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UNITED STATES 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 period ended June 30, 2002

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 No. 1-16025

HEADWAY CORPORATE RESOURCES, INC.
---------------------------------
(Exact name of registrant as specified in its charter)

DELAWARE 75-2134871
(State of other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)

317 Madison Avenue, New York, New York 10017
--------------------------------------------
(Address of principal executive offices)

(212) 672-6501
--------------
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed sine last
report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

Yes [ X ] No [ ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court.

Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 13,914,627 shares of common
stock.





FORM 10-Q
HEADWAY CORPORATE RESOURCES, INC. AND SUBSIDIARIES

INDEX

Page

PART I. Financial Information 3

Item 1. Financial Statements 3

Consolidated Balance Sheets
June 30, 2002 (Unaudited) and December 31, 2001 3

Unaudited Consolidated Statements of Operations
Three and Six Months Ended June 30, 2002 and 2001 4

Unaudited Consolidated Statement of Stockholders'
Equity/(Deficit) Six Months Ended June 30, 2002 5

Unaudited Consolidated Statements of Cash Flows
Six Months Ended June 30, 2002 and 2001 7

Notes to Consolidated Financial Statements 8

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13

Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17


PART II. Other Information 17

Item 1. Legal Proceedings 17

Item 2. Changes in Securities and Use of Proceeds 17

Item 3. Defaults Upon Senior Securities 17

Item 4. Submission of Matters to a Vote of Security Holders 17

Item 5. Other Information 18

Item 6. Exhibits and Reports on Form 8-K 18

Signatures 19

FORWARD-LOOKING STATEMENT NOTICE

When used in this report, the words "may," "will," "expect," "anticipate,"
"continue," "estimate," "project," "intend," and similar expressions are
intended to identify forward-looking statements within the meaning of Section
27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act
of 1934 regarding events, conditions, and financial trends that may affect the
Company's future plans of operations, business strategy, operating results, and
financial position. Persons reviewing this report are cautioned that any
forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may differ materially
from those included within the forward-looking statements as a result of various
factors. Such factors are discussed under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and also include
general economic factors and conditions that may directly or indirectly impact
the Company's financial condition or results of operations.

2



PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements

Headway Corporate Resources, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands, except share data)


June 30, 2002 December 31,
2001
-----------------------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 5,968 $ 8,641
Accounts receivable, trade, net 35,697 37,713
Prepaid expenses and other current assets 2,125 2,181
Deferred financing costs, current 1,792 979
Prepaid and refundable income taxes 3,552 4,279
-----------------------------
Total current assets 49,134 53,793

Property and equipment, net 5,399 5,691

Goodwill 42,440 87,313
Deferred financing costs 461 509
Other assets 1,950 1,858
-----------------------------
Total assets $ 99,384 $ 149,164
=============================

Liabilities and stockholders' equity
Current liabilities:

Long-term debt, current portion $ 82,000 $ -
Accounts payable 1,202 1,302
Accrued expenses 7,200 7,848
Accrued payroll 8,728 8,319
Capital lease obligations, current portion 190 224
Earnouts payable 545 1,287
------------------------------
Total current liabilities 99,865 18,980

Capital lease obligations, less current portion 44 111
Long-term debt - 82,000
Deferred rent 988 1,073
Deferred income taxes 307 307
Other liabilities - 264

Commitments and contingencies
Preferred stock---$.0001 par value, 5,000,000 shares
authorized: Series G, convertible preferred
stock--$.0001 par value, 1,000 shares authorized and
outstanding (aggregate liquidation value $22,162). 22,162 20,000

Stockholders' (deficit) equity
Common stock---$.0001 par value, 20,000,000 shares
authorized, 13,914,627 and 10,914,627 shares issued and
outstanding at June 30, 2002 and December 31, 2001,
respectively 1 1
Additional paid-in capital 18,920 18,268
Notes receivable (71) (71)
Deferred compensation (324) (382)
(Accumulated deficit) / retained earnings (42,226) 9,220
Other comprehensive (loss) (282) (607)
------------------------------
Total stockholders' (deficit) equity (23,982) 26,429
------------------------------
Total liabilities and stockholders' (deficit) equity $ 99,384 $ 149,164
==============================
See accompanying notes.

3



Headway Corporate Resources, Inc. and Subsidiaries

Consolidated Statements of Operations
(Unaudited)
(Dollars in Thousands, except per share data)



Three months ended June 30 Six months ended June 30,
2002 2001 2002 2001
-----------------------------------------------------

Revenues $ 65,877 $ 83,181 $ 135,518 $ 172,894

Operating expenses:
Direct costs 51,627 65,561 108,507 129,452
Selling, general and administrative 13,649 15,825 27,166 34,506
Depreciation and amortization 498 1,425 966 2,811
-----------------------------------------------------
65,774 82,811 136,639 166,769

Operating income 103 370 (1,121) 6,125

Other (income) expenses:
Interest expense 2,899 2,161 6,753 4,236
Interest income (16) (14) (41) (28)
-----------------------------------------------------
2,883 2,147 6,712 4,208

(Loss) income before income tax
(benefit) expense and cumulative
effect of accounting change (2,780) (1,777) (7,833) 1,917
Income tax (benefit) expense (880) (871) (2,424) 839
-----------------------------------------------------
(Loss) income before cumulative
effect of accounting change (1,900) (906) (5,409) 1,078

Cumulative effect of accounting change - - 45,000 -
-----------------------------------------------------
Net (loss) income (1,900) (906) (50,409) 1,078

Preferred dividend requirements (541) (375) (1,037) (750)
-----------------------------------------------------
Net (loss) income available for
common stockholders $ (2,441) $ (1,281) $ (51,446) $ 328
=====================================================


Basic and diluted (loss) earnings per share:

Basic and diluted (loss) income per
common share before cumulative
effect of accounting change $ (.21) $ (.12) $ (.57) $ .03
Cumulative effect of accounting
change - - (4.00) -
-----------------------------------------------------
Basic and diluted (loss) income per
common share $ (.21) $ (.12) $ (4.57) $ .03
=====================================================


See accompanying notes.

4



Headway Corporate Resources, Inc. and Subsidiaries

Consolidated Statement of Stockholders' Equity (Deficit)
Six Months Ended June 30, 2002
(Unaudited)
(Dollars in thousands, except share data)


- -------------------------------------------------------------------------------------------
Additional
Common Stock Paid-in Notes Deferred
Shares Amount Capital Receivable Compensation
- -------------------------------------------------------------------------------------------
Balance at December 31, 2001 10,914,627 $ 1 $18,268 $ (71) $ (382)
Amortization of stock-based
compensation - - - - 58
Preferred stock dividends - - - - -
Exercise of warrants 3,000,000 - 474 - -
Repricing of warrants (Note 6) - - 73 - -
Issuance of warrants (Note 6) - - 105 - -
Translation adjustment - - - - -
Change in fair value of derivative - - - - -
Net (loss) - - - - -
Comprehensive (loss) - - - - -
- -------------------------------------------------------------------------------------------
Balance at June 30, 2002 13,914,627 $ 1 $18,920 $ (71) $ (324)
- -------------------------------------------------------------------------------------------
See accompanying notes.



5




Headway Corporate Resources, Inc. and Subsidiaries

Consolidated Statement of Stockholders' Equity (Deficit), Continued
Six Months Ended June 30, 2002
(Unaudited)
(Dollars in thousands, except share data)


- --------------------------------------------------------------------------------
Retained Accumulated Total
Earnings Other Stockholders'
(Accumulated Comprehensive Equity
Deficit) (Loss) (Deficit)
- --------------------------------------------------------------------------------
Balance at December 31, 2001 $ 9,220 $ (607) $ 26,429
Amortization of stock-based
compensation - - 58
Preferred stock dividends (1,037) - (1,037)
Exercise of warrants - - 474
Repricing of warrants (Note 6) - - 73
Issuance of warrants (Note 6) - - 105
Translation adjustment - 61 61
Change in fair value of derivative - 264 264
Net (loss) (50,409) - (50,409)
--------
Comprehensive (loss) - - (50,084)
- --------------------------------------------------------------------------------
Balance at June 30, 2002 $ (42,226) $ (282) $ (23,982)
- --------------------------------------------------------------------------------
See accompanying notes.


6



Headway Corporate Resources, Inc. and Subsidiaries

Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in Thousands)


Six months ended June 30,
2002 2001
------------------------------
Operating activities:
Net (loss) income $ (50,409) $ 1,078
Adjustments to reconcile net (loss) income to
net cash provided by Operating activities:
Cumulative effect of accounting change 45,000 -
Depreciation and amortization 966 2,811
Amortization of deferred financing costs 1,993 407
Provision for bad debt 172 258
Amortization of deferred compensation 58 58
Changes in assets and liabilities
Accounts receivable 1,925 4,631
Prepaid expenses and other assets (348) (709)
Prepaid and refundable income taxes 800 -
Other assets (95) -
Accounts payable and accrued expenses 710 (2,942)
Accrued payroll 517 (4,900)
Income taxes payable - 1,074
Deferred rent (84) (51)
------------------------------
Net cash provided by operating activities 1,205 1,715
------------------------------
Investing activities:
Expenditures for property and equipment (657) (896)
Repayment from notes receivable - 6
Cash paid for acquisitions (872) (4,005)
------------------------------
Net cash (used in) investing activities (1,529) (4,895)
------------------------------
Financing activities:
Net proceeds from long-term debt - 12,300
Payment of capital lease obligations (101) (150)
Payments of loan acquisition fees (2,179) (100)
Cash dividends paid - (750)
------------------------------
Net cash (used in) provided by financing activities (2,280) 11,300
------------------------------
Effect of exchange rate changes on cash and cash
equivalents (69) (236)
------------------------------

(Decrease) increase in cash and cash equivalents (2,673) 7,884
Cash and cash equivalents at beginning of period 8,641 1,549
------------------------------
Cash and cash equivalents at end of period $ 5,968 $ 9,433
==============================

Non-cash Financing Activity
In May 2002, the holders of the Senior Subordinated Notes and the Series G
Convertible Preferred Stock surrendered $474,000 in accrued and unpaid interest
on the Senior Subordinated Notes to exercise the Series G Warrants. In
connection with this exercise, the Company issued 3.0 million shares of common
stock to the Holders.

7




HEADWAY CORPORATE RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

June 30, 2002

(1) BASIS OF PRESENTATION

Headway Corporate Resources, Inc. and its wholly owned subsidiaries
(collectively referred to as the "Company") provide strategic staffing solutions
and personnel worldwide. Its operations include information technology staffing,
temporary staffing, human resource staffing, permanent placement and executive
search. Headquartered in New York, the Company has temporary staffing offices in
California, Connecticut, Florida, New Jersey, North Carolina, Virginia, and
Texas and executive search offices in New York, Illinois, Massachusetts, the
United Kingdom, Japan, Hong Kong and Australia. These consolidated financial
statements include the accounts of Headway Corporate Resources, Inc. and its
subsidiaries.

The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six month periods ended June 30, 2002 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2002.

The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements.

For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended December 31, 2001.

The Company's working capital deficit was $50,731,000 at June 30, 2002, compared
to working capital of $34,813,000 at December 31, 2001. The working capital
deficiency is a direct result of the reclassification of the Company's borrowing
under the Senior Credit Facility and the Senior Subordinated Notes as current
liabilities. Notwithstanding this deficiency and assuming the Company continues
to meet its bank covenants, management expects that the Company's working
capital position will be sufficient to meet all of its working capital needs
through June 2003. The Company has met its bank covenants for the three months
ended June 30, 2002. However, there can be no assurance that we will continue to
do so. The Company is currently evaluating various financing alternatives and
exploring strategic options. The Company believes that it will be successful in
re-negotiating the terms of its Senior Credit Facility and Senior Subordinated
Notes to extend the maturity dates or in finding an additional source of
funding. However, if the Company is unable to adequately refinance the Senior
Credit Facility by June 2003, the Company may not have adequate liquidity to
operate its business.

(2) GOODWILL

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141, "Business Combinations",
effective for all combinations initiated after June 30, 2001, and No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"), effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the Statement. Other
intangible assets will continue to be amortized over their useful lives.

Upon adoption of SFAS 142 in the first quarter of 2002, the Company recorded a
one-time, non-cash charge of $45 million to reduce the carrying value of its
goodwill. Such charge is non-operational in nature and is reflected as a
cumulative effect of an accounting change in the accompanying consolidated

8


statement of operations. In calculating the impairment charge, the fair value of
the impaired reporting units underlying the business segments (see Note 5) were
estimated using a discounted cash flow methodology.

A summary of the change in the Company's goodwill during the six months and
total assets at June 30, 2002, by reporting units is as follows:


Goodwill
------------------------------------------------------------- Total Assets
January 1, 2002 Adjustments (i) Impairments June 30, 2002 June 30, 2002
--------------- --------------- ------------ ------------- -------------
Executive Search $ 11,086,000 $ 61,000 $ (8,200,000) $ 2,947,000 $ 7,596,000
Temporary Staffing 42,415,000 66,000 (10,800,000) 31,681,000 82,845,000
Technology Staffing 33,812,000 - (26,000,000) 7,812,000 12,983,000
--------------- --------------- ------------ ------------- -------------
Total $ 87,313,000 $ 127,000 $(45,000,000) $ 42,440,000 $ 103,424,000
=============== =============== ============ ============= =============

(i) During the six months ended June 30, 2002, additional purchase price of
$127,000 was recorded as goodwill upon the determination that the earnouts had
been met on certain acquisitions made in 1997, 1998 and 1999.

The 2001 results on a historical basis do not reflect the provisions of SFAS
142. Had the Company adopted SFAS 142 on January 1, 2001 and ceased to amortize
goodwill at such date, the historical net income and basic and diluted net
income per common share would have been changed to the adjusted amounts
indicated below:


Six Months Ended June 30, 2001
---------------------------------------------------------
Net income per Net income per
Net income basic common share diluted common share
---------------------------------------------------------
As reported--historical basis $ 328,000 $ .03 $ .03
Add: Goodwill amortization 2,008,000 .19 .19
Income tax impact (873,000) (.08) (.08)
---------------------------------------------------------
Adjusted $ 1,463,000 $ .14 $ .14
=========================================================

Three Months Ended June 30, 2001
---------------------------------------------------------
Net income per Net income per
Net income basic common share diluted common share
---------------------------------------------------------
As reported--historical basis $ (1,281,000) $ (.12) $ (.12)
Add: Goodwill amortization 1,005,000 .09 .09
Income tax impact (438,000) (.04) (.04)
---------------------------------------------------------
Adjusted $ 714,000 $ (.07) $ (.07)
=========================================================


(3) DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses interest rate swap contracts for hedging purposes. The Company
had entered into interest rate swap agreements that effectively converted a
portion of its floating-rate debt to a fixed-rate basis through April 18, 2002,
thus reducing the impact of interest-rate changes on interest expense.
Approximately $30,000,000 of the Company's outstanding long-term debt was
designated as the hedged item to an interest rate swap agreement which expired
on April 18, 2002. For interest rate swaps, the net amounts paid or received and
net amounts accrued through the end of the accounting period were included in
interest expense. Unrealized gains or losses on interest rate swap contracts
were not recognized in income. During the six months ended June 30, 2002, the
Company recognized a change in fair value of the derivative of $264,000 related
to the change in fair value of the interest rate swap contract net of applicable
income taxes of $16,000 as a component of other comprehensive income.

(4) (LOSS) EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted (loss)
earnings per share:

9



Three months ended June 30, Six months ended June 30,
2002 2001 2002 2001
------------------------------------------------------
Numerator:
Net (loss) income $(1,900,000) $(906,000) $(50,409,000) $1,078,000
Cumulative effect of accounting change - - 45,000,000 -
Preferred dividend requirements (541,000) (375,000) (1,037,000) (750,000)
------------------------------------------------------
Numerator for basic and diluted (loss)
earnings per share - net (loss) income
available for common stockholders before
cumulative effect of accounting change (2,441,000) (1,281,000) (6,446,000) 328,000
======================================================

Denominator:
Denominator for basic and diluted
(loss) earnings per share-- 11,784,572 10,729,627 11,260,014 10,729,627
weighted average shares ======================================================

Basic and diluted (loss) earnings
per share before cumulative effect $ (.21) $ (.12) $ (.57) $ .03
of accounting change
======================================================

(5) BUSINESS SEGMENTS

The Company classifies its business into two fundamental areas, staffing and
executive search. Staffing consists of the placement and payrolling of temporary
and permanent office, clerical and information technology professional
personnel. Executive search focuses on placing middle to upper level management
positions. The Company evaluates performance based on the segments' (loss)
profit from operations before unallocated corporate overhead.


Three months ended June 30, 2002 Three months ended June 30, 2001
-------------------------------------------------------------------
Staffing Executive Search Staffing Executive Search
-------------------------------------------------------------------
Revenues $60,445,000 $ 5,432,000 $76,960,000 $ 6,221,000
Segment (loss) profit (904,000) (185,000) (710,000) 266,000

Six months ended June 30, 2002 Six months ended June 30, 2001
-------------------------------------------------------------------
Staffing Executive Search Staffing Executive Search
-------------------------------------------------------------------
Revenues $125,760,000 $9,758,000 $152,753,000 $ 20,141,000
Segment (loss) profit (2,612,000) (717,000) (1,275,000) 3,236,000


A reconciliation of combined segment (loss) profit to consolidated net (loss)
income is as follows:


Three months ended June 30, Six months ended June 30,
2002 2001 2002 2001
-------------------------------------------------------

Total (loss) profit for reportable
segments $(1,089,000) $ (444,000) $ (3,329,000) $ 1,961,000
Unallocated amounts: - - - -
Interest expense (804,000) (278,000) (2,186,000) (551,000)
Corporate overhead (425,000) (508,000) (966,000) (1,025,000)
Cumulative effect of accounting change - - (45,000,000) -
Income tax benefit 418,000 324,000 1,072,000 693,000
-------------------------------------------------------
Net (loss) income $(1,900,000) $ (906,000) $(50,409,000) $ 1,078,000
=======================================================



10



(6) LONG-TERM DEBT AND CREDIT FACILITIES

In March 1998, Headway obtained $105 million of financing consisting of $85
million in senior debt, $20 million of equity financing and $10 million of
senior subordinated debt. As of June 30, 2002, $72,000,000 in aggregate
principal amount was outstanding under the Senior Credit Facility. The Company's
Senior Credit Facility matures on June 30, 2003 (see below), resulting in a
reclassification of the obligation from a long-term liability at December 31,
2001 to a current liability at June 30, 2002. Substantially all assets of the
Company have been pledged as collateral for the senior credit facility.

As of June 30, 2002, $10,000,000 in aggregate principal amount was outstanding
under the Senior Subordinated Notes and $20,000,000 in face amount of Series G
Convertible Preferred Stock of the Company (the "Preferred Stock") was
outstanding. The senior subordinated notes are payable in March 2006 and bear
interest at 12% per annum until March 2001, increasing to 14% per annum
thereafter. In January 2001, the terms of the senior subordinated notes were
amended, including increasing the effective interest rate to 13% until March
2001 and 15% thereafter.

On April 17, 2002, the Senior Credit Facility and Senior Subordinated Notes were
amended and the Company entered into the Second Limited Waiver with the Senior
Subordinated Notes Holders and the Preferred Stockholders, which provided the
following:

(i) An extension of the Senior Credit Facility maturity date to June 30, 2003.
(ii) A waiver of the events of default on the Senior Subordinated Notes from
March 31, 2002 through the "Recap Amendment Termination Date", defined as
the earliest of (1) June 30, 2003 or such earlier on date on which the
Senior Indebtedness may mature; (2) the date on which all amounts due under
the Senior Credit Facility shall have been paid in full in cash; (3) the
date on which the Senior Credit Facility is amended or modified in a manner
that (A) increases the Base Rate, the Default Rate, the Applicable Margin
or any other interest rate on the Senior Indebtedness (B) decreases the PIK
Amount (C) increases the amount of fees or other payments due to the Agent
or any Lender under the Senior Credit Facility (other than increases made
in connection with events of default under the Senior Credit Facility that
do not exceed, in the aggregate, 0.50% of the outstanding Senior
Indebtedness), or (D) in consideration of which, the Agent (as defined in
the Senior Credit Facility) or any Lender under the Senior Credit Facility
is issued any additional equity interest in the Company; and (4) the
acceleration of any indebtedness under the Senior Credit Facility or the
exercise of any rights or remedies by any of the Lenders under the Senior
Credit Facility.
(iii)A waiver of the payment of interest (but not the accrual of interest)
under the Senior Subordinated Notes from March 31, 2002 through the Recap
Amendment Termination Date.
(iv) A waiver of the Preferred Stock events of default and a waiver of the
payment of dividends (but not the accrual of dividends) on the Preferred
Stock from March 31, 2002 through the Recap Amendment Termination Date.
Under the terms of the Second Limited Waiver, dividends on the Preferred
Stock accrue as additional liquidation preference. Accordingly, the accrued
dividend balance as of December 31, 2001 has been re-classified from
accrued expenses to preferred stock.
(v) A waiver of the increase in interest rate on the Senior Subordinated Notes
from 15% to 20% retroactive to July 1, 2001.
(vi) An adjustment to the exercise price of the First Series G Warrants and the
Third Series G Warrants to $0.25 per share. The re-pricing of the First
Series G Warrants and the Third Series G Warrants resulted in deferred
financing costs based on the fair value of the warrants of $73,000, which
is being amortized through June 2003.
(vii)Required maintenance of certain amounts of EBITDA, as defined, and maximum
amounts of capital expenditures, as defined.
(viii) That the Company take all actions necessary to obtain Common Stockholder
Approval at a stockholder meeting to be held no later than July 15, 2002,
subject to extension under certain circumstances. Such approval was
obtained on July 15, 2002.
(ix) That the Company issue warrants to purchase 2,455,522 shares of common
stock at $0.25 per share to the lenders in connection with the amendment of
its Senior Credit Facility. Such warrants were issued in April 2002. The
issuance of these warrants resulted in deferred financing costs based on
the fair value of the warrants of $105,000, which is being amortized
through June 2003.

In May 2002, the holders of the Senior Subordinated Notes and the Series G
Convertible Preferred Stock surrendered $474,000 in accrued and unpaid interest
on the Senior Subordinated Notes to exercise the Series G Warrants. In
connection with this exercise, the Company issued 3.0 million shares of common
stock to the Holders.

11


(7) COMPREHENSIVE (LOSS) INCOME

During the six months ended June 30, 2002 and 2001, total comprehensive (loss)
income amounted to $(50,084,000) and $603,000, respectively, and during the
three months ended June 30, 2002 and 2001, total comprehensive (loss) amounted
to $(1,944,000) and $(779,000), respectively.

(8) LEGAL PROCEEDINGS

In the ordinary course of its business, Headway is periodically threatened with
or named as a defendant in various lawsuits, including discrimination,
harassment, and other similar claims. Headway maintains insurance in such
amounts and with such coverage and deductibles as management believes are
reasonable.

In May 2000, a lawsuit was filed in the Judicial District Court of Dallas
County, Texas alleging breach of contract, fraud, negligence, negligent
retention and supervision, civil conspiracy and harmful access by computer. In
July 2002, a preliminary judgment was entered in the amount of $790,000 against
Headway and the other defendants. The Company plans to appeal the ruling and
believes it will be successful in reducing the amount of the judgment. The net
loss for the six months ended June 30, 2002 reflects the full amount of the
preliminary judgment.

12



PART 1. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations

Critical Accounting Policies

Revenue Recognition

Information technology staffing, temporary staffing and human resource staffing
revenue is recognized when the temporary personnel perform the related services.
Permanent placement revenue is recognized when the placement is employed.
Provisions are made for estimated losses in realization (principally due to
applicants not remaining in employment for the guaranteed period, usually 90
days) and for bad debts. These provisions are reviewed periodically and have
always been found to be adequate based on Headway's experience in this regard.

Executive search services are primarily engaged on a retainer basis. Income from
retainer contracts which provide for periodic billings over periods of up to one
year, is recognized as earned based on the terms of the contract.

Goodwill

Goodwill prior to the first quarter of 2002 was amortized utilizing the
straight-line method over a period of 20 to 30 years. Headway periodically
evaluated the carrying value and the periods of amortization of goodwill based
on the current and expected future non-discounted income from operations of the
entities giving rise to the goodwill to determine whether events and
circumstances warranted revised estimates of carrying value or useful lives. No
such write-downs were made.

During the first quarter of 2002 Headway Corporate Resources, Inc. and its
wholly owned subsidiaries (collectively referred to as the "Company") adopted
Statements of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). Under the new rules, goodwill and intangible
assets deemed to have indefinite lives are no longer amortized but are subject
to annual impairment tests in accordance with the Statement. Other intangible
assets continue to be amortized over their useful lives. Under SFAS 142,
goodwill impairment is deemed to exist if the net carrying value of a reporting
unit's goodwill exceeds its estimated fair value. The Company's reporting units
are one level below the operating segments underlying the segments identified in
Note 5-Segment Information. Upon adoption of SFAS 142 in the first quarter of
2002, the Company recorded a one-time, non-cash charge of $45 million to reduce
the carrying value of its goodwill. Such charge is non-operational in nature and
is reflected as a cumulative effect of an accounting change in the accompanying
consolidated statement of operations.

Results of Operations

Overview

The results for the second quarter reflect a significant reduction in the demand
for the Company's staffing and executive search services. This trend is a direct
result of the soft economy and is consistent with the performance of the other
staffing and executive search companies in the sector. Many companies have
instituted hiring freezes for both temporary and permanent positions. The
financial services industry has reduced its demand for the Company's executive
search services as a direct result of the poor financial performance across the
financial services industry. The Company believes that the performance for the
balance of the year will continue to be impacted by the performance in the
general economy. The performance in executive search for the balance of the year
will depend in part on the financial services industry. The Company has taken
steps to reduce costs and is constantly looking for growth opportunities.

Consolidated

Revenues for the three and six months ended June 30, 2002 decreased $17,304,000
and $37,376,000 or 20.8% and 21.6%, respectively, compared with the
corresponding periods of the prior year. The decrease was attributable to an
overall decline in the demand for the Company's staffing and executive search
services as a direct result of weakness in the economy.

13


The executive search subsidiary, Whitney Partners, LLC (Whitney) contributed
$5,432,000 to consolidated revenues in the second quarter of 2002, a decrease of
$789,000 from $6,221,000 for the same period in 2001. Whitney's revenues for the
six months ended June 30, 2002 were $9,758,000 a decrease of $10,383,000 from
$20,141,000 for the same period in 2001. The decrease reflects a sharp decline
in the demand for new hires in the financial services industry.

The staffing subsidiary, Headway Corporate Staffing Services, Inc. (HCSS)
contributed revenues of $60,445,000 to consolidated revenues in the second
quarter of 2002, a decrease of $16,515,000 from $76,960,000 for the same period
in 2001. HCSS revenues for the six months ended June 30, 2002 were $125,760,000
a decrease of $26,993,000 from $152,753,000 for the same period in 2001. The
decline in revenues was a result of the negative impact of the unfavorable
economic conditions on the demand for information technology and clerical
staffing services.

Total operating expenses for the three and six months ended June 30, 2002
decreased $17,037,000 and $30,130,000, respectively, compared with the
corresponding periods of the prior year. The decrease in operating expenses for
the three months ended June 30, 2002 as compared to the same period in 2001 is
the result of a $13.9 million decrease in direct costs, a $2.2 million decrease
in selling, general and administrative expenses, and a $0.9 million decrease in
depreciation and amortization. The decrease in operating expenses for the six
months ended June 30, 2002 as compared to the same period in 2001 is the result
of a $20.9 million decrease in direct costs, a $7.3 million decrease in selling,
general and administrative expenses, and a $1.8 million decrease in depreciation
and amortization. Direct costs decreased as a percentage of revenues from 78.8%
to 78.4% for the second quarter of 2002 compared with the same period in 2001
while direct costs increased as a percentage of revenues to 80.1% from 74.9% for
the six months ended June 30, 2002 compared with the same period in 2001. The
increase in direct costs as a percentage of revenues for the six months ended
June 30, 2002 compared with the same period in 2001 is a result of a change in
Headway's business mix in 2002. Specifically, the executive search and permanent
placement business that has no direct costs experienced more significant
declines than the staffing business, therefore reducing its percentage of our
total revenues. Selling, general and administrative expenses increased as a
percentage of revenues from 19.0% in second quarter 2001 to 20.7% in second
quarter 2002, and was 20.0% for both the six months ended June 30, 2002 and
2001. The decrease in depreciation and amortization for both the three and six
months ended June 30, 2002 as compared to the corresponding periods of the prior
year is a result of the adoption of Statements of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), effective January
1, 2001. Under the new rules, goodwill and intangible assets deemed to have
indefinite lives are no longer amortized but are subject to annual impairment
tests in accordance with the Statement. Amortization of goodwill recorded for
the three and six months ended June 30, 2001 was $1.0 million and $2.0 million,
respectively.

Whitney's selling, general and administrative expenses decreased $1.3 million in
the second quarter of 2002 to $4.7 million as compared to $6.0 million for the
same period last year. Whitney's selling, general and administrative expenses
decreased $4.5 million for the six months ended June 30, 2002 to $9.5 million as
compared to $13.9 million for the same period last year. The decrease relates
primarily to the reduced commissions related to the lower executive search
revenues.

HCSS' selling, general and administrative expenses decreased $0.9 million in the
second quarter of 2002 to $8.4 million as compared to $9.3 million for the same
period last year. HCSS' selling, general and administrative expenses decreased
$2.8 million for the six months ended June 30, 2002 to $16.7 million as compared
to $19.5 million for the same period last year. The decrease in selling, general
and administrative expenses is primarily attributable to the lower commission
expense associated with the decline in revenues, as well as staff reductions and
other cost-cutting initiatives implemented in the latter half of 2001, offset by
a provision of $0.8 million in connection with a preliminary judgment against
Headway as a result of a lawsuit (see Note 8).

Interest expense for the three and six months ended June 30, 2002 increased $0.7
million and $2.5 million, respectively, compared with the corresponding periods
of the prior year. The increase in interest expense is due to increased
amortization of deferred financing costs relating to the amendments completed in
April 2002 and August 2001 and an increase in the applicable margin for base
rate loans under the Amended Senior Credit Facility.

During the first quarter of 2002 the Company adopted SFAS 142. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives are no
longer amortized but are subject to annual impairment tests in accordance with
the Statement. Other intangible assets continue to be amortized over their
useful lives. Under SFAS 142, goodwill impairment is deemed to exist if the net
carrying value of a reporting unit's goodwill exceeds its estimated fair value.
The Company's reporting units are one level below the operating segments
underlying the segments identified in Note 5-Segment Information. Upon adoption
of SFAS 142 in the first quarter of 2002, the Company recorded a one-time,
non-cash charge of $45 million to reduce the carrying value of its goodwill.

14


Such charge is non-operational in nature and is reflected as a cumulative effect
of an accounting change in the accompanying consolidated statement of
operations.

Liquidity and Capital Resources

In March 1998, Headway obtained $105 million of financing consisting of $85
million in senior debt, $20 million of equity financing and $10 million of
senior subordinated debt. As of June 30, 2002, $72,000,000 in aggregate
principal amount was outstanding under the Senior Credit Facility. The Company's
Senior Credit Facility matures on June 30, 2003 (see below), resulting in a
reclassification of the obligation from a long-term liability at December 31,
2001 to a current liability at June 30, 2002. Substantially all assets of the
Company have been pledged as collateral for the senior credit facility.

As of June 30, 2002, $10,000,000 in aggregate principal amount was outstanding
under the Senior Subordinated Notes and $20,000,000 in face amount of Series G
Convertible Preferred Stock of the Company (the "Preferred Stock") was
outstanding. The Senior Subordinated Notes are payable in March 2006 and bear
interest at 12% per annum until March 2001, increasing to 14% per annum
thereafter. In January 2001, the terms of the senior subordinated notes were
amended, including increasing the effective interest rate to 13% until March
2001 and 15% thereafter.

On April 17, 2002, the Senior Credit Facility and Senior Subordinated Notes were
amended and the Company entered into the Second Limited Waiver with the Senior
Subordinated Notes Holders and the Preferred Stockholders, which provided the
following:

(i) An extension of the Senior Credit Facility maturity date to June 30, 2003.
(ii) A waiver of the events of default on the Senior Subordinated Notes from
March 31, 2002 through the "Recap Amendment Termination Date", defined as
the earliest of (1) June 30, 2003 or such earlier on date on which the
Senior Indebtedness may mature; (2) the date on which all amounts due under
the Senior Credit Facility shall have been paid in full in cash; (3) the
date on which the Senior Credit Facility is amended or modified in a manner
that (A) increases the Base Rate, the Default Rate, the Applicable Margin
or any other interest rate on the Senior Indebtedness (B) decreases the PIK
Amount (C) increases the amount of fees or other payments due to the Agent
or any Lender under the Senior Credit Facility (other than increases made
in connection with events of default under the Senior Credit Facility that
do not exceed, in the aggregate, 0.50% of the outstanding Senior
Indebtedness), or (D) in consideration of which, the Agent (as defined in
the Senior Credit Facility) or any Lender under the Senior Credit Facility
is issued any additional equity interest in the Company; and (iv) the
acceleration of any indebtedness under the Senior Credit Facility or the
exercise of any rights or remedies by any of the Lenders under the Senior
Credit Facility.
(iii)A waiver of the payment of interest (but not the accrual of interest)
under the Senior Subordinated Notes from March 31, 2002 through the Recap
Amendment Termination Date.
(iv) A waiver of the Preferred Stock events of default and a waiver of the
payment of dividends (but not the accrual of dividends) on the Preferred
Stock from March 31, 2002 through the Recap Amendment Termination Date.
Under the terms of the Second Limited Waiver, dividends on the Preferred
Stock accrue as additional liquidation preference. Accordingly, the accrued
dividend balance as of December 31, 2001 has been re-classified from
accrued expenses to preferred stock.
(v) A waiver of the increase in interest rate on the Senior Subordinated Notes
from 15% to 20% retroactive to July 1, 2001.
(vi) An adjustment to the exercise price of the First Series G Warrants and the
Third Series G Warrants to $0.25 per share. The re-pricing of the First
Series G Warrants and the Third Series G Warrants resulted in deferred
financing costs based on the fair value of the warrants of $73,000, which
is being amortized through June 2003.
(vii)Required maintenance of certain amounts of EBITDA, as defined, and maximum
amounts of capital expenditures, as defined.
(viii) That the Company take all actions necessary to obtain Common Stockholder
Approval at a stockholder meeting to be held no later than July 15, 2002,
subject to extension under certain circumstances. Such approval was
obtained on July 15, 2002.
(ix) That the Company issue warrants to purchase 2,455,522 shares of common
stock at $0.25 per share to the lenders in connection with the amendment of
its Senior Credit Facility. Such warrants were issued in April 2002. The
issuance of these warrants resulted in deferred financing costs based on
the fair value of the warrants of $105,000, which is being amortized
through June 2003.

15


The Senior Subordinated Notes due in 2006 have been classified on the balance
sheet as current because the Second Limited Waiver and Amendment is through June
2003.

In May 2002, the holders of the Senior Subordinated Notes and the Series G
Convertible Preferred Stock surrendered $474,000 in accrued and unpaid interest
on the Senior Subordinated Notes to exercise the Series G Warrants. In
connection with this exercise, the Company issued 3.0 million shares of common
stock to the Holders.

Net cash provided by operations during the six months ended June 31, 2002 and
2001, was $1,205,000 and $1,715,000, respectively. The cash provided in 2002 was
primarily attributable to a decrease in accounts receivable and prepaid and
refundable income taxes, and an increase in accounts payable and accrued
expenses. The cash provided in 2001 was primarily attributable to a decrease in
accounts receivable, and an increase in income taxes payable.

Net cash used in investing activities during the six months ended June 31, 2002
and 2001, was $1,529,000 and $4,895,000, respectively. The cash used for
investing activities relates primarily to earnout payments for acquisitions
completed during 1997 and 1998 as well as capital expenditures.

Net cash used in financing activities during the six months ended June 30, 2002
was $2,280,000, primarily relating to payments of loan acquisition fees. Net
cash provided by financing activities during the six months ended June 30, 2001
of $11,300,000 was primarily a result of additional borrowings under the
Company's senior credit facility.

The Company's working capital deficit was $50,731,000 at June 30, 2002, compared
to working capital of $34,813,000 at December 31, 2001. The working capital
deficiency is a direct result of the reclassification of the Company's borrowing
under the Senior Credit Facility and the Senior Subordinated Notes as current
liabilities. Notwithstanding this deficiency and assuming the Company continues
to meet its bank covenants, management expects that the Company's working
capital position will be sufficient to meet all of its working capital needs
through June 2003. The Company has met its bank covenants for the three months
ended June 30, 2002. However, there can be no assurance that we will continue to
do so. The Company is currently evaluating various financing alternatives and
exploring strategic options. The Company believes that it will be successful in
re-negotiating the terms of its Senior Credit Facility and Senior Subordinated
Notes to extend the maturity dates or in finding an additional source of
funding. However, if the Company is unable to adequately refinance the Senior
Credit Facility by June 2003, the Company may not have adequate liquidity to
operate its business.

On January 22, 2002, the Securities and Exchange Commission issued FR-61,
Commission Statement about Management's Discussion and Analysis of Financial
Condition and Results of Operations. The release sets forth certain views of the
Securities and Exchange Commission regarding disclosure that should be
considered by registrants. Headway's contractual obligations and commercial
commitments are summarized below. The following table includes aggregate
information about Headway's contractual obligations as of June 30, 2002 and the
periods in which payments are due:

- -------------------------------------------------------------------------------
Contractual Obligations Payments Due by Period
(in thousands)
- -------------------------------------------------------------------------------
Total Less than 1-3 years 4 - 5 After 5
1 year years years
- -------------------------------------------------------------------------------
Loans Payable $82,000 $82,000 $ - $ - $ -
- -------------------------------------------------------------------------------
Capital Lease Obligations 234 190 44 - -
- -------------------------------------------------------------------------------
Operating Leases 9,318 2,657 3,488 2,090 1,083
- -------------------------------------------------------------------------------
Unconditional Purchase
Obligations None
- -------------------------------------------------------------------------------
Other Long Term
Obligations (1) 545 545 - - -
- -------------------------------------------------------------------------------
Total Contractual Cash
Obligations $92,097 $85,392 $ 3,532 $ 2,090 $ 1,083
- -------------------------------------------------------------------------------

16




The following table includes aggregate information about Headway's commercial
commitments as of June 30, 2002. Commercial commitments are items that Headway
could be obligated to pay in the future. They are not required to be included in
the consolidated balance sheet.


- -------------------------------------------------------------------------------------
Other Commercial Total Amount of Commitment Expiration Per Period
Commitments Amounts (in thousands)
Committed --------------------------------------------
Less than 1 - 3 4 - 5 Over 5
1 year years years years
- -------------------------------------------------------------------------------------
Lines of Credit None
- -------------------------------------------------------------------------------------
Standby Letters of Credit $1,687 $1,687 $ - $ - $ -
- -------------------------------------------------------------------------------------
Guarantees None
- -------------------------------------------------------------------------------------
Standby Repurchase None
Obligations
- -------------------------------------------------------------------------------------
Other Commercial None
Commitments
- -------------------------------------------------------------------------------------
Total Commercial $ 1,687 $1,687 $ - $ - $ -
Commitments
- -------------------------------------------------------------------------------------

(1) Represents earnout amounts payable to the former owners of businesses
previously acquired by Headway.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See Note 3 to the accompanying financial statements.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of its business, Headway is periodically threatened with
or named as a defendant in various lawsuits, including discrimination,
harassment, and other similar claims. Headway maintains insurance in such
amounts and with such coverage and deductibles as management believes are
reasonable.

In May 2000, a lawsuit was filed in the Judicial District Court of Dallas
County, Texas alleging breach of contract, fraud, negligence, negligent
retention and supervision, civil conspiracy and harmful access by computer. In
July 2002 a preliminary judgment was entered in the amount of $790,000 against
Headway and the other defendants. The company plans to appeal the ruling and
believes it will be successful in reducing the amount of the judgment. The net
loss for the six months ended June 30, 2002 reflects the full amount of the
preliminary judgment.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None

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

At the Annual Meeting of stockholders held on July 15, 2002, the stockholders
elected Gary S. Goldstein and Barry S. Roseman as Class 1 directors of Headway
to serve for a term of three years. E. Garrett Bewkes, III and Ehud D. Laska
continue to serve as Class 2 directors through the Annual Meeting in 2004.
Richard B. Salomon continues to serve as a Class 3 director through the Annual
Meeting in 2003. The stockholders also ratified at the Annual Meeting the
increase in the company's authorized shares and the appointment of Ernst & Young
LLP as independent auditors of Headway for 2002.

17



The number of vote's cast on the foregoing items is as follows:

For Against Abstain
Election of Directors

Gary S. Goldstein 11,379,689 1,136 N/A
Barry S. Roseman 11,379,689 1,136 N/A

Increased in authorized shares 11,149,651 934,136 31,775

Appointment of Ernst & Young 11,926,206 61,271 128,085

ITEM 5. OTHER INFORMATION
None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

EXHIBITS: Included as Exhibit No. 99.1 is the certificate required by the
Sarbanes-Oxley Act of 2002.

REPORTS ON FORM 8-K: None

18




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.

HEADWAY CORPORATE RESOURCES, INC.

Date: August 14, 2002 By: /s/ Barry S. Roseman
-------------------------------------
Barry S. Roseman
President and Chief Operating Officer


Date: August 14, 2002 By: /s/ Philicia G. Levinson
------------------------------------
Philicia G. Levinson
Senior Vice President and
Chief Financial Officer

19