Computer Horizons 10Q 2008 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

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

For the transition period from to

Commission File Number 0-7282

COMPUTER HORIZONS CORP.
(Exact name of registrant as specified in its charter)

New York
(State or other jurisdiction of
incorporation or organization)

13-2638902
(I.R.S. Employer
Identification Number)

2001 Route 46 East, Suite 310, Parsippany, NJ 07054
(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code (973) 257-5030

Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “ large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 126-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller Reporting Company x

(Do not check if a smaller reporting company)

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

As of August 1, 2008 the issuer had 33,837,284 shares of common stock outstanding.

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COMPUTER HORIZONS CORP. AND SUBSIDIARIES

Index

Part I Financial Information		3

Item 1	Financial Statements:	3

	Consolidated Condensed Statement of Net Assets as of June 30, 2008 (unaudited) and December 31, 2007 (Liquidation Basis)	3

	Consolidated Condensed Statement of Changes in Net Assets in Liquidation as of June 30, 2008 (Liquidation Basis) (unaudited)	4

	Consolidated Condensed Statements of Operations—Period from January 1, 2007 through February 16, 2007	5

	Consolidated Condensed Statements of Cash Flows Period from January 1, 2007 through February 16, 2007	6

	Notes to Consolidated Condensed Financial Statements	7

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3	Quantitative and Qualitative Disclosures about Market Risk	27

Item 4	Controls and Procedures	28

Part II Other Information		29

Item 1	Legal Proceedings	29

Item 1A	Risk Factors	32

Item 6	Exhibits	33

Signatures		34

EX-31.1
EX-31.2
EX-32.1
EX-32.2

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PART I. Financial Information

Item 1.

Computer Horizons Corp and Subsidiaries
Consolidated Condensed Statements of Net Assets as of June 30, 2008

and December 31, 2007 (Liquidation Basis)

($ in thousands)

	June 30, 2008		December 31, 2007
	(Unaudited)		(Audited)*
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	15,758	$	25,182
Refundable tax credit	9,627		9,627
Prepaid expenses and other	25		24

TOTAL CURRENT ASSETS	25,410		34,833

TOTAL PROPERTY AND EQUIPMENT, NET	4		4

TOTAL ASSETS	$	25,414	$	34,837

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Accounts payable, accrued payroll, payroll taxes and benefits	$	11	$	142

Net working capital adjustment	1,904		1,904
Income taxes payable	1,687		1,695
Other accrued expenses	2,470		4,432
Deferred Cash Receipts	4,583		957

TOTAL CURRENT LIABILITIES	10,655		9,131

TOTAL LIABILITIES	$	10,655	$	9,131

NET ASSETS IN LIQUIDATION	$	14,759	$	25,706

* Derived from audited information

The accompanying notes are an integral part of these statements.

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Computer Horizons Corp and Subsidiaries
Consolidated Condensed Statement of Changes in Net Assets in Liquidation

as of June 30, 2008 (Liquidation Basis)
($ in thousands)
(Unaudited)

Shareholder’ Equity at December 31, 2007	$	25,706
Investment Income from January 1 through March 31, 2008	163
Surrender program payment - stock options	(250		)
Second Liquidation Distribution	(10,150		)
Adjustment to Liquidation Accruals	(200		)
Net Assets in Liquidation March 31, 2008	$	15,269
Investment Income from March 1 through June 30, 2008	98
Adjustment to Liquidation Accruals	(608		)
Net Assets in Liquidation June 30, 2008	$	14,759

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Computer Horizons Corp and Subsidiaries
Consolidated Condensed Statement of Operations and Comprehensive Income (Going Concern Basis)
($ in thousands except per share data)

	For the period from January 1 to February 16, 2007
REVENUES:
Commercial	$	24,995
Chimes	4,671

Total	29,666

COSTS AND EXPENSES:
Direct costs	23,086
Selling, general & administrative	10,761
Restructuring charges	14

Total Costs	33,861

INCOME/(LOSS) FROM OPERATIONS	(4,195		)

OTHER INCOME/(EXPENSE):
Interest income	881
Interest expense	(1		)

	880

INCOME/(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(3,315		)
GAIN/(LOSS) ON SALE	102,686

INCOME FROM EXTRAORDINARY ITEMS	102,686

INCOME (TAXES)/BENEFIT:	—

NET INCOME/(LOSS) FROM CONTINUING OPERATIONS	$	99,371

INCOME/(LOSS) FROM DISCONTINUED OPERATIONS	$

NET INCOME/(LOSS)	$	99,371

EARNINGS/(LOSS) PER SHARE FROM CONTINUING OPERATIONS—BASIC	$	2.94

EARNINGS/(LOSS) PER SHARE FROM DISCONTINUED OPERATIONS—BASIC	$	—

EARNINGS/(LOSS) PER SHARE—BASIC	$	—
EARNINGS/(LOSS) PER SHARE FROM CONTINUING OPERATIONS—DILUTED	$	2.94

EARNINGS/(LOSS) PER SHARE FROM DISCONTINUED OPERATIONS—DILUTED	$	—

EARNINGS/(LOSS) PER SHARE—DILUTED	$	2.94
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING—BASIC	33,837,284

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING—DILUTED	33,837,284

The accompanying notes are an integral part of these statements.

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Computer Horizons Corp. and Subsidiaries
Consolidated Condensed Statement of Cash Flows (Going Concern Basis)
($ in thousands)
(Unaudited)

	For the period from January 1 to February 16, 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/(Loss)	$99,371

Less: Income/(Loss) from discontinued operations	—

Less: Gain on sale of Chimes and Commercial	102,625
Income/(Loss) from continuing operations	(3,254	)

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Deferred taxes	(1	)
Depreciation	234
Provision for bad debts	1,452
Restructure expense	14
FAS 123R Option Expense	(15	)

Changes in assets and liabilities, net of acquisitions	(5,124	)
NET CASH USED IN OPERATING ACTIVITIES	(6,692	)
NET CASH PROVIDED BY DISCONTINUED OPERATIONS	104,657
NET CASH PROVIDED BY OPERATING ACTIVITIES	97,965
CASH FLOWS FROM INVESTING ACTIVITIES
Sale/Purchase of furniture and equipment	1,527
NET CASH PROVIDED BY INVESTING ACTIVITIES	1,527
NET CASH PROVIDED BY/(USED IN) DISCONTINUED OPERATIONS	—
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES	1,527
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised	334

Stock issued on employee stock purchase plan	97
NET CASH PROVIDED BY FINANCING ACTIVITIES	431
NET INCREASE IN CASH AND CASH EQUIVALENTS	99,923
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	72,790
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$172,713

The accompanying notes are an integral part of these statements.

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COMPUTER HORIZONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

At a Special Meeting held on February 14, 2007, the shareholders of Computer Horizons Corp (“CHC” or the “Company”) approved the sales of the Company’s Chimes, Inc. subsidiary to an affiliate of Axium International and the Company’s Commercial Division to an affiliate of Allegis Group (the “Asset Sales”). At the Special Meeting, the shareholders of the Company also approved a proposed plan of complete liquidation and dissolution of the Company. The Company began implementing the complete liquidation and dissolution of the Company after both the Chimes and Commercial Asset Sales were completed on February 16, 2007. On March 5, 2007, the Company announced that its Board of Directors declared an initial liquidating distribution of $4.00 per share to its common shareholders. This distribution was paid March 27, 2007 to shareholders of record as of the close of business on March 16, 2007. This initial liquidating distribution was the first in what is expected to be a series of liquidating distributions pursuant to the plan of complete liquidation and dissolution approved by the Company’s shareholders on February 14, 2007. On December 19, 2007, the Board of Directors announced a second liquidating distribution of $.30 per share to its common shareholders. This distribution was paid on February 11, 2008 to shareholders of record as of the close of business on January 15, 2008. The aggregate amount of distributions to our shareholders is expected to be in the range of $4.68 to $4.78 per share of Common Stock. The actual amount and timing of future liquidating distributions cannot be predicted at this time and will depend upon a variety of factors, including, but not limited to, the ultimate settlement amounts of the Company’s liabilities and obligations, and actual costs incurred in connection with carrying out the Company’s plan of complete liquidation and dissolution, including administrative costs during the liquidation period.

The consolidated financial statements have been prepared by the Company without audit in accordance with the rules and regulations of the Securities and Exchange Commission, and should be read in conjunction with the audited Consolidated Financial Statements previously filed on the Company’s Form 10-K for the year ended December 31, 2007. In the opinion of management, the statements reflect all adjustments necessary for a fair presentation of the results of interim periods. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, which are not required for interim purposes, have been condensed or omitted. The results for any interim period are not necessarily indicative of the results to be expected for a full year.

The consolidated financial statements for the period January 1, 2007 to February 16, 2007 were prepared on the going concern basis of accounting, which contemplates realization of assets and satisfaction of liabilities in the normal course of business. As a result of the shareholders’ approval of the Plan of Liquidation, the Company adopted the liquidation basis of accounting effective February 17, 2007. This basis of accounting is considered appropriate when, among other things, liquidation of a company is probable and the net realizable values of assets are reasonably determinable. Under this basis of accounting, assets are valued at their net realizable values and liabilities are stated at their estimated settlement amounts.

The conversion from the going concern to liquidation basis of accounting required management to make significant estimates and judgments. In order to record assets at estimated net realizable value and liabilities at estimated settlement amounts under the liquidation basis of accounting, the Company recorded the following adjustments to record its assets and liabilities at fair value as of February 17, 2007, the date of adoption of the liquidation basis of accounting:

	($ in thousands)
Adjust assets and liabilities to fair value:
Write down of Fixed Assets	119
Write off of Advances to India	698
Write down of Other Assets	156

Total	$	973

Data for the statement of operations is not presented for 2008, because using the liquidation basis of accounting, net income/(loss) is no longer reported.

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Accrued Cost of Liquidation

Upon conversion to the liquidation basis of accounting, the Company accrued for the known costs to be incurred in liquidation, and has made subsequent adjustments and payments against these accounts, as follows:

($ in thousands)	As Booked 2/17/2007		Recorded prior to 2/17/2007*	Adjustments to reserves		Activity to date		Balance at 6/30/08
Lease Obligation	$	1,324		248		(1,560	)	12
Legal Fees	450			2,429		(1,208	)	1,671
Professional Fees, including insurance	2,037			3,080		(4,663	)	454
Human Resources	3,480		1,188	1,567		(6,004	)	231
Systems-related	819			(269	)	(507	)	43
Misc.	900		295	(310	)	(826	)	59

Total	$	9,010	1,483	6,745	**	(14,768	)	2,470

* Accruals carry forward from operating period.

** Adjustments to reserves totaled $6.7 million, and were primarily the result of revised estimates relating to the cost of professional services and human resource costs. (See “Sale of Commercial” and “Sale of Chimes” below, for a discussion of current legal proceedings.)

The Company will continue to incur operating costs and receive income on its investments throughout the liquidation period. On a regular basis, we evaluate our assumptions, judgments and estimates that can have a significant impact on our reported net assets in liquidation based on the most recent information available to us, and when necessary make changes accordingly. Actual costs and income may differ from our estimates, which might reduce net assets available in liquidation to be distributed to shareholders.

The Company expects to make further distributions to its shareholders of its remaining cash, less any amount applied to or reserved for actual or contingent liabilities (which will be deposited in a liquidating trust). The amounts reserved will be based on a determination by the board of directors, derived from consultation with management and outside experts, if the board of directors determines that it is advisable to retain such experts, and a review of, among other things, our estimated contingent liabilities and our estimated ongoing expenses, including, but not limited to, payroll, legal expenses, regulatory filings and other miscellaneous expenses. To the extent that assets deposited in the liquidating trust are not applied to or reserved for payment of the Company’s liabilities, these assets will be distributed to holders of beneficial interests in the liquidating trust at one or more later dates. Each shareholder will receive his or her pro rata share of each distribution based on the number of shares held on the record date for such distribution.

Sale of RGII

On September 29, 2006, the Company sold its subsidiary, RGII Technologies, Inc., to Netstar-1, Inc. for $15.3 million in cash, less an estimated net asset adjustment of $1.2 million. In addition, CHC retained all cash and cash equivalents of RGII, in the amount of $6.3 million. The amount of the estimated net asset adjustment was subject to a final review. To the extent that the final net asset amount sold to NetStar-1 was greater than the estimated asset amount at closing, the Stock Purchase Agreement provided that the excess would be paid to CHC together with interest thereon at the prime rate from the closing date to the date of payment. If the final net asset amount sold to NetStar-1 was less than the estimated asset amount at closing, the Stock Purchase Agreement provided that the deficiency would be paid by CHC to NetStar-1, together with interest thereon at the prime rate from the closing date to the date of payment. During the second quarter 2007, the parties reached agreement on the final net asset amount, resulting in a payment to the Buyer in the amount of $215 thousand. The remainder of the amount in escrow of $785 thousand was released from escrow to CHC. The sale of RGII resulted in a net book loss on disposal of $4.8 million, including approximately $969 thousand in transaction costs as reported September 30, 2006.

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Sale of Commercial

On November 7, 2006, the Company entered into an asset purchase agreement (the “Commercial Services Asset Purchase Agreement”) by and among TEKsystems, Inc., a Maryland corporation (“TEKsystems”), TEKsystems EF&I Solutions, LLC, a Maryland limited liability company, Allegis Group Canada Corporation, a Nova Scotia unlimited liability corporation, the Company, GBS Holdings Private Limited, a corporation organized under the laws of Mauritius, CHC Healthcare Solutions, LLC, a Delaware limited liability company, and Allegis Group, Inc., a Maryland corporation. Pursuant to the Commercial Services Asset Purchase Agreement, on February 16, 2007, the Company sold to TEKsystems substantially all of the assets of its Commercial Services Business (as defined in the Commercial Services Asset Purchase Agreement), for a purchase price of $57 million in cash subject to a potential post-closing working capital adjustment, estimated at $(1.9) million using data as of the date of sale (the “Commercial Services Asset Sale”). The sale was also subject to an escrow of $1.7 million of the purchase price pending receipt of tax certificates in connection with the Taxation Act—Quebec; the certificates were subsequently received and the escrow released on April 24, 2007. Assets not included in the Commercial Services Asset Sale included a refundable Quebec tax credit for 2005 and 2006 currently estimated at approximately $9.6 million (described below) and the unit’s operating cash as of the date of the sale. The Company recorded an estimated gain of $29.1 million as a result of the sale of the Commercial Services Business.

On April 17, 2007, TEKsystems submitted their revised calculation of the net working capital adjustment, asserting a claim for $6 million payable to TEKsystems. The Company continues to believe that its estimate of approximately $1.9 million is accurate, and has disputed this claim. While some differences were resolved, there still remains a difference of $3.3 million between the Company’s estimate and that of TEKsystems. The principal item in dispute relates to the Company’s belief that Computer Horizons (Canada) Corp. (“Canada Sub”) has sufficient NOL’s to offset any income tax due on the Quebec tax receivable discussed below. Under the terms of the Commercial Services Asset Purchase Agreement, such disputed items are to be determined by an independent accounting firm and, on September 19, 2007 the Company, and on September 28, 2007 TEKsystems, submitted the disputed items to such independent accounting firm for determination. However, TEKsystems refused to proceed with such process to resolve these disputed items and, as noted below, in a litigation between CHC and TEKsystems the court ordered TEKsystems to arbitrate the disputed items before the independent accounting firm. For a more detailed description of this litigation, see Item 1 of Part II of this Quarterly Report on Form 10-Q (Legal Proceedings).

The Commercial Services Asset Sale included all of the capital stock of Computer Horizons (Canada) Corp. (“Canada Sub”) but, as noted above, specifically excluded a refundable income tax credit payable to Canada Sub by Revenu Quebec for the tax years 2005 and 2006 (the “Quebec Tax Receivable”). During the third quarter of 2007, TEKsystems advised the Company that Canada Sub had received approximately Canadian $4.3 million with respect to the Quebec Tax Receivable for 2005 (representing approximately Canadian $4.4 million in tax credit and interest less a deduction for associated capital taxes of approximately Canadian $114 thousand). Using the exchange rate between the Canadian and United States dollars as of the day before the date of TEKsystem’s notice to the Company, the receipt by TEKsystems amounted to approximately US $4.4 million. TEKsystems remitted to the Company approximately $958 thousand, after deducting approximately $1.49 million for Canadian income taxes, $1.89 million as a purchase price adjustment under the Commercial Services Asset Purchase Agreement, and $114 thousand for capital taxes. Under the terms of the Commercial Services Asset Purchase Agreement, TEKsystems has no right to offset any amounts due the Company and the aforementioned amount of $1.49 million is subject to dispute and has been submitted to an independent accounting firm for determination as mentioned above. The Company has recorded the $958 thousand as a deferred cash credit in the balance sheet. After demands to remit the $4.3 million were ignored, the Company, on October 19, 2007, filed a lawsuit against TEKsystems seeking damages for the failure of TEKsystems to remit the balance of the funds received by it with respect to the 2005 Quebec Tax Receivable and a declaration that TEKsystems must promptly remit to the Company upon receipt all funds received by it in the future in payment of the 2006 Quebec Tax Receivable. For a more detailed description of this litigation, see Item 1 of Part II of this Quarterly Report on Form 10-Q (Legal Proceedings).

On December 29, 2007, the Company filed an amended complaint in this action, adding a third claim, i.e., for judgment ordering TEK to cooperate promptly with the independent accounting firm in its determination of the disputed items in the calculation of Final Net Working Capital.

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a successor to the Company by plaintiffs that have brought actions against the Company, a counterclaim for a declaration that the Company must indemnify TEK in the event it is held to owe any taxes by reason of a notice sent by an employee of the Company to taxing authorities, and a counterclaim for the purported legal fees incurred by TEK and the amount by which it allegedly reduced a receivable in settling a dispute with the Iowa Health Systems, Inc. (“IHS”) over the receivable that IHS owed. The counterclaims seek to have the court impose a constructive trust over the Company’s assets to remedy the alleged breaches of the APA by the Company. By reply filed February 27, 2008, the Company denied the substantive allegations contained in the counterclaims.

On February 27, 2008, the Company served a motion in this action to compel TEK to arbitrate the disputed matters in the calculation of Final Net Working Capital before the independent accounting firm and to compel TEK to cooperate promptly with the firm in its determination of the disputed matters. This motion was granted by the court’s order entered April 24, 2008, and such order also stayed the action, “pending the issuance of a written determination of Net Working Capital” by the independent accounting firm.

No discovery has yet been taken in this action.

The Company intends to prosecute its claims and defend against the counterclaims of TEK vigorously in this action.

On April 28, 2008, TEKsystems notified the Company that Canada Sub has received a payment from Revenu Quebec with respect to the 2006 Quebec Tax Receivable (See Note 11) of Canadian $5.6 million consisting of a calendar year 2006 credit of Canadian $5.6 million less a calendar year 2006 capital tax of Canadian $55 thousand (which was withheld by Revenu Quebec from the payment). In addition to the above payment, Canada Sub received a payment of interest on the 2006 credit of Canadian $7 thousand. Using the noon buying rate published by the Federal Reserve Bank of New York on April 28, 2008 (1.0158 Canadian $ per U.S. $), the 2006 credit equates to US $5.5 million. TEKsystems remitted to the Company US $3.6 million, representing the 2006 credit plus US $7 thousand of interest received on the 2006 credit after conversion at the exchange rate, minus US $54 thousand for capital taxes assessed by Revenu Quebec with respect to 2006 after conversion at the exchange rate, and minus US $1.9 million for income taxes payable on the 2006 credit and on the related interest calculated utilizing the above-referenced exchange rate. Under the terms of the APA, TEKsystems has no right to offset any amounts due the Company. The Company has recorded the $3.6 million as a deferred cash credit in the balance sheet.

For a more detailed description of this litigation, see Item 1 of Part II of this Quarterly Report on Form 10-Q (Legal Proceedings).

The Commercial Services Asset Purchase Agreement also grants the parties indemnification rights against each other with respect to certain matters. The maximum liability of the Company for indemnification claims under the Commercial Services Asset Purchase Agreement is $10 million and is contingent upon assertion of a claim for indemnity within nine months after the date of the Commercial Services Asset Purchase Agreement. On August 6, 2007, TEKsystems submitted a letter to the Company, on behalf of itself, the other purchaser parties to the Commercial Services Asset Purchase Agreement and their affiliates, purporting to be a claim notice under the indemnification provisions of the Commercial Services Asset Purchase Agreement asserting purported indemnification claims based, variously, on the proposition that TEKsystems and the other purchaser parties are or may be subject to claims that are Excluded Liabilities under the Commercial Services Asset Purchase Agreement or arise out of alleged breaches of representations, warranties and/or covenants made by the Company in that agreement. The Company believes that many of the claims set forth in the letter relate to the working capital adjustment referred to above and overlap with or are repetitious of the issues between the parties with respect to the correct amount of that adjustment. The Company strongly disagrees with the assertions in the letter from TEKsystems and believes such assertions are without merit and, if TEKsystems brings suit based on any of the matters stated therein, the Company intends to vigorously defend against it.

The Commercial Services Asset Sale is a taxable transaction with respect to the Company to the extent of the gain that was realized. The Company will realize gain or loss measured by the difference between the proceeds received by it and its affiliates on such sale and the Company’s (or an affiliate’s) tax basis in the assets. For purposes of calculating gain or loss, the proceeds received by the Company and its affiliates will include the cash received by them, the amount of their indebtedness that is cancelled or assumed, and any other consideration received by them for their assets. It is anticipated that the Company will have sufficient current losses to offset most of the gain expected to be realized from the Commercial Services Asset Sale for regular Federal income tax purposes and will otherwise incur approximately $300 thousand in alternative minimum taxes. The Company and/or its affiliates may

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be subject to state income taxes to the extent that gains exceed losses for state tax law purposes, but the Company does not anticipate that such taxes, if any, will be significant.

Sale of Chimes

On October 18, 2006, the Company signed a definitive asset purchase agreement (the “Chimes Asset Purchase Agreement”) by and among Axium International, Inc., a Delaware corporation, Diversity MSP, Inc., a California corporation (“Diversity MSP”) and Chimes, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (now known as Forgone, LLC, a Delaware limited liability company, and referred to herein as “Chimes”). Pursuant to the Chimes Asset Purchase Agreement, on February 16, 2007, the Company sold to Diversity MSP substantially all of the assets of Chimes, excluding cash and marketable securities, for a purchase price of $80.0 million in cash (the “Chimes Asset Sale”), with a gain of $73.6 million.

The Chimes Asset Purchase Agreement also grants the parties indemnification rights against each other with respect to certain matters. The maximum liability of the Company for indemnification claims under the Chimes Asset Purchase Agreement is $8 million and is contingent upon assertion of a claim for indemnity within six months after the closing date.

On July 23, 2007, counsel for Axium International, Inc. and Diversity MSP (collectively, “Axium”) submitted a letter to the Company on Axium’s behalf purporting to be a claim notice under the indemnification provisions of the Chimes Asset Purchase Agreement asserting losses and damages, including punitive damages, in unspecified amount as a result of allegedly “fraudulent conduct, intentional and willful and/or negligent misrepresentations, concealment and breach of representations, warranty, covenants and agreements contained in the Chimes Asset Purchase Agreement by the Company, Chimes and certain of their officers and directors. Thereafter, on August 15, 2007, the Company received a summons and complaint in a lawsuit making similar allegations. On October 2, 2007, the Company and Chimes filed an answer denying the material allegations in the complaint and asserting certain affirmative defenses and the other defendants filed a motion to dismiss the complaint as to them. See Item 1 of Part II of this Quarterly Report on Form 10-Q (Legal Proceedings) for a description of that lawsuit and the Company’s response thereto. On December 19, 2007, the Company announced that it had settled the litigation pending between it and Axium International. The lawsuit was discontinued without prejudice, the parties exchanged releases, and Computer Horizons made a payment to Diversity of $175,000.

The Chimes Asset Sale is a taxable transaction with respect to the Company to the extent of the gain that was realized. The Company will realize a gain measured by the difference between the proceeds received by it and its affiliates on such sale and the Company’s (or an affiliate’s) tax basis in the assets. For purposes of calculating the gain, the proceeds received by the Company and its affiliates will include the cash received by them, the amount of their indebtedness that is cancelled or assumed, and any other consideration received by them for their assets. It is anticipated that the Company will have sufficient NOL carry-forwards to offset most of the gain realized from the Chimes Transaction for regular Federal income tax purposes and otherwise incur approximately $1.3 million in alternative minimum taxes.

The Company and/or its affiliates may be subject to state income taxes to the extent that gains exceed losses for state tax law purposes, but does not anticipate that such taxes, if any, will be significant. Based upon current projections, such state taxes are estimated to be approximately $627 thousand after taking into account the availability of state losses to offset the gain, and have been accrued.

2. Contingencies and Estimates

The Company will continue to incur costs through the liquidation. Note 1 sets forth the current (initial) estimate of these costs. The Company will evaluate the assumptions, judgments and estimates that can have a significant impact during liquidation and make changes accordingly. In addition, the following contingencies should be noted:

	($ in thousands)
Sale of the Commercial Services Business Unit, maximum contingent liability under asset purchase agreement, upon assertion of a claim within nine months after the date of the agreement.	$	10,000
Sale of the Commercial Services Business Unit, claim filed for Net Working Capital Adjustment as provided in asset purchase agreement, as adjusted, less $1.9 million accrual. (See the discussion regarding the claim notice sent by TEKsystems under “Sale of Commercial” in Note 1 above.)	$	3,300

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The details of the above are described more fully elsewhere in this filing.

Legal Matters

The Company is involved in various routine litigation matters that arose in the normal course of business. Management believes that the resolution of these matters will not have a material adverse effect on the final liquidation of the Company. While the Company firmly maintains that all claims against the Company in such matters are without merit, it will continue to incur costs as it vigorously defends against these claims.

In addition, the Company is involved in litigation with TEKsystems, as described in Note 1 above and in Item 1 of Part II of this Quarterly Report on Form 10-Q (Legal Proceedings).

3. Liquidating Distributions

On March 5, 2007, the Company announced that its Board of Directors had declared an initial liquidating distribution of $4.00 per share, or $135.3 million, to its common shareholders (and certain former option holders under the provisions of the surrender plan described below). The initial liquidating distribution represented a partial distribution to shareholders of the proceeds received by the Company from the sales of RGII, Chimes and the Commercial Services Business Unit. In determining the amount of the initial distribution, the Company considered wind-down and transition expenses and the exposure for contingent claims under the asset purchase agreements. The distribution was paid on March 27, 2007 to shareholders of record as of the close of business on March 16, 2007. The initial liquidating distribution was the first of what is expected to be a series of liquidating distributions pursuant to the Plan of Liquidation. On December 19, 2007, the Board of Directors announced a second liquidating distribution of $.30 per share, or $10.2 million, to its common shareholders and certain former option holders under the provisions of the surrender program described below. This distribution was paid on February 11, 2008 to shareholders of record as of the close of business on January 15, 2008.

The aggregate amount of distributions to our shareholders is expected to be in the range of $4.68 to $4.78 per share of Common Stock. However, uncertainties as to the ultimate amount of our liabilities make it impossible to predict with certainty the actual aggregate net amounts that will ultimately be available for distribution to shareholders or the timing of any such distribution. Such amount and timing will depend on a number of factors, several of which cannot be determined at this time, including:

· The ultimate amount of our known, unknown and contingent debts and liabilities; and

· The fees and expenses incurred by us in the liquidation of our assets and the dissolution of the Company.

As a result, the amount of cash remaining following completion of our liquidation and dissolution could vary significantly from our current estimates.

Election to Surrender Options

In order to facilitate the participation in any liquidating distributions by the holders of Company options, the board of directors granted to each option holder the right to surrender their options in exchange for the right to receive the amount(s) that such option holder would have been entitled to receive in each distribution as if they held the number of shares of Common Stock issuable upon exercise of the surrendered options. The amount so distributed to each option holder will be reduced by the exercise price of his or her options, which will be applied to reduce the amounts that would otherwise be payable to the option holder until the exercise price has been applied in full. A total of 1,162,820 options were surrendered under the plan. The average exercise price for such options was $2.97 per share. The initial distribution to holders of surrendered options was $394,569. The second distribution to holders of surrendered options on February 11, 2008 was $250,846.

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4. Voluntary withdrawal from NASDAQ

On March 9, 2007, the Board of Directors of the Company approved a plan to voluntarily withdraw its common stock from trading on The NASDAQ Stock Market (“NASDAQ”) effective after the close of trading on March 30, 2007.

On March 12, 2007, the Company received a letter from NASDAQ stating that, based on the NASDAQ staff’s review of the Company’s public announcements concerning its shareholders’ approval of a plan of complete liquidation and dissolution of the Company and the declaration of an initial distribution (and anticipated subsequent distributions) in connection therewith and pursuant to Marketplace Rule 4300, the NASDAQ staff believes that the Company is a “public shell” and as such no longer meets NASDAQ’s continued listing requirements, but that in view of the Company’s plan to voluntarily withdraw its common stock from listing on NASDAQ and pursuant to Marketplace Rule 4450(f) the staff has determined to grant an extension of time permitting the Company’s common stock to continue to trade on NASDAQ through March 30, 2007.

On March 13, 2007, the Company announced that it had notified NASDAQ of its intention to voluntarily withdraw its common stock from listing on NASDAQ effective immediately prior to the opening of trading on April 2, 2007, with the effect that the last day of trading on NASDAQ would be March 30, 2007. The company’s stock began trading in the Pink Sheets effective at the opening of trading on Monday, April 2, 2007.

5. Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 157, Fair Value Measurements (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements required under other accounting pronouncements. FAS 157 does not change existing guidance regarding whether or not an instrument is carried at fair value. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not expect a significant impact on our consolidated financial statements of adopting SFAS No. 157.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“FAS 159”). FAS 159 permits the measurement of many financial instruments and certain other items at fair value. Entities may choose to measure eligible items at fair value at specified election dates, reporting unrealized gains and losses on such items at each subsequent reporting period. The objective of FAS 159 is to provide 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 intended to expand the use of fair value measurement. FAS 159 is effective for fiscal years beginning after November 15, 2007. The Company does not expect a significant impact on our consolidated financial statements of adopting SFAS No. 159.

6. Accounting for Stock-Based Compensation

Accounting for Stock-Based Compensation

The Company accounts for Stock Based Compensation in accordance with Financial Accounting Standards Board Statement No. 123 (revised 2004) (“FAS 123R”)—“Share-Based Payments”.

No changes occurred to the company’s outstanding stock options during the second quarter 2008. A summary of the status of all the Company’s stock option plans as of June 30, 2008 is presented below:

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	Three months ended June 30, 2008
Options (Three Months)	Shares (000’s)	Weighted Average Exercise Price
Outstanding January 1, 2008	25	$	3.31
Granted	0	$	0.00
Exercised	0	$	0.00
Canceled/forfeited/expired	0	$	0.00
Outstanding June 30, 2008	25	$	3.31

Options exercisable June 30, 2008	25	$	3.31

Weighted average fair value of options granted during the three months ended June 30, 2008		$	0.00

7. Cash

On March 5, 2007, the Company announced that its Board of Directors had declared an initial liquidating distribution of $4.00 per share, or $135.3 million, to its common shareholders and certain former option holders under the provisions of the surrender plan described in Note 3. The distribution was payable March 27, 2007 to shareholders of record as of the close of business on March 16, 2007. The initial liquidating distribution was the first of what is expected to be a series of liquidating distributions pursuant to the plan of liquidation and dissolution approved by the Company’s shareholders on February 14, 2007. On December 19, 2007, the Board of Directors announced a second liquidating distribution of $.30 per share to its common shareholders. This distribution was paid on February 11, 2008 to shareholders of record as of the close of business on January 15, 2008. The liquidating distributions represent partial distributions to shareholders of the proceeds received by the Company from the sale of its RGII Technologies subsidiary and substantially all of the non-cash assets of its Chimes, Inc. subsidiary and its Commercial division.

8. Asset-Based Lending Facility

The Company’s credit facility with CIT was cancelled by the Company effective February 12, 2007. CIT held $100 thousand in escrow for 90 days after the effective date of cancellation. During the second quarter 2007, such funds were released from escrow and returned to the Company.

9. Income Taxes

Similar to the prior year, the Company is not in a position to determine its projected annual effective tax rate. For the year ended December 31, 2008, the Company cannot estimate the rate due to the large net operating loss carryforward and corresponding valuation allowance.

As mentioned, liquidation accounting was adopted as of February 17, 2007, and as the result of operational losses, there is no provision from continuing operations for 2007. As of the second quarter 2008, the Company did not accrue any tax due to the results from operations. The liability recorded on the balance sheet as of the second quarter 2008 primarily reflects the Company’s FIN 48 reserve offset by other tax amounts.

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Deferred Tax Asset and Valuation Allowance

The Company records deferred tax assets for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and their respective tax bases, and operating loss carryforwards. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In assessing the realizability of deferred tax assets, management considers the scheduled reversal periods of the deferred tax assets, whether sustained profitability has been achieved and tax planning strategies.

The Company has significant deferred tax assets resulting from net operating loss carryforwards, capital loss carryforwards, and deductible temporary differences that may reduce taxable income in future periods. The Company has provided full valuation allowances on the future tax benefits related to capital losses, foreign net operating losses, and all state net operating losses. The Company believes that the valuation allowance is appropriate because these deferred tax assets have relatively short carryforward periods or relate to taxing jurisdictions which do not allow the filing of consolidated tax returns. Also, as a result of adopting liquidation accounting, the Company does not expect to utilize its deferred tax asset due to the sale of the remaining operations.

Financial Accounting Standard 48—Accounting for Uncertainty in Income Taxes

The Company adopted FASB Interpretation 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), at the beginning of fiscal year 2007. Including the cumulative effect for the adoption of FIN 48, at the beginning of 2007, the Company had approximately $1.3 million of total gross unrecognized tax benefits for federal and state purposes. The Income Taxes Payable balance at 6/30/08 primarily represents the total federal and state gross unrecognized tax benefits of $1.3 million plus applicable interest and penalties of $500 thousand.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through 2002. Substantially all material state, local and foreign income tax matters have been concluded for years through 2001. There are no material audits in process at this time.

The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company has accrued interest of approximately $60 thousand as of the second quarter 2008 for FIN48 related items.

10. Refundable Income Tax

The Quebec Government through Invest Quebec granted the Company’s Montreal Outsourcing Centre (“MOC”) a refundable tax credit on certain qualifying job positions in Information Technology. The outstanding receivables as of September 30, 2007 and 2006 include credits relating to 2005 and 2006. The Commercial Services Asset Sale included all of the capital stock of Computer Horizons (Canada) Corp. (“Canada Sub”) but, as noted above, specifically excluded the refundable income tax credit payable to Canada Sub by Revenu Quebec for the tax years 2005 and 2006 (the “Quebec Tax Receivable”). During the third quarter of 2007, TEKsystems advised the Company that Canada Sub had received approximately C$4.3 million with respect to the Quebec Tax Receivable for 2005, (representing approximately C$4.4 million in tax credit and interest less a deduction for associated capital taxes of approximately C$114 thousand). Using the exchange rate between the Canadian and United States dollars as of the day before the date of TEKsystem’s notice to the Company, the receipt by TEKsystems amounted to approximately US$4.4 million. An additional US$665 thousand was booked during the third quarter of 2007 to recognize the increase in value of the 2005 tax credit due to the change in exchange rate since the Company’s last estimate of such value. On April 28, 2008, TEKsystems notified the Company that Canada Sub has received a payment from Revenu Quebec with respect to the 2006 Quebec Tax Receivable of approximately Canadian $5.6 million (representing approximately C$5.6 million in tax credit and interest less a deduction for associated capital taxes of approximately C $55 thousand). Using the noon buying rate published by the Federal Reserve Bank of New York on April 28, 2008 (1.0158 Canadian $ per U.S. $), the 2006 credit equates to approximately US $5.5 million. (See “Sale of Commercial” in Note 1 above for an additional discussion of recent events surrounding the Quebec Tax Receivable for 2005 and 2006.).

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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the Period Ended June 30, 2008 and June 30, 2007

The following detailed discussion and analysis of the financial condition and results of operations of Computer Horizons Corp. (the “Company”) should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, and the financial statements and notes included elsewhere in this Quarterly Report on Form 10-Q.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar expressions. Such forward-looking statements are subject to a number of risks and uncertainties, and there can be no assurance that the expectation reflected in those statements will be realized or achieved. Such risks and uncertainties include, without limitation, possible contingent liabilities and post-closing indemnification and other obligations arising from the sale of the Company’s businesses; and risks associated with the liquidation and dissolution of the Company, including without limitation, settlement of the Company’s liabilities and obligations, costs incurred in connection with the carrying out of the plan of liquidation and dissolution, the amount of income earned on the Company’s cash and cash equivalents and short-term investments during the liquidation period, and the actual timing of liquidating distributions. All forward-looking statements included in this report are based on information available to the Company on the date hereof. The Company undertakes no obligation (and expressly disclaims any such obligation) to update forward-looking statements made in this report to reflect events or circumstances after the date of this report or to update reasons why actual results would differ from those anticipated in such forward-looking statements.

Overview

At a Special Meeting held on February 14, 2007, the shareholders of the Company approved the sales of the Company’s Chimes, Inc. subsidiary to an affiliate of Axium International and the Company’s Commercial Division to Allegis Group (collectively, the “Asset Sales”). At the Special Meeting, the shareholders of the Company also approved a proposed plan of complete liquidation and dissolution of the Company (the “Plan of Liquidation”). The Company began implementing the Plan of Liquidation after the Asset Sales were completed on February 16, 2007. Prior to the Asset Sales, the Company provided information technology staffing and project-based services to private companies and the United States government.

The Company had revenues for the period from January 1, 2007 through February 16, 2007 of $29.7 million. Using the liquidation basis of accounting, net income/(loss) is no longer reported.

As of June 30, 2008, the Company had approximately $15.8 million in cash and cash equivalents and $14.8 million in working capital and no debt outstanding.

Background of Liquidation

Sale of RGII

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provided that the deficiency would be paid by CHC to NetStar-1, together with interest thereon at the prime rate from the closing date to the date of payment. During the second quarter 2007, the parties reached agreement on the final net asset amount, resulting in a payment to the Buyer in the amount of $215 thousand. The remainder of the amount in escrow of $785 thousand was released from escrow to CHC. The sale of RGII resulted in a net book loss on disposal of $4.8 million, including approximately $969 thousand in transaction costs as reported September 30, 2006.

Sale of Commercial

On April 17, 2007, TEKsystems submitted their revised calculation of the net working capital adjustment, asserting a claim for $6 million payable to TEKsystems. The Company continues to believe that its estimate of approximately $1.9 million is accurate, and has disputed this claim. While some differences were resolved, there still remains a difference of $3.3 million between the Company’s estimate and that of TEKsystems. The principal item in dispute relates to the Company’s belief that Computer Horizons (Canada) Corp. (“Canada Sub”) has sufficient NOL’s to offset any income tax due on the Quebec tax receivable discussed below. Under the terms of the Commercial Services Asset Purchase Agreement, such disputed items are to be determined by an independent accounting firm and, on September 19, 2007 the Company, and on September 28, 2007 TEKsystems, submitted the disputed items to such independent accounting firm for determination. However, TEKsystems refused to proceed with such process to resolve these disputed items, as noted below, in a litigation between CHC and TEKsystems the court ordered TEKsystems to arbitrate the disputed items before the independent accounting firm. For a more detailed description of this litigation, see Item 1 of Part II of this Quarterly Report on Form 10-Q (Legal Proceedings).

The Commercial Services Asset Sale included all of the capital stock of Computer Horizons (Canada) Corp. (“Canada Sub”) but, as noted above, specifically excluded a refundable income tax credit payable to Canada Sub by Revenu Quebec for the tax years 2005 and 2006 (the “Quebec Tax Receivable”). During the third quarter of 2007, TEKsystems advised the Company that Canada Sub had received approximately Canadian $4.3 million with respect to the Quebec Tax Receivable for 2005 (representing approximately Canadian $4.4 million in tax credit and interest less a deduction for associated capital taxes of approximately Canadian $114 thousand). Using the exchange rate between the Canadian and United States dollars as of the day before the date of TEKsystem’s notice to the Company, the receipt by TEKsystems amounted to approximately US $4.4 million. TEKsystems remitted to the Company approximately $958 thousand, after deducting approximately $1.49 million for Canadian income taxes, $1.89 million as a purchase price adjustment under the Commercial Services Asset Purchase Agreement, and $114 thousand for capital taxes. Under the terms of the Commercial Services Asset Purchase Agreement, TEKsystems has no right to offset any amounts due the Company and the aforementioned amount of $1.49 million is subject to dispute and has been submitted to an independent accounting firm for determination, although TEKsystems has refused to proceed with such process as mentioned above. The Company has recorded the $958 thousand as a deferred cash credit in the balance sheet. After demands to remit the $4.3 million were ignored, the Company, on October 19, 2007, filed a lawsuit against TEKsystems seeking damages for the failure of TEKsystems to remit the balance of the funds received by it with respect to the 2005 Quebec Tax Receivable and a declaration that TEKsystems must promptly remit to the Company upon receipt all funds received by it in the future in payment of the 2006 Quebec Tax Receivable. For a more detailed description of this litigation, see Item 1 of Part II of this Quarterly Report on Form 10-Q (Legal Proceedings).

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By answer filed January 14, 2008, TEK denied any liability under the three claims in the Company’s amended complaint and alleged four counterclaims against the Company for its purported breaches of warranties and representations in the APA, including two counterclaims demanding a declaration that the Company must indemnify TEK for legal fees and any judgment against TEK should it be sued as a successor to the Company by plaintiffs that have brought actions against the Company, a counterclaim for a declaration that the Company must indemnify TEK in the event it is held to owe any taxes by reason of a notice sent by an employee of the Company to taxing authorities, and a counterclaim for the purported legal fees incurred by TEK and the amount by which it allegedly reduced a receivable in settling a dispute with the Iowa Health Systems, Inc. (“IHS”) over the receivable that IHS owed. The counterclaims seek to have the court impose a constructive trust over the Company’s assets to remedy the alleged breaches of the APA by the Company. By reply filed February 27, 2008, the Company denied the substantive allegations contained in the counterclaims.

No discovery has yet been taken in this action.

The Company intends to prosecute its claims and defend against the counterclaims of TEK vigorously in this action.

For a more detailed description of this litigation, see Item 1 of Part II of this Quarterly Report on Form 10-Q (Legal Proceedings).

The Commercial Services Asset Purchase Agreement also grants the parties indemnification rights against each other with respect to certain matters. The maximum liability of the Company for indemnification claims under the Commercial Services Asset Purchase Agreement is $10 million and is contingent upon assertion of a claim for indemnity within nine months after the date of the Commercial Services Asset Agreement. On August 6, 2007, TEKsystems submitted a letter to the Company, on behalf of itself, the other purchaser parties to the Commercial Services Asset Purchase Agreement and their affiliates, purporting to be a claim notice under the indemnification provisions of the Commercial Services Asset Purchase Agreement asserting purported indemnification claims based, variously, on the proposition that TEKsystems and the other purchaser parties are or may be subject to claims that are Excluded Liabilities under the Commercial Services Asset Purchase Agreement or arise out of alleged breaches of representations, warranties and/or covenants made by the Company in that agreement. The Company believes that many of the claims set forth in the letter relate to the working capital adjustment referred to above and overlap with or are repetitious of the issues between the parties with respect to the correct amount of that adjustment. The Company strongly disagrees with the assertions in the letter from TEKsystems and believes such assertions are without merit and, if TEKsystems brings suit based on any of the matters stated therein, the Company intends to vigorously defend against it.

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received by it and its affiliates on such sale and the Company’s (or an affiliate’s) tax basis in the assets. For purposes of calculating gain or loss, the proceeds received by the Company and its affiliates will include the cash received by them, the amount of their indebtedness that is cancelled or assumed, and any other consideration received by them for their assets. It is anticipated that the Company will have sufficient current losses to offset most of the gain expected to be realized from the Commercial Services Asset Sale for regular Federal income tax purposes and will otherwise incur approximately $300 thousand in alternative minimum taxes. The Company and/or its affiliates may be subject to state income taxes to the extent that gains exceed losses for state tax law purposes, but the Company does not anticipate that such taxes, if any, will be significant.

Sale of Chimes

On July 23, 2007, counsel for Axium International, Inc. and Diversity MSP (collectively, “Axium”) submitted a letter to the Company on Axium’s behalf purporting to be a claim notice under the indemnification provisions of the Chimes Asset Purchase Agreement asserting losses and damages, including punitive damages, in unspecified amount as a result of allegedly “fraudulent conduct, intentional and willful and/or negligent misrepresentations, concealment and breach of representations, warranty, covenants and agreements contained in the [Chimes Asset Purchase] Agreement” by the Company, Chimes and certain of their officers and directors. Thereafter, on August 15, 2007, the Company received a summons and complaint in a lawsuit making similar allegations. On October 2, 2007, the Company and Chimes filed an answer denying the material allegations in the complaint and asserting certain affirmative defenses and the other defendants filed a motion to dismiss the complaint as to them. See Item 1 of Part II of this Quarterly Report on Form 10-Q (Legal Proceedings) for a description of that lawsuit and the Company’s response thereto. On December 19, 2007, the Company announced that it had settled the litigation pending between it and Axium International. The lawsuit was discontinued without prejudice, the parties exchanged releases, and Computer Horizons made a payment to Diversity of $175,000.

Liquidation Basis of Accounting

The consolidated financial statements for the period January 1, 2007 to February 16, 2007 were prepared on the going concern basis of accounting, which contemplates realization of assets and satisfaction of liabilities in the normal course of business. As a result of the shareholders’ approval of the Plan, the Company adopted the liquidation basis of accounting effective February 17, 2007. This basis of accounting is considered appropriate when, among other things, liquidation of a company is probable and the net realizable values of assets are reasonably determinable. Under this basis of accounting, assets are valued at their net realizable values and liabilities are stated at their estimated settlement amounts. The conversion from the going concern to liquidation

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basis of accounting required management to make significant estimates and judgments to record assets at estimated net realizable value and liabilities at estimated settlement amounts.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared by the Company without audit in accordance with the rules and regulations of the Securities and Exchange Commission. The preparation of our financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expense, and related disclosure of contingent assets and liabilities. Accounting estimates are based on historical experience and other factors that are believed to be reasonable under the circumstances. However, actual results may vary from these estimates under different assumptions or conditions.

Pursuant to the Plan of Liquidation, since February 16, 2007, our operations have been limited to wind down of our business and affairs, selling our remaining assets and discharging our known liabilities. We plan to distribute our remaining assets to our stockholders, in accordance with the Plan of Liquidation.

Accrued Costs of Liquidation

($ in thousands)	As Booked 2/17/2007		Recorded prior to 2/17/2007*	Adjustments to reserves		Activity to date		Balance at 6/30/08
Lease Obligation	$	1,324		248		(1,560	)	12
Legal Fees	450			2,429		(1,208	)	1,671
Professional Fees, including insurance	2,037			3,080		(4,663	)	454
Human Resources	3,480		1,188	1,567		(6,004	)	231
Systems-related	819			(269	)	(507	)	43
Misc.	900		295	(310	)	(826	)	59

Total	$	9,010	1,483	6,745	**	(14,768	)	2,470

* Accruals carry forward from operating period.

** Adjustments to reserves totaled $6.7 million, and were primarily the result of revised estimates relating to the cost of professional services and human resource costs. (See “Sale of Commercial” and “Sale of Chimes” above, for a discussion of current legal proceedings.)

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when necessary make changes accordingly. Actual costs and income may differ from our estimates, which might reduce net assets available in liquidation to be distributed to shareholders.

Recent Developments

Special Shareholders Meeting

As noted above, at a Special Meeting held on February 14, 2007, the shareholders of the Company approved the Asset Sales and the Plan of Liquidation. The Company began implementing the Plan of Liquidation after the Asset Sales were completed on February 16, 2007.

Evaluation of Bad Debt Reserve

Historically, the Company determined its allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligations to the Company and the condition of the general economy and the industry as a whole. The Company wrote off accounts receivable when they became uncollectible, and payments subsequently received on such receivables were credited to the allowance for doubtful accounts.

In connection with the sale of the Commercial Services Business Unit, the allowance for doubtful accounts was increased by $1.3 million as of February 16, 2007. This recalculation was done utilizing the formula prescribed in the Commercial Services Asset Purchase Agreement, and not as a result of any deterioration in the Commercial accounts receivable.

Valuation of Deferred Tax Assets

Results of Operations—Period from January 1, 2007 to February 16, 2007

Revenues. Consolidated revenues were $29.7 million in the period from January 1, 2007 to February 16, 2007. Revenue data is not presented for 2008, because using the liquidation basis of accounting, it is no longer reported.

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Direct Costs and Gross Margins. Direct costs were $23.1 million in the period from January 1, 2007 to February 16, 2007. Gross margin, revenues less direct costs, was $6.6 million, or 22.2% in the period from January 1, 2007 to February 16, 2007. Due to the adoption of the liquidation basis of accounting effective February 17, 2007, these numbers are no longer reported.

Costs and Expenses. Selling, general and administrative expenses were $10.8 million in the period from January 1, 2007 to February 16, 2007. As a percentage of revenue, the Company’s SG&A expenses were 36.3% in the period from January 1, 2007 to February 16, 2007. Due to the adoption of the liquidation basis of accounting effective February 17, 2007, these numbers are no longer reported.

Income / (Loss) from Continuing Operations. The Company’s net loss from continuing operations totaled $(4.2) million in the period from January 1, 2007 to February 16, 2007. Due to the adoption of the liquidation basis of accounting effective February 17, 2007, these numbers are no longer reported.

Other Income/(Expense). Other income (primarily net interest income) totaled approximately $880 thousand in the period from January 1, 2007 to February 16, 2007. Due to the adoption of the liquidation basis of accounting effective February 17, 2007, these numbers are no longer reported.

Gain on Sale of Commercial Services Business Unit: Pursuant to the Commercial Services Asset Purchase Agreement, on February 16, 2007, the Company sold to TEKsystems substantially all of the assets of its Commercial Services Business (as defined in the Commercial Services Asset Purchase Agreement), for a purchase price of $57 million in cash subject to a potential post-closing working capital adjustment, estimated at $(1.9) million using data as of the date of sale. Assets not included in the sale of the Commercial Services Business included a refundable tax credit of $8.9 million, and the unit’s operating cash as of the date of the sale. The Company recorded an estimated gain of $29.1 million as a result of the sale of the Commercial Services Business.

Gain on Sale of Chimes: Pursuant to the Chimes Asset Purchase Agreement, on February 16, 2007, the Company sold to Diversity MSP substantially all of the assets of Chimes, excluding cash and marketable securities, for a purchase price of $80.0 million in cash, with an estimated gain of $73.6 million.

Provision for Income Taxes: Taxes have been provided as a result of the sale of the business operations. The Company has accrued $627 thousand for state and local taxes and $1.3 million for federal alternative minimum taxes.

As mentioned, for the quarter ended March 31, 2007, liquidation accounting was adopted and as the result of operational losses, there is no provision from continuing operations. Taxes have been provided as a result of the sale of the business operations. The Company has accrued $627 thousand for state and local taxes and $1.3 million for federal alternative minimum taxes.

Net Income. The net income for the period from January 1, 2007 to February 16, 2007 was $99.4 million, or $2.94 per basic and diluted share.

Liquidity and Capital Resources

On February 16, 2007, cash was received in the amount of $80 million for the sale of Chimes and $57 million for the sale of the Commercial Business Services Unit. On March 5, 2007, the Company announced that its Board of Directors had declared an initial liquidating distribution of $4.00 per share, or $135.3 million, to its common shareholders (and certain former option holders under the provisions of the surrender plan described above). The initial liquidating distribution represented a partial distribution to shareholders of the proceeds received by the Company from the sales of RGII, Chimes and the Commercial Services Business Unit. In determining the amount of the initial distribution, the Company considered wind-down and transition expenses and the exposure for contingent claims under the asset purchase agreements. The distribution was paid on March 27, 2007 to shareholders of record as of the close of business on March 16, 2007. The initial liquidating distribution was the first of what is expected to be a series of liquidating distributions pursuant to the Plan of Liquidation. On December 19, 2007, the Board of Directors announced a second liquidating distribution of $.30 per share, or $10.2 million, to its common shareholders and certain option holders under the provisions of the surrender plan described above. This distribution was paid on February 11, 2008 to shareholders of record as of the close of business on January 15, 2008.

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· The ultimate amount of our known, unknown and contingent debts and liabilities; and

· The fees and expenses incurred by us in the liquidation of our assets and the dissolution of the Company.

As a result, the amount of cash remaining following completion of our liquidation and dissolution could vary significantly from our current estimates.

As of June 30, 2008, the Company had approximately $14.8 million in working capital, of which $15.8 million was cash and cash equivalents.

Net cash provided by operating activities for the period from January 1 through February 16, 2007 was $98 million consisting primarily of net loss of $(3.2) million offset by the gain on sale of Chimes and the Commercial Services Business Unit of $102.6 million.

Net cash provided by investing activities for the period from January 1 through February 16, 2007 was $1.5 million, consisting primarily of the sale of fixed assets as a part of the sale of Chimes and the Commercial Services Business Unit.

Net cash provided by financing activities for the period from January 1 through February 16, 2007 was $.4 million, primarily consisting of shares issued pursuant to the employee stock option plan and employee stock purchase plan.

Recent Accounting Pronouncements

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company does not ordinarily hold market risk sensitive instruments for trading purposes. However, the Company does recognize market risk from interest rate changes. The Company has financial instruments that are subject to interest rate risk. However, at June 30, 2008, the Company was debt-free. Historically, the Company has not experienced material gains or losses due to interest rate changes. However, a reduction in interest rates would reduce the interest income received by the Company on the cash and cash equivalents it holds.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company’s CEO and CFO have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended, referred to herein as the “Exchange Act”) as of the end of the period covered by this report. Based upon such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

Internal Controls over Financial Reporting

There have not been any changes in the Company’s internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15e under the Exchange Act) during the period to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

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PART II—Other Information

Item 1. Legal Proceedings.

The Company is, or was, a party to the following lawsuits, each arising out of the Asset Sales.

Axium International, Inc. and Diversity MSP, Inc. d/b/a Ensemble Chimes Global v. Computer Horizons Corp., et al. (Supreme Court of the State of New York, County of New York, Index No. 602746/07)

Axium International, Inc. (“Axium”) and Diversity MSP, Inc. (“Diversity”) commenced this action in August 2007 against the Company, Chimes, Inc. (now known as Forgone, LLC), and certain of their officers, alleging that the defendants engaged in fraudulent conduct, including making representations allegedly known by them to be false, and active concealment and thereby induced the plaintiffs into entering into the contract with the Company and Chimes whereby Diversity purchased substantially all of the assets of Chimes, and that the Company and Chimes breached representations, warranties, covenants and agreements contained in that agreement. The complaint asked for damages in an unspecified amount and attorney’s fees. On October 2, 2007, the Company and Chimes filed an answer denying the material allegations in the complaint and asserting certain affirmative defenses, and the other defendants filed a motion to dismiss the complaint as to them. Subsequently, the action was settled in December 2007, without any admission of liability by the Company or any of the other defendants, with the payment by the Company of $175,000 to Axium and with discontinuance of all of the claims asserted by Axium and Diversity in the action with prejudice.

Computer Horizons Corp. v TEKsystems, Inc. (United States District Court, District of Maryland, Case No.: 1:07-CV- 02849 WMN)

This action relates to the Asset Purchase Agreement entered into as of November 7, 2006 by and among TEKsystems, Inc.(“TEK”), Allegis Group, Inc., the Company (referred to therein as “Seller”), and others (the “APA”) under which the Company agreed to sell and TEK agreed to purchase substantially all of the assets of the business of the Company’s Commercial Services Business Unit. Included among the assets was all of the capital stock of the Company’s Canadian subsidiary, Computer Horizons (Canada) Corp. (“Canada Sub”). Specifically excluded from the sale of assets and retained by the Company is a refundable income tax credit payable to Canada Sub by Revenu Quebec for the tax years 2005 and 2006 (the “Quebec Tax Receivable”). The closing of the sale of the assets under the APA occurred on February 16, 2007 (the “Closing Date”). Under the APA, TEK agreed to promptly remit to the Company all amounts collected by TEK after the closing in payment of the Quebec Tax Receivable.

During the third quarter of 2007, TEKsystems advised the Company that Canada Sub had received approximately Canadian $4.3 million with respect to the Quebec Tax Receivable for 2005 (representing approximately Canadian $4.4 million in tax credit and interest less a deduction for capital taxes of approximately Canadian $114 thousand). Using the exchange rate between the Canadian and United States dollars as of the day before the date of TEKsystem’s notice to the Company, the receipt by TEKsystems amounted to approximately US $4.4 million. TEKsystems remitted to the Company approximately $958 thousand, after deducting approximately $1.49 million for Canadian income taxes, $1.89 million as a purchase price adjustment under the APA, and $114 thousand for capital taxes. Under the terms of the APA, TEKsystems has no right to offset any amounts due the Company. The Company has recorded the $958 thousand as a deferred cash credit in the balance sheet as of September 30, 2007. After demands to remit the $4.3 million were ignored, on October 19, 2007, the Company commenced this action against TEK, seeking damages for the failure of TEK to remit the full amount of the Quebec Tax Receivable for 2005 to the Company, and a declaration that TEK must remit to the Company the full amount of the Quebec Tax Receivable for 2006 to be received by Canada Sub from Revenu Quebec promptly upon such receipt.

On April 28, 2008, TEKsystems notified the Company that Canada Sub has received a payment from Revenu Quebec with respect to the 2006 Quebec Tax Receivable of Canadian $5.6 million consisting of a calendar year 2006 credit of Canadian $5.6 million less a calendar year 2006 capital tax of Canadian $55 thousand (which was withheld by Revenu Quebec from the payment). In addition to the above payment, Canada Sub received a payment of interest on the 2006 credit of Canadian $7 thousand. Using the noon buying rate published by the Federal Reserve Bank of New York on April 28, 2008 (1.0158 Canadian $ per U.S. $), the 2006 credit equates to US $5.5million. TEKsystems remitted to the Company US $3.6 million representing the 2006 credit plus US $7

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thousand of interest received on the 2006 credit after conversion at the exchange rate, minus US $55 thousand for capital taxes assessed by Revenu Quebec with respect to 2006 after conversion at the exchange rate, and minus US $1.9 million for income taxes payable on the 2006 credit and on the related interest calculated utilizing the above-referenced exchange rate. Under the terms of the APA, TEKsystems has no right to offset any amounts due the Company.

The APA provides for a potential purchase price adjustment based on the Final Net Working Capital of the business sold thereunder as of the Closing Date. There are disputes between the Company and TEK concerning certain items involved in the determination of Final Net Working Capital (and any purchase price adjustment). Under the APA, all such disputed items are to be determined by an independent accounting firm. The Company and TEK submitted the disputed items to such independent accounting firm for determination, but TEK has failed to cooperate with the independent accounting firm and has prevented it from determining the disputed items in calculating Final Net Working Capital. Accordingly, the Company filed an amended complaint on December 29, 2007 in this action, adding a third claim, i.e., for judgment ordering TEK to cooperate promptly with the independent accounting firm in its determination of the disputed items in the calculation of Final Net Working Capital.

No discovery has yet been taken in this action.

The Company intends to prosecute its claims and defend against the counterclaims of TEK vigorously in this action.

TEKsystems Canada , Inc. v. Computer Horizons Corp. (United States District Court, District of Maryland, Case No.: 1:08-CV-00209 WMN)

On January 24, 2008. Canada Sub, now known as TEKsystems Canada, Inc., filed this action against the Company, alleging four claims: (1) for judgment in the amount of Canadian income taxes that Canada Sub claims is owed for its receipt of the Quebec Tax Receivable for 2005, i.e., Canadian$1,495,139, and a declaration that the Company will be liable for the amount of Canadian income taxes that will allegedly be owed upon and for Canada Sub’s future receipt of the Quebec Tax Receivable for 2006, i.e., Canadian$1,890,559, (2) for judgment in the amount of Canadian$113,854, and a declaration that the Company will be liable for at least Canadian$54,973, and Canadian$25,062 in Canadian provincial capital taxes, penalties, and interest that Canada Sub alleges it owes or will owe for, respectively, 2005, 2006, and the period January 1, 2007 through February 16, 2007, (3) for a judgment for Canada Sub’s alleged loss of tax attributes in the amount of Canadian$12,889,974 by the method by which an intercompany note made payable by Canada Sub to the Company was allegedly contributed, and (4) for a declaration that the Company will be liable for the amount that Canada Sub may allegedly owe under a purported payroll tax audit. The complaint seek to have the court impose a constructive trust over the assets of the Company to remedy its purportedly “inequitable conduct.”

On February 27, 2008, the Company filed its answer to the complaint in this action, denying the substantive allegations of the complaint.

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On February 27, 2008, the Company filed a motion in this action to stay proceedings on Canada Sub’s first two claims in its complaint, i.e., (1) for the amounts of the taxes allegedly owed for the receipt of the Quebec Tax Receivable for 2005 and allegedly will be owed upon and for Canada Sub’s future receipt of the Quebec Tax Receivable for 2006 and (2) for the amounts of the purported Canadian provincial capital taxes owed for 2005, 2006, and the period January 1, 2007 through February 16, 2007, pending completion of the arbitration between TEK and the Company before the independent accounting firm. This motion was in substance granted by the order entered April 24, 2008, mentioned above, in which the court stayed the consolidated action (i.e., the action brought by Canada Sub against the Company in the United States District Court for the District of Maryland), “pending the issuance of a written determination of “Net Working Capital” by the independent accounting firm.

By stipulations between counsel for the parties in this action and the above described action commenced by the Company in the District of Maryland and order of the Court dated February 27, 2008, the two actions in the District of Maryland were consolidated.

No discovery has yet been taken in this action.

The Company intends to defend itself vigorously against the claims of Canada Sub in the consolidated lawsuit.

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Item 1a. Risk Factors

Forward looking statements are subject to various uncertainties.

Statements made in this Report regarding the payment of additional liquidating distributions are forward-looking statements. Such forward- looking statements are subject to a number of risks and uncertainties, and there can be no assurance that the expectations reflected in those statements will be realized or achieved. Such risks and uncertainties include, without limitation, possible contingent liabilities and post-closing indemnification and other obligations arising from the sale of the Company’s businesses; and risks associated with the liquidation and dissolution of the Company, including, without limitation, settlement of the Company’s liabilities and obligations, costs incurred in connection with the carrying out of the plan of liquidation and dissolution, the amount of income earned on the Company’s cash and cash equivalents and short-term investments during the liquidation period, and the actual timing of liquidating distributions.

The Company has indemnification obligations under each of the Chimes Asset Purchase Agreement and the Commercial Services Asset Purchase Agreement

Under the Chimes Asset Purchase Agreement, the Company has agreed to indemnify Axium, Diversity MSP and their affiliates and other related parties for, among other things, any losses incurred by them arising out of the Company’s breach of the Chimes Asset Purchase Agreement, subject to certain dollar and time limitations.

Under the Commercial Services Asset Purchase Agreement, the Company has agreed to indemnify TEKsystems and its affiliates for, among other things, any losses incurred by them arising out of the Company’s breach of the Commercial Services Asset Purchase Agreement, subject to certain dollar and time limitations.

The Company’s Board of Directors will need to make provision for the satisfaction of all of the Company’s known and unknown liabilities, which could substantially delay or limit the Company’s ability to make distribution in full to shareholders.

The Company’s Board of Directors will be required to make adequate provision to satisfy the Company’s liabilities, including known and unknown claims against the Company, before authorizing any further distribution to shareholders. The process of accounting for the Company’s liabilities, including those that are presently unknown, may involve difficult valuation decisions, which could adversely impact the Company’s ability to make distribution in full in a timely manner. Substantial time may be required for the Company to determine the extent of its liabilities to known third party creditors and claimants and for the Company to settle or judicially resolve any claims that are contested. Furthermore, pursuant to the New York Business Corporation Law, the Company may be subject to claims being commenced against it for liabilities unknown to it for a period of time after dissolution. Assuming the Company has sufficient remaining cash, a period of time must elapse after dissolution before the Company would be able to make any distribution in full to shareholders of its assets remaining after satisfying or providing for all its liabilities and obligations, and such distribution may likely be made in more than one installment over an extended period of time.

If the Company’s contingent reserves are insufficient to satisfy its liabilities, creditors could assert claims against the Company seeking to prevent distributions or against the Company’s shareholders to the extent of distributions received.

If a court holds at any time that the Company has failed to make adequate provision for its expenses and liabilities or if the amount ultimately required to be paid in respect of such liabilities exceeds the amount available from the contingency reserve, the Company’s creditors could seek an injunction against the making of distributions on the grounds that the amounts to be distributed are needed to provide for the payment of the Company’s expenses and liabilities. Any such action could delay or substantially diminish the amount of any cash distributions to shareholders.

If the Company fails to create an adequate contingency reserve for payment of its expenses and liabilities, creditors could assert claims against each shareholder receiving a distribution for the payment of any shortfall, up to the amounts previously received by the shareholder in distributions from the Company.

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Item 6. Exhibits

Exhibits
*31.1 —		CEO Certification required by Rule 13a-15(e)/15d-15(e) under the Securities Exchange Act of 1934.
*31.2 —		CFO Certification required by Rule 13a-15(e)/15d-15(e) under the Securities Exchange Act of 1934.
*32.1 —		CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2 —		CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

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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.

		COMPUTER HORIZONS CORP.
		(Registrant)


DATE: August 14, 2008		/s/ DENNIS CONROY
		Dennis Conroy, President and CEO (Principal Executive Officer)


DATE: August 14, 2008		/s/ BARBARA RODRIGUEZ
		Barbara Rodriguez, Chief Financial Officer (Principal Financial and Accounting Officer)

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. junior Avg

Computer Horizons (CHZS) Inactive 10-Q2008 Q2 Quarterly report

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