UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

 

For the quarterly period ended April 5, 2013

 

 

 

For the transition period from ____________ to ____________

 

Commission file number:  0-30734

(Exact name of Registrant as specified in its charter)

 

160 Broadway, 13^th Floor
New York, New York 10038
(Address of principal executive offices)

(646) 443-2380
(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

The number of shares of Common Stock, $.0001 par value, outstanding as of May17, 2013 was 135,657,000.

 

 

 

---

 

 

 

 

---

 

 

Item 1. Financial Statements (unaudited)

 

 

 

 

 

 

 

 

 

 

---

 

 

---

 

 

 

 

 

 

 

 

 

 

 

---

 

 

 

 

 

 

   

 

 

---

 

 

1.         Description of the Company and its Business

 

Nature of Operations

 

Corporate Resource Services, Inc. (the “Company”) is a national provider of diversified staffing, recruiting, and consulting services with a focus on delivering our customers temporary staffing solutions for professional services, administrative and light industrial positions. We help our customers build a better workforce by providing trained employees in the areas of Insurance, Information Technology, Accounting, Legal, Engineering, Science, Healthcare, Life Sciences, Creative Services, Hospitality, Retail, General Business and Light Industrial work.  Our blended staffing solutions are tailored to our customers’ needs and can include customized employee pre-training and testing, on-site facilities management, vendor management, risk assessment and management, market analyses and productivity/occupational engineering studies.

 

The Company provides these services nationwide across a variety of industries and to a diverse array of clients, ranging from sole proprietorships to Fortune 1000 companies. We conduct all of our business in the United States and operate 231 staffing and on-site facilities in 42 states and the District of Columbia.  Our headquarters are in New York City.

 

The Company

 

References in these Notes to the Condensed Consolidated Financial Statements of the Company refer to Corporate Resource Services, Inc., including its wholly-owned consolidated subsidiaries (unless indicated or context otherwise requires), which are:

 

●    The CRS Group, Inc. (“CRS Group”);

 

●    Accountabilities, Inc. (“Accountabilities”);

 

●    Corporate Resources Development, Inc. (“CRD”);

 

●    Insurance Overload Services, Inc. (“Insurance Overload”);

 

●    Integrated Consulting Group, Inc. (“ICG Inc.”);

 

●    Diamond Staffing Services, Inc. (“Diamond Staffing”); and,

 

●    TS Staffing Services, Inc. (“TS Staffing”)

 

 

2.            Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying condensed consolidated financial information of the Company as of and for the three month periods ended April 5, 2013 and March 30, 2012 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they are unaudited and do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed year-end balance sheet was derived from audited financial statements, and certain information and note disclosures normally included in annual financial statements, prepared in accordance with U.S. GAAP, have been condensed or omitted pursuant to the rules and regulations of the SEC; however, the Company believes the disclosures made are adequate to make the information presented not misleading.

 

The results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended September 28, 2012, which are included in the Company’s Annual Report on Form 10-K/A as filed with the SEC on May 7, 2013.  

---

 

 

Effective January 14, 2013, the Board of Directors of the Company (the “Board”) determined to change the Company’s fiscal year from the Friday closest to September 30^th to the Friday closest to December 31^st.  The change was intended to align the Company’s fiscal periods more closely with the seasonality of its business and improve comparability with industry peers.  The Company’s fiscal quarters are the interim 13 week periods of the fiscal year, with the first quarter of a 53-week fiscal year extended to 14 weeks.  The three months ended April 5, 2013 is a 14-week fiscal quarter. 

 

Revenue Recognition

 

Staffing and consulting revenues are recognized when professionals deliver services. Permanent placement revenue, which generated 0.8% of revenues for both the three months ended April 5, 2013 and March 30, 2012, respectively, is recognized when the candidate commences employment, net of an allowance for those not expected to remain with clients through a 90-day guarantee period, wherein the Company is obligated to find a suitable replacement.

 

In addition, on May 7, 2013, we signed an agreement to purchase certain assets and assume certain liabilities of the Summit Software division (“Summit”) of Tri-Tel Communications, Inc. (“Tri-Tel”) (the “Summit Acquisition”, see Note 3).    Tri-Tel is a related party that is owned by Robert Cassera, a member of the Board who is the beneficial owner of 90.5%  of the outstanding shares of our common stock (giving effect to future issuance of the share consideration in the Summit Acquisition) through personal holdings and those of entities owned by him, including Tri-Tel, Tri-State Employment Services, Inc. and TS Employment Services, Inc. (“TS Employment”) (collectively “Tri-State”) as of May 7, 2013.  In accordance with U.S. GAAP we recorded the Summit Acquisition under the pooling-of-interests method, as described in Note 3 to these condensed consolidated financial statements.  Accordingly, our revenues were restated to include  $718,000 and $600,000 of revenues related to Summit, for the three months ended April 5, 2013 and March 30, 2012, respectively.

 

Software and related service revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable.    Multi-year licensing arrangements typically include a perpetual license for current products combined with rights to receive future versions of software products on a when-and-if-available basis and are accounted for as subscriptions, with billings recorded as unearned revenue and recognized as revenue ratably over the billing coverage period. Revenue from certain arrangements that allow for the use of a product or service over a period of time without taking possession of software are also accounted for as subscriptions.

 

Accounts Receivable

 

The Company maintains an allowance for doubtful accounts for estimated losses resulting from its clients failing to make required payments for services rendered. Management estimates this allowance based upon knowledge of the financial condition of its clients, review of historical receivables and reserve trends and other pertinent information. If the financial condition of our clients deteriorates or there is an unfavorable trend in aggregate receivable collections, additional allowances may be required. The Company sells its accounts receivable under a sale agreement, as described in Note 5 to these condensed consolidated financial statements.

 

Intangible Assets 

 

Goodwill and other intangible assets with indefinite lives are not subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. Intangible assets with finite lives are subject to amortization, and are tested for impairment when events and circumstances indicate that an asset or asset group might be impaired.  See Note 4.

 

Related Party Liabilities

The Company classifies liabilities to related parties on its balance sheet as the following:

 

●    Accrued wages and related obligations – due to related party represent accrued wages, taxes and other related items that have not yet been invoiced.

●    Loan payable – related party represents amounts due for items that have been invoiced from TS Employment other affiliates and members of Tri-State.  Tri-State charges the Company interest on a monthly basis at 12% per annum of the outstanding loan balance.

●    Related party long-term debt represents amounts due for long-term borrowings from a related party.

---

 

 

Per Share Information

 

The Company presents both basic and diluted earnings per share amounts (“EPS”).  Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS reflects any potential dilution that could occur if securities or other contracts to issue common stock, such as options, warrants, convertible notes and convertible preferred stock, were exercised or converted into common stock or could otherwise cause the issuance of common stock that then shared in earnings. 

 

When a net loss is recognized, the diluted loss per share is not computed because any potential issuance of shares of common stock would reduce the reported loss per share and, therefore, have an antidulitive effect.  Therefore, such potential issuance of shares of common stock is included in the computation of diluted earnings per share for the three months ended April 5, 2013 but not for the three months ended March 30, 2012.

 

The following table sets forth the computation of basic and diluted per share information:

 

 

Income Taxes

 

The Company accounts for income taxes using the asset and liability method. Under this method, deferred income taxes are recognized for the estimated tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end, based on enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized when, in management’s opinion, it is more likely than not that the future tax benefits from some portion of the deferred tax assets will not be realized.

 

U.S. GAAP requires that, in applying the liability method, the financial statement effects of an uncertain tax position be recognized based on the outcome that is more likely than not to occur. Under this criterion the most likely resolution of an uncertain tax position should be analyzed based on technical merits and on the outcome that will likely be sustained under examination.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates and assumptions are adequate, actual results could differ from the estimates and assumptions used.

 

Reclassifications

 

Certain reclassifications have been made to the accompanying condensed consolidated financial statements of prior periods to conform to the current period’s presentation.

---

 

 

3.             Acquisitions and Joint Ventures

 

Formation of Abest Power & Gas, LLC Joint Venture

 

On January 22, 2013, the Company announced its entry into the retail energy services industry with the formation of Abest Power & Gas, LLC (“Abest”), a joint venture between it and retail energy veteran Frank Rosa.  Abest is an energy services company that will supply electricity and gas to residential and commercial customers in states where deregulation has offered consumers the ability to choose their energy provider.  For the three months ended April 5, 2013, Abest was in development stage and did not have any revenues.  Abest incurred losses of $164,000 for the quarter ended April 5, 2013, of which 50% or $82,000 is attributable to noncontrolling interests in accordance with U.S. GAAP

 

Acquisition of Summit Software

 

The Company completed the Summit Acquisition on May 7, 2013 and recorded the transaction as a pooling-of-interests (Note 1). Pursuant to the terms of the agreement, we acquired certain assets and assumed certain liabilities in exchange for 21,000,000 shares of our common stock, valued at $0.65 per share or  $13.75 million, the agreed upon value of Summit’s business operations.  

 

As described above, Mr. Cassera is the sole owner of Tri-State and its affiliates and was the beneficial owner of approximately 90.6% of our outstanding shares of common stock on May 7, 2013 (giving effect to the future issuance of the share consideration in the Summit Acquisition). Because the Company and Tri-Tel were both controlled by Mr. Cassera, the acquisition was recorded using the pooling-of-interest method as required under U.S. GAAP for business combinations of entities under common control and the financial information for all periods presented reflects the financial results of the combined companies as if the acquisition had been in effect for all the reported periods.  For financial statement purposes, we have recorded the operations and effected the pooling-of-interest of Summit as if the Summit Acquisition had been completed on April 5, 2013.

 

The Company incurred acquisition related costs of $30,000 related to the Summit Acquisition during the three months ended April 5, 2013.    Condensed combined summary of operations of the Company giving effect to the pooling-of-interest method in conjunction with the Summit Acquisition for the three months ended April 5, 2013 and  March 30, 2012 are presented below:

 

 

 

---

 

 

 

 

Condensed combined balance sheets of the Company giving effect to the pooling-of-interest method in conjunction with the Summit Acquisition as of April 5, 2013 and December 28, 2012 are presented below:

 

 

---

 

   

 

Strategic Minor Acquisitions

 

The Company continues to acquire diverse smaller staffing firms and books of business to augment its growth strategy. The Company made acquisitions with purchase prices totaling $2.0 million and $425,000 for the three months ended April 5, 2013 and March 30, 2012, respectively.  The year-to-date 2013 acquisitions by TS Staffing included Personally Yours, Inc. (“Personally Yours”), based in Florida, and Temploy, Inc. (“Temploy”), whose business is concentrated in Southern California.

 

 

4.            Intangible Assets and Goodwill

 

The following table presents details of the Company’s intangible assets, estimated lives, related accumulated amortization and goodwill as of April 5, 2013 and December 28, 2012:

 

 

---

 

 

 

The Company recorded amortization expense of $269,000 and $380,000 for the three months ended April 5, 2013 and March 30, 2012, respectively. The Company’s estimated intangible asset amortization expense (based on existing intangible assets) for the fiscal years ending on the Friday closest to December 31,  for the remainder of 2013 and the full years 2014, 2015, 2016, 2017 and thereafter is $704,000, $887,000, $813,000, $704,000, $559,000 and $1,403,000, respectively.

 

The Company performed its latest annual impairment analysis as of September 28, 2012, and will continue to test for impairment annually. The Company also measures impairment, as conditions warrant, throughout the fiscal year. While no indicators of impairment were present as of September 28, 2012, in January 2012, a sales executive from ICG Inc. and 14 other sales, administration and operations personnel resigned from the Company and began operating a competing temporary placement firm.  Based on the effect of the associated decrease in revenues, the Company recorded impairment losses for goodwill of $398,000 and for customer lists and relationships and a non-competition agreement of $137,000 and $44,000, respectively, during the quarter ended March 30, 2012

 

5.            Sales of Receivables

 

The Company’s subsidiaries, other than ICG Inc. and Accountabilities, are currently participating in trade accounts receivable purchase agreements with Wells Fargo Capital Finance, an operating division of Wells Fargo Bank, N.A. (“Wells Fargo”). Accountabilities participated in a Wells Fargo agreement until June 13, 2011, when it entered into a similar trade accounts receivable purchase agreement with Amerisource Funding, Inc. (“Amerisource”).  ICG Inc. entered into a similar agreement with Amerisource on October 18, 2011.

 

As of April 5, 2013, the maximum aggregate amount of trade receivables that could be sold by our participating subsidiaries to Wells Fargo and its participating lender, Sterling National Bank, in the aggregate was $67,500,000. As collections reduce previously sold receivables, the subsidiaries may replenish these with new receivables. As of April 5, 2013 and December 28, 2012, trade receivables of $59,466,000 and $67,153,000, respectively, had been sold and remained outstanding with Wells Fargo. Amounts held for the Company’s reserve to repurchase disqualified receivables (“Collected Reserve”) and due to the Company from Wells Fargo totaling $6,473,000 and $7,388,000, were outstanding as of April 5, 2013 and December 28, 2012, respectively. Interest charged on the amount of receivables sold prior to collection is charged at an annual rate of the 90-day London Interbank Offered Rate plus 5.55% per annum. Receivables sold may not include amounts over 90 days old with the exception of certain healthcare-related receivables.

 

Under the terms of the agreements with Wells Fargo and Amerisource, with the exception of CRD permanent placement receivables, the lender advances 90% of the assigned receivables’ value upon sale, and the remaining 10%  is paid to us upon final collection. Under the terms of CRD’s agreement, Wells Fargo advances 65% of the assigned CRD permanent placement receivables’ value upon sale, with the remaining 35%  of the balance paid to us upon final collection. The aggregate amount of trade receivables from the permanent placement business that CRD may sell to Wells Fargo at any one time is $1,250,000. 

 

Interest expense charged under the Wells Fargo trade accounts receivable purchase agreements is included in interest expense in the accompanying statements of operations and amounted to $828,000 and $703,000 for the three months ended April 5, 2013 and March 30, 2012, respectively. Tri-State and Robert Cassera have guaranteed the Company’s obligations to Wells Fargo.

 

---

 

The Accountabilities and ICG Inc. agreements with Amerisource have a term of two years and a maximum borrowing amount of $7,500,000 and $4,500,000, respectively, with an advance rate of 90%. The agreements provide for an interest rate of the prime rate plus 1% (with minimum rates of 6% and 5% per annum for Accountabilities and ICG Inc., respectively) and a monthly collateral management fee of 0.65% and 0.60% of the average daily outstanding borrowings of Accountabilities and ICG Inc., respectively. As of April 5, 2013 and December 28, 2012, there were $9,670,000 and $10,488,000 of trade accounts receivable sold in the aggregate that remain outstanding.  The Amerisource Collected Reserve totaled $1,910,000 and $1,503,000  as of April 5, 2013 and December 28, 2012, respectively. The Company incurred interest on these borrowings of $311,000 and $316,000 for the three months ended April 5, 2013 and March 30, 2012, respectively.

 

The Company has not experienced any material trends in bad debt losses on assigned accounts receivables and receivables greater than 90 days old that are charged back to us under the Wells Fargo and Amerisource accounts receivables sales agreements. While the amount of assigned accounts receivables and receivables greater than 90 days old that are charged back to the Company has grown, such growth has been commensurate with the growth of our business and has not resulted in a greater percentage of bad debt losses on these assigned accounts receivables or receivables that have been charged back.

 

6.            Related Parties

 

Commencing August 2010, TS Employment began providing professional employer services to the Company. Professional employer services include payroll services, administration of employee benefits, workers compensation insurance coverage and accounts receivable collection services. These arrangements allow the Company to reduce certain insurance risks and costs. TS Employment is an affiliate of Tri-State, which is wholly-owned by Mr. Cassera. Due to the timing and payment of invoices received, the aggregate amount payable to TS Employment for such services was $13,466,000 and $9,650,000 as of April 5, 2013 and December 28, 2012, respectively.

 

The Company is charged an amount equal to the actual wages and associated payroll taxes for the employee plus an agreed upon rate for workers’ compensation and health insurance as well as an administrative fee. The total amount charged by Tri-State for the three months ended April 5, 2013 and March 30, 2012 was $186,645,000 and $139,977,000, respectively. These totals are restated to include $178,000 and $127,000 paid by Tri-Tel to TSE-PEO, Inc. (“TSE-PEO”), a Tri-State PEO company similar to TS Employment, for the three months ended April 5, 2013 and March 30, 2012, respectively.  The remainder was charged by TS Employment.  TS Employment and TSE-PEO charge the Company their current market rate for services, which is consistent with the amounts that it charges its other customers. Beginning on October 1, 2011,  the Company also received advances from, and owed other amounts to Tri-State and affiliates totaling $13,760,000 and $9,782,000 on April 5, 2013 and December 28, 2012, respectively. The amounts  owed to Tri-State are classified as related party loans payable. The principal amount increases or decreases based on periodic borrowings or repayments, and each subsidiary of the Company is charged interest at the rate of 12% per annum of their net loan payable. 

 

On March 30, 2012, the Company and TS Employment entered into an agreement to convert $12,000,000 of this loan payable into 25,962,788 shares of common stock, at a value per share of $0.4622. Additionally, on July 31, 2012, the Company and TS Employment agreed to convert an additional $2,100,000 of this loan into 4,543,488 shares of the common stock, at a value per share of $0.4622.  These conversions are reflected in the loan payable—related party balance, after giving effect to the conversions noted above as of April 5, 2013 and December 28, 2012.  The Company recognized $358,000 and $338,000 of related party interest expense for the three months ended April 5, 2013 and March 30, 2012, respectively.

 

 

---

 

 

7.            Debt

 

Debt as of April 5, 2013 and December 28, 2012 is summarized as follows:

 

 

The Rosenthal Agreement represented an earn out payment stream that was accounted for as a contingent purchase price and was based on the estimated projected revenues of ICG Inc. for the five years ending December 14, 2015.  Neither agreement contemplated any future services from Rosenthal. Pursuant to the Rosenthal Agreement, ICG Inc. was obligated to pay to Rosenthal 3% of cash receipts on its net sales for two years, and 2% of its net sales for the three year period thereafter.  The Company originally estimated the value of the payments under the Rosenthal Agreement to be $3,458,000. 

In January 2012, a sales executive from ICG Inc. and 14 other sales, administrative and operations personnel resigned from the Company and began to operate a competing temporary placement firm that the Company expects will affect ICG Inc.’s light industrial business for the foreseeable future.   Accordingly, the Company reduced the estimate of the liabilities related to the payment provisions of Rosenthal Agreement by $713,000 due to the facts described above in the three months ended March 30, 2012  In August 2012 the Company and Rosenthal renegotiated the payment terms with the Company agreeing to pay 1.5% of cash receipts on its net sales through September 7, 2013 and 1.0% of net sales through September 8, 2019.  The remaining liability to Rosenthal as of April 5, 2013 is $1,260,000 with approximately $228,000 estimated to be payable by April 4, 2014.  While the renegotiation changed the timing of the estimated payments it did not materially change the estimated total amount due.

---

 

Additionally, on the Closing Date ICG Inc. entered into a non-competition agreement with the former owner of ICG Seller and its members, pursuant to which ICG Inc. was obligated to pay 1% of its net sales for two years. The Company originally estimated the value of these payments to be $533,000 and reduced this estimate by $53,000 due to the facts described above in the first fiscal quarter of 2012. In August 2012, the Company also renegotiated these payment terms and agreed to pay 0.5% of net sales through August 25, 2013.  The remaining liability to the former owner at April 5, 2013 is $52,000, all of which is payable by April 4, 2014.

Payments aggregating $103,000 were paid against the debt incurred as part of ICG Acquisition during the three months ended April 5, 2013.

 

Additionally in fiscal year 2012, the Company made three acquisitions that required $1,585,000 in future payments based on net sales, which has been accounted for as long term debt.  The Company also paid $450,000 for customer lists and incurred $100,000 of long term debt.  The Company made $173,000 in payments against these debts in the three months ended April 5, 2013.

 

 

 

 

8.            Stock-Based Compensation

 

Compensation expense is measured using the grant-date fair value of the shares or options granted and is recognized on a straight-line basis over the instruments required vesting period. For shares vesting immediately, compensation expense is recognized on the date of grant. Fair value is determined by a valuation report of an independent appraiser or at a discount from the current market price quote to reflect lack of liquidity resulting from the restricted status and low trading volume.

 

During the three months ended April 5, 2013,  the Company issued 300,000 shares of its  common stock under the terms of a business advisory agreement (the “Advisory Agreement”), 200,000 shares of common stock were granted to a former officer of the Company in settlement of a termination agreement and 175,000 shares of common stock were granted to four employees in lieu of bonuses.  In addition, 286,000 of the options the Company granted under the Advisory Agreement in the fourth quarter of 2012 vested.  Under the terms of the Advisory Agreement options to purchase 1,000,000 shares of common stock were granted and vest from October 2012 to December 2013.  In addition, during the first quarter of 2013, the Company granted an officer of the Company options to purchase up to 600,000 shares of common stock that vest over three years and an employee of the Company was granted options to purchase 75,000 shares of common stock, of which 50,000 options vested immediately (in lieu of previously vested restricted shares that were previously cancelled) and 25,000 options that will vest in one year.

 

As a result of these grants, the Company recorded  $18,000 of stock compensation costs for the three months ended April 5, 2013 compared to $45,000 for the three months ended March 30, 2012.  As of April 5, 2013, unvested options to purchase 1,083,000 shares

---

 

of common stock were outstanding for which the Company will record a related expense of $62,000 over the remaining vesting periods.

 

9.            Supplemental Disclosure of Cash Flow Information

 

 

 

 

10.            Commitments and Contingencies

 

Accounts Receivable

 

In connection with the Company’s sale of its trade receivables it is contingently liable to repurchase,  at the sole discretion of Wells Fargo and Amerisource, any receivables that are 90 days past due,  with the exception of accounts related to the healthcare industry, because they are slow payers due to reimbursement cycles. Accordingly, the Company repurchases any healthcare industry related receivables that are 120 days past due. The Company provides an estimated allowance for doubtful accounts to address this contingency.

 

Lease Commitments

 

At December 28, 2012, the Company had operating leases, primarily for office premises, expiring at various dates through February 2017. Future minimum rental commitments under operating leases are as follows:

 

Employment Agreements

 

The Company has employment agreements with certain key members of management, requiring mutual termination notice periods of up to 60 days. These agreements provide those employees with a specified severance amount in the event the employee is terminated without good cause as defined in the applicable agreement.

 

Legal Proceedings

 

---

 

From time to time, the Company is involved in litigation incidental to its business including employment practices claims. There is currently no litigation that management believes will have a material impact on the financial position of the Company.

 

11.            Subsequent Events

 

On April 18, 2013 the Company announced that it will consolidate and re-brand its operating units under the Corporate Resource Services brand name.  The Company believes that branding the organization as one entity and consolidating its service offerings under one brand will enable it to better leverage the scale and breadth of its growth over the past three years and expected future growth.  Additionally, the Company intends to continue to build a national organization so that we may realize greater operational efficiencies, enhance our market presence and increase overall profitability.  Over the course of the next several months, the Company’s subsidiaries - TS Staffing, Diamond Staffing, Accountabilities, CRD and ICG Inc. - will be rebranded as Corporate Resource Services. In addition, Insurance Overload will begin to provide insurance staffing services under the brand Corporate Resource Services Insurance Overload Staffing.

 

On May 8, 2013 the Company filed a Schedule 14C Information Request as a preliminary proxy statement in order to facilitate a shareholder vote to increase our authorized shares of common stock from 145,000,000 shares to 185,000,000 shares by amending and restating the Company’s Certificate of Incorporation.  The increase was necessary to facilitate the completion of the Summit Acquisition (see Note 3) and to provide for future issuances of common stock.  Summit is a software provider focused on the PEO industry with more than 270 PEO’s and staffing clients, and provides hosting services for many companies who are transitioning to a cloud computing environment.  

 

The Company did not identify any further subsequent events that required additional disclosure or adjustments in our financial statements through the date the financial statements were available to be issued.