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

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2003

                                       OR

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

                        For the transition period from to

                           Commission File No. 1-16025

                        HEADWAY CORPORATE RESOURCES, INC.
             (Exact name of registrant as specified in its charter)

              DELAWARE                                 75-2134871
    (State of other jurisdiction          (I.R.S. Employer Identification No.)
  of incorporation or organization)

                 317 Madison Avenue, New York, New York 10017
                 --------------------------------------------
                   (Address of principal executive offices)

                                 (212) 672-6501
              (Registrant's telephone number, including area code)

                                 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 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                Yes [ X ] No [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

                                Yes [ ] No [ X ]


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest  practicable  date:  13,914,627  shares of common
stock as of August 14, 2003.





                                    FORM 10-Q
              HEADWAY CORPORATE RESOURCES, INC. AND SUBSIDIARIES

                                      INDEX

                                                                            Page

PART I.        Financial Information                                           3

     Item 1.   Financial Statements                                            3

                  Consolidated Balance Sheets
                  June 30, 2003 (Unaudited) and December 31, 2002              3

                  Unaudited Consolidated Statements of Operations
                  Three and Six Months Ended June 30, 2003 and 2002            4

                  Unaudited Consolidated Statement of Stockholders'
                  (Deficit) Six Months Ended June 30, 2003                     5

                  Unaudited Consolidated Statements of Cash Flows
                  Six Months Ended June 30, 2003 and 2002                      7

                  Notes to Consolidated Financial Statements                   8

     Item 2.   Management's Discussion and Analysis of
               Financial Condition and Results of Operations                  15

     Item 3.   Quantitative and Qualitative Disclosures About Market Risk     20

     Item 4.   Controls and Procedures                                        20

PART II.       Other Information                                              20

     Item 6.   Exhibits and Reports on Form 8-K                               20


Signatures                                                                    21

                        FORWARD-LOOKING STATEMENT NOTICE

     When used in this report, the words "may," "will," "expect,"  "anticipate,"
"continue,"   "estimate,"  "project,"  "intend,"  and  similar  expressions  are
intended to identify  forward-looking  statements  within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 regarding events,  conditions,  and financial trends that may affect the
Company's future plans of operations,  business strategy, operating results, and
financial  position.  Persons  reviewing  this  report  are  cautioned  that any
forward-looking  statements  are not  guarantees of future  performance  and are
subject to risks and uncertainties and that actual results may differ materially
from those included within the forward-looking statements as a result of various
factors. Such factors are discussed under the heading  "Management's  Discussion
and Analysis of Financial Condition and Results of Operations," and also include
general economic  factors and conditions that may directly or indirectly  impact
the Company's financial condition or results of operations.

                                       2




PART 1. FINANCIAL INFORMATION
     Item 1. Financial Statements

              Headway Corporate Resources, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                    (Dollars in Thousands, except share data)


                                                              June 30,   December 31,
                                                                2003         2002
                                                            -----------  -----------
Assets                                                      (Unaudited)
                                                                   
Current assets:
Cash and cash equivalents                                   $     6,680  $     2,450
Short-term investments                                            1,200        1,200
Accounts receivable, trade, net                                  25,429       28,319
Prepaid expenses and other current assets                         2,485        1,314
Deferred financing costs, current                                     -        1,156
Prepaid and refundable income taxes                                   -        5,325
Assets held for sale                                                  -        3,033
                                                            -----------  -----------
Total current assets                                             35,794       42,797

Property and equipment, net                                       3,033        3,302
Investment in and note receivable from Whitney Group, LLC         1,445            -
Deferred financing costs                                              -          413
Other assets                                                      1,544        1,845
                                                            -----------  -----------
Total assets                                                $    41,816  $    48,357
                                                            ===========  ===========
Liabilities and stockholders' (deficit)
Current liabilities:
Loans payable                                               $    82,000   $   82,000
Accounts payable                                                    493          904
Accrued interest                                                  5,869        3,323
Accrued expenses                                                  3,454        3,746
Accrued payroll                                                   6,610        5,224
Capital lease obligations, current portion                           50          120
Liabilities held for sale                                             -        2,732
                                                            -----------  -----------
Total current liabilities                                        98,476       98,049

Capital lease obligations, less current portion                       -            5
Deferred rent                                                       123          139

Commitments and contingencies

Preferred stock---$.0001 par value, 5,000,000 shares
  authorized: Series G, convertible preferred stock--1,000
  shares authorized and outstanding (aggregate
  liquidation value $24,463), currently redeemable by its
  terms                                                          24,463       23,285

Stockholders' (deficit)
Common stock---$.0001 par value, 80,000,000 shares
  authorized, 13,914,627 shares issued and outstanding at
  June 30, 2003 and December 31, 2002                                 1            1
Additional paid-in capital                                       18,678       18,920
Notes receivable                                                    (71)         (71)
Deferred compensation                                                 -         (267)
(Accumulated deficit)                                           (99,854)     (91,477)
Other comprehensive loss                                              -         (227)
                                                            -----------  -----------
Total stockholders' (deficit)                                   (81,246)     (73,121)
                                                            -----------  -----------
Total liabilities and stockholders' (deficit)               $    41,816   $   48,357
                                                            ===========  ===========

See accompanying notes.

                                       3




               Headway Corporate Resources, Inc. and Subsidiaries

                      Consolidated Statements of Operations
            (Unaudited) (Dollars in Thousands, except per share data)

                                        Three months ended   Six months ended
                                            June 30,              June 30,
                                          2003      2002      2003       2002
                                       ---------  --------  ---------  ---------

Revenues                                $64,497   $60,445   $129,695   $125,760

Operating expenses:
   Direct costs                          58,796    51,583    117,491    108,463
   Selling, general and administrative    6,030     8,909     12,618     17,670
   Depreciation and amortization            317       382        606        759
   Reorganization costs                   1,274         -      1,274          -
                                       ---------  --------  ---------  ---------
                                         66,417    60,874    131,989    126,892

Operating (loss)                         (1,920)     (429)    (2,294)    (1,132)

Other (income) expenses:
   Interest expense                       2,979     2,899      5,598      6,753
   Interest and other income               (186)      (16)      (187)       (41)
                                       ---------  --------  ---------  ---------
                                          2,793     2,883      5,411      6,712
Loss from continuing
  operations before income tax
  benefit and cumulative effect
  of accounting change                   (4,713)   (3,312)    (7,705)    (7,844)
Income tax benefit                         (200)   (1,061)      (793)    (2,428)
                                       ---------  --------  ---------  ---------
Loss from continuing
  operations before cumulative effect
  of accounting change                   (4,513)   (2,251)    (6,912)    (5,416)
Discontinued operations:
  (Loss) gain from discontinued
   operations                                 -       533       (380)        11
  Income tax expense                          -       182          -          4
  Gain on disposal of discontinued
   operations                                 -         -         95          -
                                       ---------  --------  ---------  ---------
(Loss) gain on discontinued operations        -       351       (285)         7
                                       ---------  --------  ---------  ---------
Loss before cumulative effect
  of accounting change                   (4,513)   (1,900)    (7,197)    (5,409)

Cumulative effect of accounting change        -         -          -    (45,000)
                                       ---------  --------  ---------  ---------
Net loss                                 (4,513)   (1,900)    (7,197)   (50,409)

Preferred dividend requirements            (597)     (541)    (1,180)    (1,037)
                                       ---------  --------  ---------  ---------

Net loss available for common
  stockholders                         $ (5,110)  $(2,441)  $ (8,377)  $(51,446)
                                       =========  ========  =========  =========

Basic and diluted loss per share:

  Basic and diluted loss from
   continuing operations per common
   share before cumulative effect of
   accounting change                   $   (.37)  $  (.24)  $   (.59)  $   (.57)
  Discontinued operations                     -       .03       (.02)         -
  Cumulative effect of accounting
   change                                     -         -          -      (4.00)
                                       ---------  --------  ---------  ---------
  Basic and diluted loss per common
   share                               $   (.37)  $  (.21)   $  (.61)  $  (4.57)
                                       =========  ========  =========  =========

See accompanying notes.

                                       4




               Headway Corporate Resources, Inc. and Subsidiaries

                Consolidated Statement of Stockholders' (Deficit)
                         Six Months Ended June 30, 2003
                                   (Unaudited)
                   (Dollars in thousands, except share data)


    ---------------------------------------------------------------------------------------
                                                       Additional
                                       Common Stock     Paid-in     Notes       Deferred
                                     Shares    Amount   Capital   Receivable  Compensation
    ---------------------------------------------------------------------------------------
                                                                
    Balance at December 31, 2002   13,914,627  $    1   $18,920    $   (71)    $   (267)

    Amortization of stock-based
     compensation                           -       -         -          -           25
    Retirement of stock related to
     stock-based compensation               -       -      (242)         -          242
    Preferred stock dividend                -       -         -          -            -
    Translation adjustment                  -       -         -          -            -
    Cumulative translation
     adjustment relating to the
     sale of the executive search
     segment                                -       -         -          -            -
    Net loss                                -       -         -          -            -
    Comprehensive loss                      -       -         -          -            -
    ---------------------------------------------------------------------------------------
    Balance at June 30, 2003       13,914,627  $    1   $18,678    $   (71)    $      -
    ---------------------------------------------------------------------------------------


See accompanying notes.


                                       5





               Headway Corporate Resources, Inc. and Subsidiaries

          Consolidated Statement of Stockholders' (Deficit), Continued
                         Six Months Ended June 30, 2003
                                   (Unaudited)
                   (Dollars in thousands, except share data)


- --------------------------------------------------------------------------
                                               Accumulated
                                                  Other           Total
                                (Accumulated   Comprehensive  Stockholders'
                                   Deficit)       (Loss)        (Deficit)
- --------------------------------------------------------------------------
Balance at December 31, 2002     $  (91,477)   $     (227)   $ (73,121)
Amortization of stock-based
   compensation                           -             -           25
Retirement of stock related to
   stock-based compensation               -             -            -
Preferred stock dividends            (1,180)            -       (1,180)
Translation adjustment                    -          (133)        (133)
Cumulative translation adjustment
   relating to the sale of the
   executive search segment               -           360          360
Net loss                             (7,197)            -       (7,197)
                                                                -------
Comprehensive loss                        -             -       (6,970)
- -------------------------------------------------------------------------
Balance at June 30, 2003         $  (99,854)    $       -    $ (81,246)
- -------------------------------------------------------------------------

See accompanying notes.

                                       6




              Headway Corporate Resources, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                             (Dollars in Thousands)


                                                            Six months ended June 30,
                                                                2003           2002
                                                          ------------------------------
                                                                     
Operating activities:
Net loss                                                     $   (7,197)   $  (50,409)
Loss (gain) from discontinued operations                            380            (7)
Gain on disposal of discontinued operations                         (95)            -
                                                          ------------------------------
Loss from continuing operations                                  (6,912)      (50,416)
Adjustments to reconcile net loss from continuing
operations to net cash provided by operating activities:
Cumulative effect of accounting change                                -        45,000
Depreciation and amortization                                       606           759
Amortization of deferred financing costs                          1,569         1,993
Provision for bad debts                                              89           172
Amortization of deferred compensation                                25            58
Changes in assets and liabilities
   Accounts receivable                                            2,801         2,743
   Prepaid expenses and other assets                             (1,172)          298
   Prepaid and refundable income taxes                            5,325           727
   Other assets                                                     301           (23)
   Accounts payable, accrued interest and expenses                1,842          (367)
   Accrued payroll                                                1,386         1,903
   Deferred rent                                                    (16)          (19)
                                                          ------------------------------
Net cash provided by continuing operations                        5,844         2,828
Net cash (used in) provided by discontinued operations           (1,202)        2,937
                                                          ------------------------------
Net cash provided by operating activities                         4,642         5,765
                                                          ------------------------------

Investing activities:
Expenditures for property and equipment                            (337)         (485)
Cash paid for acquisitions                                            -          (872)
                                                          ------------------------------
Net cash used in investing activities                              (337)       (1,357)
                                                          ------------------------------

Financing activities:
Payment of capital lease obligations                                (75)          (99)
Payments of loan acquisition fees                                     -        (2,179)
                                                          ------------------------------
Net cash used in provided by financing activities                   (75)       (2,278)
                                                          ------------------------------

Increase in cash and cash equivalents                             4,230         2,130
Cash and cash equivalents at beginning of period                  2,450         7,564
                                                          ------------------------------
Cash and cash equivalents at end of period                  $     6,680   $     5,434
                                                          ==============================

See accompanying notes.

                                       7





              HEADWAY CORPORATE RESOURCES, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                    Unaudited

                                  June 30, 2003

(1) BASIS OF PRESENTATION

Headway   Corporate   Resources,   Inc.   and  its   wholly-owned   subsidiaries
(collectively referred to as the "Company") provide strategic staffing solutions
and personnel services nationally. Its operations include information technology
staffing,  temporary staffing, human resource staffing, permanent placement and,
until recently,  executive  search.  Headquartered  in New York, the Company has
temporary  staffing  offices in California,  Connecticut,  Florida,  New Jersey,
North Carolina,  Virginia,  and, until recently,  Texas and had executive search
offices in New York, Illinois,  Massachusetts, the United Kingdom and Hong Kong.
In March 2003, the Company exited its executive  search segment through the sale
of  its  Whitney  subsidiaries  (see  note  8).  These  consolidated   financial
statements  include the accounts of Headway  Corporate  Resources,  Inc. and its
subsidiaries.

The accompanying  unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim  financial  information  and with the  instructions to Form 10-Q and
Article  10 of  Regulation  S-X.  Accordingly,  they do not  include  all of the
information and footnotes required by accounting  principles  generally accepted
in the United  States  for  complete  financial  statements.  In the  opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.  Operating results for the
three and six month periods ended June 30, 2003 are not  necessarily  indicative
of the results that may be expected for the year ended December 31, 2003.

The  balance  sheet at  December  31,  2002 has been  derived  from the  audited
financial  statements  at that date but does not include all of the  information
and footnotes required by accounting principles generally accepted in the United
States for complete financial  statements.  Certain items previously reported in
specific financial  statement captions have been reclassified due to the sale of
the Whitney subsidiaries (see note 8).

For further  information,  refer to the  consolidated  financial  statements and
footnotes  thereto  included in the Company's annual report on Form 10-K for the
year ended December 31, 2002.

As indicated  below,  substantial  doubt exists about the  Company's  ability to
continue as a going concern. The accompanying  consolidated financial statements
have been prepared  assuming that the Company will continue as a going  concern.
The financial  statements do not include any adjustments to reflect the possible
future effects on the  recoverability  of assets or  classification of assets or
the amounts and  classification  of liabilities that may result from the outcome
of this uncertainty.

(2) CHAPTER 11 FILING

Subsequent  to the end of the  Company's  fiscal  quarter,  on July 1, 2003 (the
"Petition  Date"),  Headway  Corporate  Resources,  Inc. (the "Debtor")  filed a
petition for  reorganization  under Chapter 11 of the U.S.  Bankruptcy Code with
the U.S. Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court").   Since   that   date,   the   Debtor   has   been   operating   as   a
debtor-in-possession under Chapter 11. The Company's operating subsidiaries were
not included in the Chapter 11 filing. A brief  chronology of the  circumstances
that led to such filing is set forth below.

Despite the cost-reduction initiatives,  which the Company undertook in 2001 and
2002,  during 2003 the Company  continued  to  experience  financial  difficulty
related primarily to restrictive  covenants under its Senior Credit Facility and
its debt  structure.  Further,  the Senior Credit  Facility  expired on June 30,
2003. The Company  therefore  entered into  negotiations  with its Senior Credit
Facility  lenders to amend the Senior Credit  Facility to extend the  expiration
date and to revise certain  financial ratios and minimum EBITDA  covenants.  The
Company  and such  lenders  were  unable  to agree to amend  the  Senior  Credit
Facility.  As the June 30, 2003 expiration date approached,  the Company's board
of directors  determined  that, in order to be able to operate  successfully  in
today's market environment,  it would be necessary to reduce its debt burden and
de-lever its balance sheet. After negotiations with its Senior Lenders regarding

                                       8



various alternatives, the Company concluded it would be in the best interests of
its  stakeholders to effect a consensual  restructuring  under Chapter 11 of the
Bankruptcy Code and filed its Chapter 11 petition on July 1, 2003. The Company's
operating subsidiaries were not included in the Chapter 11 filing.

The Company has reached an agreement-in-principle with the holders of its senior
and  subordinated  indebtedness on the terms of a financial  restructuring  (the
"Restructuring")  to be implemented  through a  pre-arranged  Chapter 11 plan of
reorganization  (the  "Plan").  The  Restructuring  will  involve a  significant
reduction of the  outstanding  indebtedness  and a conversion  of the balance of
such indebtedness  into 100% of the Company's equity.  Pursuant to the Plan, the
holders of the Senior Credit  Facility  would receive new notes in the principal
amount of $25.0  million,  the  holders of the Senior  Subordinated  Notes would
receive a subordinated note in the principal amount of $1.0 million  convertible
into 5% of the  common  equity of the  Company,  and the  currently  outstanding
shares of the Company's common and preferred stock will be cancelled without any
distribution    to   be   made   to   the   holders   of   such   shares.    The
agreement-in-principle is subject to numerous conditions and further agreements,
including  the  entry  of an order  confirming  the  plan of  reorganization  as
required  by  Chapter  11.  Consequently,  there  can be no  assurance  that the
Restructuring will be consummated.  The confirmation  hearing has been scheduled
for September 16, 2003.

On July 2, 2003, the Bankruptcy  Court approved a series of the Company's "first
day" motions that enable the Company to continue regular  operations  throughout
the reorganization  proceeding.  These motions  authorized,  among other things,
normal payment of employee salaries, wages and benefits; continued participation
in  workers'  compensation  insurance  programs;  continued  utilization  of the
Company's  centralized  cash management  system and maintenance of existing bank
accounts;  and  payment  to  vendors  for  post-petition  delivery  of goods and
services.  The  Bankruptcy  Court also  approved a Cash  Collateral  Stipulation
authorizing  the Debtor's use of the Senior Lenders' cash collateral to fund its
operations,  provided that these  expenditures  are  consistent  with the budget
submitted by the Company.

The  Debtor  is  currently  operating  its  business  as a  debtor-in-possession
pursuant to the Bankruptcy Code.  Pursuant to the Bankruptcy  Code,  prepetition
obligations  of  the  Debtor,  including  obligations  under  debt  instruments,
generally  may not be enforced  against  the Debtor,  and any actions to collect
prepetition  indebtedness are automatically stayed, unless the stay is lifted by
the Bankruptcy  Court. The rights of and ultimate  payments by the Company under
prepetition  obligations  may be  substantially  altered.  This could  result in
claims being  liquidated  in the Chapter 11  proceedings  at less (and  possibly
substantially  less) than 100% of their face value.  The Debtor cannot presently
determine or  reasonably  estimate the ultimate  liability  that may result from
rejecting  contracts  or leases or from the  filing of claims  for any  rejected
contracts or leases,  and no provisions have yet been made with respect to these
items.  Except for the agreed  upon  distribution  to the senior  creditors  and
subordinated  note holders,  the Plan provides for no  distribution  on any such
claims.

De-listing of Headway Corporate Resources, Inc. Common Stock

On June 26, 2003,  the Company  received a notice from the staff of the American
Stock Exchange ("AMEX" or the "Exchange")  indicating that the Company no longer
complies with the Exchange's continued listing standards as set forth in Section
1003(a)(i)  of the AMEX  Company  Guide due to  losses in two of its three  most
recent fiscal years and an equity value below $2 million.  The  Company's  stock
was therefore subject to being de-listed from the Exchange.  The Company decided
not to appeal this decision.  Accordingly,  the last day of trading was June 30,
2003.  AMEX has advised the Company  that it will file an  application  with the
Securities  and Exchange  Commission to strike the Company's  stock from listing
and registration.

Basis of Presentation

The Company's consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States applicable to
a going concern.  Except as otherwise  disclosed,  these principles  assume that
assets will be realized  and  liabilities  will be  discharged  in the  ordinary
course of business. The Company is currently operating as a debtor-in-possession
under Chapter 11 of the Bankruptcy Code, and its continuation as a going concern
is  contingent  upon,  among  other  things,  its  ability  to have  its Plan be
confirmed by the Bankruptcy Court, comply with the Cash Collateral  Stipulation,
and generate  sufficient cash flows from operations.  There is no assurance that
the  Company  will  be able to  achieve  any of  these  results.  The  Company's
consolidated financial statements do not include any adjustments relating to the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  liabilities  that  might  result  from the  outcome of these
uncertainties.

                                       9



The Company's  consolidated financial statements do not reflect adjustments that
may occur in  accordance  with  AICPA  Statement  of  Position  90-7  "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"),
which the Company will adopt for its financial reporting in periods ending after
July 1, 2003 assuming  that the Company will  continue as a "going  concern." In
the Chapter 11 proceedings,  substantially  all unsecured  liabilities as of the
Petition  Date are  subject to  compromise  or other  treatment  under a plan of
reorganization  which must be confirmed by the Bankruptcy Court after submission
to any required  vote by affected  parties.  For financial  reporting  purposes,
those  liabilities and obligations whose treatment and satisfaction is dependent
on the outcome of the Chapter 11  proceedings  will be segregated and classified
as Liabilities Subject to Compromise in the consolidated balance sheet under SOP
90-7 in future periods.

The ultimate  amount of and  settlement  terms for the Company's  pre-bankruptcy
liabilities  are subject to the ultimate  outcome of its Chapter 11  proceedings
and,  accordingly,  are  not  presently  determinable.  Pursuant  to  SOP  90-7,
professional fees associated with the Chapter 11 proceedings will be expensed as
incurred and reported as reorganization  costs.  Also,  interest expense will be
reported  only to the extent  that it will be paid  during the  pendency  of the
Chapter 11  proceedings or that it is probable that it will be an allowed claim.
The Company has incurred  $1,274,000 of professional  fees in the preparation of
its Chapter 11 filing and has classified such expenses as  reorganization  costs
for the three and six months  ended  June 30,  2003  which is  reflected  on the
Consolidated Statement of Operations.

(3) GOODWILL

In  June  2001,  the  Financial   Accounting  Standards  Board  ("FASB")  issued
Statements  of  Financial  Accounting  Standards  ("SFAS")  No.  141,  "Business
Combinations", effective for all combinations initiated after June 30, 2001, and
No. 142, "Goodwill and Other Intangible Assets".  Under the new rules,  goodwill
and  intangible  assets  deemed  to have  indefinite  lives  will no  longer  be
amortized but will be subject to annual  impairment tests in accordance with the
Statement.  Other  intangible  assets will  continue to be amortized  over their
useful lives.

Upon adoption of SFAS No. 142 in the first quarter of 2002, the Company recorded
a one-time,  non-cash  charge of $45,000,000 to reduce the carrying value of its
goodwill.  Such  charge was  non-operational  in nature and was  reflected  as a
cumulative  effect  of an  accounting  change in the  accompanying  consolidated
statement of operations.  Based on the results of the Company's  annual goodwill
impairment test in the fourth quarter of 2002 and the estimated implied value of
the  Company  based  on the  various  restructuring  proposals  received  by the
Company,  it was determined that there was a further impairment of the remaining
goodwill  and  accordingly  the balance of  $42,471,000  was written off at such
time. This amount was reflected as impairment of goodwill and long-lived  assets
in the fourth quarter of 2002 consolidated statement of operations.

                                       10




(4) LOSS PER SHARE

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


                                             Three months ended June 30,  Six months ended June 30,
                                                 2003          2002          2003          2002
                                             -------------------------------------------------------
                                                                           
Numerator:
Net loss                                     $(4,513,000)  $(1,900,000)  $(7,197,000)  $(50,409,000)
Discontinued operations, net of tax benefit            -      (351,000)      285,000         (7,000)
Cumulative effect of accounting change                 -             -             -     45,000,000
Preferred dividend requirements                 (597,000)     (541,000)   (1,180,000)    (1,037,000)
                                             -------------------------------------------------------

Numerator for basic and diluted
  loss per share - net loss from continuing
  operations available for common
  stockholders before cumulative effect of
  accounting change                           (5,110,000)   (2,792,000)   (8,092,000)    (6,453,000)
Discontinued operations, net of tax benefit            -       351,000      (285,000)         7,000
Cumulative effect of accounting change                 -             -             -    (45,000,000)
                                             -------------------------------------------------------
Numerator for basic and diluted
  loss per share - net loss available for
  common stockholders                        $(5,110,000)  $(2,441,000)  $(8,377,000)  $(51,446,000)
                                             =======================================================
Denominator:
Denominator for basic and diluted loss per
  share--weighted average shares              13,729,627    11,784,572    13,729,627     11,260,014
                                             =======================================================

Basic and diluted loss from continuing
  operations per share before cumulative
  effect of accounting change                $      (.37)  $      (.24)  $      (.59)   $      (.57)

Discontinued operations                                -           .03          (.02)             -
Cumulative effect of accounting change                 -             -             -          (4.00)
                                             -------------------------------------------------------
Basic and diluted loss per common share      $      (.37)  $      (.21)  $      (.61)   $     (4.57)
                                             =======================================================


(5) LONG-TERM DEBT AND CREDIT FACILITIES

As of June 30, 2003,  $72,000,000 in aggregate  principal amount was outstanding
under the Company's Senior Credit Facility. The Company's Senior Credit Facility
expired in June 2003 with all outstanding  amounts then due.  Substantially  all
assets of the Company  have been  pledged as  collateral  for the Senior  Credit
Facility.  In December 2002, the Company  amended the Senior Credit Facility and
obtained a waiver of  compliance  with certain  financial  covenants,  which the
Company had failed as of that date, including  maintenance of a minimum level of
EBITDA and the requirement that the Company make a partial repayment of the loan
if the accounts  receivable is below a certain level.  The amendment  provided a
waiver and reduced the amount of the monthly cash interest payment through March
31,  2003.  The waiver  expired on March 31,  2003  causing the Company to be in
default of the Senior Credit  Facility.  On May 7, 2003,  the waiver was renewed
through May 31, 2003, and then again through June 27, 2003.

As of June 30, 2003,  $10,000,000 in aggregate  principal amount was outstanding
under the Company's Senior  Subordinated Notes and $20,000,000 in face amount of
Company  Preferred  Stock was  outstanding.  The Senior  Subordinated  Notes are
payable in March 2006 and originally  bore interest at 12% per annum until March
2001, increasing to 14% per annum thereafter.  In January 2001, the terms of the
Senior  Subordinated  Notes were  amended,  including  increasing  the effective
interest rate to 13% until March 2001 and 15% thereafter.  In December 2002, the
Company  obtained a waiver of the  events of default on the Senior  Subordinated
Notes and the Preferred  Stock and the payment (but not the accrual) of interest
and dividends from March 31, 2002 through June 30, 2003, or such earlier date on
which  indebtedness  under the Senior  Credit  Facility  is  accelerated  or the
lenders  under  the  Senior  Credit  Facility  exercise  any of their  rights or
remedies.

As of June 30, 2003, the Company had a working capital deficit of  approximately
$62,682,000  compared to working  capital deficit of $55,252,000 at December 31,
2002.  The deficiency  was a direct result of the  classification  of the Senior
Credit Facility and Senior Subordinated Notes as current liabilities.

                                       11



As more fully described in Note 2, the Company reached an agreement-in-principle
with the holders of its senior and subordinated indebtedness for a restructuring
of the  Company.  The  restructuring  will  involve a  significant  reduction of
outstanding  indebtedness  and a conversion of the balance of such  indebtedness
into 100% of the Company's equity. The transaction is being implemented pursuant
to a Chapter 11 proceeding of the parent company,  Headway Corporate  Resources,
Inc., which was filed on July 1, 2003. The Company's operating subsidiaries were
not included in the Chapter 11 filing.

(6) COMPREHENSIVE LOSS

During the six months  ended June 30, 2003 and 2002,  total  comprehensive  loss
amounted to $(6,970,000) and $(50,084,000),  respectively,  and during the three
months  ended June 30,  2003 and 2002,  total  comprehensive  loss  amounted  to
$(4,513,000) and $(1,944,000), respectively.

(7) IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In  April  2002,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statements of Financial Accounting Standards ("SFAS") No. 145, "Recision of SFAS
Nos. 4, 44 and 64,  Amendment of SFAS No. 13, and  Technical  Corrections  as of
April  2000".   SFAS  No.  145  revises  the  criteria   for   classifying   the
extinguishment of debt as extraordinary and the accounting  treatment of certain
lease modifications. SFAS No. 145 was effective for fiscal 2003 and its adoption
did  not  have  a  material  impact  on  the  Company's  consolidated  financial
statements.

In July 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal Activities".  SFAS No. 146 provides guidance on the timing
of the recognition of costs associated with exit or disposal activities. The new
guidance  requires  costs  associated  with exit or  disposal  activities  to be
recognized when incurred. Previous guidance required recognition of costs at the
date of commitment to an exit or disposal  plan.  SFAS No. 146 was effective for
the Company  beginning  with the first  quarter of 2003 and its adoption did not
have a material  impact on the  Company's  results of  operations  or  financial
positions.

In  January  2003,  the FASB  issued  Interpretation  No. 46,  Consolidation  of
Variable Interest  Entities,  an Interpretation of Accounting  Research Bulletin
No. 51, (the Interpretation).  The Interpretation  significantly changes whether
entities  included in its scope are consolidated by their sponsors,  transferors
or  investors.  The  Interpretation  introduces a new  consolidation  model--the
variable interests model--which  determines control (and consolidation) based on
potential  variability  in gains and losses of the entity  being  evaluated  for
consolidation.  The Interpretation's  consolidation provisions apply immediately
to variable interests in variable interest entities (VIEs) created after January
31, 2003. It applies in the first fiscal year or interim period  beginning after
June 15, 2003 (July 1, 2003 for calendar year-end  companies) to VIEs in which a
public  company holds a variable  interest that it acquired  before  February 1,
2003. The Interpretation has no grandfathering  provisions.  The adoption of the
Interpretation  is not  expected  to have a  material  effect  on the  Company's
consolidated financial statements.

On May 15, 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". This statement
establishes  standards  for  classifying  and measuring as  liabilities  certain
financial   instruments   that  embody   obligations  of  the  issuer  and  have
characteristics of both liabilities and equity.  Instruments that are indexed to
and potentially  settled in an issuer's own shares that are not within the scope
of SFAS 150 remain  subject to existing  guidance  (e.g.,  EITF Issue No. 00-19,
"Accounting  for  Derivative  Financial  Instruments  Indexed to or  Potentially
Settled in, a Company's Own Stock,"  Accounting  Series Release 268,  Redeemable
Preferred  Stocks).  SFAS 150 is only the first phase of the FASB's  Liabilities
and Equity  Project.  It  represents  a  significant  change in  practice in the
accounting  for  a  number  of  financial  instruments,   including  mandatorily
redeemable equity instruments and certain equity derivatives that frequently are
used in connection with share repurchase  programs.  SFAS 150 generally requires
liability  classification  for  two  broad  classes  of  financial  instruments,
including  mandatorily  redeemable equity  instruments.  Many of the instruments
within the scope of SFAS 150 previously  were classified by the issuer as equity
or temporary equity pursuant to Issue No. 00-19, Rule 5-02.28 of Regulation S-X,
or ASR  268,  (FRR  Section  211),  as  interpreted  by  EITF  Topic  No.  D-98,
"Classification and Measurement of Redeemable Instruments." Instruments that are
indexed to and potentially settled in an issuer's own shares that are not within
the scope of SFAS 150 remain  subject  to  existing  guidance.  SFAS 150 must be
applied  immediately to instruments  entered into or modified after May 31, 2003
and to all other instruments that exist as of the beginning of the first interim
financial  reporting  period  beginning  after  June 15,  2003.  Application  to
pre-existing  instruments  should be  recognized as the  cumulative  effect of a

                                       12



change in  accounting  principle  (application  by  retroactive  restatement  is
precluded).  Early adoption of SFAS 150 is not  permitted.  The adoption of this
Statement  is  not  expected  to  have a  material  effect  on the  consolidated
financial statements.

(8) SALE OF EXECUTIVE SEARCH SEGMENT

On March 13, 2003, Headway Corporate Resources, Inc. exited the executive search
segment  of its  business  through a sale of its  Whitney  subsidiaries.  All of
Headway's interest in the Whitney subsidiaries was sold to Whitney Group, LLC, a
New York limited liability company (the "Whitney Group").  Gary S. Goldstein,  a
principal  stockholder  of Headway 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.  The results of operations of the
executive search segment have been classified as discontinued  operations in the
accompanying  statement  of  operations.  The  executive  search  segment had no
results of operations  for the three months ended June 30, 2003. It had revenues
of  $5,432,000,  $1,626,000  and  $9,758,000  and net income (loss) of $351,000,
$(380,000)  and $7,000 for the three  months ended June 30, 2002 and for the six
months ended June 30, 2003 and 2002, respectively.

In consideration  for the sale, the Whitney Group (i) issued to the Company a 15
percent  membership  interest in the Whitney  Group  (subject to  adjustment  in
certain circumstances), (ii) issued a promissory note in the principal amount of
$2,000,000,  and (iii) is obligated  to pay an earnout  equal to five percent of
Whitney Group's gross revenues, as defined, during a five-year period commencing
January 1, 2003.  The note bears interest at the prime lending rate as in effect
from time to time, plus two percent per annum. Interest is payable quarterly and
the full  principal  amount of the note is payable in January 2005.  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. The
Company has estimated the fair market value of the promissory note at $1,400,000
and the 15% equity interest at $45,000.  This transaction  resulted in a gain of
$95,000 which is reflected as a gain on disposal of  discontinued  operations in
the  consolidated  statements  of  operations  for the six months ended June 30,
2003.

The assets and  liabilities  of the executive  search  segment  consisted of the
following at December 31, 2002:



Cash and cash equivalents                                    $  185
Accounts receivable                                           1,600
Prepaid expenses and other current assets                     1,146
Other assets                                                    102
                                                         -----------------
   Total Assets                                              $3,033
                                                         =================

Accounts payable                                             $  191
Accrued expenses                                                398
Accrued payroll                                               1,367
Capital lease obligations, current portion                        3
Deferred rent                                                   773
                                                         -----------------
   Total liabilities                                         $2,732
                                                         =================


(9) Income Taxes

The income tax benefits  recorded in 2003 relate to income tax refunds  received
in excess of amounts previously recorded.

(10) STOCK-BASED COMPENSATION

The Company  grants stock options for a fixed number of shares to employees with
an  exercise  price  equal to the fair value of the shares at the date of grant.
The Company  accounts for stock option grants in accordance with APB Opinion No.
25,   "Accounting  for  Stock  Issued  to  Employees"  ("APB  25")  and  related
interpretations   because  the  Company  believes  the  alternative  fair  value

                                       13



accounting  provided  for  under  SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation",  requires  the use of  option  valuation  models  that  were  not
developed for use in valuing  employee stock options.  Under APB 25, because the
exercise  price of the Company's  employee stock options equals the market price
of the  underlying  stock on the  date of  grant,  no  compensation  expense  is
recognized on the date of grant.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation - Transition and  Disclosure."  SFAS No. 148 amends SFAS No. 123 to
provide  alternative  methods of transition  for a voluntary  change to the fair
value based methods of accounting  for  stock-based  employee  compensation.  In
addition,  SFAS No. 148 amends the  disclosure  requirements  of SFAS No. 123 to
require  more  prominent  disclosures  in  both  annual  and  interim  financial
statements about the method of accounting for stock-based employee  compensation
and the effect of the method used on reported  results.  The Company has elected
to continue to follow the intrinsic  value method of accounting as prescribed by
APB Opinion No. 25 to account for stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the vesting  period of the options.  The  Company's
pro forma information is as follows:



                                             Three months ended June 30,  Six months ended June 30,
                                                 2003          2002          2003          2002
                                             -------------------------------------------------------
                                                                           
 Net (loss) available for common
   stockholders as reported                  $ (5,110)     $(2,441)      $ (8,377)     $(51,446)
 Stock based compensation                           -           29             25            58
 Pro forma SFAS 123 compensation
   income (expense), net of
   income tax expense                              10          (87)            36          (178)
                                             -------------------------------------------------------
 Pro forma net (loss) available
   for common stockholders                   $ (5,100)      $(2,499)     $ (8,316)     $(51,624)
                                             =======================================================


 Basic and diluted (loss) per
   share as reported                         $   (.37)      $  (.21)     $   (.61)     $  (4.57)
                                             =======================================================
 Basic and diluted pro forma
   SFAS 123 compensation income
   (expense), net of income
   taxes per share                                  -             -             -          (.01)
                                             =======================================================
 Basic and diluted pro forma
   (loss) per share                          $   (.37)      $  (.21)     $   (.61)     $  (4.58)
                                             =======================================================



The fair value of each option  granted is  estimated  on the date of grant using
the Black-Scholes option-pricing model. There were no stock option grants during
2002 or the first two quarters of 2003.

In July 1999, the Company  issued  125,000 shares of restricted  common stock to
Gary  Goldstein,  the then Chairman of the Company.  In August 2000, the Company
issued  60,000  shares of  restricted  common  stock to an employee of a Whitney
subsidiary.  In connection  with the sale of the Whitney  subsidiaries  in March
2003 (see Note 8), these two individuals  terminated  their  employment with the
Company. At the time of their termination, none of the aforementioned shares had
vested,  and, as a result have been cancelled.  As of March 31, 2003,  there was
$242,000 of  un-amortized  deferred  compensation  relating to these  restricted
stock grants.  This amount was re-classified to additional paid-in capital as of
June 30, 2003, as a result of the employees' termination.

                                       14




               Item 2. Management's Discussion and Analysis of
                Financial Condition and Results of Operations


Chapter 11 Filing

Subsequent  to the end of the  Company's  fiscal  quarter,  on July 1, 2003 (the
"Petition Date"), Headway Corporate Resources, Inc. (individually,  the "Debtor"
and  collectively  with its  subsidiaries,  the "Company")  filed a petition for
reorganization  under  Chapter  11 of the  U.S.  Bankruptcy  Code  with the U.S.
Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court").
Since that date, the Debtor has been operating as a  debtor-in-possession  under
Chapter  11. The  Company's  operating  subsidiaries  were not  included  in the
Chapter 11 filing.  A brief  chronology  of the  circumstances  that led to such
filing is set forth below.

Despite the cost-reduction initiatives,  which the Company undertook in 2001 and
2002,  during 2003 the Company  continued  to  experience  financial  difficulty
related primarily to restrictive  covenants under its Senior Credit Facility and
its debt  structure.  Further,  the Senior Credit  Facility  expired on June 30,
2003. The Company  therefore  entered into  negotiations  with its Senior Credit
Facility  lenders to amend the Senior Credit  Facility to extend the  expiration
date and to revise certain  financial ratios and minimum EBITDA  covenants.  The
Company  and such  lenders  were  unable  to agree to amend  the  Senior  Credit
Facility.  As the June 30, 2003 expiration date approached,  the Company's board
of directors  determined  that, in order to be able to operate  successfully  in
today's market environment,  it would be necessary to reduce its debt burden and
de-lever its balance sheet. After negotiations with its Senior Lenders regarding
various alternatives, the Company concluded it would be in the best interests of
its  stakeholders to effect a consensual  restructuring  under Chapter 11 of the
Bankruptcy Code and filed its Chapter 11 petition on July 1, 2003. The Company's
operating subsidiaries were not included in the Chapter 11 filing

The Company has reached an agreement in principle with the holders of its senior
and  subordinated  indebtedness on the terms of a financial  restructuring  (the
"Restructuring")  to be implemented  through a  pre-arranged  Chapter 11 plan of
reorganization  (the  "Plan").  The  Restructuring  will  involve a  significant
reduction of the  outstanding  indebtedness  and a conversion  of the balance of
such indebtedness  into 100% of the Company's equity.  Pursuant to the Plan, the
holders of the Senior Credit  Facility  would receive new notes in the principal
amount of $25.0  million,  the  holders of the Senior  Subordinated  Notes would
receive a subordinate note in the principal  amount of $1.0 million  convertible
into 5% of the  common  equity of the  Company,  and the  currently  outstanding
shares of Headway's  common and  preferred  stock will be cancelled  without any
distribution    to   be   made   to   the   holders   of   such   shares.    The
agreement-in-principle is subject to numerous conditions and further agreements,
including  the  entry  of an order  confirming  the  plan of  reorganization  as
required  by  Chapter  11.  Consequently,  there  can be no  assurance  that the
Restructuring will be consummated.  The confirmation  hearing has been scheduled
for September 16, 2003.

On July 2, 2003, the Bankruptcy  Court approved a series of the Company's "first
day" motions that enable the Company to continue regular  operations  throughout
the reorganization  proceeding.  These motions  authorized,  among other things,
normal payment of employee salaries, wages and benefits; continued participation
in  workers'  compensation  insurance  programs;  continued  utilization  of the
Company's  centralized  cash management  system and maintenance of existing bank
accounts;  and  payment  to  vendors  for  post-petition  delivery  of goods and
services.  The  Bankruptcy  Court also  approved,  under interim  order,  a Cash
Collateral Stipulation  authorizing the Debtor's use of the Senior Lenders' cash
collateral  to  fund  its  operations,  provided  that  these  expenditures  are
consistent with the budget submitted by the Company.

The  Debtor  is  currently  operating  its  business  as a  debtor-in-possession
pursuant to the Bankruptcy Code.  Pursuant to the Bankruptcy  Code,  prepetition
obligations  of  the  Debtor,  including  obligations  under  debt  instruments,
generally  may not be enforced  against  the Debtor,  and any actions to collect
prepetition  indebtedness are automatically stayed, unless the stay is lifted by
the Bankruptcy  Court. The rights of and ultimate  payments by the Company under
prepetition  obligations  may be  substantially  altered.  This could  result in
claims being  liquidated  in the Chapter 11  proceedings  at less (and  possibly
substantially  less) than 100% of their face value.  The Debtor cannot presently
determine or  reasonably  estimate the ultimate  liability  that may result from
rejecting  contracts  or leases or from the  filing of claims  for any  rejected
contracts or leases,  and no provisions have yet been made with respect to these
items.  Except for the agreed  upon  distribution  to the senior  creditors  and
subordinated  note holders,  the Plan provides for no  distribution  on any such
claims.

The Company's consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States applicable to
a going concern.  Except as otherwise  disclosed,  these principles  assume that

                                       15



assets will be realized  and  liabilities  will be  discharged  in the  ordinary
course of business. The Company is currently operating as a debtor-in-possession
under Chapter 11 of the Bankruptcy Code, and its continuation as a going concern
is  contingent  upon,  among  other  things,  its  ability  to have  its Plan be
confirmed by the Bankruptcy Court, comply with the Cash Collateral  Stipulation,
and generate  sufficient cash flows from operations.  There is no assurance that
the  Company  will  be able to  achieve  any of  these  results.  The  Company's
consolidated financial statements do not include any adjustments relating to the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  liabilities  that  might  result  from the  outcome of these
uncertainties.

De-listing of Headway Corporate Resources, Inc. Common Stock

On June 26, 2003,  the Company  received a notice from the staff of the American
Stock Exchange ("AMEX" or the "Exchange")  indicating that the Company no longer
complies with the Exchange's continued listing standards as set forth in Section
1003(a)(i)  of the AMEX  Company  Guide due to  losses in two of its three  most
recent fiscal years and an equity value below $2 million.  The  Company's  stock
was therefore subject to being de-listed from the Exchange.  The Company decided
not to appeal this decision.  Accordingly,  the last day of trading was June 30,
2003.  AMEX has advised the Company  that it will file an  application  with the
Securities  and Exchange  Commission to strike the Company's  stock from listing
and registration.

Liquidity and Capital Resources

As of June 30, 2003,  $72,000,000 in aggregate  principal amount was outstanding
under the Company's Senior Credit Facility. The Company's Senior Credit Facility
expired in June 2003 with all outstanding  amounts then due.  Substantially  all
assets of the Company  have been  pledged as  collateral  for the senior  credit
facility.  In December 2002, the Company  amended the Senior Credit Facility and
obtained a waiver of  compliance  with certain  financial  covenants,  which the
Company had failed as of that date, including  maintenance of a minimum level of
EBITDA and the requirement that the Company make a partial repayment of the loan
if the accounts  receivable is below a certain level.  The amendment  provided a
waiver and reduced the amount of the monthly cash interest payment through March
31,  2003.  The waiver  expired on March 31,  2003  causing the Company to be in
default of the Senior Credit  Facility.  On May 7, 2003,  the waiver was renewed
through May 31, 2003, and again through June 27, 2003.

As of June 30, 2003,  $10,000,000 in aggregate  principal amount was outstanding
under the Company's Senior  Subordinated Notes and $20,000,000 in face amount of
Company  Preferred  Stock was  outstanding.  The Senior  Subordinated  Notes are
payable in March 2006 and originally  bore interest at 12% per annum until March
2001, increasing to 14% per annum thereafter.  In January 2001, the terms of the
Senior  Subordinated  Notes were  amended,  including  increasing  the effective
interest rate to 13% until March 2001 and 15% thereafter.  In December 2002, the
Company  obtained a waiver of the  events of default on the Senior  Subordinated
Notes and the Preferred  Stock and the payment (but not the accrual) of interest
and dividends from March 31, 2002 through June 30, 2003, or such earlier date on
which  indebtedness  under the Senior  Credit  Facility  is  accelerated  or the
lenders  under  the  Senior  Credit  Facility  exercise  any of their  rights or
remedies.

As of June 30, 2003, the Company had a working capital deficit of  approximately
$62,682,000  compared to working  capital deficit of $55,252,000 at December 31,
2002.  The deficiency  was a direct result of the  classification  of the Senior
Credit Facility and Senior Subordinated Notes as current liabilities.

Net cash  provided by  operations  during the six months ended June 30, 2003 and
2002, was $4,642,000 and $5,765,000, respectively. The cash provided in 2003 was
primarily  attributable to a decrease in prepaid and refundable income taxes and
accounts  receivable and an increase in accounts  payable,  accrued interest and
expenses  and  accrued  payroll.   The  cash  provided  in  2002  was  primarily
attributable  to a decrease in accounts  receivable  and prepaid and  refundable
income taxes and an increase in accrued payroll.

Net cash used in investing  activities during the six months ended June 30, 2003
and 2002, was $337,000 and $1,357,000, respectively. The cash used for investing
activities in 2003 relates primarily to capital expenditures.  The cash used for
investing   activities  in  2002  relates  primarily  to  earnout  payments  for
acquisitions completed during 1997 and 1998 as well as capital expenditures.

Net cash used in financing  activities during the six months ended June 30, 2003
and 2002 was $75,000, and $2,278,000  respectively.  The cash used for financing
activities in 2002 relates primarily to payments of fees for loan amendments.

                                       16



Headway's contractual obligations and commercial commitments are summarized
below. The following table includes aggregate information about Headway's
contractual obligations as of June 30, 2003 and the periods in which payments
are due:

  Contractual Obligations                Payments Due by Period
                                             (in thousands)
- ------------------------------------------------------------------------------
                              Total   Less than   1 - 3    4 - 5     After 5
                                        1 year    years    years      years
- ------------------------------------------------------------------------------
Loans Payable               $82,000   $82,000    $     -  $      -  $       -
- ------------------------------------------------------------------------------
Capital Lease Obligations        50        50          -         -         -
- ------------------------------------------------------------------------------
Operating Leases              5,036     1,338      2,074     1,146       478
- ------------------------------------------------------------------------------
Unconditional Purchase
Obligations                    None
- ------------------------------------------------------------------------------
Other Obligations (1)             2         2          -         -         -
- ------------------------------------------------------------------------------
Total Contractual Cash
Obligations                 $87,088   $83,390    $ 2,074  $  1,146  $    478
- ------------------------------------------------------------------------------
Preferred Stock (2)         $24,463   $24,463          -         -         -
- ------------------------------------------------------------------------------
(1)  Represents  earn out  amounts  payable to the former  owners of  businesses
     previously acquired by Headway.
(2)  In default of its terms, therefore, currently redeemable.

The following table includes  aggregate  information about Headway's  commercial
commitments as of June 30, 2003.  Commercial  commitments are items that Headway
could be obligated to pay in the future. They are not required to be included in
the consolidated balance sheet.


     Other Commercial          Total     Amount of Commitment Expiration Per Period
        Commitments           Amounts                  (in thousands)
                             Committed   --------------------------------------------
                                         Less than   1 - 3      4 - 5      Over 5
                                           1 year    years      years      years
- -------------------------------------------------------------------------------------
                                                           
Lines of Credit                  None
- -------------------------------------------------------------------------------------
Standby Letters of Credit      $1,600     $1,600    $       -  $      -   $      -
- -------------------------------------------------------------------------------------
Guarantees                       None
- -------------------------------------------------------------------------------------
Standby Repurchase Obligations   None
- -------------------------------------------------------------------------------------
Other Commercial Commitments     None
- -------------------------------------------------------------------------------------
Total Commercial Commitments  $ 1,600     $1,600    $       -  $      -   $      -
- -------------------------------------------------------------------------------------

Recent Transaction

On March 13, 2003, Headway Corporate Resources, Inc. exited the executive search
segment  of its  business  through a sale of its  Whitney  subsidiaries.  All of
Headway's interest in the Whitney  subsidiaries 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 (i) issued to the Company a 15
percent  membership  interest in the Whitney  Group  (subject to  adjustment  in
certain circumstances), (ii) issued a promissory note in the principal amount of
$2,000,000,  and (iii) is obligated  to pay an earnout  equal to five percent of
Whitney Group's gross revenues, as defined, during a five-year period commencing
January 1, 2003.  The note bears interest at the Prime Lending Rate as in effect
from time to time, plus two percent per annum. Interest is payable quarterly and
the full  principal  amount of the note is payable in January 2005.  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. The
Company has estimated the fair market value of the promissory note at $1,400,000
and the 15% equity interest at $45,000.  This transaction  resulted in a gain of
$95,000, which is reflected as a gain on disposal of discontinued  operations in
the  consolidated  statements of  operations  for the period ended June 30, 2003
(See note 8 to the unaudited financial statements).

                                       17



Critical Accounting Policies

Basis of Presentation

The Company's consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States applicable to
a going concern.  Except as otherwise  disclosed,  these principles  assume that
assets will be realized  and  liabilities  will be  discharged  in the  ordinary
course of business. The Company is currently operating as a debtor-in-possession
under Chapter 11 of the Bankruptcy Code, and its continuation as a going concern
is  contingent  upon,  among  other  things,  its  ability  to have  its Plan be
confirmed by the Bankruptcy Court, comply with the Cash Collateral  Stipulation,
and generate  sufficient cash flows from operations.  There is no assurance that
the  Company  will  be able to  achieve  any of  these  results.  The  Company's
consolidated financial statements do not include any adjustments relating to the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  liabilities  that  might  result  from the  outcome of these
uncertainties.

The  Company's  consolidated  financial  statements  included  elsewhere in this
Quarterly  Report do not reflect  adjustments  that may occur in accordance with
AICPA   Statement  of  Position  90-7   "Financial   Reporting  by  Entities  in
Reorganization  Under the Bankruptcy Code" ("SOP 90-7"),  which the Company will
adopt for its financial  reporting in periods ending after July 1, 2003 assuming
that  the  Company  will  continue  as a  "going  concern."  In the  Chapter  11
proceedings, substantially all unsecured liabilities as of the Petition Date are
subject to compromise or other  treatment under a plan of  reorganization  which
must be confirmed by the Bankruptcy  Court after submission to any required vote
by affected parties.  For financial  reporting  purposes,  those liabilities and
obligations  whose treatment and satisfaction is dependent on the outcome of the
Chapter 11 proceedings will be segregated and classified as Liabilities  Subject
to  Compromise  in the  consolidated  balance  sheet  under  SOP 90-7 in  future
periods.

The ultimate  amount of and  settlement  terms for the Company's  pre-bankruptcy
liabilities  are subject to the ultimate  outcome of its Chapter 11  proceedings
and,  accordingly,  are  not  presently  determinable.  Pursuant  to  SOP  90-7,
professional fees associated with the Chapter 11 proceedings will be expensed as
incurred and reported as reorganization  costs.  Also,  interest expense will be
reported  only to the extent  that it will be paid  during the  pendency  of the
Chapter 11  proceedings or that it is probable that it will be an allowed claim.
The Company has incurred  $1,274,000 of professional  fees in the preparation of
its Chapter 11 filing and has classified such expenses as  reorganization  costs
for the three and six months  ended  June 30,  2003  which is  reflected  on the
Consolidated Statement of Operations.

Revenue Recognition

Information technology staffing,  temporary staffing and human resource staffing
revenue is recognized when the temporary personnel perform the related services.
Permanent  placement  revenue is  recognized  when the  placement  is  employed.
Provisions  are made for estimated  losses in  realization  (principally  due to
applicants  not remaining in employment for the  guaranteed  period,  usually 90
days) and for bad debts.  These  provisions are reviewed  periodically  and have
always been found to be adequate based on Headway's experience in this regard.

Executive search services are primarily engaged on a retainer basis. Income from
retainer  contracts,  which provide for periodic  billings over periods of up to
one year, is recognized as earned based on the terms of the contract.

Goodwill and Long-Lived Assets

On  January 1, 2002 the  Company  adopted  statements  of  Financial  Accounting
Standards No. 142 "Goodwill and other Intangible Assets" ("SFAS 142"). Under the
new rules, goodwill and Intangible Assets deemed to have indefinite lives are no
longer  amortized but are subject to annual  impairment tests in accordance with
the  statement.  Other  intangible  assets  continue to be amortized  over their
useful lives.

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal  of  Long-Lived  Assets"  which  addresses  financial   accounting  and
reporting for the  impairment or disposal of  long-lived  assets and  supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed of", and the  accounting  and reporting  provisions of APB
Opinion No. 30, "Reporting the Results of Operations for a Disposal of a Segment

                                       18



of a Business" ("APB 30"). The Company periodically  evaluates whether there has
been impairment in any of its long-lived  assets.  An impairment in value exists
where the carrying value of a long-lived  asset exceeds its fair value. If it is
determined  that an  impairment  in value has  occurred,  the carrying  value is
written down for its fair value. The Company adopted SFAS No. 144 in 2002.

Results of Operations

Overview

The results for the second quarter  reflect a slight  increase in the demand for
the Company's staffing services.  Management cannot determine whether this trend
will  continue  for the rest of the year.  The Company has taken steps to reduce
costs and is constantly looking for growth opportunities.

Consolidated

Revenues for the three and six months ended June 30, 2003  increased  $4,052,000
and $3,935,000 or 6.7% and 3.1%,  respectively,  compared with the corresponding
periods of the prior  year.  ` Total  operating  expenses  for the three and six
months ended June 30, 2003 increased $5,543,000,  and $5,097,000,  respectively,
compared  with the  corresponding  periods of the prior  year.  The  increase in
operating  expenses  for the three months ended June 30, 2003 as compared to the
same period in 2002 is the result of a $7.2 million increase in direct costs and
$1.3  million of  reorganization  costs,  offset by a $2.9  million  decrease in
selling,  general and  administrative  expenses and a $0.1  million  decrease in
depreciation and  amortization.  The increase in operating  expenses for the six
months  ended June 30, 2003 as compared to the same period in 2002 is the result
of a $9.0 million  increase in direct  costs and $1.3 million of  reorganization
costs offset by a $5.0 million decrease in selling,  general and  administrative
expenses and a $0.2 million  decrease in depreciation and  amortization.  Direct
costs  increased as a percentage  of revenues from 85.3% to 91.2% for the second
quarter of 2003 compared with the same period in 2002. Direct costs increased as
a percentage  of revenues  from 86.2% to 90.6% for the six months ended June 30,
2003  compared  with the same period in 2002.  The increase in direct costs as a
percentage of revenues for the three and six months ended June 30, 2003 compared
with the same period in 2002 is a result of: 1) a change in  Headway's  business
mix in 2003,  whereby the permanent  placement business that has no direct costs
experienced  more  significant  declines than the staffing  business,  therefore
reducing its percentage of our total revenues; 2) increased workers compensation
insurance  expenses;  and 3) higher state  unemployment tax rates as a result of
the weak  economic  conditions.  Selling,  general and  administrative  expenses
decreased as a percentage of revenues  from 14.7% in the second  quarter 2002 to
9.3% in second  quarter  2003.  Selling,  general  and  administrative  expenses
decreased  as a  percentage  of  revenues  from 14.1% to 9.7% for the six months
ended June 30,  2003  compared  with the same  period in 2002.  The  decrease in
selling,  general and administrative expenses for the three and six months ended
June 30, 2003 compared with the same period in 2002 is primarily attributable to
staff reductions and other  cost-cutting  initiatives  implemented in the latter
half of 2002, as well as lower commission expense associated with the decline in
revenues.  The reorganization  costs for the three and six months ended June 30,
2003 are professional fees associated with the Chapter 11 proceedings.

Interest  expense  for the three  months  ended  June 30,  2003  increased  $0.1
million,  compared with the corresponding period of the prior year. The increase
in interest  expense is due to fully  amortizing  the deferred  financing  costs
related to the Company's Senior Subordinated Notes during the three months ended
June 30, 2003. Interest expense for the six months ended June 30, 2003 decreased
$1.2 million. The decrease in interest expense is due to decreased  amortization
of deferred  financing costs relating to the amendment  completed in August 2001
offset by an increase in  amortization  of deferred  financing costs relating to
the amendment completed in April 2002 and the elimination of expense relating to
the Company's interest rate swap contract that expired in April 2002.

Due to the Company exiting the executive  search segment of its business through
the sale of its Whitney subsidiaries on March 13, 2003, the Company has recorded
a loss from  discontinued  operations  of  $380,000  and a gain on  disposal  of
discontinued  operations of $95,000 in its consolidated  statement of operations
for the six months ended June 30, 2003.

During the first  quarter of 2002 the Company  adopted  SFAS 142.  Under the new
rules,  goodwill and intangible  assets deemed to have  indefinite  lives are no
longer  amortized but are subject to annual  impairment tests in accordance with
the  Statement.  Other  intangible  assets  continue to be amortized  over their
useful lives. Under SFAS 142, goodwill  impairment is deemed to exist if the net
carrying value of a reporting  unit's goodwill exceeds its estimated fair value.
Upon adoption of SFAS 142 in the first quarter of 2002,  the Company  recorded a
non-cash  charge of  $45,000,000  to reduce the carrying  value of its goodwill.

                                       19



Such charge is non-operational in nature and is reflected as a cumulative effect
of  an  accounting  change  in  the  accompanying   consolidated   statement  of
operations.

      Item 3. Quantitative and Qualitative Disclosures About Market Risk

The  Company  has  previously  used  interest  rate swap  contracts  for hedging
purposes.  As of June 30,  2003  there  were no  interest  rate  swap  contracts
outstanding.

                         Item 4. Controls and Procedures

The Company's  management  evaluated,  with the  participation  of the Company's
principal executive and principal  financial officers,  the effectiveness of the
Company's  disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e)  under the Securities  Exchange Act of 1934, as amended (the "Exchange
Act")), as of June 30, 2003. Based on their evaluation,  the Company's principal
executive  and  principal   financial  officers  concluded  that  the  Company's
disclosure controls and procedures were effective as of June 30, 2003.

There  has been no change  in the  Company's  internal  control  over  financial
reporting (as defined in Rules  13a-15(f) and 15d-15(f)  under the Exchange Act)
that occurred during the Company's  fiscal quarter ended June 30, 2003, that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

PART II.  OTHER INFORMATION

                   Item 6. Exhibits and Reports on Form 8-K


EXHIBITS:

Exhibit No. Title of Document                                                                    Location
                                                                                           

2.1         Plan of  Reorganization,  filed with the Bankruptcy  Court on July 1, 2003 (1)       99.1

31.1        Certification of the Chief Executive  Officer pursuant to Section 302 of the
            Sarbanes-Oxley Act of 2002                                                           This Filing

31.2        Certification of the Chief Financial  Officer pursuant to Section 302 of the
            Sarbanes-Oxley Act of 2002                                                           This Filing

32.1        Certification  of the Chief Executive  Officer pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002                                                           This Filing

32.2        Certification of the Chief Financial  Officer pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002                                                           This Filing

99.1        Disclosure  Statement,  filed with the Bankruptcy Court on July 1,2003 (1)           99.3



(1)  These exhibits are included in Headway's  current report on Form 8-K, dated
     July 1,  2003,  and filed  with the  Commission  on July 1,  2003,  and are
     incorporated  herein by this  reference.  The  reference  under the  column
     "Location" is to the exhibit number in the report on Form 8-K.


REPORTS ON FORM 8-K:  On July 1, 2003,  the  Company  filed a report on Form 8-K
dated July 1, 2003 reporting under Item 3 that Headway Corporate Resources, Inc.
filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code
with the U.S. Bankruptcy Court for the Southern District of New York.

                                       20





                                   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.

                                   HEADWAY CORPORATE RESOURCES,
INC.


Date: August 14, 2003              By: /s/ Barry S. Roseman,
                                       President and Chief Executive Officer


Date: August 14, 2003              By: /s/ Philicia G. Levinson,
                                       Chief Financial Officer


                                       21