UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

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

		For quarterly period ended March 31, 2011

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

Commission File No. 001-34993

 

CTPARTNERS EXECUTIVE SEARCH INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		52-2404079
(State or other Jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1166 Avenue of the Americas, 3rd Fl., New York, NY		10036
(Address of principal executive offices)		(Zip Code)

(212) 588-3500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $0.001 per share		NYSE AMEX
(Title of each Class)		(Name of each exchange on which registered)

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

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

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

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

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes   o No

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ YES    o NO

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

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

The number of the registrant’s common shares outstanding as of March 31, 2011 was 7,181,312.

 

 

CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES

Table of Contents

Item #		Description		Page
PART I. Financial Information
Item 1.		Financial Statements
		Condensed Balance Sheets as of March 31, 2011 and December 31, 2010 (unaudited)			1
		Condensed Consolidated Statements of Operations for the three months ended March 31, 2011 and 2010 (unaudited)			2
		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010 (unaudited)			3
		Notes to Condensed Consolidated Financial Statements (unaudited)			4-8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			9-12
Item 4.		Controls and Procedures			12
Part II. Other Information
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			12
Item 6.		Exhibits			14
		Signatures			15
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

		March 31,				December 31,
		2011				2010
Assets
Current Assets
Cash		$	20,843,450			$	24,030,543
Accounts receivable, net			22,817,624				21,197,842
Other receivables			767,368				326,542
Prepaid expenses			2,637,406				2,430,879
Deferred income taxes			925,428				1,219,024
Other			1,593,354				1,003,051
Total current assets			49,584,630				50,207,881
Leasehold Improvements and Equipment, net			4,092,351				3,147,192
Other Assets			1,158,329				1,393,823
Deferred income taxes			1,043,180				346,026
		$	55,878,490			$	55,094,922
Liabilities and Stockholders’ Equity
Current Liabilities
Current maturities of long-term debt		$	149,645			$	181,962
Accounts payable			809,348				1,574,493
Accrued compensation			20,216,971				18,132,980
Accrued business taxes			1,085,435				1,419,338
Income taxes payable			325,481				1,172,649
Accrued expenses			3,141,278				3,845,685
Total current liabilities			25,728,158				26,327,107
Long-Term Liabilities
Long-term debt, less current maturities			587,026				622,929
Deferred rent, less current maturities			1,728,603				1,667,473
Total long-term liabilities			2,315,629				2,290,402
Stockholders’ Equity
Preferred stock: 1,000,000 shares authorized, no shares issued and outstanding			—				—
Common stock: $0.001 par value, 30,000,000 shares authorized; issued and outstanding March 31, 2011, 7,181,312; December 31, 2010, 7,176,920			7,181				7,177
Additional paid-in capital			34,156,237				33,622,796
Accumulated deficit			(5,186,223	)			(5,791,728	)
Accumulated other comprehensive income (loss)			(1,142,492	)			(1,360,832	)
			27,834,703				26,477,413
		$	55,878,490			$	55,094,922

See Notes to Condensed Consolidated Financial Statements.

CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		For the Three Months Ended
		March 31,
		2011				2010
		Successor				Predecessor
Net revenue		$	30,481,192			$	25,774,725
Reimbursable expenses			1,114,706				831,901
Total revenue			31,595,898				26,606,626
Operating Expenses
Compensation and benefits			23,358,751				17,624,649
General and administrative			6,056,108				5,126,317
Reimbursable expenses			1,227,963				808,924
			30,642,822				23,559,890
Operating income			953,076				3,046,736
Interest expense, net			(10,385	)			(80,793	)
Income before income taxes			942,691				2,965,943
Income tax expense			(337,186	)			(109,484	)
Net income		$	605,505			$	2,856,459
Basic income per common share		$	0.08
Diluted income per common share		$	0.08
Basic weighted-average common shares			7,178,754
Diluted weighted-average common shares			7,568,557

See Notes to Condensed Consolidated Financial Statements.

CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		For the Three Months
		Ended March 31,
		2011				2010
		Successor				Predecessor
Cash Flows From Operating Activities
Net income		$	605,505			$	2,856,459
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization			293,832				421,446
Share/equity-based compensation			495,718				165,701
Deferred income taxes			(403,557	)			—
Change in fair value of mandatorily redeemable member units			—				198,537
Changes in operating assets and liabilities:
Accounts receivable			(1,274,832	)			(3,468,302	)
Prepaid expenses			57,526				(186,528	)
Other assets and receivables			(953,685	)			229,079
Accounts payables			(778,703	)			35,329
Accrued compensation			1,900,450				4,281,695
Accrued business taxes			(192,522	)			(110,574	)
Income taxes payable			(1,070,809	)			—
Accrued expenses			(656,638	)			424,737
Deferred rent			7,542				(37,720	)
Net cash (used in) provided by operating activities			(1,970,173	)			4,809,859
Cash Flows From Investing Activities
Purchase of leasehold improvements and equipment			(1,184,296	)			(123,903	)
Cash Flows From Financing Activities
Payments on long-term debt			(68,220	)			(108,832	)
Net (payments) on revolving credit facility			—				(4,660,027	)
Payments received on members’ notes receivable			—				6,502
Redemptions of convertible promissory notes			—				(50,000	)
Net cash used in financing activities			(68,220	)			(4,812,357	)
Net decrease in cash			(3,222,689	)			(126,401	)
Effect of foreign currency on cash			35,596				(118,853	)
Cash:
Beginning			24,030,543				5,093,700
Ending		$	20,843,450			$	4,848,448

See Notes to Condensed Consolidated Financial Statements.

CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Basis of Presentation

CTPartners Executive Search Inc., along with its subsidiaries (collectively, “CTPartners” or the “Company”), is a retained executive search firm with global executive search capabilities. The Company operates in the Americas, Europe, the Middle East and Asia Pacific. The Company also has a licensing arrangement with its associated offices in Latin America.

On December 1, 2010 (the “Conversion Date”), in anticipation of the Company’s initial public offering, the Company converted from a limited liability company to a corporation. Accordingly, the Company recapitalized its members’ equity to additional paid-in capital on the Conversion Date. On December 7, 2010, the Company became a public entity, subject to the rules and regulations of the United States Securities and Exchange Commission (“SEC”), and the relevant provisions of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The Company’s common stock trades on the NYSE AMEX exchange under the symbol “CTP”.

Reference to “Successor” in this document refers to the periods beginning December 1, 2010, after the conversion to a corporation. Reference to “Predecessor” in this document refers to the periods ended before November 30, 2010, prior to our conversion to a corporation.

The accompanying unaudited condensed consolidated financial statements include the accounts of CTPartners and 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 the requirements 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 of America for complete financial statement presentation.

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 month period ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011.

The balance sheet at December 31, 2010 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.

The interim financial statements contained in this report should be read in conjunction with the audited consolidated financial statements and footnotes presented in our Form 10-K filing for the year ended December 31, 2010, filed with the SEC on March 24, 2011.

Note 2. Accounts Receivable

The allowance for doubtful accounts and reserve for billing adjustments at March 31, 2011 and December 31, 2010 was approximately $1,225,000 and $1,244,000, respectively.

Note 3. Basic and Diluted Earnings Per Share

Basic earnings per common share is computed by dividing net income by weighted average common shares outstanding for the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Common equivalent shares are excluded from the determination of diluted earnings per share in periods in which they have an anti-dilutive effect. Potentially dilutive common shares, subject to vesting, not included in basic earnings per share were 379,803 as of March 31, 2011.

CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Leasehold Improvements and Equipment

The components of the leasehold improvements and equipment as of March 31, 2011 and December 31, 2010 are as follows:

		March 31,				December 31,
		2011				2010
Leasehold improvements		$	3,402,485			$	2,723,762
Office furniture, fixtures, and equipment			2,640,870				2,268,582
Computer equipment and software			4,261,200				4,017,124
			10,304,555				9,009,468
Accumulated depreciation and amortization			(6,212,204	)			(5,862,276	)
		$	4,092,351			$	3,147,192

Depreciation and amortization expense for the three months ended March 31, 2011 and March 31, 2010, was $293,832 and $421,446 respectively.

Note 5. Line of Credit

The Company, under the terms of its revolving credit facility, may borrow an amount equal to the lesser of $10 million or the “Borrowing Base” (the Company’s eligible accounts receivable as defined in the Credit Agreement), with interest calculated at 325 basis points above the LIBOR rate as defined in the revolving credit agreement (the adjusted LIBOR rate), which was 0.2535% at March 31, 2011. The Company had no outstanding balances under the revolving credit facility at March 31, 2011 or December 31, 2010. Additionally, the Company had issued letters of credit related to certain office lease agreements secured by the Credit Agreement in the amounts of approximately $3.2 million as of March 31, 2011 and $3.0 million as of December 31, 2010. Available borrowings under the revolving credit facility were approximately $10 million at March 31, 2011.

Note 6. Equity Incentive Plan

The purpose of the 2010 equity incentive plan is to promote the interests of the Company and our stockholders by (i) attracting, retaining and motivating employees, non-employee directors and independent contractors (including prospective employees), (ii) motivating such individuals to achieve long-term Company goals and to further align their interest with those of the Company’s stockholders by providing incentive compensation opportunities tied to the performance of the common stock of the Company and (iii) promoting increased ownership of our common stock by such individuals.

CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 6. Equity Incentive Plan (continued)

Subject to adjustment for changes in capitalization, the maximum aggregate number of shares of our common stock that may be delivered pursuant to awards granted under the 2010 equity incentive plan is 1,000,000.

A summary of the Company’s common stock subject to vesting provisions for the three months ended March 31, 2011, is presented below:

						Weighted-
						Average
		Common				Grant-Date
Non-Vested Common Stock		Stock				Fair Value
Total non-vested common stock at December 31, 2010			250,768			$	13.00
Granted			133,427				13.69
Vested			(4,392	)			13.00
Forfeited			(—	)			—
Total non-vested common stock at March 31, 2011			379,803			$	13.39

Total share/equity-based compensation expense related to vested shares for the three months ended March 31, 2011 and 2010 was $330,869 and $8,151 respectively. As of March 31, 2011, there was approximately $3.1 million of unrecognized compensation expense related to shares subject to vesting provisions granted under the plan. This expense is expected to be recognized over a weighted-average period of 2.4 years.

Certain shares are subject to a clawback provision, which places the obligation on the shareholder to surrender a portion of the shares if their employment with the Company is terminated before a specified period, typically three years. A summary of the status of the Company’s shares subject to clawback provisions for the three months ended March 31, 2011, is presented below:

						Weighted-
						Average
						Grant-Date
Common Stock Subject to Clawback		Shares				Fair Value
Shares subject to clawback at December 31, 2010			57,105			$	13.00
Granted			—				—
Expiration of clawback provisions			(5,269	)			13.00
Forfeited			—				—
Shares subject to clawback at March 31, 2011			51,836			$	13.00

Total equity/shared-based compensation expense subject to clawback provisions for the three months ended March 31, 2011 and 2010 was $164,849 and $157,550, respectively.

As of March 31, 2011, there was approximately $400,000 of unrecognized compensation expense related to shares subject to clawback provisions granted under the plan. This expense is expected to be recognized over a weighted-average period of 1.2 years.

CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 7. Enterprise Geographic Concentrations

The Company operates in four principal geographic regions: the Americas, Europe, Asia Pacific and the Middle East. The revenue, operating income (loss), depreciation and amortization, and capital expenditures, by region, for the three months ended March 31, 2011 and 2010 are as follows:

		Three Months Ended
		March 31,
		2011				2010
Revenue:
Americas		$	18,642,247			$	16,648,268
Europe			8,374,396				5,936,924
Asia Pacific			3,376,020				3,189,533
Middle East			88,529				—
Net revenue before reimbursements			30,481,192				25,774,725
Reimbursements			1,114,706				831,901
Total regions		$	31,595,898			$	26,606,626
Operating income (loss):
Americas			481,947				1,851,679
Europe			732,456				235,094
Asia Pacific			(341,121	)			959,963
Middle East			79,794				—
Total		$	953,076			$	3,046,736
Depreciation and amortization:
Americas			182,380				301,118
Europe			82,725				97,834
Asia Pacific			27,807				22,494
Middle East			920				—
Total		$	293,832			$	421,446
Capital expenditures:
Americas			1,037,166				7,779
Europe			40,144				—
Asia Pacific			49,111				116,124
Middle East			57,875				—
Total		$	1,184,296			$	123,903

CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 7. Enterprise Geographic Concentrations (continued)

Identifiable assets by geographic concentrations are as follows:

		March 31, 2011				December 31, 2010
Identifiable assets:
Americas		$	33,996,082			$	36,543,510
Europe			15,004,850				12,760,043
Asia Pacific			6,054,359				5,791,369
Middle East			823,199				—
Total regions		$	55,878,490			$	55,094,922

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

Forward-looking Statements

     Management’s Discussion and Analysis of Financial Condition and Results of Operations as well as other sections of this quarterly report on Form 10-Q contain forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. The forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry in which we operate and management’s beliefs and assumptions. Forward-looking statements may be identified by the use of words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “projects,” “forecasts,” and similar expressions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, forecasted or implied in the forward-looking statements. Factors that may affect the outcome of the forward-looking statements include, among other things, our expectations regarding our revenues, expenses and operations and our ability to sustain profitability; our ability to recruit and retain qualified executive search consultants to staff our operations appropriately; our ability to expand our customer base and relationships, especially given the off-limit arrangements we are required to enter into with certain of our clients; further declines in the global economy and our ability to execute successfully through business cycles; our anticipated cash needs; our anticipated growth strategies and sources of new revenues; unanticipated trends and challenges in our business and the markets in which we operate; social or political instability in markets where we operate; the impact of foreign currency exchange rate fluctuations; price competition; the ability to forecast, on a quarterly basis, variable compensation accruals that ultimately are determined based on the achievement of annual results; the mix of profit and loss by country; and our ability to estimate accurately for purposes of preparing our consolidated financial statements. For more information on the factors that could affect the outcome of forward-looking statements, see Risk Factors in Item 1A of our annual report on Form 10-K which was filed with the Securities and Exchange Commission on March 24, 2011. We caution the reader that the list of factors may not be exhaustive. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

     For the period January 1, 2011 to March 31, 2011, we were engaged to perform 398 searches, including 300 performed directly by us and 98 performed by our associated offices in Latin America. For the period from January 1, 2011 to March 31, 2011, we placed candidates in 110 U.S. searches and 91 non-U.S. searches. In addition, our Latin America affiliate placed 64 candidates during the period from January 1, 2011 to March 31, 2011.

     Net revenue increased $4.7 million, or 18.3%, to $30.5 million for the three-month period ended March 31, 2011 compared to $25.8 million for the three-month period ended March 31, 2010. The increase in net revenue was the result of an increase in the number of search assignments on which we were engaged and an increase in the number of executive search consultants employed by us. We experienced a slight decrease in our executive search consultant productivity due to the fact that we hired nine new executive search consultants in the current quarter who are continuing to reach their expected productivity levels. Relevant data is set forth below (this data excludes the operations of our associated offices in Latin America):

		Three Month Period												Percentage
		Ended March 31,								Increase/				Increase/
Performance Metrics		2011				2010				(Decrease)				(Decrease)
Number of new search assignments			300				256				44				17.2	%
Number of executive search consultants (as of period end)			97				79				18				22.8	%
Productivity, as measured by average annualized net revenue per executive search consultant		$	1,257,000			$	1,305,000			$	(48,000	)			(3.7	)%
Average revenue per executive search		$	89,540			$	104,020			$	(14,480	)			(13.9	)%

     Operating income decreased $2.0 million to $1.0 million for the three months ended March 31, 2011, compared to operating income of $3.0 million for the three months ended March 31, 2010. The decrease primarily reflects an increase in total revenues of $4.7 million offset by a $5.7 million increase in compensation and benefits expense and a $1.0 million increase in general and administrative expenses.

     Cash at March 31, 2011 was $20.8 million, as compared to $4.8 million at March 31, 2010. The increase in cash reflects the closing of our initial public offering in December 2010 as we received net proceeds of $24.4 million. Cash used in operating activities was $2.0 million in the three-month period ended March 31, 2011, a decrease of $6.8 million from cash provided by operating activities of $4.8 million in the three-month period ended March 31, 2010. The increase in cash used in operating activities is primarily due to an increase in receivables of

$2.2 million offset by a decrease in accrued compensation of $2.4 million, a decrease in net income of $2.3 million, a decrease in accounts payable and accrued expenses of $1.8 million, a decrease in other assets and receivables of $1.2 million, and a decrease in income taxes payable of $1.1 million.

     Cash used in investing activities was $1.2 million for the three-month period ended March 31, 2011, compared to $0.1 million for the three-month period ended March 31, 2010. This increase was due to increased capital expenditures. Cash used in financing activity was $68,000, which were payments made on long-term debt. Cash used in financing activities for the three-month period ended March 31, 2010 was $4.8 million primarily resulting from payments made on our credit facility, and from payments made on long-term debt.

Results of Operations

     The following table summarizes, for the periods indicated, our results of operations as a percentage of net revenue:

		Three Months Ending
		March 31,
		2011				2010
Revenue:
Net revenue			100.0	%			100.0	%
Reimbursable expenses			3.7				3.2
Total revenue			103.7				103.2
Operating Expenses:
Compensation and benefits			76.6				68.4
General and administrative			19.9				19.9
Reimbursable expenses			4.0				3.1
Total operating expenses			100.5				91.4
Operating income			3.1				11.8
Net interest expense			—				(0.3	)
Income before income taxes			3.1				11.5
Income tax expense			(1.1	)			(0.4	)
Net income			2.0	%			11.1	%

Three Month Period Ended March 31, 2011 Compared to Three Month Period Ended March 31, 2010

     Net Revenue. Net revenue increased $4.7 million, or 18.3%, to $30.5 million for the three-month period ended March 31, 2011 compared to $25.8 million for the three-month period ended March 31, 2010. Included in net revenue for the three month period ended March 31, 2011 and March 31, 2010, was $157,488 and $35,268 in license fees from our associated offices in Latin America. The increase in net revenue was the result of an increase in the number of search assignments on which we were engaged and an increase in the number of executive search consultants employed by us.

     Compensation and Benefits Expenses. Compensation and employee benefits expense increased $5.7 million, or 32.5%, to $23.4 million for the three-month period ended March 31, 2011 from $17.6 million for the three-month period ended March 31, 2010. As a percentage of net revenue, first quarter 2011 compensation and benefits increased to 76.6% compared to 68.4% for the same period in 2010. The increase in compensation and benefits expense was primarily the result of a $2.2 million increase in salaries related to the hiring of eighteen new consultants and sixty-two new support staff since the first quarter of 2010, a $1.3 million increase in incentive compensation for executive search consultants which was the direct result of higher consolidated net revenue and a $0.6 million increase in sign-on incentives related to the hiring of new consultants.

     General and Administrative Expenses. General and administrative expenses increased $1.0 million, or 18.2%, to $6.1 million for the three-month period ended March 31, 2011 from $5.1 million for the three-month period ended March 31, 2010. The increase was partially due to an approximate $350,000 increase in business development expense which is a direct result of an increase in the number of executive search consultants. We incurred an approximate $250,000 increase in professional fees which included accounting, audit and tax preparation services. General and administrative expenses as a percentage of net revenue remained at 19.9% for the three months ended March 31, 2011 and March 31, 2010, respectively.

     Operating Income. Operating income decreased $2.0 million to $1.0 million for the three-month period ended March 31, 2011, compared to operating income of $3.0 million for the three-month period ended March 31, 2010. The decrease primarily reflects an increase in net revenues of $4.7 million offset by a $5.7 million increase in compensation and benefits expense and a $1.0 million increase in general and administrative expenses.

     Net Interest Expense. Net interest expense decreased $70,408 or 87.1%, to $10,385 for the three-month period ended March 31, 2011 from $80,793 for the three-month period ended March 31, 2010. The decrease in net interest expense reflects an outstanding balance under our revolving credit facility throughout the three-month period ended March 31, 2011 of $0 as compared to approximately $4.0 million during the three-month period ended March 31, 2010.

     Income Before Taxes and Income Tax Expense. For the three months ended March 31, 2011, we reported income before taxes of $0.9 million and recorded income tax expense of $0.3 million, as compared to income before taxes of $3.0 million and income tax expense of $0.1 million for the three months ended March 31, 2010. The increase in income tax expense was primarily due to a $0.7 million increase in our current tax provision offset by a $0.4 million deferred tax benefit.

     During the first three-months of 2010 we were not subject to United States federal income taxes because we were taxed as a partnership under federal tax law. Accordingly, no provision or liability for income taxes was recorded for federal income taxes for such period in our consolidated financial statements since any income or loss for such period was included in the tax returns of our members. The income tax expense recorded during the first three-months of 2011 includes federal, state and local income taxes. The income tax expense recorded during the first three-months of 2010 represents state and local taxes in those jurisdictions that do not recognize entities taxed as a partnership. The Company’s subsidiaries are subject to entity-level income taxes in their respective foreign jurisdictions.

Liquidity and Capital Resources

     General. Our primary sources of liquidity are cash, cash flow from operations and borrowing availability under our revolving credit facility. We continually evaluate our liquidity requirements, capital needs and availability of capital resources based on our operating needs. We believe that our existing cash balances together with the funds expected to be generated from operations and funds available under our committed revolving credit facility will be sufficient to finance our operations for the foreseeable future.

     The following table summarizes our cash flow for the periods shown:

		Three Months Ended March 31,
		2011				2010
Net cash (used in) provided by operating activities		$	(1,970,172	)		$	4,809,859
Net cash used in investing activities			(1,184,296	)			(123,903	)
Net cash used in financing activities			(68,220	)			(4,812,357	)
Net decrease in cash		$	(3,222,688	)		$	(126,401	)

     Cash. Cash at March 31, 2011 was $20.8 million, as compared to $4.8 million at March 31, 2010. The increase in cash reflects the closing of our initial public offering in December 2010 as we received net proceeds of $24.4 million.

     Cash Flow from Operating Activities. Cash used in operating activities was $2.0 million in the three-month period ended March 31, 2011, a decrease of $6.8 million from cash provided by operating activities of $4.8 million in the three-month period ended March 31, 2010. The increase in cash used in operating activities is primarily due to an increase in receivables of $2.2 million offset by a decrease in accrued compensation of $2.4 million, a decrease in net income of $2.3 million, a decrease in accounts payable and accrued expenses of $ 1.8 million, a decrease in other assets and receivables of $1.2 million, and a decrease in income taxes payable of $1.1 million.

     Cash from Investing Activities. For the three-month period ended March 31, 2011, cash used in investing activities was $1.2 million compared to $0.1 million for the three-month period ended March 31, 2010. The increase was due to purchases for capital expenditures.

     Cash from Financing Activities. For the three-month period ended March 31, 2011, cash used in financing activity was $68,000, solely as a result of payments made on long-term debt. Cash used in financing activities for the three-month period ended March 31, 2010 was $4.8 million primarily resulting from payments made on our credit facility, and by payments made on long-term debt. Under our credit facility, we may borrow U.S. dollars at LIBOR plus 3.25%. A facility fee is charged even if no portion of the credit facility is used. Our credit facility expires on April 30, 2012. There were no borrowings outstanding under our

credit facility at March 31, 2011 and March 31, 2010, respectively. As of March 31, 2011, we had $10 million available to borrow. The facility is secured by principally by accounts receivable and equipment. Additionally, the Company is required to maintain specified leverage and fixed charge coverage ratios as defined in the Credit Agreement. The Credit Agreement also requires the Company to maintain a minimum net worth based on a formula in the Credit Agreement.

     Off-Balance Sheet Arrangements. We do not have off-balance sheet arrangements, special purpose entities, trading activities or non-exchange traded contracts.

Application of Critical Accounting Policies and Estimates

     In addition to the critical accounting policies contained in our annual report on Form 10-K, filed on March 24, 2011, the following accounting policy is critical with regard to the preparation of our unaudited quarterly condensed consolidated financial statements:

     Annual Incentive Compensation. Each quarter, management records its best estimate of its annual incentive compensation, which on a quarterly basis requires management to project annual consultant productivity, as measured by engagement fees billed and collected by that consultant. At the end of each fiscal year, bonuses expensed reflect final individual consultant productivity. Changes in any of the assumptions underlying the quarterly bonus accrual may significantly impact the compensation liability on our balance sheet and related compensation cost on our statement of operations. Differences between the assumptions used each quarter to estimate annual incentive compensation and actual cash payments made could materially impact the carrying amount of the liability and our operating results.

Recently Adopted Financial Accounting Standards

     None

Item 4. Controls and Procedures

     Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

     As of March 31, 2011, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports we file, or submit, under the Exchange Act is recorded, processed, summarized and reported as and when required.

     There were no changes in our internal control over financial reporting identified in the evaluation described in the preceding paragraph that occurred during the first quarter of 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. Other Information

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

Use of Proceeds from Registered Securities

     As of March 31, 2011, we had used the net proceeds from our initial public offering (which were registered under the Securities Act of 1933, as amended, pursuant to a registration statement on Form S-1 (File No. 333-169224), which was declared effective by the Securities and Exchange Commission on December 7, 2010) as follows:

	•		approximately $4.7 million of cash, including the related payroll taxes, was used to pay out the value of performance units granted to certain of our executive search consultants (including payments of $207,679 to Brian M. Sullivan, our chief executive officer, $197,602 to David C. Nocifora, our chief operating and chief financial officer);
	•		approximately $1.9 million to prepay in full a promissory note issued by the Company to the former chief

			executive officer of the Company and his family trust;
	•		approximately $1.6 million to prepay certain convertible promissory notes with certain employees (including a payment of $453,400 to Brian M. Sullivan, our chief executive officer); and
	•		Approximately $1.5 million to pay estimated federal income taxes related to the conversion to a corporation.

There has been no material change in the planned use of the net proceeds from that described in the prospectus included in our registration statement.

Item 6. Exhibits

Exhibit
No.		Description of Document
*31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a)
*31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a)
*32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
*32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 11, 2011