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

o	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: 000-51200

ClearPoint Business Resources, Inc.
(Exact name of registrant as specified in its charter)

Delaware	30-0429020
State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)

1600 Manor Drive, Suite 110, Chalfont, Pennsylvania 18914
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (215) 997-7710

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o

Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b 2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding as of November 16, 2009
Common Stock			14,251,964

CLEARPOINT BUSINESS RESOURCES, INC.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION			1

ITEM 1. FINANCIAL STATEMENTS.			1

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.			51

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.			80

ITEM 4T. CONTROLS AND PROCEDURES.			81

PART II— OTHER INFORMATION			81

ITEM 1. LEGAL PROCEEDINGS.			84

ITEM 1A. RISK FACTORS.			86

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.			86

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.			87

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.			87

ITEM 5. OTHER INFORMATION.			87

ITEM 6. EXHIBITS.			88

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

- ASSETS

	September 30, 2009		December 31, 2008
	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	72,031	$	960,145
Accounts receivable, net of allowance for doubtful accounts of $5,352,202 and $5,774,921 at September 30, 2009 and December 31, 2008, respectively		812,777		1,073,420
Unbilled revenue		122,210		127,685
Notes Receivable – StaffChex		214,617		—
Prepaid expenses and other current assets		17,008		217,882
Refundable federal income tax		26,128		26,128
TOTAL CURRENT ASSETS		1,264,771		2,405,260
EQUIPMENT, FURNITURE AND FIXTURES, net		903,357		1,296,689
INTANGIBLE ASSETS, net		95,833		133,333
DEFERRED FINANCING COSTS, net		219,797		536,444
NOTES RECEIVABLE, long term		267,640		—
RESTRICTED CASH		25,000		—
OTHER ASSETS		27,337		709,404
TOTAL ASSETS	$	2,803,735	$	5,081,130

See notes to condensed consolidated financial statements

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

- LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) –

	September 30, 2009			December 31, 2008
	(Unaudited)
CURRENT LIABILITIES
Current portion of long-term debt	$	2,826,538		$	5,950,209
Accounts payable		3,031,179			2,725,659
Accrued expenses and other current liabilities		2,958,938			3,336,117
Accrued payroll and related taxes		612,793			744,758
Current portion of retirement benefit payable		84,420			146,900
Current portion of deferred revenue		1,036,105			996,104
Current portion of accrued restructuring costs – related party		64,177			256,709
Current portion of accrued restructuring costs		116,963			186,055
TOTAL CURRENT LIABILITIES		10,731,113			14,342,511
ACCRUED RESTRUCTURING COSTS, net of current		192,532			—
LONG-TERM DEBT, net of current		14,709,011			10,306,054
OTHER LIABILITIES		194,659			—
LIABILITY FOR WARRANTS ISSUED		1,214,907			1,213,433
DEFERRED REVENUE, net of current		249,026			996,104
RETIREMENT BENEFIT PAYABLE, net of current		135,646			135,646
TOTAL LIABILITIES		27,426,894			26,993,748

Commitments and contingencies

STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock, $.0001 par value, authorized 1,000,000 shares; none issued		—			—
Common stock, $.0001 par value (60,000,000 shares authorized September 30, 2009 and December 31, 2008; 14,251,964 shares issued and outstanding September 30, 2009 and December 31, 2008)		1,425			1,425
Additional paid in capital		32,653,909			32,576,500
Accumulated deficit		(57,278,493	)		(54,490,543	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(24,623,159	)		(21,912,618	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	2,803,735		$	5,081,130

See notes to condensed consolidated financial statements

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -

(UNAUDITED)

	For the three months ended September 30,						For the nine months ended September 30,
	2009			2008			2009			2008
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
REVENUE	$	1,354,818		$	3,221,006		$	3,943,274		$	30,731,896
COST OF SERVICES		—			2,083,638			—			27,737,278
GROSS PROFIT		1,354,818			1,137,368			3,943,274			2,994,618
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		1,342,920			1,986,500			3,868,291			13,936,110
RESTRUCTURING EXPENSE		—			—			—			2,100,422
DEPRECIATION AND AMORTIZATION		157,787			218,709			471,093			503,405
IMPAIRMENT OF GOODWILL		—			—			—			16,821,586
FIXED ASSET IMPAIRMENT		—			—			—			1,022,210
LOSS ON DISPOSAL OF FIXED ASSETS		—			—			4,708			—
(LOSS) FROM OPERATIONS		(145,889	)		(1,067,841	)		(400,818	)		(31,389,115	)
OTHER INCOME (EXPENSE)
Interest income		3,333			11,843			7,393			11,843
Interest expense and factoring fees		(590,275	)		(540,997	)		(1,603,951	)		(1,447,113	)
Mark to market gain (loss) on derivative instruments		41,854			26,063			(1,474	)		26,063
Gain on restructuring of debt		—			—			—			686,797
Other income (expense)		—			(991	)		386,225			199,195
Gain (loss) on sale of subsidiary		—			—			—			(1,294,220	)
Loss on extinguishment of debt		(1,175,325	)		—			(1,175,325	)		—
TOTAL OTHER INCOME (EXPENSE)		(1,720,413	)		(504,082	)		(2,387,132	)		(1,817,435	)
LOSS BEFORE INCOME TAXES		(1,866,302	)		(1,571,923	)		(2,787,950	)		(33,206,550	)
INCOME TAX EXPENSE		—			—			—			5,007,180
NET LOSS	$	(1,866,302	)	$	(1,571,923	)	$	(2,787,950	)	$	(38,213,730	)
NET LOSS PER COMMON SHARE
Basic and Diluted	$	(0.13	)	$	(0.11	)	$	(0.20	)	$	(2.84	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic and Diluted		14,251,964			13,905,961			14,251,964			13,462,042

See notes to condensed consolidated financial statements

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED

- STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) -

(UNAUDITED)

										Total
					Additional					Stockholders’
	Common Stock				Paid in		Accumulated			Equity
	Shares		Amount		Capital		(Deficit)			(Deficit)
Balance as of December 31, 2008		14,251,964	$	1,425	$	32,576,500	$	(54,490,543	)	$	(21,912,618	)
Issuance of warrants		—		—		30,333		—			30,333
Stock based compensation		—		—		47,076		—			47,076
Net loss		—		—		—		(2,946,128	)		(2,946,128	)
Balance as of September 30, 2009		14,251,964	$	1,425	$	32,653,909	$	(57,436,671	)	$	(24,781,337	)

See notes to condensed consolidated financial statements

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the nine months ended September 30,
	2009			2008
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)	$	(2,787,950	)	$	(38,213,730	)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Deferred income taxes		—			5,007,180
Depreciation and amortization		659,529			1,525,613
Loss on disposal of fixed assets		4,708			—
Impairment of goodwill		—			16,821,586
Provision for (reduction in) doubtful accounts		(422,719	)		2,625,309
Provision for franchise receivables		—			1,638,879
Loss on sale of subsidiary		—			1,294,220
Issuance of warrants		30,333			57,619
Stock-based compensation		47,076			33,661
Gain on M & T restructuring forgiveness of debt		—			(866,480	)
Issuance of stock		—			120,967
Issuance of stock to related party		—			250,000
Interest expense converted to note payable		—			92,248
Interest expense – original issue discount and warrant liabilities		355,135			186,095
Mark to market loss (gain) on derivative instruments		1,474			(26,063	)
Loss on extinguishment of debt - Comvest		1,175,325			—
Changes in operating assets and liabilities:
Decrease in accounts receivable		201,105			13,075,904
Decrease in unbilled revenue		5,475			2,046,060
(Increase) decrease in prepaid expenses and other current assets		200,874			(352,702	)
(Increase) decrease in other assets		51,313			(8,962	)
Increase in accounts payable		305,520			1,011,576
(Decrease) in accrued expense and other current liabilities		(192,099	)		(1,640,422	)
(Decrease) in accrued payroll and related taxes		(131,965	)		(2,608,775	)
Increase (decrease) in deferred revenue		(707,077	)		2,241,235
Increase (decrease) in accrued restructuring costs		(69,092	)		676,197
(Decrease) in retirement benefits payable		(62,480	)		—
Total adjustments to net loss		1,452,435			43,200,945
Net cash provided by (used in) operating activities		(1,335,515	)		4,987,215
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment, furniture and fixtures		(44,968	)		(547,790	)
(Increase) in restricted cash		(25,000	)		—
Net cash (used in) investing activities		(69,968	)		(547,790	)
CASH FLOWS FROM FINANCING ACTIVITIES
(Repayments) of long-term debt		(612,367	)		(10,557,181	)
Proceeds from issuance of ComVest debt		—			8,000,000
(Repayments) of ComVest term note		(7,654,010	)		(475,347	)
Borrowings on revolving credit facility – ComVest		13,355,023			530,000
(Repayments) of revolving credit facility – ComVest		(4,503,496	)		(530,000	)
Proceeds from issuance of common stock		—			100,000
Principal (repayments) on notes payable – other		—			(150,000	)
Fees incurred in refinancing		(67,781	)		(693,082	)
Net cash provided by (used in) financing activities		517,369			(3,775,610	)
Net increase (decrease) in cash and cash equivalents		(888,114	)		663,815
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		960,145			1,993,641
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	72,301		$	2,657,456

See notes to condensed consolidated financial statements

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	For the nine months ended September 30,
	2009		2008
	(Unaudited)		(Unaudited)
Cash paid during the period for:
Interest	$	564,822	$	912,068
Income taxes	$	—	$	—

SUPPLEMENTAL SCHEDULE OF NON-CASH, INVESTING AND FINANCING ACTIVITIES:

Non cash transactions:
ComVest Warrants issued and amortizable Original Issue Discount	$	—	$	634,000
ComVest financing and amortizable Original Issue Discount	$	—	$	1,000,000
ALS accrued interest converted to note payable (See Note 11 – Debt Obligations)	$	—	$	132,661
ComVest accrued interest and fees converted to note payable	$	91,191	$	—
Offset of other assets against long-term debt	$	630,754	$	—

See notes to condensed consolidated financial statements

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — GOING CONCERN:

Historically, ClearPoint Business Resources, Inc. (“ClearPoint” or the “Company”) has funded its cash and liquidity needs through cash generated from operations and debt financing. At September 30, 2009, the Company had an accumulated deficit of $57,278,493 and working capital deficiency of $9,466,342. For the nine months ended September 30, 2009, the Company incurred a net loss of $2,787,950. Although the Company restructured its debt and obtained new financing in the third quarter of 2009 (see Note 11 — Debt Obligations), cash projected to be generated from operations may not be sufficient to fund operations and meet debt repayment obligations during the next twelve months. In order to meet its future cash and liquidity needs, the Company may be required to raise additional financing and restructure existing debt. There is no assurance that the Company will be successful in obtaining additional financing and restructuring its existing debt. If the Company does not generate sufficient cash from operations, raise additional financing and restructure existing debt, there is substantial doubt about the ability of the Company to continue as a going concern. The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 2 — ORGANIZATION AND BASIS OF PRESENTATION:

The accompanying unaudited condensed consolidated financial statements of the Company and its wholly-owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission (“SEC”).

ClearPoint provides comprehensive workforce management technology solutions throughout the United States, including its iLabor technology platform (“iLabor” or the “iLabor Network”), vendor management services (“VMS”) and staff augmentation programs. Since its inception, ClearPoint has enhanced its platform through organic growth and the integration of acquisitions. Previously, ClearPoint provided various temporary staffing services as both a direct provider and as a franchisor. During the year ended December 31, 2008, ClearPoint transitioned its business model from a temporary staffing provider through a network of branch-based offices or franchises to a provider that manages clients’ temporary staffing needs through its open Internet portal-based iLabor Network. Under the new business model, ClearPoint acts as a broker for its clients and network of temporary staffing suppliers using iLabor. The Company now derives its revenues from fees related to iLabor Network, royalty fees related to contracts entered into under the previous business model and VMS fees. All operations are centralized at its offices in Chalfont, Pennsylvania.

On February 12, 2007, ClearPoint Resources, Inc., ClearPoint’s wholly-owned subsidiary (“CPR”), consummated a merger (the “Merger”) with Terra Nova Acquisition Corporation (“Terra Nova”), a blank check company. As a result, CPBR Acquisition, Inc. (“CPBR”), a Delaware corporation and wholly-owned subsidiary of Terra Nova, merged with CPR. At the closing of the Merger, CPR stockholders were issued an aggregate of 6,051,549 shares of Terra Nova common stock.

The merger agreement also provides for CPR’s original stockholders to receive additional performance payments, in the form of cash and/or shares, contingent upon the future performance of the combined company’s share price. The performance payments are payable in a combination of cash and shares. No such payments have been made to date and none are yet due. Upon the closing of the Merger, Terra Nova changed its name to ClearPoint Business Resources, Inc.

Upon consummation of the Merger, $30.6 million was released from the Terra Nova Trust Fund to be used by the combined company. After payments totaling approximately $3.3 million for professional fees and other direct and indirect costs related to the Merger, the net proceeds amounted to $27.3 million, all of which were used by ClearPoint as follows: (i) to retire the outstanding debt to Bridge Healthcare Finance, LLC and Bridge Opportunity Finance, LLC (collectively, “Bridge”), of $12.45 million, (ii) to pay an early debt retirement penalty in the amount of $1.95 million to Bridge, (iii) to pay for the redemption of warrants related to its credit facility with Bridge in the amount of $3.29 million and (iv) to partially fund the acquisition of ALS, LLC and certain other related transaction costs.

The Merger was accounted for under the purchase method of accounting as a reverse acquisition in accordance with accounting principles generally accepted in the United States of America for accounting and financial reporting purposes. Under this method of accounting, Terra Nova was treated as the “acquired” company for financial reporting purposes. In accordance with guidance applicable to these circumstances, this Merger was considered to be a capital transaction in substance. Accordingly, for accounting purposes, the Merger was treated as the equivalent of ClearPoint issuing stock for the net monetary assets of Terra Nova, accompanied by a recapitalization.

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The Company’s accounting policies are in accordance with accounting principles generally accepted in the United States of America. Outlined below are those policies considered particularly significant.

(a)	Basis of Presentation:

The condensed consolidated financial information as of September 30, 2009 and for the nine month periods ended September 30, 2009 and 2008 have been prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to provide for fair presentation. The condensed consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, previously filed with the SEC.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of consolidated financial position as of September 30, 2009, and consolidated results of operations, and cash flows for the three and nine month-periods ended September 30, 2009 and 2008, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

(b)	Use of Estimates:

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates.

(c)	Revenue Recognition:

The Company recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the sales price is determinable, and collectability is reasonably assured. Revenue earned but not billed is recorded and accrued as unbilled revenue. In 2008, the Company transitioned from a short and long term temporary staffing provider through a network of branch based offices to a provider that manages clients’ temporary staffing spend through its open Internet portal based iLabor network, as well as its closed client embedded VMS system.

The Company evaluated the criteria outlined in Accounting Standards Codification (“ASC”) Topic 605-45, Principal Agent Considerations, in determining that it was appropriate to record the revenue from the iLabor technology platform on a net basis after deducting costs related to suppliers for sourcing labor, which represent the direct costs of the contingent labor supplied, for clients. Generally, the Company is not the primarily obligated party in iLabor transactions and the amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two.

Prior to 2008 and for the three months ended March 31, 2008, the Company’s primary major source of revenue was the temporary placement of workers. This revenue was recognized when earned and realizable and therefore when the following criteria had been met: (a) persuasive evidence of an arrangement exists; (b) services have been rendered; (c) the fee is fixed or determinable; and (d) collectability is reasonably assured. Revenue is recognized in the period in which services are provided based on hours worked by the workers. As a result of changes in the Company’s business model, in 2008, the Company recognized revenue from four major sources:

For the three months ended March 31, 2008, the Company recorded revenue from its temporary staffing operations, permanent placement fees, and temp-to-hire fees by formerly Company-owned and franchised operations. Temporary staffing revenue and the related labor costs and payroll taxes were recorded in the period in which the services were performed. Temp-to-hire fees were generally recorded when the temporary employee was hired directly by the customer. ClearPoint reserved for billing adjustments, principally related to overbillings and client disputes, made after year end that related to services performed during the fiscal year. The reserve was estimated based on historical adjustment data as percent of sales. Permanent placement fees were recorded when the candidate commenced full-time employment and, if necessary, sales allowances were established to estimate losses due to placed candidates not remaining employed for the permanent placement guarantee period, which was typically 30-60 days;

During the quarter ended June 30, 2008, the Company completed its transition from the temporary staffing provider model to its iLabor technology platform. Under this new model, the Company records revenue on a net fee basis after deducting costs paid to suppliers for sourcing labor for the Company’s clients. The Company acts as a broker for its clients and the Company’s network of temporary staffing suppliers. Revenue from the Company’s iLabor Network where it electronically procures and consolidates buying of temporary staffing for clients is recognized on a net basis;

·	The Company records royalty revenues when earned based upon the terms of the agreements with Select, StaffChex and Townsend Careers, as defined below (see Note 4 – Business and Asset Acquisitions and Dispositions and Licensing Agreements); and

·	VMS revenue, which consists of management fees recognized on a net basis and recorded as the temporary staffing service is rendered to the client.

The Company also recorded deferred revenue on the balance sheet as of September 30, 2009 and December 31, 2008. This amount of deferred revenue is being recognized ratably over the term of the agreement reached with Select (see Note 4 – Business and Asset Acquisitions and Dispositions and Licensing Agreements).

(d)	Accounts Receivable:

The Company’s trade accounts receivable are generally uncollateralized. Management closely monitors outstanding accounts receivable and provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of all receivables. Receivables are written off when deemed uncollectible.

(e)	Vendor Managed Services Receivables and Payables:

The Company manages networks of temporary staffing suppliers or vendors on behalf of clients and receives a fee for this service. The Company’s obligation to pay the vendor is conditioned upon receiving payment from the client for services rendered by the vendor’s personnel. As the right of offset between client and vendor does not exist, the receivable from the client which is included in accounts receivable, and payable to the vendor, which is included as a liability, are not offset and are recorded on a gross basis. Included in the Company’s gross accounts receivable at September 30, 2009 and December 31, 2008 were VMS gross receivables of $702,942 and $1,084,320, respectively. Included in the Company’s accounts payable at September 30, 2009 and December 31, 2008 were VMS payables of $1,253,142 and $1,173,068, respectively.

(f)	Workers’ Compensation:

Prior to February 29, 2008, the Company was responsible for the workers’ compensation costs for its temporary and regular employees and was related to domestic workers’ compensation claims ($250,000 or $500,000 per claim, depending on the policy). The Company accrued the estimated costs of workers’ compensation claims based upon the expected loss rates within the various temporary employment categories provided by the Company and the estimated costs of claims reported but not settled and claims incurred but not reported. As a result of the estimated costs, the Company estimated that the insurance carriers will issue rebates based on its findings. During 2008, the Company sold all of its ownership interest in its wholly owned subsidiary, Clearpoint HRO, LLC (“HRO”) (see Note 4 – Business and Asset Acquisitions and Dispositions and Licensing Agreements).

(g)	Equipment, Furniture and Fixtures:

Equipment, furniture, and fixtures are stated at cost. Depreciation and amortization is provided using the straight-line method over the estimated useful asset lives of three (3) to seven (7) years. The Company also provides for amortization of leasehold improvements over the lives of the respective lease term or the service life of the improvement, whichever is shorter.

(h)	Intangible Assets:

Definite lived intangible assets are amortized over their expected lives of two (2) to five (5) years. The Company’s identifiable intangible asset with a definitive life is comprised of a covenant not to compete.

(i)

Goodwill:

In accordance with ASC Topic 350-20-35, goodwill was not amortized and was assigned to specific reporting units and reviewed for possible impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicated that the reporting unit’s carrying amount of goodwill was greater than its fair value. As a result of the change in the Company’s business model in 2008 and the loss of cash flows related to the prior business model, the Company determined that an impairment of goodwill existed during 2008 and recognized an impairment charge of $16,821,586 on March 31, 2008. As of March 31, 2008, goodwill was fully impaired.

(j)	Advertising Expense:

The Company expenses advertising costs in the period in which they are incurred. Advertising expenses for the three and nine months ended September 30, 2009 were $7,638 and $22,528, respectively. Advertising expenses for the three and nine months ended September 30, 2008 were $20,445 and $52,006, respectively.

(k)	Deferred Financing Costs:

Deferred financing costs consist of legal, banking, and other related fees that were capitalized in connection with obtaining various loans and are being amortized to interest expense over the life of the related loan. Deferred financing costs of $219,707 at September 30, 2009 and $536,444 at December 31, 2008 were net of accumulated amortization of $84,870 and $197,002, respectively. On August 14, 2009, the Company entered into a modification of the ComVest Term Loan and Revolver that was accounted for as a debt extinguishment. As a result of the debt extinguishment, the unamortized balance of the deferred financing costs attributable to the ComVest term loan in the amount of $258,991 were written off and included in the loss on extinguishment of debt.

Amortization of financing costs for the three and nine months ended September 30, 2009 was $54,326 and $188,437, respectively. Amortization of financing costs for the three and nine months ended September 30, 2008 was $67,056 and $90,640, respectively.

(l)	Income Taxes:

The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under ASC Topic 740, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized.

(m)	Stock-based Employee Compensation

The Company accounts for stock-based employee compensation in accordance with the recognition and measurement provisions of ASC Topic 718, “Compensation -Stock Compensation,” related to share-based payment transactions, including employee stock options, to be recognized in the financial statements. This guidance is contained in ASC Topic 718-25-2 In addition, the Company adheres to the guidance set forth within SEC Staff Accounting Bulletin No. 107 (“SAB 107”), which certain SEC rules and regulations and provides interpretations with respect to the valuation of share-based payments for public companies.

(n)	Loss Per Share:

The Company accounts for earnings per share pursuant with ASC Topic 260, “Earnings Per Share,” which requires disclosure on the financial statements of “basic” and “diluted” earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus potentially dilutive securities outstanding for each year. Potentially dilutive securities include stock options and warrants and shares of common stock issuable upon conversion of the Company's convertible notes.

Diluted loss per share for the nine months ended September 30, 2009 and 2008 was the same as basic loss per share, since the effects of the calculation were anti-dilutive due to the fact that the Company incurred losses for all periods presented. The following securities, presented on a common share equivalent basis, were excluded from the per share computations:

	Nine Months Ended September 30,
	2009		2008
Stock Options		945,600		607,800
Warrants		4,050,825		14,915,825
		4,996,425		15,523,625

(o)	Impairment of Long Lived Assets:

Long-lived assets such as equipment, furniture and fixtures, and amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset many not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

(p)	Concentration of Credit Risk:

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, and accounts receivable and unbilled revenues.

(i)	Cash, Cash Equivalents and Restricted Cash:

The Company places its cash and cash equivalents with financial institutions. It is the Company’s policy to monitor the financial strength of these institutions on a regular basis and perform periodic reviews of the relative credit rating of these institutions to lower its risk. At times, during the nine months ended September 30, 2009 and 2008, respectively, the Company’s cash and cash equivalent balances exceeded the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $100,000 which was increased to $250,000 during 2008 on interest bearing accounts of/in financial institution. The FDIC also removed its $100,000 limit on non-interest bearing accounts all together. The Company has not experienced any losses in such accounts, and it believes it is not exposed to any significant credit risk on cash and cash equivalents. The balance in interest bearing accounts at September 30, 2009 was less than the FDIC limit of $250,000 and there were no uninsured cash and cash equivalents at September 30, 2009.

At September 30, 2009, the Company had $25,000 of restricted cash, which is classified as a non-current asset. The restricted cash serves as collateral for an irrevocable standby letter of credit that provides financial assurance that the Company will fulfill its obligations with respect to the settlement of Sunz Insurance (see Note 18 – Litigation). The cash is held in custody by the issuing bank, is restricted as to withdrawal or use, and is currently invested in money market funds. Income from these investments is paid to the Company.

(ii)	Accounts Receivable, Unbilled Revenues and Revenues:

The Company does not require collateral or other security to support customer receivables or unbilled revenues. One (1) customer account accounted for 11.4% of the accounts receivable balance as of September 30, 2009. The Company believes that credit risk is dispersed and low due to the large number of customers in different regions and different industries.

(q)	Reclassifications:

Certain amounts from the prior year financial statements have been reclassified to conform to the current year presentation. Accounts receivable – related party in the amount of $336,670 was reclassified to accounts receivable for the year ended December 31, 2008. Additionally, certain items were reclassified in the condensed consolidated statement of cash flow for the nine months ended September 30, 2008. These reclassifications had no effect on the Company’s consolidated net loss or stockholders’ deficit.

(r)	Recent Accounting Pronouncements:

Recently Adopted Standards

In September 2009, the Company adopted ASC Topic 105-10-05 (“ASC 105-10-05”), which provides for the FASB Accounting Standards Codification™ (the “Codification”) to become the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (“GAAP”) to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. The Codification does not change GAAP, but combines all authoritative standards into a comprehensive, topically organized online database. ASC 105-10-05 explicitly recognizes rules and interpretative releases of the Securities and Exchange Commission (“SEC”) under federal securities laws as authoritative GAAP for SEC registrants. Subsequent revisions to GAAP will be incorporated into the ASC through Accounting Standards Updates (“ASU”). ASC 105-10-05 is effective for interim and annual periods ending after September 15, 2009, and was effective for the Company in the third quarter of 2009. The adoption of ASC 105-10-05 impacted the Company’s financial statement disclosures, as all references to authoritative accounting literature were updated to and in accordance with the Codification. The adoption of ASC 105-10-05 did not have a material impact on the Company’s consolidated results of operations and financial condition.

In September 2006, the FASB issued an accounting standard codified within ASC Topic 820, “Fair Value Measurements and Disclosures.” This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This standard does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. This standard was effective for fiscal years beginning after November 15, 2007, and all interim periods within those fiscal years. In February 2008, the FASB delayed the effective date of this standard for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The implementation of this standard for financial assets and liabilities, effective January 1, 2008, and for non-financial assets and non-financial liabilities, effective January 1, 2009, did not have a material impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued an accounting standard codified within ASC Topic 805, “Business Combinations,” which changed the accounting for business acquisitions. This standard establishes principles and requirements for how the acquirer recognizes and measures assets acquired and liabilities assumed in a business combination, as well as, goodwill acquired and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of a business combination. In April 2009, the FASB issued an accounting standard codified within ASC Topic 805 which amends the provisions related to the initial recognition and measurement, subsequent measurement, and disclosure of assets and liabilities from contingencies in a business combination. The standard requires that contingent assets acquired and liabilities assumed be recognized at fair value on the acquisition date if the fair value can be reasonably estimated. If the fair value cannot be reasonably estimated, the contingent asset or liability would be measured in accordance with ASC Topic 450 “Contingencies.” Both standards were effective for the Company as of January 1, 2009 and will be applied prospectively to business combinations entered into on or after that date.

In December 2007, the FASB issued an accounting standard codified with ASC Topic 810, “Consolidation.” This standard requires that a noncontrolling interest in a subsidiary be reported as equity and that the amount of consolidated net income attributable to the parent and to the noncontrolling interest should be separately identified in the consolidated financial statements. The Company has applied the provisions of this standard prospectively, as of January 1, 2009, except for the presentation and disclosure requirements, which were applied retrospectively for all periods presented. The adoption of this standard did not have an impact on the Company’s consolidated financial statements.

In March 2008, the FASB issued an accounting standard related to disclosures about derivative instruments and hedging activities, codified within ASC Topic 815, Derivatives and Hedging.” This new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The adoption of this standard, effective January 1, 2009, did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued an accounting standard codified within ASC Topic 820, “Fair Values Measurements and Disclosures,” which provides additional guidance in determining whether a market is active or inactive and whether a transaction is distressed. It is applicable to all assets and liabilities that are measured at fair value and requires enhanced disclosures. This standard is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. The adoption of this standard in the second quarter of 2009 did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued an accounting standard codified within ASC Topic 825, “Financial Instruments,” that requires disclosures of the fair value of financial instruments that are not reflected in the consolidated balance sheet at fair value whenever summarized information for interim reporting periods is presented. This standard requires disclosure of the methods and significant assumptions used to estimate the fair value of financial instruments and describe the changes in methods and significant assumptions, if any, during the period. This standard is effective for interim reporting periods ending after June 15, 2009. Because this standard applies only to financial statement disclosure, the adoption did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued an accounting standard codified within ASC Topic 320, “Investments – Debt and Equity Securities.” This standard provides a framework to perform another-than-temporary impairment analysis, in compliance with GAAP, which determines whether the holder of an investment in a debt or equity security, for which changes in fair value are not regularly recognized in earnings, should recognize a loss in earnings when the investment is impaired. Additionally, this standard amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. The standard is effective for interim reporting periods ending after June 15, 2009. The Company adopted this standard during the quarter ended June 30, 2009. The adoption did not have a material impact on the Company’s consolidated financial statements.

In May 2009, the FASB issued an accounting standard codified within ASC Topic 855, “Subsequent Events,” which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this standard provides guidance on the period after the balance sheet date and the circumstances under which management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements. The standard also requires certain disclosures about events or transactions occurring after the balance sheet date. This standard is effective for interim and annual reporting periods ending after June 15, 2009. The Company adopted the provisions of this standard in the quarter ended June 30, 2009. The adoption did not have a material impact on the Company’s consolidated financial statements.

Standards Issued But Not Yet Adopted

In June 2009, the FASB issued Statement No. 166, “Accounting for Transfers of Financial Assets - an amendment of FASB Statement No. 140” (“SFAS 166”), which has yet to be codified in the ASC. SFAS 166 amends the existing guidance on transfers of financial assets. The amendments include: (1) eliminating the qualifying special-purpose entity concept, (2) a new unit of account definition that must be met for transfers of portions of financial assets to be eligible for sale accounting, (3) clarifications and changes to the derecognition criteria for a transfer to be accounted for as a sale, (4) a change to the amount of recognized gain or loss on a transfer of financial assets accounted for as a sale when beneficial interests are received by the transferor, and (5) extensive new disclosures. SFAS 166 is effective for new transfers of financial assets occurring on or after January 1, 2010. The adoption of SFAS 166 is not expected to have a material impact on the Company’s consolidated financial statements; however, it could impact future transactions entered into by the Company.

In June 2009, the FASB issued Statement No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”), which has yet to be codified in the ASC. SFAS 167 amends the consolidation guidance for variable-interest entities under FIN 46(R), “Consolidation of Variable Interest Entities - an interpretation of ARB No. 51.” The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS 167 is effective January 1, 2010. The Company is currently evaluating the impact of this standard on its consolidated financial statements

In August 2009, the FASB issued Accounting Standards Update 2009-05, “Fair Value Measurements and Disclosures (Topic 820)—Measuring Liabilities at Fair Value” (“ASU 2009-05”). ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value of such liability using one or more of the techniques prescribed by the update. ASU 2009-05 is effective for reporting periods (including interim periods) beginning after August 26, 2009, which would be the fourth quarter of 2009 for the Company. The Company is currently evaluating the impact of the pending adoption this ASU on its consolidated financial statements.

In October 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue Arrangements, (amendments to ASC Topic 605, Revenue Recognition)” (“ASU 2009-13”) and ASU 2009-14, “Certain Arrangements That Include Software Elements, (amendments to ASC Topic 985, Software)” (“ASU 2009-14”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-14 removes tangible products from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company is currently evaluating the impact of the adoption of these ASUs on its consolidated financial statements.

NOTE 4 — BUSINESS AND ASSET ACQUISITIONS AND DISPOSITIONS AND LICENSING AGREEMENTS:

(a)	Asset Purchase Agreement with StaffChex

On February 28, 2008, ClearPoint entered into an Asset Purchase Agreement (the “StaffChex Purchase Agreement”) with StaffChex, Inc. (“StaffChex”), a privately owned company. Under the StaffChex Purchase Agreement, StaffChex acquired all of the rights to customer accounts, as defined in the StaffChex Purchase Agreement, related to the temporary staffing services serviced by (i) KOR Capital, LLC (“KOR”) pursuant to the Franchise Agreement – Management Agreement, dated August 30, 2007, and (ii) StaffChex Servicing, LLC (“StaffChex Servicing”), an affiliate of StaffChex, pursuant to the Exclusive Supplier Agreement, dated September 2, 2007. The prior agreements with StaffChex Servicing and KOR were terminated on February 28, 2008 and March 5, 2008, respectively. The Company did not incur any early termination penalties in connection with such terminations. On March 5, 2008, ClearPoint completed the disposition and transfer of all of the customer accounts. In consideration for the customer accounts acquired from ClearPoint, StaffChex issued to ClearPoint 15,444 shares of common stock of StaffChex, and ClearPoint is entitled to receive an additional 15,568 shares of StaffChex common stock, pursuant to the earnout provisions set forth in the StaffChex Purchase Agreement, which have been met. As a result, the Company is entitled to 31,012 shares (16.4%) of StaffChex’s outstanding stock, of which 15,568 shares have not been issued to the Company.

ClearPoint is using the cost accounting method to record earnings from this investment in StaffChex. In addition, ClearPoint entered into an iLabor agreement with StaffChex whereby StaffChex agreed to process its temporary labor requests through iLabor and to pay to ClearPoint 2.25% (such percentage subject to reduction based on meeting certain volume targets) of StaffChex’s total collections from its total billings under the acquired customer accounts for temporary staffing services (the “Royalty”).

On March 16, 2009, the Company and StaffChex entered into Amendment No. 1 to the iLabor agreement (the “Amendment”) pursuant to which the payment terms of the iLabor agreement were restated. The Amendment provides that the Company will pay StaffChex for client-approved billable work hours at the agreed-upon hourly rate with respect to such client. Royalties payable to the Company shall be calculated based on weekly collections. For weekly collections of less than $1.4 million, the Royalty is one and one-quarter percent (1.25%) and for weekly collections of more than $1.4 million, the Royalty is two percent (2%). These weekly payments commenced on March 18, 2009. In addition, StaffChex agreed to make 104 weekly payments of $4,096 followed by 52 weekly payments of $3,105 for past-due Royalties owed through February 28, 2009. Such additional payments commenced on June 3, 2009. The failure of StaffChex to make payments due pursuant to the iLabor agreement constitutes a material breach of the iLabor agreement. In the event of nonpayment, StaffChex will have a ten (10) day cure period to make any delinquent payments. If such payments remain outstanding following the cure period, StaffChex agreed to direct its affiliated receivables factoring company to make the required payment to the Company. In addition, the Amendment provides that StaffChex may not assign, convey, sell, transfer or lease the customer account property or the underlying customer agreements transferred to StaffChex without the prior written consent of the Company. Such consent will not be required in connection with a transaction occurring after February 28, 2012 and that is part of a sale of 100% of the stock of StaffChex or all or substantially all of its assets. The Employment Development Department (“EDD”) of the State of California placed a levy on Staffchex in the amount of $272,425, against the Royalties owed to the Company in connection with payroll taxes owed to the EDD by the Company. ClearPoint recognizes 1.25% of Staffchex cash receipts. For the three and nine months ended September 30,2009 ClearPoint recognized $171,257 and $487,295, respectively, in royalty fees. The Company negotiated an Installment Agreement on October 8, 2009, with the EDD whereby Staffchex will remit the first $25,000 of Royalties on a monthly basis to EDD. Staffchex is current on its remittances to EDD. As of September 30, 2009, Staffchex was delinquent on Royalty payments due to the Company in the amount of $10,390.

(b)	Sale of ClearPoint HRO

On March 5, 2008, ClearPoint completed the disposition and transfer of the balances of customer accounts related to its temporary staffing business. On February 7, 2008, CPR and HRO, a wholly owned subsidiary of CPR, entered into a Purchase Agreement (the “HRO Purchase Agreement”) with AMS Outsourcing, Inc. (“AMS”). Pursuant to the HRO Purchase Agreement, CPR sold all of its ownership interest of HRO to AMS for an aggregate purchase price payable in the form of an earnout payment equal to 20% of the earnings before interest, taxes, depreciation and amortization of the operations of HRO for a period of twenty four (24) months following February 7, 2008. As of September 30, 2009, no such earnout has been earned or received. Subsequent to the original estimated loss of $1,894,220 recorded on the sale of HRO, CPR recorded a $600,000 reversal of the originally estimated loss in the second quarter of 2008 in conjunction with the refinancing of debt owed to Manufacturers and Traders Trust Company (“M&T”) reducing the certificate of deposit sold.

The Company recorded a net loss in 2008 of $1,294,220 on the transaction as follows:

Assets sold:
Prepaid expenses	$	153,861
Certificate of deposit		900,000
Other current assets		1,128,271
Expected Workers’ Compensation Collateral Refunds		5,091,858
		7,273,990
Liabilities assumed:
Accrued payroll and related taxes		(3,838,611	)
Letter of credit – Workers compensation insurance policy		(1,500,000	)
Accrued expenses and other liabilities		(641,159	)
		(5,979,770	)
Loss on sale	$	(1,294,220	)

(c)	License Agreement

On February 28, 2008, CPR and ClearPoint Workforce, LLC (“CPW”), a wholly owned subsidiary of CPR, entered into a Licensing Agreement (the “Optos Licensing Agreement”) with Optos Capital, LLC (“Optos”), of which Christopher Ferguson, a principal stockholder of the Company, is the sole member. Pursuant to the Optos Licensing Agreement, the Company (i) granted to Optos a non-exclusive license to use the ClearPoint Property and the Program, both as defined in the Optos Licensing Agreement, which included certain intellectual property of CPR, and (ii) licensed and subcontracted to Optos the client list previously serviced by TZG Enterprises, LLC (“TZG”), a Delaware limited liability company controlled by J. Todd Warner, a former officer of the Company, pursuant to an Agreement dated August 13, 2007 (the “TZG Agreement”) and all contracts and contract rights for the clients included on such list. In consideration of the licensing of the Program, which was part of the ClearPoint Property, CPR was entitled to receive a fee equal to 5.2% of total cash receipts of Optos related to temporary staffing services. On April 8, 2008, the Optos Licensing Agreement was terminated. In consideration for terminating the Optos Licensing Agreement, CPR and Optos agreed that there would be a net termination fee for any reasonable net costs or profit incurred, if any, when winding up the operations associated with termination. The estimated net termination fee of $500,000 was recognized in selling, general and administrative expenses in 2008 and was included in accrued expenses at September 30, 2009 and December 31, 2008. The payment of the net termination fee is expected to be in the form of cash and shares of common stock of the Company. See Note 17 – Related Party Transactions for a description of the fees payable under the Optos Licensing Agreement recorded by the Company.

On April 8, 2008, CPR entered into a License Agreement dated April 8, 2008 (the “Select License Agreement”) with Koosharem Corp., doing business as Select Staffing (“Select”) and a Temporary Help Services Subcontract dated April 8, 2008 (the “Select Subcontract”) with Select. Pursuant to the Select License Agreement and the Select Subcontract, CPR was entitled to receive annually the first 10% of all gross billings of the subcontracted contracts up to $36 million of gross billings ($3.6 million per year to CPR) and whereby Select licensed use of the iLabor network in exchange for a $1.2 million payment ($900,000 paid on April 8, 2008 and $300,000 was payable on July 1, 2008, but was not paid). On July 29, 2008, Select and Real Time Staffing Services, Inc. (“Real Time”), filed a complaint (the “Select Litigation”) in the Superior Court of California (Santa Barbara County), against the Company alleging that the Company owed it $1,033,210 for services performed for the Company’s clients. On August 22, 2008, CPR, Select and Real Time entered into a Settlement Agreement and Release (the “Select Settlement Agreement”) pursuant to which each party released the others from all prior, existing and future claims including, without limitation, the parties’ claims with respect to the Select Litigation the Select License Agreement and the Select Subcontract. Pursuant to the Select Settlement Agreement, the parties also agreed (i) that CPR would retain the $900,000 paid to it under the Select License Agreement; (ii) to allocate between Select and CPR amounts paid or payable with respect to certain client accounts; (iii) to execute an amendment to the Select Subcontract (the “Subcontract Amendment”), as described below; and (iv) that Select would file the required documents to dismiss the Select Litigation with prejudice. In addition, Select and CPR agreed not to commence any future action arising from the claims released under the Select Settlement Agreement, and, on August 28, 2008, this lawsuit was dismissed. The monthly revenue fees are split between the parties as provided in the Select License Agreement. Effective September 21, 2008, licensing fees related to the Select License Agreement consisted of amortizing deferred revenue of $83,000 plus an additional $250,000 of cash paid by Select over the life of the contract, which was 28 months. As of September 30, 2009, Select was current in its payments to CPR.

The deferred revenue of $1,285,131 as of September 30, 2009, which has a remaining life of 15 months, was comprised of the remaining balance of the original $900,000 payment, cash received on behalf of Select and relief of certain accounts payable owed to Select as of the settlement date (see Note 18 – Litigation for further detail).

Pursuant to the Subcontract Amendment dated August 22, 2008, the Subcontract fee was amended to provide that Select would pay CPR, for twenty-eight consecutive months, 25% of each month’s gross sales generated by the customers and contracts described in the Select Subcontract as well as, without duplication, sales generated by certain locations in accordance with the Select Subcontract, subject to a maximum fee of $250,000 per month. The payments are subject to acceleration upon occurrence of certain breaches of the Select Subcontract or bankruptcy filings by Select. In addition, the term of the Select Subcontract was amended to provide that the term will expire upon the payment of all fees owed under the Select Subcontract, as amended.

On May 22, 2008, ClearPoint entered into an amendment to a Managed Services Agreement with Townsend Careers, LLC (“Townsend Careers”) to take over certain contracts that were being serviced out of ClearPoint’s former Baltimore, MD office. Under the terms of the agreement, Townsend Careers agreed to pay ClearPoint a royalty fee of 6% of billings.

NOTE 5 — PREPAID EXPENSES AND OTHER CURRENT ASSETS:

	September 30, 2009		December 31, 2008
	(Unaudited)
Prepaid insurance	$	2,694	$	125,410
Other current assets		14,314		92,472

	$	17,008	$	217,882

NOTE 6 — EQUIPMENT, FURNITURE AND FIXTURES:

	September 30, 2009			December 31, 2008
	(Unaudited)
Furniture and fixtures	$	40,078		$	29,150
Computer software and equipment		1,768,571			1,740,180
Leasehold improvements		9,201			9,201
		1,817,850			1,778,531
Less, accumulated depreciation		(914,493	)		(481,842	)
Equipment, furniture and fixtures, net	$	903,357		$	1,296,689

Depreciation expense for the three and nine months ended September 30, 2009 was $145,287 and $433,593, respectively. In March 2009, the Company recorded a loss of $4,708 as a result of the disposal of an asset. Depreciation expense for the three and nine months ended September 30, 2008 was $139,154 and $287,391, respectively. In March 2008, the Company recorded a loss of $1,022,210 as a result of the abandonment of leasehold improvements, furniture and fixtures and computer equipment resulting from termination of franchise agreements. During the nine months ended September 30, 2008, the Company removed $1,837,918 of fixed assets and $815,708 of accumulated depreciation as a result of this impairment.

NOTE 7 — INTANGIBLE ASSETS:

	September 30, 2009			December 31, 2008
	(Unaudited)
Covenant not to compete	$	250,000		$	250,000
Less, accumulated amortization		(154,167	)		(116,667	)
Intangibles, net	$	95,833		$	133,333

The covenant not to compete is being amortized over its five (5) year life. Amortization expense of intangible assets for the three and nine months ended September 30, 2009 and 2008 was $12,500 and $37,500, respectively. Amortization expense expected to be incurred for the fiscal years ending December 31, 2009, 2010 and 2011 is $50,000, $50,000 and $33,333, respectively.

NOTE 8 — OTHER ASSETS

	September 30, 2009		December 31, 2008
	(Unaudited)
Due from ALS	$	—	$	500,667
Long term portion of related party receivable		—		181,400
Security deposits		27,337		27,337
	$	27,337	$	709,404

NOTE 9 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:

	September 30, 2009		December 31, 2008
	(Unaudited)
Other accrued expenses	$	1,500,320	$	1,873,437
Accrued interest		332,152		—
Insurance premiums payable		626,466		962,680
Accrued termination fee - Optos		500,000		500,000
	$	2,958,938	$	3,336,117

NOTE 10 — ACCRUED RESTRUCTURING COSTS:

Effective June 29, 2007, the Company’s management approved a restructuring program to consolidate operations and reduce costs of its field and administrative operations. As part of the restructuring program, the Company closed 24 branch and administrative offices and eliminated approximately 75 positions. The Company initially recorded $1,902,000 of restructuring charges for costs of severance, related benefits and outplacement services related to the termination of these employees and $950,000 of charges relating to the early termination of office spaces leases for a total of $2,852,000 in 2007. The Company subsequently reduced the initial expense recorded in 2007 by $650,884 due to decreases in anticipated severance costs resulting in a net charge of $2,201,116. During the year ended December 31, 2007, the Company paid out $1,176,514. These expenses were present valued and accrued and were scheduled to be paid out over a one year period. During the year ended December 31, 2008, the Company paid out $678,865 related to the 2007 restructuring reserve and recognized a reduction of initially estimated restructuring costs of $196,994 due to severance and related benefits for which the Company believed it was no longer liable as a result of a breach of contract as well as $95,913 related to early termination settlements of office spaces. During the three and nine months ended September 30, 2009, the Company paid out $7,550 and $11,902, respectively, related to the 2007 reserve.

As a result of the sale of certain entities and the transition to the Company’s new business model, effective March 12, 2008, the Company’s management approved an additional restructuring program of its field and administrative operations. As part of the restructuring program, the Company closed its remaining branch and administrative office in Florida and eliminated approximately 20 positions. The Company initially recorded $314,709 of restructuring charges for costs of severance and related benefits to a related party (see Note 16 – Management and Employment Agreements and Note 17 – Related Party Transactions), $182,075 of restructuring charges for costs of severance, related benefits and outplacement services related to the termination of employees and $1,603,638 of charges relating to the early termination of office spaces leases for a total of $2,100,422. These expenses were present valued and accrued on a one time basis and were scheduled to be paid out over a three year period. During the year ended December 31, 2008, the Company paid out $1,252,917 and recognized a reduction of the initial recorded restructuring costs of $457,571 related to early termination settlements of office spaces related to the 2008 restructuring reserve. During the three and nine months ended September 30, 2009, the Company paid out $14,356 and $57,190, respectively, related to early termination of office space leases related to the 2008 restructuring reserve.

2007 Restructuring Reserve	Employee Separation Costs			Lease Termination Obligation			Total
Accrued restructuring costs at inception	$	1,902,000		$	950,000		$	2,852,000
Payments		(548,253	)		(628,261	)		(1,176,514	)
Reductions in costs previously accrued		(650,884	)		—			(650,884	)
Accrued restructuring costs at December 31, 2007		702,863			321,739			1,024,602
Payments		(505,869	)		(172,996	)		(678,865	)
Reductions in costs previously accrued		(196,994	)		(95,913	)		(292,907	)
Total accrued restructuring costs at December 31, 2008		—			52,830			52,830
Payments		—			(11,902	)		(11,902	)
Total accrued restructuring costs at September 30, 2009		—			40,928			40,928
Less: current portion		—			(40,928	)		(40,928	)
Total accrued restructuring costs – long-term	$	—		$	—		$	—

2008 Restructuring Reserve	Employee Separation Costs			Lease Termination Obligation			Total
Accrued restructuring costs at inception	$	182,075		$	1,603,638		$	1,785,713
Accrued restructuring costs at inception – related party		314,709						314,709
Payments		(182,075	)		(1,012,842	)		(1,194,917	)
Payments – related party		(58,000	)		—			(58,000	)
Reductions in costs previously accrued		—			(457,571	)		(457,571	)
Total accrued restructuring costs at December 31, 2008		—			133,225			133,225
Total accrued restructuring costs at December 31, 2008 – related party		256,709			—			256,709
Payments		—			(57,190	)		(57,190	)
Total accrued restructuring costs at September 30, 2009		—			76,035			76,035
Total accrued restructuring costs at September 30, 2009 – related party		256,709			—			256,709
Less: current portion		(64,177	)		(76,035	)		(140,212	)
Total accrued restructuring costs – long-term	$	192,532		$	—		$	192,532

NOTE 11 — DEBT OBLIGATIONS:

A summary of all debt is as follows:

	September 30, 2009		December 31, 2008
	(Unaudited)
Term Loan with ComVest due December 31, 2010. Principal and interest payments payable monthly bearing interest of 10% per annum (net of $0 and $1,124,468 OID at September 30, 2009 and December 31, 2008, respectively.	$	—	$	6,529,542
Revolver with ComVest due December 31, 2010. Interest payments payable monthly bearing interest of 7.250% per annum.		—		1,000,000
New Revolver with ComVest due December 31, 2010. Interest payments deferred until April 2010 bearing interest of 12% per annum.		9,942,718		—
M&T Loan modification and restructure agreement dated June 20, 2008. Principal payments begin January 1, 2011 in equal amounts over 36 months plus interest at 5% per annum.		4,741,185		4,994,379
Note payable monthly to Blue Lake Rancheria with a final, balloon payment due April 30, 2009. Interest of 10% per annum is payable quarterly. This note has been guaranteed by two of the principal stockholders of the Company. See Note Payable to Blue Lake Rancheria.		490,000		690,000
Subordinated notes payable in monthly installments starting March, 2010. The notes have an interest rate of 12% per annum.		550,000		550,000
Note payable to ALS, LLC. This note has an interest rate of 5%.		1,634,129		2,155,652
Note payable in monthly installments starting February, 2010, to unrelated individuals for purchase of the common stock of StaffBridge, Inc. Interest is calculated at 8% per annum.		177,517		336,690
		17,535,549		16,256,263
Add Original Issue Discount (OID)		—		1,124,468
Total principal payments of long term debt		17,535,549		17,380,731
Less: Current portion		2,826,538		5,950,209
		14,709,011		11,430,522
Less OID		—		(1,124,468	)
Long term debt, net of current and OID	$	14,709,011	$	10,306,054

Principal payments of long-term debt for each of the next five years and thereafter are as follows:


2009	$	2,012,434
2010		10,670,236
2011		1,072,916
2012		1,072,917
2013		1,072,917
Thereafter		1,634,129
	$	17,535,549

Loan Agreements with ComVest

Revolving Credit and Term Loan Agreement

On June 20, 2008, the Company entered into a Revolving Credit and Term Loan Agreement (the “Loan Agreement”) with ComVest Capital, LLC (“ComVest”). Pursuant to the Loan Agreement, ComVest extended to the Company: (i) a secured revolving credit facility for up to $3 million (the “Revolver”) and (ii) a term loan (the “Term Loan” and, together with the Revolver, the “Loans”) in the principal amount of $9 million, of which $1 million was treated as an original issue discount, and the Company received $8 million in respect of the Term Loan. Amortization related to the original issue discount of $1,000,000 amounted to $41,302 and $113,025 for the three months ended September 30, 2009 and September 30, 2008, respectively, and $217,343 and $113,025 for the nine months ended September 30, 2009 and September 30, 2008, respectively. In accordance with ASC 470-50-40, the August 14, 2009 debt modification was accounted for as a debt extinguishment. As a result, the unamortized debt discount related to the warrant and original issue discount in the amount of $769,334, the unamortized debt issue costs attributable to the ComVest term note in the amount of $258,991 and the modification fees paid to ComVest attributable to the retirement of the ComVest term note in the amount of $147,000 were recorded as a loss on extinguishment of debt.

The amounts due under the Revolver bore interest at a rate per annum equal to the greater of: (i) the prime rate of interest announced by Citibank, N.A. plus 2.25% or (ii) 7.25%. The Loans provided that the stated interest rates were subject to increase by 500 basis points during the continuance of an event of default under the Loan Agreement. Amounts due under the Loans were payable monthly, beginning July 1, 2008.

The outstanding principal amount of the Term Loan was payable as follows: $150,000 on July 1, 2008 and subsequent payments are to be in an amount equal to the greater of (i) $200,000 less the amount of interest accrued during the preceding month or (ii) the amount equal to (a) the lesser of $450,000 or certain license fees, royalties, use fees and/or other such payments collected by the Company during the preceding month less (“Royalties”) (b) the amount of interest accrued during the preceding month (but not greater than the principal balance of the Term Loan). The installments under (ii) above were payable monthly starting August 1, 2008, including December 1, 2010. The final installment due and payable on December 31, 2010 was to be in an amount equal to the entire remaining principal balance, if any, of the Term Loan.

During the quarter ended June 30, 2009, the Company was in default on principal installment payments due for February, 2009 through June, 2009 under the Term Loan in the aggregate amount of $701,822. In addition, the Company was in default on principal installment payments due for July, 2009 under the Term Loan in the aggregate amount of $439,357 and was in default on interest payments due for July, 2009 in the amount of $61,295. The Company was also in default on interest payments due for July, 2009 under the Revolver in the amount of $18,098. The failure to make such payments constituted events of default under the Loan Agreement. The Company was obligated to pay a default interest rate of 500 basis points over the prevailing rate, which difference between the default rate and the prevailing rate was not paid. On May 19, 2009, ComVest executed a waiver letter (the Term Loan Waiver”) related to the Loan Agreement for the periods of February through April, 2009. Pursuant to the Term Loan Waiver, ComVest waived the foregoing defaults, provided that ComVest reserved the right to collect at a later time, but no later than the maturity date of the Term Loan under the Loan Agreement, the increased interest ComVest was permitted to charge during the continuance of such defaults. On August 14, 2009, ComVest executed a waiver letter, which waived the Company’s defaults under the Loan Agreement through August 14, 2009, provided the Company pays the difference between the increased interest rate charged in connection with the defaults and the regular interest rate no later than March 31, 2010.

On January 29, 2009, in order to assist the Company in making the payments under the XRoads Agreement, as defined in Note 16 – Management and Employment Agreements, the Company and ComVest entered into Amendment No. 1 (“Amendment No. 1”) to the Term Loan. Pursuant to Amendment No. 1, the Term Loan installments due and payable on each of February 1, 2009, March 1, 2009, April 1, 2009 and May 1, 2009, respectively, were reduced by an amount equal to the positive difference (if any) of (i) the lesser of (a) $50,000 or (b) the amount paid or payable to XRoads during the immediately preceding calendar month pursuant to the XRoads Agreement, minus (ii) the amount (if any) by which the aggregate Royalties collected during the immediately preceding calendar month exceeded $450,000. After the effective date of termination of the XRoads Agreement, no reduction in any subsequent Term Loan installments were to be permitted. Amendment No. 1 also contained ComVest’s acknowledgment and consent to the Company’s amendment of the payment terms and payment schedule of the StaffBridge Note pursuant to the second Debt Extension Agreement described below.

Royalty payments received primarily from StaffChex and Select were segregated and solely used for the repayment of the Term Loan. To the extent that royalty receipts from these sources did not meet the minimum threshold of $200,000 per month, the Company was to make up the difference from its operating cash. In the event that royalty receipts from these sources exceeded $450,000 in a given month, the Company could utilize the excess for operations or offset amounts owed on the ComVest Revolver at its discretion. The outstanding borrowings under the Loan Agreement were secured by all the assets of the Company.

The Company paid to ComVest non-refundable closing fees in the amount of $530,000, charged to the Revolver, simultaneously with funding of the amounts payable to the Company under the Loan Agreement. In addition, the Company was to pay to ComVest a monthly collateral monitoring, availability and administrative fee equal to 0.15% of the average daily principal amount outstanding under the Revolver during the preceding calendar month, up to $4,500 per month. Fees paid pursuant to the Revolver were $11,847 and $11,360 for the three months ended September 30, 2009 and September 30, 2008, respectively, and $37,054 and $11,360 for the nine months ended September 30, 2009 and September 30, 2008, respectively.

The Company utilized the proceeds of the Loans to repay approximately $1,050,000 pursuant to the M&T Restructure Agreement, as defined below, owed to M&T, a creditor of the Company and approximately $530,000 in closing costs and expenses.

Amended and Restated Revolving Credit Agreement

On August 14, 2009, the Company entered into the Amended and Restated Revolving Credit Agreement with ComVest (the “Amended Loan Agreement”), which amended and restated the Loan Agreement, dated June 20, 2008. Pursuant to the Amended Loan Agreement, the maximum availability under the secured revolving credit facility (the “Amended Revolver”) was increased from $3.0 million to $10.5 million (the “Amended Revolver Maximum”). The remaining outstanding principal balances of $2.9 million under the revolving credit note and $7.1 million under the term loan extended by ComVest pursuant to the Original Loan Agreement were paid in full by an advance from the Amended Revolver, and the term note was cancelled.

Effective as of the first business day of each of the first twelve (12) calendar weeks in each calendar quarter beginning with the calendar quarter ending March 31, 2010, the Amended Revolver Maximum will be reduced by an amount equal to 1/12th of the amount, calculated as of the last day of the immediately preceding calendar quarter, equal to the sum of: (i) the amount (if any) by which the Amended Revolver Maximum exceeds the amounts outstanding under the Amended Revolver, plus (ii) all cash and cash equivalents of the Company and its subsidiaries determined in accordance with accounting principles generally accepted in the United States on a consolidated basis, minus (iii) all documented reasonable costs and expenses incurred and paid in cash by the Company between August 14, 2009 and such quarter-end in connection with the registration of the resale of shares underlying the Amended ComVest Warrant (as defined below). To the extent the amounts outstanding under the Amended Revolver exceed the Amended Revolver Maximum, the Company must make a payment to ComVest to reduce the amount outstanding to an amount less than or equal to the Amended Revolver Maximum. The Company may borrow under the Amended Revolver from time to time, up to the then applicable Amended Revolver Maximum.

The Company may request an increase in the Amended Revolver Maximum to an aggregate amount not in excess of $11,250,000 minus: (i) any and all required reductions as described above, and (ii) the outstanding principal amount of any indebtedness incurred after August 14, 2009, up to a maximum principal amount outstanding of $750,000 minus any increase in the Amended Revolver Maximum then in effect. To request such an increase, the Company must introduce to ComVest a participant reasonably satisfactory to ComVest to participate in the advances under the Amended Revolver in a principal amount not less than the requested increase in the Amended Revolver Maximum, on a pari passu basis with ComVest.

The amounts due under the Amended Revolver bear interest at a rate per annum equal to 12.00%, subject to increase by 400 basis points during the continuance of any event of default under the Amended Loan Agreement. Subject to certain exceptions, the interest payments will be deferred as follows:

(i)	interest in respect of all periods through and including September 30, 2009 will accrue but will not be due and payable in cash except as and when provided in paragraph (iii) below;

(ii)

10% of all interest accruing during the period from October 1, 2009 through and including December 31, 2009 will be due and payable in cash monthly in arrears on the first day of each calendar month commencing November 1, 2009 and continuing through and including January 1, 2010, and the remaining 90% of such accrued interest will be due and payable in accordance with the following paragraph (iii);

(iii)

all accrued interest described in paragraph (i) above, and the deferred portion of accrued interest described in paragraph (ii) above, will be due and payable (A) as to 10% thereof, on April 1, 2010, (B) as to 15% thereof, on July 1, 2010, (C) as to 35% thereof, on October 1, 2010, and (D) as to the remaining 40% thereof, on December 31, 2010; and

(iv)	accrued interest in respect of all periods from and after January 1, 2010 will be due and payable in cash monthly in arrears on the first day of each calendar month commencing February 1, 2010 and upon the maturity of the Amended Revolver.

The Amended Revolver matures on December 31, 2010, subject to extension to December 31, 2011, in ComVest’s sole and absolute discretion, if the Company requests the extension no earlier than September 30, 2010 and no later than October 31, 2010 and there are no continuing events of default on the originally scheduled Amended Revolver maturity date (which defaults may be waived in ComVest’s sole and absolute discretion).

In addition, the Amended Loan Agreement provides that:

(i)	ComVest must pre-approve the hiring of all members of senior management of the Company and all employment agreements or other contracts with respect to senior management; and

(ii)

the Company will, on or prior to September 28, 2009, elect two (2) members of the Board of Directors of the Company, each to be placed within separate classes of the Board of Directors and each of which will be unaffiliated with and independent of ComVest. This date was subsequently extended to December 27, 2009.

The Amended Loan Agreement also requires the Company to, subject to certain exceptions, obtain ComVest’s written consent until all obligations under the Amended Loan Agreement have been satisfied in full in connection with certain transactions including, but not limited to, incurrence of additional indebtedness or liens on the Company’s assets; sales of assets; making investments in securities or extension of credit to third parties; purchase of property or business combination transactions; declaration or payment of dividends or redemption of the Company’s equity securities; payment of certain compensation to the Company’s executive officers; changing the Company’s business model or ceasing substantially all of its operations for a period exceeding 10 days; sale of accounts receivable; amendment of the Company’s organizational documents; certain transactions with the Company’s affiliates; making certain capital expenditures, and incurring monthly operating expenses in excess of specified dollar amounts. In addition, beginning with fiscal quarter ending March 31, 2010, the Company must maintain certain fixed charge coverage ratios set forth in the Amended Loan Agreement. At September 30, 2009, the Company was in compliance with all applicable covenants set forth in the Amended Loan Agreement.

The Amended Loan Agreement lists various events of default including, but not limited to: default in the payment of principal or interest under all obligations of the Company under the Amended Loan Agreement or in the observance or performance of any covenant set forth in the Amended Loan Agreement; default of the Company or any of its subsidiaries under any indebtedness exceeding $100,000 (excluding any amount due to Blue Lake and any litigation brought with respect to amounts owed to Blue Lake, so long as such amounts are paid solely in shares of the Company’s common stock); occurrence of certain bankruptcy or insolvency events; and existence of any litigation, arbitration or other legal proceedings, other than certain specified litigation, brought by any creditors of the Company or any subsidiary in an aggregate claimed amount exceeding $300,000.

In connection with the execution of the Amended Loan Agreement, ComVest executed a waiver of existing events of default under the original Loan Agreement (the “Waiver”). The Waiver is effective provided that the Company pays to ComVest on March 31, 2010 (or sooner if there is a further event of default) approximately $160,000, constituting the difference between interest calculated at the default rate and at the non-default rate under (i) the term note on the outstanding principal balance of the term note for the period from March 1, 2009 through August 14, 2009, and (ii) the original revolving credit note on the outstanding principal balance of the advances from time to time during the default period stated in (i) above.

Upon occurrence of an event of default, and at all times during the continuance of an event of default, (i) at the option of ComVest (except with respect to bankruptcy defaults for which acceleration shall be automatic) all obligations of the Company under the Amended Loan Agreement become immediately due and payable, both as to principal, interest and other charges, without any requirement for demand or notice by ComVest, and bear interest at the default rates of interest as described above; (ii) ComVest may file suit against the Company and its subsidiaries under the Amended Loan Agreement and/or seek specific performance thereunder; (iii) ComVest may exercise its rights under the Collateral Agreement, as defined below, against the assets of the Company and its subsidiaries; (iv) the Amended Revolver may be immediately terminated or reduced, at ComVest’s option; and (v) upon ComVest’s request, the Company will provide it with immediate, full and unobstructed access to and control of its books, records, systems and other elements of its business and management.

The Company’s obligations under the Amended Loan Agreement and the Amended Revolver are jointly and severally guaranteed by each of its direct and indirect subsidiaries (the “Guarantors”) pursuant to the Guaranty Agreement, dated as of June 20, 2008 (the “Guaranty Agreement”) and the Reaffirmation of Guaranty, dated as of August 14, 2009 (the “Reaffirmation of Guaranty”), and are secured by a security interest in all of the Company’s and its subsidiaries’ assets (the “Collateral”) as set forth in the Collateral Agreement dated June 20, 2008 (the “Collateral Agreement”). Pursuant to the Guaranty Agreement and the Reaffirmation of Guaranty, in the event the Company’s obligations are declared immediately due and payable, then the Guarantors shall, upon demand by ComVest, pay all or such portion of the Company’s obligations under the Amended Loan Agreement declared due and payable.

Upon the occurrence of an event of default under the Amended Loan Agreement, as described above, ComVest may enforce against the Guarantors their obligations set forth in the Guaranty Agreement. Pursuant to the Collateral Agreement, upon an event of default under the Amended Loan Agreement, ComVest may exercise any remedies available to it under the Uniform Commercial Code, and other applicable law, including applying all or any part of the Collateral or proceeds from its disposition as payment in whole or in part of the Company’s obligations under the Amended Loan Agreement.

In connection with the Amended Loan Agreement, each of Messrs. Michael Traina, the Company’s Chairman of the Board of Directors and Chief Executive Officer, and John Phillips, the Company’s Chief Financial Officer, reaffirmed their respective Validity Guaranties previously given to ComVest on June 20, 2008 (the “Validity Guaranty”) by executing a Reaffirmation of Validity Guaranties, dated August 14, 2009 (the “Reaffirmation of Validity Guaranties”). The Validity Guaranty provides that each officer will not, intentionally or through conduct constituting gross negligence, and the Company will not, through intentional acts of either Mr. Traina or Mr. Phillips or through conduct constituting gross negligence by each such officer, provide inaccurate or misleading information to ComVest, conceal any information required to be delivered to ComVest or fail to cause the Collateral to be delivered to ComVest when required or otherwise take any action that constitutes fraud. In the event of a breach or violation of the obligations of Messrs. Traina or Phillips under the Validity Guaranty, the officer must indemnify and hold ComVest harmless from any loss or damage resulting from such breach or violation.

The Company is obligated to pay ComVest modification fees in the amount of $210,000, charged to the Amended Revolver, payable $60,000 on January 1, 2010 and $50,000 on each of April 1, 2010, July 1, 2010 and October 1, 2010. In addition, on the first business day of each calendar month prior to the maturity date of the Amended Revolver and on the Amended Revolver maturity date or the earlier termination of the Amended Revolver, the Company must pay ComVest a monthly unused commitment fee equal to 0.25% of the amount by which the Amended Revolver Maximum exceeds the average daily outstanding principal amount of advances during the immediately preceding calendar month, charged to the Amended Revolver.

Warrant Issued to ComVest

In connection with June 20, 2008 Revolving Credit and Term Loan Agreement with ComVest, the Company issued a warrant to purchase 2,210,825 shares of common stock at an exercise price of $0.01 per share, immediately exercisable during the period commencing June 20, 2008 and ending on June 30, 2014. This warrant was valued at $634,000 and treated as a discount to the long term portion of the debt and was amortized over the life of the long term debt. Amortization related to the warrant amounted to $26,184 and $71,658 for the three months ended September 30, 2009 and September 30, 2008, respectively, and $137,792 and $71,658 for the nine months ended September 30, 2009 and September 30, 2008, respectively. As a result of the August 14, 2009 financing transaction with ComVest described above and in accordance with ASC 470-50-40-17, the unamortized debt discount related to the warrant in the amount of $298,507 was written off as part of the loss on extinguishment of debt.

In connection with the August 14, 2009 transaction with ComVest described above, the Company issued to ComVest the Amended and Restated Warrant, dated August 14, 2009 (the “Amended ComVest Warrant”), to purchase, in the aggregate, 2,210,825 shares (the “ComVest Warrant Shares”) of the Company’s common stock, $0.0001 par value per share (the “Common Stock”), for an exercise price of $0.01 per share (the “ComVest Exercise Price”). Upon the occurrence and during the continuation of an event of default (other than certain specified events of default) under the Amended Loan Agreement, then upon five (5) business days’ notice to the Company, the Amended ComVest Warrant is exercisable for a number of shares of Common Stock that, when aggregated with all ComVest Warrant Shares previously acquired upon exercise of the Amended ComVest Warrant, constitutes 51% of the fully diluted Common Stock of the Company at the time of exercise (a “Default Exercise”). The exercise price of the Amended ComVest Warrant for a Default Exercise is $0.001 per share of Common Stock. The exercise price of the Amended ComVest Warrant may be paid to the Company in cash, check or, at ComVest’s option, by crediting the exercise price to any obligation then owed to it under the Amended Loan Agreement. The Amended ComVest Warrant is exercisable until August 31, 2014. The ComVest Exercise Price and the number of ComVest Warrant Shares are subject to adjustment following certain events, including distributions on the Common Stock; merger, consolidation or share exchange; and certain issuances of Common Stock. The Amended ComVest Warrant may be exercised via a “cashless exercise.”

If at any time the Common Stock is not registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the Company has ceased or suspended the filing of periodic reports under the Exchange Act, ComVest has the right to require the Company to redeem and purchase from ComVest, for a cash purchase price of $2.0 million, 50% of the Amended ComVest Warrant, or the equivalent of 50% of the ComVest Warrant Shares that may be, or have been, issued upon exercise of the Amended ComVest Warrant: (i) if the Company or any of its stockholders enters into a binding agreement with respect to any sale (as defined in the Amended Loan Agreement); (ii) upon and after the occurrence and during the continuance of an event of default under the Amended Loan Agreement; or (iii) any other event or circumstance that causes, effects, or requires any payment in full under the Amended Loan Agreement.

If there is a proposed sale of a majority of the outstanding shares of Common Stock of the Company, on an as-converted basis, ComVest has the right, exercisable upon written notice to the selling stockholder(s) provided not less than ten (10) days prior to the proposed date for consummation of the sale, to elect to participate in the transaction and sell to the proposed purchaser(s) a portion of the ComVest Warrant Shares equal, on a percentage basis, to the percentage of the selling stockholder(s)’ Common Stock included in the proposed transaction.

Loan Modification and Restructure Agreement with M&T

On February 23, 2007, pursuant to a Credit Agreement (the “M&T Credit Agreement”), the Company entered into credit facilities with M&T consisting of a $20 million revolving credit facility (“M&T Revolver”) expiring in February 2010 and a $3 million term loan (“M&T Term Loan”) expiring in February 2012. In July 2007, the Company amended the M&T Credit Agreement to increase the M&T Term Loan to $5 million in the First Amendment to the M&T Credit Agreement. These credit facilities carried an interest rate of LIBOR plus between 1.50% and 2.25%, depending on the Company’s ratio of debt to earnings before interest, tax, depreciation and amortization. The available amount to be borrowed from the M&T Revolver was limited based upon ratios of accounts receivable and unbilled revenue. The M&T Revolver and M&T Term Loan contained certain financial covenants including leverage ratios and a fixed charge coverage ratio. On March 21, 2008, ClearPoint entered into the Second Amendment to M&T Credit Agreement, dated as of March 21, 2008, among ClearPoint and M&T. Pursuant to the Second Amendment, the M&T Credit Agreement was amended, among other matters, as follows: (i) the aggregate amount of the revolving credit commitments was gradually reduced from $20 million to $15 million at March 21, 2008 and $4 million at June 30, 2008; (ii) the applicable margin, which is a component of the interest rate calculations, was increased to (a) 3.5% and 1.25% for any revolving credit loan that is a “Eurodollar Loan” and a “Base Rate Loan”, respectively (as defined in the M&T Credit Agreement), and (b) 4.5% and 2.25% for any M&T Term Loan that is a Eurodollar Loan and a Base Rate Loan, respectively; (iii) the applicable commitment fee percentage, which is included in the calculations of commitment fees payable by the Company on the amount of the unused revolving credit commitments, was increased to 0.25%; and (iv) the covenants related to the ratios of total debt or senior debt, as applicable, to modified earnings before interest, taxes, depreciation and amortization (“EBITDA”) were amended to lower the ratios as of September 30, 2008.

On April 14, 2008, the Company entered into a Waiver (the “M&T Waiver”) to the M&T Credit Agreement. Pursuant to the M&T Waiver, the required lenders under the M&T Credit Agreement waived compliance with certain financial covenants set forth in the M&T Credit Agreement for the period ended December 31, 2007. In connection with the M&T Waiver, the Company paid a $100,000 fee to M&T. The Company was not in compliance with the financial and reporting covenants at March 31, 2008. The Company did not receive a waiver for such non-compliance from M&T. On May 9, 2008, the Company received a letter from M&T indicating, among other matters, that the principal amount of revolving credit loans outstanding under the M&T Credit Agreement shall be limited to a maximum amount of $7.3 million for the period ended May 16, 2008.

On May 21, 2008, the Company received a notice of default from M&T in connection with the M&T Credit Agreement. The Company defaulted on its obligations under the M&T Credit Agreement as a result of its failure to comply with financial covenants contained in the M&T Credit Agreement, including obligations to maintain certain leverage and fixed charge coverage ratios. As a consequence of the default, M&T exercised its right to declare all outstanding obligations under the credit facilities to be immediately due and payable and demanded the immediate payment of approximately $12.8 million, consisting of approximately (i) $7.4 million under the M&T Revolver; (ii) $3.9 million under the M&T Term Loan; and (iii) $1.5 million under a letter of credit. Also pursuant to the notice of default, M&T exercised its right to terminate the M&T Revolver and the M&T Term Loan and to terminate its obligation to make any additional loans or issue additional letters of credit to the Company.

In connection with the Loan Agreement with ComVest described above, the Company and M&T entered into a Loan Modification and Restructure Agreement dated June 20, 2008 (the “M&T Restructure Agreement”) pursuant to which the parties agreed to: (i) consolidate the M&T revolving credit loan of $7,065,809 and the M&T term loan of $3,866,667 (the “M&T Obligations”), (ii) reduce the carrying amount of the consolidated obligations from $10,932,476 to $8,600,000, net of cash payments made during the negotiations, (iii) subordinate the M&T Obligations to the Company’s obligations to ComVest (the “ComVest Obligations”) and (iv) permit the Company to repay the M&T Obligations on a deferred term basis. The M&T Restructure Agreement provides that on the earlier of the first day of the calendar month following the Company’s full satisfaction of the ComVest Obligations or January 1, 2011 (the “Obligations Amortization Date”), the Company shall repay a total of $3 million in principal amount (the “M&T Deferred Obligations”) to M&T in 36 equal monthly payments plus interest on the outstanding balance of such amount at a rate of 5% per annum, subject to increase to 12% per annum upon occurrence of certain agreement termination events and spring back events, as set forth in the agreement. In the event of a sale of substantially all of the Company’s or any subsidiary’s assets, a capital infusion or an infusion of subordinated indebtedness, the Company must prepay the M&T Deferred Obligations by an amount equal to 25% of such proceeds as are payable to ComVest under such circumstances.

In addition, prior to the Obligations Amortization Date, the Company must pay M&T: (i) cash proceeds arising out of certain of its and its subsidiaries’ accounts receivable in an amount not less than $3 million and (ii) existing and future federal and state income tax refunds of not less than $1 million due or which become due to the Company for any period prior to January 1, 2008. In the event such payments by the Company are less than the stated minimum amounts, such shortfall will be added to the M&T Deferred Obligations. Excesses of either amounts paid by the Company will be remitted to the Company and/or applied to the M&T Deferred Obligations in accordance with the M&T Restructure Agreement. The Company remitted all applicable federal and state income tax refunds to M&T required under the M&T Restructure Agreement. At September 30, 2009, income tax refunds of $1,024,000 resulting from net operating loss carry-backs and $91,000 in refunds of overpayments were received by the Company and remitted to M&T. At September 30, 2009, the Company remitted to M&T a total of approximately $2,478,000 which was comprised of approximately $1,364,000 applied to the $3 million accounts receivable target and $1,114,000 applied to the $1 million federal and state income tax refund target. The excess of $114,000 over the $1 million tax refund target will be credited to the M&T Deferred Obligations. At September 30, 2009, the outstanding balance related to the $3 million accounts receivable target was $1,522,434.

The Company issued to M&T warrants to purchase, in the aggregate, 1,500,000 shares of its common stock, of which warrants to purchase 1,200,000 shares have an exercise price of $0.01 and warrants to purchase 300,000 shares have an exercise price of $1.00. In accordance with ASC 480 “Distinguishing Liabilities from Equity, the fair value of all of the warrants has been classified as a liability since M&T has the right to put the warrants back to the Company in exchange for a cash settlement of $1.00 per share. The Company valued the warrants at $1,247,246 using the Black-Scholes valuation model and the value was offset against the gain on restructuring of debt. At September 30, 2009, the Company’s consolidated balance sheet included a warrant liability of $1,214,907 related to the fair value of warrants issued to M&T in connection with the M&T Restructure Agreement.

The Company accounted for the M&T Restructure Agreement pursuant to ASC 470-60, “Troubled Debt Restructurings by Debtors” , which required the Company to reduce the carrying amount of the old debt (M&T Obligations of $10,932,476) by the minimum cash value of the put option of the warrants issued ($1,200,000) and the warrant liability of $47,246, and determine whether the carrying value of the remaining debt exceeded the future cash payments of the new debt (M&T Loan Modification of $8,600,000 and future interest payment of $218,750). ASC 470-60 also requires that the new debt be recorded as the total of future cash payments. The excess of the carrying amount of the remaining debt over the future cash payments of the new debt was $866,480, which was reduced by the unamortized deferred financed cost and current refinancing cost of $179,683. As a result of the application of ASC 470-60, the Company recorded a gain of $686,797 ($0.05 per share), which is reflected in the consolidated statement of operations for the year ended December 31, 2008.

M&T had issued (i) a certain certificate of deposit to the Company in the amount of $1.5 million (the “COD”) and (ii) a certain standby letter of credit for the account of the Company in favor of Ace Risk Management (the “Ace Letter of Credit”). M&T liquidated the COD and applied $600,000 of the COD to the M&T Obligations. To the extent M&T is required to make payments under the Ace Letter of Credit in excess of $900,000 at any time, such excess shall be added to the M&T Deferred Obligations. Excesses of such amount paid will be remitted to the Company and/or applied to the M&T Deferred Obligations in accordance with the M&T Restructure Agreement.

Pursuant to the M&T Restructure Agreement, the Company must comply with various covenants while the M&T Deferred Obligations are outstanding and provided that (i) no bankruptcy or insolvency event has taken place and (ii) the Company and/or its subsidiaries have not terminated operation of their business without the prior written consent of M&T (each being a “Spring Back Event”). Such covenants include, but are not limited to: delivery to M&T of financial and other information delivered to ComVest; restrictions on the aggregate compensation which may be paid to the Chief Executive Officer and Chief Financial Officer of the Company; limitations on dividends and distributions of cash or property to equity security holders of the Company and/or redemptions or purchases of capital stock or equity securities of other entities; restrictions on collateralizing subordinated indebtedness. At September 30, 2009, the Company was in compliance with all applicable covenants set forth in the M&T Restructure Agreement. The M&T Restructure Agreement provides that the Company may continue to pay regularly scheduled payments (but not prepayments or accelerated payments) on (i) existing subordinated indebtedness, except to the extent prohibited by the ComVest transaction documents and (ii) the Blue Lake Note as defined below. For each $50,000 paid on account of the Blue Lake Note, Michael D. Traina, the Company’s Chairman of the board of directors and Chief Executive Officer, and Christopher Ferguson, a principal stockholder of the Company, shall, on a several basis, be liable as sureties for the M&T Deferred Obligations, each in the amount of $10,000, subject to an aggregate amount of each surety’s liability of $150,000.

The M&T Restructure Agreement does not terminate or extinguish any of the liens or security interests granted to M&T pursuant to the M&T Credit Agreement and related documents.

Note Payable to Blue Lake Rancheria

On March 1, 2005, CPR issued a Promissory Note (“Blue Lake Note”) to Blue Lake Rancheria, a fully recognized Indian tribe (“Blue Lake”), for $1,290,000 in principal amount guaranteed by Messrs. Traina and Ferguson. The Blue Lake Note matured on March 31, 2008. Effective March 31, 2008, CPR amended and restated the Blue Lake Note and extended its maturity date under the Agreement, dated as of March 31, 2008, by and between CPR and Blue Lake (the “Blue Lake Agreement”). Pursuant to the Blue Lake Agreement, on April 14, 2008, CPR and Blue Lake entered into an Amended and Restated Promissory Note (“Amended Blue Lake Note”) with a principal amount of $1,290,000, which was due and payable as follows: (i) $200,000 was paid on April 8, 2008; (ii) $50,000 is payable on the first business day of each calendar month for 12 consecutive months (totaling $600,000 in the aggregate), the first payment to occur on May 1, 2008, and the last to occur on April 1, 2009; and (iii) on April 30, 2009, CPR was obligated to pay to Blue Lake the balance of the principal amount, equal to $490,000, plus accrued interest. The interest rate on the Amended Blue Lake Note was increased from 6% to 10% per annum. ClearPoint agreed to issue 900,000 shares (“Escrow Shares”) of ClearPoint’s common stock in the name of Blue Lake to be held in escrow, pursuant to an escrow agreement, as security for the payment of the principal amount and interest under the Amended Blue Lake Note.

CPR did not make the required payments of: (i) $50,000 in January, 2009 and (ii) $490,000, plus accrued interest, of which $20,417 was accrued as of September 30, 2009, in April, 2009 under the Amended Blue Lake Note. On May 1, 2009, the Company received a notice from Blue Lake indicating CPR’s failure to pay such amounts and demanding that the Company immediately pay a total of approximately $572,744. Pursuant to the terms of the Amended Blue Lake Note, CPR’s failure to make the foregoing payments when due constitutes an event of default if not cured within five business days of receipt of written notice from Blue Lake. The Company did not cure such default on or prior to May 8, 2009. On May 7, 2009, Blue Lake requested disbursement of the Escrow Shares and, pursuant to the Escrow Agreement; the escrow agent was obligated to deliver the Escrow Shares to Blue Lake 10 calendar days after receipt of the request for disbursement.

An event of default under the Amended Blue Lake Note triggers a cross-default provision pursuant to the Loan Agreement with ComVest. In addition, a default under the Loan Agreement would trigger a cross-default provision pursuant to the M&T Restructure Agreement unless the default under the Loan Agreement is waived in writing by ComVest. On May 13, 2009, ComVest executed a waiver letter (the “Blue Lake Waiver”) to the Loan Agreement. Pursuant to the Blue Lake Waiver, effective May 1, 2009, ComVest waived the cross-default provision which was triggered by CPR’s failure to make the payments due under the Amended Blue Lake Note and all remedies available to ComVest as a result of the failure to make such payments provided that such payments due under the Amended Blue Lake Note are paid solely in Escrow Shares. On August 14, 2009, ComVest executed a waiver letter, which waived all of the Company’s defaults under the Blue Lake Note through August 14, 2009

On July 14, 2009, Blue Lake filed a Complaint in the Superior Court of Humboldt County, California seeking payment of the $490,000, plus accrued interest and fees (see Note 18 – Litigation).

Sub Notes

On March 1, 2005, CPR issued Amended and Restated Notes (collectively, the “Sub Notes”) to each of Matthew Kingfield, B&N Associates, LLC, Alyson P. Drew and Fergco Bros. LLC (collectively, the “Sub Noteholders”) for $50,000, $100,000, $100,000 and $300,000, respectively. Ms. Drew is the spouse of ClearPoint’s director Parker Drew. Fergco Bros. LLC (“Fergco”) is twenty-five percent (25%) owned by Mr. Ferguson, a principal stockholder of the Company.

Effective March 31, 2008, CPR amended and restated the Sub Notes and extended their maturity dates to March 31, 2009 (collectively, the “Amended Sub Notes”). All sums outstanding from time to time under each Amended Sub Note bear the same interest of 12% per annum as under the Sub Note, payable quarterly, with all principal payable on the maturity date. CPR’s failure to make any payment of principal or interest under the Amended Sub Note when such payment is due constitutes an event of default, if such default remains uncured for 5 business days after written notice of such failure is given to CPR by the Sub Noteholder. Upon an event of default and at the election of the Sub Noteholder, the Sub Note, both as to principal and accrued but unpaid interest, will become immediately due and payable.

In consideration of each Sub Noteholder agreeing to extend the maturity date of the Sub Note, ClearPoint issued warrants (“Initial Sub Note Warrants”) to the Sub Noteholders to purchase, in the aggregate, 82,500 shares of common stock (the “Sub Note Warrant Shares”) at an exercise price of $1.55 per share. The Initial Sub Note Warrant is immediately exercisable during the period commencing on March 31, 2008 and ending on March 31, 2010. CPR had the right in its sole discretion, to extend the maturity date of the Amended Sub Notes to March 31, 2010, and in connection with such extension, the Sub Noteholders had the right to receive additional Sub Note Warrants (the “Additional Sub Note Warrants”) to purchase, in the aggregate, an additional 82,500 shares of common stock.

On June 20, 2008, CPR exercised its right to extend the maturity date of the Amended Sub Notes to March 31, 2010 and, in connection with such extension, the Sub Noteholders received Additional Sub Note Warrants to purchase 82,500 Sub Note Warrant Shares at an exercise price of $1.55 per share. The Additional Sub Note Warrant is immediately exercisable during the period commencing on June 20, 2008 and ending on March 31, 2011. At June 30, 2008, the Company valued the warrants at $7,619 using the Black-Scholes valuation model and they were expensed under selling, general and administrative expenses. The exercise price and the number of Sub Note Warrant Shares are subject to adjustment in certain events, including a stock split and reverse stock split.

CPR did not make the required quarterly interest payments for July 2009 under the Amended Sub Notes for the quarter ended September 30, 2009, in the aggregate amount of $27,500. Pursuant to the terms of the Amended Sub Notes, CPR’s failure to make the foregoing payments when due constitutes an event of default if not cured within five business days of receipt of written notice from a Sub Noteholder. An event of default under the Amended Sub Notes triggers a cross-default provision pursuant to the Loan Agreement with ComVest. In addition, a default under the Loan Agreement would trigger a cross-default provision pursuant to the M&T Restructure Agreement unless the default under the Loan Agreement is waived in writing by ComVest. On August 14, 2009, ComVest executed a waiver letter, which waived all of the Company’s defaults under the Amended Sub Notes through August 14, 2009.

In connection with the Loan Agreement with ComVest described above, ComVest entered into a Subordination Agreement dated June 20, 2008 (the “Noteholder Subordination Agreement”) with each of the Sub Noteholders and CPR. Pursuant to the Noteholder Subordination Agreement, the Sub Noteholders agreed to subordinate the Company’s obligations to them under the Amended Sub Notes to the ComVest Obligations. So long as no event of default under the ComVest Loan Agreement has occurred, the Company may continue to make scheduled payments of principal and accrued interest when due in accordance with the Sub Notes, as amended. In the case of an event of default under the Loan Agreement with ComVest, the Company may not pay and the Sub Noteholders may not seek payment on the Sub Notes, as amended, until the ComVest Obligations have been satisfied in full. The Noteholder Subordination Agreement also sets forth priorities among the parties with respect to distributions of the Company’s assets made for the benefit of the Company’s creditors.

On September 11, 14 and 15, 2009, CPR amended and restated the Sub Notes by issuing third amended and restated promissory notes dated September 8, 2009 (the “Third Amended Sub Notes”) to Fergco, Alyson Drew, B&N Associates, LLC and Matthew Kingfield, respectively, for $550,000 in aggregate principal amount. As of the dates of issuance of the Third Amended Sub Notes, ClearPoint was in default in the aggregate amount of $25,000 in past due interest under the Sub Notes. Pursuant to the Third Amended Sub Notes, principal amounts shall be due and payable in monthly installments equal to 10% of the principal amount of the Third Amended Sub Notes beginning March 31, 2010. The Third Amended Sub Notes continue to bear interest at the rate of 12% per annum. Interest due for the period of May 1, 2009 through August 31, 2009 and additional interest accruing for the period of September 1, 2009 through February 28, 2010 shall be deferred and paid in monthly installments beginning March 31, 2010. Interest payments for the period beginning March 1, 2010 and future periods will be paid monthly, one month in arrears, beginning April 30, 2010. CPR has the right to prepay all or any portion of the Third Amended Sub Notes from time to time without premium or penalty. Any prepayment shall be applied first to accrued but unpaid interest and then applied to reduce the principal amount owed. The Third Amended Sub Notes provide that CPR’s failure to make any payment of principal or interest due shall constitute an event of default if uncured for five days after written notice has been given by the Sub Noteholders to CPR. Upon the occurrence of an event of default and at any time thereafter, all amounts outstanding under the Third Amended Sub Notes shall become immediately due and payable.

Note Payable to ALS, LLC

On February 23, 2007, the Company acquired certain assets and liabilities of ALS, LLC and its subsidiaries, doing business as Advantage Services Group based in Florida, that expanded the Company’s operations to clients in California and Florida. The purchase price of $24.4 million consisted of cash of $19 million, a note of $2.5 million (the “ALS Note”), shares of the Company’s common stock with a value of $2.5 million (439,367 shares) and the assumption of $0.4 million of current liabilities.

In connection with the transaction with ComVest described above, on June 20, 2008, the Company entered into a Letter Agreement dated June 20, 2008 (the “ALS Agreement”) with ALS, LLC and its subsidiaries whereby the parties agreed, among other things: (i) to execute the ALS Subordination Letter dated June 20, 2008, as defined below; (ii) to amend the ALS Note to provide for an outstanding principal amount of $2,155,652 (remaining principal balance of $2,022,991 plus accrued interest of $132,661) bearing interest at a rate of 5% per annum (a reduction from 7%) payable in 24 equal monthly installments, commencing January 2014, payable as permitted pursuant to the ALS Subordination Letter; (iii) that the Company would issue 350,000 shares of common stock to ALS (the “ALS Shares”) in accordance with the ALS Acquisition; (iv) that ALS may defend and indemnify the Company in connection with the TSIL Litigation, as defined in Note 18 – Litigation, and (v) that the parties will take all appropriate actions to dismiss their claims against each other in connection with the TSIL Litigation.

The transaction was not classified as a restructuring of debt. The Company valued the ALS Shares at their fair market value as of the date of issuance of $101,500 and recorded that amount as an expense during the year ended December 31, 2008.

Pursuant to a Subordination Letter sent by ALS to ComVest, M&T and the Company dated June 20, 2008 (the “ALS Subordination Letter”), ALS agreed that the Company may not make and ALS may not receive payments on the ALS Note, provided however, that (i) upon payment in full of all obligations under the Term Loan owing to ComVest and so long as the Company is permitted to make such payments, the Company shall make monthly interest payments on the outstanding principal balance of the ALS Note and (ii) upon payment in full of the M&T Obligations, the Company shall make 24 equal monthly installments on the ALS Note, as amended pursuant to the ALS Agreement described above. For the three months ended September 30, 2009 and 2008, the Company recorded $19,218 and $27,281, respectively, in interest expense associated with the ALS Note, and for the nine months ended September 30, 2009 and 2008, the Company recorded $63,233 and $27,281, respectively, in interest expense associated with the ALS Note. As of September 30, 2009, the Company had $241,982 of accrued interest payable recorded on its consolidated balance sheet associated with the ALS Note. The Company presented the ALS Note on the balance sheet net of other assets of $300,000 in expenses related to the TSIL Litigation as per the letter agreement dated June 20, 2008 and an advance payment of $330,000 on the ALS Note, which nets out to $1,634,129 (see Note 18 – Litigation).

Notes Payable to StaffBridge

On December 31, 2007, the note payable to former shareholders of StaffBridge, Inc. for purchase of the common stock of StaffBridge, Inc. (“StaffBridge Note”) dated August 14, 2006 was amended from an original maturity date of December 31, 2007 to a new maturity date of June 30, 2008. In addition, the amount of the StaffBridge Note was increased to $486,690 for accrued interest and the interest rate was increased to eight percent from six percent per annum payable in monthly installments starting January 15, 2008. The Company incurred an origination fee in the amount of $19,467, which equaled four percent of the principal amount in the form of 9,496 shares of common stock of the Company. This fee was charged to interest expense.

In addition, in connection with the financing transaction with ComVest, on June 30, 2008, the former shareholders of StaffBridge, Inc. (the “StaffBridge Shareholders”), executed a Debt Extension Agreement (the “Debt Extension Agreement”) and entered into a Subordination Agreement (the “StaffBridge Subordination Agreement”) with ComVest and CPR.

Pursuant to the Debt Extension Agreement, the StaffBridge Shareholders agreed that, in connection with the receipt from the Company of $150,000 payable for work performed by TSP 2, Inc., an entity controlled by certain StaffBridge Shareholders and a contractor for the Company (“TSP”), the StaffBridge Note was amended, effective June 30, 2008, to extend the maturity date to December 31, 2008 and to reduce the outstanding principal amount to $336,690.

Effective December 31, 2008, the StaffBridge Note was further amended pursuant to a second Debt Extension Agreement dated December 31, 2008 to provide for the following payment schedule of the outstanding amount due under the StaffBridge Note: $100,000 was paid on January 12, 2009 and the remaining balance shall be paid in four equal quarterly payments of $59,172, beginning on March 31, 2009, which was made, and ending on December 31, 2009. Amendment No. 1 to the ComVest Loan Agreement contains ComVest’s acknowledgment and consent to the Company’s amendment of the payment terms and payment schedule of the StaffBridge Note pursuant to the second Debt Extension Agreement.

The Company did not make the required quarterly payment to StaffBridge for the quarter ended June 30, 2009 of $59,172 and was also in arrears on interest payments due in the amount of $2,366. An event of default under the StaffBridge Note triggers a cross-default provision pursuant to the Loan Agreement with ComVest. In addition, a default under the Loan Agreement would trigger a cross-default provision pursuant to the M&T Restructure Agreement unless the default under the Loan Agreement is waived in writing by ComVest. On August 14, 2009, ComVest executed a waiver letter which waived all of the Company’s defaults under the StaffBridge Note through August 14, 2009.

On September 15, 2009, the StaffBridge Note was amended pursuant a Debt Extension Agreement Amendment dated September 3, 2009 (the “Extension Agreement”). Pursuant to the Extension Agreement, the outstanding balance under the StaffBridge Note shall be paid in monthly installments beginning February 15, 2010. Each monthly installment payment under the StaffBridge Note will be in the total amount of $17,105.86, consisting of (i) $16,137.95 with respect to the outstanding principal balance and (ii) $967.91 relating to accrued and unpaid interest as of August 31, 2009 and interest for the period of September 1, 2009 through January 31, 2010. The StaffBridge Note continues to bear interest at the rate of 8% per annum.

Pursuant to the StaffBridge Subordination Agreement, the StaffBridge Shareholders agreed to subordinate the Company’s obligations to them under the StaffBridge Note to the ComVest Obligations. So long as no event of default under the Loan Agreement with ComVest has occurred, the Company may continue to make scheduled payments of principal and accrued interest when due in accordance with the StaffBridge Note. In the case of an event of default under the Loan Agreement, the Company may not pay and the StaffBridge Shareholders may not seek payment on the StaffBridge Note until the ComVest Obligations have been satisfied in full. The Subordination Agreement also sets forth priorities among the parties with respect to distributions of the Company’s assets made for the benefit of the Company’s creditors.

Bridge Notes

On June 6, 2008, the Company issued notes (the “Original Bridge Notes”) to each of Messrs. Traina, Drew and TerraNova Partners, L.P. (“TerraNova Partners” and, together with Messrs. Traina and Drew, the “Bridge Lenders”) in the principal amounts of $104,449, $50,000 and $100,000, respectively. Mr. Traina is the Company’s Chairman of the board of directors, Chief Executive Officer and principal stockholder. Mr. Drew is a member of the Company’s board of directors and TerraNova Partners, a principal stockholder of the Company, is 100% beneficially owned by Mr. Kololian, the Company’s lead director. Mr. Kololian also controls 100% of the voting interest and 55% of the non-voting equity interest in the general partner of TerraNova Partners. During the course of negotiations with ComVest, Mr. Traina agreed to loan an additional $5,000 to the Company. On June 26, 2008, the Company issued amended and restated Original Bridge Notes (the “Amended Bridge Notes”) to each Bridge Lender. The Amended Bridge Notes contained identical terms and provided that (i) the principal amount of the Amended Bridge Notes would bear interest at a rate of 8% per annum, payable quarterly and (ii) the Company had the right to repay the Amended Bridge Notes in shares of the Company’s common stock at a price equal to the closing price of the Company’s common stock on June 26, 2008. The Amended Bridge Notes did not contain the provision stating that the principal balance will bear interest only upon demand for payment by the Bridge Lender, as provided in the Original Bridge Note.

On June 25, 2008 Mr. Drew’s Amended Bridge Note was repaid in full and Mr. Traina was repaid $5,000 in connection with his Amended Bridge Note. The balance of Mr. Traina’s Amended Bridge Note was repaid on July 16, 2008.

On August 12, 2008, the Company’s board of directors approved the payment of the Amended Bridge Note issued to TerraNova Partners in 204,082 shares of common stock, based on a valuation at the June 26, 2008 closing price in accordance with the terms of the Amended Bridge Note. On March 6, 2009, these shares were issued to TerraNova Partners.

Notes Payable to Messrs. Traina and Ferguson

CPR issued promissory notes (the “Promissory Notes”), dated February 22, 2008, in the aggregate principal amount of $800,000, to each of Messrs. Traina and Ferguson, in consideration for loans of $800,000, in the aggregate, made to CPR.

The terms of the Promissory Notes were identical. The principal amount of each Promissory Note was $400,000, and each bore interest at the rate of 6% per annum, which was to be paid quarterly, and each was due on February 22, 2009. The Promissory Notes were subordinate and junior in right of payment to the prior payment of any and all amounts due to M&T pursuant to the M&T Credit Agreement, as amended. On February 28, 2008, CPW advanced $800,000, on behalf of Optos, to the provider of Optos’s outsourced employee leasing program. The advanced funds were utilized for Optos’ payroll. In consideration of making the advance on its behalf, Optos assumed the Promissory Notes, and the underlying payment obligations, issued by CPR on February 22, 2008.

NOTE 12 — STOCK-BASED COMPENSATION:

On February 12, 2007, the Company adopted the 2006 Long-Term Incentive Plan (the “Plan”) which was approved by stockholders. Under the Plan, the Company grants stock options to key employees, directors and consultants of the Company. All grants prior to March 31, 2007 are 100% vested. Options granted to two employees on September 11, 2007 are 100% vested. Options granted on September 11, 2007 to all other employees of the Company are one-third vested as of September 11, 2007, an additional one-third vested as of September 17, 2008 with the remaining one-third vesting September 11, 2009. With respect to the options granted August 20, 2008, the vesting period is one-third on August 20, 2009, an additional one-third on August 20, 2010 with the remaining one-third on August 20, 2011. Options expire between 3 and 10 years from the date of grant or earlier at the determination of the board of directors.

For grants to non-employee directors after March 31, 2007, the vesting period is 3 years from the grant date, subject to their continuing service on the board. Options authorized for issuance under the Plan total 2,750,000. The number of shares covered by stock options that may be exercised by any participant during any calendar year cannot have an aggregate fair market value in excess of $100,000 measured at the date of the grant. The exercise price for options cannot be less than the fair market value of the Company’s common stock on the date of the grant. At September 30, 2009, 1,804,400 options were available for issuance.

Accounting for Employee Awards

The Company’s consolidated results of operations for the nine months ended September 30, 2009 and 2008 include share-based employee compensation expense related to employee awards totaling $32,561 and $32,066, respectively. The Company’s consolidated results of operations for the three months ended September 30, 2009 and 2008 include share-based employee compensation expense related to employee awards totaling $7,994 and $10,961, respectively. Such amounts have been included in the Consolidated Statements of Operations in selling, general and administrative expense. No income tax benefit has been recognized in the Consolidated Statements of Operations for share-based compensation arrangements as the Company has provided for a 100% valuation allowance on its deferred tax assets.

Accounting for Non-Employee Awards

Stock compensation expense related to non-employee options was $14,515 and $1,595 for the nine months ended September 30, 2009 and 2008, respectively. Stock compensation expense related to non-employee options was $4,892 and $1,595 for the three months ended September 30, 2009 and 2008, respectively. Such amounts have been included in the Consolidated Statements of Operations in selling, general and administrative expense.

Total stock-based compensation recognized by the Company for the nine months ended September 30, 2009 and 2008, all of which relates to stock options, was as follows:

	Nine Months Ended
	September 30, 2009		September 30, 2008
	(Unaudited)
Statement of Operations line item:
SG&A	$	47,076	$	33,661
Total	$	47,076	$	33,661

Total stock-based compensation recognized by the Company for the three months ended September 30, 2009 and 2008, all of which relates to stock options, was as follows:

	Three Months Ended
	September 30, 2009		September 30, 2008
	(Unaudited)
Statement of Operations line item:
SG&A	$	12,886	$	12,556
Total	$	12,886	$	12,556

During the nine months ended September 30, 2009 and 2008, no stock options were granted. The following information relates to the stock option activity under the Plan for the nine months ended September 30, 2009 and 2008, respectively:

	Shares subject to Options			Weighted Average Option Prices
	(Unaudited)
Outstanding at January 1, 2009		1,002,008		$	1.01
Granted		—			—
Exercised		—			—
Cancelled		(56,408	)		3.69
Outstanding at September 30, 2009		945,600			2.86

The aggregate intrinsic value for the options in the table above was $0 at September 30, 2009 based on the closing common share price of $0.05 as at September 30, 2009. The aggregate intrinsic value represents the total pre-intrinsic value (the difference between the Company’s closing stock price on the last trading day of the third quarter of 2009 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2009. This amount changes based on the fair market value of the Company’s common stock.

At September 30, 2009 and 2008, there was $83,807 and $176,718 respectively of unrecognized compensation cost related to all unvested stock options.

Warrants

At September 30, 2009, warrants to purchase 4,050,825 shares were outstanding, having a weighted average exercise price of $0.37 per share with an average remaining contractual life of 2.15 years.

	Number of Warrants			Weighted Average Exercise Price
	(Unaudited)
Balance, January 1, 2009		14,915,825		$	3.80
Issued during the period		175,000			.19
Cancelled during the period		(11,040,000	)		5.00
Exercised during the period		—			—
Balance, September 30, 2009		4,050,825			0.37

At September 30, 2009 the range of exercise prices of the outstanding warrants was as follows:

Range of exercise prices		Number of warrants		Average remaining contractual life		Weighed average exercise price
$	0.01 - 1.55		4,050,825		2.15	$	0.37

Warrants were valued using the Black-Scholes model, using the weighted average key assumptions of volatility of 106% to 309%, a risk-free interest rate of 0.60% to 3.03%, a term equivalent to the life of the warrant and reinvestment of all dividends in the Company of zero percent.

NOTE 13 — FAIR VALUE MEASUREMENTS:

The Company follows the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures,” which 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.

The fair value hierarchy has three levels based on the reliability of the inputs used to determine 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 following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.

			Fair Value Measurements Reporting Date (Unaudited)
Description	September 30, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities:
Warrant Liability	$	1,214,907	$	—	$	—	$	1,214,907

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Beginning Balance	$	1,213,433
Total gains or (losses) (realized/unrealized)
Included in earnings		1,474
Included in other comprehensive income		—
Purchases, issuances and settlements		—
Transfer in and/or out of Level 3		—
Ending Balance	$	1,214,907

NOTE 14 — COMMITMENTS AND CONTINGENCIES:

Leases:

The Company typically leases offices and equipment under operating leases that expire over one to four years. Future minimum rental payments required under operating leases that have remaining lease terms in excess of one year as of September 30, 2009 were as follows (unaudited):

Remainder of fiscal 2009	$	50,074
Fiscal 2010		84,076
Fiscal 2011		25,631
Fiscal 2012		3,424
Thereafter		—
Total	$	163,205

The above lease commitments do not include future minimum rental payments that have been accrued for in restructuring costs (see Note 10 – Accrued Restructuring Costs). Rent expense for the three months ended September 30, 2009 and 2008 was $41,439 and $49,321, respectively, and rent expense for the nine months ended September 30, 2009 and 2008 was $122,949 and $139,329, respectively.

Employee Benefit Plan:

In 1991, Quantum Resources Corporation (“Quantum”) established a savings and profit sharing (IRC Section 401(k)) plan (“Plan”). The Company acquired all of the outstanding stock of Quantum on July 29, 2005 and, as a result, assumed the Plan. Employees are eligible to participate upon their date of hire. Participants may elect to defer a percentage of their compensation subject to the IRS limit on elective deferrals. The Plan also allows for a discretionary Company match of elective deferrals that will vest on a three-year cliff vesting schedule. There was no Company match for the nine months ended September 30, 2009 and 2008.

Retirement Benefit Liability:

Upon its acquisition of Quantum, the Company assumed a stock purchase agreement dated December 30, 1986 with a former owner. The agreement called for the payment of retirement benefits in equal monthly payments, adjusted for the cost of living increases equal to the Consumer Price Index. The former owner is entitled to these benefits until his death.

The Company recorded an estimated liability of $220,066 based upon the expected remaining life of the former owner, and made payments of $20,990 and $0 in the three months ended September 30, 2009 and 2008, respectively, and $111,457 and $20,990 in the nine months ended September 30, 2009 and 2008, respectively. Estimated future payments to the former owner are as follows:

At September 30, 2009 (Unaudited)
Remainder of fiscal 2009	$	20,992
2010		83,484
2011		84,420
2012 and thereafter		84,420
Total minimum payments		273,316
Present value (at 12.25% discount rate) net minimum retirement payments	$	220,066
Less, current portion		(84,420	)
	$	135,646

NOTE 15 — INCOME TAXES:

Deferred tax assets and liabilities are determined based on temporary differences between income and expenses reported for financial reporting and tax reporting. The Company is required to record a valuation allowance to reduce its net deferred tax assets to the amount that it believes is more likely than not to be realized. In assessing the need for a valuation allowance, the Company historically had considered all positive and negative evidence, including scheduled reversals of deferred tax liabilities, prudent and feasible tax planning strategies and recent financial performance. The Company determined that the negative evidence, including historic and current losses, as well as uncertainties related to the ability to utilize Federal and state net loss carry-forwards, outweighed any objectively verifiable positive factors, and as such, concluded that a full valuation allowance against the deferred tax assets was necessary. In the first quarter of fiscal 2008, the deferred tax asset balance as of December 31, 2007 of $5,007,180 was offset by a 100% valuation allowance. For the nine months ended September 30, 2009 and 2008, the Company continued a 100% full valuation allowance to offset any income tax benefit because it is more likely than not that the future benefit will not be realized.

The establishment of the deferred tax asset allowance does not preclude the Company from reversing a portion or all of the allowance in future periods if the Company believes the positive evidence is sufficient enough to utilize at least a portion of the deferred tax assets, nor does it limit the ability to utilize losses for tax purposes, subject to loss carry-forward limitations and periods permitted by tax law.

The Company filed all applicable federal and state income tax returns to enable it to receive the minimum amount required under the M&T Restructure Agreement and remit the funds directly to M&T in satisfaction of that portion of the Company’s obligation (see Note 11 – Debt Obligations). During the year ended December 31, 2008, the Company received and remitted approximately $1,058,000 in federal and state tax refunds to M&T. During the three months ended September 30, 2009, the Company did not receive or remit any federal or state tax refunds to M&T, and during the nine months ended September 30, 2009, the Company received and remitted approximately $56,000 in federal and state tax refunds to M&T.

As of September 30, 2009 and December 31, 2008, the Company did not have any unrecognized tax benefits. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of September 30, 2009, the Company had no accrued interest or penalties. The Company currently has no federal or state tax audits in progress although years 2005 through 2008 are open and subject to a federal or state audit.

NOTE 16 — MANAGEMENT AND EMPLOYMENT AGREEMENTS:

On February 12, 2007, the Company entered into an employment agreement with Mr. Traina, Chief Executive Officer (“CEO”) of the Company, whereby the Company agreed to pay the CEO $25,000 per month, plus benefits, with the term of the agreement being 3 years.

On February 28, 2008, Mr. Ferguson resigned from the Company in connection with the Optos Licensing Agreement. In connection with Mr. Ferguson’s resignation as the Company’s and CPR’s director, President and Secretary, the Company and Mr. Ferguson entered into the Separation of Employment Agreement and General Release (the “Ferguson Separation Agreement”). In consideration for Mr. Ferguson’s agreement to be legally bound by the terms of the Ferguson Separation Agreement and his release of his claims, if any, under the Ferguson Separation Agreement, Mr. Ferguson was entitled to be reimbursed for any health insurance payments for Mr. Ferguson for a period equal to 52 weeks. Pursuant to the Ferguson Separation Agreement, except for the parties’ continuing obligations under the Employment Agreement between the Company and Mr. Ferguson, dated as of February 12, 2007, such employment agreement is of no further force and effect. Pursuant to the Ferguson Separation Agreement, Mr. Ferguson agreed not to stand for election as a director of the Company, and, for as long as Mr. Ferguson beneficially owns at least 5% of the Company’s outstanding shares of common stock, Mr. Ferguson will be entitled to be an observer at each meeting of the Company’s board of directors. Under the Ferguson Separation Agreement, the Company entered into a consulting agreement (the “Ferguson Consulting Agreement”) with Mr. Ferguson pursuant to which he was entitled to be paid $25,000 per month for twelve (12) months. In return, Mr. Ferguson was obligated to assist the Company with matters relating to the performance of his former duties and worked with the Company to effectively transition his responsibilities. As of December 31, 2008, the Company paid Mr. Ferguson $58,000 pursuant to the Ferguson Consulting Agreement and recorded a related party liability of $256,709 as of December 31, 2008 pursuant to the Ferguson Consulting Agreement. As of September 30, 2009, no further payments were made. The Company agreed to resume making payments to Mr. Ferguson in the first quarter of 2010 and recorded the short and long term portions of such obligation of $64,177 and $192,532, respectively, at September 30, 2009. The long term portion of $192,532 of such obligation was included in accrued restructuring costs (see Note 10 – Accrued Restructuring Costs).

On June 20, 2008, Kurt Braun, the Company’s former Chief Financial Officer, resigned effective June 20, 2008. In connection with Mr. Braun’s resignation as the Company’s Chief Financial Officer, the Company and Mr. Braun entered into a Separation of Employment Agreement and General Release (the “Braun Separation Agreement”).

In consideration of Mr. Braun’s agreement to be legally bound by the terms of the Braun Separation Agreement, his release of his claims, if any, under the Braun Separation Agreement, and his agreement to provide the transitional services to the Company, the Company agreed to, among other things: (i) pay Mr. Braun $75,000, minus all payroll deductions required by law or authorized by Mr. Braun, to be paid as salary continuation over 26 weeks beginning within a reasonable time after the seven day revocation period following execution of the Braun Separation Agreement; (ii) continue to pay all existing insurance premiums for Mr. Braun and his immediate family through the 26 week period, and thereafter permit Mr. Braun, at his own expense, to continue to receive such coverage in accordance with COBRA regulations; (iii) pay Mr. Braun the balance of any accrued but unused vacation or paid time off hours, minus all payroll deductions required by law or authorized by Mr. Braun; and (iv) amend Mr. Braun’s Nonqualified Stock Option Agreement, dated March 30, 2007, to permit Mr. Braun to exercise 90,000 of the 140,000 stock options granted until March 30, 2010. The balance of the Braun Stock Options expired on September 20, 2008 in accordance with the Company’s 2006 Plan. As of September 30, 2009, the Company paid Mr. Braun approximately $75,000 as severance under the Braun Separation Agreement.

On June 20, 2008, John Phillips and the Company entered into an Employment Agreement (the “Phillips Employment Agreement”). Pursuant to the Phillips Employment Agreement, Mr. Phillips’ current base salary is $175,000 per year, which may be increased in accordance with the Company’s normal compensation review practices. On November 7, 2008, the Company’s board of directors increased Mr. Phillips’ base salary to $195,000 effective November 10, 2008. Mr. Phillips is also entitled to participate in any benefit plan of the Company currently available to executive officers to the extent he is eligible under the provisions thereof, and the Company will pay health, dental and life insurance premiums for Mr. Phillips and members of his immediate family. Mr. Phillips is entitled to receive short- and long-term disability insurance, and is entitled to three weeks of paid time off per year. Mr. Phillips may be entitled to discretionary bonuses as determined by the Company’s CEO, the board of the directors and the Compensation Committee. On August 20, 2008, Mr. Phillips was granted a stock option to purchase 50,000 shares of the Company’s common stock. The option vests in three equal annual installments beginning August 20, 2009 and expires August 20, 2018. The exercise price of the option is $0.30 per share.

On January 13, 2009, the Company entered into an agreement (the “XRoads Agreement”) with XRoads Solutions Group, LLC (“XRoads”). Pursuant to the XRoads Agreement, among other matters, XRoads agreed to provide the services of Brian Delle Donne to serve as the Company’s Interim Chief Operating Officer. The term of the XRoads Agreement commenced on January 13, 2009 and continued until May 13, 2009. Effective May 14, 2009, the XRoads Agreement was amended pursuant to Amendment No. 1 dated May 18, 2009 (the “XRoads Amendment”). Pursuant to the XRoads Amendment, the term of the XRoads Agreement was extended to run from May 14, 2009 through August 13, 2009 (the “XRoads Extension”).

The Company paid XRoads $50,000 per month for each of the first four months of Mr. Delle Donne’s services. In addition, XRoads is entitled to a monthly fee based upon achievement of certain increases in EBITDA, calculated pursuant to the XRoads Agreement. Such fee is equal to 10% of increases in monthly EBITDA during the term of the XRoads Agreement over EBITDA for the month ended January 31, 2009, capped at $50,000 per month (the “EBITDA Fee”). During the nine months ended September 30, 2009, the Company paid no EBITDA Fees to XRoads. The Company also agreed to pay reasonable expenses incurred by XRoads for services related to its services and remitted a retainer in the amount of $10,000 to XRoads for such purpose. During the nine months ended September 30, 2009, pursuant to the XRoads Agreement, the Company paid XRoads a total of $290,000 and the $10,000 retainer for reimbursement of expenses. Any amounts not paid when due pursuant to the XRoads Agreement will bear interest at an annual rate of 12% or the maximum rate allowed by law, whichever is less. As of the date of filing this Quarterly Report on Form 10-Q, the Company accrued an aggregate of $37,500 pursuant to the XRoads Agreement, consisting of $37,500 in fees related to services provided by XRoads.

The terms and conditions of the original XRoads Agreement which were not affected by the XRoads Amendment remained in full force and effect during the XRoads Extension. The Company agreed to pay XRoads $45,000 per 30 day period of the XRoads Extension and the EBITDA Fee remained at 10%, calculated in accordance with the XRoads Amendment, and subject to the cap of $50,000 per month.

In addition, the Company issued XRoads a warrant to purchase up to 100,000 shares of common stock at the exercise price of $0.12 per share, exercisable through December 31, 2010 in connection with the expiration of the XRoads Agreement on May 13, 2009. In connection with the XRoads Extension, the Company issued an additional warrant to purchase up to 75,000 shares of common stock at an exercise price of $0.29 per share, exercisable through April 30, 2011.

In the event the Company elects to pursue a financing (either in the form of debt or equity) within one year of the date of the XRoads Agreement, XRoads shall serve as its non-exclusive financial advisor for such financing in accordance with the terms of the XRoads Agreement. If such financing is consummated pursuant to the terms set forth in the XRoads Agreement, the Company agreed to pay XRoads a transaction fee based on the type and value of the transaction. The transaction fee will be prorated accordingly in the event the Company retains an additional financial advisor in connection with the transaction, but such fee shall not be less than $75,000 if XRoads’ efforts result in an bona fide financing alternative.

In the event of a material breach of the XRoads Agreement by either party, including, but not limited to, the Company’s failure to promptly pay amounts due for services rendered or for reimbursement of expenses, the non-breaching party may terminate the XRoads Agreement at any time thereafter upon 5 days advance notice. For a description of Amendment No. 1 to the Term Loan issued by ComVest in connection with the XRoads Agreement, as amended, see Note 11 – Debt Obligations.

The XRoads Agreement provided that either the Company or XRoads could terminate the XRoads Agreement at any time with at least thirty days prior written notice. On July 6, 2009, the Company sent such thirty-day termination notice to XRoads. The XRoads Agreement and Brian Delle Donne’s services as the Company’s Interim Chief Operating Officer were terminated effective August 7, 2009.

NOTE 17 — RELATED PARTY TRANSACTIONS

Notes Issued to Related Parties

Alyson Drew and Fergco

On March 1, 2005, the Company issued a 12% Amended and Restated Subordinated Note in the original principal amount of $100,000 due 2008 to Alyson Drew (the “Drew Note”), the spouse of the Company’s director Parker Drew.

On March 1, 2005, the Company issued a 12% Amended and Restated Note in the original principal amount of $300,000 due March 31, 2008 (the “Fergco Note”) to Fergco, a New Jersey limited liability company of which Mr. Ferguson, the Company’s principal stockholder, owns a 25% ownership interest and his brothers own the remaining 75% interest.

On March 31, 2008, the Company amended the Drew Note and the Fergco Note by issuing Second Amended and Restated Notes in the original principal amounts of $100,000 and $300,000 to Alyson Drew and Fergco, respectively. For additional information regarding the Drew Note and the Fergco Note, see Note 11 – Debt Obligations.

The proceeds of these notes were used to fund acquisitions. Pursuant to the terms of these notes, ClearPoint has been making interest only payments until the maturity of the notes. During the nine months ended September 30, 2008, ClearPoint made interest payments of $12,000 and $36,000 to Alyson Drew and Fergco pursuant to the Drew Note and Fergco Note, respectively. During the nine months ended September 30, 2009, the Company made interest payments of $4,000 and $12,000 to Alyson Drew and Fergco pursuant to the Drew Note and Fergco Note, respectively.

Michael Traina and Christopher Ferguson

CPR issued promissory notes, dated February 22, 2008, in the aggregate principal amount of $800,000, to each of Michael Traina and Christopher Ferguson in consideration for loans of $800,000 made to CPR. For additional information regarding these promissory notes, see Note 11 – Debt Obligations.

Bridge Notes

On June 6, 2008, the Company issued the Original Bridge Notes, to each of Michael Traina, Parker Drew and TerraNova Partners in the principal amounts of $104,449, $50,000 and $100,000, respectively. During the course of negotiations with ComVest, Mr. Traina agreed to loan an additional $5,000 to the Company. For additional information regarding the Original Bridge Notes, as amended, see Note 11 – Debt Obligations.

Agreements with Related Parties

Agreements with Christopher Ferguson and Kurt Braun

On February 28, 2008, Mr. Ferguson, the Company’s former director, President and Secretary, resigned effective February 28, 2008. In connection with Mr. Ferguson’s resignation, the Company entered into the Ferguson Separation Agreement and the Ferguson Consulting Agreement. On June 20, 2008, Kurt Braun, the Company’s former Chief Financial Officer, resigned effective June 20, 2008. In connection with Mr. Braun’s resignation, the Company entered into the Braun Separation Agreement. For additional information regarding these agreements, see Note 16 – Management and Employment Agreements.

Agreements with TerraNova Management

TerraNova Management Corporation (“TNMC”), an affiliate of Mr. Kololian, was retained to provide certain advisory services to the Company, effective upon the closing of the merger with Terra Nova, pursuant to the Advisory Services Agreement between TNMC and the Company, dated February 12, 2007 (the “Advisory Services Agreement”). Mr. Kololian controls 100% of the voting interest and 55% of the non-voting equity interest of TNMC. Pursuant to the Advisory Services Agreement, TNMC provided services to the Company including advice and assistance to the Company in its analysis and consideration of various financial and strategic alternatives, as well as assisting with transition services. During the fiscal year ended December 31, 2007, TNMC received a fixed advisory fee of $175,000 (prorated for a partial year) for such services. Pursuant to the terms of the Advisory Services Agreement, it was terminated effective February 11, 2008, however TNMC continued to provide substantially similar services under substantially similar terms to the Company on a monthly basis.

On June 26, 2008, the Company entered into a new Advisory Services Agreement (the “New Advisory Services Agreement”) with TNMC. Pursuant to the New Advisory Services Agreement, the Company agreed to provide compensation to TNMC for its services since the expiration of the former Advisory Services Agreement and to engage TNMC to provide future advisory services. The New Advisory Services Agreement is effective as of June 26, 2008, continues for a one year term and is automatically renewed for successive one-year terms unless terminated by either party by written notice not less than 30 days prior the expiration of the then-current term. The Company agreed to compensate TNMC for services rendered since expiration of the former Advisory Services Agreement and for advisory services similar to those performed under the former Advisory Services Agreement. Monthly fees payable to TNMC under the New Advisory Services Agreement are capped at $50,000 per month. Fees payable to TNMC may be paid 100% in shares of common stock, at the Company’s option. Beginning in the month of June, 2008, 75% of the fees payable to TNMC may also be paid in shares of common stock and, with the agreement of TNMC, the remaining 25% may also be paid in shares of common stock. Shares of common stock made as payments under the New Advisory Services Agreement are priced at the month-end closing price for each month of services rendered. During the fiscal year ended December 31, 2008, the Company incurred approximately $292,665 in fees owing to TNMC for such services. Fees or reimbursement of expenses recorded pursuant to the New Advisory Services Agreement during the nine months ended September 30, 2009 and 2008 were $0 and $80,000, respectively.

The Company’s board of directors approved payment of $266,000 for the services performed by TNMC pursuant to the New Advisory Services Agreement in the form of an aggregate of 479,470 shares of common stock for the months of February through August, 2008 as follows: on August 12, 2008, the board of directors approved payment for the months of February, March, April, May and June, 2008 in 417,008 shares of common stock and on November 7, 2008, the board of directors approved payment for the months of July and August, 2008 in 62,462 shares of common stock.

Additionally, the Company incurred approximately $99,202 for reimbursement of expenses incurred by TNMC in connection with the New Advisory Services Agreement for the fiscal year ended December 31, 2008.

Agreements with ALS, LLC

On February 23, 2007, the Company acquired certain assets and liabilities of ALS. The purchase price of $24.4 million consisted of cash of $19 million, the ALS Note, shares of common stock with a value of $2.5 million (439,367 shares) and the assumption of approximately $400,000 of current liabilities. ALS is a holder of more than 5% of the Company’s common stock. For additional information regarding the ALS Note, see Note 11 – Debt Obligations.

Transactions with Dennis Cook, The Cameron Company, LLC and WES Health System

Dennis Cook, a member of the Company’s board of directors, serves as the President and Chief Executive Officer of WES Health System (“WES”). During the nine months ended September 30, 2008, the Company leased office space from WES for which it paid a total of $1,875. In addition, on March 29, 2007, Mr. Cook was granted options to purchase 20,000 shares of common stock at an exercise price of $6.10. The options vested immediately. During the first quarter of 2008, the Company provided certain temporary employees and payroll services to WES for approximately $657,000. The Company did not lease office space from, and did not provide services to, WES during the three or nine months ended September 30, 2009.

Transactions with Optos

On February 28, 2008, CPR and its subsidiary, CPW, entered into the Optos Licensing Agreement with Optos, of which Christopher Ferguson is the sole member. Pursuant to the Optos Licensing Agreement, the Company (i) granted to Optos a non-exclusive license to use the ClearPoint Property and the Program, both as defined in the Optos Licensing Agreement, which included certain intellectual property of CPR, and (ii) licensed and subcontracted to Optos the client list previously serviced by TZG, pursuant to the TZG Agreement, dated August 13, 2007 and all contracts and contract rights for the clients included on such list. In consideration of the licensing of the Program, which was part of the ClearPoint Property, CPR was entitled to receive a fee equal to 5.2% of total cash receipts of Optos related to temporary staffing services. The foregoing agreement with TZG was terminated on February 28, 2008 in connection with the Optos Licensing Agreement. During the nine months ended September 30, 2009 and 2008, the Company recorded $0 and $336,670, respectively, in fees payable by Optos under the Optos Licensing Agreement.

On April 8, 2008, the Optos Licensing Agreement was terminated. In consideration for terminating the Optos Licensing Agreement, CPR and Optos agreed that there would be a net termination fee for any reasonable net costs or profit incurred, if any, when winding up the operations associated with termination. This fee is estimated to be $500,000 and was recorded as an expense. The payment of the net termination fee will be in the form of cash and shares of common stock of the Company. As of September 30, 2009, the following balances concerning the Optos Licensing Agreement were recorded:

Accounts receivable – related party	$	336,670
Accrued termination fee		(500,000	)
Vendor managed services payable and other liabilities		(201,799	)
Net (due) Optos	$	(365,129	)

Agreement with StaffChex

On March 16, 2009, the Company and StaffChex entered into the Amendment to the iLabor agreement pursuant to which the payment terms of the iLabor agreement were restated. For additional information regarding the Amendment with StaffChex, see Note 4 – Business and Asset Acquisitions and Dispositions and Licensing Agreements.

Agreement with XRoads Solutions

On January 13, 2009, the Company entered into the XRoads Agreement. Pursuant to the XRoads Agreement, among other matters, XRoads agreed to provide the services of Brian Delle Donne to serve as the Company’s Interim Chief Operating Officer. For additional information regarding the XRoads Agreement, as amended, see Note 16 – Management and Employment Agreements.

NOTE 18 — LITIGATION:

Temporary Services Insurance Ltd.

On September 21, 2007, Temporary Services Insurance Ltd. (“TSIL”), which claims to be a captive reinsurance company offering workers’ compensation insurance to its shareholders through an insurance program, filed a complaint (the “TSIL Litigation”) in the U.S. District Court in Florida against ALS, Advantage Services Group, LLC (“Advantage Services”), certain officers and shareholders of ALS and Advantage Services as well as certain other third party companies (collectively, the “ALS Defendants”) alleging that it was owed at least $2,161,172 in unpaid insurance assessments, as well as other requested damages, from the ALS Defendants. Kevin O’Donnell, a former officer of the ALS companies and a named defendant in the TSIL Litigation, controls KOR, a former franchisee of the Company.

The Company is also named as a defendant because it acquired certain assets from ALS and its wholly owned subsidiaries, including Advantage Services Group II, LLC (“ASG II”), in February 2007, for which it paid a portion of the purchase price at closing to the ALS Defendants, through ALS. It is alleged that this transfer rendered ASG II, one of the named insureds on the TSIL policy, insolvent and unable to pay the insurance assessments and damages owed to TSIL. TSIL requested in its complaint that its damages be satisfied from the assets transferred to the Company. Agreements related to the acquisition of certain assets and liabilities of ALS in February 2007 contain provisions under which the Company may seek indemnification from ALS in connection with the foregoing. The Company intends to pursue all appropriate claims for such indemnification and cannot estimate the potential liability, if any.

On January 11, 2008, the Company filed its Answer denying all claims in the TSIL Litigation and also filed a Crossclaim against ALS making claims for contractual and common law indemnity. ALS filed its Answer to the Company’s Crossclaim, denying all claims, and filed a Counterclaim asking for a declaratory judgment that it does not have to indemnify the Company and asserting a breach of contract claim based on an alleged failure to pay ALS certain amounts due under the ALS Note arising out of the acquisition of certain assets and liabilities of ALS in February 2007. The court in the TSIL Litigation entered an order dated February 22, 2008 (the “TSIL Order”), requiring the Company not to make any payments to ALS pursuant to the purchase agreement without first seeking leave of court.

On or about June 20, 2008, in connection with ALS’ agreement to subordinate the ALS Note to ComVest and M&T, ALS and its subsidiaries and certain other individuals (the “ALS Parties”) entered into a letter agreement with the Company (the “ALS Agreement”). Pursuant to the ALS Agreement, the ALS Parties and the Company agreed, among other things, as follows:

·	That the ALS Parties acknowledge their obligation to indemnify the Company in connection with the TSIL Litigation, subject to certain sections of the ALS purchase agreement;

·	That the ALS Parties shall be responsible for the Company’s attorney’s fees incurred in the TSIL Litigation from June 20, 2008, not to exceed $300,000;

That the ALS Parties and the Company shall take all appropriate actions to dismiss all of their respective claims against one another in the TSIL Litigation, and that following such dismissal, the Company shall cooperate as reasonably requested by the ALS Parties in connection with the TSIL Litigation including consenting in connection with a request to lift the TSIL Order, or otherwise permit payment to the ALS Parties in accordance with the terms of the ALS purchase agreement and the ALS Note; and

In addition, the Company agreed not to assert its right to set off from the Note any other amounts in connection with the TSIL Litigation until such time (if at all) as a final judgment is entered against the Company in the TSIL Litigation, or the amount of TSIL’s claims against the Company are liquidated by settlement or otherwise.

ALS did not elect to provide a defense to the Company, and the Company remains represented by its own counsel. On November 21, 2008, a joint stipulation for voluntary dismissal was filed with the court pursuant to which the Company and ALS jointly dismissed such claims with prejudice. On December 8, 2008, the court entered an order dismissing all claims between the Company and ALS with prejudice. The discovery in the litigation has concluded. Both TSIL and the Company have filed Motions for Summary Judgment as to the claims asserted by TSIL against the Company. The Company filed its motion on June 24, 2009 and TSIL filed its motion on August 14, 2009. These motions will be ruled upon at an uncertain time prior to trial, which is presently scheduled for November 2009.

James W. Brown et al.

On or about October 29, 2007, the Company received a copy of a letter sent by a law firm to the California Labor & Workforce Development Agency, pursuant to which such law firm sought permission under the California Labor Code Private Attorney General Act of 2004 to file a complaint against the Company, a wholly owned subsidiary of the Company and ALS and one of its subsidiaries, on behalf of a class of employees currently and formerly employed by the defendants in California (the employees had not been named). On January 30, 2008, James W. Brown (“Brown”), on behalf of himself and all others similarly situated, on behalf of the general public and as an “aggrieved employee” under the California Labor Code Private Attorneys General Act, filed a complaint in the Superior Court of the State of California (Alameda County) (the “Brown Litigation”) against ClearPoint Advantage, LLC, a wholly owned subsidiary of CPR (“CP Advantage”).

The complaint in the Brown Litigation alleges that CP Advantage (i) failed to pay overtime compensation to employees who worked a 4/10 schedule but did not work a 4 day week (Calif. Labor Code Section 1194 and 2699(f)) to him and to all California employees similarly situated, (ii) failed to pay wages at the end of the assignment (Calif. Labor Code Sections 201, 202 and 203 and 2699(f)) to him and to all California employees similarly situated, (iii) failed to pay all wages due on termination (Calif. Labor Code Sections 204 and/or 204b and 2699(f)) to him and to all California employees similarly situated, (iv) failed to provide proper itemized wage statements (Calif. Labor Code Section 226(a)) to him and to all California employees similarly situated, and (v) issued checks with no in-state address for presentation that could not be cashed on demand and without a fee (Calif. Labor Code Section 212 and 2699(f)) to him and to all California employees similarly situated. On March 25, 2008, CP Advantage filed its Answer and denied all claims. In addition, on March 26, 2008, CP Advantage filed a Notice of Removal to remove the Brown Litigation to the United States District Court of the Northern District of California. Brown sought unspecified penalties, damages, interest, attorneys’ fees, costs of suit and, in relation to the claim regarding the alleged issuance of checks drawn on out-of-state banks with no in-state address for presentation, an injunction to preclude such alleged conduct.

On November 17, 2008, a settlement was reached and as part of such settlement the lawsuit was dismissed. With respect to the claim relating to the issuance of paychecks to Brown and other similarly situated California employees with no in-state address listed on the checks, and which could not be cashed without fee and on demand, the parties agreed to toll the statute of limitations until June 30, 2010, so that if any action is later brought based on those same claims, the statute of limitations on those claims will relate back to January 30, 2008.

APX Holdings, LLC

On or about March 4, 2008, Richard K. Diamond, Chapter 7 Trustee (“Trustee”) for In Re APX Holdings, LLC et al., filed a complaint (the “APX Litigation”) in the United States Bankruptcy Court in California against ASG Northern California, Advantage Services Group, the Company and MVI, alleging, among other things, that APX Holdings, LLC and other related parties (collectively, the “Debtors”) made transfers to the defendants within ninety (90) days prior to March 16, 2006 (Debtors’ petition date). Plaintiff filed a First Amended Complaint on March 14, 2008. Plaintiff alleged that those transfers had been made to or for the benefit of the defendants as creditors of the Debtors and that the transfers had been made for or on account of an antecedent debt owed by one or more of the Debtors before the transfers had been made. Plaintiff also alleged that the transfers had been made while the Debtors were insolvent. Plaintiff made similar claims alleging that the transfers constituted the receipt of an interest of the Debtors in property and that the Debtors had received less than a reasonably equivalent value from the defendants in exchange for the transfers. Plaintiff claimed that the defendants owed plaintiff at least $506,000 plus interest and costs and such other relief deemed proper by the court.

The Company was named as a defendant in the APX Litigation because it had acquired certain assets from ALS and its wholly owned subsidiaries, which referred to themselves collectively as Advantage Services Group, in February 2007. All of the transfers alleged in the APX Litigation took place almost a year prior to the time that the Company consummated the asset acquisition with ALS.

On June 27, 2008, the Trustee filed a Stipulation dismissing the Company and MVI from the APX Litigation.

Alliance Consulting Group Associates, Inc.

On April 25, 2008, Alliance Consulting Group Associates, Inc. (“Alliance”) filed a complaint (the “Alliance Litigation”) in the Court of Common Pleas (Montgomery County, Pennsylvania), against CPR alleging that CPR failed to honor certain of its contractual obligations to pay Alliance for services rendered under a Professional Services Master Agreement, dated June 18, 2007.

Namely, Alliance alleged that CPR failed to pay approximately $600,000. Alliance seeks damages in the amount of approximately $600,000, plus interest, costs and attorneys’ fees and such other relief deemed proper by the court. CPR filed an answer and counterclaim on June 16, 2008. In its counterclaim, CPR alleged in a breach of contract claim that Alliance had failed to deliver certain computer programming and consulting services according to specifications and that CPR had to expend certain monies to fix the resulting problems. On or about July 2, 2008, Alliance answered CPR’s counterclaim denying the allegations.

On September 17, 2009, the Company and Alliance entered into a Settlement Agreement and Release of Claims whereby all claims asserted or which could have been asserted by the Parties were settled for an initial payment by the Company to Alliance in the amount of $50,000 to be paid by September 18, 2009 and an additional $150,000 to be paid in twenty-four (24) equal monthly payments of $6,250 commencing on April 15, 2010. In the event the Company fails to make any payment due under the Alliance Settlement Agreement, Alliance may, after providing the Company with prior written notice and five business days’ opportunity to cure, confess judgment against the Company in the amount of $300,000. The initial payment of $50,000 was made timely.

Sunz Insurance

On or about June 25, 2008, Sunz Insurance Company (“Sunz”) filed a complaint (the “Sunz Litigation”) in the Circuit Court of the 9th Judicial Circuit (Orange County, Florida), against ASG, LLC d/b/a ClearPoint HR (“ALS”) and CP Advantage. Sunz claims to have provided workers compensation insurance to ALS and CP Advantage and that such policy was cancelled on February 22, 2008, for alleged nonpayment of funds due under the insurance contract. Sunz claims that ALS and CP Advantage owe in excess of $500,000 under the policy. Sunz, in addition to damages, seeks pre-judgment interest, court costs, attorneys’ fees and such other relief deemed proper by the court. On February 9, 2009, the court ordered Sunz to conduct an audit of ALS and CP Advantage and set this matter for mandatory mediation. On March 3, 2009, ALS and CP Advantage answered Sunz’s allegations and denied any liability. On April 29, 2009, this dispute was settled in mediation. Pursuant to the settlement, the Company made a cash payment of approximately $49,000 to Sunz and issued an irrevocable letter of credit to cover future claims, if any. The letter of credit will expire on February 23, 2013.

Select

On July 29, 2008, Select and Real Time, filed a complaint (the “Select Litigation”) in the Superior Court of California (Santa Barbara County), against the Company and, on August 1, 2008, Select filed an amended complaint. In the amended complaint, Select alleged that the Company had entered into an agreement with Select whereby Select would supply services and personnel for temporary employment through the Company to its clients. Select claimed that the Company owed it $1,033,210 for services performed. Select sought, in addition to the monies claimed, interest, attorneys’ fees and punitive damages of $1,000,000 as well as court costs and other just and proper relief.

On August 22, 2008, CPR, Real Time and Select entered into the Select Settlement Agreement pursuant to which each party released the others from all prior, existing and future claims including, without limitation, the parties’ claims with respect to the Select Litigation, the Select License Agreement and the Select Subcontract. Pursuant to the Select Settlement Agreement, the parties also agreed (i) that CPR would retain $900,000 paid to it under the Select License Agreement; (ii) to allocate between them amounts paid or payable with respect to certain client accounts; (iii) to execute an amendment to the Select Subcontract; and (iv) that Select would file the required documents to dismiss the Select Litigation with prejudice. In addition, the parties agreed not to commence any future action arising from the claims released under the Select Settlement Agreement and to terminate the Select License Agreement effective August 22, 2008. On August 28, 2008, this lawsuit was dismissed with prejudice.

On September 1, 2009, Select filed a new complaint in the Superior Court of California (Santa Barbara County) against ClearPoint alleging that ClearPoint failed to pay Select approximately $107,000 pursuant to the Select Subcontract since August 2009 and that ClearPoint failed to perform certain obligations under the Select Subcontract. Select seeks, in addition to the monies claimed, interest, attorneys’ fees and court costs and other just and proper relief. ClearPoint is in the process of reviewing the complaint and must respond to the complaint by November 20, 2009.

Leon R. Cobaugh

On or about October 20, 2008, Leon R. Cobaugh (“Cobaugh”) filed a complaint in the Circuit Court for Chesterfield County of the Commonwealth of Virginia against the Company and Quantum. The complaint alleges that, pursuant to the Stock Purchase Agreement dated December 30, 1986 (“SPA”), Cobaugh retired from his positions as an officer, director and employee of AIDE Management Resources Corporation, the prior name of Quantum, and sold his stock in such entity to the remaining stockholders in exchange for lump sum payments and monthly payments from Quantum for the rest of Cobaugh’s life. The Company acquired all of the outstanding stock of Quantum on July 29, 2005. Upon its acquisition of Quantum, the Company assumed Quantum’s obligations under the SPA. Cobaugh alleged that the Company had failed to make the required monthly payments due under the SPA beginning June 1, 2008 and sought to recover a minimum of $200,000 as may be adjusted based on the Consumer Price Index under the SPA. This dispute was settled on January 22, 2009. Pursuant to the settlement agreement among the parties, past due amounts to Cobaugh were paid, and the Company agreed to continue making future payments as required by the SPA.

XL Specialty Insurance Company

On November 10, 2008, XL Specialty Insurance Company (“XL”) filed a complaint in the Supreme Court of the State of New York (New York County), and, on December 9, 2008, XL filed an amended complaint (the “XL Complaint”) alleging that, among other things, XL issued workers’ compensation insurance policies to CP Advantage during 2007 and CP Advantage failed to make certain payments with regard to claims made against CP Advantage under the policies and maintain collateral required by the insurance policy documents. XL seeks to recover from the Company, as a guarantor of CP Advantage’s obligations under the insurance policies, $745,548, in the aggregate, in connection with certain claims against and pursuant to the collateral obligations of, CP Advantage. XL, in addition to damages, seeks pre-judgment interest, attorneys’ fees, costs and expenses and such other relief deemed proper by the court. The Company filed its answer in this matter on February 17, 2009 and contends that a third party is liable for the payments under the insurance policies pursuant to an agreement governing the sale of HRO. This litigation is currently moving into the discovery phase.

AICCO, Inc.

On November 18, 2008, AICCO, Inc. (“AICCO”) filed a complaint in the Court of Common Pleas of Bucks County, Pennsylvania against the Company alleging that AICCO agreed to finance premiums of certain insurance policies procured by the Company pursuant to a certain premium finance agreement among AICCO and the Company. AICCO claims that the Company breached the terms of such agreement by failing to make certain installment payments and seeks damages of approximately $166,586, together with interest and attorney’s fees and costs. On December 23, 2008, the Company filed an answer in this matter and joined two additional defendants on January 23, 2009. The joined defendants filed their answer to the Company’s complaint on March 27, 2009. The additional defendants’ answer included a counter-claim for indemnification from the Company. The Company replied to the additional defendants’ counterclaim on April 27, 2009 denying any liability. The Company contends that the joined defendants are liable for the installment payments pursuant to an agreement governing the sale of HRO. The Company alleged breach of contract against the joined defendants and seeks contribution and indemnification from such parties in this matter.

On June 2, 2009, AICCO filed a motion for summary judgment against the Company and on July 2, 2009, the Company filed its opposition to such motion, and filed a cross-motion for summary judgment against the additional defendants. On July 29, 2009, the additional defendants filed their opposition to the Company's cross-motion, and filed a motion for summary judgment against the Company. On July 31, 2009, AICCO replied to the Company’s opposition to AICCO’s motion for summary judgment. On October 21, 2009, the Motion for Summary Judgment filed by AICCO, Inc. against the Company was granted in favor of the Plaintiff in the amount of $166,587, together with interest at a contract rate of 6.57% per annum until the Judgment is paid in full, plus costs and reasonable attorney’s fees.

ClearPoint’s motion for summary judgement against the additional defendants and the additional defendants’ motion for summary judgement against ClearPoint were both denied in 2009 in connection with the breach of the agreement governing the sale of HRO and for contribution and indemnification.

Blue Lake Rancheria

On July 14, 2009, Blue Lake Rancheria filed against the Company a Complaint in the Superior Court of Humboldt County, California seeking payment of the $490,000, plus accrued interest and attorneys' fees. The lawsuit also names Michael D. Traina, the Company’s Chairman of the board of directors and Chief Executive Officer, and Christopher Ferguson, the Company’s majority stockholder, as defendants. On September 14, 2009, the Company filed a Notice of Demurrer to Complaint with the Superior Court of California, County of Humboldt. On November 3, 2009, the Company received a new complaint filed by Blue Lake Rancheria asserting the same claims previously made. The Company is currently in discussions with Blue Lake to review alternatives.

Michael W. O’Donnell

In May 2009, Michael W. O’Donnell filed a claim in the Circuit Court of the Ninth Judicial Circuit in and for Orange County, Florida seeking an unspecified amount of unpaid wages and reasonable attorney’s fees related to the termination of his employment with the Company. On August 21, 2008, Mr. O’Donnell was notified that his employment was being terminated for Cause, as defined in the Employment Agreement dated February 23, 2007 and the Amended Letter Agreement dated June 17, 2008 between the Company and the ALS Parties, which include Mr. O’Donnell. The Company has answered Mr. O’Donnell’s claims and disputed his allegations. Furthermore, on August 7, 2009, the Company also filed a counter-claim against Mr. O’Donnell for breach of contract arising out of his failure to honor the terms of the Employment Agreement and the Amended Letter Agreement.

National Union Fire Insurance

National Union Fire Insurance made a Demand for Arbitration on the Company asserting a claim for approximately $4,158,000 for amounts owed for premiums, adjustments, expenses and fees associated with a Workers Compensation Policy previously held by the Company and sold as part of the sale to Mercer Ventures, Inc. to TradeShow Products, Inc. The Company complied with the Demand and named an arbitrator for the proceeding. The date of the arbitration has not yet been scheduled.

Allegiant Professional Business Services Inc.

On July 31, 2009, Allegiant Professional Business Services Inc. (“Allegiant”) (formerly known as TradeShow Products, Inc.) made a claim for damages and breach of contract related to the sale of Mercer Ventures, Inc. to TradeShow Products, Inc. Allegiant is seeking repayment of $91,604 for nonpayment of taxes. The Company is in the process of responding to the claim.

The Company has accrued for some, but not all, of these matters where payment is deemed probable and an estimate or range of outcomes can be made. An adverse decision in a matter for which the Company has no reserve may result in a material adverse effect on its liquidity, capital resources and results of operations. In addition, to the extent that the Company’s management has been required to participate in or otherwise devote substantial amounts of time to the defense of these matters, such activities would result in the diversion of management resources from business operations and the implementation of the Company’s business strategy, which may negatively impact the Company’s financial position and results of operations.

The principal risks that the Company insures against are general liability, automobile liability, property damage, alternative staffing errors and omissions, fiduciary liability and fidelity losses. If a potential loss arising from these lawsuits, claims and actions is probable, reasonably estimable, and is not an insured risk, the Company records the estimated liability based on circumstances and assumptions existing at the time. Whereas management believes the recorded liabilities are adequate, there are inherent limitations in the estimation process whereby future actual losses may exceed projected losses, which could materially adversely affect the financial condition of the Company.

Generally, the Company is engaged in various other litigation matters from time to time in the normal course of business. Management does not believe that the ultimate outcome of such matters, either individually or in the aggregate, will have a material adverse impact on the financial condition or results of operations of the Company.

NOTE 19 — SUBSEQUENT EVENTS:

The Company evaluated all events subsequent to September 30, 2009 through the date the accompanying condensed consolidated financial statements were issued on November 16, 2009. There were no subsequent events to report except the following:

As discussed above, on August 14, 2009, the Company entered into the Amended Loan Agreement with ComVest. The Amended Loan Agreement provided that the Company should, on or prior to September 28, 2009, include two (2) members designated by ComVest, each to be placed within separate classes of the Company’s Board of Directors and each of whom will be unaffiliated with and independent of ComVest.

On October 7, 2009, the Company and ComVest entered into a Letter Amendment (the “Letter Amendment”) to the Amended Loan Agreement pursuant to which the parties agreed to extend the Company’s obligation to have such directors serve on the Company’s Board of Directors until December 27, 2009.

On October 21, 2009, the Motion for Summary Judgment filed by AICCO, Inc. against the Company was granted in favor of the Plaintiff in the amount of $166,587, together with interest at a contract rate of 6.57% per annum until the Judgment is paid in full, plus costs and reasonable attorney’s fees. See “Part II - Item 1A. Risk Factors” for a discussion of risks that the Company may face in connection with this judgement.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to assist in the understanding and assessment of significant changes and trends related to the results of operations and financial condition of ClearPoint Business Resources, Inc. together with its consolidated subsidiaries (“ClearPoint” or the “Company”). The information contained in Item 2 has been derived from, and should be read in conjunction with, the consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and ClearPoint’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”).

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). ClearPoint’s forward-looking statements include, but are not limited to, statements regarding ClearPoint’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance and are based on ClearPoint’s current assumptions, estimates, forecasts, expectations and beliefs concerning ClearPoint’s business and their potential effects on ClearPoint and speak only as of the date of such statement. ClearPoint has no plans to update its forward-looking statements to reflect events or circumstances after the date hereof. There can be no assurance that future developments affecting ClearPoint will be those that it has anticipated. These forward-looking statements involve a number of risks and uncertainties (some of which are beyond ClearPoint’s control) that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following factors:

·	ClearPoint’s ability to continue as a going concern, obtain additional financing and restructure existing debt obligations;

·	ClearPoint’s ability to service and repay outstanding debt obligations;

·	limitations that ClearPoint’s outstanding debt obligations impose on cash flow available for operations;

·	ClearPoint’s ability to facilitate the market acceptance of the iLabor Network and increase revenues; and

·	the effect of the current economic downturn.

The foregoing risks are not exhaustive. The “Risk Factors” set forth in Part I, Item 1A. of ClearPoint’s Annual Report on Form 10-K filed for the year ended December 31, 2008 and this Quarterly Report on Form 10-Q include additional risk factors which could impact ClearPoint’s business and financial performance. Should one or more of these risks or uncertainties materialize, or should any of ClearPoint’s assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. You should not place undue reliance on forward-looking statements.

Information contained in this section and in Part II of this Quarterly Report on Form 10-Q and expressed in U.S. dollars is presented in thousands (000s), except for per share data and as otherwise noted. Percentages contained in this section were calculated, where possible, using the information from ClearPoint’s consolidated financial statements, and not the rounded information provided in this section. As a result, these percentages may differ slightly from calculations obtained based upon the rounded figures provided in this section and totals contained in this section may be affected by rounding.

Overview

ClearPoint is a workplace management solutions company. ClearPoint focuses its services on helping companies manage their contingent labor needs. Through the iLabor Network, ClearPoint provides services to clients ranging from small businesses to Fortune 500 companies. The iLabor Network specializes in the highly transactional “go to work” or “on-demand” segment of the temporary labor market. ClearPoint considers the hospitality, distribution, warehouse, manufacturing, logistics, transportation, convention services, hotel chains, retail and administrative sectors among the segments best able to be served by the iLabor Network.

During the fiscal year ended December 31, 2008, ClearPoint began to transition its business model from a temporary staffing provider through a network of branch-based offices or franchises to a provider that manages clients’ temporary staffing needs through its open Internet portal-based iLabor Network. ClearPoint completed this transition during the three months ended June 30, 2008. Under its new business model, ClearPoint acts as a broker for its clients and network of temporary staffing suppliers.

ClearPoint derives its revenues from the following sources: (i) royalty payments related to client contracts which ClearPoint subcontracted or sold to other providers of temporary staffing services; (ii) revenues generated by the iLabor Network; and (iii) revenues related to VMS.

Historically, ClearPoint has funded its cash and liquidity needs through cash generated from operations and debt financing. ClearPoint incurred net losses of approximately $2,788 and $38,214 for the nine months ended September 30, 2009 and 2008, respectively. ClearPoint is highly leveraged and has very limited financial resources. At September 30, 2009, ClearPoint had cash and cash equivalents of $72, $27,427 of total liabilities and accumulated deficit of approximately $57,278.

In 2008, ClearPoint defaulted on its debt obligations to M&T and had to restructure its outstanding debt obligations. Effective June 20, 2008, ClearPoint replaced M&T with ComVest as its senior lender and entered into subordination agreements with its other lenders. As a result of its liquidity problems as well as the absence of firm commitments for any additional financing, ClearPoint’s independent registered public accounting firm included an explanatory paragraph in its report on ClearPoint’s consolidated financial statements for the fiscal year ended December 31, 2008 regarding ClearPoint’s ability to continue as a going concern.

During the nine months ended September 30, 2009, ClearPoint (i) did not make certain required payments under its debt obligations, including the Loan Agreement with ComVest, the Blue Lake Note, the Sub Notes payable to Sub Noteholders and the StaffBridge Note, (ii) amended and restated its Loan Agreeement with ComVest and (iii) restructured its debt obligations under the Sub Notes and the StaffBridge Note. See “—Liquidity and Capital Resources” for additional information regarding such defaults, waivers from ComVest and agreements related to our debt restructuring.

ClearPoint included a “going concern” note in its condensed consolidated financial statements for the fiscal quarter ended September 30, 2009 (see Note 1 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q). As of September 30, 2009, cash projected to be generated from operations may not be sufficient to fund operations and meet debt repayment obligations during the next twelve months. In order to meet its cash and liquidity needs, ClearPoint will be required to raise additional financing and restructure existing debt, and there is no assurance that ClearPoint will be successful in obtaining additional financing and restructuring existing debt obligations. If ClearPoint cannot generate sufficient cash from operations, raise additional financing and restructure existing debt, there is substantial doubt about the ability of ClearPoint to continue as a going concern for the next twelve months.

Demand for ClearPoint’s staffing services has been adversely affected by the general level of economic activity and rising unemployment in the United States. During the current economic downturn, some of ClearPoint’s clients have been reducing their temporary labor spending as part of a general cost reduction strategy. In addition, some of ClearPoint’s clients have limited their utilization of temporary employees before laying off regular full-time employees. Generally, ClearPoint has experienced less demand for its services and more competitive pricing pressure during this period of economic downturn, which has adversely affected its business, financial condition and results of operations. ClearPoint is dependent on its approved staffing supplier base to fill open positions posted by its clients. If due to the economic downturn some of ClearPoint’s suppliers curtail their operations or are otherwise unable to fill sufficient open positions posted by its clients, ClearPoint may be unable to compete effectively, which could materially adversely affect its business, financial condition and results of operations. In addition, ClearPoint continues to face significant business challenges related to:

·	its ability to service and repay its outstanding debt obligations;

·	limitations imposed by the outstanding debt obligations on the cash flow available for its operations; and

·	its ability to facilitate the market acceptance of the iLabor Network.

In the face of these challenges, ClearPoint expects to focus on:

·	evaluating additional sources of financing and restructuring its existing debt obligations in the event that iLabor penetration and adoption does not meet ClearPoint’s operating cash requirements;

·	maintaining and enhancing the functionality of its iLabor Network for current and prospective clients;

·	continuing to expand its supplier base to provide more extensive market coverage; and

·	increasing sales and marketing efforts through direct and indirect channels.

Application of Critical Accounting Policies and Estimates

ClearPoint’s discussion and analysis of its financial condition and results of operations are based on ClearPoint’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with these principles in the United States of America requires ClearPoint to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and also affect the amounts of revenues and expenses reported for each period. Actual results could differ from those which result from using the estimates.

Critical accounting policies require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

ClearPoint’s significant accounting policies are described in Note 3 to the Notes to ClearPoint’s Consolidated Financial Statements for the year ended December 31, 2008, as set forth in the Annual Report on Form 10-K filed with the SEC on April 15, 2009 and additional policies are described in Note 3 to the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Seasonality

ClearPoint experiences fluctuation in revenue and operating results based on a number of factors, including, but not limited to, competition in its markets, availability of qualified personnel and the personnel demands of its clients. Historically, ClearPoint has experienced a rise in demand from its transportation and retail clients in the third and fourth quarter due to the increase in the shipment of products for the holiday season. The first quarter has been traditionally the slowest quarter from a revenue perspective due to national holidays and client planning cycles. Inclement weather can cause a slowdown in ClearPoint’s business due to business shutdowns by its clients. This revenue seasonality will also typically impact ClearPoint’s profitability as most operating expenses are spread evenly throughout the year.

Results of Operations (Unaudited)

Three Months Ended September 30, 2009 Compared to

Three Months Ended September 30, 2008 (000’s)

The following summarizes select items of ClearPoint’s condensed consolidated statements of operations for the three months ended September 30, 2009 and September 30, 2008:

$(000’s)	2009			% of Revenue			2008			% of Revenue			% Change
Revenues	$	1,355			100.0	%	$	3,221			100.0	%		(57.9	)%
Cost of services		—			—			2,084			64.7	%	NA
Gross profit		1,355			100.0	%		1,137			35.3	%		19.2	%
SG&A expenses		1,343			99.1	%		1,986			61.7	%		(32.4	)%
Depreciation and amortization expense		158			11.7	%		219			6.8	%		(27.9	)%
(Loss) from operations		(146	)		(10.8	)%		(1,068	)		(33.2	)%		(86.3	)%
Other income (expense)		—			—			(1	)		(.03	)%		—
Interest income		3			2	%		12			0.4	%		(75.0	)%
Interest (expense)		(590	)		(43.5	)%		(541	)		(16.8	)%		9.0	%
Derivative income		42			3.1	%		26			0.8	%		61.5	%
Gain on restructuring of debt		—			—			—			—			—
Gain (loss) on sale of subsidiary		—			—			—			—			—
Loss on extinguishment of debt		(1,175	)		(86.7	)%		—			—			—
Loss before income taxes		(1,866	)		(137.7	)%		(1,572	)		(48.8	)%		18.7	%
Income tax expense		—			—	%		—			—	%		—	%
Net (loss)	$	(1,866	)		(137.7	)%	$	(1,572	)		(48.8	)%		18.7	%

Net Revenues

ClearPoint’s revenues for the three months ended September 30, 2009 and 2008 were $1,355 and $3,221, respectively, which represented a decrease of $1,866 or 57.9%. For the three months ended September 30, 2009 and 2008, ClearPoint provided payrolling services to clients which was recorded in 2008 on a gross basis. For the three months ended September 30, 2009 ClearPoint recorded all revenue on a net basis. ClearPoint recorded $1,170 of royalties in net revenue during the three months ended September 30, 2009 and $900 of royalties in net revenue during the three months ended September 30, 2008.

Cost of Services and Gross Profit

Cost of services consists of direct labor expenses for time charged directly to a client and related payroll taxes, unemployment and workers’ compensation insurance expenses, employee benefits, and other out-of-pocket expenses directly associated with the performance of the service to the client. ClearPoint’s cost of services for the three months ended September 30, 2009 and 2008 was $0 and $2,084, respectively, which represented a decrease of $2,084. For the three months ended September 30, 2009 and 2008, ClearPoint provided payrolling services to clients, which was recorded in 2008 on a gross basis. For the three months ended September 30, 2009 ClearPoint recorded all revenue on a net basis. ClearPoint’s gross profit for the three months ended September 30, 2009 and 2008 was $1,355 and $1,137, respectively, which represented an increase of $218 or 19.2%. As described in the Overview above, all revenues are being recognized on a net fee basis such as royalty, license fees and payrolling services with no cost of services. As a percentage of revenue for the three months ended September 30, 2009 and 2008, ClearPoint’s gross profit was 100% and 35.3% respectively.

Selling, General and Administrative Expenses

ClearPoint’s selling, general, administrative (“SG&A”) expenses for the three months ended September 30, 2009 and 2008 were $1,343 and $1,986, respectively, which represented a decrease of $643 or 32.4%. The decrease was a direct result of ClearPoint’s 2008 restructuring and franchising of many of its branches, as ClearPoint had substantially less SG&A expenses associated with ClearPoint’s former branch based operations during the three months ended September 30, 2009, which include expenses related to salaries, employee benefits and rents

Depreciation and Amortization Expense

ClearPoint’s depreciation and amortization expense for the three months ended September 30, 2009, and 2008 was $158 and $219, respectively, which represented a decrease of $61 or 27.9%. The decrease was due to the reduction of equipment purchases.

Interest Expense

ClearPoint’s interest expense for the three months ended September 30, 2009 and 2008 was $590 and $541, respectively, which represented an increase of $49, or 9.0%, primarily due to the increased interest cost from the increase in ClearPoint’s overall debt and the amortization of deferred financing fees to interest expense.

Other Income or Expense

For the three months ended September 30, 2009 and 2008, total Other Income was $0 and $(1), respectively. During the three months ended September 30, 2008, the income was primarily attributable to payroll refunds.

Loss on Exinguishment of Debt

For the three months ended September 30, 2009 and 2008, Loss on Extinguishment of Debt was $1,175 and $(0), respectively. The August 14, 2009 debt modification was accounted for as a debt extinguishment. As a result, the unamortized debt discount related to the warrant and original issue discount in the amount of $769,334, the unamortized debt issue costs attributable to the ComVest term note in the amount of $258,991 and the modification fees paid to ComVest attributable to the retirement of the ComVest term note in the amount of $147,000 were recorded as a loss on extinguishment of debt.

Net Loss

ClearPoint’s net loss for the three months ended September 30, 2009 and 2008 was $1,866 and $1,572, respectively, which represented an increase in loss of $294 or 18.7%. The increase in loss was primarily a result of the loss on the extinguishment of debt and a decrease in SG&A expense primarily due to the reduction of employee costs.

Nine Months Ended September 30, 2009 Compared to

Nine Months Ended September 30, 2008 (000’s)

The following summarizes select items of ClearPoint’s condensed consolidated statements of operations for the nine months ended September 30, 2009 and September 30, 2008:

$ (000’s)	2009			% of Revenue			2008			% of Revenue			% Change
Revenues	$	3,943			100.0	%	$	30,732			100.0	%		(87.2	)%
Cost of services		—			—			27,737			90.3	%	NA
Gross profit		3,943			100.0	%		2,995			9.7	%		31.7	%
SG&A expenses		3,868			98.1	%		13,936			45.4	%		(72.2	)%
Restructuring expense		—			—			2,100			6.8	%		—
Fixed assets impairment expense, net		5			0.1	%		1,022			3.3	%		(99.5	)%
Impairment of goodwill		—			—			16,822			54.7	%		—
Depreciation and amortization expense		471			11.9	%		504			1.6	%		(6.5	)%
(Loss) from operations		(401	)		(10.2	)%		(31,389	)		(102.1	)%		(98.7	)%
Other income (expense)		386			9.8	%		198			0.7	%		99.0	%
Interest income		8			.2	%		12			—			(33.3	)%
Interest, OID and warrant liability (expense)		(1,604	)		(40.7	)%		(1,447	)		(4.7	)%		10.9	%
Derivative income		(2	)		(0.01	)%		26			—			107.7	%
Gain on restructuring of debt		—			—			687			2.2	%		—
Gain (loss) on sale of subsidiary		—			—			(1,294	)		(4.2	)%		—
Loss on extinguishment of debt		(1,175	)		(29.8	)%		—			—			—
Loss before income taxes		(2,788	)		(70.7	)%		(33,207	)		(108.1	)%		(92.8	)%
Income tax expense		—			—	%		5,007			16.3	%		(100.0	)%
Net (loss)	$	(2,788	)		(70.7	)%	$	(38,214	)		(124.4	)%		(92.8	)%

Net Revenues

ClearPoint’s revenues for the nine months ended September 30, 2009 and 2008 were $3,943 and $30,732, respectively, which represented a decrease of $26,789 or 87.2%. This decrease was due primarily to the changes in ClearPoint’s business model, as described in the Overview above, which resulted in all revenues being recognized on a net fee basis such as franchise, royalty and license fees. ClearPoint recorded $3,484 and $1,165 of royalties in net revenue during the nine months ended September 30, 2009 and 2008, respectively.

Cost of Services and Gross Profit

Cost of services consists of direct labor expenses for time charged directly to a client and related payroll taxes, unemployment and workers’ compensation insurance expenses, employee benefits, and other out-of-pocket expenses directly associated with the performance of the service to the client. ClearPoint’s cost of services for the nine months ended September 30, 2009 and 2008 was $0 and $27,737, respectively, which represented a decrease of $27,737. Under the new business model, there are no costs of services rendered. ClearPoint’s gross profit for the nine months ended September 30, 2009 and 2008 was $3,943 and $2,995, respectively, which represented an increase of $948 or 31.7%. This increase was due primarily to the changes in ClearPoint’s business model, as described in the Overview above, which resulted in more revenues being recognized on a net fee basis such as royalty and license fees with no cost of services as revenues are recorded net of costs associated with supplying temporary labor. As a percentage of revenue for the nine months ended September 30, 2009 and 2008, ClearPoint’s gross profit was 100% and 9.7%, respectively.

Selling, General, Administrative and Restructuring Expenses

ClearPoint’s SG&A and restructuring expenses for the nine months ended September 30, 2009 and 2008 were $3,868 and $13,936, respectively, which represented a decrease of $10,068 or 72.2%. The decrease was a direct result of ClearPoint’s change in business model, which substantially reduced SG&A expenses associated with ClearPoint’s former branch based operations during the nine months ended September 30, 2009, as well as the recognition of $416 in recovery of bad debt. During the nine months ended September 30, 2008, ClearPoint recorded $1,605 in a provision for amounts due from the former franchisees that are no longer in operation and allowances for doubtful accounts totaling $5,185. As a percentage of revenue for the nine months ended September 30, 2009 and 2008, SG&A expenses were 98.1% and 45.4% respectively, largely as a result of reduced revenue due to the recording of franchise royalties on a net basis.

Effective March 12, 2008, ClearPoint initiated an additional restructuring program of its field and administrative operations in order to further reduce its ongoing SG&A expenses. As part of the restructuring program, ClearPoint closed its remaining branch and administrative office in Florida and eliminated approximately 20 positions. Restructuring expenses related to these closures and position eliminations during the nine months ended September 30, 2009 and 2008, were $0 and $2,100, respectively, which represented a decrease of $2,100. The decrease was related to the fact that ClearPoint did not initiate an additional reserve in 2009 to further reduce its ongoing SG&A expenses.

Impairment of Goodwill and Fixed Assets and Depreciation and Amortization Expense

ClearPoint’s depreciation and amortization expense for the nine months ended September 30, 2009, and 2008 were $471 and $504, respectively, which represented a decrease of $33 or 6.5%. For the nine months ended September 30, 2008, ClearPoint recorded an impairment charge of $1,022 related to fixed assets as a result of the termination of franchise agreements described in Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. ClearPoint removed $1,838 of fixed assets and $816 of accumulated depreciation as a result of this impairment. ClearPoint also recorded an impairment of goodwill for the nine months ended September 30, 2008 of $16,822 based upon management’s determination that the carrying amount of the goodwill was less than its fair value.

Interest Expense

ClearPoint’s interest expense for the nine months ended September 30, 2009 and 2008 was $1,604 and $1,447, respectively, which represented an increase of $157, or 10.9%, primarily due to the increased interest cost from the increase in ClearPoint’s overall debt.

Other Income or Expense

For the nine months ended September 30, 2009 and 2008, total Other Income was $386 and $198, respectively. For the nine months ended September 30, 2009, the income was primarily due to the recognition of $358 in connection with the settlement of the litigation involving Sunz and other income of $30, and was partially offset by the loss on derivative instruments of $2. For the nine months ended September 30, 2008, the other income primarily consisted of payroll refunds.

Loss on Extinguishment of Debt

For the nine months ended September 30, 2009 and 2008, Loss on Extinguishment of Debt was $1,175 and $(0), respectively. The August 14, 2009 debt modification was accounted for as a debt extinguishment. As a result, the unamortized debt discount related to the warrant and original issue discount in the amount of $769,334, the unamortized debt issue costs attributable to the ComVest term note in the amount of $258,991 and the modification fees paid to ComVest attributable to the retirement of the ComVest term note in the amount of $147,000 were recorded as a loss on extinguishment of debt.

Net Loss

ClearPoint’s net loss for the nine months ended September 30, 2009 and 2008 was $2,788 and $38,214, respectively, which represented a decrease in loss of $35,426or 92.8%. The decrease was primarily a result of ClearPoint’s change in business model. During the nine months ended September 30, 2008, ClearPoint recorded an impairment of goodwill of $16,822, restructuring charge of $2,100, SG&A expenses of $13,936, and an income tax benefit valuation allowance of $5,007. For the nine months ended September 30, 2009, ClearPoint recorded a loss on extinguishment of debt of $1,175, ClearPoint’s SG&A expenses significantly decreased (as described above) and there were no impairment charges recorded.

Liquidity and Capital Resources

General

Historically, ClearPoint has funded its cash and liquidity needs through cash generated by operating activities and through various forms of debt and equity financing. As of September 30, 2009, cash projected to be generated from operations may not be sufficient to fund operations and meet debt repayment obligations. Based on ClearPoint’s cash position and working capital deficiency, it may need to raise additional financing and restructure existing debt in order to support its business operations. The amount of financing required will be determined by many factors, some of which are beyond ClearPoint’s control, and may require financing sooner than currently anticipated. ClearPoint has no commitment for any additional financing or debt restructuring and can provide no assurance that such additional financing or debt restructuring will be negotiated on terms acceptable to ClearPoint, if at all. If ClearPoint is unable to generate sufficient cash from operations or obtain additional financing and restructure existing debt, or if such funds cannot be negotiated on terms favorable to ClearPoint, there is substantial doubt about the ability of ClearPoint to continue as a going concern (see also Note 1 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q).

ClearPoint’s traditional use of cash flow was for funding payroll in advance of collecting revenue, particularly during periods of economic upswings and growth and during periods in which sales are seasonally high throughout the year. Temporary personnel were generally paid on a weekly basis while payments from clients were generally received 30 to 60 days after billing. ClearPoint’s new iLabor-focused business model has essentially eliminated these funding requirements since ClearPoint’s main focus is no longer to act as the employer for the temporary personnel, but rather to be the facilitator, bringing together clients and suppliers of temporary labor, via ClearPoint’s iLabor Network. Revenue from ClearPoint’s iLabor Network, where it electronically procures and consolidates buying of temporary staffing for clients nationally, is recognized on a net basis. ClearPoint contracts directly with clients seeking to procure temporary staffing services through its iLabor portal. ClearPoint also contracts directly with, and purchases from, temporary staffing suppliers, the temporary placement of workers which is then subsequently resold to its clients. There is no specific fee or other payment charged to ClearPoint’s clients or suppliers in connection with their respective use of the iLabor Network.

ClearPoint’s primary cash requirements include the payment of interest and principal on its debt obligations, payments to suppliers providing temporary staffing services to ClearPoint’s clients and general working capital of the business.

Cash and Cash Equivalents and Cash Flows

The table below sets forth, for the periods indicated, ClearPoint’s beginning balance of cash and cash equivalents, net cash flows from operating, investing and financing activities and ClearPoint’s ending balance of cash and cash equivalents:

	Nine Months Ended September 30,
$ (000’s)	2009			2008
Cash and cash equivalents at beginning of period	$	960		$	1,994
Cash provided by (used in) operating activities		(1,335	)		4,987
Cash (used in) investing activities		(70	)		(548	)
Cash provided by (used in) financing activities		517			(3,775	)
Cash and cash equivalents at end of period	$	72		$	2,658

Nine Months Ended September 30, 2009 and 2008

Net cash provided by (used in) operating activities was ($1,335) and $4,987 for the nine months ended September 30, 2009 and 2008, respectively. Cash used in operating activities during the nine months ended September 30, 2009 primarily consisted of: a book loss of $2,788; non-cash items of: depreciation and amortization expense of $654, partially offset by a reduction in the provision for doubtful accounts of $423, interest expense related to the original issue discount and warrant liability of $355, issuance of warrants relating to a consulting agreement of $30, a loss on derivatives of $1, stock based compensation of $47, a loss on extinguishment of debt of $1,125 and disposal of fixed assets of $5; and cash items of: a decrease in accounts receivable of $201 related to collections and conversion of receivables to a note and a decrease in new revenues related to the adoption of new iLabor business, a decrease in unbilled revenue of $5, an increase in notes receivable related to StaffChex accounts receivable, a decrease in prepaid expenses and other current assets of $201 a decrease in other assets of $51, an increase in accounts payable of $306, a decrease in accrued expenses of $192, a decrease in accrued payroll taxes of $132, a decrease in deferred revenue of $707, a decrease in accrued restructuring costs of $69 and a decrease in retirement benefits of $62.

Cash provided by operating activities during the nine months ended September 30, 2008 primarily consisted of: a book net loss of $38,214; non cash items of: a deferred tax expense of $5,007 as of January 1, 2008 due to a full valuation allowance against the deferred tax assets, depreciation and amortization expense of $1,712, an impairment of goodwill of $16,822, a provision for doubtful accounts of $2,627, a provision for doubtful accounts of $1,639 relating to franchisees and a loss on the sale of ClearPoint HRO, LLC of $1,294, issuance of stock of $121 and issuance of stock to a related party of $250, issuance of warrants related to the refinancing of $1,247, gain on the restructuring of debt of $2,114 and stock based compensation of $34; and cash items of: a decrease in accounts receivable of $13,074 due to the franchising of the Company’s branches and the related decrease in revenue in addition to the adoption of the new technology based iLabor business model, a decrease in unbilled revenue of $2,046, an increase in prepaid expenses and other current assets of $353, an increase in other assets of $9, an increase in accounts payable of $1,021, a decrease in accrued expenses and other accrued liabilities of $1,548, a decrease in accrued payroll and related taxes of $2,608, an increase of deferred revenue of $2,241 and an increase in accrued restructuring costs of $676.

Net cash (used in) investing activities was ($70) and ($548) for the nine months ended September 30, 2009 and 2008, respectively. The primary use of cash for investing activities for the nine months ended September 30, 2009 was for the purchase of fixtures and software and a increase in restricted cash. The primary uses of cash for investing activities for the nine months ended September 30, 2008 was for capitalized software development for $548.

Net cash provided by (used in) financing activities was $517 and $(3,775) for the nine months ended September 30, 2009 and 2008, respectively. The following primary financing activities in the nine months ended September 30, 2009 resulted in the net cash provided of $517: repayments of long term debt of $612, repayments of ComVest long term debt of $7,654, repayments of ComVest Revolvingcredit facility of $4,503, borrowings against ClearPoint’s Revolving credit facility of $13,355, and fees incurred in refinancing $68. The primary activities in the nine months ended September 30, 2008 that resulted in net cash used of $3,775 were net repayments to M&T on the revolving credit facility of $8,747, repayments to M&T on the term loan of $1,360, borrowing from ComVest of $8,000, net of original issue discount of $1,000, net borrowings from noteholders of $(50), repayments of debt owed to Blue Lake of $450 and fees incurred in the refinancing of debt of $693.

Debt Restructuring – M&T and ComVest

M&T

On February 23, 2007, pursuant to a Credit Agreement (the “M&T Credit Agreement”), ClearPoint entered into credit facilities with M&T consisting of a $20,000 revolving credit facility (“M&T Revolver”) expiring in February 2010 and a $3,000 term loan (“M&T Term Loan”) expiring in February 2012. In July 2007, ClearPoint amended the M&T Credit Agreement to increase the M&T Term Loan to $5,000 in the First Amendment to the M&T Credit Agreement. On March 21, 2008, ClearPoint entered into the Second Amendment to M&T Credit Agreement, dated as of March 21, 2008, among ClearPoint and M&T. Pursuant to the Second Amendment, the M&T Credit Agreement was amended, among other matters, as follows: (i) the aggregate amount of the revolving credit commitments was gradually reduced from $20,000 to $15,000 at March 21, 2008 and $4,000 at June 30, 2008; (ii) the applicable margin, which is a component of the interest rate calculations, was increased to (a) 3.5% and 1.25% for any revolving credit loan that is a “Eurodollar Loan” and a “Base Rate Loan”, respectively (as defined in the M&T Credit Agreement), and (b) 4.5% and 2.25% for any M&T Term Loan that is a Eurodollar Loan and a Base Rate Loan, respectively; (iii) the applicable commitment fee percentage, which is included in the calculations of commitment fees payable by ClearPoint on the amount of the unused revolving credit commitments, was increased to 0.25%; and (iv) the covenants related to the ratios of total debt or senior debt, as applicable, to modified EBITDA were amended to lower the ratios as of September 30, 2008.

On April 14, 2008, ClearPoint entered into a Waiver (the “M&T Waiver”) to the M&T Credit Agreement. Pursuant to the M&T Waiver, the required lenders under the M&T Credit Agreement waived compliance with certain financial covenants set forth in the M&T Credit Agreement for the period ended December 31, 2007. In connection with the M&T Waiver, ClearPoint paid a $100 fee to M&T. ClearPoint was not in compliance with the financial and reporting covenants at March 31, 2008. ClearPoint did not receive a waiver for such non-compliance from M&T. On May 9, 2008, ClearPoint received a letter from M&T indicating, among other matters, that the principal amount of revolving credit loans outstanding under the M&T Credit Agreement shall be limited to a maximum amount of $7,300 for the period ended May 16, 2008.

On May 21, 2008, ClearPoint received a notice of default from M&T in connection with the M&T Credit Agreement. ClearPoint defaulted on its obligations under the M&T Credit Agreement as a result of its failure to comply with financial covenants contained in the M&T Credit Agreement, including obligations to maintain certain leverage and fixed charge coverage ratios. As a consequence of the default, M&T exercised its right to declare all outstanding obligations under the credit facilities to be immediately due and payable and demanded the immediate payment of approximately $12,800, consisting of approximately (i) $7,400 under the M&T Revolver; (ii) $3,900 under the M&T Term Loan; and (iii) $1,500 under a letter of credit. Also pursuant to the notice of default, M&T exercised its right to terminate the M&T Revolver and the M&T Term Loan and to terminate its obligation to make any additional loans or issue additional letters of credit to ClearPoint.

ClearPoint and M&T entered into a Loan Modification and Restructure Agreement dated June 20, 2008 (the “M&T Restructure Agreement”) pursuant to which the parties agreed to: (i) consolidate the certain obligations owing to M&T (the “M&T Obligations”), (ii) reduce the carrying amount of the consolidated obligations from $10,900, which consisted of the M&T Revolver and Term Loan of approximately $7,000 and $3,900, respectively (net of additional cash payments made during negotiations), to $8,600, (iii) subordinate the M&T Obligations to ClearPoint’s obligations to ComVest (the “ComVest Obligations”) and (iv) permit ClearPoint to repay the M&T Obligations on a deferred term basis. The M&T Restructure Agreement provides that on the earlier of the first day of the calendar month following ClearPoint’s full satisfaction of the ComVest Obligations or January 1, 2011 (the “Obligations Amortization Date”), ClearPoint shall repay a total of $3,000 in principal amount (the “M&T Deferred Obligations”) to M&T in 36 equal monthly payments plus interest on the outstanding balance of such amount at a rate of 5% per annum, subject to increase to 12% per annum upon occurrence of certain agreement termination events and Spring Back Events, as defined below. In the event of a sale of substantially all of ClearPoint’s or any subsidiary’s assets, a capital infusion or an infusion of subordinated indebtedness, ClearPoint must prepay the M&T Deferred Obligations by an amount equal to 25% of such proceeds as are payable to ComVest under such circumstances.

Pursuant to the M&T Restructure Agreement, ClearPoint must comply with various covenants while the M&T Deferred Obligations are outstanding and provided that (i) no bankruptcy or insolvency event has taken place and (ii) ClearPoint and/or its subsidiaries have not terminated operation of their business without the prior written consent of M&T (each being a “Spring Back Event”). Such covenants include, but are not limited to: delivery to M&T of financial and other information delivered to ComVest; restrictions on the aggregate compensation which may be paid to the Chief Executive Officer and Chief Financial Officer of ClearPoint; limitations on dividends and distributions of cash or property to equity security holders of ClearPoint and/or redemptions or purchases of capital stock or equity securities of other entities; and restrictions on collateralizing subordinated indebtedness. At September 30, 2009, ClearPoint was in compliance with all applicable covenants set forth in the M&T Restructure Agreement.

The M&T Restructure Agreement provides that ClearPoint may continue to pay regularly scheduled payments (but not prepayments or accelerated payments) on (i) existing subordinated indebtedness, except to the extent prohibited by the ComVest transaction documents and (ii) the Blue Lake Note. For each $50 paid on account of the note issued to Blue Lake, Michael D. Traina, ClearPoint’s Chairman of the board of directors and Chief Executive Officer, and Christopher Ferguson, ClearPoint’s former director, President and Secretary, shall, on a several basis, be liable as sureties for the M&T Deferred Obligations, each in the amount of $10, subject to an aggregate amount of each surety’s liability of $150. See Note 11- Debt Obligations included in Part I of this Quarterly Report on Form 10-Q for more information related to the M&T Restructure Agreement.

ComVest

Loan Agreement Dated June 20, 2008

On June 20, 2008, ClearPoint entered into the Loan Agreement with ComVest. Pursuant to the ComVest Loan Agreement, ComVest extended to ClearPoint: (i) a secured revolving credit facility for up to $3,000 (the “ComVest Revolver”) and (ii) a term loan (the “ComVest Term Loan” and, together with the ComVest Revolver, the “ComVest Loans”) in the principal amount of $9,000, of which $1,000 is treated as an original issue discount, and ClearPoint received $8,000 in respect of the ComVest Term Loan. ClearPoint also issued to ComVest a warrant to purchase 2,210,825 shares of common stock at an exercise price of $0.01 per share (the “ComVest Warrant”). The ComVest Warrant was valued at $634 and treated as a discount to the long term portion of the refinancing and was amortized over the life of the long term debt. The amounts due under the ComVest Revolver bore interest at a rate per annum equal to the greater of: (i) the prime rate of interest announced by Citibank, N.A. plus 2.25% or (ii) 7.25%. The ComVest Loans provided that the stated interest rates were subject to increase by 500 basis points during the continuance of an event of default under the ComVest Loan Agreement.

During the quarter ended June30, 2009, the Company was in default on principal installment payments due for February, 2009 through June, 2009 under the ComVest Term Loan in the aggregate amount of $702. In addition, the Company was in default on principal installment payments due for July, 2009 under the ComVest Term Loan in the aggregate amount of $440 and was in default on interest payments due for July, 2009 in the amount of $61. The Company was also in default on interest payments due for July, 2009 under the ComVest Revolver in the amount of $18,098. The failure to make such payments constituted events of default under the Loan Agreement. The Company was obligated to pay a default interest rate of 500 basis points over the prevailing rate, which difference between the default rate and the prevailing rate was not paid. On May 19, 2009, ComVest executed a waiver letter (the Term Loan Waiver”) related to the Loan Agreement for the periods of February through April, 2009. Pursuant to the Term Loan Waiver, ComVest waived the foregoing defaults, provided that ComVest reserved the right to collect at a later time, but no later than the maturity date of the Term Loan under the Loan Agreement, the increased interest ComVest was permitted to charge during the continuance of such defaults. On August 14, 2009, ComVest executed a waiver letter (the “Waiver”), which waived the Company’s defaults under the Loan Agreement through August 14, 2009.. The Waiver is effective provided that the Company pays to ComVest on March 31, 2010 (or sooner if there is a further event of default) approximately $160, constituting the difference between interest calculated at the default rate and at the non-default rate under (i) the ComVest Term Note on the outstanding principal balance of such note for the period from March 1, 2009 through August 14, 2009, and (ii) the ComVest Revolver on the outstanding principal balance of the advances from time to time during the default period stated in (i) above. See Note 11- Debt Obligations included in Part I of this Quarterly Report on Form 10-Q for more information related to the Loan Agreement.

In accordance with ASC 470-50-40, the August 14, 2009 debt modification described below was accounted for as a debt extinguishment. As a result, the unamortized debt discount related to the warrant issued to ComVest and original issue discount in the amount of $769, the unamortized debt issue costs attributable to the ComVest Term Loan in the amount of $259 and the modification fees paid to ComVest attributable to the retirement of the ComVest Term Loan in the amount of $147 were recorded as a loss on extinguishment of debt.

Amended Loan Agreement Dated August 14, 2009

Pursuant to the Amended Loan Agreement, the maximum availability under the secured revolving credit facility (the “Amended Revolver”) was increased from $3,000 to $10,500 (the “Amended Revolver Maximum”). The remaining outstanding principal balances of $2,900 under the revolving credit note and $7,100 under the term loan extended by ComVest pursuant to the ComVest Loan Agreement were paid in full by an advance from the Amended Revolver, and the ComVest Term Loan was cancelled.

The Company may request an increase in the Amended Revolver Maximum to an aggregate amount not in excess of $11,250 minus: (i) any and all required reductions as described above, and (ii) the outstanding principal amount of any indebtedness incurred after August 14, 2009, up to a maximum principal amount outstanding of $750 minus any increase in the Amended Revolver Maximum then in effect. To request such an increase, ClearPoint must introduce to ComVest a participant reasonably satisfactory to ComVest to participate in the advances under the Amended Revolver in a principal amount not less than the requested increase in the Amended Revolver Maximum, on a pari passu basis with ComVest.

(i)	interest in respect of all periods through and including September 30, 2009 will accrue but will not be due and payable in cash except as and when provided in paragraph (iii) below;

(ii)

(iii)

(iv)	accrued interest in respect of all periods from and after January 1, 2010 will be due and payable in cash monthly in arrears on the first day of each calendar month commencing February 1, 2010 and upon the maturity of the amended ComVest revolver.

The Amended Revolver matures on December 31, 2010, subject to extension to December 31, 2011, in ComVest’s sole and absolute discretion, if ClearPoint requests the extension no earlier than September 30, 2010 and no later than October 31, 2010 and there are no continuing events of default on the originally scheduled Amended Revolver maturity date (which defaults may be waived in ComVest’s sole and absolute discretion).

In addition, the Amended Loan Agreement provides that:

(i)	ComVest must pre-approve the hiring of all members of senior management of the Company and all employment agreements or other contracts with respect to senior management; and

(ii)

The Amended Loan Agreement also requires the Company to, subject to certain exceptions, obtain ComVest’s written consent until all obligations under the Amended Loan Agreement have been satisfied in full in connection with certain transactions including, but not limited to, incurrence of additional indebtedness or liens on ClearPoint’s assets; sales of assets; making investments in securities or extension of credit to third parties; purchase of property or business combination transactions; declaration or payment of dividends or redemption of ClearPoint’s equity securities; payment of certain compensation to ClearPoint’s executive officers; changing ClearPoint’s business model or ceasing substantially all of its operations for a period exceeding ten days; sale of accounts receivable; amendment of ClearPoint’s organizational documents; certain transactions with ClearPoint’s affiliates; making certain capital expenditures, and incurring monthly operating expenses in excess of specified dollar amounts. In addition, beginning with the fiscal quarter ending March 31, 2010, ClearPoint must maintain certain fixed charge coverage ratios set forth in the Amended Loan Agreement.

The Amended Loan Agreement lists various events of default including, but not limited to: default in the payment of principal or interest under all obligations of ClearPoint under the Amended Loan Agreement or in the observance or performance of any covenant set forth in the Amended Loan Agreement; default of ClearPoint or any of its subsidiaries under any indebtedness exceeding $100 (excluding any amount due to Blue Lake and any litigation brought with respect to amounts owed to Blue Lake, so long as such amounts are paid solely in shares of ClearPoint’s common stock); occurrence of certain bankruptcy or insolvency events; and existence of any litigation, arbitration or other legal proceedings, other than certain specified litigation, brought by any creditors of ClearPoint or any subsidiary in an aggregate claimed amount exceeding $300.

Upon the occurrence of an event of default, and at all times during the continuance of an event of default, (i) at the option of ComVest (except with respect to bankruptcy defaults for which acceleration is automatic) all obligations of ClearPoint under the Amended Loan Agreement become immediately due and payable, both as to principal, interest and other charges, without any requirement for demand or notice by ComVest, and bear interest at the default rates of interest as described above; (ii) ComVest may file suit against ClearPoint and its subsidiaries under the Amended Loan Agreement and/or seek specific performance thereunder; (iii) ComVest may exercise its rights under the Collateral Agreement, as defined below, against the assets of ClearPoint and its subsidiaries; (iv) the Amended Revolver may be immediately terminated or reduced, at ComVest’s option; and (v) upon ComVest’s request, ClearPoint will provide it with immediate, full and unobstructed access to and control of its books, records, systems and other elements of its business and management.

The Company’s obligations under the Amended Loan Agreement and the Amended Revolver are jointly and severally guaranteed by each of its direct and indirect subsidiaries, referred to as the guarantors, pursuant to the Guaranty Agreement, dated as of June 20, 2008 (the “Guaranty Agreement”), and the Reaffirmation of Guaranty, dated as of August 14, 2009 (the “Reaffirmation of Guaranty”), and are secured by a security interest in all of ClearPoint’s and its subsidiaries’ assets (the “Collateral”), as set forth in the Collateral Agreement dated June 20, 2008 (the “Collateral Agreement”). Pursuant to the Guaranty Agreement and the Reaffirmation of Guaranty, in the event ClearPoint’s obligations are declared immediately due and payable, then the guarantors will, upon demand by ComVest, pay all or such portion of ClearPoint’s obligations under the Amended Loan Agreement declared due and payable.

Upon the occurrence of an event of default under the Amended Loan Agreement, as described above, ComVest may enforce against the guarantors their obligations set forth in the Guaranty Agreement. Pursuant to the Collateral Agreement, upon an event of default under the Amended Loan Agreement, ComVest may exercise any remedies available to it under the Uniform Commercial Code, and other applicable law, including applying all or any part of the collateral or proceeds from its disposition as payment in whole or in part of ClearPoint’s obligations under the Amended Loan Agreement.

In connection with the amended ComVest loan agreement, each of Messrs. Michael D. Traina, ClearPoint’s Chairman of the board of directors and Chief Executive Officer, and John G. Phillips, ClearPoint’s Chief Financial Officer, reaffirmed their respective validity guaranties previously given to ComVest on June 20, 2008 (the “Validity Guaranty”), by executing a reaffirmation of validity guaranties, dated August 14, 2009 (the “Reaffirmation of Validity Guaranties”). The Validity Guaranty provides that each officer will not, intentionally or through conduct constituting gross negligence, and ClearPoint will not, through intentional acts of either Mr. Traina or Mr. Phillips or through conduct constituting gross negligence by each such officer, provide inaccurate or misleading information to ComVest, conceal any information required to be delivered to ComVest or fail to cause the collateral to be delivered to ComVest when required or otherwise take any action that constitutes fraud. In the event of a breach or violation of the obligations of Messrs. Traina or Phillips under the Validity Guaranty, the officer must indemnify and hold ComVest harmless from any loss or damage resulting from such breach or violation.

The Company is obligated to pay ComVest modification fees in the amount of $210, charged to the Amended Revolver, payable $60 on January 1, 2010 and $50 on each of April 1, 2010, July 1, 2010 and October 1, 2010. In addition, on the first business day of each calendar month prior to the maturity date of the Amended Revolver and on the Amended Revolver maturity date or the earlier termination of the Amended Revolver, the Company must pay ComVest a monthly unused commitment fee equal to 0.25% of the amount by which the Amended Revolver Maximum exceeds the average daily outstanding principal amount of advances during the immediately preceding calendar month, charged to the Amended Revolver.

Warrants Issued to ComVest

In connection with June 20, 2008 Revolving Credit and Term Loan Agreement with ComVest, the Company issued a warrant to purchase 2,210,825 shares of common stock at an exercise price of $0.01 per share, immediately exercisable during the period commencing June 20, 2008 and ending on June 30, 2014. This warrant was valued at $634 and treated as a discount to the long term portion of the debt and was amortized over the life of the long term debt. Amortization related to the warrant amounted to $26 and $72 for the three months ended September 30, 2009 and September 30, 2008, respectively, and $138 and $72 for the nine months ended September 30, 2009 and September 30, 2008, respectively. As a result of the August 14, 2009 financing transaction with ComVest described above and in accordance with ASC 470-50-40-17, the unamortized debt discount related to the warrant in the amount of $299 was written off as part of the loss on extinguishment of debt.

ALS

On February 23, 2007, ClearPoint acquired certain assets and liabilities of ALS. The purchase price of $24,400 consisted of cash of $19,000, the ALS Note of $2,500 at an interest rate of 7%, shares of common stock with a value of $2,500 (439,367 shares) and the assumption of approximately $400 of current liabilities. ALS’ stockholders may also receive up to two additional $1,000 payments in shares of common stock based on financial and integration performance metrics of ClearPoint in calendar years 2007 and 2008. No such payments have been made to date. The balance of this note payable at September 30, 2009 was not repaid due to the pending litigation with TSIL (see Part II, Item 1 “Legal Proceedings” of this Quarterly Report on Form 10-Q). In connection with the transaction with ComVest described above, on June 20, 2008, ClearPoint entered into the ALS Agreement with ALS and certain other parties whereby the parties agreed, among other things: (i) to execute the ALS Subordination Letter dated June 20, 2008 (defined below); (ii) to amend the ALS Note to provide for an outstanding principal amount of $2,156 (remaining principal balance of $2,023 plus accrued interest of $133), which balance was $2,265 including interest at September 30, 2009, bearing interest at a rate of 5% per annum payable in 24 equal monthly installments, payable as permitted pursuant to the ALS Subordination Letter; (iii) that ClearPoint would issue 350,000 shares of common stock to ALS (the “ALS Shares”) in accordance with the acquisition of ALS; (iv) that ALS may defend and indemnify ClearPoint in connection with the TSIL Litigation and (v) that the parties will take all appropriate actions to dismiss their claims against each other in connection with the TSIL Litigation. ClearPoint presented the ALS Note on the balance sheet net of other assets of $300 in expenses related to the TSIL Litigation and an advance payment of $331 on the ALS Note, which nets out to $1,634. On November 21, 2008, a joint stipulation for voluntary dismissal was filed with the court pursuant to which ClearPoint and ALS jointly dismissed such claims with prejudice. On December 8, 2008, the court entered an order dismissing all claims between ClearPoint and ALS with prejudice. ClearPoint valued the shares issued at their fair market value as of the date of issuance of $102 and recorded that amount as expense. ClearPoint has no future obligation to issue any additional shares of common stock to ALS.

Pursuant to a Subordination Letter sent by ALS to ComVest, M&T and ClearPoint dated June 20, 2008 (the “ALS Subordination Letter”), ALS agreed that ClearPoint may not make and ALS may not receive payments on the ALS Note, provided however, that (i) upon payment in full of all obligations under the ComVest Term Loan so long as ClearPoint is otherwise permitted to make such payments, ClearPoint shall make monthly interest payments on the outstanding principal balance of the ALS Note and (ii) upon payment in full of the M&T Obligations, ClearPoint shall make 24 equal monthly installments on the ALS Note, as amended pursuant to the ALS Agreement described above. The transaction did not classify as a restructuring of debt. For the nine months ended September 30, 2009 and 2008, ClearPoint accrued $63 and $70, respectively, in interest expense associated with the ALS Note. As of September 30, 2009, ClearPoint had $247 of accrued interest payable recorded on its consolidated balance sheet associated with the ALS Note.

StaffBridge

On August 14, 2006, ClearPoint acquired 100% of the common stock of StaffBridge for $233 in cash and the StaffBridge Note payable of $450 due December 31, 2007. The StaffBridge Note, due to the StaffBridge Shareholders, bears interest at 6% per annum and is payable quarterly. On December 31, 2007, the StaffBridge Note was amended to extend the maturity date to June 30, 2008. In addition, the amount of StaffBridge Note was increased to $487 to include accrued interest and the interest rate was increased to 8% per annum payable in monthly installments starting January 15, 2008. ClearPoint incurred an origination fee equal to 4% of the principal amount payable in the form of 9,496 shares of common stock. As of June 30, 2008, ClearPoint did not pay any monthly interest installments pursuant to the amended StaffBridge Note. The failure to pay such interest installments would permit noteholders to declare all amounts owing under the StaffBridge Note due and payable. On August 13, 2008, the outstanding accrued interest of $24 was paid and ComVest waived any default related thereto effective June 30, 2008. In addition, in connection with the financing transaction with ComVest, on June 30, 2008, the StaffBridge Shareholders executed a certain Debt Extension Agreement (the “Debt Extension Agreement”) and entered into a Subordination Agreement (the “StaffBridge Subordination Agreement”) with ComVest and CPR.

Pursuant to the Debt Extension Agreement, the StaffBridge Shareholders agreed that, in connection with the receipt from ClearPoint of $150 payable for work performed by TSP, the StaffBridge Note was amended, effective June 30, 2008, to extend the maturity date to December 31, 2008 and to reduce the outstanding principal amount to approximately $337.

Pursuant to the StaffBridge Subordination Agreement, the StaffBridge Shareholders agreed to subordinate ClearPoint’s obligations to them under the StaffBridge Note to the ComVest Obligations. So long as no event of default under the ComVest Loan Agreement has occurred, ClearPoint may continue to make scheduled payments of principal and accrued interest when due in accordance with the StaffBridge Note. In the case of an event of default under the ComVest Loan Agreement, ClearPoint may not pay and the StaffBridge Shareholders may not seek payment on the StaffBridge Note until the ComVest Obligations have been satisfied in full. The StaffBridge Subordination Agreement also sets forth priorities among the parties with respect to distributions of ClearPoint’s assets made for the benefit of ClearPoint’s creditors.

Effective December 31, 2008, the StaffBridge Note was further amended pursuant to a second Debt Extension Agreement dated December 31, 2008 to provide for the following payment schedule of the outstanding amount due under the StaffBridge Note: $100 was paid on or about December 31, 2008 and the remaining balance shall be paid in four equal quarterly payments of $59, beginning on March 31, 2009 and ending on December 31, 2009. Amendment No. 1 to the ComVest Loan Agreement contains ComVest’s acknowledgement and consent to ClearPoint’s amendment of the payment terms and payment schedule of the StaffBridge Note pursuant to the second Debt Extension Agreement.

ClearPoint did not make the required quarterly payment to StaffBridge for the quarter ended June 30, 2009 of $59 and was also in arrears on interest payments due in the amount of $2. An event of default under the StaffBridge Note triggers a cross-default provision pursuant to the ComVest Loan Agreement. In addition, a default under the ComVest Loan Agreement would trigger a cross-default provision pursuant to the M&T Restructure Agreement unless the default under the ComVest Loan Agreement is waived in writing by ComVest. On August 14, 2009, ComVest executed a waiver letter, which waived all of ClearPoint’s defaults under the StaffBridge Note through August 14, 2009. On September 15, 2009, the StaffBridge Note was amended pursuant to a Debt Extension Agreement Amendment dated September 3, 2009, pursuant to which the outstanding balance under the StaffBridge Note shall be paid in monthly installments beginning February 15, 2010. Monthly installment payment under the StaffBridge Note will be in the total amount of $17,105.86, consisting of (i) $16,137.95 with respect to the outstanding principal balance and (ii) $967.91 relating to accrued and unpaid interest as of August 31, 2009 and interest for the period of September 1, 2009 through January 31, 2010. The StaffBridge Note continues to bear interest at the rate of 8% per annum.

Promissory Notes Issued to Blue Lake and Sub Noteholders

Blue Lake

On March 1, 2005, CPR issued a promissory note the Blue Lake Note in the amount of $1,290 which was due March 31, 2008. Interest of 6% per annum was payable quarterly. This note has been guaranteed by Michael Traina and Christopher Ferguson and was primarily used to assist ClearPoint in funding its workers’ compensation insurance policy. The Blue Lake Note matured on March 31, 2008. Effective March 31, 2008, CPR amended and restated the Blue Lake Note and extended its maturity date under an agreement dated as of March 31, 2008, by and between CPR and Blue Lake (the “Blue Lake Agreement”). Pursuant to the Blue Lake Agreement, on April 14, 2008, CPR and Blue Lake entered into an Amended and Restated Promissory Note (the “Amended Blue Lake Note”), with a principal amount of $1,290, which was due and payable as follows: (i) $200 was paid on April 8, 2008, (ii) $50 is payable on the first business day of each calendar month for 12 consecutive months (totaling $600 in the aggregate), the first payment to occur on May 1, 2008 and the last to occur on April 1, 2009, and (iii) on April 30, 2009, CPR was obligated to pay to Blue Lake the balance of the principal amount, equal to $490, plus accrued interest. The interest rate was increased from 6% to 10% per annum. ClearPoint agreed to issue 900,000 shares (“Escrow Shares”) of common stock in the name of Blue Lake to be held in escrow, pursuant to an escrow agreement, as security for the payment of the principal amount and interest under the Amended Blue Lake Note.

CPR did not make the required payments of: (i) $50 in January, 2009 and (ii) $490, plus accrued interest, of which $20,417 has been accrued as of September 30, 2009, in April, 2009 under the Blue Lake Note. On May 1, 2009, ClearPoint received a notice from Blue Lake indicating CPR’s failure to pay such amounts and demanding that ClearPoint immediately pay a total of approximately $573. Pursuant to the terms of the Blue Lake Note, CPR’s failure to make the foregoing payments when due constitutes an event of default if not cured within five business days of receipt of written notice from Blue Lake. ClearPoint did not cure such default on or prior to May 8, 2009. On May 7, 2009, Blue Lake requested disbursement of the Escrow Shares and, pursuant to the Escrow Agreement, the escrow agent was obligated to deliver the Escrow Shares to Blue Lake 10 calendar days after receipt of the request for disbursement.

An event of default under the Blue Lake Note triggers a cross-default provision pursuant to the ComVest Loan Agreement. In addition, a default under the ComVest Loan Agreement would trigger a cross-default provision pursuant to the M&T Restructure Agreement, unless the default under the ComVest Loan Agreement is waived in writing by ComVest. On May 13, 2009, ComVest executed the Blue Lake Waiver to the Loan Agreement, pursuant to which, effective May 1, 2009, ComVest waived the cross-default provision which was triggered by CPR’s failure to make the payments due under the Blue Lake Note and all remedies available to ComVest as a result of the failure to make such payments, provided that such payments due under the Blue Lake Note are paid solely in Escrow Shares. On July 14, 2009, Blue Lake filed a Complaint in the Superior Court of Humboldt County, California seeking payment of the $490,000, plus accrued interest and fees. On September 14, 2009, the Company filed a Notice of Demurrer to Complaint with the Superior Court of California, County of Humboldt. On October 26, 2009, the Company received a new complaint filed by Blue Lake Rancheria asserting the same claims previously made. The Company is currently in discussions with Blue Lake to review alternatives.

For additional information regarding this Complaint, see “Note 18 — Litigation” to ClearPoint’s condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. On August 14, 2009, ComVest executed a waiver letter, which waived all of ClearPoint’s defaults under the Blue Lake Note through August 14, 2009. In addition, the Amended Loan Agreement with ComVest specifically excludes from the definition of an event of default any litigation brought in respect of the Blue Lake Note, provided that and so long as payments under the Blue Lake Note are paid solely in shares of ClearPoint’s common stock.

Sub Noteholders

On March 1, 2005, CPR issued a 12% Amended and Restated Note in the original principal amount of $300 due March 31, 2008 to Fergco Bros. LLC (“Fergco”), a New Jersey limited liability company of which Christopher Ferguson owns a twenty-five percent (25%) ownership interest. The balance of this note payable at September 30, 2009 was $300 (“$300 Note”).

On March 1, 2005, CPR issued 12% Amended and Restated Notes in the aggregate original principal amount of $310 due March 31, 2008 to several ClearPoint stockholders who do not individually own 5% or more of the outstanding securities of ClearPoint and who are not members of the immediate family of any ClearPoint director or executive officer, except of $100 owed to Alyson Drew, the spouse of Parker Drew, a director of ClearPoint. The balance of these notes payable at September 30, 2009 was $250 (“$250 Notes”). The holders of the $300 Note and the $250 Notes are collectively referred to as the Sub Noteholders.

Effective March 31, 2008, CPR amended and restated the $300 Note and the $250 Notes (collectively “Sub Notes”), and extended their maturity dates to March 31, 2009 under the amended sub notes, dated March 31, 2008 and issued by CPR to each Sub Noteholder (collectively, the “Amended Sub Notes”). All sums outstanding from time to time under each Amended Sub Note bear the same interest of 12% per annum as under the Sub Note, payable quarterly, with all principal payable on the maturity date. CPR’s failure to make any payment of principal or interest under the Amended Sub Note when such payment is due constitutes an event of default, if such default remains uncured for 5 business days after written notice of such failure is given to CPR by the Sub Noteholder. Upon an event of default and at the election of the Sub Noteholder, the Sub Note, both as to principal and accrued but unpaid interest, will become immediately due and payable.

On June 20, 2008, CPR exercised its right to extend the maturity date of the Amended Sub Notes to March 31, 2010 and, in connection with such extension, the Sub Noteholders received Additional Sub Note Warrants to purchase 82,500 Sub Note Warrant Shares at an exercise price of $1.55 per share. The Additional Sub Note Warrant is immediately exercisable during the period commencing on June 20, 2008 and ending on March 31, 2011. The exercise price and the number of Sub Note Warrant Shares are subject to adjustment in certain events, including a stock split and reverse stock split.

In connection with the transaction with ComVest described above, ComVest entered into a Subordination Agreement dated June 20, 2008 (the “Noteholder Subordination Agreement”) with each of the Sub Noteholders and CPR. Pursuant to the Noteholder Subordination Agreement, the Sub Noteholders agreed to subordinate ClearPoint’s obligations to them under the Amended Sub Notes to the ComVest Obligations. So long as no event of default under the ComVest Loan Agreement has occurred, ClearPoint may continue to make scheduled payments of principal and accrued interest when due in accordance with the Sub Notes, as amended. In the case of an event of default under the ComVest Loan Agreement, ClearPoint may not pay and the Sub Noteholders may not seek payment on the Sub Notes, as amended, until the ComVest Obligations have been satisfied in full. The Noteholder Subordination Agreement also sets forth priorities among the parties with respect to distributions of ClearPoint’s assets made for the benefit of ClearPoint’s creditors.

CPR did not make the required interest payments under the Amended Sub Notes for the quarter ended June 30, 2009, in the aggregate amount of $11. Pursuant to the terms of the Amended Sub Notes, CPR’s failure to make the foregoing payments when due constitutes an event of default if not cured within five business days of receipt of written notice from a Sub Noteholder. An event of default under the Amended Sub Notes triggers a cross-default provision pursuant to the ComVest Loan Agreement. In addition, a default under the ComVest Loan Agreement would trigger a cross-default provision pursuant to the M&T Restructure Agreement unless the default under the ComVest Loan Agreement is waived in writing by ComVest. On August 14, 2009, ComVest executed a waiver letter, which waived all of ClearPoint’s defaults under the Amended Sub Notes through August 14, 2009.

On September 11, 14 and 15, 2009, CPR amended and restated the Sub Notes by issuing third amended and restated promissory notes dated September 8, 2009 (the “Third Amended Sub Notes”) to Fergco, Alyson Drew, B&N Associates, LLC and Matthew Kingfield, respectively, for $550 in aggregate principal amount. As of the dates of issuance of the Third Amended Sub Notes, ClearPoint was in default in the aggregate amount of $25 in past due interest under the Sub Notes. Pursuant to the Third Amended Sub Notes, principal amounts shall be due and payable in monthly installments equal to 10% of the principal amount of the Third Amended Sub Notes beginning March 31, 2010. The Third Amended Sub Notes continue to bear interest at the rate of 12% per annum. Interest due for the period of May 1, 2009 through August 31, 2009 and additional interest accruing for the period of September 1, 2009 through February 28, 2010 shall be deferred and paid in monthly installments beginning March 31, 2010. Interest payments for the period beginning March 1, 2010 and future periods will be paid monthly, one month in arrears, beginning April 30, 2010. CPR has the right to prepay all or any portion of the Third Amended Sub Notes from time to time without premium or penalty. Any prepayment shall be applied first to accrued but unpaid interest and then applied to reduce the principal amount owed. The Third Amended Sub Notes provide that CPR’s failure to make any payment of principal or interest due shall constitute an event of default if uncured for five days after written notice has been given by the Sub Noteholders to CPR. Upon the occurrence of an event of default and at any time thereafter, all amounts outstanding under the Third Amended Sub Notes shall become immediately due and payable.

On February 22, 2008, CPR issued promissory notes (the “Promissory Notes”), in the aggregate principal amount of $800, with $400 to each of Michael D. Traina and Christopher Ferguson in consideration for loans totaling $800 made to CPR. The terms of the Promissory Notes issued to Messrs. Traina and Ferguson were identical. The principal amount of each Promissory Note was $400, they bore interest at the rate of 6% per annum, which was to be paid quarterly, and they were due on February 22, 2009. The Promissory Notes were subordinate and junior in right of payment to the prior payment of any and all amounts due to M&T pursuant to the M&T Credit Agreement.

On February 28, 2008, ClearPoint Workforce, LLC (“CPW”) advanced $800, on behalf of Optos, to the provider of Optos’ outsourced employee leasing program. The advanced funds were utilized for Optos’ payroll. In consideration of making the advance on its behalf, Optos assumed the Promissory Notes, and the underlying payment obligations, issued by CPR on February 22, 2008.

On June 6, 2008, ClearPoint issued notes (the “Bridge Notes”) to each of Michael D. Traina, Parker Drew and TerraNova Partners (collectively, the “Bridge Lenders”) in the principal amounts of $104, $50 and $100, respectively. During the course of negotiations with ComVest, Mr. Traina agreed to loan an additional $5 to ClearPoint. TerraNova Partners, ClearPoint’s principal stockholder, is 100% owned by Vahan Kololian, ClearPoint’s lead director and principal stockholder. Mr. Kololian also controls 100% of the voting interest and 55% of the non-voting equity interest in the general partner of TerraNova Partners.

The Bridge Notes contained identical terms. The Bridge Notes were unsecured and payable on demand. No interest accrued on the unpaid principal balance of the Bridge Notes until demand. After demand, the Bridge Notes would bear interest at an annual rate of 5%.

On June 26, 2008, ClearPoint issued amended and restated Bridge Loans (the “Amended Bridge Notes”) to each Bridge Lender. The Amended Bridge Notes contained identical terms and provided that (i) the principal amount of the Amended Bridge Notes will bear interest at a rate of 8% per annum, payable quarterly and (ii) ClearPoint had the right to repay the Amended Bridge Notes in shares of common stock at a price equal to the closing price of the common stock on June 26, 2008. The Amended Bridge Notes did not contain the provision stating that the principal balance will bear interest only upon demand for payment by the Bridge Lender, as provided in the Bridge Note. Mr. Drew’s Amended Bridge Note was repaid in full and Mr. Traina was repaid $5 during the quarter ended June 30, 2008. The balance of Mr. Traina’s loan was repaid in July 2008. On August 12, 2008, ClearPoint’s board of directors approved the payment of the Amended Bridge Note issued to TerraNova in 204,082 shares of common stock.

Transactions Related to Transition from Temporary Staffing Business Model to iLabor Network Model

HRO

On February 7, 2008, CPR entered into a Purchase Agreement effective as of February 7, 2008 (the “HRO Purchase Agreement”) with HRO, CPR’s wholly owned subsidiary, and AMS Outsourcing, Inc. (“AMS”). Pursuant to the HRO Purchase Agreement, CPR sold all of the issued and outstanding securities of HRO to AMS for an aggregate purchase price payable in the form of an earnout payment equal to 20% of the earnings before interest, taxes, depreciation and amortization of the operations of HRO for a period of twenty four (24) months following February 7, 2008. AMS was obligated to pay such fee in arrears on the first business day of every month. Unpaid fees were subject to interest at a rate of 1.5% per month. As of September 30, 2009, AMS did not pay to CPR the earnout payments required under the HRO Purchase Agreement.

ClearPoint ceased recording revenues related to the HRO Purchase Agreement during the year ended December 31, 2008.

KOR and StaffChex

On August 30, 2007, ClearPoint entered into an agreement (the “KOR Agreement”) with KOR, a Florida limited liability company controlled by Kevin O’Donnell, a former officer of ClearPoint, pursuant to which ClearPoint granted to KOR an exclusive right and license (i) to set up and operate, in parts of northern California and Florida, a franchise of ClearPoint’s system and procedures for the operation of light industrial and clerical temporary staffing services and (ii) to use in connection with the operation certain of ClearPoint’s proprietary intellectual property. The KOR Agreement replaced the agreement between ClearPoint and KOR entered on July 9, 2007. In consideration for the grant and license, KOR was required to pay to ClearPoint, on a weekly basis, a royalty equal to 4.5% of all gross revenues earned by KOR from its operations. KOR also agreed to pay ClearPoint, on a weekly basis, a royalty equal to 50% of the net income from KOR’s operations. Through this relationship KOR operated and managed up to twelve of ClearPoint’s former branches. The KOR Agreement was terminated on March 5, 2008 as described below.

On February 28, 2008, CPR entered into a Purchase Agreement (the “StaffChex Purchase Agreement”) with StaffChex subject to certain conditions for the completion of the transaction. Under the StaffChex Purchase Agreement, StaffChex assumed certain liabilities of CPR and acquired from CPR all of the Customer Account Property, as defined in the StaffChex Purchase Agreement, related to the temporary staffing services serviced by (i) KOR, pursuant to the KOR Agreement, dated August 30, 2007, and (ii) StaffChex Servicing, LLC (“StaffChex Servicing”) pursuant to an Exclusive Supplier Agreement, dated September 2, 2007. In consideration for the Customer Account Property acquired from CPR, StaffChex issued to CPR 15,444 shares of common stock and CPR is entitled to receive an additional 15,568 shares of StaffChex common stock, pursuant to the earnout provisions set forth in the StaffChex Purchase Agreement, which have been met. As a result, CPR is entitled to 31,012 shares (16.4%) of StaffChex’s outstanding stock, of which 15,568 shares have not yet been issued.

In addition, CPR entered into an iLabor agreement with StaffChex (the “StaffChex iLabor Agreement”) whereby StaffChex agreed to process its temporary labor requests through iLabor and to pay to CPR a percentage (the “Royalty”) (as of September 30, 2009, the percentage was 1.25%) of StaffChex’s total collections from its total billings for temporary staffing services provided to ClearPoint’s clients through the iLabor Network or otherwise. On March 5, 2008, CPR completed the disposition of all of the Customer Account Property related to the temporary staffing services formerly provided by StaffChex Servicing and KOR, agreements with whom were terminated on February 28, 2008 and March 5, 2008, respectively. ClearPoint did not incur any early termination penalties in connection with such terminations.

On March 16, 2009, CPR and StaffChex entered into Amendment No. 1 to the StaffChex iLabor Agreement pursuant to which the payment terms of the StaffChex iLabor Agreement were restated as follows: for weekly collections of less than $1,400, the Royalty is one and one-quarter percent (1.25%) and for weekly collections of $1,400 or more, the Royalty is two percent (2%). If collections for a calendar year exceed $110,000, the Royalty will be one and one-half percent (1.5%) for each dollar exceeding $110,000 and if such collections exceed $150,000, the Royalty will be one and one-quarter percent (1.25%) for each dollar exceeding $150,000. Unpaid Royalties shall bear interest at the rate of one and one-half percent (1.5%) per month. Weekly payments commenced on March 18, 2009. In addition, StaffChex agreed to make 104 weekly payments of $4 followed by 52 weekly payments of $3 for past-due Royalties owed through February 28, 2009. Such additional payments commenced on June 3, 2009.

On September 1, 2009, StaffChex notified ClearPoint that a Notice of Levy (the “Levy”) had been placed by the California Employment Development Department for payroll taxes owed by ClearPoint subsidiaries. The Levy instructed StaffChex to forward all royalty payments due to ClearPoint to the State of California until such time as ClearPoint satisfied the tax liability. The Company has negotiated an Installment Agreement with the EDD whereby Staffchex will remit the first $25,000 of Royalties on a monthly basis to EDD. Staffchex is current on its remittances to EDD. As of September 30, 2009, Staffchex was delinquent on Royalty payments due to the Company in the amount of $10,390.

TZG, Optos and Select

On August 13, 2007, ClearPoint entered into an Agreement with TZG, a Delaware limited liability company controlled by J. Todd Warner, a former officer of ClearPoint, pursuant to which ClearPoint granted to TZG an exclusive right and license (i) to set up and operate a franchise of ClearPoint’s system and procedures for the operation of transportation and light industrial temporary staffing services and (ii) to use in connection with the operation certain of ClearPoint’s proprietary intellectual property. In consideration for the grant and license, TZG was required to pay to ClearPoint, on a weekly basis, a royalty equal to 6% of all gross revenues earned by TZG from the operation. Through this relationship, TZG operated and managed up to twenty-five of ClearPoint’s branches. The Agreement with TZG was terminated on February 28, 2008, as described below.

On February 28, 2008, CPR and its subsidiary, CPW, entered into a Licensing Agreement (the “Optos Licensing Agreement”) with Optos, of which Christopher Ferguson is the sole member. Pursuant to the Optos Licensing Agreement, ClearPoint (i) granted to Optos a non-exclusive license to use the ClearPoint Property and the Program, both as defined in the Optos Licensing Agreement, which include certain intellectual property of CPR, and (ii) licensed and subcontracted to Optos the client list previously serviced by TZG, pursuant to the TZG Agreement, dated August 13, 2007 and all contracts and contract rights for the clients included on such list. In consideration of the licensing of the Program, which is part of the ClearPoint Property, CPR was entitled to receive a fee equal to 5.2% of total cash receipts of Optos related to temporary staffing services. With CPR’s consent, Optos granted, as additional security under certain of its credit agreements, conditional assignment of Optos’ interest in the Optos Licensing Agreement to its lender under such credit agreements. The foregoing agreement with TZG was terminated on February 28, 2008 in connection with the Optos Licensing Agreement. ClearPoint did not incur any early termination penalties in connection with such termination.

On April 8, 2008, the Optos Licensing Agreement was terminated. In consideration for terminating the Optos Licensing Agreement, CPR and Optos have agreed that there will be a net termination fee for any reasonable net costs or profit incurred, if any, when winding up the operations associated with termination. This fee is estimated to be $500 and has been recorded as an expense in the nine months ended September 30, 2008. The payment of the net termination fee will be in the form of cash and shares of common stock of ClearPoint.

On April 8, 2008, CPR entered into the Select License Agreement dated April 8, 2008 with Select. The initial term of the Select License Agreement was for a period of six years. Pursuant to the Select License Agreement, CPR granted to Select a non-exclusive, non-transferable right and license to use the iLabor Network as a hosted front-office tool. CPR exclusively retains all right, title and interest in and to the iLabor Network. In addition, Select agreed to become a supplier of temporary personnel to third party clients through the iLabor Network and to fulfill agreed-upon orders for such personnel accepted by Select through the iLabor Network. CPR also agreed to permit Select to use the iLabor Network to find and select third-party, temporary personnel suppliers to fulfill orders for Select’s end-user client. In consideration of the license granted, Select agreed to pay a non-refundable fee equal to $1,200, of which $900 was paid on April 8, 2008 and $300 was due on July 1, 2008, but was not paid. The July payment was waived and incorporated into the Select Settlement Agreement described below. Under the License Agreement, if Select used the iLabor Network to find and select third-party, temporary personnel suppliers to fulfill orders for Select’s end-user clients, then the parties would split the net amount billed to the end-user clients less the amount paid to such vendors.

Effective March 30, 2008, CPR entered into the Select Subcontract with Select. The Select Subcontract expires April 7, 2013. Pursuant to the Select Subcontract, CPR subcontracts to Select the client contracts and contract rights previously serviced on behalf of CPR by other entities (the “Customers”). Pursuant to the Select Subcontract, the parties agree that Select will directly interface with the Customers, but at no time will CPR relinquish its ownership, right, title or interest in or to its contracts with the Customers (the “Contracts”). Subject to certain exceptions, upon expiration of the Select Subcontract, CPR will abandon such rights in the Contracts and Select may solicit the Customers serviced under the Select Subcontract. Select is responsible for invoicing the Customers and for collection of payment with regard to services provided to Customers by Select. During each one year period of the term of the Select Subcontract, Select was obligated to pay CPR 10% of such year’s annual gross sales, not exceeding $36,000 annually in gross sales, generated by the client contracts as well as certain other revenue generated by location (the “Subcontract Fee”).

On July 29, 2008, Select, together with Real Time, initiated the Select Litigation claiming that ClearPoint owed it $1,033 for services performed. For additional information regarding the Select Litigation, see “Note 18 – Litigation” to ClearPoint’s condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

On August 22, 2008, CPR, Real Time and Select entered into the Select Settlement Agreement pursuant to which each party released the others from all prior, existing and future claims including, without limitation, the parties’ claims with respect to the Select Litigation, the Select License Agreement and the Select Subcontract. Pursuant to the Select Settlement Agreement, the parties also agreed (i) that CPR would retain $900 paid to it under the Select License Agreement; (ii) to allocate between them amounts paid or payable with respect to certain client accounts; (iii) to execute an amendment to the Select Subcontract, as described below; and (iv) that Select would file the required documents to dismiss the Select Litigation with prejudice. In addition, the parties agreed not to commence any future action arising from the claims released under the Select Settlement Agreement, and on August 28, 2008 this lawsuit was dismissed.

Also, pursuant to the Select Settlement Agreement, the parties terminated the Select License Agreement effective August 22, 2008. There were no termination penalties incurred in connection with the termination of the Select License Agreement.

In connection with the Select Settlement Agreement, on August 22, 2008, CPR and Select entered into the First Amendment to the Select Subcontract (the “Subcontract Amendment”). Pursuant to the Subcontract Amendment, the following changes were made to the Select Subcontract:

The Subcontract Fee was amended to provide that Select would pay CPR, for twenty-eight consecutive months, 25% of each month’s gross sales generated by the Customers and Contracts as well as, without duplication, sales generated by certain locations in accordance with the Select Subcontract, subject to a maximum fee of $250 per month. The payments are subject to acceleration upon occurrence of certain breaches of the Select Subcontract or bankruptcy filings by Select.

·	The term of the Select Subcontract was amended to provide that the term will expire upon the payment of all fees owed under the Select Subcontract, as amended.

On September 1, 2009, Select filed a new complaint in the Superior Court of California (Santa Barbara County) against ClearPoint alleging that ClearPoint failed to pay Select approximately $107 pursuant to the Select Subcontract since August 2009 and that ClearPoint failed to perform certain obligations under the Select Subcontract. Select seeks, in addition to the monies claimed, interest, attorneys’ fees and court costs and other just and proper relief. ClearPoint is in the process of reviewing the complaint and must respond to the complaint by November 20, 2009.

Advisory Services Agreement

TerraNova Management Corp., an affiliate of Mr. Kololian and the manager of TerraNova Partners (“TNMC”), was retained to provide certain advisory services to ClearPoint, effective upon the closing of the merger with Terra Nova, pursuant to the Advisory Services Agreement between TNMC and us, dated February 12, 2007 (the “Initial Agreement”). Pursuant to the Initial Agreement, TNMC provided services to ClearPoint including: advice and assistance in analysis and consideration of various financial and strategic alternatives, as well as assisting with transition services. Pursuant to the terms of the Initial Agreement, it was terminated effective February 11, 2008, however TNMC continued to provide substantially similar services under substantially similar terms to ClearPoint on a monthly basis. No payments were accrued or paid to TNMC for January, 2008.

On June 26, 2008, ClearPoint entered into a new Advisory Services Agreement (the “Advisory Services Agreement”) with TNMC in order to: (i) provide compensation to TNMC for its services since the expiration of the Initial Agreement and (ii) engage TNMC to provide future advisory services. Pursuant to the Advisory Services Agreement, TNMC is obligated to provide advice and assistance to ClearPoint in its analysis and consideration of various financial and strategic alternatives (the “Advisory Services”), however the Advisory Services will not include advice with respect to investments in securities or transactions involving the trading of securities or exchange contracts. The Advisory Services Agreement was effective as of June 26, 2008, continues for a one year term and is automatically renewed for successive one-year terms unless terminated by either party by written notice not less than 30 days prior the expiration of the then-current term. The Advisory Services Agreement was automatically renewed on June 26, 2009 pursuant to its terms. During the nine months ended September 30, 2009, ClearPoint was obligated to pay TNMC $2 for reimbursement of travel expenses.

ClearPoint agreed to compensate TNMC for services rendered since expiration of the Initial Agreement and for Advisory Services going forward in accordance with the rates set forth in the Advisory Services Agreement and to reimburse TNMC for reasonable travel, lodging and meal expenses relating to the provision of the Advisory Services. Monthly fees payable to TNMC pursuant to the Advisory Services Agreement are capped at $50 per month. Fees payable to TNMC may be paid 100% in shares of common stock, at ClearPoint’s option. At ClearPoint’s option, 75% of the fees payable to TNMC beginning in the month of June, 2008 may be paid in shares of common stock and, with the agreement of TNMC, the remaining 25% may also be paid in shares of common stock. Shares of common stock made as payments under the Advisory Services Agreement are priced at the month-end closing price for each month of services rendered. ClearPoint incurred approximately $293 in fees owing to TNMC for its services in the fiscal year ended December 31, 2008. ClearPoint’s board of directors approved payment of $266 for the Advisory Services in the form of an aggregate of 479,470 shares of common stock for the months of February through August, 2008 as follows: on August 12, 2008, the board of directors approved payment for the months of February, March, April, May and June, 2008 in 417,008 shares of common stock and, on November 7, 2008, the board of directors approved payment for the months of July and August, 2008 in 62,462 shares of common stock. ClearPoint recorded approximately $101 for reimbursement of expenses incurred by TNMC in connection with the Advisory Services provided from February, 2008 through September, 2009.

Agreements with Christopher Ferguson, Kurt Braun and John Phillips

On February 28, 2008, Christopher Ferguson resigned as ClearPoint’s and CPR’s director, President and Secretary in connection with the Optos Licensing Agreement described above. ClearPoint and Mr. Ferguson entered into the Separation of Employment Agreement and General Release (the “Ferguson Separation Agreement”). In consideration for Mr. Ferguson’s agreement to be legally bound by the terms of the Ferguson Separation Agreement and his release of his claims, if any, under the Ferguson Separation Agreement, Mr. Ferguson is entitled to be reimbursed for any health insurance payments for Mr. Ferguson for a period equal to 52 weeks. Pursuant to the Ferguson Separation Agreement, ClearPoint entered into a consulting agreement with Mr. Ferguson pursuant to which he was entitled to be paid $25 per month for twelve (12) months. In return, Mr. Ferguson was obligated to assist ClearPoint with matters relating to the performance of his former duties and worked with ClearPoint to effectively transition his responsibilities. As of September 30, 2009, ClearPoint paid Mr. Ferguson approximately $58 pursuant to the consulting agreement and recorded a related party liability of $257 as of September 30, 2009 pursuant to the consulting agreement. ClearPoint agreed to resume making payments to Mr. Ferguson in the first quarter of 2010 and recorded the short and long term portions of such obligation of $64 and $193, respectively, at September 30, 2009.

On June 20, 2008, Kurt Braun, ClearPoint’s former Chief Financial Officer, resigned effective June 20, 2008. In connection with Mr. Braun’s resignation as ClearPoint’s Chief Financial Officer, ClearPoint and Mr. Braun entered into a Separation of Employment Agreement and General Release (the “Braun Separation Agreement”). In consideration of Mr. Braun’s agreement to be legally bound by the terms of the Braun Separation Agreement, his release of his claims, if any, under the Braun Separation Agreement, and his agreement to provide the transitional services to ClearPoint, ClearPoint has agreed to, among other things: (i) pay Mr. Braun $75, minus all payroll deductions required by law or authorized by Mr. Braun, to be paid as salary continuation over 26 weeks beginning within a reasonable time after the seven day revocation period following execution of the Braun Separation Agreement; (ii) continue to pay all existing insurance premiums for Mr. Braun and his immediate family through the 26 week period, and thereafter permit Mr. Braun, at his own expense, to continue to receive such coverage in accordance with COBRA regulations; (iii) pay Mr. Braun the balance of any accrued but unused vacation or paid time off hours, minus all payroll deductions required by law or authorized by Mr. Braun; and (iv) amend Mr. Braun’s Nonqualified Stock Option Agreement, dated March 30, 2007, to permit Mr. Braun to exercise 90,000 of the 140,000 stock options granted until March 30, 2010. The balance of the Braun Stock Options expired on June 20, 2008 in accordance with ClearPoint’s 2006 equity incentive plan. As of September 30, 2009, ClearPoint paid Mr. Braun approximately $75 as severance under the Braun Separation Agreement.

On June 20, 2008, John Phillips and ClearPoint entered into an Employment Agreement (the “Phillips Employment Agreement”). Pursuant to the Phillips Employment Agreement, Mr. Phillips’ current base salary is $175 per year, which may be increased in accordance with ClearPoint’s normal compensation review practices. On November 7, 2008, ClearPoint’s board of directors increased Mr. Phillips’ base salary to $195 effective November 10, 2008. Mr. Phillips is also entitled to participate in any benefit plan of ClearPoint currently available to executive officers to the extent he is eligible under the provisions thereof, and ClearPoint will pay health, dental and life insurance premiums for Mr. Phillips and members of his immediate family. Mr. Phillips is entitled to receive short- and long-term disability insurance, and is entitled to three weeks of paid time off per year. Mr. Phillips may be entitled to discretionary bonuses as determined by ClearPoint’s Chief Executive Officer, the board of directors and the Compensation Committee of the board of directors. On August 20, 2008, Mr. Phillips was granted a stock option to purchase 50,000 shares of common stock. The option vests in three equal annual installments beginning August 20, 2009 and expires August 20, 2018. The exercise price of the option is $0.30 per share.

Agreement with XRoads Solutions

On January 13, 2009, ClearPoint entered into an agreement with XRoads (the “XRoads Agreement”). Pursuant to the XRoads Agreement, among other matters, XRoads agreed to provide the services of Brian Delle Donne to serve as ClearPoint’s Interim Chief Operating Officer (the “XRoads Engagement”). In such capacity, Mr. Delle Donne had direct responsibility over ClearPoint’s day to day operations and reported to Michael D. Traina, ClearPoint’s Chief Executive Officer. XRoads was required to submit bi-weekly oral or written progress reports to ClearPoint’s board of directors. The term of the XRoads Agreement commenced on January 13, 2009 and continued until May 13, 2009. Effective May 14, 2009, the XRoads Agreement was amended pursuant to Amendment No. 1 dated May 18, 2009 (the “XRoads Amendment”). Pursuant to the XRoads Amendment, the term of the XRoads Agreement was extended to run from May 14, 2009 through August 13, 2009 (the “XRoads Extension”). The XRoads Agreement provided that either ClearPoint or XRoads could terminate the XRoads Agreement at any time with at least thirty days prior written notice. On July 6, 2009, ClearPoint sent such thirty-day termination notice to XRoads. The XRoads Agreement and Brian Delle Donne’s services as ClearPoint’s Interim Chief Operating Officer were terminated effective August 7, 2009.

ClearPoint paid XRoads $50 per month for each of the first four months of Mr. Delle Donne’s services. In addition, XRoads was entitled to a monthly fee based upon achievement of certain increases in EBITDA, calculated pursuant to the XRoads Agreement. Such fee was equal to 10% of increases in monthly EBITDA during the term of the XRoads Agreement over EBITDA for the month ended January 31, 2009, capped at $50 per month (the “EBITDA Fee”). During the nine months ended September 30, 2009, ClearPoint paid no EBITDA Fees to XRoads .ClearPoint also agreed to pay reasonable expenses incurred by XRoads for services related to its services and remitted a retainer in the amount of $10 to XRoads for such purpose. During the nine months ended September 30, 2009, pursuant to the XRoads Agreement, ClearPoint paid XRoads a total of $290 and the $10 retainer for reimbursement of expenses. Any amounts not paid when due pursuant to the XRoads Agreement will bear interest at an annual rate of 12% or the maximum rate allowed by law, whichever is less. As of the date of filing this Quarterly Report on Form 10-Q, ClearPoint accrued an aggregate of $37 pursuant to the XRoads Agreement, consisting of $37 in fees related to services provided by XRoads, $0 in accrued interest and $0 in reimbursement of expense.

The terms and conditions of the original XRoads Agreement which were not affected by the XRoads Amendment remained in full force and effect during the XRoads Extension. ClearPoint agreed to pay XRoads $45 per 30 day period of the XRoads Extension and the EBITDA Fee remained at 10%, calculated in accordance with the XRoads Amendment, and subject to the cap of $50 per month.

In addition, ClearPoint issued XRoads a warrant to purchase up to 100,000 shares of common stock at the exercise price of $0.12 per share, exercisable through December 31, 2010 in connection with the expiration of the XRoads Agreement on May 13, 2009. In connection with the XRoads Extension, ClearPoint issued an additional warrant to purchase up to 75,000 shares of common stock the exercise price of $0.29 per share, exercisable through April 30, 2011.

In the event ClearPoint elects to pursue a financing (either in the form of debt or equity) within one year of the date of the XRoads Agreement, XRoads shall serve as ClearPoint’s non-exclusive financial advisor for such financing in accordance with the terms of the XRoads Agreement. If such financing is consummated pursuant to the terms set forth in the XRoads Agreement, ClearPoint agreed to pay XRoads a transaction fee based on the type and value of the transaction. The transaction fee will be prorated accordingly in the event ClearPoint retains an additional financial advisor in connection with the transaction, but such fee shall not be less than $75 if XRoads’ efforts result in an bona fide financing alternative for ClearPoint.

Warrants and Unit Purchase Option Issued in 2005 Public Offering

As a result of the 2005 public offering, there were 11,040,000 common stock purchase warrants issued and outstanding at the beginning of the fiscal quarter ended June 30, 2009, which included warrants that were part of the outstanding units. Such warrants expired on April 17, 2009 according to their terms. Each warrant entitled the holder to purchase one share of common stock at an exercise price of $5.00 per share commencing on February 12, 2007 (the completion of the merger with Terra Nova). In connection with the 2005 public offering, an option was issued for $100 to the representative of the underwriters to purchase 240,000 units at an exercise price of $9.90 per unit with each unit consisting of one share of common stock and two common stock purchase warrants. In addition, the warrants underlying such units were exercisable at $6.65 per share. The option expired on April 17, 2009 according to its terms.

Subsequent Events

For a description of subsequent events, see Note 19 – Subsequent Events to the Notes to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

Income Taxes

As of September 30, 2009, ClearPoint had a net current and non-current deferred tax asset of $0. Deferred tax assets and liabilities are determined based on temporary differences between income and expenses reported for financial reporting and tax reporting. ClearPoint is required to record a valuation allowance to reduce its net deferred tax assets to the amount that it believes is more likely than not to be realized. In assessing the need for a valuation allowance, ClearPoint historically had considered all positive and negative evidence, including scheduled reversals of deferred tax liabilities, prudent and feasible tax planning strategies and recent financial performance. ClearPoint determined that the negative evidence, including historic and current losses, as well as uncertainties related to the ability to utilize federal and state net loss carry-forwards, outweighed any objectively verifiable positive factors, and as such, concluded that a full valuation allowance against the deferred tax assets was necessary.

Contingencies and Litigation

ClearPoint is involved in various litigation matters. For a description of such matters, see Note 18 to the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. ClearPoint has accrued for some, but not all, of these matters where payment is deemed probable and an estimate or range of outcomes can be made. An adverse decision in a matter for which ClearPoint has no reserve may result in a material adverse effect on its liquidity, capital resources and results of operations. In addition, to the extent that ClearPoint’s management has been required to participate in or otherwise devote substantial amounts of time to the defense of these matters, such activities would result in the diversion of management resources from business operations and the implementation of ClearPoint’s business strategy, which may negatively impact ClearPoint’s financial position and results of operations.

The principal risks that ClearPoint insures against are general liability, automobile liability, property damage, alternative staffing errors and omissions, fiduciary liability and fidelity losses. If a potential loss arising from these lawsuits, claims and actions is probable, reasonably estimable, and is not an insured risk, ClearPoint records the estimated liability based on circumstances and assumptions existing at the time. Whereas management believes the recorded liabilities are adequate, there are inherent limitations in the estimation process whereby future actual losses may exceed projected losses, which could materially adversely affect the financial condition of ClearPoint.

Generally, ClearPoint is engaged in various other litigation matters from time to time in the normal course of business. Management does not believe that the ultimate outcome of such matters, either individually or in the aggregate, will have a material adverse impact on the financial condition or results of operations of ClearPoint.

Listing on Nasdaq

On July 16, 2008, staff of the Nasdaq Listing Qualifications Department notified ClearPoint that it had determined to delist ClearPoint’s securities from The Nasdaq Capital Market. On July 23, 2008, ClearPoint requested an appeal of this determination. On September 9, 2008, the Staff notified ClearPoint that its appeal had been denied and that trading in ClearPoint’s securities would be suspended on September 11, 2008. ClearPoint’s securities were delisted from Nasdaq effective at the opening of the trading session on November 24, 2008. Effective September 11, 2008, ClearPoint’s common stock was quoted on The OTC Bulletin Board under the symbol “CBPR.OB.” Effective September 15, 2008, ClearPoint’s units and warrants were quoted on The OTC Bulletin Board under the symbols “CBPRU.OB” and “CPBRW.OB,” respectively. Following the expiration of ClearPoint’s warrants in April, 2009, ClearPoint’s units and warrants were no longer quoted on The OTC Bulletin Board.

Recent Accounting Pronouncements

Recently Adopted Standards

In April 2009, the FASB issued an accounting standard codified within ASC Topic 825, “Financial Instruments,” that requires disclosures of the fair value of financial instruments that are not reflected in the consolidated balance sheet at fair value whenever summarized information for interim reporting periods are presented. This standard requires disclosure of the methods and significant assumptions used to estimate the fair value of financial instruments and describe the changes in methods and significant assumptions, if any, during the period. This standard is effective for interim reporting periods ending after June 15, 2009. Because this standard applies only to financial statement disclosure, the adoption did not have a material impact on the Company’s consolidated financial statements.

Standards Issued But Not Yet Adopted

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4T. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our management, under the supervision and with the participation of the principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2009, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

A control system, no matter how well designed and operated, can provide only reasonable assurance that the control system’s objectives will be met. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Temporary Services Insurance Ltd.

On September 21, 2007, Temporary Services Insurance Ltd. (“TSIL”), which claims to be a captive reinsurance company offering workers’ compensation insurance to its shareholders through an insurance program, filed a complaint (the “TSIL Litigation”) in the U.S. District Court in Florida against ALS, Advantage Services Group, LLC (“Advantage Services”), certain officers and shareholders of ALS and Advantage Services as well as certain other third party companies (collectively, the “ALS Defendants”) alleging that it was owed at least $2,161 in unpaid insurance assessments, as well as other requested damages, from the ALS Defendants. Kevin O’Donnell, a former officer of the ALS companies and a named defendant in the TSIL Litigation, controls KOR, a former franchisee of ClearPoint.

ClearPoint is also named as a defendant because it acquired certain assets from ALS and its wholly owned subsidiaries, including Advantage Services Group II, LLC (“ASG II”), in February 2007, for which it paid a portion of the purchase price at closing to the ALS Defendants, through ALS. It is alleged that this transfer rendered ASG II, one of the named insureds on the TSIL policy, insolvent and unable to pay the insurance assessments and damages owed to TSIL. TSIL requested in its complaint that its damages be satisfied from the assets transferred to ClearPoint. Agreements related to the acquisition of certain assets and liabilities of ALS in February 2007 contain provisions under which ClearPoint may seek indemnification from ALS in connection with the foregoing. ClearPoint intends to pursue all appropriate claims for such indemnification and cannot estimate the potential liability, if any.

On January 11, 2008, ClearPoint filed its Answer denying all claims in the TSIL Litigation and also filed a Crossclaim against ALS making claims for contractual and common law indemnity. ALS filed its Answer to ClearPoint’s Crossclaim, denying all claims, and filed a Counterclaim asking for a declaratory judgment that it does not have to indemnify ClearPoint and asserting a breach of contract claim based on an alleged failure to pay ALS certain amounts due under the ALS Note arising out of the acquisition of certain assets and liabilities of ALS in February 2007. The court in the TSIL Litigation entered an order dated February 22, 2008 (the “TSIL Order”), requiring ClearPoint not to make any payments to ALS pursuant to the purchase agreement without first seeking leave of court.

On or about June 20, 2008, in connection with ALS’ agreement to subordinate the ALS Note to ComVest and M&T, ALS and its subsidiaries and certain other individuals (the “ALS Parties”) entered into a letter agreement with ClearPoint (the “ALS Agreement”). Pursuant to the ALS Agreement, the ALS Parties and ClearPoint agreed, among other things, as follows:

·	That the ALS Parties acknowledge their obligation to indemnify ClearPoint in connection with the TSIL Litigation, subject to certain sections of the ALS purchase agreement;

·	That the ALS Parties shall be responsible for ClearPoint’s attorney’s fees incurred in the TSIL Litigation from June 20, 2008, not to exceed $300;

That the ALS Parties and ClearPoint shall take all appropriate actions to dismiss all of their respective claims against one another in the TSIL Litigation, and that following such dismissal, ClearPoint shall cooperate as reasonably requested by the ALS Parties in connection with the TSIL Litigation including consenting in connection with a request to lift the TSIL Order, or otherwise permit payment to the ALS Parties in accordance with the terms of the ALS purchase agreement and the ALS Note; and

In addition, ClearPoint agreed not to assert its right to set off from the Note any other amounts in connection with the TSIL Litigation until such time (if at all) as a final judgment is entered against ClearPoint in the TSIL Litigation, or the amount of TSIL’s claims against ClearPoint are liquidated by settlement or otherwise.

ALS did not elect to provide a defense to ClearPoint, and ClearPoint remains represented by its own counsel. On November 21, 2008, a joint stipulation for voluntary dismissal was filed with the court pursuant to which ClearPoint and ALS jointly dismissed such claims with prejudice. On December 8, 2008, the court entered an order dismissing all claims between ClearPoint and ALS with prejudice. The discovery in the litigation has concluded. Both TSIL and ClearPoint have filed Motions for Summary Judgment as to the claims asserted by TSIL against ClearPoint. ClearPoint filed its motion on June 24, 2009 and TSIL filed its motion on August 14, 2009. These motions will be ruled upon at an uncertain time prior to trial, which is presently scheduled for November 2009.

Alliance Consulting Group Associates, Inc.

Namely, Alliance alleged that CPR failed to pay approximately $600,000. Alliance seeks damages in the amount of approximately $600 plus interest, costs and attorneys’ fees and such other relief deemed proper by the court. On September 17, 2009, CPR and Alliance Global Services, LLC, as successor to Alliance, entered into a Settlement Agreement and Release of Claims (the “Alliance Settlement Agreement”). Pursuant to the Alliance Settlement Agreement, CPR paid $50 to Alliance and agreed to pay Alliance an aggregate of $150 in 24 equal installments beginning on April 15, 2010. In the event CPR fails to make any payment due under the Alliance Settlement Agreement, Alliance may, after providing CPR with prior written notice and five business days’ opportunity to cure, confess judgment against CPR in the amount of $300.

Select Staffing

On July 29, 2008, Select and Real Time, doing business as Select Staffing, initiated the Select litigation in the Superior Court of California (Santa Barbara County), against ClearPoint and, on August 1, 2008, Select filed an amended complaint. In the amended complaint, Select alleged that ClearPoint had entered into an agreement with Select whereby Select would supply services and personnel for temporary employment through ClearPoint to its clients. Select claimed that ClearPoint owed it $1,033 for services performed. Select sought, in addition to the monies claimed, interest, attorneys’ fees and punitive damages of $1,000 as well as court costs and other just and proper relief.

On August 22, 2008, CPR, Real Time and Select entered into the Select settlement agreement pursuant to which each party released the others from all prior, existing and future claims including, without limitation, the parties’ claims with respect to the Select litigation, the Select license agreement and the Select subcontract. Pursuant to the Select settlement agreement, the parties also agreed (i) that CPR would retain $900 paid to it under the Select license agreement; (ii) to allocate between them amounts paid or payable with respect to certain client accounts; (iii) to execute an amendment to the Select subcontract; and (iv) that Select would file the required documents to dismiss the Select litigation with prejudice. In addition, the parties agreed not to commence any future action arising from the claims released under the Select settlement agreement and to terminate the Select license agreement effective August 22, 2008. On August 28, 2008, this lawsuit was dismissed with prejudice.

On September 1, 2009, Select filed a new complaint in the Superior Court of California (Santa Barbara County) against ClearPoint alleging that ClearPoint failed to pay Select approximately $107 pursuant to the Select subcontract since August 2009 and that ClearPoint failed to perform certain obligations under the Select subcontract. Select seeks, in addition to the monies claimed, interest, attorney’s fees and court costs and other just and proper relief. ClearPoint is in the process of reviewing the complaint and must respond to the complaint by November 20, 2009.

XL Specialty Insurance Company

On November 10, 2008, XL Specialty Insurance Company (“XL”) filed a complaint in the Supreme Court of the State of New York (New York County), and, on December 9, 2008, XL filed an amended complaint (the “XL Complaint”) alleging that, among other things, XL issued workers’ compensation insurance policies to CP Advantage during 2007 and CP Advantage failed to make certain payments with regard to claims made against CP Advantage under the policies and maintain collateral required by the insurance policy documents. XL seeks to recover from the Company, as a guarantor of CP Advantage’s obligations under the insurance policies, $746, in the aggregate, in connection with certain claims against and pursuant to the collateral obligations of, CP Advantage. XL, in addition to damages, seeks pre-judgment interest, attorneys’ fees, costs and expenses and such other relief deemed proper by the court. The Company filed its answer in this matter on February 17, 2009 and contends that a third party is liable for the payments under the insurance policies pursuant to an agreement governing the sale of HRO. This litigation is currently moving into the discovery phase.

AICCO, Inc.

On November 18, 2008, AICCO, Inc. (“AICCO”) filed a complaint in the Court of Common Pleas of Bucks County, Pennsylvania against ClearPoint alleging that AICCO agreed to finance premiums of certain insurance policies procured by ClearPoint pursuant to a certain premium finance agreement among AICCO and ClearPoint. AICCO claims that ClearPoint breached the terms of such agreement by failing to make certain installment payments and seeks damages of approximately $167, together with interest and attorney’s fees and costs. On December 23, 2008, ClearPoint filed an answer in this matter and joined two additional defendants on January 23, 2009. The joined defendants filed their answer to ClearPoint’s complaint on March 27, 2009. The additional defendants’ answer included a counter-claim for indemnification from ClearPoint. ClearPoint replied to the additional defendants’ counterclaim on April 27, 2009 denying any liability. ClearPoint contends that the joined defendants are liable for the installment payments pursuant to an agreement governing the sale of HRO. ClearPoint alleged breach of contract against the joined defendants and seeks contribution and indemnification from such parties in this matter.

On June 2, 2009, AICCO filed a motion for summary judgment against ClearPoint and on July 2, 2009, ClearPoint filed its opposition to such motion, and filed a cross-motion for summary judgment against the additional defendants. On July 29, 2009, the additional defendants filed their opposition to ClearPoint's cross-motion, and filed a motion for summary judgment against ClearPoint. On July 31, 2009, AICCO replied to ClearPoint’s opposition to AICCO’s motion for summary judgment. On October 21, 2009, the Motion for Summary Judgment filed by AICCO, Inc. against the Company was granted in favor of the Plaintiff in the amount of $167, together with interest at a contract rate of 6.57% per annum until the Judgment is paid in full, plus costs and reasonable attorney’s fees.

Michael W. O’Donnell

In May 2009, Michael W. O’Donnell filed a claim in the Circuit Court of the Ninth Judicial Circuit in and for Orange County, Florida seeking an unspecified amount of unpaid wages and reasonable attorney’s fees related to the termination of his employment with ClearPoint. On August 21, 2008, Mr. O’Donnell was notified that his employment was being terminated for Cause, as defined in the Employment Agreement dated February 23, 2007 and the Amended Letter Agreement dated June 17, 2008 between ClearPoint and the ALS Parties, which include Mr. O’Donnell. ClearPoint has answered Mr. O’Donnell’s claims and disputed his allegations. Furthermore, on August 7, 2009, ClearPoint also filed a counter-claim against Mr. O’Donnell for breach of contract arising out of his failure to honor the terms of the Employment Agreement and the Amended Letter Agreement.

National Union Fire Insurance

On May 11, 2009, National Union Fire Insurance made a Demand for Arbitration on ClearPoint asserting a claim for approximately $4,158 for amounts owed for premiums, adjustments, expenses and fees associated with a Workers Compensation Policy previously held by ClearPoint and sold as part of the sale to Mercer Ventures, Inc. to TradeShow Products, Inc. ClearPoint complied with the Demand and named an arbitrator for the proceeding. The date of the arbitration has not yet been scheduled.

Blue Lake Rancheria

On July 14, 2009, Blue Lake Rancheria filed against ClearPoint a Complaint in the Superior Court of Humboldt County, California seeking payment of the $490, plus accrued interest and attorneys' fees. The lawsuit also names Michael D. Traina, ClearPoint’s Chairman of the board of directors and Chief Executive Officer, and Christopher Ferguson, ClearPoint’s majority stockholder, as defendants. Messrs. Traina and Ferguson served as guarantors of the payment of the Blue Lake Note. ClearPoint asserts that the exercise of the shares being released from escrow satisfied the obligation due to Blue Lake. On September 14, 2009, the Company filed a Notice of Demurrer to Complaint with the Superior Court of California, County of Humboldt. On October 26, 2009, the Company received a new complaint filed by Blue Lake Rancheria asserting the same claims previously made. The Company is currently in discussions with Blue Lake to review alternatives.

Allegiant Professional Business Services Inc.

On July 31, 2009, Allegiant Professional Business Services Inc. (“Allegiant”) (formerly known as TradeShow Products, Inc.) made a claim for damages and breach of contract related to the sale of Mercer Ventures, Inc. to TradeShow Products, Inc. Allegiant is seeking repayment of $92 for nonpayment of taxes. ClearPoint is in the process of responding to the claim.

ClearPoint has accrued for some, but not all, of these matters where payment is deemed probable and an estimate or range of outcomes can be made. An adverse decision in a matter for which ClearPoint has no reserve may result in a material adverse effect on its liquidity, capital resources and results of operations. In addition, to the extent that ClearPoint’s management has been required to participate in or otherwise devote substantial amounts of time to the defense of these matters, such activities would result in the diversion of management resources from business operations and the implementation of ClearPoint’s business strategy, which may negatively impact ClearPoint’s financial position and results of operations.

ITEM 1A. RISK FACTORS.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed below and in our reports filed with the SEC, which could materially affect our business, financial condition or results of operations.

The risks described below and in our reports filed with the SEC are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors, including the risks faced by us described below and in our reports filed with the SEC.

This Quarterly Report on Form 10-Q includes a going concern note to our condensed consolidated financial statements for the fiscal quarter ended September 30, 2009 which may require us to scale back or cease operations.

At September 30, 2009, we had cash and cash equivalents of $72, an accumulated deficit of approximately $57,278 and working capital deficiency of approximately $9,466. For the nine months ended September 30, 2009, we incurred a net loss of approximately $2,788. Due to such financial position and results of operations as well as the absence of firm commitments for any additional financing, we included “Note 1 – Going Concern” to our condensed consolidated financial statements for the quarter ended September 30, 2009, which states that there is substantial doubt about our ability to continue as a going concern.

If we are unable to generate sufficient cash from operations, obtain additional funding and restructure existing debt, we may not be able to continue operations as proposed, requiring us to modify our business plan, curtail various aspects of our operations or cease operations. In such event, you may lose a portion or all of your investment. In addition, the going concern note may cause concern to one or more of our constituencies of debt holders, clients, suppliers, or trade creditors. If any debt holder’s, client’s or trade creditor’s concern results in adverse changes in their respective business relations with us, these changes may materially adversely affect our cash flows and results of operations.

We may default on certain of our debt obligations. If we continue to experience liquidity issues, we may be unable to repay our outstanding debt obligations when due and may seek, or be forced to seek, protection under the federal bankruptcy laws.

We are highly leveraged and we have very limited financial resources. At September 30, 2009, we had cash and cash equivalents of approximately $72 and approximately $27,427 of total liabilities.

Our ability to borrow under the amended loan agreement with ComVest would be compromised in the event of non-compliance with applicable covenants under such agreement. Such non-compliance constitutes an event of default and, unless waived by ComVest, permits the lender to exercise its remedies under the amended loan agreement, including declaring all amounts owing to ComVest to be immediately due and payable as well as requiring us to pay ComVest approximately $160 previously deferred by ComVest pursuant to its waiver dated August 14, 2009. An event of default under the amended loan agreement with ComVest also requires us to pay higher rates of interest on the amounts we owe to ComVest and, pursuant to a cross-default provision, may trigger an agreement termination event under the Loan Modification and Restructure Agreement with M&T, which would, among other remedies available to M&T, result in the deferred obligations under such agreement, which constituted, in the aggregate, approximately $4,741 at September 30, 2009, becoming accelerated and immediately due and payable.

In addition, the creation of any lien or other encumbrance on any of our assets may constitute an event of default under the amended loan agreement with ComVest. On October 21, 2009, the Motion for Summary Judgment filed by AICCO, Inc. against us in connection with its lawsuit alleging that we had not made certain installment payments to AICCO, Inc., was granted in favor of the plaintiff in the amount of $167, together with interest at a rate of 6.57% per annum until the judgment is paid in full, plus costs and reasonable attorney’s fees. If AICCO, Inc. obtains any lien, causes the occurence of any levy upon, or seizes or attaches, any of our assets with respect to this judgement, then, subject to certain limitiations, we will be in default under the amended loan agreement with ComVest.

There is no assurance that we will be able to pay the required amount, stay this judgment or that we will able to obtain the necessary waiver from ComVest regarding such event of default. In addition, there is no assurance that we will be able to comply with other requirements of our existing debt obligations. If adequate funds are not available, or are not available on acceptable terms, we may not be able to repay or restructure our existing debt obligations, or obtain the necessary waivers, and we may seek protection under the federal bankruptcy laws or be forced into an involuntary bankruptcy filing.

Issuance of shares of our common stock upon the exercise of the ComVest amended and restated warrant will cause significant dilution of equity interests of existing holders of common stock, reduce the proportionate voting power of existing holders of common stock and could potentially reduce the market value of our common stock.

In connection with the amended loan agreement with ComVest, we issued to ComVest the amended and restated warrant dated August 14, 2009 to purchase, in the aggregate, 2,210,825 shares of our common stock. Pursuant to the amended and restated warrant, upon the occurrence and during the continuation of an event of default (other than certain specified events of default) under the amended loan agreement, the amended and restated warrant is exercisable for a number of shares of our common stock that constitutes an aggregate of 51% of our fully diluted common stock at the time of exercise, which would result in ComVest taking control of us. If the judgment rendered against us in connection with the lawsuit brought by AICCO, Inc. is not paid or stayed and, AICCO, Inc. obtains a lien, levies upon, or seizes or attaches, any of our assets wth respect to this judgment, unless such event of default is cured by us or waived by ComVest, then ComVest will be entitled to exercise the amended and restated warrant into shares of our common stock representing an aggregate of 51% of our fully diluted common stock at the time of exercise, which will cause significant dilution of equity interests of existing holders of common stock, reduce the proportionate voting power of existing holders of common stock and reduce the value of our common stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On August 14, 2009, ClearPoint entered into the Amended ComVest Loan Agreement with ComVest. In connection with Amended ComVest Loan Agreement, ClearPoint issued to ComVest the Amended ComVest Warrant to purchase, in the aggregate, 2,210,825 shares of ClearPoint’s common stock for an exercise price of $0.01 per share (the “ComVest Warrant”). Upon the occurrence and during the continuation of an event of default (other than certain specified events of default) under the Amended ComVest Loan Agreement, the ComVest Warrant is exercisable for a number of shares of common stock that, when aggregated with all shares of common stock previously acquired by ComVest upon exercise of the ComVest Warrant, constitutes 51% of ClearPoint’s fully diluted common stock at the time of exercise. The ComVest Warrant is exercisable until August 31, 2014. For additional information regarding the ComVest Warrant, see Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.

ClearPoint offered and sold the ComVest Warrant in reliance on the exemption from the registration requirements of Securities Act of 1933, as amended (the “Securities Act”), under Section 4(2) of the Securities Act, based upon a determination that the ComVest Warrant was being issued to sophisticated investors that could fend for themselves and that had access to certain information about ClearPoint and there was no general solicitation.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Other than ClearPoint’s failure to make certain payments on or provide required information pursuant to, as applicable, the ComVest Loan Agreement, the StaffBridge Note and the Amended Sub Notes discussed in Part II, Item 5 “Other Information” in this Quarterly Report on Form 10-Q, which is incorporated herein by reference, there have been no defaults upon senior securities that were not previously reported on a Current Report on Form 8-K.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5. OTHER INFORMATION.

During the quarter ended September 30, 2009, ClearPoint was in default on principal installment payments due for July, 2009 under the ComVest Term Loan in the aggregate amount of $439 and was in default on interest payments due for July, 2009 in the amount of $61. ClearPoint was also in default on interest payments due for July, 2009 under the ComVest Revolver in the amount of $18. The failure to make such payments constituted events of default pursuant to the ComVest Loan Agreement. ClearPoint is obligated to pay a default rate of 500 basis points over the prevailing interest rate, which difference between the default rate and the prevailing rate was not paid during the quarter ended September 30, 2009. In addition, ClearPoint did not make the required quarterly payment under the StaffBridge Note for the quarter ended September 30, 2009 of $59 and was also in arrears on interest payments due in the amount of $5. In addition, ClearPoint did not make the required interest payments under the Amended Sub Notes for the quarter ended September 30, 2009, in the aggregate amount of $22. An event of default under the StaffBridge Note or the Amended Sub Notes triggers a cross-default provision pursuant to the ComVest Loan Agreement. In addition, a default under the ComVest Loan Agreement triggers a cross-default provision pursuant to the M&T Restructure Agreement unless the default under the ComVest Loan Agreement is waived in writing by ComVest. See Part I, Item 2 “Manageement’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q for information related to ComVest Waiver of the foregoing defaults and ClearPoint’s debt restructing transactions entered into during the quarter ended September 30, 2009.

ITEM 6. EXHIBITS.

Exhibit No.		Description
4.1		Form of Amended and Restated Revolving Credit Note issued to ComVest Capital, LLC, dated August 14, 2009 (incorporated by reference from Exhibit 4.1 to the Current Report on Form 8-K filed on August 20, 2009).

4.2		Form of Amended and Restated Warrant issued to ComVest Capital, LLC, dated August 14, 2009 (incorporated by reference from Exhibit 4.2 to the Current Report on Form 8-K filed on August 20, 2009).

4.3		Form of Third Amended and Restated Promissory Note dated September 8, 2009 (incorporated by reference from Exhibit 4.1 to the Current Report on Form 8-K filed on August 20, 2009).

10.1		Amended and Restated Revolving Credit Agreement by and between ComVest Capital, LLC and ClearPoint Business Resources, Inc., dated as of August 14, 2009 (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed on August 20, 2009).

10.2		Waiver Letter, dated August 14, 2009, of ComVest Capital, LLC (incorporated by reference from Exhibit 10.2 to the Current Report on Form 8-K filed on August 20, 2009).

10.3		Reaffirmation of Validity Guaranties made by Michael D. Traina and John Phillips, dated as of August 14, 2009 (incorporated by reference from Exhibit 10.3 to the Current Report on Form 8-K filed on August 20, 2009).

10.4		Reaffirmation of Guaranty made by each of the entities set forth therein, dated as of August 14, 2009 (incorporated by reference from Exhibit 10.4 to the Current Report on Form 8-K filed on August 20, 2009).

10.5		Debt Extension Agreement Amendment issued by the former shareholders of StaffBridge, Inc. dated September 3, 2009 (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed on September 17, 2009).

10.6		Settlement Agreement & Release of Claims dated September 17, 2009 by and between Alliance Global Services, LLC, as successor to Alliance Consulting Group Associates, Inc., and ClearPoint Resources, Inc. (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed on September 23, 2009).

10.7		Letter Amendment to the Amended and Restated Revolving Credit Agreement by and between ComVest Capital, LLC and ClearPoint Business Resources, Inc. (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed on October 8, 2009).

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.

	CLEARPOINT BUSINESS RESOURCES, INC.

Date: November 16, 2009	By:	/s/ Michael D. Traina
		Michael D. Traina
		Chief Executive Officer



Date: November 16, 2009	By:	/s/ John G. Phillips
		John G. Phillips
		Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.		Description
4.1		Form of Amended and Restated Revolving Credit Note issued to ComVest Capital, LLC, dated August 14, 2009 (incorporated by reference from Exhibit 4.1 to the Current Report on Form 8-K filed on August 20, 2009).

4.2		Form of Amended and Restated Warrant issued to ComVest Capital, LLC, dated August 14, 2009 (incorporated by reference from Exhibit 4.2 to the Current Report on Form 8-K filed on August 20, 2009).

4.3		Form of Third Amended and Restated Promissory Note dated September 8, 2009 (incorporated by reference from Exhibit 4.1 to the Current Report on Form 8-K filed on August 20, 2009).

10.1		Amended and Restated Revolving Credit Agreement by and between ComVest Capital, LLC and ClearPoint Business Resources, Inc., dated as of August 14, 2009 (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed on August 20, 2009).

10.2		Waiver Letter, dated August 14, 2009, of ComVest Capital, LLC (incorporated by reference from Exhibit 10.2 to the Current Report on Form 8-K filed on August 20, 2009).

10.3		Reaffirmation of Validity Guaranties made by Michael D. Traina and John Phillips, dated as of August 14, 2009 (incorporated by reference from Exhibit 10.3 to the Current Report on Form 8-K filed on August 20, 2009).

10.4		Reaffirmation of Guaranty made by each of the entities set forth therein, dated as of August 14, 2009 (incorporated by reference from Exhibit 10.4 to the Current Report on Form 8-K filed on August 20, 2009).

10.5		Debt Extension Agreement Amendment issued by the former shareholders of StaffBridge, Inc. dated September 3, 2009 (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed on September 17, 2009).

10.6		Settlement Agreement & Release of Claims dated September 17, 2009 by and between Alliance Global Services, LLC, as successor to Alliance Consulting Group Associates, Inc., and ClearPoint Resources, Inc. (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed on September 23, 2009).

10.7		Letter Amendment to the Amended and Restated Revolving Credit Agreement by and between ComVest Capital, LLC and ClearPoint Business Resources, Inc. (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed on October 8, 2009).

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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Clearpoint Business Resources, Inc 10-Q