U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): March 13, 2003
HEADWAY CORPORATE RESOURCES, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
1-16025
(Commission File No.)
Delaware 75-2134871
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
317 Madison Avenue, New York, New York 10017
--------------------------------------------
(Address of principal executive offices)
(212) 672-6501
(Registrant's telephone number)
Not Applicable
(Former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
On March 13, 2003, Headway Corporate Resources, Inc., completed the sale of
(1) 12,000 ordinary shares of Tyzack Holdings Limited, a corporation
organized under the laws of England and Wales ("Tyzack");
(2) 10,000 common shares of The Whitney Group (Asia) Limited (HK), a
corporation organized under the laws of Hong Kong ("Whitney Asia");
(3) All of membership interests of Whitney Partners LLC, a Delaware limited
liability company ("Whitney LLC"); and
(4) 2,500 shares of common stock, $1.00 par value per share (or such
membership interests into which such shares are exchanged) of Carlyle Group
Ltd., an Illinois corporation (or such corporation's successor, "Carlyle").
Tyzack, Whitney Asia, Whitney LLC, and Carlyle are collectively referred to
herein as the "Companies" or the "Executive Search Segment."
The interests in the Companies sold represent all of Headway's interest in
the Companies, and were sold to Whitney Group, LLC, a New York limited liability
company (the Whitney Group"). Gary S. Goldstein, who had resigned his positions
as an officer and director of Headway and its subsidiaries, is an officer and
principal owner of membership interest in the Whitney Group.
In consideration for the sale, the Whitney Group issued to Headway a 15
percent membership interest in the Whitney Group (subject to adjustment in
certain circumstances) and a promissory note in the principal amount of
$2,000,000 bearing interest at the Prime Lending Rate as in effect from time to
time, plus two percent per annum, which is secured by all of the interests in
the Companies sold in the transaction. Interest is payable quarterly and the
full principal amount of the note is payable in January 2005. Further, the
Whitney Group is obligated to pay to Headway as additional consideration an
earnout equal to five percent of gross revenues of the Companies, as defined,
during a five-year period commencing January 1, 2003. The Whitney Group may, at
its election, prepay and terminate the promissory note and earnout obligation
through a lump sum payment of $5,000,000 less the actual amount of principal
previously paid on the promissory note and earnout payments. The Whitney Group
is obligated to prepay the promissory note and earnout obligation on the
foregoing terms if one or more specified events occur prior to January 1, 2006,
that constitute a change in control or ownership of the Whitney Group. For
purposes of the proforma financial statements herein, Headway is estimating the
fair market value of the promissory note at $1,400,000 and the 15% equity
interest at $45,000.
The sale of the Companies represents a disposition of the Executive Search
Segment of Headway's business, which Headway effected so that it could focus on
its core staffing business.
2
Item 7. Financial Statements and Exhibits
Headway Corporate Resources, Inc. and Subsidiaries
Proforma Unaudited Consolidated Balance Sheet
September 30, 2002
(Dollars in Thousands)
As Adjustments
Reported (1) Proforma
--------------------------------
Assets
Current assets:
Cash and cash equivalents $ 7,937 $ (300) $ 7,637
Accounts receivable, trade, net 32,563 (3,000) 29,563
Prepaid expenses and other current assets 2,555 (1,023) 1,532
Deferred financing costs, current 1,389 - 1,389
Prepaid and refundable income taxes 4,817 (572) 4,245
--------------------------------
Total current assets 49,261 (4,895) 44,366
Property and equipment, net 5,040 (907) 4,133
Goodwill 42,440 (2,947) 39,493
Deferred financing costs 437 - 437
Note Receivable 1,400 1,400
Investment in Whitney 45 45
Other assets 1,947 (1,028) 919
--------------------------------
Total assets $ 99,125 $ (8,332) $90,793
================================
Liabilities and stockholders' (deficit)
Current liabilities:
Loans payable in default $ 82,000 $ - $82,000
Accounts payable 1,372 (248) 1,124
Accrued expenses 7,453 (386) 7,067
Accrued payroll 10,234 (1,742) 8,492
Capital lease obligations, current portion 162 (3) 159
Earnouts payable 245 - 245
--------------------------------
Total current liabilities 101,466 (2,379) 99,087
Capital lease obligations, less current portion 19 - 19
Deferred rent 957 (789) 168
Deferred income taxes 307 - 307
Commitments and contingencies
Preferred stock---$.0001 par value, 5,000,000
shares authorized: Series G, convertible
preferred stock--$.0001 par value, 1,000 shares
authorized and outstanding (aggregate
liquidation value $22,717), currently redeemable
by its terms 22,717 - 22,717
Stockholders' deficit
Common stock---$.0001 par value, 20,000,000 shares
authorized, 13,914,627 and 10,914,627 shares
issued and outstanding at September 30, 2002 and
December 31, 2001, respectively 1 - 1
Additional paid-in capital 18,920 - 18,920
Notes receivable (71) - (71)
Deferred compensation (295) - (295)
Accumulated deficit (44,636) (5,164) (49,800)
Other comprehensive loss (260) - (260)
--------------------------------
Total stockholders' deficit (26,341) (5,164) (31,505)
--------------------------------
Total liabilities and stockholders' deficit $ 99,125 $ (8,332) $90,793
================================
3
(1) The adjustment reflects the sale of the Whitney Group. In consideration for
the sale, the Whitney Group issued to Headway a 15 percent membership interest
in the Whitney Group (subject to adjustment in certain circumstances) and a
promissory note in the principal amount of $2,000,000 bearing interest at the
Prime Lending Rate as in effect from time to time, plus two percent per annum,
which is secured by all of the interests in the Companies sold in the
transaction. Headway is estimating the fair market value of the promissory note
at $1,400,000 and the 15% equity interest at $45,000.
4
Headway Corporate Resources, Inc. and Subsidiaries
Proforma Unaudited Consolidated Statement of Operations
Nine Months Ended September 30, 2002
(Dollars in Thousands, except per share data)
As Reported Adjustments Proforma
(1)
------------------------------------------
Revenues $ 202,078 $ 12,623 $ 189,455
Operating expenses:
Direct costs 163,382 - 163,382
Selling, general and administrative 38,925 12,631 26,294
Depreciation and amortization 1,555 284 1,271
------------------------------------------
203,862 12,915 190,947
------------------------------------------
Operating loss (1,784) (292) (1,492)
Other (income) expenses:
Interest expense 9,376 673 8,703
Interest income (53) - (53)
------------------------------------------
9,323 673 8,650
------------------------------------------
Loss before income tax benefit and cumulative (11,107) (965) (10,142)
effect of accounting change
Income tax benefit (3,843) (215) (3,628)
------------------------------------------
Loss before cumulative effect of accounting change (7,264) (750) (6,514)
Cumulative effect of accounting change (45,000) (8,200) (36,800)
------------------------------------------
Net loss (52,264) (8,950) (43,314)
Preferred dividend requirements (1,592) - (1,592)
------------------------------------------
Net loss available for common stockholders $ (53,856) $ (8,950) $ (44,906)
==========================================
Basic and Diluted loss per share:
Basic and diluted loss per share before
cumulative effect of accounting change $ (0.73) $ (0.06) $ (0.67)
Cumulative effect of accounting change (3.72) (0.68) (3.04)
------------------------------------------
Basic and diluted loss per common share $ (4.45) $ (0.74) $ (3.71)
==========================================
(1) Adjustments exclude the revenues and expenses of the Executive Search
Segment.
5
Headway Corporate Resources, Inc. and Subsidiaries
Proforma Unaudited Consolidated Statement of Operations
Year Ended December 31, 2001
(Dollars in Thousands, except per share data)
Reported Adjustments Proforma
2001 (1) 2001
---------------------------------------
Revenues $ 323,037 $ 25,941 $ 297,096
Operating expenses:
Direct costs 253,354 - 253,354
Selling, general and administrative 62,587 22,655 39,932
Depreciation and amortization 5,787 805 4,982
---------------------------------------
321,728 23,460 298,268
---------------------------------------
Operating (loss) income 1,309 2,481 (1,172)
Other (income) expenses:
Interest expense 10,879 443 10,436
Interest income (113) - (113)
---------------------------------------
10,766 443 10,323
---------------------------------------
(Loss) income before income tax (benefit)
expense (9,457) 2,038 (11,495)
Income tax (benefit) expense (3,778) 937 (4,715)
---------------------------------------
Net (loss) income (5,679) 1,101 (6,780)
Preferred dividend requirements (1,500) - (1,500)
---------------------------------------
Net (loss) income available forcommon
stockholders $ (7,179) $ 1,101 $ (8,280)
=======================================
Basic and diluted (loss) earnings per share:
Basic and diluted (loss) earnings per common
share $ (0.67) $ 0.10 $ (0.77)
=======================================
(1) Adjustments exclude the revenues and expenses of the Executive Search
Segment.
6
Exhibits
SEC Ref. No Title of Document Location
- ----------- ----------------- --------
10.1 Purchase Agreement between Headway Corporate Attached
Resources, Inc., and Whitney Group, LLC dated
March 7, 2003, without exhibits*
99.1 Headway Press Release dated March 13, 2003 Attached
* The excluded exhibits, which Headway agrees to provide supplementally to the
Securities and Exchange Commission upon request, include the following:
Exhibit A Escrow Agreement
Exhibit B Secured Promissory Note
Exhibit C Receipt and Confirmation
Exhibit D-1 Seller Release
Exhibit D-2 Goldstein, Purchaser and Companies' Releases
Exhibit E Salans Opinion (legal opinion)
Exhibit F Assignment and Assumption Agreement of Third
Avenue Lease Obligations
Exhibit G Goldstein Employment Agreement
Exhibit H Guaranty
Exhibit I MCSW Opinion (legal opinion)
Exhibit J Budget and Cash Use Covenants
Exhibit K Transition Services
Exhibit L Purchaser's Operating Agreement
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HEADWAY CORPORATE RESOURCES, INC.
Date: March 28, 2003 By: /s/ Philicia G. Levinson
Senior Vice President and Chief Financial Officer
7