4

2. Properties 8

3. Legal Proceedings 9

4. Submission of Matters to a Vote of Security Holders 9

Part II 5. Market for Registrant's Common Equity and Related Stockholder 9 Matters

6. Selected Financial Data 11

7. Management's Discussion and Analysis of Financial Condition 12 and Results of Operations

7A. Quantitative and Qualitative Disclosures About Market Risk 18

8. Financial Statements and Supplementary Data 18

9. Changes in and Disagreements with Accountants 19 on Accounting and Financial Disclosure

Part III 10. Directors and Executive Officers of the Registrant 19

11. Executive Compensation 19

12. Security Ownership of Certain Beneficial Owners and Management and 19 Related Stockholder Matters

13. Certain Relationships and Related Transactions 19

Part IV 14. Controls and Procedures 19

15. Exhibits, Financial Statement Schedule, and Reports on Form 8-K 20

PART I

Item 1. Business

General

Headway Corporate Resources, Inc. ("Headway") is a leading provider of staffing services to businesses in a variety of industries, including, financial services, media, entertainment, biotechnology, information technology and telecommunications. Headway established its human resource business through 20 acquisitions of staffing and professional services companies from 1996 through 1999. Headquartered in New York City, we operate domestically from regional and local offices in, California, Connecticut, Florida, New York, North Carolina, Virginia and, until recently, Texas. Until recently, Headway was also a leading provider of executive search services to the financial services through its Whitney subsidiaries. In March 2003, Headway exited the executive search segment through a sale of the Whitney subsidiaries so that it could focus on its core staffing business.

Headway's goal is to build a national human resource business focused on providing staffing services to the industries identified above. Headway's strategy for achieving this goal is to emphasize programs that generate internal growth and market penetration in the industries and geographical areas we service.

Effective January 1, 2002, the Company adopted Statements of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). Under the new rules, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests in accordance with SFAS 142. Other intangible assets continue to be amortized over their useful lives. Under SFAS 142, goodwill impairment is deemed to exist if the net carrying value of a reporting unit's goodwill exceeds its estimated fair value. Upon adoption of SFAS 142 in the first quarter of 2002, the Company recorded a non-cash charge of $45 million to reduce the carrying value of its goodwill. Such charge is non-operational in nature and is reflected as a cumulative effect of an accounting change in the 2002 consolidated statement of operations. Based on the results of our annual goodwill impairment test in the fourth quarter of 2002 and the estimated implied value of the Company based on the various restructuring proposals received by the Company, it was determined that there was a further impairment of the remaining goodwill and accordingly the balance of $42,471,000 was written off. This amount is reflected in impairment of goodwill and long-lived assets in the 2002 consolidated statement of operations.

The Company has a working capital deficiency and, as more fully described in the Liquidity and Capital Resources section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, the Company is in default on its Senior Credit Facility, Senior Subordinated Notes and Series G Convertible Preferred Stock. Management is negotiating with its lenders to restructure these liabilities and for other potential sources of financing. There can be no assurance that such negotiation will be concluded on favorable terms or at all.

Market Overview

In the recent years prior to 2001, the temporary employment service industry experienced significant growth in response to the changing work environment in the United States. Employers developed increasingly stringent criteria for permanent employees, while moving toward project-oriented temporary and contract hiring. These changes were the result of increasing automation that resulted in shorter technological cycles, and global competitive pressures. Many employers

responded to these challenges by turning to temporary and contract personnel to keep personnel costs variable, achieve maximum flexibility, outsource highly specialized skills, and avoid the negative effects of layoffs. However, in 2002 and 2001 the temporary employment service industry experienced a significant slow down in demand in response to unfavorable conditions in the overall economy. Many companies initiated layoffs of both temporary and permanent workers, and implemented hiring freezes. Due to substantial economic uncertainty, we cannot predict when this trend will change or improve. However, we believe that when the economy does begin to recover, employers will look to use temporary and contract workers as a way to keep their personnel costs variable and maintain maximum flexibility, and that this will fuel growth in the temporary employment service industry.

Growth Strategy

We intend to focus on internal growth as the key element of our growth strategy. We will continue to concentrate on existing market locations, customer segments, and skill areas that value high levels of service to improve growth. Further, we will endeavor to increase penetration of existing markets, expand existing specialties into new and contiguous geographic markets to the ones we service, and identify new service areas that complement our current services that we believe will be attractive to the industries we serve. Finally, we will continue our practice of enhancing the knowledge and skills of our consultants and employees to strengthen our existing relationships with clients and enhance our reputation for providing highly skilled personnel.

Services

The human resource management services offered by Headway include

o temporary staffing and value added services

o IT/professional staff services

o permanent placement services, and

o human resource administration services.

Temporary Staffing and Value Added Services. Headway provides employees to clients for periods ranging from one day to several months to satisfy a specific job skill need arising from absenteeism, special projects, fluctuations in the client's volume of business inherent in the business cycle, technology and business system changes, and other causes. The job skills required by clients and offered by Headway range from entry-level clerks and secretaries to master administrative assistants.

Under vendor-on-premise programs, Headway assumes administrative responsibility for coordinating some or all staffing services at a client's location or organization, including recruiting activities, skills testing and training. Headway also provides payroll services to its clients for its permanent employees, thereby mitigating the administrative burden of employment. By using Headway's services, clients can make changes in workforce quickly without the administrative burden and cost of hiring and firing.

IT/Professional Staff Services. Rapid changes in technology and competitive pressures in the financial services industry create demand by employers for computer programmers and technicians, desktop publishing operators, network administrators, and computer graphic specialists to help implement the systems

required to meet these challenges. Headway offers to its clients IT/professional staff services in which persons with these special skills are placed on a temporary, contract, or permanent basis.

Executive Search and Permanent Placement. Headway provides permanent placement services to its clients for office/clerical positions and IT/professional personnel. Clients use Headway's temporary staffing services as a means for locating and evaluating new personnel with a view to permanent employment. Clients are able to evaluate the abilities and productivity of workers during temporary employment through Headway and make informed decisions on whether to retain the workers on a permanent basis, all without the administrative burden associated with adding the workers to their workforce from the outset.

Headway, through its Whitney subsidiaries, also provided search services to the financial services industry. In March 2003, Headway exited the executive search business through the sale of its Whitney subsidiaries so that it could focus on its core staffing business.

Human Resource Administration Services. Many of Headway's clients use long-term contingent workers on a regular basis to satisfy recurring needs for highly skilled workers in the areas of accounting, finance, business administration, marketing, computer programming, computer graphics, and other areas requiring a high level of business or technical expertise. The use of contingent workers on a regular basis can create a number of problems for clients. The possibility always exists that these workers will accept employment elsewhere that prevents them from being available to the client when needed. Furthermore, there is always a risk contingent workers will be viewed by federal and state taxing authorities as employees rather than contingent workers for income tax withholding and benefits purposes. To mitigate these potential problems, Headway offers a service where it assumes the position of employer for the independent contractors. As an employer, Headway manages the scheduling of these people to make them available to service the needs of the clients, and implements income tax withholding and other employee benefit programs to ensure compliance with the legal requirements of employment under applicable federal and state laws.

Operating Strategy

In 2002, Headway continued its program to diversify its specialization outside of financial services to include media, entertainment, biotechnology and information technology and continued to expand its service offerings to include accounting and finance, legal and mortgage underwriters. Headway has a strong presence in the financial services industry. Headway will continue to focus on this industry, because Headway believes there is a substantial untapped market for its services in this industry and because its core strengths of industry experience and human resources expertise enable it to develop unique, value-added staffing solutions for the financial services industry. Headway will work to maintain its relationships with existing clients in the financial services industry, expand service offerings in existing locations and cross-sell services to existing clients. It will also look to complete small but strategic acquisitions. Although Headway expects to focus on this industry, it expects that it will continue to have a diversified client base, with no more than 50% of its annual revenues being derived from financial services clients.

Headway employs a decentralized, Hub-Spoke management model. Local regional managers manage Headway's operations in each market, including any satellite offices in that market. Headway believes it has a strong market presence in each of its major markets largely due to the commitment, ability, and creativity of its regional managers who drive each local business. Headway fosters this entrepreneurial environment by giving its regional managers the authority to respond quickly and creatively to client needs. Regional managers are responsible for achieving operational and financial objectives, including revenues and earnings growth, and have authority over hiring, recruiting,

compensation, pricing, and sales management. Headway believes that accountability and authority, combined with the support of Headway's corporate level support services, enables its regional managers to compete successfully in the local marketplace. Headway also believes this entrepreneurial environment allows Headway to attract talented managers and successfully serve its clients' needs.

Headway emphasizes recruiting, training, and retaining experienced sales consultants and providing highly qualified temporary employees. Headway trains its sales consultants to operate as partners with their clients in evaluating and meeting the client's staffing requirements. Headway promotes and monitors quality of service in a number of ways. It seeks highly qualified temporary employees through referrals from existing temporary employees and conducts in-depth interviews by Headway personnel experienced in the temporary employees' field. Headway performs skill evaluations and offers programs to its temporary employees to improve their skills. Headway contacts clients within hours of the beginning of a project to receive a preliminary determination of satisfaction, and obtains client satisfaction reports upon the completion of projects. Headway seeks to understand and proactively assess clients' needs, respond promptly to clients' requests, and continually monitor job performance and client satisfaction. Headway believes that its commitment to providing quality service has enabled it to establish and maintain long-term relationships with clients.

Headway's services are marketed through its network of Hubs whose managers and placement coordinators make regular personal sales visits to clients and prospective clients. Headway emphasizes long-term personal relationships with clients who are developed through regular assessment of client requirements and constant monitoring of temporary staff performance. New clients are obtained through sales calls, consultation meetings with target companies, and client referrals. Headway's management and regional managers participate in national and regional trade associations, local chambers of commerce, and other civic associations. Headway monitors sales, marketing, and recruiting functions to identify opportunities to deliver high value-added quality services. Headway believes that its client's select service providers principally on the basis of quality of service, range of services offered, specialized expertise, and ability to service multiple locations, and Headway is striving to satisfy these criteria in its marketing efforts.

Human Resources

As of December 31, 2002, Headway had approximately 309 full-time employees. In the fourth quarter of 2002, Headway employed approximately 7,400 temporary employees in a typical week. None of Headway's employees, including its temporary employees, is represented by a collective bargaining agreement. Headway believes its employee relations to be strong. Hourly wages for Headway's temporary employees are determined according to local market conditions. Headway pays mandated costs of employment, including the employer's share of social security taxes, federal and state unemployment taxes, unemployment compensation insurance, general payroll expenses and workers' compensation insurance. Headway offers access to various insurance programs and other benefits, such as vacations, holidays and 401(k) programs to qualified temporary employees and professionals.

Competition

The staffing industry is intensely competitive and fragmented and has limited barriers to entry. Headway competes for employees and clients in national, regional, and local markets with full-service and specialized temporary staffing service businesses. A significant number of Headway's competitors have greater marketing, financial, and other resources and more established operations than Headway. Price competition in the staffing industry

is intense and pricing pressures from competitors and customers are increasing. Many of Headway's clients have relationships with more than one staffing service company. However, in recent years, an increasing number of companies have consolidated their staffing services purchases and entered into exclusive contracts with a single temporary staffing company or small number of temporary staffing companies. If current or potential clients enter into exclusive contracts with competitors of Headway, it will be difficult or impossible for Headway to obtain business from such clients. Headway expects that the level of competition will remain high in the future, which could limit Headway's ability to maintain or increase its market share or maintain or increase gross margins. However, Headway believes that its strategy of becoming a dominant provider in each of its markets will allow it to remain competitive in this environment.

Regulation

Generally, Headway's operations are not subject to state or local licensing requirements or other regulations specifically governing the provision of commercial and professional staffing services. There can be no assurance, however, that states in which Headway operates or may operate in the future will not adopt such licensing or other regulations affecting Headway.

The laws of various states require Headway to maintain workers' compensation and unemployment insurance coverage for its temporary employees. Headway maintains state mandated workers' compensation and unemployment insurance coverage. The extent and type of health insurance benefits that employers are required to provide employees has been the subject of intense scrutiny and debate in recent years at both the national and state levels. Proposals have been made to mandate that employers provide health insurance benefits to staffing employees. In addition, some states could impose sales taxes, or raise sales tax rates, on staffing services. Further increases in such premiums or rates, or the introduction of new regulatory provisions, could substantially raise the costs associated with hiring and employing staffing employees.

Intellectual Property

Headway maintains a number of trademarks, trade names, service marks and other intangible rights. Headway believes that it has all rights to trademarks and trade names necessary for the conduct of its business and is not currently aware of any infringing uses or other conditions that would materially and adversely affect its use of proprietary rights.

Availability of Reports and Other Information

Our corporate website is http://headwaycorp.com. We make available on this website, free of charge, access to our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A and amendments to those materials filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically submit such material to the Securities Exchange and Commission. In addition, the Commission's website is http://www.sec.gov. The Commission makes available on its website, free of charge, reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically with the Commission. Information provided on our website or on the Commission's website is not part of this Annual Report on Form 10-K.

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