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Smart-Tek Solutions (OTCBB: STTN.PK), a professional employer organization that also provides healthcare staffing, reported its second-quarter net loss more than tripled even as revenue decreased by just 4.2 percent, according to a filing with the U.S. Securities and Exchange Commission.
The company reported a net loss of $1.9 million in the second quarter compared to a net loss of $599,161 in the second quarter of last year, according to its SEC filing.
Second-quarter gross profit shrank to $375,200 from approximately $1.7 million in the year-ago quarter. The company reported the decrease was due to higher workers’ comp expenses.
Smart-Tek also reported in its SEC filing that the IRS requested a substantial amount of payroll records and that the company has a payroll tax withholding liability of approximately $15.7 million. “The IRS staff is in process of reconciling the total amount of the payroll tax liability,” according to the filing. “After the conclusion of the reconciliation process by the IRS staff, the company’s legal tax counsel will handle a negotiated repayment plan that is acceptable to the IRS and the company.”
The filing also included a going concern note. Total liabilities exceeded total assets by $10.5 million on June 30, according to the filing. Management has hired a consultant to put controls in the cash management area and “will institute more efficient management techniques in the finance department,” according to the filing.
Second-quarter revenue at Smart-Tek fell 4.2 percent on a year-over-year basis to $6.1 million from $6.4 million in the year-ago quarter. The company attributed the decrease to the loss of a large client.