Table
of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June
30,
2008
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period
from
to
Commission File Number: 001-33613
HIRERIGHT, INC.
(Exact name of registrant as specified in its
charter)
Delaware
|
|
33-0465016
|
(State or other
jurisdiction of
|
|
(IRS employer
identification no.)
|
incorporation or
organization)
|
|
|
5151 California Avenue, Irvine,
CA 92617
www.hireright.com
(Address of principal executive offices)
(949) 428-5800
(Telephone number, including area code)
Not Applicable
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
x
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of large accelerated filer, accelerated filer, and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
|
Accelerated filer
o
|
Non-accelerated filer
o
(Do not check if a smaller reporting company)
|
Smaller reporting company
x
|
Indicated by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes
o
No
x
The
number of shares of the registrants common stock, $0.01 par value, outstanding
on August 1, 2008 was 11,539,862.
Table of Contents
HIRERIGHT, INC.
CONDENSED,
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
June 30,
|
|
December 31,
|
|
(in thousands, except share amounts)
|
|
2008
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
46,982
|
|
$
|
17,819
|
|
Short-term investments
|
|
1,550
|
|
29,005
|
|
Accounts receivable, net of allowance for
doubtful accounts of $109 and $153 at
June 30, 2008 and
December 31, 2007, respectively, and reserve for sales
allowances of $147 and $139 at
June 30, 2008 and December 31, 2007, respectively
|
|
12,043
|
|
10,002
|
|
Prepaid expenses and other current assets
|
|
2,239
|
|
1,216
|
|
Deferred tax assetcurrent
|
|
1,301
|
|
1,331
|
|
|
|
|
|
|
|
Total current assets
|
|
64,115
|
|
59,373
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated
depreciation and amortization
of $6,407 and $5,597 at
June 30, 2008 and December 31, 2007, respectively
|
|
2,188
|
|
2,003
|
|
Long-term investments
|
|
9,513
|
|
8,595
|
|
Other assets
|
|
523
|
|
486
|
|
Deferred tax assetnon-current
|
|
964
|
|
964
|
|
TOTAL
|
|
$
|
77,303
|
|
$
|
71,421
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
Accounts payable
|
|
$
|
4,602
|
|
$
|
3,428
|
|
Accrued liabilities
|
|
2,502
|
|
1,228
|
|
Accrued payroll and benefits
|
|
3,326
|
|
3,790
|
|
|
|
|
|
|
|
Total current liabilities
|
|
10,430
|
|
8,446
|
|
|
|
|
|
|
|
OTHER LIABILITIES
|
|
100
|
|
203
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
Common stock, $0.01 par value100,000,000
shares
authorized; 11,536,114 and 11,233,597 shares issued and
outstanding at June 30, 2008
and December 31, 2007, respectively
|
|
115
|
|
112
|
|
Additional paid-in capital
|
|
69,359
|
|
68,071
|
|
Other comprehensive gaincurrency
translation
|
|
14
|
|
11
|
|
Accumulated deficit
|
|
(2,715
|
)
|
(5,422
|
)
|
|
|
|
|
|
|
Net stockholders equity
|
|
66,773
|
|
62,772
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
77,303
|
|
$
|
71,421
|
|
The accompanying notes are
an integral part of these condensed, consolidated financial statements.
3
Table
of Contents
HIRERIGHT, INC.
CONDENSED, CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
(in thousands, except per share data)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
|
Service revenue
|
|
$
|
18,013
|
|
$
|
16,806
|
|
$
|
33,775
|
|
$
|
31,321
|
|
Reimbursed fee revenue
|
|
1,819
|
|
1,770
|
|
3,382
|
|
3,275
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
19,832
|
|
18,576
|
|
37,157
|
|
34,596
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE:
|
|
|
|
|
|
|
|
|
|
Cost of service revenue
|
|
7,597
|
|
7,364
|
|
14,965
|
|
14,380
|
|
Reimbursed fees paid
|
|
1,819
|
|
1,770
|
|
3,382
|
|
3,275
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue
|
|
9,416
|
|
9,134
|
|
18,347
|
|
17,655
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
10,416
|
|
9,442
|
|
18,810
|
|
16,941
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
1,167
|
|
1,023
|
|
2,214
|
|
1,932
|
|
Sales and marketing
|
|
3,177
|
|
2,706
|
|
6,114
|
|
5,085
|
|
General and administrative
|
|
4,000
|
|
2,586
|
|
6,622
|
|
4,873
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
8,344
|
|
6,315
|
|
14,950
|
|
11,890
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS
|
|
2,072
|
|
3,127
|
|
3,860
|
|
5,051
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
343
|
|
120
|
|
926
|
|
212
|
|
Interest expense
|
|
|
|
2
|
|
|
|
1
|
|
Other income (expense)net
|
|
(762
|
)
|
(6
|
)
|
(776
|
)
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) net
|
|
(419
|
)
|
116
|
|
150
|
|
206
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
1,653
|
|
3,243
|
|
4,010
|
|
5,257
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX PROVISION
|
|
449
|
|
1,343
|
|
1,303
|
|
2,180
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
1,204
|
|
1,900
|
|
2,707
|
|
3,077
|
|
Preferred stock dividends
|
|
|
|
(544
|
)
|
|
|
(1,087
|
)
|
Income allocable to preferred stockholders
|
|
|
|
(1,028
|
)
|
|
|
(1,509
|
)
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ALLOCABLE TO COMMON
STOCKHOLDERS
|
|
$
|
1,204
|
|
$
|
328
|
|
$
|
2,707
|
|
$
|
481
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.10
|
|
$
|
0.17
|
|
$
|
0.24
|
|
$
|
0.24
|
|
Diluted
|
|
$
|
0.10
|
|
$
|
0.11
|
|
$
|
0.22
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT
SHARES:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
11,481
|
|
1,975
|
|
11,467
|
|
1,966
|
|
Diluted
|
|
12,190
|
|
3,086
|
|
12,169
|
|
3,053
|
|
The accompanying notes are an integral part of these condensed,
consolidated financial statements.
4
Table
of Contents
HIRERIGHT, INC.
CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six Months Ended June 30,
|
|
(in thousands)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
CASH PROVIDED BY OPERATING ACTIVITIES:
|
|
|
|
|
|
Net income
|
|
$
|
2,707
|
|
$
|
3,077
|
|
Adjustments to reconcile net income to net
cash provided by operating activities:
|
|
|
|
|
|
Impairment of auction rate securities
|
|
762
|
|
|
|
Depreciation and amortization
|
|
775
|
|
623
|
|
Stock-based compensation expense
|
|
346
|
|
153
|
|
Deferred income taxes
|
|
30
|
|
1,317
|
|
Excess tax benefit from exercise of stock
options
|
|
(263
|
)
|
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
Accounts receivable, net
|
|
(2,040
|
)
|
(2,278
|
)
|
Prepaid expenses and other current assets
|
|
(1,023
|
)
|
237
|
|
Other assets
|
|
(36
|
)
|
113
|
|
Accounts payable
|
|
1,180
|
|
(1,253
|
)
|
Accrued liabilities
|
|
1,536
|
|
1,615
|
|
Accrued payroll and benefits
|
|
(485
|
)
|
(167
|
)
|
Other liabilities
|
|
(103
|
)
|
284
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
3,386
|
|
3,721
|
|
|
|
|
|
|
|
CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
|
|
|
|
|
|
Purchases of investments
|
|
(17,000
|
)
|
(4,719
|
)
|
Sales of investments
|
|
42,775
|
|
1,000
|
|
Purchases of fixed assets
|
|
(959
|
)
|
(882
|
)
|
|
|
|
|
|
|
Net cash provided by (used in) investing
activities
|
|
24,816
|
|
(4,601
|
)
|
|
|
|
|
|
|
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
683
|
|
143
|
|
Payment of deferred offering costs
|
|
|
|
(1,165
|
)
|
Excess tax benefit from exercise of stock
options
|
|
263
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing
activities
|
|
946
|
|
(1,022
|
)
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
15
|
|
2
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
|
|
29,163
|
|
(1,900
|
)
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS Beginning of
period
|
|
17,819
|
|
4,201
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS End of period
|
|
$
|
46,982
|
|
$
|
2,301
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
1,200
|
|
$
|
230
|
|
|
|
|
|
|
|
NON-CASH FINANCING TRANSACTIONS:
|
|
|
|
|
|
Vesting of stock options early exercised
|
|
$
|
|
|
$
|
44
|
|
|
|
|
|
|
|
Accrued purchases of fixed assets
|
|
$
|
101
|
|
$
|
|
|
The accompanying notes are an integral part of these condensed,
consolidated financial statements.
5
Table
of Contents
HIRERIGHT, INC.
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
General
Business.
HireRight, Inc. (the Company) was
incorporated in California in 1990 and reincorporated in Delaware in July 2007.
Our shares of common stock are listed on the NASDAQ Global Market and trade
under the symbol HIRE. We are a
provider of on-demand employment screening solutions. Our customers use our
comprehensive screening services in conjunction with our web-based software
applications to conduct and manage their employment screening programs
efficiently and effectively, make more informed employment decisions, improve
workplace safety and mitigate risk. We offer a comprehensive set of background
screening services including criminal, motor vehicle and other public records
searches, employment, education and professional license verifications and
credit checks, as well as drug and health screening services.
Basis of Presentation.
The accompanying condensed, consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles (GAAP) in the United States for interim financial
information, and in accordance with the rules and regulations of the
United States Securities and Exchange Commission (the SEC). Accordingly, they
do not include all of the information and notes required by GAAP in the United
States for annual financial statements as permitted under applicable rules and
regulations, and should be read in conjunction with our audited consolidated
financial statements and notes thereto for the fiscal year ended December 31,
2007 included in the Companys Annual Report on Form 10-K.
The condensed, consolidated financial statements
included herein are unaudited; however, they contain all adjustments, including
normal recurring adjustments, which in the opinion of management are necessary
for a fair presentation. The results of operations for the six months ended June 30,
2008 are not necessarily indicative of results that can be expected for the
full year.
The preparation of our condensed, consolidated
financial statements in accordance with GAAP in the United States requires
management to make estimates and assumptions that affect the amounts reported
in our condensed, consolidated financial statements and notes thereto. Actual
results could differ materially from those estimates.
Initial Public Offering.
The Registration Statement for the Companys initial public offering (the Public Offering) was declared effective on August 7, 2007 (the Effective Date). The Company consummated the Public Offering on August 13, 2007 and sold 2,954,115 shares of its common stock, at a price of $15.00 per share. An additional 1,420,885 shares were sold by selling stockholders. The Company received approximately $39.4 million, net of underwriting discounts, commissions, and other offering costs. Upon the closing of the Public Offering, all of the Companys outstanding preferred stock automatically converted into an aggregate of 6,201,142 shares of the Companys common stock.
Pending
Merger With USIS.
On June 9,
2008, the Company entered into an Agreement and Plan of Merger (the Merger
Agreement) with US Investigations Services, LLC (USIS) and Hercules
Acquisition Corp. (the Purchaser), a wholly-owned subsidiary of USIS.
The Merger Agreement initially provided that, subject to the terms and
conditions of the Merger Agreement, HireRight stockholders would be entitled to
receive $15.60 in cash for each share of common stock that they own.
On June 19,
2008, the Company received a letter from a third party strategic buyer which
included a preliminary, non-binding proposal to acquire HireRight at a price
per share in cash of $17.00, subject to its completion of a due diligence
review of HireRight. On July 17,
2008, following the third partys completion of due diligence, the Company
received another letter from the third party, in which the third party proposed
to acquire HireRight for $18.00 per share in cash.
On July 23,
2008, HireRight and USIS entered into an amendment to the Merger Agreement,
which increased the merger consideration payable to HireRight stockholders upon
completion of the proposed merger to $18.75 per share in cash. On July 25, 2008, we mailed proxy
statements and related materials to stockholders of record as of July 15,
2008 and scheduled a special meeting of stockholders on August 18, 2008.
Also on July 25,
2008, we received a revised proposal from the third party, in which the third
party proposed to acquire all outstanding shares of HireRight common stock at a
price of $19.00 per share in cash. On July 29,
2008, HireRight and USIS entered into another amendment to the Merger
Agreement, which increased the merger consideration payable to HireRight
stockholders upon completion of the proposed merger to $19.75 per share in
cash.
6
Table of Contents
The Merger
Agreement further provides that, following the consummation of the merger, the
Purchaser will merge with and into HireRight. The Company will survive the
merger as a wholly-owned subsidiary of USIS. The Merger Agreement also contains
customary representations, warranties and covenants made by the Company. The merger, which is expected to close in the
third calendar quarter, is subject to, among other things, approval by
HireRight stockholders and other customary closing conditions. If the merger is completed, our common stock
will be delisted from and will no longer be traded on the NASDAQ Global Market
and will be deregistered under the Securities Exchange Act of 1934. Following the completion of the merger,
HireRight will no longer be an independent public company.
In addition, if
the transaction contemplated under the Merger Agreement does not occur, we
could be required to pay USIS a termination fee of $6,850,000 if we complete an
alternative merger or business combination transaction with a party other than
USIS or under other circumstances described in the Merger Agreement. There are
several closing conditions that are requirements for the completion of the
transaction, and these closing conditions are described in greater detail in
our Definitive Proxy Statement on Schedule 14A, as filed with the SEC on July 25,
2008 and in a Proxy Supplement on Schedule 14A, as filed with the SEC on July 31,
2008.
2.
Investments
The Company accounts for its investments in marketable securities under
Statements of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity
Securities
(SFAS 115). Investments consist of auction rate
municipal and equity securities with interest at rates that are reset
periodically. These securities are recorded at fair value in the accompanying
balance sheets. The Company evaluates its investments for other-than-temporary
impairment on a security by security basis. As of June 30, 2008, the
Company determined that its securities were other-than-temporarily impaired and
recorded a write down of auction rate securities of $0.8 million. No impairment
of securities was recorded in the comparable period as of June 30,
2007. As of June 30, 2008, there
was $7,000 in unrealized holding losses. The Company classifies all
available-for-sale securities as current or non-current assets in the
accompanying balance sheets based on managements intended holding period and
liquidity considerations based on market conditions.
At June 30, 2008, the Company held
$11.8 million, par value, of securities which have an auction reset
feature. The Dutch auction process that resets the applicable interest rate at
predetermined calendar intervals is intended to provide liquidity to the holder
of auction rate securities by matching buyers and sellers within a market
context enabling the holder to gain immediate liquidity by selling such
interests at par or rolling over their investment. If there is an imbalance
between buyers and sellers the risk of a failed auction exists. Of the seven
securities held by the Company as of June 30, 2008, five securities having
an aggregate par value of $8.3 million have failed at auction in 2008. Given
the deteriorating credit markets, and the increased incidence of failure within
the auction market in 2008, there can be no assurance as to when we will be
able to liquidate a particular security. In the case of an auction failure, we
would not be able to access those funds until a future auction of these investments
is successful, the security is called by the issuer or a buyer is found outside
the auction process. As a result, we have classified our auction rate
securities as long-term investments, except for $1.6 million of such securities
which have been either sold or redeemed by the issuer at par value subsequent
to quarter end. Additionally, as
mentioned above the Company recorded a $0.8 million impairment charge in other
income (expense) on the Companys Condensed, Consolidated Statements of Income
for the three and six months ended June 30, 2008.
We will continue to monitor and evaluate these investments, noting that
there is no assurance as to when the market for this investment class will
return to orderly operations.
7
Table
of Contents
3. Fair Value of
Financial Instruments
On
January 1, 2008, the Company adopted the provisions of SFAS No. 157,
Fair Value Measurements
(SFAS 157
),
related to its financial assets and liabilities. The Company measures certain
assets and liabilities at fair value as discussed throughout the footnotes to
its quarterly and annual financial statements. Assets or liabilities that have
recurring measurements are shown below:
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
|
|
|
Quoted Prices
|
|
Significant
|
|
|
|
|
|
|
|
in Active
|
|
Other
|
|
Significant
|
|
|
|
|
|
Markets for
|
|
Observable
|
|
Unobservable
|
|
|
|
|
|
Identical Assets
|
|
Inputs
|
|
Inputs
|
|
Description
|
|
June 30, 2008
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Cash and cash equivalents (1)
|
|
$
|
46,982
|
|
$
|
46,982
|
|
$
|
|
|
$
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
1,550
|
|
1,550
|
(2)
|
|
|
|
|
Long-term investments
|
|
9,513
|
|
|
|
9,513
|
(3)
|
|
|
|
|
$
|
58,045
|
|
$
|
48,532
|
|
$
|
9,513
|
|
$
|
|
|
(1)
|
|
The
carrying amount approximates fair value because of the short maturity of
these instruments.
|
(2)
|
|
These
investments consist of auction rate securities which are actively traded.
Recent transaction activity has occurred within identical assets.
|
(3)
|
|
These
investments consist of
auction
rate securities which have had few transactions due to recent market
conditions. The fair value of such securities is determined by quoted prices
for identical or similar assets in markets that are not active, as well as
inputs other than quoted prices that are observable for the assets.
|
As
discussed in Note 2 above, the Companys short-term and long-term investments
consist of auction rate municipal and equity securities with interest at rates
that are reset periodically. These securities are publicly traded and the
Company determines its fair value based on the latest available quoted market
prices
.
See
Note 2 for additional discussion of the Companys investment securities.
The Company also adopted the provisions of SFAS No. 159,
The Fair Value Option for Financial Assets and
Financial Liabilities
(SFAS 159) as of January 1,
2008. The adoption of SFAS 159 did not
have a material impact on the Companys financial position, as the Company did
not make any fair value elections under SFAS 159.
4.
Share-Based Compensation
During the three and six
months ended June 30, 2008, stock options for the purchase of 35,328
shares of common stock at a weighted average exercise price of $10.25, and
335,828 shares of common stock at a weighted average exercise price of $8.38
per share were awarded, respectively, with vesting generally over four years.
For the comparable periods in 2007, stock options for the purchase of 42,937
shares of common stock at a weighted average exercise price of $15.44 per share
and 67,816 shares at a weighted-average exercise price of $13.78 per share,
respectively, were awarded.
At
June 30, 2008, there were 750,967 outstanding stock options granted under
our Stock Option/Stock Issuance Plan (the 2000 Plan) and 387,074 outstanding
stock options granted under our 2007 Long Term Incentive Plan (the 2007 Plan).
The 2007 Plan became effective on the Effective Date of the Companys Public
Offering. All stock option awards up until the Effective Date were made under
the 2000 Plan. Commencing on the
Effective Date, new options and other stock awards may only be granted under
the 2007 Plan. The maximum aggregate number of shares of common stock or
options to purchase shares of the Companys common stock that may initially be
issued under the 2007 Plan is 1,000,000. Outstanding options granted under both
our 2000 Plan and 2007 Plan expire ten years from the grant date and typically
vest 25% upon completion of one year of service with the remaining options
vesting in 36 successive equal monthly installments upon completion of each
additional month of service thereafter.
During
the three and six months ended June 30, 2008, in accordance with the
prospective method of adoption of SFAS No. 123 (revised 2004),
Share-Based Payment
(SFAS 123(R)), the Company recognized
share-based compensation expense of $213,000 and $346,000, respectively,
compared to $76,000 and $153,000, respectively, for the comparable 2007
periods. At June 30, 2008, there was approximately $2.0 million of
unrecognized compensation cost related to unvested shares that will be
recognized over a weighted average period of 1.9 years.
8
Table of Contents
A
summary of significant assumptions used in determining the fair value of the
options granted is as follows:
|
|
Six Months Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
Expected life (years)
|
|
6.25
|
|
6.25
|
|
Risk-free interest rate
|
|
3.14 3.56
|
%
|
4.69 4.82
|
%
|
Volatility
|
|
41.56 41.77
|
%
|
41.50 41.65
|
%
|
Dividend yield
|
|
0
|
%
|
0
|
%
|
As
of June 30, 2008, the total number of outstanding options vested and
expected to vest (based on anticipated forfeitures) was 1,072,266, which had a
weighted-average exercise price of $5.81. The average remaining life of these
options was 7.6 years and the aggregate intrinsic value was $12.1 million at June 30,
2008.
As
of June 30, 2008, the total number of outstanding options currently
exercisable was 587,715, which had a weighted-average exercise price of $3.67.
The average remaining life of these options was 6.3 years and the aggregate
intrinsic value was $7.9 million at June 30, 2008.
Employee Stock Purchase Plan
During
2007, the Company adopted a qualified employee stock purchase plan, or ESPP,
which was implemented during the second quarter of 2008. In connection with the
adoption of the ESPP, the Company has reserved for issuance a total of 225,000
shares of common stock. Under the terms of the ESPP, rights to purchase common
shares may be granted to eligible qualified employees subject to certain
restrictions. The ESPP enables the Companys eligible employees, through
payroll withholdings, to purchase a limited number of common shares at 95% of
the lesser of the fair market value of a Companys common share on the first
business day or the last business day of a purchase period. Each purchase
period is for a six-month term, with purchases being made at the end of such
period.
5. Calculation of Earnings
per Common Share
Basic
earnings per common share is calculated by dividing net income allocable to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted earnings per common share is calculated by dividing
net income allocable to common stockholders by the weighted average number of
common shares outstanding after giving effect to all potentially dilutive
common shares outstanding during the period. Basic and diluted earnings per
common share were calculated as follows:
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
in thousands, except per share amounts
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,204
|
|
$
|
1,900
|
|
$
|
2,707
|
|
$
|
3,077
|
|
Less preferred stock dividends
|
|
|
|
(544
|
)
|
|
|
(1,087
|
)
|
Less income allocable to preferred
stockholders
|
|
|
|
(1,028
|
)
|
|
|
(1,509
|
)
|
|
|
|
|
|
|
|
|
|
|
Net income allocable to common stockholders
|
|
$
|
1,204
|
|
$
|
328
|
|
$
|
2,707
|
|
$
|
481
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
11,481
|
|
1,975
|
|
11,467
|
|
1,966
|
|
Effect of dilutive potential common shares:
|
|
|
|
|
|
|
|
|
|
Weighted average unvested common shares
|
|
|
|
4
|
|
|
|
7
|
|
Common equivalent shares from warrants to
purchase common stock
|
|
245
|
|
377
|
|
236
|
|
367
|
|
Common equivalent shares from options to
purchase common stock
|
|
464
|
|
730
|
|
466
|
|
713
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
12,190
|
|
3,086
|
|
12,169
|
|
3,053
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.10
|
|
$
|
0.17
|
|
$
|
0.24
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
$
|
0.10
|
|
$
|
0.11
|
|
$
|
0.22
|
|
$
|
0.16
|
|
9
Table
of Contents
The anti-dilutive effect of 419,927 and 124,655
shares from outstanding stock options have been excluded from the earnings per
share calculations for the three and six months ended June 30, 2008,
respectively.
6. Recent
Accounting Pronouncements
In February 2008, the FASB issued FASB Staff Position No. 157-2
(Staff Position 157-2), which deferred the effective date for certain
portions of SFAS 157 related to nonrecurring measurements of nonfinancial assets
and liabilities. That provision of
SFAS 157 will be effective for the Companys 2009 fiscal year. We are currently evaluating the effect, if
any, that the adoption of Staff Position 157-2 will have on our
results of operations, financial position and cash flows.
In December 2007, the FASB issued SFAS No. 141revised 2007,
Business Combinations
(SFAS 141R).
SFAS 141R establishes principles and requirements for how an acquirer in a
business combination recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest; recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and determines what information
to disclose to enable financial statement users to evaluate the nature and
financial effects of the business combination. SFAS 141R applies to
business combinations for which the acquisition date is on or after December 15,
2008. Early adoption is prohibited. We are currently evaluating the effect, if
any, that the adoption of SFAS 141R will have on our results of
operations, financial position and cash flows.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statementsan Amendment to ARB No. 51
(SFAS 160).
SFAS 160 requires all entities to report noncontrolling (minority)
interests in subsidiaries as equity in the consolidated financial statements,
but separate from the equity of the parent company. The statement further requires
that consolidated net income be reported at amounts attributable to the parent
and the noncontrolling interest, rather than expensing the income attributable
to the minority interest holder. This statement also requires that companies
provide sufficient disclosures to clearly identify and distinguish between the
interests of the parent company and the interests of the noncontrolling owners,
including a disclosure on the face of the consolidated statements for income
attributable to the noncontrolling interest holder. This statement is effective
for fiscal years beginning on or after December 15, 2008. Early adoption
is prohibited. We are currently evaluating the effect, if any, that the
adoption of SFAS 160 will have on our results of operations, financial
position and cash flows.
In May 2008, the FASB
issued FASB Statement No. 162,
The
Hierarchy of Generally Accepted Accounting Principles
(SFAS 162).
SFAS 162 identifies the sources of accounting principles and the framework for
selecting the principles to be used in the preparation of financial statements
of nongovernmental entities that are presented in conformity with GAAP. SFAS
162 will become effective 60 days following the SECs approval of the Public
Company Accounting Oversight Board amendments to AU Section 411,
The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles
. We are currently evaluating the effect, if
any, that the adoption of SFAS 162 will have on our results of operations,
financial position and cash flows.
7. Commitments and Contingencies
During the first quarter of 2008, following the Companys
reincorporation into Delaware and 4.5 to 1 reverse stock split, a former
employee demanded that HireRight reissue him 27,777 shares of the Companys common
stock in exchange for a 125,000 share (pre-split basis) stock certificate he
claimed was given to him by HireRight and which he claimed was owned by him
without restrictions. Based on all information available to HireRight, the
Company believed that the former employee received such shares by exercise of unvested
stock options and was only entitled to a portion of such shares. The
former employee filed a complaint on February 6, 2008 in the Orange County
Superior Court, seeking monetary, non-monetary and punitive damages. The
complaint further alleged failure by HireRight to provide annual reports and
notice of annual stockholders meetings. The parties settled this matter on
June 5, 2008, with HireRight receiving a release of claims and dismissal
of the action (with prejudice) in exchange for a cash payment of $159,000.
The Company is currently involved in certain legal matters that have
arisen in the normal course of business. Management believes that the ultimate
resolution of such actions will not have a material adverse effect on the
Companys consolidated financial position and results of operations.
10
Table
of Contents
8.
Segment
Information
The Company provides web-based screening services, primarily to
customers located throughout the United States, and provides similar services
to similar customers across industries. Separate profitability or financial
information is not analyzed for particular individual screening services.
Management, including the chief operating decision maker, evaluates the Companys
performance based on its overall operating results for the Company, and
therefore, the Company has determined that it operates under one reportable
segment.
9.
Income
Taxes
At June 30, 2008, the
Company had a federal net operating loss carryforward of approximately $1.8
million. The federal net operating losses will begin to expire in 2011. In
general, Section 382 of the Internal Revenue Code includes provisions
which limit the amount of net operating loss carryforwards and other tax
attributes that may be used annually in the event that a 50% ownership change
(as defined) occurs in any three-year period. During 2000, the Company
experienced an ownership change for purposes of Section 382, and the
annual utilization of net operating loss carryforwards and credits prior to the
change will be limited accordingly. Such limitation is reflected in the
deferred income tax benefit balances as of June 30, 2008.
As of June 30, 2008,
the Company had no material unrecognized tax benefits and no adjustments to
liabilities or operations were required. The Company recognizes interest and
penalties related to uncertain tax positions in income tax expense. There was
no expense related to interest and penalties for the six months ended June 30,
2008.
Tax years 2004 through 2007
and 2003 through 2007 are subject to examination by the federal and state
taxing authorities, respectively. There are no income tax examinations
currently in process.
11
Table of Contents
Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations
Overview
We are a leading provider of
on-dem
and employment screening solutions. Our customers use our
comprehensive screening services in conjunction with our web-based software
applications to conduct and manage their employment screening programs
efficiently and effectively, make more informed employment decisions, improve
workplace safety and mitigate risk. We offer a comprehensive set of background
screening services including criminal, motor vehicle and other public records
searches, employment, education and professional license verification
s and credit checks, as well as drug and
health screening services.
Our
screening solutions are flexible and scalable, and therefore able to meet the
demands of customers across a range of sizes and industries, with hiring
operations dispersed throughout the United States and internationally. We serve
a diverse customer base in a variety of industries, such as business services,
technology, healthcare, manufacturing, telecommunications and financial
services. As of June 30, 2008, we had 2,839 customers, which included 70
of the Fortune 500 companies. Our sales are derived from a combination of
direct sales efforts as well as through our established network of strategic
alliances with many of the leading recruiting software application providers
and human resource outsourcing, or HRO, providers.
Cautionary Statement Regarding Forward Looking Statements
Certain statements contained in this Quarterly Report
on Form 10-Q, which are not purely historical, are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934, including but not limited to statements
regarding our expectations, hopes, beliefs, intentions, estimates or strategies
regarding the future, such as our future operating performance and financial
results, as well as those set forth in Part II, Item 1 Legal Proceedings
below. Actual results could differ
materially from those projected in any forward-looking statements as a result of
a number of factors, including those detailed below in this Managements
Discussion and Analysis section and elsewhere herein and in our Annual Report
on Form 10-K for the period ended December 31, 2007. Any forward-looking statements are made as of
the date hereof, and the Company assumes no obligation to update the
forward-looking statements, or to update the reasons why actual results could
differ materially from those projected in the forward-looking statements. For a discussion of risks and uncertainties
that should be considered and which could materially adversely affect the
Company and which could cause our actual results to differ materially from
those anticipated in our forward-looking statements, please see Risk Factors
below and in Part I, Item 1A of our Annual Report on Form 10-K for
the period ended December 31, 2007 and in Part II, Item 1A of our
Quarterly Report on Form 10-Q for the period ended March 31, 2008.
The
following discussion of our financial condition and results of operations
should be read together with the consolidated financial statements and related
notes
included in the
Companys Annual Report on Form10-K for the period ended December 31,
2007.
Significant Events and
Developments
Pending
Merger With USIS.
On June 9,
2008, the Company entered into an Agreement and Plan of Merger (the Merger
Agreement) with US Investigations Services, LLC (USIS) and Hercules
Acquisition Corp. (the Purchaser), a wholly-owned subsidiary of USIS.
The Merger Agreement initially provided that, subject to the terms and
conditions of the Merger Agreement, HireRight stockholders would be entitled to
receive $15.60 in cash for each share of common stock that they own.
On June 19,
2008, the Company received a letter from a third party strategic buyer which
included a preliminary, non-binding proposal to acquire HireRight at a price
per share in cash of $17.00, subject to its completion of a due diligence
review of HireRight. On July 17,
2008, following the third partys completion of due diligence, the Company
received another letter from the third party, in which the third party proposed
to acquire HireRight for $18.00 per share in cash.
On July 23,
2008, HireRight and USIS entered into an amendment to the Merger Agreement,
which increased the merger consideration payable to HireRight stockholders upon
completion of the proposed merger to $18.75 per share in cash. On July 25, 2008, we mailed proxy
statements and related materials to stockholders of record as of July 15,
2008 and scheduled a special meeting of stockholders on August 18, 2008.
12
Table of Contents
Also on July 25,
2008, we received a revised proposal from the third party, in which the third
party proposed to acquire all outstanding shares of HireRight common stock at a
price of $19.00 per share in cash. On July 29,
2008, HireRight and USIS entered into another amendment to the Merger
Agreement, which increased the merger consideration payable to HireRight
stockholders upon completion of the proposed merger to $19.75 per share in
cash.
The Merger
Agreement further provides that, following the consummation of the merger, the
Purchaser will merge with and into HireRight. The Company will survive the
merger as a wholly-owned subsidiary of USIS. The Merger Agreement also contains
customary representations, warranties and covenants made by the Company. The merger, which is expected to close in the
third calendar quarter, is subject to, among other things, approval by
HireRight stockholders and other customary closing conditions. If the merger is completed, our common stock
will be delisted from and will no longer be traded on the NASDAQ Global Market and
will be deregistered under the Securities Exchange Act of 1934. Following the completion of the merger,
HireRight will no longer be an independent public company.
In addition, if
the transaction contemplated under the Merger Agreement does not occur, we
could be required to pay USIS a termination fee of $6,850,000 if we complete an
alternative merger or business combination transaction with a party other than
USIS or under other circumstances described in the Merger Agreement. There are
several closing conditions that are requirements for the completion of the
transaction, and these closing conditions are described in greater detail in
our Definitive Proxy Statement on Schedule 14A, as filed with the SEC on July 25,
2008 and in a Proxy Supplement on Schedule 14A, as filed with the SEC on July 31,
2008.
13
Table of Contents
Results of Operations
The following table sets
forth selected statements of income data for the periods indicated, expressed
as a percent of total revenue:
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
|
Service revenue
|
|
90.8
|
%
|
90.5
|
%
|
90.9
|
%
|
90.5
|
%
|
Reimbursed fee revenue
|
|
9.2
|
%
|
9.5
|
%
|
9.1
|
%
|
9.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE:
|
|
|
|
|
|
|
|
|
|
Cost of service revenue
|
|
38.3
|
%
|
39.7
|
%
|
40.3
|
%
|
41.5
|
%
|
Reimbursed fees paid
|
|
9.2
|
%
|
9.5
|
%
|
9.1
|
%
|
9.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue
|
|
47.5
|
%
|
49.2
|
%
|
49.4
|
%
|
51.0
|
%
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
52.5
|
%
|
50.8
|
%
|
50.6
|
%
|
49.0
|
%
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
5.9
|
%
|
5.5
|
%
|
6.0
|
%
|
5.6
|
%
|
Sales and marketing
|
|
16.0
|
%
|
14.6
|
%
|
16.5
|
%
|
14.7
|
%
|
General and administrative
|
|
20.2
|
%
|
13.9
|
%
|
17.8
|
%
|
14.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
42.1
|
%
|
34.0
|
%
|
40.3
|
%
|
34.4
|
%
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS
|
|
10.4
|
%
|
16.8
|
%
|
10.3
|
%
|
14.6
|
%
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
1.7
|
%
|
0.6
|
%
|
2.5
|
%
|
0.6
|
%
|
Interest expense
|
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
Other income (expense)net
|
|
(3.8
|
)%
|
0.0
|
%
|
(2.1
|
)%
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)net
|
|
(2.1
|
)%
|
0.6
|
%
|
0.4
|
%
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
8.3
|
%
|
17.4
|
%
|
10.7
|
%
|
15.2
|
%
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX PROVISION
|
|
2.3
|
%
|
7.2
|
%
|
3.5
|
%
|
6.3
|
%
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
6.0
|
%
|
10.2
|
%
|
7.2
|
%
|
8.9
|
%
|
Three and
Six months ended June 30, 2008 and 2007
Service revenue
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30
|
|
June 30
|
|
$ in thousands
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Service revenue
|
|
$
|
18,013
|
|
$
|
16,806
|
|
$
|
33,775
|
|
$
|
31,321
|
|
As a percent of total revenue
|
|
90.8
|
%
|
90.5
|
%
|
90.9
|
%
|
90.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenue for the
three months ended June 30, 2008 increased $1.2 million, or 7.2%, compared
to the corresponding prior year period. This increase was primarily due to a
$2.1 million increase in service revenue generated from net new customers in
the three months ended June 30, 2008, compared to the 2007 period, offset
by a decrease in service revenue derived from existing customers of $0.9
million. We define revenue derived from net new customers to mean revenue
derived during the period from customers who had not used our services during
the 13 months immediately preceding the end of that period, net of revenue
derived during the period from customers who had been billed for services in
the prior period and were billed for less than 10% of that prior period amount
in the period being analyzed. The increase in service revenue from new
customers was due to customers that have started using our services in the
third quarter of 2007 or later from whom we had not generated revenue during
the period prior to June 30, 2007. As of June 30, 2008, we had 2,839
14
Table of Contents
customers, compared to 1,723
customers as of June 30, 2007. The decrease in service revenue from
existing customers compared to the prior year period was primarily the result
of a slowdown in the number of
background screens ordered by these customers in the current quarter, which we
believe is due in most part to less hiring and less movement by employees to
new positions due to the current macro-economic uncertainties. This slowdown of existing customer revenue
reduced our overall service revenue growth rate. We are unable to currently
predict if this existing customer growth slowdown will continue into the future
and, if so, for how long.
Service revenue for the six
months ended June 30, 2008 increased $2.5 million, or 7.8%, compared to
the corresponding prior year period. This increase was primarily due to a $3.9
million increase in service revenue generated from net new customers in the six
months ended June 30, 2008, compared to the 2007 period, offset by a
decrease in service revenue derived from existing customers of $1.4 million.
The increase in service revenue from new customers was due to customers that
have started using our services in the third quarter of 2007 or later from whom
we had not generated revenue during the period prior to June 30, 2007. The
decrease in service revenue from existing customers compared to the prior year
period was primarily the result of a
slowdown in the number of background screens ordered by these customers in the
current period, which we believe is due in most part to less hiring and less
movement by employees to new positions due to the current macro-economic
uncertainties. This slowdown of existing
customer revenue reduced our overall service revenue growth rate. We are unable
to currently predict if this existing customer growth slowdown will continue
into the future and, if so, for how long.
Reimbursed fee revenue
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30
|
|
June 30
|
|
$ in thousands
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Reimbursed fee revenue
|
|
$
|
1,819
|
|
$
|
1,770
|
|
$
|
3,382
|
|
$
|
3,275
|
|
As a percent of total revenue
|
|
9.2
|
%
|
9.5
|
%
|
9.1
|
%
|
9.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reimbursed fee revenue for
the three months ended June 30, 2008 remained fairly consistent as
compared to the corresponding prior year period. Similarly, reimbursed fee revenue as a
percentage of total revenue also remained fairly consistent.
Reimbursed fee revenue for
the six months ended June 30, 2008 remained relatively consistent,
increasing only $0.1 million, or 3.3%, compared to the corresponding prior year
period. This increase was a result of an
increase in the number of screening transactions.
Cost of revenue
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30
|
|
June 30
|
|
$ in thousands
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$
|
7,597
|
|
$
|
7,364
|
|
$
|
14,965
|
|
$
|
14,380
|
|
As a percent of service revenue
|
|
42.2
|
%
|
43.8
|
%
|
44.3
|
%
|
45.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
10,416
|
|
$
|
9,442
|
|
$
|
18,810
|
|
$
|
16,941
|
|
As a percent of service revenue
|
|
57.8
|
%
|
56.2
|
%
|
55.7
|
%
|
54.1
|
%
|
Cost of revenue for the
three months ended June 30, 2008 increased $0.2 million, or 3.2%, compared
to the three months ended June 30, 2007.
The increase was primarily due to an increase in vendor costs. Overall,
cost of service revenue as a percent of service revenue declined 1.6 percentage
points for the three months ended June 30, 2008 compared to the corresponding
prior year period. This decline was largely due to improved fixed cost leverage
with respect to our facilities and overhead costs, as well as the
implementation of certain automation projects.
15
Table of Contents
Cost of revenue for the six
months ended June 30, 2008 increased $0.6 million, or 4.1%, compared to
the six months ended June 30, 2007.
The increase was primarily due to an increase in vendor costs and
salaries and wages. Overall, cost of service revenue as a percent of service
revenue declined 1.6 percentage points for the six months ended June 30,
2008 compared to the corresponding prior year period. This decline was largely
due to improved fixed cost leverage with respect to our facilities and overhead
costs, as well as the implementation of certain automation projects.
Research and development expense
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30
|
|
June 30
|
|
$ in thousands
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expense
|
|
$
|
1,167
|
|
$
|
1,023
|
|
$
|
2,214
|
|
$
|
1,932
|
|
As a percent of service revenue
|
|
6.5
|
%
|
6.1
|
%
|
6.6
|
%
|
6.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
expense for the three months ended June 30, 2008 increased $0.1 million,
or 14.1%, compared to the three months ended June 30, 2007. The increase was the result of higher
salaries and related benefits for existing employees, partially offset by
development costs capitalized in the 2008 period in excess of amounts
capitalized in the 2007 period. Research and development expense as a percent
of service revenue increased by 0.4 percentage points for the three months
ended June 30, 2008 compared to the corresponding prior year period. This
increase as a percentage of service revenue primarily resulted from an increase
in the current period in amortization expense from capitalized software as well
as an increase in labor expense resulting from a decrease in capitalized labor.
Research and development
expense for the six months ended June 30, 2008 increased $0.3 million, or
14.6%, compared to the six months ended June 30, 2007. The increase was the result of higher
salaries and related benefits for existing employees, partially offset by
increased development costs capitalized in the 2008 period. Research and
development expense as a percent of service revenue increased by 0.4 percentage
points for the six months ended June 30, 2008 compared to the
corresponding prior year period. This increase as a percentage of service
revenue primarily resulted from an increase in the current period in
amortization expense from capitalized software as well as an increase in labor
expense resulting from a decrease in capitalized labor.
Sales and
marketing expense
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30
|
|
June 30
|
|
$ in thousands
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing expense
|
|
$
|
3,177
|
|
$
|
2,706
|
|
$
|
6,114
|
|
$
|
5,085
|
|
As a percent of service revenue
|
|
17.6
|
%
|
16.1
|
%
|
18.1
|
%
|
16.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing expense
for the three months ended June 30, 2008 increased $0.5 million, or 17.4%,
compared to the corresponding prior year period. Approximately $0.3 million of the increase
was due to higher salaries and related benefits resulting from 11 additional
full-time equivalent employees during the three months ended June 30, 2008
compared to the 2007 period. The remaining increase in sales and marketing
expense was attributable to higher travel and marketing expenses. We anticipate
that sales and marketing expense will continue to increase as a percentage of
service revenue through the end of 2008 as we plan to continue to invest in our
sales and marketing capabilities, with particular focus on the small and
midsized business markets.
Sales and marketing expense
for the six months ended June 30, 2008 increased $1.0 million, or 20.2%,
compared to the corresponding prior year period. Approximately $0.7 million of the increase
was due to higher salaries and related benefits resulting from 11 additional
full-time equivalent employees during the six months ended June 30, 2008
compared to the 2007 period. The remaining increase in sales and marketing
expense was attributable to higher travel and marketing expenses. We anticipate
that sales and marketing expense will continue to increase as a percentage of
service revenue through the end of 2008 as we plan to continue to invest in our
sales and marketing capabilities, with particular focus on the small and
midsized business markets.
16
Table of Contents
General and administrative expense
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30
|
|
June 30
|
|
$ in thousands
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
General and adminstrative expense
|
|
$
|
4,000
|
|
$
|
2,586
|
|
$
|
6,622
|
|
$
|
4,873
|
|
As a percent of service revenue
|
|
22.2
|
%
|
15.4
|
%
|
19.6
|
%
|
15.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
expense for the three months ended June 30, 2008 increased $1.4 million,
or 54.7%, compared to the three months ended June 30, 2007. This increase in general and administrative
expenses was primarily due to $1.2 million in financial advisory, legal
advisory and ancillary costs relating to the pending merger transaction
described above. There was also an increase of approximately $0.2 million from
a legal settlement involving a former employee.
As a percent of service revenue, general and administrative expense
increased 6.8 percentage points for the three months ended June 30, 2008,
compared to the corresponding prior year period.
General and administrative
expense for the six months ended June 30, 2008 increased $1.7 million, or
35.9%, compared to the six months ended June 30, 2007. This increase in general and administrative
expenses was primarily due to a $1.2 million increase in financial advisory,
legal advisory and ancillary costs relating to the pending merger transaction
described above, as well as a legal settlement of approximately $0.2 million
paid to a former employee. The remaining
increase is due to increases in consulting and professional fees. As a percent of service revenue, general and
administrative expense increased 4.0 percentage points for the six months ended
June 30, 2008, compared to the corresponding prior year period.
Other income
(expense)
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30
|
|
June 30
|
|
$ in thousands
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
$
|
(419
|
)
|
$
|
116
|
|
$
|
150
|
|
$
|
206
|
|
As a percent of service revenue
|
|
(2.3
|
)%
|
0.7
|
%
|
0.4
|
%
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
decreased $0.5 million to a net expense of $0.4 million for the three months
ended June 30, 2008, as compared to $0.1 million in the three months ended
June 30, 2007. The decrease is a
result of a write down in auction rate securities of $0.8 million, which is
offset by $0.3 million in earnings on the proceeds from our initial public
offering held in investments and money market accounts.
Other income (expense)
decreased $0.1 million to $0.1 million for the six months ended June 30,
2008, as compared to the $0.2 million in the six months ended June 30,
2007. This decrease was from a write
down in auction rate securities of $0.8 million, which was offset by $0.7
million in earnings on the proceeds from our initial public offering held in
investments and money market accounts.
Income taxes
The effective tax rate for the three and six months ended June 30,
2008 was approximately 32.5% compared to approximately 41.5% for the same
periods in 2007. The decrease in the effective tax rate during the three and
six months ended June 30, 2008 compared to the three and six months ended June 30,
2007 period was primarily a result of tax-exempt interest income generated from
investments in tax-exempt securities during the current periods.
Liquidity
and Capital Resources
Operating Activities
Our principal uses of cash in operating
activities are for operating expenses and working capital. Cash flows from
operations are significantly influenced by the amount of cash invested in
personnel and infrastructure to support the anticipated future growth in our
business, the increasing number of customers using our services and the amount
and timing of payments by these customers.
17
Table of Contents
For the six months ended June 30,
2008, cash generated by operating activities of $3.4 million resulted primarily
from net income, including adjustments for depreciation and amortization and
non-cash deferred taxes, partially offset by an increase in operating assets
and liabilities primarily as a result of the growth in revenues. Cash provided by operating activities of $3.7
million for the prior year six month period was primarily attributable to net
income, including adjustments for depreciation and amortization and non-cash
deferred taxes, partially offset by an increase in operating assets and
liabilities.
Investing Activities
Net cash provided by investing activities for
the six months ended June 30, 2008 was $24.8 million and was comprised of
net investment securities sales of $25.8 million, less purchases of fixed
assets of $1.0 million. The use of cash for investing activities in the six
months ended June 30, 2007 was $4.6 million and represented net investment
securities purchases and purchases of fixed assets of $3.7 million and $0.9
million, respectively. See also Note 2 of our Notes to Condensed, Consolidated
Financial Statements above for additional disclosures about investments.
Financing Activities
Net cash provided by financing activities for
the six months ended June 30, 2008 was $0.9 million, primarily due to the
exercise of stock options. The use of cash for financing activities in the six
months ended June 30, 2007 of $1.0 million was primarily for preparation
relating to our initial public offering in August 2007.
We currently
believe that our existing cash position, cash flows provided by operating
activities and existing credit facilities will be sufficient to fund our
working capital requirements and planned investments for at least the next
twelve months. We currently have no
interest bearing debt. If the pending
merger with USIS does not occur, the Company plans to use the net proceeds from
our initial public offering primarily for working capital and other general
corporate purposes, including the expansion of our sales and marketing
activities, development of new service offerings and expansion of our
international operations. In addition, we may use a portion of the net proceeds
for acquisitions of, or investments in, businesses, products or
technologies that enhance or add new services or additional functionality,
further solidify our market position or allow us to offer complementary
products, services or technologies.
In the event an acquisition plan is
adopted which requires funds exceeding the availability described above, an
alternate source of funds to accomplish the acquisition would have to be
developed. Following the Companys
reincorporation into Delaware and our initial public offering, which was
completed on August 13, 2007, the Company had 100,000,000 shares of common
stock authorized, of which 11,536,114 shares were outstanding at June 30,
2008, and 10,000,000 shares of preferred stock authorized, of which none were
outstanding. The board of directors is authorized to issue up to an aggregate
of 10,000,000 shares of preferred stock in one or more series without further
vote or action by the stockholders. The
Company could issue additional shares of common or preferred stock or enter
into new or revised borrowing arrangements to raise funds.
As mentioned
above, we executed a definitive merger agreement, as amended, with USIS whereby
USIS will seek to acquire all outstanding common stock of HireRight for $19.75
per share. In relation to the merger transaction, the Company has incurred
transaction related expenses of approximately $1.2 million during the second
quarter of 2008. These expenses relate primarily to financial and legal
advisory, as well as other due diligence related expenses. Additional merger
expenses are expected to be incurred in the third quarter.
Critical
Accounting Policies and Estimates
The foregoing discussion and analysis of the Companys
financial condition and results of operations are based upon the consolidated
financial statements of the Company, which have been prepared in accordance
with
accounting
principles generally accepted in the United
States. The preparation of our
financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues, costs and expenses, as
well as the disclosure of contingent assets and liabilities and other related
disclosures. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about carrying values of
our assets and liabilities that are not readily apparent from other sources. In
many instances, we could have reasonably used different accounting estimates.
Actual results could differ from those estimates. We include any revisions to
our estimates in our results for the period in which the actual amounts become
known.
We
believe the critical accounting policies described below affect the more
significant judgments and estimates used in the preparation of our consolidated
financial statements. Accordingly, the following are the policies that we
believe are the most critical to aid in fully understanding and evaluating our
historical consolidated financial condition and results of operations:
18
Table of Contents
Allowance for Doubtful Accounts.
We
maintain an allowance for doubtful accounts for estimated losses resulting from
the inability of certain of our customers to pay us. This provision is based on
our historical experience and for specific customers that, in our opinion, are
likely to default on our receivables from them. In order to identify these
customers, we perform ongoing reviews of all customers that have breached their
payment terms, as well as those that have filed for bankruptcy or for whom
information has become available indicating a significant risk of
non-recoverability. We continue to monitor and evaluate our customers over
time. Historically, the allowance for doubtful accounts has been sufficient to
cover our uncollectible receivables. To the extent that our future collections
differ from our assumptions based on historical experience, the amount of our
bad debt and allowance recorded may be different. Although no individual
customer accounted for more than 6% of our total revenue thus far in 2008, if
our historical collection experience changes unexpectedly or if one or more of
our largest customers fails to pay the amounts owed to us, our allowance for
doubtful accounts would likely be inadequate.
Accounting for Income Taxes.
We
record income tax expense in accordance with SFAS No. 109,
Accounting for Income Taxes
(SFAS 109),
which requires that we recognize deferred tax assets and liabilities for
temporary differences in the bases of assets and liabilities for tax and
financial reporting purposes. We record a valuation allowance related to
deferred tax assets when it is more likely than not that some portion or all of
the deferred tax asset will not be realized. We eliminated our valuation
allowance in 2006 because we were profitable in 2006 and expected to be
profitable in future years. The preparation of financial projections involves
significant subjectivity due to the inherent uncertainty involved in estimating
future performance. If we fail to perform as projected, we may need to record a
valuation allowance in the future.
Accounting for Stock-Based
Compensation.
Effective January 1, 2006, we adopted
SFAS 123(R), which requires that all stock-based compensation to
employees, including grants of employee stock options, be expensed in our financial
statements based on their respective grant date fair values. Under
SFAS 123(R), we estimate the fair value of each stock-based payment award
using the Black-Scholes option pricing model. The determination of the fair
value of stock-based payment awards using the Black-Scholes model is affected
by our stock price and a number of assumptions, including expected volatility,
expected life, risk-free interest rate and expected dividends. We do not have a
history of market prices of our common stock as we were not a public company
until our recent initial public offering, and as such, we estimate volatility
in accordance with Staff Accounting Bulletin No. 107 (SAB 107)
using historical volatilities of other publicly traded companies in our
industry. The expected life of the awards is based on the simplified method as
defined in SAB 107. The risk-free interest rate assumption is based on
observed interest rates appropriate for the terms of our awards. The dividend
yield assumption is based on our history and expectation of not paying any
dividends. Forfeitures are estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates. We recognized stock-based compensation expense in our consolidated
financial statements based on awards that are ultimately expected to vest. A
summary of significant assumptions used in determining the fair value of the
options is as follows:
|
|
Six Months Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
Expected life (years)
|
|
6.25
|
|
6.25
|
|
Risk-free interest rate
|
|
3.14 3.56
|
%
|
4.69 4.82
|
%
|
Volatility
|
|
41.56 41.77
|
%
|
41.50 41.65
|
%
|
Dividend yield
|
|
0
|
%
|
0
|
%
|
If
factors change and we employ different assumptions, stock-based compensation
expense may differ significantly from what we have recorded in the past. If
there are any modifications or cancellations of the underlying unvested
securities, we may be required to accelerate, increase or cancel any remaining
unearned stock-based compensation expense. Future stock-based compensation
expense and unearned stock-based compensation will increase to the extent that
we grant additional equity awards to employees or we assume unvested equity
awards in connection with acquisitions.
Recent Accounting Pronouncements
In February 2008, the FASB issued FASB Staff Position No. 157-2
(Staff Position 157-2), which deferred the effective date for certain
portions of SFAS No. 157,
Fair Value Measurements (SFAS
157)
related to nonrecurring measurements of nonfinancial assets
and liabilities. That provision of SFAS
157 will be effective for the Companys 2009 fiscal year. We are currently evaluating the effect, if
any, that the adoption of Staff Position 157-2 will have on our
results of operations, financial position and cash flows.
In December 2007, the FASB issued SFAS No. 141revised 2007,
Business Combinations
(SFAS 141R).
SFAS 141R establishes principles and requirements for how an acquirer in a
business combination recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest; recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and determines what information
to disclose to enable financial statement users to evaluate the nature and
financial effects of the business
19
Table of Contents
combination.
SFAS 141R applies to business combinations for which the acquisition date
is on or after December 15, 2008. Early adoption is prohibited. We are
currently evaluating the effect, if any, that the adoption of SFAS 141R
will have on our results of operations, financial position and cash flows.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statementsan Amendment to ARB No. 51
(SFAS 160).
SFAS 160 requires all entities to report noncontrolling (minority)
interests in subsidiaries as equity in the consolidated financial statements,
but separate from the equity of the parent company. The statement further
requires that consolidated net income be reported at amounts attributable to
the parent and the noncontrolling interest, rather than expensing the income
attributable to the minority interest holder. This statement also requires that
companies provide sufficient disclosures to clearly identify and distinguish
between the interests of the parent company and the interests of the noncontrolling
owners, including a disclosure on the face of the consolidated statements for
income attributable to the noncontrolling interest holder. This statement is
effective for fiscal years beginning on or after December 15, 2008. Early
adoption is prohibited. We are currently evaluating the effect, if any, that
the adoption of SFAS 160 will have on our results of operations, financial
position and cash flows.
In May 2008, the FASB issued FASB Statement No. 162,
The Hierarchy of Generally Accepted Accounting Principles
(SFAS 162). SFAS 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP. SFAS 162 will become effective 60 days
following the SECs approval of the Public Company Accounting Oversight Board
amendments to AU Section 411,
The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles
. We are currently evaluating the effect, if any, that the
adoption of SFAS 162 will have on our results of operations, financial
position and cash flows.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There are no material changes to the disclosure set forth in the Quantitative and Qualitative Disclosures
about Market Risk
section of
Managements Discussion and Analysis of
Financial Condition and Results of Operations
contained in the Companys Annual Report on Form 10-K
for the period ended December 31, 2007, except as discussed in Note 2 of our Notes to Condensed,
Consolidated Financial Statements above.
Item 4T. Controls and Procedures
The Companys Chief Executive Officer and Chief Financial Officer, with
the participation of the Companys management, carried out an evaluation of the
effectiveness of the Companys disclosure controls and procedures (as defined
in Exchange Act Rule 13a-15(e)). Based upon that evaluation, the
Chief Executive Officer and the Chief Financial Officer concluded that, as of
the end of the period covered by this report, the Companys disclosure controls
and procedures are effective at the reasonable assurance level in identifying
material information relating to the Company (including its consolidated
subsidiaries) required to be included in this report.
Disclosure controls and procedures, no matter how well designed and
implemented, can provide only reasonable assurance of achieving an entitys
disclosure objectives. The likelihood of achieving such objectives is affected
by limitations inherent in disclosure controls and procedures. These include
the fact that human judgment in decision-making can be faulty and that
breakdowns in internal control can occur because of human failures such as
simple errors or mistakes or intentional circumvention of the established
process.
There were no changes in the Companys internal controls over financial
reporting, identified by the Chief Executive Officer or the Chief Financial
Officer that occurred during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, the Companys
internal control over financial reporting.
We are not required to comply with all of the rules and
regulations of the Securities and Exchange Commission, particularly the
requirement that we include in our annual report on Form 10-K a report of
management and accompanying auditors report on the Companys internal control
over financial reporting (404 reporting). Compliance by the Company with the
404 reporting rules and regulations will be required in our annual report
on Form 10-K for the fiscal year ending December 31, 2008, unless the
rules and regulations governing 404 reporting are revised.
20
Table of Contents
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We encounter lawsuits from time to time in the ordinary course of
business and, at June 30, 2008, we were parties to several civil lawsuits.
The Company does not expect that the resolution of these lawsuits will have a
material adverse impact on future results of operations or financial position.
Certain lawsuits filed against the Company from time to time contain claims not
covered by insurance, or seek damages in excess of policy limits, and such
claims could be filed in the future. The Company may file intellectual property
infringement and/or other types of lawsuits in the future which may result in
materially increased costs and other adverse consequences. Any costs and/or
losses that we may suffer from such lawsuits, and the effect such litigation may
have upon the reputation and marketability of our products and services, could
have a material adverse impact on the future results of operations, financial
condition and/or prospects of the Company.
Item 1A. Risk Factors
Except for modifications to the risk factors set
forth below and in Part II, Item 1A of our Quarterly Report on Form 10-Q
for the period ended March 31, 2008, there have been no material changes
to the risk factors disclosed in Part I, Item 1A in our Annual Report on Form 10-K
for the period ended December 31, 2007.
Our investments in marketable
securities are subject to risks which may cause losses.
We invest our cash balances in high-quality issuers and limit the
amount of credit exposure to any one issuer other than the United States
government and its agencies. As of June 30, 2008, our investments in
marketable securities consist primarily of auction rate securities. Our auction
rate securities are investment grade quality as of June 30, 2008. However,
such risks, including the systemic failure of future auctions for auction rate
securities, may result in a loss of liquidity, substantial impairment to our
investments, realization of substantial future losses, or a complete loss of
the investment in the long-term which may have a material adverse effect on our
business, results of operations, liquidity, and financial condition. See
Note 2 of our Notes to Condensed, Consolidated Financial Statements above
for additional information about our investments in marketable securities.
Failure to complete the merger for
any reason other than acceptance of a superior proposal could adversely affect
the Companys stock price and the Companys future business and financial
results.
Completion of the merger is conditioned upon, among other things, the
receipt of certain regulatory and antitrust approvals, including under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and approval
of the Companys stockholders. There is no assurance that the Company will
receive the necessary approvals or satisfy the other conditions necessary for
completion of the merger. Failure to complete the merger would prevent the
Company and its stockholders from realizing its anticipated benefits. The
Company will also incur significant transaction costs, whether or not the
merger is completed and, under certain circumstances, may be required to pay an
amount up to $
6,850,000
to USIS if the Merger Agreement is terminated. In addition, the current market
price of the Companys common shares likely reflects a market assumption that
the merger or another change in control transaction will occur, and a failure
to complete the merger for reasons other than the acceptance of a superior
proposal could result in a significant decline in the market price of the
Companys common shares.
The Companys business could be
adversely impacted by uncertainty related to the proposed merger, whether or
not the merger is completed.
Whether
or not the merger is completed, the announcement and pendency of the merger
could impact or cause disruptions in the Companys business, which could have
an adverse effect on the Companys results of operations, financial condition
and success of the merger, including:
·
|
the
Companys employees may experience uncertainty about their future roles with
the current and/or combined company, which might adversely affect the
Companys ability to retain and hire managers and other employees;
|
·
|
the
attention of the Companys management may be directed toward the completion
of the merger and transaction-related considerations and may be diverted from
the day-to-day business operations of the Companys business; and
|
·
|
potential
litigation in connection with the merger.
|
21
Table of Contents
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable
Item 3. Defaults
Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Our
Annual Meeting of Stockholders was held on May 29, 2008 in Irvine,
California, at which the following matters were submitted to a vote of our
stockholders:
(a) Votes regarding the election of the
persons named below as Class I directors for a term expiring in 2011 were
as follows:
Name
|
|
For
|
|
Withheld
|
|
Jeffrey H. Anderson
|
|
10,525,567
|
|
4,887
|
|
Thomas B. Blaisdell
|
|
10,525,567
|
|
4,887
|
|
In
addition, the persons named below continued as directors following the Annual
Meeting of Stockholders:
John
P. Bowmer
Cranston
R. Lintecum
Richard
E. Allen
Eric
J. Boden
Margaret
L. Taylor
(b) Votes regarding ratification of the
appointment of Deloitte & Touche LLP as the Companys independent
registered public accounting firm to serve for the fiscal year ending December 31,
2008, were as follows:
For
|
|
Against
|
|
Abstain
|
|
Broker Non-Votes
|
|
10,506,143
|
|
24,200
|
|
111
|
|
0
|
|
Item 5. Other Information
Not applicable
22
Table of Contents
Item 6. Exhibits
Exhibit
|
|
Description
|
|
|
|
2.1
|
|
|
Agreement
and Plan of Merger, dated as of June 9, 2008, by and among
HireRight, Inc., Hercules Acquisition Corp. and US Investigations
Services, LLC. (1)
|
|
|
|
|
2.2
|
|
|
Voting
Agreement, dated June 9, 2008, by and among Hercules Acquisition Corp.,
US Investigations Services, LLC and certain stockholders of
HireRight, Inc. (1)
|
|
|
|
|
2.3
|
|
|
Amendment No. 1 to the Agreement and Plan of Merger, dated as of
July 23, 2008, by and among HireRight, Inc., US Investigations
Services, LLC, and Hercules Acquisition Corp. (2)
|
|
|
|
|
2.4
|
|
|
Amendment No. 2 to the Agreement and Plan of Merger, dated as of
July 29, 2008, by and among HireRight, Inc., US Investigations
Services, LLC, and Hercules Acquisition Corp. (3)
|
|
|
|
|
3.1
|
|
|
Certificate
of Incorporation of HireRight, Inc. (4)
|
|
|
|
|
3.2
|
|
|
Bylaws
of HireRight, Inc. (4)
|
|
|
|
|
4.1
|
|
|
Specimen
common stock certificate(4)
|
|
|
|
|
31.1
|
*
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
31.2
|
*
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
32.1
|
*
|
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
32.2
|
*
|
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
*
|
|
New
exhibit filed with this report.
|
|
(1)
|
|
Filed
as an exhibit to the Companys Current Report on Form 8-K dated June 9,
2008 and incorporated herein by reference.
|
|
(2)
|
|
Filed
as an exhibit to the Companys Current Report on Form 8-K dated July 23,
2008 and incorporated herein by reference.
|
|
(3)
|
|
Filed
as an exhibit to the Companys Current Report on Form 8-K dated July 29,
2008 and incorporated herein by reference.
|
|
(4)
|
|
Filed
as an exhibit to the Companys Registration Statement on Form S-1
Registration No. 333-140613 and incorporated herein by reference.
|
23
Table of Contents
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.
|
|
HIRERIGHT,
INC.
|
|
|
|
|
|
|
Date:
|
August 7,
2008
|
/s/
Eric J. Boden
|
|
|
Eric
J. Boden
|
|
|
President
and Chief Executive Officer
|
|
|
(duly
authorized officer)
|
|
|
|
|
|
|
Date:
|
August 7,
2008
|
/s/
Jeffrey A. Wahba
|
|
|
Jeffrey
A. Wahba
|
|
|
Chief
Financial Officer
|
|
|
(principal
financial officer)
|
24
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