UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Amendment No. 1 to FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission File Number 0-29485
RESOLVE STAFFING, INC.
--------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
NEVADA 33-0850639
------------------------------- --------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
105 NORTH FALKENBURG ROAD, SUITE B
TAMPA, FLORIDA 33619
---------------------------------------
(Address of Principal Executive Offices)
(813) 662-0074
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
N/A
--------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
If changed since Last Report)
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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of May 15, 2003 there were
outstanding 6,191,069 shares of common stock, par value $0.0001, and no shares
of preferred stock.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements of Resolve Staffing, Inc. have
been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. All adjustments,
which, in the opinion of management, are necessary for a fair presentation of
the financial condition and results of operations, have been included. Operating
results for the three-month period ended March 31, 2003 and are not necessarily
indicative of the results that may be expected for the year ending December 31,
2003.
INDEX TO FINANCIAL STATEMENTS
Consolidated balance sheets as of March 31, 2003 (unaudited)
and December 31, 2002 3
Consolidated statements of operations for the three months ended
March 31, 2003 and 2002 4
Consolidated statements of cash flows for the three months ended
March 31, 2003 and 2002 5
Consolidated statements of stockholders' equity for the three months ended
March 31, 2003 (unaudited) and for the year ended December 31, 2002 6
Notes to consolidated financial statements 7
2
RESOLVE STAFFING, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2003 (UNAUDITED) AND DECEMBER 31, 2002
ASSETS 2003 2002
-------- --------
CURRENT ASSETS
Cash and cash equivalents $ 6,396 $ --
Accounts receivable, net of allowance for bad
debts of $4,500 for 2002 and $1,800 for 2001 122,353 89,674
Prepaid and other assets 94,811 82,790
-------- --------
Total current assets 223,560 172,464
-------- --------
PROPERTY AND EQUIPMENT
Property and equipment 32,782 28,382
Less: Accumulated depreciation 15,139 14,015
-------- --------
Net property and equipment 17,643 14,367
-------- --------
TOTAL ASSETS $241,202 $186,831
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 44,005 $ 43,386
Bank overdraft -- 9,712
Accrued salaries 23,187 --
Accrued payroll taxes 13,142 10,803
Notes payable 57,181 40,000
Debentures payable 11,150 11,150
Note payable - related party 67,000 --
Loan payable - related parties 24,860 7,760
Other current liabilities 9,438 7,935
--------- ---------
Total current liabilities 249,963 127,746
--------- ---------
LONG-TERM LIABILITIES
Loans payable - related party -- 67,000
--------- ---------
Total long-term liabilities -- 67,000
--------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.0001 par value, 50,000,000 shares
authorized, issued and outstanding: 2003 - 6,046,069
shares; 2002 - 4,821,069 shares 605 482
Paid-in capital 911,567 737,190
Less: Stock Compensation (142,916) --
--------- ---------
Retained earnings (deficit) (778,016) (745,587)
--------- ---------
Total stockholders' equity (deficit)
(8,760) (7,915)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 241,203 $ 186,831
========= =========
3
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
2003 2002
----------- -----------
SERVICE REVENUES $ 262,246 $ 85,540
DIRECT COST OF SERVICES 198,911 55,458
----------- -----------
GROSS MARGIN 63,335 30,082
OPERATING EXPENSES
Legal & professional fees 28,960 53,385
Advertising/Promotion 1,810 2,648
Salaries and benefits 41,716 49,125
Taxes & licenses 1,829 3,337
Penalties -- --
Rent & leases 4,877 9,328
Travel & entertainment 1,425 2,035
Administrative expenses 12,859 15,111
----------- -----------
Total operating expenses 93,476 134,969
----------- -----------
LOSS FROM OPERATIONS (30,141) (104,887)
OTHER INCOME (EXPENSES)
Interest and other income -- --
Interest expense (2,288) (1,802)
----------- -----------
Net other income (expenses) (2,288) (1,802)
----------- -----------
NET INCOME (LOSS) $ (32,429) $ (106,689)
=========== ===========
LOSS PER SHARE
Basic $ (.01) $ (1.20)
=========== ===========
Fully diluted $ (.01) $ (1.20)
=========== ===========
AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 5,592,180 88,626
=========== ===========
Fully diluted 5,592,180 88,626
=========== ===========
4
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONHTS ENDED MARCH 31, 2003 AND 2002
2003 2002
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (32,429) $(106,688)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation 1,124 1,480
Common stock issued for services 171,500 --
Contributed services 3,000 19,800
Conversion of loans and interest to capital -- 251
Decrease (increase) in current assets:
Accounts receivable (32,679) (
21,520)
Prepaid and other assets (154,937) (88,504)
Increase (decrease) in current liabilities:
Accounts payable 619 (13,895)
Bank overdraft (9,712) --
Payroll tax accruals 2,339 (
10,390)
Salary accrual 23,187 --
Customer deposits -- --
Other current liabilities 4,503 1,186
--------- ---------
Total adjustments 8,944 (
111,592)
--------- ---------
Net cash (used) by operating activities (23,485) (218,280)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (4,400) --
--------- ---------
Net cash (used) by investing activities (4,400) --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of units/warrants and capital stock, net of redemption -- --
Proceeds from convertible subordinated notes --
Proceeds from convertible debentures -- --
Proceeds from insurance financing 23,594 62,204
Repayments of insurance financing (6,413)
Proceeds from note payable -- --
Loan from stockholders, net of repayments 17,100 158,400
Capital contribution -- 22,096
--------- ---------
Net cash provided by financing activities 34,281 242,700
--------- ---------
NET INCREASE (DECREASE) IN CASH
6,396 24,420
CASH, BEGINNING OF THE PERIOD -- 19,467
--------- ---------
CASH, END OF THE PERIOD $ 6,396 $ 43,887
========= =========
5
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2002 AND
FOR THE THREE MONTHS ENDED MARCH 31, 2003
COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- ---------- ---------- ---------- ----------
BALANCE, JANUARY 1, 2002 83,334 8 425,467 (407,403) 18,072
Issuance of common stock for services 3,333 -- 100 -- 100
Issuance of common stock in conversion
of debentures 248,367 25 7,426 -- 7,451
Donated services -- -- 82,550 -- 82,550
Contributed capital by shareholder -- -- 22,096 -- 22,096
Issuance of common stock for cash,
notes and debt 5,000,000 500 199,500 -- 200,000
Cancellation of common stock (513,965) (51) 51 -- --
Net loss during period -- -- -- (338,184) (338,184)
---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 2002 4,821,069 482 737,190 (745,587) (7,915)
Issuance of common stock for services -
Pinnacle Corp. Services 950,000 95 132,905 -- 133,000
Issuance of common stock for services
of Chief Executive Officer 275,000 28 38,472 -- 38,500
Donated services -- -- 3,000 -- 3,000
Net loss during period -- -- -- (32,429) (32,429)
---------- ---------- ---------- ---------- ----------
BALANCE, MARCH 31, 2003 (UNAUDITED) 6,046,069 $ 605 $ 911,567 $ (778,016) $ (134,156)
========== ========== ========== ========== ==========
6
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003 AND 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions incorporated in
Regulation S-B, Item 310(b) of the Securities and Exchange Commission.
Accordingly, they do not include all the information and footnotes required by
accounting principles generally accepted in the United States of America for
complete financial statements. The financial statements are unaudited, but in
the opinion of management, all adjustments (consisting of normal recurring
adjustments and accruals) considered necessary for a fair presentation of the
Company's financial position, results of operations and cash flows for the three
months ended March 31, 2003 have been included.
These statements are not necessarily indicative of the results to be expected
for the full fiscal year. These statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Form 10-KSB
for the year ended December 31, 2002 as filed with the Securities and Exchange
Commission
NATURE OF OPERATIONS
Resolve Staffing, Inc., formerly Columbialum Staffing, Inc., was organized under
the laws of the State of Nevada on April 9, 1998. Integra Staffing, Inc., was
organized under the laws of the State of Florida corporation on August 16, 1999
(collectively referred to as "Resolve").
Since its inception, Integra Staffing, Inc. ("Integra") was a temporary staffing
company. Integra's strategy has been to provide efficient and affordable
solutions to its customers' employment and labor force needs.
On December 10, 2001, Resolve Staffing, Inc. acquired 100% of the outstanding
common stock of Integra Staffing, Inc. The acquisition of Integra was accounted
for as a reverse merger. As a result, Integra was treated as the acquiring
entity and Resolve Staffing was treated as the acquired entity for accounting
purposes.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Resolve Staffing,
Inc. and its wholly owned subsidiary Integra Staffing, Inc. All significant
intercompany accounts and transactions have been eliminated.
BASIS OF ACCOUNTING
Resolve maintains its financial records and financial statements on the accrual
basis of accounting. The accrual basis of accounting provides for matching of
revenues and expenses.
LOSS PER SHARE
Resolve records basic and fully diluted loss per share in accordance with
Financial Accounting Standards Board Statement No. 128, "EARNINGS PER SHARE".
Basic earnings (loss) per share includes no dilution and is computed by dividing
income (loss) available to common stockholders by the weighted average number of
shares outstanding for the period. Diluted earnings (loss) per share reflect the
potential dilution of securities that could share in the earnings (loss) of the
entity.
7
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003 AND 2002
NOTE B - PREPAID EXPENSES & OTHER ASSETS
At March 31, 2003 and December 31, 2002, the components of PREPAID EXPENSES &
OTHER ASSETS are summarized as follows:
2003 2002
-------- --------
Prepaid insurance $ 89,659 $ 78,275
Prepaid interest 637 --
Trademark 2,325 2,325
Deposits 2,190 2,190
-------- --------
Total $ 94,811 $ 82,790
======== ========
In February 2002, Resolve financed its insurance premiums of $93,861, including
its workers compensation insurance, with monthly to payments of approximately
$8,088 per month through November 2002. The Company estimated its future payroll
for the current policy year ending February 2003, on the assumption that certain
growth and/or an acquisition would be consummated during the year, neither of
which has occurred. The prepaid insurance consist of the unamortized portion of
its insurance premiums as well the estimated $65,000 overpayment on its workers
compensation premiums, which the Company expects to receive, after the
completion of the insurance carrier's audit of the payroll for the policy
period.
In February 2003, Resolve financed its current insurance premiums of $23,594,
including its workers compensation insurance, with monthly to payments of
approximately $2,148 per month through November 2003.
In February 2003, the Resolve issued stock in exchange for one-year consulting
services to a company partially owned by Don Quarterman, its president and
William A. Brown, its executive vice-president valued at $133,000. Resolve also
issued stock to Wanda D. Dearth, its Chief Executive Officer valued at $38,500
in connection with her compensation agreement. These amounts are being charged
to expense pro-rata over 12 months. The remaining outstanding amount of $142,916
was recorded as a contra account to equity in the accompanying financial
statements.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment as of March 31, 2003 and December 31, 2002 is summarized
as follows:
2003 2002
-------- --------
Computer software $ 9,940 $ 5,590
Computers 6,187 6,187
Furniture and fixtures 5,079 5,079
Office equipment 11,576 11,576
-------- --------
32,782 28,382
Less accumulated depreciation (15,139) (14,015)
-------- --------
Net property and equipment $ 17,643 $ 14,367
======== ========
Depreciation expense for the three months ended March 31, 2003 and the year
ended December 31, 2002 was $1,124 and $5,813, respectively.
8
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003 AND 2002
NOTE D - CONVERTIBLE DEBENTURES AND NOTE PAYABLE
CONVERTIBLE DEBENTURES DUE DECEMBER 31, 2002
On November 16, 2001, Resolve borrowed $7,300 from the former shareholders of
Integra and unrelated individuals secured by a 5% convertible debenture due
December 31, 2002. The debenture was convertible into Resolve's $0.0001 par
value common stock at $0.001 per share through the debenture's maturity date.
On March 30, 2002, Resolve issued 248,367 shares of its common stock to the
holders of the 5% convertible debentures in exchange for the conversion of the
$7,300 principal amount and the accrued interest to date of $151.
CONVERTIBLE DEBENTURES DUE JUNE 30, 2003
On December 6, 2001, Resolve borrowed $11,150 from an unrelated individuals
secured by a 6% convertible debenture due June 30, 2003. The debentures are
convertible into Resolve's $0.0001 par value common stock at $0.10 per share
through the debenture's maturity date.
NOTE PAYABLE
During May and June 2002, Resolve obtained loans from Barbara Green, an
unrelated individual, and on June 3, 2002 Resolve formalized the advances with a
promissory note for the total advances of $40,000. The note is includes interest
at 12% per annum payable quarterly in arrears, and is secured by the accounts
receivable of the Company.
On February 3, 2003, Resolve secured an extension of the note's maturity date to
May 3, 2003, subject to the timely payment of accrued interest on the note. The
note's maturity date was subsequently extended to June 3, 2003.
INSURANCE FINANCING
In February 2003, Resolve financed its current insurance premiums of $23,594,
net of a $4,968 down payment, with interest at the rate of 9.0% per annum,
payable in monthly to payments of approximately $2,148 per month through
November 2003.
SUBORDINATED CONVERTIBLE NOTES
The Board of Directors authorized the issue and sale of its 18% Subordinated
Convertible Notes ("Notes") due October 1, 2002 in the aggregate principal
amount of not more than $250,000. The Note contained an option for Resolve to
extend the maturity date for up to two successive three months periods ending
January 1, 2003 and April 1, 2003. The principal amount of the Notes was
convertible into shares of Resolve's $0.0001 par value common stock at $2 per
share. As of March 31, 2002, notes were issued in the amount of $100,000. On
June 24, 2002, after negotiations with the note holders, the $100,000 in notes
were cancelled in exchange for units, each consisting of one share of common
stock and one purchase warrant at $.04 per unit.
NOTE E - INCOME TAXES
For financial statements purposes, Resolve has an accumulated losses of
$670,044, from its inception through March 31, 2003, which can be used to offset
future income through 2018.
9
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003 AND 2002
NOTE E - INCOME TAXES (CONTINUED)
For income tax purposes Resolve has a net operating loss carryover of $344,154,
which can be used to offset future Federal and state taxable income through 2018
as indicated below
PERIOD ENDED MARCH 31, LOSSES
--------------------- --------
2014 $ 1,820
2015 3,305
2016 53,817
2017 252,783
2018 32,429
--------
Total $344,154
========
The potential tax benefit of these losses and credits is estimated as follows:
Future tax benefit $ 96,400
Valuation allowance (96,400)
--------
Future tax benefit $ --
========
At March 31, 2003 and December 31, 2002, no deferred tax assets or liabilities
were recorded in the accompanying financial statements.
NOTE F - LOSS PER SHARE
Resolve has reported basic loss per share based on the weighted average number
of shares outstanding for the each period presented. Resolve cannot report fully
diluted loss per share including the shares reserved for the issuance of
4,256,600 common shares upon conversion of warrants and 111,500 shares upon
conversion of 6% debentures due June 30, 2003, even though they are common stock
equivalents, as the effect would be anti-dilutive. Resolve will include the
effect of this dilution in the calculation of fully diluted earnings (loss) per
share only upon actual conversion or the extent they are not anti-dilutive.
For purposes of computation of loss per share, the number of shares outstanding
have been retroactively adjusted to reflect Resolve's 1 for 30 reverse stock
split dated May 28, 2002 for all periods presented.
NOTE G - CASH FLOW SUPPLEMENTAL INFORMATION
Cash paid for interest during the three months ended March 31, 2003 and 2002
amounted to $-0- and $447 respectively.
10
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003 AND 2002
NOTE H - NON-CASH TRANSACTIONS
During three months ended March 31, 2003, the following non-cash transactions
were recorded:
1. Resolve's officers provided services to the Company valued at
$3,000 and donated to the Company.
2. Resolve issued 950,000 shares of common stock to Pinnacle
Corporate Services, an unrelated entity, in exchange for
services. The value of the shares was determined at $.14 per
share, based on the underlying valued of the services to be
provided to Resolve.
3. Resolve issued 275,000 shares of common stock to Wanda D. Dearth,
our CEO, as part of her compensation package. The value of the
shares was determined at $.14 per share, based on the underlying
valued of the services to be provided to Resolve.
NOTE I - RELATED PARTY TRANSACTIONS
During the three month period ended March 31, 2002, Resolve borrowed $8,000 from
Work Holdings, LLC, one of its shareholders of Resolve. In addition, Work
Holdings, LLC paid expenses on behalf of the Company totaling $14,096. On March
31, 2002 the total amount of $22,096 was contribute to the Company, and $284
remains outstanding at March 31, 2003.
During the three months ended March 31, 2002, Resolve borrowed $26,287 from its
president, R. Gale Porter, former president of Resolve, of which $4,076 remains
outstanding at March 31, 2003. The debt is not evidenced by promissory note, and
the Company is paying no interest.
During the three months ended March 31, 2003, Resolve borrowed $25,500 from
William A. Brown, executive vice-president and major shareholder of Resolve,
which remain outstanding at March 31, 2003, along with a debt of $67,000
evidenced by a promissory note due on March 31, 2004, with interest at the rate
of 5% per annum payable quarterly in arrears starting March 31, 2003.
During the three months ended March 31, 2003, the Company's officers provided
services to Resolve valued at $3,000, which were donated to Resolve.
NOTE J - STOCK AND WARRANTS ISSUANCES
On March 30, 2002, Resolve issued 3,333 shares of its common stock to Apogee
Business Consultants, LLC, in connection with consulting services provided to
the Company.
On March 30, 2002, Resolve issued 248,367 shares of its common stock to the
holders of the 5% convertible debentures in exchange for the conversion of the
$7,300 principal amount and the accrued interest to date of $151.
On February 1, 2003, Resolve issued 950,000 shares of its common stock to
Pinnacle Corporate Services, LLC in exchange for a one-year agreement to provide
consulting services valued at $133,000 to be provided to the Company.
On February 7, 2003, Resolve issued 275,000 shares of its common stock valued at
$38,500 to Wanda D. Dearth, its Chief Executive Officer in connection with a
compensation agreement for her services.
11
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003 AND 2002
NOTE K - REGISTRATION STATEMENT
On July 27, 2002, Resolve filed a registration statement on Form SB-2 with the
Securities and Exchange Commission, under the Securities Act of 1933. The
Company is in the process of revising the registration statement, including the
number of shares and warrants being registered, and responding to the SEC's
comments. According to the registration statement, 3,656,760 shares of common
stock are being registered and offered (including 111,500 shares underlying
convertible debentures and 1,750,000 shares underlying the warrants). The
registration statement has not yet been declared effective.
NOTE L - APPOINTMENT OF CHIEF EXECUTIVE OFFICER AND DIRECTOR
On February 7, 2003, the Board of Directors appointed Wanda D. Dearth as Chief
Executive Officer and director of Resolve. Resolve entered into a letter
agreement to retain Ms. Dearth as CEO for a term of three years, with automatic
renewal option, and provides for no compensation until March 30, 2003.
The agreement provides for a $25,000 cash bonus payable no later than August 10,
2003, and monthly cash payments as follows:
AMOUNT
----------------
April 1 to May 31, 2003 $ 5,000
June 1 to August 31, 2003 7,000
Beginning September 1, 2003 10,000
The Board agreed to issued Ms. Dearth a total of 275,000 shares of the Company's
$.0001 par value common stock from the Incentive Plan as part of the
compensation package. Ms. Dearth will be issued 100,000 shares of common stock,
with unconditional piggyback registration rights, with the remaining 175,000
shares being held in escrow and will vest over the employment term as follows:
SHARES
----------------
May 10, 2003 30,000
August 10, 2003 45,000
November 10, 2003 50,000
February 10, 2004 50,000
Ms. Dearth and Resolve have agreed that the value of the shares is $.14 per
share, and is commensurate with the value of the services to be provided by Ms.
Dearth. The agreement also provides for the payment of $25,000 if Ms. Dearth is
terminated in the first 90 days. The Board agreed to proceed with the
development of an Employment Agreement embodying the above.
NOTE L - ISSUANCE OF COMMON STOCK FOR CONSULTING SERVICES
On February 1, 2003, the Board of Directors approved a one-year agreement with
Pinnacle Corporate Services, LLC ("Pinnacle") to provide Resolve with the
following services: review and analyze Resolve's formal and informal product
marketing, assistance and/or preparation of financial, strategic and business
plans, assist and advise Resolve on recruiting key management talent and members
of the board of directors, and provide advise and consult with Resolve
concerning management, products and services. According to the agreement,
Resolve agreed to issue Pinnacle a total of 950,000 shares of the Company's
$.0001 par value common stock as part of the compensation package. Resolve
agreed to prepare and file a registration statement on or before May 31, 2003
and register the shares issued to Pinnacle. Cristino L. Perez approved the
agreement. The other Board members, Don Quarterman and William A. Brown,
abstained from the vote, due to a conflict of interest.
12
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003 AND 2002
NOTE M - ISSUANCE OF COMMON STOCK FOR CONSULTING SERVICES (CONTINUED)
According to the agreement, Resolve issued Pinnacle 100,000 shares of common
stock upon signing of the agreement on February 1, 2003 with the remaining
850,000 shares being held in escrow and will vest over the term of the agreement
as follows: 100,000 shares on March 1, 2003; 100,000 shares on April 1, June 1,
August 1, September 1, and November 1, 2003 and 250,000 shares on February 1,
2004. Pinnacle and Resolve have agreed that the value of the shares is $.14 per
share, and is commensurate with the value of the services to be provided by
Pinnacle.
NOTE N - SUBSEQUENT EVENTS
On May 14, 2003, Resolve secured a $50,000 line of credit from Mercantile Bank,
payable on demand, with interest at the rate of 3% above the Mercantile Bank's
prime rate (their current rate is 4.25%) per annum payable monthly. The line of
credit is secured by a security interest in all of the assets of the Company and
is personally guaranteed by William A. Brown, the Company's executive
vice-president. As of May 15, 2003, Resolve has not drawn down on the line of
credit, therefore, the full $50,000 remains available.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Information
This report and other reports, as well as other written and oral
statements made or released by us, may contain forward looking statements.
Forward-looking statements are statements that describe, or that are based on,
our current expectations, estimates, projections and beliefs. Forward-looking
statements are based on assumptions made by us, and on information currently
available to us. Forward-looking statements describe our expectations today of
what we believe is most likely to occur or may be reasonably achievable in the
future, but such statements do not predict or assure any future occurrence and
may turn out to be wrong. You can identify forward-looking statements by the
fact that they do not relate strictly to historical or current facts. The words
"believe," "anticipate," "intend," "expect," "estimate," "project", "predict",
"hope", "should", and "may", other words and expressions that have similar
meanings, and variations of such words and expressions, among others, usually
are intended to help identify forward-looking statements.
Forward-looking statements are subject to both known and unknown
risks and uncertainties and can be affected by inaccurate assumptions we might
make. Risks, uncertainties and inaccurate assumptions could cause actual results
to differ materially from historical results or those currently anticipated.
Consequently, no forward-looking statement can be guaranteed. The potential
risks and uncertainties that could affect forward looking statements include,
but are not limited to the ability to raise needed financing, increased
competition, extent of the market demand for and supply of goods and services of
the types provided by the Company, governmental regulation, performance of
information systems, and the ability of the Company to hire, train and retain
qualified employees. In addition, other risks, uncertainties, assumptions, and
factors that could affect the Company's results and prospects have been and may
further be described in the Company's prior and future filings with the
Securities and Exchange Commission and other written and oral statements made or
released by the Company.
We caution you not to place undue reliance on any forward-looking
statements, which speak only as of the date of this document. The information
contained in this report is current only as of its date, and we assume no
obligation to update any forward-looking statements.
The financial information set forth in the following discussion
should be read in conjunction with, and qualified in its entirety by, the
Company's unaudited consolidated 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.
Readers are referred to our Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2002.
GENERAL
Resolve Staffing, Inc., formerly Columbialum Staffing, Inc. was
organized as a Nevada corporation on April 9, 1998 and since its inception until
its acquisition of Integra Staffing, Inc. on December 10, 2001, had been
devoting most of its efforts developing its business plan, raising capital,
obtaining financing, establishing its accounting systems, and other
administrative functions.
Integra Staffing, Inc., ("Integra") was organized under the laws of the
State of Florida, on August 16, 1999. Integra is a temporary staffing company.
Integra's strategy has been to provide efficient and affordable solutions to its
customers' employment and labor force needs.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our significant accounting policies are more fully described in Note A to the
financial statements. However, certain accounting policies are particularly
important to the portrayal of the Company's financial position and results of
operations and require the application of significant judgment by our
management; as a result they are subject to an
14
inherent degree of uncertainty. In applying these policies, Resolve's management
uses their judgment to determine the appropriate assumptions to be used in the
determination of certain estimates. Those estimates are based on our historical
operations, terms of existing contracts, our observance of trends in the
industry, information provided by our customers and information available from
other outside sources, as appropriate. Our significant accounting policies
include:
o REVENUE COST RECOGNITION. We record our service revenues from our
customers at the time our temporary employees perform services on customer
assignments. We record revenues from permanent placement at the time the
customer agrees to hire a candidate we supply to them. Consistent with
industry practice, we are at risk for all employee salaries and wages,
employment-related taxes, workers compensation insurance and other
benefits we provide to the employee, whether or not we are able to collect
our accounts receivable from our customers.
o ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS RECEIVABLE. We estimate and provide
an allowance for uncollectible accounts based on analysis and age of our
open accounts, our experience with the particular customer, our own
historical experience with bad debts, as well as other information
obtained from outside sources.
o WORKERS COMPENSATION INSURANCE. The cost of our workers compensation
insurance is based on premiums determined by our insurance carrier for the
particular type of service our employees provide to our customers,
modified by a factor computed based on our claims history. A deterioration
in our claims experience would result in increased insurance costs for
future salary and wages base. Although we attempt to estimate our future
liability, often it is the result of unanticipated claims for work related
injuries.
15
o LONG-LIVED ASSETS. We depreciate property and equipment and amortize
patents over the respective asset's estimated useful life. We determine
the useful lives of each asset based of how long we determine the asset
will generate revenue or has a useful economic life. We review the
remaining useful life of our assets annually to ascertain that our
estimate is still valid. If we determine the useful lives have materially
changed, we either change the useful life of the assets or we may write
the asset off completely if we determine the asset has exhausted its
useful life.
o INCOME TAXES. As part of the process of preparing our financial
statements, we are required to estimate our income taxes. This process
involves estimating our actual current tax exposure together with
assessing temporary differences resulting from differing treatment of
specific items, such as depreciation, allowance for uncollectible accounts
receivable and others. These differences result in deferred tax assets and
liabilities. We then assess the likelihood that our deferred tax assets
will be recovered from future taxable income, and to the extent we believe
that recovery is not likely, we must establish a valuation allowance. To
the extent we establish a valuation allowance or increase the allowance in
a period, we must include an expense within the tax provision in the
statement of operations. To date, we have recorded a valuation allowance
for the entire amount of our deferred tax assets due to the uncertainty of
our ability to utilize them. In the event that actual results differ from
these estimates or we adjust these estimates in future periods, we may
need to establish or adjust an additional valuation allowance, which could
materially impact our financial position and results of operations.
RESULTS OF OPERATIONS
COMPARISON OF CONSOLIDATED OPERATIONS FOR THEE THREE MONTHS ENDED MARCH 31, 2003
AND 2002.
Comparison of consolidated operations of our Company and Integra Staffing,
Inc., our wholly owned subsidiary are as follows:
The net loss decreased from $106,689 for three months ended March 31, 2002
to $32,429 or a 70% decrease for three months ended March 31, 2003. The major
factors contributing to this decrease are the general business recovery and our
aggressive marketing efforts, and a marked decrease in legal and accounting
expenses of $24,426.
Revenues for three months ended March 31, 2002 compared to 2003 increased
from $85,540 to $262,247 or a 207% increase, reflecting an increase in business
recovery and our aggressive marketing efforts. All of our revenues for the three
months ended March 31, 2003 and 2002 were generated entirely from providing
workers to our customers.
For the three months ended March 31, 2003 and 2002 the major categories of
expenses, as a percent of revenue were as follows:
2003 2002
---- ----
Legal & professional 11% 62%
Advertising & promotion 1% 3%
Salaries & benefits 16% 57%
Taxes & licenses 1% 1%
Rent & leases 2% 11%
Travel & entertainment 1% 2%
Administrative expenses 5% 18%
Legal & professional expense decreased from $53,385 in 2002 to $28,960
in 2003 or a 46% decrease, reflecting principally (1) a decrease in consulting
expenses of $24,300, associated with a six-month agreement with Apogee Business
Consultants engaged to assist our management with (a) the requirements for the
structure and documentation of the acquisition of Integra Staffing, Inc., (b)
the increased level of compliance associated with the change of control, (c)
restructuring our common and preferred stock, and (d) assistance and
coordination with our stock transfer agent. The agreement with the consultant
expired in June 2002.
16
Advertising and promotion expense decreased from $2,648 in 2002 to
$1,811 in 2003, or a 32% decrease, reflecting a decreased level of outside
advertising and promotion, while relying more and more on direct customer sales
contacts by our sales staff.
Salaries and benefits decreased from $49,125 in 2002 to $41,716 in
2003, or a 15% decrease, reflecting the lower officers' compensation a lower
level of donated services our CFO and by our current president compared to our
former president. General office salaries increased $1,567 due to the employment
of a part time office clerk.
Rent & leases expense decreased from $9,327 in 2002 to $4,877 in 2003,
reflecting a lower rental cost of our new facilities as well as a reduction of
common area maintenance costs associated with the previous leased offices.
Travel & entertainment decreased from $2,035 in 2002 to $1,425 in 2003,
reflecting the concentrated effort of our management to control costs and
expenses.
Taxes & licenses increased slightly from $1,002 in 2002 to $1,829 in
2003, reflecting additional costs of licensing in Nevada as well as Florida.
General and administrative expenses decreased from $15,111 in 2002 to
$12,859 in 2003 or a 15% decrease. Changes in the major components of general
and administrative expenses from the three months ended March 31, 2002 to March
31, 2003 were as follows: a decease in insurance expenses of $3,757; a decrease
in public company expenses of $1,340; an increase in computer support of $1,873;
an increase in printing costs of $849; a decrease in office expenses of $402; a
decrease in depreciation of $355; and an increase in telephone expenses of $728.
17
COMMITMENTS
During May and June 2003, we obtained loans from Barbara Green, an
unrelated individual, in the aggregate amount of $40,000 under a promissory note
extended to June 3, 2003, with interest at the rate of 12% per annum, secured
with our accounts receivable.
On December 31, 2002 we converted $67,000 in loans obtained from
William A. Brown, our executive vice-president into an unsecured promissory note
due March 31, 2004, with interest at the rate of 5% per annum, payable
quarterly.
In February 2003, we financed our current insurance premiums of
$23,594, after a down payment of $4,968, payable in monthly installment of
$2,148 through November 2003, with interest at the rate of 9% per annum.
In December 2001 we borrowed $11,150 from related individuals secured
by a 6% convertible debenture due June 30, 2003. The debentures are convertible
into shares of our common at $.10 per share through June 30, 2003.
In addition, we borrowed funds from Mr. Brown with a remaining balance
of $24,860, payable on demand. These loans are not evidenced by a promissory
notes and without interest.
Resolve has a current material commitment with its landlord. We lease
approximately 1,056 square feet of office space, housing our operating offices,
pursuant to a three-year lease expiring June 30, 2005 at $1,106 per month, plus
applicable Florida sales tax. We have an option to renew the lease for two
successive terms under the same terms and conditions as the original lease.
These lease payment amounts are included in the table below, under the heading
"operating leases."
The following table presents a summary of the our contractual
obligations and other commercial commitments as of March 31, 2003.
PAYMENTS DUE BY PERIOD
LESS THAN 1 TO 3 4 TO 5 AFTER
TOTAL 1 YEAR YEARS YEARS 5 YEARS
Note payable to Barbara Green 40,000 40,000 0 0 0
Note payable to William A. Brown 67,000 67,000 0 0 0
Notes payable - Insurance financing 17,181 17,181 0 0 0
Debenture payable 11,150 11,150 0 0 0
Related parties loans 24,860 24,860 0 0 0
Operating leases 33,180 13,272 19,908 0 0
Total contractual cash obligations 193,371 173,463 19,908 0 0
LIQUIDITY AND CAPITAL RESOURCES
FOR THE THREE MONTHS ENDED MARCH 31, 2003
For the three months ended March 31, 2003 we incurred a net loss of
$32,429. Of this loss, $32,708, consisting of depreciation ($1,124) and services
donated by our officers ($3,000), as well as expensing of prepaid consulting
expenses ($22,167) and prepaid salary for our CEO ($6,417), both of which
resulted from the issuance of our common stock, and did not represent the use of
cash. Increases in accounts receivable, prepaid and other expenses, and bank
overdraft, offset by increases in accounts payable, payroll, salary, and other
accruals brought the total cash used in operations to $23,485.
18
During the three months ended March 31, 2003, we borrowed $20,500 from
William A. Brown, our executive vice-president and major shareholder. This debt
is not evidenced by a promissory notes and carries no interest.
Our average monthly revenue for each of the four quarters of 2002 was
$28,500, $33,200, $39,500, and $54,500, respectively, and has increased to a
monthly average of $88,300 for the first quarter of 2003. Although we have seen
our average monthly revenues and business activity increase in recent months,
evidenced by our flexible staffing employees increasing from 42 during the three
months ended September 2002 to 108 during the three months ended March 2003, we
expect to continue to incur losses for the foreseeable future. We expect our
operating expenses to increase significantly in the near future as we attempt to
build our brand and expand our customer base. We hope our expenses will be
funded from operations and short-term loans from officer, shareholders or
others; however, our operations may not provide such funds and we may not be
able obtain short-term loans from officers, shareholders or others. Our officers
and shareholders are under no obligation to provide additional loans to the
company,
PROSPECTIVELY
We have decided to upgrade our computer system at a cost of $12,018,
which will be completed during early June 2003. The cost of the upgrade will be
payable 25% down and the remainder at $350 per month without interest. We intend
to fund this cost from operations.
The liquidity needs of the Company for the remainder of 2003 are
expected to increase mostly from the Company's operating activities and in part
from capital expenditures for computer equipment. As of March 31, 2003, we had
$6,396 with which to satisfy our future cash requirements.
We anticipate a refund of overpaid workers insurance of approximately
$65,000 for the policy period ended February 22, 2003. We have provided the
required documentation to our insurance carrier, who have now completed
insurance policy audit, and are awaiting receipt of our refund.
Additionally, on May 14, 2003, we secured a $50,000 line of credit from
Mercantile Bank, payable on demand, with interest at the rate of 3% above
Mercantile Bank's prime rate (their current prime rate is 4.25%) per annum,
payable monthly. The line of credit is secured by security interest in all of
the assets of the Company and is personally guaranteed by William A. Brown, our
executive vice-president. As of May 15, 2003 we have not drawn down on the line
of credit, therefore, the full $50,000 remains available to us.
At May 15, 2003, the Company had no other material commitments for
capital expenditures.
ITEM 3. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, an evaluation was carried
out under the supervision and with the participation of the Resolve's
management, including its Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information relating to the Company (including its consolidated
subsidiaries) required to be included in the Company's periodic SEC filings.
There were no significant changes in our internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation.
19
PART II - OTHER INFORMATION
Item 2. Changes in Securities
In February 2003,pursuant to an employment agreement, we agreed issue
to Ms. Dearth, our chief executive officer, 275,000 restricted shares of the
Company's $.0001 par value common stock. Ms. Dearth and Resolve have agreed that
the value of the shares is $.14 per share. We believe such issuance was pursuant
to Section 4(2) of the Securities Act.
On February 1, 2003, we issued 100,000 shares of our restricted common
stock to Pinnacle Corporate Services, LLC pursuant to our consulting agreement
with them. The shares were issued pursuant to Section 4(2) of the Securities
Act.
On March 1, 2003, we issued 100,000 shares of our restricted common
stock to Pinnacle Corporate Services, LLC pursuant to our consulting agreement
with them. The shares were issued pursuant to Section 4(2) of the Securities
Act.
On April 1, 2003, we issued 100,000 shares of our restricted common
stock to Pinnacle Corporate Services, LLC pursuant to our consulting agreement
with them. The shares were issued pursuant to Section 4(2) of the Securities
Act.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99.1 Certification by Wanda D. Dearth, Chief
Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.2 Certification by Cristino L. Perez, Chief
Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
None.
20
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
RESOLVE STAFFING, INC.
Dated: June 24, 2003 /s/ Wanda D. Dearth
----------------------------------------
By: Wanda D. Dearth
Chief Executive Officer (principal
executive officer, director)
/s/ Donald E. Quarterman, Jr.
Dated: June 24, 2003 ----------------------------------------
By: Donald E. Quarterman, Jr.
President, Director
/s/ Cristino L. Perez
Dated: June 24, 2003 ----------------------------------------
By: Cristino L. Perez
Chief Financial Officer (principal
financial & accounting officer, director)
21
CERTIFICATIONS
I, Wanda D. Dearth, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Resolve Staffing,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
June 24, 2003
/s/ Wanda D. Dearth
- -----------------------------
Name: Wanda D. Dearth
Title: Chief Executive Officer
22
I, Cristino L. Perez, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Resolve Staffing,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
June 24, 2003
/s/ Cristino L. Perez
- ------------------------------
Name: Cristino L. Perez
Title: Chief Financial Officer
23