Resolve Staffing 10K/A 2006 Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR FISCAL YEAR ENDED DECEMBER 31, 2006.

Commission File Number 000-29485

RESOLVE STAFFING, INC.

(Name of small business issuer in its charter)

Nevada	33-085-0639
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

3235 Omni Drive

Cincinnati, OH 45245

(800) 894-4250

(Address and telephone number of principal executive offices)

Securities registered under Section 12(b) of the Exchange Act: None.

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $0.0001

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act, during the past 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 [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [].

Check whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as indicated by Exchange Act Rule 12 b-2). Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]

Check whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

Check if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Check if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

The aggregate market value of the voting and nonvoting common equity held by non-affiliates of the Registrant, computed by reference to the closing sale price of such common equity as quoted on the Over the Counter Electronic Bulletin Board of $2.99 per share as of December 31, 2006 was $13,066,638.

As of November 13, 2007, the registrant had 19,428,511 shares of common stock, par value $.0001 per share, outstanding.

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Resolve Staffing, Inc.

2006 Annual Report on Form 10-K/A

Table of Contents

	Page
PART I
ITEM 1. BUSINESS	3
ITEM 1A. RISK FACTORS	8
ITEM 1B. UNRESOLVED STAFF COMMENTS	16
ITEM 2. PROPERTIES	16
ITEM 3. LEGAL PROCEEDINGS	17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS	17

PART II.
ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER SALES OF UNREGISTERED SECURITIES	18
ITEM 6. SELECTED FINANCIAL DATA	19
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS	20
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	26
ITEM 9A. CONTROLS AND PROCEDURES	27
ITEM 9B. OTHER INFORMATION	27

PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	27
ITEM 11. EXECUTIVE COMPENSATION	28
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT AND RELATED STOCKHODER MATTERS	30
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	32
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES	33

PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	33
FINANCIAL STATEMENTS	33
SIGNATURES	59
EXHIBIT INDEX	60

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CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING INFORMATION

The following information includes statements that are forward looking in nature. The accuracy of such statements depends on a variety of factors that may affect the business and operations of the Company. Certain of these factors are discussed under “Business - Factors Influencing Future Results and Accuracy of Forward-Looking Statements” included in PART I of this report and Management’s Discussion and Analysis of Financial Conditions and Results of Operations. When used in this discussion, the words “expect(s)”, “feel(s)”, “believe(s)”, “will”, “may”, “anticipate(s)” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, and actual results could differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, and are urged to carefully review and consider the various disclosures elsewhere in this Form 10-K/A.

PART I

ITEM 1. BUSINESS

About Us

Resolve Staffing, Inc. (“Company” or “Registrant”), headquartered in Cincinnati, Ohio, is a national provider of outsourced human resource services with approximately 74 offices reaching from California to New York. The Company provides a full range of human resource outsourcing services, including Professional Employer Organization (“PEO”) services and solutions for temporary, temporary-to-hire, or direct hire staffing in the medical, truck driver, clerical, office administration, customer service, professional and light industrial categories.

We offer a comprehensive range of human resource management services to help small and medium-sized businesses manage the increasing costs and complexities of a broad array of employment-related issues. We believe that the combination of these two principal services, PEO and staffing, enables us to provide our clients with a unique blend of services not offered by our competition. Our platform of human resource outsourcing (“HRO”) services is built upon our expertise in payroll processing, employee benefits and administration, workers' compensation coverage, effective risk management and workplace safety programs and human resource administration.

In a PEO arrangement, we enter into a contract to become a co-employer of the client's existing workforce and assume responsibility for some or all of the client's human resource management responsibilities. Staffing services include on-demand or short-term staffing assignments, long-term or indefinite-term contract staffing and comprehensive on-site management. Our staffing services also include direct placement services, which involve fee-based search efforts for specific employee candidates at the request of our PEO clients, staffing customers or other companies.

On February 7, 2005, the Company, entered into an equity purchase agreement (“Agreement”), to purchase ELS Personnel Services (“ELS”) (the “Reverse Combination”) from Employee Leasing Services, Inc., (“ELS Inc.”), a privately-held company located in Cincinnati, Ohio. The Company’s Chief Executive Officer and director, Ronald Heineman, is a principal shareholder, officer and director of ELS. Pursuant to the equity purchase agreement, the Company acquired the ownership interest in the group of companies which comprised ELS Personnel Services, (ELS Personnel Services, LLC, Five Star Staffing, Inc., Five Star Staffing (NY), Inc., and American Staffing Resources, Ltd.) comprising a total of 10 temporary employee staffing locations. See “Basis of Presentation” section in the notes to the financial statements for discussion of accounting treatment of the acquisition of ELS.

Employee Leasing Services, Inc., operated 3 locations and acquired the 7 temporary employee staffing locations throughout fiscal 2004. ELS Inc. acquired Five Star Staffing, Inc. which consisted of 3 locations, in August 2004, Five Star Staffing (NY), Inc., which consisted of 3 locations, in November 2004 and American Staffing Resources, Ltd which consisted of 1 location , in November 2004. Prior to ELS Inc.’s acquisition of these entities, these entities were owned and operated by unrelated third parties in various locations throughout Florida, New York and Ohio.

In connection with the Reverse Combination on February 7, 2005, ELS was deemed to be the acquiring company for accounting purposes and the Reverse Combination was accounted for as a reverse acquisition under the purchase method of accounting for business combinations in accordance with accounting principles generally accepted in the United States of America. The acquisition of the ELS entities was treated as a reverse acquisition for financial accounting purposes and therefore the accompanying comparative financial information is that of ELS rather than the historical financial statements of the Company. In conjunction with this transaction, the group of companies known as ELS Personnel Services, which were legally acquired by the Company, changed its name to Resolve Staffing, Inc.

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On various dates during 2005, the Company, entered into purchase agreements (“Agreements”), to acquire all of the assets and/or ownership of various separate privately-held entities owned and operated by unrelated parties located throughout the United States. Pursuant to the acquisition agreements, the Company acquired a total of 31 temporary employee staffing locations from the newly acquired entities. These include:

·	On January 24, 2005, the Company acquired certain assets from Solaris Staffing, Inc. These assets included the operations of certain temporary staffing offices located in upstate New York.

·	On February 20, 2005, the Company acquired SupportStaff Employment Services, a full-service staffing firm located in Sebring, FL.

·	On May 9, 2005, the Company acquired certain assets from Pride Staffing, Inc. These assets include a temporary staffing office located in Erie, PA.

·	On June 13, 2005 the Company acquired The Arnold Group, a Southern California staffing firm.

·	On June 20, 2005 the Company acquired Taylor Personnel Services, Inc., a Buffalo, New York staffing firm.

·	On August 22, 2005 the Company acquired Truckers Plus, Inc., a thirteen location truck driver staffing firm headquartered in Memphis, Tennessee.

·	On September 14, 2005 the Company acquired QRD International Inc. d/b/a Delta Staffing, a Southern California staffing firm.

·	On September 30, 2005 the Company acquired Midwest Staffing Inc., a medical staffing firm located in Oklahoma City, Oklahoma.

·	On October 21, 2005 the Company acquired Star Personnel Services of Kentucky, LLC, a Northern KY staffing firm.

·	On October 31, 2005 the Company acquired Project Solvers Inc., a temporary and permanent placement firm specific to the fashion, apparel, and design industries, with a New York office.

·	On November 10, 2005 the Company acquired ProCare Medical Staffing, LLC, a medical staffing firm with an Illinois office.

·	On November 28, 2005 the Company acquired Big Sky Travel Nurses, Inc., a medical staffing firm, with a Montana office.

·	On December 11, 2005 the Company acquired Assisted Staffing, Inc., a medical staffing firm with an Arizona office location.

·	On December 26, 2005 the Company acquired Pagnard Enterprises, Inc., a temporary staffing firm with an Ohio office.

·	On December 27, 2005 the Company acquired Drivers Plus, Inc., a truck driver staffing firm with an office in Missouri.

·	On December 30, 2005 the Company acquired Staffpro, Inc., a temporary staffing firm with one office in Kentucky and one office in Ohio.

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financial statements of the Company for the year ended December 31, 2004 are included in the Company’s Annual Report on Form 10-KSB, filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2005. The audited financial statements of ELS for the two years ended December 31, 2003 and 2004 or such time as the entity was under the control of ELS, Inc. through December 31, 2004 have been included in the Company’s amended report on Form 8-K pertaining to this acquisition which was filed in December, 2005. In accordance with the accounting treatment described above, the historical financial statements prior to the Reverse Combination reflect those of ELS. In conjunction with this transaction, the group of companies known as ELS Personnel Services, which were legally acquired by the Company, changed its name to Resolve Staffing, Inc. The financial information for 2004 includes the combined balances and combined results of operations of the individual entities which comprise ELS. The combined results of operations for the acquired entities include the activities of each entity from the date of acquisition to December 31, 2004.

On January 24, 2006, the Company acquired R & R Staffing Services, Inc., located in Syracuse, New York.

On March 27, 2006, the Company acquired Ready Nurses LLC, a Fulton, Missouri based medical staffing firm.

On May 5, 2006, the Company acquired Steadystaff, a Baltimore/Washington D. C. based staffing firm.

On June 1, 2006, the Company announced that it has completed the acquisition of Star Personnel, headquartered in Cincinnati, Ohio.

On October 1, 2006, the Company, entered into an equity purchase agreement (“Agreement”), to purchase Employee Leasing Services, Inc. (“ELS Inc.”) (“Combination”), a group of privately-held companies known as ELS Inc. located in Cincinnati, Ohio. The Company’s Chief Executive Officer and Director, Ronald Heineman, is a principal shareholder, officer and director of ELS Inc. Pursuant to the equity purchase agreement, the Company acquired the ownership interest in the group of companies which comprised ELS Inc.

In connection with the Combination on October 1, 2006, Resolve was deemed to be the acquiring company for accounting purposes and the Combination was accounted for as an acquisition under the purchase method of accounting for business combinations in accordance with accounting principles generally accepted in the United States of America. The financial information for 2006, 2005 and 2004 includes the consolidated balances as of December 31, 2006 and 2005 and the consolidated results of operations of the individual entities which comprise Resolve for the years ended December 31, 2006, 2005 and 2004. The consolidated results of operations for the acquired entities include the activities of each entity from the date of acquisition to the end of the period.

Our ability to offer clients a broad range of services allows us to become an outsourced human resource department and strategic partner for our clients. We believe our approach allows our clients to focus on their core business rather than human resources, thus making them more productive.

Our Business

The Company focuses on meeting our clients' flexible human resource outsourcing needs, targeting opportunities in a fragmented; growing market that we believe has been under-served by large, full-service staffing and PEO companies. Significant benefits to clients include providing the ability to outsource the recruiting and many logistical aspects of their human resource needs, as well as converting the fixed cost of employees to the variable cost of outsourced services. A summary of our Payroll Administration Services and Aggregation of Statutory and Non-Statutory Employee Benefits Services are as follows:

·	Professional Employer Organization - In a PEO arrangement, we enter into a contract to become a co-employer of the client's existing workforce and assume responsibility for some or all of the client's human resource management responsibilities.
·	Payroll Administration Services - We assume responsibility for our employees for payroll and attendant record-keeping, payroll tax deposits, payroll tax reporting, and all federal, state, payroll tax reports (including 941s, 940s, W-2s, W-3s, W-4s and W-5s), state unemployment taxes, employee file maintenance, unemployment claims and monitoring and responding to changing regulatory requirements.

Aggregation of Statutory and Non-Statutory Employee Benefits Services - We provide workers' compensation and unemployment insurance to our service employees. Workers' compensation is a state-mandated comprehensive insurance program that requires employers to fund medical expenses, lost wages, and other costs that result from work related injuries and illnesses, regardless of fault and without any co-payment by the employee. Unemployment insurance is an insurance tax imposed by both federal and state governments. Our human resources and claims administration departments monitor and review workers' compensation for loss control purposes.

We are the employer of record with respect to flexible staffing services and assume responsibility for most employment regulations, including compliance with workers' compensation and state unemployment laws. As part of our basic services in the flexible staffing market, we conduct a human resources needs analysis for clients and client employees. Such analysis includes reviewing work schedules and productivity data, in addition to recruiting, interviewing, and qualifying candidates for available positions. Based on the results of that review, we recommend basic and additional services that the client should implement.

We provide certain other services to our flexible industrial staffing clients on a fee-for-service basis. These services include screening, recruiting, training, workforce deployment, loss prevention and safety training, pre-employment testing and assessment, background searches, compensation program design, customized personnel management reports, job profiling, description, application, turnover tracking and analysis, drug testing policy administration, affirmative action plans, opinion surveys and follow-up analysis, exit interviews and follow-up analysis, and management development skills workshops.

The focus of our temporary staffing service is to provide short and long term employees as well as temp to hire employees to financially secured employers. The average employee will work a 40 hour work week for a client and will work for an average of two employers per month. It is estimated an employee will work an average of 14 days per month. Our service specializes in a variety of staffing fields including medical, truck driver, clerical, and light industrial staffing with the largest percentage in the clerical and light industrial fields. Each applicant is thoroughly interviewed tested and screened to meet the requirements of our customers. For long term and temp to hire positions a large percentage of our customers will interview our candidates and then select the one they believe to be best suited for the position.

The Market

The Human Resource Outsourcing (HRO) market is large and growing rapidly. Some of the key factors driving growth include the desire of businesses to outsource non-core business functions, to reduce regulatory compliance risk, to rationalize the number of service providers that they use, and to reduce costs by integrating human resource systems and processes.

The outsourcing of business processes represents a growing trend within the United States. By utilizing the expertise of outsourcing service providers, businesses are able to reduce processing costs and administrative burdens while at the same time offering competitive benefits for their employees. The technical capabilities, knowledge and operational expertise that we have built, along with our broad portfolio of services for clients, have enabled us to capitalize on the growing business processing outsourcing trend.

Our goal is to become a leading national provider of HRO services for small and medium-sized businesses. We seek to differentiate our strategic position by offering a full spectrum of PEO and staffing services. We believe that the integrated nature of our service platform assists our clients and customers in successfully aligning and strengthening their organizational structure to meet the demands of their businesses. In pursuit of this goal, we have adopted the operating and growth strategies described below to provide the framework for our future growth, while maintaining the quality and integrity of our current service offerings.

Competition

The HRO industry is characterized by intense competition. In staffing, we compete with many small providers in addition to several large public companies, including Ablest, Inc., Spherion, Adecco, S.A., Kelly Services, Inc., Manpower, Inc., and others. There are limited barriers to entry and new competitors frequently enter the market. Although a large percentage of flexible staffing providers are locally operated with fewer than five offices, most of the large public companies have significantly greater marketing, financial and other resources than us. We believe that by focusing primarily on customer service, we enjoy a competitive advantage over many of our competitors that attempt to provide a broader range of staffing services. We also believe that by targeting regional and local companies, rather than the national companies that are generally being pursued by our competitors; we can gain certain competitive advantages.

PEO companies that periodically compete with us in the same markets have greater financial and marketing resources than we do, such as Administaff, Inc., Gevity HR, Inc., and Paychex, Inc., among others. Competition in the PEO industry is based largely on price, although service and quality can also provide competitive advantages. A significant limiting factor to the growth of the PEO industry is the perception of potential clients that they have the capacity to handle human resource issues internally. We believe that our growth is attributable to our ability to provide small and medium-sized companies with the opportunity to reduce workers' compensation costs and to provide enhanced benefits to their employees while reducing their overall personnel administration costs.

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We believe that several factors contribute to obtaining and retaining clients in the professional, clerical, administrative, light industrial and technical support staffing market. These factors include an understanding of clients' specific job requirements, the ability to reliably provide the correct number of employees on time, the ability to monitor job performance, and the ability to offer competitive prices. To attract qualified candidates for flexible employment assignments, companies must offer competitive wages, positive work environments, flexibility of work schedules, an adequate number of available work hours and, in some cases, vacation and holiday pay. We believe we are reasonably competitive in these areas in the markets in which we compete, although we cannot assure you that we will maintain a competitive standing in the future.

Employees

As of December 31, 2006 we employed over 10,000 PEO employees and over 4,000 temporary employees.

Typical Client

Our HRO clients represent a cross-section of the industrial sector, of which no client currently represents more than 5% of our total revenues. We attempt to maintain diversity within our client base in order to decrease our exposure to downturns or volatility in any particular industry, but we cannot assure you that we will be able to maintain such diversity or decrease our exposure to such volatility. All prospective clients fill out a questionnaire to help us evaluate workers' compensation risk, creditworthiness, unemployment history, and operating stability. We are not dependent on any one customer in any of the markets we serve.

Our Offices

Our Company headquarters are located at 3235 Omni Drive, Cincinnati, Ohio 45245. Our telephone number is 800-894-4250.

In addition to our corporate headquarters, we lease facilities at approximately 74 locations throughout the United States. Our offices are adequate for our present level of operations. In the future we will need additional facilities in which to centralize our accounting, training, human resource, risk management and executive work activities. We anticipate that we will require larger scale data processing and network communication capabilities, which will be needed in order to facilitate the assimilation of acquired companies into our methods of operating and accounting standards, and to provide customers state-of-the-art service and support.

Industry Regulation

Overview

We are subject to the laws and regulations of the jurisdictions within which we operate, including those governing high deductible employers under the workers' compensation systems in certain states. We believe we are in compliance with all HRO licensing requirement. As an employer, we are subject to federal, state, and local statutes and regulations governing our relationships with our employees and affecting businesses generally, including employees at client worksites. We assume the sole responsibility and liability for the payment of federal and state employment taxes with respect to wages and salaries paid to our employees.

Our operations are affected by numerous federal and state laws relating to labor, tax and employment matters. By entering into a co-employer relationship with employees who are assigned to work at client locations (sometimes referred to as "work-site employees"), we assume certain obligations and responsibilities of an employer under these federal and state laws. Because many of these federal and state laws were enacted prior to the development of nontraditional employment relationships, such as professional employer, temporary employment, and outsourcing arrangements, many of these laws do not specifically address the obligations and responsibilities of nontraditional employers. In addition, the definition of "employer" under these laws is not uniform. As an employer, we are subject to all federal statutes and regulations governing our employer-employee relationships. Subject to the discussion of risk factors below, we believe that our operations are in compliance in all material respects with applicable federal statutes and regulations.

We offer various benefit plans to our worksite employees. These plans include a multiple-employer retirement plan, a cafeteria plan, a group health plan, a group life insurance plan, a group disability insurance plan and an employee assistance plan. Generally, employee benefit plans are subject to provisions of both the Internal Revenue Code and the Employee Retirement Income Security Act of 1974, as amended. In order to qualify for favorable tax treatment under the Code, the benefit plans must be established and maintained by an employer for the exclusive benefit of the employer's employees. An IRS examination may determine that we were not the employer of our worksite employees under Internal Revenue Code provisions applicable to

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employee benefit plans. If the IRS were to conclude that we were not the employer of our worksite employees for employee benefit plan purposes, those employees would not have qualified to make tax favored contributions to our multiple-employer retirement plans or cafeteria plan. If such conclusion were applied retroactively, employees' vested account balances, could become taxable immediately, we could lose our tax deduction to the extent the contributions were not vested, the plan trust could become a taxable trust and penalties could be assessed. In such a scenario, we could face the risk of potential litigation by some of our clients. As such, we believe that a retroactive application by the IRS of an adverse conclusion could have a material adverse effect on our financial position, results of operations and liquidity.

ERISA also governs employee pension and welfare benefit plans. The United States Supreme Court has held that the common law test of employment must be applied to determine whether an individual is an employee or an independent contractor under ERISA. If we were found not to be an employer for ERISA purposes, our employee benefit plans would not be subject to ERISA. As a result of such finding, we and our employee benefit plans would not enjoy the preemption of state law provided by ERISA and could be subject to varying state laws and regulations, as well as to claims based upon state common law.

Workers' compensation

Workers' compensation is a state mandated comprehensive insurance program that requires employers to fund medical expenses, lost wages and other costs resulting from work-related injuries and illnesses. In exchange for providing workers' compensation coverage for employees, employers are generally immune from any liability for benefits in excess of those provided by the relevant state statutes. In most states, the extensive benefits coverage for both medical costs and lost wages is provided through the purchase of commercial insurance from private insurance companies, participation in state-run insurance funds, high deductible funds or, if permitted by the state, employer high deductible. Workers' compensation benefits and arrangements vary on a state-by-state basis and are often highly complex. In Florida, for instance, employers are required to furnish, solely through managed care arrangements, the medically necessary remedial treatment for injured employees.

Trademarks and Service Marks

We do not have any registered trade or service marks. It is our intention to develop service marks as appropriate and seek federal registration when possible. We have begun the process of registering the mark "Resolve Staffing(TM)", and the name "Resolve Staffing" with a design, and, if federal registration is granted, we intend to develop Resolve Staffing as our brand identity.

ITEM 1A. RISK FACTORS

We were incorporated in April 1998, and have been engaged in the staffing business since August 1999. Our potential for future profitability must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development, particularly companies in rapidly evolving markets, such as staffing services in general and those catering to small to medium businesses in particular. Since we do not have a lengthy history in the staffing business; therefore, prospective investors do not have a historical basis from which to evaluate our performance.

We Lost Money in 2006

We have incurred net losses from operations in 2006. Our net loss for the fiscal year ended December 31, 2006 was $2,421,799 and as of December 31, 2006 we had an accumulated deficit of $3,821,016. While we expect to become profitable in the future, we can not guarantee profitability. We expect our operating expenses to continue to increase as we attempt to build our brand, expand our customer base and make acquisitions. While we expect to become profitable, to become profitable, we must increase revenue substantially and achieve and maintain positive gross margins. We may not be able to increase revenue and gross margins sufficiently to achieve profitability.

Unless We Find a New Working Capital Funding Source, We Risk Losing Employees, Customers and Workers’ Compensation Coverage

We pay our flexible staffing employees on a weekly basis. However, on average, we receive payment for these services from our customers 30 to 60 days after the date of invoice. As we establish or acquire new offices, or as we expand existing offices, we will have increasing requirements for cash to fund these payroll obligations. Our primary sources of working capital funds for payroll related and workers' compensation expenditures have been loans or private placements of securities to individuals, including certain of our shareholders. If we do not obtain an institutional financing source and we are unable to secure alternative financing on acceptable terms, we will lose employees, customers, and may be unable to pay payroll related premiums.

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We are uncertain whether our current senior lender will agree to refinance or extend our senior debt facility, and if so, whether the terms of refinancing will be acceptable to us.

Our senior debt forbearance agreement expires as of December 31, 2007 and our senior lender has indicated that it would prefer that the Company refinance the debt with alternate financing in order for the current senior lender to exit. If our existing senior lender does not refinance our senior debt and a new lender cannot be found or a new forbearance agreement negotiated with the current lender that would include terms acceptable to the Company, it would have a material adverse effect on our financial condition.

We are Subject to Government Regulations and any Change in these Regulations, or the Possible Retroactive Application of These Regulations Could Result in Additional Tax Liability

As an employer, we are subject to all federal, state and local statutes and regulations governing our relationships with our employees and affecting businesses generally, including our employees assigned to work at client company locations (sometimes referred to as worksite employees).

Our workers' compensation loss reserves may be inadequate to cover our ultimate liability for workers' compensation costs.

We maintain reserves (recorded as accrued liabilities on our balance sheet) to cover our estimated liabilities for our high deductible workers' compensation program. The determination of these reserves is based upon a number of factors, including current and historical claims activity, claims payment patterns and medical cost trends and developments in existing claims. Accordingly, reserves do not represent an exact calculation of liability. Reserves can be affected by both internal and external events, such as adverse developments on existing claims or changes in medical costs, claims handling procedures, administrative costs, inflation, and legal trends and legislative changes. Reserves are adjusted from time to time to reflect new claims, claim developments, or systemic changes, and such adjustments are reflected in the results of the periods in which the reserves are changed. Because of the uncertainties that surround estimating workers' compensation loss reserves, we cannot be certain that our reserves are adequate. If our reserves are insufficient to cover our actual losses, we would have to increase our reserves and incur charges to our earnings that could be material.

Adverse developments in the market for excess workers' compensation insurance could lead to increases in our costs.

We have a high deductible employer workers' compensation coverage in certain states. To manage our financial exposure in the event of catastrophic injuries or fatalities, we maintain excess workers' compensation insurance through our insurance providers. Changes in the market for excess workers' compensation insurance may lead to limited availability of such coverage, additional increases in our insurance costs or further increases in our high deductible retention, any of which may have a material adverse effect on our financial condition.

If we are determined not to be an "employer" under certain laws and regulations, our clients may stop using our services, and we may be subject to additional liabilities.

We believe that we are an employer of employees provided to our PEO clients on a co-employment basis under the various laws and regulations of the Internal Revenue Service and the U.S. Department of Labor. If we are determined not to be an employer under such laws and regulations and are therefore unable to assume obligations of our clients for employment and other taxes, our clients may be held jointly and severally liable for payment of such taxes. Some clients or prospective clients may view such potential liability as an unacceptable risk, discouraging current clients from continuing a relationship with us or prospective clients from entering into a new relationship with us. Any determination that we are not an employer for purposes of ERISA could adversely affect our cafeteria benefits plan operated under Section 125 of the Internal Revenue Code and result in liabilities to us under the plan.

We may be exposed to employment-related claims and costs and periodic litigation that could adversely affect our business and results of operations.

We either co-employ employees in connection with our PEO arrangements or place our employees in our customers' workplace in connection with our staffing business. As such, we are subject to a number of risks inherent to our status as an employer, including without limitation:

•	claims of misconduct or negligence on the part of our employees, discrimination or harassment claims against our employees, or claims by our employees of discrimination or harassment by our clients;
•	immigration-related claims;
•	claims relating to violations of wage, hour and other workplace regulations;
•	claims relating to employee benefits, entitlements to employee benefits, or errors in the calculation or administration of such benefits; and
•	possible claims relating to misuse of customer confidential information, misappropriation of assets or other similar claims.

If we experience significant incidents involving any of the above-described risk areas we could face substantial out-of-pocket losses, fines or negative publicity. In addition, such claims may give rise to litigation, which may be time consuming, distracting and costly, and could have a material adverse effect on our business. With respect to claims involving our co-employer relationship with our PEO clients, although our PEO services agreement provides that the client will indemnify us for any liability attributable to the conduct of the client or its employees, we may not be able to enforce such contractual indemnification, or the client may not have sufficient assets to satisfy its obligations to us.

We are required to pay a number of federal and state payroll taxes and related payroll costs, including unemployment taxes, workers' compensation insurance premiums and claims, Social Security, and Medicare, among others, for our employees. We also incur costs related to providing additional benefits to our employees, such as insurance premiums for health care. Health insurance premiums, unemployment taxes and workers' compensation insurance premiums and costs are significant to our operating results, and are determined, in part, by our claims experience. We attempt to increase fees charged to our customers to offset any increase in these costs, but we may be unable to do so or we may lose customers if we do. If the federal or state legislatures adopt laws specifying additional benefits for temporary workers, demand for our services may be adversely affected. In addition, workers' compensation expenses are based on our actual claims experiences in each state and our actual aggregate workers' compensation costs may exceed estimates.

Because Our Staffers Work at the Clients’ Place of Business, We May be Exposed to Employment Related Claims and Costs that Arise from that Clients’ Work Place Location and We do not Control the Clients’ Working Environment

Temporary staffing companies, such as ours, employ people in the workplace of their customers. This creates a risk of potential litigation based on claims by customers of employee misconduct or negligence, claims by employees of discrimination or harassment, including claims relating to actions of our customers, claims related to the inadvertent employment of illegal aliens or unlicensed personnel, payment of workers' compensation claims and other similar claims. We may be held responsible for the actions at a job site of workers not under our direct control.

We May Lose Customers if We are Unable to Attract Qualified Temporary Personnel Due to Low Unemployment Rates and an Increase in Competition for Qualified Temporary Personnel

We compete with other temporary personnel companies to meet our customer's needs. We must continually attract reliable temporary workers to fill positions and may from time to time experience shortages of available temporary workers. During periods of increased economic activity and low unemployment, the competition among temporary staffing firms for qualified personnel increases. Many regions in which we operate are experiencing historically low rates of unemployment and we have experienced, and may continue to experience, significant difficulties in hiring and retaining sufficient number of qualified personnel to satisfy the needs of our customers. Also, we may face increased competitive pricing pressures during these periods of low unemployment rates.

We Require Additional Capital to Fund Our Current Operations and to Make Acquisitions. We May Have to Curtail Our Business if we Cannot Find Adequate Funding

The expansion and development of our business will require significant additional capital, which we may be unable to obtain on suitable terms, or at all. We currently have no legally binding commitments with any third parties to obtain any material amount of additional equity or debt financing. If we are unable to obtain adequate funding on suitable terms, or at all, we may have to delay, reduce or eliminate some or all of our advertising, marketing, acquisition activity, general operations or any other initiatives.

If We are Unable to Successfully Integrate and Manage Acquired Business Without Substantial Expense or Delay We May Not be Able to Effectively Operate Our Business and/or It May decrease the Value of Our Common Stock

In the future, we intend to expand our operations through acquisitions of small and medium size private companies, or divisions or segments of major private and public companies. We will do this to:

·	recruit well−trained, high−quality professionals;
·	expand our service offerings;

·	gain additional industry expertise;
·	broaden our client base; and

·	expand our geographic presence.

We may not be able to integrate successfully businesses which we may acquire in the future without substantial expense, delays or other operational or financial problems. We may not be able to identify, acquire or profitably manage additional businesses.

Our Plan to Make Acquisitions May Divert Management’s Attention From Day-to-Day Business Operations Which Could Prevent Our Business From Growing

If we are able to identify acquisition candidates, management's time and attention will be diverted from such activities as sales, marketing and tailoring staffing solutions to meet customer's needs. If management is not able to address these day−to−day operational tasks, we may lose customers or fail to increase revenue.

Acquisition Activities May Cause Us to Lose Existing Customers Because of Conflicts or Service Problems

The clients of companies we may acquire may be in the same or similar businesses with our existing clients. Although we do not enter into agreements to restrict the type of business which we service, providing staff services to existing clients' direct competition may cause such existing clients to look elsewhere for staffing services.

Our Principal Stockholders, Officers and Directors Own a Controlling Interest in Our Voting Stock and Investors Will Not Have Voice in Our Management

Our officers, directors and stockholders with greater than 5% holdings will, in the aggregate, beneficially own approximately 77% of our outstanding common stock. As a result, these stockholders, acting together, will have the ability to control substantially all matters submitted to our stockholders for approval, including:

·	election of our board of directors;
·	removal of any of our directors;

·	amendment of our certificate of incorporation or bylaws; and
·	adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.

As a result of their ownership and positions, our directors and executive officers collectively are able to influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, sales of significant amounts of shares held by our directors and executive officers, or the prospect of these sales, could adversely affect the market price of our common stock. Management's stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

There are a Large Number of Shares Underlying Our Warrants that May be Available for Future Sale and the Sale of These Shares May Cause the Price of Our Stock to Drop

As of November 6, 2007, we had 19,828,511 shares of common stock issued and outstanding, which includes 400,000 shares held in escrow as described in Note C to the accompanying financial statements. We also have 2,000,000 shares issuable upon exercise of our warrants. The sale of these shares may cause the market price of our common stock to drop. The issuance of shares upon conversion or exercise of the warrants may result in substantial dilution to the interests of other stockholders.

The Application of the “Penny Stock Regulation” Could Harm the Market Price of Our Common Stock

Our securities may be deemed a penny stock. Penny stocks generally are equity securities with a price of less than $5.00 per share other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. Our securities may be subject to "penny stock rules" that impose additional sales practice requirements on broker−dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker−dealer must make a special suitability determination for the purchase of such

Page - 8

securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the "penny stock rules" require the delivery, prior to the transaction, of a disclosure schedule prescribed by the Commission relating to the penny stock market. The broker−dealer also must disclose the commissions payable to both the broker−dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. Consequently, the "penny stock rules" may restrict the ability of broker−dealers to sell our securities and may have the effect of reducing the level of trading activity and price of our common stock in the secondary market.

Should We Enter Into an Acquisition in Exchange for the Issuance of Shares of Our Common Stock, Such Issuance May Have a Dilutive Effect for Our Current Shareholders and May Cause the Price of Our Common Stock to Decline

The future issuance of all or part of our remaining authorized but currently unissued common stock in connection with an acquisition may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might cause the price of our common stock to decline.

We compete with numerous larger competitors, many of which are better financed and have a stronger presence in the industry than ourselves.

As many of these firms have significantly stronger name recognition than ourselves, they are in a position to quickly attract clients which are in need of services thus adversely impacting our potential pool of clients. Our marketing structure is not proprietary and it would not be difficult for a company to offer similar services. Further, entry into the marketplace by new competitors is relatively easy especially considering their existing presences and their greater resources for financing, advertising and marketing.

Any significant economic downturn could result in the Company’s clients using fewer temporary employees, which would materially adversely affect our business.

Because demand for temporary personnel services is sensitive to changes in the level of economic activity, the Company’s business may suffer during economic downturns. As economic activity begins to slow down, companies tend to reduce their use of temporary employees before undertaking layoffs of their regular employees, resulting in decreased demand for temporary personnel. Significant declines in demand, and thus in revenues, can result in expense de-leveraging, which would result in lower profit levels.

The staffing services industry is highly competitive with limited barriers to entry, which could limit the Company’s ability to maintain or increase its market share or profitability.

The staffing services market is highly competitive with limited barriers to entry, and in recent years has been undergoing significant consolidation. The Company competes in markets throughout North America with full-service and specialized temporary service agencies. Several of the Company’s competitors, including Adecco S.A., Vedior N.V., Randstad Holding N.V. and Kelly Services, Inc., have very substantial marketing and financial resources. Price competition in the staffing industry is intense and pricing pressures from competitors and customers are increasing. The Company expects that the level of competition will remain high in the future, which could limit its ability to maintain or increase its market share or profitability.

Unless we find a new working capital funding source, we risk losing employees, customers and workers’ compensation coverage

Government regulations may result in prohibition or restriction of certain types of employment services or the imposition of additional licensing or tax requirements that may reduce the Company’s future earnings.

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The temporary employment industry is heavily regulated. Within the United States, wherein the Company now operates, the Company’s operations may have to adjust to:

•	additional regulations that prohibit or restrict the types of employment services that The Company currently provides;
•	the imposition of new or additional benefit requirements;
•	requirements that require The Company to obtain additional licensing to provide staffing services; or
•	Increases in taxes, such as sales or value-added taxes, payable by the providers of staffing services.

Any future regulations may have a material adverse effect on the Company’s financial condition, results of operations and liquidity because they may make it more difficult or expensive for the Company to continue to provide staffing services.

The Company’s acquisition strategy may have a material adverse effect on its business due to unexpected or underestimated costs.

The Company has completed a series of acquisitions during 2005-2006 of smaller and less capitalized temporary staffing services competitors and its current plan is to continue with this acquisition strategy in the future although no assurance or guaranty can be given that the Company will make further acquisitions. The Company’s acquisition strategy involves significant risks, including:

•	difficulties in the assimilation of the operations, services and corporate culture of acquired companies;
•	over-valuation by the Company of acquired companies;
•	insufficient indemnification from the selling parties for legal liabilities incurred by the acquired companies prior to the acquisitions; and
•	diversion of management’s attention from other business concerns.

These risks could have a material adverse effect on the Company’s business because they may result in substantial costs to the Company and disrupt the Company’s business. In addition, future acquisitions could materially adversely affect the Company’s business, financial condition, results of operations and liquidity because they would likely result in the incurrence of additional debt or dilution, contingent liabilities, an increase in interest expense and amortization expenses related to separately identified intangible assets. Possible impairment losses on goodwill and restructuring charges could also occur.

Intense competition may limit the Company’s ability to attract, train and retain the qualified personnel necessary for the Company to meet its customers’ staffing needs.

The Company depends on its ability to attract and retain qualified temporary personnel who possess the skills and experience necessary to meet the staffing requirements of its clients. The Company must continually evaluate and upgrade its base of available qualified personnel through recruiting and training programs to keep pace with changing client needs and emerging technologies. Competition for individuals with proven professional skills, particularly employees with accounting and technological skills, is intense, and the Company expects demand for such individuals to remain very strong for the foreseeable future. Qualified personnel may not be available to the Company in sufficient numbers and on terms of employment acceptable to the Company. Developing and implementing training programs require significant expenditures and may not result in the trainees developing effective or adequate skills. The Company may not be able to develop training programs to respond to its clients’ changing needs or retain employees whom it has trained. The failure to recruit, train and retain qualified temporary employees could materially adversely affect the Company’s business because it may result in an inability to meet its customers’ staffing needs.

The Company may be exposed to employment-related claims and costs and other litigation that could materially adversely affect its business, financial condition and results of operations.

The Company is in the business of employing people and placing them in the workplaces of other businesses. Risks relating to these activities include:

•	claims of misconduct or negligence on the part of the Company’s employees;
•	claims by the Company’s employees of discrimination or harassment directed at them, including claims relating to actions of its clients;
•	claims related to the employment of illegal aliens or unlicensed personnel;
•	payment of workers’ compensation claims and other similar claims;
•	violations of wage and hour requirements;
•	retroactive entitlement to employee benefits;
•	errors and omissions of the Company’s temporary employees, particularly in the case of professionals, such as accountants; and
•	claims by the Company’s clients relating to its employees’ misuse of client proprietary information, misappropriation of funds, other criminal activity or torts or other similar claims.

The Company may incur fines and other losses or negative publicity with respect to these problems. In addition, some or all of these claims may give rise to litigation, which could be time-consuming to its management team and costly and could have a negative impact on its business. the Company cannot assure you that it will not experience these problems in the future or that its insurance will be sufficient in amount or scope to cover any of these types of liabilities.

The Company cannot assure you that its insurance will cover all claims that may be asserted against it. Should the ultimate judgments or settlements exceed its insurance coverage, they could have a material effect on the Company’s results of operations, financial position and cash flows. The Company also cannot assure you that it will be able to obtain appropriate types or levels of insurance in the future or that adequate replacement policies will be available on acceptable terms, if at all.

If the Company loses its key personnel, then its business may suffer.

The Company’s operations are dependent on the continued efforts of its officers and executive management. In addition, the Company is dependent on the performance and productivity of its local managers and field personnel. The Company’s ability to attract and retain business is significantly affected by local relationships and the quality of service rendered. The loss of those key officers and members of executive management who have acquired significant experience in operating a staffing service may cause a significant disruption to the Company’s business. Moreover, the loss of the Company’s key managers and field personnel may jeopardize existing client relationships with businesses that continue to use its staffing services based upon past relationships with these local managers and field personnel. The loss of such key personnel could materially adversely affect the Company’s operations, because it may result in an inability to establish and maintain client relationships and otherwise operate its business.

The price of the Company’s common stock may fluctuate significantly, which may result in losses for investors.

The market price for the Company’s common stock has been and may continue to be volatile. For example, during the fiscal year ended December 31, 2006, the prices of the Company’s common stock as reported on the OTCBB ranged from a high of $3.26 to a low of $.09. the Company’s stock price can fluctuate as a result of a variety of factors, including factors listed in these “Risk Factors” and others, many of which are beyond the Company’s control. These factors include:

•	actual or anticipated variations in the Company’s quarterly operating results;
•	announcement of new services by the Company or the Company’s competitors;
•	announcements relating to strategic relationships or acquisitions;
•	changes in financial estimates or other statements by securities analysts; and
•	changes in general economic conditions.

Because of this volatility, the Company may fail to meet the expectations of its shareholders or the public marketplace, and its stock price could decline as a result.

Because we do not intend to pay any cash dividends on our common stock, our Shareholders will not be able to receive a return on their shares unless they sell them.

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. Unless we pay dividends, our Shareholders will not be able to receive a return on their shares unless they sell them. There is no assurance that Shareholders will be able to sell shares when desired or that when they chose to do so, that they will receive a return on their investment in the Common Stock.

As a public company, our administrative costs will be significantly higher than they are now, which will make it more difficult for us to be profitable and cash flow positive. Difficulties in complying with the Sarbanes-Oxley Act and other legal and accounting requirements applicable to public companies could affect our market value.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Commission, have imposed various new requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time

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consuming and costly. Expenses as a result of our being a public company include additional amounts for legal and accounting services, transfer agent fees, additional insurance costs, printing and filing fees and fees for investor and public relations.

The existence of outstanding warrants may impair our ability to obtain additional equity financing.

The existence of outstanding warrants may adversely affect the terms at which we could obtain additional equity financing. The holders of these warrants have the opportunity to profit from a rise in the value or market price of our Common Stock and to exercise them at a time when we could obtain equity capital on more favorable terms than those contained in these securities.

We may issue shares of preferred stock in the future, which could depress the price of our stock.

Our corporate charter authorizes us to issue shares of “blank check” preferred stock. Our board of directors has the authority to fix and determine the relative rights and preferences of preferred shares, as well as the authority to issue such shares, without further shareholder approval. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends are declared to holders of our common stock, and the right to the redemption of such preferred shares, together with a premium, prior to the redemption of the common stock. To the extent that we do issue such additional shares of preferred stock, the rights of the holders of our Common Stock and other securities could be impaired thereby, including, without limitation, with respect to liquidation.

We may, in the future, issue additional common shares, which would reduce investors' percent of ownership and may dilute our share value.

Our corporate charter authorizes the issuance of 50,000,000 shares of Common Stock. The future issuance of Common Stock may result in substantial dilution in the percentage of our Common Stock held by our then existing shareholders. We may value any Common Stock issued in the future on an arbitrary basis. The issuance of Common Stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our Common Stock.

The future issuance of all or part of our remaining authorized but currently unissued Common Stock in connection with an acquisition may result in substantial dilution in the percentage of our Common Stock held by our then existing shareholders. We may value any Common Stock issued in the future on an arbitrary basis. The issuance of Common Stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might cause the price of our Common Stock to decline.

The timing and amount of our capital requirements are not entirely within our control and cannot accurately be predicted and as a result, we may not be able to raise capital in time to satisfy our needs.

If capital is required, we may require financing sooner than anticipated. We have no commitments for financing, and we cannot be sure that any financing would be available in a timely manner, on terms acceptable to us, or at all. Further, any equity financing could reduce ownership of existing shareholders and any borrowed money could involve restrictions on future capital raising activities and other financial and operational matters. If we were unable to obtain financing as needed, including the refinancing of our credit facility with our senior lender by December 31, 2007, we could become insolvent and be subject to bankruptcy proceedings.

We may not be able to raise sufficient capital or generate adequate revenue to meet our obligations and fund our operating expenses.

Failure to raise adequate capital and generate adequate sales revenues to meet our obligations and develop and sustain our operations could result in our having to curtail or cease operations. Additionally, even if we do raise sufficient capital and generate revenues to support our operating expenses, there can be no assurances that the revenue will be sufficient to enable us to develop business to a level where it will generate profits and cash flows from operations.

Our Common Stock is subject to the "Penny Stock" Rules of the Commission and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

The Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

·	that a broker or dealer approve a person's account for transactions in penny stocks; and
·	the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

·	obtain financial information and investment experience objectives of the person; and
·	make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:

·	sets forth the basis on which the broker or dealer made the suitability determination; and
·	that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our Common Stock and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

We require additional capital to fund our current operations and to make acquisitions. We may have to curtail our business if we can-not find adequate funding

ITEM 1B. UNRESOLVED STAFF COMMENTS

On May 17, 2007, the U.S. Securities and Exchange Commission (“Commission”) issued comments to the Company in connection with the Commission’s review of the Form 10-K filed by the Registrant on April 16, 2007, for the year ended December 31, 2006. Specifically, the Company’s conclusion that the accounting acquirer in the Combination was most appropriately determined to be ELS, and therefore a reverse merger was questioned by the Commission and ultimately, we decided to further evaluate the best means to report the Combination. Upon further consideration and additional interpretation of SFAS 141, as it relates to the Combination, we determined to concur with the Commission’s accounting staff and treat the Company as the accounting acquirer, therefore accounting for the transaction as a forward merger. Revising our reports to account for the Combination as a forward rather than a reverse merger requires the amendment of our Form 10-K for the period ended December 31, 2006 and our quarterly reports filed for the quarters ended March 31 and June 30, 2007.

We believe that once our periodic reports are amended and the Company responds to the comments we received from the Commission, the staff comments should be completed.

ITEM 2. PROPERTIES

Our headquarters are located at 3235 Omni Drive, Cincinnati, Ohio 45245. Our telephone number is 800-894-4250.

In addition to our corporate headquarters, the Company leases facilities at approximately 74 locations throughout the United States. Our offices are adequate for our present level of operations. In the future we will need additional facilities in which to centralize our accounting, training, human resource, risk management and executive work activities. We anticipate that we will require larger scale data processing and network communication capabilities, which will be needed in order to facilitate the assimilation of acquired companies into our methods of operating and accounting standards, and to provide customers state-of-the-art service and support.

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We provide PEO and/or staffing services through all 74 of our branch offices. The following table shows the number of branch offices located in each state in which we operate. We also lease office space in other locations in our market areas which we use to recruit and place employees.

State	Number of Branch Offices
New York	16
Ohio	12
Florida	10
Kentucky	7
California	4
North Carolina	3
Illinois	3
Pennsylvania	2
Texas	2
Tennessee	2
Missouri	2
Maryland	2
South Carolina	1
Alabama	1
Georgia	1
Oklahoma	1
Montana	1
Arizona	1
Colorado	1
Michigan	1
Indiana	1
Total	74

ITEM 3. LEGAL PROCEEDINGS

The Company is subject to legal proceedings and claims, which arise in the ordinary course of its business. In the opinion of management, with the exception of the items listed below, the amount of ultimate liability with respect to currently pending or threatened actions is not expected to materially affect the financial position or results of operations of the Company. Litigation is subject to inherent uncertainties and an adverse result may arise that may harm our business.

The Company is in receipt of a Determination and Assessment from the State of Michigan, Department of Labor & Economic Growth, Unemployment Insurance Agency seeking payment of amounts totaling $9,505,212. The Company and legal counsel believe that this assessment is baseless and without merit and intends to contest this assessment vigorously. As of December 31, 2006, no amount is accrued in the Company’s financial statements as the matter is deemed groundless and outside the authority of the Agency.

The Company has received notice letters from the State of Ohio sales tax auditors indicating their intention to make an assessment on employee leasing or co-employment sales. As of the date of filing of this amended report on Form 10-K/A/, we have been notified that the assessed amount of Ohio sales taxes is $52,711,436.50. The Company conducts its business through written contracts of at least one year, and claims exemption from the sales tax auditor’s position. We continue to work with the sales tax auditors to have this matter dismissed. As of December 31, 2006, no amount is accrued in the Company’s financial statements as the Company and legal counsel believe this assessment is groundless.

As of December 31, 2006 the Company is in receipt of a notice from the United States Department of Labor asserting various violations of ERISA relating to the ELS Inc. group health plan. The Company is attempting to address the alleged violations and does not believe this matter will have a material impact on the accompanying financial statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no submissions of matters to a vote of shareholders in 2006.

Executive Officers of the Registrant

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Information required by this Item 4 concerning executive officers of the Company appears under Item 10 “Directors and Officers of the Registrant”.

PART II

ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock is currently quoted on the OTCBB market under the symbol “RSFF”. As of November 6, 2007, management believes there to be approximately 400 holders of record of our common stock. To date, we have not paid any dividends on our common stock. We do not currently intend to pay dividends in the future. We are prohibited from declaring or paying dividends while certain debentures or warrants are outstanding.

The OTCBB is maintained by the National Association of Securities Dealers, Inc. (“NASD”) and is a electronic medium consisting of a network of securities dealers who buy and sell stocks. The following table sets forth the high and low bid prices per share of our Common Stock for each quarterly period during the last two fiscal years as reported on the OTCBB. These prices may represent inter-dealer quotations without retail markups, markdowns, or commissions and may not necessarily represent actual transactions.

	Low	High
Fiscal Year ended December 31, 2005
First Quarter	$0.50	$0.75
Second Quarter	$0.45	$1.01
Third Quarter	$0.50	$1.05
Fourth Quarter	$0.63	$1.46

Fiscal Year ended December 31, 2006
First Quarter	$1.38	$2.85
Second Quarter	$1.60	$2.25
Third Quarter	$0.90	$1.98
Fourth Quarter	$1.60	$3.26

Recent Sale of Unregistered Securities

On February 7, 2005, the Company issued a total of 13,000,000 shares of common stock as part of the payment for the acquisition of ELS, Inc.

On May 25, 2005, the Company Staffing, Inc. issued 100,000 shares to certain consultants as part of their compensation.

On August 18, 2005, the Company issued 50,000 shares to a certain vendor as part of his compensation and 100,000 shares as per an employment agreement with certain shareholders and employees of Truckers Plus.

On November 22, 2005, the Company issued 430,000 shares to various consultants as part of their compensation.

On September 7, 2006, the Company issued 100,000 shares as per an employment agreement with certain shareholders and employees of Truckers Plus.

On October 1, 2006, the Company issued 1,000,000 shares of common stock to certain investors for an aggregate investment of $1.5 million. In addition, the investors received two warrants for the purchase of additional shares of stock (one share at $2.00 and one share at $3.00). The stock issued to the investors, along with the shares underlying the warrants, has subsequently been registered pursuant to an S-1 filed with the SEC. The registration has yet to be declared effective as of the date of the 10-K/A filing.

On October 1, 2006, the Company issued 1,486,685 shares of common stock pursuant to the acquisition of ELS Inc.

On November 30, 2006, the Company issued 300,000 shares of common stock to certain consultants as part of their compensation.

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The Company did not purchase shares of its common stock, or declare a stock repurchase program, during 2006. The offers and sales of our unregistered securities as disclosed above, were exempt from the registration requirements of § 5 of the Securities Act of 1933, as the offers and sales were exempt from registration under § 4(1) and § 4(2) of the Securities Act of 1933, or in the alternative, were exempt under the provisions of Regulation D promulgated under such Act.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the Company’s financial statements and the accompanying notes listed in Item 15 of this Report.

Statement of Operations Data

	Years Ended December 31,
		2006		2005		2004		2003		2002

Revenues	$	152,304,237	$	31,138,212	$	4,284,006	$	1,105,798	$	467,911

Cost of revenues		134,038,039		25,356,038		3,567,164		835,550		353,097

Gross profit		18,266,198		5,782,174		716,842		270,248		114,814

Operating expenses		19,297,192		6,004,356		759,586		640,572		440,608

Loss from operations		(1,030,994)		(222,182)		(42,744)		(370,324)		(325,794)

Interest expense		(1,390,805)		(266,140)		(13,160)		(16,249)		(12,390)

Loss before taxes		(2,421,799)		(488,322)		(55,904)		(386,573)		(338,184)

Provision for (benefit from) income taxes		-		-		-		-		-

Net loss	$	(2,421,799)	$	(488,322)	$	(55,904)	$	(386,573)	$	(338,184)

Basic and diluted loss per share	$	(0.16)	$	(0.03)	$	(0.00)	$	(0.07)	$	(0.12)

Weighted average number of shares used in loss per share computation:
Basic and diluted		15,016,545		14,540,838		13,000,000		5,607,969		2,821,424

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Balance Sheet Data

	December 31,
		2006		2005		2004		2003		2002

Current assets	$	19,461,646	$	6,969,150	$	2,164,414	$	137,705	$	172,464

Property and equipment, net		1,343,773		601,261		149,956		24,293		14,367

Advances and notes receivable - related parties		681,237		-		-		-		-

Other assets		31,870,530		6,926,662		640,000		-		-

Total assets	$	53,357,186	$	14,497,073	$	2,954,370	$	161,998	$	186,831


Current liabilities	$	41,107,048	$	4,623,595	$	2,480,731	$	328,251	$	127,746

Long term liabilities		9,660,709		10,083,698		393,556		-		67,000

Stockholders’ equity (deficit):

Stockholders’ equity (deficit)		2,589,429		(210,220)		80,103		(166,253)		(7,915)

Total liabilities and stockholders’ equity (deficit)	$	53,357,186	$	14,497,073	$	2,954,390	$	161,998	$	186,831

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The financial information set forth in the following discussion should be read in conjunction with the Company's audited financial statements and notes included herein. The results described below are not necessarily indicative of the results to be expected in any future period. Certain statements in this discussion and analysis, including statements regarding our strategy, financial performance and revenue sources, are forward-looking information based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.

Overview

We provide Human Resource Outsourcing (HRO) services, comprised of staffing services and PEO services. We generate staffing services revenues primarily from short-term staffing, contract staffing, on-site management and direct placement services. Our PEO service fees are generated from contractual agreements with our PEO clients under which we become a co-employer of our client’s workforce with responsibility for some or all of the client’s human resource functions. We recognize revenues from our staffing services for all amounts invoiced, including direct payroll, employer payroll-related taxes, workers’ compensation coverage and a service fee (equivalent to a mark-up percentage). PEO service fee revenues are recognized on a net basis in accordance with Emerging Issues Task Force No. 99-19, “Reporting Revenues Gross as a Principal Versus Net as an Agent” (“EITF No. 99-19”). As such, our PEO service fee revenues represent the gross margin generated from our PEO services after deducting the amounts invoiced to PEO customers for direct payroll expenses such as salaries, wages, health insurance and employee out-of-pocket expenses incurred incidental to employment. These amounts are also excluded from cost of revenues. PEO service fees also include amounts invoiced to our clients for employer payroll-related taxes and workers’ compensation coverage.

Our cost of revenues is comprised of direct payroll costs for staffing services, employer payroll-related taxes and employee benefits and workers’ compensation. Direct payroll costs represent the gross payroll earned by staffing services employees based on salary or hourly wages. Payroll taxes and employee benefits consist of the employer’s portion of Social Security and Medicare taxes, federal unemployment taxes, state unemployment taxes and staffing services employee reimbursements for

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materials, supplies and other expenses, which are paid by the customer. Workers’ compensation expense consists primarily of the costs associated with our high deductible workers’ compensation program, such as claims reserves, claims administration fees, legal fees, state administrative agency fees and excess insurance costs for catastrophic injuries.

The largest portion of workers’ compensation expense is the cost of workplace injury claims. When an injury occurs and is reported to us, our respective independent insurer analyzes the details of the injury and develops a case reserve, which is the insurer’s estimate of the cost of the claim based on similar injuries and their professional judgment. We then record or accrue an expense and a corresponding liability based upon our estimate of the ultimate claim cost. As cash payments are made by our insurer against specific case reserves, the accrued liability is reduced by the corresponding payment amount. The insurer also reviews existing injury claims on an on-going basis and adjusts the case reserves as new or additional information for each claim becomes available. We have established an additional reserve for both future unanticipated increases in costs (“adverse loss development”) of the claims reserves for open claims and for claims incurred but not reported related to prior and current periods. We believe our operational policies and internal claims reporting system help to limit the occurrence of unreported incurred claims.

Selling, general and administrative expenses represent both branch office and corporate-level operating expenses. Branch operating expenses consist primarily of branch office staff payroll and personnel related costs, advertising, rent, office supplies, depreciation and branch incentive compensation. Corporate-level operating expenses consist primarily of executive and office staff payroll and personnel related costs, professional and legal fees, travel, depreciation, occupancy costs, information systems costs and executive and corporate staff incentive compensation.

Amortization of intangible assets consists of the amortization of software costs, and covenants not to compete, which are amortized using the straight-line method over their estimated useful lives, which range from two to ten years.

Critical accounting policies

For a discussion of recent accounting pronouncements and their potential effect on the Company’s results of operations and financial condition, refer to the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K/A. Note that the preparation of this Annual Report on Form 10-K/A requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition - We recognize PEO revenues when each periodic payroll is delivered to the client. Revenues are reported in accordance with the requirements of FASB Emerging Issues Task Force Issue No. 99-19, “Reporting Revenues Gross as a Principal Versus Net as an Agent.”(EITF 99-19). Consistent with our revenue recognition policy, our net PEO revenues and cost of PEO revenues do not include the payroll cost of its worksite employees. Instead, PEO revenues and cost of PEO revenues are comprised of all other costs related to its worksite employees, such as payroll taxes, employee benefit plan premiums and workers’ compensation insurance. Payroll taxes consist of the employer’s portion of Social Security and Medicare taxes, federal unemployment taxes and state unemployment taxes. PEO revenues also include professional service fees, which are primarily computed as a percentage of client payroll or on a per check basis.

Staffing and managed service revenue and the related labor costs and payroll are recorded in the period in which services are performed. We follow EITF 99-19, in the presentation of staffing and managed service revenues and expenses. This guidance requires us to assess whether we act as a principal in the transaction or as an agent acting on behalf of others. In situations where we are the principal in the transaction and have the risks and rewards of ownership, the transactions are recorded gross in the consolidated statements of operations.

Purchase price allocations in the business combinations - We account for acquisitions of businesses in accordance with the requirements of SFAS 141, Business Combinations ("SFAS 141"). Pursuant to SFAS 141, we utilize the purchase method in accounting for acquisitions whereby the total purchase price is first allocated to the assets acquired and liabilities assumed, and any remaining purchase price is allocated to goodwill. We recognize intangible assets apart from goodwill if they arise from contractual or other legal rights or if they are capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented, or exchanged. Assumptions and estimates are used in determining the fair value of assets acquired and liabilities assumed in a business combination. Valuation of intangible assets acquired requires significant judgment in determining fair value and whether such intangibles are amortizable or non-amortizable and, if amortizable, the period and method by which the intangible asset will be amortized. Changes in the initial assumptions could lead to changes in

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amortization charges recorded in our financial statements. Additionally, estimates for purchase price allocations may change as subsequent information becomes available.

Allowance for Doubtful Accounts - We are required to make estimates of the collectibility of accounts receivables. Management analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in the customers' payment tendencies when evaluating the adequacy of the allowance for doubtful accounts. If the financial condition of our customers deteriorates, resulting in an impairment of their ability to make payments, additional allowances may be required. The allowance for bad debts is recorded monthly as a percent of sales, and quarterly all accounts are reviewed for collectablity and the balance is reviewed and adjusted accordingly.

Workers' Compensation Reserves - We are high deductible for workers' compensation coverage in certain states. The estimated reserve for unsettled workers' compensation claims represents our best estimate of total plan liability, which includes an evaluation of information provided by our carrier for workers' compensation claims and, in part, an annual actuarial analysis from an independent actuary. Included in the claims liabilities are case reserve estimates for reported losses, plus additional amounts based on projections for incurred but not reported claims, anticipated increases in case reserve estimates and additional claims administration expenses. These estimates are continually reviewed and adjustments to liabilities are reflected in current operating results as they become known. We believe that the difference between amounts recorded for our estimated liabilities and the possible range of costs to settle related claims is not material to results of operations; nevertheless, it is reasonably possible that adjustments required in future periods may be material to results of operations.

Management uses estimates in its high deductible workers compensation policy liability and allowance for bad debt reserves. Based on quarterly calculations of workers compensation policy ultimate loss versus paid and reserved losses, the Company reviews whether current policy reserves for incurred but not reported claims are adequate and adjusted accordingly.

Intangible Assets and Goodwill - We assess the recoverability of intangible assets and goodwill annually and whenever events or changes in circumstances indicate that the carrying value might be impaired. Factors that are considered include significant underperformance relative to expected historical or projected future operating results, significant negative industry trends and significant change in the manner of use of the acquired assets. Management's current assessment of the carrying value of intangible assets and goodwill indicates there was no impairment as of December 31, 2006. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets, as of the date of our annual assessment during the fourth quarter of our fiscal year.

Forward-looking information

Statements in this Item or in Item 1 of this report which are not historical in nature, including discussion of economic conditions in the Company’s market areas and effect on revenue growth, the potential for and effect of past and future acquisitions, the effect of changes in the Company’s mix of services on gross margin, the adequacy of the Company’s workers’ compensation reserves and allowance for doubtful accounts, the effectiveness of the Company’s management information systems, and the availability of financing and working capital to meet the Company’s funding requirements, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such factors with respect to the Company include difficulties associated with integrating acquired businesses and clients into the Company’s operations, economic trends in the Company’s service areas, material deviations from expected future workers’ compensation claims experience, the effect of changes in the workers’ compensation regulatory environment in one or more of the Company’s primary markets, collectibility of accounts receivable, the carrying values of deferred income tax assets and goodwill, which may be affected by the Company’s future operating results, and the availability of capital or letters of credit necessary to meet state-mandated surety deposit requirements for maintaining the Company’s status as a qualified high deductible employer for workers’ compensation coverage, among others.

The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Fluctuations in Quarterly Operating Results

We have historically experienced significant fluctuations in our quarterly operating results and expect such fluctuations to continue in the future. Our operating results may fluctuate due to a number of factors such as wage limits on statutory payroll taxes, claims experience for workers’ compensation, demand for our services and competition. Payroll taxes, as a component

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of cost of revenues, generally decline throughout a calendar year as the applicable statutory wage bases for federal and state unemployment taxes and Social Security taxes are exceeded on a per employee basis. Our revenue levels in the fourth quarter may be affected by many customers’ practice of operating on holiday-shortened schedules. Workers’ compensation expense varies with both the frequency and severity of workplace injury claims reported during a quarter and the estimated future costs of such claims. In addition, adverse loss development of prior period claims during a subsequent quarter may also contribute to the volatility in the Company’s estimated workers’ compensation expense.

Total business increased significantly due to two large acquisitions, ELS Inc. and Power Personnel. Please refer to the Pro Forma table below for more detailed breakdown of the business components. The addition of ELS Inc. improved Resolve's cash flow. A PEO collects its revenue at roughly the same time it disburses expenses. The lack of carrying accounts receivable enhances cash flow by making days sales outstanding a one day requirement. Power Personnel was purchased and retained its operating lines of credit. It should need little or no funding from its parent. The funding of the Power Personnel purchase to the former owner as described in Note G is the only cash flow requirement.

Results of Operations

We report PEO revenues in accordance with the requirements of EITF No. 99-19 which requires us to report such revenues on a net basis because we are not the primary obligor for the services provided by our PEO clients to their customers pursuant to our PEO contracts. We present for comparison purposes the Pro forma non-GAAP gross revenues and pro forma non-GAAP cost of revenues information for the years ended December 31, 2006 and 2005 set forth in the table below. Although not in accordance with generally accepted accounting principles in the United States (“GAAP”), management believes this information is more informative as to the level of our business activity and more illustrative of how we manage our operations, including the preparation of our internal operating forecasts, because it presents our PEO services on a basis comparable to our staffing services.

Management uses non-GAAP revenue as a measure for business velocity. The PEO business collects significantly more cash than GAAP reporting under the EITF. The cash must be used prudently and affects working capital decisions, even though it is netted for GAAP purposes. A reconciliation of pro forma non-GAAP gross revenues to pro forma net revenues is reflected in the table below:

Pro Forma Non-GAAP

	Year Ended December 31,
	2006	2005
Revenues:
Staffing services	$139,821,391	$31,138,212
Professional employer services	294,385,052	210,698,722

Total revenues	434,206,443	241,836,934

Total cost of revenues	406,512,132	216,699,415

Gross margin	$27,694,311	$25,137,519

A reconciliation of pro forma non-GAAP gross revenues to pro forma net revenues is as follows for the years ended December 31, 2006 and 2005:

Pro Forma Non-GAAP

	Gross Revenue Reporting Method		Reclassification		Net Revenue Reporting Method
	2006	2005	2006	2005	2006	2005
Revenues:
Staffing services	$ 139,821,391	$ 31,138,212	$ -	$ -	$ 139,821,391	$ 31,138,212
Professional employer services	294,385,052	210,698,722	(243,719,404)	(167,449,561)	50,665,648	43,249,161

Total revenues	434,206,443	241,836,934	(243,719,404)	(167,449,561)	190,487,039	74,387,373

Total cost of revenues	406,512,132	216,699,415	(243,719,404)	(167,449,561)	162,792,728	49,249,854

Gross margin	$ 27,694,311	$25,137,519	$ -	$ -	$ 27,694,311	$25,137,519

Comparison of consolidated operations for year ended December 31, 2006 to year ended December 31, 2005

In the fourth quarter, the Company purchased the PEO operations of ELS Inc. ELS Inc. was a national PEO, and added new segment revenue by expanding the Company’s product line. Also, in the quarter, the Company purchased Power Personnel in New York. This added seven offices to the Company's New York region.

Revenues for the year ended December 31, 2005 compared to 2006 increased from $31,138,212 to $152,304,237, a 389% increase, reflecting an increase in organic growth and our aggressive acquisition and marketing efforts. This growth is also attributable to both growth through acquisition and growth with our existing clients as well as expanding our customer base.

Cost of revenues increased from $25,356,038 in 2005 to $134,038,039, in 2006, an increase of 429% from the prior year. This increase is attributable to our aggressive sales growth, diversified service offering, and acquisitions. Our gross profit decreased, as a percent of revenues, from approximately 18% to approximately 12%. This decrease is attributable to a number of factors including a change in our service mix as a result of our aggressive acquisition efforts (we now offer a variety of HRO Services including Staffing, PEO, Payroll Services, Benefits Administration, etc.).

We expect our gross profit margins to increase, as a percent of revenues, in the future as we continue to grow our business in higher margin areas and as one time adjustments (attributable to the merger with ELS Inc.) decrease.

Operating expenses have increased from $6,004,356 in 2005 to $19,297,192 in 2006. This increase is attributable to our aggressive growth through acquisitions and our organic growth. The Company has grown into a national provider of HRO services with approximately 74 offices. This increase in operating expenses includes marketing, salaries, rents, and various other expenses associated with these locations. These costs have decreased from approximately 19% to 13% as a percent of revenues.

Interest expense increased from $266,140 in 2005 to $1,390,805 in 2006. The increase is attributable to increased debt obligations related to our increased credit lines, aggressive acquisition strategy and the recent merger with ELS Inc. A major portion of our debt is through affiliated parties, including Ron Heineman. This is discussed in detail in the footnotes to our financial statements.

No provision for income taxes have been reflected or recorded on these financial statements. We incurred a net loss of $2,421,799 for the year ended December 31, 2006 as a result of the matters discussed above. Losses to date may be used to offset future taxable income, assuming the Company becomes profitable.

Comparison of consolidated operations for year ended December 31, 2005 to year ended December 31, 2004

Revenues for the year ended December 31, 2004 compared to 2005 increased from $4,284,006 to $31,138,212, a 627% increase, reflecting an increase in business recovery and our aggressive acquisition and marketing efforts. This growth is also attributable to both growth through acquisition and growth with our existing clients as well as expanding our customer base.

Cost of revenues increased from $3,567,164 in 2004 to $25,356,038, in 2005, an increase of 611% from the prior year. This increase is attributable to our aggressive sales growth and acquisitions. Our gross margin increased, as a percent of revenues, from approximately 17% to approximately 19%. We expect our gross profit margins to increase, as a percent of revenues, in the future as we continue to grow our business in higher margin areas such as the truck driver and medical staffing market niches.

Operating expenses have increased from $759,586 in 2004 to $6,004,356 in 2005. This increase is attributable to our aggressive growth through acquisitions. The Company has grown into a national provider of staffing services with approximately 52 offices. This increase in operating expenses includes marketing, salaries, rents, and various other expenses associated with these locations. These costs have increased from approximately 18% to 19% as a percent of revenues. This increase is attributable to the continued development of our infrastructure to support our growth and as a result of non cash related Amortization of Non Compete Agreements and depreciation.

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Interest expense increased from $13,160 in 2004 to $266,140 in 2005. The increase is attributable to increase debt obligations related to our aggressive acquisition strategy. A majority of our debt is through affiliated parties, including Ron Heineman and ELS, Inc. This is discussed in detail in the footnotes to our financial statements.

No provision for income taxes have been reflected or recorded on these financial statements. We incurred a net loss of $488,322 for the year ended December 31, 2005 as a result of the matters discussed above. This represents a $432,418 increase in operating loss from 2004. Losses to date may be used to offset future taxable income, assuming the Company becomes profitable.

Liquidity and Capital Resources

As reflected in the accompanying financial statements, the Company has a net working capital deficit of $21,645,402 and a stockholder’s equity of $2,589,429, as of December 31, 2006.

For the year ended December 31, 2006 we incurred a net loss of $2,421,799. Of this loss, $1,256,156 did not represent the use of cash. Non-cash expenditures consisted of depreciation of $311,918, increase in allowance for doubtful accounts of $365,442, and amortization of non-compete agreements of $578,796. Changes in accounts receivable, prepaid and other expenses, and bank overdraft, along with decreases in accounts payable, payroll, salary, and other accruals brought the total cash used by operations to $4,217,093.

The Company expects its operating expenses to increase significantly in the near future as the Company attempts to build its brand and expand its customer base. The Company hopes our expenses will be funded from operations and short-term loans from officers, shareholders or others; however, the Company’s operations may not provide such funds and the Company may not be able to obtain short-term loans from officers, shareholders or others. The Company’s officers and shareholders are under no obligation to provide additional loans to the Company.

Net cash used in investing activities totaled $3,601,512 for 2006, compared to net cash used in investing activities of $2,113,997 for 2005. For 2006, the principal uses of cash for investing activities were for acquisitions totaling an aggregate value of $2,790,820 and the acquisition of property and equipment totaling $351,286.

Net cash provided by financing activities for 2006 was $7,818,605 compared to net cash used by financing activities of $5,729,751 for 2005. For 2006, the principal source of cash from financing activities was from lines of credit and a capital raise.

The Company’s business strategy continues to focus on growth through the expansion of operations at existing offices, together with the selective acquisition of additional personnel-related business, both in its existing markets and other strategic geographic markets. The Company periodically evaluates proposals for various acquisition opportunities, but there can be no assurance that any additional transactions will be consummated.

During March 2007 the Company finalized its renewal of its various lines of credit described in Note G. The lines of credit were increased to $29,150,000, call for interest payable monthly at the prime interest rate, include certain financial covenants and mature September 30, 2007 and January 31, 2008. These lines of credit are guaranteed by certain shareholders and affiliated entities. During May 2007, the Company received a notice of default under the terms of these various lines of credit. During September 2007, the Company and the Bank entered into a Forbearance and Reaffirmation Agreement whereby the Bank agreed to forbear from exercising its rights and remedies against the Company and the Subsidiaries with respect to the defaults existing as of September 28, 2007 until the earlier to occur of (i) December 31, 2007 or (ii) the occurrence of a “Forbearance Default”.

Off Balance Sheet Arrangements

Depending on certain goals and performances being met, the Company has the following off balance sheet arrangements which are the result of the various acquisitions described previously.

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·	The Arnold Group - Based on sales targets, the prior owners may receive contingent performance payments not to exceed $125,000 through May 31, 2007.
·	Taylor Personnel Services, Inc. - Based on sales targets, the prior owners may receive contingent performance payments not to exceed $80,000 through May 31, 2007.

·	QRD International, Inc. dba Delta Staffing - Based on gross profit targets, the prior owners may receive contingent performance payments of up to approximately $75,000 through September 11, 2007.
·	Midwest Staffing, Inc. - Based on pre-tax profit targets, the prior owners may receive contingent performance payments not to exceed $75,000 through September 27, 2007.

·	Project Solvers, Inc. - Based on pre-tax profit targets, the prior owners may receive contingent performance payments not to exceed $200,000 through October 25, 2008.
·	Pro Care Medical Staffing, LLC. - Based on pre-tax targets the prior owners may receive contingent performance payments not to exceed $650,000 in total through November 9, 2007.

·	Big Sky Travel Nurses, Inc. - Based on pre- tax profit targets, the prior owners may receive contingent performance payments of up to approximately $15,000 through November 27, 2007.
·	Assisted Staffing, Inc. - Based on pre- tax profit targets, the prior owners may receive contingent performance payments of up to approximately $25,000 through December 10, 2007.

·	Driver’s Plus, Inc. - Based on pre- tax profit targets, the prior owners may receive contingent performance payments of up to approximately $10,000 through December 26, 2007.
·	Ready Nurse, LLC. - Based on pre- tax profit targets, the prior owners may receive contingent performance payments of up to approximately $10,000 through March 5, 2008.

·	KFT, Inc. dba Power Personnel - Based on pre- tax profit targets the prior owners may receive contingent performance payments of up to approximately $50,000 through October 10, 2008 and October, 10 2009.
·	Steadystaff, LLC - January 1, 2007 to December 31, 2007 and January 1, 2008 to December 31, 2008, based on pre-tax profit targets the prior owners may receive contingent performance payouts up to approximately $10,000 per year.

Contractual Obligations

The Company’s contractual obligations as of December 31, 2006, including long-term debt and commitments for future payments under non-cancelable lease arrangements, are summarized below:

	Payments Due by Period
Contractual Obligations	Total	Less than 1 year	1-3 years	4-5 years	After 5 years

Operating leases	$ 2,737,143	$ 1,035,826	$ 1,582,348	$ 118,969	$ -
Long-term debt	32,058,833	22,398,124	5,000,260	2,367,564	2,292,885
Interest	2,404,411	1,679,859	375,019	177,567	171,966
Total contractual obligations	34,795,976	23,433,950	6,582,608	2,486,533	2,292,885
Total With Interest	$37,200,387	$25,113,809	$6,957,627	$2,664,100	$2,464,851

Inflation

Inflation generally has not been a significant factor in the Company’s operations during the periods discussed above. The Company has taken into account the impact of escalating medical and other costs in establishing reserves for future expenses for high deductible workers’ compensation claims.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are primarily exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the market values of our cash and cash equivalents, and our long-term debt. The cash and cash equivalents consist primarily of tax-exempt money market funds and overnight investments which are not significantly exposed to interest rate risk, except to the extent that changes in interest rates will ultimately affect the amount of interest income earned on these investments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and notes thereto required by this item begin on page F-1 of this report, as listed in Item 15.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On August 16, 2004, Aidman, Piser and Company ("APC"), the Registrant's independent auditors, notified the Registrant that they were resigning from the client-auditor relationship with the Registrant effective as of that date. With respect to Item 304(a)(1) of Regulation S-B, the Registrant further discloses the following information:

APC was engaged by Registrant to serve as the Registrant's independent auditors for the fiscal year ended December 31, 2003. The report of APC with respect to the Registrant's financial statements for the fiscal year ended December 31, 2003 was modified for the uncertainty surrounding our ability to continue as a going concern. During the fiscal year ended December 31, 2003 and the period from December 31, 2003 through the date of APC's resignation, there were no disagreements between the Registrant and APC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of APC, would have caused APC to make reference to the subject matter of the disagreements in connection with its report on the Registrant's financial statements for such year.

As stated in APC's resignation letter dated August 16, 2004, a review of the Registrant's Forms 10-QSB for the first and second quarter of the current year has not been completed. As a result, the Registrant's previously issued financial statements for the first quarter of 2004 and the financial statements to be issued for the second quarter of 2004 were subsequently reviewed by the Registrant's new auditors.

On September 21, 2004, the Company engaged PKF San Diego, Certified Public Accountants, A Professional Corporation located in San Diego, California, ("PKF"), as its independent registered public accounting firm. The Company did not previously consult with PKF regarding any matter, including but not limited to:

1. The application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company's financial statements; or

2. Any matter that was either the subject matter of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-B and the related instructions) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-B).

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

The Company’s disclosure controls and procedures are designed to ensure that information the Company must disclose in its reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported on a timely basis. The Company’s management has evaluated, with the participation and under the supervision of our chief executive officer (“CEO”) and chief financial officer (“CFO”), the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our CEO and CFO have concluded that, as of such date, the Company’s disclosure controls and procedures are effective in ensuring that information relating to the Company required to be disclosed in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

Changes in internal controls

There were no changes in our internal controls or in other factors that could significantly affect those controls since the most recent evaluation of such controls.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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Additional information required by this Item 10 concerning directors and executive officers of the Company appears under the heading “Executive Officers of the Registrant” in this report.

Presently, The Company has a total of eight officers and directors. The following table identifies, as of November 6, 2007, each executive officer and director of the Company.

Name	Age	Position
Ronald Heineman	49	Chief Executive Officer, Chief Financial Officer, President, Director
Scott Horne	45	VP of Franchise Development
Steve Ludders	54	Chief Operating Officer
Tom Lawry	45	Controller, Treasurer
Steve Roux	39	Executive Vice President
William Walton	71	Director
William A. Brown	48	Director
Donald Quarterman, Jr.	38	Director

Directors serve until the next annual meeting and until their successors are elected and qualified. Officers are appointed to serve for one year until the meeting of the Board of Directors following the annual meeting of stockholders and until their successors have been elected and qualified.

Ronald Heineman. Mr. Heineman is our President and Chief Executive Officer and our Chief Financial Officer. He is also the President and Chief Executive Officer and Chief Financial Officer of ELS Inc., Human Resource Solutions. ELS Inc. is a professional employer organization (“PEO”) operating in 28 states. Prior to this, Mr. Heineman was Corporate, Vice President, Human Resources for Frisch’s Restaurants, Inc. a large publicly held restaurant chain operating Big Boy, Golden Corral, Roy Rogers Restaurants and several large hotels. Mr. Heineman was responsible for attaining results in the areas of Employment, Training, Benefits, Loss Prevention and Government Compliance. Mr. Heineman was employed with Frisch’s for 23 years.

Donald Quarterman, Jr. Mr. Quarterman joined us as President, Chief Operating Officer and director December 4, 2002. Mr. Quarterman brings with him over 7 years of staffing industry experience in venture capital, mergers and acquisitions, and strategic consulting. Mr. Quarterman is a Managing Partner and co-founder of Pinnacle Corporate Services, LLC, a business consulting firm that works with emerging growth companies in the areas of business and strategic planning, business development strategies, and executive and director recruitment, since August 2001. From 1997 to 2000, Mr. Quarterman was Director of Operations for Catalyst Ventures, an Investment Banking firm located in Tampa, Florida. From 1993 to 1997, Mr. Quarterman was a Vice President at Geneva Corporate Finance, one of the largest middle-market merger and acquisition firms in the United States. Mr. Quarterman earned an MBA degree, with a concentration in Finance and Entrepreneurship, from the University of South Florida. Mr. Quarterman resigned as an officer of the Company on September 22, 2004. He remains with the Company as a Director.

William A. Brown. Mr. Brown joined Resolve Staffing, Inc as Vice-President and director on December 4, 2002. From October 2001 to April 2002, Mr. Brown was President of Integra Staffing, Inc., our predecessor company, and prior to that as an investor. After the acquisition of Integra Staffing, Inc. by the Company, Mr. Brown continued to be involved as an investor and major shareholder. Mr. Brown is founder and President of J. B. Carrie Properties, Inc., a real estate management and development company which was organized in 1988. Mr. Brown is also involved in the senior assisted living business managing 3 facilities in the state of Florida. Mr. Brown graduated from Florida State University with a degree in Sociology. Mr. Brown resigned as an officer of the Company on September 22, 2004. He remains as a Director.

William Walton. Mr. Walton joined the Company Staffing as a member of the Board of Directors after the acquisition of ELS Inc.’s staffing offices in February of 2005. Mr. Walton is a partner of ELS Human Resource Solutions. Mr. Walton entered the staffing industry in the mid 1980s and eventually purchased a Snelling Personnel franchise in 1989. In 1991, he joined ELS Inc. and helped to grow it into a company generating in excess of $200 million in total receipts. Mr. Walton brings a diverse experience base to the Company and is expected to play a key role as the Company strives to become a Total Human Resource Outsourcing Company.

Steve Ludders. Mr. Ludders was promoted to Chief Operating Officer and Executive Vice-President on January 4, 2006. Mr. Ludders was Regional Director and in charge of business development since joining the Company. Prior to joining the Company, Mr. Ludders' was a former vice-president of Strategic Planning with Interim Personnel, a $2 billion public staffing firm, for over five years. Mr. Ludders is an MBA Thunderbird Graduate.

Page - 22

Scott Horne. Mr. Horne became Chief Financial Officer and Executive Vice-President on January 4, 2006. Mr. Horne was in charge of accounting since joining the Company. Mr. Horne has extensive experience in finance and accounting for Human Resource Outsourcing companies, including being chief financial officer of ELS Inc., a national PEO, for over five years. Mr. Horne graduated from Xavier University with an MBA in Finance. Mr. Scott Horne resigned as Chief Financial Officer of the Company Staffing, Inc. by letter dated May 17, 2007. Mr. Horne will remain with the Company as VP of Franchise Development.

Steve Roux. Mr. Roux is Chief Operating Officer and Executive Vice President of Resolve Staffing's PEO subsidiary companies. He has extensive background in the PEO industry with over 10 years of experience in executive positions.

Tom Lawry. Mr. Lawry became Controller and Treasurer on January 4, 2006. Mr. Lawry has extensive accounting experience in the staffing and PEO markets, spending over five years with ELS, Inc.

ITEM 11. EXECUTIVE COMPENSATION

Executive Compensation

The following Summary Compensation Table sets forth certain information regarding the compensation of our officers as of December 31, 2006.

Summary Compensation Table

		Annual Compensation		Long Term Compensation Awards
	Year	Salary	Bonus	Securities Underlying Options	All Other Compensation	Total Compensation

Ronald Heineman, CEO	2004	-	-	-	-	-
	2005	-	-	-	-	-
	2006	41,383	-	-	-	41,383

Steve Ludders, COO	2004	-	-	-	-	-
	2005	-	-	-	70,200	70,200
	2006	123,846	18,846	-	-	142,692

Scott Horne, CFO	2004	-	-	-	-	-
	2005	-	-	-	43,200	43,200
	2006	36,923	-	-	-	36,923

Tom Lawry, Controller	2004	-	-	-	-	-
	2005	-	-	-	-	-
	2006	21,154	-	-	-	21,154

Steve Roux	2004	-	-	-	-	-
	2005	-	-	-	-	-
	2006	37,692	-	-	-	37,692

Option Grants During Last Fiscal Year

No options, warrants or similar rights to purchase our Common Stock have been granted to any officers or directors.

Employment Agreements

On October 1, 2006, we entered into an executive employment agreement with Ronald E. Heineman pursuant to which Mr. Heineman was employed as our chief executive officer. The agreement has an initial term of five years, and will be

Page - 23

automatically renewed for additional five year terms unless either the company or Mr. Heineman provides written notice of an intent not to renew. Under the agreement, Mr. Heineman is entitled to receive; (1) a base salary of $12,535 per month, subject to annual increases as determined by the Board of Directors; and (2) annual bonus based on the achievement of specific goals as determined by the Board of Directors. We will pay severance to Mr. Heineman if his employment is terminated by us without cause or by Mr. Heineman for cause. The severance payment is equal to: (1) his then-current base salary per month for a period of three years; (2) all unused vacation accrued as of the termination date; (3) if Mr. Heineman makes timely election of COBRA continuation coverage, the full premium on his behalf; and (4) up to $30,000 in outplacement fees as selected by Mr. Heineman up through a specified date. In the event of a change in control, as defined, Mr. Heineman may elect for a five year extension of the then current Employment Agreement or a payment as defined in the Employment Agreement and agreed to by the Company and Mr. Heineman. During 2007, the term of this agreement was extended to a seven year term.

On October 1, 2006, we entered into an executive employment agreement with Scott D. Horne pursuant to which Mr. Horne was employed as our executive vice president and chief financial officer. The agreement has an initial term of three years, and will be automatically renewed for additional three year terms unless either the company or Mr. Horne provides written notice of an intent not to renew. Under the agreement, Mr. Horne is entitled to receive; (1) a base salary of $12,100 per month, subject to annual increases as determined by the company’s CEO; and (2) annual bonus based on the achievement of specific goals as determined by the company’s CEO. We will pay severance to Mr. Horne if his employment is terminated by us without cause. The severance payment is equal to: (1) his then-current base salary per month for a period of one year; (2) all unused vacation accrued as of the termination date; (3) if Mr. Horne makes timely election of COBRA continuation coverage, the full premium on his behalf; and (4) up to $20,000 in outplacement fees as selected by Mr. Horne up through a specified date. The severance amounts payable for termination without cause will be paid upon the execution and delivery of a complete release of all employment related claims Mr. Horne may then have against the company. In the event of a change in control, as defined, Mr. Horne may elect for a two year extension of the then current Employment Agreement or payment of Mr. Horne’s salary and benefits, as defined, for a period of two years. Subsequent to the period covered by this report, Mr. Horne resigned in his capacity as chief financial officer of the Company and his executive employment agreement is no longer in force, effective May 17, 2007. Mr. Horne has remained employed by the Company in his current capacity of executive vice-president of franchise development.

On October 1, 2006, we entered into an executive employment agreement with Stephen R. Roux pursuant to which Mr. Roux was employed and will perform duties as assigned to him. The agreement has an initial term of three years, and will be automatically renewed for additional three year terms unless either the company or Mr. Roux provides written notice of an intent not to renew. Under the agreement, Mr. Roux is entitled to receive; (1) a base salary of $12,100 per month, subject to annual increases as determined by the company’s CEO; and (2) annual bonus based on the achievement of specific goals as determined by the company’s CEO. We will pay severance to Mr. Roux if his employment is terminated by us without cause. The severance payment is equal to: (1) his then-current base salary per month for a period of one year; (2) all unused vacation accrued as of the termination date; (3) if Mr. Roux makes timely election of COBRA continuation coverage, the full premium on his behalf; and (4) up to $20,000 in outplacement fees as selected by Mr. Roux up through a specified date. The severance amounts payable for termination without cause will be paid upon the execution and delivery of a complete release of all employment related claims Mr. Roux may then have against the company. In the event of a change in control, as defined, Mr. Roux may elect for a two year extension of the then current Employment Agreement or payment of Mr. Roux’s salary and benefits, as defined, for a period of two years.

Compensation of Directors

We pay our directors $3,000 per quarter in connection with their role as members of our board. Our directors are also reimbursed for travel and out-of-pocket expenses in connection with attendance at board meetings. The following table summarizes compensation that our directors earned during 2006 for services as members of our Board of Directors.

	Year	Fees Earned or Paid in Cash	Options Awarded	All Other Compensation	Total
Ronald Heineman	2004	$ -	$ -	$ -	$ -
	2005	-	-	-	-
	2006	12,000	-	-	12,000
					-
William Walton	2004	-	-	-	-
	2005	-	-	-	-
	2006	12,000	-	-	12,000
					-
William A. Brown	2004	-	-	-	-
	2005	-	-	-	-
	2006	12,000	-	-	12,000
					-
Donald Quarterman, Jr.	2004	-	-	-	-
	2005	-	-	-	-
	2006	12,000	-	-	12,000

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

As of November 13, 2007, there were 19,428,511 shares of common stock, par value $.0001 outstanding. The following table sets forth certain information regarding the beneficial ownership of our common stock as of November 13, 2007:

·	all directors
·	each person who is known by us to be the beneficial owner of more than five percent (5%) of the outstanding common stock
·	each executive officer named in the Summary Compensation Table

·	all directors and executive officers as a group

The number of shares beneficially owned by each director or executive officer is determined under rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under the SEC rules, beneficial ownership includes any shares as to which the individual has the sole or shared voting power or investment power. In addition, beneficial ownership includes any shares that the individual has the right to acquire within 60 days. Unless otherwise indicated, each person listed below has sole investment and voting power (or shares such powers with his or her spouse). In certain instances, the number of shares listed includes (in addition to shares owned directly), shares held by the spouse or children of the person, or by a trust or estate of which the person is a trustee or an executor or in which the person may have a beneficial interest.

Title of Class	Name and Address of Beneficial Owner	Amount of Beneficial Ownership	Percent of Class
Common Stock	Ronald Heineman (1) c/o Resolve Staffing, Inc. 3235 Omni Drive Cincinnati, OH 45245	8,194,215	41.38%
Common Stock	Scott Horne c/o Resolve Staffing, Inc. 3235 Omni Drive Cincinnati, OH 45245	310,000	1.60%
Common Stock	Steve Ludders c/o Resolve Staffing, Inc. 3235 Omni Drive Cincinnati, OH 45245	50,000	0.26%
Common Stock	Bill Brown (2) c/o Resolve Staffing, Inc. 3235 Omni Drive Cincinnati, OH 45245	2,377,639	12.24%
Common Stock	Bill Walton c/o Resolve Staffing, Inc. 3235 Omni Drive Cincinnati, OH 45245	4,025,000	20.72%
Common Stock	Steve Roux c/o Resolve Staffing, Inc. 3235 Omni Drive Cincinnati, OH 45245	310,000	1.60%
Common Stock	Don Quarterman c/o Resolve Staffing, Inc. 3235 Omni Drive Cincinnati, OH 45245	0	0.00%
Common Stock	Tom Lawry c/o Resolve Staffing, Inc. 3235 Omni Drive Cincinnati, OH 45245	0	0.00%

Common Stock	All Officers and Directors as a Group	15,266,854	77.00%

(1) Includes 400,000 shares pledged to Ron Heineman to secure a line of credit.

(2) Includes 2,106,921 shares owned by the William A. Brown Family Trust, of which Mr. Brown is trustee, 400 shares owned by his wife, Christina Brown and 270,318 shares owned by Work Holdings LLC, of which Mr. Brown is the majority owner.

STOCK OPTION AND INCENTIVE PLANS

During the year ended December 31, 2001, the Company adopted a 2001 Equity Incentive Plan ("Incentive Plan") for the benefit of key employees (including officers and employee directors) and consultants of the Company and its affiliates. The Incentive Plan is intended to provide those persons who have substantial responsibility for the management and growth of the Company with additional incentives and an opportunity to obtain or increase their proprietary interest in the Company, encouraging them to continue in the employ of the Company.

On May 28, 2002, the Company’s 2001 Stock Incentive Plan was amended to restore the number of shares which may be issued under the plan to 600,000 and to permit the issuance of unrestricted shares. No shares have been issued under this plan.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who own more than 10 percent of our common stock, to file with the Commission initial reports of ownership and reports of changes in ownership of our common stock. Officers, directors and greater than 10 percent shareholders are required by the rules and regulations of the Commission to furnish to us copies of all Section 16(a) forms they file.

To management’s knowledge, based solely on review of the copies of these reports furnished and representations that no other reports were required, during the fiscal year ended December 31, 2006, all Section 16(a) filing requirements applicable to the Company’s officers, directors and greater than 10 percent beneficial owners were in compliance. The Company is aware that Steve Ludders, our Chief Operating Officer, was delayed in filing a Form 4 following his sale of 10,000 shares on February 16, 2007.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Note Payable

On December 8, 2003, ELS Inc. entered into a non-interest bearing short-term credit agreement with the Company that provides for borrowings up to $200,000. At that time Ronald Heineman was the Chief Executive Officer and director of both companies. The underlying promissory note is secured by 400,000 shares of common stock that were released to an escrow agent, but not issued for accounting or reporting purposes. Balances due under the credit agreement were originally due May 8, 2004.

During March 2006, the agreement was amended to allow unlimited maximum borrowings with a maturity date of March 31, 2007. The note bears interest at 3 percent per annum and is payable monthly. As of December 31, 2006 amounts owed were eliminated on consolidation. As of December 31, 2005 $5,873,936 was outstanding under this note.

Loan Guarantees

The lines of credit described in Note G are secured by substantially all assets of the Company and guaranteed by Ron Heineman, with second mortgage guarantees by Restaurant Management Group, LLC and W.H. 2, LLC (“WH2”). Prior to the

Page - 24

Combination, the lines of credit with ELS Inc. were also guaranteed by the Company. The Company has two lines of credit providing for maximum borrowings of $17,150,000 and $12,000,000 with a bank that were guaranteed by ELS Inc. Borrowings under the Company’s lines of credit were $11,735,029 and $2,906,471, respectively, at December 31, 2006, and $3,341,927and $-, respectively at December 31, 2005.

Related Party Lease

The Company leases its Cincinnati facility from WH2, a limited liability company owned by stockholders of the company under an operating lease expiring during September 30, 2011. Rent expense under this lease was $21,600, $- and $-, for the years ended December 31, 2006, 2005 and 2004, respectively. Future minimum annual rentals under this operating lease are presented in Note H.

Management Fees

Company personnel perform various management functions on behalf of the above mentioned related parties and other limited liability companies either wholly or partially owned by certain stockholders of the Company. Certain administrative costs are allocated to related parties under common management at the discretion of management. The Company was allocated $55,269, $264,566 and $331,532 of administrative costs for the years ended December 31, 2006, 2005 and 2004, respectively. Fees are no longer allocated due to the Combination that took place on October 1, 2006.

Advances Receivable

Advances receivable from related parties at December 31, 2006 and 2005 were $681,237 and $-, respectively.

During the year ended December 31, 2002, the Company borrowed $67,000 from William A. Brown, executive vice-president and major shareholder of the Company. As of December 31, 2006 and 2005, the balance of the Note was $91,500. The debt is evidenced by a promissory note due on March 31, 2004, with interest at the rate of 5% per annum payable quarterly in arrears. The note has been verbally extended on a month-to-month basis.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following are the fees billed us by our auditors, PKF, Certified Public Accountants, A Professional Corporation, (PKF) respectively, for services rendered thereby during 2006, 2005 and 2004:

	2006	2005	2004

Audit Fees	176,136	76,570	29,876
All Other Fees	9,206	-	-

The fees billed by PKF represent those fees billed to the Company during each period presented.

The increase in fees was due to the acquisition of Employee Leasing Services, Inc. on October 1, 2006 as well as the required filing and additional work performed for the cut-off financial information at the time of the merger. The acquisition of Employee Leasing Services, Inc. added additional complexities and consolidation issues to the Company's reporting requirements.

Audit Fees consist of the aggregate fees billed for professional services rendered for the audit of our annual financial statements and the reviews of the financial statements included in our Forms 10-QSB and for any other services that were normally provided in connection with our statutory and regulatory filings or engagements.

Audit Related Fees consist of the aggregate fees billed for professional services rendered for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements and were not otherwise included in Audit Fees. The 2006 fees in this category related to specific research of accounting treatment under new FASB rules as well as capital raises.

Tax Fees consist of the aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning. Included in such Tax Fees were fees for preparation of our tax returns and consultancy and advice on other tax planning matters.

Page - 25

All Other Fees consist of the aggregate fees billed for products and services provided by PKF not otherwise included in Audit Fees, Audit Related Fees or Tax Fees. Included in such Other Fees were fees for services rendered by PKF in connection with our private offering conducted during such periods.

Our Board of Directors has considered whether the provision of the non-audit services described above is compatible with maintaining PKF's independence and determined that such services are appropriate.

Before the auditors are engaged to provide us audit or non-audit services, such engagement is (without exception, required to be) approved by our Board of Directors.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Exhibits

Exhibits are listed in the Exhibit Index that follows the signature page of this report.

Financial Statements and Schedules

The Financial Statements, together with the reports thereon of our auditors are included on the pages indicated below

Page - 26

INDEX TO FINANCIAL STATEMENTS


Report of PKF, Independent Registered Public Accounting Firm for Years Ended December 31, 2006, 2005 and 2004	F-1
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-2
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005, and 2004	F-3
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2006, 2005 and 2004	F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	F-5
Notes to Consolidated Financial Statements	F-6
Schedule I	F-26

Page - 27

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Resolve Staffing, Inc.

Cincinnati, Ohio

We have audited the accompanying consolidated balance sheets of Resolve Staffing, Inc. and Subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholder’s equity (deficit), cash flows and financial statement schedule for the years ended December 31, 2006, 2005 and 2004. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements and schedule referred to above present fairly, in all material respects, the consolidated financial position of Resolve Staffing, Inc. and Subsidiaries as of December 31, 2006 and 2005, and the consolidated results of its operations, cash flows and the financial statement schedule for the years ended December 31, 2006, 2005 and 2004, in conformity with accounting principles generally accepted in the United States of America.

/s/ PKF

November 13, 2007	PKF
San Diego, California	Certified Public Accountants
	A Professional Corporation

Page F - 1

RESOLVE STAFFING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2006 AND 2005

ASSETS	2006	2005
Current assets:
Cash	$ -	$ -
Accounts receivable - trade, net	18,155,656	6,638,782
Prepaid expenses	1,158,640	330,368
Worker’s compensation insurance refunds receivable	147,350	-
Total current assets	19,461,646	6,969,150

Property and equipment, net	1,343,773	601,261

Advances and notes receivable - related parties	681,237	-

Other assets:
Worker’s compensation insurance deposits	1,319,931	-
Other assets	393,456	-
Goodwill	29,724,511	6,695,579
Covenants not to compete	432,632	231,083
Total other assets	31,870,530	6,926,662

Total assets	$ 53,357,186	$ 14,497,073

Current liabilities:
Bank overdraft	$ 1,255,405	$ 205,551
Accounts payable and accrued liabilities	7,253,878	1,011,903
Accounts payables - related parties	-	825,921
Accrued salaries and payroll taxes	6,323,928	639,474
Accrued workers' compensation insurance	2,239,400	-
Lines of credit	15,702,621	91,927
Notes payable	6,604,003	1,757,319
Notes payable - related parties	91,500	91,500
Workers' compensation insurance policy reserves	1,636,313	-
Total current liabilities	41,107,048	4,623,595

Long term liabilities:
Notes payable - related parties	-	5,873,936
Line of credit and notes payable, less current portion	9,660,709	4,209,762
Total long term liabilities	9,660,709	10,083,698

Stockholders’ equity (deficit):
Common stock, $0.0001 par value; 50,000,000 shares authorized, issued and outstanding 2006: 18,642,740 shares; 2005: 15,219,101 shares	1,864	1,522
Paid-in capital	6,408,581	1,187,475
Accumulated deficit	(3,821,016)	(1,399,217)
Total stockholders’ equity (deficit)	2,589,429	(210,220)

Total liabilities and stockholders’ equity (deficit)	$ 53,357,186	$ 14,497,073

See accompanying notes to consolidated financial statements.

Page F - 2

RESOLVE STAFFING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004


	2006	2005	2004
Revenues	$ 152,304,237	$ 31,138,212	$ 4,284,006

Cost of revenues	134,038,039	25,356,038	3,567,164

Gross profit	18,266,198	5,782,174	716,842

Operating expenses	19,297,192	6,004,356	759,586

Loss from operations	(1,030,994)	(222,182)	(42,744)

Interest expense	(1,390,805)	(266,140)	(13,160)

Loss before taxes	(2,421,799)	(488,322)	(55,904)

Provision for (benefit from) income taxes	-	-	-

Net loss	$ (2,421,799)	$ (488,322)	$ (55,904)

Basic and diluted loss per share	$ (0.16)	$ ( 0.03)	$ (0.00)

Weighted average number of shares used in loss per share computation:
Basic and diluted	15,016,545	14,540,838	13,000,000

See accompanying notes to consolidated financial statements.

Page F - 3

RESOLVE STAFFING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2006 , 2005 AND 2004

	Common Shares	Stock Amount	Paid in Capital	Accumulated Deficit	Total
Balance at December 31, 2003	13,000,000	$1,300	$989,698	$(854,991)	$136,007
Net Loss				(55,904)	(55,904)

Balance at December 31, 2004	13,000,000	$1,300	$989,698	$(910,895)	80,103

Issuance of common stock for acquisitions	1,639,101	164	139,835	-	139,999
Issuance of common stock for services	580,000	58	57,942	-	58,000
Net loss	-	-	-	(488,322)	(488,322)
Balance at December 31, 2005	15,219,101	1,522	1,187,475	(1,399,217)	(210,220)

Options granted shares subscribed with note payable	4,000,000		6,000,000	(6,000,000)	-
Stock compensation expense			119,749		119,749
Shares purchased		400	(400)		-
Shares cancelled	(3,466,667)	(347)	347		-
Note receivable cancelled			(5,200,000)	5,200,000	-
Note receivable paid (offsets note payable to ELS Inc.)				800,000	800,000
Contingent shares issued for acquisition of subsidiary	100,000	10	199,990	-	200,000
Warrants exercised	3,621	-	-	-	-
Issuance of common stock for services	300,000	30	(30)	-	-
Issuance of common stock	1,000,000	100	1,499,900	-	1,500,000
ELS Inc. acquisition	1,486,685	149	2,601,550	-	2,601,699
Net loss				(2,421,799)	(2,421,799)
Balance at December 31, 2006	18,642,740	$ 1,864	$ 6,408,581	$ (3,821,016)	$ 2,589,429

See accompanying notes to consolidated financial statements.

Page F - 4

RESOLVE STAFFING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

	2006	2005	2004
Cash Flows From Operating Activities:
Net loss	$ (2,421,799)	$ (488,322)	$ (55,904)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Stock-based compensation	-	58,000	-
Depreciation	311,918	71,586	10,120
Change in allowance for doubtful accounts	365,442	78,022	-
Amortization of non-compete agreements	578,796	106,917	-
Changes in operating assets and liabilities:
Accounts receivable-trade	(9,689,435)	(5,404,372)	(830,296)
Worker’s compensation insurance policy refunds	(147,350)	-	-
Prepaid and other assets	(601,682)	269,854	(239,322)
Worker’s compensation insurance policy deposit	(1,319,931)	-	-
Accounts payable and accrued liabilities	2,494,918	547,078	265,307
Payables to related parties	(825,921)	825,921	-
Accrued salaries and payroll taxes	3,162,238	244,206	58,081
Worker’s compensation insurance	2,239,400	-	-
Worker’s compensation insurance policy reserves	1,636,313	-	-

Net cash flows used in operating activities	(4,217,093)	(3,691,110)	(792,014)


Cash Flows From Investing Activities:
Purchases of property and equipment	(351,286)	(172,517)	-
Goodwill on non-compete agreements	(85,244)	-	-
Loans to related parties	(374,162)	-	-
Acquisition of net assets of subsidiaries	(2,790,820)	(1,941,480)	-
Net cash flows used in investing activities	(3,601,512)	(2,113,997)	-

Cash Flows From Financing Activities:
Bank overdraft	(926,244)	167,680	21,734
Net borrowings on lines of credit	9,958,244	(400,000)	400,000
Proceeds from notes payable	351,910	3,914,919	519,177
Paydowns on notes payable	(4,800,257)	(1,164,107)	-
Borrowings from related parties	5,821,571	6,713,463	-
Additional paid in capital	2,419,749	-	-
Paydowns on related party debt	(5,006,368)	(3,502,204)	(73,541)

Net cash provided by financing activities	7,818,605	5,729,751	867,370

Net Increase (decrease) in Cash	-	(75,356)	75,356

Cash, Beginning of the Year	-	75,356	-

Cash, End of the Year	$ -	$ -	$ 75,356

See accompanying notes to consolidated financial statements.

Page F - 5

RESOLVE STAFFING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

NOTE A - NATURE OF OPERATIONS, LIQUIDITY AND MANAGEMENT’S PLANS, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Resolve Staffing, Inc., (“Resolve” or the “Company”) was organized under the laws of the State of Nevada on April 9, 1998. The Company is a national provider of outsourced human resource services with over 74 offices reaching from California to New York. The Company provides a full range of supplemental staffing and outsourced solutions, including solutions for temporary, temporary-to-hire, or direct hire staffing in the clerical, office administration, customer service, professional and light industrial categories.

Through the acquisition of the companies known as Employee Leasing Services, Inc. (“ELS Inc.”), the Company is also a professional employer organization (“PEO”) providing a variety of personnel management services, including human resources, payroll, employer payroll taxes and benefits administration as well as health and workers’ compensation insurance programs. Services are provided to a diversified group of customers throughout the United States. As of December 31, 2006, the Company served approximately 560 clients located in 43 states with approximately 10,000 active PEO client employees and approximately 4,000 temporary staffing employees.

Approximately 55% of PEO revenues are derived from clients within the state of Ohio. The Company’s PEO operations are headquartered in Cincinnati, Ohio with its main processing center located in Shelby Township, Michigan.

On February 7, 2005, Resolve Staffing, Inc., entered into an equity purchase agreement (“Agreement”), to purchase ELS Personnel Services (“ELS”) (the “Reverse Combination”) from Employee Leasing Services, Inc., (“ELS Inc.”), a privately-held company located in Cincinnati, Ohio. The Company’s Chief Executive Officer and director, Ronald Heineman, is a principal shareholder, officer and director of ELS. Pursuant to the equity purchase agreement, Resolve acquired the ownership interest in the group of companies which comprised ELS Personnel Services, (ELS Personnel Services, LLC, Five Star Staffing, Inc., Five Star Staffing (NY), Inc., and American Staffing Resources, Ltd.) comprising a total of 10 temporary employee staffing locations. See Basis of Presentation section in the notes to the financial statements for discussion of accounting treatment of the acquisition of ELS.

Employee Leasing Services, Inc., operated 3 locations and acquired the 7 temporary employee staffing locations throughout fiscal 2004. ELS Inc. acquired Five Star Staffing, Inc. which consisted of 3 locations, in August 2004, Five Star Staffing (NY), Inc., which consisted of 3 locations, in November 2004 and American Staffing Resources, Ltd which consisted of 1 location, in November 2004. Prior to ELS Inc.’s acquisition of these entities, these entities were owned and operated by unrelated third parties in various locations throughout Florida, New York and Ohio.

In connection with the Reverse Combination on February 7, 2005, ELS was deemed to be the acquiring company for accounting purposes and the Reverse Combination was accounted for as a reverse acquisition under the purchase method of accounting for business combinations in accordance with accounting principles generally accepted in the United States of America. The acquisition of the ELS entities was treated as a reverse acquisition for financial accounting purposes and therefore the accompanying comparative financial information is that of ELS rather than the historical financial statements of Resolve Staffing, Inc. In conjunction with this transaction, the group of companies known as ELS Personnel Services, which were legally acquired by Resolve Staffing, Inc., changed its name to Resolve Staffing, Inc.

On October 1, 2006, Resolve Staffing, Inc., entered into an equity purchase agreement (“Agreement”), to purchase Employee Leasing Services, Inc. (the “Combination”), a privately-held group of companies located in Cincinnati, Ohio. The Company’s Chief Executive Officer and Director, Ronald Heineman, is a principal shareholder, officer and director of ELS Inc. Pursuant to the equity purchase agreement, Resolve acquired the ownership interest in the group of companies which comprised ELS Inc.

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Principles of Consolidation

The consolidated financial statements for 2006, 2005 and 2004 include the accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated in preparing the accompanying consolidated financial statements.

Nature of Business

The Company provides its PEO services by entering into a co-employment relationship with its clients, under which the Company and its clients each take responsibility for certain portions of the employer-employee relationship. The Company and its clients designate each party’s responsibilities through its client services agreements, under which the Company becomes the employer of its worksite employees for most administrative and regulatory purposes. As a co-employer of its worksite employees, the Company assumes most of the rights and obligations associated with being an employer. The Company enters into an employment agreement with each worksite employee, thereby maintaining a variety of employer rights, including the right to hire or terminate employees, the right to evaluate employee qualifications or performance and the right to establish employee compensation levels. Typically, the Company only exercises these rights in consultation with its clients or when necessary to ensure regulatory compliance. The responsibilities associated with the Company’s role as employer include the following obligations with regard to its worksite employees: (1) to compensate its worksite employees through wages and salaries, (2) to pay the employer portion of payroll-related taxes, (3) to withhold and remit (where applicable) the employee portion of payroll-related taxes, (4) to provide employee benefit programs, and (5) to provide workers’ compensation insurance coverage.

In addition to its assumption of employer status for its worksite employees, the Company’s services also include other human resource functions for its clients.

The Company plans to continue to grow the business through the acquisition of private companies in the staffing industry that would provide types of staffing and/or related services with which it’s familiar. The Company may seek private staffing companies for acquisitions or strategic alliances both in and out of its current markets. By acquiring existing staffing companies the Company believes it will enable it to:

·	recruit well-trained, high-quality professionals;
·	expand its service offerings;
·	gain additional industry expertise;
·	broaden its client base; and
·	expand its geographic presence.

On various dates during 2006 and 2005, Resolve Staffing, Inc., entered into purchase agreements (“Agreements”), to acquire all of the assets and/or ownership of various separate privately-held entities owned and operated by unrelated parties located throughout the United States. Pursuant to the acquisition agreements, Resolve acquired a total of 62 temporary employee staffing locations from the newly acquired entities.

Acquisition of Entity from Related Party

In connection with the Combination on October 1, 2006, described above, Resolve was deemed to be the acquiring company for accounting purposes and the Combination was accounted for as an acquisition under the purchase method of accounting for business combinations in accordance with accounting principles generally accepted in the United States of America. In conjunction with this transaction, Resolve issued 1,486,685 shares of restricted common stock valued at $2,601,699 (See Note M) and a note payable in the amount of $11,977,641 (originally $18,641,498, See Notes C, G and N) in exchange for 100% of the ownership of ELS Inc. In accordance with the accounting for an acquisition the fair value of the assets and liabilities assumed, on the date of acquisition were deemed to be those of ELS Inc. (the acquired entity) and were as follows:

Accounts Receivable	$ 465,423
Prepaid and Other Assets	181,560
Property and Equipment	454,123
Goodwill	14,898,181
Related Party Receivable	6,996,214
Deposits and Other Assets	389,996
Accounts Payable and Accrued Liabilities	(5,761,842)
Bank overdraft	(1,894,315)
Notes Payable	(1,150,000)
Total	$ 14,579,340

Acquisition of Entities from Related Parties

In connection with the Reverse Combination on February 7, 2005, described in the Basis of Presentation section of the notes to consolidated financial statements, ELS was deemed to be the acquiring company for accounting purposes and the Reverse Combination was accounted for as a reverse acquisition under the purchase method of accounting for business combinations in accordance with accounting principles generally accepted in the United States of America. In conjunction with this transaction, Resolve issued 13,000,000 shares of restricted common stock valued at $130,000, a note payable in the amount of $1,500,000, and paid cash of $17,125, in exchange for 100% of the ownership interest in 4 entities with 10 staffing locations. The fair value of the assets and liabilities assumed, on the date of acquisition were as follows:

Accounts receivable				$ 30,457
Prepaid and other assets				56,378
Property and equipment				15,280
Goodwill				2,035,679
Accounts payable and accrued liabilities				(71,425)

Notes payable				(419,244)

				$ 1,647,125

Acquisition of Entities from Unrelated Parties

During 2006 and 2005, Resolve Staffing, Inc., entered into purchase agreements (“Agreements”), to acquire all of the assets and/or ownership of various privately-held entities owned and operated by unrelated parties. Pursuant to the acquisition agreements, Resolve acquired the temporary employee staffing locations from the newly acquired entities.

Resolve agreed a total purchase price for the acquisition of the entities from unrelated parties of $8,941,355, $6,030,000 and $-, for the years ended December 31, 2006, 2005 and 2004, respectively. The Company paid cash, issued notes payable, issued common stock and accrued contingent expenses in exchange for the assets acquired and liabilities assumed of the above acquired entities as described below. The following table summarizes the estimated fair value of the net assets acquired on the date of acquisition:

	2006	2005
Cash	$ 415,585	$ -
Accounts Receivable	1,727,458	227,455
Prepaid and Other Assets	48,490	77,376
Property and Equipment	249,021	335,095
Goodwill	8,130,751	4,029,083
Non-compete Agreements	695,101	338,000
Accounts Payable and Accrued Liabilities	(589,214)	(355,607)
Line of credit	(1,252,450)	-
Notes Payable	(6,018,337)	(231,521)
Net Assets Acquired:	$ 3,406,405	$ 4,419,881

The financial results of these acquired entities are included in the consolidated financial statements from the date of acquisition.

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In conjunction with the previous purchase agreements described in Note J, the Company capitalized $381,684 and $167,923 in goodwill during 2006 and 2005, respectively.

In conjunction with the acquisitions from all unrelated parties during 2006 and 2005, approximately $23,029,000 and $6,056,000, respectively, has been assigned to goodwill. All of the goodwill is expected to be deductible for tax purposes.

Basis of Presentation

Because the owners of ELS held approximately 90% of the Company’s outstanding common stock after the Reverse Combination, as well as the Company’s analysis of the other criteria used for determining which entity is the accounting acquirer under SFAS No. 141, ELS is deemed to be the acquiring company for accounting purposes and the Combination has been accounted for as a reverse acquisition under the purchase method of accounting for business combinations in accordance with accounting principles generally accepted in the United States of America. The audited financial statements of Resolve for the year ended December 31, 2004 are included in the Resolve Staffing, Inc. Annual Report on Form 10-KSB, filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2005. The audited financial statements of ELS for the two years ended December 31, 2003 and 2004 or such time as the entity was under the control of ELS, Inc. through December 31, 2004 have been included in the Resolve Staffing, Inc. amended report on Form 8-K pertaining to this acquisition which was filed in December, 2005. In accordance with the accounting treatment described above, the historical financial statements prior to the Reverse Combination reflect those of ELS. In conjunction with this transaction, the group of companies known as ELS Personnel Services, which were legally acquired by Resolve Staffing, Inc., changed its name to Resolve Staffing, Inc. The financial information for 2004 includes the combined balances and combined results of operations of the individual entities which comprise ELS. The combined results of operations for the acquired entities include the activities of each entity from the date of acquisition to December 31, 2004.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company provides for workers' compensation, health care insurance and unemployment taxes related to its employees. A deterioration in claims experience could result in increased costs to the Company in the future. The Company records an estimate of any existing liabilities under these programs at each balance sheet date. The Company's future costs could also increase if there are any material changes in government regulations related to employment law or employee benefits.

Revenue Recognition

The Company recognizes PEO revenues when each periodic payroll is delivered to the client. Revenues are reported in accordance with the requirements of FASB Emerging Issues Task Force Issue No. 99-19, “Reporting Revenues Gross as a Principal Versus Net as an Agent.”(EITF 99-19). Consistent with its revenue recognition policy, the Company’s net PEO revenues and cost of PEO revenues do not include the payroll cost of its worksite employees. Instead, PEO revenues and cost of PEO revenues are comprised of all other costs related to its worksite employees, such as payroll taxes, employee benefit plan premiums and workers’ compensation insurance. Payroll taxes consist of the employer’s portion of Social Security and Medicare taxes, federal unemployment taxes and state unemployment taxes. PEO revenues also include professional service fees, which are primarily computed as a percentage of client payroll or on a per check basis.

Staffing and managed service revenue and the related labor costs and payroll are recorded in the period in which services are performed. The Company follows EITF 99-19, in the presentation of staffing and managed service revenues and expenses. This guidance requires Resolve to assess whether it acts as a principal in the transaction or as an agent acting on behalf of others. In situations where Resolve is the principal in the transaction and has the risks and rewards of ownership, the transactions are recorded gross in the consolidated statements of operations.

Stock Based Employee Compensation

The Company adopted SFAS 123(R) to account for its stock-based compensation beginning January 1, 2006. Previously, the Company elected to account for its stock-based compensation plans under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), Financial Accounting Standards Board Interpretation No, 44, Accounting for Certain Transactions Involving Stock Compensation (“FIN 44”), and Statement of Financial Accounting

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Standards No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure (“SFAS 148”). During 2006, the Company did not grant any stock options which would require a calculation as prescribed by SFAS 123(R).

There are no differences between the historical and pro-forma stock based compensation value.

Accounts Receivable

The PEO segment does not typically extend credit to its customers. In certain situations, however, credit is extended on a secured basis. Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions. Accounts receivable are written off when deemed uncollectible Recoveries of accounts receivable previously written off are recorded when received.

Resolve's trade accounts receivable result from the sale of its services to customers, and customers consist primarily of private companies. Resolve uses the allowance method to account for uncollectible accounts. Bad debt expense for the years ended December 31, 2006 and 2005 was $819,656 and $88,483, respectively. The Company’s policy for determining when receivables are past due is 31 days after original invoice date. The Company’s policy for charging off uncollectible accounts receivable requires approval of the Chief Financial Officer, after reviewing Corporate Credit recommendation in consultation with the specific branch involved, determining that the debt has little, if any chance, of being collected. An allowance for doubtful accounts in the amounts of $472,428, $96,986 and $10,700 was recorded at December 31, 2006, 2005 and 2004, respectively.

Concentration of Credit Risk

Financial instruments, which potentially expose Resolve to concentrations of credit risk consist principally of trade accounts receivable.

Resolve's trade accounts receivable result from the sale of its services to customers, and customers consist primarily of private companies. In order to minimize the risk of loss from these private companies, credit limits, ongoing credit evaluation of its customers, and account monitoring procedures are utilized. Collateral is not generally required. Management analyzes historical bad debt, customer concentrations, customer credit-worthiness, current economic trends, and changes in customer payment tendencies, when evaluating the allowance for doubtful accounts. As of December 31, 2006, no customer accounted for 10% or more of gross accounts receivable and no customer accounted for 10% or more of the net revenues for the year ended December 31, 2006. As of December 31, 2005, no customers accounted for 10% or more of gross accounts receivable and no customers accounted for 10% or more of the net revenues for the year ended December 31, 2005.

The Company is obligated to pay the salaries, wages, related benefit costs, and payroll taxes of worksite employees. Accordingly, the Company's ability to collect amounts due from customers could be affected by economic fluctuations in its markets or these industries.

Stock Split

On December 28, 2004, the Company initiated a reverse stock split of the Company’s common stock on a 1 for 5 basis. The Company maintained the par value of the Company’s common stock at $.0001 and also maintained the number of shares of common stock the Company is authorized to issue at 50,000,000.

Financial Instruments

Resolve estimates that the fair value of all financial instruments at December 31, 2006 and 2005 do not differ materially from the aggregate carrying value of its financial instruments recorded in the accompanying consolidated balance sheets.

Liquidity and Management’s Plans

As reflected in the accompanying consolidated financial statements, the Company has a net working capital deficit of $21,645,402 and stockholder’s equity of $2,589,429, as of December 31, 2006. During 2006, the Company incurred losses and has been dependent upon the financial support of stockholders, management and other related parties.

For the year ended December 31, 2006 the Company incurred a net loss of $2,421,799. Of this loss, $1,256,156 did not represent the use of cash. Non-cash expenditures consisted of depreciation of $311,918, increase in allowance for doubtful

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accounts of $365,442, and amortization of non compete agreements of $578,796. Changes in accounts receivable, prepaid and other assets, along with increases in accounts payable, payroll, salary, and other accruals brought the total cash used in operations to $4,217,093. Additionally the Company used $3,601,512 to purchase computer equipment, software and office equipment and the acquisition of subsidiaries during 2006.

Management has successfully obtained additional financial resources, which the Company believes will support operations. These financial resources include financing from both related and non-related third parties, are discussed in the accompanying footnotes to the financial statements. Our senior debt forbearance agreement expires as of December 31, 2007 and our senior lender has indicated that it would prefer that the Company refinance the debt with alternate financing in order for the current senior lender to exit. If our existing senior lender does not refinance our senior debt and a new lender cannot be found or a new forbearance agreement negotiated with the current lender that would include terms acceptable to the Company, it would have a material adverse effect on our financial condition. There can be no assurance that management will be successful in continuing operations without additional financing efforts. The consolidated financial statements do not reflect any adjustments that may arise as a result of this uncertainty.

Property and Equipment

Property and equipment are stated at cost. The cost of significant additions and betterments is capitalized; maintenance and repairs are charged to expense as incurred. Depreciation is provided on property and equipment using both straight-line and accelerated methods over the estimated useful lives of the respective assets as follows:

Office equipment 5 - 7 years

Computer hardware and software 3 - 5 years

Leasehold improvements - lesser of estimated life or term of leases

Vehicles 3 years

When property and equipment are retired or otherwise disposed, the cost and related accumulated depreciation are removed and any resulting gain or loss is reflected in the statement of income for the period.

Advertising Costs

Advertising costs, except for costs associated with direct-response advertising, are charged to operations when incurred. The costs of direct-response advertising are capitalized and amortized over the period during which future benefits are expected to be received. Resolve did not have direct-response advertising costs during the years ended December 31, 2006, 2005 and 2004. Total advertising costs for the years ended December 31, 2006, 2005 and 2004 were $882,641, $311,376 and $24,533, respectively.

Income Tax

Resolve records its federal and state income tax liability in accordance with Statement of Financial Accounting Standards Statement No. 109 "Accounting for Income Taxes". Deferred taxes are provided for differences between the basis of assets and liabilities for financial statements and income tax purposes, using current tax rates. Deferred tax assets represent the expected benefits from net operating losses carried forward and general business credits that are available to offset future income taxes.

Loss Per Share

Net loss per share is computed based upon the weighted average number of outstanding shares of the Company’s common stock for each period presented. The weighted average number of shares for 2006, 2005 and 2004 excludes 2,843,820, 851,320 and 851,320 common stock equivalents, respectively, representing warrants, since the effect of including them would be anti-dilutive.

Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments" ("SFAS 155"), which amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") and SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 140"). SFAS 155 simplifies the accounting for certain derivatives embedded in other financial instruments by allowing them to be accounted for as a whole if the holder elects to account for the whole instrument on a fair value basis. SFAS 155 also clarifies and amends certain other provisions of SFAS 133 and SFAS 140. SFAS 155 is effective for all financial instruments acquired, issued or

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subject to a re-measurement event occurring in fiscal years beginning after September 15, 2006. The Company adopted SFAS 155 on January 1, 2007 which does not have a material effect on the Company’s consolidated financial statements.

In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the Company’s financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes". The provisions of FIN 48 are effective for the Company’s fiscal year beginning January 1, 2007. The Company believes that the adoption will not have a material effect on the its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company will be required to adopt SFAS 157 in the first quarter of 2008. The Company’s management is currently evaluating the requirements of SFAS 157 and has not yet determined the impact on its consolidated financial statements.

In September 2006, the Securities and Exchange Commission Staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements” (“SAB No. 108”). SAB No. 108 requires the use of two alternative approaches in quantitatively evaluating materiality of misstatements. If the misstatement as quantified under either approach is material to the current year financial statements, the misstatement must be corrected. If the effect of correcting the prior year misstatements, if any, in the current year income statement is material, the prior year financial statements should be corrected. In the year of adoption (fiscal years ending after November 15, 2006, or calendar year 2006 for us), the misstatements may be corrected as an accounting change by adjusting opening retained earnings rather than including the adjustment in the current year statement of operations. Upon completing its evaluation of the requirements of SAB No. 108, the Company determined it did not affect its consolidated financial statements.

Reportable Segments

As of the date of Combination, the Company operates in two reportable segments under Statement of Financial Accounting Standards Board (FASB) Statement No. 131, “Disclosure about Segments of Enterprise and Related Information.”

Presented below is the reconciliation of segment information to the consolidated statement of operations for 2006. Prior to 2006 the Company operated in one segment.

	Total	Staffing	PEO
Revenue	$ 152,304,237	$ 139,821,391	$ 12,482,846
Cost of revenues	134,038,039	122,503,186	11,534,853
Gross profit	18,266,198	17,318,205	947,993
Operating expenses	19,297,192	17,485,357	1,811,835
Loss from operations	(1,030,994)	(167,152)	(863,842)
Interest expense	(1,390,805)	(1,311,683)	(79,122)
Net loss	$ (2,421,799)	$ (1,478,835)	$ (942,964)

Workers’ Compensation Insurance

Worksite employees in the state of Ohio are part of the state sponsored workers’ compensation insurance program. Accruals for Ohio workers’ compensation expense are recorded based on actual rates provided by the state.

The Company maintains high deductible workers’ compensation coverage for most other work site employees in states other than Ohio. Accruals for high deductible workers’ compensation expense are made based upon the Company’s claims experience and analysis by the Company’s third party administrator, utilizing the Company’s historic loss information. As such, a majority of the Company’s recorded expense for workers’ compensation is management’s best estimate. Management believes that the amount accrued is adequate to cover all known and unreported claims at each balance sheet date. However, if the actual costs of such claims and related expenses exceed the amount estimated, additional reserves may be required, which could have a material negative effect on operating results.

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Goodwill

As discussed in Note E, the Company has acquired businesses from related and un-related parties since 2005. The acquisitions were accounted for using the purchase method of accounting in accordance with FASB Statement No. 141, Business Combinations. The cost in excess of net assets purchased was recorded as an asset (entitled “Goodwill”). The Company does not amortize the goodwill balance, but reviews annually (or more frequently if impairment indicators arise) for impairment under a two-step impairment test in accordance with FASB Statement No. 142, Accounting for Goodwill and Other Intangible Assets. The first step is to compare the carrying amount of the reporting unit’s assets to the fair value of the reporting unit. If the carrying amount exceeds the fair value, then the second step is required to be completed, which involves the fair value of the reporting unit being allocated to each asset and liability with the excess being implied goodwill. The impairment loss is the amount by which the recorded goodwill exceeds the implied goodwill. No impairment loss was recognized for the years ended December 31, 2006, 2005 and 2004.

Health Benefits

Claims incurred under health benefit plans are expensed as incurred according to the terms of the contract. Liability reserves are established for the benefit claims reported but not yet paid and claims that have been incurred but not yet reported.

NOTE B - PROPERTY AND EQUIPMENT, NET

Property and equipment as of December 31, 2006 and 2005 is summarized as follows:

	2006	2005

Office equipment	$ 746,832	$383,677
Computer hardware and software	872,230	431,632
Leasehold improvements	260,307	50,887
Vehicles	8,139	-
Total property and equipment	1,887,508	866,196
Less, accumulated depreciation	(543,735)	(264,935)
Net property and equipment	$ 1,343,773	$ 601,261

Depreciation expense for the years ended December 31, 2006, 2005 and 2004 was $311,918, $71,586 and $10,120, respectively.

NOTE C - RELATED PARTY TRANSACTIONS

Note Receivable

On December 8, 2003, ELS Inc. entered into a non-interest bearing short-term credit agreement with Resolve Staffing, Inc. that provides for borrowings up to $200,000. At that time Ronald Heineman was the Chief Executive Officer and Director of both companies. The underlying promissory note is secured by 400,000 shares of common stock that were released to an escrow agent, but not issued for accounting or reporting purposes. Balances due under the credit agreement were originally due May 8, 2004.

During March 2006, the agreement was amended to allow unlimited maximum borrowings with a maturity date of March 31, 2007. The note bears interest at 3 percent per annum and is payable monthly. As of December 31, 2006 amounts owed were eliminated in consolidation. As of December 31, 2005 $5,873,936 was outstanding under this note. At December 31, 2006 this note is eliminated in consolidation.

Note payable to related party relates to borrowings of $91,500 from William Brown, a Director and Shareholder. The underlying note bears interest at 5% and was due on March 31, 2004. The Company has a verbal agreement to extend the maturity date on a month-to-month basis.

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Notes payable to related parties of $18,641,498 were issued in conjunction with the Combination. On May 1, 2007, the holders of these notes and the Company agreed to amend the original note and reduce the amounts by $6,663,857. The outstanding amount of the notes, after the reduction, as of December 31, 2006 is $10,280,343. See Notes A, G and N.

Related Party Lease

The Company leases its Cincinnati facility from W.H. 2, LLC (WH2), a limited liability company owned by stockholders of the Company under an operating lease expiring during September 2011. Future minimum annual rentals under this operating lease are presented in Note H.

Advances Receivable

Advances receivable from related parties as of December 31, 2006 and 2005 were $681,237 and $-, respectively.

NOTE D - WORKERS’ COMPENSATION INSURANCE

The Company maintains a high deductible insurance policy with respect to workers’ compensation coverage for its worksite employees who are not employed in the State of Ohio. The Company had provided a total of $1,636,313 at December 31, 2006, as the estimated liability for unsettled workers’ compensation claims. The Company did not accrue for estimated unsettled worker’s compensation claims at December 2005. The estimated liability for unsettled workers’ compensation claims represents management’s best estimate, which includes, in part, an evaluation of information provided by the Company’s third-party administrators for workers’ compensation claims to estimate the total future costs of all claims, including potential future adverse loss development. Included in this claim liability are case reserve estimates for reported losses, plus additional amounts based on projections for incurred but not reported claims, anticipated increases in case reserve estimates and additional claim related administration expenses. These estimates are continually reviewed and adjustments to liabilities are reflected in current operating results as they become known. The Company believes that the difference between amounts recorded for its estimated liabilities and the possible range of costs to settle related claims is not material to results of operations; nevertheless, it is reasonably possible that adjustments required in future periods may be material to the results of operations.

During 2006, the Company’s primary high deductible workers’ compensation insurance policy was provided by Providence Property and Casualty Insurance Company of Frisco, Texas. Under this policy, the Company’s deductible in most cases equals $500,000 per occurrence and covers most of its worksite employees who are not employed in the state of Ohio (except California which are not covered under the policy.) The Company regularly evaluates the financial capacity of its insurers to assess the recoverability of any potential insurance receivables.

NOTE E - INTANGIBLE ASSETS

The Company’s intangible assets are comprised of goodwill and covenants not to compete arising from acquisitions. Goodwill will be assessed for impairment annually by management. The Company’s covenants not to compete have contractual lives principally ranging from one to two years and are being amortized over the period of benefit.

Intangibles consist of the following at December 31:

	2006	2005

Covenants not to compete	$ 613,547	$ 338,000

Less amortization	( 180,915)	(106,917)

	$ 432,632	$ 231,083

Goodwill	$ 29,724,511	$ 6,695,579

NOTE F - EMPLOYEE BENEFIT PLAN

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The Company and many of its clients’ employees participate in a multi-employer 401(k) retirement savings plan covering substantially all employees who have completed one year of service and are at least 21 years of age. Participants may defer up to 50% of their annual base compensation up to the limits prescribed by the Internal Revenue Code (IRC).

The Company and its clients are required to match employee contributions at the rate of $1.00 for every $1.00 contributed by the employee, up to a maximum of 3% and $0.50 for every $1.00 contributed for the next 2% of the employee’s base compensation in accordance with the IRC safe harbor rules. The Company and its clients may also make discretionary matching and profit sharing contributions to the plan.

Total Company contributions and plan expenses paid by the Company were $36,896, $- and $-,, for the years ended December 31, 2006, 2005 and 2004, respectively.

NOTE G - LONG TERM DEBT AND LINES OF CREDIT

Notes payable and lines of credit as of December 31, 2006 and 2005 are as follows:

	2006	2005
Working capital line of credit to one bank, interest payable monthly at 7.75% per annum, maturing December 31, 2007, maximum of $12,000,000 in borrowings. Borrowings are not to exceed 80% of accounts receivable.	$11,735,029	$-
Over-line facility line of credit to one bank, interest payable monthly at 11.25% per annum, maturing December 31, 2007, maximum of $17,150,000.	2,906,471	3,341,927
Revolving line of credit with a financial institution that provides for maximum borrowings of $1,700,000 through November 2007. Borrowings are not to exceed 85% of accounts receivable. Interest accrues at 9.25% per annum.	986,956	-
Line of credit with a bank that provides for maximum borrowings of $100,000. Interest accrues at the bank's prime rate of 9.25% per annum. Maturity date is on demand.	74,165	-
Note payable to a bank, interest payable monthly at a rate of 6.6% per annum, maturing September 1, 2009.	303,746	398,100
Note payable to a financial institution, interest payable at annual percentage rate of 8.25% per annum. Monthly payments of $47,049 through July 2007.	351,910	-
Notes payable to two individuals for the Combination, interest payable at a rate of 5% per annum.. Note principal and interest payments are due the first day of each month through December 31, 2017; however, no interest shall be accrued until January 1, 2008. See notes A, C and N.	10,280,343	-
Note payable to individual for the stock purchase of Power Personnel. The note will be paid in monthly installments of $125,637 through October 2008. Interest is payable at 8.3% per annum.	2,555,931	-
Two notes payable to financial institutions due June 2007 and November 2007. Interest accruing between 3.5% and 9.25% per annum.	37,866	-
Note payable to ELS, Inc., accruing interest at 3% per annum, due March 2007. As of December 31, 2006 amounts owed were eliminated on consolidation	-	5,873,936
Notes payable to various individuals for the acquisition of various staffing entities during 2005 and 2006. Notes are due at varying dates through December 2007 with monthly payment amounts ranging from $5,833 to $34,891. These notes bear no interest and accordingly management has imputed interest at 7.25% per annum. Shown net of discount of $103,300.	2,734,916	2,278,981
Note payable to an individual accruing interest at 5% to 12% per annum, maturity date is being extended verbally on a month to month basis.	91,500	131,500
Total long term debt and lines of credit	32,058,833	12,024,444
Current portion of long term debt and lines of credit	(22,398,124)	(1,940,746)

Long term portion of long term debt and lines of credit	$ 9,660,709	$ 10,083,698

See Note C—Related Party Balances and Transactions, for information about the Credit Agreement with Ron Heineman.

Page F - 14

See Note C -- Related Party Balances and Transactions, for information about the Note Payable to William Brown.

Maturities of long term debt and lines of credit are as follows:


Year ending December 31,
2007		$22,398,124
2008		2,565,230
2009		1,251,248
2010		1,183,782
2011		1,183,782
Thereafter		3,476,667
Total		$32,058,833

NOTE H - OPERATING LEASES

The Company rents various office spaces for each of its locations across the United States, under lease terms ranging from month-to-month expiring September, 2011. Monthly payments due under these leases range from $210 to $4,970. The Company has the option to renew various leases under the same terms and conditions as the original leases and anticipates exercising certain of these options. The Company also leases various office and computer equipment under operating leases that require quarterly payments between $3,641 and $4,988 through March 2007. The Company also leases office space from a related party at $4,100 a month through July 2009. This lease was amended and renewed on October 1, 2006 to $10,800 a month through September 30, 2011.

Future minimum annual rentals under all operating lease agreements are as follows:

Year Ended December 31,	Total	Related Party	Other
2007	$ 1,035,826	$ 129,600	$ 906,226
2008	767,854	129,600	638,254
2009	518,270	129,600	388,670
2010	296,224	129,600	166,624
2011	118,969	108,000	10,969
	$ 2,737,143	$ 626,400	$ 2,110,743

Total rent expense for all operating leases was $1,041,195, $385,831 and $50,425 for the years ended December 31, 2006, 2005 and 2004, respectively.

NOTE I - MAJOR VENDOR

Workers’ compensation paid to the State of Ohio Bureau of Workers’ Compensation constitute approximate 60% of workers’ compensation insurance cost of revenues for the PEO segment. This is considered a major vendor relationship. Because the State of Ohio is a monopolistic state with regard to workers’ compensation insurance, there are no alternative sources for workers’ compensation insurance within the state. The Company believes that, by nature of rules afforded PEOs within the state, the risk from this relationship is primarily related to rates. The standard client agreement provides that the Company may, at its discretion, adjust the amount billed to clients to reflect changes in the Company’s direct costs. Also, the Company maintains the ability to remove clients from their policy and, due to having PEO status, the removal of the client from the policy will remove that client’s claims history from the Company policy. Any such rate changes or removals require a 30 day notice to the client. Regardless of the Company’s assertion, there is no assurance that the Company will be able to successfully pass through rate increases or successfully manage claims in the future.

NOTE J - COMMITMENTS AND CONTINGENCIES

The Company is a defendant in various lawsuits and claims arising in the normal course of business. Management believes it has valid defenses in these cases and is defending them vigorously. While the results of litigation cannot be predicted with certainty, management believes the final outcome of such litigation will not have a material adverse effect on the Company’s financial position or results of operations.

Page F - 15

The Company maintains letters of credit of approximately $4,375,000 at December 31, 2006 to secure workers’ compensation policies in lieu of providing deposits. There were no draws on the letters of credit for the year ended December 31, 2006.

In accordance with the high deductible workers’ compensation policy, the Company is required to purchase $490,000 of the insurance company’s non-voting stock during the year ended December 31, 2007. There are no additional deposits to be made during the year ending December 31, 2007 as all deposits were made in 2006.

The Company is in receipt of a Determination and Assessment from the State of Michigan, Department of Labor & Economic Growth, Unemployment Insurance Agency seeking payment of amounts totaling $9,505,212. The Company and legal counsel believe that this assessment is baseless and without merit and intends to contest this assessment vigorously. As of December 31, 2006, no amount is accrued in the Company’s consolidated financial statements as the matter is deemed groundless and outside the authority of the Agency.

The Company has received notice letters from the State of Ohio sales tax auditors indicating their intention to make an assessment on employee leasing or co-employment sales. As of the date of filing of this amended report on Form 10-K/A/, we have been notified that the assessed amount of Ohio sales taxes is $52,711,436.50. The Company conducts its business through written contracts of at least one year, and claims exemption from the sales tax auditor’s position. The Company continues to work with the sales tax auditors to have this matter dismissed. As of December 31, 2006, no amount is accrued in the Company’s consolidated financial statements as the Company and legal counsel believe this assessment is groundless.

Depending on certain goals and performances being met, Resolve has the following off balance sheet arrangements in which Resolve is obligated to pay the previous owners of the following entities certain contingent amounts, which are the result of the various acquisitions. If additional amounts are paid these amounts will be recorded as additional goodwill when paid.

·	The Arnold Group - Based on sales targets, the prior owners may receive contingent performance payments not to exceed $125,000 through May 31, 2007.
·	Taylor Personnel Services, Inc. - Based on sales targets, the prior owners may receive contingent performance payments not to exceed $80,000 through May 31, 2007.

·	QRD International, Inc. dba Delta Staffing - Based on gross profit targets, the prior owners may receive contingent performance payments of up to approximately $75,000 through September 11, 2007.
·	Midwest Staffing, Inc. - Based on pre-tax profit targets, the prior owners may receive contingent performance payments not to exceed $75,000 through September 27, 2007.

·	Project Solvers, Inc. - Based on pre-tax profit targets, the prior owners may receive contingent performance payments not to exceed $200,000 through October 25, 2008.
·	Pro Care Medical Staffing, LLC. - Based on pre-tax targets the prior owners may receive contingent performance payments not to exceed $ 650,000 in total through November 9, 2007.

·	Big Sky Travel Nurses, Inc. - Based on pre- tax profit targets, the prior owners may receive contingent performance payments of up to approximately $15,000 through November 27, 2007.
·	Assisted Staffing, Inc. - Based on pre- tax profit targets, the prior owners may receive contingent performance payments of up to approximately $25,000 through December 10, 2007.

·	Driver’s Plus, Inc. - Based on pre- tax profit targets, the prior owners may receive contingent performance payments of up to approximately $10,000 through December 26, 2007.
·	Ready Nurse, LLC. - Based on pre- tax profit targets, the prior owners may receive contingent performance payments of up to approximately $10,000 through March 5, 2008.

·	KFT, Inc. dba Power Personnel - Based on pre- tax profit targets the prior owners may receive contingent performance payments of up to approximately $ 50,000 through October 10, 2008 and October, 10 2009.
·	Steadystaff, LLC - January 1, 2007 to December 31, 2007 and January 1, 2008 to December 31, 2008, based on pre-tax profit targets the prior owners may receive contingent performance payouts up to approximately $10,000 per year.

NOTE K - INCOME TAXES

At December 31, 2006, the Company had federal and state tax net operating loss carryforwards (“NOL”) of approximately $2,004,000. The federal and state tax loss carry forwards will begin to expire in 2025 and 2015, respectively, unless previously utilized.

Page F - 16

Pursuant to Internal Revenue Code Sections 382 and 383, the Company’s use of its net operating loss and credit carryforwards may be limited as a result of cumulative changes in ownership of more than 50% over a three-year period. Management is currently in the process of calculating these limitations.

The Company also recorded a valuation allowance of approximately $404,000 related to federal and state loss and tax credit carryforwards and other temporary differences of Resolve. The tax benefit of these carryforwards, if and when realized, will first reduce the existing value of goodwill up to a total of $404,000, then, if applicable, remaining amounts will be applied first to other intangible assets with any excess amount recognized as an income tax benefit.

Significant components of the Company's deferred tax assets are shown below. A valuation allowance has been established to offset the deferred tax assets, as realization of such assets has not met the more likely than not threshold required under SFAS No. 109.

*December 31,*	2006	2005
Deferred tax assets:
Net operating loss carry forwards	$ 779,400	$ 156,300
Allowance and Accruals	183,800	-
Bad Debt Allowance	11,400	-
Other	-	700
Gross deferred tax assets	974,600	157,000
Fixed Assets and Intangibles	(95,100)	-
	879,500
Valuation allowance	(879,500)	(157,000)
	$ -	$ -

Significant components of the provision for income taxes for the years ended December 31, 2006, 2005 and 2004 are as follows:

	2006	2005	2004
Current
Federal	$ -	$ -	$ -
State	-	-	-

Deferred
Federal	-	-	-
State	-	-	-


Income tax expense	$ -	$ -	$ -

Reconciliation of the statutory federal income tax benefit to the Company's effective tax benefit:

Years Ended December 31,	2006	2005	2004
Statutory U.S. federal rate	35.00%	34%	34%
State income taxes - net of federal benefit	3.03%	0%	0%
Permanent differences	-7.79%	6%	6%
True up of prior year tax provision	1.63%	0%	0%
Other	-0.92%	0%	0%
Change in valuation allowance	-30.95%	-40%	-40%
Provision for income taxes	0.00%	0.00%	0.00%

NOTE L - CASH FLOW SUPPLEMENTAL INFORMATION

Cash paid for interest during the years ended December 31, 2006, 2005 and 2004 amounted to $1,154,054, $238,454 and $13,160, respectively.

Non-cash investing and financing activities

Page F - 17

During 2006 the Company issued 300,000 shares of common stock for services related to the raising of funds. The shares were valued at approximately $410,000 and have been recorded as an increase and decrease in paid in capital (See Note M).

Acquisition of Entity from Related Party

In connection with the Combination on October 1, 2006, described in Note A, Resolve was deemed to be the acquiring company for accounting purposes and the Combination was accounted for as an acquisition under the purchase method of accounting for business combinations in accordance with accounting principles generally accepted in the United States of America. In conjunction with this transaction, Resolve issued 1,486,685 shares of restricted common stock valued at $2,601,699 (See Note M) and notes payable in the amount of $11,977,641 (originally $18,641,498, See Note C) in exchange for 100% of the ownership of ELS Inc. See Note A for the fair value of the assets and liabilities assumed on the date of acquisition.

In conjunction with the Reverse Combination on February 7, 2005, described in the basis of Presentation section of the notes to consolidated financial statements, ELS was deemed to be the acquiring company for accounting purposes and the Reverse Combination was accounted for as a reverse acquisition under the purchase method of accounting for business combinations in accordance with accounting principles generally accepted in the United States of America. In conjunction with this transaction, Resolve issued 13,000,000 shares of restricted common stock valued at $130,000 and a note payable in the amount of $1,500,000 in exchange for 100% of the ownership interest in 4 entities with 10 staffing locations. The fair value of the assets and liabilities assumed, on the date of acquisition were as follows:

Accounts receivable	$30,457
Prepaid and other assets	48,483
Property and equipment	15,280
Goodwill	2,026,496
Accounts payable and accrued liabilities	(71,472)
Notes payable	(419,244)
	$1,630,000

Acquisition of Entities from Unrelated Parties

During 2006 and 2005, Resolve Staffing, Inc., entered into purchase agreements (“Agreements”), to acquire all of the assets and/or ownership of multiple privately-held entities owned and operated by unrelated parties. Pursuant to the acquisition agreements, Resolve acquired the temporary employee staffing locations from the newly acquired entities.

Resolve issued notes payable, issued common stock and accrued contingent expenses in the amount of $6,218,337 and $2,492,416, as of December 31, 2006 and 2005, respectively; in exchange for the assets and liabilities of the above staffing entities as described below. The following table summarizes the estimated fair value, of the assets acquired and liabilities assumed, on the date of acquisition:

	2006	2005
Accounts Receivable	$ 1,327,064	$ 135,252
Prepaid & Other Assets	48,490	21,815
Property & Equipment	20,000	104,489
Goodwill	6,664,447	2,659,971
Non-Compete Agreements	-	144,000
Accounts Payable & Accrued Liabilities	(589,214)	(355,608)
Line of credit	(1,252,450)	-
Notes Payable	(6,018,337)	(217,503)
Total Assets Acquired:	$ 200,000	$ 2,492,416

The Company had no non-cash investing or financing activities during 2004.

NOTE M - STOCKHOLDERS’ (DEFICIT) EQUITY

Page F - 18

Issuance of Common Stock

On January 9, 2006, Resolve Staffing entered into a consulting agreement with Dan Seifer. Under the term of the agreement, Mr. Seifer will be paid in options to acquire up to 4,000,000 shares of common stock of the Company and is to provide the following services in a timely manner:

Business Plan Development - Become familiar with the business and operations of the Company and review and analyze the Company’s formal and informal financial, strategic, and business plans. In conjunction with the Company, prepare and update a formal strategic business plan along with a detailed financial model/projection, and update the business plan and financial model as needed during the term of this Agreement;

Strategic Consulting - Assist the Company in sourcing and locating joint-venture partners. Advise the Company in strategic planning matters and assist in the implementation of short- and long-term strategic planning initiatives to fully develop and enhance the Company’s assets, resources, products, and technologies. Provide advice to and consult with the Company concerning management, product marketing, strategic planning, and corporate organization in connection with the Company’s business and advise the Company regarding its overall development, progress, needs, and condition. If requested by the Company, assist in the due diligence of prospective strategic partners.

·	Other Services - Perform other services as may be reasonably requested by the Company that are within the normal scope of operations of Dan Seifer.

On March 31, 2006, Resolve agreed to issue a Note Receivable to Mr. Seifer, and related parties, for the purchase of shares underlying the options mentioned above. A note was issued in the aggregate amount of $6 million. Prior to June 30, 2006 $800,000 was paid on this note. The agreement was terminated on June 30, 2006 and the remaining balance of 3,466,666 shares was canceled.

On September 7, 2006 the Board of Directors agreed to issue 100,000 shares of common stock as compensation to the former owners of Truckers Plus, as called for in the purchase agreement.

On October 1, 2006, as part of the consideration, Resolve issued shares of its common stock to the selling shareholders of ELS Inc. Additionally, Resolve agreed to issue notes payable totaling approximately $12 million (originally $18.6 million, See Note C) and pay certain other settlement amounts described in the ELS Inc. purchase agreement.

In accordance with acquisition accounting, the shares of common stock issued by Resolve to the former owners of ELS Inc., described in Note A, have been shown as outstanding from the date of acquisition. The value of these shares, $2,601,699, has been presented in the consolidated statement of stockholders’ equity (deficit).

Effective October 1, 2006, the Company agreed to issue 1,000,000 shares of restricted common stock to certain accredited investors, for an aggregate consideration of $1,500,000. In addition, the investors received a warrant to purchase additional shares of common stock at $2.00 and a warrant to purchase additional shares of common stock at $3.00. The shares of common stock acquired by these investors, including the warrant shares, have registration rights associated with them, whereby the Company has committed to use its best efforts to prepare and file a registration statement with the Commission registering the shares for resale, within 30 days from the date of acquisition of the shares. This registration statement was filed during February 2007.

During October, 2006 the Company issued 300,000 shares of common stock to individuals as compensation for services provided relating to the sale of the 1,000,000 shares of common stock described above. The shares issued to these individuals have been valued at approximately $410,000, based on management’s estimate of fair value, and have been recorded as an increase and a reduction in paid in capital in the accompanying consolidated statement of stockholders’ equity (deficit) as these shares were issued in conjunction with the capital raise discussed above.

On February 7, 2005, the Company entered into the Reverse Combination described above. In conjunction with the Reverse Combination and the treatment as a reverse acquisition, the 13,000,000 shares of common stock issued as part of this transaction have been presented as if they were outstanding for all periods presented.

On May 25, 2005, Resolve Staffing, Inc. issued 100,000 shares to certain consultants as part of their compensation.

On August 18, 2005, Resolve issued 50,000 shares to certain consultants as part of their compensation and 100,000 shares as per an employment agreement with certain shareholders and employees of Truckers Plus.

Page F - 19

On November 22, 2005, Resolve issued 430,000 shares to various consultants as part of their compensation.

Common Stock Warrants

On April 18, 2006, the Board of Directors of Resolve Staffing, Inc. declared a dividend distribution of one stock right for each outstanding share of the Company's Common Stock, $.0001 par value per share (“Common Stock”), to stockholders of record at the close of business on May 26, 2006 (the “Record Date”). The Board of Directors of the Company also authorized the issuance of one Right for each share of Common Stock issued after the Record Date. Additional details are provided on an 8-K filed on April 21, 2006.

During 2006, warrants covering 7,500 were exercised and converted into 3,621 shares of common stock.

As of December 31, 2006 there were 2,843,820 warrants outstanding. 843,820 warrants were due to expire on June 30, 2007 and each warrant has an exercise price of $.75 per share price (See Note N). The additional 2,000,000 warrants were issued on October 1, 2006 as part of the Company’s offering and sale of units consisting of one share of common stock and two common stock purchase warrants, 50% of which were initially exercisable at a price of $2.00 and the remaining 50% exercisable at a price of $3.00 per share, up to and including September 30, 2008. None of the 2,000,000 common stock purchase warrants have yet been exercised. By subsequent modifications to the warrant agreements, the Company and all of the purchasers of the common stock purchase warrants sold to private placement investors on October 1, 2006, were adjusted. The adjusted common stock purchase warrants now have an exercise price of $1.25 and $1.75, respectively and are exercisable for a term that expires September 30, 2009.

Employee Agreements

The employment agreement with Mr. Heineman dated October 1, 2006, (for a 5 year term) sets forth the terms of his continued employment with the Company as chief executive officer and provides for, among other matters: a base salary, bonuses based on the achievement of specific goals as determined by the agreement and a severance package as specified in the agreement. Subsequent to year end the term of this agreement was extended to seven years.

The employment agreement with Mr. Horne dated October 1, 2006, (for a 3 year term) sets forth the terms of his continued employment with the Company as executive vice president and chief financial officer and provides for, among other matters: a base salary, bonuses based on the achievement of specific goals as determined by the agreement and a severance package as specified in the agreement. Subsequent to the period covered by this report, Mr. Horne resigned in his capacity as chief financial officer of the Company and his executive employment agreement is no longer in force, effective May 17, 2007. Mr. Horne has remained employed by the Company in his current capacity of executive vice-president of franchise development.

The employment agreement with Mr. Roux dated October 1, 2006, (for a 3 year term) sets forth the terms of his continued employment with the Company and provides for, among other matters: a base salary, bonuses based on the achievement of specific goals as determined by the agreement and a severance package as specified in the agreement.

Equity Incentive Plan

During the year ended December 31, 2001, Resolve adopted a 2001 Equity Incentive Plan ("Incentive Plan") for the benefit of key employees (including officers and employee directors) and consultants of Resolve and its affiliates. The Incentive Plan is intended to provide those persons who have substantial responsibility for the management and growth of Resolve with additional incentives and an opportunity to obtain or increase their proprietary interest in Resolve, encouraging them to continue in the employ of Resolve.

On May 28, 2002, Resolve's 2001 Stock Incentive Plan was amended to restore the number of shares which may be issued under the plan to 600,000 and to permit the issuance of unrestricted shares. No shares have been issued under this plan.

NOTE N - SUBSEQUENT EVENTS

On January 3, 2007 the Company issued 150,000 shares of common stock for the acquisition of one unrelated party. The shares issued for the acquisition have been valued at approximately $457,500 and have been recorded as an increase in paid in capital.

On January 20, 2007 certain individuals converted outstanding warrants into shares of common stock. A total of 714,360 warrants were converted into 535,770 shares of common stock.

Page F - 20

On January 26, 2007 the Board of Directors elected to purchase 129,460 warrants (with a strike price of $.75) for an aggregate of $6,473 pursuant to the warrant agreement.

On February 20, 2007 the Company issued 100,000 shares of common stock for the acquisition of one unrelated party. The shares issued for the acquisition have been valued at approximately $280,000 and have been recorded as an increase in paid in capital.

On May 1, 2007 the original price and the corresponding outstanding balance of the notes payable, related to the acquisition of ELS Inc. and described in Notes A, C and G, to the shareholders Ron Heineman and William Walton were reduced by $6,663,857. Additionally the interest rate was reduced from 8.25% per annum to a fixed 5% annual rate and no interest will be accrued until January 1, 2008 on the entire outstanding balance and no interest will accrue on a portion of the amount for the life of the loan.

Mr. Scott Horne resigned as Chief Financial Officer of Resolve Staffing, Inc. by letter dated May 17, 2007. Mr. Horne will remain with the Company as VP of Franchise Development.

Subsequent to year end certain subsidiaries of the Company received assessments from the Internal Revenue Service ("IRS") in a combined amount of approximately $884,000. As of December 31, 2006 no amount has been accrued in the Company's consolidated financial statements as the Company's management believes all required documentation will be provided to the IRS and expects the assessments to be fully abated.

NOTE O - PROFORMA INFORMATION

The consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (GAAP), which requires that the financial results of acquired entities are included in the consolidated financial statements from the date of acquisition. As a result, the consolidated statement of operations does not include the activity of the acquired companies for the period from January 1 to the date of acquisition. Below is the pro forma information for the significant acquisitions entered into during 2006, including the acquisition of Star Personnel (and Direct Staffing), the acquisition of ELS Inc. by Resolve Staffing, Inc. on October 1, 2006, the acquisition of Power Personnel, on October 11, 2006, Allstaff on November 6, 2006 and Voyager on November 20, 2006.

Presented below is the unaudited pro forma condensed combined consolidated statement of operations for the year ended December 31, 2006 as if the acquisition of Star Personnel, Power Personnel, Allstaff, Voyager and ELS Inc. had been completed January 1, 2006.

	Actual	Star Personnel, Inc.	Power Personnel, Inc.	ELS Inc. (Pre Combination)	Pro-forma adjustments	Pro-forma
Service Revenues	$ 152,304,237	$ 6,665,403	$ 7,679,844	$ 40,202,590	(a) (55,269)	$ 206,796,805

Cost of Services	134,038,039	4,614,832	6,190,000	34,430,645	(a) (55,269)	179,218,247

Gross Margin	18,266,198	2,050,571	1,489,844	5,771,945	-	27,578,558

Operating Expenses	19,297,192	2,073,399	1,414,420	5,594,102	-	28,379,113

Income (Loss) From Operations	(1,030,994)	(22,828)	75,424	177,843	-	(800,555)
				��
Interest expense	(1,390,805)	(93)	(107,848)	2,511	( b) (527,985)	(2,024,220)

Net (Loss) Income	$ (2,421,799)	$(22,921)	$(32,424)	$ 180,354	$ (527,985)	$ (2,824,775)


Pro-forma earnings per share information for the year ended December 31, 2006:
Basic weighted average shares outstanding:					19,158,613
Pro forma basic net loss per common share:					$ (0.14)

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS

a)	Elimination of Management Fees allocated to Resolve by ELS Inc. for the period January 1, 2006 through September 30, 2006.
b)	Interest expense related to Bill Walton and Ron Heineman notes payable issued for the ELS Inc./Resolve combination. Interest computed as if the notes were issued January 1, 2006.

SCHEDULE I—VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2004, 2005 and 2006

Allowances are deducted from the assets to which they apply.

	Balance at		Charged to		Charged to				Balance
	Beginning		Costs and		Other				at End
	of Period		Expenses		Accounts		Deductions		of Period

Year ended December 31, 2004:
Allowance for:
Uncollectible accounts	$	8,264	$	3,764	$	-	$	(1,328)	$	10,700

Year ended December 31, 2005:
Allowance for:
Uncollectible accounts	$	10,700	$	88,483	$	-	$	(2,197)	$	96,986

Year ended December 31, 2006:
Allowance for:
Uncollectible accounts	$	96,986	$	819,656	$	-	$	(444,214)	$	472,428

Page F - 21

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Resolve Staffing, Inc., a Nevada Corporation

Dated November 14, 2007	By: /s/ Ronald Heineman
	Ronald Heineman, Chief Executive Officer

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

Signature	Title	Date
/s/ Ronald Heineman		November 14, 2007
Ronald Heineman	Chief Executive Officer and Director

/s/ Ron Heineman		November 14, 2007
Ron Heineman	Chief Financial Officer

/s/ Donald Quarterman, Jr.		November 14, 2007
Donald Quarterman, Jr.	Director

/s/ William Brown		November 14, 2007
William Brown	Director

/s/ William Walton		November 14, 2007
William Walton	Director

Page - 49

EXHIBIT INDEX

Exhibit No.	Description
3.1	Articles of Incorporation of the Company (1)
3.2	Bylaws of the Company (2)
10.1	Form of Securities Subscription Agreement dated September 26, 2006. (3)
10.2	Form of Warrant Agreement dated September 26, 2006. (4)
21.1	List of Subsidiaries (5)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
32.1	Certification pursuant to 18 U.S.C. Section 1350.

(1) incorporated by reference to Exhibit 3.1 on Form SB-2/A, as filed with the SEC on July 24, 2003
(2) incorporated by reference to Exhibit 3.2 on Form SB-2/A, as filed with the SEC on July 24, 2003
(3) incorporated by reference to Exhibit 10.1 on Form S-1, as filed with the SEC on February 7, 2007
(4) incorporated by reference to Exhibit 10.15 on Form S-1, as filed with the SEC on February 7, 2007
(5) incorporated by reference to Exhibit 21.1 on Form S-1, as filed with the SEC on February 7, 2007

Resolve Staffing (RSFF) Inactive 10-K/A2006 FY Annual report (amended)