In Thousands
Stock consideration		$	331
Cash consideration			400
Total consideration for acquisition		$	731

In Thousands
Property and Equipment		$	114
Intangible assets – trade name			17
Intangible assets – customer relationships			577
Goodwill			23
Total fair value of assets acquired		$	731

In Thousands
Stock consideration		$	2,400
Earn-out consideration			2,198
Total consideration for acquisition		$	4,598

In Thousands
Property and equipment		$	5
Intangible assets - management agreement			1,396
Intangible assets - customer relationships			2,113
Goodwill			1,084
Total fair value of assets acquired		$	4,598

(In Thousands)	Useful Lives		2012				2011
Computer software	5 years		$	1,447			$	1,447
Office equipment, furniture and fixtures and leasehold improvements	2 to 10 years			2,311				2,066
Total property and equipment, at cost				3,758				3,513
Accumulated depreciation and amortization				(3,240	)			(3,104	)
Property and equipment, net			$	518			$	409

Intangible Assets

As of September 30, 2012

(In Thousands)		Cost				Accumulated Amortization				Loss on impairment of Intangible assets				Net Book Value
Non-Compete		$	89			$	48				41			$	—
Customer Relationships			2,913				662				60				2,191
Management Agreement			1,396				270				1,126				—
Trade Name			17				4				—				13
		$	4,415			$	984			$	1,227			$	2,204

As of September 30, 2011

(In Thousands)		Cost				Accumulated Amortization				Loss on impairment of Intangible assets				Net Book Value
Non-Compete		$	89			$	24				—			$	65
Customer Relationships			2,913				296				—				2,617
Management Agreement			1,396				270				1,126				—
Trade Name			17				—				—				17
		$	4,415			$	590			$	1,126			$	2,699

Amortization expense was approximately $394,000 and approximately $537,000 for the years ended September 30, 2012 and 2011, respectively.

Finite life intangible assets are comprised of a non-compete agreement, management agreement, trade name and customer relationships.  The non-compete agreement and trade name are amortized on a straight – line basis over the estimated useful lives of 5 years.  The customer relationships are amortized based on the future undiscounted cash flows over estimated remaining useful lives of three to 10 years.  The management agreement intangible was being amortized over the five year term of the agreement.  Over the next five years, annual amortization expense for these finite life intangible assets will be $393,000 in 2013, $376,000 in 2014, $359,000 in 2015, $340,000 in 2016 and $322,000 in 2017 and $414,000 thereafter.

Long-lived assets, such as purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  The Company evaluates, regularly, whether events and circumstances have occurred that indicate possible impairment and relies on a number of factors, including operating results, business plans, economic projections, and anticipated future cash flows.  The Company uses an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether the assets are recoverable.

During the year ended, September 30, 2012, the Company recorded an impairment charge of approximately $101,000 for the remaining unamortized amount of the non-compete and a certain amount of the customer relationship intangible asset related to the agricultural operation.  In addition the Company recorded an impairment charge of approximately $173,000 related to the goodwill of the agriculture operation.   The impairment charge represents the difference between the fair value and the carrying value of the intangible assets.  The agricultural operation has limited margins and lost a large customer and management determined that the present value of the future cash flows associated with the operation did not support the recorded value.

 

 

		September 30 th
(In Thousands)		2012				2011
Accrued expenses		$	282			$	201
Accrued rent			-				31
Second Installment of the Ashley Ellis, LLC purchase price			-				200
Contingent earn-out liability due within one year			834				803
Deferred rent			80				72
Total other current liabilities		$	1,196			$	1,307

		Year Ended September 30
(Number of Options in Thousands)		201 2				2011
Number of options outstanding:
Beginning of year			301				388
Granted			1,747				—
Exercised			—				(12	)
Terminated			(301	)			(75	)
End of year			1,747				301
Number of options exercisable at end of year			1,658				255
Number of options available for grant at end of year			1,201				731
Weighted average option prices per share:
Granted during the year		$	.41			$	—
Exercised during the year			—				.40
Terminated during the year			—				1.26
Outstanding at end of year			.38				.95
Exercisable at end of year			.40				1.00

Range of Exercise Prices		Number Outstanding				Weighted Average Price				Number Exercisable				Weighted Average Price				Average Remaining Life (Years)
Under $1.00			1,747			$	.38				1,658			$	.40				4
$1.25 to $2.39

 

		2012			2011
Expected option life (years)			5.0
Expected stock price volatility			76	%
Expected dividend yield			—	%
Risk-free interest rate			.91	%

		Year Ending September 30,
(In Thousands)		2012				2011
Current tax provision		$	—			$	—
Deferred tax provision (credit) related to:
Temporary differences
Stock option Expense			74				2
Deferred compensation expense			(60	)			(57	)
Vacation expense			39				32
Intangible assets			94				(272	)
Allowance for doubtful accounts			46				19
Other			(45	)			(24	)
Loss carryforwards			(194)				104
Valuation allowances			46				196
Provision for income taxes		$	—			$	—

		Year Ended September 30,
(In Thousands)		2012			2011
Income tax provision at statutory federal tax rate		$	50			$	122
Valuation allowance			(50	)			(122	)
Provision for income taxes		$	—			$	—

		Year Ended September 30,
(In Thousands)		2012				2011
Temporary differences
Stock option Expense		$	217			$	138
Deferred compensation expense			120				184
Vacation expense			30				47
Intangible assets			107				282
Allowance for doubtful accounts			104				55
Other			85				105
Net operating loss carryforwards			3,560				3,366
Valuation allowances			(4,223	)			(4,177	)
Net deferred income tax asset		$	—			$	—

 

		Fiscal Year Ended
		September 30
(In Thousands)		2012				2011
Direct Hire Placement Services
Revenue		$	7,215			$	4,430
Placement services gross margin			100	%			100	%
Operating loss			(1,701	)			(678	)
Depreciation & amortization			237				180
Accounts receivable – net			980				699
Intangible assets			465				584
Goodwill			24				24
Total assets			3,334				5,301
Management Services
Revenue		$	—			$	838
Operating income			—				519
Fee receivable			—				225
Total assets			—				225
Contract Staffing Services
Agricultural services revenue		$	7,852			$	12,412
Industrial services revenue			28,206				12,349
Professional services revenue			9,132				7,160
Agricultural services gross margin			4.41	%			4.6	%
Industrial services gross margin			17.15	%			14.6	%
Professional services gross margin			19.38	%			29.9	%
Operating income (loss)		$	894			$	715
Depreciation and amortization			309				533
Accounts receivable – agricultural services			597				666
Accounts receivable – industrial services			4,056				3,837
Accounts receivable – professional services			1,128				1,177
Intangible assets			1,739				2,115
Goodwill			1,083				1,256
Total assets		$	7,865			$	5,970
Consolidated
Total revenue		$	52,405			$	37,189
Operating income (loss)			(807	)			556
Depreciation and amortization			546				713
Total accounts receivables – net			6,761				6,604
Intangible assets			2,204				2,699
Goodwill			1,106				1,280
Total assets		$	11,199			$	11,496

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

On November 26, 2012, the Company dismissed BDO USA, LLP (“BDO”), its independent registered public accounting firm. The decision was approved by the Company’s Audit Committee.

The reports of BDO on the Company’s financial statements for the fiscal years ended   September 30, 2011 and 2010 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. During the fiscal years ended September 30, 2011 and September 30, 2010, (i) there were no disagreements with BDO on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of BDO would have caused it to make reference to such disagreement in its reports; and (ii) there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

In connection with the audit of the Company’s financial statements for the fiscal year ended September 30, 2012 (the “2012 Audit”), on October 12, 2012, BDO notified the Company of its need to expand the scope of the procedures to be performed as part of the 2012 Audit, to ascertain the extent of the Company’s business and financial affiliation with Mr. Wilbur Anthony Huff following the indictment of Mr. Huff for various conspiracies and fraudulent schemes.  On October 18, 2012, BDO set out a work plan for such extended audit procedures (the “Work Plan”), which consisted of two phases.  The first phase of the Work Plan had estimated fees of $150,000, without any limit or guarantee.  BDO could not estimate the fees for phase II of the Work Plan.  Through multiple communications, the Company’s Audit Committee expressed its disagreement to BDO regarding the necessity and scope of the extended audit procedures.  After being unable to agree upon the extent of the 2012 Audit, the Company’s Audit Committee informed BDO, on November 26, 2012, that it was terminating the services of BDO due to (i) the open ended nature of fees which may be imposed by BDO for the two phase Work Plan, (ii) the open ended time frame for the completion of both phases of the Work Plan, and (iii) the uncertainty of BDO’s conclusion following the completion of the Work Plan.

 On November 29, 2012, the Company engaged Friedman, LLP (“Friedman”) as the Company’s new independent registered public accounting firm to audit the Company’s financial statements for the fiscal years ending September 30, 2012 and 2011. The appointment of Friedman was approved by the Company’s Audit Committee.

During each of the Company’s two most recent fiscal years and through the interim period preceding the engagement of Friedman, the Company (a) has not engaged Friedman as either the principal accountant to audit the Company’s financial statements, or as an   independent accountant to audit a significant subsidiary of the Company and on whom the principal accountant is expected to express reliance in its report; and (b) has not consulted with Friedman regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and no written report or oral advice was provided to the Company by Friedman concluding there was an important factor to be considered by the Company in reaching a decision as to an accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event, as that term is described in Item 304(a)(1)(v) of Regulation S-K.

Item 9A. Controls and Procedures.

We carried out an evaluation required by Rule 13a-15 of the Exchange Act under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Empire Resorts, Inc.’s “disclosure controls and procedures” and “internal control over financial reporting” as of the end of the period covered by this Annual Report.

The evaluation of General Employments Inc.’s disclosure controls and procedures and internal control over financial reporting included a review of our objectives and processes, implementation by us and the effect on the information generated for use in this Annual Report. In the course of this evaluation and in accordance with Section 302 of the Sarbanes Oxley Act of 2002, we sought to identify material weaknesses in our controls, to determine whether we had identified any acts of fraud involving personnel who have a significant role in our internal control over financial reporting that would have a material effect on our consolidated financial statements, and to confirm that any necessary corrective action, including process improvements, were being undertaken. Our evaluation of our disclosure controls and procedures is done quarterly and management reports the effectiveness of our controls and procedures in our periodic reports filed with the Securities and Exchange Commission. Our internal control over financial reporting is also evaluated on an ongoing basis by our internal auditors and by other individuals in our organization. The overall goals of these evaluation activities are to monitor our disclosure controls and procedures and internal control over financial reporting and to make modifications as necessary. We periodically evaluate our processes and procedures and make improvements as required.

 

 

41

---

Table of Contents

Because of inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Management applies its judgment in assessing the benefits of controls relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Disclosure Controls and Procedures

Disclosure controls and procedures are designed with the objective of ensuring that (i) information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and (ii) information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (b) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of the our management and directors; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of September 30, 2012.

There were no changes in our internal controls over financial reporting during the fourth quarter of the year ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

Item 9B. Othe r Information.

Not applicable.

 

 

42

---

Table of Contents

PART III

 

Item 10, Directors, Ex ecu tive Officers and Corporate Governance.

DIRECTORS AND EXECUTIVE OFFICERS

Executive Officers

The named executive officers and directors of the Company as of March 29, 2013 are as follows:

Name	Age	Position
Michael K. Schroering	55	Chief Executive Officer, Chairman of the Board
Brad A. Imhoff	50	Chief Operating Officer, President of the Professional Staffing Division
Andrew J. Norstrud	39	Chief Financial Officer, Treasurer
Katy M. Imhoff	29	Vice President of Operations, Vice President of the Professional Staffing Division
Edward Hunter	66	Director
Thomas C.  Williams	53	Director
Dennis W. Baker	66	Director

Michael K, Schroering – Chief Executive Officer, Chairman of the Board

Mr. Schroering joined General Employment Enterprises as a director in November 2012 and become the Chairman of the Board and Chief Executive Officer in December 2012. Prior to joining the Company, he served as President of The Schroering Company which he founded in 1993. The Schroering Company is a Louisville-based commercial real estate firm specializing in consulting services, site procurement, owner and tenant representation for the sale/leasing of office and industrial space. Other companies under his leadership have been active in real estate development through GlobalPort United, LLC which owns interest in several million square feet of big box warehouse space. Mr. Schroering received a B.A. in Business Administration in Finance and Management from Loyola University (1979) and went to the University of Louisville School of law (1979 – 1981).

Brad A. Imhoff – Chief Operating Officer, President of the Professional Staffing Division

Mr. Imhoff has served as Chief Operating Officer and President of the Professional Staffing Division since September 1, 2011. Prior to joining the Company, Mr. Imhoff, co-founded Ashley Ellis, LLC (“Ashley Ellis”) a company that provided services related to the recruitment and placement of technical personnel, in January 2009 and served as its Chief Executive Officer and sole member from January 2009 until August 31, 2011, at which time substantially all of the assets of Ashley Ellis were acquired by the Company. Prior to founding Ashley Ellis, Mr. Imhoff worked as a sales consultant and participated in sales training seminars from January 2005 to January 2009. Prior to that, Mr. Imhoff managed and co-owned Camden Aviation LLC, a private jet charter company, from January 2000 to January 2005 and, co-founded and served as Chief Executive Officer of Camden Vale Corporation, an information technology recruiting firm, from January 1995 to October 2001. Mr. Imhoff previously served as Vice President of Staffing of the Company from October 1985 to January 1995.

Andrew J. Norstrud – Chief Financial Officer, Treasurer

Mr. Norstrud joined General Employment Enterprises in March 2013.  Prior to joining the Company, Mr. Norstrud was a consultant with Norco Accounting and Consulting from October 2011 until March 2013.  From October 2005 to October 2011, Mr. Norstrud served as the Chief Financial Officer for Jagged Peak.  Prior to his role at Jagged Peak, Mr. Norstrud was the Chief Financial Officer of Segmentz, Inc., and played an instrumental role in the company achieving its strategic goals by pursuing and attaining growth initiatives, building an exceptional financial team, completing and integrating strategic acquisitions and implementing the structure required of public companies.  Previously, Mr. Norstrud worked for Grant Thornton LLP and PricewaterhouseCoopers LLP and has extensive experience with young, rapid growth public companies.  Mr. Norstrud earned a BA in Business and Accounting from Western State College and a Master of Accounting with a systems emphasis from the University of Florida.  He is a Florida licensed Certified Public Accountant.

 

 

43

---

Table of Contents

Katy Imhoff – Vice President of Operations, Vice President of Professional Division

Ms. Imhoff has served as Vice President of Operations and Vice President of the Professional Staffing Division since September 1, 2011. Prior to joining the Company, Ms. Imhoff co-founded Ashley Ellis in January 2009, a company that provided services related to the recruitment and placement of technical personnel, and served as its Chief Operations Officer and Vice President until August 31, 2011, when Ashley Ellis become a wholly owned subsidiary of the Company. Prior to founding Ashley Ellis, Ms. Imhoff served as a consultant from 2006 to December 1 2008 for the Company and, previously, for Austin Vale, an India-based recruitment firm for technical personnel. In this position, Ms. Gallagher consulted on strategic planning, marketing and training. Prior to that, Ms. Gallagher was the sole owner of Ashton Zane Inc, a provider of sales training seminars across the country, from 2004 to 2006.

Edward Hunter – Director

Mr. Hunter joined the Company in October 2012 as a Director.  Mr. Hunter has practiced as an international business lawyer and litigator for more than 35 years, in both private practice and as in-house counsel. Most recently, he practiced with the business-focused firm of Robinson & Robinson, LLP, from 2002 to 2010, and since then with his own law office in Laguna Hills, California. Within the past five years, he served as a director of En Pointe Technologies, Inc. (formerly NASDAQ-CM: (now privately held)) (2003-2009) and of International Stem Cell Corporation (OTC: ISCO) (2007-2009), where he also served as Chairman of the respective Compensation Committees and as a member of their Audit Committees. From 2006 to 2009, he served on the board of Ovex Technologies (Pvt.) Ltd. of Lahore, Pakistan, chaired its Compensation Committee, and served on its Audit Committee. He previously served on the registrant’s Board of Directors from February 2009 to July 2009. He has been designated a “financial expert” within the meaning of the Sarbanes-Oxley Act of 2002 (“SOX”) and has experience implementing internal control and other procedures to comply with SOX requirements.  In addition to legal training and experience as an attorney, Mr. Hunter has completed the Corporate Directors Certification Program at the UCLA Anderson Graduate School of Management and the certification procedures of the National Association of Corporate Directors. As chair of three previous Compensation Committees, he led each company’s compliance with Regulation S-K (nonfinancial disclosures) and the evolving new rules and standards for executive compensation.

Thomas C. Williams – Director

Mr. Williams has served as a director of the Company since July 2009. Since 2005, Mr. Williams has served as acting Vice Chairman of Capital Management of Bermuda (previously Travelers of Bermuda), a company providing pension benefits for expatriates who have worked outside the U.S. and accrued benefits towards their retirement which are not covered by their domestic pension plans. Mr. Williams served as the Chief Executive Officer of Innova Insurance Ltd., a Bermuda based insurer, which provides extension risk to the Capital Markets on life insurance related assets from 2005 to 2009 when it was acquired.  Mr. Williams is Chairman of the Nominating Committee and is a member of the Audit and Compensation Committees. The Company believes that Mr. Williams is qualified to sit on the board of directors because of his significant management experience.

Dennis W. Baker – Director

Mr. Baker has served as a director of the Company since 2000. From April 1975 to April 2006, Mr. Baker held various positions with CF Industries Holdings, Inc., a fertilizer manufacturing and distribution company, and most recently served as Treasurer from March 1988 to April 2007, when he retired. During this time, he also held the following titles at CF Industries Holdings, Inc.: Assistant Treasurer, Director of Financial Planning and Budgeting, Manager of Financial Planning, Manager of Budgets and Capital Expenditure Control, Capital Expenditure Control Analyst and Financial Analyst. On May 1, 2011 Mr. Baker was elected to the Board of Directors of CIS World, Inc. Mr. Baker is Chairman of the Audit Committee and is a member of the Compensation and Nominating Committees. The Company believes that Mr. Baker is qualified to sit on the board of directors because of his extensive management experience.

 

 

44

---

Table of Contents

All executive officers are elected annually by the Board of Directors at the first meeting of the board held following each Annual Meeting of Shareholders, and they hold office until their successors are elected and qualified.

Brad A. Imhoff is married to Katy Imhoff, the Vice President of operations for the Company.  Brad A. Imhoff is the brother of Herbert F. Imhoff Jr., our former President and former director.  Herbert Imhoff, Jr. retired from all positions within the Company effective January 31, 2013.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s directors and officers, and persons who own more than 10% of a registered class of its equity securities, to file reports of ownership and changes in ownership (typically, Forms 3, 4 and/or 5) of such equity securities with the SEC. Such entities are also required by SEC regulations to furnish the Company with copies of all such Section 16(a) reports.

Based solely on a review of Forms 3 and 4 and amendments thereto furnished to the Company and written representations that no Form 5 or amendments thereto were required, the Company believes that during the fiscal year ended September 30, 2012 and 2011, its directors and officers, and greater than 10% beneficial owners, have complied with all Section 16(a) filing , except as follows:

·

Michael Schroering was late in filing his initial Form 3 dated September 21, 2012 reflecting the acquisition of 199,334 shares directly and 15,842,410 shares indirectly through LEED HR, LLC on August 16, 2012.

·

LEED HR, LLC was late in filing its initial Form 3 dated September 14, 2012 reflecting the acquisition of 15,842,410 shares on August 16, 2012.

 

Board Leadership Structure and Role in Risk Oversight

The Board of Directors believes that the Company’s Chief Executive Officer is best situated to serve as Chairman because he is the director most familiar with the Company’s business and industry, and most capable of effectively identifying strategic priorities and leading the discussion and execution of strategy. Independent directors and management have different perspectives and roles in strategy development. The Company’s independent directors bring experience, oversight and expertise from outside the company and industry, while the Chief Executive Officer brings company-specific experience and expertise. The Board of Directors believes that the combined role of Chairman and Chief Executive Officer is in the best interest of shareholders because it promotes strategy development and execution, and facilitates information flow between management and the Board of Directors, which are essential to effective governance. The Board of Directors does not have a lead independent director.

The Board of Directors provides overall risk oversight for the Company as part of its normal, ongoing responsibilities. It receives reports from Mr. Schroering and other members of senior management on a periodic basis on areas of risk facing the Company. In addition, board committees oversee specific elements of risk or potential risk.

Director Independence

The Board of Directors has determined that each director, other than Mr. Schroering, is an independent director under the listing standards of the NYSE MKT. In addition, the Board of Directors has determined that each current member of the Audit Committee meets the additional independence criteria required for audit committee membership under the listing standards of the NYSE MKT and Rule 10A-3 of the Exchange Act.

Board and Committee Meetings

The Board of Directors meets on a regularly scheduled basis to review significant developments affecting the Company and to act on matters requiring Board approval. It also holds special meetings when an important matter requires Board action between scheduled meetings. The Board of Directors held eight meetings during the last fiscal year. No director of the Company attended less than 75% of the total meetings of the Board and Committees on which such Board members served during this period.

 

 

45

---

Table of Contents

There are three standing committees of the Board of Directors, which are the Nominating Committee, the Audit Committee and the Compensation Committee.

Nominating Committee

The functions of the Nominating Committee are to assist the Board of Directors in identifying, interviewing and recommending to the Board of Directors qualified candidates to fill positions on the board.  The Nominating Committee met two times during 2012.

The Company does not have a policy regarding the consideration of diversity, however defined, in identifying nominees for director. Instead, in evaluating candidates to serve on the Company’s Board of Directors, consideration is given to the level of experience, financial literacy and business acumen of the candidate. In addition, qualified candidates for director are those who, in the judgment of the Nominating Committee, have significant decision-making responsibility, with business, legal or academic experience. The Nominating Committee will consider recommendations for board candidates that are received from various sources, including directors and officers of the Company, other business associates and shareholders, and all candidates will be considered on an equal basis, regardless of source.

Shareholders may contact the Nominating Committee to make such recommendations by writing in care of the Secretary of the Company, at One Tower Lane, Suite 2200, Oakbrook Terrace, Illinois 60181. Submissions must be in accordance with the Company’s By-Laws and include: (a) a statement that the writer is a shareholder and is proposing a candidate for consideration by the Nominating Committee; (b) the name, address and number of shares beneficially owned by the shareholder; (c) the name, address and contact information of the candidate being recommended; (d) a description of the qualifications and business experience of the candidate; (e) a statement detailing any relationships between the candidate and the Company and any relationships or understandings between the candidate and the proposing shareholder; and (f) the written consent of the candidate that the candidate is willing to serve as a director if nominated and elected.

The Nominating Committee is presently composed of three non-employee directors: Thomas C. Williams (Chairman), Dennis W. Baker, and Edward Hunter.

The Board of Directors has adopted a written charter for the Nominating Committee. The Nominating Committee Charter is not available on the Company’s website. A copy of the Nominating Committee Charter was attached as an appendix to the proxy statement prepared in connection with the February 10, 2011 Annual Meeting of Shareholders.

Audit Committee

The Audit Committee is primarily concerned with the effectiveness of the Company’s accounting policies and practices, its financial reporting and its internal accounting controls. In addition, the Audit Committee reviews and approves the scope of the annual audit of the Company’s books, reviews the findings and recommendations of the independent registered public accounting firm at the completion of their audit, and approves annual audit fees and the selection of an auditing firm. The Audit Committee met four times during fiscal 2012.

The Audit Committee is presently composed of three non-employee directors: Dennis W. Baker (Chairman), Edward Hunter and Thomas C. Williams. The Board of Directors has determined that Mr. Baker, Mr. Hunter and Mr. Williams are all considered an “audit committee financial expert” as defined by rules of the SEC.  The Board of Directors has determined that each audit committee financial expert meets the additional independence criteria required under the listing standards of the NYSE MKT and Rule 10A-3 of the Exchange Act.

The Board of Directors has adopted a written charter for the Audit Committee. The Audit Committee Charter is not available on the Company’s website. A copy of the Audit Committee Charter is attached as appendix A to the proxy filed with the SEC on January 27, 2012.

 

 

46

---

Table of Contents

Compensation Committee

The Compensation Committee has the sole responsibility for approving and evaluating the officer compensation plans, policies and programs. It may not delegate this authority. It meets as often as necessary to carry out its responsibilities. The Compensation Committee has the authority to retain compensation consultants, but has not done so. The Compensation Committee met three times during fiscal 2012.

In the past, the Compensation Committee has met each September to consider the compensation of the Company’s executive officers, including the establishment of base salaries and performance targets for the succeeding year, and the consideration of stock option awards. Management provides the Compensation Committee with such information as may be requested by the Compensation Committee, which in the past has included historical compensation information of the executive officers, tally sheets, internal pay equity statistics, and market survey data. Under the guidelines of the NYSE MKT, the chief executive officer may not be present during the Compensation Committee’s deliberations regarding his compensation. If requested by the committee, the chief executive officer may provide recommendations regarding the compensation of the other officers.

The Compensation Committee also has the responsibility to make recommendations to the Board of Directors regarding the compensation of directors.

The Compensation Committee is presently composed of three non-employee directors: Edward Hunter (Chairman), Dennis W. Baker, and Thomas C. Williams.

The Board of Directors has adopted a written charter for the Compensation Committee. The Compensation Committee Charter is not available on the Company’s website. A copy the Compensation Committee Charter was attached as an appendix to the proxy statement prepared in connection with the March 22, 2010 Annual Meeting of Shareholders.

Shareholder Communications

The Board of Directors has established a procedure by which shareholders of the Company can communicate with the Board of Directors. Shareholders interested in communicating with the Board of Directors as a group or with individual directors may do so, in writing. Correspondence to the directors should be sent by regular mail c/o the Secretary, General Employment Enterprises, Inc., One Tower Lane, Suite 2200, Oakbrook Terrace, Illinois 60181. Any such correspondence will be reviewed by the Secretary, who will then forward it to the appropriate parties. Communications that are solicitations or deemed to be irrelevant to the Board of Directors’ responsibilities may be discarded, at the discretion of the Secretary.

The Company has a code of ethics that applies to all of its directors and employees, including its principal executive officer, principal financial officer and principal accounting officer.  The code of ethics is filed as an exhibit to this Annual Report .

 

 

47

---

Table of Contents

Item 11, Exe cuti ve Compensation.

 

EXECUTIVE COMPENSATION

Summary Compensation Information

The following table summarizes all compensation awarded to, earned by or paid to all individuals serving as the Company’s principal executive officer, its two most highly compensated executive officers other than the principal executive officer, and up to two additional individuals who were serving as executive officers at the end of the last completed fiscal year, for each of the last two completed fiscal years. These individuals are referred to throughout this proxy statement as the “named executive officers.”

Summary Compensation Table

 

Name and Principal Position		Fiscal Year		Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)			NonEquity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Salvatore J. Zizza		2012		120,000				––		76,500	(1)						––		196,500
former Chief Executive Officer and Chairman of the Board(2)		2011		97,667				––		––							––		97,667
Herbert F. Imhoff, Jr.(3)		2012		––				––		76,500	(1)						180,000		256,500
former President		2011		––				––		––							180,000		180,000
Brad Imhoff(4)		2012		180,000				––		––							2,500		182,500
Chief Operating Officer and President, Professional Staffing Division		2011		15,000				––		––							2,500		17,500
Katy Imhoff(5)		2012		150,000				––		––							––		150,000
Vice President, Professional Staffing Division		2011		12,500				––		––							––		12,500
Marilyn L. White(6)		2012		––				––		––							––		––
former Vice President		2011		137,500				––		––							32,500	(7)	170,000
Jarett Misch(8)		2012		108,200				––		––							9,500		117,700
former Chief Financial Officer and Treasurer		2011		––				––		––							––		––
James R. Harlan(9) former Chief Financial Officer and Treasurer		2011		119,167				––		––							––		119,167

 

(1)

Includes an option to purchase 300,000 shares of common stock at a price of $0.41 per share, granted on February 22, 2012.  Due to a change of control, subsequent to year end, all of such options were immediately vested and exercisable.   In connection with Mr. Zizza’s retirement, the Board agreed to extend the period during which Mr. Zizza can exercise his stock options that are vested from one year to eighteen months from the date of his retirement on December 26, 2012.

(2)

As of December 26, 2012, Mr. Zizza retired from all positions with the Company.

(3)

As of August 31, 2011, Herbert F. Imhoff, Jr. no longer served as Chief Operating Officer of the Company.  Effective January 31, 2013, Mr. Herbert Imhoff, Jr. retired from all positions with the Company.

(4)

On August 31, 2011, Mr. Brad Imhoff was appointed Chief Operating Officer and President of the Professional Staffing Division.

 

 

48

---

Table of Contents

 

 

(5)

On August 31, 2011, Ms. Imhoff was appointed Vice President, Professional Staffing Division

(6)

On August 31, 2011, Marilyn L. White was terminated from her position as Vice President of the Company.

(7)

Amount represents severance payment made to Ms. White

(8)

On December 30, 2011, James Harlan was terminated from his position as Chief Financial Officer and Treasurer.

(9)

Mr. Misch was appointed Chief Financial Officer and Treasurer of the Company effective January 3, 2012.  On February 22, 2013, Mr. Misch resigned from all positions with the Company.

 

Employment and Change in Control Agreements

Salvatore J. Zizza: On September 7, 2011, the Company and Salvatore J. Zizza, the Company’s Chairman and Chief Executive Officer, entered into an employment agreement (the “Zizza Employment Agreement”) and a change of control agreement (the “Zizza Change of Control Agreement”), each dated as of September 1, 2011. The Zizza Employment Agreement provides for a two-year term ending on September 1, 2013, unless Mr. Zizza’s employment is earlier terminated by either party in accordance with the provisions thereof. Mr. Zizza is to receive a base salary at the rate of $120,000 per year, subject to increase in the discretion of the Board of Directors of the Company. Mr. Zizza will also receive a life insurance policy with coverage equal to two times his base salary and a disability income insurance policy with coverage equal to 50% of his base salary. Mr. Zizza will be entitled to receive equity compensation on the same terms and conditions as other executives and members of the Board of Directors of the Company. In the event that Mr. Zizza’s employment is terminated (other than as a result of Mr. Zizza’s death or disability) either (i) by the Company for a reason other than Cause or (ii) by Mr. Zizza for Good Reason (each as defined in the Zizza Employment Agreement), Mr. Zizza will continue to receive his base salary and other benefits provided under the Zizza Employment Agreement for the remainder of the term of the Zizza Employment Agreement.

The term of the Zizza Change of Control Agreement commenced on September 1, 2011 and will terminate on the earlier of (i) two years following the date of execution; (ii) termination of Mr. Zizza’s employment; or (iii) the execution of a written agreement between the Company and Mr. Zizza terminating the Zizza Change of Control Agreement. Under the Zizza Change of Control Agreement, in the event that the Company terminates Mr. Zizza’s employment without Cause or Mr. Zizza resigns with Good Reason after a Change of Control (each as defined in the Zizza Change of Control Agreement), Mr. Zizza will receive, subject to his execution of a separation agreement and release of claims in a form reasonably satisfactory to the Company, (i) a lump sum payment equal to all unpaid compensation remaining from the day of separation to the end of the term of the Zizza Employment Agreement; (ii) continuation of health insurance benefits for six months following his separation from service; (iii) reimbursement for the premiums associated with COBRA for 18 months following the six-month continuation of health insurance period; and (iv) the same percentage of Company-paid group-term life insurance benefits as were provided to Mr. Zizza and his family under plans of the Company as of the Change of Control for a total of twenty-four months following the year in which Mr. Zizza separates from service.

On December 26, 2012, Mr. Zizza informed the Board that he was retiring from all positions with the Company, effective immediately.  Under the terms of the Zizza Employment Agreement, Mr. Zizza will continue to receive his base salary of $10,000 per month through August 31, 2013.  Additionally, the Board agreed to extend the period during which Mr. Zizza can exercise his stock options that are vested and outstanding as of December 26, 2012 from one year to eighteen months from the date of his retirement.  As of December 26, 2012, Mr. Zizza had options to purchase 300,000 shares of the Company’s common stock vested and outstanding.

Brad A. Imhoff : In connection with Brad A. Imhoff’s appointment as Chief Operating Officer of the Company, the Company entered into an employment agreement (the “Imhoff Employment Agreement”) and a change of control agreement (the “Imhoff Change of Control Agreement”) with Mr. Imhoff, each dated as of August 31, 2011. The Imhoff Employment Agreement provides for a three-year term ending on September 1, 2014, unless Mr. Imhoff’s employment is earlier terminated in accordance with the provisions thereof. Mr. Imhoff is to receive a base salary at the rate of $180,000 per year for the term of the Imhoff Employment Agreement. Mr. Imhoff is also entitled to receive an annual bonus equal to 10% of the increase in profits earned by the Company’s Professional Staffing Division over the prior fiscal year minus an agreed upon corporate allocation and not including any profits of acquired entities or assets until the applicable earnout periods related thereto have expired. The fiscal year ending September 30, 2011 will be used as the first baseline to determine the profitability bonus and will be used in subsequent years to determine the profitability bonus to the extent that profits in subsequent years are less than profits for the fiscal year ending September 30, 2011. Upon the expiration of the term of the Imhoff Employment Agreement or termination of Mr. Imhoff’s employment by the Company with cause under the circumstances set forth in the Imhoff Employment Agreement, the Company’s obligations are limited generally to paying Mr. Imhoff his base salary through the termination date.

 

49

---

Table of Contents

The term of the Imhoff Change of Control Agreement commenced on August 31, 2011 and will terminate on the earlier of (i) three years following the date of execution; (ii) termination of Mr. Imhoff’s employment; or (iii) the execution of a written agreement between the Company and Mr. Imhoff terminating the Imhoff Change of Control Agreement. Under the Imhoff Change of Control Agreement, in the event that the Company terminates Mr. Imhoff’s employment without Cause or Mr. Imhoff resigns with Good Reason after a Change of Control (each as defined in the Imhoff Change of Control Agreement), Mr. Imhoff will receive, subject to his execution of a separation agreement and release of claims in a form reasonably satisfactory to the Company, (i) a lump sum payment equal to all unpaid compensation remaining from the day of separation to the end of the term of the Imhoff Employment Agreement; (ii) continuation of health insurance benefits for six months following his separation from service; (iii) reimbursement for the premiums associated with COBRA for 18 months following the six-month continuation of health insurance period; and (iv) the same percentage of Company-paid group-term life insurance benefits as were provided to Mr. Imhoff and his family under plans of the Company as of the Change of Control for a total of twenty-four months following the year in which Mr. Imhoff separates from service.

Katy M. Imhoff : On August 31, 2011, the Company and Katy Gallagher, Vice President Operations, entered into an employment agreement (the “Katy Imhoff Employment Agreement”) and a change of control agreement (the “Katy Imhoff Change of Control Agreement”). Ms. Imhoff will serve as the Vice President of Operations and the Vice President of the Professional Staffing Division of the Company. The Katy Imhoff Employment Agreement provides for a three-year term ending on September 1, 2014, unless Ms. Imhoff’s employment is earlier terminated in accordance with the provisions thereof. Ms. Imhoff is to receive a base salary at the rate of $150,000 per year for the term of the Katy Imhoff Employment Agreement. Upon the Death, Disability, expiration of the term of the Katy Imhoff Employment Agreement, or a termination of Ms. Imhoff’s employment with Cause (each as defined in the Katy Imhoff Employment Agreement), the Company’s obligations are limited generally to paying Ms. Imhoff her base salary through the termination date.

The term of the Katy Imhoff Change of Control Agreement commenced on August 31, 2011 and will terminate on the earlier of (i) three years following the date of execution; (ii) termination of Ms. Imhoff’s employment; or (iii) the execution of a written agreement between the Company and Ms. Imhoff terminating the Katy Imhoff Change of Control Agreement. Under the Katy Imhoff Change of Control Agreement, in the event that the Company terminates Ms. Imhoff’s employment without Cause or Ms. Imhoff resigns with Good Reason after a Change of Control (each as defined in the Katy Imhoff Change of Control Agreement), Ms. Imhoff will receive, subject to her execution of a separation agreement and release of claims in a form reasonably satisfactory to the Company, (i) a lump sum payment equal to all unpaid compensation remaining from the day of separation to the end of the term of the Katy Imhoff Employment Agreement; (ii) continuation of health insurance benefits for six months following her separation from service; (iii) reimbursement for the premiums associated with COBRA for 18 months following the six-month continuation of health insurance period; and (iv) the same percentage of Company-paid group-term life insurance benefits as were provided to Ms. Imhoff and her family under plans of the Company as of the Change of Control for a total of twenty-four months following the year in which Ms. Imhoff separates from service.

Consulting Agreement

In connection with the completion of the sale of shares of Common Stock to PSQ on July 1, 2009, Mr. Imhoff, Jr. resigned from his positions as Chairman of the Board and Chief Executive Officer of the Company and his employment agreement with the Company was replaced by a new consulting agreement. Under the consulting agreement, dated as of June 22, 2009, the Company became obligated to pay an annual consulting fee of $180,000 over a five-year period and to issue 500,000 shares of Common Stock to Mr. Imhoff, Jr. in exchange for his service to the Company.  On January 31, 2013, Mr. Herbert Imhoff informed the Board that he was retiring from all positions with the Company, effectively immediately.   Mr. Imhoff Jr. will continue to receive monthly payments of $15,000 through June 30, 2014 as well as medical benefits provided by the Company.  Additionally, under the terms of his stock option agreements, he will have one year to exercise his stock options that are vested and outstanding as of January 31, 2013.  As of January 31, 2013, Mr. Imhoff, Jr, had options to purchase 315,000 shares of the Company’s common stock vested and outstanding.

 

 

50

---

Table of Contents

Option Awards

The option awards column represents the fair value of the stock options as measured on the grant date. The methods and assumptions used to determine the fair value of stock options granted are disclosed in “Note 15 - Stock Option Plans” in the notes to consolidated financial statements contained elsewhere herein.

All stock options awarded to the named executive officers during fiscal 2012 were at option prices that were equal to the market price on the date of grant, had vesting dates two years or less after the date of grant, and had expiration dates ten years after the date of grant.  Due to a change of control, subsequent to year end, all of such options were immediately vested and exercisable.  There were no stock options awarded in fiscal 2011.

All Other Compensation

Name		Year		Executive Retirement Plan ($)				Consulting Fees ($)				Other ($)				Total All Other Compensation ($)
Salvatore J. Zizza		2012			––				––				76,500	(1)			76,500
former Chief Executive Officer and Chairman of the Board		2011			––				––				––				––
Herbert F. Imhoff, Jr.		2012			––				180,000				76,500	(1)			256,500
former President		2011			––				180,000				––				180,000
Marilyn L. White		2012			––				––				––				––
former Vice President		2011			––				––				32,500	(2)			32,500

 

(1)

Includes an option to purchase 300,000 shares of common stock at a price of $0.41 per share, granted on February 22, 2012. Due to a change of control, subsequent to year end, all of such options were immediately vested and exercisable.  In connection with Mr. Zizza’s retirement, the Board agreed to extend the period during which Mr. Zizza can exercise his stock options that are vested from one year to eighteen months from the date of his retirement on December 26, 2012.

(2)

Amount represents severance payment made to Ms. White.

 

51

---

Table of Contents

 

Outstanding Equity Awards at Fiscal Year-End

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

 

The following table summarizes equity awards granted to Named Executive Officers and Directors that were outstanding as of September 30, 2012:

 

	Option Awards										Stock Awards
N	Number of Securities Underlying Unexercised Options: # Exercisable		Number of Securities Underlying Unexercised Options: # Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unearned and Unexercisable Options:		Option Exercise Price $			Option Expiration Date		# of Shares or Units of Stock That Have Not Vested #	Market Value of Shares or Units of Stock That Have Not Vested $	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested #	Equity Incentive Plan Awards: Market of Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested $
Salvatore J. Zizza former Chairman of the Board of Directors, Chief Executive Officer	300,000	(2)	0	0			0.41		6/25/14		0	0	0	0
Herbert F. Imhoff, Jr. President	300,000	(2)	0	0			0.41		1/30/14		0	0	0	0
Dennis Baker, Director	300,000	(2)	0	0			0.41		2/22/17		0	0	0	0
	15,000		0	0			2.39		2/25/17		0	0	0	0
	15,000	(1)	0	0			0.73		2/22/19		0	0	0	0
Charles W. B. Wardell III, Director	300,000	(2)	0	0			0.41		10/4/13		0	0	0	0
(3)	15,000	(1)	0	0			0.73		9/4/13		0	0	0	0
Thomas C. Williams, Director	300,000	(2)	0	0			0.41		2/22/17		0	0	0	0
(2)	15,000	(1)	0	0			0.73		2/22/19		0	0	0	0

 

(1)

The options vest at the rate of 3,000 every year beginning on September 30, 2012. Due to a change of control, subsequent to year end, all of such options were immediately vested and exercisable.

(2)

Includes an option to purchase 300,000 shares of common stock at a price of $0.41 per share, granted on February 22, 2012.  Due to a change of control, subsequent to year end, all of such options were immediately vested and exercisable.

(3)

Charles W. B. Wardell resigned as of September 4, 2012

 

Retirement Benefits

The Company does not maintain a tax-qualified defined benefit retirement plan for any of its executive officers or employees. The Company has a 401(k) retirement plan in which all full-time employees may participate after one year of service.

Potential Payments upon Termination of Employment or Change in Control

We have entered into certain agreements (such as the employment agreements discussed above under the caption “ Employment and Change in Control Agreements ”) and maintain certain plans that require us to provide compensation to the named executive officers in the event of certain terminations of their employment or if the Company experiences a change in control. The amount of compensation that would be payable at September 30, 2012 to each named executive officer for such terminations is shown in the tables below.

 

 

52

---

Table of Contents

Brad A. Imhoff:

Executive Benefits and Payments Upon Termination		Voluntary Termination				Involuntary Not for Cause Termination				Death or Disability				For Cause Termination				Change in Control				Good Reason
Compensation :
Base Salary Continuance		$	––			$	345,000			$	––			$	––			$	345,000			$	345,000
Vacation Pay			––				31,000				––				––				31,000				31,000
Benefits and Perquisites:
Life Insurance			––				656				––				––				656				656
Disability Insurance			––				1,158				––				––				1,158				1,158
Medical Dental Vision			––				11,287				––				––				11,287				11,287
Total		$	––			$	389,101			$	––			$	––			$	389,101			$	389,101

Katy M. Imhoff:

Executive Benefits and Payments Upon Termination		Voluntary Termination				Involuntary Not for Cause Termination				Death or Disability				For Cause Termination				Change in Control				Good Reason
Compensation :
Base Salary Continuance		$	––			$	287,500			$	––			$	––			$	287,500			$	287,500
Vacation Pay			––				25,862				––				––				25,862				25,862
Benefits and Perquisites:
Life Insurance			––				656				––				––				656				656
Disability Insurance			––				965				––				––				965				965
Medical Dental Vision			––				11,297				––				––				11,297				11,297
Total		$	––			$	326,280			$	––			$	––			$	326,280			$	326,280

DIRECTOR COMPENSATION

Compensation of Directors

Under the Company’s standard compensation arrangements that were in effect during fiscal 2011, each non-employee director received a monthly retainer of $2,000 with the exception of Mr. Baker who received $2,500 per month from March 2011 forward. Directors did not receive any additional compensation for attendance at meetings of the Board of Directors or its committees. Employees of the Company did not receive any additional compensation for service on the Board of Directors.

 

53

---

Table of Contents

The following table sets forth information concerning the compensation paid to each of the directors during fiscal 2012:

 

Director Compensation

Name		Fees Earned or Paid in Cash ($)				Option Awards (1) ($)				Total ($)
Dennis W. Baker			30,000				76,500				106,500
Herbert F. Imhoff, Jr.			24,000				(2)				24,000
Charles W. B. Wardell III			24,000				76,500				100,500
Thomas C. Williams			24,000				76,500				100,500

(1)

The aggregate number of outstanding option awards at the end of fiscal 2012 were as follows for each of the non-employee directors: Mr. Baker – 330,000; Mr. Imhoff, Jr. – 315,000; Mr. Wardell – 315,000; Mr. Williams – 315,000.  Due to a change of control, subsequent to year end, all of such options were immediately vested and exercisable.

(2)

Options granted were included in compensation above as Herbert F. Imhoff, Jr. was also an employee. Herbert F. Imhoff, Jr. has since retired from all positions for the Company.

Option Awards

The option awards column represents the fair value of the stock options as measured on the grant date. The methods and assumptions used to determine the fair value of stock options granted are disclosed in “Note 16 - Stock Option Plans” in the notes to consolidated financial statements in the Company’s Annual Report for fiscal 2012 accompanying this proxy statement.

 

 

54

---

Table of Contents

Item 12, Sec urity Ownership of Certain Beneficial Owners and Management.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Listed in the following table is information concerning persons known to the Company to be beneficial owners of more than five percent of the Company’s outstanding Common Stock, and information concerning the beneficial ownership of the Company’s outstanding Common Stock by each director, director nominee and named executive officer, as defined below, individually, and by all current directors and executive officers as a group. Unless noted otherwise, the named persons have sole voting and dispositive power over the shares listed. Except as noted otherwise, the information is as of March 28, 2013.

Name and Address of Beneficial Owner		Amount and Nature of Beneficial Ownership				Percent of Class(1)
LEED HR, LLC and Michael Schroering(2) LEED HR, LLC 2650 East Point Parkway, Suite 280 Louisville, KY 40223			16,041,744	(2)			73.9%
Dennis W. Baker.			373,800	(3)			1.7%
Thomas C. Williams			306,000	(4)			1.4%
Brad A. Imhoff			1,252,300	(5)			5.8%
Katy M. Imhoff			1,252,300	(6)			5.8%
Andrew J. Norstrud(7)			––				––
Edward Hunter(8)			––				––
Current directors and executive officers as a group (6 individuals)			17,973,844				82.8%

* Represents less than 1%.

(1)           Based on 21,699,675 shares issued and outstanding as of March 28, 2013.

(2)           Based on the Schedule 13D filed on September 13, 2013 and the Schedule 13D/A filed on September 21, 2012 by each of LEED HR, LLC a Kentucky limited liability company, and Mr. Schroering, which disclosed that LEED HR, LLC owns directly 15,824,410 shares of Common Stock.  Mr. Schroering owns directly 199,334 shares of Common Stock.  Mr. Schroering is the sole manager of LEED HR, LLC.  By virtue of this relationship, Mr. Schroering may be deemed to beneficially own, the  15,824,410 shares of Common Stock owned directly by LEED HR, LLC. 

 

 

55

---

Table of Contents

(3)           Represents (i) 52,800 shares of Common Stock owned, (and (ii) 321,000 shares issuable upon the exercise of stock options that are currently exercisable.  

 

(4)           Represents 306,000 shares issuable upon the exercise of stock options that are currently exercisable.

 

(5)           Represents (i) 1,250,000 shares of Common Stock held directly by Ashley Ellis LLC, of which Mr. Imhoff is the sole member and Chief Executive Officer , (ii) 1,150 shares of Common Stock directly owned and (iii) 1,150 shares of Common Stock owned by Mr. Imhoff’s daughter, Lisa Imhoff.

(6)           Ms. Imhoff is married to Mr. Brad Imhoff and may be deemed to own the shares beneficially owned by him.   Ms. Imhoff disclaims beneficial ownership of such shares except to the extent of her pecuniary interest therein.

(7)           Mr. Norstrud joined the Company effective March 28, 2013.

 

(8)           Mr. Hunter joined the Company effective October 2, 2012.

 

Item 13, Certain Relationships and Related Transactions, and Director Independence.

Transactions with Related Persons, Promoters and Certain Control Persons

On August 31, 2011, the Company entered into an asset purchase agreement (the “Ashley Purchase Agreement”) with Ashley Ellis, an Illinois limited liability company, and Brad A. Imhoff for the purchase of certain assets of Ashley Ellis, including customer lists, comprising Ashley Ellis’ services business. Ashley Ellis’ services business was operated from offices in Illinois, Texas and Georgia and provided services related to the recruitment and placement of technical personnel. The Ashley Purchase Agreement was deemed effective on September 1, 2011.

Brad A. Imhoff is the brother of Herbert F. Imhoff, Jr., a former director and the former President of the Company.  Effective January 31, 2013, Herbert Imhoff, Jr. retired from all positions with the Company. Brad A. Imhoff and Ashley Ellis, an entity of which Brad A. Imhoff is the sole member and Chief Executive Officer, were parties to the transaction. As consideration for the assets, the Company paid Ashley Ellis $200,000 on the date of closing and paid Ashley Ellis an additional $200,000 within six months of closing. The Company also issued to Ashley Ellis 1,250,000 restricted shares of the Company’s common stock. As the sole member of Ashley Ellis, Brad A. Imhoff has an interest in the entire consideration paid by the Company to Ashley Ellis for the assets.

In connection with the transactions contemplated by the Ashley Purchase Agreement, on August 31, 2011, the Company and Ashley Ellis entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which Ashley Ellis was granted certain piggyback registration rights with respect to the shares to be issued to Ashley Ellis under the Ashley Purchase Agreement. The Registration Rights Agreement contains certain indemnification provisions for the benefit of the Company and Ashley Ellis and other customary provisions.

 

In conjunction with the acquisition of DMCC and RFFG of Cleveland in December 2011, BMP, an Ohio corporation and a wholly-owned subsidiary of the Company, entered into a management service agreement (the “Management Agreement”) with RFFG effective November 1, 2010.   Thomas J. Bean, a 10% shareholder of the Company at the time (prior to consideration of common shares issued in this transaction), was the manager of RFFG.

Pursuant to the Management Agreement, BMP agreed to provide services to RFFG to operate its day-to-day business, including services related to accounting, sales, finance, workers’ compensation, benefits, physical locations, information technologies and employees.  The Management Agreement provided that additional services may be added if BMP and RFFG mutually agree to the cost to be charged by BMP for such services and as long as BMP has the resources to provide such services.

 

 

56

---

Table of Contents

In consideration of the services provided under the Management Agreement, RFFG agreed to pay BMP monthly fees that approximate 6% of its gross revenues on an annual basis.  For the year ended September 30, 2011, the Company recorded approximately $838,000 of revenue related to this agreement.  As of September 30, 2011, BMP has $225,000 of management fee receivable.

Due to an unresolved issue with the Ohio Bureau of Workers Compensation, RFFG ceased operations as of July 15, 2011 and, as a result, the Management Agreement was effectively terminated.  As a result, the Company recorded a loss on impairment of intangible assets of $1,126,000 (as discussed further in Note 9), offset by income of $1,276,000 for the reduction of an associated earn-out liability.   There was approximately $140,000 unpaid related to this Management Agreement, which was offset against amounts owed related to certain earn-out payments provided under the original Asset Purchase Agreement.

 

In November 2009, the Company discovered that it did not receive the proceeds from a bank for a $2,300,000 certificate of deposit that was scheduled to mature in October 2009. Although the Company made a formal inquiry of the bank, it did not receive an adequate explanation for the bank’s non-performance related to the deposit. In December 2009, the Company entered into an agreement to assign its interests in the certificate of deposit, without recourse and the Company was reimbursed for the face value of the deposit.  At that time, management believed the certificate of deposit was purchased by an unrelated third party that had other business interests with the bank.  New information was brought to management’s attention in October 2012 and it now believes Thomas J. Bean was involved and that others, who may or may not have been related to the Company may also have been involved in the transaction.

 

Director Independence

The Board of Directors has determined that each director, other than Mr. Schroering, is an independent director under the listing standards of the NYSE MKT. In addition, the Board of Directors has determined that each current member of the Nominating Committee, Compensation Committee and Audit Committee meets the additional independence criteria required for such membership under the listing standards of the NYSE MKT and Rule 10A-3 of the Exchange Act.

Item 14, Pr inc ipal Accountant Fees and Services.

 

 

57

---

Table of Contents

The Audit Committee is governed by a charter. The Audit Committee held four meetings during fiscal year 2012. The Audit Committee is comprised solely of independent directors as defined by the NYSE Amex Stock Exchange listing standards and Rule 10A-3 of the Securities Exchange Act of 1934.

Audit Committee of the Board of Directors

Dennis W. Baker, Committee Chair

Thomas C. Williams

Edward Hunter

INDEPENDENT PUBLIC ACCOUNTANTS

The Audit Committee of the Company’s Board of Directors has selected Friedman, LLP to serve as the Company’s independent registered public accounting firm and to audit the Company’s consolidated financial statements for the fiscal years ending September 30, 2012 and 2011. Friedman LLP has served as the Company’s independent registered public accounting firm since November 29, 2012.

 

PRINCIPAL ACCOUNTANT FEES

The following table presents fees billed or expected to be billed by BDO USA, LLP and Friedman, LLP for professional services rendered for the audit of the Company’s financial statements for the fiscal years ended September 30, 2012 and 2011, and fees billed by BDO USA, LLP during those years for other professional services:

		Fiscal				Fiscal
		2012(1)(2)				2011
Audit fees		$	350,000			$	122,000
Audit-related fees			18,000				4,000
Tax fees			—				—
All other fees			—				52,000

“Audit fees” relate to services for the audit of the Company’s consolidated financial statements for the fiscal year and for reviews of the interim consolidated financial statements included in the Company’s quarterly reports filed with the SEC.

“Audit-related fees” relate to services that are reasonably related to the audit of the Company’s consolidated financial statements and are not included in “audit fees.” These services include audits of the Company’s 401(k) retirement plan, the acquisition of certain assets of On-Site Services, Inc. and consultations on certain accounting matters.

“All other fees” relate to services rendered in connection with the subpoena issued to the Company by the SEC on February 14, 2011.

(1)

Friedman, LLP performed an audit of the Company’s financial statements for the years ended, September 30, 2012 and September 30, 2011

(2)

BDO USA, LLP charged the Company $50,000 for services for the year ended September 30, 2012, however did not complete the audit due to a dispute related to the audit fees required to complete the audit.

The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by the independent registered public accounting firm, and to not engage them to perform the specific non-audit services proscribed by law or regulation. At the beginning of each fiscal year, the Audit Committee meets with the independent registered public accounting firm and approves the fees and services to be performed for the ensuing year. On a quarterly basis, the Audit Committee reviews the fees billed for all services provided for the year to date, and it pre-approves additional services if necessary. The Audit Committee’s pre-approval policies allow management to engage the independent registered public accounting firm for consultations on tax or accounting matters up to an aggregate of $10,000 annually. All fees listed in the table above were approved in accordance with the Audit Committee’s policies.

 

 

58

---

Table of Contents

PART IV

Item 15, Exhibits and Financial Statement Schedules.

Exhibits

The following exhibits are filed as part of this report:

No.	Description of Exhibit
2.01	Securities Purchase and Tender Offer Agreement, dated March 30, 2009, by and among General Employment Enterprises, Inc. and PSQ, LLC.  Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated March 30, 2009, Commission File No. 1-05707.
2.02	Acquisition of Assets of On-Site Services dated June 2. 2010. Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated June 8, 2010, File No. 1-05707.
2.03	Financial Statements of On-Site Services dated August 16, 2010, Incorporated by reference to Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3 to the Company’s Current Report on Form 8-K dated August 16, 2010, File No. 1-05707.
3.01	Articles of Incorporation and amendments thereto. Incorporated by reference to Exhibit 3 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 1996, Commission File No. 1-05707.
3.02	By-Laws of General Employment Enterprises, Inc., as amended June 30, 2009.  Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated March 30, 2009, Commission File No. 1-05707
4.01	Rights Agreement dated as of February 4, 2000, between General Employment Enterprises, Inc. and Continental Stock Transfer and Trust Company, as Rights Agent. Incorporated by reference to Exhibit 1 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on February 7, 2000, Commission File No. 1-05707.
4.02	Amendment No. 1 to Rights Agreement, dated as of March 30, 2009, by and between General Employment Enterprises, Inc. and Continental Stock Transfer and Trust Company, as Rights Agent. Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A/A filed with the Securities and Exchange Commission on March 31, 2009, Commission File No. 1-05707.
10.01*	Key Manager Plan, adopted May 22, 1990. Incorporated by reference to Exhibit 10(h) to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 1990, Commission File No. 1-05707.
10.02*	General Employment Enterprises, Inc. 1995 Stock Option Plan. Incorporated by reference to Exhibit 4.1 to the Company’s Form S-8 Registration Statement dated April 25, 1995, Registration No. 33-91550.
10.03*	Second Amended and Restated General Employment Enterprises, Inc. 1997 Stock Option Plan.
10.04*	General Employment Enterprises, Inc. 1999 Stock Option Plan. Incorporated by reference to Exhibit 10 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, Commission File No. 1-05707.

 

 

59

---

Table of Contents

 

10.05*	Chief Executive Officer Bonus Plan, adopted September 24, 2001. Incorporated by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2001, Commission File No. 1-05707.
10.06*	Operational Vice President Bonus Plan effective for fiscal years beginning on or after October 1, 2004. Incorporated by reference to Exhibit 10.01 to the Company’s Quarterly Report of Form 10-QSB for the quarterly period ended December 31, 2004, Commission File No. 1-05707.
10.07*	Form of stock option agreement under the General Employment Enterprises, Inc. 1997 Stock Option Plan. Incorporated by reference to Exhibit 99.01 to the Company’s current report on Form 8-K dated September 25, 2006, Commission File No. 1-05707.
10.08*	Chief Executive Officer Bonus Plan Amendment 1, effective for fiscal years beginning on or after October 1, 2006. Incorporated by reference to Exhibit 10.01 to the Company’s quarterly report on Form 10-QSB for the quarterly period ended December 31, 2006, Commission File No. 1-05707.
10.09*	Form of director stock option agreement under the Amended and Restated General Employment Enterprises, Inc. 1997 Stock Option Plan. Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended September 30, 2007, Commission File No. 1-05707.
10.10*	Form of stock option agreement under the General Employment Enterprises, Inc. 1999 Stock Option Plan. Incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended September 30, 2007, Commission File No. 1-05707.
10.11*	Form of indemnity agreement with directors and officers, adopted November 19, 2007. Incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended September 30, 2007, Commission File No. 1-05707.
10.12*	Escrow Agreement, dated as of March 30, 2009, by and among General Employment Enterprises, Inc., PSQ, LLC and Park Avenue Bank, as escrow agent.  Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 30, 2009, Commission File No. 1-05707.
10.13*	Consulting Agreement, dated as of March 30, 2009, by and among Herbert F. Imhoff, Jr., General Employment Enterprises, Inc. and PSQ LLC.  Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated March 30, 2009, Commission File No. 1-05707.
10.14*	Registration Rights Agreement, dated as of March 30, 2009, by and between General Employment Enterprises, Inc., PSQ, LLC and Herbert F. Imhoff, Jr.  Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated March 30, 2009, Commission File No. 1-05707.
10.15*	Amendment No. 1, dated as of June 22, 2009, to Consulting Agreement, dated as of March 30, 2009, by and among Herbert F. Imhoff, Jr., General Employment Enterprises, Inc. and PSQ LLC.  Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated June 22, 2009, Commission File No. 1-05707.
10.16*	Employment Agreement between General Employment Enterprises, Inc. and Kent M. Yauch, dated June 26, 2009.  Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated June 22, 2009, Commission File No. 1-05707.
10.17*	Employment Agreement between General Employment Enterprises, Inc. and Marilyn L. White, dated June 26, 2009.  Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated June 22, 2009, Commission File No. 1-05707.
10.18*	Form of director stock option under the Second Amended and Restated General Employment Enterprises, Inc. 1997 Stock Option Plan.
10.19*	Form of employee stock option under the Second Amended and Restated General Employment Enterprises, Inc. 1997 Stock Option Plan.

 

 

60

---

Table of Contents

 

10.20*	Amendment No. 4 dated as of February 5, 2010 to Statement of Acquisition of Beneficial Ownership by Herbert F. Imhoff, Jr. Incorporated by reference to Form SC 13D dated February 5, 2010, Commission File No. 5-40677.
10.21	Account Purchase Agreement dated as December 14, 2010 by and between   Wells Fargo Bank, National Association and Triad Personnel Services, Inc., the Company, BMPS, Inc., BMCH, Inc. d/b/a Triad Personnel Services, and BMCH PA, Inc. d/b/a Triad Temporaries (the “Account Purchase Agreement”).  Incorporated by reference to Exhibit 10.01 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011, Commission File No. 001-05707.
10.22	First Amendment to Account Purchase Agreement dated May 2, 2011.  Filed herewith.
10.23	Second Amendment to Account Purchase Agreement dated as February 15, 2012.  Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated March 30, 2012, Commission File No. 001-05707.
10.24	Third Amendment to Account Purchase Agreement dated September 25, 2012.  Filed herewith.
10.25	Fourth Amendment to Account Purchase Agreement dated December 14, 2012.  Filed herewith.
10.26	Fifth Amendment to Account Purchase Agreement dated as January 14, 2013.  Filed herewith.
10.27	Asset Purchase Agreement, dated as of August 31, 2011, by and among General Employment Enterprises, Inc., Ashley Ellis LLC and Brad A. Imhoff.  Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated September 7, 2011, Commission File No. 001-05707.
10.28	Registration Rights Agreement, dated as of August 31, 2011, by and between General Employment Enterprises, Inc. and Ashley Ellis LLC.  Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 7, 2011, Commission File No. 001-05707.
10.29	Employment Agreement, dated as of August 31, 2011, by and between General Employment Enterprises, Inc. and Katy M. Imhoff.  Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated September 7, 2011, Commission File No. 001-05707.
10.30	Change of Control Agreement, dated as of August 31, 2011, by and between General Employment Enterprises, Inc. and Katy M. Imhoff.  Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated September 7, 2011, Commission File No. 001-05707.
10.31	Employment Agreement, dated as of September 1, 2011, by and between General Employment Enterprises, Inc. and Salvatore J. Zizza.  Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated September 7, 2011, Commission File No. 001-05707.
10.32	Change of Control Agreement, dated as of September 1, 2011, by and between General Employment Enterprises, Inc. and Salvatore J. Zizza.  Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated September 7, 2011, Commission File No. 001-05707.
10.33	Employment Agreement, dated as of August 31, 2011, by and between General Employment Enterprises, Inc. and Brad A. Imhoff.  Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K dated September 7, 2011, Commission File No. 001-05707.
10.34	Change of Control Agreement, dated as of August 31, 2011, by and between General Employment Enterprises, Inc. and Brad A. Imhoff.  Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K dated September 7, 2011, Commission File No. 001-05707.
10.35	Registration Rights Agreement, effective as of December 30, 2010, by and among General Employment Enterprises, Inc., Triad Personnel Services, Inc., DMCC Staffing, LLC and RFFG of Cleveland, LLC.  Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 5, 2011, Commission File No. 001-05707.

 

 

61

---

Table of Contents

 

10.36	General Employment Enterprises, Inc. 2011 Incentive Plan.  Incorporated by reference as Appendix B to the Company’s Proxy Statement dated January 23, 2012, Commission File No. 1-05707.*
10.37	Sixth Amendment to Account Purchase Agreement dated as March 27, 2013.  Filed herewith.
14.01	General Employment Enterprises, Inc. Code of Ethics for Directors, Officers and Employees, adopted as of August 16, 2004. Incorporated by reference to Exhibit 14.01 to the Company’s Form 8-K Current Report dated August 16, 2004, Commission File No. 1-05707.
23.01	Consent of Independent Registered Public Accounting Firm.
31.01	Certification of the principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
31.02	Certification of the principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
32.01	Certifications of the principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.02	Certifications for the principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code.
101.INS	XBRL Instant document, filed

 

62

---

Table of Contents

SIG NA TURES

Pursuant to the requirements of Section 13 or 15(d) 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.

 

GENERAL EMPLOYMENT ENTERPRISES, INC.

 (Registrant)

 

Date: 3/29/2013	By: /s/ Michael Schroering
	Michael Schroering
	Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: 3/29/2013	By: /s/ Michael Schroering
	Michael Schroering
	Chief Executive Officer
	(Principal executive officer)
Date: 3/29/2013	By: /s/ Andrew J. Norstrud
	Andrew J. Norstrud
	Chief Financial Officer
	(Principal financial and accounting officer)
Date: 3/29/2013	By: /s/ Dennis W. Baker
	Dennis W. Baker, Director
Date: 3/29/2013	By: /s/ Edward Hunter
	Edward Hunter, Director
Date: 3/29/2013	By: /s/ Thomas C. Williams
	Thomas C. Williams, Director

 

 

63

---