10-Q 1 v157505_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2009

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

For the transition period from ___________ to _______________

Commission File Number 0-16530

BRANDPARTNERS GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

DELAWARE	13-3236325
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

10 MAIN ST., ROCHESTER, NEW HAMPSHIRE 03839

(Address of Principal Executive Offices)

(603) 335-1400

Registrant’s Telephone number, Including Area Code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer¨	Accelerated filer¨

Non-accelerated filer x	Smaller reporting company¨

Indicate by check mark whether the registrant is a shell company. Yes¨ Nox

The number of shares of the Company’s common stock outstanding as of August 13, 2009 was 43,910,859.

BRANDPARTNERS GROUP, INC.

TABLE OF CONTENTS

Part I Financial Statements

	Item 1 Financial Statements

	Consolidated Balance Sheets
	June 30, 2009 (unaudited) and December 31, 2008	3

	Consolidated Statements of Operations (unaudited) for the
	Six and Three Months Ended June 30, 2009 and 2008	4

	Consolidated Statements of Cash Flows (unaudited) for the Six
	Months Ended June 30, 2009 and 2008	5

	Notes to Consolidated Financial Statements (unaudited)	6

	Item 2 Management’s Discussion and Analysis of Financial
	Condition and Results of Operations	14

	Item 3 Quantitative and Qualitative Disclosures about
	Market Risk	21

	Item 4 Controls and Procedures	21

Part II Other Information

	Item 1A Risk Factors	21

	Item 5 Other Information	22

	Item 6 Exhibits	23

	Signatures	24

Part I Financial Statements

Item 1 Financial Information

BrandPartners Group, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	June 30, 2009			December 31, 2008
	(unaudited)

ASSETS

Cash	$	583,169		$	1,348,271
Accounts receivable, net of allowance for
doubtful accounts of $26,592 and $87,064		3,687,216			7,555,631
Costs and estimated earnings in excess of billings		559,381			986,616
Inventories, net		423,106			640,112
Prepaid expenses and other current assets		281,539			300,416
Total current assets		5,534,411			10,831,046

Property and equipment, net		525,543			670,039
Goodwill, net		10,271,969			10,271,969
Other assets		31,432			31,532

Total assets	$	16,363,355		$	21,804,586

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable and accrued expenses	$	2,761,743		$	4,601,753
Billings in excess of costs and estimated earnings		3,357,961			7,790,590
Short term debt		44,386			32,903
Total current liabilities		6,164,090			12,425,246

Long term debt, net of current maturities		6,772,189			6,648,041

Stockholders' equity
Preferred stock, $.01 par value; 20,000,000 shares
authorized; none outstanding.		-			-
Common stock, $.01 par value; 100,000,000 shares
authorized; issued 44,010,859 and 38,823,859		440,108			388,234
Additional paid in capital		45,271,201			45,181,302
Accumulated deficit		(42,019,150	)		(42,573,154	)
Accumulated other comprehensive income
Foreign currency adjustment		47,417			47,417
Treasury stock, 100,000 shares at cost		(312,500	)		(312,500	)

Total stockholders' equity		3,427,076			2,731,299

Total liabilities and stockholders' equity	$	16,363,355		$	21,804,586

The accompanying notes are an integral part of these financial statements.

BrandPartners Group, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	6 Months Ended			6 Months Ended			3 Months Ended			3 Months Ended
	June 30			June 30			June 30			June 30
	2009			2008			2009			2008

Revenues	$	19,957,123		$	17,978,144		$	8,499,487		$	8,730,827

Costs and expenses
Cost of revenues		14,656,678			12,549,018			6,493,260			6,072,418
Selling, general and administrative		4,171,456			4,000,884			1,887,627			2,075,687

Total expenses		18,828,134			16,549,902			8,380,887			8,148,105

Operating income		1,128,989			1,428,242			118,600			582,722

Interest expense, net		(547,558	)		(585,877	)		(272,902	)		(286,804	)

INCOME (LOSS) BEFORE INCOME TAXES		581,431			842,365			(154,302	)		295,918

Provision for Income Taxes		27,427			26,627			8,927			16,500

NET INCOME (LOSS)	$	554,004		$	815,738		$	(163,229	)	$	279,418

Basic and diluted earnings per share
Basic	$	0.01		$	0.02		$	0.00		$	0.01
Diluted	$	0.01		$	0.02		$	0.00		$	0.01

Weighted - average shares outstanding
Basic		39,960,928			38,236,821			41,215,255			39,221,711
Diluted		40,264,678			38,574,321			41,215,255			39,559,211

The accompanying notes are an integral part of these financial statements.

BrandPartners Group, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	6 months ended			6 months ended
	June 30,			June 30,
	2009			2008

Cash flows provided by operating activities
Net income	$	554,004		$	815,738

Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation		171,727			233,240
Amortization of deferred financing costs		-			32,850
Provision for doubtful accounts		1,000			(84,097	)
Allowance for obsolete inventory		57,930			104,321
Stock-based compensation		81,440			42,777
Non-cash consulting expense		15,334			-
Loss on disposal of assets		-			1,750

Changes in operating assets and liabilities

Accounts receivable		3,867,415			620,530
Costs and estimated earnings in excess of billings		427,235			52,809
Inventories		159,076			(47,486	)
Prepaid expenses and other assets		18,977			81,458
Accounts payable and accrued expenses		(1,825,011	)		224,689
Billings in excess of costs and estimated earnings		(4,432,629	)		(1,863,206	)

Net cash provided by (used in) operating activities		(903,502	)		215,373

Cash flows (used in) investing activities
Acquisition of equipment		(27,231	)		(94,202	)

Cash flows provided by (used in) financing activities
Net borrowings on short term debt		-			(69,448	)
Proceeds from long term debt		133,721			129,131
Payments on long term debt		1,910			(286,917	)
Proceeds from issuance of common stock		30,000			-

Net cash provided by (used in) financing activities		165,631			(227,234	)

NET DECREASE IN CASH		(765,102	)		(106,063	)
Effect of exchange rates on cash		-			(1,915	)

Cash, beginning of period		1,348,271			184,504

Cash, end of period	$	583,169		$	76,526

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	411,608		$	448,904
Cash paid during the period for income taxes	$	66,710		$	94,368

The accompanying notes are an integral part of these financial statements.

BrandPartners Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE A – NATURE OF BUSINESS AND BASIS OF PRESENTATION

The accompanying consolidated financial statements of BrandPartners Group, Inc. (“BrandPartners”) and Subsidiaries (the “Company”) have been prepared by the Company pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America for annual financial statements and should be read in conjunction with our consolidated financial statements and notes for the fiscal year ended December 31, 2008 filed with the SEC on Form 10-K. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of financial position, results of operations and cash flows. The consolidated statements of operations for the six and three months ended June 30, 2009 are not necessarily indicative of the results expected for the entire year.

Subsequent events have been evaluated through the filing date of the unaudited consolidated financial statements.

BrandPartners operates through its wholly-owned subsidiaries:

	BrandPartners Retail, Inc.	“Brand Retail”
	Building Partners, Inc.	“Build Partners”

BRAND RETAIL

Brand Retail was formerly known as Willey Brothers, Inc. On January 16, 2001, the Company acquired the stock of Brand Retail for a combination of cash, common stock of the Company, options to purchase the Company’s stock, and notes payable. The total purchase price was approximately $33.1 million.

BUILD PARTNERS

Build Partners was incorporated in Delaware in January of 2006 and provides general contracting services.

Through its subsidiaries, the Company provides integrated products and services to the financial services industry and other retail markets. Those products and services include:

Strategic retail positioning and branding

Environmental design and constructions services

Retail merchandising analysis, display systems and signage

Point-of-sale communications and marketing programs

These products and services are offered as a complete turnkey package or as individual offerings, based upon the client’s needs.

RISK

We cannot determine at the present time when or if any of these subsidiaries will remain or be profitable in the future. We have relied and continue to rely upon cash payments from our operating subsidiaries to, among other things, pay creditors, maintain capital and meet our operating requirements. Regulations, legal restrictions, and contractual agreements could restrict any needed payments from our subsidiaries. If we were unable to receive cash from our subsidiaries, or from any operating subsidiaries that we may acquire in the future, our operations and financial condition would be materially and adversely affected.

BrandPartners Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The accounting policies followed by the Company are set forth in Note B to the Company’s consolidated financial statements in its Form 10-K for December 31, 2008.

NOTE B – INVENTORIES, NET

Inventories are priced at the lower of cost (determined by the weighted-average method, which approximates first-in, first-out) or market. Inventories consist of the following at:

	June 30, 2009			December 31, 2008
	(unaudited)

Finished goods	$	348,945		$	351,931
Raw materials		188,839			341,058
Work in process		4,307			32,314
	$	542,091		$	725,303
Less - Reserves		(118,985	)		(85,191	)
Total Inventories, Net	$	423,106		$	640,112

NOTE C – GOODWILL AND DEFERRED FINANCING COSTS

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. We evaluate the recoverability and measure the potential impairment of goodwill under the Financial Accounting Standards (“SFAS”) No. 142 Goodwill and Other Intangible Assets. SFAS No. 142 requires that the Company analyze goodwill for impairment on at least an annual basis or if such an event or change in circumstances occur. In assessing the recoverability of our goodwill, management must make certain assumptions regarding estimated future cash flows and other factors to determine its fair value. If the calculated fair value of the goodwill is less than its carrying value, an impairment loss is recognized in an amount equal to the difference. For the six months ended June 30, 2009 and 2008, no impairment loss was recognized.

Deferred financing costs are being amortized on a straight-line basis over three to seven years, which represents the life of the related debt.

BrandPartners Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE D – SHORT TERM DEBT

	June 30, 2009		December 31, 2008
	(unaudited)

Capital lease, current portion		20,086	$	20,753
Put warrant (1)		24,300	$	12,150

Total Short Term Debt	$	44,386	$	32,903

On May 5, 2005, the Company negotiated a credit facility (the “Facility”) with a commercial lender. The Facility provides for the following:

$2,000,000 Term Loan, which required 36 equal monthly payments

$5,000,000 Revolving Line of Credit

Prime Interest Rate on Term Loan principal not subject to LIBOR

Prime Rate interest plus 25 basis points (0.25%) on Revolving Line of Credit Loan principal not subject to LIBOR

LIBOR equals LIBOR plus 275 basis points (2.75%)

Under the terms of the agreement, the Company is required to maintain certain financial covenants and ratios. At June 30, 2009, the Company was in compliance with the covenants and ratios. The Facility expires on April 30, 2010, pursuant to an extension negotiated on March 30, 2009. On June 30, 2009, LIBOR was 0.32%, and the adjusted interest rate was 3.82% for the revolving line of credit. At June 30, 2009, approximately $2.9 million was available under the line of credit. On May 5, 2008, the $2,000,000 Term Loan was paid in full.

On March 22, 2007, certain of the financial covenants were waived and adjusted. As part of the waiver agreement, the amount available under the Revolving Line of Credit was adjusted to be the lesser of (1) $5 million or (2) 70% of acceptable accounts receivable, plus 50% of the cost in excess of billings (capped at $1 million), less an available reserve of $250,000. The Prime Rate interest premium was increased to 50 basis points (0.50%) for the Revolving Line of Credit and to 25 basis (0.25%) points for the Term Loan principal.

BrandPartners Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(1)	The put warrant is related to the subordinated promissory note in the principal amount of $5,000,000, which is discussed further in Note E (2).

NOTE E – LONG TERM DEBT

Long Term Debt consists of the following:

	June 30, 2009			December 31, 2008
	(unaudited)

Capital lease (1)		42,719			52,959
Note payable (2)		5,000,000			5,000,000
Interest payable		1,749,556			1,615,835
		6,792,275			6,668,794
Less capital lease current portion (1)		(20,086	)		(20,753	)
Total Long Term Debt	$	6,772,189		$	6,648,041

(1)

The Company leases the telephone system for its main location and other equipment under capital leases which commenced in 2006. The leases expire in 2009 and 2011. The economic substance of the leases is that the Company is financing the acquisition of certain assets through the leases, and accordingly, they are recorded in the Company’s assets and liabilities. The lease agreements contain a bargain purchase option at the end of the lease term. For a complete listing of the Company’s capital leases see the Company’s Form 10-K as of December 31, 2008.

(2)

A subordinated promissory note (“the Note”) in the principal amount of $5,000,000 was issued on October 22, 2001 by an unrelated third party. The Note bears interest at 16% per annum, with 12% payable quarterly in cash and 4% being accreted to the unpaid principal (“PIK amount”). The terms of the Note were modified effective March 30, 2009 whereby the maturity date was extended to October 29, 2010, at which time the principal and all PIK amounts of approximately $7.1 million will be due. Under the terms of the amendment, the Company will be required to make a mandatory prepayment of $1 million on or prior to July 31, 2010. If the Company fails to make the timely payment of $1 million, the accreted principal amount of the Note will then bear interest at a rate of 17% per annum with interest of 13% per annum payable in accordance with the term of the Note and interest of 4% accruing. Under the terms of the Note, the Company is required to maintain certain financial covenants and is in compliance as of June 30, 2009.

BrandPartners Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Concurrently and in connection with the 2001 issuance of the Note, the Company issued 405,000 warrants to purchase common stock of the Company at $0.01 per share. The warrants expire on October 11, 2011 and can be “put” to the Company.

The warrant transaction has been treated as a debt discount and has been amortized to interest expense over prior periods. Changes to the future fair value of the “put warrants” are recorded in accordance with FASB No. 133 and charged to selling, general and administrative expenses. As of June 30, 2009 and December 31, 2008, the liability of the put warrant has been disclosed in the amounts of $24,300 and $12,150, respectively, under Short Term Debt (Note D).

If the Company is unable to pay the Put Warrant repurchase price, the Put Note can be issued to the holder of the warrants. That Put Note would have the following characteristics:

Interest rate of 18% per annum

Due and payable on October 29, 2010

No financial covenants

BrandPartners Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE F – FAIR VALUE MEASUREMENTS

Effective January 1, 2008, we adopted SFAS 157, Fair Value Measurements (SFAS 157). SFAS 157 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The adoption of SFAS No. 157 did not have a material impact on our fair value measurements.

The following tables present our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.

			Fair Value Measurements at Reporting Date Using
Description	June 30, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Liabilities - Put warrant (See Note E)	$	24,300	$	24,300

Total	$	24,300	$	24,300	$	-	$	-

NOTE G – SIGNIFICANT CUSTOMERS

For the six months ended June 30, 2009, one customer accounted for approximately 28% of the Company’s revenue. For the three months ended June 30, 2009, one customer accounted for approximately 23% of the Company’s revenue. Accounts receivable for this customer as of June 30, 2009 were $1.1 million. For the six months ended June 30, 2008, one customer accounted for approximately 26% of the Company’s revenue. For the three months ended June 30, 2008, two customers accounted for approximately 17% and 13% of the Company’s revenue, respectively. Accounts receivable for these customers as of June 30, 2008 were $1.8 million.

BrandPartners Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE H – COMMITMENTS AND CONTINGENCIES

As of June 30, 2009, the Company had booked orders, consisting of signed contracts not yet completed, for approximately $7.2 million.

The Company has provided various representations, warranties and other standard indemnifications in the ordinary course of business, in agreements to acquire and sell business assets and in financing arrangements. The Company is subject to various legal proceedings and claims, which arise in the ordinary course of business.

Management believes the ultimate liability with respect to these contingent obligations will not have a material effect on the Company’s financial position, results of operations or cash flows.

NOTE I – STOCK-BASED COMPENSATION

The Company did not grant any stock options for the six months ending June 30, 2009 and 2008, nor did any options fully vest.

For the six month period ended June 30, 2009, the Company issued an aggregate of 2,900,000 shares of restricted common stock to officers and directors as well as employees of its wholly-owned subsidiary BrandPartners Retail, Inc. pursuant to the Company’s 2004 Stock Incentive Plan. The Company also issued 1,500,000 shares of restricted common stock as consideration for consulting and/or service agreements that were entered into in May 2009.

In 2008, the Company awarded 4,750,000 shares of restricted common stock to key officers, employees and directors in accordance with the Company’s 2004 Stock Incentive Plan, of which 1,062,500 shares were subsequently cancelled.

Compensation expense for the number of shares issued is recognized over the vesting period. For the six and three month period ended June 30, 2009, this expense totaled approximately $97,000 and $72,000, respectively. For the six and three month period ended June 30, 2008, this expense totaled approximately $43,000 and nil, respectively.

NOTE J – INCOME TAXES

At June 30, 2009, the Company utilized net operating losses (“NOL’s”) to reduce its exposure to federal income tax expense.

The Company has NOL’s of approximately $9.0 million available to offset future taxable income. These NOL’s expire at various dates through 2028. At December 31, 2008, the Company had deferred tax assets of approximately $4.1 million. The deferred tax assets consist primarily of net operating loss carry-forwards and previously accrued reserves. Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which is uncertain. Accordingly, the deferred tax assets have been fully offset by a valuation allowance of the same amount. Pursuant to Section 382 of the Internal Revenue Code, NOL carry-forwards may be limited in use in any given year in the event of a significant change in ownership.

There may be state tax expense in certain states where the tax statutes do not recognize or do limit the use of NOL’s.

NOTE K - SUBSEQUENT EVENTS

On August 7, 2009, the Company held its 2009 annual meeting of shareholders. Three proposals were presented to shareholders at the annual meeting. All proposals received the requisite approval from shareholders entitled to vote.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2009, the Company had a working capital deficit of approximately $630,000, stockholders’ equity of approximately $3.4 million, and a current ratio of approximately .90 to 1. At December 31, 2008, the Company had a working capital deficit of approximately $1.6 million, stockholders’ equity of approximately $2.7 million, and a current ratio of approximately .87 to 1.

As of June 30, 2009, the Company had cash of approximately $583,000. As of December 31, 2008, the Company had cash of approximately $1.3 million.

For the six months ended June 30, 2009, the net cash used in operating activities amounted to approximately $0.9 million, which resulted primarily from a decrease in (i) billings in excess of costs and estimated earnings of $4.4 million and (ii) accounts payable and accrued expenses of $1.8 million. These negative variances were partially offset by net income plus non-cash items of $0.9 million and the decrease in accounts receivable of $3.9 million.

Due to the nature of the project accounting used for large contracts, all vendor and labor costs are recorded on the balance sheet until the associated revenue is recognized. Upon revenue recognition, the associated expenses and profit are transferred to the statement of operations.

The accompanying consolidated balance sheets include the following captions at:

	June 30,			December 31,
	2009			2008			Difference
	(unaudited)
Costs and estimated earnings in excess of billings	$	559,381		$	986,616		$	(427,235	)

Billings in excess of costs and estimated earnings		(3,357,961	)		(7,790,590	)		4,432,629

Totals	$	(2,798,580	)	$	(6,803,974	)	$	4,005,394

Investing activities used cash flows to principally fund the acquisition of equipment amounting to approximately $27,000 during the six month period ended June 30, 2009.

Financing activities cash flows include proceeds from long-term debt of $134,000 and issuance of common stock of $30,000 during the six month period ended June 30, 2009.

INDEBTEDNESS

BRANDPARTNERS CREDIT FACILITY

BrandPartners negotiated a credit facility (the “Facility”) with a commercial lender effective May 5, 2005. The Facility provides for the following:

$2,000,000 Term Loan, which required 36 equal monthly payments

$5,000,000 Revolving Line of Credit

Prime Interest Rate on Term Loan principal not subject to LIBOR

Prime Rate interest plus 25 basis points (0.25%) on Revolving Line of Credit Loan principal not subject to LIBOR

LIBOR equals LIBOR plus 275 basis points (2.75%)

Under the terms of the agreement, the Company is required to maintain certain financial covenants and ratios. The Facility expires on April 30, 2010, pursuant to an extension negotiated on March 30, 2009. On June 30, 2009, LIBOR was 0.32%, and the adjusted interest rate was 3.82% for the revolving line of credit. At June 30, 2009, approximately $2.9 million was available under the line of credit. On May 5, 2008, the $2,000,000 Term Loan was paid in full.

Effective March 30, 2009, the Company entered into an amendment to its Loan Agreement with its commercial lender whereby it’s revolving facility was renewed. The line of credit as renewed continues to be a demand facility subject to the terms and conditions of the Company’s Loan Agreement and Revolving Line of Credit.

If for any reason the Company defaults on the Facility, the amount outstanding under the Facility becomes due and payable, and the lender has the right to proceed against the collateral granted to secure the indebtedness under the Facility, including substantially all of the assets of BrandPartners.

THE BRAND RETAIL SUBORDINATED NOTE PAYABLE

At June 30, 2009 and December 31, 2008, the Company had a liability of $24,300 and $12,150 related to the “put warrants,” respectively.

If the Company is unable to pay the Put Warrant repurchase price, the Put Note can be issued to the holder of the warrants. That Put Note would have the following characteristics:

(a)

Interest rate of 18% per annum

(b)

Due and payable on October 29, 2010

(c)

No financial covenants

As part of the extension and amendment, the terms of the Note were modified so that the Company will be required to make a mandatory prepayment of $1 million on or prior to July 31, 2010. If the Company fails to make timely prepayment of $1 million, the accreted principal amount of the Note will then bear interest at a rate of 17% per annum with interest of 13% per annum payable quarterly in cash and 4% being accreted to the unpaid principal (“PIK amount”).

While we are seeking to modify terms of the facility, if we are unable to modify same or make payment on this facility at any time or at the maturity date of same, or if we are unable to abide by the financial covenants of the facility, we may be deemed in default of the subordinate loan agreement.

LIQUIDITY ISSUES

The Company’s ability to generate cash flow from operations sufficient to make scheduled payments on its debts as they become due will depend on its future performance and the Company’s ability to successfully implement business and growth strategies. The Company’s performance will also be affected by prevailing economic conditions. Many of these factors are beyond the Company’s control. If future cash flows and capital resources are insufficient to meet the Company’s debt obligations and commitments, the Company may be forced to reduce or delay activities and capital expenditures, obtain additional equity capital or restructure or refinance its debt. In the event that the Company is unable to do so, the Company may be left without sufficient liquidity, and it may not be able to meet its debt service requirements. In such a case, an event of default would occur and could result in all of the Company’s indebtedness becoming immediately due and payable.

COMMITMENTS AND CONTINGENCIES

As of June 30, 2009 booked orders for the company, consisting of signed contracts not yet completed, totaled approximately $7.2 million.

Management believes the ultimate liability with respect to these contingent obligations will not have a material effect on the Company’s financial position, results of operations or cash flows.

OFF BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements that provide financing, liquidity, market or credit risk support or involve leasing, hedging or research and development services for our business or other similar arrangements that may expose us to liability that is not expressly reflected in the financial statements, except for facilities operating leases.

As of June 30, 2009, we did not have any relationships with unconsolidated entities or financial partnerships, often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such we are not subject to any material financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2009 COMPARED TO SIX MONTHS ENDED JUNE 30, 2008

REVENUES: Revenues are recognized as products and services are delivered. If the Company is managing the project for its customers, these services and their related products are accounted for using the percentage of completion method.

Revenues for the first six months of 2009 compared to the first six months of 2008 increased by 11%, or approximately $2.0 million, which was primarily due to new retail bank projects being signed and delivered in the first six months of 2009 versus 2008.

COST OF REVENUES: Cost of revenues increased 17% or approximately $2.1 million primarily due to higher revenues in the first six months of 2009 versus the same 2008 period. In addition, due to the change in our product and services mix, our cost of revenues as a percentage of revenue was 73% for the first six months of 2009 as compared to 70% for the first six months of 2008.

SELLING, GENERAL & ADMINISTRATIVE EXPENSES: SG&A amounted to approximately $4.2 million in the first six months of 2009 versus $4.0 million for the same period in 2008, an increase of approximately $200,000 or 5%. The increased SG&A expense was principally due to consulting, investor relations and other professional fees of approximately $189,000.

OPERATING INCOME: Operating income for the first six months of 2009 in the amount of $1.1 million decreased approximately $299,000 or 21% due to the factors noted above.

INTEREST EXPENSE, NET: Interest expense, net for the six months ended June 30, 2009 decreased by approximately $38,000 or 6.5% versus the same period in 2008 due to a lower level of outstanding borrowed funds in 2009 versus 2008.

NET INCOME: Net income for the first six months of 2009 amounted to approximately $554,000 compared to a net income of $816,000 for the first six months of 2008, a decrease of $262,000.

THREE MONTHS ENDED JUNE 30, 2009 COMPARED TO THREE MONTHS ENDED JUNE 30, 2008

REVENUES: Revenues for the second quarter of 2009 compared to the second quarter of 2008 decreased by 3%, or approximately $231,000, which was primarily due to certain projects which were anticipated to close with prospective clients being either delayed or put on hold.

COST OF REVENUES: Cost of revenues increased 7% or approximately $421,000 primarily due to lower margin projects. Our cost of revenues as a percentage of revenue was 76% for the second quarter of 2009 as compared to 70% for the second quarter of 2008.

SELLING, GENERAL & ADMINISTRATIVE EXPENSES: SG&A amounted to approximately $1.9 million in the second quarter of 2009 versus $2.1 million for the same period in 2008, a decrease of approximately $200,000 or 9%. The decreased SG&A expense was principally due to reduced compensation costs ($309,000) and offset by consulting, investor relations and other professional fees.

OPERATING INCOME: Operating income for the second quarter of 2009 in the amount of $119,000 decreased approximately $464,000 or 80% versus the same period in 2008, due to the factors noted above.

INTEREST EXPENSE, NET: Interest expense, net for the second quarter of 2009 decreased by approximately $14,000 or 5% versus the same period in 2008 due to a lower level of outstanding borrowed funds in 2009.

NET INCOME (LOSS): The Company incurred a net loss for the second quarter of 2009 of approximately $163,000 compared to net income of $279,000 for the second quarter of 2008, a decrease of $442,000.

HOLDING COMPANY AND OPERATING SUBSIDIARIES

We conduct our business through our wholly owned subsidiaries (Brand Retail and Build Partners). We have relied and continue to rely on cash payments from our operating subsidiaries to, among other things, pay creditors, maintain capital, and meet our operating requirements. Regulations, legal restrictions, and contractual agreements could restrict any needed payments from our present subsidiaries and any other operating subsidiaries we may subsequently acquire. If we were unable to receive cash funds from any of our operating subsidiaries, our operations and financial condition would be materially and adversely affected.

STOCK PRICE FLUCTUATIONS

The market price of our common stock may be affected by our operating results, changes in our business and management, changes in the industries in which we conduct our business, and general and market conditions. In addition, the stock markets commonly experience price and volume fluctuations. These fluctuations have affected stock prices of many companies without regard to their specific operating performance. The price of our common stock may fluctuate significantly in the future.

INFLATION

We do not believe that inflation has had a material effect on the Company’s results of operations.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are not historical facts, but rather reflect the Company’s current expectations concerning future results and events. The words “believes,” “anticipates,” “expects,” and similar expressions, which identify forward-looking statements, are subject to certain risks, uncertainties and factors, including those which are economic, competitive, and technological, that could cause actual results to differ materially from results forecasted or anticipated. Such factors include, among others:

The continued services of James Brooks as Chairman of the Board and Chief Executive Officer of BrandPartners Group and other key senior management members.

Our ability to identify appropriate acquisition candidates, finance and complete such acquisitions and successfully integrate the acquired businesses

Changes in our business strategies or development plans

Competition

Our ability to grow within the financial services industry

Our ability to successfully penetrate other markets

General economic and business conditions, both nationally and in the regions in which we operate

Our ability to pass vendor cost increases on to our customers

Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of the unanticipated events. Readers are also urged to carefully review and consider the various disclosures made by the Company in this report, as well as the Company’s periodic reports on Form 10-K, Form 10-Q, and other filings with the Securities and Exchange Commission.

ITEM 1A. RISK FACTORS

For information regarding factors that could affect the Company’s results of operations, financial condition or liquidity, see the risk factors discussed under “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of BrandPartners’ most recent Annual Report on Form 10-K. See also “Forward-Looking Statements,” included in Item 2 of this Quarterly Report on Form 10-Q. There have been no material changes from the risk factors previously disclosed in BrandPartner’s most recent Annual Report on Form 10-K.

ITEM 3. QUALITATIVE AND QUANTATIVE DISCLOSURES ABOUT MARKET RISK

Our Revolving Credit Facility exposes us to the risk of earnings or cash flow loss due to changes in market interest rates. A portion of the Revolving Credit Facility accrues interest at LIBOR plus an applicable margin. The balance of the Facility accrues interest at the Wall Street Journal’s published prime rate. For a description of the terms of the Term Loan and Revolving Credit Facility, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” above.

The table below provides information on our market sensitive financial instruments as of June 30, 2009.

	Principal Balance		Weighted Average Interest Rate at June 30, 2009

Revolving Credit Facility	$	-		3.82	%

ITEM 4T. CONTROLS AND PROCEDURES

Evaluation of the Company’s Disclosure and Internal Controls

The Company evaluated the effectiveness of the design and operation of its “disclosure controls and procedures” pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period of this quarterly report on Form 10-Q for the second quarter ended June 30, 2009. This evaluation was done with the participation of management, under the supervision of our Chief Executive Officer (“CEO) and the Chief Accounting Officer (“CAO”).

Limitations on the Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are being met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered 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. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also 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. Over time, controls may be inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and may not be detected. The Company conducts periodic evaluations of its internal controls to enhance, where necessary, its procedures and controls.

Conclusions

Based on our evaluation, the CEO and the CAO concluded that the registrant’s disclosures, controls, and procedures are effective as of the end of such period to ensure that information required to be disclosed in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Security Exchange Commission rules and forms.

Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 5. OTHER INFORMATION

On May 14, 2009, the Company entered into a subscription agreement with an accredited investor in reliance on the exemption from registration provided by Section 4(2) under the Securities Act of 1933.

On August 7, 2009, the Company held its 2009 annual meeting of shareholders. As of the June 29, 2009 record date, holders of a total of 43,910,859 shares of common stock were eligible to vote on the proposals presented at the annual meeting. Of the shares eligible to vote, a total of 37,616,076 shares were present at the meeting in person or by proxy. Three proposals were presented to shareholders at the annual meeting; the proposals received the requisite approval from shareholders entitled to vote and the votes cast for same are set forth below:

Prior to the Annual Meeting, the Board of Directors was comprised of five (5) directors, of which four (4) directors stood for election and one (1) director Clifford D. Brune elected not to stand for re-election. The votes cast for the four incumbent director nominees standing for election and terms elected were as follows:

Mr. J. Weldon Chitwood ((Class I Director), one (1) year term) – 29,640,005 shares voted in favor and 7,860,729 shares against and 59,465 shares withheld.

Mr. Anthony S. Graham ((Class I Director, one (1) year term) – 29,674,094 shares voted in favor and 7,826,641 shares against and 59,465 shares withheld.

Mr. Richard Levy ((Class II Director, two (2) year term) – 29,494,937 shares voted in favor and 8,061,874 shares against and 59,265 shares withheld.

Mr. James F. Brooks ((Class III Director, three (3) year term) – 27,578,713 shares voted in favor and 9,978,078 shares against and 59,285 shares withheld.

The proposal to ratify MSPC Certified Public Accountants & Advisors P.C. as the Company’s independent public accountants for the 2009 fiscal year received the affirmative vote of 30,176,810 shares, 6,157,695 shares against and 1,281,571 abstentions.

The proposal to amend the certificate of incorporation to increase the authorized common stock of the company from 100,000,000 to 200,000,000 shares received the affirmative vote of 26,412,538 shares, 10,679,381 shares against and 524,156 abstentions

ITEM 6. EXHIBITS

31.1	Certification of Chief Executive Officer.

31.2	Certification of Chief Accounting Officer.

32.1	Certification of Chief Executive Officer and Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

	BRANDPARTNERS GROUP, INC.

Dated: August 13, 2009

	By:	/S/ James F. Brooks

		James F. Brooks
		Chief Executive Officer and President

Dated: August 13, 2009

	By:	/S/ Jane E. Quilliam

		Jane E. Quilliam
		Chief Accounting Officer