Global Employment (GEYH) 10-Q 2009 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2008

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission file number: 000-51737

GLOBAL EMPLOYMENT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	43-2069359
(State of Incorporation)	(IRS Employer Identification No.)
10375 Park Meadows Drive, Suite 375
Lone Tree, Colorado	80124
(Address of principal executive offices)	(Zip Code)

(303) 216-9500
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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. Yesþ Noo.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer:o Accelerated filer:o Non-accelerated filer:þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

At March 30, 2008, the total number of outstanding shares of our Common Stock ($.001 par value) was 10,548,330.

GLOBAL EMPLOYMENT HOLDINGS, INC.
Index

PART I — FINANCIAL INFORMATION
Item 1 — Consolidated Condensed Financial Statements (unaudited)
Unaudited Consolidated Condensed Balance Sheets at March 30, 2008 and December 30, 2007	F-1
Unaudited Consolidated Condensed Statements of Operations for the three months ended March 30, 2008 and April 1, 2007	F-2
Unaudited Consolidated Condensed Statement of Changes in Stockholders’ Equity for the three months ended March 30, 2008	F-3
Unaudited Consolidated Condensed Statements of Cash Flows for the three months ended March 30, 2008 and April 1, 2007	F-4
Notes to Unaudited Consolidated Condensed Financial Statements	F-5
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3 — Quantitative and Qualitative Disclosures about Market Risk	7
Item 4 — Controls and Procedures	7
PART II — OTHER INFORMATION
Item 1 — Legal Proceedings	8
Item 1A — Risk Factors	8
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds	9
Item 3. Defaults Upon Senior Securities	9
Item 4. Submission Of Matters To A Vote Of Security Holders	9
Item 5. Other Information	9
Item 6. Exhibits	9
Signatures	10
Exhibits	11
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

GLOBAL EMPLOYMENT HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

	March			December
	2008			2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	18,000		$	330,000
Accounts receivable, net		28,289,000			27,784,000
Deferred income taxes		1,838,000			1,809,000
Prepaid expenses and other current assets		2,286,000			2,344,000
Total current assets		32,431,000			32,267,000
Property and equipment, net		2,551,000			2,040,000
Deferred income taxes		8,642,000			8,406,000
Other assets, net		1,743,000			1,823,000
Intangibles, net		4,944,000			5,463,000
Goodwill		19,487,000			19,487,000
Total assets	$	69,798,000		$	69,486,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Bank overdrafts	$	1,484,000		$	1,220,000
Accounts payable		277,000			343,000
Accrued liabilities		25,031,000			23,737,000
Current portion of long-term debt — credit facility		3,522,000			9,375,000
Line of credit		8,079,000			6,735,000
Total current liabilities		38,393,000			41,410,000
Other long-term liabilities		1,025,000			601,000
Warrant and conversion liability		4,963,000			5,568,000
Warrant and conversion liability due to related parties		197,000			222,000
Long-term debt — credit facility		2,221,000			—
Long-term debt — convertible notes, net		15,223,000			14,731,000
Long-term debt — convertible notes, due to related parties, net		1,413,000			1,383,000
Mandatorily redeemable preferred stock, net		5,235,000			4,588,000
Total liabilities		68,670,000			68,503,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Series A preferred stock, $.001 par value, 10,000,000 authorized shares designated, 12,750 issued and outstanding in 2008 and 2007. Included above under mandatorily redeemable preferred stock, net
Common stock, $.001 par value, 40,000,000 shares authorized; 10,555,010 issued, 10,548,330 outstanding in 2008 and 2007		1,000			1,000
Treasury Stock, at cost, 6,680 shares in 2008 and 2007		—			—
Additional paid in capital		33,732,000			33,418,000
Accumulated deficit		(32,605,000	)		(32,436,000	)
Total stockholders’ equity		1,128,000			983,000
Total liabilities and stockholders’ equity	$	69,798,000		$	69,486,000

The accompanying notes are an integral part of these consolidated condensed financial statements.

F-1

GLOBAL EMPLOYMENT HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

	Three months ended
	March			March
	2008			2007
REVENUES, net	$	46,018,000		$	36,621,000
COST OF SERVICES		34,884,000			26,444,000
GROSS PROFIT		11,134,000			10,177,000
OPERATING EXPENSES
Selling, general and administrative		9,278,000			8,717,000
Depreciation and amortization		758,000			343,000
Total operating expenses		10,036,000			9,060,000
OPERATING INCOME		1,098,000			1,117,000
OTHER INCOME (EXPENSE)
Interest expense:
Other interest expense, net of interest income		(2,121,000	)		(2,192,000	)
Fair market valuation of warrant and conversion liability		630,000			2,280,000
Other income (expense)		(11,000	)		(395,000	)
Total other income (expense), net		(1,502,000	)		(307,000	)
INCOME (LOSS) BEFORE INCOME TAXES		(404,000	)		810,000
INCOME TAX (BENEFIT)		(235,000	)		(181,000	)
NET INCOME (LOSS)	$	(169,000	)	$	991,000
Basic earnings (loss) per share of common stock	$	(0.02	)	$	0.16
Weighted average number of basic common shares outstanding		10,548,330			6,023,442
Diluted earnings (loss) per share of common stock	$	(0.04	)	$	0.16
Weighted average number of diluted common shares outstanding		16,000,717			6,023,442

The accompanying notes are an integral part of these consolidated condensed financial statements.

F-2

GLOBAL EMPLOYMENT HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

					Three months ended March 2008
	Preferred stock				Common stock				Treasury stock					Additional		Accumulated
	Amount		Shares		Amount		Shares		Amount		Shares			paid in capital		deficit			Total
Balances at December 2007	$	—		—	$	1,000		10,555,010	$	—		(6,680	)	$	33,418,000	$	(32,436,000	)	$	983,000
Share-based compensation		—		—		—		—		—		—			314,000		—			314,000
Net loss		—		—		—		—		—		—			—		(169,000	)		(169,000	)
Balances at March 30, 2008	$	—		—	$	1,000		10,555,010	$	—		(6,680	)	$	33,732,000	$	(32,605,000	)	$	1,128,000

The accompanying notes are an integral part of these consolidated condensed financial statements.

F-3

GLOBAL EMPLOYMENT HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

	Three months ended
	March			March
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(169,000	)	$	991,000
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		239,000			136,000
Amortization of intangibles and other assets		519,000			207,000
Amortization of debt discount and issuance costs		618,000			628,000
Bad debt expense		111,000			110,000
Deferred taxes		(265,000	)		(193,000	)
Accretion of preferred stock		255,000			273,000
Amortization of warrant discount on preferred stock		392,000			359,000
Share-based compensation		314,000			723,000
Fair market valuation of warrant and conversion liability		(630,000	)		(2,280,000	)
Changes in operating assets and liabilities:
Accounts receivable		(574,000	)		(942,000	)
Prepaid expenses and other		58,000			(1,143,000	)
Accounts payable		(67,000	)		(367,000	)
Accrued expenses and other liabilities		1,064,000			3,048,000
Net cash flows provided by operating activities		1,865,000			1,550,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(131,000	)		(162,000	)
Acquisition of Career Blazers, net of cash and cash equivalents acquired		—			(9,600,000	)
Net cash flows used in investing activities		(131,000	)		(9,762,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdrafts		263,000			(700,000	)
Net borrowings on revolving credit facility		1,343,000			1,712,000
Borrowings on term note		—			12,000,000
Repayments of term note		(3,632,000	)		(3,750,000	)
Debt issuance costs		—			(737,000	)
Repurchase of convertible debt		(20,000	)		—
Net cash flows provided by (used in) financing activities		(2,046,000	)		8,525,000
Net increase in cash and cash equivalents		(312,000	)		313,000
Cash and cash equivalents, beginning of period		330,000			58,000
Cash and cash equivalents, end of period	$	18,000		$	371,000
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for income taxes	$	68,000		$	158,000
Cash paid during the period for interest	$	815,000		$	897,000
Supplemental Disclosure of Non-Cash Information
Landlord leasehold incentives recorded as leasehold improvements	$	480,000		$	—

The accompanying notes are an integral part of these consolidated condensed financial statements.

F-4

GLOBAL EMPLOYMENT HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. Financial Statement Presentation

The accompanying unaudited consolidated condensed financial statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC. The consolidated condensed balance sheet as of December 30, 2007 presented herein has been derived from the audited balance sheet included in the Company’s annual report on Form 10-K for the year ended December 30, 2007.

Certain information and footnote disclosures, which are normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to SEC rules and regulations. The accompanying consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 30, 2007. The information reflects all normal and recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the financial position of the Company, and its results of operations for the interim periods set forth herein. The results for the three months ended March 30, 2008 are not necessarily indicative of the results to be expected for the full year or any other period.

Global Employment Holdings, Inc. or Holdings, was formed in Delaware in 2004. On March 31, 2006, we entered into and closed a share purchase agreement with the holders of 98.36% of Global Employment Solution’s, or GES, outstanding equity securities. Also on March 31, 2006, GES entered into a merger agreement with a wholly owned subsidiary of ours, resulting in GES being 100% owned by us. Holdings did not have any operations before March 31, 2006. GES was formed in 1998 and developed its platform and scale through a series of acquisitions of staffing and PEO businesses during 1998 and 1999.

Effective February 25, 2007, Holdings closed the asset purchase agreement with Career Blazers Personnel Services, Inc., Career Blazers Contingency Professionals, Inc., Career Blazers Personnel Services of Washington, D.C., Inc. and Cape Success LLC, collectively referred to as Career Blazers.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates. Significant estimates included in the Company’s consolidated condensed financial statements include PEO unbilled accounts receivable, allowance for doubtful accounts, workers’ compensation liabilities, share-based compensation, warrant and conversion valuation and income taxes. The accrual for the large deductible workers compensation insurance program is based on estimates and actuarial assumptions. Additionally, the valuation of the warrant and conversion liability and share-based compensation uses the Black-Scholes model based upon interest rates, stock prices, maturity estimates and volatility factors. The Company believes these estimates and assumptions are reliable. However, these estimates and assumptions may change in the future based on actual experience as well as market conditions.

Fiscal Periods

The Company’s fiscal year is based on a 52/53-week cycle ending on the Sunday closest to each calendar year end. Consequently, the 1^st quarter of 2008 ended on March 30; fiscal 2007 ended on December 30, 2007; and the 1^st quarter of 2007 ended on April 1, 2007. Our balance sheet dates are referred to herein as March 2008 and December 2007. Our fiscal quarters are referred to herein as March 2008 and March 2007. For each quarter in 2008 and 2007, the Company had 13 week periods, respectively.

Consolidation

The consolidated condensed financial statements include the accounts of the Company and our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications of items in prior periods’ financial statements have been made to conform to the current period presentation.

F-5

GLOBAL EMPLOYMENT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Cash and Cash Equivalents

Our policy is to invest any cash in excess of operating requirements in highly liquid, income-producing investments. We consider such investments with maturities of three months or less at the time of purchase to be cash equivalents.

Fair Value of Financial Instruments

The Company does not believe that its financial instruments, primarily cash and cash equivalents, and accounts receivable are subject to significant concentrations of credit risk. The Company’s cash exceeds the FDIC limits on insured balances. Maintaining deposits with major banks mitigates this risk. Credit is extended based on an evaluation of the customer’s financial condition and, if necessary, a deposit or some other form of collateral or guarantee is obtained. Credit losses have generally been within management’s expectations. Concentrations of credit risk with respect to trade accounts receivable are limited due to the Company’s large number of customers and their dispersion across many different industries and geographic locations nation-wide as well as customer payment terms in the PEO segment and contingency division of our staffing segment.

The Company uses fair value measurements in areas that include, but are not limited to: the allocation of purchase price consideration to tangible and identifiable intangible assets; impairment testing of goodwill and long-lived assets; share-based compensation arrangements and valuation of the warrant and conversion liability. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair values because of the short-term nature of these instruments. The carrying value of our bank debt approximates fair value due to the variable nature of the interest rates under our Credit Facility. The fair value of the Company’s debt instruments approximates the carrying value based on current rates available to the Company for debt with similar terms and risk. The warrants and conversion features embedded in the convertible notes, mandatorily redeemable convertible preferred stock and common stock as well as stock options granted to employees and directors are valued at estimated fair market value utilizing a Black-Scholes option pricing model. The Company, using available market information and appropriate valuation methodologies, has determined the estimated fair value of its financial instruments. However, considerable judgment is required in interpreting data to develop the estimates of fair value.

The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) 157,Fair Value Measurements, which established a framework for measuring fair value and expands disclosures about fair value measurements. The adoption of SFAS 157 did not have a material impact on our consolidated financial statements.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For valuation techniques using a fair-value hierarchy, the Company has determined that its warrant and conversion liability falls into the Level 2 category, which values the liability using quoted prices and other inputs for similar liabilities in active markets that are observable either directly or indirectly. The fair market value of the warrant and conversion liability is reported as a derivative and the change in the fair market value are included in other income on the unaudited consolidated condensed statements of operations and is included in long term liabilities on the unaudited consolidated condensed balance sheets. The fair market valuation factors and assumptions in computing the warrant and conversion liability are further discussed below.

There were no assets or liabilities where Level 1 and 3 valuation techniques were used and there were no assets and liabilities measured at fair value on a non-recurring basis.

Revenue Recognition

Our PEO revenues consist of amounts received or receivable under employee leasing customer service agreements. Amounts billed to PEO customers include actual wages of employees dedicated to each work-site and related payroll taxes paid by us, a contractual administrative fee, and workers compensation and health care charges at rates provided for in the agreements. PEO gross profit includes the administrative fees earned plus the differential in amounts charged to customers for workers compensation coverage and unemployment insurance for the leased employees and the actual cost of the insurance to us. Based on the subjective criteria established by EITF No. 99-19,Reporting Revenue Gross as a Principal versus Net as an Agent,we record PEO revenues net, having determined that this better reflects the substance of the transactions between us and our PEO customers. We believe this provides greater comparability to the financial results within the industry. In addition, we believe it will better focus us on, and allow investors to better understand, the financial results of our business. Revenues relating to earned but unpaid wages of work-site employees at the end of each period are recognized as unbilled accounts receivable and revenues, and the related direct payroll costs are accrued as earned by the work-site employees. Subsequent to the end of each period, such wages are paid and the related revenue is billed. Health care billings are concurrent with insurance provider billings. All billings for future health care coverage are deferred and recognized over the proper service dates, usually less than one calendar month.

Temporary service and contingency revenues are recognized as our employees render services to customers. Permanent placement revenues are recognized when employment candidates accept offers of permanent employment. Provisions for sales allowances, based on historical experience, are recognized at the time the related sale is recognized.

All revenues are earned in the United States.

F-6

GLOBAL EMPLOYMENT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Net Earnings (Loss) per Share of Common Stock

Basic earnings (loss) per common share are computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period adjusted to reflect potentially dilutive securities. Outstanding warrants, stock options and the conversion of our mandatorily redeemable convertible preferred stock related to 3,786,509 shares of common stock were excluded from the calculation of dilutive earnings (loss) per share for the three months ended March 2008 as the effect of the assumed exercise or conversion would be anti-dilutive. Outstanding warrants and other dilutive securities related to 9,392,856 shares of common stock for the quarter ended March 2007 were excluded from the calculation of dilutive earnings (loss) per share as the effect of the assumed exercise of these warrants and other securities would be anti-dilutive. A reconciliation of basic and diluted net income and weighted average common shares outstanding for 2008 is presented below:

	March 2008
Basic Net Loss	$	(169,000	)
Convertible debt interest and amortization, net of tax		666,000
Make whole conversion interest, net of tax (a)		(1,177,000	)
Diluted Net Loss	$	(680,000	)
Weighted average number of basic common shares outstanding		10,548,330
Impact of the assumed conversion or exercise of:
Convertible notes		5,452,386
Convertible debt make whole (a)		—
Weighted average number of diluted common shares outstanding		16,000,717

(a) As more fully explained in Note 5, the Company currently has assumed payment of the present value of interest under a redemptive event in cash.

Workers’ Compensation

The Company maintains guaranteed cost policies for workers’ compensation coverage in the states in which it operates, with minimal loss retention for employees in our commercial division of the staffing services segment. Under these policies the Company is required to maintain refundable deposits, which are included in prepaid expenses and other current assets in the accompanying consolidated condensed balance sheets, of $1,785,000 and $1,774,000 as of March 2008 and December 2007, respectively.

The Company had established workers’ compensation collateral deposits to fund claims relating to our large deductible insurance program that existed from February 1999 through July 2002. These funds and earnings thereon were used to pay claims under this program. Amounts funded represented contractually agreed upon rates primarily based upon payroll levels and the related workers’ compensation class codes. As of March 2008, the funds assets had been fully utilized to pay claims. Future claim payments will come from working capital. As of March 2008 and December 2007, the estimated claims under this program were $2,037,000, and are reported within accrued liabilities in the accompanying consolidated condensed balance sheets. Our policy is to use the estimated undiscounted workers’ compensation claims associated with the large deductible insurance program when determining our obligation there under. These workers’ compensation claims are based upon an estimate of reported and unreported losses, net of amounts covered under the applicable insurance policy after deductibles ranging from $250,000 to $350,000 per occurrence, for injuries occurring on or before the applicable policy period end. The policy periods are also subject to aggregate reinsurance over specified limits. These claim estimates are continually reviewed by the Company’s risk management department and any adjustments are reflected in operations as a component of cost of services in the period of change, as they become known. Estimated losses may not be paid for several years and actual losses could differ from these estimates.

F-7

GLOBAL EMPLOYMENT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated net of an allowance for doubtful accounts of $550,000 and $476,000 at March 2008 and December 2007, respectively. The majority of the Company’s accounts receivable are due from customers of the Company for amounts due related to services provided under employee leasing client service agreements, temporary staffing or permanent placement fees. Credit is extended based on evaluation of a customer’s financial condition and underlying collateral or guarantees. Accounts receivable are stated at amounts due from customers net of an allowance for doubtful accounts. The Company determines its allowance for employee leasing and temporary staffing accounts receivable by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, and the condition of the general economy and the industry as a whole. Based on previous loss history, permanent placement allowances are established to estimate losses (returned placement revenues) due to placed candidates not remaining employed for the period guaranteed by the Company, which is normally 30 to 90 days. The Company writes-off accounts receivable when they become uncollectible against the allowance for doubtful accounts, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts.

Property and Equipment

Property and equipment are stated net of accumulated depreciation and amortization of $2,868,000 and $2,629,000 at March 2008 and December 2007, respectively.

Goodwill and Identifiable Intangible Assets

Goodwill represents the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed of the Company’s acquired subsidiaries. The amount recognized as goodwill includes acquired intangible assets that do not meet the criteria in SFAS 141,Business Combinations,for recognition as an asset apart from goodwill. Pursuant to SFAS 142,Goodwill and Other Intangible Assets,goodwill is tested for impairment at least annually and more frequently if an event occurs that indicates the assets may be impaired. The test for impairment is performed at one level below the operating segment level, which is defined in SFAS 142 as the reporting unit. Pursuant to SFAS 144,Accounting for the Impairment or Disposal of Long-Lived Assets,and SFAS 142, we determined there were no events or changes in circumstances that indicated that carrying values of goodwill or other intangible assets subject to amortization may not be recoverable as of March 2008.

Taxes Collected from Customers and Remitted to Governmental Authorities

In accordance with the disclosure requirements of EITF Issue No. 06-03,How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net Presentation),we report taxes gross and such amounts are not significant to our consolidated net revenues.

Income Taxes

The current provision for income taxes represents estimated amounts payable or refundable on tax returns filed or to be filed for the year. Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the consolidated balance sheets. Deferred tax assets are also recognized for net operating loss and tax credit carryovers. The overall change in deferred tax assets and liabilities for the period measures the deferred tax expense or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to tax expense in the period of enactment. Deferred tax assets are reduced by a valuation allowance based on an assessment of available evidence if deemed more likely than not that some or all of the deferred tax assets will not be realized.

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes — an Interpretation of SFAS Statement No. 109, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. FIN 48 prescribes a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then valued to determine the amount of benefit to be recognized in the financial statements. The Company adopted FIN 48 effective as of the beginning of 2007. The adoption of FIN 48 did not have a material impact on our consolidated financial position or results of operations.

F-8

GLOBAL EMPLOYMENT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Share-Based Compensation

The Company adopted the fair value method of accounting pursuant to SFAS 123 (revised 2004),Share-Based Paymentsfor all issuances of restricted stock and stock options beginning in 2006 and applied it to the options issued in 2007. This statement requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period in which the employee is required to provide service in exchange for the award, which is usually the vesting period. No compensation cost is recognized for equity instruments for which employees do not render the requisite service.

Warrant and Conversion Feature Valuation

The Company applied the provisions of SFAS 133Accounting for Derivative Instruments and Hedging Activitiesand EITF 00-19,Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stockand related standards for the accounting of the valuation of the common stock warrants and conversion features embedded in the convertible debt, mandatorily redeemable convertible preferred stock and common stock. Accordingly, the Company recorded a warrant and conversion feature liability upon the issuance of common stock, mandatorily redeemable convertible preferred stock and convertible debt equal to the estimated fair market value of the various features with a corresponding discount to the underlying financial instruments issued in March 2006 and September 2007. The liability is adjusted quarterly to the estimated fair market value based upon then current market conditions.

The valuation of the warrant and conversion liability uses the Black-Scholes model based upon interest rates, stock prices, estimated term of the underlying financial instruments and volatility factors. We utilize historical volatility over a period generally commensurate with the remaining contractual term of the underlying financial instruments and use daily intervals for price observations. The Company bases the estimate of expected volatility on the historical volatility of similar entities whose share prices are publicly available. The Company will continue to consider the volatilities of those entities unless circumstances change such that the identified entities are no longer similar to the Company’s or until there is sufficient information available to utilize the Company’s stock volatility.

The Company believes these estimates and assumptions are reliable. However, these estimates and assumptions may change in the future based on actual experience as well as market conditions.

Business Combinations

The Company utilizes the purchase method in accounting for acquisitions whereby the total purchase price is first allocated to the assets acquired and liabilities assumed, and any remaining purchase price is allocated to goodwill. The Company recognizes intangible assets apart from goodwill if they arise from contractual or other legal rights, or if they are capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented, or exchanged. Assumptions and estimates are used in determining the fair value of assets acquired and liabilities assumed in a business combination. Valuation of intangible assets acquired requires that we use significant judgment in determining fair value and whether such intangibles are amortizable and, if the asset is amortizable, the period and the method by which the intangible asset will be amortized. Changes in the initial assumptions could lead to changes in amortization charges recorded in our financial statements. Additionally, estimates for purchase price allocations may change as subsequent information becomes available.

Recent Accounting Pronouncements

In March 2008, the FASB issued SFAS 161—Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133.The use and complexity of derivative instruments and hedging activities have increased significantly over the past several years. Constituents have expressed concerns that the existing disclosure requirements in FASB Statement No. 133,Accounting for Derivative Instruments and Hedging Activities,do not provide adequate information about how derivative and hedging activities affect an entity’s financial position, financial performance, and cash flows. This Statement requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. It encourages, but does not require, comparative disclosures for earlier periods at initial adoption. This Statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The Company does not anticipate the adoption of SFAS 161 will have a material effect on its consolidated financial statements.

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GLOBAL EMPLOYMENT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

In December 2007, the FASB issued SFAS 141R (revised 2007) —Business Combinations.This statement establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets, acquired, the liabilities assumed, any controlling interest in the business and the goodwill acquired. SFAS 141R further requires that acquisition-related costs and costs associated with restructuring or exiting activities of an acquired entity will be expensed as incurred. SFAS 141R also establishes disclosure requirements which will require disclosure of the nature and financial effects of business combinations. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning the Company’s first annual reporting period beginning on or after December 15, 2008. Early adoption is not permitted. The Company cannot anticipate whether the adoption of SFAS 141R will have a material impact on its consolidated financial statements as the impact is solely dependent on whether the Company enters into a business combination after the date the statement is adopted.

In December 2007, the FASB issued SFAS 160 —Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 151.This statement establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is not permitted. The Company does not anticipate the adoption of SFAS 160 will have a material effect on its consolidated financial statements.

In February 2007, the FASB issued SFAS 159 —The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115.This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. It is expected to expand the use of fair value measurement, which is consistent with the FASB’s long-term measurement objectives for accounting for financial instruments. It is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement 157 — FairValue Measurements.The statement is effective for our fiscal year beginning in 2008. At March 2008, we did not elect to adopt the provisions of SFAS 159.

In September 2006, the FASB issued SFAS 157,Fair Value Measurements(“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The statement is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. As previously mentioned, we adopted SFAS 157 on January 1, 2008, which did not have a material impact on our consolidated financial statements.

In February 2008, the FASB issued FASB Staff Position (“FSP”) No. 157-2 (“FSP 157-2”). FSP 157-2 delays the effective date of SFAS 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. In February 2008, the FASB also issued FSP No. 157-1 that would exclude leasing transactions accounted for under SFAS No. 13,Accounting for Leases,and its related interpretive accounting pronouncements. We do not expect the SFAS 157 related guidance to have a material impact on our consolidated financial statements.

3. Credit Facility

CapitalSource Agreement

On February 28, 2007, the Company and its subsidiaries entered into a Credit and Security Agreement (“the CS facility”) with CapitalSource Finance LLC (“CapitalSource”). The CS facility provided for a revolving line of credit and letters of credit collateralized by the Company’s eligible accounts receivable, as defined in the CS facility, with a borrowing capacity of $18 million. The facility also provided for up to $12 million borrowing under a term note. Beginning June 30, 2007 payments of $875,000 on the term note were payable quarterly. Additionally, 75% of the Company’s free cash, as defined in the facility, from

F-10

GLOBAL EMPLOYMENT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

each year beginning with 2007, was due in April of the following year. Any proceeds from the disposition of assets, recoveries under insurance policies and the sale of debt or equity securities, unless such sales or issuances were approved by CapitalSource, were to be applied to repay the facility. Interest on the line of credit was payable at prime rate plus 2.25% or the applicable 30, 60 or 90-day LIBOR plus 3.5%. A fee of 0.5% per annum is payable on the unused portion of the line of credit. Additionally, an annual collateral management fee of $25,000 was charged. The term note bore interest at prime rate plus 3.75% or the applicable 30, 60 or 90-day LIBOR plus 5.0%. At March 2008 and December 2007, the outstanding balance of the term note was $5,743,000 and $9,375,000 and borrowing availability under the revolving line of credit was $5,241,000 and $7,722,000, respectively.

In February 2007, the Company funded $10,750,000 on the revolving line of credit and $12,000,000 on the term note in connection with the acquisition of Career Blazers and the payment in full of all outstanding amounts owed to our then senior lender, Wells Fargo Bank (“Wells Fargo”). We paid a closing fee of $510,000 upon funding.

In connection with the stock subscription agreement, as explained below, the cash proceeds of $2,757,000 received were used initially to pay down the revolving line of credit. The Company paid down the term loan by this amount in March 2008. The facility was to have expired in December 2010.

The CS facility included various financial and other covenants, including senior and total debt leverage, fixed charge coverage, minimum EBITDA, as defined, annual capital expenditure limitations and restrictions on the payment of dividends. Additionally, the facility contained a provision that allowed the lender to call the outstanding balance of the facility if any material adverse change in the business or financial condition of the Company occurred. We were in default of our loan covenants as of December 2007 and March 2008 with regard to minimum EBITDA requirements. We began negotiations with CapitalSource in December 2007 to amend the CS facility in order to cure the default. CapitalSource continued to fund our liquidity requirements pending either a payoff or amendment of the facility. As a result of not curing the default and not yet closing on the new facility prior to the filing of our Form 10-K, the Company reclassified its debt owed to CapitalSource to current portion of long-term debt - credit facility in the accompanying consolidated condensed balance sheet as of December 2007.

The facility required certain customer payments to be paid directly to blocked lockbox accounts controlled by CapitalSource, providing, however, that absent the occurrence and continuation of an event of default, the Company could operate and transact business through the blocked accounts in the ordinary course of business, including making withdrawals from such accounts into a master deposit account maintained by the Company.

In April 2008, in conjunction with the closing of the Wells Fargo 2008 Agreement, as described below, we paid in full the outstanding balances owed to CapitalSource, in the amount of $14,096,000, including an early retirement fee of $49,000, and terminated the underlying credit and security agreement. In addition, we recognized additional interest of $471,000 related to unamortized loan fees. In connection with the pay off of the CapitalSource facility, we collateralized one letter of credit, with an expiration date of December 31, 2008, in the amount of $192,000 with $202,000 of cash.

Wells Fargo 2008 Agreement

On April 29, 2008, the Company and its subsidiaries entered into a Credit and Security Agreement (“2008 facility”) with Wells Fargo for a revolving line of credit and letters of credit collateralized by our subsidiaries eligible accounts receivable as defined in the 2008 facility, which provides for a borrowing capacity of $26 million, including up to $6 million under a term note. Borrowing under the term note may be funded in increments during the first twelve months of the agreement. The term note is payable in monthly installments (currently $213,000), based upon the amount funded, plus interest beginning in May 2008 and matures in April 2010, unless paid in full earlier. Additionally, 25% of our free cash, as defined in the 2008 facility, from each year beginning with 2008, is due in April of the following year. The term note bears interest at prime rate plus 2.75% or the applicable 30, 60, 90-day or one year LIBOR plus 5.0%. Interest on the revolving line of credit is payable at prime rate or the applicable 30, 60, 90-day or one year LIBOR plus 3.0% subject to certain minimums. A fee of 0.25% per annum is payable on the unused portion of the line of credit. Additionally, a monthly collateral management fee will be charged. We paid a closing fee of $50,000 to Wells Fargo. The 2008 facility expires in April 2011.

We borrowed $9,996,000 on the revolving line of credit and $4,100,000 on the term note in connection with the payment in full of all outstanding amounts owed to CapitalSource. As a result of entering into the 2008 facility, the Company reclassified $2,221,000, the amount of debt repayable after one year, to long-term debt — credit facility in the accompanying consolidated condensed balance sheets as of March 2008.

F-11

GLOBAL EMPLOYMENT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

In addition to the repayment of the loan from CapitalSource, the proceeds of the 2008 facility can be used to repurchase our senior secured convertible notes and for ongoing working capital needs. As further explained below, we repurchased $3,000,000 of senior secured convertible notes on May 9, 2008 for $2,850,000 plus accrued interest. We borrowed $1,000,000 on the term note and the remainder on the revolving line of credit.

This agreement requires certain customer payments to be paid directly to blocked lockbox accounts controlled by Wells Fargo, and contains a provision that allows the lender to call the outstanding balance of the line of credit and term note if any material adverse change in the business or financial condition of Holdings were to occur. The agreement includes various financial and other covenants with which we have to comply in order to maintain borrowing availability and avoid penalties including a fixed charge coverage ratio, annual capital expenditure limitations and restrictions on the payment of dividends.

4. Other Long Term Liabilities

Other long-term liabilities consisted of accrued rent related to landlord leasehold incentives, amortizable over the remaining terms of the respective lease and abandoned property lease payments due over the remaining terms of the respective lease.

5. Convertible Notes

At March 2008, the Company had $24 million aggregate principal amount of senior secured convertible notes outstanding. The convertible notes are stated net as a result of recording a discount associated with the valuation of the detachable warrants and conversion feature. The discount will be amortized over the life of the instrument using the effective interest method. The notes mature on March 31, 2011 and bear interest at an annual rate of 8.0%, as adjusted. Interest is paid quarterly. In connection with the asset purchase agreement of Career Blazers, the Company agreed to temporarily increase from 8.0% to 9.5% the interest rate and premium paid on the senior secured convertible notes beginning on February 28, 2007 and ending on the date on which the Company had made the requisite $5 million minimum offering of common stock or the stand-by-purchasers satisfied their commitment to purchase an aggregate of $3 million of common stock in lieu thereof (the “back-stop”). The stand-by purchasers completed the back-stop stock purchase effective September 30, 2007 and the interest rate on the senior secured convertible debt reverted to 8% from 9.5% beginning on October 1, 2007.

The notes are convertible at a holder’s option at any time prior to maturity into shares of the Company’s common stock. The issuance of common stock and warrants to the stand-by purchasers effective September 30, 2007, as described above, caused automatic adjustments to the conversion and exercise prices of the Company’s currently outstanding senior secured convertible notes, Series A mandatorily redeemable convertible preferred stock, and warrants to purchase common stock. The adjustments were made automatically and in such manner as provided for by the terms of the respective securities. The conversion price of the convertible notes adjusted from $6.25 per share to $4.40 per share.

If during the period from March 31, 2007 through March 31, 2009, the closing sale price of our common stock is less than 200% of the conversion price then in effect for each of 20 trading days out of 30 consecutive trading days, a holder who converts will receive a payment in shares, or at the Company’s option in cash, equal to the present value of the interest that would have accrued from the redemption date through the third anniversary of the issuance date. The Company’s stock is not currently trading at 200% of the conversion price. A note holder may not convert the Company’s convertible notes to the extent such conversion would cause such note holder, together with its affiliates, to beneficially own a number of shares of common stock which would exceed 4.99% of the Company’s then outstanding shares of common stock following such conversion, excluding for purposes of such determination shares of common stock issuable upon conversion of our convertible notes and convertible preferred stock which have not been converted and upon exercise of the warrants which have not been exercised. A holder may require the Company to redeem its notes upon an event of default under the notes or upon a change of control (as defined in the notes), in each case at a declining premium (currently 15%) over the principal amount of notes being redeemed. The Company may redeem the notes after the 60th day prior to the third anniversary of the closing of the recapitalization if the closing sale price of our common stock is equal to or greater than 200% of the conversion price then in effect for each of 20 consecutive trading days. If the Company so redeems the notes, the Company must pay a premium equal to the present value of the interest that would have accrued from the redemption date through the maturity date. The senior secured convertible notes agreement includes various covenants with which the Company must comply, including the ratio of indebtedness to consolidated EBITDA, as defined.

F-12

GLOBAL EMPLOYMENT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Senior secured subordinated notes consisted of the following at:

		March			December
		2008			2007
Non Related Party	Principal	$	21,953,000		$	21,953,000
	Discount		(6,730,000	)		(7,222,000	)
	Net	$	15,223,000		$	14,731,000
Related Party	Principal		2,038,000			2,060,000
	Discount		(625,000	)		(677,000	)
	Net	$	1,413,000		$	1,383,000

Effective April 29, 2008, in consideration for the signing of a new subordination agreement by the holders of our senior secured convertible notes with Wells Fargo with respect to the 2008 facility as described above, we entered into the Agreement to Enter into a New Subordination Agreement (“Agreement”) with the holders. Under this Agreement, we have agreed to make, and made, an offer to repurchase, pro rata from the holders, on or before May 9, 2008 (the “Repurchase Date”) at least $3,000,000 aggregate principal amount of notes at a price equal to 95% of the principal amount thereof plus interest accrued through the Repurchase Date. Each holder wishing to sell notes has delivered a completed Repurchase Election Form to us. To the extent that a holder elected to have less than its pro rata share of notes repurchased, other holders have elected to have us purchase such amounts from them on a pro rata basis. Accordingly, we repurchased $3,000,000 of Notes on May 9, 2008 for $2,850,000 plus accrued interest, including $157,000 from certain officers, directors and employees. We utilized borrowings under the 2008 facility to fund the purchase.

We have also agreed we will not repurchase notes other than: (i) as described above or (ii) pursuant to an additional note repurchase program for up to $3,000,000 aggregate principal amount of notes at the same price and on the same terms set forth above. Following completion of the second repurchase program, we may negotiate with each holder individually with respect to the terms, if any, of additional note repurchases.

6. Stockholders’ Equity

Preferred stock

The Company issued 12,750 shares of our Series A mandatorily redeemable convertible preferred stock on March 31, 2006 at a purchase price of $1,000 per share. If not previously converted, the preferred stock is subject to mandatory redemption on March 31, 2013 at the face amount plus a premium calculated at an annual rate of 8% (as adjusted and subject to temporary adjustment as described below) from issuance to maturity. Upon liquidation, the Company’s preferred stockholders will receive the face amount of the preferred stock plus a payment equal to 8% per annum (subject to temporary adjustment as described below) of the face amount, and will thereafter share ratably with the Company’s common stockholders in the distribution of the remaining assets. On February 28, 2007, in consideration for the consent by the holders of our senior secured convertible notes and Series A mandatorily redeemable convertible preferred stock to the refinancing of the Company’s senior debt and amendment of the convertible notes, the Company amended the certificate of designations, rights, and preferences of the Series A mandatorily redeemable convertible preferred stock to increase the premium rate paid on the preferred stock from 8.0% to 9.5% for the period beginning on February 28, 2007 and ending on the date on which the Company had issued at least $5 million of common stock for cash or the date on which certain stand-by-purchasers purchased an aggregate of $3 million of the newly issued common stock. The Stand-By Purchasers completed the stock purchase effective September 30, 2007 and the interest rate on the Series A mandatorily redeemable convertible preferred stock reverted to 8% from 9.5% beginning on October 1, 2007.

The Series A mandatorily redeemable convertible preferred stock is convertible at a holder’s option at any time into an amount of shares of the Company’s common stock resulting from dividing the face value plus a premium, calculated at an annual rate of 8% (subject to temporary adjustment as described above) from issuance to maturity, by a conversion price, subject to adjustment upon certain events. The original conversion price upon issuance on March 31, 2006 was $5.75 per share. The issuance of the common stock and warrants effective March 2008 caused an automatic adjustment in the conversion price of the Series A mandatorily redeemable convertible preferred stock to $4.07 per share. The adjustment was made automatically and in such a manner as provided for by the terms of the Series A mandatorily redeemable convertible preferred stock. A stockholder may not convert the Series A mandatorily redeemable convertible preferred stock to the extent such conversion would cause such stockholder, together with its affiliates, to beneficially own a number of shares of common stock which would exceed 4.99% of the Company’s then outstanding shares of common stock following such conversion, excluding for purposes of such determination shares of common stock issuable upon conversion of the convertible notes and convertible preferred stock which have not been converted and upon exercise of the warrants which have not been exercised.

F-13

GLOBAL EMPLOYMENT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

A holder may require the Company to redeem its Series A mandatorily redeemable convertible preferred stock upon a change of control (as defined in the certificate of designation setting forth the terms of the Series A mandatorily redeemable convertible preferred stock) at a declining premium (currently 15%) or upon other specified events at a premium equal to the present value of the interest that would have accrued from the redemption data through the maturity date. The terms of the senior credit facility prohibit the redemption of the Company’s preferred stock. The Series A mandatorily redeemable convertible preferred stock has no voting rights except as otherwise provided by the Delaware General Corporation Law.

Series A mandatorily redeemable convertible preferred stock consisted of the following at:

	March			December
	2008			2007
Principal and premium	$	14,913,000		$	14,657,000
Discount		(9,678,000	)		(10,069,000	)
Net	$	5,235,000		$	4,588,000

Warrants to purchase common stock

On March 31, 2006, Holdings issued warrants to purchase our common stock to the purchasers of our convertible notes, Series A mandatorily redeemable convertible preferred stock and common stock in the recapitalization. The Company also issued warrants to purchase our common stock to our placement agent in the recapitalization (collectively “recapitalization warrants”). In September 2007, we issued 1,838,339 warrants to certain stand-by purchasers under the back-stop.

On December 28, 2007, Holdings closed a Warrant Exercise and Cancellation Agreement (the “Warrant Agreement”) with respect to substantially all of its outstanding warrants to purchase common stock. A total of 2,524,578 shares of common stock were issued in exchange for 6,172,283 warrants. Each warrant holder exercised all of its warrants in a cash-less manner, except one warrant holder, who would have beneficially owned in excess of 4.99% of the outstanding common stock, reduced the number of warrants that it exercised so as to own 4.99% ownership of the outstanding common stock and agreed to exercise the remaining warrants from time to time on the same terms and conditions when and to the extent it can do so without exceeding the 4.99% limitation. This holder continues to hold 340,727 warrants exercisable into 112,440 shares of common stock.

7. Warrant and Conversion Feature Valuation

The Company applied the provisions of SFAS 133Accounting for Derivative Instruments and Hedging Activitiesand EITF 00-19,Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stockand related standards for the accounting of the valuation of the common stock warrants and conversion features embedded in our convertible debt, mandatorily redeemable convertible preferred stock and common stock. Accordingly, we recorded a warrant and conversion liability upon the issuance of our common stock, mandatorily redeemable convertible preferred stock and convertible debt equal to the estimated fair market value of the various features with a corresponding discount to the underlying financial instruments issued at March 31, 2006 and September 30, 2007. The liability is adjusted quarterly to the estimated fair market value based upon then current market conditions. The Company records the change in the estimated fair market value of the warrant and conversion liability as a reduction of interest expense.

8. Income Taxes

The Company has established a valuation allowance of $1,027,000 against our net deferred tax assets as of March 2008 and December 2007. The valuation allowance results from the uncertainty regarding our ability to produce sufficient state taxable income in various states in future periods necessary to realize the benefits of the related deferred tax assets. The Company determined that the net deferred tax assets related to certain state net operating loss carry forwards should remain subject to an allowance until the Company has forecasted net income into the foreseeable future sufficient to realize the related state net deferred tax assets. Income tax expense attributable to income from operations for the three months of 2008 differed from the amount computed by applying the U.S. federal income tax rate of 34% to pretax income from operations primarily as a result of revaluation of the warrant and conversion feature liability, accretion and amortization related to preferred stock, share-based compensation, amortization of goodwill and FICA tip credits.

F-14

GLOBAL EMPLOYMENT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

9. Stock Options

In 2006, Holdings established the Global Employment Holdings, Inc. 2006 Stock Plan (“the 2006 Stock Plan”). The purpose of the 2006 Stock Plan is to: (i) promote the interests of the Company and its stockholders by strengthening Holding’s ability to attract, motivate and retain employees, officers, consultants and members of the board of directors; (ii) furnish incentives to individuals chosen to receive awards of Holding common stock under the plan because they are considered capable of responding by improving operations and increasing profits or otherwise adding value to Holding; and (iii) provide a means to encourage stock ownership and proprietary interest in Holding to valued employees, members of the board of directors and consultants upon whose judgment, initiative, and efforts the continued financial success and growth of our business largely depend.

The aggregate number of shares of common stock that may be issued, transferred or exercised pursuant to Awards under the 2006 Stock Plan will not exceed 2,100,000 shares of common stock, of which 1,750,000 shares may only be granted to employees and consultants and 350,000 shares may only be granted to non-employee directors. Our stockholders will be asked to approve an increase in the number of shares which may be granted to 4,051,000 and 756,000, respectively, at the 2008 annual meeting of stockholders. Awards under the 2006 Stock Plan may be stock options or stock grants. Vesting of equity instruments issued under the Stock Incentive Plan is determined on a grant-by-grant basis, but typically vest over a three-year period and expire within 10 years of issuance.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option pricing model based on various assumptions. The Company bases the estimate of expected volatility on the historical volatility of similar entities whose share prices are publicly available. We will continue to consider the volatilities of those entities unless circumstances change such that the identified entities are no longer similar to the Company or until there is sufficient information available to utilize the Company’s own stock volatility. The Company uses historical data to estimate employee termination within the valuation model; separate groups of employees that have similar historical termination behavior are considered separately for valuation purposes. The Company has elected to use the “plain vanilla” method to estimate expected term, and has applied it consistently to all “plain vanilla” employee share options. The risk-free rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. We believe these estimates and assumptions are reliable. However, these estimates and assumptions may change in the future based on actual experience as well as market conditions.

During the three months ended March 2007, there were 1,001,359 stock options granted, net of 21,802 forfeitures, under the 2006 Plan. The fair value of options granted under these plans during the three months ended March 2007, ranged from $3.04 to $3.31, with a weighted-average fair value of $3.09, based upon post modification factors. There were no grants during the 1^st quarter of 2008. As of March 2008, there were 1,495,540 grants outstanding at a weighted average exercise price of $2.97 and weighted average fair value of $2.58 and 534,334 grants were fully vested with an intrinsic value of $28,500. 4,000 grants were forfeited during the 1^st quarter of 2008.

The compensation cost that has been charged against income for this plan was $314,000 and $723,000 for the three months ended March 2008 and 2007, respectively and $81,000 of deferred tax benefit was recognized in the consolidated statements of operations for share-based compensation arrangements during 2008.

As of March 2008, there was $1,629,000 of unrecognized compensation cost related to nonvested options granted under the 2006 Stock Plan.

In April 2008, the Company granted 480,000 options to certain officers and employees and 126,802 options to three board members and 30,250 options were forfeited.

10. Other Intangible Assets

As of March 2008 and December 2007, intangible assets, net, in the accompanying unaudited condensed consolidated balance sheets consisted of non-compete agreements, trade names, trademarks, temporary employee data base, customer relationships, customer contracts and customer lists related to the acquisition of Career Blazers.

F-15

GLOBAL EMPLOYMENT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Amortization expense on intangible assets for the three months ended March 2008 and 2007 was $519,000 and $207,000, respectively. As of March 2008 and December 2007, accumulated amortization on intangible assets was $2,474,000 and $1,955,000, respectively. The weighted average amortization period for the identifiable intangible assets is 4.0 years.

The $739,000 of goodwill recorded in the acquisition of Career Blazers is also deductible for tax purposes over a fifteen year period. The assets acquired and recorded are included in the staffing segment included in Note 11.

11. Segment Reporting

Our business is divided into two major segments, staffing services and professional employer organization, also known as PEO services. These segments consist of several different practice groups. Our temporary staffing practice group provides temporary and temp-to-hire services in areas such as light industrial, clerical, logistics fulfillment, call center operations, financial services, and warehousing, among others. As a result of the acquisition of Career Blazers in February 2007, we added a significant amount of “payrolling” services, also referred to as contingency services, into our temporary staffing practice group. Payrolling services are when a staffing firm places on its payroll employees recruited or hired by the customer. Payrolling is distinguished from PEO arrangements in that the employees generally are on temporary assignments and make up a small proportion of the customer’s work force. Our direct hire placement practice group responds to our customer’s requests by finding suitable candidates from our national network of candidates across a broad range of disciplines. Our professional services practice group provides temporary and temp-to-hire services in areas such as information technology, known as IT, life sciences and others. Career Blazers is included in the staffing services segment. Our PEO services group assists customers in managing human resources responsibilities and employer risks such as payroll and tax administration, workers compensation, employee benefit programs, and regulatory compliance. Our operating segments are based on the type of services provided to customers. Staffing services are provided to customers throughout the United States and as such, the revenue earned is spread over numerous states. These operations do not meet the quantitative thresholds outlined by the SFAS 131,Disclosure about Segments of an Enterprise and Related Information,which requires the reporting of financial information by region. The reconciling difference between the two segments and total company represents costs, revenue and assets of the corporate division. All revenue is earned within the United States. One customer accounted for 16.7% of total revenue for the three months ended March 2008 (3.3% of gross profit). This customer is in the staffing services segment. No other customer accounted for more than 7% of revenues.

Segment information is as follows (unaudited):

	March 2008			March 2007
Staffing revenues	$	37,637,000		$	27,744,000
PEO revenues	$	8,381,000		$	8,877,000
Total company revenues	$	46,018,000		$	36,621,000
Staffing depreciation	$	134,000		$	36,000
PEO depreciation	$	40,000		$	41,000
Total company depreciation	$	239,000		$	136,000
Staffing amortization	$	519,000		$	207,000
PEO amortization	$	—		$	—
Total company amortization	$	519,000		$	207,000
Staffing income before income taxes	$	1,536,000		$	1,420,000
PEO income before income taxes	$	1,294,000		$	1,606,000
Total company income (loss) before income taxes	$	(404,000	)	$	810,000
Staffing assets	$	45,260,000		$	41,136,000
PEO assets	$	35,825,000		$	32,856,000
Total company assets	$	69,798,000		$	71,382,000

F-16

GLOBAL EMPLOYMENT HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

	March 2008		March 2007
Staffing goodwill and intangibles	$	12,341,000	$	14,644,000
PEO goodwill and intangibles	$	12,090,000	$	12,090,000
Total company goodwill and intangibles	$	24,431,000	$	26,734,000
Staffing capital expenditures	$	65,000	$	25,000
PEO capital expenditures	$	12,000	$	51,000
Total company capital expenditures	$	131,000	$	162,000

F-17

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words “believe,” “anticipate,” “plan,” “expect,” “intend,” and similar expressions are intended to identify forward-looking statements. Our actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, the following: (1) actual demand for our services, (2) our ability to attract, train and retain qualified staffing consultants, (3) our ability to remain competitive in obtaining and retaining PEO and temporary staffing customers, (4) the availability of qualified temporary employees and other qualified contract professionals, (5) our ability to manage our growth efficiently and effectively, (6) continued performance of our information systems, and (7) other risks detailed from time to time in our reports filed with the SEC, including our annual report onForm 10-K under the Section “Risk Factors” as filed with the SEC on April 15, 2008. Other factors also may contribute to the differences between our forward-looking statements and our actual results. All forward-looking statements in this document are based on information available to us as of the date we file this quarterly report on form 10-Q, and we assume no obligation to update any forward-looking statement or the reasons why our actual results may differ.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Global Employment Holdings Inc., our operations, and our present business environment. This MD&A should be read in conjunction with “Item 1. Financial Statements” of this report on Form 10-Q.

OVERVIEW OF OUR BUSINESS

Through our wholly-owned operating subsidiary, Global Employment Solutions, we are a leading provider of human capital solutions with offices in key cities throughout the United States. Our business is divided into two major segments, staffing services and PEO services.

Staffing services

The staffing services segment consists of several areas of specialization. We provide direct placement and temporary staffing services in a number of areas, such as light industrial, clerical, information technology, engineering, accounting and finance, call center and logistics, among others. As a result of the acquisition of Career Blazers, we added a significant amount of “payrolling” services, also referred to as contingency services. Payrolling services are when a staffing firm places on its payroll employees recruited or hired by the customer. Payrolling is distinguished from PEO arrangements in that the employees generally are on temporary assignments and make up a small proportion of the customer’s work force. Our direct hire placement practice group responds to our customers’ requests by finding suitable candidates from our national network of candidates across a broad range of disciplines. We provide direct hire placement services on a contingency basis and as a retained service provider.

Our temporary staffing services consist of on-demand or short-term staffing assignments, contract staffing, on-site management, and human resource administration. Short-term staffing services assist employers in dealing with employee demands caused by such factors as seasonality, fluctuations in customer demand, vacations, illnesses, parental leave, and special projects without incurring the ongoing expense and administrative responsibilities associated with recruiting, hiring and retaining permanent employees. As more and more companies focus on effectively managing variable costs and reducing fixed overhead, the use of short-term staffing services allows companies to utilize the “just-in-time” approach for their personnel needs, thereby converting a portion of their fixed personnel costs to a variable expense.

Our contract staffing services place temporary employees with customers for time-periods of more than three months or for an indefinite time period. This type of arrangement often involves outsourcing an entire department in a large corporation or providing the workforce for a large project. In an on-site management arrangement, we place an experienced manager on-site at a customer’s place of business. The manager is responsible for conducting all recruiting, employee screening, interviewing, drug testing, hiring and employee placement functions at the customer’s facility for a long-term or indefinite period.

Management believes that professional, clerical/administrative and light industrial staffing services are the foundation of the staffing industry and will remain a significant market for the foreseeable future. Management also believes that employees performing these staffing functions are, and will remain, an integral part of the labor market in local, regional and national economies in which we operate.

1

PEO services

Our PEO services segment assists customers in managing human resources responsibilities and employer risks. In a PEO services arrangement, we enter into a contract to become a co-employer of the customer-company’s existing workforce. Pursuant to this contract, we assume responsibility for some or all of the human resource management responsibilities, including payroll, payroll taxes, employee benefits, health insurance, workers’ compensation coverage, workplace safety programs, compliance with federal and state employment laws, labor and workplace regulatory requirements and related administrative responsibilities. We have the right to hire and fire our PEO employees, although the customer-company remains responsible for day-to-day assignments, supervision and training and, in most cases, recruiting.

Fluctuations in quarterly operating results

We have historically experienced significant fluctuations in our quarterly operating results and anticipate such fluctuations to continue in the future. Our operating results may fluctuate due to a number of factors such as seasonality, wage limits on payroll taxes, claims experience for workers’ compensation and unemployment, demand and competition for services. Our revenue levels fluctuate from quarter to quarter primarily due to the impact of seasonality on our staffing services business. Payroll taxes and benefits fluctuate with the level of direct payroll costs, but tend to represent a smaller percentage of revenues and direct payroll later in the fiscal year as federal and state statutory wage limits for unemployment and social security taxes are exceeded by some employees.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amount of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, estimates, assumptions and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in Note 2,Summary of Significant Accounting Policies, of the Notes to Unaudited Condensed Consolidated Financial Statements included in Item 1. Financial Statements. Please also refer to our annual report on Form 10-K for the year ended December 30, 2007 filed with the Securities and Exchange Commission (“SEC”) on April 15, 2008 for a more detailed discussion of our critical accounting policies. The only significant change to our critical accounting policies relates to the adoption of SFAS 157 in 2008, which has been discussed in Note 2,Summary of Significant Accounting Policies,of the Notes to the Unaudited Condensed Consolidated Financial Statements.

NEW ACCOUNTING STANDARDS

See the “New Accounting Standards” section within Note 2,Summary of Significant Accounting Policies,of the Notes to the Unaudited Condensed Consolidated Financial Statements for a more detailed discussion.

2

RESULTS OF OPERATIONS

The following table summarizes, for the periods indicated, selected statements of operations data expressed as a percentage of revenues:

	Three months ended
	March 2008			March 2007
REVENUES, net		100.0	%		100.0	%
COST OF SERVICES		75.8	%		72.2	%
GROSS PROFIT		24.2	%		27.8	%
OPERATING EXPENSES
Selling, general and administrative		20.2	%   (a)		23.8	%   (b)
Depreciation and amortization		1.6	%		0.9	%
Total operating expenses		21.8	%		24.7	%
OPERATING INCOME		2.4	%		3.0	%
OTHER INCOME (EXPENSE)
Interest expense:
Other interest expense, net of interest income		-4.6	%		-6.0	%
Fair market valuation of warrant and conversion liability		1.4	%		6.2	%
Other income (expense)		0.0	%		-1.1	%
Total other expense, net		-3.2	%		-0.8	%
INCOME (LOSS) BEFORE INCOME TAXES		-0.8	%		2.2	%
INCOME TAX (BENEFIT)		-0.5	%		-0.5	%
NET INCOME (LOSS)		-0.3	%		2.7	%

(a)	Includes $314,000 of share-based compensation expense (<1%)
(b)	Includes $723,000 of share-based compensation expense (2%)

We report PEO revenues on a net basis as opposed to a gross basis as described above. The gross revenues and cost of revenues information below, although not in accordance with GAAP, is presented for comparison purposes and because management believes such information is informative as to the level of our business activity and useful in managing our operations.

A reconciliation of non-GAAP gross revenues to net revenues is as follows:

	Gross reporting						Net reporting
	method			Reclassification			method
For the quarter ended March 2008
Revenues, net	$	142,959,000		$	(96,941,000	)	$	46,018,000
Cost of services		(131,825,000	)		96,941,000			(34,884,000	)
Gross profit	$	11,134,000		$	—		$	11,134,000
For the quarter ended March 2007
Revenues, net	$	135,222,000		$	(98,601,000	)	$	36,621,000
Cost of services		(125,045,000	)		98,601,000			(26,444,000	)
Gross profit	$	10,177,000		$	—		$	10,177,000

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CHANGES IN RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 2008 AND MARCH 2007

These operational results were achieved during periods in which there were growing concerns about the macro-economic environment including a weakening economy with declining GDP growth and increasing jobless claims. The economic uncertainties in which we currently operate make it challenging for us to predict the near-term future and a U.S. recession, if it should occur, could have a significant adverse impact on our business.

We believe that some of the initiatives undertaken during the last several years such as restructuring both our back office and field operations and upgrading our corporate systems and technology have increased our operating efficiencies, thereby enabling us to be more responsive to our clients. We believe our field operations model, which allows us to deliver our service offerings in a disciplined and consistent manner across all geographies and business lines, as well as our highly centralized back office operations, are competitive advantages and keys to our future growth and profitability.

Our plan is to focus our organic sales efforts on opportunities yielding a higher gross margin which may result in decreased opportunities for revenue from lower margin business. Further, we plan to seek strategic acquisitions which will provide either geographic or business line opportunities. We believe this focus will enhance shareholder value in future years.

In February 2007, we acquired the business operations of Career Blazers. The results of operations of Career Blazers were included in our consolidated financial statements for the full quarter of 2008 and one month of the three month period ended March 2007.

Revenues

We experienced mixed revenue growth in 2008 over 2007. Overall net revenues increased 25.7%. The year-over-year revenue growth is primarily attributable to additional revenue from the acquisition of Career Blazers, an increase in the number of billed hours in the commercial division of the staffing services segment and increased permanent placements, offset by a decrease in average worksite employees at the PEO services segment and the number of billed hours in the professional division of the staffing services segment. One customer accounted for 16.7% of total revenue for the three months ended March 2008 (3.3% of gross profit). This customer is in the contingency staffing division of the staffing services segment. No other customer accounted for more than 7% of revenues.

Revenues by division as a percent of total revenues are as follows:

	March			March
	2008			2007
PEO		18.2	%		24.2	%
Staffing:
Commercial		38.2	%		37.9	%
Professional		16.2	%		21.4	%
Contingency		22.1	%		11.0	%
Permanent Placement		5.3	%		5.5	%
Total		100.0	%		100.0	%

Staffing services segment revenues increased 35.7%. Permanent placement fee revenues (included in staffing segment revenues) increased 21.8%. The year-over-year revenue growth is primarily attributable to the following factors:

• Additional revenue from the acquisition of Career Blazers of $7.8 million;

• 22.5% increase in the number of billed hours in the commercial division of the staffing services segment, offset by;

• 27.0% decrease in the number of billed hours in the professional division of the staffing services segment, excluding Career Blazers

The professional division revenues reflect reduced demand for staffing services as customers were affected by weaker economic conditions and a reduction in our clinical research customer usage due to customer funding reductions.

4

PEO services segment net revenues decreased 5.6%. The decrease was due to a 4.7% decrease in the average number of worksite employees and a decrease in billed worker’s compensation premium, offset by a 3.7% increase in average wages per employee. The decline in average worksite employees was due, in part, to the loss of residential construction jobs and economic softness in the Florida market. The decline in worker’s compensation premium was due largely to a state mandated reduction in statutory rates.

Gross profit and gross margin percentage

Gross profit increased 9.4% due to the additional revenue of Career Blazers, an increase in staffing consulting and temporary revenues, as well as increased permanent placement fees, offset by a decrease in PEO revenues and gross margin percentage. Staffing segment gross profit increased 21.2%. PEO services segment gross profit decreased 9.8%.

Our consolidated gross margin percentage decreased due a to larger percentage of our consolidated revenues coming from our lower margin contingency staffing division and the commercial staffing line of business offset by higher permanent placement fees and favorable changes in burden rates.

Gross margin percentage (without permanent placement revenue) in our professional staffing division decreased from 18.0% to 14.2% primarily due to the additional lower margin contingency staffing and the mix of business between higher margin IT staffing and lower margin clerical staffing.

Gross margin percentage for the commercial staffing division changed slightly from 15.9% to 15.2% due to lower permanent placement fees, offset by slightly favorable workers’ compensation burden.

Gross margin percentage for the PEO segment decreased from 44.7% to 42.7% primarily due to the statutory workers’ compensation rate reductions offset by an increase in average salary per worksite employee and slightly favorable burden rates.

We expect gross profit, as a percentage of net revenues, to continue to be influenced by fluctuations in the mix between staffing and PEO services, including the mix within the staffing segment and the volume of permanent placement revenue. Future gross margin trends can be affected by economic conditions, changes in statutory unemployment rates as well as workers’ compensation cost, which may be negatively affected by unanticipated adverse claim losses.

Selling, general and administrative expenses

Selling, general and administrative, also referred to as SG&A, expenses represent both branch office and corporate-level operating expenses. Branch operating expenses consist primarily of branch office payroll and personnel related costs, advertising, rent, office supplies and branch incentive compensation. Corporate-level operating expenses consist primarily of executive and office staff payroll and personnel related costs, professional and legal fees, marketing, travel, occupancy costs, information systems costs, executive and corporate staff incentive bonuses, expenses related to being a publicly-traded company and other general and administrative expenses.

SG&A expenses increased 6.4%. The increase is primarily the result of the additional two months expense of Career Blazers, salaries, commissions and bonuses due to higher field headcount generating higher revenues, new branch openings and expenses related to being a publicly-traded company. SG&A as a percent of revenues decreased from 23.8% to 20.2%. We expect increases in SG&A expenses in 2008 from levels experienced in 2007, due to additional headcount, new branch openings and share-based compensation.

Depreciation and amortization

Depreciation expense increased $103,000 reflecting capital requirements of the Company. We anticipate depreciation expense in 2008 to remain consistent with 2007. Amortization increased $312,000 due to a full three months expense in 2008 vs. one month in 2007 related to the addition of identifiable intangible assets in the acquisition of Career Blazers.

Other expense

In 2007 we recorded $395,000 related to the extinguishment of our loan facility with Wells Fargo Bank in February 2007.

5

Interest Expense

Other interest expense, net, decreased $71,000. The decrease was primarily due to lower average outstanding balances on our senior credit facility in 2008 compared to 2007. We recorded a reduction in interest expense relating to the estimated fair market valuation adjustment of the warrant and conversion liability of $630,000 and $2,280,000 for 2008 and 2007, respectively. The reduction was primarily the result of changes in interest rates, stock prices, the estimated term of the underlying financial instruments and volatility factors.

Income Taxes

Income tax benefit attributable to income from operations for the three months ended March 2008 and 2007 differed from the amount computed by applying the U.S. federal income tax rate of 34% to pretax income from operations primarily as a result of the share-based compensation, FICA tip credits, preferred stock accretion and amortization and income related to the fair market valuation of the warrant and conversion liability.

LIQUIDITY AND CAPITAL RESOURCES

To meet our capital and liquidity requirements, we primarily rely on operating cash flow as well as borrowings under our existing credit facility. Please see the accompanying Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 2008 and 2007 for a more detailed description of our cash flows. The Company is principally focused on achieving the appropriate balance in the following areas of cash flow: (i) achieving positive cash flow from operating activities; (ii) investing in our infrastructure to allow sustainable growth via capital expenditures; (iii) making strategic acquisitions, and (iv) reducing the outstanding balance of our debt. Our operating cash flows and credit line have historically been sufficient to fund our working capital and capital expenditure needs. Our working capital requirements consist primarily of the financing of accounts receivable and related payroll expenses.

Operating Activities

The significant variations in cash provided by operating activities and net income or loss are principally related to adjustments for certain non-cash charges such as depreciation and amortization expense, share-based compensation and fair market valuation of warrant and conversion features. These adjustments are more fully detailed in our Unaudited Consolidated Condensed Statements of Cash Flows for the three months ended March 2008 and 2007.

Net cash provided by operating activities increased $315,000 over 2007.

Accounts receivable represented 87% and 86% of current assets as of March 2008 and December 2007, respectively. Our trade accounts receivable balance increased 1.5% from December 2007.

Investing Activities

Capital expenditures were $131,000 in 2008 compared to $162,000 in 2007 and were primarily related to acquisition of computer related equipment, leaseholds and furniture. In 2007, we utilized $9,600,000 for the acquisition of Career Blazers.

Financing Activities

Our cash position is determined after considering outstanding checks (“bank overdrafts”) issued against cash balances maintained at the corresponding bank.

The net increase on our line of credit was primarily related to the repayments on our bank term note in 2008 and the acquisition of Career Blazers in 2007.

Management expects that current liquid assets, funds anticipated to be generated from operations and credit available under the credit and security agreement with Wells Fargo and other potential sources of financing will be sufficient in the aggregate to fund our working capital needs for the foreseeable future.

6

On April 29, 2008, the Company and its subsidiaries entered into a Credit and Security Agreement (“2008 facility”) with Wells Fargo Bank (“Wells Fargo”) for a revolving line of credit and letters of credit collateralized by our subsidiaries eligible accounts receivable as defined in the 2008 facility, which provides for a borrowing capacity of $26 million, including up to $6 million under a term note. Borrowing under the term note may be funded in increments during the first twelve months of the agreement. The term note is payable in monthly installments (currently $213,000), based upon the amount funded, plus interest beginning in May 2008 and matures in April 2010, unless paid in full earlier. Additionally, 25% of our free cash, as defined in the 2008 facility, from each year beginning with 2008, is due in April of the following year. The term note bears interest at prime rate plus 2.75% or the applicable 30, 60, 90-day or one year LIBOR plus 5.0%. Interest on the revolving line of credit is payable at prime rate or the applicable 30, 60, 90-day or one year LIBOR plus 3.0% subject to certain minimums. A fee of 0.25% per annum is payable on the unused portion of the line of credit. Additionally, a monthly collateral management fee will be charged. We paid a closing fee of $50,000 to Wells Fargo. The 2008 facility expires in April 2011.

We borrowed $9,996,000 on the revolving line of credit and $4,100,000 on the term note in connection with the payment in full of all outstanding amounts owed to CapitalSource.

In addition to the repayment of the loan from CapitalSource, the proceeds of the 2008 facility can be used to repurchase our senior secured convertible notes and for ongoing working capital needs. We repurchased $3,000,000 of senior secured convertible notes on May 9, 2008 for $2,850,000 plus accrued interest, including $157,000 from certain officers, directors and employees. We borrowed $1,000,000 on the term note and the remainder on the revolving line of credit under the 2008 facility.

Borrowing availability under the revolving line of credit was $1,573,000 and availability under the term note was $900,000 as of May 11, 2008.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements other than operating leases entered into in the normal course of business.

COMMITMENTS

We have not entered into any other significant commitments that have not been previously disclosed in our annual report on Form 10-K for the year ended December 30, 2007 as filed with the SEC on April 15, 2008.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to certain market risks from transactions that we enter into in the normal course of business. Our primary risk exposure relates to interest rate risk.

Our 2008 facility provides for a revolving line of credit in the maximum amount of $20 million and a $6 million term loan. Based on current outstanding debt, a future increase in our variable interest rates of two percentage points could increase our interest expense by approximately $280,000 per year. Our exposure to market risk for changes in interest rates is not significant with respect to interest income, as our investment portfolio is not material to our consolidated balance sheet. We currently have no plans to hold an investment portfolio that includes derivative financial instruments.

The valuation of the warrant and conversion liability requires the use of the volatility of our stock as well as long-term interest rates. Because our stock has not developed a long term volatility factor, we have utilized daily historical closing stock prices of comparable companies to determine a volatility factor. Changes in the stock prices and volatility, as well as changes in interest rates, has had and may have a significant non-cash impact on the warrant and conversion valuation and net income in future periods.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of March 30, 2008, we carried out an evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 and 15d-15 under the Exchange Act (“Disclosure Controls”). Based on the Evaluation, our CEO and CFO concluded that as of March 30, 2008, in light of the material weaknesses described below, our disclosure controls and procedures were not effective to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in rules and forms of the SEC and is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure. Notwithstanding the material weaknesses, our company’s unaudited consolidated condensed financial statements in this Form 10-Q fairly present, in all material respects, the financial condition, results of operations and cash flows of our company as of and for the periods presented in accordance with generally accepted accounting principles in the United States.

7

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. In assessing the effectiveness of our internal control over financial reporting, the following material weaknesses in internal control over financial reporting existed as of March 30, 2008:

Control Activities

We formalized the review, documentation and follow-up of key balance sheet account analyses and reconciliations. We also developed a review checklist and verification process with our accounting consulting firm to increase the level of their involvement in key accounting issues, including the calculation of earnings per share. However, we were not able to test an adequate sample related to these key internal controls to determine if they were fully operating and effective in a manner to effectively support the requirements of the financial reporting and period-end close process.

Changes in Internal Control over Financial Reporting

Management has evaluated, with the participation of our principal executive and principal financial officers, whether any changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, except as noted above, management has concluded that no other changes have occurred.

Inherent Limitations of Internal Control over Financial Reporting

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

CEO and CFO Certifications

Exhibits 31.1 and 31.2 are the Certifications of the CEO and the CFO, respectively. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This Item of this report, which you are currently reading, is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of our business, we are periodically threatened with or named as a defendant in various lawsuits. We carry insurance to mitigate any potential liabilities associated therewith. The principal risks that we insure against, subject to and upon the terms and conditions of our various insurance policies, are workers’ compensation, general liability, automobile liability, property damage, alternative staffing errors and omissions, fiduciary liability and fidelity losses.

This quarterly report on Form 10-Q should be read in conjunction with our annual report on Form 10-K as filed on April 15, 2008. From time to time we have been threatened with, or named as a defendant in litigation, administrative claims and lawsuits. As of the date of this report, management believes the resolution of these matters will not have a material adverse effect on our consolidated financial statements.

Item 1A. Risk Factors

There has been no material changes in our risk factors from those disclosed in our annual report on Form 10-K, filed April 15, 2008 under PART 1, Item 1A., “Risk Factors”.

8

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission Of Matters To A Vote Of Security Holders

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit #	Description
31.1	Certification of Howard Brill, Chief Executive Officer and President pursuant to Rule 13a-14(a) and the Exchange Act of 1934.
31.2	Certification of Dan Hollenbach, Chief Financial Officer pursuant to Rule 13a-14(a) and the Exchange Act of 1934.
32.1	Certification of Howard Brill, Chief Executive Officer and President, and Dan Hollenbach, Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

9

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GLOBAL EMPLOYMENT HOLDINGS, INC.
Date: May 14, 2008	By:	/s/ Howard Brill
		Howard Brill
		Chief Executive Officer and President (Principal Executive Officer)
Date: May 14, 2008	By:	/s/ Dan Hollenbach
		Dan Hollenbach
		Chief Financial Officer (Principal Financial and Accounting Officer)

10

EXHIBIT INDEX

Exhibit #	Description	Reference
10.1	Credit and Security Agreement	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2008 (File No. 000-51737).
10.2	$20,000,000 Revolving Promissory Note	Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2008 (File No. 000-51737).
10.3	$6,000,000 Term Note	Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2008 (File No. 000-51737).
10.4	Pledge Agreement	Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2008 (File No. 000-51737).
10.5	Patent and Trademark Security Agreement	Incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2008 (File No. 000-51737).
10.6	Copyright Security Agreement	Incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2008 (File No. 000-51737).
10.7	Guarantee	Incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2008 (File No. 000-51737).
10.8	Guarantor Security Agreement	Incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2008 (File No. 000-51737).
10.9	Subordination Agreement	Incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2008 (File No. 000-51737).
10.10	Agreement to Enter into New Subordination Agreement	Incorporated by reference to Exhibit 10.10 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2008 (File No. 000-51737).

31.1	Certification of Howard Brill, Chief Executive Officer and President pursuant to Rule 13a-14(a) and the Exchange Act of 1934.	Filed herewith
31.2	Certification of Dan Hollenbach, Chief Financial Officer pursuant to Rule 13a-14(a) and the Exchange Act of 1934.	Filed herewith
32.1	Certification of Howard Brill, Chief Executive Officer and President, and Dan Hollenbach, Chief Financial Officer pursuant to 18 U.S.C. Section 1350.	Filed herewith

11