<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1997 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-26208
BUSINESS RESOURCE GROUP
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-0150337
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification No.)
2150 NORTH FIRST STREET, SUITE 101
SAN JOSE, CA 95131
(Address of principal executive offices)
(408) 325-3200
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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.
[X] Yes [ ] No
At April 30, 1997 there were 4,895,646 shares of the
Registrant's Common Stock outstanding.
<PAGE> 2
BUSINESS RESOURCE GROUP
FORM 10-Q
QUARTER ENDED APRIL 30, 1997
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1: Condensed Financial Statements
Condensed Balance Sheets at
April 30, 1997 and October 31, 1996................ 3
Condensed Statements of Income for the Three
Months and Six Months ended April 30, 1997
and 1996........................................... 4
Condensed Statements of Cash Flows for the
Six Months ended April 30, 1997 and 1996........... 5
Notes to Condensed Financial Statements............ 6
Item 2: Management's Discussion and Analysis
of Financial Condition and Results
of Operations ..................................... 7
PART II: OTHER INFORMATION
Item 1: Legal Proceedings ........................................ 11
Item 2: Changes in Securities .................................... 11
Item 3: Defaults Upon Senior Securities - none
Item 4: Submission of Matters to a Vote of
Security Holders ................................. 11
Item 5: Other Information - none
Item 6: Exhibits and Reports on Form 8-K ......................... 12
SIGNATURES ............................................................... 13
EXHIBITS ................................................................. 14
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BUSINESS RESOURCE GROUP
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
------- -------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents....................... $ 1,614 $ 1,011
Accounts receivable, net .................. 14,281 16,122
Inventory ................................. 951 974
Prepaids and other current assets ......... 1,170 1,387
------- -------
Total current assets ................... 18,016 19,494
Property and equipment, net ................... 2,552 2,017
Other assets .................................. 986 1,049
------- -------
$21,554 $22,560
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft ............................ $ -- $ 476
Accounts payable .......................... 3,300 5,935
Accrued liabilities ....................... 3,465 2,877
Income taxes payable ...................... 427 31
Current portion of notes payable and
capital lease obligations ................. 42 112
------- -------
Total current liabilities .............. 7,234 9,431
Deferred income tax liability ................. 127 127
Shareholders' equity:
Preferred stock ........................... -- --
Common stock .............................. 49 49
Additional paid-in capital ................ 10,834 10,685
Retained earnings ......................... 3,310 2,268
------- -------
Total shareholders' equity ............. 14,193 13,002
------- -------
$21,554 $22,560
======= =======
</TABLE>
See notes to condensed financial statements.
<PAGE> 4
BUSINESS RESOURCE GROUP
CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
---------------------- ----------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues:
Workspace products ................... $18,551 $18,293 $36,999 $31,128
Workspace services ................... 3,931 2,265 7,744 3,814
Vendor commission .................... 44 82 95 201
------- ------- ------- -------
Total net revenues ................ 22,526 20,640 44,838 $35,143
------- ------- ------- -------
Cost of net revenues:
Workspace products ................... 14,771 15,103 29,601 25,465
Workspace services ................... 2,833 1,685 5,566 2,758
------- ------- ------- -------
Total cost of net revenues ........ 17,604 16,788 35,167 28,223
------- ------- ------- -------
Gross profit ............................. 4,922 3,852 9,671 6,920
Selling, general and
administrative expenses .............. 4,022 2,978 7,926 5,409
------- ------- ------- -------
Income from operations ................... 900 874 1,745 1,511
Interest income .......................... 11 26 34 81
------- ------- ------- -------
Income before income taxes ............... 911 900 1,779 1,592
Provision for income taxes ............... 377 373 736 659
------- ------- ------- -------
Net income ............................... $ 534 $ 527 $ 1,043 $ 933
------- ------- ------- -------
Net income per common and common
equivalent share ...................... $ .11 $ .11 $ .21 $ .19
------- ------- ------- -------
Shares used in computation ............... 4,984 4,919 4,945 4,889
------- ------- ------- -------
</TABLE>
See notes to condensed financial statements.
<PAGE> 5
BUSINESS RESOURCE GROUP
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30,
---------------------
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................. $ 1,043 $ 933
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization ........................... 342 184
Changes in operating assets and liabilities:
Accounts receivable .................................. 1,841 (4,822)
Inventory ............................................ 23 (507)
Prepaids and other Current Assets .................... 217 721
Accounts payable ..................................... (2,635) 2,917
Accrued liabilities .................................. 588 524
Income taxes payable ................................. 396 620
------- -------
Net cash provided (used) by operating activities ........... 1,815 (872)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ........................ (794) (627)
Cash paid for acquisitions ................................ -- (300)
Other assets ............................................... (21) (95)
------- -------
Net cash used by investing activities ...................... (815) (285)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in bank overdraft ................................... (476) 118
Repayment of notes payable & capital lease obligations ..... (70) (214)
Issuance of common stock ................................... 149 --
------- -------
Net cash used by financing activities ...................... (397) (96)
------- -------
NET INCREASE (DECREASE) IN CASH ................................ 603 (1,990)
CASH AND EQUIVALENTS:
Beginning of period ........................................ 1,011 5,326
------- -------
End of period .............................................. $ 1,614 $ 3,336
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ................................................... $ 1 $ 19
======= =======
Income taxes ............................................... $ 340 $ --
======= =======
Cash flow for acquisitions:
Tangible assets acquired ................................... $ -- $ 333
Intangible assets acquired ................................. $ -- $ 255
Liabilities assumed ........................................ $ -- $ (288)
------- -------
Cash paid for acquisitions ................................. $ -- $ 300
======= =======
</TABLE>
See notes to condensed financial statements.
<PAGE> 6
BUSINESS RESOURCE GROUP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The financial information as of April 30, 1997 and for the three and six
month periods ended April 30, 1997 and 1996 is unaudited. In the opinion of
management, such information reflects all adjustments, consisting only of normal
recurring adjustments, considered necessary for a fair presentation of the
results of such periods. The accompanying condensed financial statements should
be read together with the audited financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended October
31, 1996. The financial statements have been prepared in accordance with the
regulations of the Securities and Exchange Commission, but omit certain
information and footnote disclosure necessary to present the statements in
accordance with generally accepted accounting principles.
NOTE 2. RECENTLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS128). The
Company is required to adopt SFAS 128 in the first quarter of fiscal 1998 and
will restate at that time earnings per share (EPS) data for prior periods to
conform with SFAS 128. Earlier application is not permitted.
SFAS 128 replaces current EPS reporting requirements and requires a dual
presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing net income by the weighted average of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
If SFAS 128 had been in effect during the current and prior year periods, basic
EPS would have been $.11 for each of the quarters ended April 30, 1997 and 1996,
and $.21 and $.19 for the six-month periods ended April 1997 and 1996
respectively. Diluted EPS under SFAS 128 would not have been significantly
different than primary EPS currently reported for the periods.
<PAGE> 7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION:
Except for the historical information contained in this Quarterly Report on
Form 10-Q, the matters discussed herein are forward-looking statements that are
subject to certain risks and uncertainties that could cause the actual results
to differ materially from those projected. Factors that could cause actual
results to differ materially include the timely availability, delivery and
acceptance of new products and services, the impact of competitive products and
pricing, the management of growth and acquisitions, business developments in
underlying businesses in which the company's customers compete that may thereby
affect demand for the Company's product and services and other risks detailed
below and included from time to time in the Company's other SEC reports and
press releases, copies of which are available from the Company upon request.
Additionally, the results of operations for the three and six month periods
ended April 30, 1997 are not necessarily indicative of the results to be
expected for the full fiscal year. Operating results are subject to the
successful close of large project business and related vendor lead times. The
Company's revenues are generally the result of a consultative selling process
and the precise timing of the issuance of customer purchase orders is often
contingent upon customer site development and move-in schedules. In order to
minimize risk of procurement errors and obsolete inventory, the Company
generally does not issue vendor purchase orders until final product
configurations are documented in a formal customer purchase order. As a result,
the short-term timing of product delivery can be impacted, which in turn may
affect the specific quarter in which revenue is recognized on particular
projects. Vendor delivery lead times also affect product availability and the
resulting time at which the Company delivers product and recognizes revenue;
lead times for many of the products sold by the Company average 4 to 12 weeks.
Consequently, these factors can affect quarter to quarter results. The Company
assumes no obligation to update any forward-looking statements contained herein.
RESULTS OF OPERATIONS:
THREE MONTHS ENDED APRIL 30, 1997 COMPARED TO THREE MONTHS ENDED APRIL 30, 1996.
Net revenues were $22.5 million for the three months ended April 30, 1997,
an increase of 9% from $20.6 million for the three months ended April 30, 1996.
Increases in product revenue ($258,000 or 1%) and service revenue ($1.6 million
or 74%) more than offset the decline in vendor commissions ($38,000 or 46%). The
overall increase in revenue was primarily the result of new large project
business from both new and existing customers (including Cisco Systems, S3,
National Semiconductor, HMT Technologies, Digital Square, Micro Bar and Legato),
the addition of five new sales people (up 10% over the prior year to 54) and
revenue generated by the Company's southwestern United States and Texas regional
business units acquired in September 1995
<PAGE> 8
and January 1996, respectively (3.7 million, including projects from the
Department of Energy, Motorola, BARN Technologies and Gadzooks).
During the three months ended April 30, 1997 Cisco Systems and National
Semiconductor, which historically have been significant customers of the
Company, contributed $11.3 million or 50% of total revenue, up from $9.7 million
or 47% of total revenue in the comparable period in 1996. Cisco alone
represented approximately 46% of the Company's revenue for the quarter ended
April 30, 1997. While the Company maintains an excellent working relationship
with Cisco Systems, the Company has been advised that because of business
uncertainty in the computer networking market Cisco expects to reduce its rate
of orders for the Company's products in the third quarter of the current fiscal
year and possibly in future quarters. The Company currently believes that this
expected reduction in orders by Cisco will have a material effect on its third
quarter financial results. There can also be no assurance that the Company's
financial results for future expected quarters will not be materially and
adversely affected should such reduction in orders continue or increase.
Service revenue increased during the second fiscal quarter of 1997 due to
increases in installation, delivery services and workspace management services.
Such increases contributed to the increase in service revenue as a percentage of
total revenue, which rose to 17.5% from 11% in the second quarter of 1996.
Commission revenue declined as most vendors have discontinued their
policies of billing customers directly and only paying a commission to the
Company.
Gross profit increased to $4.9 million during the second fiscal quarter of
1997 from $3.9 million during the same period of fiscal 1996, a 26% increase,
while increasing as a percentage of net revenues to 21.8 % during the second
fiscal quarter of 1997 from 18.7% during the same fiscal quarter of 1996. The
Company experienced a three percentage point increase in product margin as a
percentage of net revenue to 20.4% in second quarter 1997 from 17.4% in second
quarter 1996. This increase was primarily the result of a shift in product mix
to higher margin projects during the second fiscal quarter of 1997 from lower
margin projects in the second quarter of 1996. Service margins also increased as
a percentage of revenue, to 27.9% in the second quarter of 1997 from 25.5% in
the second quarter of 1996. The increase was due to the higher absorption and
utilization of the installation services group.
Selling, general and administrative expenses increased 35% to $4.0 million
for the three months ended April 30, 1997 from $3.0 million for the same period
of the prior year. As a percentage of net revenue, expenses increased to 17.9%
in the second quarter of fiscal 1997 from 14.4% in the second quarter of fiscal
1996. The increase in spending was primarily attributable to higher revenue and
related sales commissions, the continued expansion of the Company's Texas,
Arizona and San Jose operations, particularly in the areas of sales and project
management personnel, the continued building of the Company's system
<PAGE> 9
and wide-area-network infrastructure, and the hiring of key management
personnel.
Interest income, net of interest expense and the Company's other expenses,
totaled $11,000 for the three months ended April 30, 1997 versus interest
income, net of interest expense, of $26,000 for the same period of fiscal 1996.
The Company's effective tax rate was 41.4%.
SIX MONTHS ENDED APRIL 30, 1997 COMPARED TO SIX MONTHS ENDED APRIL 30, 1996.
Net revenues were $44.8 million for the six months ended April 30, 1997, an
increase of 28% from $35.1 million for the six months ended April 30, 1996.
Increases were achieved in product revenue ($5.9 million or 19%) and service
revenue ($3.9 million or 103%), partially offset by a decrease in commission
revenue ($106,000 or 53%). The overall increase in revenue was primarily the
result of the continuing strength of sales to Cisco Systems and National
Semiconductor, with combined revenue of $19.2 million for the six months ended
April 30, 1997, up from $13.9 million for the same period of 1996, and large
project business from S3, HMT Technologies and Legato (which combined accounted
for approximately $5.0 million in net revenues), and revenue generated by the
Company's southwestern United States and Texas regional business units ($7.7
million, including large projects from Comp USA, Department of Energy, Motorola,
BABN Technologies and Gadzooks). As a percentage of total net revenue, sales to
Cisco Systems and National Semiconductor accounted for 43% for the first six
months of fiscal 1997, up from 40% during the same period a year ago. As noted
above, the Company has been advised that because of business uncertainty in the
computer networking market Cisco expects to reduce its rate of orders for the
Company's products in the third quarter of the current fiscal year and possibly
in future quarters. The Company currently believes that this reduction in orders
by Cisco will have a material effect on its third quarter financial results.
There can also be no assurance that the Company's financial results for future
expected quarters will not be materially and adversely affected should such
reduction in orders continue or increase.
The increase in service revenue in the first six months of fiscal 1997 as
compared to the year earlier period was primarily attributable to increases in
delivery services, installation and workspace management services.
Commission revenue declined as most vendors have discontinued their
policies of billing customers directly and only paying a commission to the
Company.
Gross profit increased to $9.7 million for the first six months of fiscal
1997 from $6.9 million during the same period a year ago, a 41% increase. As a
percentage of net revenues, gross profits increased from 20% for the first six
months of fiscal 1996 to 22% during the same period of fiscal 1997. The impact
of higher product margin (20%
<PAGE> 10
in the first six months of fiscal 1997 versus 18% in the same period of fiscal
1996) and higher service margin (28.1% in the first six months of fiscal 1997
versus 27.7% in the same period of fiscal 1996) offset by the reduction in
commission revenue ($95,000 in the first six months of 1997 versus $201,000 in
the same period of fiscal 1996) accounted for the increase in gross profit.
Selling, general and administrative expenses increased 46% to $7.9 million
for the six months ended April 30, 1997 from $5.4 million for the same period of
the prior year. As a percentage of net revenue selling, general and
administrative expenses increased from 15% for the first six months of fiscal
1996 to 18% for the first six months of fiscal 1997. The increase in spending is
primarily attributable to increased sales commissions relating to higher revenue
levels, the addition and expansion of operations in the Company's Texas business
unit, the expansion of operations in Arizona and San Jose, the continued
building of the Company's business system infrastructure, and the hiring of key
management personnel.
Interest income, net of interest expense totaled $34,000 for the six months
ended April 30, 1997 versus interest income, net of interest expense of $81,000
for the same period of fiscal 1996. The decrease was due to lower average cash
balances experienced during the six month period.
The Company has used a tax rate of 41.4% for both periods reported.
LIQUIDITY AND CAPITAL RESOURCES:
Working capital at April 30, 1997 was $10.8 million, up slightly from $10.1
million at October 31, 1996.
During the six months ended April 30, 1997, net cash provided by operating
activities was $1.8 million, representing net income of $1.0 million, decreases
of $1.8 million in accounts receivable and $217,000 in prepaids and other
current assets and increases of $588,000 in accrued liabilities and $396,000 in
income taxes payable, offset by a decrease of $2.6 million in accounts payable.
Accounts receivable decreased as a result of intensified collection activities
and the timing of payments for revenue generated during the quarter. Accounts
payable decreased due to the acceleration of vendor payments to take advantage
of vendor discounts. Net cash used in investing activities was $815,000
primarily representing the purchase of property and equipment for $794,000. Net
cash used by financing activities was $397,000, representing the change in bank
overdraft of $476,000 and the repayments of capital lease obligations and notes
payable of $70,000, offset by the issuance of common stock for the Company's
employee stock purchase plan of $149,000.
The Company has an $8 million credit facility, including an option to
convert up to $3 million of the total facility into term loans. As of April 30,
1997 the Company had no borrowings under this credit facility
<PAGE> 11
The Company presently believes existing cash, together with cash generated
from operations and the Company's available borrowing capacity will provide
sufficient funds to meet the Company's anticipated working capital requirements
and its planned expansion/acquisition strategy for the foreseeable future.
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
On January 24,1997 Neil A. Armstrong filed a complaint against the Company,
one of its vendors and another third party in the United States District Court
for the Northern District of California. In general, this complaint asserts
claims for the alleged unauthorized use of the name and images of Mr. Armstrong.
Although no assurances can be given as to the results of this case, based on its
present status, management does not believe that such results will have a
material adverse effect on the Company's financial condition or results of
operations.
ITEM 2: CHANGES IN SECURITIES
On April 21, 1997, the Company issued a warrant (the "Warrant") to purchase
up to 60,000 shares of its Common Stock to Gateway Advisors (the "Warrant
Holder"). The Warrant is exercisable at any time on or before April 21, 2002 at
an initial exercise price of $5.50 per share, subject to adjustments for any
stock splits, stock dividends, recapitalizations, reorganizations or the like.
The issuance of the Warrant was deemed exempt from registration under the
Securities Act of 1933, as amended, in reliance on Section 4(2) of such Act as a
transaction by an issuer not involving any public offering. The Warrant Holder
represented its intention to acquire the Warrant (and the shares of Common Stock
issuable upon exercise thereof) for investment only and not with a view to or
for sale in connection with any distribution thereof. The Warrant Holder also
had adequate access, through its relationship with the Company, to information
about the Company. An appropriate legend was affixed to the Warrant.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of shareholders was held on March 3, 1997.
(b) The first matter voted upon at the meeting was the election of
directors and the results of that vote were as follows:
<TABLE>
<CAPTION>
Shares Present
For Withheld Abstained but not Voting
--- -------- --------- --------------
<S> <C> <C>
Brian D. McNay 4,559,848 19,089 0 0
John W. Peth 4,560,036 18,901 0 0
Harry S. Robbins 4,424,868 154,069 0 0
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C>
Jeffrey Tuttle 4,560,036 18,901
Charles J. Winter 4,560,036 18,901
</TABLE>
(c) The second matter voted upon at the meeting was to authorize an
amendment to the Company's 1995 Stock Option Plan to increase the
number of shares of Common Stock reserved for the issuance thereunder
by 500,000 shares to an aggregate of 1,700,000 shares.
The results of that vote were as follows:
Shares Present
In Favor Opposed Abstained but Not Voting
-------- ------- --------- --------------
3,761,216 176,269 7,200 634,252
(d) The third matter voted upon at the meeting was to authorize an
amendment to the Company's 1995 Director's Stock Option Plan to
increase the number of shares of Common Stock reserved for the
issuance thereunder by 75,000 shares to an aggregate of 175,000
shares. The results of that vote were as follows:
Shares Present
In Favor Opposed Abstained but Not Voting
-------- ------- --------- -------------
3,777,982 184,819 7,882 608,254
(e) The fourth matter voted upon at the meeting was to ratify the
appointment of Deloitte and Touche as independent auditors for
the Company for the fiscal year ending October 31, 1997.The
results of that vote were as follows:
Shares Present
In Favor Opposed Abstained but Not Voting
-------- ------- --------- --------------
4,572,048 4,189 2,700 0
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.28 Common Stock Purchase Warrant issued to Gateway Advisors
dated April 21, 1997.
11.1 Computation of Net Income Per Share
27.1 Financial Data Schedule
<PAGE> 13
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
during the three months ended April 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUSINESS RESOURCE GROUP
-----------------------------
Registrant
Date: 6/13/97 /s/ Charles J. Winter
--------------------- -----------------------------
Charles J. Winter
President and
Chief Executive Officer
(Principal Financial and
Accounting Officer)
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
No. Description
--- -----------
<S> <C>
10.28 Common Stock Purchase Warrant issued to Gateway Advisors
dated April 21, 1997.
11.1 Computation of Net Income Per Share
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.28
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, (ii) THE SALE IS MADE IN ACCORDANCE WITH RULE 144
UNDER THE ACT, OR (iii) THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT.
April 21, 1997
BUSINESS RESOURCE GROUP
COMMON STOCK PURCHASE WARRANT
60,000 Shares
Void after April 21, 2002
1. Number and Price of Shares Subject to Warrant. Subject to the terms
and conditions of this Warrant, Gateway Advisors, Inc. or its permitted
transferees (each a "Holder") is entitled to purchase from Business Resource
Group (the "Company"), at any time after the date hereof and on or before April
21, 2002, up to 60,000 shares (which number of shares is subject to adjustment
as described below) of fully paid and non-assessable Common Stock of the Company
(the "Shares"). Subject to adjustments for any stock splits, reverse stock
splits, stock dividends, recapitalization or reclassification, the purchase
price of one share of Common Stock shall be equal to $5.50. The purchase price
of one share of Common Stock payable from time to time upon the exercise of this
Warrant (whether such price be the price specified above or an adjusted price
determined as hereinafter provided) is referred to herein as the "Warrant
Price."
2. Adjustments. The number of Shares issuable upon the exercise
of this Warrant and the exercise price thereof shall be subject to adjustment
from time to time, and the Company agrees to provide notice upon the happening
of certain events, as follows:
(a) Reclassification, etc. If the Company at any time shall,
by subdivision, combination or reclassification of securities or otherwise,
change any of the securities to which purchase rights under this Warrant exist
into the same or a different number of securities of any class or classes, this
Warrant shall thereafter be to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change. If shares of the class of the Company's stock for which this Warrant is
being exercised are subdivided or combined into a greater or smaller number of
shares of stock, the Warrant Price shall be proportionately reduced in the case
of subdivision of shares or proportionately increased in the case of combination
of shares, in both
<PAGE> 2
cases by the ratio which the total number of shares of such class of stock to be
outstanding immediately after such event bears to the total number of shares of
such class of stock outstanding immediately prior to such event.
(b) Adjustment for Dividends in Stock. In case at any time or
from time to time on or after the date hereof the holders of the shares of the
Company's Common Stock (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received, or, on or
after the record date fixed for the determination of eligible shareholders,
shall have become entitled to receive, without payment therefor, other or
additional stock or securities (or any rights or options to subscribe for or
purchase any of the foregoing) of the Company by way of dividend, then and in
each case, the holder of this Warrant shall, upon the exercise hereof, be
entitled to receive, in addition to the number of Shares receivable thereupon,
and without payment of any additional consideration therefor, the amount of such
other or additional stock of the Company which such holder would hold on the
date of such exercise had it been the holder of record of such Shares on the
date hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock receivable by it as aforesaid during such period, giving effect
to all adjustments called for during such period by this Section 2.
3. Sale, Merger, or Consolidation of the Company.
(a) "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
(b) Expiration of Warrant on Acquisition. The Company shall
give Holder written notice of the pendency of any proposed Acquisition,
including the principal terms and expected closing date thereof, not later than
ten (10) days prior to such closing date. Provided that such notice has been
given as provided in the prior sentence this Warrant shall automatically expire
to the extent then unexercised upon the closing of the Acquisition; provided,
however, that if such notice is not timely given as provided in the preceding
sentence, then this Warrant shall expire ten (10) days after notice is so given
and if the closing of the Acquisition shall have occurred prior to such
expiration date, then this Warrant shall be exercisable for the same securities,
cash, and property as would be payable for the Shares issuable upon exercise of
the unexercised portion of this Warrant as if such Shares were outstanding on
the record date for the Acquisition and subsequent closing. The Warrant Price
shall be adjusted accordingly.
4. No Shareholder Rights. This Warrant shall not entitle Holder
to any of the rights of a shareholder of the Company.
5. Reservation of Stock. The Company covenants that during the period
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Shares upon the exercise of
2
<PAGE> 3
this Warrant. The Company agrees that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
Shares upon the exercise of this Warrant.
6. Exercise and Conversion of Warrant.
(a) This Warrant may be exercised by Holder or its permitted
assigns, in whole or in part, by delivery of the Notice of Exercise in the form
attached hereto as Attachment 1 and surrender of this Warrant at the principal
office of the Company, accompanied by payment in full of the Warrant Price as
described above. Upon partial exercise hereof, a new warrant or warrants
containing the same date and provisions as this Warrant shall be issued by the
Company to the registered holder for the number of shares of Common Stock with
respect to which this Warrant shall not have been exercised.
(b) Notwithstanding anything to the contrary contained in this
Section 6, Holder may elect to receive Shares on a "net exercise" basis in an
amount equal to the value of this Warrant by delivery of the Notice of
Conversion in the form attached hereto as Attachment 2 and surrender of this
Warrant at the principal office of the Company, in which event the Company shall
issue to Holder a number of Shares computed using the following formula:
X = (P)(Y)(A-B)
-----------
A
Where: X = the number of Shares to be issued to Holder.
P = the portion of the Warrant being exercised.
Y = the number of Shares issuable upon exercise
of this Warrant.
A = the Fair Market Value of one Share.
B = Warrant Price.
(c) As used herein, the Fair Market Value of the Shares shall
mean with respect to each Share the average of the closing prices of the
Company's Common Stock sold on all securities exchanges on which the Common
Stock may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day the Common Stock is
not so listed, the average of the representative bid and asked prices quoted on
the Nasdaq National Market as of 4:00 p.m., New York City time, or, if on any
day the Common Stock is not quoted on the Nasdaq National Market, the average of
the highest bid and lowest asked price on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of five days consisting of the day as of which the current fair
market value of the Shares is being determined and the four consecutive business
days prior to such day. If at any time the Common Stock is not listed on any
securities exchange or quoted on the Nasdaq National Market or the
over-the-counter market, the current fair market value of a Share shall be the
highest price per
3
<PAGE> 4
share which the Company could obtain from a willing buyer (other than a current
employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by the Board of
Directors of the Company, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the current Fair Market Value of a Share shall be
deemed to be the value received by the holders of the Company's Common Stock for
each share of Common Stock in such merger, acquisition or other consolidation.
(d) This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the Shares
issuable upon such exercise shall be treated for all purposes as the holder of
such shares of record as of the close of business on such date. As promptly as
practicable on or after such date, the Company shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of full Shares issuable upon such exercise, together with cash in
lieu of any fraction of a Share.
7. Transfer of Warrant. This Warrant and all rights hereunder may be
transferred, in whole or in part, provided that any such transfer is in
compliance with the legend appearing on the first page hereof and the transferee
delivers a duly executed copy of Attachment 4; provided, however, for a period
of one year from the date of issuance the Warrant may not be sold, transferred,
assigned or hypothecated except to officers or partners of Holder; and, provided
further that any transferee must acquire the lesser of the right to acquire (i)
30,000 Shares or (ii) all of the Shares issuable upon exercise of this Warrant.
8. Compliance with Securities Laws.
(a) Holder represents and agrees that this Warrant is being
purchased only for investment, for Holder's own account, and without any present
intention to sell or distribute the Warrant or the Shares, other than a
distribution to certain employees of Holder who agree in writing to be bound by
the terms of this Warrant to the same extent as Holder. Holder further
acknowledges that the Shares will not be issued pursuant to the exercise of this
Warrant unless the exercise of this Warrant and the issuance and delivery of
such Shares shall comply with all relevant provisions of law, including, without
limitation, the Act and other federal and state securities laws and regulations
and the requirements of any stock exchange or other system upon which the Shares
may then be listed.
(b) Holder acknowledges and agrees that this Warrant and the
Shares (collectively, the "Securities") have not been registered under the Act
and accordingly will not be transferable except as permitted under the various
exemptions contained in the Act, or upon satisfaction of the registration and
prospectus delivery requirements of the Act. Therefore, the Securities must be
held indefinitely unless they are subsequently registered under the Act, or an
exemption from such registration is available. Holder understands that unless
the Shares are registered under the Act the certificate evidencing the Shares
will be imprinted with a legend which prohibits the transfer of the Shares
unless they are registered or unless the Company receives an opinion of counsel
reasonably satisfactory to the Company that such registration is
4
<PAGE> 5
not required. Holder is aware of the adoption of Rule 144 by the Securities and
Exchange Commission and that at the time Holder wishes to sell the Securities,
the Company may not be satisfying the current public information requirements of
Rule 144 and, in such case, Holder would be precluded from selling the
Securities under Rule 144. Holder understands that a stop transfer instruction
will be in effect with respect to transfer of Securities inconsistent with the
requirements of all applicable securities laws.
9. Registration Rights. Holder shall be entitled to the
registration rights set forth on Attachment 3 to this Warrant.
10. Miscellaneous. This Warrant shall be governed by the laws of
the State of California. The headings in this Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the Company and the registered Holder hereof. All notices and other
communications from the Company to Holder shall be mailed by first-class
registered or certified mall, postage prepaid, to the address furnished to the
Company in writing by the last Holder of this Warrant who shall have furnished
an address to the Company in writing.
ISSUED effective the 21st day of April 1997.
BUSINESS RESOURCE GROUP,
a California Corporation
By: /s/ Charles J. Winter
-----------------------------------------
Title: President and Chief Executive Officer
---------------------------------------
5
<PAGE> 6
Attachment 1
NOTICE OF EXERCISE
TO: BUSINESS RESOURCE GROUP
1. The undersigned hereby elects to purchase ________________ shares of
the Common Stock of Business Resource Group, pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in full,
together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
--------------------------------------
Name of Warrant Holder
Date:
---------------------------------
By:
-----------------------------------
Title:
--------------------------------
6
<PAGE> 7
Attachment 2
NOTICE OF CONVERSION
TO: BUSINESS RESOURCE GROUP
1. The undersigned hereby elects to acquire ________________ shares of
the Common Stock of Business Resource Group, pursuant to the terms of the
attached Warrant, by conversion of _________ percent (____%) of the Warrant.
2. Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
--------------------------------------
Name of Warrant Holder
Date:
---------------------------------
By:
-----------------------------------
Title:
--------------------------------
7
<PAGE> 8
Attachment 3
STATEMENT OF REGISTRATION RIGHTS
1. Definitions. For purpose of the Warrant to which this
Statement of Registration Rights is attached as Attachment 3:
(a) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933, as
amended (the "Act"), and the declaration or ordering of effectiveness of such
registration statement or document;
(b) The term "Registrable Securities" means the shares of
Common Stock issued or issuable upon exercise of the Warrant;
(c) The term "Holder" means the original holder of the
Warrant and any permitted transferee of the Warrant to the extent such persons
are the holders of Registrable Securities; and
(d) The term "Warrant" means the original Warrant dated
April 21, 1997 issued to Gateway Advisors, Inc. and all Warrants issued as a
result of the transfer of such original Warrant.
2. Company Registration. If (but without any obligation to do so) the
Company proposes at any time before April 21, 2002 to register (including for
this purpose a registration effected by the Company for shareholders other than
Holder) any of its stock or other securities under the Act in connection with
the public offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to participants in a
Company stock plan, or a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), the
Company shall, at such time, promptly give Holder written notice of such
registration. Upon the written request of Holder given within fifteen (15) days
after mailing of such notice by the Company, the Company shall, subject to the
provisions of Section 7 hereof and Section 6 of the Warrant, cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
3. Obligation of the Company. Subject to the terms of the Warrant and
this Attachment 3, in the event that the Company is to effect the registration
of any Registrable Securities pursuant to Section 2 hereof, the Company shall
promptly:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
holders of a majority of the securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days,
8
<PAGE> 9
or such shorter period as is required to dispose of all securities covered by
such registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to Holder such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as Holder may reasonably request in order to
facilitate the disposition of Registrable Securities owned by Holder.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by Holder,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions or to agree to any
restrictions as to the conduct of its business in the ordinary course thereof.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Holder shall
also enter into and perform its obligations under such underwriting agreement,
including furnishing an opinion of counsel for such Holder if requested by the
managing underwriter.
(f) Notify Holder at any time when a prospectus relating to
Registrable Securities of Holder covered by such registration statement is
required to be delivered under the Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made.
(g) Furnish, at the request of Holder, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to the Warrant, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to Holder and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to Holder.
9
<PAGE> 10
4. Availability of Rule 144. Notwithstanding anything in the Warrant or
this Statement of Registration Rights to the contrary, the Company shall not be
obligated to effect any such registration, qualification or compliance, pursuant
to Section 2, if application of Rule 144 would allow Holder requesting a
registration under Section 2 to dispose of the Registrable Securities for which
a registration is demanded within a single 90-day period.
5. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to the Warrant that the
selling Holder shall furnish to the Company such information regarding itself,
the Registrable Securities held by Holder, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
6. Expenses. The Company shall bear and pay all expenses other than
underwriting discounts and commissions incurred in connection with any
registration, filing or qualification of Registrable Securities with respect to
the registrations pursuant to Section 2 hereof for Holder, including (without
limitation) all registration, filing, and qualification fees, printers and
accounting fees relating or apportionable thereto, and the cost of any
reasonable fees or disbursements of counsel for Holder.
7. Underwriting Requirements. In connection with any registrations in
which Registrable Securities have a right to be included pursuant to Section 2
hereof and which involves an underwriting of securities being issued by the
Company, the Company shall not be required, under Section 2 hereof, to include
any of Holder's securities in such underwriting unless Holder accepts the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by it, and then only in such quantity as will not, in the opinion of
the underwriters, jeopardize the success of the offering by the Company. If the
total amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters reasonably believe
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters believe will not jeopardize the
success of the offering, the securities so included to be apportioned pro rata
among the selling Holder and other shareholders holding contractual registration
rights according to the total amount of securities entitled to be included
therein owned by each selling shareholder or in such other proportions as shall
mutually be agreed to by Holder and each other selling shareholder.
8. Delay of Registration. Holder shall have no right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of the Warrant.
9. Indemnification. In the event any Registrable Securities are
included in a registration statement filed by the Company:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless Holder, its officers and directors, any underwriter (as
defined in the Act) for Holder and each person, if any, who controls Holder or
underwriter within the meaning of the Act or the
10
<PAGE> 11
Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or several) asserted by a third
party to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation of the Company of the Act, the 1934
Act, any state securities law or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities law; and the Company will reimburse
Holder, any of its officers or directors, underwriter or controlling person for
any legal or other expenses reasonably incurred by them, as incurred, in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, underwriter or controlling person.
(b) To the extent permitted by law, Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the registration statement, each person, if any, who controls the Company
with the meaning of the Act, any underwriter and any other shareholder selling
securities in such registration statement or any of its directors or officers or
any person who controls such shareholder, against any losses, claims, damages,
or liabilities (joint or several) asserted by a third party to which the Company
or any such director, officer, controlling person, or underwriter or controlling
person, or other such shareholder or director, officer or controlling person may
become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by Holder expressly for use in
connection with such registration; and Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, underwriter or controlling person, other shareholder,
officer, director, or controlling person, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the obligations of Holder hereunder shall be limited to
an amount equal to the net proceeds (equal to the offering price less the
exercise price, expenses and underwriting commissions and discounts) to such
Holder of Shares sold as contemplated herein. Notwithstanding the foregoing, the
indemnity agreement contained in this Section 9(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Holder, which consent shall not be
unreasonably withheld.
11
<PAGE> 12
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying part under this Section 9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 9, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 9.
10. Reports Under the 1934 Act. With a view to making available to
Holder the benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the SEC that may at any time permit Holder to sell securities of
the Company to the public without registration, the Company will endeavor to:
(a) Make and keep public information available, as those
terms are understood and defined in SEC Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(c) furnish to Holder, so long as Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144, the Act and the
1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing Holder of any
rule or regulation of the SEC which permits the selling of any such securities
without registration or pursuant to such form.
11. Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to the Warrant may be assigned by
Holder to a permitted transferee or assignee of the Warrant or of at least
30,000 Shares, provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act.
12
<PAGE> 13
Attachment 4
STATEMENT OF HOLDER
The undersigned, represents and warrants to Business Resource Group, a
California corporation that the representations and warranties contained in
Section 8 of the Common Stock Purchase Warrant to which this Statement is
attached are true and correct. The undersigned also agrees to be bound by the
terms of Section 9(b) of Attachment 3 to such Warrant.
GATEWAY ADVISORS, INC.
By: /s/ Robert Wallace
--------------------------------
President
13
<PAGE> 1
Exhibit 11.1
BUSINESS RESOURCE GROUP
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
------------------ ------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
PRIMARY
Net income ................................ $ 534 $ 527 $1,043 $ 933
====== ====== ====== ======
Weighted average shares outstanding-
Common shares ......................... 4,883 4,841 4,878 4,841
Common equivalent shares-
Stock options ......................... 102 78 67 48
------ ------ ------ ------
Total common stock and common
stock equivalents ..................... 4,985 4,919 4,945 4,889
====== ====== ====== ======
Net income per common and
common share equivalent ............... $ .11 $ .11 $ .21 $ .19
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-01-1996
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<CASH> 1,614
<SECURITIES> 0
<RECEIVABLES> 14,343
<ALLOWANCES> 62
<INVENTORY> 951
<CURRENT-ASSETS> 18,016
<PP&E> 3,440
<DEPRECIATION> 888
<TOTAL-ASSETS> 21,554
<CURRENT-LIABILITIES> 7,234
<BONDS> 0
0
0
<COMMON> 49
<OTHER-SE> 14,144
<TOTAL-LIABILITY-AND-EQUITY> 21,554
<SALES> 18,551
<TOTAL-REVENUES> 22,526
<CGS> 14,771
<TOTAL-COSTS> 17,604
<OTHER-EXPENSES> 4,022
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 911
<INCOME-TAX> 377
<INCOME-CONTINUING> 534
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 534
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
