Attached files
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EX-31.1 - BRANDPARTNERS GROUP INC | v166211_ex31-1.htm |
EX-32.1 - BRANDPARTNERS GROUP INC | v166211_ex32-1.htm |
EX-10.1 - BRANDPARTNERS GROUP INC | v166211_ex10-1.htm |
EX-10.2 - BRANDPARTNERS GROUP INC | v166211_ex10-2.htm |
EX-31.2 - BRANDPARTNERS GROUP INC | v166211_ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended September 30, 2009
OR
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from ___________ to _______________
Commission
File Number 0-16530
BRANDPARTNERS
GROUP, INC.
(Exact
Name of Registrant as Specified in its Charter)
DELAWARE
|
13-3236325
|
(State
or Other Jurisdiction of
|
(I.R.S.
Employer
|
Incorporation
or Organization)
|
Identification
No.)
|
10
MAIN ST., ROCHESTER, NEW HAMPSHIRE 03839
(Address
of Principal Executive Offices)
(603)
335-1400
Registrant’s
Telephone number, Including Area Code
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes x No ¨
Indicate
by check mark whether the registrant 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 (Section 232.405 of
this chapter) during the preceding 12 months (or such shorter period that the
registrant was required to submit and post such files).
Yes ¨ No ¨ (Not yet applicable
to Registrant)
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company.
Yes ¨ No x
The
number of shares of the Company’s common stock outstanding as of November 19,
2009 was 43,960,859.
BRANDPARTNERS
GROUP, INC.
TABLE OF
CONTENTS
Part
I Financial Statements
|
|
Item
1 Financial Statements
|
|
Consolidated
Balance Sheets September 30, 2009 (unaudited) and December 31,
2008
|
3
|
Consolidated
Statements of Operations (unaudited) for the Nine and Three Months Ended
September 30, 2009 and 2008
|
4
|
Consolidated
Statements of Cash Flows (unaudited) for the Nine Months Ended September
30, 2009 and 2008
|
5
|
Notes
to Consolidated Financial Statements (unaudited)
|
6
|
Item
2 Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
14
|
Item
3 Quantitative and Qualitative Disclosures about Market
Risk
|
21
|
Item
4 Controls and Procedures
|
21
|
Part
II Other Information
|
|
Item
1A Risk Factors
|
21
|
Item
6 Exhibits
|
22
|
Signatures
|
23
|
2
Part
I Financial Statements
Item 1
Financial Information
BrandPartners
Group, Inc. and Subsidiaries
CONSOLIDATED
BALANCE SHEETS
September 30, 2009
|
December 31, 2008
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Cash
|
$ | 341,280 | $ | 1,348,271 | ||||
Accounts
receivable, net of allowance for doubtful accounts of $56,721 and
$87,064
|
2,961,314 | 7,555,631 | ||||||
Costs
and estimated earnings in excess of billings
|
681,491 | 986,616 | ||||||
Inventories,
net
|
365,624 | 640,112 | ||||||
Prepaid
expenses and other current assets
|
220,733 | 300,416 | ||||||
Total
current assets
|
4,570,442 | 10,831,046 | ||||||
Property
and equipment, net
|
443,944 | 670,039 | ||||||
Goodwill,
net
|
10,271,969 | 10,271,969 | ||||||
Other
assets
|
31,432 | 31,532 | ||||||
Total
assets
|
$ | 15,317,787 | $ | 21,804,586 | ||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$ | 2,479,350 | $ | 4,601,753 | ||||
Billings
in excess of costs and estimated earnings
|
3,070,509 | 7,790,590 | ||||||
Short
term debt
|
1,275,246 | 32,903 | ||||||
Total
current liabilities
|
6,825,105 | 12,425,246 | ||||||
Long
term debt, net of current maturities
|
6,836,203 | 6,648,041 | ||||||
Stockholders'
equity
|
||||||||
Preferred
stock, $.01 par value; 20,000,000 shares authorized; none
outstanding.
|
- | - | ||||||
Common
stock, $.01 par value; 100,000,000 shares authorized; issued 44,060,859
and 38,823,859
|
440,609 | 388,234 | ||||||
Additional
paid in capital
|
45,351,757 | 45,181,302 | ||||||
Accumulated
deficit
|
(43,870,804 | ) | (42,573,154 | ) | ||||
Accumulated
other comprehensive income
|
||||||||
Foreign
currency adjustment
|
47,417 | 47,417 | ||||||
Treasury
stock, 100,000 shares at cost
|
(312,500 | ) | (312,500 | ) | ||||
Total
stockholders' equity
|
1,656,479 | 2,731,299 | ||||||
Total
liabilities and stockholders' equity
|
$ | 15,317,787 | $ | 21,804,586 |
The
accompanying notes are an integral part of these financial
statements.
3
BrandPartners
Group, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited)
9 Months Ended
|
9 Months Ended
|
3 Months Ended
|
3 Months Ended
|
|||||||||||||
September 30
|
September 30
|
September 30
|
September 30
|
|||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenues
|
$ | 25,352,988 | $ | 26,894,801 | $ | 5,395,865 | $ | 8,916,657 | ||||||||
Costs
and expenses
|
||||||||||||||||
Cost
of revenues
|
19,673,326 | 19,411,414 | 5,016,648 | 6,862,391 | ||||||||||||
Selling,
general and administrative
|
6,113,505 | 5,951,461 | 1,942,049 | 1,950,583 | ||||||||||||
Total
expenses
|
25,786,831 | 25,362,875 | 6,958,697 | 8,812,974 | ||||||||||||
Operating
income (loss)
|
(433,843 | ) | 1,531,926 | (1,562,832 | ) | 103,683 | ||||||||||
Interest
expense, net
|
(827,566 | ) | (890,704 | ) | (280,009 | ) | (304,827 | ) | ||||||||
INCOME
(LOSS) BEFORE INCOME TAXES
|
(1,261,409 | ) | 641,222 | (1,842,841 | ) | (201,144 | ) | |||||||||
Provision
for Income Taxes
|
36,240 | 58,746 | 8,813 | 32,118 | ||||||||||||
NET
INCOME (LOSS)
|
$ | (1,297,649 | ) | $ | 582,476 | $ | (1,851,654 | ) | $ | (233,262 | ) | |||||
Basic
and diluted earnings per share
|
||||||||||||||||
Basic
|
$ | (0.03 | ) | $ | 0.02 | $ | (0.04 | ) | $ | (0.01 | ) | |||||
Diluted
|
$ | (0.03 | ) | $ | 0.01 | $ | (0.04 | ) | $ | (0.01 | ) | |||||
Weighted
- average shares outstanding
|
||||||||||||||||
Basic
|
41,277,755 | 38,685,585 | 43,868,468 | 39,573,359 | ||||||||||||
Diluted
|
41,277,755 | 39,023,085 | 43,868,468 | 39,573,359 |
The
accompanying notes are an integral part of these financial
statements.
4
BrandPartners
Group, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
9 months ended
|
9 months ended
|
|||||||
September 30,
|
September 30,
|
|||||||
2009
|
2008
|
|||||||
Cash
flows provided by operating activities
|
||||||||
Net
income (loss)
|
$ | (1,297,649 | ) | $ | 582,476 | |||
Adjustments
to reconcile net income (loss) to net cash provided by (used in) operating
activities
|
||||||||
Depreciation
|
253,325 | 340,398 | ||||||
Amortization
of deferred financing costs
|
- | 38,565 | ||||||
Bad
debt expense
|
17,254 | (96,224 | ) | |||||
Allowance
for obsolete inventory
|
78,395 | 142,166 | ||||||
Stock-based
compensation
|
177,830 | 73,715 | ||||||
Loss
on disposal of assets
|
- | 1,750 | ||||||
Changes
in operating assets and liabilities
|
||||||||
Accounts
receivable
|
4,577,063 | (433,331 | ) | |||||
Costs
and estimated earnings in excess of billings
|
305,125 | (32,698 | ) | |||||
Inventories
|
196,093 | 51,073 | ||||||
Prepaid
expenses and other assets
|
79,783 | 104,721 | ||||||
Accounts
payable and accrued expenses
|
(2,107,404 | ) | 436,630 | |||||
Billings
in excess of costs and estimated earnings
|
(4,720,081 | ) | (1,359,311 | ) | ||||
Net
cash (used in) operating activities
|
(2,440,266 | ) | (150,070 | ) | ||||
Cash
flows used in investing activities
|
||||||||
Acquisition
of equipment
|
(27,230 | ) | (143,821 | ) | ||||
Cash
flows provided by financing activities
|
||||||||
Net
borrowings on short term debt
|
1,231,205 | 476,831 | ||||||
Proceeds
from long term debt
|
202,716 | 195,398 | ||||||
Payments
on long term debt
|
(3,416 | ) | (291,673 | ) | ||||
Proceeds
from issuance of common stock
|
30,000 | - | ||||||
Net
cash provided by financing activities
|
1,460,505 | 380,556 | ||||||
NET
INCREASE (DECREASE) IN CASH
|
(1,006,991 | ) | 86,665 | |||||
Effect
of exchange rates on cash
|
- | (1,915 | ) | |||||
Cash,
beginning of period
|
1,348,271 | 184,504 | ||||||
Cash,
end of period
|
$ | 341,280 | $ | 269,254 | ||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid during the period for interest
|
$ | 613,694 | $ | 677,792 | ||||
Cash
paid during the period for income taxes
|
$ | 90,517 | $ | 115,949 |
SUPPLEMENTAL SCHEDULE OF
NON-CASH INVESTING AND FINANCING ACTIVITIES
On
Feburary 12, 2009, the Company issued a warrant to purchase 1,500,000 shares at
$0.25 per share as part of the consideration under a Consulting Agreement
entered into on May 12, 2008.
A $15,000
non-cash expense was recognized in 2008 and was included in accounts payable and
accrued expenses.
The
accompanying notes are an integral part of these financial
statements.
5
BrandPartners
Group, Inc. and Subsidiaries
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE A –
NATURE OF BUSINESS AND BASIS OF PRESENTATION
The
accompanying consolidated financial statements of BrandPartners Group, Inc.
(“BrandPartners”) and subsidiaries (the “Company”) have been prepared by the
Company pursuant to the rules of the Securities and Exchange Commission (“SEC”)
for quarterly reports on Form 10-Q and do not include all of the information and
note disclosures required by accounting principles generally accepted in the
United States of America for annual financial statements and should be read in
conjunction with our consolidated financial statements and notes for the fiscal
year ended December 31, 2008 filed with the SEC on Form 10-K. The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and include all adjustments (consisting of normal recurring adjustments), which
are, in the opinion of management, necessary for a fair presentation of
financial position, results of operations and cash flows. The
consolidated statements of operations for the nine and three months ended
September 30, 2009 are not necessarily indicative of the results expected for
the entire year.
Subsequent
events have been evaluated through the filing date of the unaudited consolidated
financial statements.
BrandPartners
operates through its wholly-owned subsidiaries:
BrandPartners
Retail, Inc.
|
“Brand
Retail”
|
Building
Partners, Inc.
|
“Build
Partners”
|
BRAND
RETAIL
Brand
Retail was formerly known as Willey Brothers, Inc. On January 16,
2001, the Company acquired the stock of Brand Retail for a combination of cash,
common stock of the Company, options to purchase the Company’s stock, and notes
payable. The total purchase price was approximately $33.1
million.
BUILD
PARTNERS
Build
Partners was incorporated in Delaware in January of 2006 and provides general
contracting services.
Through
its subsidiaries, the Company provides integrated products and services to the
financial services industry and other retail markets. Those products
and services include:
|
·
|
Strategic
retail positioning and branding
|
|
·
|
Environmental
design and constructions services
|
|
·
|
Retail
merchandising analysis, display systems and
signage
|
|
·
|
Point-of-sale
communications and marketing
programs
|
These
products and services are offered as a complete turnkey package or as individual
offerings, based upon the client’s needs.
RISK
We cannot
determine at the present time when or if any of these subsidiaries will remain
or be profitable in the future. We have relied and continue to rely
upon cash payments from our operating subsidiaries and debt borrowings to, among
other things, pay creditors, maintain capital and meet our operating
requirements. Regulations, legal restrictions, and contractual
agreements could restrict any needed payments from our
subsidiaries. If we were unable to receive cash from our
subsidiaries, or from any operating subsidiaries that we may acquire in the
future or to satisfy our loan covenants, our operations and financial condition
would be materially and adversely affected.
6
BrandPartners
Group, Inc. and Subsidiaries
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The
accounting policies followed by the Company are set forth in Note B to the
Company’s consolidated financial statements in its Form 10-K for December 31,
2008.
NOTE B –
INVENTORIES, NET
Inventories
are priced at the lower of cost (determined by the weighted-average method,
which approximates first-in, first-out) or market. Inventories
consist of the following at:
September 30, 2009
|
December 31, 2008
|
|||||||
(unaudited)
|
||||||||
Finished
goods
|
$ | 332,789 | $ | 351,931 | ||||
Raw
materials
|
155,514 | 341,058 | ||||||
Work
in process
|
855 | 32,314 | ||||||
$ | 489,158 | $ | 725,303 | |||||
Less
- Reserves
|
(123,534 | ) | (85,191 | ) | ||||
Total
Inventories, Net
|
$ | 365,624 | $ | 640,112 |
NOTE C –
GOODWILL AND DEFERRED FINANCING COSTS
Goodwill
represents the excess of the purchase price over the fair value of the net
assets acquired. We evaluate the recoverability and measure the
potential impairment of goodwill under the Accounting Standards Codification
(“ASC”) ASC 350 “Intangibles-Goodwill and
Other”. ASC 350
requires that the Company analyze goodwill for impairment on at least an annual
basis or if such an event or change in circumstances occur. In
assessing the recoverability of our goodwill, management must make certain
assumptions regarding estimated future cash flows and other factors to determine
its fair value. If the calculated fair value of the goodwill is less
than its carrying value, an impairment loss is recognized in an amount equal to
the difference. The fair value of the reporting unit is reconciled to
the Company’s current market capitalization based upon the two year stock price
average. For the nine months ended September 30, 2009 and 2008, no impairment
loss was recognized.
Deferred
financing costs are being amortized on a straight-line basis over three to seven
years, which represents the life of the related debt.
7
BrandPartners
Group, Inc. and Subsidiaries
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE D –
RECENT ACCOUNTING PRONOUNCEMENTS
On July
1, 2009, the Accounting Standards Codification became FASB’s officially
recognized source of authoritative U.S. generally accepted accounting principles
applicable to all public and non-public non-governmental agencies, superseding
existing FASB, AICPA, EITF and related literature. Rules and interpretive
releases of the SEC under the authority of federal securities law are also
sources of authoritative GAAP for SEC registrants. All other accounting
literature is considered non-authoritative. The switch to the ASC affects the
way companies refer to U.S. GAAP in financial statements and accounting
policies. Citing particular content in the ASC involves specifying the unique
numeric path to the content through the Topic, Section and Paragraph
structure.
In May
2009, the FASB issued SFAS 165 “Subsequent Events,” which
was subsequently incorporated into FASB ASC topic 855 “Subsequent Events.” This ASC
establishes general standards of accounting for and disclosures of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. In particular, this ASC sets forth the period after
the balance sheet date during which management of a reporting entity
should
evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, the circumstances under which an entity
should recognize events or transactions occurring after the balance sheet date
in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. In
accordance with this ASC, an entity should apply the requirements to interim or
annual financial periods ending after June 15, 2009. Subsequent events were
evaluated through November 19, 2009 which is the date the financial statements
were issued. The impact of adoption of this ASC did not have a material impact
on the results of operations or financial position of the
Company.
8
BrandPartners
Group, Inc. and Subsidiaries
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE E –
SHORT TERM DEBT
September 30, 2009
|
December 31, 2008
|
|||||||
(unaudited)
|
||||||||
Revolving
Credit Facility
|
$ | 1,231,205 | $ | - | ||||
Capital
lease, current portion
|
19,741 | 20,753 | ||||||
Put
warrant (1)
|
24,300 | 12,150 | ||||||
Total
Short Term Debt
|
$ | 1,275,246 | $ | 32,903 |
On May 5,
2005, the Company negotiated a credit facility (the “Facility”) with a
commercial
lender. The
Facility provides for the following:
|
·
|
$2,000,000
Term Loan, which required 36 equal monthly
payments
|
|
·
|
$5,000,000
Revolving Line of Credit
|
|
·
|
Prime
Interest Rate on Term Loan principal not subject to
LIBOR
|
|
·
|
Prime
Rate interest plus 25 basis points (0.25%) on Revolving Line of Credit
Loan principal not subject to LIBOR
|
|
·
|
LIBOR
equals LIBOR plus 275 basis points
(2.75%)
|
Under the
terms of the agreement, the Company is required to maintain certain financial
covenants and ratios. At September 30, 2009, the Company was not in
compliance with the covenants and ratios. The Facility expires on
April 30, 2010, pursuant to an extension negotiated on March 30,
2009. On September 30, 2009, LIBOR was 0.25%, and the adjusted
interest rate was 3.75% for the revolving line of credit. At
September 30, 2009, approximately $1.2 million was available under the line of
credit. On May 5, 2008, the $2,000,000 Term Loan was paid in
full.
On March
22, 2007, certain of the financial covenants were waived and
adjusted. As part of the waiver agreement, the amount available under
the Revolving Line of Credit was adjusted to be the
lesser of (1) $5 million or (2) 70% of acceptable accounts receivable, plus 50%
of the cost in excess of billings (capped at $1 million), less an available
reserve of $250,000. The
Prime Rate interest premium was increased to 50 basis points (0.50%) for the
Revolving Line of Credit and to 25 basis (0.25%) points for the Term Loan
principal.
On
November 17, 2009, the Company received a waiver of certain financial covenants
from its commercial lender. Additionally, the Company has been in active
negotiations with its subordinated lender on restructuring its subordinated debt
facility. As a part of these ongoing negotiations on November 17, 2009, the
Company and its wholly owned subsidiaries entered into a Waiver and Amendment
Agreement with its subordinated lender whereby it received a waiver of certain
financial covenants and the original promissory note as issued and subsequently
amended was further modified to provide that effective as of September 30, 2009,
interest on the note shall accrue on the accreted principal amount of the note
at the rate of 18% per annum, of which 12% per annum shall be paid in cash on
each interest payment date and 6% per annum shall be paid on each interest
payment date by addition to the accrued and unpaid interest to the principal
outstanding under the note. The interest payment originally payable on
September 30, 2009 will now be payable on January 15, 2010 under the waiver and
amendment agreement.
(1)
|
The
put warrant is related to the subordinated promissory note in the
principal amount of $5,000,000, which is discussed further in Note F
(2).
|
9
BrandPartners
Group, Inc. and Subsidiaries
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE F –
LONG TERM DEBT
Long Term
Debt consists of the following:
September 30, 2009
|
December 31, 2008
|
|||||||
(unaudited)
|
||||||||
Capital
lease (1)
|
$ | 37,393 | $ | 52,959 | ||||
Note
payable (2)
|
5,000,000 | 5,000,000 | ||||||
Interest
payable
|
1,818,551 | 1,615,835 | ||||||
6,855,944 | 6,668,794 | |||||||
Less
capital lease current portion (1)
|
(19,741 | ) | (20,753 | ) | ||||
Total
Long Term Debt
|
$ | 6,836,203 | $ | 6,648,041 |
|
(1)
|
The
Company leases the telephone system for its main location and other
equipment under capital leases which commenced in 2006. The
leases expire in 2009 and 2011. The economic substance of the
leases is that the Company is financing the acquisition of certain assets
through the leases, and accordingly, they are recorded in the Company’s
assets and liabilities. The lease agreements contain a bargain purchase
option at the end of the lease term. For a complete listing of the
Company’s capital leases see the Company’s Form 10-K as of December 31,
2008.
|
|
(2)
|
A
subordinated promissory note (“the Note”) in the principal amount of
$5,000,000 was issued on October 22, 2001 by an unrelated third
party. The Note bears interest at 16% per annum, with 12%
payable quarterly in cash and 4% being accreted to the unpaid principal
(“PIK amount”). The terms of the Note were modified effective
March 30, 2009 whereby the maturity date was extended to October 29, 2010,
at which time the principal and all PIK amounts of approximately $7.1
million will be due. Under the terms of the amendment, the Company will be
required to make a mandatory prepayment of $1 million on or prior to July
31, 2010. If the Company fails to make the timely payment of $1 million,
the accreted principal amount of the Note will then bear interest at a
rate of 17% per annum with interest of 13% per annum payable in accordance
with the term of the Note and interest of 4% accruing. Under
the terms of the Note, the Company is required to maintain certain
financial covenants and is not in compliance as of September 30,
2009.
|
On
November 17, 2009, the Company received a waiver of certain financial covenants
from its commercial lender. Additionally, the Company has been in active
negotiations with its subordinated lender on restructuring its subordinated debt
facility. As a part of these ongoing negotiations on November 17, 2009, the
Company and its wholly owned subsidiaries entered into a Waiver and Amendment
Agreement with its subordinated lender whereby it received a waiver of certain
financial covenants and the subordinated promissory note (“the Note”) as issued and
subsequently amended was further modified to provide that effective as of
September 30, 2009, interest on the Note shall accrue on the accreted principal
amount of the Note at the rate of 18% per annum, of which 12% per annum shall be
paid in cash on each interest payment date and 6% per annum shall be paid on
each interest payment date by addition to the accrued and unpaid interest to the
principal outstanding under the Note. The interest payment originally
payable on September 30, 2009 will now be payable on January 15, 2010 under the
waiver and amendment agreement.
Concurrently
and in connection with the 2001 issuance of the Note, the Company issued 405,000
warrants to purchase common stock of the Company at $0.01 per
share. The warrants expire on October 11, 2011 and can be “put” to
the Company.
The
warrant transaction has been treated as a debt discount and has been amortized
to interest expense over prior periods. Changes to the future fair
value of the “put warrants” are recorded in accordance with ASC 815 and charged
to selling, general and administrative expenses. As of
September 30, 2009 and December 31, 2008, the liability of the put warrant has
been disclosed in the amounts of $24,300 and $12,150, respectively, under Short
Term Debt (Note E).
10
BrandPartners
Group, Inc. and Subsidiaries
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
If the
Company is unable to pay the Put Warrant repurchase price, the Put Note can be
issued to the holder of the warrants. That Put Note would have the
following characteristics:
|
a)
|
Interest
rate of 18% per annum
|
|
b)
|
Due
and payable on October 29, 2010
|
|
c)
|
No
financial covenants
|
11
BrandPartners
Group, Inc. and Subsidiaries
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE G –
FAIR VALUE MEASUREMENTS
Effective
January 1, 2008, we adopted ASC 820 “Fair Value Measurements and
Disclosures”. ASC 820 clarifies the definition of fair value, prescribes
methods for measuring fair value, and establishes a fair value hierarchy to
classify the inputs used in measuring fair value as follows:
Level
1-Inputs are unadjusted quoted prices in active markets for identical assets or
liabilities available at the measurement date.
Level
2-Inputs are unadjusted quoted prices for similar assets and liabilities in
active markets, quoted prices for identical or similar assets and liabilities in
markets that are not active, inputs other then quoted prices that are
observable, and inputs derived from or corroborated by observable market
data.
Level
3-Inputs are unobservable inputs which reflect the reporting entity’s own
assumptions on what assumptions the market participants would use in pricing the
asset or liability based on the best available information.
The
adoption of ASC 820 did not have a material impact on our fair value
measurements.
The
following tables present our assets and liabilities that are measured at fair
value on a recurring basis and are categorized using the fair value hierarchy.
The fair value hierarchy has three levels based on the reliability of the inputs
used to determine fair value.
Fair Value Measurements at Reporting Date Using
|
||||||||||||||||
Quoted Prices in
|
||||||||||||||||
Active Markets for
|
Significant Other
|
Significant
|
||||||||||||||
Identical Assets
|
Observable Inputs
|
Unobservable
|
||||||||||||||
Description
|
September 30, 2009
|
(Level 1)
|
(Level 2)
|
Inputs (Level 3)
|
||||||||||||
Liabilities
- Put warrant (See Note E)
|
$ | 24,300 | $ | 24,300 | ||||||||||||
Total
|
$ | 24,300 | $ | 24,300 | $ | - | $ | - |
NOTE H –
SIGNIFICANT CUSTOMERS
For the
nine months ended September 30, 2009, one customer accounted for approximately
24% of the Company’s revenue. For the three months ended September 30, 2009, one
customer accounted for approximately 23% of the Company’s
revenue. Accounts receivable for this customer as of September 30,
2009 were approximately $0.4 million. For the nine months ended
September 30, 2008, one customer accounted for approximately 19% of the
Company’s revenue. For the three months ended September 30, 2008,
three customers accounted for approximately 15%, 12% and 11% of the Company’s
revenue, respectively. Accounts receivable for these customers as of September
30, 2008 were $1.6 million.
12
BrandPartners
Group, Inc. and Subsidiaries
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE I –
COMMITMENTS AND CONTINGENCIES
As of
September 30, 2009, the Company had booked orders, consisting of signed
contracts not yet completed, for approximately $7.7 million.
The
Company has provided various representations, warranties and other standard
indemnifications in the ordinary course of business, in agreements to acquire
and sell business assets and in financing arrangements. The Company
is subject to various legal proceedings and claims, which arise in the ordinary
course of business. Management believes the ultimate liability with respect to
these contingent obligations will not have a material effect on the Company’s
financial position, results of operations or cash flows.
NOTE J –
STOCK-BASED COMPENSATION
The
Company did not grant any stock options for the nine months ending September 30,
2009 and 2008, nor did any options fully vest.
For the
nine month period ended September 30, 2009, the Company issued an aggregate of
2,900,000 shares of restricted common stock to officers and directors as well as
employees of its wholly-owned subsidiary BrandPartners Retail, Inc. pursuant to
the Company’s 2004 Stock Incentive Plan, of which 300,000 shares were
subsequently cancelled. The Company also issued 2,000,000 shares of restricted
common stock as consideration for consulting and/or service agreements that were
entered into in May 2009 and September 2009.
In 2008,
the Company awarded 4,750,000 shares of restricted common stock to key officers,
employees and directors in accordance with the Company’s 2004 Stock Incentive
Plan, of which 1,212,500 shares were subsequently cancelled.
Compensation
expense for the number of shares issued is recognized over the vesting
period. For the nine and three month period ended September 30, 2009,
this expense totaled approximately $178,000 and $81,000, respectively. For the
nine and three month period ended September 30, 2008, this expense totaled
approximately $74,000 and $31,000, respectively.
NOTE K –
INCOME TAXES
At
September 30, 2009, the Company utilized net operating losses (“NOL’s”) to
reduce its exposure to federal income tax expense.
The
Company has NOL’s of approximately $9.0 million available to offset future
taxable income. These NOL’s expire at various dates through
2028. At December 31, 2008, the Company had deferred tax assets of
approximately $4.1 million. The deferred tax assets consist primarily
of net operating loss carry-forwards and previously accrued
reserves. Realization of deferred tax assets is dependent upon future
earnings, if any, the timing and amount of which is
uncertain. Accordingly, the deferred tax assets have been fully
offset by a valuation allowance of the same amount. Pursuant to
Section 382 of the Internal Revenue Code, NOL carry-forwards may be limited in
use in any given year in the event of a significant change in
ownership.
There may
be state tax expense in certain states where the tax statutes do not recognize
or do limit the use of NOL’s.
13
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS.
LIQUIDITY
AND CAPITAL RESOURCES
As of
September 30, 2009, the Company had a working capital deficit of approximately
$2.3 million, stockholders’ equity of approximately $1.7 million, and a current
ratio of approximately .67 to 1. At December 31, 2008, the Company
had a working capital deficit of approximately $1.6 million, stockholders’
equity of approximately $2.7 million, and a current ratio of approximately .87
to 1.
As of
September 30, 2009, the Company had cash of approximately
$341,000. As of December 31, 2008, the Company had cash of
approximately $1.3 million.
For the
nine months ended September 30, 2009, the net cash used in operating activities
amounted to approximately $2.4 million, which resulted primarily from a net loss
before non-cash expenses of $0.8 million and a decrease in (i) billings in
excess of costs and estimated earnings of $4.7 million and (ii) accounts payable
and accrued expenses of $2.1 million. These negative variances were partially
offset by the decrease in (i) accounts receivable of $4.6 million and (ii) costs
and estimated earnings in excess of billings of $0.3 million.
Due to
the nature of the project accounting used for large contracts, all vendor and
labor costs are recorded on the balance sheet until the associated revenue is
recognized. Upon revenue recognition, the associated expenses and
profit are transferred to the statement of operations.
The
accompanying consolidated balance sheets include the following captions
at:
September 30,
|
December 31,
|
|||||||||||
2009
|
2008
|
Difference
|
||||||||||
(unaudited)
|
||||||||||||
Costs
and estimated earnings in excess of billings
|
$ | 681,491 | $ | 986,616 | $ | (305,125 | ) | |||||
Billings
in excess of costs and estimated earnings
|
(3,070,509 | ) | (7,790,590 | ) | 4,720,081 | |||||||
Totals
|
$ | (2,389,018 | ) | $ | (6,803,974 | ) | $ | 4,414,956 |
Investing
activities used cash flows to principally fund the acquisition of equipment
amounting to approximately $27,000 during the nine month period ended September
30, 2009.
Financing
activities cash flows include borrowings from short-term debt of $1.2 million,
proceeds from long-term debt of $203,000 and issuance of common stock of $30,000
during the nine month period ended September 30, 2009.
14
INDEBTEDNESS
BRANDPARTNERS
CREDIT FACILITY
BrandPartners
negotiated a credit facility (the “Facility”) with a commercial lender effective
May 5, 2005. The Facility provides for the following:
|
·
|
$2,000,000
Term Loan, which required 36 equal monthly
payments
|
|
·
|
$5,000,000
Revolving Line of Credit
|
|
·
|
Prime
Interest Rate on Term Loan principal not subject to
LIBOR
|
|
·
|
Prime
Rate interest plus 25 basis points (0.25%) on Revolving Line of Credit
Loan principal not subject to LIBOR
|
|
·
|
LIBOR
equals LIBOR plus 275 basis points
(2.75%)
|
Under the
terms of the agreement, the Company is required to maintain certain financial
covenants and ratios. The Facility expires on April 30, 2010,
pursuant to an extension negotiated on March 30, 2009. On September
30, 2009, LIBOR was 0.25%, and the adjusted interest rate was 3.75% for the
revolving line of credit. At September 30, 2009, approximately $1.2
million was available under the line of credit. On May 5, 2008, the
$2,000,000 Term Loan was paid in full.
On March
22, 2007, certain of the financial covenants were waived and
adjusted. As part of the waiver agreement, the amount available under
the Revolving Line of Credit was adjusted to be the lesser of (1) $5 million or
(2) 70% of acceptable accounts receivable, plus 50% of the cost in excess of
billings (capped at $1 million), less an available reserve of $250,000. The
Prime Rate interest premium was increased to 50 basis points (0.50%) for the
Revolving Line of Credit and to 25 basis (0.25%) points for the Term Loan
principal.
Effective
March 30, 2009, the Company entered into an amendment to its Loan Agreement with
its commercial lender whereby its revolving facility was renewed. The line of
credit as renewed continues to be a demand facility subject to the terms and
conditions of the Company’s Loan Agreement and Revolving Line of
Credit.
If for
any reason the Company defaults on the Facility, the amount outstanding under
the Facility becomes due and payable, and the lender has the right to proceed
against the collateral granted to secure the indebtedness under the Facility,
including substantially all of the assets of BrandPartners. Under the terms of
the Facility, the Company is required to maintain certain financial covenants
and is not in compliance as of September 30, 2009.
On
November 17, 2009, the Company received a waiver of certain financial covenants
from its commercial lender. Additionally, the Company has been in active
negotiations with its subordinated lender on restructuring its subordinated debt
facility. As a part of these ongoing negotiations on November 17, 2009, the
Company and its wholly owned subsidiaries entered into a Waiver and Amendment
Agreement with its subordinated lender whereby it received a waiver of certain
financial covenants and the original promissory note as issued and subsequently
amended was further modified to provide that effective as of September 30, 2009,
interest on the note shall accrue on the accreted principal amount of the note
at the rate of 18% per annum, of which 12% per annum shall be paid in cash on
each interest payment date and 6% per annum shall be paid on each interest
payment date by addition to the accrued and unpaid interest to the principal
outstanding under the note. The interest payment originally payable on
September 30, 2009 will now be payable on January 15, 2010 under the waiver and
amendment agreement.
15
THE BRAND
RETAIL SUBORDINATED NOTE PAYABLE
A
subordinated promissory note (“the Note”) in the principal amount of $5,000,000
was issued on October 22, 2001 to an unrelated third party. The Note
bears interest at 16% per annum, with 12% payable quarterly in cash and 4% being
accreted to the unpaid principal (“PIK amount”). The Note matures on
October 29, 2010, at which time the principal and all PIK amounts of
approximately $7.1 million will be due. Under the terms of the Note,
the Company is required to maintain certain financial covenants and is not in
compliance as of September 30, 2009.
Concurrently
and in connection with the 2001 issuance of the Note, the Company issued 405,000
warrants to purchase common stock of the Company at $0.01 per
share. The warrants expire on October 11, 2011 and can be “put” to
the Company.
The
warrant transaction has been treated as a debt discount and has been amortized
to interest expense over prior periods. Changes to the future fair
value of the “put warrants” are recorded in accordance with ASC 815 and charged
to selling, general and administrative expenses.
At
September 30, 2009 and December 31, 2008, the Company had a liability of $24,300
and $12,150 related to the “put warrants,” respectively.
If the
Company is unable to pay the Put Warrant repurchase price, the Put Note can be
issued to the holder of the warrants. That Put Note would have the
following characteristics:
|
(a)
|
Interest
rate of 18% per annum
|
|
(b)
|
Due
and payable on October 29, 2010
|
|
(c)
|
No
financial covenants
|
As part
of the extension and amendment, the terms of the Note were modified so that the
Company will be required to make a mandatory prepayment of $1 million on or
prior to July 31, 2010. If the Company fails to make timely prepayment of $1
million, the accreted principal amount of the Note will then bear interest at a
rate of 17% per annum with interest of 13% per annum payable quarterly in cash
and 4% being accreted to the unpaid principal (“PIK amount”).
While we
are seeking to modify terms of the facility, if we are unable to modify same or
make payment on this facility at any time or at the maturity date of same, or if
we are unable to abide by the financial covenants of the facility, we may be
deemed in default of the subordinate loan agreement.
On
November 17, 2009, the Company received a waiver of certain financial covenants
from its commercial lender. Additionally, the Company has been in active
negotiations with its subordinated lender on restructuring its subordinated debt
facility. As a part of these ongoing negotiations on November 17, 2009, the
Company and its wholly owned subsidiaries entered into a Waiver and Amendment
Agreement with its subordinated lender whereby it received a waiver of certain
financial covenants and the Note as issued and subsequently amended was further
modified to provide that effective as of September 30, 2009, interest on the
Note shall accrue on the accreted principal amount of the Note at the rate of
18% per annum, of which 12% per annum shall be paid in cash on each interest
payment date and 6% per annum shall be paid on each interest payment date by
addition to the accrued and unpaid interest to the principal outstanding under
the Note. The interest payment originally payable on September 30, 2009
will now be payable on January 15, 2010 under the waiver and amendment
agreement.
16
LIQUIDITY
ISSUES
During
the nine months ended September 30, 2009, the Company used net cash to support
its business operations of approximately $2,440,000 versus $150,000 for the same
period in the prior year. As of September 30, 2009, the Company had access to
approximately $1.2 million under its revolving line of credit. Also, the Company
will be required to make a mandatory prepayment of $1 million on the
subordinated promissory note (“the Note”) on or prior to July 31, 2010. If the
Company fails to make the timely payment of $1 million, the accreted principal
amount of the Note will then bear interest at a rate of 17% per annum with
interest of 13% per annum payable in accordance with the term of the Note and
interest of 4% accruing. Further, the Company is required to pay in
full approximately $7.1 million (principal plus PIK amount) on October 24, 2010,
the maturity date of the Note.
The
Company’s ability to generate cash flow from operations sufficient to make
scheduled payments on its debts as they become due will depend on its future
performance and the Company’s ability to successfully implement business and
growth strategies. The Company’s performance will also be affected by
prevailing economic conditions. Many of these factors are beyond the
Company’s control. If future cash flows and capital resources are
insufficient to meet the Company’s debt obligations and commitments, the Company
may be forced to reduce or delay activities and capital expenditures, obtain
additional equity capital or restructure or refinance its debt. In
the event that the Company is unable to do so, the Company may be left without
sufficient liquidity, and it may not be able to meet its debt service
requirements. In such a case, an event of default would occur and
could result in all of the Company’s indebtedness becoming immediately due and
payable.
COMMITMENTS
AND CONTINGENCIES
As of
September 30, 2009 booked orders for the Company, consisting of signed contracts
not yet completed, totaled approximately $7.7 million.
The
Company has provided various representations, warranties and other standard
indemnifications in the ordinary course of business, in agreements to acquire
and sell business assets and in financing arrangements. The Company
is subject to various legal proceedings and claims, which arise in the ordinary
course of business.
Management
believes the ultimate liability with respect to these contingent obligations
will not have a material effect on the Company’s financial position, results of
operations or cash flows.
OFF
BALANCE SHEET ARRANGEMENTS
We have
no off-balance sheet arrangements that provide financing, liquidity, market or
credit risk support or involve leasing, hedging or research and development
services for our business or other similar arrangements that may expose us to
liability that is not expressly reflected in the financial statements, except
for facilities operating leases.
As of
September 30, 2009, we did not have any relationships with unconsolidated
entities or financial partnerships, often referred to as structured finance or
special purpose entities, established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited
purposes. As such we are not subject to any material financing, liquidity,
market or credit risk that could arise if we had engaged in such
relationships.
17
RESULTS
OF OPERATIONS
NINE
MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2008
REVENUES: Revenues
are recognized as products and services are delivered. If the Company
is managing the project for its customers, these services and their related
products are accounted for using the percentage of completion
method.
Revenues
for the first nine months of 2009 compared to the first nine months of 2008
decreased by 6%, or approximately $1.5 million. The decrease was due to various
projects that were anticipated to close with prospective clients that were
either delayed or put on hold due to the economic environment.
COST OF
REVENUES: Due to the change in our product and services mix, our cost
of revenues as a percentage of revenue was 77% for the first nine months of 2009
as compared to 72% for the first nine months of 2008.
SELLING,
GENERAL & ADMINISTRATIVE EXPENSES: SG&A amounted to
approximately $6.1 million in the first nine months of 2009 versus $6.0 million
for the same period in 2008. The increased SG&A expense was principally due
an increase in consulting and other professional fees of approximately $640,000
which was offset by a decrease in compensation, depreciation and travel expenses
of approximately $485,000.
OPERATING
INCOME (LOSS): The Company incurred an operating loss for the first
nine months of 2009 of approximately $0.4 million compared to operating income
of $1.5 million for the first nine months of 2008, a decrease of $1.9 million
due to the factors mentioned above.
INTEREST
EXPENSE, NET: Interest expense, net for the nine months ended
September 30, 2009 decreased by approximately $63,000 or 7.1% versus the same
period in 2008 primarily due to a lower level of outstanding borrowed funds on
the line of credit in 2009 versus 2008. The average outstanding level of
borrowed funds under the line of credit amounted to approximately $0.7 million
and $2.3 million for the nine months ended September 30, 2009 and
2008.
NET
INCOME (LOSS): The Company incurred a net loss for the first nine
months of 2009 of approximately $1.3 million compared to net income of $582,000
for the first nine months of 2008, a decrease of $1.9 million.
THREE
MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30,
2008
REVENUES: Revenues
for the third quarter of 2009 compared to the third quarter of 2008 decreased by
39%, or approximately $3.5 million, which was primarily due to certain projects
which were anticipated to close with prospective clients being either delayed or
put on hold as previously discussed.
COST OF
REVENUES: Our cost of revenues as a percentage of revenue was 93% for
the third quarter of 2009 as compared to 77% for the third quarter of 2008 due
to the change in our products and services mix.
SELLING,
GENERAL & ADMINISTRATIVE EXPENSES: SG&A amounted to
approximately $1.9 million in the third quarter of 2009 and 2008,
respectively.
OPERATING
INCOME (LOSS): The Company incurred an operating loss for the third
quarter of 2009 of approximately $1.6 million compared to operating income of
$0.1 million for the third quarter of 2008, a decrease of $1.7 million due to
the factors mentioned above.
INTEREST
EXPENSE, NET: Interest expense, net for the third quarter of 2009
decreased by approximately $25,000 or 8% versus the same period in 2008 as
previously discussed.
18
NET
INCOME (LOSS): The Company incurred a net loss for the third quarter
of 2009 of approximately $1.9 million compared to a net loss of $233,000 for the
third quarter of 2008, a decrease of $1.6 million.
HOLDING
COMPANY AND OPERATING SUBSIDIARIES
We
conduct our business through our wholly-owned subsidiaries (Brand Retail and
Build Partners). We have relied and continue to rely on cash payments
from our operating subsidiaries and debt borrowings to, among other things, pay
creditors, maintain capital, and meet our operating
requirements. Regulations, legal restrictions, and contractual
agreements could restrict any needed payments from our present subsidiaries and
any other operating subsidiaries we may subsequently acquire. If we
were unable to receive cash funds from any of our operating subsidiaries or to
satisfy our loan covenants, our operations and financial condition would be
materially and adversely affected.
19
STOCK
PRICE FLUCTUATIONS
The
market price of our common stock may be affected by our operating results,
changes in our business and management, changes in the industries in which we
conduct our business, and general and market conditions. In addition,
the stock markets commonly experience price and volume
fluctuations. These fluctuations have affected stock prices of many
companies without regard to their specific operating performance. The
price of our common stock may fluctuate significantly in the
future.
INFLATION
We do not
believe that inflation has had a material effect on the Company’s results of
operations.
FORWARD-LOOKING
STATEMENTS
This
Quarterly Report on Form 10-Q contains forward-looking statements within the
meaning of section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, that are not historical
facts, but rather reflect the Company’s current expectations concerning future
results and events. The words “believes,” “anticipates,” “expects,”
and similar expressions, which identify forward-looking statements, are subject
to certain risks, uncertainties and factors, including those which are economic,
competitive, and technological, that could cause actual results to differ
materially from results forecasted or anticipated. Such factors
include, among others:
|
·
|
The
continued services of James Brooks as Chairman of the Board and Chief
Executive Officer of BrandPartners Group and other key senior management
members.
|
|
·
|
Our
ability to identify appropriate acquisition candidates, finance and
complete such acquisitions and successfully integrate the acquired
businesses
|
|
·
|
Changes
in our business strategies or development
plans
|
|
·
|
Competition
|
|
·
|
Our
ability to grow within the financial services
industry
|
|
·
|
Our
ability to successfully penetrate other
markets
|
|
·
|
General
economic and business conditions, both nationally and in the regions in
which we operate
|
|
·
|
Our
ability to pass vendor cost increases on to our
customers
|
Readers
are cautioned not to place undue reliance on those forward-looking statements,
which speak only as of the date hereof. The Company undertakes no
obligation to republish revised forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of the
unanticipated events. Readers are also urged to carefully review and
consider the various disclosures made by the Company in this report, as well as
the Company’s periodic reports on Form 10-K, Form 10-Q, and other filings with
the Securities and Exchange Commission.
20
ITEM
1A. RISK FACTORS
For
information regarding factors that could affect the Company’s results of
operations, financial condition or liquidity, see the risk factors discussed
under “Management's Discussion and Analysis of Financial Condition and Results
of Operations” in Item 7 of BrandPartners’ most recent Annual Report on
Form 10-K. See also “Forward-Looking Statements,” included in Item 2
of this Quarterly Report on Form 10-Q. There have been no material
changes from the risk factors previously disclosed in BrandPartner’s most recent
Annual Report on Form 10-K.
ITEM
3. QUALITATIVE AND QUANTATIVE DISCLOSURES ABOUT MARKET
RISK
Our
Revolving Credit Facility exposes us to the risk of earnings or cash flow loss
due to changes in market interest rates. A portion of the Revolving
Credit Facility accrues interest at LIBOR plus an applicable
margin. The balance of the Facility accrues interest at the Wall
Street Journal’s published prime rate. For a description of the terms
of the Term Loan and Revolving Credit Facility, see “Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Liquidity and
Capital Resources” above.
The table
below provides information on our market sensitive financial instruments as of
September 30, 2009.
Principal
Balance
|
Weighted Average
Interest Rate at
September 30,
2009
|
|||||||
Revolving
Credit Facility
|
$ | 1,231,205 | 3.75 | % |
A 1%
change in the weighted average interest rate would amount to an additional
annual interest cost of approximately $12,000.
ITEM
4T. CONTROLS AND PROCEDURES
Evaluation
of the Company’s Disclosure and Internal Controls
The
Company evaluated the effectiveness of the design and operation of its
“disclosure controls and procedures” pursuant to Rule 13a-15(b) of the
Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period
of this quarterly report on Form 10-Q for the third quarter ended September 30,
2009. This evaluation was done with the participation of management,
under the supervision of our Chief Executive Officer (“CEO) and the Chief
Accounting Officer (“CAO”).
Limitations
on the Effectiveness of Controls
A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are being
met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of a simple error or
mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control. The design of any system of controls also is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Over time,
controls may be inadequate because of changes in conditions, or the degree of
compliance with the policies or procedures may deteriorate. Because
of the inherent limitations in a cost effective control system, misstatements
due to error or fraud may occur and may not be detected. The Company
conducts periodic evaluations of its internal controls to enhance, where
necessary, its procedures and controls.
21
Conclusions
Based on
our evaluation, the CEO and the CAO concluded that the registrant’s disclosures,
controls, and procedures are effective as of the end of such period to ensure
that information required to be disclosed in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Security Exchange Commission rules and
forms.
Internal
Control over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred
during our most recent fiscal quarter ended September 30, 2009 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
ITEM
6. EXHIBITS
10.1
|
Form
of Waiver letter agreement dated as of November 17, 2009, between the
Company, BrandPartners Retail, Inc., Grafico Incorporated and TD Bank,
N.A..
|
10.2
|
Form
of Waiver and Amendment No. 4 to Note between the Company, BrandPartners
Retail, Inc., Grafico Incorporated and Corporate Mezzanine II, L.P. dated
as of November 17, 2009.
|
31.1
|
Certification
of Chief Executive Officer.
|
31.2
|
Certification
of Chief Accounting Officer.
|
32.1
|
Certification
of Chief Executive Officer and Chief Accounting Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
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.
BRANDPARTNERS
GROUP, INC.
|
||
Dated:
November 19, 2009
|
||
By:
|
/S/ James F. Brooks
|
|
James
F. Brooks
|
||
Chief
Executive Officer and President
|
||
Dated:
November 19, 2009
|
||
By:
|
/S/ Jane E. Quilliam
|
|
Jane
E. Quilliam
|
||
Chief
Accounting
Officer
|
23