ý
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended June 30, 2008
|
|
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
11-3255619
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
195
Route 9 South, Suite 109
Manalapan,
New Jersey 07726
|
||
(Address
of principal executive offices)
|
||
(732)
333-3622
|
||
(Registrant’s
telephone number, including area code)
|
||
Securities
registered under Section 12(b) of the Exchange Act: Not
Applicable
|
||
Securities
registered under Section 12(g) of the Exchange Act:
|
||
Common
Stock, $.0001 par value
|
||
(Title
of class)
|
Large
Accelerated Filer o
|
Accelerated
Filer o
|
|
Non
- Accelerated Filer o
|
Smaller
Reporting Company x
|
Item
1. - Financial Statements (Unaudited)
|
|
Balance
Sheets as of June 30, 2008 and September 30, 2007
|
3
|
Statements
of Operations for the Three and Nine Months Ended June 30, 2008 and
2007
|
4
|
Statement
of Stockholders’ Equity for the Nine Months Ended June 30,
2008
|
5
|
Statements
of Cash Flows for the Nine Months Ended June 30, 2008 and
2007
|
6
|
Notes
to Financial Statements
|
7
|
Item
2. - Management’s Discussion and Analysis of Financial Condition and
Results of Operations
|
15
|
Item
3. - Quantitative and Qualitative Disclosure about Market
Risks
|
27
|
Item
4. - Controls and Procedures
|
27
|
Item
1. - Legal Proceedings
|
27
|
Item
1A. - Risk Factors
|
28
|
Item
2. - Unregistered Sales of Equity Securities and Use of
Proceeds
|
28
|
Item
3. - Defaults upon Senior Securities
|
28
|
Item
4. - Submission of Matters to a Vote of Security Holders
|
28
|
Item
5. - Other Information
|
28
|
Item
6. - Exhibits
|
28
|
Signatures
|
29
|
June
30,
|
September
30,
|
|||||||
2008
|
2007
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
|
$
|
89,000
|
$
|
137,000
|
||||
Accounts
receivable – less allowance for doubtful accounts of $523,000 and
$338,000, respectively
|
1,105,000
|
224,000
|
||||||
Due
from financial institution
|
123,000
|
134,000
|
||||||
Unbilled
receivables
|
212,000
|
1,182,000
|
||||||
Prepaid
expenses
|
366,000
|
268,000
|
||||||
Due
from related party
|
76,000
|
51,000
|
||||||
Total
current assets
|
1,971,000
|
1,996,000
|
||||||
Property
and equipment, net
|
344,000
|
149,000
|
||||||
Other
assets
|
9,000
|
34,000
|
||||||
Intangible
assets, net
|
1,506,000
|
2,023,000
|
||||||
Goodwill
|
3,332,000
|
4,617,000
|
||||||
Total
assets
|
$
|
7,162,000
|
$
|
8,819,000
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued liabilities
|
$
|
1,365,000
|
$
|
1,348,000
|
||||
Accrued
wages and related obligations
|
1,515,000
|
1,367,000
|
||||||
Current
portion of long-term debt
|
437,000
|
691,000
|
||||||
Current
portion of related party long-term debt
|
985,000
|
1,647,000
|
||||||
Due
to related party
|
61,000
|
169,000
|
||||||
Total
current liabilities
|
4,363,000
|
5,222,000
|
||||||
Long
term debt, net of current portion
|
341,000
|
450,000
|
||||||
Related
party long-term debt, net of current portion
|
1,212,000
|
2,440,000
|
||||||
Acquisition
related contingent liability
|
193,000
|
257,000
|
||||||
Total
liabilities
|
6,109,000
|
8,369,000
|
||||||
Commitments
and contingencies (Note 10)
|
||||||||
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; 23,857,000 and
17,469,000 shares issued and outstanding as of June 30, 2008 and September
30, 2007, respectively
|
2,000
|
2,000
|
||||||
Additional
paid-in capital
|
3,195,000
|
1,735,000
|
||||||
Accumulated
deficit
|
(2,144,000
|
)
|
(1,287,000
|
)
|
||||
Total
stockholders’ equity
|
1,053,000
|
450,000
|
||||||
Total
liabilities and stockholders’ equity
|
$
|
7,162,000
|
$
|
8,819,000
|
||||
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
|
Ended
|
|||||||||||||||
June
30,
2008
|
June
30,
2007
|
June
30,
2008
|
June
30,
2007
|
|||||||||||||
Revenue
|
$ | 15,889,000 | $ | 16,241,000 | $ | 49,780,000 | $ | 40,710,000 | ||||||||
Direct
cost of services
|
13,442,000 | 13,410,000 | 41,833,000 | 33,929,000 | ||||||||||||
Gross
profit
|
2,447,000 | 2,831,000 | 7,947,000 | 6,781,000 | ||||||||||||
Selling,
general and administrative expenses *
|
2,182,000 | 2,493,000 | 7,528,000 | 6,126,000 | ||||||||||||
Depreciation
and amortization
|
116,000 | 106,000 | 341,000 | 214,000 | ||||||||||||
Income
from operations
|
149,000 | 232,000 | 78,000 | 441,000 | ||||||||||||
Interest
expense
|
144,000 | 246,000 | 687,000 | 633,000 | ||||||||||||
Loss
on goodwill impairment
|
- | - | 148,000 | - | ||||||||||||
Net
loss on debt extinguishments
|
- | - | 100,000 | - | ||||||||||||
Net
income (loss)
|
$ | 5,000 | $ | (14,000 | ) | $ | (857,000 | ) | $ | (192,000 | ) | |||||
Net
income (loss) per share:
|
||||||||||||||||
Basic
|
$ | 0.00 | $ | 0.00 | $ | (0.04 | ) | $ | (0.01 | ) | ||||||
Diluted
|
$ | 0.00 | $ | 0.00 | $ | (0.04 | ) | $ | (0.01 | ) | ||||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
21,582,000 | 16,530,000 | 19,165,000 | 15,079,000 | ||||||||||||
Diluted
|
22,045,000 | 16,530,000 | 19,165,000 | 15,079,000 | ||||||||||||
Nine
Months Ended
|
||||
June
30, 2008
|
||||
Common
Stock – Shares:
|
||||
Balance
at beginning of period
|
17,469,000 | |||
Debt
conversions to restricted common stock
|
2,194,000 | |||
Stock-based
compensation relating to restricted common stock, net of
forfeitures
|
1,402,000 | |||
Issuance
of restricted common stock to employees and directors for
cash
|
1,108,000 | |||
Issuance
of restricted common stock to related party for cash and cancellation of
outstanding invoices
|
1,400,000 | |||
Private
placement to independent third parties
|
284,000 | |||
Balance
at end of period
|
23,857,000 | |||
Common
Stock – Par Value:
|
||||
Balance
at beginning of period
|
$ | 2,000 | ||
- | ||||
Balance
at end of period
|
$ | 2,000 | ||
Additional
Paid-In Capital:
|
||||
Balance
at beginning of period
|
$ | 1,735,000 | ||
Debt
conversions to restricted common stock
|
622,000 | |||
Stock-based
compensation relating to restricted common stock
|
250,000 | |||
Issuance
of restricted common stock to employees and directors for
cash
|
221,000 | |||
Issuance
of restricted common stock to related party for cash and cancellation of
outstanding invoices
|
280,000 | |||
Private
placement to independent third parties
|
87,000 | |||
Balance
at end of period
|
$ | 3,195,000 | ||
Accumulated
Deficit
|
||||
Balance
at beginning of period
|
$ | (1,287,000 | ) | |
Net
loss
|
(857,000 | ) | ||
Balance
at end of period
|
$ | (2,144,000 | ) | |
Nine
Months Ended
|
||||||||
June
30,
|
June
30,
|
|||||||
2008
|
2007
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$
|
(857,000
|
)
|
$
|
(192,000
|
)
|
||
Adjustments
to reconcile net loss to cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
341,000
|
214,000
|
||||||
Stock-based
compensation
|
250,000
|
12,000
|
||||||
Bad
debt expense
|
184,000
|
127,000
|
||||||
Loss
on goodwill impairment
|
148,000
|
-
|
||||||
Net
loss on debt extinguishments
|
100,000
|
-
|
||||||
Amortization
of discount on long-term debt
|
18,000
|
-
|
||||||
Common
stock issued for fees
|
-
|
67,000
|
||||||
Changes
in operating assets and liabilities, net of effect of
acquisitions:
|
||||||||
Trade
accounts receivable
|
(95,000
|
)
|
(381,000
|
)
|
||||
Due
from financial institution
|
11,000
|
310,000
|
||||||
Prepaid
expenses
|
(98,000
|
)
|
(49,000
|
)
|
||||
Due
from related party
|
(108,000
|
)
|
(14,000
|
)
|
||||
Other
assets
|
25,000
|
(2,000
|
)
|
|||||
Accounts
payable and accrued liabilities
|
369,000
|
268,000
|
||||||
Net
cash provided by operating activities
|
288,000
|
360,000
|
||||||
Cash
flows from investing activities:
|
||||||||
Purchase
of property and equipment
|
(246,000
|
)
|
(56,000
|
)
|
||||
Acquisitions
|
-
|
(533,000
|
)
|
|||||
Net
cash used in investing activities
|
(246,000
|
)
|
(589,000
|
)
|
||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from issuance of long-term debt
|
-
|
50,000
|
||||||
Principal
payments on long-term debt
|
(173,000
|
)
|
(177,000
|
)
|
||||
Proceeds
from issuance of long-term debt – related parties
|
62,000
|
385,000
|
||||||
Principal
payments on long-term debt – related parties
|
(452,000
|
)
|
(403,000
|
)
|
||||
Payments
on contingent acquisition related liability
|
(64,000
|
)
|
(162,000
|
)
|
||||
Proceeds
from issuance of common stock
|
537,000
|
720,000
|
||||||
Net
cash (used in) provided by financing activities
|
(90,000
|
)
|
413,000
|
|||||
Change
in cash
|
(48,000
|
)
|
184,000
|
|||||
Cash
at beginning of period
|
137,000
|
8,000
|
||||||
Cash
at end of period
|
$
|
89,000
|
$
|
192,000
|
||||
3.
|
Net
Income (Loss) per Share
|
Three
Months Ended
|
Three
Months Ended
|
Nine
Months Ended
|
Nine
Months Ended
|
|||||||||||||
June
30, 2008
|
June
30, 2007
|
June
30, 2008
|
June
30, 2007
|
|||||||||||||
Net
income (loss)
|
$ | 5,000 | $ | (14,000 | ) | $ | (857,000 | ) | $ | (192,000 | ) | |||||
Basic:
|
||||||||||||||||
Weighted average shares
|
21,582,000 | 16,530,000 | 19,165,000 | 15,079,000 | ||||||||||||
Diluted:
|
||||||||||||||||
Weighted average shares
|
21,582,000 | 16,530,000 | 19,165,000 | 15,079,000 | ||||||||||||
Potentially
dilutive shares
|
463,000 | - | - | - | ||||||||||||
Total
dilutive shares
|
22,045,000 | 16,530,000 | 19,165,000 | 15,079,000 | ||||||||||||
Net
income (loss) per share:
|
||||||||||||||||
Basic
|
$ | 0.00 | $ | 0.00 | $ | (0.04 | ) | $ | (0.01 | ) | ||||||
Diluted
|
$ | 0.00 | $ | 0.00 | $ | (0.04 | ) | $ | (0.01 | ) |
Property
and equipment
|
$
|
5,000
|
||
Non-competition
agreement
|
81,000
|
|||
Accounts
receivable
|
200,000
|
|||
Customer
lists and relationships
|
1,199,000
|
|||
Goodwill
|
1,889,000
|
|||
Total
assets acquired
|
3,374,000
|
|||
Accrued
liabilities
|
62,000
|
|||
Total
purchase price
|
$
|
3,312,000
|
||
Nine
Months Ended
|
Nine
Months Ended
|
|||||||
June
30, 2008
|
June
30, 2007
|
|||||||
Revenue
|
$ | 49,780,000 | $ | 49,027,000 | ||||
Net
loss
|
$ | (857,000 | ) | $ | (380,000 | ) | ||
Basic
and diluted loss per share
|
$ | (0.04 | ) | $ | (0.02 | ) | ||
As
of June 30, 2008
|
As
of September 30, 2007
|
|||||||||||||||||||||||
Accumulated
|
Accumulated
|
|||||||||||||||||||||||
Gross
|
Amortization
|
Net
|
Gross
|
Amortization
|
Net
|
|||||||||||||||||||
Customer
lists and relationships (7 years)
|
$
|
2,007,000
|
$
|
(554,000
|
)
|
$
|
1,453,000
|
$
|
2,269,000
|
$
|
(325,000
|
)
|
$
|
1,944,000
|
||||||||||
Non-competition
agreements (3
years)
|
111,000
|
(58,000
|
)
|
53,000
|
110,000
|
(31,000
|
)
|
79,000
|
||||||||||||||||
Total
|
$
|
2,118,000
|
$
|
(612,000
|
)
|
$
|
1,506,000
|
$
|
2,379,000
|
$
|
(356,000
|
)
|
$
|
2,023,000
|
||||||||||
Goodwill
(indefinite life)
|
$
|
3,332,000
|
$
|
3,332,000
|
$
|
4,617,000
|
$
|
4,617,000
|
||||||||||||||||
Goodwill
as of September 30, 2007
|
$ | 4,617,000 | ||
ReStaff
purchase price adjustment
|
(1,398,000 | ) | ||
Final
valuation of ReStaff intangible assets
|
261,000 | |||
Impairment
|
(148,000 | ) | ||
Goodwill
as of June 30, 2008
|
$ | 3,332,000 |
6.
|
Long-Term
Debt
|
June
30,
|
September
30,
|
|||||||
2008
|
2007
|
|||||||
Long-term
debt
|
||||||||
16.25%
subordinated note (i)
|
$ | 102,000 | $ | 93,000 | ||||
3%
convertible subordinated note (ii)
|
464,000 | 527,000 | ||||||
18%
unsecured note (iii)
|
80,000 | 80,000 | ||||||
Long
term capitalized consulting obligations (v)
|
57,000 | 159,000 | ||||||
Long
term capitalized lease obligation (xiv)
|
25,000 | - | ||||||
10%
convertible subordinated note (xiii)
|
- | 232,000 | ||||||
Other
debt
|
50,000 | 50,000 | ||||||
Total
|
778,000 | 1,141,000 | ||||||
Less
current maturities
|
437,000 | 691,000 | ||||||
Non-current
portion
|
341,000 | 450,000 | ||||||
Related
party long-term debt
|
||||||||
13%
unsecured demand note (iv)
|
104,000 | 101,000 | ||||||
Long
term capitalized consulting obligations (vi)
|
24,000 | 46,000 | ||||||
12%
unsecured convertible note (vii)
|
100,000 | 270,000 | ||||||
Demand
loans (viii)
|
83,000 | 30,000 | ||||||
6%
unsecured note (ix)
|
100,000 | 300,000 | ||||||
6%
unsecured note (x)
|
1,677,000 | 2,846,000 | ||||||
9%
unsecured note (xi)
|
109,000 | 210,000 | ||||||
Unsecured
loan (xii)
|
- | 284,000 | ||||||
Total
|
2,197,000 | 4,087,000 | ||||||
Less
current maturities
|
985,000 | 1,647,000 | ||||||
Non-current
portion
|
1,212,000 | 2,440,000 | ||||||
Total
long-term debt
|
2,975,000 | 5,228,000 | ||||||
Less
current maturities
|
1,422,000 | 2,338,000 | ||||||
Total
non-current portion
|
$ | 1,553,000 | $ | 2,890,000 | ||||
Nonvested
Shares
|
Shares
|
Weighted-Average
Grant-Date
Fair Value
|
||||||
Nonvested
at October 1, 2007
|
585,000 | $ | 0.34 | |||||
Granted
|
1,403,000 | $ | 0.30 | |||||
Vested
|
(298,000 | ) | $ | 0.32 | ||||
Forfeited
|
(1,000 | ) | $ | 0.30 | ||||
Nonvested
at June 30, 2008
|
1,689,000 | $ | 0.31 | |||||
Nine
Months Ended
|
Nine
Months Ended
|
|||||||
June
30,
|
June
30,
|
|||||||
2008
|
2007
|
|||||||
Cash
paid for interest
|
$
|
590,000
|
$
|
567,000
|
||||
Non-cash
investing and financing activities:
|
||||||||
ReStaff
Acquisition: issuance of restricted common stock
|
307,000
|
|||||||
Restricted
common stock issued to satisfy Humana Businesses’
liabilities
|
89,000
|
|||||||
Restricted
common stock issued for future services
|
66,000
|
|||||||
ReStaff
Acquisition purchase price adjustment and debt reduction
|
1,398,000
|
|||||||
Debt
converted to restricted common stock at fair value
|
622,000
|
|||||||
Stock-based
compensation
|
250,000
|
12,000
|
||||||
Capital
lease obligation for computer equipment
|
33,000
|
|||||||
Note
receivable outstanding for restricted common stock issued
|
25,000
|
|||||||
Issuance
of shares for related-party outstanding invoices
|
26,000
|
|||||||
$
|
2,944,000
|
$
|
1,041,000
|
▪
|
CPA Partner on Premise
Program
|
▪
|
Staffing
Abilities
|
|
▪
|
National
Recruiting Center – Through our national recruiting center, we receive and
complete job orders for candidates for any market in the
U.S. Through this center, we also obtain overflow orders from
our CPA firm affiliates and orders outside of their designated area, with
a targeted split fee of 50/50, thereby further capitalizing on our CPA
firm relationships, but at higher margins than those derived through our
Partner on Premise agreements.
|
|
▪
|
Job
Board – Through our job board AccountingEmployees.com, we are able to
capitalize on one of the fastest growing segments of the staffing
industry. CPA members post jobs for free while all other
postings are fee based.
|
|
▪
|
Management
believes that the CPA Partner on Premise sales and marketing agreements
represents a significant marketing differentiator to our current and
potential clients in that the services are associated with the trusted
name of known regional public accounting firms, and represents an
important part of our strategy of growing our Direct Professional Services
offering. In recognition of this, we are continuing to invest
in efforts to support the identification and procurement of additional CPA
firm affiliates nationwide, as well as investing in the continued
improvement and refinement of our operations and general and
administrative
|
|
▪
|
A
significant component of our growth to date has come through
acquisitions. Management continues to invest resources in
activities to seek, complete and integrate acquisitions that enhance
current service offerings and effectively assimilate into our CPA Partner
on Premise marketing and sales strategy. Additionally,
management seeks acquisitions in desired geographical markets and which
have minimal costs and risks associated with
integration. Management believes that effectively acquiring
businesses with these attributes will be critical to carrying out our
strategy of capitalizing on the CPA Partner on Premise Program and other
sales and marketing initiatives.
|
|
▪
|
Our
success depends on our ability to provide our clients with highly
qualified and experienced personnel who possess the skills and experience
necessary to satisfy their needs. Such individuals are in great
demand, particularly in certain geographic areas, and are likely to remain
a limited resource for the foreseeable future. Management is
responding to this demand through proactive recruiting efforts, targeted
marketing, the use of our job board, AccountingEmployees.com, and the
continued expansion of the CPA Partner on Premise Program which management
believes is also an attractive differentiator to prospective
candidates.
|
|
▪
|
We
have financed our growth largely through the issuance of debt and have
incurred negative working capital. As of June 30, 2008 we had
negative working capital of ($2,392,000), for which the component
constituting the current portion of long term debt was
$1,422,000. Total outstanding debt as of June 30, 2008 was
$2,975,000, $427,000 of which is past due or due upon demand, whereas
$1,677,000 of which is subject to proportionate reduction in the event the
associated acquired businesses for which the debt was issued do not
produce agreed upon levels of profitability. In order to
service our debt, maintain our current level of operations, as well as
fund the increased costs of becoming a reporting company and our growth
initiatives, we must be able to generate sufficient amounts of cash flow
and working capital. Management is engaged in several
activities, as explained further in the Working Capital section below, to
effectively accomplish these
objectives.
|
|
▪
|
As
a result of becoming a fully reporting public company, we will experience
increases in certain general and administrative expenses to comply with
the laws and regulations applicable to public companies. These laws and
regulations include the provisions of the Sarbanes-Oxley Act of 2002 and
the rules of the Securities and Exchange Commission and the Nasdaq Stock
Market. To comply with the corporate governance and operating
requirements of being a public company, we will incur increases in such
items as personnel costs, professional services fees, and fees for
independent directors.
|
▪
|
Stratus Services Group, Inc.
Offices Acquisition (“Stratus Acquisition”). In November
2005, we acquired the operations of three general staffing offices from
Stratus Services Group, Inc. in exchange for certain future earn-out
payments.
|
▪
|
US Temp Services, Inc. Offices
Acquisition (“US Temp Acquisition”). On March 31, 2006,
we acquired the operations, including five general staffing offices, of US
Temp Services, Inc. in exchange for cash, notes and shares of our common
stock.
|
▪
|
ReStaff Services, Inc. Offices
Acquisition (“ReStaff Acquisition”). On February 26,
2007, we acquired the operations, including three general staffing
offices, of ReStaff Services, Inc. in exchange for, cash, notes and shares
of our common stock.
|
|
a)
|
In
October 2007, we entered into forbearance agreements with respect to
$286,000 of the $427,000 past due. These short term debt
holders have agreed to waive defaults and refrain from exercising their
rights and remedies against us until October 31, 2008, in exchange for an
increased interest rate,
|
|
b)
|
As
explained further below, pursuant to the agreement with the former owner
of ReStaff, we have successfully negotiated a reduction of $1,398,000 in
the purchase price of ReStaff. The reduction in the purchase price was
accomplished through the restructuring of the remaining indebtedness to
the former owner of ReStaff and the issuance of 250,000 shares of
restricted common stock valued at $50,000 on the restructuring
date. Notes payable with outstanding principal balances of
$3,090,000 and related accrued interest of $158,000 were exchanged for two
new notes. One of the new notes issued is subject to
proportionate reduction in principal in the event the acquired operations
generate less than $1,000,000 in net income (as defined in the asset
purchase agreement) in any year during the term of the
note.
|
|
c)
|
In
January 2008 the holder of the $250,000, 10% convertible subordinate note
issued in August 2007, as described in (xiii) of the section
captioned “Debt” below, agreed to exchange the note and accrued interest
for 744,031 shares of common stock and warrants to purchase 100,000 shares
of common stock at $0.50,
|
|
d)
|
In
January 2008 the holder of the $280,000, 12% unsecured convertible note
issued April 1, 2006, as described in (vii) of the section
captioned “Debt” below, agreed to exchange $100,000 of the outstanding
principal for 600,000 shares of common
stock.
|
|
e)
|
In
March, 2008 the related party described in (xii) of the section captioned
“Debt” below agreed to exchange $120,000 of outstanding principal on the
note for 600,000 shares of common
stock.
|
|
f)
|
During
the second quarter of 2008 we issued 1,107,500 shares of restricted common
stock to certain employees and directors at a price of $0.20 per share
raising gross proceeds of $221,500.
|
|
g)
|
In
January 2008 we commenced a private offering to sell up to $200,000
of common stock and warrants, at
no
|
|
h)
|
In
December 2007 we retained an outside financial advisory and investment
banking firm to advise and assist us in raising
capital. Through June 30, 2008 we have completed the planning
phase and we are actively pursuing the raising of
capital.
|
|
i)
|
In
May 2008 we issued 184,000 shares of restricted common stock in a private
placement offering to independent third parties at a price of $0.28 per
share, raising gross proceeds of
$51,500.
|
|
j)
|
In
May 2008 we sold 1,000,000 shares of restricted common stock for a
$200,000 non-interest bearing note with the related party described in
(xii) of the section captioned “Debt” below. The $0.20 offering
price represented a 25% discount from the market price. As of June 30,
2008, $25,000 remained outstanding on the
note.
|
|
k)
|
We
are aggressively managing cash and expenses, including the increased costs
of becoming a reporting company, 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 becoming a reporting company,
and
|
|
l)
|
We
are continuing our efforts at expanding our higher margin professional
services.
|
June
30,
|
September
30,
|
|||||||
2008
|
2007
|
|||||||
Long-term
debt
|
||||||||
16.25%
subordinated note (i)
|
$ | 102,000 | $ | 93,000 | ||||
3%
convertible subordinated note (ii)
|
464,000 | 527,000 | ||||||
18%
unsecured note (iii)
|
80,000 | 80,000 | ||||||
Long
term capitalized consulting obligations (v)
|
57,000 | 159,000 | ||||||
Long
term capitalized lease obligation (xiv)
|
25,000 | - | ||||||
10%
convertible subordinated note (xiii)
|
- | 232,000 | ||||||
Other
debt
|
50,000 | 50,000 | ||||||
Total
|
778,000 | 1,141,000 | ||||||
Less
current maturities
|
437,000 | 691,000 | ||||||
Non-current
portion
|
341,000 | 450,000 | ||||||
Related
party long-term debt
|
||||||||
13%
unsecured demand note (iv)
|
104,000 | 101,000 | ||||||
Long
term capitalized consulting obligations (vi)
|
24,000 | 46,000 | ||||||
12%
unsecured convertible note (vii)
|
100,000 | 270,000 | ||||||
Demand
loans (viii)
|
83,000 | 30,000 | ||||||
6%
unsecured note (ix)
|
100,000 | 300,000 | ||||||
6%
unsecured note (x)
|
1,677,000 | 2,846,000 | ||||||
9%
unsecured note (xi)
|
109,000 | 210,000 | ||||||
Unsecured
loan (xii)
|
- | 284,000 | ||||||
Total
|
2,197,000 | 4,087,000 | ||||||
Less
current maturities
|
985,000 | 1,647,000 | ||||||
Non-current
portion
|
1,212,000 | 2,440,000 | ||||||
Total
long-term debt
|
2,975,000 | 5,228,000 | ||||||
Less
current maturities
|
1,422,000 | 2,338,000 | ||||||
Total
non-current portion
|
$ | 1,553,000 | $ | 2,890,000 | ||||
Item
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISKS
|
Item
4.
|
CONTROLS
AND PROCEDURES
|
Part
II
|
Other
Information
|
Item
1.
|
Legal
Proceedings
|
Item
1A.
|
Risk
Factors
|
Item
3.
|
Defaults
Upon Senior Securities
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
Item
5.
|
Other
Information
|
Item
6
|
Exhibits
|
Number
|
Description
|
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
|
|
10.43
|
Stock
Purchase Agreement dated May 15, 2008 between Accountabilities, Inc. and
Tri-State Employment Services, Inc.
|
10.44
|
Form
of Stock Purchase Agreement utilized in connection with May, 2008 Private
Placement
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act
of 2002
|
31.2
|
Certification
of Chief Financial 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
|
ACCOUNTABILITIES, INC. | |||
Date:
August 14, 2008
|
By:
|
/s/ Jeffrey J. Raymond | |
Name: Jeffrey J. Raymond | |||
Title: Chief Executive Officer | |||
Date:
August 14, 2008
|
By:
|
/s/ Stephen DelVecchia | |
Name: Stephen DelVecchia | |||
Title: Chief Financial Officer | |||