
885,000 | |||
Total
assets acquired
|
2,370,000 | |||
Accrued
liabilities
|
(62,000 | ) | ||
Total
purchase price
|
$ | 2,308,000 |
4.
|
Intangible
Assets and Goodwill
|
As of September 30, 2010
|
As of September 30, 2009
|
|||||||||||||||||||||||
Accumulated
|
Accumulated
|
|||||||||||||||||||||||
Gross
|
Amortization
|
Net
|
Gross
|
Amortization
|
Net
|
|||||||||||||||||||
Customer
lists and relationships (7 years)
|
$ | 4,318,000 | $ | 1,467,000 | $ | 2,851,000 | $ | 2,068,000 | $ | 919,000 | $ | 1,149,000 | ||||||||||||
Non-competition
agreements (3 years)
|
111,000 | 111,000 | - | 111,000 | 100,000 | 11,000 | ||||||||||||||||||
Trade
Name (20 years)
|
101,000 | 6,000 | 95,000 | 101,000 | 1,000 | 100,000 | ||||||||||||||||||
Total
|
$ | 4,530,000 | $ | 1,584,000 | $ | 2,946,000 | $ | 2,280,000 | $ | 1,020,000 | $ | 1,260,000 | ||||||||||||
Goodwill
(indefinite life)
|
$ | 3,623,000 | $ | 3,623,000 | $ | 4,243,000 | $ | 4,243,000 |
Goodwill
as of September 30, 2008
|
$
|
3,332,000
|
||
Goodwill
acquired through Tri-Overload Acquisition
|
1,296,000
|
|||
ReStaff
purchase price adjustment
|
(385,000
|
)
|
||
Goodwill
as of September 30, 2009
|
4,243,000
|
|||
Additional
ReStaff purchase price adjustment
|
(620,000
|
) | ||
Goodwill
as of September 30, 2010
|
$ |
3,623,000
|
5.
|
Related
Parties
|
6.
|
Property
and Equipment
|
September 30,
|
September 30,
|
|||||||
2010
|
2009
|
|||||||
Furniture
and fixtures
|
$ | 1,291,000 | $ | 162,000 | ||||
Office
equipment
|
39,000 | 417,000 | ||||||
Computer
equipment
|
177,000 | 177,000 | ||||||
Software
|
5,000 | 5,000 | ||||||
Leasehold
improvements
|
22,000 | 8,000 | ||||||
1,534,000 | 769,000 | |||||||
Less
accumulated depreciation and amortization
|
456,000 | 266,000 | ||||||
$ | 1,078,000 | $ | 503,000 |
7.
|
Long-Term
Debt
|
|
September 30,
|
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 | |||||||
CRD
Acquisition (v)
|
2,000,000 |
-
|
||||||
Long
term capitalized lease obligation (iv)
|
4,000 | |||||||
Tri-Overload
Acquisition (xi)
|
427,000 | 726,000 | ||||||
Other
debt
|
50,000 | 50,000 | ||||||
Total
|
2,478,000 | 1,370,000 | ||||||
Less
current maturities
|
1,478,000 | 777,000 | ||||||
Non-current
portion
|
$ | 1,000,000 | $ | 593,000 | ||||
Related
party long-term debt
|
||||||||
13%
unsecured demand note (vi)
|
$ | 104,000 | $ | 104,000 | ||||
18%
unsecured convertible note (vii)
|
100,000 | 100,000 | ||||||
CRD
Acquisition (x)
|
750,000 |
-
|
||||||
Demand
loans (viii)
|
55,000 | 131,000 | ||||||
6%
unsecured note (ix)
|
-
|
1,056,000 | ||||||
Total
|
1,009,000 | 1,391,000 | ||||||
Less
current maturities
|
1,009,000 | 811,000 | ||||||
Non-current
portion
|
$ |
-
|
$ | 580,000 | ||||
Total
long-term debt
|
3,487,000 | 2,761,000 | ||||||
Less
current maturities
|
2,487,000 | 1,588,000 | ||||||
Total
non-current portion
|
$ | 1,000,000 | $ | 1,173,000 |
2011
|
$ | 2,487,000 | ||
2012
|
773,000 | |||
2013
|
227,000 | |||
2014
|
- | |||
2015
|
- | |||
$ | 3,487,000 |
8.
|
Stock-Based
Compensation
|
|
Shares
|
Weighted-Average
Grant-Date Fair Value
|
||||||
Nonvested
at September 30, 2008
|
1,624,000 | $ | 0.31 | |||||
Vested
|
(567,000 | ) | $ | 0.31 | ||||
Forfeited
|
(84,000 | ) | $ | 0.25 | ||||
Nonvested
at September 30, 2009
|
973,000 | $ | 0.31 | |||||
Vested
|
(326,000 | ) | $ | 0.32 | ||||
Forfeited
|
(350,000 | ) | $ | 0.30 | ||||
Nonvested
at September 30, 2010
|
297,000 | $ | 0.33 |
9.
|
Concentrations
of Credit Risk
|
10.
|
Sales
of Receivables
|
11.
|
Income
Taxes
|
|
September 30,
|
September 30,
|
||||||
2010
|
2009
|
|||||||
Deferred
tax assets:
|
||||||||
Net
operating losses
|
$ | 1,759,000 | $ | 832,000 | ||||
Accounts
receivable
|
189,000 | - | ||||||
Restricted
stock
|
52,000 | 39,000 | ||||||
Goodwill,
customer lists and relationships and non-compete and solicit
agreements
|
174,000 | - | ||||||
Valuation
allowance
|
(2,174,000 | ) | (798,000 | ) | ||||
- | 73,000 | |||||||
Deferred
tax liabilities:
|
||||||||
Goodwill,
customer lists and relationships and non-compete and solicit
agreements
|
- | (73,000 | ) | |||||
$ | - | $ | - |
Years Ended
|
||||||||
September 30,
|
September 30,
|
|||||||
2010
|
2009
|
|||||||
U.S.
Federal statutory rate
|
(34.0 | )% | (35.0 | )% | ||||
State
income taxes, net of federal benefit
|
(6.0 | )% | (5.0 | )% | ||||
Stock
based compensation valuation
|
6.7 | % | 6.7 | % | ||||
Change
in valuation allowance
|
33.3 | % | 33.3 | % | ||||
Effective
tax rate
|
0.0 | % | 0.0 | % |
12.
|
Supplemental
Disclosure of Cash Flow Information
|
Years Ended
|
||||||||
|
September 30,
|
September 30,
|
||||||
2010
|
2009
|
|||||||
Cash
paid for interest
|
$ | 608,000 | $ | 381,000 | ||||
Non-
cash investing and financing activities:
|
||||||||
ReStaff
Acquisition purchase price adjustment and debt reduction
|
- | 385,000 | ||||||
Debt
converted to unregistered common stock at fair value
|
2,520,000 | - | ||||||
Stock-based
compensation
|
129,000 | 161,000 | ||||||
Shares
issued for IOS acquisition at fair value
|
6,200,000 | - | ||||||
Assets
acquired for issuance of debt - CRD
|
3,000,000 | - | ||||||
Assets
acquired for issuance of debt - IOS
|
- | 1,410,000 |
13.
|
Commitments
and Contingencies
|
Years Ending September 30:
|
Operating Leases
|
|||
2011
|
$ | 1,513,000 | ||
2012
|
1,322,000 | |||
2013
|
1,395,000 | |||
2014
|
1,409,000 | |||
2015
|
739,000 | |||
Thereafter
|
96,000 | |||
$ | 6,474,000 |
14.
|
Subsequent
Events
|