UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q





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





For
the quarterly period ended March 31, 2010





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





Commission
file number 000-30734





CORPORATE
RESOURCE SERVICES, INC.


(Exact
name of Registrant as specified in its charter)





Delaware
            
            80-0551965(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)




160
Broadway, 11th
Floor


New
York,  New York 10038


(Address
of principal executive offices)





(646)
443-2380


(Registrant’s
telephone number, including area code)





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





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes
ý  No
o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T  during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). o
Yes   o  No





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.





Large
      accelerated Filer  o
            Accelerated
      filer  oNon
      - accelerated filer  o
            Smaller
      reporting company  x





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


Yes
o  No
ý





The
number of shares of Common Stock, $.0001 par value, outstanding as of May 4,
2010 was 33,596,000.













CORPORATE
RESOURCE SERVICES, INC.


INDEX





PART
I – FINANCIAL INFORMATION





Item
      1. Financial Statements (Unaudited)Condensed
      Consolidated Balance Sheets as of March 31, 2010 (unaudited) and September
      30, 2009
            
            2Condensed
      Consolidated Statements of Operations for the Three and Six Months Ended
      March 31, 2010 and
      2009(unaudited)
            
            3Condensed
      Consolidated Statement of Stockholders’ Equity for the Six Months Ended
      March 31, 2010 (unaudited)
            
            4Condensed
      Consolidated Statements of Cash Flows for the Six Months Ended March 31,
      2010 and 2009 (unaudited)
            
            5Notes
      to Condensed Consolidated Financial Statements
            
            6Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
            
            13Item
      3. Quantitative and Qualitative Disclosures about Market
    Risks
            
            20Item
      4. Controls and Procedures
            
            21PART
      II – OTHER INFORMATIONItem
      1. Legal Proceedings
            
            21Item
      1A. Risk Factors
            
            21Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
            
            21Item
      3. Defaults Upon Senior Securities
            
            21Item
      4. (Removed and Reserved)
            
            21Item
      5. Other Information
            
            21Item
      6. Exhibits
            
            22Signatures
            
            23







CORPORATE
RESOURCE SERVICES, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS




March
      31,
            
            
            September
      30,2010
            
            
            2009(unaudited)ASSETSCurrent
      assets:Cash
            
            $
            81,000
            
            
            $
            63,000Accounts
      receivable – less allowance for doubtful accounts of $323,000
      and $188,000, respectively
            
            
            1,017,000
            
            
            
            996,000Due
      from financial institution
            
            
            468,000
            
            
            
            130,000Unbilled
      receivables
            
            
            687,000
            
            
            
            783,000Prepaid
      expenses
            
            
            112,000
            
            
            
            299,000Due
      from related party
            
            
            21,000
            
            
            
            21,000Total
      current assets
            
            
            2,386,000
            
            
            
            2,292,000Property
      and equipment, net
            
            
            115,000
            
            
            
            141,000Other
      assets
            
            
            21,000
            
            
            
            21,000Intangible
      assets, net
            
            
            820,000
            
            
            
            944,000Goodwill
            
            
            2,327,000
            
            
            
            2,947,000Total
      assets
            
            $
            5,669,000
            
            
            $
            6,345,000LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued liabilities
            
            $
            2,151,000
            
            
            $
            1,579,000Accrued
      wages and related obligations-due to related party
            
            
            1,726,000
            
            
            
            1,801,000Accrued
      wages and related obligations
            
            
            29,000
            
            
            
            35,000Current
      portion of long-term debt
            
            
            50,000
            
            
            
            454,000Current
      portion of related party long-term debt
            
            
            259,000
            
            
            
            811,000Due
      to related party
            
            
            808,000
            
            
            
            344,000Total
      current liabilities
            
            
            5,023,000
            
            
            
            5,024,000Long
      term debt, net of current portion
            
            
            -
            
            
            
            190,000Related
      party long-term debt, net of current portion
            
            
            -
            
            
            
            580,000Total
      liabilities
            
            
            5,023,000
            
            
            
            5,794,000Commitments
      and contingenciesStockholders’
      equity:Preferred
      stock, $0.0001 par value, 5,000,000 shares authorized; zero shares issued
      and outstanding
            
            
            -
            
            
            
            -Common
      stock, $0.0001 par value, 95,000,000 shares authorized; 29,339,000 and
      23,689,000 shares issued and outstanding as of March 31, 2010 and
      September 30, 2009, respectively
            
            
            3,000
            
            
            
            2,000Additional
      paid-in capital
            
            
            6,081,000
            
            
            
            3,397,000Accumulated
      deficit
            
            
            (5,438,000
            )
            
            
            (2,848,000
            )Total
      stockholders’ equity
            
            
            646,000
            
            
            
            551,000Total
      liabilities and stockholders’ equity
            
            $
            5,669,000
            
            
            $
            6,345,000


See accompanying notes to condensed
consolidated financial statements.




2





CORPORATE
RESOURCE SERVICES, INC.





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(unaudited)





Three
      Months
            
            
            Six
      MonthsEnded
            
            
            EndedMarch
      31,
              2010
            
            
            March
      31,
              2009
            
            
            March
      31,
              2010
            
            
            March
      31,
              2009Revenue
            
            $
            13,522,000
            
            
            $
            12,935,000
            
            
            $
            27,636,000
            
            
            $
            29,590,000Direct
      cost of producing revenues-purchased from related party
            
            
            12,226,000
            
            
            
            11,232,000
            
            
            
            24,913,000
            
            
            
            25,664,000Gross
      profit
            
            
            1,296,000
            
            
            
            1,703,000
            
            
            
            2,723,000
            
            
            
            3,926,000Selling,
      general and administrative expenses *
            
            
            1,701,000
            
            
            
            1,818,000
            
            
            
            3,562,000
            
            
            
            3,583,000Depreciation
      and amortization
            
            
            82,000
            
            
            
            103,000
            
            
            
            166,000
            
            
            
            215,000(Loss)
      income from continuing operations
            
            
            (487,000
            )
            
            
            (218,000
            )
            
            
            (1,005,000
            )
            
            
            128,000Interest
      expense
            
            
            66,000
            
            
            
            107,000
            
            
            
            162,000
            
            
            
            250,000Loss
      on debt extinguishments
            
            
            922,000
            
            
            
            -
            
            
            
            1,423,000
            
            
            
            -Net
      loss from continuing operations
            
            
            (1,475,000
            )
            
            
            (325,000
            )
            
            
            (2,590,000
            )
            
            
            (122,000
            )Income
      (loss) from discontinued operations
            
            
            -
            
            
            
            (186,000
            )
            
            
            -
            
            
            
            (371,000
            )Net
      loss
            
            $
            (1,475,000
            )
            
            $
            (511,000
            )
            
            $
            (2,590,000
            )
            
            $
            (493,000
            )Net
      loss per share from continuing operations:Basic
            
            $
            (0.06
            )
            
            $
            (0.01
            )
            
            $
            (0.10
            )
            
            $
            (0.01
            )Diluted
            
            $
            (0.06
            )
            
            $
            (0.01
            )
            
            $
            (0.10
            )
            
            $
            (0.01
            )Net
      income (loss) per share from discontinued operations:Basic
            
            $
            0.00
            
            
            $
            (0.01
            )
            
            $
            0.00
            
            
            $
            (0.02
            )Diluted
            
            $
            0.00
            
            
            $
            (0.01
            )
            
            $
            0.00
            
            
            $
            (0.02
            )Total
      net loss per share:Basic
            
            $
            (0.06
            )
            
            $
            (0.02
            )
            
            $
            (0.10
            )
            
            $
            (0.02
            )Diluted
            
            $
            (0.06
            )
            
            $
            (0.02
            )
            
            $
            (0.10
            )
            
            $
            (0.02
            )Weighted
      average shares outstanding:Basic
            
            
            26,725,000
            
            
            
            22,445,000
            
            
            
            24,746,000
            
            
            
            22,297,000Diluted
            
            
            26,725,000
            
            
            
            22,445,000
            
            
            
            24,746,000
            
            
            
            22,297,000







*
            Includes
      $35,000 and $75,000 for the three and six months ended March 31, 2010,
      respectively and $41,000 and $82,000 for the three and six months ended
      March 31, 2009, respectively, in non-cash charges for stock based
      compensation.





See
accompanying notes to condensed consolidated financial statements.




3





CORPORATE
RESOURCE SERVICES, INC.





CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY


(unaudited)





Six
      Months EndedMarch
      31, 2010Common
      stock – shares:Balance
      at beginning of period
            
            
            23,689,000Forfeitures
      of restricted stock grants
            
            
            (350,000)Debt
      conversions to unregistered common stock
            
            
            6,000,000Balance
      at end of period
            
            
            29,339,000Common
      stock – par value:Balance
      at beginning of period
            
            $
            2,000Debt
      conversions to unregistered common stock
            
            
            1,000Balance
      at end of period
            
            $
            3,000Additional
      paid-in capital:Balance
      at beginning of period
            
            $
            3,397,000Debt
      conversions to unregistered common stock
            
            
            2,609,000Stock-based
      compensation relating to unregistered common stock
            
            
            75,000Balance
      at end of period
            
            $
            6,081,000Accumulated
      deficit:Balance
      at beginning of period
            
            $
            (2,848,000
            )Net
      loss
            
            
            (2,590,000
            )Balance
      at end of period
            
            $
            (5,438,000
            )Total
      stockholders’ equity
            
            $
            646,000





See
accompanying notes to condensed consolidated financial statements.




4





CORPORATE
RESOURCE SERVICES, INC.





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited)




Six
      Months EndedMarch
      31,2010
            
            
            March
      31,2009Cash
      flows from operating activities:Net
      loss
            
            $
            (2,590,000
            )
            
            $
            (493,000
            )Less:
      net income (loss) from discontinued operations
            
            
            -
            
            
            
            (371,000
            )Net
      loss from continuing operations
            
            $
            (2,590,000
            )
            
            $
            (122,000
            )Adjustments
      to reconcile net loss to cash provided by operating
      activities:Depreciation
      and amortization
            
            
            166,000
            
            
            
            215,000Stock-based
      compensation
            
            
            75,000
            
            
            
            82,000Bad
      debt expense
            
            
            135,000
            
            
            
            76,000Loss
      on debt extinguishments
            
            
            1,423,000
            
            
            
            -Changes
      in operating assets and liabilities:Trade
      accounts receivable including unbilled receivables
            
            
            (103,000
            )
            
            
            623,000Due
      from financial institution
            
            
            (338,000
            )
            
            
            (75,000
            )Prepaid
      expenses
            
            
            187,000
            
            
            
            83,000Due
      to (from) related party
            
            
            464,000
            
            
            
            193,000Other
      assets
            
            
            -
            
            
            
            1,000Accounts
      payable and accrued liabilities-due to related parties
            
            
            (75,000
            )
            
            
            (606,000
            )Accounts
      payable and accrued liabilities-due to unrelated parties
            
            
            711,000
            
            
            
            172,000Net
      cash provided by operating activities – continuing
    operations
            
            
            55,000
            
            
            
            642,000Net
      cash used in operating activities – discontinued
operations
            
            
            (17,000
            )
            
            
            (399,000
            )Net
      cash provided by operating activities
            
            
            38,000
            
            
            
            243,000Cash
      flows from investing activities:Purchase
      of property and equipment
            
            
            (16,000
            )
            
            
            (8,000
            )Net
      cash used in investing activities – continuing operations
            
            
            (16,000
            )
            
            
            (8,000
            )Net
      cash used in investing activities – discontinued
operations
            
            
            -
            
            
            
            -Net
      cash used in investing activities
            
            
            (16,000
            )
            
            
            (8,000
            )Cash
      flows from financing activities:Principal
      payments on long-term debt
            
            
            (4,000
            )
            
            
            (66,000
            )Principal
      payments on long-term debt – related parties
            
            
            -
            
            
            
            (207,000
            )Net
      cash used in financing activities – continuing operations
            
            
            (4,000
            )
            
            
            (273,000
            )Net
      cash used in financing activities – discontinued
operations
            
            
            -
            
            
            
            -Net
      cash used in financing activities
            
            
            (4,000
            )
            
            
            (273,000
            )Change
      in cash
            
            
            18,000
            
            
            
            (38,000
            )Cash
      at beginning of period
            
            
            63,000
            
            
            
            69,000Cash
      at end of period
            
            $
            81,000
            
            
            $
            31,000


See accompanying notes to condensed
consolidated financial statements.


5


CORPORATE
RESOURCE SERVICES, INC.





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(unaudited)





1.
Description of the Company and its Business





Holding
Company Reorganization





Corporate
Resource Services, Inc., a Delaware corporation (the “Company”), was formed on
December 15, 2009 for the purpose of acquiring and managing staffing
companies.  On February 23, 2010, the Company completed a holding
company reorganization whereby Accountabilities, Inc., a Delaware corporation
(“Accountabilities”), which immediately prior to the reorganization was the
Company’s parent company, became a wholly-owned subsidiary of the
Company.





As a
result of the reorganization, the former holders of Accountabilities’ common
stock now own shares of the Company’s common stock, par value $0.0001, and each
restricted share of Accountabilities’ common stock issued and outstanding under
the Accountabilities, Inc. Equity Incentive Plan immediately prior to the
effective time of the reorganization was automatically converted into a
similarly restricted share of the Company’s common stock.  The
consolidated assets, liabilities and stockholders’ equity of the Company remains
the same as the consolidated assets, liabilities and stockholders’ equity of
Accountabilities immediately prior to the reorganization.





References
in these Notes to Condensed Consolidated Financial Statements to the “Company”
refer, for periods prior to February 23, 2010, to Accountabilities, and, for the
periods after the reorganization, to Corporate Resource Services, Inc., in each
case including its consolidated subsidiaries, unless otherwise indicated or the
context otherwise requires.





Nature
of Operations





Through
its two wholly-owned subsidiaries, Accountabilities and Corporate Resource
Development Inc. (“CRD”), a newly formed wholly-owned subsidiary of the Company,
the Company is a national provider of diversified staffing, recruiting and
consulting services, including temporary staffing services, with a focus on
light industrial services and clerical and administrative
support.  The Company provides its services across a variety of
industries and to a diverse range of clients ranging from sole proprietorships
to Fortune 1000 companies.  The Company conducts all of its business
in the United States through the operation of 16 staffing and recruiting
offices.





2.
Summary of Significant Accounting Policies





Interim
Financial Information





The
financial information as of and for the three and six months ended March 31,
2010 and 2009 is unaudited, but includes all adjustments (consisting only of
normal recurring adjustments) that the Company considers necessary for a fair
presentation of its financial position at such dates and the operating results
and cash flows for those periods.  The year-end balance sheet data was
derived from audited financial statements, and certain information and note
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission (the “SEC”); however, the Company believes the disclosures
made are adequate to make the information presented not misleading in any
material respect.





The
results of operations for the interim periods presented are not necessarily
indicative of the results of operations to be expected for the full fiscal
year.  These condensed interim financial statements should be read in
conjunction with the audited financial statements and notes thereto for the year
ended September 30, 2009, which are included in Accountabilities’ Form 10-K as
filed with the SEC on December 28, 2009.  Certain reclassifications
have been made to the accompanying condensed consolidated financial statements
to conform to the current period’s presentation.





Use
of Estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period.  Although management believes these estimates and assumptions
are adequate, actual results could differ from the estimates and assumptions
used.





6





3. 
Discontinued Operations





CPA
Partner on Premise Program (“CPA POP”):





In April
2009, the Company discontinued its CPA POP service offering through which it had
provided staffing and recruiting services for the placement of finance and
accounting personnel through sales and marketing agreements with ten public
accounting firms. The Company has reported the results of the CPA POP as
discontinued operations in the accompanying statements of
operations.  All prior period information has been reclassified to be
consistent with the current period presentation.





Direct
Professional Services:





In the
first quarter of fiscal 2010, in an effort to focus management’s efforts and use
the Company’s capital more directly on its light industrial and clerical and
administrative service offerings, the Company discontinued the portion of the
Direct Professional Services offering associated with the provision of
accounting and finance services offered directly to
clients.  Accordingly, the Company has reported the operations
associated with the direct provision of accounting and finance services as
discontinued operations in the accompanying statements of
operations.  All prior period information has been reclassified to be
consistent with the current period presentation.





4.
Net Loss per Share





The
Company presents both basic and diluted earnings per share amounts
(“EPS”).  Basic EPS is calculated by dividing net (loss) income by the
weighted average number of common shares outstanding during the
period.  Diluted EPS considers the potential dilution that could occur
if securities or other contracts to issue common stock were exercised or could
otherwise cause the issuance of common stock.  Diluted EPS per share
reflects the potential dilution that could occur if securities or other
contracts to issue common stock, such as options, convertible notes and
convertible preferred stock, were exercised or converted into common stock or
could otherwise cause the issuance of common stock that then shared in earnings
(loss).  Such potential additional common stock is included in the
computation of diluted earnings per share.  Diluted loss per share is
not computed because any potential additional common stock would reduce the
reported loss per share and therefore have an antidilutive
effect.  The weighted-average number of common shares outstanding does
not include the anti-dilutive effect of approximately 592,000 common stock
equivalent shares for the three and six months ended March 31, 2010, and 688,000
common stock equivalent shares for the three and six months ended March 31,
2009, representing warrants, convertible debt and non-vested
shares.





5.
Intangible Assets and Goodwill





The
following table provides a detailed presentation of the Company’s intangible
assets, estimated lives, related accumulated amortization and
goodwill:





As
      of March 31, 2010
            
            
            As
      of September 30, 2009Accumulated
            
            
            
            
            
            
            
            
            AccumulatedGross
            
            
            Amortization
            
            
            Net
            
            
            Gross
            
            
            Amortization
            
            
            NetCustomer
      lists and relationships
              (7
      years)
            
            $
            1,821,000
            
            
            $
            (1,001,000
            )
            
            $
            820,000
            
            
            $
            1,821,000
            
            
            $
            (888,000
            )
            
            $
            933,000Non-competition
      agreements
              (3
      years)
            
            
            111,000
            
            
            
            (111,000
            )
            
            
            -
            
            
            
            111,000
            
            
            
            (100,000
            )
            
            
            11,000Total
            
            $
            1,932,000
            
            
            $
            (1,112,000
            )
            
            $
            820,000
            
            
            $
            1,932,000
            
            
            $
            (988,000
            )
            
            $
            944,000Goodwill
      (indefinite life)
            
            $
            2,327,000
            
            
            
            
            
            
            $
            2,327,000
            
            
            $
            2,947,000
            
            
            
            
            
            
            $
            2,947,000





The
Company recorded amortization expense for the six months ended March 31, 2010
and 2009 of $124,000 and $153,000, respectively.  Estimated intangible
asset amortization expense (based on existing intangible assets) for the
remaining six months of fiscal 2010 is $113,000 and for the fiscal years ending
September 30, 2011, 2012, 2013 and 2014 is $227,000, $227,000, $183,000 and
$69,000, respectively.





On
February 5, 2010, the Company entered into a Settlement and Release Agreement
with the former owner of a business acquired by the Company in 2007, ReStaff
Services, Inc. (“ReStaff”), whereby all obligations owed by the Company to
ReStaff, totaling $1,165,000, were released in exchange for a series of payments
totaling $545,000.  This debt restructuring was accounted for as a
reduction in the purchase price of ReStaff, with a corresponding adjustment to
goodwill.  Subsequently, the restructured note was settled in exchange
for the issuance of shares of the Company’s common stock.


7





Goodwill
balances and the adjustment made during the second quarter of fiscal 2010 are as
follows:





Goodwill
      as of September 30, 2009
            
            $
            2,947,000ReStaff
      purchase price adjustment
            
            
            (620,000
            )Goodwill
      as of March 31, 2010
            
            $
            2,327,000





6.
Related Parties





The
Company has entered into a professional services arrangement with Tri-State
Employment Services, Inc. (“TSE”), a professional employer organization (“PEO”)
that is also the beneficial owner, with its affiliates, of approximately 58% of
the Company’s outstanding common stock.  TSE, as a PEO, is a single
source provider of integrated services that enable business owners to
cost-effectively outsource functions such as human resource support, employee
benefits, payroll and workers’ compensation and other strategic
services.  TSE does this by becoming an employer of record for tax and
insurance purposes.  Fees for this arrangement charged by TSE to the
Company are comparable to the fees TSE charges its other
customers.  While amounts payable to TSE are part of the Company’s
costs of doing business, the Company sets the rates and prices that it charges
its end user customers (i.e. those who
require temporary services workers).  The Company has this PEO
relationship with employees associated with all of its operations.  As
shown on the accompanying balance sheet, amounts accrued for wages and related
charges at March 31, 2010 and 2009 are $1,726,000 and $1,801,000,
respectively.





On
February 22, 2010, TSE agreed to assume the obligation to make a series of
payments totaling $545,000 from the Company in exchange for the issuance of
3,666,667 shares of the Company’s common stock, as more fully described
below.  On May 3, 2010, CRD entered into an account purchase agreement
with TSE, as more fully described below.





The
caption “Due to related party” on the accompanying condensed consolidated
balance sheets primarily consists of $749,000 advanced to the Company by TSE,
and $59,000 due to a former officer of the Company for compensation related to
the discontinued accounting operations.





7.
Long-Term Debt





Long-term
debt at March 31, 2010 and September 30, 2009 is summarized as
follows:




March
      31,
            
            
            September
      30,2010
            
            
            2009Long-term
      debt16.25%
      subordinated note (i)
            
            
            -
            
            
            $
            102,0003%
      convertible subordinated note (ii)
            
            
            -
            
            
            
            408,00018%
      unsecured note (iii)
            
            
            -
            
            
            
            80,000Long
      term capitalized lease obligation (viii)
            
            
            -
            
            
            
            4,000Other
      debt
            
            $
            50,000
            
            
            
            50,000Total
            
            
            50,000
            
            
            
            644,000Less
      current maturities
            
            
            50,000
            
            
            
            454,000Non-current
      portion
            
            
            -
            
            
            
            190,000Related
      party long-term debt13%
      unsecured demand note (iv)
            
            
            104,000
            
            
            
            104,00018%
      unsecured convertible note (v)
            
            
            100,000
            
            
            
            100,000Demand
      loans (vi)
            
            
            55,000
            
            
            
            131,0006%
      unsecured note (vii)
            
            
            -
            
            
            
            1,056,000Total
            
            
            259,000
            
            
            
            1,391,000Less
      current maturities
            
            
            259,000
            
            
            
            811,000Non-current
      portion
            
            
            -
            
            
            
            580,000Total
      long-term debt
            
            
            309,000
            
            
            
            2,035,000Less
      current maturities
            
            
            309,000
            
            
            
            1,265,000Total
      non-current portion
            
            $
            -
            
            
            $
            770,000








(i)
            A
      $175,000 subordinated note was issued March 31, 2006, originally due
      January 30, 2007 and originally having an annual interest rate of 8% with
      principal and interest payable in equal monthly installments of
      $18,150.  The note was secured by office equipment and other
      fixed assets.  Due to the failure to make timely payments under
      the terms of the note, the holder declared the note in technical default,
      began assessing interest at a higher rate, imposed late charges and has
      since entered into forbearance agreements under which defaults have been
      waived and forbearance terms extended.  On December 29, 2009,
      the obligations under this note were transferred by the holder to TSE and
      then settled in full in exchange for shares of the Company’s common stock,
      as further described below.




8




(ii)
            A
      $675,000 convertible subordinated note was issued March 31, 2006, bearing
      interest at an annual rate of 3% and originally due on March 31,
      2012.  The note was secured by office equipment and other fixed
      assets.  On December 29, 2009, the obligations under this note
      were transferred by the holder to TSE and then settled in full in exchange
      for shares of the Company’s common stock, as further described
      below.





(iii)
            An
      $80,000 unsecured non-interest bearing note was issued March 31, 2006, and
      originally due June 29, 2006.  Due to the failure to make timely
      payments under the terms of the note, on April 1, 2007, the holder elected
      the option of declaring the note in technical default and began charging
      interest at a rate of 18% per annum.  Since then, the Company
      entered into forbearance agreements under which the holder has waived
      defaults and effectively extended forbearance terms.  On
      December 29, 2009, the obligations under this note were transferred by the
      holder to TSE and then settled in full in exchange for shares of the
      Company’s common stock, as further described
  below.





Concurrent
      with the acquisition of the debt described in (i), (ii) and (iii) above,
      TSE entered into an exchange agreement with the Company whereby all
      obligations associated with the debt, including the outstanding principal
      and accrued interest at that date, were satisfied through the issuance of
      2,333,333 shares of the Company’s common stock.  On the date of
      the exchange, there was $590,000 in principal and accrued interest of
      $52,000 outstanding on the notes.  The Company recorded a loss
      of $501,000 on the extinguishment of the debt representing the difference
      between the fair value of the shares issued on the date of the exchange
      and the remaining principal and accrued interest payable on the
      notes.  The fair value of the shares issued in the exchange was
      determined by reference to the per share closing price of the Company’s
      common stock on the date of the exchange, which was $0.49.  A
      special committee of independent directors of the Company approved
      entering into this exchange
agreement.





(iv)
            An
      unsecured demand note was issued March 31, 2006 having an original
      principal of $150,000 and bearing an annual interest rate of
      8%.  The Company has entered into various forbearance agreements
      under which the holder agreed to waive defaults, refrain from exercising
      its rights and remedies against the Company, and effectively extend the
      terms of the forbearance until October 31, 2008, in exchange for an
      increase in the interest rate to 13% per annum.  On October 31,
      2008, the Company entered into another forbearance agreement with the
      holder of the note effectively extending the terms of the original
      forbearance agreement until October 31, 2009.  As of the date of
      this Form 10-Q, no demand for payment has been received by the Company and
      the Company and the holder are currently discussing extending the terms
      and conditions for payment on the
note.





(v)
            A
      $100,000 unsecured convertible note and 600,000 shares of common stock
      were issued on January 31, 2008 to a shareholder and director of the
      Company in exchange for another note that had an outstanding principal
      balance of $200,000.  This $100,000 unsecured convertible note
      was originally due October 31, 2008 and bore interest at an annual rate of
      12%.  It is convertible at any time at the option of the holder
      at a specified price of $0.40 per share. Due to the failure to pay the
      note at maturity, the interest rate on the note has increased to 18% per
      annum.





(vi)
            Demand
      loans consist of amounts due to two separate shareholders of the
      Company.  The amounts are not subject to interest, are
      classified as short-term loans and are due and payable upon demand by the
      shareholders.





(vii)
            On
      February 5, 2010, the Company entered into a Settlement and Release
      Agreement with the former owner of ReStaff, whereby all obligations owed
      by the Company to ReStaff were released in exchange for a series of
      payments totaling $545,000.  These obligations included the
      remaining principal of $1,056,000 outstanding on this note, $75,000
      previously included in demand loans and $34,000 in accrued interest
      payable.  This debt restructuring was accounted for as a
      reduction in the purchase price of ReStaff, with a corresponding
      adjustment to goodwill.





On
      February 22, 2010, TSE agreed to assume the obligation to make the series
      of payments totaling $545,000 to the former owner of Restaff from the
      Company.  In exchange for the assumption of this payment
      obligation and taking TSE’s lead in negotiating the disputed amount, the
      Company agreed to issue 3,666,667 shares of its common
      stock.  The Company recorded a loss of $922,000 on the
      extinguishment of debt, representing the difference between the fair value
      of the shares issued on the date of the exchange and
      $545,000.  The fair value of the shares issued on the date of
      the exchange was determined by reference to the per share closing price of
      the Company’s common stock on the date of the exchange, which was
      $0.40.




9




(viii)
            In
      November 2007, the Company entered into a capital lease agreement to
      purchase computer equipment.  The original principal of $33,000
      was payable over a lease term of 24 months in equal monthly installments
      of $1,843.





Reliance
on Related Parties





The
Company has historically relied on funding from related parties in order to meet
its liquidity needs, such as the debt described in (iv), (v), (vi) and (vii)
above.  Management believes that the terms associated with these
instruments would not differ materially from those that might have been
negotiated with independent parties.  However, management believes
that the advantages the Company derived from obtaining funding from related
parties include a shortened length of time to identify and obtain funding
sources and the lack of agent or broker compensation often deducted from gross
proceeds available to the Company.  Management anticipates the Company
will continue to have significant working capital requirements to fund its
growth and operations, and to the extent the Company does not generate
sufficient cash flow from operations to meet these working capital requirements,
the Company will continue to seek other sources of funding, including through
the issuance of related party debt.





8.
Stock-Based Compensation





In
September, 2007, the Board of Directors of Accountabilities adopted the
Accountabilities, Inc. Equity Incentive Plan (the “Plan”).  Under the
terms of the reorganization discussed above, the Company has assumed the Plan
and any agreement thereunder pursuant to which restricted stock awards of
Accountabilities’ common stock were granted.  The Plan provides for
the grant of stock options, stock appreciation rights and restricted stock
awards to employees, directors and other persons in a position to contribute to
the growth and success of the Company.  A total of 2,000,000 shares of
common stock have been reserved for issuance under the Plan, and as of March 31,
2010, grants with respect to 1,403,000 shares had been made.





During
April 2007, 585,000 shares of restricted common stock were granted to certain
employees prior to the adoption of the Plan.  Restricted stock award
vesting is determined on an individual grant basis.  Of the shares
granted, 500,000 vest over five years and 85,000 vest over three
years.





A summary
of the status of the Company’s nonvested shares as of March 31, 2010, and the
changes during the six months ended March 31, 2010, is presented
below:




Number
      of
              Non-Vested
              AwardShares
            
            
            Weighted-Average
              Grant-Date Fair ValueNonvested
      at October 1, 2009
            
            
            974,000
            
            
            $
            0.31Forfeitures
            
            
            (350,000
            )
            
            $
            0.30Vested
            
            
            (326,000
            )
            
            $
            0.32Nonvested
      at March 31, 2010
            
            
            298,000
            
            
            $
            0.33





Compensation
expense is measured using the grant-date fair value of the shares granted and is
recognized on a straight-line basis over the required vesting
period.  Fair value is determined as a discount from the current
market price quote to reflect a) lack of liquidity resulting from the restricted
status and low trading volume and b) recent private placement
valuations.  For the six months ended March 31, 2010 and 2009,
compensation expense relating to restricted stock awards was $75,000 and
$82,000, respectively.  As of March 31, 2010, there was $177,000 of
total unrecognized compensation cost.  That cost is expected to be
recognized as an expense over a weighted-average period of 1.8
years.  The total fair value of the shares that vested during the six
months ended March 31, 2010 was $129,000.





9.
Receivable Sale Agreement





Additional
overadvance amounts are occasionally extended to the Company at the election of
the financial institution to which the Company sells its trade
receivables.  As of March 31, 2010, the total amount outstanding under
the overadvance was $89,000.  Overadvances are subject to a fee of
2%.  The overadvance was originally repayable in weekly payments of
$8,500, which weekly payment amounts were increased to $9,500 in December
2009.  In addition, payments of $5,000 are due in the last week of
each of January, February, March and April of 2010, with the balance of the
overadvance, if any, due by May 28, 2010.




10




10.
Supplemental Disclosure of Cash Flow Information





Six
      Months Ended
            
            
            Six
      Months EndedMarch
      31,
            
            
            March
      31,2010
            
            
            2009Cash
      paid for interest
            
            $
            123,000
            
            
            $
            229,000Non-cash
      investing and financing activities:Stock
      based compensation
            
            
            75,000
            
            
            
            82,000ReStaff
      Acquisition purchase price adjustment and debt reduction
            
            
            620,000Debt
      converted to restricted common stock at fair value
            
            
            2,610,000
            
            
            
            -





11.
Stockholders’ Equity





As part
of the reorganization discussed above, each issued and outstanding share of
Accountabilities’ common stock was automatically converted into one share of the
Company’s common stock, and each restricted share of Accountabilities’ common
stock issued and outstanding under the Plan immediately prior to the
reorganization was automatically converted into a similarly restricted share of
Company’s common stock.  Additionally, (a) any warrant to purchase
shares of Accountabilities’ common stock outstanding and unexercised immediately
prior to the effective time of the reorganization was converted into a warrant
to acquire, under the same terms and conditions, shares of the Company’s common
stock, and (b) each outstanding note which was convertible in whole or in part
into shares of Accountabilities’ common stock became convertible at the
effective time of the reorganization into shares of Company’s common stock under
the same terms and conditions.





The
Company is authorized to issue 95,000,000 shares of common stock, par value
$0.0001 per share, and 5,000,000 shares of preferred stock, par value
$0.0001.





12.
Commitments and Contingencies





Unremitted
Payroll Taxes Related to Predecessor Company





Included
in Accounts payable and accrued liabilities in the accompanying financial
statements are assessments for unremitted payroll taxes for calendar year 2004
received from the IRS and certain state taxing authorities totaling
approximately $700,000.  The assessments relate to a subsidiary of
Accountabilities which had been conducting employee leasing and benefits
processing operations which were discontinued in December 2004.  The
amount included in Accounts payable and accrued liabilities in the accompanying
financial statements represents what management estimates will ultimately be
payable for this liability based upon its knowledge of events and
circumstances.  However, there can be no assurance that future events
and circumstances will not result in an ultimate liability, including penalties
and interest, in excess of management’s current estimate.





Lease
Commitments





At March
31, 2010 and September 30, 2009, the Company had operating leases, primarily for
office premises, expiring at various dates through September 2017.  On
November 27, 2009, the Company vacated its corporate headquarters in Manalapan,
New Jersey and relocated to New York City, New York.  The Company
leased its New Jersey corporate headquarters under an operating lease that was
set to expire in December 2014.  The Company entered into a new
operating lease for its New York City location for 2,400 square feet of office
space which is set to expire on December 31, 2016.





The
landlord of the vacated New Jersey corporate headquarters alleges that the
Company is obligated to make payments under the lease for its former New Jersey
location through December 2014, which the Company is contesting.  As a
result of vacating the New Jersey location prior to the expiration of the lease,
the Company has recorded an additional liability for the remaining lease
rentals, reduced by an estimate of the landlord’s recovery from re-letting the
space, at fair value as of March 31, 2010.  The Company retained the
full right to use the premises until January 2010, the time at which the
premises were no longer available to the Company.  Included in
accounts payable and accrued liabilities at March 31, 2010 on the accompanying
balance sheet is a total estimated net liability of $303,000 related to this
lease.  The total remaining lease payments under the lease of
$1,142,000, net of the effect of estimated sublease rentals of $811,000 and
prepaid rent of $11,000, was discounted using a rate of
4.75%.   The Company had previously recorded rent expense on a
straight-line basis resulting in a recognized liability of
$167,000.  As of March 31, 2010, the Company recorded $136,000 in
additional rent expense in selling, general and administrative expenses to
recognize the fair value of the liability of $303,000.




11




13.
Subsequent Events





The
Company has evaluated subsequent events from the balance sheet date through the
date the financial statements were filed.  The following are material
subsequent events:





On March
24, 2010, Corporate Resource Development Inc. (“CRD”), a newly formed
wholly-owned subsidiary of the Company, entered into a foreclosure and asset
purchase agreement (the “GT Acquisition Agreement”) with several parties to
acquire a portion of the assets of GT Systems, Inc., a staffing company, and
certain of its affiliates through a private sale by Rosenthal & Rosenthal,
Inc (“Rosenthal”).  The transaction closed on April 5,
2010.  Pursuant to the GT Acquisition Agreement, Rosenthal foreclosed
on certain assets of GT Systems, Inc. and certain of its operating affiliates
(collectively, the “GT Entities”) related to the temporary and permanent
placement of employees, and sold the assets to CRD in a secured creditor’s
private sale under Article 9 of the Uniform Commercial Code for $3,000,000 in
cash, payable in installments (the “GT Purchase Price”).  The
acquisition of the business acquired by the Company will be accounted for under
the acquisition method of accounting.





In
connection with the Company’s guarantee of the GT Purchase Price, on April 5,
2010 the Company issued 4,257,332 shares of the Company’s common stock to
Rosenthal as collateral for payment of the balance of the GT Purchase
Price.  These shares are held in escrow and are subject to a stock
repurchase agreement, dated April 5, 2010, between the Company and Rosenthal
pursuant to which the Company has the right to repurchase some or all of such
shares as the GT Purchase Price is paid.  Additionally, in connection
with the entry into the GT Acquisition Agreement, CRD entered into a three-year
(with the option of extending) consulting agreement, dated March 24, 2010, with
Eric Goldstein (“Goldstein”), the former owner of the GT Entities, whereby CRD
has agreed to a base annual compensation of $200,000 to Goldstein, in addition
to certain sales-based compensation of 0.4% of the gross sales of CRD up to
annual Company sales of $80,000,000 and sales-based compensation of 0.6% of any
portion of gross sales exceeding $80,000,000 per year. Further, in connection
with the entry into the GT Acquisition Agreement, CRD entered into an employment
agreement with Habib Noor ("Noor"), dated March 29, 2010, whereby CRD has agreed
to employ Noor as president of a division of CRD in exchange for base annual
compensation of $600,000 to Noor plus certain bonus amounts upon the attainment
of a specified level of revenues by the division, and CRD also entered into a
services agreement, dated March 29, 2010, with Noor Associates, Inc. ("Noor
Associates"), a company wholly-owned by Noor, whereby CRD agreed to be the
employer of record for certain temporary staffing employees of Noor Associates,
as well as perform certain back office services in support of Noor Associates,
in exchange for a percentage of the gross payroll for each client generated by
Noor Associates.





On May 3,
2010, CRD entered into an account purchase agreement (the “Account Purchase
Agreement”) with TSE.  Under the terms of the Account Purchase
Agreement, CRD will sell its receivables to TSE.  The maximum amount
of trade receivables that may be sold is equal to $45,000,000, for which TSE
will advance 90% of the assigned receivables’ value upon sale, and 10% upon
final collection, subject to certain offsets.  The risk CRD bears from
bad debt losses on trade receivables sold is retained by CRD, and receivables
sold which become greater than 90 days old can be charged back to CRD by
TSE.  Currently, TSE obtains the funds necessary under the Account
Purchase Agreement from its current lender, and is passing through the financing
costs associated with these funds to the Company, although this arrangement is
intended to be temporary and is subject to the Company obtaining its own
arrangement with a financing source.


12


Item 2.
            MANAGEMENT’S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITIONAND
      RESULTS OF OPERATIONS





The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and
related notes. This discussion and analysis contains “forward-looking
statements”. These statements relate to expectations concerning matters that are
not historical facts. Such forward-looking statements may be identified by words
such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,”
“expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or
“will” or the negative of these terms or other comparable terminology. These
statements, and all phases of our operations, are subject to known and unknown
risks, uncertainties and other factors as identified in our annual report on
Form 10-K for the fiscal year ended September 30, 2009, and our other reports
filed with the Securities and Exchange Commission, or SEC. Readers are cautioned
not to place undue reliance on these forward-looking statements. Our actual
results, levels of activity, performance or achievements and those of our
industry may be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. Except as required by law, we undertake no
obligation to update the forward-looking statements in this filing. References
in this filing to the “Company,” “we,” “us,” and “our” refer, for periods prior
to February 23, 2010, to Accountabilities, Inc., and, for the periods after
February 23, 2010, to Corporate Resource Services, Inc., in each case including
consolidated subsidiaries, unless otherwise indicated or the context otherwise
requires.





Holding
Company Reorganization





Corporate
Resource Services, Inc., a Delaware corporation was formed on December 15, 2009
for the purpose of acquiring and managing staffing companies.  On
February 23, 2010, we completed a holding company reorganization whereby
Accountabilities, Inc., a Delaware corporation (“Accountabilities”), which
immediately prior to the reorganization was our parent company, became our
wholly-owned subsidiary.





As a
result of the reorganization, the former holders of Accountabilities’ common
stock now own shares of our common stock, par value $0.0001, and each restricted
share of Accountabilities’ common stock issued and outstanding under the
Accountabilities, Inc. Equity Incentive Plan immediately prior to the effective
time of the reorganization was automatically converted into a similarly
restricted share of our common stock.  Our capitalization and
consolidated assets, liabilities and stockholders’ equity remains the same as
the capitalization and consolidated assets, liabilities and stockholders’ equity
of Accountabilities immediately prior to the reorganization.





Overview





Through
our two wholly-owned subsidiaries, Accountabilities and Corporate Resource
Development Inc., or CRD, our newly formed wholly-owned subsidiary, we are a
national provider of diversified staffing, recruiting and consulting services,
including temporary staffing services, with a focus on light industrial services
and clerical and administrative support.  We provide our services
across a variety of industries and to a diverse range of clients ranging from
sole proprietorships to Fortune 1000 companies.  We conduct all of our
business in the United States through the operation of 16 staffing and
recruiting offices.





Our
future profitability and rate of growth, if any, will be directly affected by
our ability to continue to expand our service offerings at acceptable gross
margins, and to achieve economies of scale, through the continued introduction
of differentiated marketing and sales channels, and through the successful
completion and integration of acquisitions.  Our ability to be
profitable will also be affected by the extent to which we must incur additional
expenses to expand our sales, marketing, and general and administrative
capabilities to expand our business.  The largest component of our
operating expenses is personnel costs.  Personnel costs consist of
salaries, benefits and incentive compensation, including bonuses and stock-based
compensation, for our employees.  Our management expects our operating
expenses will continue to grow in absolute dollars, assuming our revenues
continue to grow.  As a percentage of revenue, we expect these
expenses to decrease as our revenues increase, although we have no assurance
that either will.





The
following are material trends that are creating opportunities and risks for our
business:





·
            We
      have financed our growth largely through the issuance of
      debt.  As of March 31, 2010, we had negative working capital of
      ($2,637,000).  In order to service our debt, maintain our
      current level of operations and fund our growth initiatives, we must be
      able to generate sufficient amounts of cash flow from our
      operations.  Our management is engaged in several activities, as
      explained further in the “Working Capital” section below, to effectively
      accomplish these objectives; however, continued or increased volatility
      and disruption in the global capital and credit markets could negatively
      impact our business operations and therefore our liquidity and ability to
      meet working capital needs.




13




·
            Any
      further economic downturn could result in less demand from customers and
      lower revenues.  Because demand for staffing services is
      sensitive to changes in the level of economic activity, our business
      suffers during economic downturns.  As economic activity slows,
      companies tend to reduce their use of temporary employees and recruitment
      services before undertaking layoffs of their regular employees, resulting
      in decreased demand for our personnel.  Conversely, if the
      economy improves, demand for temporary staffing and recruitment services
      may increase as employers seek to fill open positions using temporary
      staffing until permanent employees are hired, resulting in increased
      demand for our personnel.




·
            A
      significant component of our growth to date has come through
      acquisitions.  Our management continues to invest resources in
      activities to seek, complete and integrate acquisitions that grow or
      enhance our current service offerings.  Additionally, management
      seeks acquisitions in desired geographical markets and that have minimal
      costs and risks associated with integration.  Our management
      believes that effectively acquiring businesses with these attributes will
      be critical to carrying out our
strategy.




·
            As
      a result of the current economic situation, our competitors have decreased
      their pricing in order to capture market share.  This has
      resulted in increased competitive pressure in our market, as well as
      downward pressure on our gross
margins.




Discontinued
Operations





In
addition to our light industrial and clerical and administrative service
offerings, we historically have provided professional accounting and finance
consulting and staffing services through both our CPA Partner on Premise Program
and directly to clients.





In April
2009, we discontinued our CPA Partner on Premise Program service offering, which
provided finance and accounting staffing and recruiting services through sales
and marketing agreements with regional public accounting firms.  We
reached our conclusion to exit this service offering after reviewing the
historical operating performance and future prospects of these services and the
likely need for continued capital to support ongoing losses.  As a
result, the CPA Partner on Premise Program is classified as discontinued
operations for all periods presented in the accompanying financial
statements.





In the
first quarter of fiscal 2010, in an effort to focus management’s efforts, and
use our capital more directly for our light industrial and clerical and
administrative service offerings, we discontinued our remaining accounting and
finance operations, which formed part of our Direct Professional Services
offering.  As a result, the operations associated with the direct
provision of accounting and finance services is classified as discontinued
operations for all periods presented in the accompanying financial
statements.





During
the fiscal year ending September 30, 2009, the Company decided to focus more of
its efforts on providing temporary commercial staffing and decrease its
activities in the permanent placement of personnel.  Consequently,
permanent placement revenues and gross profit have decreased to $449,000 and
28.7% in the 2009 fiscal year from $1,424,000 and 41.9% in the corresponding
prior year.





Mergers
and Acquisitions





One of
our key strategies is to focus on mergers and acquisitions of companies that
grow or complement our existing service offerings and lines of business and
expand our geographic presence and/or further expand and strengthen our existing
infrastructure.





Our most
recent material acquisition is the acquisition by CRD of certain assets of the
GT Entities, as discussed in Note 13 to the financial statements included in
this Quarterly Report on Form 10-Q.  We will account for this
acquisition as a purchase and the results of operations of acquired operations
will be included in our results beginning April 5, 2010, during our third fiscal
quarter of 2010. In addition, in connection with the acquisition, CRD entered
into a consulting agreement with Eric Goldstein, the former owner of GT Systems,
Inc., as well as an employment agreement with Habib Noor and a services
agreement with Noor Associates, Inc., as more fully described in Note 13 to the
financial statements included in this Quarterly Report on Form
10-Q.





Our
management continues to invest resources in activities to seek, complete and
integrate acquisitions that may grow or enhance our current service offerings,
expand our geographical market presence, and effectively assimilate into our
marketing and sales strategies.  Currently, our management expects
acquisitions to continue to constitute a significant portion of any future
growth, including the potential asset acquisitions from one or more related
parties.  Completing such acquisitions, however, will likely be
limited by our ability to negotiate purchase terms and/or obtain third party
financing on terms acceptable to us, given our current working capital deficit,
as discussed below.





We are
currently engaged in discussions with Tri-State Employment Services, Inc., or
TSE, a professional employer organization that is also the beneficial owner,
with its affiliates, of approximately 58% of our outstanding common stock, for
the potential acquisition of certain of the staffing assets of
TSE.  It is expected that any consideration paid to TSE under such an
acquisition is likely to consist of our equity securities.  However,
there is no assurance that any such acquisition will be completed.




14




Recent
Accounting Pronouncements





There are
no recently issued accounting pronouncements that are not yet effective that we
believe will have a material effect on our financial statements.





Results
of Operations





Three
months ended March 31, 2010 compared to three months ended March 31,
2009





Revenue





For the
three months ended March 31, 2010, revenue increased $587,000, or 4.5%, to
$13,522,000, as compared to $12,935,000 for the same period of the prior
year.  This increase in revenue was primarily attributable to the
acquisition of new accounts in existing offices.





Direct
cost of services





For the
three months ended March 31, 2010, direct cost of services increased by
$994,000, or 8.8%, to $12,226,000, as compared to $11,232,000 for the same
period of the prior year.  This increase was primarily due to the
increase in revenues for the period.





Gross
profit





For the
three months ended March 31, 2010, gross profit decreased $407,000, or 23.9%, to
$1,296,000, as compared to $1,703,000 for the same period in the prior
year.  As a percentage of revenue, gross profit for the three months
ended March 31, 2010 decreased to 9.6% compared to 13.2% for the same period in
the prior year, reflecting a combination of lower bill rate pricing to retain
existing clients or gain new clients in the current recession as well as changes
in our client mix.





Selling,
general and administrative expenses





For the
three months ended March 31, 2010, selling, general and administrative expenses
decreased $117,000, or 6.4%, to $1,701,000, as compared to $1,818,000 in the
same period of the prior year.  Selling, general and administrative
expenses include non-cash charges for stock based compensation expense of
$35,000 for the three months ended March 31, 2010, as compared with $41,000 in
the same period of the prior year.  As a percentage of revenue,
selling, general and administrative expenses decreased to 12.5% for the three
months ended March 31, 2010, compared to 14.1% during the same period in the
prior year.





Depreciation
and amortization





For the
three months ended March 31, 2010, depreciation and amortization decreased
$21,000, or 20.3%, to $82,000, as compared to $103,000 in the same period in the
prior year.  The decrease is attributable to lower amortization
expense recorded on certain intangible assets acquired that have been fully
amortized prior to the current fiscal quarter as well as the elimination of
certain leasehold improvements during the fourth quarter of fiscal 2009 due to a
relocation of our corporate headquarters.





Loss
from continuing operations





As a
result of the above, loss from continuing operations was ($487,000) for the
three months ended March 31, 2010, compared to a loss from continuing operations
of ($218,000) for the same period in the prior year.





Interest
expense





Interest
expense includes the net discounts associated with the sales of accounts
receivable, as well as interest on debt associated with acquired companies and
financing our operations. Interest expense for the three months ended March 31,
2010 was $66,000, which represents a 38.3% decrease from interest expense of
$107,000 for the same period in the prior year.  The decrease is
attributable to a reduction in the amount of debt outstanding that occurred
during the first two quarters of fiscal 2010 through the restructuring and
extinguishment of certain of such debt through the issuance of our common
stock.  See the section entitled “Working Capital” below for further
discussion.




15




Loss
on debt extinguishment





On
February 22, 2010, TSE agreed to assume our obligation to make a series of
payments totaling $545,000 to the former owner of ReStaff Services, Inc., or
ReStaff, in relation to our entry into a settlement and release agreement with
the former owner of ReStaff on February 5, 2010.  In exchange for the
assumption of this payment obligation and TSE’s lead in negotiating the disputed
amount, we agreed to issue 3,666,667 shares of our common stock to
TSE.  We recorded a loss of $922,000 on the extinguishment of debt,
representing the difference between the fair value of the shares issued on the
date of the exchange and $545,000.  The fair value of the shares
issued on the date of the exchange was determined by reference to the per share
closing price of our common stock on the date of the exchange, which was
$0.40.





Net
loss from continuing operations





The
factors described above resulted in a net loss from continuing operations for
the three months ended March 31, 2010 of ($1,475,000) as compared to a net loss
from continuing operations of ($325,000) for the same period in the prior
year.





Income
(loss) from discontinued operations





Income
(loss) from discontinued operations reported during the three months ended March
31, 2009 relates to our discontinued CPA Partner on Premise Program and the
discontinued portion of the Direct Professional Services offering associated
with the provision of accounting services directly to clients.





Net
loss





The
factors described above resulted in net loss for the three months ended March
31, 2010 of ($1,475,000), as compared to net loss of ($511,000) during the same
period of the prior year.





Six
months ended March 31, 2010 compared to six months ended March 31,
2009





Revenue





For the
six months ended March 31, 2010, revenue decreased $1,954,000, or 6.6%, to
$27,636,000, as compared to $29,590,000 for the same period of the prior
year.  This decrease in revenue was primarily attributable to the
overall decline in economic activity since the beginning of the recession that
began in December 2007, offset in part by the acquisition of new accounts in
existing offices in the second quarter of fiscal 2010.  We began
experiencing declines in revenue versus the prior year most significantly in the
second quarter of fiscal 2009.  Our current revenue decline
encompassed declines in billable hours at current clients, losses of accounts
and lower billings for several larger customers, which were not fully offset by
the acquisition of new accounts in existing offices.





Direct
cost of services





For the
six months ended March 31, 2010, direct cost of services decreased by $751,000,
or 2.9%, to $24,913,000, as compared to $25,664,000 for the same period of the
prior year.  This decrease was primarily due to the decrease in
revenues for the period.





Gross
profit





For the
six months ended March 31, 2010, gross profit decreased $1,203,000, or 30.6%, to
$2,723,000, as compared to $3,926,000 for the same period in the prior
year.  As a percentage of revenue, gross profit for the six months
ended March 31, 2010 decreased to 9.9% compared to 13.3% for the same
period in the prior year, reflecting a combination of lower bill rate pricing to
retain existing clients or gain new clients in the current recession as well as
changes in our client mix.





Selling,
general and administrative expenses





For the
six months ended March 31, 2010, selling, general and administrative expenses
decreased $21,000, or 0.6%, to $3,562,000, as compared to $3,583,000 in the same
period of the prior year.  Selling, general and administrative
expenses include non-cash charges for stock based compensation expense of
$75,000 for the six months ended March 31, 2010, as compared with $82,000 in the
same period of the prior year.  As a percentage of revenue, selling,
general and administrative expenses were 12.9% for the six months ended March
31, 2010, compared to 12.1% during the same period in the prior
year.  During the first quarter of the current fiscal year we received
notices from Los Angeles and Culver City California and the state of New
Hampshire notifying us of business taxes and related penalties and interest due
for prior fiscal years which we have estimated to total approximately
$274,000.  This total includes approximately $85,000 of penalties and
$16,000 of interest, all of which have been included in selling general and
administrative expenses in the first quarter of fiscal 2010.  We are
in preliminary conversations with all three jurisdictions to seek waivers of the
associated penalties, but there is no assurance that such waivers will be
obtained.  Before taking into account the expense associated with
these local business taxes selling general and administrative expenses in the
first six months of the current year decreased $298,000, or 8.3% as compared to
the first six months of the prior year, primarily as a result of reduced
administrative headcount and compensation in addition to broad efforts at
lowering general overhead expenditures.




16




Depreciation
and amortization





For the
six months ended March 31, 2010, depreciation and amortization decreased
$49,000, or 22.7%, to $166,000, as compared to $215,000 in the same period in
the prior year.  The decrease is attributable to lower amortization
expense recorded on certain intangible assets acquired that have been fully
amortized prior to the current fiscal quarter as well as the elimination of
certain leasehold improvements during the fourth quarter of fiscal 2009 due to a
relocation of our corporate headquarters.





(Loss)
income from continuing operations





As a
result of the above, loss from continuing operations was ($1,005,000) for the
six months ended March 31, 2010, compared to income from operations of $128,000
for the same period in the prior year.





Interest
expense





Interest
expense includes the net discounts associated with the sales of accounts
receivable, as well as interest on debt associated with acquired companies and
financing our operations.  Interest expense for the six months ended
March 31, 2010 was $162,000, which represents a 35.2% decrease from interest
expense of $250,000 for the same period in the prior year.  The
decrease is attributable to a reduction in the amount of debt outstanding that
occurred during fiscal 2009 and the first six months of fiscal 2010 through
restructuring and extinguishment of certain of our outstanding debt through the
issuance of our common stock, as well as the reduction in the federal prime
lending rate from 5.00% in effect at the beginning of fiscal 2009 to 3.25% at
the beginning of the current fiscal year resulting in lowered interest expense
on our sold outstanding accounts receivable.





Loss
on debt extinguishments





On
February 22, 2010, TSE agreed to assume our obligation to make a series of
payments totaling $545,000 to the former owner of ReStaff in relation to our
entry into a settlement and release agreement with the former owner of ReStaff
on February 5, 2010.  In exchange for the assumption of this payment
obligation and TSE’s lead in negotiating the disputed amount, we agreed to issue
3,666,667 shares of our common stock to TSE.  We recorded a loss of
$922,000 on the extinguishment of debt, representing the difference between the
fair value of the shares issued on the date of the exchange and
$545,000.  The fair value of the shares issued on the date of the
exchange was determined by reference to the per share closing price of our
common stock on the date of the exchange, which was $0.40.





On
December 29, 2009, we entered into an exchange agreement with TSE, whereby all
amounts due to TSE under the terms of notes recently acquired by TSE from a
third party were settled in full, in exchange for the issuance to TSE of shares
of our common stock.  On the date of the exchange, there was $590,000
in principal and accrued interest of $52,000 outstanding on the notes for which
we issued 2,333,333 shares of our common stock.  Loss on debt
extinguishment of $501,000 was measured as the difference between the fair value
of the common stock we issued and the remaining outstanding principal and
accrued interest on the notes that were exchanged during the first quarter of
fiscal 2010.





Net
loss from continuing operations





The
factors described above resulted in a net loss from continuing operations for
the six months ended March 31, 2010 of ($2,590,000) as compared to a net loss
from continuing operations of ($122,000) for the same period in the prior
year.





Loss
from discontinued operations





Loss from
discontinued operations reported during the six months ended March 31, 2009
relates to our discontinued CPA Partner on Premise Program and the discontinued
portion of the Direct Professional Services offering associated with the
provision of accounting services directly to clients.





Net
loss





The
factors described above resulted in net loss for the six months ended March 31,
2010 of ($2,590,000), as compared to net loss of ($493,000) during the same
period of the prior year.




17




Liquidity
and Capital Resources





Cash
Flows





We have
historically relied on cash flows from operations, borrowings under debt
facilities, the sale of our trade receivables prior to collection, loans from
related parties and proceeds from sales of our common stock to satisfy our
working capital requirements and to fund acquisitions.  In the future,
we may need to raise additional funds through debt or equity financings to
satisfy our working capital, take advantage of business opportunities, including
growth of our existing business and mergers and acquisitions.  To the
extent that funds are not available to meet our operating needs, we may have to
further reduce operating expenses or eliminate portions of our
operations.





At March
31, 2010, cash was $81,000, an increase of $18,000 from $63,000 as of September
30, 2009.





Net cash
flows provided by operating activities from continuing operations during the six
months ended March 31, 2010 decreased by $587,000 to $55,000, from $642,000
during the same period of the prior year.  This decrease reflects the
increase in Net loss from continuing operations in the first six months of
fiscal 2010, which, after adding back certain non-cash expenses to both the
first six months of fiscal 2010 and 2009, such as Loss on debt extinguishment,
Depreciation and amortization, Stock based compensation expense, and Bad debt
expense, resulted in a revised decrease of $1,043,000.  Offsetting
this decrease was greater cash provided by changes in operating assets in
liabilities during the six months ended March 31, 2010, which totaled
$456,000.





Net cash
used in investing activities during the six months ended March 31, 2010,
increased $8,000 to ($16,000) from ($8,000) during the same period of the prior
year, which reflects expenditures associated with the relocation of our
corporate headquarters from New Jersey to New York during the current fiscal
year.





Net cash
used in financing activities during the six months ended March 31, 2010,
decreased by $269,000 to ($4,000) from ($273,000) during the same period of the
prior year.  This decrease was primarily due to the restructuring and
elimination of certain debt outstanding during the current fiscal year as well
as our failure to make scheduled principal payments on other outstanding
debt.





Working
Capital





As of
March 31, 2010, we had negative working capital of ($2,637,000), for which the
component constituting the current portion of long-term debt was
$309,000.  Within the current portion of long-term debt $259,000 is
past due or due upon demand as explained further below.  Of the
negative working capital, $2,190,000 is due and payable to TSE relating to costs
charged by TSE for professional employment organization services provided by TSE
to us, which arise and are paid in the ordinary course of business, normally on
a weekly basis.  Total outstanding debt as of March 31, 2010 was
$309,000.  The working capital deficit of ($2,637,000) as of March 31,
2010 represents a decrease in the deficit of $95,000 as compared to a working
capital deficit of ($2,732,000) as of September 30, 2009.





In order
to service our debt, maintain our current level of operations and finance our
growth initiatives, we must be able to generate sufficient amounts of cash flow
and working capital.  Our management has engaged and continues to
engage in the following activities to effectively accomplish these
objectives:





a)
            On
      December 29, 2009, we entered into an exchange agreement with TSE, whereby
      all amounts due to TSE under the terms of notes acquired by TSE from a
      third party were settled in full, in exchange for the issuance of shares
      of our common stock.  On the date of the exchange, there was
      $590,000 in principal and accrued interest of $52,000 outstanding on the
      notes for which we issued 2,333,333 shares of our common
      stock.





b)
            In
      the first quarter of fiscal 2010, we discontinued the operations
      associated with the direct provision of accounting and finance services in
      order to focus management’s efforts, as well as our capital, more directly
      on our light industrial, and clerical and administrative service
      offerings.  This discontinued segment of our operations
      generated income (losses) from its operations of $1,000 and ($311,000) for
      the six months ended March 31, 2010 and 2009,
      respectively.  This segment has been reported as discontinued
      operations in the accompanying financial
  statements.





c)
            On
      February 5, 2010, we entered into a settlement and release agreement with
      the former owner of Restaff Services, Inc. or ReStaff, whereby all
      obligations we owed to ReStaff were released in exchange for a series of
      payments totaling $545,000.  These obligations included the
      remaining principal of $1,056,000 outstanding on a note, $75,000
      previously included in demand loans and $34,000 in accrued interest
      payable.




18


d)
            On
      February 22, 2010, TSE agreed to assume our obligation to make the
      $545,000 series of payments to the former owner of ReStaff under our
      February 5, 2010 settlement and release agreement.  In exchange
      for the assumption of this payment obligation and TSE’s lead in
      negotiating the disputed amount, we agreed to issue 3,666,667 shares of
      our common stock to TSE.  We recorded a loss of $922,000 on the
      extinguishment of debt, representing the difference between the fair value
      of the shares issued on the date of the exchange and
      $545,000.  The fair value of the shares issued on the date of
      the exchange was determined by reference to the per share closing price of
      our common stock on the date of the exchange, which was
    $0.40.





e)
            On
      March 24, 2010, CRD entered into a foreclosure and asset purchase
      agreement, or the GT Acquisition Agreement to acquire a portion of the
      assets of GT Systems, Inc., a staffing company, and certain of its
      affiliates, collectively referred to as the GT Entities, through a private
      sale by Rosenthal & Rosenthal, Inc., or Rosenthal.  The
      transaction closed on April 5, 2010.  Pursuant to the GT
      Acquisition Agreement, Rosenthal foreclosed on certain assets of the GT
      Entities, related to the temporary and permanent placement of employees,
      and sold the assets to CRD in a secured creditor’s private sale under
      Article 9 of the Uniform Commercial Code for $3,000,000 in cash, or the GT
      Purchase Price.  In connection with our guarantee of the
      obligation of CRD to pay the GT Purchase Price, on April 5, 2010 the
      Company issued 4,257,332 shares of the Company’s common stock to
      Rosenthal.  These shares are held in escrow and are subject to a
      stock repurchase agreement, dated April 5, 2010, between Rosenthal and us,
      pursuant to which we have the right to repurchase some or all of such
      shares as the GT Purchase Price is
paid.





f)
            Subsequent
      to the completion of our second fiscal quarter of 2010, on May 3, 2010,
      CRD entered into an account purchase agreement with TSE.  Under
      the terms of the account purchase agreement, CRD will sell its receivables
      to TSE.  The maximum amount of trade receivables that may be
      sold is equal to $45,000,000, for which TSE will advance 90% of the
      assigned receivables’ value upon sale, and 10% upon final collection,
      subject to certain offsets.  The risk CRD bears from bad debt
      losses on trade receivables sold is retained by CRD, and receivables sold
      which become greater than 90 days old can be charged back to CRD by
      TSE.  Currently, TSE obtains the funds necessary under the
      agreement from its current lender, and is passing through the financing
      costs associated with these funds to us, although this arrangement is
      intended to be temporary and is subject to obtaining our own arrangement
      with a financing source.





g)
            TSE
      has provided further financial accommodations to us by allowing us to
      delay from time to time amounts due to TSE under our professional services
      arrangement with TSE.





h)
            We
      are aggressively managing cash and expenses with activities such as
      seeking additional efficiencies in our operating offices and corporate
      functions (including headcount reductions, if appropriate), improving our
      accounts receivable collection efforts, obtaining more favorable vendor
      terms, and using our finance and accounting consultants when available to
      aid in the necessary obligations associated with being a public reporting
      company.





We
believe, based on the above activities and our current expectations, that we
have adequate resources for liquidity to meet our operating needs through March
31, 2011.





Because
our revenue depends primarily on billable labor hours, most of our charges are
invoiced weekly, bi-weekly or monthly depending on the associated payment of
labor costs, and are due currently, with collection times typically ranging from
30 to 60 days.  We sell our accounts receivable to a financial
institution as a means of managing our working capital.  Under the
terms of our receivable sale agreement the maximum amount of trade receivables
that can be sold is $8,000,000.  As collections reduce previously sold
receivables, we may replenish these with new receivables.  Net
discounts per the agreement are represented by an interest charge at an annual
rate of prime plus 1.5%, or the Discount Rate, applied against outstanding
uncollected receivables sold.  The risk we bear from bad debt losses
on trade receivables sold is retained by us, and receivables sold may not
include amounts over 90 days past due.  The agreement is subject to a
minimum discount computed as minimum sales per month of $3,000,000 multiplied by
the then effective Discount Rate, and a termination fee of 3% applies to the
maximum facility in year one of the agreement, 2% in year two, and 1%
thereafter.  In addition, an overadvance of $500,000 was received, is
secured by outstanding receivables, and is currently being repaid in weekly
payments of $9,500, with $5,000 payments due in the last week of each of
January, February, March and April of 2010.  As of March 31, 2010, the
amount of advances against sold receivables outstanding was $4,264,000, which
includes $88,000 outstanding related to the overadvance.  The
overadvance is expected to be paid in full by May 11, 2010.





Sales
of Common Stock





While
there were no sales of our common stock during the three months ended March 31,
2010, on February 22, 2010 we did issue 3,666,667 shares of our common stock to
TSE, as more fully described in Note 7 to the financial statements included in
this Quarterly Report on Form 10-Q.  Further, as more fully described
in Note 13 to the financial statements included in this Quarterly Report on Form
10-Q, on April 5, 2010 we issued 4,257,332 shares of our common stock to
Rosenthal.  In connection with these issuances, we relied on an
exemption from registration under the Securities Act of 1933, as amended, or the
Securities Act, as set forth in Section 4(2) of the Securities Act and
Regulation D promulgated thereunder.




19




Critical
Accounting Policies





The
following discussion and analysis of our financial condition and results of
operations is based upon our financial statements, which have been prepared in
accordance with generally accepted accounting principles in the United States
and the rules of the SEC.  The preparation of these financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.





The
following represents a summary of the critical accounting policies, which our
management believes are the most important to the portrayal of our financial
condition and results of operations and involve inherently uncertain issues that
require management’s most difficult, subjective or complex
judgments.





Revenue
Recognition.  We recognize staffing and consulting revenues
when professionals deliver services.  Permanent placement revenue is
recognized when the candidate commences employment, net of an allowance for
those not expected to remain with clients through a 90-day guarantee period,
wherein we are obligated to find a suitable replacement.





Allowance for Doubtful
Accounts.  We maintain an allowance for doubtful accounts for
estimated losses resulting from our clients failing to make required payments
for services rendered.  Our management estimates this allowance based
upon knowledge of the financial condition of our clients, review of historical
receivable and reserve trends and other pertinent information.  If the
financial condition of any of our clients deteriorates or there is an
unfavorable trend in aggregate receivable collections, additional allowances may
be required.





Stock-Based
Compensation.We calculate stock-based compensation expense in
accordance with the FASB ASC Topic 718, “Compensation-Stock Compensation,”
or ASC 718.  This pronouncement requires the measurement and
recognition of compensation expense for all share-based payment awards made to
employees and directors including employee stock options, stock appreciation
rights and restricted stock awards to be based on estimated fair
values.  Fair value for restricted stock is determined as a discount
from the current market price quote to reflect a) lack of liquidity resulting
from the restricted status and low trading volume and b) recent private
placement valuations.  Under ASC 718, the value of the portion of the
award that is ultimately expected to vest is recognized as an expense over the
requisite service periods.  We recognize stock-based compensation
expense on a straight-line basis.





Income Taxes.  We
account for income taxes in accordance with FASB ASC Topic 740, “Income Taxes,”
or ASC 740.  Under ASC 740, deferred income taxes are recognized for
the estimated tax consequences in future years of differences between the tax
basis of assets and liabilities and their financial reporting amounts at each
year-end based on enacted tax laws and statutory rates applicable to the periods
in which the differences are expected to affect taxable income.  If
necessary, valuation allowances are established to reduce deferred tax assets to
the amount expected to be realized when, in management’s opinion, it is more
likely than not that some portion of the deferred tax assets will not be
realized.  The estimated provision for income taxes represents current
taxes that would be payable net of the change during the period in deferred tax
assets and liabilities. We evaluate the probable resolution of tax positions
based on the technical merits, that the position will be sustained upon
examination, presuming that the tax position will be examined by the relevant
taxing authority that has full knowledge of all relevant
information.





Intangible
Assets.  In accordance with FASB ASC Topic 350,
“Intangibles-Goodwill and Other,” or ASC 350, goodwill and other intangible
assets with indefinite lives are not subject to amortization but are tested for
impairment annually or whenever events or changes in circumstances indicate that
the asset might be impaired.  We performed our annual impairment
analysis as of May 31, 2009 and will continue to test for impairment
annually.  No impairment was indicated as of May 31,
2009.  Other intangible assets with finite lives are subject to
amortization, and impairment reviews are performed in accordance with ASC Topic
360, “Property, Plant & Equipment,” or ASC 360.





Item
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not
Applicable.




20




Item
4. CONTROLS AND PROCEDURES





As
required by SEC Rule 13a-15(b) under the Securities and Exchange Act of 1934, as
amended, or the Exchange Act, we carried out an evaluation, under the
supervision and with the participation of our management, including our
principal executive and principal financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures (as such term is
defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period
covered by this Quarterly Report on Form 10-Q.  Based on this
evaluation, we noted that certain changes to the design of our disclosure
controls and procedures had not been made that were necessary to reflect
significant changes that occurred in our senior management and board of
directors.  Due to this, our principal executive and principal
financial officer concluded that our disclosure controls and procedures were not
effective as of March 31, 2010.  We are in the process of remediating
the material weaknesses identified in our assessment by defining and documenting
the roles and responsibilities of new senior management as they relate to proper
disclosure controls and procedures.





There
were no changes in our internal controls over financial reporting during the
quarter ended March 31, 2010 that have materially affected, or are reasonably
likely to have materially affected, our internal controls over financial
reporting.  We are however in the process of remediating the material
weaknesses identified in our assessment as of our fiscal year end September 30,
2009.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.




Part
II Other Information





Item
1. Legal Proceedings





We are
involved, from time to time, in routine litigation arising in the ordinary
course of business, including the matters described in our Annual Report on Form
10-K for the fiscal year ended September 30, 2009.





Item
1A. Risk Factors





There
have been no material changes with respect to the risk factors disclosed in our
latest Annual Report on Form 10-K for the fiscal year ended September 30, 2009
as filed with the SEC.





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





Not
applicable.





Item
3. Defaults Upon Senior Securities





We are
currently in default under a promissory note in the principal amount $100,000,
as a result of our failure to make timely payments of principal and/or
interest.  We are currently in discussions with the holder of the note
concerning the terms of a possible forbearance agreement or
restructuring.  As of March 31, 2010, the aggregate amount of payments
due but not made under the note was $100,000.





Item
4. (Removed and Reserved)





Item
5. Other Information





Upon the
departure of Stephen DelVecchia on February 12, 2010, our former Chief Financial
Officer and principal financial and accounting officer, Jay Schecter, our Chief
Executive Officer, assumed the responsibilities of principal financial and
accounting officer.


21





Item
6. Exhibits





Number
            
            Description2.4
            
            Agreement
      and Plan of Merger, dated as of February 23, 2010, by and among
      Accountabilities, Inc., Corporate Resources Services, Inc. and ACBT Merger
      Co., Inc. (incorporated by reference to Exhibit 2.1 to the Form
      8-K  filed by the Registrant on February 24,
    2010)3.1
            
            Amended
      and Restated Certificate of Incorporation of the Registrant (incorporated
      by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant on
      February 24, 2010)3.2
            
            Amended
      and Restated By-laws of the Registrant (incorporated by reference to
      Exhibit 3.2 to the Form 8-K filed by the Registrant on February 24,
      2010)10.1+
            
            Client
      Services Agreement, dated August 1, 2006, by and between Accountabilities,
      Inc., a wholly-owned subsidiary of the Company and
  TSE-PEO10.2
            
            Settlement
      and Release Agreement, dated February 5, 2010, by and between Rhonda
      Faria, ReStaff Services, Inc. and Accountabilities, Inc.
      (incorporated by reference to Exhibit 10.51 to the Form 10-Q filed by the
      Registrant on February 12, 2010)10.3
            
            Foreclosure
      and Asset Purchase Agreement, dated as of March 24, 2010, by and among
      Rosenthal and Rosenthal, Inc., GT Systems Inc., certain of operating
      affiliates of GT Systems Inc., Eric Goldstein, Corporate Resource
      Development Inc., Corporate Resource Services, Inc. and Tri-State
      Employment Services, Inc.10.4
            
            Consulting
      Agreement, dated March 24, 2010, by and between Corporate Resource
      Development Inc. and Eric Goldstein.10.5
            
            Services
      Agreement, dated March 29, 2010, by and between Corporate Resource
      Development Inc. and Noor Associates, Inc.10.6
            
            Employment
      Agreement, dated March 29, 2010, between Corporate Resource Development
      Inc. and Habib Noor.*10.7
            
            Debt
      Assumption Agreement, entered into as of February 22, 2010, by and between
      Accountabilities, Inc. and Tri-State Employment Services, Inc.
      (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the
      Registrant on February 24, 2010)31.1
            
            Certification
      of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act
      of 200232.1
            
            Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of Sarbanes-Oxley Act of 2002







+
            Certain
      portions of this exhibit have been omitted pursuant to a request for
      confidential treatment. The omitted portions have been separately filed
      with the SEC.




*
            Constitutes
      a management contract required to be filed pursuant to Item 6 of Form
      10-Q.


22




SIGNATURES





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




Corporate
      Resource Services, Inc.Date:  May
      17, 2010
              By:
              /s/
      Jay H. SchecterJay
      H. SchecterChief
      Executive Officer(Principal
      Executive and Financial and Accounting Officer)





23