SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2009

¨	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		98-0434371
State or other jurisdiction of incorporation or		(I.R.S. Employer Identification No.)
organization

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act:

Common Stock, $0.0001 par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No o

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 o No x*

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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 Act). Yes o No x

As of June 30, 2009, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $1,187,027, based on the last reported sale price as quoted on the Over-the-Counter Bulletin Board. For the purposes of determining this amount only, the registrant has defined affiliates of the registrant to include the executive officers and directors of the registrant and holders of more than 10% of the registrant’s common stock on June 30, 2009.

The number of shares outstanding of the registrant’s common stock as of March 29, 2010 was 32,922,789 shares.

* On March 15, 2010, the registrant filed a Form 15 with the Securities and Exchange Commission to deregister its securities and suspend its obligation to file periodic reports under the Securities Exchange Act of 1934, as amended, except that the registrant has filed this Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

None.

CLEARPOINT BUSINESS RESOURCES, INC.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS		1

PRESENTATION OF INFORMATION		1

PART I		3
	Item 1. Business	3
	Item 1A. Risk Factors	9
	Item 1B. Unresolved Staff Comments	21
	Item 2. Properties	21
	Item 3. Legal Proceedings	21
	Item 4. (Removed and Reserved)	25

PART II		26
	Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26
	Item 6. Selected Financial Data	28
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk	67
	Item 8. Financial Statements and Supplementary Data	68
	Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	132
	Item 9A(T). Controls and Procedures	132
	Item 9B. Other Information	133

PART III		134
	Item 10. Directors, Executive Officers and Corporate Governance	134
	Item 11. Executive Compensation	137
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	146
	Item 13. Certain Relationships and Related Transactions, and Director Independence	149
	Item 14. Principal Accounting Fees and Services	154

PART IV		155
	Item 15. Exhibits, Financial Statement Schedules	155

SIGNATURES		S-1

EXHIBIT INDEX		E-1

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, referred to as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act. Our forward-looking statements include, but are not limited to, statements regarding our 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 Annual Report on Form 10-K are not guarantees of future performance and are based on our current assumptions, estimates, forecasts, expectations and beliefs concerning our business and their potential effects on us and speak only as of the date of such statement. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks and uncertainties (some of which are beyond our 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:

our ability to continue as a going concern and obtain additional financing or restructure existing debt obligations;

our ability to comply with covenants contained in our agreements with lenders, including, but not limited to, our ability to service and repay our outstanding debt obligations;

limitations that our outstanding debt obligations impose on our cash flow available for our operations;

our ability to facilitate the market acceptance of our iLabor network and increase revenues; and

other risk factors set forth in this Annual Report on Form 10-K.

The foregoing risks are not exhaustive. The “Risk Factors” set forth in Part I, Item 1A of this Annual Report on Form 10-K include additional risk factors which could impact our business and financial performance. Should one or more of these risks or uncertainties materialize, or should any of our 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 as a prediction of actual results. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PRESENTATION OF INFORMATION

Financial information contained in Part I and Items 6 and 7 of Part II of this Annual Report on Form 10-K expressed in U.S. dollars is presented in thousands (000’s) unless otherwise noted. Percentages contained in this report were calculated, where possible, using the information from our consolidated financial statements, and not the rounded information contained in this report. As a result, these percentages may differ slightly from calculations based upon the rounded figures provided in this report and totals contained in this report may be affected by rounding.

Unless the context indicates otherwise, references to “ClearPoint Business Resources, Inc.,” “ClearPoint,” the “Company,” “we,” “us” and “our” in this Annual Report on Form 10-K refer to ClearPoint Business Resources, Inc. and its subsidiaries.

PART I

Item 1. Business.

Description of Business

Company Overview

ClearPoint is a workplace management solutions provider. Prior to year 2008, 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.

ClearPoint’s services focus on assisting clients in managing their contingent labor needs. iLabor creates a dynamic, competitive open marketplace for suppliers of temporary labor to bid on and fulfill orders for temporary labor placed by ClearPoint’s clients. The iLabor network 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. Historically, this portion of the market has been underserved by technology solutions. ClearPoint considers the hospitality, distribution, warehouse, manufacturing, logistics, transportation, convention services, hotel chains, retail, technology and administrative sectors among the segments best able to be served by the iLabor network.

iLabor is an on-demand e-procurement solution which eliminates the need for clients to install and maintain costly hardware and software applications. A client can access iLabor through standard Internet connections and web browsers, which also eliminates the need for time consuming and costly systems integrations. Regardless of size, number of locations, or number of temporary staffing companies utilized, ClearPoint’s clients receive one bill, centralized reporting, company wide metrics, and standardized quality control from one point of entry, iLabor. The iLabor platform provides real time feedback on all posted positions and provides a centralized reporting mechanism for clients to review and monitor their spending on temporary labor.

Many of these same benefits of ClearPoint’s product offering are realized by ClearPoint’s suppliers as well. They incur no software or implementation fees and can access the application through a standard Internet browser. They also have the opportunity to access more clients via the portal and benefit from ClearPoint’s consolidated invoicing and payments, thereby reducing their internal overhead costs.

ClearPoint believes that its iLabor technology has allowed ClearPoint to better position itself in the human capital industry. The iLabor network is a technology-based procurement method that provides a low cost and easy alternative for ClearPoint’s clients, as well as traditional staffing companies in the industry, to procure temporary labor through a ClearPoint-approved staffing supplier network that has national coverage. It is the strength of ClearPoint’s base of temporary labor suppliers that enables ClearPoint to effectively and efficiently meet the stringent demands of iLabor clients, often within very tight time constraints. The iLabor platform is a fully scalable product offering that can accommodate significant growth in transaction volumes for ClearPoint without significant increases to ClearPoint’s existing cost structure.

ClearPoint’s VMS system provides human resource outsourcing, customized managed services programs, and workforce optimization embedded within the clients’ internal technology infrastructure. ClearPoint’s VMS system is a management software program that encompasses every facet of the coordinating, ordering, planning and tracking of all contract/temporary personnel, including contract employees from various staffing companies.

Technology and Services

ClearPoint is a technology based service provider in the procurement of temporary labor. ClearPoint provides the following services:

Management of Temporary Workforce

iLabor. ClearPoint’s iLabor network is a proprietary technology-based platform which provides clients a comprehensive web-based portal to streamline the process involved in procurement and management of contingent workforces through a network of ClearPoint-approved staffing suppliers. The iLabor platform provides a virtual marketplace for the e-procurement of temporary labor and provides clients with one contract and one contact point to order temporary staff on a national scale, without the requirement to implement costly systems integration.

VMS. ClearPoint’s VMS program provides a system for human resource outsourcing, customized managed services programs, and workforce optimization embedded within the clients’ internal technology infrastructure. ClearPoint’s human resource outsourcing service becomes an extension of its client’s human resource department as a sole source provider of staffing services for both contract and direct positions. ClearPoint will also design and implement performance based solutions for its clients and provide value-added consulting services tailored to the client’s business. ClearPoint’s VMS system is a management program that encompasses every facet of coordinating, ordering, planning and tracking of all contract/temporary personnel from various staffing companies and utilizes ClearPoint’s personnel onsite with its clients to help them optimize their workforce and reduce expenses.

Business Services

ClearPoint, through its approved partners, provides business process outsourcing, support services and benefits solutions and administration for clients. ClearPoint designs its business services and outsourcing programs to be client-specific business service solutions tailored to meet the needs of the particular client, which are easier and more cost effective for the client than building the necessary in-house recruiting and credentialing infrastructure. The goal of each outsourced program is to improve the client’s process and outcomes for the particular division that will be operated by ClearPoint. ClearPoint’s outsourcing offering can also include managing other functions for the client, such as payroll administration, training and retention programs, risk management and call centers.

Project-Based Staff Augmentation

Primarily from ClearPoint’s approved supplier network, ClearPoint provides full service project solutions, executive search and temporary and permanent placement, contract recruiting services and short- and long-term hourly-based assignments for clients in both commercial services and professional services. ClearPoint’s Project-Based Staff Augmentation for commercial services specializes in the light industrial, transportation, logistics and distribution industry.

Clients, Suppliers and other Contractual Parties

ClearPoint’s clients range in size from small businesses to Fortune 500 companies located throughout the United States. ClearPoint’s clients operate primarily in the transportation, logistics, engineering, scientific, aerospace, allied health, information technology, manufacturing, distribution, call center, financial, hospitality, food service, retail, data processing, legal and administration industries. With the introduction of iLabor, ClearPoint’s client base now includes other providers of temporary labor which use iLabor to fill open positions they are not able to fill themselves due to resource constraints or limitations in geographic coverage, providing them with incremental revenues and earnings.

Historically, ClearPoint has sought to maintain a diverse client base in an effort to reduce the impact of client turnover. ClearPoint has traditionally had a larger concentration in the transportation and retail industries, but has recently expanded in the hospitality sector as well. No single client accounted for more than 10% of ClearPoint’s revenues for the year ended December 31, 2009.

ClearPoint currently works with one client utilizing its VMS system which accounted for 6.7% of ClearPoint’s revenues for the year ended December 31, 2009. ClearPoint maintains onsite personnel managing the client’s contingent labor needs sourcing, assessing, and screening candidates for temporary positions within the company.

ClearPoint’s supplier network ranges from small one-location offices to national firms with hundreds of office locations across the United States. Suppliers are afforded many of the same benefits of using iLabor available to ClearPoint’s clients and can access the system through a standard Internet connection without any cost for software or implementation. They also receive consolidated billing and check processing and have the potential to service more clients in their geographic region with reduced overhead expenses.

In connection with its prior business model, ClearPoint entered into agreements with StaffChex, Inc. and Koosharem Corp., doing business as Select Staffing, pursuant to which ClearPoint receives royalty payments. Royalty payments received from Select and StaffChex for the year ended December 31, 2009 constituted 88% of ClearPoint’s total revenues for such period. For additional information regarding agreements with Select and StaffChex, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Transactions Related to Transition from Temporary Staffing Business Model to iLabor Network Model.”

Sales and Marketing

ClearPoint sells its technology services through both direct and indirect channels. A direct approach is used to target specific large accounts within the light industrial market segment and is augmented by indirect channel partners with specific temporary labor expertise. ClearPoint uses a solutions sales approach whereby ClearPoint’s products and services are presented to improve processes, increase efficiency, provide reporting tools and reduce expenses within an organization. This is typically done through lead qualification and follow up presentations to involved constituents of a prospective client.

Research and Development

ClearPoint focuses its research and development efforts primarily on the development of software upgrades to the iLabor system. ClearPoint’s research and development expenditures totaled $434 and $446 for the years ended December 31, 2009 and 2008, respectively.

Regulation

ClearPoint’s services are subject to various federal, state and local regulations. In addition, ClearPoint’s services may be subject to various state and local tax regulations. Some or all of ClearPoint’s services are subject to federal and state consumer protection laws and regulations prohibiting unfair and deceptive trade practices.

ClearPoint also is subject to regulations applicable to businesses conducting online commerce. Presently, there are relatively few laws specifically directed toward online services. However, due to the increasing popularity and use of the Internet and online services, it is likely that new laws and regulations will be adopted with respect to the Internet or online services. These laws and regulations could cover issues such as online contracts, user privacy, freedom of expression, pricing, fraud, content and quality of services, taxation, advertising, intellectual property rights and information security.

Intellectual Property

ClearPoint’s intellectual property assets take various forms, including know-how and related trade secrets, trademarks, trade names and copyrights, and related licensing. In terms of trademarks and brand equity, ClearPoint currently maintains three pending applications for federal registration with the U.S. Patent & Trademark Office, namely, applications to protect variations on the “iLabor” and “ClearPoint iLabor” brand of web-based software and services, as well as five issued registrations covering “ClearPoint iLabor”, ClearPoint’s “We Get To The Point” slogan, and two other marks. ClearPoint is actively prosecuting the above-mentioned pending applications in the effort to secure registration. In connection with its proprietary know-how and trade secrets, ClearPoint implements safeguards to limit access to sensitive information and to secure employee cooperation in protecting company assets. The technology which ClearPoint deploys through its iLabor network will be its core product offering as it moves forward. As a result, continuous enhancements and evaluation of safeguards of intellectual property constitute an important part of ClearPoint’s business strategy.

Competition

ClearPoint competes with e-procurement technology providers in the temporary staffing industry such as IQNavigator and Fieldglass, Inc., which focus on higher-end services and on-site vendor management, as well as other traditional temporary staffing firms offering similar services on a national, regional or local basis. The staffing business is very competitive and highly fragmented, with limited barriers to entry into the market, and no company has a dominant market share in the United States. ClearPoint is not aware of any competitors that compete directly with its iLabor platform in the light industrial market segment.

In the temporary staffing industry, historically, ClearPoint’s strongest competitors, for both iLabor and VMS, included national staffing companies that have close existing relationships with clients, greater financial resources and larger marketing presence, as well as specialty providers in certain verticals. In addition, such organizations could also discount their services to a point which would make it difficult for ClearPoint to compete effectively and maintain or gain a market share. iLabor differentiates itself from the traditional temporary staffing providers and e-procurement vendors by leveraging a network of staffing suppliers branching throughout the United States and focusing on the underserved light industrial market segment. In the third quarter of 2009, ClearPoint expanded its offerings to include selective services which provide for résumé-oriented positions to be filled through the iLabor portal. With the introduction of iLabor, ClearPoint operates as a clearing house for clients’ temporary staffing requirements, where many of the national staffing companies have now signed on to the iLabor network, thereby becoming the fulfillment arm of ClearPoint’s iLabor ordering system. Small, local providers are also signing on to the iLabor network. ClearPoint’s future success will depend on the adoption rate of the iLabor procurement system by corporate buyers of temporary staffing as well as by larger staffing companies looking to generate incremental revenues and earnings.

Seasonality

ClearPoint experiences fluctuation in revenue and operating results based on a number of factors, including the personnel demands of its clients. Historically, ClearPoint has experienced a rise in demand from its retail clients in the 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.

Employees

As of April 12, 2010, ClearPoint employed 14 full-time staff employees.

Business Combinations and Transactions Related to iLabor Network Model

ClearPoint was incorporated in Delaware on July 21, 2004. ClearPoint Resources, Inc., ClearPoint’s wholly-owned subsidiary (f/k/a Mercer Staffing, Inc. and ClearPoint Business Resources, Inc.), referred to as CPR, was formed in Delaware on January 1, 2005, as a holding company of its wholly owned subsidiaries consisting of, among others, Mercer Ventures, Inc., referred to as MVI, and Allied Contract Services, LLC. On February 12, 2007, CPR consummated the merger with Terra Nova. As a result of the merger, CPR stockholders were issued an aggregate of 6,051,549 shares of Terra Nova common stock. Upon the closing of the merger, Terra Nova changed its name to ClearPoint Business Resources, Inc.

On February 23, 2007, ClearPoint acquired certain assets and liabilities of ALS, LLC and its subsidiaries, also known as ASG, LLC and referred to as ALS. The purchase price of $24,400 consisted of cash of $19,000, a promissory note in the amount of $2,500, referred to as the ALS Note, shares of common stock with a value of $2,500 (439,367 shares) and the assumption of approximately $400 of current liabilities. The principal and interest balance of the promissory note at December 31, 2009 was approximately $2,284 and was not repaid due to the litigation involving Temporary Services Insurance, Ltd., referred to as the TSIL litigation. For additional information regarding the TSIL litigation, see Part I, Item 3 “Legal Proceedings.” For additional information regarding the transaction with ALS, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—ALS.”

On August 14, 2006, ClearPoint acquired 100% of the common stock of StaffBridge, Inc., referred to as StaffBridge, for $233 in cash and a note in the amount of $450,000, referred to as the StaffBridge note. The StaffBridge note was amended to extend the maturity date to December 31, 2009. On September 15, 2009, the StaffBridge note was amended to defer payments on the outstanding balance under the StaffBridge note until February 15, 2010. For additional information regarding the StaffBridge note, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—StaffBridge.”

For information related to transactions implementing ClearPoint’s new business model, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Transactions Related to Transition from Temporary Staffing Business Model to iLabor Network Model.”

Change of Control and Deregistration

On February 9, 2010, ClearPoint received a notice of default from ComVest Capital, LLC, its senior lender, referred to as ComVest, in connection with the Amended and Restated Revolving Credit Agreement dated as of August 14, 2009, referred to as the amended ComVest loan agreement. ClearPoint defaulted on certain of its obligations under the amended ComVest loan agreement. As a consequence of such defaults, ComVest elected to invoke the default exercise provision under an amended and restated warrant issued to ComVest, referred to as the amended ComVest warrant. As a result, ClearPoint is obligated to issue to ComVest 18,670,825 shares of ClearPoint’s common stock. As a result of this transaction, effective April 12, 2010, ComVest owned 51% of ClearPoint’s fully diluted common stock and approximately 56.7% of outstanding shares of ClearPoint’s common stock. In connection with this transaction, directors Brendan Calder, Dennis Cook, Parker Drew, Harry Glasspiegel, Vahan Kololian and Michael Perrucci resigned from ClearPoint’s board of directors. Gary E. Jaggard, Chief Executive Officer of ComVest Capital Advisors, LLC, an affiliate of ComVest Group Holdings, LLC and the Managing Director of ComVest, was appointed by ClearPoint’s board of directors to serve as a director. The board of directors also agreed to appoint Robert O’Sullivan, Vice Chairman of ComVest Group Holdings, LLC, as a director. The date upon which Mr. O’Sullivan will become a director has not been determined yet. Michael D. Traina remains a director.

On March 31, 2010, ClearPoint filed a Form 15 with the Securities and Exchange Commission to deregister ClearPoint’s common stock and suspend ClearPoint’s obligation to file periodic reports under the Exchange Act, except that ClearPoint has filed this Annual Report on Form 10-K for the fiscal year ended December 31, 2009. The deregistration itself is expected to be effective within 90 days of the filing of the Form 15. ClearPoint’s common stock is now quoted on the Pink Sheets, a centralized electronic quotation service for over-the-counter securities. ClearPoint can give no assurance that trading in its stock will continue on the Pink Sheets or on any other securities exchange or quotation medium or that its common stock will be actively traded.

Item 1A. Risk Factors.

You should carefully consider the risks and uncertainties described below, as well as the other information included in this report, before making your investment decisions with respect to our securities. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of these risks or uncertainties actually occur, our business, financial condition and results of operations could be materially and adversely affected. In that case, the value of our securities could decline substantially.

Risks Related to Our Business

Our independent auditors included an explanatory paragraph regarding our ability to continue as a going concern in the audit report on our consolidated financial statements for the year ended December 31, 2009 and notes to our consolidated financial statements for the year ended December 31, 2009 contain a going concern note, which may require us to scale back or cease operations.

At December 31, 2009, we had cash and cash equivalents of approximately $75, an accumulated deficit of approximately $57,566 and working capital deficiency of approximately $19,353. For the year ended December 31, 2009, we incurred a net loss of approximately $3,075. Due to such financial position and results of operations as well as the absence of firm commitments for any additional financing, our independent registered public accounting firm included an explanatory paragraph in the audit report on our consolidated financial statements for the year ended December 31, 2009 regarding our ability to continue as a going concern and we included “Note 1 – Going Concern” in notes to our consolidated financial statements for the year ended December 31, 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 and obtain additional funding, we may not be able to continue operations as proposed, requiring us to 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 explanatory paragraph in the report of our independent auditors and/or the going concern note may cause concern to one or more of our constituencies of debt holders, clients, suppliers, trade creditors or other contractual parties. If any debt holder’s, client’s, supplier’s, trade creditor’s or other contractual party’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 have defaulted 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 or restructure such debt obligations, 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 December 31, 2009, we had cash and cash equivalents of approximately $75 and approximately $27,546 of total liabilities.

Our ability to borrow under the amended ComVest loan agreement 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 ComVest loan agreement, including declaring all amounts owing to ComVest to be immediately due and payable. As of April 12, 2010, our outstanding obligations under the amended ComVest loan agreement were approximately $10,311, in addition to interest and fees of approximately $1,281. An event of default under the amended ComVest loan agreement 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, referred to as the M&T restructure agreement, with Manufacturers and Traders Trust Company, referred to as 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 $4,800 at December 31, 2009, becoming accelerated and immediately due and payable. Also listed as an event of default under the loan agreement with ComVest is a default with respect to any other of our indebtedness exceeding $100, if the effect of such default would permit the lender to accelerate the maturity of such indebtedness.

We defaulted on certain obligations under the amended ComVest loan agreement as a result of our failure to pay approximately $108 of accrued interest which was due and payable on February 1, 2010, our failure to pay a $60 installment of a certain modification fee which was due and payable on January 1, 2010 and the entry of a judgment against us related to a lawsuit filed by AICCO, Inc. and delivery of a judgment note in favor of AICCO, Inc. in the amount of approximately $195. ComVest waived defaults existing under the Amended Loan Agreement as of February 10, 2010, but as a consequence of such defaults, ComVest elected to invoke the default exercise provision under the amended ComVest warrant. As a result, we are obligated to issue to ComVest 18,670,825 shares of our common stock. In connection with this transaction, effective April 12, 2010, ComVest owned 51% of our fully diluted common stock and approximately 56.7% of outstanding shares of our common stock.

In addition, we did not make the $166 payment of default interest owed to ComVest on March 31, 2010. We also did not make scheduled payments of interest to ComVest on February 1, 2010, March 1, 2010 or April 1, 2010, in the aggregate amount of $635, consisting of deferred interest payments and loan modification fees that were due under the amended ComVest loan agreement, as well as the current monthly interest due from February 1, 2010 through April 1, 2010.

In September 2009, we restructured the note payable to the former shareholders of StaffBridge, referred to as the StaffBridge note, and the notes payable to the sub noteholders to provide that our future payments on such notes began on February 15, 2010 and March 31, 2010, respectively. We did not make scheduled payments of principal and interest of $33 and $4, respectively, due to StaffBridge on February 15, 2010 or March 15, 2010. We also did not make scheduled payments of principal and interest of $55 and $6, respectively, to the sub noteholders on March 31, 2010. Our failure to make such payments constitutes an event of default under the amended ComVest loan agreement. On April 14, 2010, ComVest waived the foregoing events of default.

In March, 2010, M&T notified us of the existence of events of default under the M&T restructure agreement, including our failure to comply with our covenant to collect the accounts receivable, our failure to deliver certain financial information to M&T and the existence of events of default under the amended ComVest loan agreement. An event of default under the M&T restructure agreement would trigger a cross-default provision pursuant to the amended ComVest loan agreement, unless such default is waived in writing by ComVest. Our obligations to M&T are subordinated to our obligations to ComVest.

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.

Royalty payments received primarily from StaffChex and Select constitute a majority of our revenues, and an adverse effect on our relationship with any of these companies could cause our revenues to decrease, which will negatively impact our business, financial condition and results of operations.

The majority of our revenues are generated from royalty payments made pursuant to agreements with StaffChex, Inc., referred to as StaffChex, and Koosharem Corp. doing business as Select Staffing, referred to as Select. For the year ended December 31, 2009, such royalty payments accounted for approximately 88% of our total revenues. An adverse effect on our relationship with StaffChex or Select could cause our revenues to decrease, which may negatively impact our business, financial condition and results of operations. See Part I, Item 3 “Legal Proceedings” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Transactions Related to Transition from Temporary Staffing Business Model to iLabor Network Model” for a description of our dispute with Select and a notice of levy on the StaffChex royalty payments, respectively.

We may be unable to obtain additional financing to repay our existing debt obligations, which will have a material adverse impact on our liquidity and ability to continue operations.

Our ability to obtain financing depends, in part, upon prevailing capital market conditions as well as our operating results, which may negatively impact our efforts to arrange financing on satisfactory terms.

The going concern explanatory paragraph in the report of our independent auditors and the going concern note to our consolidated financial statements for the fiscal year ended December 31, 2009 indicate an absence of obvious or reasonably assured sources of future funding necessary to maintain our ongoing operations. There is no assurance that our capital raising efforts will be able to attract the additional capital or other funds we need to sustain our operations. The going concern explanatory paragraph in the report of our independent auditors and the going concern note may make it more difficult for us to raise capital. If adequate funds are not available to us, or are not available on acceptable terms, we may not be able to repay our existing debt obligations. The failure to obtain additional capital on acceptable terms will have a material adverse effect on our liquidity and ability to continue operations. See “—We have defaulted 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 or restructure such debt obligations, and may seek, or be forced to seek, protection under the federal bankruptcy laws.”

We incurred losses for the last three years, and continued losses may negatively impact our business, ability to repay debt, financial condition and results of operations.

We incurred net losses of $3,075, $38,786 and $12,390 for the years ended December 31, 2009, 2008 and 2007, respectively. At December 31, 2009, we had an accumulated deficit of $57,566. If we continue to experience losses, it may negatively impact our business, ability to repay debt, financial condition and results of operations.

Our indebtedness may limit cash flow available for our operations.

On June 20, 2008, we consolidated and deferred payment on our obligations to M&T and entered into a $3,000 revolving credit facility and a $9,000 term note with ComVest. Such debt restructuring effectively replaced M&T with ComVest as our senior lender. On August 14, 2009, we entered into the amended ComVest loan agreement to increase the maximum availability under our revolving credit facility to $10,500 and repaid and terminated the term note through an advance from the revolving credit facility. Amounts outstanding under the amended revolving credit facility bear interest at the rate of 12% per annum. We are obligated to pay ComVest $166 in default interest, which was due on March 31, 2010. We also did not make scheduled payments of interest to ComVest on February 1, 2010, March 1, 2010 or April 1, 2010 in the aggregate amount of $635, which consists of deferred interest payments that were due under the amended ComVest loan agreement as well as the current monthly interest due from February 1, 2010 through April 1, 2010. We are also obligated to pay additional default interest for such periods in the aggregate amount of $32. See “—We have defaulted 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 or restructure such debt obligations, and may seek, or be forced to seek, protection under the federal bankruptcy laws.” There is no assurance that we will be able to make future scheduled payments in accordance with the amended ComVest loan agreement.

In addition, as part of restructuring our debt obligations to M&T, of which approximately $4,700 was outstanding at December 31, 2009, we agreed to pay M&T up to $3,000 in cash proceeds arising out of our accounts receivable. At December 31, 2009, we remitted approximately $1,499 to M&T against the $3,000 receivable target. We also agreed to pay M&T our federal and state income tax refunds, which we anticipated to be not less than $1,000. At December 31, 2009, we remitted approximately $1,024 of federal tax refunds and approximately $91 of state tax refunds to M&T.

Our obligation to dedicate a portion of our cash flow to service our debt reduces our cash flow available for our operations. The amount of indebtedness we have could limit our flexibility in planning for, or reacting to, changes in the markets in which we compete and require us to dedicate more cash flow to service our debt than we desire. Subject to limitations in the amended ComVest loan agreement, we may incur additional debt in the future to finance our operations or otherwise and servicing this debt could further limit our cash flow.

If the remedial policies and procedures we have implemented are insufficient to address the identified material weaknesses in our internal control over financial reporting, our financial statements may contain material misstatements.

Our management performs assessments of the effectiveness of our internal control over financial reporting. In connection with such evaluation, our management determined that our internal control over financial reporting was not effective as of December 31, 2007, based on the criteria in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and identified certain material weaknesses in our internal control over financial reporting.

Although we believe that we addressed our material weaknesses in internal control over financial reporting and our internal control over financial reporting was effective as of December 31, 2009, we cannot guarantee that any additional material weaknesses or significant deficiencies will not arise in the future due to a failure to maintain adequate internal control over financial reporting. In such case, our financial statements may contain material misstatements and our operating results may be adversely affected. Any such failure could also adversely affect the results of the periodic future management evaluations and annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting. Internal control weaknesses could also cause investors, as well as our clients and staffing suppliers, to lose confidence in our reported financial information.

If iLabor does not gain market acceptance, it may negatively impact our business, financial condition and results of operations.

iLabor constitutes the major component of our business model. In 2008, we transitioned from the temporary staffing model to our iLabor technology platform to enable our clients to procure temporary labor through a ClearPoint approved staffing supplier network. Due to the transition of our business from the temporary staffing model to the iLabor network, for the years ended December 31, 2008 and December 31, 2009, revenues from the iLabor network constituted less than 1% and approximately 10% of our revenue, respectively. Because it has been recently introduced, our iLabor model has not been proven in the market and there is no assurance that it will result in sustainable revenues for us. If iLabor does not gain market acceptance, it may negatively impact our business, financial condition and results of operations.

Financial and operating covenants in our agreements with ComVest and M&T may reduce our operating flexibility, which may have an adverse effect on our business and financial condition.

The amended ComVest loan agreement related to our revolving credit facility and/or the M&T restructure agreement contain various financial covenants as well as covenants that restrict our ability to, among other matters:

incur other indebtedness;

create liens or other encumbrances on our assets;

enter into any merger or consolidation transaction;

sell, lease, assign or otherwise dispose of all or substantially all of our property, business or assets;

sell or assign our accounts receivable, promissory notes or trade acceptances;

utilize the cash proceeds arising from our accounts receivable;

make any investment in, or otherwise acquire or hold securities, or make loans or advances, or enter into any arrangement for the purpose of providing funds or credit;

make acquisitions or investments;

amend our organizational documents;

pay dividends or make other distributions on our capital stock;

make changes to our business model;

pay certain compensation to our executive officers; and

make capital expenditures or incur monthly operating expenses in excess of specified dollar amounts.

These restrictions may limit our ability to obtain future financing, make capital expenditures or otherwise take advantage of business opportunities that may arise from time to time. Our ability to meet the financial covenants can be affected by events beyond our control, such as general economic conditions.

In addition, pursuant to the terms of the agreements with ComVest and M&T, the failure to comply with covenants constitutes an event of default, including as a result of cross default provisions, and entitles the lenders to, among other remedies, declare the loans due and payable. See “—We have defaulted 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 or restructure such debt obligations, and may seek, or be forced to seek, protection under the federal bankruptcy laws.”

We are subject to various lawsuits, the impact of which on our financial position and results of operations is uncertain. The inherent uncertainty related to litigation and the preliminary stage of some of these matters makes it difficult to predict the ultimate outcome or potential liability that we may incur as a result.

We are subject to various lawsuits. See Part I, Item 3 “Legal Proceedings” for additional information related to these lawsuits. We believe that we have several defenses to the claims raised in these matters and intend to vigorously defend them. Due to the inherent uncertainties in litigation and because the ultimate resolution of these proceedings is influenced by factors outside of our control, we are currently unable to predict the ultimate outcome of these matters or their impact on our financial position or results of operations. Although we accrued for certain of the liability exposures for these matters on our balance sheet, an adverse decision in these matters may result in a material adverse effect on our liquidity, capital resources and results of operations. In addition, to the extent that our management will be 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 our management resources from our business operations and the implementation of our business strategy, which may negatively impact our financial position and results of operations.

Seasonality causes fluctuations in our revenue and operating results.

Our clients are concentrated in the technology and retail industries. Accordingly, our liquidity and results of operations depend on the trends affecting such industries and the business cycles of these clients that impact their continued demand for temporary staffing. Historically, we have experienced a rise in demand from our retail clients in the third and fourth quarters 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 our business due to business shutdowns by our clients. Lower demand for temporary staffing related to seasonal or other trends affecting our clients could have a material adverse effect on our revenue and operating results.

We may be unable to protect our proprietary technology and intellectual property rights or keep pace with that of our competitors.

Our success depends to a significant degree upon the protection of the intellectual property rights in our e-procurement platforms, including our software and other proprietary information and material, and our ability to develop technologies that are as good as, or better than, our competitors. We may be unable to deter infringement or misappropriation of our software and other proprietary information and material, detect unauthorized use or take appropriate steps to enforce our intellectual property rights. Additionally, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States. Our competitors could, without violating our intellectual property rights, develop technologies that are as good as, or better than, our technology. Protecting our intellectual property and other proprietary rights can be expensive. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and consequently harm our operating results. Our failure to protect the intellectual property rights in our software and other proprietary information and material, or to develop technologies that are as good as or better than those of our competitors, could put us at a competitive disadvantage. These failures could have a material adverse effect on our business.

The success of ClearPoint iLabor® depends on the continued growth in the use of the Internet and the adequacy of the Internet infrastructure.

The success of our ClearPoint iLabor® products and services is substantially dependent upon continued growth in the use of the Internet. The number of clients using the Internet for temporary staffing purposes may not increase for a number of reasons, including:

actual or perceived lack of security of information or privacy protection;

possible disruptions, computer viruses or other damage to Internet servers or to users’ computers;

governmental regulation;

lack of access to high-speed communications equipment; and

increases in the cost of accessing the Internet.

As currently configured, the Internet may not support an increase in the number or requirements of users. In addition, there have been outages and delays on the Internet as a result of damage to the current infrastructure. The amount of traffic on our e-procurement platforms could decline materially if there are outages or delays in the future. The use of the Internet may also decline if there are delays in the development or adoption of modifications by third parties that are required to support increased levels of activity on the Internet. If any of the foregoing occurs, the number of clients using ClearPoint iLabor® products and services could decrease. In addition, we may be required to spend significant capital to adapt our operations to any new or emerging technologies relating to the Internet.

If we do not respond to rapid technological changes, our services, proprietary technology and systems may become noncompetitive or obsolete.

We currently provide software and technology platforms for the procurement of temporary labor by our clients. We utilize our proprietary software and technology solutions, including iLabor and VMS, to provide temporary staffing solutions to our clients. For the years ended December 31, 2009 and 2008, we spent approximately $434 and $446, respectively, on software development activities related to our iLabor and VMS solutions. If we do not invest a significant portion of our capital to continuously develop, upgrade and customize our iLabor and VMS platforms, we may be unable to compete effectively.

Due to the costs and management time required to introduce new services and enhancements, we may be unable to respond to rapid technological changes in a timely manner. If competitors introduce new services using new technologies or if new industry standards and practices emerge, our services and proprietary technology and systems may become noncompetitive and our ability to attract and retain clients and new suppliers may be at risk.

In addition, developing our proprietary technology entails significant technological and business risks. We may use new technologies ineffectively or fail to adapt our technology to meet the requirements of clients and suppliers or emerging industry standards. Finally, the new technologies may be challenging to develop and implement and may cause us to incur substantial costs.

We are subject to various regulations of government authorities. Our failure to comply with such regulations or changes in existing regulations could have a material adverse effect on our business.

Our services are subject to various federal, state and local regulations. For example, our services may be subject to various state and local taxing regulations. Some or all of our services are subject to federal and state consumer protection laws and regulations prohibiting unfair and deceptive trade practices.

We are also subject to regulations applicable to businesses conducting online commerce. Presently, there are relatively few laws specifically directed toward online services. However, due to the increasing popularity and use of the Internet and online services, it is likely that new laws and regulations will be adopted with respect to the Internet or online services. These laws and regulations could cover issues such as online contracts, user privacy, freedom of expression, pricing, fraud, content and quality of services, taxation, advertising, intellectual property rights and information security. Our failure to comply with existing legislation or any new legislation affecting our services could have a material adverse effect on our business.

We operate in a highly competitive industry and may be unable to compete effectively, which may adversely impact our business, financial condition and results of operations.

We operate in a highly competitive industry in which barriers to entry are relatively low. We will need to maintain and update our product offering to remain competitive in the industry. Although we are not aware of any other products similar to ours currently in the light industrial market, other companies are at liberty to develop and introduce products which would compete directly with us. To the extent that other companies have broader financial resources available to them, they may be able to bring a product to market and maintain it with more resources than we have available. We also run the risk of large suppliers working directly with potential clients and establishing relationships that would preclude the use of our iLabor network.

Interruptions or delays in service from our iLabor and VMS platforms could materially adversely affect our business, financial condition and results of operations.

We provide much of our services, including iLabor and VMS, through computer hardware and software that is hosted at a remote third-party site located in New Jersey. All web-hosting and other technology distribution facilities are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar events. These facilities are also subject to break-ins, sabotage, intentional acts of terrorism, vandalism and similar misconduct. Despite precautions that we take, the occurrence of a natural disaster, act of terrorism or other unanticipated problem at the facility where our technology is hosted could result in lengthy interruptions in our service, which could materially adversely affect our business, financial condition and results of operations.

We are highly dependent on our senior management and the continued performance and productivity of our approved supplier base; the loss of their services could have a material adverse impact on our business, financial condition and results of operations.

We are highly dependent on the continued efforts of the members of our senior management as well as the performance and productivity of our supplier base. The loss of any of the members of our senior management may cause a significant disruption in our business. In addition, the loss of any staffing suppliers in our supplier base may jeopardize existing client relationships with businesses that use our services based on relationships with these suppliers. The loss of the services of members of our senior management or suppliers in our supplier base could have a material adverse effect on our business, financial condition and results of operations.

If our staffing suppliers fail to attract and retain qualified personnel, it may negatively impact our business, financial condition and results of operations.

Our success depends upon our staffing suppliers’ ability to attract and retain qualified temporary and full-time personnel who possess the skills and experience necessary to meet the staffing requirements of our clients. Our suppliers must continually evaluate and upgrade their base of available qualified personnel to keep pace with changing client needs and emerging technologies. Furthermore, a substantial number of their temporary employees during any given year may terminate their employment with them and accept regular staff employment with our clients. Competition for individuals, especially qualified transportation personnel, with proven skills remains intense, and demand for these individuals is expected to remain strong for the foreseeable future. There can be no assurance that qualified personnel will continue to be available to our suppliers in sufficient numbers. If our suppliers are unable to attract the necessary qualified personnel for our clients, it may have a negative impact on our business, financial condition and results of operations.

Our staffing suppliers may be exposed to employment-related claims and costs that could materially adversely affect our business, financial condition and results of operations.

Our staffing suppliers are in the business of employing people and placing them in the workplace of our clients. Attendant risks of these activities include, but are not limited to:

possible claims by clients of employee misconduct or negligence;

claims by employees of discrimination or harassment (including claims relating to actions of our clients);

fines and costs related to the inadvertent employment of illegal aliens;

payment of workers’ compensation claims and other similar claims;

violations of wage and hour requirements;

errors and omissions of temporary employees (this would include claims of negligence due to a temporary employee’s lack of intimate familiarity with a client’s operations); and

claims by clients relating to employees’ misuse of client proprietary information, misappropriation of funds, other criminal activity or torts or similar claims.

Some or all of these claims may give rise to litigation which could include us as a named party, which could be time-consuming to our management team as well as costly to us. Such claims could also materially negatively affect our suppliers’ business and financial position, which could adversely impact the viability of our supplier network. Therefore, such claims could have a material adverse effect on our business, financial condition and results of operations. In addition, there may also be negative publicity with respect to these problems that could have a material adverse effect on our business.

Risks Related to Investment in Our Common Stock

Voting control by our majority stockholder limits your ability to influence the outcome of director elections and other matters requiring stockholder approval.

As of April 12, 2010, ComVest beneficially owned 56.7% of our common stock. Accordingly, ComVest can control the election of directors and, therefore, our policies and direction. In addition, this concentration of ownership could have the effect of preventing a change in our control or discouraging a potential acquirer from attempting to obtain control of us, which in turn could have a material adverse effect on the market price of our common stock or prevent our stockholders from realizing a premium over the market price for their shares of common stock. See “—Anti-takeover provisions to which we may be subject may make it more difficult for a third party to acquire control of us, even if the change in control would be beneficial to our stockholders.”

Quotation of our common stock on the Pink Sheets® will adversely affect the liquidity, trading market and price of our common stock and our ability to raise capital.

Because we have deregistered our common stock under the Exchange Act, we are no longer subject to the reporting requirements of the Securities and Exchange Commission and our common stock is no longer quoted on The OTC Bulletin Board. Our common stock is now quoted on the Pink Sheets® operated by Pink OTC Markets Inc. The quotation of our common stock on the Pink Sheets® may reduce the price and liquidity of our common stock. In addition, the quotation of our common stock on the Pink Sheets® may materially adversely affect our ability to raise capital on terms acceptable to us or at all.

Our common stock may be subject to the “penny stock” rules of the Securities and Exchange Commission, which make transactions in our stock cumbersome and may reduce the value of an investment in our common stock.

Under the rules of the SEC, “penny stock” means, for the purposes relevant to us, any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. As of April 12, 2010, the last reported sale price per share of our common stock was $0.01, and trading in shares of our common stock may be subject to “penny stock” rules.

Subject to certain exemptions, the penny stock rules established by the SEC impose additional sales practices on broker-dealers and require that a broker or dealer:

approve an investor’s account for transactions in penny stocks; and

receive from the investor a written agreement to the transaction.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

obtain information regarding the investor’s financial situation, investment experience and objectives; and

make a reasonable determination that the transactions in penny stock are suitable for that investor and that the investor has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver to the investor, prior to any transactions in penny stock, a written statement which sets forth the basis on which the broker or dealer made the suitability determination described above.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. In addition, the mark-ups or commissions charged by the broker-dealers may be greater than any profit a seller may make and investors may be unable to reap any profit from any sale of the stock, if they can sell it at all.

Our stock price may be subject to significant volatility and could suffer a decline in value.

The stock market in general and the market for technology-related stocks in particular has been highly volatile. As a result, the market price of our common stock is likely to be similarly volatile, and investors in our common stock may experience a decrease in the value of their stock, including decreases unrelated to our operating performance or prospects. During 2008, the price of our common stock ranged from a high of $2.94 to a low of $0.03. During 2009, the price of our common stock ranged from a high of $0.40 to a low of $0.01. We believe that many factors, including several which are beyond our control, have a significant effect on the market price of our common stock and could cause the market price of our common stock to decline. These factors include, but are not limited to, those listed in this “Risk Factors” section and the following:

changes in general economic conditions and the overall performance of the equity markets;

announcements of new technologies or services by us or our competitors;

announcements relating to strategic relationships or acquisitions;

developments with respect to intellectual property rights;

publication of unfavorable research reports about us or our industry;

coverage or lack of coverage by securities analysts;

significant volatility in the market price and trading volume of software companies in general, and human resources software companies in particular;

actual or anticipated changes in laws and government regulations;

changes in industry trends or conditions;

departures of key personnel; and

sales of a significant number of shares of our common stock or other securities in the market.

In addition, the stock market in general and the market for technology-related stocks in particular has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance.

Our quarterly operating results may fluctuate significantly, and these fluctuations may cause our stock price to fall.

As a result of fluctuations in our revenue and operating expenses, our quarterly operating results may vary significantly. We may not be able to curtail our spending quickly enough if our revenue falls short of our expectations. We expect that our operating expenses will increase substantially in the future as we expand our selling and marketing activities, increase our new product development efforts and hire additional personnel. Our operating results may fluctuate in the future as a result of factors including, but not limited to, the following:

our ability to increase services sold to existing clients, attract new clients and suppliers, cross-sell our solutions and satisfy our clients’ requirements;

changes in our pricing policies;

the introduction of new features to our solutions;

the rate of expansion and effectiveness of our sales force;

new product and service introductions by our competitors;

concentration of marketing expenses for activities, such as trade shows and advertising campaigns;

concentration of research and development costs; and

concentration of expenses associated with commissions earned on sales.

We believe that period-to-period comparisons of our results of operations are not necessarily meaningful as our future revenue and results of operations may vary substantially. It is also possible that in future quarters our results of operations will be below the expectations of securities market analysts and investors. In either case, the price of our common stock could decline materially.

Issuance of shares of our common stock upon the exercise of our options and warrants may 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.

As of April 12, 2010, 32,922,789 shares of our common stock were outstanding. We have reserved 2,750,000 shares of common stock in connection with our 2006 Long Term Incentive Plan, referred to as our 2006 plan, under which options to purchase 638,100 shares of common stock were outstanding as of April 12, 2010. We have also reserved approximately 2,657,500 shares of common stock for issuance in connection with previously issued warrants that are exercisable into common stock, including: 82,500 shares issuable upon the exercise of the warrants issued to the sub noteholders; 1,500,000 shares issuable upon the exercise of warrants issued to M&T; and 175,000 shares issuable upon the exercise of warrants issued to XRoads Solutions Group, LLC, referred to as XRoads; and 900,000 shares for issuance to Blue Lake Rancheria, referred to as Blue Lake.

Should existing holders of options or warrants exercisable into shares of our common stock exercise such securities into shares of our common stock, it may cause 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 and outstanding warrants.

Anti-takeover provisions to which we may be subject may make it more difficult for a third party to acquire control of us, even if the change in control would be beneficial to our stockholders.

Anti-takeover provisions in the General Corporation Law of the State of Delaware, or GCL, our certificate of incorporation, and our Amended and Restated Bylaws, referred to as our bylaws, could hinder or delay a change in control of our company, including transactions in which holders of common stock might otherwise receive a premium over the market price of their shares at the time of the transaction. For example, our certificate of incorporation establishes a classified or “staggered” board of directors, which means that only approximately one third of our directors is required to stand for election at each annual meeting of our stockholders. Our certificate of incorporation authorizes us to issue 60,000,000 shares of common stock and 1,000,000 shares of “blank check” preferred stock. No shares of preferred stock were outstanding as of April 12, 2009. Under our certificate of incorporation, our board of directors may issue additional shares of common stock or issue preferred stock convertible into shares of common stock, which could significantly dilute the ownership of a potential acquirer. Also, pursuant to our bylaws, it may be difficult for the potential acquirer to call a special meeting of our stockholders because only a majority of the board of directors, our Chief Executive Officer, Chairman, or Secretary acting at the request of the stockholders owning a majority of our capital stock entitled to vote may call a special meeting of stockholders. For a discussion of the anti-takeover effect of the voting control by our majority stockholder, see “—Voting control by our majority stockholder may limit your ability to influence the outcome of director elections and other matters requiring stockholder approval.”

We may issue shares of preferred stock that could be entitled to dividends, liquidation preferences and other special rights and preferences not shared by holders of our common stock.

We are authorized to issue up to 1,000,000 shares of “blank check” preferred stock. We may issue shares of preferred stock in one or more series as our board of directors may from time to time determine without stockholder approval. The voting powers, preferences and other special rights and the qualifications, limitations or restrictions of each such series of preferred stock may differ from each other. The issuance of any such series of preferred stock could materially adversely affect the rights of holders of our common stock and could reduce the value of our common stock.

We do not pay cash dividends on our common stock and do not anticipate doing so in the foreseeable future.

We are subject to contractual limitations on the payment of dividends under the amended ComVest loan agreement, the M&T restructure agreement, and the GCL. As a Delaware corporation, we may not declare and pay dividends on our capital stock if the amount paid exceeds an amount equal to the surplus, which represents the excess of our net assets over paid-in-capital or, if there is no surplus, our net profits for the current and/or immediately preceding year. Under applicable Delaware case law, dividends may not be paid on our common stock if we become insolvent or the payment of dividends will render us insolvent. We do not pay, and we do not anticipate paying, any cash dividends on the common stock in the foreseeable future. Therefore, any gains on your investment in our common stock will depend on increases in the stock price, which may or may not occur.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

The headquarters of ClearPoint are located at 1600 Manor Drive, Suite 110, Chalfont, PA 18914. ClearPoint leases approximately 5,500 square feet and pays a monthly fee of $12, with its lease expiring on May 31, 2010.

Item 3. Legal Proceedings.

Temporary Services Insurance Ltd.

On September 21, 2007, TSIL, which claimed to be a captive reinsurance company offering workers’ compensation insurance to its shareholders through an insurance program, initiated the TSIL litigation in the U.S. District Court in Florida against ALS, Advantage Services Group, LLC, certain officers and shareholders of ALS and Advantage Services Group, LLC, as well as certain other third party companies, collectively referred to as 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 Capital, LLC, referred to as KOR, a former franchisee of ClearPoint.

ClearPoint was also named as a defendant because it acquired certain assets from ALS and its wholly owned subsidiaries, including Advantage Services Group II, LLC, referred to as ASG II, in February 2007, for which it paid a portion of the purchase price at closing to the ALS defendants, through ALS. It was 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.

The court in the TSIL litigation entered an order dated February 22, 2008, referred to as 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 certain lenders of ClearPoint, 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 purchase agreement governing ClearPoint’s acquisition the assets and liabilities of ALS, referred to as 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 ALS note; and

In addition, ClearPoint agreed not to assert its right to set off from the ALS 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.

Both TSIL and ClearPoint filed motions for summary judgment and, on March 26, 2010, the court granted ClearPoint’s motion for summary judgment in its favor.

Select Staffing

On September 1, 2009, Select filed a complaint in the Superior Court of California (Santa Barbara County) against ClearPoint alleging that ClearPoint failed to pay Select pursuant to the Select subcontract since August 2009 and that ClearPoint failed to perform certain obligations under the Select subcontract. On December 30, 2009, that complaint was dismissed with prejudice by mutual agreement of the parties.

For additional information regarding the Select license agreement and the Select subcontract, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Transactions Related to Transition from Temporary Staffing Business Model to iLabor Network Model.”

XL Specialty Insurance Company

On November 10, 2008, XL Specialty Insurance Company, referred to as 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, referred to as the XL complaint, alleging that, among other things, XL issued workers’ compensation insurance policies to ClearPoint Advantage, LLC, a wholly owned subsidiary of CPR and referred to as 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 ClearPoint, as a guarantor of CP Advantage’s obligations under the insurance policies, approximately $745, 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. CPR 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. XL filed a motion for summary judgment on March 31, 2010.

AICCO, Inc.

On November 18, 2008, AICCO, Inc., referred to as AICCO, filed a complaint the Court of Common Pleas of Bucks County, Pennsylvania against ClearPoint, referred to as the AICCO litigation, 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 claimed that ClearPoint breached the terms of such agreement by failing to make certain installment payments and sought damages of approximately $167, together with interest and attorney’s fees and costs. ClearPoint joined two additional defendants on January 23, 2009. ClearPoint contended that the joined defendants were liable for the installment payments pursuant to an agreement governing the sale of HRO. ClearPoint alleged breach of contract against the joined defendants and sought 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 August 27, 2009, ClearPoint filed its opposition to the additional defendants’ motion for summary judgment.

On December 23, 2009, ClearPoint and AICCO entered into a Settlement Agreement and Release, referred to as the AICCO settlement. Pursuant to the AICCO settlement, ClearPoint agreed to pay AICCO an aggregate amount of $190 in full and final settlement of all claims relating to the AICCO litigation. ClearPoint agreed to pay such amount as follows: (i) four monthly installment payments of $15, the first of which was paid on December 29, 2009, and will continue on the 15th day of each month thereafter, including March 15, 2010, followed by (ii) 12 monthly installment payments of $11, commencing on April 15, 2010. As of April 12, 2010, ClearPoint is current on all payments owed pursuant to the AICCO settlement.

In the event ClearPoint fails to make any payment due under the AICCO settlement, after AICCO provides ClearPoint with prior written notice and five days’ opportunity to cure, judgment may be entered against ClearPoint in the amount of approximately $195, together with an interest rate of 6% per annum accruing as of the date the missed payment was due, plus costs and attorney’s fees associated with the entry and execution of such judgment, less any amounts paid under the AICCO Settlement. Accordingly, on December 23, 2009, ClearPoint executed a Judgment Note in favor of AICCO providing for such judgment payment.

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.

In addition, in December 2009, Mr. O’Donnell filed a Demand for Indemnification pursuant to the Asset Sale and Purchase Agreement dated February 23, 2007, as amended. Mr. O’Donnell demanded that ClearPoint indemnify him for potential losses arising out of the lawsuit filed by GE Capital described below. This litigation is currently in the discovery phase.

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 of MVI to TradeShow. 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, referred to as Blue Lake, filed against ClearPoint a Complaint in the Superior Court of Humboldt County, California seeking payment of $490 under the Blue Lake note, 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 stockholder, as defendants. Messrs. Traina and Ferguson formerly served as guarantors of the payment of the Blue Lake note. ClearPoint filed a motion to dismiss the Complaint on September 14, 2009, contending that the Complaint failed to state a claim for relief and is improperly vague. On October 5, 2009, Blue Lake filed an Amended Complaint, which ClearPoint has answered. The case has proceeded to discovery. ClearPoint asserts, among other things, that the release of the shares from escrow satisfies the obligation due to Blue Lake, and that Messrs. Traina and Ferguson are no longer guarantors of the payment of the Blue Lake note.

Allegiant Professional Business Services Inc.

On February 8, 2010, ClearPoint was served with a Summons and Complaint that Allegiant Professional Business Services, Inc., referred to as Allegiant, filed in the Superior Court of California, County of San Diego, Central Division on December 21, 2009. The complaint alleged breach of contract and fraud and sought approximately $91 in damages. On February 22, 2010, Allegiant agreed to dismiss the complaint without prejudice. Because the state court docket did not timely reflect the dismissal, ClearPoint filed a Notice of Removal to federal court on March 2, 2010. On March 15, 2010, the Court signed a stipulated order to dismiss without prejudice and closed the matter.

Jennifer Garcia

On August 11, 2009, Jennifer Garcia filed a complaint against ClearPoint in the Superior Court of San Francisco, California. The Complaint alleges that Ms. Garcia was personally injured by a temporary employee of ClearPoint while they were working at a client site in August, 2006. ClearPoint’s insurance policy provided coverage on a claims-made and reported basis subject to a retroactive date of June 29, 2006 and therefore, has denied coverage to Ms. Garcia. Plaintiff is alleging approximately $50 in damages. ClearPoint is currently in discussions with Ms. Garcia.

GE Capital Information Technology Solutions, Inc.

On November 10, 2009, GE Capital Information Technology Solutions, Inc., referred to as GE Capital, filed a complaint against ClearPoint in the Circuit Court of the Ninth Judicial Circuit in Orange County, Florida. On or about January 6, 2006, ALS entered into an Image Management Plus Agreement with GE Capital. The Complaint alleges that ALS breached the terms of the contract by failing to make the payments after February, 2008. GE Capital accelerated the balance due pursuant to the terms of the contract. GE Capital demands judgment against ClearPoint and ALS for damages, interest, attorney fees and other costs of approximately $15. ClearPoint is currently reviewing the complaint.

General

Although ClearPoint accrued for certain of the liability exposures for these matters on its balance sheet, an adverse decision in these matters 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.

Item 4. (Removed and Reserved).

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Prior to February 13, 2007, our units, common stock and warrants were quoted on The OTC Bulletin Board under the symbols “TNVAU.OB,” “TNVA.OB” and “TNVAW.OB,” respectively. Our units, common stock and warrants were listed on Nasdaq under the symbols “CPBRU,” “CPBR” and “CPBRW,” respectively, starting February 13, 2007. Our securities were suspended from trading on Nasdaq on September 11, 2008 as a result of our failure to comply with certain Nasdaq listing requirements, and our securities were delisted from Nasdaq effective at the opening of the trading session on November 24, 2008. Effective September 11, 2008, our common stock was quoted on The OTC Bulletin Board under the symbol “CBPR.OB.” Effective September 15, 2008, our units and warrants were quoted on The OTC Bulletin Board under the symbols “CBPRU.OB” and “CPBRW.OB,” respectively. Effective April 17, 2009, our units and warrants expired.

On March 31, 2010, we filed a Form 15 with the Securities and Exchange Commission to deregister our common stock and suspend our obligation to file periodic reports under the Exchange Act, except that we have filed this Annual Report on Form 10-K for the fiscal year ended December 31, 2009. The deregistration itself is expected to be made effective within 90 days of the filing of the Form 15. As a result of the deregistration, our common stock is no longer quoted on The OTC Bulletin Board and is now quoted on the Pink Sheets.

The following table sets forth the high and low sales prices per share of our common stock on The OTC Bulletin Board and Nasdaq, as applicable, for the periods indicated. The over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily reflect actual transactions. On April 12, 2010, the last reported sales price of our common stock as reported on The OTC Bulletin Board was $0.01 per share.

(in dollars)	Units						Common Stock				Warrants
	High			Low			High		Low		High		Low
2009:
Fourth Quarter		—			—			0.06		0.01		—		—
Third Quarter		—			—			0.19		0.02		—		—
Second Quarter (beginning April 18, 2009)		—			—			0.30		0.04		—		—
Second Quarter (through April 17, 2009)		N/A	(1)		N/A	(1)		0.40		0.11		0.01		0.001
First Quarter		N/A	(1)		N/A	(1)		0.24		0.03		0.01		0.001
2008:
Fourth Quarter		0.12			0.10			0.24		0.02		0.01		0.001
Third Quarter (beginning September 11, 2008)		N/A	(1)		N/A	(1)		0.25		0.05		0.02		0.001
Third Quarter (through September 10, 2008)		0.50			0.25			0.52		0.09		0.04		0.001
Second Quarter		1.35			0.06			1.54		0.15		0.06		0.01
First Quarter		2.60			2.10			2.94		1.27		0.30		0.04

(1) There were no reported sales of our units during this period.

Recent Sales of Unregistered Securities

There have been no unregistered sales of equity securities during the period covered by this report that were not previously reported on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.

Dividend Policy

We have not paid any cash dividends on our common stock to date. We do not anticipate declaring any dividends in the foreseeable future.

We are subject to contractual limitations on the payment of dividends under the amended ComVest loan agreement and the M&T restructure agreement. For additional information regarding such contractual limitations, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and Note 11 to our Consolidated Financial Statements in Part II, Item 8 “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. In addition, as a Delaware corporation, we may not declare and pay dividends on our capital stock if the amount paid exceeds an amount equal to the surplus, which represents the excess of our net assets over paid-in-capital or, if there is no surplus, our net profits for the current and/or immediately preceding fiscal year.

Holders

As of April 12, 2010, there were 17 record holders of our common stock, solely based upon the count our transfer agent provided us as of that date and such numbers do not include:

any beneficial owners of securities whose shares are held in the names of various dealers, clearing agencies, banks, brokers or other fiduciaries; and

broker-dealers or other participants who hold or clear shares directly or indirectly through the Depository Trust Company, or its nominee, Cede & Co.

Item 6. Selected Financial Data.

The following selected financial data should be read together with our consolidated financial statements contained in Part II, Item 8 “Financial Statements and Supplementary Data” and accompanying notes and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this Annual Report on Form 10-K. The selected consolidated financial data in this section are not intended to replace our consolidated financial statements and the accompanying notes. Our historical results are not necessarily indicative of our future results.

The selected consolidated financial data set forth below are derived from our consolidated financial statements. The consolidated statement of operations data for the fiscal years ended December 31, 2009, 2008, 2007, 2006 and 2005 and the consolidated balance sheet data as of December 31, 2009, 2008, 2007, 2006 and 2005 are derived from our audited consolidated financial statements and related notes of which the financial statements and notes for the fiscal years ended December 31, 2009 and 2008 are included in this Annual Report on Form 10-K.

	Fiscal Year Ended December 31, (in thousands, except per share data)
	2009			2008			2007(a)			2006			2005
Statement of Operations Data:
Revenue	$	5,242		$	33,496		$	191,685		$	113,942		$	84,200
Cost of services		—			29,108			166,631			93,337			68,789
Gross profit		5,242			4,388			25,054			20,605			15,411
SG&A expense		4,831			15,559			26,705			13,550			11,025
Restructuring expense		—			1,350			2,201			—			—
Impairment of goodwill		—			16,822			—			—			—
Fixed assets impairment expense, net		5			1,022			—			—			—
Depreciation and amortization expense		628			723			10,313			2,489			2,013
Income (loss) from operations		(222	)		(31,088	)		(14,165	)		4,566			2,373
Other income (expense)		386			(86	)		(1,608	)		26			(1	)
Interest income		40			7			134			—			—
Interest, OID and warrant liability (expense)		(1,827	)		(2,025	)		(1,872	)		(5,072	)		(3,648	)
Derivative income (expense)		(87	)		34			—			—			—
Gain on restructuring of debt		—			687			—			—			—
(Loss) on sale of subsidiary		(190	)		(1,294	)		—			—			—
(Loss) on extinguishment of debt		(1,175	)		—			—			—			—
Prepayment penalty on early retirement of debt		—			—			—			—			—
Net (loss) before income tax		(3,075	)		(33,765	)		(17,511	)		(480	)		(1,276	)
Income tax expense (benefit)		—			5,021			(5,121	)		945			(77	)
Net (loss)	$	(3,075	)	$	(38,786	)	$	(12,390	)	$	(1,425	)	$	(1,199	)

Net (loss) per common share – basic and diluted	$	(0.22	)	$	(2.84	)	$	(1.00	)	$	(0.24	)	$	(0.20	)

	December 31,
	2009			2008			2007(a)			2006			2005
	(in thousands, except per share data)
Balance Sheet Data:
Working capital (deficit) (current assets less current liabilities)	$	(19,592	)	$	(11,937	)	$	(3,188	)	$	9,070		$	8,601
Total assets		2,559			5,081			55,277			22,253			22,388
Total long-term debt, net of current		4,872			10,306			8,523			14,965			13,927
Stockholders’ equity (deficit)		(24,986	)		(21,913	)		15,646			(2,714	)		(1,883	)

(a)

Selected financial data for the fiscal year ended December 31, 2007 were impacted by the acquisition of certain assets and assumption of certain liabilities of ALS in February, 2007. See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—ALS” included in this Annual Report on Form 10-K.

Our consolidated financial statements have been prepared assuming that we will continue as a going concern. However, we had a net loss of $3,075 and utilized cash of $1,751 in operating activities during the year ended December 31, 2009, and had a stockholders’ deficit of $(24,986). These factors raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from this uncertainty.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of ClearPoint’s financial condition and results of operations in conjunction with its consolidated financial statements and the notes to such consolidated financial statements included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting ClearPoint’s current expectations, which involve risks and uncertainties. See Part I, Item 1A “Risk Factors” for a discussion of important factors that could cause actual results to differ materially from those described or implied by the forward-looking statements contained in this discussion. Please refer to “Forward-Looking Statements” included in this Annual Report on Form 10-K.

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. In the third quarter of 2009, ClearPoint expanded its offerings to include selective services which provide for résumé-oriented positions to be filled through the iLabor portal. ClearPoint considers the hospitality, distribution, warehouse, manufacturing, logistics, technology, convention services, hotel chains, retail and administrative sectors among the segments best able to be served by the iLabor Network.

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 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 $3,075 and $38,786 for the fiscal years ended December 31, 2009 and 2008, respectively. ClearPoint is highly leveraged and has very limited financial resources. At December 31, 2009, ClearPoint had cash and cash equivalents of $75, $27,546 of total liabilities and accumulated deficit of approximately $57,566.

In 2008, ClearPoint defaulted on its debt obligations to M&T and had to restructure its outstanding debt obligations. In June, 2008, ClearPoint replaced M&T with ComVest as its senior lender and entered into subordination agreements with its other lenders.

During 2009, ClearPoint defaulted on its debt obligations to ComVest. As a consequence of such defaults, ComVest invoked the default exercise provision under an amended and restated warrant issued to ComVest. As a result, ClearPoint is obligated to issue to ComVest 18,670,825 shares of ClearPoint’s common stock, effectively resulting in ComVest’s control of ClearPoint.

In addition, as of April 12, 2010, ClearPoint did not make scheduled payments due to ComVest and certain other creditors. ClearPoint’s failure to make such payments constitutes an event of default under the amended ComVest loan agreement. On April 14, 2010, ComVest waived the foregoing events of default. See “—Liquidity and Capital Resources” for additional information regarding ClearPoint’s debt obligations and the above-mentioned defaults under such obligations.

On March 17, 2010, M&T notified ClearPoint of the existence of events of default under the M&T restructure agreement. An event of default under the M&T restructure agreement would trigger a cross-default provision pursuant to the amended ComVest loan agreement, unless such default is waived in writing by ComVest. ClearPoint’s obligations to M&T are subordinated to its obligations to ComVest.

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 financial statements for the fiscal year ended December 31, 2009 regarding ClearPoint’s ability to continue as a going concern. In addition, ClearPoint included a “going concern” note in its consolidated financial statements for the fiscal year ended December 31, 2009 (see Note 1 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K).

As of December 31, 2009, cash projected to be generated from operations was not sufficient to fund operations and meet debt repayment obligations for 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.

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.

For a more detailed discussion of these matters, see Part I, Item 1A “Risk Factors.”

In March, 2010, ClearPoint voluntarily deregistered its common stock and, as a result, its obligation to file periodic reports with the Securities and Exchange Commission was immediately suspended, except that ClearPoint has filed this Annual Report on Form 10-K for the fiscal year ended December 31, 2009. As a result of the deregistration, ClearPoint’s common stock is now quoted on the Pink Sheets, a centralized electronic quotation service for over-the-counter securities. ClearPoint can give no assurance that trading in its stock will continue on the Pink Sheets or on any other securities exchange or quotation medium or that its common stock will be actively traded.

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 consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles, or GAAP. 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.

On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, workers’ compensation reserves, collectibility of accounts receivable, impairment of goodwill, income taxes and litigation contingencies. Management bases its estimates and judgments on historical experiences and on various other factors believed to be reasonable under the circumstances. Actual results under circumstances and conditions different than those assumed could result in differences from the estimated amounts in the financial statements.

Management believes the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of ClearPoint’s consolidated financial statements, and actual results could differ materially from the amounts reported based on these policies.

Revenue Recognition

ClearPoint 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, ClearPoint 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.

ClearPoint evaluated the criteria outlined in Accounting Standards Codification, referred to as 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, ClearPoint 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, ClearPoint’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 ClearPoint’s business model, in 2008, ClearPoint recognized revenue from four major sources:

· For the three months ended March 31, 2008, ClearPoint 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, ClearPoint completed its transition from the temporary staffing provider model to its iLabor technology platform. Under this new model, ClearPoint records revenue on a net fee basis after deducting costs paid to suppliers for sourcing labor for ClearPoint’s clients. ClearPoint acts as a broker for its clients and ClearPoint’s network of temporary staffing suppliers. Revenue from ClearPoint’s iLabor Network where it electronically procures and consolidates buying of temporary staffing for clients is recognized on a net basis;

· ClearPoint 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.

ClearPoint also recorded deferred revenue on the balance sheet as of December 31, 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).

Workers’ Compensation Reserves

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

In connection with the sale of HRO, ClearPoint sold its workers compensation insurance policies, which included both collateral and insurance premium liabilities. AICCO was listed as one of the policies which had a premium liability. On December 23, 2009, ClearPoint and AICCO entered into the AICCO settlement pursuant to which ClearPoint agreed to pay AICCO an aggregate amount of $190 in full and final settlement of all claims relating to the AICCO litigation. This payment is recorded on the income statement as loss on sale of subsidiary (see Note 4 – Business and Asset Acquisitions and Dispositions and Licensing Agreements).

Collectibility of Accounts Receivable

ClearPoint provides an allowance for uncollectible accounts receivable based on an estimation of losses which could occur if clients are unable to make required payments. ClearPoint evaluates this allowance on a regular basis throughout the year and makes adjustments as the evaluation warrants. These allowances were $5,253 at December 31, 2009 and $5,775 at December 31, 2008. ClearPoint’s estimates are influenced by numerous factors including its large, diverse client base, which is disbursed across a wide geographical area. One (1) customer accounted for 12% of the accounts receivable balance as of December 31, 2009. The same customer accounted for 11% of the accounts receivable balance as of December 31, 2008. If customers’ creditworthiness deteriorates, or if actual defaults are higher than our historical experience or if other circumstances arise, ClearPoint’s estimates of the collectibility of amounts due to ClearPoint could be overstated, and additional allowances could be required, which would have an adverse impact on ClearPoint’s consolidated financial statements.

Goodwill

ASC Topic 350-20-35 “Goodwill and Other” requires that goodwill and certain intangible assets with indefinite useful lives are no longer required to be amortized but instead are subject to an impairment test performed on an annual basis or whenever events or circumstances indicate that impairment may have occurred. Intangible assets with finite useful lives continue to be amortized over their useful lives. The valuation methodologies considered include analyses of estimated future discounted cash flows at the reporting unit level, publicly traded companies multiples within the temporary staffing industry and historical control premiums paid by acquirers purchasing companies similar to ClearPoint’s. As part of the assessment, management relied on a number of factors to discount anticipated future cash flows including operating results, business plans and present value techniques. Rates used to discount cash flows are dependent upon market interest rates and the cost of capital at the valuation date. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment. ClearPoint recorded an impairment of goodwill at March 31, 2008 of $16,822 based upon management’s determination that the carrying amount of the goodwill was less than its fair value. This impairment related to the assignment of contracts previously serviced by ClearPoint but no longer in its control. It was therefore determined that the previously recorded goodwill could no longer be substantiated. As a result of the goodwill impairment during the quarter ended March 31, 2008, no goodwill is recognized in the consolidated balance sheet at December 31, 2009.

Income Taxes

ClearPoint accounts for income taxes in accordance with ASC Topic 740 “Income Taxes” by utilizing an asset and liability approach that requires recording deferred tax assets and liabilities for the future year consequences of events that have been recognized in its financial statements or tax returns Under ASC Topic 740, ClearPoint measures these expected future tax consequences based upon provisions of tax law as currently enacted. Significant judgment is required in determining any valuation allowance against deferred tax assets. In assessing the need for a valuation allowance, ClearPoint considers all available evidence, including historical operating results and estimates of future taxable income. ClearPoint’s assessment at December 31, 2009 has resulted in a full valuation allowance being recorded against the deferred tax assets. In the event ClearPoint changes its determination as to the amount of deferred tax assets that can be realized, an adjustment to the valuation allowance with a corresponding effect to the provision for income taxes in the period in which such determination is made could have an adverse impact on ClearPoint’s consolidated financial statements. The effects of future changes in tax laws are not anticipated. Variations in the actual outcome of these future tax consequences could materially impact ClearPoint’s financial position or its results of operations. ClearPoint also provides a reserve for tax contingencies when it believes a probable and estimatable exposure exists.

Litigation Contingencies

ClearPoint is subject to various litigation matters which may have an adverse impact on its consolidated financial statements. An estimated settlement contingency is required when it is probable and the amount or range of amounts can be reasonably estimated. ClearPoint regularly evaluates current information available to determine whether such accruals should be adjusted or whether new accruals are required. ClearPoint believes that as of December 31, 2009, it had adequate reserves recorded for asserted claims. Should settlements be materially different from those reserves, it could have an adverse impact on ClearPoint’s consolidated financial statements.

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 retail clients in the third and fourth quarter due to the increase in the product volume 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

Summary Financial Results (000’s)

The following table summarizes select items of ClearPoint’s consolidated statement of operations for the fiscal years ended December 31, 2009 and 2008, respectively.

	Fiscal Year Ended December 31,						Percentage Change
$ (000’s)	2009			2008			‘09/’08
Net revenues	$	5,242		$	33,496			(84	)%
Cost of services		—			29,108			N/A
Gross profit		5,242			4,388			19	%
SG&A expenses		4,831			15,559			(69	)%
Restructuring expense		—			1,350			N/A
Impairment of goodwill		—			16,822			N/A
Fixed assets impairment expense, net		5			1,022			(100	)%
Depreciation and amortization expense		628			723			(13	)%
(Loss) from operations		(222	)		(31,088	)		(99	)%
Other income (expense)		386			(86	)		(549	)%
Interest Income		40			7			471	%
Interest (expense) and factoring fees		(1,472	)		(1,515	)		(3	)%
Interest, OID and warrant liability (expense)		(355	)		(510	)		(30	)%
Derivative income (loss)		(87	)		34			(356	)%
Gain on restructuring of debt		—			687			N/A
Loss on extinguishment of debt		(1,175	)		—			N/A
(Loss) on sale of subsidiary		(190	)		(1,294	)		(85	)%
Net (loss) before income taxes		(3,075	)		(33,765	)		(91	)%
Income tax expense (benefit)		—			5,021			N/A
Net (loss)	$	(3,075	)	$	(38,786	)		(92	)%

Fiscal Year Ended December 31, 2009 Compared to Fiscal Year Ended December 31, 2008

The following table summarizes select items of ClearPoint’s consolidated statement of operations for the fiscal years ended December 31, 2009 and December 31, 2008:

$ (000’s)	2009			% of Revenue			2008			% of Revenue
Net revenues	$	5,242			100.0	%	$	33,496			100.0	%
Cost of services		—			—			29,108			86.9	%
Gross profit		5,242			100.0	%		4,388			13.1	%
Selling, general and administrative expenses		4,831			92.2	%		15,559			46.5	%
Restructuring expense		—			—			1,350			4.0	%
Impairment of goodwill and depreciation and amortization expense		633			12.1	%		18,567			55.4	%
(Loss) from operations		(222	)		(4.2	)%		(31,088	)		(92.8	)%
Interest (expense) and factoring fees		(1,472	)		(28.1	)%		(1,515	)		(4.5	)%
Interest (expense) of amortization of OID and warrant liability		(355	)		(6.8	)%		(510	)		(1.5	)%
(Loss) on extinguishment of debt		(1,175	)		(22.4	)%		—			—
Gain on restructuring of debt		—			—			687			2.1	%
(Loss) on sale of subsidiary		(190	)		(3.6	)%		(1,294	)		(3.9	)%
Other income (expense)		339			6.5	%		(45	)		(.1	)%
Net loss before income taxes		(3,075	)		(58.7	)%		(33,765	)		(100.8	)%
Income tax expense (benefit)		—			—			5,021			15.0	%
Net loss	$	(3,075	)		(58.7	)%	$	(38,786	)		(115.8	)%

Net Revenues

ClearPoint’s revenues for the years ended December 31, 2009 and 2008 were $5,242 and $33,496, respectively, which represented a decrease of $28,254 or 84%. This decrease was primarily due to the changes in ClearPoint’s business model. During the year ended December 31, 2009, ClearPoint operated under its new business model, in which it acts as a broker for its clients through a network of temporary staffing suppliers. During the year ended December 31, 2008, ClearPoint transitioned its business model from a temporary staffing provider to a provider that manages clients’ temporary staffing needs through its open Internet portal-based iLabor Network. ClearPoint records the broker fees related to these transactions. ClearPoint’s former contracts related to temporary staffing services were sold or subcontracted. During 2008, ClearPoint recognized revenue from the sale or subcontracting of the former temporary staffing business as royalty fees from KOR, StaffChex, Townsend Careers, LLC and TZG Enterprises, LLC, referred to as TZG, and licensing fees from Optos Capital, LLC, referred to as Optos. See “—Liquidity and Capital Resources—Transactions Related to Transition from Temporary Staffing Business Model to iLabor Network Model” for a description of ClearPoint’s agreements with StaffChex and Select. During the year ended December 31, 2009, ClearPoint recognized revenue from the sale or subcontracting of the former temporary staffing business as royalty fees from Select and StaffChex. ClearPoint recorded $4,611 of royalty and license fees in net revenue during the year ended December 31, 2009 and $3,868 during the year ended December 31, 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 services to the client. ClearPoint’s cost of services for the years ended December 31, 2009 and 2008 were $0 and $29,108, respectively, which represented a decrease of $29,108. This decrease was due to the changes in ClearPoint’s business model under which all revenues are recorded on a net fee basis with no cost of sales being recorded in 2009. Under the prior business model, revenues were recorded on a gross basis with associated cost of sales being recorded separately. As a percentage of revenues for the years ended December 31, 2009 and 2008, ClearPoint’s gross profit was 100% and 13.1%, respectively.

Selling, General and Administrative and Expenses

ClearPoint’s selling, general and administrative (SG&A) expenses for the years ended December 31, 2009 and 2008 were $4,831 and $15,559, respectively, which represented a decrease of $10,728 or 69%. The decrease in SG&A expenses was the result of ClearPoint’s change in the business model and related to lower personnel costs, rent, utilities and general overhead. Overall, SG&A expenses were primarily lower as a result of a lower headcount, lower office rent and related expenses.

Restructuring Expenses

ClearPoint’s restructuring expenses for the years ended December 31, 2009 and 2008 were $0 and $1,350, respectively, which represented a decrease of $1,350. ClearPoint initiated a restructuring program of its field and administrative operations in order to further reduce its ongoing SG&A expenses. As part of the 2008 restructuring program, ClearPoint closed its remaining branch and administrative office in Florida and eliminated approximately 20 positions. There were no additional restructuring programs in 2009.

Impairment of Goodwill and Depreciation and Amortization Expense

ClearPoint’s recorded impairments of goodwill for the years ended December 31, 2009 and 2008 were $0 and $16,822, respectively, which represented a decrease of $16,822. ClearPoint recorded an impairment of goodwill for the year ended December 31, 2008 in the amount of $16,822 based upon management’s determination that the carrying amount of the goodwill was less than its fair value. Goodwill had a $0 balance as of December 31, 2008 and 2009.

ClearPoint’s depreciation and amortization expenses for the years ended December 31, 2009 and 2008 were $628 and $723, respectively, which represented a decrease of $95 or 13.1%. For the year ended December 31, 2008, ClearPoint recorded an impairment charge of $1,022 related to fixed assets as a result of the termination of franchise agreements. ClearPoint removed $1,838 of fixed assets and $816 of accumulated depreciation as a result of this impairment. For the year ended December 31, 2009, ClearPoint recorded an impairment charge of $5 related to fixed assets as a result of newer technology relating to its display booth. ClearPoint removed $6 of fixed assets and $1 of accumulated depreciation as a result of this impairment.

Loss from Operations

ClearPoint’s loss from operations for the years ended December 31, 2009 and 2008 was $222 and $31,088, respectively, which represented a decrease in the loss of $30,866 or 99%. The change in loss from operations was primarily due to the $10,728 reduction of SG&A expenses as described above, and because no impairment of goodwill was charged in 2009, while $16,822 was charged for the year ended December 31, 2008.

Interest, OID and Warrant Liability Expense

ClearPoint’s interest, original issue discount (OID) and warrant liability expense for the years ended December 31, 2009 and 2008 were $355 and $510, respectively, which represented a decrease of $155 or 30%. This decrease was primarily due to the treatment of the amortization of the original issue discount and warrant expense related to the original ComVest loan agreement and the amended ComVest loan agreement in 2009, whereby approximately 48% of the original OID and warrant liability was written off in conjunction with the refinancing.

Loss on Extinguishment of Debt

For the years ended December 31, 2009 and 2008, Loss on Extinguishment of Debt was $1,175 and $0, respectively. The August 14, 2009 amended ComVest loan agreement 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, the unamortized debt issue costs attributable to the ComVest term note in the amount of $259 and the modification fees paid to ComVest attributable to the retirement of the ComVest term note in the amount of $147 were recorded as a loss on extinguishment of debt.

Loss on Sale of Subsidiary

For the years ended December 31, 2009 and 2008, Loss on Sale of Subsidiary was $190 and $1,294, respectively, representing a decrease of $1,104 or 85%. On December 23, 2009, ClearPoint and AICCO entered into the AICCO settlement. For additional information regarding the AICCO settlement, see Part I, Item 3. “Legal Proceedings.” Pursuant to the AICCO settlement, ClearPoint agreed to pay AICCO an aggregate amount of $190 in full and final settlement of all claims between ClearPoint and AICCO relating to the AICCO litigation. This workers compensation premium liability was transferred in 2008 as part of the initial recording of the loss on sale of subsidiary of $1,294.

Gain on Restructuring of Debt

For the years ended December 31, 2009 and 2008, Gain on Restructuring of Debt was $0 and $687, respectively. ClearPoint accounted for the M&T restructure agreement pursuant to ASC Topic 470, “Accounting by Debtors and Creditors for Troubled Debt Restructurings,” which required ClearPoint to reduce the carrying amount of the old debt (M&T obligations of $10,932) by the minimum cash value of the put option of the warrants issued ($1,200) and the warrant liability of $47, 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 and future interest payment of $219) ASC Topic 470 also requires that the new debt be recorded as the total of future cash payments), the excess of the carrying of the remaining debt over the future cash payments of the new debt was $866, which was reduced by the unamortized deferred financed cost and current refinancing cost of $180. As a result of the application of ASC Topic 470, ClearPoint recorded a gain of $687 ($0.05 per share), which is reflected in the consolidated statement of operations for the year ended December 31, 2008 gain on restructuring of debt of $687 as a result of the M&T restructure agreement.

Other Income or Expense

For the years ended December 31, 2009 and 2008, Other Income or (Expense) were $386 and $(86), respectively, which represents an increase of $472 or 549%. The increase was primarily due to the recognition of $358 of other income from the insurance settlement with Sunz Insurance Company, referred to as Sunz, in 2009 versus the waiver charge by M&T incurred in the second quarter of 2008 of $100.

Net Loss

ClearPoint’s net loss for the years ended December 31, 2009 and 2008 was $3,075 and $38,786, respectively, which represented a decrease in the loss of $33,711 or 92.1%. The change in net loss was primarily due to increased gross profit as well as the overall reduction in SG&A expenses. The change in net loss was also a result of a number of non-cash items during the year ended December 31, 2008 relating to: debt restructuring transactions of $1,350, an impairment charge of goodwill of $16,822, an impairment charge of fixed assets of $1,022 and a recording of deferred tax assets valuation allowance of $5,021 to the provision for income taxes for deferred tax benefits recognized in prior periods.

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 financing. As of December 31, 2009, cash projected to be generated from operations was not 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 restructuring 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 Consolidated Financial Statements included in this Annual Report on Form 10-K).

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 iLabor-focused business model has essentially eliminated these funding requirements because 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:

	Fiscal Year Ended December 31,
$(000’s)	2009			2008
Cash and cash equivalents at beginning of period	$	960		$	1,994
Cash provided by (used in) operating activities		(1,751	)		4,614
Cash (used in) investing activities		(70	)		(571	)
Cash provided by (used in) financing activities		936			(5,077	)
Cash and cash equivalents at end of period	$	75		$	960

Fiscal Years Ended December 31, 2009 and 2008

Net cash provided (used) by operating activities was $(1,751) and $4,614 for the years ended December 31, 2009 and 2008, respectively. The primary change in the year ended December 31, 2009 that resulted in $1,751 of net cash used was related to (i) a book loss of $3,075; (ii) non cash items of depreciation and amortization expense of $628, a loss on extinguishment of debt $1,175, loss on disposal of fixed assets $5, a decrease in the provision for doubtful accounts of $403, a loss on sale of subsidiary of $190, an increase in consulting expenses associated with payment of warrants of $30 interest expense on original issue discount and warrant liability of $355, a loss on derivative of $87, and non-cash stock based compensation of $60; and (iii) cash items of a decrease in accounts receivable of $76 due to the change in business model and an decrease in unbilled revenue of $51, a decrease in prepaid expenses and other current assets of $129, a decrease in other assets of $61, an increase in accounts payable of $91, a decrease in accrued expenses and other accrued liabilities of $66, a decrease in accrued restructuring costs of $90, and a decrease in unbilled of $50, a decrease in deferred revenue of $992 and a decrease in retirement benefits due of $62.

The primary change in the year ended December 31, 2008 that resulted in $4,614 of net cash provided was due to (i) a book net loss of $38,786; (ii) non cash items of a deferred tax of $5,007, refundable federal income tax of $1,024, depreciation and amortization expense of $18,567 largely due to the write down of goodwill and fixed assets, a loss on sale of subsidiary $1,294, an increase in the provision for doubtful accounts of $2,596, an increase in the provision for franchise receivables of $1,639, an increase in expenses associated with issuance of warrants of $58, an increase on M&T restructure forgiveness of debt of $866, the issuance of stock of $387, interest expense converted to note payable of $92, interest expense on original issue discount and warrant liability of $510, a gain on derivative of $34, and non-cash stock based compensation of $49; and (iii) cash items of a decrease in accounts receivable of $13,701 due to the change in business model and an decrease in unbilled revenue of $2,037, a decrease in prepaid expenses and other current assets of $107, an increase in other assets of $626, a decrease in accounts payable of $155, a decrease in accrued expenses and other accrued liabilities of $3,341, a decrease in accrued restructuring costs of $582, an increase in deferred revenue $1,992 and a decrease in retirement benefits due of $56.

Net cash used in investing activities was $(70) and $(571) for the years ended December 31, 2009 and 2008, respectively. The primary uses of cash for investing activities for the year ended December 31, 2009 were the purchase of equipment, furniture and fixtures of $45 and an increase in restricted cash of $25. The primary uses of cash for investing activities for the year ended December 31, 2008 were the purchase of equipment, furniture and fixtures of $571.

Net cash provided by (used in) financing activities was $936 and $(5,077) for the years ended December 31, 2009 and 2008, respectively. The primary activities in the year ended December 31, 2009 were repayments of long term debt of $635, repayments of ComVest long term debt of $7,654, repayments of ComVest Revolving credit facility of $6,930, borrowings against ClearPoint’s revolving credit facility of $16,222, and fees incurred in refinancing $68. The primary activities in the year ended December 31, 2008 were the net borrowings from ComVest on the revolving credit facility of $1,530 with repayment of $530 and the borrowing from the ComVest term loan of $8,000 with repayments of $1,346, the repayment of the M&T term loan of $2,641, the repayment to M&T on the revolving credit facility of $8,747, repayment of Blue Lake in the amount of $600 and fees incurred due to the refinancing transaction with ComVest of $693, proceeds from the issuance of common stock to TerraNova Partners L.P., referred to as TerraNova Partners, of $100 and repayments of other notes payable of $150.

Debt Restructuring – M&T and ComVest

M&T

On February 23, 2007, pursuant to a credit agreement, referred to as the M&T credit agreement, ClearPoint entered into credit facilities with M&T consisting of a $20,000 revolving credit facility, referred to as the M&T revolver, expiring in February 2010 and a $3,000 term loan, referred to as the 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 earnings before interest, taxes, depreciation and amortization, or EBITDA, were amended to lower the ratios as of September 30, 2008.

On April 14, 2008, ClearPoint entered into a waiver, referred to as 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 the M&T restructure agreement dated June 20, 2008 pursuant to which the parties agreed to: (i) consolidate the certain obligations owing to M&T, referred to as the M&T obligations, (ii) reduce the carrying amount of the consolidated obligations from $10,900, which consisted of the M&T revolver and M&T 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 the obligations owing to ComVest, referred to as 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, referred to as the obligations amortization date, ClearPoint shall repay a total of $3,000 in principal amount, referred to as 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.

The $8,600 being paid to M&T is comprised of the following components: $3,000 note payable; guarantee of $3,000 of accounts receivable; pledging a minimum of a $1,000 tax refund, $1,000 cash payment made at the time of closing of the ComVest transactions described below; and $600 of the $1,500 certificate of deposit held by M&T.

ClearPoint issued to M&T warrants to purchase its common stock of which warrants to purchase 1,200,000 shares of common stock have an exercise price of $0.01 per share and warrants to purchase 300,000 shares of common stock have an exercise price of $1.00 per share, collectively referred to as the M&T warrants. In accordance with ASC 480 “Distinguishing Liabilities from Equity,” the fair value of all of the M&T warrants has been classified as a liability because M&T has the right to put the warrants back to ClearPoint in exchange for a cash settlement of $1.00 per share. ClearPoint valued the warrants at $1,247 using the Black-Scholes valuation model and the value was offset against the gain on restructuring of debt. At December 31, 2009, ClearPoint’s consolidated balance sheet included a warrant liability of $1,203 related to the fair value of the M&T warrants.

In addition, prior to the obligations amortization date, ClearPoint must pay M&T: (i) cash proceeds arising out of certain of its and its subsidiaries’ accounts receivable, referred to as the M&T accounts receivable, in an amount not less than $3,000 and (ii) existing and future federal and state income tax refunds of not less than $1,000 due or which become due to ClearPoint for any period prior to January 1, 2008. In the event such payments by ClearPoint are less than the stated minimum amounts, such shortfall will be added to the M&T deferred obligations. Excesses of either amounts paid by ClearPoint will be remitted to ClearPoint and/or applied to the M&T deferred obligations in accordance with the M&T restructure agreement. ClearPoint remitted all applicable federal and state income tax refunds to M&T required under the M&T restructure agreement. At December 31, 2009, income tax refunds of $1,024 resulting from net operating loss carry-backs and $93 in refunds of overpayments were received by ClearPoint and remitted to M&T. At December 31, 2009, ClearPoint remitted to M&T a total of approximately $2,500 which was comprised of approximately $1,383 applied to the $3,000 M&T accounts receivable target and $1,117 applied to the $1,000 federal and state income tax refund target. The excess of $117 over the $1,000 tax refund target will be credited to the M&T deferred obligations. At December 31, 2009, the outstanding balance related to the $3,000 M&T accounts receivable target was $1,500.

On March 17, 2010, ClearPoint received a letter from M&T in connection with the M&T restructure agreement. The letter stated that it serves as a notice of existence of events of default under the M&T restructure agreement, including ClearPoint’s failure to comply with its covenant to collect the M&T accounts receiveable, ClearPoint’s failure to deliver certain financial information to M&T and the existence of events of default under the amended ComVest loan agreement. In addition, M&T requested an explanation of ClearPoint’s efforts to collect the M&T accounts receivable, evidence that remittances from the M&T accounts receiveable were applied in accordance with the M&T restructure agreement and copies of all information furnished to ComVest pursuant to the amended ComVest loan agreement. The letter further provided M&T reserved all of its rights, benefits and security against ClearPoint in connection with such alleged defaults, including the right to accelerate the M&T deferred obligations. An event of default under the M&T restructure agreement would trigger a cross-default provision pursuant to the amended ComVest loan agreement, unless such default is waived in writing by ComVest. If the cross-default provision is triggered, ComVest may, among other things, declare all outstanding obligations under the amended ComVest loan agreement to be immediately due and payable. ClearPoint’s obligations to M&T are subordinated to its obligations to ComVest pursuant to the ComVest-M&T agreement described below.

ClearPoint accounted for the M&T restructure agreement pursuant to ASC Topic 470, “Troubled Debt Restructurings by Debtors,” which required ClearPoint to reduce the carrying amount of the old debt (M&T obligations of $10,932) by the minimum cash value of the put option of the warrants issued ($1,200) and the warrant liability of $47, 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 and future interest payment of $219). ASC Topic 470, 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, which was reduced by the unamortized deferred financed cost and current refinancing cost of $180. As a result of the application of ASC Topic 470, ClearPoint recorded a gain of $687 ($0.05 per share), which is reflected in the consolidated statement of operations for the year ended December 31, 2008.

M&T issued (i) a certain certificate of deposit to ClearPoint in the amount of $1,500, referred to as the COD, and (ii) a certain standby letter of credit for the account of ClearPoint in favor of Ace Risk Management, referred to as the Ace letter of credit. On June 27, 2008, M&T liquidated the COD and applied $600 to ClearPoint’s outstanding obligations. To the extent M&T is required to make payments under the Ace letter of credit in excess of $900 at any time, such excess shall be added to the M&T deferred obligations. Excesses of such amount paid will be remitted to ClearPoint and/or applied to the M&T deferred obligations in accordance with the M&T restructure agreement. As of December 31, 2009 no excess was paid. On March 17, 2010 M&T notified ClearPoint that an excess amount of $94 has been paid by M&T and has also been added to the M&T deferred obligations.

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 referred to as 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 December 31, 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 Blue Lake note, 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.

The M&T restructure agreement lists various agreement termination events including, but not limited to: default in payment of principal or interest or any other obligations when due and payable under the M&T restructure agreement; default in the observance of any covenant which is not cured within 30 days; and occurrence of an event of default under the ComVest loan agreement which is not cured pursuant to the applicable grace or notice period. Upon the occurrence of an agreement termination event, and at all times during the continuance thereof, the M&T deferred obligations are accelerated and become immediately due and payable. In addition, upon the occurrence of any spring back event, the amount equal to (a) all outstanding principal balance of the M&T obligations, together with accrued and unpaid interest thereon and costs and expenses reimbursable pursuant to the M&T credit agreement less (b) any amount received by M&T pursuant to the M&T restructure agreement on account of the M&T deferred obligations or the M&T obligations, referred to as the spring back amount, is automatically accelerated and becomes immediately due and payable. Pursuant to one of the conditions to closing the transaction with M&T, as set forth in the M&T restructure agreement, ClearPoint paid $1,000 to M&T for application to the M&T obligations.

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.

ComVest

ComVest Loan Agreement dated June 20, 2008

On June 20, 2008, ClearPoint entered into the ComVest 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, referred to as the ComVest revolver, and (ii) a term loan, referred to as 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. Amortization related to the original issue discount of $1,000 amounted to $217 and $312 for the years ended December 31, 2009 and December 31, 2008, respectively.

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, referred to as the ComVest warrant. The ComVest 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 $138 and $198 for the years ended December 31, 2009 and December 31, 2008, respectively. As a result of the amended ComVest loan agreement described below, and in accordance with ASC 470-50-40-17, the unamortized debt discount related to the ComVest warrant in the amount of $299 was written off as part of the loss on extinguishment of 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.

For the year ended December 31, 2009, ClearPoint remitted approximately $963 of principal and interest payments pursuant to the ComVest term loan, all of which was derived from its royalty receipts, $103 of interest payments pursuant to the ComVest revolver, all of which was derived from its operating cash. As of December 31, 2009, ClearPoint remitted, since inception of the loan, $2,693 of principal and interest payments, pursuant to the ComVest term loan, of which $2,084 was derived from its royalty receipts and $609 was derived from its other operations and $643 of principal and interest payments, pursuant to the ComVest revolver, all of which was derived from its other operations.

In connection with the ComVest loan agreement described above, ComVest entered into a Subordination and Intercreditor Agreement, referred to as the ComVest-M&T agreement, dated June 20, 2008 with M&T. The ComVest loans issued to ClearPoint pursuant to the ComVest loan agreement effectively replaced M&T with ComVest as a senior lender of ClearPoint. Pursuant to the ComVest-M&T agreement, the parties confirmed their agreements and understandings with respect to the relative priorities of their respective claims and liens against ClearPoint. The ComVest-M&T agreement provides that, subject to certain exceptions, M&T may not receive payment on certain of the M&T obligations, as described in the ComVest-M&T agreement, or seek enforcement against the collateral securing the M&T obligations from ClearPoint or any other person, other than from Messrs. Traina and/or Christopher Ferguson pursuant to personal guarantees, until the ComVest obligations have been satisfied in full. In addition, the ComVest-M&T agreement provides for priorities with respect to the various components of collateral securing ClearPoint’s obligations to the parties and sets forth certain restrictions on the parties with respect to collection of such obligations.

ClearPoint paid to ComVest non-refundable closing fees in the amount of $530, charged to the ComVest revolving credit facility, simultaneously with funding of the amounts payable to ClearPoint under the ComVest loan agreement. In addition, ClearPoint 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 ComVest revolver during the preceding calendar month, up to $4.50 per month. ClearPoint utilized the proceeds of the ComVest loans to repay approximately $1,050 pursuant to the M&T restructure agreement owed to M&T and approximately $530 in closing costs and expenses.

As of June 30, 2009, ClearPoint 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, 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 aggregate amount of $61. ClearPoint was also in default on interest payments due for July, 2009 under the ComVest revolving credit facility in the aggregate amount of $18. The failure to make such payments constituted events of default under the ComVest loan agreement. ClearPoint 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, referred to as the term loan waiver, related to the ComVest loan agreement for the periods of February, 2009 through April, 2009. Pursuant to the term loan waiver, ComVest waived the defaults during the foregoing period, provided that ComVest reserved the right to collect at a later time, but no later than the maturity date of the ComVest term loan under the ComVest loan agreement, the increased interest ComVest was permitted to charge during the continuance of such defaults.

On August 14, 2009, in connection with entering into the amended ComVest loan agreement described below, ComVest executed a waiver letter, which waived ClearPoint’s defaults under the ComVest loan agreement from May, 2009 through August 14, 2009, including defaults under the StaffBridge note, the Blue Lake note and the sub notes described below, provided ClearPoint paid to ComVest approximately $166 (or sooner if there is a further event of default), constituting the difference between interest calculated at the default rate and at the non-default rate on the balance of the ComVest term loan and revolving credit facility of $7,100 and $2,900, respectively, under the original ComVest loan agreement. ClearPoint has not paid the default interest payment of $166.

Amended ComVest Loan Agreement dated August 14, 2009

On August 14, 2009, ClearPoint entered into the amended ComVest loan agreement with ComVest. The amended ComVest loan agreement amended and restated the original ComVest loan agreement, as amended. Pursuant to the amended ComVest loan agreement, the maximum availability under the secured revolving credit facility, referred to as the amended ComVest revolver, was increased from $3,000 to $10,500, referred to as the amended ComVest 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 ComVest revolver, and the ComVest term loan was cancelled. 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 ComVest warrant 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.

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 ComVest 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 ComVest revolver maximum exceeds the amounts outstanding under the amended ComVest revolver, plus (ii) all cash and cash equivalents of ClearPoint 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 ClearPoint between August 14, 2009 and such quarter-end in connection with the registration of the resale of shares underlying the amended ComVest warrant. To the extent the amounts outstanding under the amended ComVest revolver exceed the amended ComVest revolver maximum, ClearPoint must make a payment to ComVest to reduce the amount outstanding to an amount less than or equal to the amended ComVest revolver maximum. ClearPoint may borrow under the amended ComVest revolver from time to time, up to the then applicable amended ComVest revolver maximum.

ClearPoint may request an increase in the amended ComVest 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 ComVest 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 ComVest revolver in a principal amount not less than the requested increase in the amended ComVest revolver maximum, on a pari passu basis with ComVest.

The amounts due under the amended ComVest revolver bear interest at a rate per annum equal to 12%, subject to increase by 400 basis points during the continuance of any event of default under the amended ComVest 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 ComVest revolver.

The amended ComVest 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 ComVest revolver maturity date (which defaults may be waived in ComVest’s sole and absolute discretion).

In addition, the amended ComVest loan agreement provides that ComVest must pre-approve the hiring of all members of senior management of ClearPoint and all employment agreements or other contracts with respect to senior management. Under the amended ComVest loan agreement, ClearPoint must make all necessary adjustments to its system of internal control over financial reporting and disclosure controls and procedures no later than December 31, 2009.

The amended ComVest loan agreement also requires ClearPoint to, subject to certain exceptions, obtain ComVest’s written consent until all obligations under the amended ComVest 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 ComVest loan agreement.

The amended ComVest 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 ComVest loan agreement or in the observance or performance of any covenant set forth in the amended ComVest 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 ComVest 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 ComVest 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 ComVest 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.

ClearPoint’s obligations under the amended ComVest loan agreement and the amended ComVest 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, referred to as the guaranty agreement, and the Reaffirmation of Guaranty, dated as of August 14, 2009, referred to as the reaffirmation of guaranty, and are secured by a security interest in all of ClearPoint’s and its subsidiaries’ assets, referred to as the collateral, as set forth in the Collateral Agreement dated June 20, 2008, referred to as 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 ComVest loan agreement declared due and payable.

Upon the occurrence of an event of default under the amended ComVest 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 ComVest 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 ComVest 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, referred to as the validity guaranty, by executing a reaffirmation of validity guaranties, dated August 14, 2009, referred to as 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.

ClearPoint is obligated to pay ComVest modification fees in the amount of $210, charged to the amended ComVest revolver, which were payable $60 on January 1, 2010 and $50 on each of April 1, 2010, July 1, 2010 and October 1, 2010. ClearPoint did not pay the modification fee installments due on January 1, 2010 or April 1, 2010. In addition, on the first business day of each calendar month prior to the maturity date of the amended ComVest revolver and on the amended ComVest revolver maturity date or the earlier termination of the amended ComVest revolver, ClearPoint must pay ComVest a monthly unused commitment fee equal to 0.25% of the amount by which the amended ComVest revolver maximum exceeds the average daily outstanding principal amount of advances during the immediately preceding calendar month, charged to the amended ComVest revolver.

Change of Control Pursuant to Exercise of ComVest Warrant

In connection with the amended ComVest loan agreement, ClearPoint issued to ComVest the amended ComVest warrant, dated August 14, 2009, to purchase, in the aggregate, 2,210,825 shares of ClearPoint’s common stock. The amended ComVest warrant provided that, upon the occurrence and during the continuation of certain events of default under the amended ComVest loan agreement, and upon five business days’ notice to ClearPoint, the amended ComVest warrant was exercisable for a number of shares of common stock that constituted 51% of ClearPoint’s fully diluted common stock at the time of exercise, referred to as a default exercise. The exercise price of the amended ComVest warrant related to the default exercise was $0.001 per share of Common Stock.

On February 9, 2010, ClearPoint received a notice of default from ComVest in connection with the amended ComVest loan agreement. ClearPoint defaulted on its obligations under the amended ComVest loan agreement as a result of: (i) its failure to pay approximately $108 of accrued interest which was due and payable on February 1, 2010; (ii) its failure to pay a $60 installment of a certain modification fee which was due and payable on January 1, 2010; and (iii) the entry of a judgment against ClearPoint related to the AICCO litigation and delivery of a judgment note in favor of AICCO in the amount of approximately $195. Pursuant to a letter dated February 10, 2010, ComVest waived existing defaults under the amended ComVest loan agreement.

As a consequence of such defaults, ComVest elected to invoke the default exercise provision under the amended ComVest warrant. As a result, ClearPoint is obligated to issue to ComVest 18,670,825 shares of common stock and received approximately $19 from ComVest as the exercise price. In connection with this transaction, effective April 12, 2010, ComVest owned 51% of the ClearPoint’s fully diluted common stock and approximately 56.7% of outstanding shares of the ClearPoint’s common stock.

ClearPoint did not make scheduled payments of interest to ComVest under the amended ComVest loan agreement on February 1, 2010, March 1, 2010 or April 1, 2010, in the aggregate amount of $635, consisting of deferred interest payments and loan modification fees that were due under the amended ComVest loan agreement as well as the current monthly interest due from February 1, 2010 through April 1, 2010. In addition, ClearPoint has not made scheduled payments due on the StaffBridge note and the sub notes as described below under “—StaffBridge” and “—Notes Issued to Blue Lake and Sub Noteholders,” respectively. ClearPoint’s failure to pay such amounts constitutes an event of default under the amended ComVest loan agreement. As of April 12, 2010, ClearPoint’s outstanding obligations under the amended ComVest loan agreement were approximately $10,500, in addition to interest fees of approximately $1,281. On April 14, 2010, ComVest waived the foregoing events of default.

Merger

On February 12, 2007, ClearPoint consummated the merger with Terra Nova. As a result, CPBR Acquisition, Inc., referred to as CPBR, a Delaware corporation and wholly-owned subsidiary of Terra Nova, merged with and into ClearPoint. At the closing of the merger, ClearPoint stockholders were issued an aggregate of 6,051,549 shares of Terra Nova common stock. Ten percent of the Terra Nova common stock being issued to ClearPoint stockholders at the time of the merger was placed into escrow to secure the indemnity rights of Terra Nova under the merger agreement and are governed by the terms of an escrow agreement. A further 10% of the Terra Nova common stock being issued to ClearPoint stockholders at the time of the merger was placed into escrow to be released upon finalization of certain closing conditions pursuant to the merger agreement which release has since occurred. Upon the closing of the merger, Terra Nova changed its name to ClearPoint Business Resources, Inc.

Upon consummation of the merger, $30,600 was released from a trust fund to be used by the combined company. After payments totaling approximately $3,300 for professional fees and other direct and indirect costs related to the merger, the net proceeds amounted to $27,300. 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. All historical share and per share amounts have been retroactively adjusted to give effect to the reverse acquisition of Terra Nova and related recapitalization.

ALS

On February 23, 2007, ClearPoint acquired certain assets and liabilities of ALS (see Note 4 of the Notes to the Consolidated Financial Statements for the year ended December 31, 2009). The purchase price of $24,400 consisted of cash of $19,000, a note of $2,500 at an interest rate of 7%, referred to as the ALS note, 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 the ALS note payable at December 31, 2009 was not repaid due to the pending litigation with TSIL. For additional information regarding the litigation with TSIL, referred to as the TSIL litigation, see Part I, Item 3 “Legal Proceedings.”

In connection with the transaction with ComVest described above, on June 20, 2008, ClearPoint entered into a letter agreement dated June 20, 2008, referred to as the ALS agreement, with ALS and certain other parties, referred to as the ALS parties, whereby the parties agreed, among other things: (i) to execute the ALS subordination letter dated June 20, 2008, as described 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 $2,284 including interest at December 31, 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, referred to as the ALS shares, in accordance with the acquisition of ALS concurrently with the execution of the ALS agreement; (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 related to expenses for the TSIL litigation and an advance payment of $330 on the ALS note, which nets out to $1,638. 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 ALS 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, referred to as 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 years ended December 31, 2009 and 2008, ClearPoint accrued $82 and $50, respectively, in interest expense associated with the ALS note. As of December 31, 2009, ClearPoint had $261 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 in the amount of $450 due December 31, 2007. The StaffBridge note, due to former shareholders of StaffBridge, referred to as 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 principal amount of the 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, referred to as the debt extension agreement, and entered into a subordination agreement, referred to as 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 2, Inc., an entity controlled by certain StaffBridge shareholders and a contractor for ClearPoint, referred to as 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 was to 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 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. Each monthly installment payment under the StaffBridge note will be in the total amount of $17, consisting of (i) $16 with respect to the outstanding principal balance and (ii) $1 relating to accrued and unpaid interest as of August 31, 2009 and interest for the period of September 1, 2009 through January 31, 2010 calculated at the rate of 8% per annum.

ClearPoint did not make required payments due on February 15, 2010 or March 15, 2010 under the StaffBridge note, in the aggregate amount of $37, consisting of $33 in principal and $4 in interest. The failure to pay such interest installments would permit the noteholders to declare all amounts owing under the StaffBridge note due and payable, which would also constitute a cross-default under the amended ComVest loan agreement.

Promissory Notes Issued to Blue Lake and Sub Noteholders

Blue Lake

On March 1, 2005, CPR issued the Blue Lake note to Blue Lake 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 D. 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, referred to as 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 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 twelve 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, referred to as the 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 Blue Lake note.

CPR did not make the required payments of: (i) $50 in January, 2009 and (ii) $490, plus accrued interest, of which $8 has been accrued as of December 31, 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 is obligated to deliver the escrow shares to Blue Lake ten 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 ComVest 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. For additional information regarding this Complaint, see Part I, Item 3 “Legal Proceedings.”

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 ComVest loan agreement 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. See “—Debt Restructuring – M&T and ComVest—ComVest.”

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, referred to as Fergco, a New Jersey limited liability company of which Christopher Ferguson owns a 25% ownership interest. The balance of this note payable at December 31, 2009 was $300, referred to as the $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 for $100 owed to Alyson Drew, the spouse of Parker Drew, a former director of ClearPoint. The balance of these notes payable at December 31, 2009 was $250, referred to as the $250 notes.

Effective March 31, 2008, CPR amended and restated the $300 note and the $250 notes, collectively referred to as the 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 referred to as 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. In consideration of each sub noteholder agreeing to extend the maturity date of the sub note, ClearPoint issued warrants, referred to as the initial sub note warrants, to the sub noteholders to purchase, in the aggregate, 82,500 shares of common stock, referred to as the sub note warrant shares, at an exercise price of $1.55 per share. The initial sub note warrant was 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, referred to as 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 the 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, referred to as 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 $28. 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. See “—Debt Restructuring – M&T and ComVest—ComVest.”

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, referred to as 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 $28 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.

ClearPoint did not make payments due under the third amended sub notes on March 31, 2010 in the aggregate amount of $61, consisting of $55 in principal and $6 in interest. The failure to pay such interest installments would permit the sub noteholders to declare all amounts owing under the third amended sub notes due and payable, which would also constitute a cross-default under the amended ComVest loan agreement.

On February 22, 2008, CPR issued promissory notes, referred to as 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, a wholly-owned subsidiary of CPR, referred to as 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, referred to as the bridge notes, to each of Michael D. Traina, Parker Drew and TerraNova Partners, collectively referred to as 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 is 100% owned by Vahan Kololian, ClearPoint’s former 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.

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 notes, referred to as 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 original bridge notes. 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 Partners in 204,082 shares of common stock in accordance with the terms of the amended bridge note.

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, referred to as the HRO purchase agreement, with HRO, CPR’s wholly owned subsidiary, and AMS Outsourcing, Inc., referred to as 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 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 December 31, 2009, AMS did not pay to CPR the earnout payments required under the HRO purchase agreement.

ClearPoint ceased recording revenues related to the MVI purchase agreement and the HRO purchase agreement during the year ended December 31, 2008.

KOR

On August 30, 2007, ClearPoint entered into an agreement, referred to as 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.

StaffChex

On February 28, 2008, CPR entered into a purchase agreement, referred to as 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, referred to as 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 (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, referred to as the StaffChex iLabor agreement, whereby StaffChex agreed to process its temporary labor requests through iLabor and to pay to CPR a percentage, referred to as the royalty (as of December 31, 2009, the percentage was 0.75%), 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 1.25% and for weekly collections of $1,400 or more, the royalty is 2%. If collections for a calendar year exceed $110,000, the royalty will be 1.5% for each dollar exceeding $110,000 and if such collections exceed $150,000, the royalty will be 1.25% for each dollar exceeding $150,000. Unpaid royalties shall bear interest at the rate of 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, referred to as the levy, had been placed by the California Employment Development Department, referred to as the EDD, in the amount of $272 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 satisfies the tax liability. ClearPoint negotiated an Installment Agreement with the EDD pursuant to which the parties agreed that StaffChex will remit the first $25 of royalties on a monthly basis to the EDD.

As of November 18, 2009, StaffChex was delinquent on royalty payments due to CPR in the amount of $56. On November 18, 2009, StaffChex transferred certain contracts, referred to as the StaffChex accounts, to CPR pursuant to a certain Assignment and Assumption Agreement, Option and Bill of Sale dated November 18, 2009, referred to as the StaffChex assignment agreement. Pursuant to the StaffChex assignment agreement, CPR assumed the obligations under the StaffChex accounts, with certain exceptions, including, but not limited to, obligations relating to certain tax liabilities, payment obligations of StaffChex arising prior to November 18, 2009, liabilities related to claims arising out of events or conditions or actual or alleged violations of law occurring prior to November 18, 2009 and any liability of StaffChex based on its acts or omissions after November 18, 2009. In consideration for the assignment of the StaffChex accounts, CPR (1) assigned its right, title and interest to 12,405 shares of StaffChex common stock to StaffChex and StaffChex agreed to reissue 18,607 shares of StaffChex common stock to CPR, referred to as the reissued StaffChex shares and (2) granted StaffChex an option to purchase the reissued StaffChex shares for a purchase price of $250 at any time prior to the earlier of (i) November 18, 2011 or (ii) the date on which CPR assigns and delivers such reissued StaffChex shares to StaffChex in accordance with the “success fee” described below.

In addition, CPR agreed to amend the StaffChex iLabor agreement to reduce the royalties. On November 18, 2009, CPR and StaffChex entered into Amendment No. 2 to the StaffChex iLabor agreement in order to provide for payment of past-due amounts owed by StaffChex under the StaffChex iLabor agreement and to restate the payment terms thereunder effective as of November 1, 2009. Amendment No. 2 provides that during the first full week after the transfer of the StaffChex accounts, such accounts are expected to meet or exceed minimum billings of $96 per week, referred to as the guaranteed billings. In the event the StaffChex accounts do not meet the guaranteed billings in a given week, StaffChex will transfer such additional contracts whose billings, when added to those of the StaffChex accounts, will satisfy the guaranteed billings. CPR may, in its reasonable discretion, accept or reject the StaffChex accounts. In addition, as of the effective date of Amendment No. 2 and through January 31, 2010, the royalties were equal to 0.75%, provided that such amount shall be payable in two portions: (i) 0.25%, to the extent not already paid by StaffChex, shall be payable weekly through January 31, 2010 and (ii) the balance of 0.50% will be deferred and paid with past-due royalties (as defined below). Royalties owed for the period of September 28, 2009 through November 1, 2009 equaled 1.25% and were payable in weekly installments beginning March 1, 2010 through May 31, 2010, in addition to any other amounts owed pursuant to Amendment No. 2.

It is expected that for the six month period of February 1, 2010 through July 31, 2010, the average monthly billings of the StaffChex accounts will meet or exceed a minimum of $625 per month. If such monthly billings do not meet this minimum amount, then 5% of the shortfall will be due and payable in equal installments over the 16-week period beginning September 1, 2010. Upon the date on which billings from the StaffChex accounts meet or exceed a total of $308 per week for six consecutive weeks, CPR will pay a “success fee” in the form of an immediate transfer and assignment of reissued StaffChex shares to StaffChex and the StaffChex iLabor Agreement will automatically terminate and be of no further force and effect, provided, however, that provisions relating to the payment of amounts deferred or past-due which are otherwise payable shall survive such termination.

In addition, pursuant to Amendment No. 2, StaffChex agreed to continue making scheduled weekly payments of $4 until June 1, 2011, and 52 weekly payments of $3 thereafter, for past-due royalties owed through February 28, 2009, referred to as the past-due royalties, commencing on June 1, 2011. The failure of StaffChex to make payments due pursuant to the StaffChex iLabor Agreement constitutes a material breach. In the event of nonpayment, StaffChex will have a 10-day cure period to make any delinquent payments. If such payments remain outstanding following the cure period, the royalties shall revert to 1.25% and StaffChex agreed to direct its affiliated receivables factoring company to make the required payment to CPR.

Effective January 11, 2010, CPR and StaffChex entered into Amendment No. 3 to the StaffChex iLabor Agreement pursuant to which the parties agreed that the royalties shall equal 0.75% of which 0.50% shall be deferred in accordance with Amendment No. 2 until February 1, 2010. As of April 12, 2010, StaffChex was current on payments pursuant to the StaffChex iLabor Agreement. Additionally, StaffChex agreed to direct Wells Fargo Business Credit to pay ClearPoint $3 per week, effective January 11, 2010 in lieu of StaffChex accounts until such time as the StaffChex accounts increase to $96. For the period of December 14, 2009 through January 8, 2010, StaffChex will pay ClearPoint 3% of actual billings for the StaffChex accounts. All amounts due to ClearPoint shall be paid directly from Wells Fargo Business Credit on a weekly basis pursuant to a certain Account Transfer Agreement dated May 16, 2008.

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 TZG agreement was terminated on February 28, 2008, as described below.

On February 28, 2008, CPR and its subsidiary, CPW, entered into a Licensing Agreement, referred to as 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. 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 a License Agreement dated April 8, 2008, referred to as the Select license agreement, 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 Select 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 Temporary Help Services Subcontract dated April 8, 2008, referred to as 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, referred to as 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, referred to as 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, referred to as the subcontract fee.

On July 29, 2008, Select, together with Real Time Staffing Services, Inc., referred to as Real Time, filed a complaint against ClearPoint and on August 1, 2008, Select filed an amended complaint, referred to as the Select litigation, claiming that ClearPoint owed it $1,033 for services performed and other damages. For additional information regarding the Select litigation, see Part I, Item 3 “Legal Proceedings.”

On August 22, 2008, CPR, Real Time and Select entered into a Settlement Agreement and Release, referred to as 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, the Select litigation 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, referred to as 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 28 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. On December 30, 2009, the complaint was dismissed with prejudice by mutual agreement of the parties.

Advisory Services Agreement

TerraNova Management Corp., an affiliate of Mr. Kololian and the manager of TerraNova Partners, referred to as 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 ClearPoint, dated February 12, 2007, referred to as the initial TNMC agreement. Pursuant to the initial TNMC 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 TNMC 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, referred to as the TNMC advisory services agreement, with TNMC in order to: (i) provide compensation to TNMC for its services since the expiration of the initial TNMC agreement and (ii) engage TNMC to provide future advisory services. Pursuant to the TNMC advisory services agreement, TNMC is obligated to provide advice and assistance to ClearPoint in its analysis and consideration of various financial and strategic alternatives, referred to as 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 TNMC 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 TNMC advisory services agreement was automatically renewed on June 26, 2009 pursuant to its terms.

ClearPoint agreed to compensate TNMC for services rendered since expiration of the initial TNMC agreement and for advisory services going forward in accordance with the rates set forth in the TNMC 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 TNMC 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 TNMC 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 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 $99 for reimbursement of expenses incurred by TNMC in connection with the advisory services provided from February, 2008 through December 31, 2009. ClearPoint incurred approximately $15 for reimbursement of expenses incurred by TNMC for advisory services during the year ended December 31, 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, referred to as 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. For the years ended December 31, 2009 and December 31, 2008, Mr. Ferguson was reimbursed $9 and $12, respectively, for health insurance payments. 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 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 December 31, 2009, ClearPoint paid Mr. Ferguson approximately $58 pursuant to the consulting agreement and recorded a related party liability of $257 as of December 31, 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 $257 and $0, respectively, at December 31, 2009. Such payments were not made to Mr. Ferguson as of April 12, 2010.

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, referred to as 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 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; (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 the option to purchase 90,000 of the 140,000 shares underlying the option until March 30, 2010. The balance of the shares underlying the option expired on June 20, 2008 in accordance with ClearPoint’s 2006 plan. As of December 31, 2009, ClearPoint paid Mr. Braun approximately $75 as severance under the Braun separation agreement.

On June 20, 2008, John G. Phillips and ClearPoint entered into an Employment Agreement, referred to as 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 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, referred to as 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, referred to as 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, referred to as the XRoads extension. The XRoads agreement provided that either ClearPoint or XRoads could terminate the XRoads agreement at any time with at least 30 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. 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. During the fiscal year ended December 31, 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 bear interest at an annual rate of 12% or the maximum rate allowed by law, whichever is less.

ClearPoint accrued an aggregate of $39 pursuant to the XRoads agreement, consisting of $37 in fees related to services provided by XRoads, $1 in accrued interest and $1 in reimbursement of expense. On November 18, 2009, ClearPoint and XRoads entered into a Settlement Agreement and Mutual Release, referred to as the XRoads settlement, relating to the payment of amounts due under the XRoads agreement. Pursuant to the XRoads settlement, ClearPoint agreed to pay XRoads, in full and complete satisfaction and settlement of all obligations under the XRoads agreement, the sum of $40, which was paid in full to XRoads in six weekly installments beginning December 4, 2009 and ending January 8, 2010. In consideration for the payment of such amounts, ClearPoint and XRoads agreed to release each other from all claims related to the XRoads agreement. 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.

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 year ended December 31, 2009, which included warrants that were part of the outstanding units. 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). Such warrants expired on April 17, 2009 according to their terms. 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.

Income Taxes

As of December 31, 2009, ClearPoint had a current and long term 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 Consolidated Financial Statements and Part I, Item 3 “Legal Proceedings.” 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.

Recent Accounting Pronouncements

Recently Adopted Standards

In September 2009, ClearPoint adopted 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 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 ClearPoint in the third quarter of 2009. The adoption of ASC 105-10-05 impacted ClearPoint’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 ClearPoint’s consolidated results of operations and financial condition.

In December 2007, the FASB issued an accounting standard codified within ASC 805, “Business Combinations” which changed the accounting for business acquisitions. Under this standard, business combinations continue to be required to be accounted for at fair value under the acquisition method of accounting, but the standard changed the method of applying the acquisition method in a number of significant aspects. Acquisition costs will generally be expensed as incurred; noncontrolling interests will be valued at fair value at the acquisition date; in-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date, until either abandoned or completed, at which point the useful lives will be determined; and restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date. The standard is effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of the first annual period subsequent to December 15, 2008. Adoption of the standard did not have a significant impact on ClearPoint’s financial position and results of operations; however, any business combination entered into after the adoption may significantly impact ClearPoint’s financial position and results of operations when compared to acquisitions accounted for under prior GAAP and result in more earnings volatility and generally lower earnings due to the expensing of deal costs and restructuring costs of acquired companies.

In February 2009, the FASB issued an accounting standard codified within ASC 805, “Business Combinations” which amends the provisions related to the initial recognition and measurement, subsequent measurement, and disclosure of assets and liabilities arising from contingencies in a business combination. The standard applies to all assets acquired and liabilities assumed in a business combination that arise from contingencies that would be within the scope of ASC 450, “Contingencies”, if not acquired or assumed in a business combination, except for assets or liabilities arising from contingencies that are subject to specific guidance in ASC 805. The standard applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of the standard effective January 1, 2009 did not have an impact on ClearPoint’s financial position and results of operations.

In March 2008, the FASB issued an accounting standard related to disclosures about derivative instruments and hedging activities, codified within ASC 815, “Derivatives and Hedging”. Provisions of this standard change the disclosure requirements for derivative instruments and hedging activities including enhanced disclosures about (a) how and why derivative instruments are used, (b) how derivative instruments and related hedged items are accounted for under ASC 815 and its related interpretations, and (c) how derivative instruments and related hedged items affect our financial position, financial performance, and cash flows. This statement was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. ClearPoint adopted the standard on January 1, 2009.

In April 2008, the FASB issued an accounting standard codified within ASC 350, “Intangibles - Goodwill and Other” which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset Under this standard, entities estimating the useful life of a recognized intangible asset must consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension. The intent of the standard is to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. Adoption of the standard was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. ClearPoint adopted the standard on January 1, 2009. ClearPoint does not expect the standard to have a material impact on its accounting for future acquisitions of intangible assets.

In June 2008, the FASB issued new guidance regarding the classification of financial instruments that are indexed to a company’s own stock. The new guidance revised the criteria for determining whether an instrument is indexed to a company’s own stock and the resultant accounting treatment of those instruments. The new guidance is effective for annual periods beginning after December 15, 2008. The adoption of this new guidance on January 1, 2009 did not have a material impact on ClearPoint’s consolidated financial statements.

In November 2008, the FASB issued an accounting standard codified within ASC 350, “Intangibles - Goodwill and Other” that applies to defensive assets which are acquired intangible assets which the acquirer does not intend to actively use, but intends to hold to prevent its competitors from obtaining access to the asset. The standard clarifies that defensive intangible assets are separately identifiable and should be accounted for as a separate unit of accounting in accordance with guidance provided within ASC 805, “Business Combinations” and ASC 820, “Fair Value Measurements and Disclosures”. The standard was effective for intangible assets acquired in fiscal years beginning on or after December 15, 2008. ClearPoint adopted this standard effective January 1, 2009 and will apply the provisions of this guidance to intangible assets acquired on or after that date. ClearPoint does not expect the standard to have a material impact on its accounting for future acquisitions of intangible assets.

In April 2009, the FASB issued an accounting standard codified within ASC 825, “Financial Instruments” that requires disclosures about the fair value of financial instruments that are not reflected in the consolidated balance sheets at fair value whenever summarized financial information for interim reporting periods is presented. Entities are required to disclose the methods and significant assumptions used to estimate the fair value of financial instruments and describe changes in methods and significant assumptions, if any, during the period. The standard was effective for interim reporting periods ending after June 15, 2009 and was adopted by ClearPoint in the second quarter of 2009.

In April 2009, the FASB issued an accounting standard codified within ASC 820, “Fair Value Measurements and Disclosures,” which provides guidance on determining fair value when there is no active market or where the price inputs being used represent distressed sales. The standard reaffirms the objective of fair value measurement, which is to reflect how much an asset would be sold for in an orderly transaction. It also reaffirms the need to use judgment to determine if a formerly active market has become inactive, as well as to determine fair values when markets have become inactive. The standard is effective for interim and annual periods ending after June 15, 2009 and was adopted by ClearPoint in the second quarter of 2009. The adoption of this accounting pronouncement did not have a material impact on ClearPoint’s consolidated results of operations and financial condition.

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. ClearPoint adopted this standard during the quarter ended June 30, 2009. The adoption did not have a material impact on ClearPoint’s consolidated financial statements.

In May 2009, the FASB issued an accounting standard codified within ASC 855 “Subsequent Events,” which sets forth 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. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. The standard was effective for interim or annual periods ending after June 15, 2009 and was adopted by ClearPoint in the second quarter of 2009. In February 2010, the FASB issued Accounting Standards Update No. 2010-09 (“ASC Update 2010-09”) “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements.” This ASU amends FASB Codification topic 855. The amendments in ASU 2010-09 remove the requirement in ASC 855-10 for a SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. This ASU was effective upon issuance and ClearPoint adopted this ASU as of December 31, 2009. Except for the removal of disclosure requirements in ASC 855-10, the adoption of this standard did not have a material impact on ClearPoint’s consolidated financial statements.

In August 2009, the FASB issued ASU No. 2009-05, “Fair Value Measurements and Disclosures – Measuring Liabilities at Fair Value.”. The ASU provides additional guidance for the fair value measurement of liabilities under ASC 820 “Fair Value Measurements and Disclosures”. The ASU 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 using certain techniques. The ASU also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. It also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. ClearPoint adopted the ASU in the fourth fiscal quarter of 2009. The adoption of the ASU did not have a material impact on ClearPoint’s consolidated results of operations and financial condition.

Standards Issued But Not Yet Adopted

In December 2009, the FASB issued ASU No. 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” which amends ASC 810, “Consolidation” to address the elimination of the concept of a qualifying special purpose entity. The standard also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. This standard also requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE whereas previous accounting guidance required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred. The standard provides more timely and useful information about an enterprise’s involvement with a variable interest entity and will be effective as of the beginning of interim and annual reporting periods that begin after November 15, 2009, which for ClearPoint would be January 1, 2009. ClearPoint does not expect the adoption of this standard to have a material effect on its consolidated results of operations and financial condition.

In January 2010, the FASB issued ASU No. 2010-6, “Improving Disclosures About Fair Value Measurements,” which provides amendments to ASC 820 “Fair Value Measurements and Disclosures,” including requiring reporting entities to make more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements including information on purchases, sales, issuances, and settlements on a gross basis and (4) the transfers between Levels 1, 2, and 3. The standard is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. ClearPoint does not expect the adoption of this standard to have a material impact 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. ClearPoint is currently evaluating the impact of the adoption of these ASUs on the its consolidated results of operations or financial condition.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 8. Financial Statements and Supplementary Data.

The following is a summary of the unaudited quarterly financial information for the fiscal years ended December 31, 2009 and 2008:

	2009 – Quarter Ended (unaudited)
	($ in thousands, except per share data)
	December 31,			September 30,			June 30,			March 31,
Revenue	$	1,299		$	1,355		$	1,351		$	1,237
Cost of Services		—			—			—			—
Gross Profit		1,299			1,355			1,351			1,237
Selling, general and administrative expenses		963			1,343			1,335			1,190
Restructuring expense (reductions)					—			—			—
Impairment of goodwill		—			—			—			—
Loss on disposal of fixed assets		—			—			—			5
Depreciation and amortization expense		90			158			158			222
Income (loss) before income taxes		246			(146	)		(142	)		(180	)
Other income (expense)		—			—			358			28
Interest Income ( expense)		33			3			2			2
Interest, OID and warrant liability (expense)		(291	)		(590	)		(511	)		(435	)
Derivative Income (expense)		(85	)		42			9			(53	)
Gain (loss) on sale of subsidiary		(190	)		—			—			—
Loss on extinguishment of debt		—			(1,175	)		—			—
Net loss before income taxes		(287	)		(1,866	)		(284	)		(638	)
Income tax expense (benefit)		—			—			—			—
Net (loss) income	$	(287	)	$	(1,866	)	$	(284	)	$	(638	)
Net (loss) per share	$	(0.03	)	$	(0.13	)	$	(0.02	)	$	(0.04	)

	2008 – Quarter Ended (unaudited)
	($ in thousands, except per share data)
	December 31,			September 30,			June 30,			March 31,
Revenue	$	2,764		$	3,221		$	3,292		$	24,220
Cost of Services		1,371			2,084			2,910			22,744
Gross Profit		1,393			1,137			382			1,476
Selling, general and administrative expenses		1,623			1,986			6,392			5,558
Restructuring expense (reductions)		(750	)		—			—			2,100
Impairment of goodwill		—			—			—			16,822
Fixed assets impairment expense, net		—			—			—			1,022
Depreciation and amortization expense		219			219			163			122
Income (loss) before income taxes		301			(1,068	)		(6,173	)		(24,148	)
Other income (expense)		(284	)		(1	)		300			(101	)
Interest Income ( expense)		(5	)		12			—			—
Interest, OID and warrant liability (expense)		(578	)		(541	)		(358	)		(548	)
Derivative Income		8			26			—			—
Gain on restructuring of debt		—			—			687			—
Gain (loss) on sale of subsidiary		—			—			600			(1,894	) (2)
Net loss before income taxes		(558	)		(1,572	)		(4,944	)		(26,691	)
Income tax expense (benefit)		14			—			—			5,007
Net (loss)	$	(572	)	$	(1,572	)	$	(4,944	)(2)	$	(31,698	)
Net (loss) per share	$	(0.04	)	$	(0.11	)	$	(0.37	)	$	(2.40	)

(1)	Includes gain of restructuring of debt and gain on sale of subsidiary.

(2)	Includes the loss on the sale of subsidiary.

Net income (loss) per share is computed independently for each quarter presented. Therefore, the sum of the quarterly net income (loss) per share figures in 2009 and 2008 does not necessarily equal to the total computed for the entire year.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

ClearPoint Business Resources, Inc. and Subsidiaries

Chalfont, Pennsylvania

We have audited the accompanying consolidated balance sheet of ClearPoint Business Resources, Inc. and Subsidiaries (the “Company”) as of December 31, 2009 and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ClearPoint Business Resources, Inc. and Subsidiaries as of December 31, 2009, and the results of its operations and its cash flows for year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements as of and for the year ended December 31, 2009 have been prepared assuming that the Company will continue as a going concern. As disclosed in Note 1 to the consolidated financial statements, the Company’s recurring losses from operations, net working capital deficiency, stockholders’ deficit, debt covenant violations, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also disclosed in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As disclosed in Note 19 to the consolidated financial statements, the Company filed Form 15 with the Securities and Exchange Commission on March 31, 2010 to deregister the Company’s common stock and suspend the Company’s obligation to file periodic reports under the Securities Exchange Act of 1934.

/s/ ASHER & COMPANY, Ltd.

Philadelphia, Pennsylvania
April 15, 2010

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

ClearPoint Business Resources, Inc. and Subsidiaries

Chalfont, Pennsylvania

We have audited the accompanying consolidated balance sheet of ClearPoint Business Resources, Inc. and Subsidiaries (the “Company”) as of December 31, 2008 and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ClearPoint Business Resources, Inc. and Subsidiaries as of December 31, 2008, and the results of their operations and their cash flows for year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements for the year ended December 31, 2008, have been prepared assuming that the Company will continue as a going concern. As disclosed in Note 1 to the consolidated financial statements, the Company’s recurring losses from operations, accumulated deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also disclosed in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As disclosed in Note 13 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” effective January 1, 2008.

/s/Parente Randolph, LLC

Parente Randolph, LLC
Morristown, New Jersey
April 13, 2009

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

-ASSETS-

	December 31,
	2009		2008
CURRENT ASSETS
Cash and cash equivalents	$	74,551	$	960,145
Accounts receivable, net of allowance for doubtful accounts of $5,252,759 and $5,774,921 at December 31, 2009 and 2008, respectively		872,329		1,073,420
Unbilled revenue		76,734		127,685
Notes receivable - StaffChex		251,906		—
Prepaid expenses and other current assets		115,083		217,882
Refundable federal income tax		—		26,128
TOTAL CURRENT ASSETS		1,390,603		2,405,260
EQUIPMENT, FURNITURE AND FIXTURES, net		591,403		1,296,689
INTANGIBLE ASSETS, net		83,333		133,333
DEFERRED FINANCING COSTS, net		175,838		536,444
NOTES RECEIVABLE, long term		275,661		—
RESTRICTED CASH		25,000		—
OTHER ASSETS		17,550		709,404
TOTAL ASSETS	$	2,559,388	$	5,081,130

See notes to consolidated financial statements.

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS—(Continued)

-LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)-

	December 31,
	2009			2008
CURRENT LIABILITIES
Current portion of long-term debt	$	13,100,585		$	5,950,209
Accounts payable		2,816,409			2,725,659
Accrued expenses and other current liabilities		3,668,912			4,080,875
Current portion of retirement benefit payable		84,420			146,900
Current portion of deferred revenue		1,000,438			996,104
Current portion of accrued restructuring costs – related party		256,709			256,709
Current portion of accrued restructuring costs		55,134			186,055
TOTAL CURRENT LIABILITIES		20,982,607			14,342,511
ACCRUED RESTRUCTURING COSTS, net of current		40,834			—
LONG-TERM DEBT, net of current		4,872,097			10,306,054
OTHER LIABILITIES		126,250			—
LIABILITY FOR WARRANTS ISSUED		1,388,393			1,213,433
DEFERRED REVENUE, net of current		—			996,104
RETIREMENT BENEFIT PAYABLE, net of current		135,646			135,646
TOTAL LIABILITIES		27,545,827			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 December 31, 2009 and 2008; 14,251,964 shares issued and outstanding, December 31, 2009; 14,251,964 shares issued and outstanding, December 31, 2008.)		1,425			1,425
Additional paid in capital		32,578,031			32,576,500
Accumulated deficit		(57,565,895	)		(54,490,543	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(24,986,439	)		(21,912,618	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	2,559,388		$	5,081,130

See notes to consolidated financial statements.

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years ended December 31,
	2009			2008
REVENUE	$	5,241,706		$	33,496,240
COST OF SERVICES		—			29,107,840
GROSS PROFIT		5,241,706			4,388,400
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		4,831,488			15,559,077
RESTRUCTURING EXPENSE		—			1,349,944
DEPRECIATION AND AMORTIZATION		627,941			723,275
IMPAIRMENT OF GOODWILL		—			16,821,586
LONG LIVED ASSETS IMPAIRMENT AND ABANDONMENT		4,708			1,022,210
(LOSS) FROM OPERATIONS		(222,431	)		(31,087,692	)
OTHER INCOME (EXPENSE)
Interest income		39,866			10,670
Interest expense and factoring fees		(1,472,023	)		(1,515,010	)
Interest expense of amortization of OID and warrant liability		(355,135	)		(509,532	)
Mark to market gain (loss) on Derivative Instruments		(86,529	)		33,813
Gain on restructuring of debt		—			686,797
Other income (expense)		386,225			(89,375	)
(Loss) on sale of subsidiary		(190,000	)		(1,294,220	)
Loss on extinguishment of debt		(1,175,325	)		—
TOTAL OTHER INCOME (EXPENSE)		(2,852,921	)		(2,676,857	)
LOSS BEFORE INCOME TAX (BENEFIT) EXPENSE		(3,075,352	)		(33,764,549	)
INCOME TAX (BENEFIT) EXPENSE		—			5,021,192
NET LOSS	$	(3,075,352	)	$	(38,785,741	)
NET LOSS PER COMMON SHARE
Basic and Diluted	$	(0.22	)	$	(2.84	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		14,251,964			13,644,900
Basic and Diluted

See notes to consolidated financial statements.

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

	Common Stock				Additional Paid in			Accumulated			Total Stockholders’ Equity
	Shares		Amount		Capital			(Deficit)			(Deficit)
Balance as of January 1, 2008		13,208,916	$	1,321	$	31,349,176		$	(15,704,802	)	$	15,645,695
Issuance of common stock in connection with the amendment of the ALS Note		350,000		35		101,465						101,500
Issuance of common stock in connection with the amendment of the StaffBridge note		9,496		1		19,469						19,470
Issuance of warrants to ComVest related to the restructuring of debt						634,000						634,000
Issuance of warrants to sub debt holders in connection with amending the maturity dates of the sub debt						50,000						50,000
Issuance of warrants to sub debt holders in connection with an additional amendment extension of the due dates of maturity dates of the sub debt						7,616						7,616
Issuance of common stock in exchange for payment of advisory services and repayment of bridge loan to TNMC		683,552		68		365,931						365,999
Issuance of stock options		—		—		48,843			—			48,843
Net loss		—		—		—			(38,785,741	)		(38,785,741	)
Balance as of December 31, 2008		14,251,964	$	1,425	$	32,576,500		$	(54,490,543	)	$	(21,912,618	)
Issuance of warrants as payment for advisory service		—		—		30,333			—			30,333
Reclassification of ComVest warrants to liabilities		—		—		(88,431	)		—			(88,431	)
Stock based compensation		—		—		59,629			—			59,629
Net loss		—		—		—			(3,075,352	)		(3,075,352	)
Balance as of December 31, 2009		14,251,964	$	1,425	$	32,578,031		$	(57,565,895	)	$	(24,986,439	)

See notes to consolidated financial statements.

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years ended December 31,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)	$	(3,075,352	)	$	(38,785,741	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Deferred income taxes (benefit)		—			5,007,180
Depreciation and amortization		627,941			723,275
Loss on extinguishment of debt		1,175,325			—
Long lived assets impairment and abandonment		4,708			1,022,210
Impairment of goodwill		—			16,821,586
Provision for (reduction in) doubtful accounts		(402,542	)		2,596,030
Provision for franchise receivables		—			1,638,879
Loss (gain) on sale of subsidiary		190,000			1,294,220
Issuance of warrants		—			57,616
Consulting expense paid in warrants		30,333			—
Stock based compensation		59,629			48,843
Gain on M&T restructuring forgiveness of debt		—			(866,480	)
Issuance of stock		—			120,970
Issuance of stock to related party		—			266,000
Interest expense converted to note payable		—			92,248
Interest expense – original issue discount and warrant liability		355,135			509,532
Mark to market (gain) loss on derivative instruments		86,529			(33,813	)
Changes in operating assets and liabilities:
Decrease in accounts receivable		76,066			13,701,356
Decrease in unbilled revenue		50,951			2,036,647
Decrease in prepaid expenses and other current assets		128,927			106,864
Refundable federal income taxes		—			1,023,872
(Increase) decrease in other assets		61,100			(625,743	)
Increase (decrease) in accounts payable		90,750			(154,866	)
(Decrease) in accrued expense and other current liabilities		(66,073	)		(3,340,689	)
Increase (decrease) in deferred revenue		(991,770	)		1,992,210
(Decrease) in accrued restructuring costs		(90,086	)		(581,838	)
(Decrease) in retirement benefits payable		(62,480	)		(55,504	)
Total adjustments to net loss		1,324,443			43,400,605
Net cash provided by (used in) operating activities		(1,750,909	)		4,614,864
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment, furniture and fixtures		(44,968	)		(571,078	)
(Increase) in restricted cash		(25,000	)		—
Net cash (used in) investing activities		(69,968	)		(571,078	)
CASH FLOWS FROM FINANCING ACTIVITIES
(Repayments) of long-term debt		(634,795	)		(11,988,209	)
Proceeds from issuance of ComVest debt		—			8,000,000
(Repayments) of ComVest term note		(7,654,010	)		(1,345,991	)
Borrowings on revolving credit facility – ComVest		16,221,523			1,530,000
(Repayments) on revolving credit facility - ComVest		(6,929,654	)		(530,000	)
Net (repayments) on notes payable — other		—			(150,000	)

	Years ended December 31,
	2009			2008
Proceeds from issuance of common stock		—			100,000
Fees incurred in refinancing		(67,781	)		(693,082	)
Net cash provided by (used in) financing activities		935,283			(5,077,282	)
Net increase (decrease) in cash and cash equivalents		(885,594	)		(1,033,496	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		960,145			1,993,641
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	74,551		$	960,145

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	Years ended December 31,
	2009		2008
Cash paid during the year for:
Interest	$	589,383	$	1,460,508
Income taxes	$	—	$	—
Cash received during the year for:
Income taxes	$	—	$	1,023,872

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

	Years ended December 31,
	2009		2008
Non cash transactions:
ComVest Warrants issued and amortizable Original Issue Discount	$	—	$	634,000
ComVest financing and amortizable Original Issue Discount Income taxes	$	—	$	1,000,000
ALS accrued interest converted to note payable	$	—	$	40,413
ComVest accrued interest and fees converted to note payable	$	91,192	$	—
ALS accrued interest converted to note payable	$	630,754	$	—
Settlement of alliance lawsuit – offset fixed assets against accrued expenses	$	400,000	$	—

See notes to consolidated financial statements.

CLEARPOINT BUSINESS RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2009, the Company had an accumulated deficit of $57,565,895 and working capital deficiency of $19,592,004. For the year ended December 31, 2009, the Company incurred a net loss of $3,075,352. Although the Company restructured its debt and obtained new financing in the third quarter of 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 future cash and liquidity needs, the Company may be required to raise additional financing or restructure its existing debt. There is no assurance that the Company will be successful in obtaining additional financing or restructuring of its existing debt. If the Company does not generate sufficient cash from operations, raise additional financing or restructure existing debt, there is substantial doubt about the ability of the Company to continue as a going concern. On February 9, 2010, as a consequence of certain defaults under the Amended Loan Agreement with ComVest, ComVest exercised the default exercise provision under the Amended ComVest Warrant. As a result, ComVest now beneficially owns a majority of the Company’s common stock (see Note 11 – Debt Obligations). The accompanying 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 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 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, the Company has enhanced its platform through organic growth and the integration of acquisitions. Prior to fiscal year 2008, 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 derives its revenues from fees related to iLabor technology, royalty fees related to contracts entered into under the previous business model and VMS fees. All core 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. Ten percent (10%) of the Terra Nova common stock being issued to CPR stockholders at the time of the Merger was released from escrow subsequent to the indemnity rights provision of the Merger agreement being met. A further ten percent (10%) of the Terra Nova common stock being issued to CPR stockholders at the time of the Merger was released from escrow subsequent to certain closing conditions pursuant to the Merger agreement being met.

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, Terra Nova changed its name to ClearPoint Business Resources, Inc.

Upon consummation of the Merger, $30.6 million was released from the Terra NovaTrust 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”) (see Note 11 – Debt Obligations), 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 (see Note 4 – Business and Asset Acquisitions and Dispositions and Licensing Agreements), 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 accompanying consolidated financial statements include the accounts of ClearPoint and its wholly owned subsidiaries ClearPoint Resources, Inc. and Emgate Solutions, LLC. All significant inter-company transactions and balances have been eliminated.

(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.

The Company recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the sales price is fixed or 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 December 31, 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).

One (1) customer accounted for 12% and another customer for 76% of the revenue for the year ended December 31, 2009. The same customers accounted for 3% and 5% of the revenue, respectively, for the year ended December 31, 2008.

(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 service providers (“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 accounts receivable at December 31, 2009 and 2008 was VMS receivables of $756,275 and $1,154,716, respectively. Included in the Company’s accounts payable at December 31, 2009 and 2008 was VMS payables of $1,279,531 and $291,153, 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 their 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).

In connection with the sale of HRO, the Company sold its workers compensation insurance policies, which included collateral as well as insurance premium liabilities. AICCO, Inc. (“AICCO”) was listed as one of the insurance policies which the Company owed. As a result of the sale of HRO, this liability was transferred and assumed by AMS Outsourcing, Inc. and remained unpaid. On December 23, 2009, the Company and AICCO entered into a Settlement Agreement and Release pursuant to which the Company agreed to pay AICCO an aggregate amount of $190,000 in full and final settlement of all claims relating to certain litigation involving AICCO (see Note 18 – Litigation). This payment is recorded on the income statement as loss on sale of subsidiary.

(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:

The Company’s identifiable intangible asset with a definitive life is comprised of a covenant not to compete, which is amortized on a straight-line basis over its expected useful life of five (5) years.

(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 indicate that the reporting unit’s carrying amount of goodwill is 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. As of December 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 years ended December 31, 2009 and 2008 were $31,674 and $127,980, 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 over the life of the related loan. Deferred financing costs of $175,838 at December 31, 2009 and $536,444 at December 31, 2008 were net of accumulated amortization of $65,584 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 years ended December 31, 2009 and 2008 was $232,395 and $211,510, 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.

The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. For the years ended December 31, 2009 and 2008, the Company did not identify any uncertain tax positions taken or expected to be taken in an income tax return which would require adjustment to or disclosure in its financial statements.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2009 and 2008, the Company had no accrued interest or penalties. The Company currently has no federal or state tax audits in progress although years 2006 through 2008 are open and subject to a federal or state audit.

(m) Stock-based Employee Compensation:

The Company accounts for stock-based 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. The Company measures and recognizes the cost of stock-based awards granted to employees and directors based on the grant-date fair value of the award and recognizes expense over the vesting period. The Company estimates the grant date fair value of each award using a Black-Scholes option-pricing model. 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.

The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2009 and 2008:

	Year Ended December 31, 2009			Year Ended December 31, 2008
Numerator
Net (Loss)	$	(3,075,353	)	$	(38,785,741	)
Denominator
Basic and diluted weighted average shares		14,251,964			13,334,900
Basic and diluted earnings per share	$	(0.22	)	$	(2.84	)

Diluted loss per share for the years ended December 31, 2009 and 2008 is 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, have been excluded from the per share computations:

	For the years ended
	December 31, 2009		December 31, 2008
Stock Options		928,100		1,002,008
Warrants		4,050,825		11,505,000
		4,978,925		12,705,800

(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, unbilled revenues and royalty payments associated with the prior business model.

(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 2009 and 2008, the Company’s cash and cash equivalent balances exceeded the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $100,000 which was subsequently increased to $250,000 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 December 31, 2009 was not more than the FDIC limit of $250,000. The uninsured cash and cash equivalents totaled $0 at December 31, 2009.

At December 31, 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 and Unbilled Revenues:

The Company does not require collateral or other security to support customer receivables or unbilled revenues. One (1) customer accounted for 12% of the accounts receivable balance as of December 31, 2009. One (1) customer accounted for 11% of the accounts receivable balance as of December 31, 2008. The Company believes that credit risk is dispersed and low due to large number of customers in different regions and different industries.

(q) Reclassifications:

Certain items were reclassified in the 2008 consolidated balance sheet and statement of cash flows to conform with the 2009 presentation. These reclassifications had no material impact on the Company’s 2008 consolidated balance sheet and statement of cash flows.

(r) Recent Accounting Pronouncements:

Recently Adopted Standards

In September 2009, the Company adopted 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 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 December 2007, the FASB issued an accounting standard codified within ASC 805, “Business Combinations” which changed the accounting for business acquisitions. Under this standard, business combinations continue to be required to be accounted for at fair value under the acquisition method of accounting, but the standard changed the method of applying the acquisition method in a number of significant aspects. Acquisition costs will generally be expensed as incurred; noncontrolling interests will be valued at fair value at the acquisition date; in-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date, until either abandoned or completed, at which point the useful lives will be determined; and restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date. The standard is effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of the first annual period subsequent to December 15, 2008. Adoption of the standard did not have a significant impact on the Company’s financial position and results of operations; however, any business combination entered into after the adoption may significantly impact the Company’s financial position and results of operations when compared to acquisitions accounted for under prior GAAP and result in more earnings volatility and generally lower earnings due to the expensing of deal costs and restructuring costs of acquired companies.

In February 2009, the FASB issued an accounting standard codified within ASC 805, “Business Combinations” which amends the provisions related to the initial recognition and measurement, subsequent measurement, and disclosure of assets and liabilities arising from contingencies in a business combination. The standard applies to all assets acquired and liabilities assumed in a business combination that arise from contingencies that would be within the scope of ASC 450, “Contingencies”, if not acquired or assumed in a business combination, except for assets or liabilities arising from contingencies that are subject to specific guidance in ASC 805. The standard applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of the standard effective January 1, 2009 did not have an impact on the Company’s financial position and results of operations.

In March 2008, the FASB issued an accounting standard related to disclosures about derivative instruments and hedging activities, codified within ASC 815, “Derivatives and Hedging”. Provisions of this standard change the disclosure requirements for derivative instruments and hedging activities including enhanced disclosures about (a) how and why derivative instruments are used, (b) how derivative instruments and related hedged items are accounted for under ASC 815 and its related interpretations, and (c) how derivative instruments and related hedged items affect our financial position, financial performance, and cash flows. This statement was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company adopted the standard on January 1, 2009.

In April 2008, the FASB issued an accounting standard codified within ASC 350, “Intangibles - Goodwill and Other” which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset Under this standard, entities estimating the useful life of a recognized intangible asset must consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension. The intent of the standard is to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. Adoption of the standard was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company adopted the standard on January 1, 2009. The Company does not expect the standard to have a material impact on its accounting for future acquisitions of intangible assets.

In November 2008, the FASB issued an accounting standard codified within ASC 350, “Intangibles - Goodwill and Other” that applies to defensive assets which are acquired intangible assets which the acquirer does not intend to actively use, but intends to hold to prevent its competitors from obtaining access to the asset. The standard clarifies that defensive intangible assets are separately identifiable and should be accounted for as a separate unit of accounting in accordance with guidance provided within ASC 805, “Business Combinations” and ASC 820, “Fair Value Measurements and Disclosures”. The standard was effective for intangible assets acquired in fiscal years beginning on or after December 15, 2008. The Company adopted this standard effective January 1, 2009 and will apply the provisions of this guidance to intangible assets acquired on or after that date. The Company does not expect the standard to have a material impact on its accounting for future acquisitions of intangible assets.

In April 2009, the FASB issued an accounting standard codified within ASC 820, “Fair Value Measurements and Disclosures,” which provides guidance on determining fair value when there is no active market or where the price inputs being used represent distressed sales. The standard reaffirms the objective of fair value measurement, which is to reflect how much an asset would be sold for in an orderly transaction. It also reaffirms the need to use judgment to determine if a formerly active market has become inactive, as well as to determine fair values when markets have become inactive. The standard is effective for interim and annual periods ending after June 15, 2009 and was adopted by the Company in the second quarter of 2009. The adoption of this accounting pronouncement did not have a material impact on the Company’s consolidated results of operations and financial condition.

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 855 “Subsequent Events,” which sets forth 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. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. The standard was effective for interim or annual periods ending after June 15, 2009 and was adopted by the Company in the second quarter of 2009. In February 2010, the FASB issued Accounting Standards Update No. 2010-09 (“ASC Update 2010-09”) “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements.” This ASU amends FASB Codification topic 855. The amendments in ASU 2010-09 remove the requirement in ASC 855-10 for a SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. This ASU was effective upon issuance and the Company adopted this ASU as of December 31, 2009. Except for the removal of disclosure requirements in ASC 855-10, the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In August 2009, the FASB issued ASU No. 2009-05, “Fair Value Measurements and Disclosures – Measuring Liabilities at Fair Value.” The ASU provides additional guidance for the fair value measurement of liabilities under ASC 820 “Fair Value Measurements and Disclosures”. The ASU 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 using certain techniques. The ASU also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. It also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The Company adopted the ASU in the fourth fiscal quarter of 2009. The adoption of the ASU did not have a material impact on the Company’s consolidated results of operations and financial condition.

Standards Issued But Not Yet Adopted

In December 2009, the FASB issued ASU No. 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” which amends ASC 810, “Consolidation” to address the elimination of the concept of a qualifying special purpose entity. The standard also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. This standard also requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE whereas previous accounting guidance required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred. The standard provides more timely and useful information about an enterprise’s involvement with a variable interest entity and will be effective as of the beginning of interim and annual reporting periods that begin after November 15, 2009, which for the Company would be January 1, 2010. The Company does not expect the adoption of this standard to have a material effect on its consolidated results of operations and financial condition.

In January 2010, the FASB issued ASU No. 2010-6, “Improving Disclosures About Fair Value Measurements,” which provides amendments to ASC 820 “Fair Value Measurements and Disclosures,” including requiring reporting entities to make more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements including information on purchases, sales, issuances, and settlements on a gross basis and (4) the transfers between Levels 1, 2, and 3. The standard is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. The Company does not expect the adoption of this standard to have a material impact 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 results of operations or financial condition.

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. 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 was entitled to 31,012 shares (16.4%) of StaffChex’s outstanding stock, of which 15,568 shares were not issued to the Company. In addition, pursuant to Amendment No. 2 to the iLabor Agreement, StaffChex is only obligated to issue 3,163 shares to the Company.

ClearPoint is accounting for its investment in StaffChex under the cost method. In addition, ClearPoint entered into an iLabor agreement with StaffChex (the “iLabor Agreement”) 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. ClearPoint recognizes 1.25% of StaffChex cash receipts. For the years ended December 31, 2009 and December 31, 2008, ClearPoint recognized $615,042 and $1,147,997 respectively, in royalty fees. 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. 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.

On November 18, 2009, StaffChex transferred certain contracts (the “Transferred Accounts”) to CPR pursuant to a certain Assignment and Assumption Agreement, Option and Bill of Sale dated November 18, 2009 (the “Assignment Agreement”). Pursuant to the Assignment Agreement, CPR assumed the obligations under the Transferred Accounts, with certain exceptions, including, but not limited to, obligations relating to certain tax liabilities, payment obligations of StaffChex arising prior to November 18, 2009, liabilities related to claims arising out of events or conditions or actual or alleged violations of law occurring prior to November 18, 2009 and any liability of StaffChex based on its acts or omissions after November 18, 2009. In consideration for the assignment of the Transferred Accounts, CPR (1) assigned its right, title and interest to 12,405 shares of StaffChex Stock to StaffChex and StaffChex agreed to reissue 18,607 shares of StaffChex Stock to CPR (the “Reissued Shares”) and (2) granted StaffChex an option to purchase the Reissued Shares for a purchase price of $250,000 at any time prior to the earlier of (i) November 18, 2011 or (ii) the date on which CPR assigns and delivers such Reissued Shares to StaffChex in accordance with the “success fee” described below.

In addition, CPR agreed to amend the iLabor Agreement to reduce the Royalties. On November 18, 2009, CPR and StaffChex entered into Amendment No. 2 to the iLabor Agreement (“Amendment No. 2”) in order to provide for payment of past-due amounts owed by StaffChex under the iLabor Agreement and to restate the payment terms thereunder effective as of November 1, 2009 (the “Effective Date”).

Amendment No. 2 provides that during the first full week after the transfer of the Transferred Accounts, such accounts are expected to meet or exceed minimum billings of $96,153 per week (the “Guaranteed Billings”). In the event the Transferred Accounts do not meet the Guaranteed Billings in a given week, StaffChex will transfer such additional contracts whose billings, when added to those of the Transferred Accounts, will satisfy the Guaranteed Billings. CPR may, in its reasonable discretion, accept or reject the Transferred Accounts.

In addition, pursuant to Amendment No. 2, as of the Effective Date and through January 31, 2010, the Royalties shall equal 0.75%, provided that such amount shall be payable in two portions: (i) 0.25%, to the extent not already paid by StaffChex, shall be payable weekly from the Effective Date through January 31, 2010 and (ii) the balance of 0.50% (the “Deferred Amount”) will be deferred and paid with Past-Due Royalties (as defined below). Royalties owed for the period of September 28, 2009 through the Effective Date shall equal 1.25% and will be paid in weekly installments beginning March 1, 2010 through May 31, 2010, in addition to any other amounts owed pursuant to Amendment No. 2.

Upon the date on which billings from the Transferred Accounts meet or exceed a total of $307,682 per week for six consecutive weeks, CPR will pay a “success fee” in the form of an immediate transfer and assignment of Reissued Shares to StaffChex and the iLabor Agreement will automatically terminate and be of no further force and effect, provided, however, that provisions relating to the payment of amounts deferred or past-due which are otherwise payable shall survive such termination.

It is expected that for the six month period of February 1, 2010 through July 31, 2010, the average monthly billings of the Transferred Accounts will meet or exceed a minimum of $625,000 per month. If such monthly billings do not meet this minimum amount, then 5% of the shortfall will be due and payable in equal installments over the 16-week period beginning September 1, 2010.

In addition, pursuant to Amendment No. 2, StaffChex agreed to continue making scheduled weekly payments of $4,096 until June 1, 2011, and 52 weekly payments of $3,105 thereafter, for past-due Royalties owed through February 28, 2009 commencing on June 1, 2011. The failure of StaffChex to make payments due pursuant to the StaffChex iLabor Agreement constitutes a material breach. In the event of nonpayment, StaffChex will have a 10-day cure period to make any delinquent payments. If such payments remain outstanding following the cure period, the Royalties shall revert to 1.25% and StaffChex agreed to direct its affiliated receivables factoring company to make the required payment to CPR.

Effective January 11, 2010, CPR and StaffChex entered into Amendment No. 3 to the iLabor Agreement pursuant to which the parties agreed that the Royalties shall equal 0.75% of which 0.50% shall be deferred in accordance with Amendment No. 2 until February 1, 2010. Additionally, StaffChex agreed to direct Wells Fargo Business Credit to pay ClearPoint $2,885 per week, effective January 11, 2010 in lieu of StaffChex accounts until such time as the StaffChex accounts increase to $96,153. For the period of December 14, 2009 through January 8, 2010, StaffChex will pay ClearPoint 3% of actual billings for the StaffChex accounts. All amounts due to ClearPoint shall be paid directly from Wells Fargo Business Credit on a weekly basis pursuant to a certain Account Transfer Agreement dated May 15, 2008. As of April 12, 2010, StaffChex was current on all payments pursuant to the iLabor Agreement.

(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 ClearPoint HRO, LLC (“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. To date, 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.

Management considered the guidance of ASC Topic 205-20, “Presentation of Financial Statements – Discontinued Operations,” and determined that the disposition and transfer to AMS of certain customer account balances related to the Company’s temporary staffing business did not meet the criteria to be reported as discontinued operations. A summary of the assets sold and liabilities assumed in the transaction, resulting in a loss on sale of subsidiary of $1,294,220 for the year ended December 31, 2008, is 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 for the year ended December 31, 2008	$	(1,294,220	)

For the year ended December 31, 2009, ClearPoint and AICCO (formerly AMS) entered into a Settlement Agreement and Release, referred to as the AICCO settlement. Pursuant to the AICCO settlement, ClearPoint agreed to pay AICCO an aggregate amount of $190,000 in full and final settlement of all claims relating to the AICCO litigation. As a result, this $190,000 settlement amount is recorded on the income statement as a loss on sale of subsidiary for the year ended December 31, 2009 as it relates to a change in the estimate of the liabilities assumed in the original sale in 2008. (See Note 18 – Litigation).

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 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 December 31, 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 December 31, 2009, Select was current in its payments to CPR. As of December 31, 2009, Select was current in its payments to CPR.

The deferred revenue of $1,000,438 as of December 31, 2009, which has a remaining life of 12 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. The deferred revenue of $1,992,208 as of December 31, 2008, which had a remaining life of 24 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 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. On December 30, 2009, the complaint was dismissed with prejudice by mutual agreement of the parties.

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. Beginning in the fiscal quarter ended June 30, 2008, the Company ceased recording fees under such agreement due to non-payment by Townsend Careers. In addition, all fees recorded have been written off because of non payment by Townsend.

NOTE 5 — PREPAID EXPENSES AND OTHER CURRENT ASSETS:

	December 31, 2009		December 31, 2008
Prepaid insurance	$	87,670	$	125,410
Other current assets		27,413		92,472
	$	115,083	$	217,882

NOTE 6 — EQUIPMENT, FURNITURE AND FIXTURES:

	December 31, 2009			December 31, 2008
Furniture and fixtures	$	40,078		$	29,150
Computer software and equipment		1,368,571			1,740,180
Leasehold improvements		9,201			9,201
		1,417,850			1,778,531
Less, accumulated depreciation		(826,447	)		(481,842	)
Equipment, furniture and fixtures, net	$	591,403		$	1,296,689

Depreciation expense for the years ended December 31, 2009 and 2008 was $345,546 and $427,706, respectively. Alliance assisted the Company in develping the technology platform for the iLabor network. On September 17, 2009, the Company and Alliacne entered into a Settlement Agreement and Release pursuant to which the Company agreed to pay Alliance an aggregate amount of $200,000 in full and final settlement of all claims relating to certain litigation involving Alliance. In connection with such Settlement Agreement and Release, the software development fees owed to Alliance for this project were reduced by $400,000 and, as a result, the Company reduced its capitalized software by $400,000 and reversed $200,000 of depreciation expense previously recorded for this asset (see Note 18 – Litigation).

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 the TZG and KOR agreements described in Note 4 — Business and Asset Acquisitions and Licensing Agreements.

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:

	December 31, 2009			December 31, 2008
Covenant not to compete	$	250,000		$	250,000
Less, accumulated amortization		(166,667	)		(116,667	)
Intangibles, net	$	83,333		$	133,333

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

NOTE 8 — OTHER ASSETS

	December 31, 2009		December 31, 2008
Due from ALS	$	—	$	500,667
Long term portion of related party receivable		—		181,400
Security deposits		17,550		27,337
	$	17,550	$	709,404

NOTE 9 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:

	December 31, 2009		December 31, 2008
Other accrued expenses	$	1,653,381	$	2,422,166
Accrued interest		994,269		196,029
Insurance premiums payable		521,262		962,680
Accrued termination fee - Optos		500,000		500,000
	$	3,668,912	$	4,080,875

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 $2,210,116. These expenses were present valued and accrued and will 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 believes it is 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 year ended December 31, 2009, the Company paid out $45,365 related to the 2007 restructuring 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 $496,784 of restructuring charges for costs of severance, related benefits and outplacement services related to the termination of these 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 year ended December 31, 2009, the Company paid out $44,721. The Company calculated the restructuring costs as follows:

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	)
Accrued restructuring costs at December 31,2008		—			52,830			52,830
Payments		—			(45,365	)		(45,365	)
Total accrued restructuring costs at December 31,2009		—			7,465			7,465
Less: current portion		—			(7,465	)		(7,465	)
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		—			(44,722	)		(44,722	)
Total accrued restructuring costs at December 31,2009		—			88,503			88,503
Total accrued restructuring costs at December 31,2009 – related party		256,709			—			256,709
Less: current portion		(256,709	)		(47,669	)		(304,378	)
Total accrued restructuring costs – long-term	$	—		$	40,834		$	40,834

NOTE 11 — DEBT OBLIGATIONS:

A summary of all debt is as follows:

	December 31,
	2009		2008
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)	$	—	$	6,529,542
Revolving Credit Facility 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		10,383,061		—
M&T Loan Modification and Restructure Agreement dated June 20, 2008. Principal payments on balance after reduction of payments connected with accounts receivable assigned to M&T, begin January 1, 2011 in equal amounts over 36 months plus interest at 5% per annum		4,718,756		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..		490,000		690,000
Subordinated notes payable beginning March 31, 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%		1,653,347		2,155,652
Note payable to unrelated individuals for purchase of the common stock of StaffBridge, Inc. due and payable beginning February 15, 2010. Interest is calculated at 8% per annum		177,518		336,690
		17,972,682		16,256,263
Add Original Issue Discount (OID)		—		1,124,468
Total principal payments of long term debt		17,972,682		17,380,731
Less: Current portion		13,100,585		5,950,209
		4,872,097		11,430,522
Less OID		—		(1,124,468	)
Long term debt, net of current and OID	$	4,872,097	$	10,306,054

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

Year ended December 31,
2010	$	13,100,585
2011		1,072,917
2012		1,072,917
2013		1,072,916
2014		826,674
Thereafter		826,673
	$	17,972,682

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 $217,343 and $311,831 for the years ended December 31, 2009 and December 31, 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

Clearpoint Business Resources, Inc 10-K