**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM10-Q**

| **x**      | **Quarterly  Report Under Section 13 or 15(d)** | ** ** |
|------------|------------------------------------------------------|------------|
| ** ** | **of the  Securities Exchange Act of 1934**          | ** ** |

** **

** **

**for thequarterly period ended March 31, 2007**

** **

**or**

** **

| **o**      | **Transition  Report pursuant to Section 13 or 15(d)** | ** ** |
|------------|-------------------------------------------------------------|------------|
| ** ** | **of the  Securities Exchange Act of 1934**                 | ** ** |

 

**forthe transition period from         to        **

**CommissionFile Number 0-7282**

**COMPUTERHORIZONS CORP.**

(Exact name ofregistrant as specified in its charter)

| **New York**                     |   | **13-2638902**          |
|----------------------------------|--------|-------------------------|
| (State or other  jurisdiction of |   | (I.R.S. Employer        |
| incorporation or  organization)  |   | Identification  Number) |

 

**49 OldBloomfield Avenue, Mountain Lakes, New Jersey 07046-1495**

(Address ofprincipal executiveoffices)              (Zipcode)

Registrant’stelephone number, including area code **(973)299-4000**

**NotApplicable**

(Former name,former address and former fiscal year, ifchanged since last report)

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding twelve months (or for such shorter period that the registrant wasrequired to file such reports) and (2) has been subject to such filingrequirements for the past 90 days.

|        |   | x   |   | o  |
|--------|--------|-----|--------|----|
|   |   | Yes |   | No |

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated fileror a non-accelerated filer. See definitions of “accelerated filer and largeaccelerated filer”.

| o (Large Accelerated Filer |   | x (Accelerated  Filer |   | o (Non-accelerated  Filer |
|---------------------------------|--------|----------------------------|--------|--------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

|        |   | o   |   | x  |
|--------|--------|-----|--------|----|
|   |   | Yes |   | No |

 

As of August 1, 2007 theissuer had   33,837,284 shares of common stock outstanding.

 

----

**COMPUTERHORIZONS CORP. AND SUBSIDIARIES**

Index
| Part I     |   | Financial  Information |                                                                                                                                                                              |
|------------|--------|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |   |                   |                                                                                                                                                                              |   |
| Item 1     |   |                   | Financial  Statements:                                                                                                                                                            |   |
|       |   |                   |                                                                                                                                                                              |   |
|       |   |                   | Condensed Statement of Net Assets June 30, 2007  (Liquidation Basis- Unaudited) and Consolidated Condensed Balance Sheet  (Going Concern Basis- Audited) December 31, 2006   |   |
|       |   |                   |                                                                                                                                                                              |   |
|       |   |                   | Condensed Statement of  Changes in Net Assets in Liquidation – Period from February 17- March 31,  2007 (Unaudited)                                                          |   |
|       |   |                   |                                                                                                                                                                              |   |
|       |   |                   | Consolidated Condensed  Statements of Operations- Period from January 1, 2007 through February 16,  2007 (unaudited) and the Three and Six Months Ended June 30, 2006 (unaudited) |   |
|       |   |                   |                                                                                                                                                                              |   |
|       |   |                   | Consolidated Condensed  Statements of Cash Flows Period from January 1, 2007 through February 16,  2007 (unaudited) and the Three and Six Months Ended June 30, 2006 (unaudited)  |   |
|       |   |                   |                                                                                                                                                                              |   |
|       |   |                   | Notes to Condensed Financial  Statements                                                                                                                                          |   |
|       |   |                   |                                                                                                                                                                              |   |
| Item 2     |   |                   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                       |   |
|       |   |                   |                                                                                                                                                                              |   |
| Item  3    |   |                   | Quantitative and Qualitative  Disclosures about Market Risk                                                                                                                       |   |
|       |   |                   |                                                                                                                                                                              |   |
| Item 4     |   |                   | Controls and Procedures                                                                                                                                                           |   |
|       |   |                   |                                                                                                                                                                              |   |
| Part II    |   | Other  Information     |                                                                                                                                                                              |
|       |   |                   |                                                                                                                                                                              |   |
| Item  1A   |   |                   | Risk Factors                                                                                                                                                                      |   |
|       |   |                   |                                                                                                                                                                              |   |
| Item 6     |   |                   | Exhibits                                                                                                                                                                          |   |
|       |   |                   |                                                                                                                                                                              |   |
| Signatures |   |
|       |   |                   |                                                                                                                                                                              |   |
| EX-31.1    |   |
| EX-31.2    |   |
| EX-32.1    |   |
| EX-32.2    |   |
|            |        |                        |                                                                                                                                                                                   |  |  |

 

2

----

PART I.  Financial Information

Item 1.

**ComputerHorizons Corp and Subsidiaries**

**Consolidated Statement of Net Assets as of June 30, 2007(Liquidation Basis)**

**ConsolidatedBalance Sheet as of  December 31, 2006(Going Concern Basis)**

($in thousands)
| ** **                                                                                                                                                   | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                                                   | ** ** | **(Unaudited)**             | ** ** | **(Audited)***                  | ** ** |
| **ASSETS**                                                                                                                                                   | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| **CURRENT ASSETS:**                                                                                                                                          | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| Cash and cash  equivalents                                                                                                                                   |       | $                           | 27,837     |                            | $          | 71,790 |   |
| Cash held in escrow                                                                                                                                          |       | —                      |       | 1,000                           |       |
| Accounts receivable,                                                                                                                                         |       | 162                         |       | 34,517                          |       |
| Refundable tax credit                                                                                                                                        |       | 8,962                       |       | 8,547                           |       |
| Prepaid expenses and  other                                                                                                                                  |       | 486                         |       | 4,741                           |       |
| **TOTAL CURRENT ASSETS**                                                                                                                                     |       | 37,448                      |       | 120,595                         |       |
|                                                                                                                                                         |       |                        |       |                            |       |
| **TOTAL PROPERTY AND EQUIPMENT,  NET**                                                                                                                       |       | 12                          |       | 2,746                           |       |
| ** **                                                                                                                                                   | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| **OTHER ASSETS - NET:**                                                                                                                                      | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| Deferred income taxes                                                                                                                                        |       | —                      |       | 1,491                           |       |
| Other                                                                                                                                                        |       | —                      |       | 940                             |       |
| **TOTAL OTHER ASSETS**                                                                                                                                       |       | —                      |       | 2,431                           |       |
| ** **                                                                                                                                                   | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| **TOTAL ASSETS**                                                                                                                                             |       | $                           | 37,459     |                            | $          | 125,772 |   |
|                                                                                                                                                         |       |                        |       |                            |       |
| **LIABILITIES AND SHAREHOLDERS  EQUITY**                                                                                                                     | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| **CURRENT LIABILITIES:**                                                                                                                                     | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| Accounts payable                                                                                                                                             |       | $                           | 46         |                            | $          | 28,126 |   |
| Accrued payroll,  payroll taxes and benefits                                                                                                                 |       | —                      |       | 9,431                           |       |
| Net working capital  adjustment                                                                                                                              |       | 1,904                       |       |                            |       |
| Income taxes payable                                                                                                                                         |       | 2,354                       |       | 1,150                           |       |
| Restructuring reserve                                                                                                                                        |       | —                      |       | 61                              |       |
| Other accrued expenses                                                                                                                                       |       | 4,136                       |       | 4,212                           |       |
| Change of control  payable                                                                                                                                   |       | —                      |       | 2,316                           |       |
| Deferred Tax                                                                                                                                                 |       | —                      |       | 1,491                           |       |
| Deferred compensation                                                                                                                                        |       | —                      |       | 1,847                           |       |
| **TOTAL CURRENT LIABILITIES**                                                                                                                                |       | 8,439                       |       | 48,634                          |       |
|                                                                                                                                                         |       |                        |       |                            |       |
| **TOTAL OTHER LIABILITIES**                                                                                                                                  |       | —                      |       | 443                             |       |
|                                                                                                                                                         |       |                        |       |                            |       |
| **TOTAL LIABILITIES**                                                                                                                                        |       | $                           | 8,439      |                            | $          | 49,077 |   |
|                                                                                                                                                         |       |                        |       |                            |       |
| **SHAREHOLDERS EQUITY:**                                                                                                                                     | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| Common stock,  issued$.10 par; authorized 100,000,000 shares; issued 33,837,284  and 33,733,652 shares at March 31, 2007 and December 31, 2006, respectively |       |                        |       | 3,373                           |       |
| Additional paid in  capital                                                                                                                                  |       |                        |       | 148,046                         |       |
| Accumulated other  comprehensive loss                                                                                                                        |       |                        |       | (652                            | )          |
| Retained earnings/  (Accumulated deficit)                                                                                                                    |       |                        |       | (73,930                         | )          |
|                                                                                                                                                         |       | —                      |       | 76,837                          |       |
| Less shares held in treasury,  at cost; 0 and 25,000 shares at March 31, 2007  and December 31, 2006, respectively                                           |       |                        |       | (140                            | )          |
| **TOTAL SHAREHOLDERS EQUITY**                                                                                                                                |       | —                      |       | 76,697                          |       |
|                                                                                                                                                         |       |                        |       |                            |       |
| **TOTAL LIABILITIES AND  SHAREHOLDERS EQUITY**                                                                                                               |       |                        |       | $                               | 125,772    |   |
| ** **                                                                                                                                                   | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| **NET ASSETS IN LIQUIDATION**                                                                                                                                |       | $                           | 29,020     |                            |       |   |

 

The accompanyingnotes are an integral part of these statements.

 

----

* Derived fromaudited information

 

3

----

**ComputerHorizons Corp and Subsidiaries**

**Condensed Statement of Net Assets as of June 30, 2007(Liquidation Basis)**

($ in thousands)

(Unaudited)
| Shareholders’  Equity at February 16, 2007             |   | $        | 176,624 |   |
|-------------------------------------------------------------|--------|----------|---------|--------|
| Liquidation  basis adjustments:                             |   |     |    |
| Adjust assets  and liabilities to fair value                |   | (973     | )       |
| Accrued cost of  liquidation                                |   | (9,010   | )       |
|                                                        |   |     |    |
| Net Assets in  Liquidation February 16, 2007                |   | 166,641  |    |
|                                                        |   |     |    |
| Cash  distribution to shareholders                          |   | (135,349 | )       |
| Transition  Services Billing                                |   | 930      |    |
| Surrender  program payment - stock options                  |   | (395     | )       |
| Adjustments to  Liquidation accruals                        |   | 121      |    |
| Investment  income from February 17, 2007 to March 31, 2007 |   | 672      |    |
| Costs incurred  from February 17, 2007 to March 31, 2007    |   | (2,433   | )       |
| Net Assets in  Liquidation March 31, 2007                   |   | $        | 30,187  |   |
|                                                        |   |     |    |
| Settlement with  NetStar-1                                  |   | (215     | )       |
| Tax accrual                                                 |   | (710     | )       |
| Adjustments to  Liquidation accruals                        |   | (1,309   | )       |
| Transition  Services Billing                                |   | (3       | )       |
| Investment Income  from April 1 through June 30, 2007       |   | 1,071    |    |
| Net Assets in  Liquidation June 30, 2007                    |   | $        | 29,020  |   |

 

4

----

**Computer Horizons Corp and Subsidiaries**

Consolidated Condensed Statement of Operations and ComprehensiveIncome (Going Concern Basis)

($in thousands except per share data)

(Unaudited)
| ** **                                                            | ** ** | **For the period from  January 1 to  February 16, 2007** | ** ** | **Three Months  Ended June 30,  2006** | ** ** | **Six Months  Ended June 30,  2006** | ** ** |
|-----------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|-----------------------------------------------------|------------|
|                                                                  |       |                                                                                        |       |                                                  |       |                                                |       |
| **REVENUES:**                                                         | ** ** | ** **                                                                                  | ** ** | ** **                                            | ** ** | ** **                                          | ** ** |
| Commercial                                                            |       | $                                                                                           | 24,995     |                                                  | $          | 45,643                                              |       | $ | 91,482 |   |
| Chimes                                                                |       | 4,671                                                                                       |       | 8,056                                                 |       | 15,497                                              |       |
| **Total**                                                             |       | 29,666                                                                                      |       | 53,699                                                |       | 106,979                                             |       |
| **COSTS  AND EXPENSES:**                                              | ** ** | ** **                                                                                  | ** ** | ** **                                            | ** ** | ** **                                          | ** ** |
| Direct costs                                                          |       | 23,086                                                                                      |       | 36,243                                                |       | 72,625                                              |       |
| Selling, general  & administrative                                |       | 10,761                                                                                      |       | 17,145                                                |       | 34,371                                              |       |
| Restructuring  charges                                                |       | 14                                                                                          |       | —                                                |       | —                                              |       |
| Special charges                                                       |       | —                                                                                      |       | 219                                                   |       | 213                                                 |       |
| Total Costs                                                           |       | 33,861                                                                                      |       | 53,607                                                |       | 107,209                                             |       |
|                                                                  |       |                                                                                        |       |                                                  |       |                                                |       |
| **INCOME/(LOSS)  FROM OPERATIONS**                                    |       | (4,195                                                                                      | )          | 92                                                    |       | (230                                                | )          |
| ** **                                                            | ** ** | ** **                                                                                  | ** ** | ** **                                            | ** ** | ** **                                          | ** ** |
| **OTHER  INCOME/(EXPENSE):**                                          | ** ** | ** **                                                                                  | ** ** | ** **                                            | ** ** | ** **                                          | ** ** |
| Interest income                                                       |       | 881                                                                                         |       | 446                                                   |       | 844                                                 |       |
| Interest expense                                                      |       | (1                                                                                          | )          | (1                                                    | )          | (64                                                 | )          |
|                                                                  |       | 880                                                                                         |       | 445                                                   |       | 780                                                 |       |
|                                                                  |       |                                                                                        |       |                                                  |       |                                                |       |
| **INCOME/(LOSS)  FROM CONTINUING OPERATIONS BEFORE INCOME TAXES**     |       | (3,315                                                                                      | )          | 537                                                   |       | 550                                                 |       |
| ** **                                                            | ** ** | ** **                                                                                  | ** ** | ** **                                            | ** ** | ** **                                          | ** ** |
| **GAIN ON  SALE**                                                     |       | 102,686                                                                                     |       | —                                                |       | —                                              |       |
| ** **                                                            |       |                                                                                        |       |                                                  |       |                                                |       |
| **INCOME  FROM EXTRAORDINARY ITEMS**                                  |       | 102,686                                                                                     |       | —                                                |       | —                                              |       |
|                                                                  |       |                                                                                        |       |                                                  |       |                                                |       |
| **INCOME  (TAXES)/BENEFIT:**                                          |       | —                                                                                      |       | (37                                                   | )          | (71                                                 | )          |
|                                                                  |       |                                                                                        |       |                                                  |       |                                                |       |
| **NET  INCOME/(LOSS) FROM CONTINUING OPERATIONS**                     |       | $                                                                                           | 99,371     |                                                  | $          | 500                                                 |       | $ | 479 |   |
| **LOSS  FROM DISCONTINUED OPERATIONS**                                |       | $                                                                                           |       |                                                  | $          | (14,552                                             | )          | $ | (13,772 | ) |
| ** **                                                            | ** ** | ** **                                                                                  | ** ** | ** **                                            | ** ** | ** **                                          | ** ** |
| **NET  INCOME/(LOSS)**                                                |       | $                                                                                           | 99,371     |                                                  | $          | (14,052                                             | )          | $ | (13,293 | ) |
| ** **                                                            | ** ** | ** **                                                                                  | ** ** | ** **                                            | ** ** | ** **                                          | ** ** |
| **EARNINGS/(LOSS)  PER SHARE FROM CONTINUING OPERATIONS - BASIC**     |       | $                                                                                           | 2.94       |                                                  | $          | 0.02                                                |       | $ | 0.01 |   |
| **EARNINGS/(LOSS)  PER SHARE FROM DISCONTINUED OPERATIONS - BASIC**   |       | $                                                                                           | —     |                                                  | $          | (0.45                                               | )          | $ | (0.43 | ) |
| **EARNINGS/(LOSS)  PER SHARE - BASIC**                                |       | $                                                                                           | —     |                                                  | $          | (0.44                                               | )          | $ | (0.41 | ) |
| **EARNINGS/(LOSS)  PER SHARE FROM CONTINUING OPERATIONS - DILUTED**   |       | $                                                                                           | 2.94       |                                                  | $          | 0.02                                                |       | $ | 0.01 |   |
| **EARNINGS/(LOSS)  PER SHARE FROM DISCONTINUED OPERATIONS - DILUTED** |       | $                                                                                           | —     |                                                  | $          | (0.00                                               | )          | $ | (0.00 | ) |
| **EARNINGS/(LOSS)  PER SHARE - DILUTED**                              |       | $                                                                                           | 2.94       |                                                  | (0.44      | )                                                   | (0.41      | ) |
| **WEIGHTED  AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC**            |       | 33,837,284                                                                                  |       | 32,247,000                                            |       | 32,280,000                                          |       |
|                                                                  |       |                                                                                        |       |                                                  |       |                                                |       |
| **WEIGHTED AVERAGE NUMBER OF  SHARES OUTSTANDING - DILUTED**          |       | 33,837,284                                                                                  |       | 32,247,000                                            |       | 32,591,000                                          |       |

 

The accompanying notes are an integralpart of these statements.

5

----

**ComputerHorizons Corp. and Subsidiaries**

**Consolidated Condensed Statement of Cash Flows**

($ in thousands)

(Unaudited)
| ** **                                                                                               | ** ** | **For the period from  January 1 to February 16,  2007** | ** ** | **Three Months Ended  June 30, 2006** | ** ** | **Six Months Ended  June 30, 2006** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------------------------|------------|
|                                                                                                     |       |                                                                                        |       |                                                      |       |                                                    |       |
| **CASH  FLOWS FROM OPERATING ACTIVITIES**                                                                | ** ** | ** **                                                                                  | ** ** | ** **                                                | ** ** | ** **                                              | ** ** |
| Net  Income/(Loss)                                                                                       |       | $                                                                                           | 99,371     |                                                      | $          | (14,051                                                 | )          | $ | (13,293 | ) |
| Less:  Income/(Loss) from discontinued operations                                                        |       |                                                                                        |       | (14,552                                                   | )          | (13,772                                                 | )          |
| Less: Gain on  sale of Chimes and Commercial                                                             |       | 102,625                                                                                     |       |                                                      |       | —                                                  |       |
| Income/(Loss)  from continuing operations                                                                |       | (3,254                                                                                      | )          | 501                                                       |       | 479                                                     |       |
| **Adjustments  to reconcile net income/(loss) to net cash provided by/(used in) operating  activities:** | ** ** | ** **                                                                                  | ** ** | ** **                                                | ** ** | ** **                                              | ** ** |
| Deferred taxes                                                                                           |       | (1                                                                                          | )          | 27                                                        |       | 27                                                      |       |
| Depreciation                                                                                             |       | 234                                                                                         |       | 1,372                                                     |       | 1,372                                                   |       |
| Amortization of  intangibles                                                                             |       | —                                                                                      |       | (103                                                      | )          | 466                                                     |       |
| Provision for  bad debts                                                                                 |       | 1,452                                                                                       |       | (180                                                      | )          | —                                                  |       |
| Restructure  expense                                                                                     |       | 14                                                                                          |       | —                                                    |       | —                                                  |       |
| FAS 123R Option  Expense                                                                                 |       | (15                                                                                         | )          | 95                                                        |       | 378                                                     |       |
| Changes in  assets and liabilities, net of acquisitions                                                  |       | (5,122                                                                                      | )          | 14,564                                                    |       | (18,105                                                 | )          |
| **NET  CASH USED IN OPERATING ACTIVITIES**                                                               |       | (6,692                                                                                      | )          | 16,276                                                    |       | (15,383                                                 | )          |
| ** **                                                                                               |       |                                                                                        |       |                                                      |       |                                                    |       |
| **NET  CASH PROVIDED BY DISCONTINUED OPERATIONS**                                                        |       | 104,657                                                                                     |       | (3,816                                                    | )          | 2,580                                                   |       |
| **NET  CASH PROVIDED BY/ (USED IN) OPERATING ACTIVITIES**                                                |       | 97,965                                                                                      |       | 12,460                                                    |       | (12,803                                                 | )          |
|                                                                                                     |       |                                                                                        |       |                                                      |       |                                                    |       |
| **CASH  FLOWS FROM INVESTING ACTIVITIES**                                                                | ** ** | ** **                                                                                  | ** ** | ** **                                                | ** ** | ** **                                              | ** ** |
| Proceeds from  sale of assets                                                                            |       | —                                                                                      |       |                                                      |       |                                                    |       |
| Sale/Purchase of  furniture and equipment                                                                |       | 1,527                                                                                       |       | (619                                                      | )          | (848                                                    | )          |
| **NET  CASH (USED IN) INVESTING ACTIVITIES**                                                             |       | 1,527                                                                                       |       | (619                                                      | )          | (848                                                    | )          |
| **NET  CASH PROVIDED BY/(USED IN) DISCONTINUED OPERATIONS**                                              |       | —                                                                                      |       | —                                                    |       | 174                                                     |       |
| **NET  CASH PROVIDED BY/ (USED IN) INVESTING ACTIVITIES**                                                |       | 1,527                                                                                       |       | (619                                                      | )          | (674                                                    | )          |
|                                                                                                     |       |                                                                                        |       |                                                      |       |                                                    |       |
| **CASH  FLOWS FROM FINANCING ACTIVITIES**                                                                | ** ** | ** **                                                                                  | ** ** | ** **                                                | ** ** | ** **                                              | ** ** |
| Stock options  exercised                                                                                 |       | 334                                                                                         |       | 878                                                       |       | 2,582                                                   |       |
| Stock issued on  employee stock purchase plan                                                            |       | 97                                                                                          |       | 115                                                       |       | 247                                                     |       |
| **NET  CASH PROVIDED BY FINANCING ACTIVITIES**                                                           |       | 431                                                                                         |       | 993                                                       |       | 2,829                                                   |       |
|                                                                                                     |       |                                                                                        |       |                                                      |       |                                                    |       |
| Foreign currency  gains/(losses)                                                                         |       |                                                                                        |       | 414                                                       |       | 507                                                     |       |
| **NET  INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS**                                                |       | 99,923                                                                                      |       | 13,248                                                    |       | (10,141                                                 | )          |
|                                                                                                     |       |                                                                                        |       |                                                      |       |                                                    |       |
| **CASH  AND CASH EQUIVALENTS AT BEGINNING OF YEAR**                                                      |       | 72,790                                                                                      |       | —                                                    |       | 46,365                                                  |       |
|                                                                                                     |       |                                                                                        |       |                                                      |       |                                                    |       |
| **CASH  AND CASH EQUIVALENTS AT END OF PERIOD**                                                          |       | $                                                                                           | 172,713    |                                                      | $          | 13,248                                                  |       | $ | 36,224 |   |

 

The accompanying notes are an integral partof these statements.

6

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**COMPUTER HORIZONS CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

(unaudited)

**1.**             Basis of Presentation

At a SpecialMeeting held on February 14, 2007, the shareholders of Computer Horizons Corp.(the “Company”) approved the sales of the Company’s Chimes, Inc. subsidiary toan affiliate of Axium International and the Company’s Commercial Division to anaffiliate of Allegis Group (collectively, the “Asset Sales”).  At the Special Meeting, the shareholders ofthe Company also approved a proposed plan of complete liquidation anddissolution of the Company (the “Plan of Liquidation”).  The Company began implementing the Plan ofLiquidation after the Asset Sales were completed on February 16, 2007.

The consolidatedfinancial statements have been prepared by the Company without audit inaccordance with the rules and regulations of the Securities and ExchangeCommission, and should be read in conjunction with the audited ConsolidatedFinancial Statements previously filed on the Company’s Form 10-K for the yearended December 31, 2006.  In the opinionof management, the statements reflect all adjustments necessary for a fairpresentation of the results of interim periods. Certain information and note disclosures, normally included in financialstatements prepared in accordance with accounting principles generally acceptedin the United States of America, which are not required for interim purposes,have been condensed or omitted.  Theresults for any interim period are not necessarily indicative of the results tobe expected for a full year.

The consolidatedfinancial statements for the period January 1, 2007 to February 16, 2007 andfor all periods presented for 2006 were prepared on the going concern basis ofaccounting, which contemplates realization of assets and satisfaction ofliabilities in the normal course of business. As a result of the shareholders’ approval of the Plan of Liquidation,the Company adopted the liquidation basis of accounting effective February 17,2007.  This basis of accounting isconsidered appropriate when, among other things, liquidation of a company isprobable and the net realizable values of assets are reasonablydeterminable.  Under this basis ofaccounting, assets are valued at their net realizable values and liabilitiesare stated at their estimated settlement amounts.

The conversionfrom the going concern to liquidation basis of accounting required managementto make significant estimates and judgments. In order to record assets at estimated net realizable value andliabilities at estimated settlement amounts under the liquidation basis ofaccounting, the Company recorded the following adjustments to record its assetsand liabilities at fair value as of February 17, 2007, the date of adoption ofthe liquidation basis of accounting:
|                                              | ** ** | **($ in thousands)** | ** ** |
|----------------------------------------------|------------|--------------------------------|------------|
| Adjust assets and liabilities to fair value: |       |                           |       |
| Write down of Fixed Assets                   |       | 119                            |       |
| Write off of Advances to India               |       | 698                            |       |
| Write down of Other Assets                   |       | 156                            |       |
| Total                                        |       | $                              | 973        |   |
|                                              |            |                                |            |  |

 

***Accrued Cost of Liquidation***

Upon conversion tothe liquidation basis of accounting, the Company accrued for the known costs tobe incurred in liquidation, and has made subsequent adjustments and paymentsagainst these accounts, as follows:

The Company willcontinue to incur operating costs and receive income on its investmentsthroughout the liquidation period.  On aregular basis, we evaluate our assumptions, judgments and estimates that canhave a significant impact on our reported net assets in liquidation based onthe most recent information available to us, and when necessary make changesaccordingly.  Actual costs and income maydiffer from our estimates, which might reduce net assets available inliquidation to be distributed to shareholders.

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($ in thousands)
|                     | ** ** | **As Booked  2/17/2007** | ** ** | **Recorded prior to  2/17/2007*** | ** ** | **Adjustments to  reserves** | ** ** | **Payments  to date** | ** ** | **Balance at  6/30/07** | ** ** |
|---------------------|------------|-------------------------------|------------|---------------------------------------------|------------|-----------------------------------|------------|----------------------------|------------|------------------------------|------------|
| Lease Obligation    |       | $                             | 1,324      |                                        |       |                              | (45        | )                          | (1,279     | )                            | —     |   |
| Professional Fees   |       | 1,927                         |       |                                        |       | 228                               |       | (1,130                     | )          | 1,025                        |       |
| Legal and Insurance |       | 560                           |       |                                        |       | 488                               |       | (188                       | )          | 861                          |       |
| Human Resources     |       | 3,480                         |       | 1,188                                       |       | 518                               |       | (4,017                     | )          | 1,169                        |       |
| Systems-related     |       | 819                           |       |                                        |       | —                            |       | (398                       | )          | 421                          |       |
| Misc.               |       | 900                           |       | 295                                         |       |                              |       | (534                       | )          | 661                          |       |
| Total               |       | $                             | 9,010      |                                        | 1,482      |                              | 1,188      |                       | (7,545     | )                            | 4,136      |   |

 

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*              Accrualscarry forward from operating period.

The Companyexpects to make further distributions to its shareholders of its remainingcash, less any amount applied to or reserved for actual or contingentliabilities (which will be deposited in a liquidating trust).  The amounts reserved will be based on adetermination by the board of directors, derived from consultation withmanagement and outside experts, if the board of directors determines that it isadvisable to retain such experts, and a review of, among other things, ourestimated contingent liabilities and our estimated ongoing expenses, including,but not limited to, payroll, legal expenses, regulatory filings and othermiscellaneous expenses.  To the extentthat assets deposited in the liquidating trust are not applied to or reservedfor payment of the Company’s liabilities, these assets will be distributed toholders of beneficial interests in the liquidating trust at one or more laterdates.  Each shareholder will receive hisor her pro rata share of each distribution based on the number of shares heldon the record date for such distribution.

*Sale of RGII*

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

*Sale of Commercial*

On November 7,2006, the Company entered into an asset purchase agreement (the “CommercialServices Asset Purchase Agreement”) by and among TEKsystems, Inc., a Marylandcorporation (“TEKsystems”), TEKsystems EF&I Solutions, LLC, a Marylandlimited liability company, Allegis Group Canada Corporation, a Nova Scotiaunlimited liability corporation, the Company, GBS Holdings Private Limited, acorporation organized under the laws of Mauritius, CHC Healthcare Solutions,LLC, a Delaware limited liability company, and Allegis Group, Inc., a Marylandcorporation.  Pursuant to the Commercial ServicesAsset Purchase Agreement, on February 16, 2007, the Company sold to TEKsystemssubstantially all of the assets of its Commercial Services Business (as definedin the Commercial Services Asset Purchase Agreement), for a purchase price of$57 million in cash subject to a potential post-closing working capitaladjustment, estimated at $(1.9) million using data as of the date of sale (the “CommercialServices Asset Sale”).  The sale was alsosubject to an escrow of $1.7 million of the purchase price pending receipt oftax certificates in connection with the Taxation Act – Quebec; the certificateswere subsequently received and the escrow released on April 24, 2007. Assetsnot included in the Commercial Services Asset Sale included a refundable taxcredit of $8.9 million, and the unit’s operating cash as of the date ofthe sale. The Company recorded an estimated gain of $29.1 million as aresult of the sale of the Commercial Services Business. On April 17, 2007,TEKsystems submitted their revised calculation of the net working capitaladjustment, asserting a claim for $6 million payable to TEKsystems.  The Company continues to believe that itsestimate of $1.9 million is accurate, and is working with TEKsystems to resolvethe discrepancies.  In the event thatagreement cannot be reached, under the Commercial Services Asset PurchaseAgreement, the parties are required to submit the matter to an independentaccounting firm for determination.

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The CommercialServices Asset Purchase Agreement also grants the parties indemnificationrights against each other with respect to certain matters. The maximumliability of the Company for indemnification claims under the CommercialServices Asset Purchase Agreement is $10 million and is contingent uponassertion of a claim for indemnity within nine months after the closing date. OnAugust 6, 2007, TEKsystems submitted a letter to the Company, on behalf ofitself, the other purchaser parties to the Commercial Services Asset PurchaseAgreement and their affiliates, purporting to be a claim notice under theindemnification provisions of the Commercial Services Asset Purchase Agreementasserting purported indemnification claims based, variously, on the propositionthat TEKsystems and the other purchaser parties are or may be subject to claimsthat are Excluded Liabilities under the Commercial Services Asset PurchaseAgreement or arise out of alleged breaches of representations, warrantiesand/or covenants made by the Company in that agreement. The Company believesthat many of the claims set forth in the letter relate to the working capitaladjustment referred to above and overlap with or are repetitious of the issuesbetween the parties with respect to the correct amount of that adjustment. TheCompany strongly disagrees with the assertions in the letter from TEKsystemsand believes such assertions are without merit and, if TEKsystems brings suitbased on any of the matters stated therein, the Company intends to vigorouslydefend against it.

The CommercialServices Asset Sale is a taxable transaction with respect to the Company to theextent of the gain that was realized. The Company will realize gain or loss measured by the difference betweenthe proceeds received by it and its affiliates on such sale and the Company’s(or an affiliate’s) tax basis in the assets. For purposes of calculating gain or loss, the proceeds received by theCompany and its affiliates will include the cash received by them, the amountof their indebtedness that is cancelled or assumed, and any other considerationreceived by them for their assets.  It isanticipated that the Company will have sufficient current losses to offset mostof the gain expected to be realized from the Commercial Services Business assetsale for regular Federal income tax purposes and otherwise incur approximately$300 thousand in alternative minimum taxes. The Company and/or its affiliates may be subject to state income taxesto the extent that gains exceed losses for state tax law purposes, but does notanticipate that such taxes, if any, will be significant.

*Sale of Chimes*

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

The Chimes AssetPurchase Agreement also grants the parties indemnification rights against eachother with respect to certain matters. The maximum liability of the Company forindemnification claims under the Chimes Asset Purchase Agreement is $8 millionand is contingent upon assertion of a claim for indemnity within six monthsafter the closing date.

On July 23, 2007,counsel for Axium International, Inc. and Diversity MSP (collectively, “Axium”)submitted a letter to the Company on Axium’s behalf purporting to be a claimnotice under the indemnification provisions of the Chimes Asset PurchaseAgreement asserting losses and damages, including punitive damages, inunspecified amount as a result of allegedly “fraudulent conduct, intentionaland willful and/or negligent misrepresentations, concealment and breach ofrepresentations, warranty, covenants and agreements contained in the [ChimesAsset Purchase] Agreement” by the Company, Chimes and their officers anddirectors.  The Company stronglydisagrees with the assertions in the letter from Axium’s counsel and believessuch assertion are without merit. If Axium brings suit based on any of thematters stated therein, the Company intends to vigorously defend against it.

The Chimes AssetSale is a taxable transaction with respect to the Company to the extent of thegain that was realized.  The Company willrealize gain measured by the difference between the proceeds received by it andits affiliates on such sale and the Company’s (or an affiliate’s) tax basis inthe assets.  For purposes of calculatingthe gain, the proceeds received by the Company and its affiliates will includethe cash received by them, the amount of their indebtedness that is cancelledor assumed, and any other consideration received by them for their assets.  It is anticipated that the Company will havesufficient NOL carry-forwards to offset most of the gain realized from theChimes Transaction for regular Federal income tax purposes and otherwise incurapproximately $1 million in alternative minimum taxes.

The Company and/or its affiliates may be subject tostate income taxes to the extent that gains exceed losses for state tax lawpurposes, but does not anticipate that such taxes, if any, will besignificant.  Based upon current projections,such state taxes are estimated to be approximately $617 thousand after takinginto account the availability of state losses to offset the gain, and have beenaccrued.

**2.**             Contingencies and Estimates

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

9

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|                                                                                                                                                                                                                                                                                  | ** ** | **($ in thousands)** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| Sale of the Commercial Services Business Unit,  maximum contingent  liability under asset purchase agreement, upon assertion of a claim within  nine months after the closing date.                                                                                              |       | $                              | 10,000     |   |
| Sale of the Commercial Services Business Unit, claim  filed for Net  Working Capital Adjustment as provided in asset purchase agreement less  $1.9 million accrual. (See the discussion regarding the claim notice sent by  TEKsystems in “Sale of Commerical” above.) |       | $                              | 4,100      |   |
| Sale of Chimes, maximum contingent liability under  asset purchase  agreement, upon assertion of a claim within six months after the closing  date. (See the discussion regarding the claim notice sent by Axium in “Sale  of Chimes” above.)                          |       | $                              | 8,000      |   |
|                                                                                                                                                                                                                                                                             |       |                           |       |

 

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

*Legal Matters*

The Company isinvolved in various and routine litigation matters, which arise through thenormal course of business.  Managementbelieves that the resolution of these matters will not have a material adverseeffect on the final liquidation of the Company. While it firmly maintains that all pending claims are meritless, theCompany will, however, continue to expend costs as it vigorously defendsagainst these claims. (See claim notice filed by Axium in “Sale of Chimes”above)

**3.**             Initial Liquidating Distribution

On March 5, 2007,the Company announced that its Board of Directors had declared an initialliquidating distribution of $4.00 per share, or $135.3 million, to its commonshareholders and certain former option holders under the provisions of thesurrender plan as described below.  Theinitial liquidating distribution represented a partial distribution toshareholders of the proceeds received by the Company from the sales of RGII,Chimes and the Commercial Services Business Unit.  In determining the amount of the initialdistribution, the Company considered wind down and transition expenses and theexposure for contingent claims under the asset purchase agreements.  The distribution was payable on March 27,2007 to shareholders of record as of the close of business on March 16,2007.  The initial liquidatingdistribution was the first of what is expected to be a series of liquidatingdistributions pursuant to the Plan of Liquidation.

The aggregateamount of distributions to our shareholders is expected to be in the range of$4.68 to $4.81 per share of Common Stock. However, uncertainties as to the ultimate amount of our liabilities makeit impossible to predict with certainty the actual aggregate net amounts thatwill ultimately be available for distribution to shareholders or the timing ofany such distribution.  Such amount andtiming will depend on a number of factors, several of which cannot bedetermined at this time, including:

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

·      The fees and expensesincurred by us in the liquidation of our assets and the dissolution of theCompany.

As aresult, the amount of cash remaining following completion of our liquidationand dissolution could vary significantly from our current estimates.

*Election to Surrender Options*

In order tofacilitate the participation in any liquidating distributions by the holders ofCompany options, the board of directors granted to each option holder the rightto surrender their options in exchange for the right to receive the amount(s)that such option holder would have been entitled to receive in eachdistribution as if they held the number of shares of Common Stock issuable uponexercise of the surrendered options.  Theamount so distributed to each option holder will be reduced by the exerciseprice of his or her options, which will be applied to reduce the amounts thatwould otherwise be payable to the option holder until the exercise price hasbeen applied in full.  A total of1,162,820 options were surrendered under the plan.  The average exercise price for such optionswas $2.97 per share.  The initialdistribution to holders of surrendered options was $394,569.

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**4.**             Voluntary withdrawal from NASDAQ

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

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

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

**5.**             Recent Accounting Pronouncements

In June 2006, theFinancial Accounting Standards Board (FASB) issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes-an interpretation of FASB StatementNo. 109 (FIN 48), which clarifies the accounting for uncertainty in incometaxes recognized in an enterprise’s financial statements.  This Interpretation prescribes a recognitionthreshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a taxreturn.  This interpretation alsoprovides guidance on derecognition, classification, interest and penalties,accounting in interim periods, disclosure and transition.

On January 1,2007, the Company adopted the provisions of FASB Interpretation 48, Accountingfor Uncertainty in Income Taxes, in regards to our accounting and disclosure ofuncertain tax positions.  The Company hasreviewed its accounting for income taxes in light of the provisions of FIN 48and does not expect that adoption will materially affect our consolidatedfinancial statements.  Upon the adoptionof FIN 48, a tax contingency reserve of approximately $350 thousand wasestablished related to various Federal, Foreign and State income tax matters.  An additional amount was accrued for interestand penalties.

**6.**             Accounting for Stock-Based Compensation

*Accounting for Stock-Based Compensation*

The Company issuedcommon stock options to certain employees and certain of its boardmembers.  In January 2006, the Companyadopted Financial Accounting Standards Board Statement No. 123 (revised 2004) (“FAS123R”) - “Share-Based Payments”.  FAS123R requires all entities to recognize compensation expense in an amount equalto the fair value of share-based payments, such as stock options granted toemployees.  The Company elected to applyFAS 123R under a modified prospective method. Under this method, the Company is required to record compensationexpense for newly granted options and (as previous awards continue to vest) forthe unvested portion of previously granted awards that remain outstanding atthe date of adoption.  The financialstatements for prior interim periods and fiscal years do not reflect anyadjusted amounts.

No changesoccurred to the company’s outstanding stock options during the second quarter2007.  A summary of the status of all theCompany’s stock option plans as of June 30, 2007 and the changes during the sixmonths ended on that date is presented below:

11

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|                                                                                           | ** ** | **Six months ended  June 30, 2007** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                                | ** ** | ** **                          | ** ** | **Weighted** | ** ** |
| ** **                                                                                | ** ** | ** **                          | ** ** | **Average** | ** ** |
| ** **                                                                                | ** ** | **Shares**                          | ** ** | **Exercise** | ** ** |
| **Options (Six Months)**                                                                  | ** ** | **(000’s)**                    | ** ** | **Price** | ** ** |
| ** **                                                                                | ** ** | ** **                          | ** ** | ** ** | ** ** |
| Outstanding January 1, 2007                                                               |       | 1,287                               |       | $ | 3.72 |   |
| Granted                                                                                   |       | 0                                   |       | $ | 0.00 |   |
| Exercised                                                                                 |       | (99                                 | )          | $ | 3.37 |   |
| Canceled/forfeited/expired                                                                |       | (1,163                              | )          | $ | 3.76 |   |
| Outstanding June 30                                                                       |       | 25                                  |       | $ | 3.31 |   |
| Options exercisable June 30, 2007                                                         |       | 25                                  |       | $ | 3.31 |   |
| Weighted average  fair value of options granted during the six months ended June 30, 2007 |       |                                |       | $  | 0.00 |   |

 

Cash received fromoption exercise under all share-based payment arrangements for the six monthsended June 30, 2007 was $431,000.  Thereare no tax benefits realized for the tax deductions from option exercise of theshare-based payment arrangements for the same period due to the full valuationallowance position.  As the Companycurrently has a full valuation allowance with respect to its deferred taxassets, no tax benefit from the options are recognized at this time.  If the Company determines that it is morelikely than not that it will recognize a tax benefit from the exercise of theoptions, then this amount would generally reflect the overall tax benefit.

*FAS 123R Calculations*

FAS 123R providesprocedures for the estimation of employee compensation by forecasting thefuture stock price at an estimated point in time.  Following the sale of Chimes and Commercial,the Company can more accurately estimate the ending share price based on theaggregate amount of distribution range per share as well as the expected term.  Using the midpoint of the liquidating distributionrange, the FAS123R estimated compensation expense for stock option plans in2007 was estimated at $16 thousand.

As of June 30,2007, there was no total unrecognized compensation cost related to non-vestedshare-based compensation arrangements granted under these plans.

In addition to thethree share-based compensation plans detailed above, the Company alsomaintained an Employee Stock Purchase Plan (“the ESPP”).  The ESPP purchased shares quarterly at a 15%discount from the lower of the opening and closing stock prices for theperiod.  The shares were purchased at afixed discount and therefore gave rise to a liability under FAS 123R.  The Company discontinued the ESPP as of theend of fourth quarter 2006.  The lastcontributions were accepted through December 31, 2006 and the final purchasefor the ESPP was made on January 3, 2007.

**7.**             Cash

On March 5, 2007,the Company announced that its Board of Directors had declared an initialliquidating distribution of $4.00 per share, or $135.3 million, to its commonshareholders and certain former option holders under the provisions of thesurrender plan described in Note 3.  Thedistribution was payable March 27, 2007 to shareholders of record as of theclose of business on March 16, 2007.  Theinitial liquidating distribution was the first of what is expected to be aseries of liquidating distributions pursuant to the plan of liquidation anddissolution approved by the Company’s shareholders on February 14, 2007.  The liquidating distribution represents a partialdistribution to shareholders of the proceeds received by the Company from thesale of its RGII Technologies subsidiary and substantially all of the non-cashassets of its Chimes, Inc. subsidiary and its Commercial division.

**8.**             Comprehensive Income/(Loss)

Statement ofFinancial Accounting Standards No. 130, “Reporting Comprehensive Income” (FAS130), requires that items defined as other comprehensive income/ (loss), suchas foreign currency translation adjustments and unrealized gains and losses, beseparately classified in the financial statements and that the accumulatedbalance of other comprehensive income/ (loss) be reported separately fromretained earnings and additional paid-in capital in

12

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theequity section of the balance sheet.  Thecomponents of comprehensive loss for the period from January 1, 2007 toFebruary 16, 2007 and the six month period ended June 30, 2006 are indicated inthe table below.  Due to the shortenedtime period during 2007 as a result of the adoption of the liquidation basis ofaccounting effective February 17, 2007, these numbers are not comparable.
|                                      | ** ** | **Period**                                                   | ** ** |
|--------------------------------------|------------|--------------------------------------------------------------|------------|
| **(dollars in thousands)** | ** ** | **January 1 through  February 16, 2007** | ** ** | **Three months  ended  June 30, 2006** | ** ** | **Six months  ended  June 30, 2006** | ** ** |
| Comprehensive income/(loss) :        |       |                                                         |       |   |   |   |   |
| Net income/(loss)                    |       | $                                                            | 99,371     |   | $ | (14,051 | ) | $ | (13,293 | ) |
| Foreign currency adjustment          |       | 9                                                            |       | 414 |   | 507 |   |
| Comprehensive income/(loss)          |       | $                                                            | 99,380     |   | $ | (13,637 | ) | $ | (12,786 | ) |

 

The accumulatedbalances related to each component of other comprehensive income (loss) for theperiod from January 1, 2007 through February 16, 2007 and the six months endedJune 30, 2006 were as follows:
| **(dollars in thousands)**    | ** ** | **Foreign Currency   Translation** | ** ** | **Unrealized  Gain/(Loss) on  Investments** | ** ** | **Accumulated Other  Comprehensive Loss** | ** ** |
|-----------------------------------------|------------|----------------------------------------------|------------|--------------------------------------------------|------------|-----------------------------------------------------|------------|
| Balance at December 31, 2006            |       | $                                            | (652       | )                                                | $          | —                                              |       | $ | (652 | ) |
| Accumulated comprehensive income/(loss) |       | 9                                            |       | —                                           |       | 9                                                   |       |
| Balance at February 16, 2007            |       | $                                            | (643       | )                                                | $          | —                                              |       | $ | (643 | ) |
|                                    |       |                                         |       |                                             |       |                                                |       |
| Balance at December 31, 2005            |       | $                                            | (643       | )                                                | $          | —                                              |       | $ | (643 | ) |
| Accumulated comprehensive income/(loss) |       | 507                                          |       | —                                           |       | 507                                                 |       |
| Balance at June 30, 2006                |       | $                                            | (136       | )                                                | $          | —                                              |       | $ | (136 | ) |

 

**9.**             Purchase of Treasury Stock

In April of 2001,the Board of Directors approved the repurchase in the open market of up to 10%of its common shares outstanding, or approximately 3.2 million shares.  The Company did not repurchase shares of itscommon stock for the six months ended June 30, 2007 and the six months endedJune 30, 2006.  As of January 2007 allTreasury Shares were fully depleted.  Nofurther purchases are contemplated.

**10.**          Asset-Based Lending Facility

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

**11.**          Income Taxes

Similar to theprior year, the Company is not in a position to determine its projected annualeffective tax rate.  For the year endedDecember 31, 2006, the Company could not estimate the rate due to the large netoperating loss carryforward and corresponding valuation allowance.

Income tax expensehas been provided for the quarter ended June 30, 2006 at an effective tax rateof 1.06%.  As mentioned, liquidationaccounting was adopted as of February 17, 2007, and as the result ofoperational losses, there is no provision from continuing operations.  For the quarter ended June 30, 2007, taxeshave been provided as a result of the sale of the business operations.  The Company has accrued $617 thousand forstate and local taxes and $1.3 million for federal alternative minimum taxes.

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*Deferred Tax Asset andValuation Allowance*

The Companyrecords deferred tax assets for the future tax consequences attributable todifferences between the financial statement carrying amounts of existing assetsand their respective tax bases, and operating loss carryforwards.  Deferred tax assets are reduced by avaluation allowance if, based on available evidence, it is more likely than notthat some portion or all of the deferred tax assets will not be realized.  In assessing the realizability of deferredtax assets, management considers the scheduled reversal periods of the deferredtax assets, whether sustained profitability has been achieved and tax planningstrategies.

The Company hassignificant deferred tax assets resulting from net operating losscarryforwards, capital loss carryforwards, and deductible temporary differencesthat may reduce taxable income in future periods.  The Company has provided full valuationallowances on the future tax benefits related to capital losses, foreign netoperating losses, and all state net operating losses.  The Company believes that the valuationallowance is appropriate because these deferred tax assets have relativelyshort carryforward periods or relate to taxing jurisdictions which do not allowthe filing of consolidated tax returns. Also, as a result of adopting liquidation accounting, the Company doesnot expect to utilize its deferred tax asset due to the sale of the remainingoperations.

*Financial Accounting Standard 48 – Accounting forUncertainty in Income Taxes*

The Companyadopted FASB Interpretation 48, Accounting for Uncertainty in Income Taxes (“FIN48”), at the beginning of fiscal year 2007. As a result of the implementation the Company recognized a $150 thousandnet increase to reserves for uncertain tax positions.  This change has two components of whichamounts related to a re-class to a non income tax reserve balance of $200thousand for sales and use tax and a $350 thousand increase to the income taxreserve.  The $350 thousand increase wasaccounted for as an adjustment to the beginning balance of retained earnings onthe Balance Sheet.  Including thecumulative effect for the adoption of FIN 48, at the beginning of 2007, theCompany had approximately $1.3 million of total gross unrecognized taxbenefits.  Of this total, $845 thousand(net of the federal benefit on state issues) represents the amount ofunrecognized tax benefits that, if recognized, would favorably affect theeffective income tax rate in any future periods.

The Company andits subsidiaries are subject to U.S. federal income tax as well as income taxof multiple state jurisdictions.  TheCompany has substantially concluded all U.S. federal income tax matters foryears through 2002.  Substantially allmaterial state, local and foreign income tax matters have been concluded foryears through 2001.  There are nomaterial audits in process at this time.

The Company’scontinuing practice is to recognize interest and/or penalties related to incometax matters in income tax expense.  TheCompany had an immaterial amount of accrued interest and penalties during thesecond quarter of 2007 and at December 2006.

**12.**          Change of Control and other Special Chargesand Contingency Payments

The balance of the$2.3 million in change of control payments to employees was re-classed to theshort-term liability section of the 2006 balance sheet due to the futureliquidation of the Company.  These liabilitieswere paid in full as of the end of the second quarter of 2007.

**13.**          Refundable Income Tax

The QuebecGovernment through Invest Quebec has granted the Company’s Montreal OutsourcingCentre (“MOC”) a refundable tax credit on certain qualifying job positions inInformation Technology.  This program hasbeen available to MOC since 2002.  Theoutstanding receivable as of June 30, 2007 includes credits relating to 2005,2006 and the period from January 1 through February 16, 2007.  The outstanding receivable as of December 31,includes credits relating to 2005 and 2006.

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**Item 2.**

**MANAGEMENT’SDISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

For the Periods Ended June 30, 2007 and June 30, 2006

The following detaileddiscussion and analysis of the financial condition and results of operations ofComputer Horizons Corp. (the “Company”) should be read in conjunction with thefinancial statements and related notes included in the Company’s Annual Reporton Form 10-K for the year ended December 31, 2006, and the financial statementsand notes included elsewhere in this Report on Form 10-Q.

**FORWARD-LOOKINGSTATEMENTS**

This report containsforward-looking statements within the meaning of the safe harbor provisions ofthe Private Securities Litigation Reform Act of 1995.  In some cases, forward-looking statements canbe identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,”“continue” or similar expressions. Forward-looking statements also include the assumptions underlying orrelating to any of the foregoing statements. Such forward-looking statements are based upon current expectations andbeliefs and are subject to a number of factors and uncertainties that couldcause actual results to differ materially from those described in theforward-looking statements including, but not limited to, risks associated withunforeseen technical difficulties, the ability to meet customer requirements,market acceptance of service offerings, changes in technology and standards,the ability to complete cost reduction initiatives, dependencies on certaintechnologies, delays, market acceptance and competition, as well as other risksdescribed from time to time in the Company’s filings with the Securities andExchange Commission, press releases and other communications. Allforward-looking statements included in this report are based on informationavailable to the Company on the date hereof. The Company undertakes no obligation (and expressly disclaims any suchobligation) to update forward-looking statements made in this report to reflectevents or circumstances after the date of this report or to update reasons whyactual results would differ from those anticipated in such forward-lookingstatements.

**Overview**

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

The Company had revenuesfor the period from January 1, 2007 through February 16, 2007 of $29.7million.  Using the liquidation basis ofaccounting, net income/(loss) is not reported for the second quarter of2007.  Due to the shortened time periodsas a result of the liquidation basis of accounting, these numbers are notcomparable to the prior year.

As of June 30, 2007, theCompany had approximately $27.6 million in cash and cash equivalents (which nolonger includes Chimes vendor cash) and $29.6 million in working capital and nodebt outstanding.

**Background of Liquidation**

*Sale of RGII*

On September 29, 2006,the Company sold its subsidiary, RGII Technologies, Inc., to Netstar-1, Inc.for $15.3 million in cash, less an estimated net asset adjustment of $1.2million.  In addition, CHC retained allcash and cash equivalents of RGII, in the amount of $6.3 million.  The amount of the estimated net assetadjustment was subject to a final review. To the extent that the final net asset amount sold to NetStar-1 wasgreater than the estimated net asset amount at closing, the Stock PurchaseAgreement provided that the excess would be paid to CHC together with interestthereon at the prime rate from the closing date to the date of payment.  If the final net asset amount sold toNetStar-1 was less than the estimated net asset amount at closing, the StockPurchase Agreement provided that the deficiency would be paid by CHC toNetStar-1, together with interest thereon at the prime rate from the closingdate to the date of payment.  During thesecond quarter 2007, the parties reached agreement on the

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final net asset amount,resulting in a payment to the Buyer in the amount of $215 thousand.  The remainder of the amount in escrow of $785thousand was released from escrow to CHC. The sale of RGII resulted in a netbook loss on disposal of $4.8 million, including approximately $969 thousand intransaction costs as reported September 30, 2006.

*Sale of Commercial*

On November 7, 2006, theCompany entered into an asset purchase agreement (the “Commercial ServicesAsset Purchase Agreement”) by and among TEKsystems, Inc., a Marylandcorporation (“TEKsystems”), TEKsystems EF&I Solutions, LLC, a Marylandlimited liability company, Allegis Group Canada Corporation, a Nova Scotiaunlimited liability corporation, the Company, GBS Holdings Private Limited, acorporation organized under the laws of Mauritius, CHC Healthcare Solutions,LLC, a Delaware limited liability company, and Allegis Group, Inc., a Marylandcorporation.  Pursuant to the CommercialServices Asset Purchase Agreement, on February 16, 2007, the Company sold toTEKsystems substantially all of the assets of its Commercial Services Business(as defined in the Commercial Services Asset Purchase Agreement), for apurchase price of $57 million in cash subject to a potential post-closingworking capital adjustment, estimated at $(1.9) million using data as of thedate of sale (the “Commercial Services Asset Sale”).  The sale was also subject to an escrow of$1.7 million of the purchase price pending receipt of tax certificates inconnection with the Taxation Act – Quebec; the certificates were subsequentlyreceived and the escrow released on April 24, 2007.  Assets not included in the CommercialServices Asset Sale included a refundable tax credit of $8.9 million, andthe unit’s operating cash as of the date of the sale.  The Company recorded an estimated gain of$29.1 million as a result of the sale of the Commercial Services Business.  On April 17, 2007, TEKsystems submitted theirrevised calculation of the net working capital adjustment, asserting a claimfor $6 million payable to TEKsystems. The Company continues to believe that its estimate of $1.9 million isaccurate, and is working with TEKsystems to resolve the discrepancies.  In the event that agreement cannot bereached, under the Commercial Services Asset Purchase Agreement, the partiesare required to submit the matter to an independent accounting firm fordetermination.

The Commercial ServicesAsset Purchase Agreement also grants the parties indemnification rights againsteach other with respect to certain matters. The maximum liability of theCompany for indemnification claims under the Commercial Services Asset PurchaseAgreement is $10 million and is contingent upon assertion of a claim forindemnity within nine months after the closing date. On August 6, 2007,TEKsystems submitted a letter to the Company, on behalf of itself, the otherpurchaser parties to the Commercial Services Asset Purchase Agreement and theiraffiliates, purporting to be a claim notice under the indemnificationprovisions of the Commercial Services Asset Purchase Agreement assertingpurported indemnification claims based, variously, on the proposition thatTEKsystems and the other purchaser parties are or may be subject to claims thatare Excluded Liabilities under the Commercial Services Asset Purchase Agreementor arise out of alleged breaches of representations, warranties and/orcovenants made by the Company in that agreement. The Company believes that manyof the claims set forth in the letter relate to the working capital adjustmentreferred to above and overlap with or are repetitious of the issues between theparties with respect to the correct amount of that adjustment. The Companystrongly disagrees with the assertions in the letter from TEKsystems andbelieves such assertions are without merit and, if TEKsystems brings suit basedon any of the matters stated therein, the Company intends to vigorously defendagainst it.

The Commercial ServicesAsset Sale is a taxable transaction with respect to the Company to the extentof the gain that was realized.  TheCompany will realize gain or loss measured by the difference between theproceeds received by it and its affiliates on such sale and the Company’s (oran affiliate’s) tax basis in the assets. For purposes of calculating gain or loss, the proceeds received by theCompany and its affiliates will include the cash received by them, the amountof their indebtedness that is cancelled or assumed, and any other considerationreceived by them for their assets.  It isanticipated that the Company will have sufficient current losses to offset mostof the gain expected to be realized from the Commercial Services Business assetsale for regular Federal income tax purposes and otherwise incur approximately$300 thousand in alternative minimum taxes. The Company and/or its affiliates may be subject to state income taxesto the extent that gains exceed losses for state tax law purposes, but does notanticipate that such taxes, if any, will be significant.

*Sale of Chimes*

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

The Chimes Asset PurchaseAgreement also grants the parties indemnification rights against each otherwith respect to certain matters. The maximum liability of the Company forindemnification claims under the Chimes Asset Purchase Agreement is $8 millionand is contingent upon assertion of a claim for indemnity within six monthsafter the closing date.

On July 23, 2007, counselfor Axium International, Inc. and Diversity MSP (collectively, “Axium”)submitted a letter to the Company on Axium’s behalf purporting to be a claimnotice under the indemnification provisions of the Chimes Asset PurchaseAgreement asserting losses and damages, including punitive damages, inunspecified amount as a result of allegedly “fraudulent conduct, intentionaland willful and/or negligent misrepresentations, concealment and breach ofrepresentations, warranty, covenants and agreements contained in the [ChimesAsset Purchase] Agreement” by the Company, Chimes and their officers anddirectors.  The Company stronglydisagrees with the assertions in the letter from Axium’s counsel and believessuch assertions are without merit. If Axium brings suit based on any of thematters stated therein, the Company intends to vigorously defend against it.

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The Chimes Asset Sale isa taxable transaction with respect to the Company to the extent of the gainthat was realized.  The Company willrealize gain measured by the difference between the proceeds received by it andits affiliates on such sale and the Company’s (or an affiliate’s) tax basis inthe assets.  For purposes of calculatingthe gain, the proceeds received by the Company and its affiliates will includethe cash received by them, the amount of their indebtedness that is cancelledor assumed, and any other consideration received by them for their assets.  It is anticipated that the Company will havesufficient NOL carry-forwards to offset most of the gain realized from theChimes Transaction for regular Federal income tax purposes and otherwise incurapproximately $1 million in alternative minimum taxes.

TheCompany and/or its affiliates may be subject to state income taxes to theextent that gains exceed losses for state tax law purposes, but does notanticipate that such taxes, if any, will be significant.  Based upon current projections, such statetaxes are estimated to be approximately $617 thousand after taking into accountthe availability of state losses to offset the gain, and have been accrued.

***Liquidation Basis of Accounting***

The consolidatedfinancial statements for the period January 1, 2007 to February 16, 2007 andfor all periods presented for 2006 were prepared on the going concern basis ofaccounting, which contemplates realization of assets and satisfaction ofliabilities in the normal course of business. As a result of the shareholders’ approval of the Plan, the Companyadopted the liquidation basis of accounting effective February 17, 2007.  This basis of accounting is consideredappropriate when, among other things, liquidation of a company is probable andthe net realizable values of assets are reasonably determinable.  Under this basis of accounting, assets arevalued at their net realizable values and liabilities are stated at theirestimated settlement amounts.  Theconversion from the going concern to liquidation basis of accounting requiredmanagement to make significant estimates and judgments to record assets atestimated net realizable value and liabilities at estimated settlement amounts.

***Critical Accounting Policies and Estimates***

Our discussion andanalysis of financial condition and results of operations are based upon ourconsolidated financial statements, which have been prepared by the Companywithout audit in accordance with the rules and regulations of the Securitiesand Exchange Commission.  The preparationof our financial statements requires us to make estimates that affect thereported amounts of assets, liabilities, revenue and expense, and relateddisclosure of contingent assets and liabilities.  Accounting estimates are based on historicalexperience and other factors that are believed to be reasonable under thecircumstances.  However, actual resultsmay vary from these estimates under different assumptions or conditions.

Pursuant to the Plan ofLiquidation, since February 16, 2007, our operations have been limited to winddown of our business and affairs, selling our remaining assets and dischargingour known liabilities.  We plan todistribute our remaining assets to our stockholders, in accordance with thePlan of Liquidation.

***Accrued Costs of Liquidation***

Upon conversion to theliquidation basis of accounting, the Company accrued for the known costs to beincurred in liquidation, and has made subsequent adjustments and paymentsagainst these accounts, as follows:

($ in thousands)
|                      | ** ** | **As Booked  2/17/2007** | ** ** | **Recorded prior  to 2/17/2007*** | ** ** | **Adjustments to  reserves** | ** ** | **Payments  to date** | ** ** | **Balance at  6/30/07** | ** ** |
|----------------------|------------|-------------------------------|------------|---------------------------------------------|------------|-----------------------------------|------------|-----------------------|------------|------------------------------|------------|
| Lease Obligation     |       | $                             | 1,324      |                                        |       |                              | (45        | )                     | (1,279     | )                            | —     |   |
| Professional  Fees   |       | 1,927                         |       |                                        |       | 228                               |       | (1,130                | )          | 1,025                        |       |
| Legal and  Insurance |       | 560                           |       |                                        |       | 488                               |       | (188                  | )          | 861                          |       |
| Human Resources      |       | 3,480                         |       | 1,188                                       |       | 518                               |       | (4,017                | )          | 1,169                        |       |
| Systems-related      |       | 819                           |       |                                        |       | —                            |       | (398                  | )          | 421                          |       |
| Misc.                |       | 900                           |       | 295                                         |       |                              |       | (534                  | )          | 661                          |       |
| Total                |       | $                             | 9,010      |                                        | 1,482      |                              | 1,188      |                  | (7,545     | )                            | 4,136      |   |

 

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* Accruals carry forward fromoperating period.

 

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The Company will continueto incur operating costs and receive income on its investments throughout the liquidationperiod.  On a regular basis, we evaluateour assumptions, judgments and estimates that can have a significant impact onour reported net assets in liquidation based on the most recent informationavailable to us, and when necessary make changes accordingly.  Actual costs and income may differ from ourestimates, which might reduce net assets available in liquidation to bedistributed to shareholders.

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

**Recent Developments**

*Special ShareholdersMeeting*

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

*Change of Control Chargesand Special Charges*

The balance of the $2.3million in change of control payments to employees was re-classed to theshort-term liability section of the 2006 balance sheet due to the liquidationof the Company.  These liabilities werepaid in full as of the end of the second quarter of 2007.

**Evaluation of Bad DebtReserve**

Historically, the Companydetermined its allowance for doubtful accounts by considering a number offactors, including the length of time trade accounts receivable are past due,the Company’s previous loss history, the customer’s current ability to pay itsobligations to the Company and the condition of the general economy and theindustry as a whole.  The Company wroteoff accounts receivable when they became uncollectible, and paymentssubsequently received on such receivables were credited to the allowance fordoubtful accounts.

In connection with thesale of the Commercial Services Business Unit, the allowance for doubtfulaccounts was increased by $1.3 million as of February 16, 2007.  This recalculation was done utilizing theformula prescribed in the Commercial Services Asset Purchase Agreement, and notas a result of any deterioration in the Commercial accounts receivable.

**Valuation of Deferred TaxAssets**

The Company recordsdeferred tax assets for the future tax consequences attributable to differencesbetween the financial statement carrying amounts of existing assets and theirrespective tax bases, and operating loss carryforwards.  Deferred tax assets are reduced by avaluation allowance if, based on available evidence, it is more likely than notthat some portion or all of the deferred tax assets will not be realized.  In assessing the realizability of deferredtax assets, management considers the scheduled reversal periods of the deferredtax assets, whether sustained profitability has been achieved and tax planningstrategies.

The Company hassignificant deferred tax assets resulting from net operating losscarryforwards, capital loss carryforwards, and deductible temporary differencesthat may reduce taxable income in future periods.  The Company has provided full valuationallowances on the future tax benefits related to capital losses, foreign netoperating losses, and all state net operating losses.  The Company believes that the valuationallowance is appropriate because these deferred tax assets have relativelyshort carryforward periods or relate to taxing jurisdictions which do not allowthe filing of consolidated tax returns. Also, as a result of adopting liquidation accounting, the Company doesnot expect to utilize its deferred tax asset due to the sale of the remainingoperations.

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**Financial Accounting StandardInterpretation 48 – Accounting for Uncertainty in Income Taxes**

The Company adopted FASBInterpretation 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), atthe beginning of fiscal year 2007.  As aresult of the implementation the Company recognized a $150,000 net increase toreserves for uncertain tax positions. This change has two components of which amounts related to a reclass toa non income tax reserve balance of $200 thousand for sales and use tax and a$350 thousand increase to the income tax reserve.  The $350 thousand increase was accounted foras an adjustment to the beginning balance of retained earnings on the BalanceSheet.  Including the cumulative effectfor the adoption of FIN 48, at the beginning of 2007, the Company hadapproximately $1.3 million of total gross unrecognized tax benefits.  Of this total, $845 thousand (net of thefederal benefit on state issues) represents the amount of unrecognized taxbenefits that, if recognized, would favorably affect the effective income taxrate in any future periods.

The Company and itssubsidiaries are subject to U.S. federal income tax as well as income tax ofmultiple state jurisdictions.  TheCompany has substantially concluded all U.S. federal income tax matters foryears through 2002.  Substantially allmaterial state and local, and foreign income tax matters have been concludedfor years through 2001.  There are nomaterial audits in process at this time.

The Company’s continuingpractice is to recognize interest and/or penalties related to income taxmatters in income tax expense.  TheCompany had an immaterial amount of accrued interest during the second quarterof 2007 and $0 accrued for penalties at December 2006.

**Results of Operations – Periodfrom January 1, 2007 to February 16, 2007**

*Revenues*. Consolidated revenues decreased to $29.7 million in the period fromJanuary 1, 2007 to February 16, 2007, down from $107 million in the first sixmonths of 2006.  Due to the shortenedtime period during 2007 as a result of the adoption of the liquidation basis ofaccounting effective February 17, 2007, these numbers are not comparable.

*DirectCosts and Gross Margins*.  Direct costs were $23.1million and $72.6 million in the period from January 1, 2007 to February 16,2007 and the first six months of 2006, respectively.  Gross margin, revenues less direct costs,decreased to $6.6 million, or 22.2% in the period from January 1, 2007 toFebruary 16, 2007 from 32.1% in the six months ended June 30, 2006.  Due to the shortened time period during 2007as a result of the adoption of the liquidation basis of accounting effectiveFebruary 17, 2007, these numbers are not comparable.

*Costsand Expenses*.  Selling, general and administrative expenseswere $10.8 million in the period from January 1, 2007 to February 16, 2007,compared to $34 million in the first six months of 2006.  As a percentage of revenue, the Company’sSG&A expenses were 36.3% in the period from January 1, 2007 to February 16,2007, as compared to 32.1% in the first six months of 2006.  Due to the shortened time period during 2007as a result of the adoption of the liquidation basis of accounting effectiveFebruary 17, 2007, these numbers are not comparable.

*Income/ (Loss) from Continuing Operations*.  The Company’snet loss from continuing operations totaled $(4.2) million in the period fromJanuary 1, 2007 to February 16, 2007. This compares to net loss from continuing operations of $230 thousand inthe first six months of 2006.  Due to theshortened time period during 2007 as a result of the adoption of theliquidation basis of accounting effective February 17, 2007, these numbers arenot comparable.

*OtherIncome/(Expense)*.  Other income (primarily net interest income)totaled approximately $880 thousand in the period from January 1, 2007 toFebruary 16, 2007, compared to approximately $780 thousand in the first sixmonths of 2006.  Due to the shortenedtime period during 2007 as a result of the adoption of the liquidation basis ofaccounting effective February 17, 2007, these numbers are not comparable.

*Gain onSale of Commercial Services Business Unit*:  Pursuant tothe Commercial Services Asset Purchase Agreement, on February 16, 2007, theCompany sold to TEKsystems substantially all of the assets of its CommercialServices Business (as defined in the Commercial Services Asset PurchaseAgreement), for a purchase price of $57 million in cash subject to a potentialpost-closing working capital adjustment, estimated at $(1.9) million using dataas of the date of sale.  Assets notincluded in the sale of the Commercial Services Business included a refundabletax credit of $8.9 million, and the unit’s operating cash as of the date of thesale.  The Company recorded an estimatedgain of $29.1 million as a result of the sale of the Commercial ServicesBusiness.

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

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*Provisionfor Income Taxes*:  Similar to the prior year, the Company is notin a position to determine its projected annual effective tax rate.  For the year ended December 31, 2006, theCompany could not estimate the rate due to the large net operating losscarryforward and corresponding valuation allowance.  For all periods after February 16, 2007, theCompany has adopted liquidation accounting.

Income tax expense hasbeen provided for the quarter ended June 30, 2006 at an effective tax rate of1.06%.  As mentioned, for the quarterended March 31, 2007, liquidation accounting has been adopted and as the resultof operational losses, there is no provision from continuing operations.  Taxes have been provided as a result of thesale of the business operations.  TheCompany has accrued $617 thousand for state and local taxes and $1.3 millionfor federal alternative minimum taxes.

*NetIncome*.  The net income for the period from January 1,2007 to February 16, 2007 was $99.4 million, or $2.94 per basic and dilutedshare.

**Liquidity and CapitalResources**

On February 16, 2007,cash was received in the amount of $80 million for the sale of Chimes and $57million for the sale of the Commercial Business Services Unit.  On March 5, 2007, the Company announced thatits Board of Directors had declared an initial liquidating distribution of$4.00 per share, or $135.3 million, to its common shareholders and certainformer option holders under the provisions of the surrender plan described inNote 3 to the Company’s Financial Statements included in this Report.  The liquidating distribution represented apartial distribution to shareholders of the proceeds received by the companyfrom the sales of RGII, Chimes and the Commercial Services Business Unit.  In determining the amount of the initialdistribution, the Company considered wind down and transition expenses and theexposure for contingent claims under the asset purchase agreements.  The distribution was payable on March 27,2007 to shareholders of record as of the close of business on March 16,2007.  The initial liquidatingdistribution was the first of what is expected to be a series of liquidatingdistributions pursuant to the Plan of Liquidation.

The aggregate amount ofdistributions to our shareholders is expected to be in the range of $4.68 to$4.81 per share of Common Stock. However, uncertainties as to the ultimate amount of our liabilities makeit impossible to predict with certainty the actual aggregate net amounts that willultimately be available for distribution to shareholders or the timing of anysuch distribution.  Such amount andtiming will depend on a number of factors, several of which cannot bedetermined at this time, including:

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

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

As a result, the amountof cash remaining following completion of our liquidation and dissolution couldvary significantly from our current estimates.

As of June 30, 2007, theCompany had approximately $29.6 million in working capital, of which $27.6million was cash and cash equivalents. Included in cash and cash equivalents at December 31, 2006 wasrestricted cash of $1.2 million.  Restrictedcash pertains to funds received by Chimes and held in client-specific bankaccounts to be used to make payments to vendors of the applicable client.  Cash and cash equivalents at December 31,2006 also included approximately $23.3 million of cash which was fullydisbursed to Chimes vendors in accordance with the client payment terms.

At June 30, 2007, theonly receivables remaining on the Company’s books relate to transition servicesprovided to the purchasers of Chimes and the Commercial Services Business Unit.

The balance of the $2.3million in change of control payments to employees was re-classed to theshort-term liability section of the 2006 balance sheet due to the liquidationof the Company.  These liabilities were paidin full as of the end of the second quarter of 2007.

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

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

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

**Recent AccountingPronouncements**

In June 2006, theFinancial Accounting Standards Board (FASB) issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes-an interpretation of FASB StatementNo. 109 (FIN 48), which clarifies the accounting for uncertainty in incometaxes recognized in an enterprise’s financial statements.  This Interpretation prescribes a recognitionthreshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a taxreturn.  This interpretation alsoprovides guidance on derecognition, classification, interest and penalties,accounting in interim periods, disclosure and transition.

On January 1, 2007, theCompany adopted the provisions of FASB Interpretation 48, Accounting forUncertainty in Income Taxes, in regards to our accounting and disclosure ofuncertain tax positions.  The Company hasreviewed its accounting for income taxes in light of the provisions of FIN 48and does not expect that adoption will materially affect our consolidatedfinancial statements.  Upon the adoptionof FIN 48, a tax contingency reserve of approximately $350 thousand wasestablished related to various Federal, Foreign and State income tax matters.

Item 3.    Quantitative and Qualitative Disclosures aboutMarket Risk

The Company does notordinarily hold market risk sensitive instruments for trading purposes.  However, the Company does recognize marketrisk from interest rate changes.  The Companyhas financial instruments that are subject to interest rate risk.  However, at June 30, 2007, the Company wasdebt-free.  Historically, the Company hasnot experienced material gains or losses due to interest rate changes.  However, a reduction in interest rates wouldreduce the interest income received by the Company on the cash it holds.

Item 4.    Controls and Procedures

**Disclosure Controls andProcedures**

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

**Internal Controls overFinancial Reporting**

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

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PART II - Other Information

Item 1a.  RiskFactors

*Forwardlooking statements are subject to various uncertainties.*

Statements made in thisReport regarding the payment of additional liquidating distributions areforward-looking statements.  Suchforward- looking statements are subject to a number of risks and uncertainties,and there can be no assurance that the expectations reflected in thosestatements will be realized or achieved. Such risks and uncertainties include, without limitation, possiblecontingent liabilities and post-closing indemnification and other obligationsarising from the sale of the Company’s businesses; and risks associated withthe liquidation and dissolution of the Company, including, without limitation,settlement of the Company’s liabilities and obligations, costs incurred inconnection with the carrying out of the plan of liquidation and dissolution,the amount of income earned on the Company’s cash and cash equivalents andshort-term investments during the liquidation period, and the actual timing ofliquidating distributions.

*Wehave indemnification obligations under each of the Chimes Asset PurchaseAgreement and the Commercial Services Asset Purchase Agreement*

Under the Chimes AssetPurchase Agreement, we have agreed to indemnify Axium, Diversity MSP and theiraffiliates and other related parties among other things, any losses incurred bythem arising out of our breach of the Chimes Asset Purchase Agreement, subjectto certain dollar and time limitations.

Under the Commercial ServicesAsset Purchase Agreement, we have agreed to indemnify TEKsystems and itsaffiliates for, among other things, any losses incurred by them arising out ofour breach of the Commercial Services Asset Purchase Agreement, subject tocertain dollar and time limitations.

*Our Board will need tomake provision for the satisfaction of all of our known and unknownliabilities, which could substantially delay or limit our ability to makedistribution in full to shareholders.*

Our Board of Directorswill be required to make adequate provision to satisfy our liabilities,including known and unknown claims against us, before authorizing any furtherdistribution to shareholders.  Theprocess of accounting for our liabilities, including those that are presentlyunknown, may involve difficult valuation decisions, which could adverselyimpact the Board’s ability to make distribution in full in a timelymanner.  Substantial time may be requiredfor us to determine the extent of our liabilities to known third partycreditors and claimants and for us to settle or judicially resolve any claimsthat are contested.  Furthermore,pursuant to the New York Business Corporation Law, we may be subject to claimsbeing commenced against us for liabilities unknown to us for a period of timeafter dissolution.  Assuming we havesufficient remaining cash, a period of time must elapse after dissolutionbefore we would be able to make any distribution in full to shareholders of ourassets remaining after satisfying or providing for all our liabilities andobligations, and such distribution may likely be made in more than oneinstallment over an extended period of time.

*If our contingentreserves are insufficient to satisfy our liabilities, creditors could assertclaims against us seeking to prevent distributions or against our shareholdersto the extent of distributions received.*

If a court holds at anytime that we have failed to make adequate provision for our expenses andliabilities or if the amount ultimately required to be paid in respect of suchliabilities exceeds the amount available from the contingency reserve, ourcreditors could seek an injunction against the making of distributions on thegrounds that the amounts to be distributed are needed to provide for thepayment of our expenses and liabilities. Any such action could delay or substantially diminish the amount of anycash distributions to shareholders.

If we fail to create anadequate contingency reserve for payment of our expenses and liabilities,creditors could assert claims against each shareholder receiving a distributionfor the payment of any shortfall, up to the amounts previously received by theshareholder in distributions from us.

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Item 6.    Exhibits
| Exhibits    | ** **                                                                                                                    |
|-------------|-------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                          |
| 31.1 – | CEO Certification  required by Rule 13a-15(e)/15d-15(e) under the Securities Exchange Act of  1934.                           |
|        |                                                                                                                          |
| 31.2 – | CFO Certification  required by Rule 13a-15(e)/15d-15(e) under the Securities Exchange Act of  1934.                           |
|        |                                                                                                                          |
| 32.1 – | CEO Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. |
|        |                                                                                                                          |
| 32.2 – | CFO Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. |

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Signatures

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.
|        |           |   |   | COMPUTER HORIZONS CORP.                      |
|--------|----------------|--------|--------|----------------------------------------------|
|   |           |   |   | (Registrant)                                 |
|   |           |   |   |                                         |
| DATE:  | August 8, 2007 |   |   | /s/ Dennis Conroy                            |
|   |           |   |   | Dennis Conroy, President and CEO             |
|   |           |   |   | (Principal Executive Officer)                |
|   |           |   |   |                                         |
|   |           |   |   |                                         |
| DATE:  | August 8, 2007 |   |   | /s/ Barbara Moss                             |
|   |           |   |   | Barbara Moss,                                |
|   |           |   |   | Chief Financial Officer                      |
|   |           |   |   | (Principal Financial and Accounting Officer) |

 

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