As filed with the Securities and Exchange Commission on July 24, 2003
Registration No. 333-97255
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2/A
Amendment No. 5
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Resolve Staffing, Inc.
(Exact name of registrant as specified in its charter)
Nevada 7363 33-0860639
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification
Number)
105 North Falkenburg Road, Suite B
Tampa, FL 33619
Phone: (813) 662-0074
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Wanda D. Dearth, CEO
c/o Resolve Staffing, Inc.
105 North Falkenburg Road, Suite B
Tampa, FL 33619
Phone: (813) 662-0074
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With Copies to:
Gregory Sichenzia, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas, 21st Floor
New York, New York 10018
Phone: (212) 930-9700
Facsimile (212) 930-9725
(Former name or former address if changed since last report)
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this Form is post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
Proposed Proposed
maximum maximum
Title of securities Amount to offering price aggregate Amount of
to be registered be registered per share (2) offering price registration fee (3)
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Common Stock 1,661,631 $0.25 $ 415,408 $ 38.22
Common stock 1,592,500 $0.25 $ 398,125 $ 36.63
underlying
warrants (1)
TOTAL 3,254,131 $0.25 $ 813,533 $ 74.85(4)
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(1) Such figure represents 1,592,500 shares of our common stock that are not
yet outstanding but may be issued upon the exercise of outstanding
warrants to purchase 1,592,500 shares of our common stock at an exercise
price of $.15 per share.
(2) The fee with respect to these shares has been calculated pursuant to Rules
457 under the Securities Act of 1933. There is no present public market
for the shares and an arbitrary offering price of $.25 was chosen for
purposes of calculating the registration fee.
(3) Calculated using $92.00 per million dollars.
(4) $124.31 previously paid via file no. 333-97255
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The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
SUBJECT TO COMPLETION, DATED JULY 24, 2003
P R O S P E C T U S
-----------------
We may sell up to 3,254,131 shares of our common stock of Resolve Staffing,
Inc.
This prospectus relates to the offer and sale from time to time by the selling
securityholders of up to 3,254,131 shares of our common stock, of which:
- 1,661,631 shares of common stock are currently owned by the selling
securityholders;
- 1,592,500 shares of our common stock are not yet outstanding but may
be issued upon the exercise of outstanding warrants to purchase
1,592,500 shares of our common stock at an exercise price of $.15 per
share.
Each selling security holder will be deemed an underwriter of the
shares of stock which they are offering.
Of the 3,254,131 shares of common stock registered herein, we are
registering for our non-affiliated selling securityholders (i) 332,126 shares of
common stock currently held; and (ii) 209,500 shares of our common stock
issuable upon the exercise of outstanding warrants. Cristino Perez, William A.
Brown Family Trust, Global Partners, LLC, Work Holdings LLC, R. Gale Porter,
Nilda Hoormik, Rene Morissette and Venancio Pardo, who are our affiliated
selling securityholders, may offer up to (a) 1,329,505 shares of common stock
currently held and (b) 1,383,000 shares of our common stock issuable upon the
exercise of outstanding warrants.
The shares are being sold by the non-affiliated selling securityholders in
separate transactions at $.25 per share until shares of our common stock are
quoted, if at all, on the OTC Bulletin Board and thereafter at privately
negotiated prices. The affiliated selling shareholders, Cristino Perez, William
A. Brown Family Trust, Global Partners, LLC, Work Holdings LLC, R. Gale Porter,
Nilda Hoormik, Rene Morissette and Venancio Pardo, may only sell their shares at
a fixed price for the duration of the offering. If and when our common stock is
traded on the OTC Bulletin Board, only the non-affiliated shareholders may be
allowed to sell their shares at market prices. There is no market for the shares
of our common stock and no such market may ever develop.
Our executive offices are located at 105 North Falkenburg Road, Suite
B, Tampa, Florida 33619, and our telephone number is (813) 662-0074.
INVESTING IN OUR COMMON STOCK INVOLVES SIGNIFICANT RISKS. SEE
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"RISK FACTORS" BEGINNING ON PAGE 5.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state or jurisdiction where the offer or sale is not
permitted.
The date of this prospectus is July 24, 2003.
1
TABLE OF CONTENTS
Page
About Resolve Staffing, Inc ...........................................3
Special Note Regarding Recent Changes in the Common Stock..............4
Risk Factors .........................................................5
Use of Proceeds .......................................................8
Market for the Registrant's Common Stock
and Related Shareholder Matters.....................................8
Management's Discussion and Analysis
or Plan of Operation................................................11
Business...............................................................16
Management.............................................................22
Summary Compensation Table.............................................23
Security Ownership of Certain Beneficial Owners
and Management......................................................24
Certain Relationships and Related Transactions.........................26
Selling Security Holders ..............................................28
Plan of Distribution
Description of Securities..............................................32
Legal Matters .........................................................37
Experts ...............................................................37
Available Information .................................................37
You should rely only on the information contained in this prospectus.
Neither we nor any of the selling security holders have authorized anyone to
provide you with different information. This prospectus may only be used where
it is legal to sell these securities. The information in this prospectus may be
accurate only on the date of this prospectus.
If it is against the law in any state to make an offer to sell the
shares (or to solicit an offer from someone to buy the shares), then this
prospectus does not apply to any person in that state, and no offer or
solicitation is made by this prospectus to any such person.
Until (insert date 90 days after the effective date), all dealers that
effect transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
2
Prospectus Summary
You should read this summary together with the other information
contained in other parts of this prospectus. Because it is a summary, it does
not contain all of the information that you should consider before buying our
common stock.
About Resolve Staffing, Inc.
We are a staffing services firm providing client with professional,
clerical, light industrial, and technical personnel on a permanent, contract and
temporary placement basis. We have marketed our services to approximately 87
companies in the Tampa, Florida area and currently provide technical, clerical,
administrative, accounting, sales, human resources and light industrial staff to
18 companies.
Our company (formerly Columbialum Staffing, Inc., and Columbialum,
Ltd.) was organized in Nevada in April 1998 as a "blank check" or "shell"
company whose primary purpose was to merge with or acquire one or a number of
small private companies. On September 27, 2001, a limited liability company,
Work Holdings, LLC, which is controlled by Rene Morissette, acquired 97.4% of
the outstanding common stock of the company, changed management, and, in
November 2001, entered into an agreement to acquire Integra Staffing, Inc. We
acquired Integra in December 2001 and its staffing business is the core of our
business at the present time.
Integra was organized in August 1999. As of July 18, 2003, we had 49
employees, of whom 42 were flexible staffing personnel and 7 were employed in
sales, administrative and management capacities. During the three months ended
March 31, 2003, we placed 108 flexible staffing personnel, and for the six
months ended June 30, 2003, we placed a total of 149 flexible staffing personnel
into positions within the Tampa, Florida area. We plan to grow our business
through the acquisition of private companies in the staffing industry that would
provide types of staffing and/or related services with which we are familiar. We
may seek private staffing companies for acquisitions or strategic alliances both
in and out of the Tampa, Florida area. We believe that by acquiring existing
staffing companies it will enable us to: expand our service offerings; broaden
our client base; and expand our geographic presence.
About the Offering
The shares to be offered include 1,661,631 shares of common stock are currently
owned by the selling securityholders and 1,592,500 shares of our common stock
not yet outstanding but may be issued upon the exercise of outstanding warrants
to purchase 1,592,500 shares of our common stock at an exercise price of $.15
per share. Based on our current shares outstanding as of June 30, 2003, of
6,225,082, if warrants to purchase 1,592,500 registered shares were exercised by
the selling securityholders, we would have an aggregate of 7,817,582 shares of
our common stock outstanding. This offering is made by selling security holders
only, who are not obligated to make any sales. We will not receive any proceeds
from the sale of shares by selling security holders. We may receive $262,500 if
warrants to purchase 1,592,500 are exercised at $.15 per share, although these
warrants have a cashless conversion provision.
3
Summary Financial Data
Because the following is a summary, it does not contain all of the
financial information that may be important to you. You should also read
carefully all the information contained in this prospectus, including the
financial statements and their explanatory notes.
SELECTED FINANCIAL DATA
Year Ended Year Ended
December 31, 2002 December 31, 2001
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Income Statement: Percent Percent
2002 of sales 2001 of sales
------------- ---------- -------------- ----------
Revenues $ 467,911 100% $ 471,821 100%
Direct Cost of Revenues $ 353,097 75% $ 359,742 76%
Gross Profit $ 114,814 25% $ 112,079 24%
Operating Expenses $ 440,608 94% $ 380,329 81%
Loss before income taxes $ (325,794) ( 69%) $ (268,250) ( 57%)
Other income $ (12,390) ( 3%) $ (21,272) ( 4%)
Net loss (loss) $ (338,184) ( 72%) $ (289,522) ( 61%)
Net loss per share - basic $ (.12) $ (3.47)
Net loss per share - fully diluted $ (.12) $ (3.47)
Three Months Ended
March 31,
2003 2002
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Revenues $262,246 $ 85,540
Direct Cost of Revenues $198,911 $ 55,458
Gross Profit $ 63,335 $ 30,082
Operating Expenses $ 93,476 $ 134,969
Loss before income taxes $(30,141) $(104,887)
Other Income (expense) $ (2,288) $ (1,802)
Net loss $(32,429) $(106,689)
Net loss per share - basic $ (.01) $ (1.20)
Net loss per share - fully diluted $ (.01) $ (1.20)
Balance Sheet: December March 31,
31, 2002 2003
Current assets $ 172,464 $223,560
Current liabilities $ 127,746 $249,963
Working capital $ 44,718 $116,513
Property & equipment $ 14,367 $ 17,643
Total assets $ 186,831 $241,202
Stockholders' equity (deficit) $ ( 7,915) $8,760
SPECIAL NOTE REGARDING RECENT CHANGES IN THE COMMON STOCK
On May 29, 2002, we filed an amendment to our articles of incorporation
to reverse split our outstanding common stock one-for-thirty. All share and per
share amounts in this prospectus have been adjusted to reflect this change.
4
RISK FACTORS
An investment in our common stock involves risks. You should carefully
consider the risks described below and the other information in this prospectus
before you decide to buy our common stock. You could lose all or part of your
investment as a result of these risks.
Risks Related to Our Business
Investors may lose their investment in our common stock if, because we have a
limited operating history, prospective investors have a limited historical basis
to judge whether our business can be successful.
We were incorporated in April 1998, and through Integra, have only
been engaged in the staffing business since August 1999. We have a limited
operating history upon which an investor may evaluate our business and
prospects. 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 have lost money in each quarter since inception. We expect future losses and
may never become profitable
We have incurred net losses from operations in each quarter since
inception. Our net loss for the fiscal year ended December 31, 2002 was
$338,184. Our net loss for the three months ended March 31, 2003, was $32,429
and as of March 31, 2003, we had an accumulated deficit of $778,016. We expect
to continue to incur losses for the foreseeable future. We expect to increase
significantly our operating expenses in the near future as we attempt to build
our brand, expand our customer base and make acquisitions. 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.
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). Professional employer
organizations, or PEOs, provide their clients with a range of services
consisting of payroll administration, benefits administration, unemployment
services and human resources consulting services. PEO's become co-employers with
their clients as to the clients' worksite employees, with employment-related
liabilities contractually allocated between the PEO's and their clients. We may
be subject to certain federal and state laws related to PEO services. Because
many of these laws were enacted before the development of alternative employment
arrangements, such as those provided by PEOs and other staffing businesses, many
of these laws do not specifically address the obligations and responsibilities
of non-traditional employers. Interpretive issues concerning these relationships
have arisen and remain unsettled. Uncertainties arising under the Internal
Revenue Code of 1986, as amended, include, but are not limited to, the qualified
tax status and favorable tax status of certain benefit plans we and other
alternative employers provide. The unfavorable resolution of these unsettled
issues could result in additional tax liability. In addition, the Internal
Revenue Service has formed an examination division, market segment
specialization program, to examine PEOs throughout the United States.
Our employee related costs are significant and, if increased, and we are unable
to pass these costs on to our customers, will increase our cost of doing
business
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.
5
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. We estimate
that $125,000 will be required to fund current operations and that an additional
$750,000 will be necessary to support acquisitions. 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. During the next 12 months, we
expect to meet our cash requirements with existing cash, cash equivalents bank
and private financing, and the proceeds of future private placements of our
securities. We intend to seek lines of credit secured by our accounts
receivable.
If we are unable to successfully integrate and manage acquired businesses
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:
o recruit well-trained, high-quality professionals;
o expand our service offerings;
o gain additional industry expertise;
o broaden our client base; and
o 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 task, we may lose customers or fail to
increase revenue.
Acquisition activities may cause us to lose existing customers because of
conflicts or service problems.
6
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 will own a controlling
interest in our voting stock and investors will not have any voice in our
management.
Upon completion of this offering our officers, directors and
stockholders with greater than 5% holdings will, in the aggregate, beneficially
own approximately 93.8% 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:
o election of our board of directors;
o removal of any of our directors;
o amendment of our certificate of incorporation or bylaws; and
o 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 is no current trading market for our securities. Without a trading market,
purchasers of the securities may have difficulty selling their shares.
There is currently no established public trading market for our
securities. A public trading market in our securities may never develop. If a
trading market does develop, it may not be sustained for any significant time.
We intend to apply for admission to quotation of its securities on the OTC
Bulletin Board. If for any reason our common stock is not listed on the OTC
Bulletin Board or a public trading market does not develop, purchasers of the
shares may have difficulty selling their common stock.
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 June 30, 2003, we had 6,225,082 shares of common stock issued and
outstanding. We also had warrants outstanding that may be exercised or converted
into an aggregate of 4,290,600 shares of common stock. Upon effectiveness of
this Registration Statement, 3,254,131 of the shares offered, including the
listed shares issuable upon exercise of our warrants, may be sold without
restriction. 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.
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.
USE OF PROCEEDS
The selling security holders will sell all of the shares of common
stock offered by this prospectus. Accordingly, we will not receive any of the
proceeds from the sale of these shares. We may receive proceeds from the
exercise of warrants for cash rather than by the exercise of "net exercise
provisions" contained in the warrants. We will use such proceeds, if any, for
general working capital purposes.
MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SHAREHOLDER MATTERS
Market information and offering prices
7
Our securities do not currently, and have not in the past, traded on
any public market. Thus, there is currently no market for our securities and
there can be no assurance that a trading market will develop or, if one
develops, that it will continue or provide liquidity into which shares may be
sold.
The non-affiliated selling security holders may resell our shares by
means of this prospectus initially at $.25 per share until our shares are quoted
on the Bulletin Board. Once the shares are quoted on the Bulletin Board,
non-affiliated selling security holders may either sell at current market prices
or at privately negotiated prices. The affiliated selling shareholders may only
sell their shares at a fixed price for the duration of the offering and that if
and when our common stock is traded on the OTC Bulletin Board, the
non-affiliated shareholders will only be allowed to sell their shares at
privately negotiated prices. These initial prices were arbitrarily determined
and bear no relationship to book value, market value or any other recognized
criteria for valuing shares.
Number of shareholders
The number of shareholders of record of our common stock as of the
close of business on June 29, 2003 was sixty-eight.
Dividend policy
To date, we have declared no cash dividends on our common stock, and we
do not expect to pay cash dividends in the near term. We intend to retain future
earnings, if any, to provide funds for operation of our business.
Recent sales of unregistered securities
On November 16, 2001, we issued an aggregate of $7,300 principal amount
of 5% convertible subordinated debentures due December 31, 2002 to 26
individuals and entities, each of whom were accredited investors pursuant to
Rule 506 of Regulation D under the Securities Act of 1933, as amended (the
"Securities Act"). The transaction was made directly by our officers and
directors without a placement agent. The debentures were converted into 248,366
shares of our common stock which may be sold by using this prospectus.
On December 6, 2001, we issued an aggregate of $11,150 of 6%
convertible subordinated debentures due June 30, 2003 to 104 accredited and 32
non-accredited investors pursuant to Rule 506 of Regulation D under the
Securities Act. No placement agent was employed for this offering. The
debentures are convertible into restricted shares of our common stock for $.10
per share that may result in the issuance of up to 111,500 shares which may be
sold by using this prospectus. On or before June 30, 2003, several debenture
holders elected to convert their debentures into shares of our common stock.
Those shares are included in this prospectus. On June 30, 2003, we repaid in
full, with interest accrued, all of the debentures that were not converted into
shares of our common stock.
On December 10, 2001, we issued 50,000 shares of our restricted common
stock to six individuals in exchange for all of the outstanding capital stock of
Integra, which exchange was exempt under Section 4(2) of the Securities Act.
Each of the six individuals that exchanged shares of Integra Staffing, Inc. for
our shares of common stock represented that they were accredited investors as
defined in Regulation D under the Securities Act of 1933 or had sufficient
knowledge and experience in financial matters to be capable of evaluating the
risk of such an exchange, and based on those representations, the Company
determined the six individuals to be accredited investors.
On January 21, 2002, we issued 3,334 shares of our restricted common
stock to Apogee Business Consultants, LLC pursuant to our consulting agreement
with them. The shares were issued pursuant to Section 4(2) of the Securities
Act.
In March 2002 we issued $100,000 principal amount of 18% Subordinated
Convertible Notes due October 1, 2002 to two accredited investors pursuant to
Rule 506 of Regulation D (described below). The notes were convertible into our
common stock at $2 per share. In April 2002, we authorized a one-for-thirty
reverse split of our common stock, effectively changing the conversion price to
$60 on a post split basis. We negotiated with the investors to issue each
investor 58,000 units consisting of one share of common stock and one warrant
exercisable into common at $.15 per share in exchange for assignment of their
notes. Such notes were subsequently re-issued as follows: Bruce Gordy - $2,320;
Global Partners, LLC $16,252; R. Gale and Jerry M. Porter - $19,736; William A.
Brown Family Limited Partnership $58,372; Ronald Dowdy - $2,320 and Brenda
Holson - $1,000. Each investor receiving an assigned note represented that they
were accredited investors as defined in Regulation D under the Securities Act of
1933 or had sufficient knowledge and experience in financial matters to be
capable of evaluating the risk of such an investment, and based on those
representations, the Company determined the investors to be accredited
investors. All of such notes were subsequently cancelled in exchange for an
aggregate of 2,500,000 units as stated below.
On June 24, 2002, we issued 5,000,000 units to 19 accredited investors
pursuant to Rule 506 of Regulation D. The units each consisted of one share of
common stock and one warrant. The consideration we received consisted of cash
($40,000), the cancellation of the notes described above ($100,000) and the
relief from an obligation to repay certain debt ($60,000), equivalent to $.04
per unit for an aggregate of $200,000. We issued 1,000,000 units for the $40,000
cash, we issued an aggregate of 2,500,000 units in exchange for the return and
cancellation of the $100,000 notes mentioned above and we issued 1,500,000 units
in exchange for relief of the $60,000 debt. The units were offered by our
directors and no commissions were paid. On November 22, 2002, Mr. R. Gale
Porter, our former present, surrendered 743,000 warrants and agreed to cancel
513,965 shares of common stock which were among conditions for the William A.
Brown Trust purchasing 500,000 units from Mr. Porter.
8
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.
On June 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 June 25, 2003, twenty-nine holders of our 6% debentures issued on
December 6, 2001 elected to convert their debentures into shares of common
stock. We issued an aggregate of 34,000 shares of our restricted common stock to
these twenty-nine holders. The shares were issued pursuant to Section 3(a)(9) of
the Securities Act.
Shares Eligible for Future Sale
We cannot predict the effect, if any, that market sales of shares of
our common stock or the availability of shares of our common stock for sale will
have on the market price of our common stock prevailing from time to time. Sales
of substantial amounts of our common stock, including shares issued upon
exercise of outstanding warrants or upon the conversion of outstanding
convertible securities, in the public market after this offering could adversely
affect market prices prevailing from time to time and could impair our ability
to raise capital through the sale of our equity securities.
All of the shares sold in this offering will be freely tradable, except
that any shares acquired by our affiliates, as that term in is defined in Rule
144 under the Securities Act, may only be sold in compliance with the
limitations described below. Any of our affiliates that are selling security
holders may not acquire shares sold in this offering until their distribution is
completed. Based on shares outstanding as of May 15, 2003, the 4,563,451 shares
of our common stock outstanding that are not registered in this prospectus will
be deemed restricted securities as defined under Rule 144. Restricted shares may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 or 144(k) promulgated under the
Securities Act, which rules are summarized below. Subject to the provisions of
Rules 144 and 144(k), additional shares will be available for sale in the public
market as follows:
Number of Shares Date
----------------------- --------------------
27,560 September 27, 2003
10,252 December 12, 2002
2,988,000 June 24, 2004
In addition, there are 2,664,100 shares of our common stock issuable
upon exercise of warrants, which have not been included in this registration.
Although such warrants provide registration rights to the holders of such
warrants, the holders have verbally agreed to waive such registration rights.
These shares would be tradeable in the public market one year after the date of
exercise in the case of the warrants, assuming compliance with the other
provisions of Rule 144.
Rule 144. In general, under Rule 144 as currently in effect, a person,
or group of persons whose shares are required to be aggregated, who has
beneficially owned shares that are restricted securities as defined in Rule 144
for at least one year is entitled to sell, within any three-month period
commencing 90 days after the date of this prospectus, a number of shares that
does not exceed:
o 1% of the then outstanding shares of our common stock, which will be
approximately 62,251 shares prior to this offering and 104,817 shares
assuming all of the outstanding warrants were exercised.
9
In addition, a person who is not deemed to have been an affiliate at
any time during the three months preceding a sale and who has beneficially owned
the shares proposed to be sold for at least two years would be entitled to sell
these shares under Rule 144(k) without regard to the requirements described
above. To the extent that shares were acquired from one of our affiliates, a
person's holding period for the purpose of effecting a sale under Rule 144 would
commence on the date of transfer from the affiliate.
Securities Authorized for Issuance under Equity Compensation Plans
The Resolve Staffing, Inc. 2001 Equity Incentive Plan, adopted by
written consent of the majority of our stockholders effective as of November 1,
2001, covers up to 3,000,000 shares of our Common Stock which are issuable upon
the exercise of stock options or as outright stock awards. The purpose of the
Plan is to enable us to encourage eligible plan participants to contribute to
our success by granting such individuals stock options or stock rewards. Options
granted under the Plan may qualify as "incentive stock options" as defined in
Section 422A of the Internal Revenue Code of 1986.
As of May 14, 2003 there were no options to purchase our common stock
outstanding under our 2001 Equity Incentive Plan. In the future, we intend to
file a registration statement on Form S-8 under the Securities Act to register
all 3,000,000 shares of our common stock subject to the Plan, all shares of our
common stock issued upon exercise of stock options and all shares of our common
stock issuable under our stock option plans. Accordingly, shares of our common
stock issued under these plans will be eligible for sale in the public markets,
subject to vesting restrictions and the lock-up agreements described below.
The Board presently administers the Plan. Subject to the express
provisions of the Plan, the Board has the complete discretion and power to
determine from among eligible persons those to whom options or stock awards may
be granted, the option price, the number of shares of common stock to be granted
and the recipients. Securities may be granted under the Plan from time to time
until November 1, 2011, or such earlier date as may be determined by the Board.
On February 7, 2003, we issued 275,000 shares under the Plan to Wanda D. Dearth
in consideration for services under an employment arrangement as our CEO. No
determinations have been made regarding the persons to whom securities will be
granted in the future. The following table sets forth certain information
regarding the plan as of May 14, 2003:
Number of securities Number of
to be issued upon Weighted average securities
exercise of exercise price of remaining
outstanding options, outstanding options, available for
Plan Category warrants and rights warrants and rights future issuance
- ---------------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved
by security holders - 0 - - 0 - 2,725,000
- ---------------------------------------------------------------------------------------------------------------------
Equity compensation plans not approved
by security holders - 0 - - 0 - - 0 -
- ---------------------------------------------------------------------------------------------------------------------
Total - 0 - - 0 - 2,725,000
- ---------------------------------------------------------------------------------------------------------------------
Registration Rights
Demand Registration Rights. The holders of 2,506,600 warrants, are
entitled to request us to register their shares of common stock and common stock
issuable upon the exercise of the warrants or conversion of the debentures under
the Securities Act which have not been included in this registration statement.
Under the terms of a Registration Rights Agreement entered into between us and
these holders, the holders of registrable securities constituting at least 51%
of the total shares of registrable securities may request that we register all
or any portion of the shares held by such requesting holder or holders. In such
an event, all remaining holders of these rights (excluding holders of shares not
previously converted from preferred stock) are entitled to notice of the
registration and have the right to request us, subject to limitations that the
underwriters may impose on the number of shares included in the registration, to
include their registrable shares in the registration as well. We are obligated
to register such shares up to a maximum of one time under this agreement.
Piggyback Registration Rights. The holders of registrable securities
have also been provided piggyback registration rights which apply when we
register shares (but not when registration occurs pursuant to a Form S-4, S-8 or
other form not available for registering restricted stock for sale to the
public).
Lock-up. This registration rights agreement also provides that if
requested in writing by the underwriter for a future underwritten public
offering of our securities, if there even is one, each holder of restricted
stock (as defined in the agreement) who is a party to the agreement shall agree
not to publicly sell any shares of restricted stock or other shares of common
stock without the consent of the underwriters for a period of not more than 180
days following the effective date; provided all of the selling stockholders in
the offering and our directors and officers have agreed to be similarly bound.
This lock-up agreement does not relate to any of the shares of common stock
registered by the Selling Shareholders hereunder.
10
Termination. The rights of the holders of registrable shares terminate
upon the earlier of seven years or when the shares may be sold without
limitation under Rule 144.
Expenses. We will pay all expenses incurred by us in connection with
the registration of securities, except for underwriting discounts and selling
commissions applicable to the sale of registrable securities, which will be paid
by the sellers of registrable securities participating in the registration.
Other. All registration rights of any of our stockholders have either
been waived or complied with in connection with this offering.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
The following discussion contains certain forward-looking statements
that are subject to business and economic risks and uncertainties, and our
actual results could differ materially from those forward-looking statements.
The following discussion regarding our financial statements should be read in
conjunction with the financial statements and notes thereto.
General overview
Our activities since inception were limited to organizational matters,
and did not have operating activity until we acquired Integra in December, 2001.
We registered our common stock on a Form 10-SB Registration Statement
filed pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") and
Rule 12(g) thereof. We file periodic reports under Rule 13(a) of the Exchange
Act with the Securities and Exchange Commission, including quarterly reports on
Form 10-QSB and annual reports on Form 10-KSB.
Liquidity and capital resources
We have financed our operations through short-term credit facilities
and from the sale of convertible debentures:
o On November 16, 2001, we issued an aggregate of $7,300 principal
amount of 5% convertible subordinated debentures due December 31, 2002
to 18 individuals and entities, each of whom were accredited investors
pursuant to Rule 506 of Regulation D under the Securities Act of 1933,
as amended (the "Securities Act"). The transaction was made directly
by the officers and directors of the Company without a placement
agent.
o On December 6, 2001, we issued an aggregate of $11,150 of 6%
convertible subordinated debentures due June 30, 2003. Several
debenture holders elected to convert their debentures into shares of
common stock, and those who did not elect to convert their debentures
were paid in full, plus accrued interest, on June 30, 2003.
o In March 2002, we sold 18% Subordinated Convertible Notes due October
1, 2002 in the aggregate principal amount of $100,000.
o We sold 5,000,000 units each consisting of one share of our common
stock and one five-year $.15 common stock purchase warrant on June 24,
2002 for $200,000. Of the $200,000, $40,000 was for cash , $100,000
was in exchange for the above notes and $60,000 was for the
satisfaction of outstanding debt. The number of warrants outstanding
was reduced to 4,256,600 after cancellation of 743,400 warrants by Mr.
R. Gale Porter, our former president, on November 22, 2002.
o During May and June 2002 we secured short term loans from Barbara
Green, an unrelated individual in the aggregate amount of $40,000. On
June 3, 2002, the loans were converted to a promissory note due
February 3, 2003, which was subsequently extended to June 3, 2003,
which was subsequently extended to October 3, 2003, with interest at
the rate of 12% per annum, secured by our accounts receivables. The
note extension to October 3, 2003 required us to pay Ms. Green the
accrued interest by July 3, 2003, which was paid to Ms. Green by July
3, 2003.
o From August 2002 through December 2002, we received loans from William
A. Brown, our vice-president and major shareholder in the aggregate
amount of $67,000. The loans were converted to a promissory note due
March 31, 2004. Interest on the note at the rate of 5% per annum is
payable quarterly.
o Subsequent to December 31, 2002 through March 31, 2003, we received
additional loans from William A. Brown amounting to $25,500. These
loans are not evidenced by promissory notes, were provided interest
free and are due on demand. No demand has been made for the repayment
of these loans.
We have incurred net losses from operations in each quarter since
inception, our net loss for the fiscal year ended December 31, 2002 was $338,184
and for the fiscal year ended December 31, 2001 was 289,522. Our average monthly
revenues 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 quarterly revenues and
business activity increase in recent months, evidenced by the number of flexible
staffing employees we have placed in jobs in the Tampa, Florida area, increasing
11
from 42 for the three months ended September 2002 to 108 during the three months
ended March 31, 2003. and 149 for the six months ended June 30, 2003. The number
of employees we had as of July 18, 2003, 49, of whom 42 were flexible staffing
personnel and 7 were employed in sales, administrative and management
capacities, our annual revenues have continued to decrease, from $471,821 during
fiscal year 2001 to $467,911 during fiscal year 2002, with an increase in the
corresponding net loss, from $289,522 during fiscal year 2001 to $338,184 during
fiscal year 2002. Revenue for the three months ended March 31, 2003 increased to
$262,246 from the $85,540 for the three months ended March 31, 2002. Our loss
during such periods decreased to $32,429 for the 2003 period compared to
$106,689 for the 2002 period. Of this loss for the three months ended March 31,
2003, $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.
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 major shareholders;
however, our operations may not provide such funds and we may not obtain short
term loans from shareholders. Our shareholders are under no obligation to
provide additional loans to the company, and there are no agreements for them to
do so. 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.
On February 7, 2003, we entered into an employment agreement with Ms.
Wanda Dearth to become our Chief Executive Officer. Under this agreement, Ms.
Dearth is to receive $71,000 in salary ($5,000 a month in April and May, $7,000
a month in June through August, and $10,000 a month thereafter) and a $25,000
bonus during 2003. Based on our current level of operations, we believe we will
be able to satisfy these cash payments from current operations. However, payment
of this expense, without further increases in revenues or additional financing
could have a significant impact on our cash, which could retard the Company's
growth or cause the Company to restrict its business operations.
As of March 31, 2003, we had working capital of $116,513. As of that
date we had current liabilities of $249,963, including a liability to a note
holder of $40,000 due June 3, 2003. Through December 31, 2002, we received loans
from William A. Brown, our vice-president and major shareholder of $67,000 with
which the insurance financing debt was satisfied. The $67,000 note is due March
31, 2004, and interest at the rate of 5% per annum is due quarterly.
Subsequently, through March 31, 2003, we received additional loans from Mr.
Brown in the amount of $25,500, without interest. The $25,500 aggregate loans
are due on demand and are not evidenced by a promissory note. Our shareholders
are under no obligation to provide additional loans to the Company, and there
are no agreements for them to do so. During the next twelve months, we plan to
satisfy our cash requirements, if at all, through additional equity financing,
factoring (revolving financing secured by and related to the amount of accounts
receivable) and from sales of our services. We do not have specific plans for
additional equity financing, or factoring of our receivables, and we may not be
successful in this regard. Factoring of our accounts receivables would be
subject to the satisfaction of the $40,000 loan to Barbara Green, which is
secured by our accounts receivable. If we are not able to obtain additional
financing our operations may be curtailed or discontinued and an investment in
our common stock would be lost.
Revenues have been slower to materialize than previously anticipated.
At our current level of operations, we would require a minimum of $125,000 to
satisfy the Company's basic cash needs for the next 12 months.
As of March 31, 2003, we did not have any cash with which to satisfy our
future cash requirements. However, besides receiving loans from William A.
Brown, our vice-president and major shareholder, of $25,500 though March 31,
2003, we anticipate a refund of workers insurance paid of approximately $55,000
from the policy that was in force through February 22, 2003. We have been
informed by the insurance company that we will receive a refund of $55,000, with
the check being mailed to us the last week in July, 2003. We have renewed the
current policies at an annual cost of approximately $23,594. We made a down
payment of $4,968, and financed the remaining premiums payable in nine monthly
payments of $2,148.
Management anticipates meeting the remaining of its cash needs from
increased operations, from factoring our accounts receivable of approximately
$122,000 at March 31, 2003, and from short-term private financing from its
officers, directors, shareholders, and others. On May 14, 2003, we secured a
$50,000 line of credit from Mercantile Bank, payable on demand, with interest at
the rate of 7.5% per annum, payable monthly. The line of credit is secured by
our general credit and is personally guaranteed by Mr. William A. Brown, our
Executive Vice-President. On May 29, 2003, we drew down $7,000 for payroll and
on June 26, 2003, we drew down $14,000 for payroll and to pay the convertible
debentures due June 30, 2003. As of July 24, 2003, we have drawn down $21,000,
while $29,000 remains available to us. We do have any arrangement with our
officers, directors, stockholders or others and they are not under any
obligation to provide loans us. From January 1, 2003 through March 31, 2003, Mr.
William A. Brown, our vice-president has made additional loans to us of $25,500.
We have no arrangements regarding additional future loans, if any.
Our monthly revenues have increased from approximately $54,500 during
the quarter ended December 31, 2002, to $88,300 for the first quarter of 2003.
Additionally, we would require approximately $750,000 during the next
12 months to implement our expansion and development plans. If we are unable to
obtain this additional financing, we may be forced to curtain or discontinue our
present expansion and development plans.
12
Previously, we applied for and were tentatively approved for a
three-year $5 million line of credit from a private financial institution for up
to 85% of our qualified trade accounts receivable, secured by accounts
receivable of target acquisitions as well as our current accounts receivable,
which required guarantees by the officers and directors. The line of credit
required a commitment fee of 1%, and interest at the rate of the Wall Street
Journal prime rate plus 2.25%. We decided not to pursue funding from this line
of credit because the cost of such a equity line was prohibitive at our current
level of operations.
Management has not sought or obtained any other additional equity or
debt financing as of the date of this report, we plan to obtain a credit line
similar to the one described above, which would be adequate to fund our
expansion and much of our planned development efforts. In the event that we are
unable to obtain further debt or equity financing, we may not be able to
continue operations as currently conducted, expand our present operations, or
achieve successful acquisitions of other enterprises.
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.
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
At May 12, 2003, we had no other material commitments for capital
expenditures.
Critical accounting policies and estimates
Our significant accounting policies are more fully described in Note A
to our financial statements. However, certain of our accounting policies are
particularly important to the portrayal of our financial position and results of
operations and require the application of significant judgment by our
management; as a result they are subject to an inherent degree of uncertainty.
In applying these policies, our 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, 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 receivable 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.
13
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 may have an adverse affect on
our workers compensation rate 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.
o Long-lived assets: We depreciate property and equipment 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 the assets annually to ascertain that our estimate is still
valid. If we determine the useful lives has materially changed, we
either change the useful life of the assets or in some cases, may write
the asset if we determined 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
involved 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 must 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. We recorded a valuation allowance of $82,280 as of
December 31, 2002 due to uncertainties relating to our ability to
utilize some of our deferred tax assets, consisting primarily of net
operating losses carried forward to the period over which they could
be recoverable. In the event that actual results differ from these
estimates or we adjust these estimates in future periods, we may need
to establish an additional valuation allowance which could materially
impact our financial position and 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.
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.
14
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.
Comparison of consolidated operations for the year ended December 31, 2002
and December 31, 2001
Comparison of consolidated operations of our Company and Integra
Staffing, Inc., our wholly owned subsidiary are as follows:
The net loss increased from $289,522 for year ended December 31, 2001
to $338,184 or a 17% increase for year ended December 31, 2002. The primary
factor in this increase relates to legal and accounting expenses of $83,100, and
related public company expenses of $4,100.
Revenues for years ended December 31, 2001 to 2002 decreased from
$471,821 to $467,911 or less than 1% decrease. All of our revenues for the years
ended December 31, 2002 and 2001 were generated entirely from providing workers
to our customers.
For the years December 31, 2002 and 2001 the major categories of
expenses, as a percent of revenue were as follows:
2002 2001
-------- ---------
Legal & professional 29% 11%
Advertising & promotion 2% 5%
Salaries and benefits 42% 42%
Payroll taxes 2% 2%
Penalties 0% 4%
Rent & leases 5% 5%
Travel & entertainment 1% 2%
Administrative expenses 13% 10%
Legal & professional expense increased from $52,621 in 2001 to $135,701
in 2002 or a 16% increase, reflecting (1) an increase in consulting expenses of
$6,500, associated with a six-month agreement with an outside consultant 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, and (2)
the legal and accounting costs associated with the increased level of compliance
as a public company and the costs associated with filing our registration
statement.
Advertising and promotion expense decreased from $21,710 in 2001 to
$10,806 in 2002, or a 50% decrease, reflecting a decreased level of operations
and in order to conserve resources, relying more and more on direct customer
sales contacts by our sales staff.
Salaries and benefits decreased from $197,304 in 2001 to $194,924 in
2002, or a 1% decrease, reflecting the comparable level of activity for both
years, however, the year 2002 reflects $82,550 of services donated by our
officers. Related payroll taxes remained fairly constant as they relate to
salaries.
Payroll tax penalties decreased from $19,638 in 2001 to $-0- in 2002,
reflecting our ability to secure financing in order to timely pay our payroll
taxes.
Rent & leases expense increased slightly from $22,626 in 2001 to
$23,742 in 2002, reflecting additional common area maintenance costs associated
with the termination of the previous leased operational office.
Travel & entertainment decreased from $10,071 in 2001 to $4,103 in
2001, reflecting the concentrated effort of our management to control costs and
expenses.
Taxes & licenses increased slightly from $7,807 in 2001 to $8,847 in
2002, reflecting additional costs of licensing in Nevada as well as Florida.
15
General and administrative expenses increased from $48,551 in 2001 to
$62,483 in 2002 or a 28% increase. Changes in the major components of general
and administrative expenses from year 2001 to 2002 were as follows: increase in
public company expenses of $4,134; increase in computer support of $4,039;
increase in bad debt expense of $2,700; increase in printing costs of $2,282;
increase in office expenses of $2,282; increase in depreciation of $1,139; and
decrease in repairs and maintenance of $3,502.
INFLATION
Management believes that inflation has not had a material effect on our
results of operations.
BUSINESS
Background of the company
Resolve (formerly Columbialum Staffing, Inc. and Columbialum, Ltd.) was
organized under the laws of the State of Nevada on April 9, 1998, and was a
"blank check" or "shell" company whose primary purpose was to engage in a merger
with, or acquisition of one or a small number of private firms expected to be
private corporations, partnerships or sole proprietorships. On September 27,
2001, Work Holdings LLC, a limited liability company controlled by Rene
Morissette and William A. Brown, acquired 97.4% of our outstanding common stock,
changed management, and in November 2001, entered into an agreement to acquire
Integra Staffing, Inc. ("Integra") for 50,000 shares of our common stock. Work
Holdings LLC was a parent of Resolve prior to the acquisition of Integra. As a
result of the issuance of 50,000 shares to the former shareholders of Integra in
the acquisition, Work Holdings LLC's ownership was reduced to 39%, was reduced
to 9.8% as a result of the conversion of outstanding convertible debentures and
was further reduced to 3.68% (6.69% assuming the exercise of 200,000 warrants)
as a result of the issuance of 5,000,000 units, previously described. We
acquired Integra in December 2001 and its staffing business is the core of our
business at the present time.
Integra was organized on August 16, 1999 in the State of Florida. We
acquired all of the outstanding capital stock of Integra on December 12, 2001 in
exchange for 50,000 shares of our common stock. At the time of the exchange, the
50,000 shares represented 60% of our outstanding common stock. The shareholders
of Integra were two trusts in which Frank Harman was the grantee and beneficiary
and Cristino L. Perez, our CFO, was trustee, R. Gale Porter and his wife, Jerry
G. Porter, Charles and Lorraine Lincoln and the William A. Brown Family Trust.
On September 24, 2001, Premier Ventures Inc. entered into an agreement
to acquire 32,466 shares of Resolve from M. Richard Cutler and Vi Bui for
$25,000. The purchase of such shares was completed on September 26, 2001. On
September 27, 2001, Work Holdings LLC acquired the 32,466 shares from Premier
Ventures in exchange for the payment of $100,000. At the time of the transfer,
such shares represented 97.4% of our outstanding stock. Premier provided no
services to us other than the sale of the 32,466 shares of common stock. There
are no relationships or associations between Premier, its officers, directors
and affiliates and Resolve, Work Holdings LLC or their respective officers,
directors and affiliates. The acquisition of 97.4% of our stock outstanding in
September 2001 (which shares now represent 0.6% of our outstanding stock) by
Work Holdings LLC was to obtain a reporting company shell with which to acquire
assets of a temporary workforce business. Work Holdings LLC is managed by Rene
Morissette, who has no family relationship to any of our officers and directors.
Work Holdings LLC is beneficially owned by Mr. William Brown, a director.
Acquisition of Integra
We entered into an agreement to acquire Integra in November 2001 in
exchange for the issuance of 50,000 shares of common stock and completed the
transaction December 12, 2001, which involved the issuance of the shares to the
individuals that owned Integra capital stock, as follows:
R. Gale and Jerry Porter 17,500
Cristino L. and Elona Perez 7,750
William A. Brown Family Trust 12,685
Frank Hartman 1,815
Charles and Lorraine Lincoln 10,250
-------
50,000
Integra was incorporated for the purpose of establishing and operating
a temporary employment agency. The terms of the acquisition required Columbialum
to issue 1,500,000 shares of (pre-split) common stock representing 60% of the
then outstanding shares in exchange for 100% of the outstanding shares of
Integra common stock, 1,000 shares at a par value of $.01 per share. The
exchange rate was 1,500 shares of Columbialum for every one share of Integra.
There were no finders' fees paid, directly or indirectly, in connection with the
acquisition of Integra.
We plan to grow our business through the acquisition of private
companies in the staffing industry that would provide types of staffing and/or
related services with which we are familiar. We may seek private staffing
companies for acquisitions or strategic alliances both in and out of the Tampa,
Florida area. We believe that by acquiring existing staffing companies it will
enable us to:
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o recruit well-trained, high-quality professionals;
o expand our service offerings;
o gain additional industry expertise;
o broaden our client base; and
o expand our geographic presence.
We do not currently have any signed agreements to acquire any private
company. We have had discussions with one staffing company and have signed a
confidentiality agreement to facilitate the exchange of due diligence
information. We have decided to not pursue this company at this time. At this
time, we have not had any meetings, agreements, or understandings with any other
company. The confidentiality agreement does not obligate either party to any
transaction, but limits the parties from disseminating proprietary information
to anyone except employees or agents of the respective companies.
While we may prefer to structure potential acquisitions in the form of
a stock for stock exchange, we may acquire private companies for a combination
of cash and stock. We currently do not have the cash reserves to effect an
acquisition, although we would consider entering into some type of financing
arrangement to secure the cash needed to effect an acquisition. Since we
currently do not have any signed acquisition or financing agreements, the terms
of any such acquisition or financing would be speculative. There can be no
assurance that required financing will be available on acceptable terms. The
principal factors that would effect whether a transactionis solely for stock or
a combination of stock and cash are the tax and financial objectives of the
prospective sellers. Three major factors in being able to acquire private
companies are (1) workers compensation insurance coverage, (2) financing, and
(3) an exit strategy for owners of these private companies. We have secured or
workers compensation insurance with a major carrier with an excellent
modification rate, and are poised to add additional staffing employees cost
effectively. Although, except as described above, the Company has not actively
attempted to attract or negotiate with acquisition candidates, management will
attempt to secure temporary and permanent financing for the initial cash
requirement of a limited number of acquisitions. Management further believes
that negotiations with prospective target companies would be most effective once
the Company's stock has a public market, of which there is no assurance.
Management believes that private companies may be acquired using future payout
and not require significant current cash outlay. Any such acquisition may
require the issuance of large number of shares of common or preferred stock,
which would have a dilutive effect on current shareholders. We do not anticipate
that an acquisition of other staffing companies, if any, would result in a
change in our control. However, since we cannot predict what the terms of any
future acquisition, if any, there could exist a situation in which an
acquisition might effect a change of control of our Company. If a change of
control should occur, our current management may not be able to implement our
current business plan, which could result in a new business plan by the new
owners, which business plan may differ or completely deviate from our business
plan. Upon a change of control, no assurances can be made of the future
direction of our Company. The Company has no intention of becoming a "blank
check" company, as defined in Rule 419 of the 1933 Securities Act.
We had verbal agreements with two business brokers in an effort to
assist us to identify potential candidates for potential acquisitions consistent
with our growth by acquisition plan. These brokers were not affiliates of the
Company or of our officers, directors or affiliates. There were no arrangements
as to compensation in the event that any of these brokers identified a potential
business acquisition, they have not identified any such candidates and we have
not paid any commissions or any fees to them. We have decided not to use their
services and have terminated their agreements.
We hope to complete the acquisition of at least one private company
within the next 12 months, but we may not be able to do so. This acquisition we
hope would be accomplished entirely by the issuance of common or preferred
stock. If cash was required for the acquisition or to support the operations of
the acquired company, we would try to raise funds in a private equity financing
or by securing a line of credit. We do not have any commitments for either type
of financing.
Expansion Plan
We also plan to grow our business through opening additional offices,
initially in local area, and subsequently expanding to mid-market areas of
Florida and then throughout the southeast United States. This plan would
increase the Company's business concentration in coverage areas. The basic
requirements for such expansion would be initial funding for premises,
personnel, etc. as well as the accounts receivables. This type of expansion
would be accomplished by direct investment and would not normally require
issuance of common or preferred stock. The Company has not yet begun this
expansion program. We anticipate that with in the next 12 months the Company
open two additional offices with in 10 miles of our present locations. The
funding of such officers would be accomplished through funds generated from
operations and private financing for such purpose.
General
We are a local provider of human resource services focusing on the
professional, clerical, administrative and light industrial staffing market in
Tampa, Florida, through our Integra subsidiary. Integra recruits, trains and
deploys temporary personnel and provides payroll administration services to its
clients. Integra's clients, consisting primarily of local companies, include
businesses in the manufacturing, distribution, hospitality, and construction
industries.
17
As of July 18, 2003, we had 49 employees, of whom 42 were flexible
staffing personnel and 7 were employed in sales, administrative and management
capacities. During the three months ended March 31, 2003, we placed 108 flexible
staffing personnel, and during the six months ended June 30, 2003, we placed a
total of 149 flexible staffing personnel into positions within the Tampa,
Florida area. We have approximately 18 clients. Substantially all of our revenue
came from providing temporary workers and were generated by our predecessor,
Integra Staffing, Inc.
Staffing companies provide one or more of three basic services to
clients: (i) flexible staffing; (ii) placement and search; and (iii)
outplacement. Based on information provided by the American Staffing
Association, formerly the National Association of Temporary and Staffing
Services, the National Association of Professional Employer Organizations and
Staffing Industry Analysts, Inc., staffing industry revenues for 2000 were
approximately $63.6 billion. Over the last five years, the staffing industry has
experienced significant growth, due largely to the utilization of temporary help
across a broader range of industries. Staffing industry revenues grew from
approximately $59.5 billion in 1999 to approximately $63.6 billion in 2000, or
6.9%.
Company services
Our Integra subsidiary focuses on meeting our clients' flexible
staffing needs, targeting opportunities in a fragmented, growing market that we
believe has been under-served by large full service staffing companies.
Significant benefits of Integra's services to clients include providing the
ability to outsource the recruiting and many logistical aspects of their
staffing needs, as well as converting the fixed cost of employees to the
variable cost of outsourced services.
- - PAYROLL ADMINISTRATION. We assume responsibility for our Integra
service 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. 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 industrial
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 in the Tampa Bay area. The average employee will work a 40 hour work
week for a client and will work for an average of 2 employers per month. It is
estimated an employee will work an average of 14 days per month. Our service
specializes in clerical and light industrial staffing with the largest
percentage in the clerical field. 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.
At this time we do not have any contractual agreements with our
customers for providing staffing.
18
Sales and Marketing
We market our flexible staffing services through a combination of
direct sales, telemarketing, trade shows and advertising. We have two full time
salespersons.
Clients
Our clients represent a cross-section of the industrial sector, of
which no single client currently represents more than 5% of our total revenues.
Although more than 99% of Integra's clients are local and regional companies,
Integra's client list does include some national companies. One customer, H. Lee
Moffit Medical Clinic, represented 16% of our revenue for the year ended
December 31, 2001 and -0-% of our revenue for the fiscal year ended December 31,
2002.
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. Generally, flexible industrial
staffing clients do not sign long-term contracts.
Many of our clients are concentrated geographically in western Florida,
however we are not dependent on any one customer in any of the markets we serve.
Competition
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.
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.
INDUSTRY REGULATION
Overview
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. Payroll taxes for the third quarter of 2001 were past due from
Integra in the amount of $13,275 at December 31, 2001, and an arrangement was
made with the IRS whereby this liability was paid in full in monthly
installments through May, 2002.
Employee Benefit Plans. We plan to 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 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.
19
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, self-insurance funds or, if permitted by the state, employer self
insurance. 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.
Corporate employees
As of July 18, 2003, we had 49 employees, of whom 42 were flexible
staffing personnel and 7 were employed in sales, administrative and management
capacities. Of the seven administrative employees, three are officers and work
full time. During the three months ended March 31, 2003, we placed 108 flexible
staffing personnel, and during the six months ended June 30, 2003, we placed a
total of 149 flexible staffing personnel into positions within the Tampa,
Florida area.
Twenty of our part-time employees work 30 hours or more per week. We believe
that our relationships with our employees are good.
Expansion program
We plan to acquire competitive temporary staffing firms operating in
larger metropolitan cities including Tampa, Florida and surrounding areas.
Target companies being sought will have recognized local brands and a network of
office locations able to collectively produce positive cash flows. Our principal
areas of interest are in the southeast and mid-west market places. We plan to
operate acquired companies under their existing brand identities to minimize
alienation of the local community by a name change. Where possible, we plan to
consolidate administrative and record keeping functions in an effort to improve
operating efficiency.
Our acquisition program will be focused on acquiring businesses that
have a strong presence in the office administration, data processing, network
administration, and technical production support market segments within the
staffing industry. We believe that our expertise and service regimes, once
integrated into operating procedures of the acquired companies, will allow these
businesses to be more competitive and attractive to staffing service consumers
in these critical market segments.
In addition, we plan to acquire or develop platform entry business in
the emerging Professional Employer Organization ("PEO") industry. PEO's provide
their clients with a range of services consisting of payroll administration,
benefits administration, unemployment services and human resources consulting
services. PEO's become co-employers with their clients as to the clients
worksite employees, with employment related liabilities contractually allocated
between the PEO's and their clients. While PEO co-employment relationships raise
questions concerning the employer/employee relations under tax and welfare
benefit laws, we believe that offering these services to our clients will create
revenue growth potential.
We have no definitive agreements or understandings with respect to any
acquisitions, but did sign a confidentiality agreement with one company in order
to review certain due diligence documents, including customer lists and
financial statements and have access to their current employees. We have decided
to not pursue this company at this time. This company is not affiliated with any
member of our management or affiliates.
20
Property
Our prior executive offices consisted of 2,000 square feet of office
space at facilities which were provided to us by R. Gale Porter, our former
President, Chief Operating Officer and a director, without rent until such time
as we raised sufficient funds for an adequate level of operations. Mr. R. Gale
Porter, the Company's president, resigned effective October 23, 2002 and the
arrangement for the use of executive offices at no cost to the Company was
terminated. The Company's operations were consolidated at our new premises
leased in June, 2002.
We entered into a lease on June 19, 2002, effective July 8, 2002, for
1,056 square feet office space, housing our operating offices, pursuant to a
three-year lease with Tampa Associates, A Georgia Partnership, an unaffiliated
party. The lease expiring June 30, 2005. The monthly rental is $1,106 per month,
plus escalations for increases in real estate taxes and common charges.
Previously we occupied a 1,540 square feet office space, housing our
operating offices, pursuant to a three-year lease expiring October 31, 2003. The
space was leased to another tenant, therefore, we were relieved of any liability
on the lease after August 31, 2002.
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 these 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.
Legal Proceedings
We are not the subject of any legal proceeding. Our business, however,
may be subject to routine legal proceedings from time to time in the ordinary
course of our business.
We have reached an agreement with our prior securities counsel and
established a payment schedule. We currently owe previous counsel $17,000, who
will be paid $3,000 in each of May, July, August and September and $5,000 in
June.
Consulting Agreement
On October 1, 2001 we entered into a consulting agreement with Apogee
Business Consultants, LLC, an unrelated entity, though March 31, 2002. The
agreement was subsequently extended informally through June 30, 2002 on the same
terms as the original agreement. The agreement expired and has not been renewed.
Under the terms of the agreement, Apogee Business Consultants provided
services to the Company including, assistance with our merger with Integra
Staffing, Inc., assistance with the preparation and filing appropriate filings
with the Commission, obtaining our CUSIP number, coordinate with our transfer
agent for the issuance of our common stock, and other services.
As compensation for services provided by Apogee Business Consultants,
we agreed to pay $7,500 per month plus 100,000 shares of common stock (3,333
shares of common stock after the one-for-thirty stock split) and to provide
registration rights on such shares on any registration statement filed by the
Company. We also agreed to sell Apogee 200,000 (6,667 after the one-for-thirty
stock split) of our common stock at approximately $0.0001 per share. We have
made all required monthly payments to Apogee under the agreement.
On February 7, 2003, the Board of Directors approved a one-year
agreement with Pinnacle Corporate Services, LLC ("Pinnacle") to provide Resolve
with the following services: 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, provide advise and
consult with Resolve concerning management, products and services, and review
and advise Resolve in its efforts to consolidate segments of the staffing
industry. Don Quarterman is a co-founder and the current Managing Partner of
Pinnacle and William Brown has had negotiations about becoming a significant
investor in Pinnacle. There are no other relationships or associations between
Pinnacle, its officers, directors and affiliates and Resolve or its respective
officers, directors and affiliates. Pinnacle will not be seeking, brokering, or
negotiating any merger or acquisition nor will it engage in any capital raising
on behalf of Resolve. Pinnacle's services to us are strictly consulting in
nature. Their consulting services will focus on preparing our business plans and
targeting and recruiting key personnel to staff any acquired companies after
completion of the acquisition. According to the agreement, Resolve will issue
Pinnacle a total of 950,000 restricted shares of the Company's $.0001 par value
common stock as compensation for its services. Resolve agreed to prepare and
file a registration statement on or before December 31, 2003 and register the
shares issued to Pinnacle. The agreement was approved by Cristino L. Perez, our
Chief Financial Officer and a director. The other Board members, Don Quarterman
and William A. Brown, abstained from the vote due to their conflict of interest,
as disclosed above. 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.
21
MANAGEMENT
The following table sets forth the names and ages of our current
directors and executive officers, the principal offices and positions held by
each person and the date such person became a director or executive officer. The
executive officers are elected annually by the Board of Directors. The directors
serve one-year terms until their successors are elected. The executive officers
serve terms of one year or until their death, resignation or removal by the
Board of Directors. There are no family relationships between any of the
directors and executive officers. In addition, there was no arrangement or
understanding between any executive officer and any other person pursuant to
which any person was selected as an executive officer.
Our directors and executive officers as of May 12, 2003, are as
follows:
Name Age Position
Wanda D. Dearth 50 Chief Executive Officer and Director
Donald E. Quarterman, Jr. 34 President, Chief Operating Officer and Director
William A. Brown 45 Executive Vice-President and Director
Cristino L. Perez 59 Chief Financial Officer, Secretary, Treasurer, and
Director
Ms. Dearth serves as our Chief Executive Officer and director since
February 10, 2003. Ms. Dearth has more than 15 years of health care staffing,
marketing and management experience. Prior to joining us, Ms. Dearth was an
independent consultant and a consultant with Comforce Nurse Staffing Services
from January 2001 to February 2003. From June 2000 through December 2001, Ms.
Dearth was Chief Operating Officer and President at Cryo-Cell International,
Inc., a Nasdaq Small Cap company specializing in the storage of umbilical cord
blood stem cells. From August 1998 to May 2000, Ms. Dearth was a business unit
vice president with Kforce.com HealthCare, where she handled business
development for the nurse staffing division and she served as a regional
director for StarMed Staffing from January 1, 1998 to July 7, 1998.
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. 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 Resolve, 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. Perez has served as our Chief Financial Officer, Secretary,
Treasurer and Director since December 12, 2001. Mr. Perez served as Secretary,
Treasurer and Director of Integra since October 2001. From October 1999 to June
2002, Mr. Perez was employed by Baumann, Raymondo & Company, P.A., Certified
Public Accountants with primary responsibilities for development of accounting
and auditing services to small publicly held enterprises. From 1993 to 1999, Mr.
Perez operated his own tax and accounting service, with concentration of
services to small private and publicly held companies. Mr. Perez earned a BA
degree in Accounting from the University of South Florida.
Mr. R. Gale Porter served as President and director from December 12,
2001 until his resignation October 23, 2002. Mr. Porter resigned for personal
financial reasons.
22
Executive compensation
We entered into a letter agreement to retain Wanda D. Dearth as CEO on
February 7, 2003. The agreement is for a term of three years, with an 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 agreement also provides for the issuance to Ms. Dearth 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.
We do not have employment contracts with any of our other management
personnel.
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation information
for services rendered in all capacities for the three fiscal years ended
December 31, 2002 for each person that served as our Chief Executive Officer. No
executive officer's salary and bonus exceeded $100,000 in any of the applicable
years.
SUMMARY COMPENSATION TABLE
Other
Year Annual Restricted All Other
Ended Compen- Stock Options/ LTIP Compen-
Name and Principal Position Dec. 30 Salary Bonus sation Awards SARs Payouts sation
M. Richard Cutler, 2002 -0- -0- -0- -0- -0- -0- -0-
President, Treasurer 2001 -0- -0- -0- -0- -0- -0- -0-
And Secretary (1) 2000 -0- -0- -0- -0- -0- -0- -0-
Rene Morissette, 2002 -0- -0- -0- -0- -0- -0- -0-
President, Treasurer 2001 750 -0- -0- -0- -0- -0- -0-
And Secretary (2) 2000 -0- -0- -0- -0- -0- -0- -0-
Charles Lincoln, 2002 -0- -0- -0- -0- -0- -0- -0-
Chairman and 2001 -0- -0- -0- -0- -0- -0- -0-
CEO (3) 2000 -0- -0- -0- -0- -0- -0- -0-
R. Gale Porter, 2002 37,450 -0- -0- -0- -0- -0- -0-
President and COO (4) 2001 -0- -0- -0- -0- -0- -0- -0-
2000 -0- -0- -0- -0- -0- -0- -0-
Donald E. Quarterman, Jr., 2002 3,000 -0- -0- -0- -0- -0- -0-
President and COO (5) 2001 -0- -0- -0- -0- -0- -0- -0-
2000 -0- -0- -0- -0- -0- -0- -0-
- -----------
(1) Appointed April 9, 1998; resigned September 27, 2001.
(2) Appointed September 26, 2001; resigned January 11, 2002.
(3) Appointed December 12, 2001; resigned March 18, 2002.
(4) Appointed March 18, 2002; resigned October 23, 2002
(5) Assumed the duties of Chief Executive on December 4, 2002.
23
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
Number of Securities Percent of Total
Underlying Options/SAR's
Options/SAR's Granted to Employees Exercise of
Name Granted (#) in Fiscal Year Base Price ($ / SH) Expiration Date
- ------------------------ --------------------- ---------------------- ----------------------- -----------------
M. Richard Cutler None N/A N/A N/A
Rene Morissette None N/A N/A N/A
Charles Lincoln None N/A N/A N/A
R. Gale Porter None N/A N/A N/A
Donald E. Quarterman, None N/A N/A N/A
Jr.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Shares Value of Unexercised
Acquired on Value Number of Unexercised Options In-the-Money Options
Name Exercise Realized Exercisable / Unexercisable Exercisable / Unexercisable
- --------------------- --------------- ------------ -------------------------------- -------------------------------
M. Richard Cutler N/A N/A None N/A
Rene Morissette N/A N/A None N/A
Charles Lincoln N/A N/A None N/A
R. Gale Porter N/A N/A None N/A
Donald E. N/A N/A None N/A
Quarterman, Jr.
Compensation of directors
Directors were not separately compensated for their services since
inception.
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common
stock as of June 25, 2003, by:
o each person who is known by us to beneficially own more than 5% of
our common stock
o each of the named executive officers and each of our directors; and
o all of our officers and directors as a group
Percentage of ownership is based on 6,191,082 shares outstanding as of
June 25, 2003.
For the table set forth below, William A. Brown is the control person
of the William A. Brown Family Trust and the William A. Brown Family
Partnership. Work Holdings LLC is controlled by Rene Morissette, its sole
managing director. Global Partners LLC is controlled by Nilda Hoornik, its sole
managing director.
24
Number
of Shares
Name and Address of of Common Stock Percentage of
Beneficial Owner Beneficially Owned Ownership
- ---------------- ------------------ ---------
R. Gale Porter (1)
310 E. Harrison
Tampa, FL 33602 300,000 4.85%
Cristino L. Perez (2)
105 N. Falkenburg Road
Tampa, Florida 33619 2,855,848 37.63%
Donald E. Quarterman (3)
3837 Northdale Boulevard
Tampa, FL 33624 950,000 15.34%
Wanda D. Dearth (4)
105 N. Falkenburg Road
Tampa, Florida 33619 275,000 4.44%
William A. Brown (5)(7)
106 Stanley Street
Tampa, FL 33604 5,030,995 58.11%
Rene Morissette (6)(7)
1410 W. Perdiz
Tampa, FL 33612 458,582 7.16%
Work Holdings LLC (8)
1410 W. Perdiz
Tampa, FL 33612 427,560 6.69%
Nilda Hoornik (9)
3314 W Pametto St.
Tampa, FL 33607 2,776,421 36.75%
Global Partners, LLC(10)
3314 W Pametto St.
Tampa, FL 33607 2,776,421 36.75%
Pinnacle Corporate Services, LLC(11)
3837 Northdale Blvd., Suite 303
Tampa, FL 33624 950,000 15.34%
All Officers and Directors as a
group (4 persons) (12) 9,111,843 90.61%
- ----------------
Footnotes to this table on following page
(1) Mr. R. Gale Porter was our Chief Operating Officer, President, and a
director of the Company until his resignation on October 23, 2002. Represents
300,000 shares which he owns jointly with his spouse.
(2) Cristino L. Perez is our Chief Financial Officer, Secretary, Treasurer, and
is a director of the Company. Includes 45,027 shares owned directly by him,
his spouse or jointly and 34,400 shares issuable upon the conversion of
warrants. We have also attributed to Mr. Perez 1,412,921 shares of common stock
and 1,363,500 shares issuable upon the exercise of warrants representing the
securities owned by Global Partners, LLC in which Mr.
Perez's wife, through her individual retirement account, is a majority
shareholder of Global Partners, LLC.
(3) Donald E. Quarterman, Jr. was appointed Chief Operating Officer, President
and director on December 4, 2002. Includes 950,000 shares owned by Pinnacle
Corporate Services, LLC, a Company in which Mr. Quarterman is a managing
partner.
(4) Wanda D. Dearth was appointed Chief Operating Officer, President and
director on February 10, 2003. Such figure assumes ownership by Ms. Dearth of
275,000 shares of our common stock.
(5) It includes 816,835 shares owned by the Trust controlled by William A. Brown
as Trustee, and 750,000 shares issuable upon conversion of warrants owned by the
Trust. It also includes 1,517,300 shares and 1,517,300 shares issuable upon
exercise of warrants transferred to the Trust from the William A. Brown
Family Partnership, also controlled by William A. Brown, as General Partner. It
also includes 2,000 shares owned by his wife, Christina Brown. We have also
attributed to Mr. Brown 227,560 shares of common stock and 200,000 shares
issuable upon the exercise of warrants representing the securities owned by Work
Holdings LLC in which Mr. Brown, through his individual retirement account, is a
majority shareholder of Work Holdings LLC.
(6) Mr. Morissette is the managing director of Work Holdings LLC. Accordingly,
the amount attributable to Mr. Morissette includes 227,560 shares of common
stock owned by Work Holdings LLC and 200,000 shares issuable upon the
exercise of warrants owned by Work Holdings LLC. Such figure also includes 7,500
warrants to purchase common stock and 8,011 shares of common stock and 7,500
warrants to purchase common stock owned by Mr. Morrisette's wife.
(7) Mr. Morissette is the managing director of Work Holdings LLC. Mr. William
Brown owns 58.01% of Work Holdings LLC.
(8) Includes 200,000 shares of common stock issuable upon the exercise of
warrants.
(9) Nilda Hoornik is the managing director of Global Partners LLC. Includes
1,000 shares that may be obtained by Ms. Hoornik upon the conversion of her
debenture. Includes securities owned by owned by Global Partners LLC which
includes 1,363,500 shares of common stock issuable upon the exercise of warrants
and 1,412,921 shares of common stock.
25
(10) Includes 1,363,500 shares of common stock issuable upon the exercise of
warrants and 1,412,921 shares of common stock.
(11) Donald E. Quarterman, Jr. is a managing partner of Pinnacle Corporate
Services, LLC.
(12) Includes 3,867,200 that may be obtained by officers and directors and their
related parties upon the exercise of outstanding warrants.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our business activities were organized by Mr. R. Gale Porter, our former
president, Mr. Cristino Perez, our CFO, Mr. William A. Brown and Mr. Venancio
Pardo, who are deemed to be promoters of our Company.
In December 2001, we acquired Integra Staffing through the issuance of
50,000 shares of our commons tock, 76% of which were issued to the organizers in
exchange for the outstanding shares of Integra as follows:
Name Number of Shares
--------------------------------- --------------------
Cristino L. Perez 7,750
William A. Brown Family Trust 12,685
R. Gale Porter 17,500
The remaining 12,065 shares were issued to a non-affiliated minority
shareholder of Integra.
On November 16, 2001, Resolve borrowed $7,300 from former shareholders
of Integra and unrelated individuals secured by 5% convertible debentures due
December 31, 2002. The debentures were convertible into Resolve's $0.0001 par
value common stock at $0.0001 per share through the debenture's maturity date.
On March 30, 2002, the debentures and accrued interest of $151 were converted
into 248,667 common shares of the Company. Of these 248,667 shares, 156,636
shares (63%) were issued to our organizers as follows:
Name Number of Shares
--------------------------------------- ----------------
R. Gale Porter 53,065
William A. Brown Family Trust 54,151
Global Partners LLC for the benefit
of Venancio Pardo 22,202
For the benefit of Cristino Perez'
spouse 27,218
On June 24, 2002, Resolve sold 5,000,000 units, each consisting of one
share of our common stock and one five-year $.15 common stock purchase warrant
for $.04 per unit. Of that amount:
o 1,527,800 units were sold to our officers and directors for $1,376
in cash, the cancellation of $19,736 in notes, and the
satisfaction $40,000 in outstanding debt of the Company.
o 2,890,200 units were sold to our shareholders owning 10% or more
of the Company's common stock for $18,664 in cash, the
cancellation of $76,944 in notes, and the satisfaction of $20,000
in outstanding debt of the Company.
The consideration we received from officers and directors for the
issuance of 917,400 was as follows:
Number of Consideration
Name Units Received
---------------------------------- --------------- --------------------------------
Cristino L. Perez 34,400 $1,376
Global Partners LLC for the
benefit of Mr. Perez' spouse 883,000 The proportional share of a cash
payment of $18,288, the
cancellation of Notes of
$16,252 and $20,000 of debt on
total purchases of 1,363,500
units.
26
The consideration we received from our 10% or more shareholders for
4,325,600 units was as follows:
Number of Consideration
Name Units Received
---------------------------------------- --------------- --------------------------
William A. Brown Family 1,517,300 Cancellation of $60,692
Limited Partnership of Notes
R. Gale Porter 1,493,400 Cancellation of
$19,736 of Notes and
$40,000 of debt
Venancio Pardo 9,400 $ 376.00
Global Partners LLC for the benefit of:
Venancio Pardo 255,000 $ 3,420.20
Cristino L. Perez' spouse 883,000 $ 11,843.27
Fiero Partners 167,500 $ 777.93
In consideration for the immediate registration of 300,000 shares of
the Company's restricted common shares owned by R. Gale Porter, our former
president, Mr. Porter agreed to contribute back to the Company 513,965 common
shares and 743,400 common shares issuable upon conversion of warrants.
Additionally, Mr. Porter agreed to subject the 300,000 shares to a lock-up
agreement, whereby a maximum of 10,000 shares can be sold per month after 60
days from the time the Company's shares first are listed on an exchange or on an
electronic medium that provides real-time trade reporting or 180 days from the
time the Company's registration statement is declared effective.
On November 22, 2002, Mr. Porter sold 750,000 units of the Company's
securities to the William A. Brown Family Trust. Each unit consists of one share
of the Company's common stock and one common stock purchase warrant. The
consideration for the purchase and sale was a promissory note due June 30, 2003
for $30,000, secured by a pledge of the shares and warrants.
Mr. Venancio Pardo's adult daughter, who shares her parents' residence,
purchased a 6% convertible debenture due June 30, 2003 from Resolve, which
entitles her to convert such debenture into 1,000 shares of Resolve's common
stock. In addition, she is the sole owner of ICBM Corporation and its subsidiary
1Mundo, Inc. ICBM Corporation and 1Mundo, Inc. each purchased a 6% convertible
debenture due June 30, 2003 from Resolve, which entitles them to convert such
debentures into 1,000 shares of Resolve's common stock. On June 30, 2003, we
repaid the convertible debentures, plus accrued interest, held by Mr. Venancio
Pardo's adult daughter, ICBM Corporation and 1Mundo, Inc.
From January 1, 2002 through December 31, 2002, Mr. R. Gale Porter and
Mr. Cristino L. Perez have provided services to our company in their capacity of
President and CFO respectively. The services provided by Mr. Porter, valued at
$37,450 were contributed to the Company. Of the services provided by Mr. Perez,
valued at $44,100, $2,000 was paid in cash, and the remaining $42,100 were
contributed to the Company. Mr. Perez has agreed to continue to provide services
to our company until such time as we are able to generate sufficient funds for
an adequate level of operations. Mr. Porter provided services to our company
until his resignation on October 23, 2002.
From September 27, 2001 until his resignation as president on October
23, 2002, Mr. R. Gale Porter had provided us with the use of executive offices
at no cost to us. We no longer use such offices.
During the year ended December 31, 2002, Resolve borrowed $67,000 from
William A. Brown, executive vice-president and major shareholder of Resolve, of
which $67,000 remains outstanding at December 31, 2002. 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 starting March 31, 2003.
On February 7, 2003, the Board of Directors approved a one-year
agreement with Pinnacle Corporate Services, LLC ("Pinnacle") to provide Resolve
with the following services: 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, provide advise and
consult with Resolve concerning management, products and services, and review
and advise Resolve in its efforts to consolidate segments of the staffing
industry. Pinnacle's services regarding any potential acquisition will only be
on a consulting basis. Don Quarterman is a co-founder and the current Managing
Partner of Pinnacle and William Brown has had negotiations about becoming a
significant investor in Pinnacle. Pinnacle will not be seeking, brokering, or
negotiating any merger or acquisition nor will it engage in any capital raising
on behalf of Resolve. There are no other relationships or associations between
Pinnacle, its officers, directors and affiliates and Resolve or its respective
officers, directors and affiliates. According to the agreement, Resolve will
issue Pinnacle a total of 950,000 restricted shares of the Company's $.0001 par
value common stock as compensation for its services. Resolve agreed to prepare
and file a registration statement on or before December 31, 2003 and register
the shares issued to Pinnacle. The agreement was approved by Cristino L. Perez,
our Chief Financial Officer and a director. The other Board members, Don
Quarterman and William A. Brown, abstained from the vote due to their conflict
of interest, as disclosed above. 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.
27
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 (currently 4.25%) per annum, payable monthly. The line of credit is
secured by our general credit and is personally guaranteed by Mr. William A.
Brown, our Executive Vice-President. On May 29, 2003, we drew down $7,000 for
payroll and on June 26, 2003, we drew down $14,000 for payroll and to pay the
convertible debentures due June 30, 2003. As of July 24, 2003, we have drawn
down $21,000, while $29,000 remains available to us.
SELLING SECURITY HOLDERS
The table below sets forth information concerning the resale of the
shares of common stock by the selling security holders. We will not receive any
proceeds from the resale of the common stock by the selling security holders.
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling security holder has sole or shared voting power or investment power
and also any shares which the selling security holder has the right to acquire
within 60 days. The actual number of shares of common stock issuable upon the
conversion of the debentures is subject to adjustment depending on, among other
factors, the number of shares outstanding at the time of conversion and could be
materially less than the number estimated in the table.
The following table also sets forth the name of each person who is
offering the resale of shares of common stock by this prospectus, the number of
shares of common stock beneficially owned by each person, the number of shares
of common stock that may be sold in this offering and the number of shares of
common stock each person will own after the offering, assuming they sell all of
the shares offered.
Control Persons of Selling Security Holders
William A. Brown is the control person of the William A. Brown Family Trust
and the William A. Brown Family Partnership. Work Holdings LLC is controlled by
Rene Morissette, its sole managing director. Global Partners LLC is controlled
by Nilda Hoornik, its sole managing director.
Other control persons and their respective entities are as follows:
-Walter G. Masky, President of Video Concepts Limited, Inc.
-George Chaconas, Trustee of George Chaconas Trust
Beneficial Ownership Beneficial Ownership
Name of Prior to Offering Shares After Offering
Selling Security Holders Shares Percentage Offered (1) Shares Percentage
- --------------------------------- ---------- ---------- ------------- --------------------------
R. Gale Porter (2) 300,000 4.85% 300,000 0 0.00%
Cristino L. Perez (3) 2,855,848 37.63% 79,427 0 0.00%
William A. Brown Family Trust (4) 5,028,995 50.41% 799,836 3,801,600 48.38%
Nilda Hoornik (5) 2,776,421 36.75% 1,083,420 1,693,001 22.67%
C. Bruce Gordy (6) 119,908 1.92% 119,908 0 0.00%
Frank Hartman 81,655 1.32% 81,655 0 0.00%
Ronald E. Dowdy 119,908 1.94% 119,908 0 0.00%
Rene Morissette (7) 443,071 6.92% 415,511 27,560 *%
Charles & Lorraine Lincoln (8) 81,569 1.32% 71,317 10,252 *
Video Concepts Ltd., Inc. 59,954 * 59,954 0 0.00%
Arthur G. Knox 4,000 * 4,000 0 0.00%
Brenda Holson 50,000 * 50,000 0 0.00%
Susan Morisette. IRA 15,511 * 15,511 0 0.00%
Venancio Pardo (9) 18,800 * 18,800 0 0.00%
Stephanie Crumpler 784 * 784 0 0.00%
Jaime Ceniceros 17 * 17 0 0.00%
Cora Lo 17 * 17 0 0.00%
Sheri Skiba 17 * 17 0 0.00%
Susan Egbert 17 * 17 0 0.00%
Mike Cutler 17 * 17 0 0.00%
Frank Hartman, Custodian 15 * 15 0 0.00%
for Ginifer Hartman
Juan Carnovali 3,000 * 3,000 0 0.00%
Daniel and/or Lori J. Alonso 2,000 * 2,000 0 0.00%
Wilfredo and/or Maria del 2,000 * 2,000 0 0.00%
Carmen Alonso
28
Roy M. Barnhart 1,000 * 1,000 0 0.00%
Patricia B. Stewart 1,000 * 1,000 0 0.00%
Vernon Barclay 1,000 * 1,000 0 0.00%
John Kingman Keating 1,000 * 1,000 0 0.00%
Cole Whitaker 1,000 * 1,000 0 0.00%
James E. Meyer 1,000 * 1,000 0 0.00%
Erin Dowdy (10) 1,000 * 1,000 0 0.00%
Megan Dowdy (10) 1,000 * 1,000 0 0.00%
George Chaconas Trust 1,000 * 1,000 0 0.00%
John V. Trujillo I/T/F John V.
Trujillo, Jr and Jayna J. 1,000 * 1,000 0 0.00%
Trujillo
Brenda Holson 1,000 * 1,000 0 0.00%
John E. Helms 1,000 * 1,000 0 0.00%
Christina H. Brown (11) 2,000 * 2,000 0 0.00%
Jerry Knox (12) 1,000 * 1,000 0 0.00%
Arthur G. Knox (12) 1,000 * 1,000 0 0.00%
Terence McCarty 1,000 * 1,000 0 0.00%
Roberta Dantico 1,000 * 1,000 0 0.00%
Michael J. Echevarria 1,000 * 1,000 0 0.00%
Tony Muniz, Jr. 1,000 * 1,000 0 0.00%
Michael S. McConnell 1,000 * 1,000 0 0.00%
Randy R. Barbas 1,000 * 1,000 0 0.00%
Philip J. Ciaravella 1,000 * 1,000 0 0.00%
Robert E. Johnson 1,000 * 1,000 0 0.00%
Allen Kinley 1,000 * 1,000 0 0.00%
Michael Edward Eggleston 1,000 * 1,000 0 0.00%
Malcolm G. Taaffee 1,000 * 1,000 0 0.00%
- -----------------
* Less than 1.00%
(1) Represents 1,750,000 shares of the 5,000,000 issuable upon conversion of
warrants at $.15 per share and includes 1,465,260 shares currently issued
and outstanding. The remaining 3,250,000 underlying the warrants belonging
to officers, directors and major shareholders are not being registered at
this time.
(2) Mr. R. Gale Porter served as the Company's Chief Operating Officer,
President, and is a director of the Company until his resignation on
October 23, 2002. The ownership consist of 300,000 shares which he owns
jointly with his spouse. This ownership does not include the underlying
interest in 3,079 shares owned by Work Holdings, LLC, a limited liability
corporation whose sole managing director is Rene Morissette, in which Mr.
Porter has a 1.35% interest. Mr. Porter disclaims beneficial interest of
the shares owned by Work Holdings, LLC in that he has neither voting nor
investment powers with respect to such shares. On November 22, 2002, Mr.
Porter sold 750,000 shares and 750,000 shares issuable upon conversion of
warrants in a private transaction to the William A. Family Trust. In
consideration of registration rights on the 300,000 shares by the Company,
Mr. Porter agreed to return 513,965 shares and 743,400 shares issuable
upon conversion of warrants to the Company for cancellation. Additionally,
Mr. Porter agreed to subject the 300,000 shares to a lock-up agreement,
whereby a maximum of 10,000 shares can be sold per month after 60 days
from the time the Company's shares first are listed on an exchange or on
an electronic medium that provides real-time trade reporting or 180 days
from the time the Registration Statement is declared effective .
(3) Cristino L. Perez is the Company's Chief Financial Officer, Secretary,
Treasurer, and is a director of the Company. Includes 45,027 shares which
he or his spouse own directly and jointly with his spouse and 34,400
shares issuable upon conversion of warrants to him. It also includes
1,412,921 shares and 1,363,500 shares issuable upon conversion of warrants
owned by Global Partners, LLC, a limited liability corporation, in which
Mr. Perez's spouse has a majority interest. This ownership does not
include the underlying interest in 4,169 shares owned by Work Holdings,
LLC, a limited liability corporation whose sole managing director is Rene
Morissette, in which Mr. Perez has a 1.83% interest. Mr. Perez disclaims
beneficial interest of the shares owned by Work Holdings, LLC in that he
has neither voting nor investment powers with respect to such shares.
(4) William A. Brown Family Trust consists of 816,835 shares owned by the
trust controlled by William A. Brown as Trustee, and 750,000 shares
isssuable upon conversion of warrants owned by the Trust. It also includes
1,517,300 shares previously owned by the William A. Brown Family
Partnership, also controlled by William A. Brown, as General Partner, and
1,517,300 shares issuable upon conversion of warrants also previously
owned by the Partnership, which were transferred to the Trust. This
ownership also includes the underlying interest in 227,560 shares owned by
Work Holdings, LLC, a limited liability company whose sole managing
director is Rene Morissette, and 200,000 shares issuable upon conversion
of warrants owned by Work Holdings, LLC. Mr. Brown owns a majority
interest in Work Holdings, LLC.
(5) Nilda Hoornik consisting of 1,412,921 shares owned by Global Partners,
LLC, a limited liability company in which she is the sole managing
director, and 1,363,500 shares issuable upon conversion of warrants owned
by this limited liability corporation. These shares are beneficially
owned, based on their interest in the corporation as follows: Elona
Perez's individual retirement account, 63.87%; Cristino L. Perez, 9.0%;
Venancio Pardo's individual retirement account, 10.16%; Fiero Partners,
12.06%; and others, 4.90%. Nilda Horrnik also owns 1,000 shares issuable
upon conversion of a debenture. Ms. Hoornik is the sister of Cris Perez,
our chief financial officer and a director.
29
(6) C. Bruce Gordy consisting of 61,906 shares owned directly by him, and
58,000 shares issuable upon conversion of warrants also owned by him. This
ownership does not include the underlying interest in 58,000 shares owned
by Work Holdings, LLC, a limited liability company whose sole managing
director is Rene Morissette, and 58,000 shares issuable upon conversion of
warrants owed by Work Holdings, LLC. Mr. Gordy disclaims beneficial
interest of the shares owned by Work Holdings, LLC in that he has neither
voting nor investment powers with respect to such shares.
(7) Rene Morissette consisting of 8,011 shares owned directly by him, and
7,500 shares issuable upon conversion of warrants owned by him, and
227,559 shares and 200,000 shares issuable upon conversion of warrants
owned by Work Holding, LLC, a limited liablility company in which he is
the sole managing director. These shares are beneficially owned, based on
their interest in the corporation as follows: Charles Lincoln, 5.4%; R.
Gale Porter, 1.35%; Venancio Pardo's individual retirement account, 3.53%;
Cristino L. Perez, 1.83%; , C Bruce Gordy, 25.49%; William A. Brown's
individual retirement account, 58.01%, and others 4.4%.
(8) Includes 47,545 shares which he owns jointly with his spouse, 17,012
shares owned by Intequest, Inc. and 17,012 shares owned by Esprit Business
Service, Inc., in which Mr. Lincoln is the sole stockholder in each
corporation.
(9) Venancio Pardo consisting of 9,400 shares owned directly by him, and 9,400
shares issuable upon conversion of warrants owned by him. This ownership
does not include the underlying interest in 152,202 shares owned by Global
Partners, LLC, a limited liability corporation whose sole managing
director is Nilda Hoornik, and 130,000 shares issuable upon conversion of
warrants owned by this limited liability corporation, in which Mr. Pardo
has a 10.16% interest. Mr. Pardo disclaims beneficial interest of the
shares owned by Global Partners, LLC in that he has neither voting nor
investment powers with respect to such shares. This ownership does not
include the underlying interest in 8,026 shares owned by Work Holdings,
LLC, a limited liability corporation whose sole managing director is Rene
Morissette, in which Mr. Pardo has a 3.53% interest. Mr. Pardo disclaims
beneficial interest of the shares owned by Work Holdings, LLC in that he
has neither voting nor investment powers with respect to such shares.
(10) Erin Dowdy and Megan Dowdy are sisters and the daughters of Ronald Dowdy.
(11) Christina Brown is the wife of our director, William Brown.
(12) Arthur G. Knox is the father of Jerry Knox.
PLAN OF DISTRIBUTION
The shares may be sold or distributed from time to time by the selling security
holders named in this prospectus, by their donees or transferees, or by their
other successors in interest. The shares are being sold by the selling
securityholders in separate transactions at $.25 per share until shares of our
common stock are quoted, if at all, on the OTC Bulletin Board or the proposed
Bulletin Board Exchange. Thereafter, the non-affiliated selling security holders
may sell their shares at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices, or at fixed
prices, which may be changed. Each selling security holder reserves the right to
accept or reject, in whole or in part, any proposed purchase of shares, whether
the purchase is to be made directly or through agents.
Each selling security holder will be deemed an underwriter of the shares of
stock which they are offering.
Cristino Perez, William A. Brown Family Trust, Global Partners, LLC, Work
Holdings LLC, R. Gale Porter, Nilda Hoormik, Rene Morissette and Venancio Pardo,
who are our affiliated selling securityholders, may offer up to (a) 1,329,505
shares of common stock currently held and (b) 1,383,000 shares of our common
stock issuable upon the exercise of outstanding warrants.
The affiliated selling shareholders, Cristino Perez, William A. Brown Family
Trust, Global Partners, LLC, Work Holdings LLC, R. Gale Porter, Nilda Hoormik,
Rene Morissette and Venancio Pardo, may only sell their shares at a fixed price
for the duration of the offering. If and when our common stock is traded on the
OTC Bulletin Board, only the non-affiliated shareholders may be allowed to sell
their shares at market prices.
30
The selling security holders may offer their shares at various times in
one or more of the following transactions:
o in ordinary brokers' transactions and transactions in which the broker
solicits purchasers;
o in transactions involving cross or block trades or
otherwise on an appropriate market;
o in transactions "at the market" to or
through market makers in the common stock or into an existing market for
the common stock;
o in other ways not involving market makers or
established trading markets, including direct sales of the shares to
purchasers or sales of the shares effected through agents;
o through transactions in options, swaps or other derivatives which may or
may not be listed on an exchange;
o in privately negotiated transactions;
o in transactions to cover short sales; or
o in a combination of any of the
foregoing transactions.
The selling security holders also may sell their shares in accordance
with Rule 144 under the Securities Act of 1933.
From time to time, one or more of the selling security holders may
pledge or grant a security interest in some or all of the shares owned by them.
If the selling security holders default in performance of the secured
obligations, the pledgees or secured parties may offer and sell the shares from
time to time. The selling security holders also may transfer and donate shares
in other circumstances. The number of shares beneficially owned by selling
security holders who transfer, donate, pledge or grant a security interest in
their shares will decrease as and when the selling security holders take these
actions. The plan of distribution for the shares offered and sold under this
prospectus will otherwise remain unchanged, except that the transferees, donees
or other successors in interest will be selling security holders for purposes of
this prospectus. Prior to donees, pledges, assignees, transferees or successors
in interest selling any shares registered hereunder, a post-effective amendment
to this registration statement must be filed.
A selling security holder may sell short the common stock. The selling
security holder may deliver this prospectus in connection with such short sales
and use the shares offered by this prospectus to cover such short sales.
A selling security holder may enter into hedging transactions with
broker-dealers. The broker-dealers may engage in short sales of the common stock
in the course of hedging the positions they assume with the selling security
holder, including positions assumed in connection with distributions of the
shares by such broker-dealers. A selling security holder also may enter into
option or other transactions with broker-dealers that involve the delivery of
the shares to the broker-dealers, who may then resell or otherwise transfer such
shares. In addition, a selling security holder may loan or pledge shares to a
broker-dealer, which may sell the loaned shares or, upon a default by the
selling security holder of the secured obligation, may sell or otherwise
transfer the pledged shares.
The selling security holders may use brokers or agents to sell their
shares. The persons acting as agents may receive compensation in the form of
commissions, discounts or concessions. This compensation may be paid by the
selling security holders or the purchasers of the shares for whom such persons
may act as agent, or to whom they may sell as principal, or both. The
compensation as to a particular person may be less than or in excess of
customary commissions. The selling security holders and any agents or
broker-dealers that participate with the selling security holders in the offer
and sale of the shares may be deemed to be "underwriters" within the meaning of
the Securities Act. Any commissions they receive and any profit they realize on
the resale of the shares by them may be deemed to be underwriting discounts and
commissions under the Securities Act. Neither we nor any selling security
holders can presently estimate the amount of such compensation. In the event
that a selling shareholder engages a broker-dealer, we will file a
post-effective amendment to this registration statement describing the
arrangements between such selling shareholder and the broker-dealer.
We have advised the selling security holders that during such time as
they may be engaged in a distribution of the shares, they are required to comply
with Regulation M under the Securities Exchange Act. With certain exceptions,
Regulation M prohibits any selling security holder, any affiliated purchasers
and any broker-dealer or other person who participates in such distribution from
bidding for or purchasing, or attempting to induce any person to bid for or
purchase, any security which is the subject of the distribution until the entire
distribution is complete. Regulation M also prohibits any bids or purchases made
in order to stabilize the price of a security in connection with the
distribution of that security. The foregoing restrictions may affect the
marketability of the shares.
Under our agreements with the selling security holders, we are required
to bear the expenses relating to this offering, excluding any underwriting
discounts or commissions, brokerage fees, stock transfer taxes and fees of legal
counsel to the selling security holders. We estimate these expenses will total
approximately $40,000.
31
We have agreed to indemnify most of the selling security holders
against certain liabilities, including certain liabilities under the Securities
Act, including Mr. Perez, Mr. Pardo, Mr. Porter (until his resignation on
October 23, 2002), Mr. Brown and the entities controlled by them. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the registrant under
these provisions, the registrant has been informed that in the opinion of the
securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is therefore unenforceable.
It is possible that a significant number of shares could be sold at the
same time. Such sales, or the perception that such sales could occur, may
adversely affect prevailing market prices for the common stock.
This offering by any selling security holder will terminate two years
from the date of this prospectus or, if earlier, on the date on which the
selling security holder has sold all of his shares.
Penny Stock Rules
Our common stock is subject to the "penny stock" rules that impose
additional sales practice requirements should because our shares presently do
not trade in any market and can be expected to trade below $5.00 per share. For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of the common shares and must have
received the purchaser's written consent to the transaction prior to the
purchase. The "penny stock" rules also require the delivery, prior to the
transaction, of a risk disclosure document mandated by the Securities and
Exchange Commission relating to the penny stock market. The broker-dealer must
also disclose:
o the commission payable to both the broker-dealer and the registered
representative,
o current quotations for the securities, and
o if the broker-dealer is the sole market maker, the broker-dealer must
disclose this fact and the broker-dealer's presumed control over the
market.
Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks.
These rules apply to sales by broker-dealers 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), unless our common shares trade above $5.00 per share.
Consequently, the "penny stock" rules may restrict the ability of broker-dealers
to sell shares of our common stock, and may affect the ability to sell the
shares in the secondary market as well as the price at which such sales can be
made. Also, some brokerage firms will decide not to effect transactions in
"penny stocks" and it is unlikely that any bank or financial institution will
accept "penny stock" as collateral.
Underwriter Status
The selling security holders and any broker-dealers or agents that are
involved in selling the shares may be considered to be "underwriters" within the
meaning of the Securities Act for such sales. An underwriter is a person who has
purchased shares from an issuer with a view towards distributing the shares to
the public. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
considered to be underwriting commissions or discounts under the Securities Act.
Our affiliates who are selling shareholders, R. Gale Porter, Cristino Perez,
Nilda Hoornik, William A. Brown Family Trust and William A. Brown Family Limited
Partnership, Global Partners LLC and Vernacio Pardo, are underwriters in this
offering. Because the selling security holders are deemed "underwriters" within
the meaning of Section 2(11) of the Securities Act, they will be subject to the
prospectus delivery requirements.
We are required to pay all fees and expenses incident to the
registration of the shares in this offering. However, we will not pay any
commissions or any other fees in connection with the resale of the common stock
in this offering. We have agreed to indemnify the selling security holders and
their officers, directors, employees and agents, and each person who controls
any selling security holder, in certain circumstances against liabilities,
including liabilities arising under the Securities Act. Each selling security
holder has agreed to indemnify us and our directors and officers in certain
circumstances against certain liabilities, including liabilities arising under
the Securities Act.
If the selling security holder notifies us that they have a material
arrangement with a broker-dealer for the resale of the common stock, then we
would be required to file a post-effective amendment to the registration
statement of which this prospectus is a part, and file a prospectus supplement
to describe the agreements between the selling security holder and the
broker-dealer.
32
DESCRIPTION OF SECURITIES
The following is a summary of our Articles of Incorporation, as
amended.
Common Stock
Our Articles of Incorporation authorizes the issuance of up to
50,000,000 shares of common stock and 10,000,000 shares of preferred stock.
Each share of our common stock entitles its holder to one vote upon
all matters on which holders of our common stock are entitled to vote under
applicable law or otherwise. Stockholders are not permitted to vote their shares
cumulatively. Accordingly, the holders of more than 50% of the issued and
outstanding shares of common stock can elect all of our directors. Holders of
common stock have no preemptive or other subscription rights, conversion rights,
redemption or sinking fund provisions. In the event of our liquidation,
dissolution or winding up, whether voluntary or involuntary, each share of
common stock will be entitled to share ratably in any assets available for
distribution to holders of our equity securities after satisfaction of all
liabilities and after providing for each class of stock, if any, having
preference over the common stock.
The rights of the holders of common stock are subject to any rights
that may be fixed for holders of preferred stock, when and if any preferred
stock is issued.
Preferred Stock
Our board of directors is authorized by our certificate of
incorporation to issue up to ten million shares of one or more series of serial
preferred stock. No shares of serial preferred stock have been authorized or
designated for future issuance by our board. In addition, we have no present
plans to issue any such shares.
In the event that our board of directors does authorize, designate
and issue shares of serial preferred stock, it may exercise its discretion in
establishing the terms of such serial preferred stock. In the exercise of such
discretion, our board may determine the voting rights, if any, of the series of
serial preferred stock being issued, which could include the right to vote
separately or as a single class with our common stock and/or other series of
serial preferred stock; to have more or less voting power per share than that
possessed by our common stock or other series of serial preferred stock; and to
vote on certain specified matters presented to the shareholders or on all of
such matters or upon the occurrence of any specified event or condition. On our
liquidation, dissolution or winding up, the holders of serial preferred stock
may be entitled to receive preferential cash distributions fixed by our board
when creating the particular series of preferred stock before the holders of our
common stock are entitled to receive anything. Serial preferred stock authorized
by our board could be redeemable or convertible into shares of any other class
or series of our capital stock.
The issuance of serial preferred stock by our board of directors
could adversely affect the rights of holders of our common stock by, among other
things, establishing preferential dividends, liquidation rights or voting
powers. The issuance of serial preferred stock could be used to discourage or
prevent efforts to acquire control of our company through the acquisition of
shares of our common stock, even if a change in control were in our
stockholders' interest.
Warrants
Each of the 4,256,600 outstanding warrants represent the right to
acquire one share of common stock at an initial exercise price of $.15 per share
for a period of five years ending June 30, 2007. The exercise price and the
number of shares issuable upon exercise of the warrants will be adjusted upon
the occurrence of the following events:
o issuance of common stock as a dividend on shares of common stock,
o subdivisions, reclassifications or combinations of the common stock or
similar events.
The warrants do not contain provisions protecting against dilution
resulting from the sale of additional shares of common stock for less than the
exercise price of the warrants or the current market price of our securities and
do not entitle warrant holders to any voting or other rights as a shareholder
until such warrants are exercised and common stock is issued.
33
The warrants contain a provision referred to as a "net exercise
provision" that allows the holder to convert the warrants into shares of our
common stock, without making any cash payment. If the holder elects to exercise
this net exercise right, the holder authorizes the company to withhold the
number of shares that would have to be sold at the prevailing market price at
the time of exercise to pay the exercise price. For example, if our stock has a
market price of $.60 per share and a holder exercises the net exercise right for
10,000 warrants, the holder would receive 7,500 shares. This is because the
holder would have had to sell 2,500 shares at $.60 in order to pay the $1,500
exercise price for 10,000 shares (10,000 x $.15 = $1,500). This example is an
illustration and should not be interpreted as any indication of whether a market
for our common stock will develop.
Holders of warrants may exercise their warrants for the purchase of
shares of common stock and resell such shares only if a current prospectus
relating to such shares is then in effect and only if such shares are qualified
for sale, or deemed to be exempt from qualification under applicable state
securities laws. We are required to use our best efforts to maintain a current
prospectus relating to such shares of common stock at all times when the market
price of the common stock exceeds the exercise price of the warrants until the
expiration date of the warrants, although there can be no assurance that we will
be able to do so.
The shares of common stock issuable on exercise of the warrants will
be, when issued in accordance with the warrants, duly and validly issued, fully
paid and non-assessable. At all times that the warrants are outstanding, we will
authorize and reserve at least that number of shares of common stock equal to
the number of shares of common stock issuable upon exercise of all outstanding
warrants.
For the term of the warrants, the holders thereof are given the
opportunity to profit from an increase in the per share market price of our
common stock, with a resulting dilution in the interest of all other
stockholders. So long as the warrants are outstanding, the terms on which we
could obtain additional capital may be adversely affected. The holders of the
warrants might be expected to exercise the warrants at a time when we would, in
all likelihood, be able to obtain additional capital by a new offering of
securities on terms more favorable than those provided by the warrants.
Option 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 3,000,000 and to permit the
issuance of unrestricted shares.
Transfer and Warrant Agent
Florida Atlantic Stock Transfer, Inc. serves as our transfer agent.
Indemnification
Our certificate of incorporation allows us to indemnify our officers
and directors to the maximum extent allowed under Nevada law. This includes
indemnification for liability which could arise under the Securities Act. We
have agreed to indemnify certain selling security holders against some
liabilities, as more fully set forth in registration rights agreements,
including liabilities under he Securities Act, and to contribute to payments
such selling security holders may be required to make.
Certain selling security holders have agreed to indemnify us, our
officers and directors against some liabilities, as more fully set forth in the
registration rights agreements, including liabilities under the Securities Act,
and to contribute to payment we and our controlling persons may be required to
make.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrant under these provisions, the registrant has been informed that in the
opinion of the securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
LEGAL MATTERS
The validity of our common stock offered hereby is being passed upon for Resolve
Staffing, Inc. by Sichenzia Ross Friedman Ference LLP, New York, New York.
EXPERTS
The financial statements as of and for the years ended December 31,
2002 and 2001 included in this Prospectus have been so included in reliance on
the report of Timothy M. Griffiths, CPA, independent certified public
accountant, given on the authority of said firm as experts in auditing and
accounting.
34
Changes in and disagreements with accountants on accounting and financial
disclosure
On March 1, 2002, our Board of Directors adopted a resolution changing
our independent accountant from Haskell & White, LLP (the "Former Accountant")
to the firm of Timothy M. Griffiths, Certified Public Accountant (the "New
Accountant"). The action was taken principally because we had completed the
acquisition of Integra and the board decided it would be in our best interest to
utilize the services of Integra's auditor. During the fiscal year ended December
31, 2000 and 1999, and for the periods from inception on April 9, 1998 through
December 31, 2000, and any subsequent interim period to the date of the
dismissal (February 26, 2002), we had no disagreement with our Former Accountant
on any matter of accounting principal or practice, financial statement
disclosure or auditing scope or procedure which would have caused the Former
Accountant to make reference in its report upon the subject matter of
disagreement. The Former Accountant previously issued a report dated March 27,
2001 on our financial statements as of and for the year ended December 31, 2000
and 1999, and for the period from inception on April 9, 1998 through December
31, 2000. The report did not contain an adverse opinion or disclaimer of opinion
or qualification as to audit scope or accounting principle. The Former
Accountant's report did contain additional disclosure relating to uncertainty as
to our ability to continue as a going concern but did not contain any adjustment
for the disclosed uncertainties. The Former Accountant reviewed this disclosure
and has furnished us with a letter addressed to the SEC that did not contain any
new information or clarification of the disclosure.
We did not consult with the New Accountant regarding any matters prior
to its engagement, including matters relating to the application of accounting
principles, although the New Accountant rendered an unqualified audit report on
Integra's balance sheets as of December 31, 2000 and 1999 and related statements
of operations, cash flows and stockholders' equity for the year ended December
31, 2000 and the period from inception (August 16, 1999) to December 31, 1999,
which was included in our Form 8-K dated December 12, 2001, as amended.
AVAILABLE INFORMATION
We have filed a registration statement on Form SB-2 under the
Securities Act of 1933, as amended, relating to the shares of common stock being
offered by this prospectus, and reference is made to such registration
statement. This prospectus constitutes the prospectus of Resolve Staffing, Inc.,
filed as part of the registration statement, and it does not contain all
information in the registration statement, as certain portions have been omitted
in accordance with the rules and regulations of the Securities and Exchange
Commission ("SEC").
We are subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") which requires us to file reports,
proxy statements and other information with the Securities and Exchange
Commission. Such reports, proxy statements and other information may be
inspected at public reference facilities of the SEC at Judiciary Plaza, 450
Fifth Street N.W., Washington D.C. 20549. Copies of such material can be
obtained from the Public Reference Section of the SEC at Judiciary Plaza, 450
Fifth Street N.W., Washington, D.C. 20549 at prescribed rates. Because we file
documents electronically with the SEC, you may also obtain this information by
visiting the SEC's Internet website at http://www.sec.gov.
We intend to furnish our stockholders with annual reports containing
audited financial statements.
This prospectus includes statistical data that were obtained from
industry publications. These industry publications generally indicate that the
authors of these publications have obtained information from sources believed to
be reliable, but do not guarantee the accuracy and completeness of their
information. While we believe these industry publications to be reliable, we
have not independently verified their data.
35
FINANCIAL STATEMENTS
The Financial Statements required by Item 304 of Regulation S-B are stated in
U.S. dollars and are prepared in accordance with U.S. Generally Accepted
Accounting Principles
PAGE
----
Independent auditor's report F-1
Financial statements -
Consolidated balance sheets as of December 31, 2002 and 2001 F-2
Consolidated statements of operations for the years ended
December 31, 2002 and 2001 F-3
Consolidated statements of cash flows for the years ended
December 31, 2002 and 2001 F-4
Consolidated statements of stockholders' equity for the year ended
December 31, 2002 and 2001 F-5
Notes to consolidated financial statements F-6
Consolidated balance sheets as of March 31, 2003 (unaudited)
and December 31, 2002 F-18
Consolidated statements of operations for the three months ended
March 31, 2003 and 2002 F-19
Consolidated statements of cash flows for the three months ended
March 31, 2003 and 2002 F-20
Consolidated statements of stockholders' equity for the three months
ended March 31, 2003 (unaudited) and for the year ended
December 31, 2002 F-21
Notes to consolidated financial statements F-22
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Resolve Staffing, Inc.
Tampa, Florida
I have audited the accompanying consolidated balance sheets of Resolve Staffing,
Inc., (formerly Resolve Staffing, Inc.) as of December 31, 2002 and 2001, and
the related consolidated statements of operations, cash flows and stockholders'
equity for the years ended then ended. These consolidated financial statements
are the responsibility of the Company's management. My responsibility is to
express an opinion on these consolidated financial statements based on my audit.
I conducted the audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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.
I believe that my audits provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Resolve Staffing, Inc. at December
31, 2002 and 2001, and the result of its operations, its cash flows and
stockholders' equity for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
/s/ Timothy M. Griffiths, C.P.A.
TIMOTHY M. GRIFFITHS, CPA
Tampa, Florida
March 22, 2003, except for notes D, E, F and R, which are as of July 24, 2003
F-1
RESOLVE STAFFING, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
ASSETS 2002 2001
--------------------- -------------------
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ - $ 19,467
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR BAD
DEBTS OF $4,500 FOR 2002 AND $1,800 FOR 2001 89,674 30,069
PREPAID AND OTHER ASSETS 82,790 8,317
---------------------
TOTAL CURRENT ASSETS 172,464 57,853
---------------------
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT 28,382 28,382
LESS: ACCUMULATED DEPRECIATION 14,015 8,202
--------------------- -------------------
NET PROPERTY AND EQUIPMENT 14,367 20,180
--------------------- -------------------
TOTAL ASSETS $ 186,831 $ 78,083
===================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 43,386 $ 23,698
BANK OVERDRAFT 9,712 -
ACCRUED PAYROLL TAXES 10,803 17,171
NOTE PAYABLE 40,000 -
DEBENTURES PAYABLE 11,150 18,450
LOAN PAYABLE - RELATED PARTIES 7,760 -
OTHER CURRENT LIABILITIES 4,935 642
--------------------- -------------------
TOTAL CURRENT LIABILITIES 127,746 59,961
--------------------- -------------------
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: 2002 - 4,821,069
SHARES; 2001 - 83,334 SHARES 482 8
PAID-IN CAPITAL 737,190 425,467
RETAINED EARNINGS (DEFICIT) ( 745,587) ( 407,403)
--------------------- -------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) ( 18,072
7,915)
--------------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 186,831 $ 78,033
===================== ===================
READ INDEPENDENT AUDITOR'S REPORT. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS.
F-2
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
---------------------- --------------------
SERVICE REVENUES $ 467,911 $ 471,821
DIRECT COST OF SERVICES 353,097 359,742
---------------------- --------------------
GROSS MARGIN 114,814 112,079
OPERATING
EXPENSES
LEGAL & PROFESSIONAL FEES 135,701 52,621
ADVERTISING/PROMOTION 10,806 21,710
SALARIES AND BENEFITS 194,924 197,304
TAXES & LICENSES 8,848 7,808
PENALTIES - 19,638
RENT & LEASES 23,743 22,626
TRAVEL & ENTERTAINMENT 4,103 10,071
ADMINISTRATIVE EXPENSES 62,483 48,551
---------------------- --------------------
TOTAL OPERATING EXPENSES 440,608 380,329
---------------------- --------------------
LOSS FROM OPERATIONS ( 325,794) ( 268,250)
OTHER INCOME
(EXPENSES)
INTEREST AND OTHER INCOME 716 326
INTEREST EXPENSE ( 13,106) ( 21,272)
---------------------- --------------------
NET OTHER INCOME (EXPENSES) ( 12,390) ( 21,272)
---------------------- --------------------
NET INCOME (LOSS) $( 338,184) $( 289,522)
====================== ====================
LOSS PER
SHARE
BASIC $ (.12) $ (3.47)
====================== ====================
FULLY DILUTED $ (.12) $ (3.47)
====================== ====================
AVERAGE NUMBER OF SHARES
OUTSTANDING
BASIC 2,821,424 83,333
====================== ====================
FULLY DILUTED 2,821,424 83,333
====================== ====================
READ INDEPENDENT AUDITOR'S REPORT. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS.
F-3
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE YEARS ENDED DECEMBER 31, 2002 AND
2001
2002 2001
--------------------- ---------------------
CASH FLOWS FROM OPERATING
ACTIVITIES
NET LOSS $( 338,184) $ ( 289,522)
ADJUSTMENTS TO RECONCILE NET LOSS TO CASH USED IN OPERATING
ACTIVITIES:
DEPRECIATION 5,813 4,473
BAD DEBT EXPENSE 2,700 -
CONTRIBUTION OF ASSETS - ( 7,825)
CONTRIBUTED SERVICES 82,650 -
CONVERSION OF LOANS AND INTEREST TO CAPITAL 151 ( 5,125)
DECREASE (INCREASE) IN CURRENT
ASSETS:
ACCOUNTS RECEIVABLE ( 62,305) 27,982
PREPAID AND OTHER ASSETS ( 74,473) ( 5,701)
INCREASE (DECREASE) IN CURRENT
LIABILITIES:
ACCOUNTS PAYABLE 19,688 17,168
BANK OVERDRAFT 9,712 -
PAYROLL TAX ACCRUALS ( 6,368) ( 49,459)
SALARY ACCRUAL - ( 9,885)
CUSTOMER DEPOSITS - ( 8,558)
OTHER CURRENT LIABILITIES 4,293 ( 1,282)
--------------------- ---------------------
TOTAL ADJUSTMENTS ( 18,139) ( 38,312)
--------------------- ---------------------
NET CASH (USED) BY OPERATING ACTIVITIES ( 356,323) ( 327,834)
--------------------- ---------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
PURCHASE OF PROPERTY AND EQUIPMENT - ( 8,821)
--------------------- ---------------------
NET CASH (USED) BY INVESTING ACTIVITIES - ( 8,821)
--------------------- ---------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
SALE OF UNITS/WARRANTS AND CAPITAL STOCK, NET OF REDEMPTION 40,000 317,975
PROCEEDS FROM CONVERTIBLE SUBORDINATED NOTES 100,000
PROCEEDS FROM CONVERTIBLE DEBENTURES - 18,450
PROCEEDS FROM INSURANCE FINANCING 93,061
REPAYMENTS OF INSURANCE FINANCING ( 93,061)
PROCEEDS FROM NOTE PAYABLE 40,000 -
LOAN FROM STOCKHOLDERS, NET OF REPAYMENTS 134,760 -
CAPITAL CONTRIBUTION 22,096 -
--------------------- ---------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 336,856 336,425
--------------------- ---------------------
NET INCREASE (DECREASE) IN CASH (19,467) (230)
CASH, BEGINNING OF THE YEAR 19,467 19,697
--------------------- ---------------------
CASH, END OF THE YEAR $ -0- $19,467
===================== =====================
READ INDEPENDENT AUDITOR'S REPORT. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS.
F-4
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------------- -------------- -------------- ------------------- -------------
BALANCE, DECEMBER 31, 2000 37,500 4 107,496 ( 112,756) (5,256)
RECAPITALIZATION OF
PUBLIC
COMPANY FOR INTEGRA MERGER 45,834 4 317,971 ( 5,125) 312,850
NET LOSS DURING PERIOD - - - ( 289 ,522) (289,522)
---------------- -------------- -------------- -------------------
- -------------
BALANCE, DECEMBER 31, 2001 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)
================ ============== ============== ================== =============
READ INDEPENDENT AUDITOR'S REPORT. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
F-5
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Resolve Staffing, Inc.
("Resolve"), formerly Columbialum Staffing, Inc., is presented to assist in
understanding Resolve's financial statements. The financial statements and notes
are the representation of Resolve's management who is responsible for their
integrity and objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America consistently
applied in the preparation of the financial statements.
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").
Resolve Staffing, Inc. was in the development stage until its merger with
Integra Staffing, Inc. on December 10, 2001.
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.
REVERSE MERGER METHOD OF ACCOUNTING
Following the acquisition, the former management of Integra became the
management of Resolve and the former stockholders of Integra were issued
approximately 60% of the outstanding shares of Resolve's $0.0001 par value
common stock. In accordance with accounting principles generally accepted in the
United States of America, Resolve's acquisition of Integra has been accounted
for as a reverse merger. As a result, Integra has been treated as the acquiring
entity and Resolve has been treated as the acquired entity for accounting
purposes. The historical financial statements of Integra have become the
historical financial statements of Resolve in connection with the acquisition.
Similarly, the historical equity and retained deficit of Integra prior to the
acquisition have been retroactively restated for the equivalent number of shares
issued in connection with the acquisition.
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.
Read independent auditor's report.
F-6
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE AND COST RECOGNITION
Service revenues generated from employees on customer assignments to its
clients, under client service agreements, are recognized as income at the time
service is provided, while service revenues generated from permanent placement
services are recognized at the time the customer agrees to hire a candidate
supplied by the Company. In consideration for payment of such service fees,
Resolve agrees to pay the following direct costs associated with the worksite
employees: (a) salaries and wages, (b) employment-related taxes and (c) workers'
compensation insurance premiums. These costs are recorded on the accrual
accounting of accounting.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, Resolve considers amounts held by
financial institutions and short-term investments with an original maturity of
90 days or less to be cash and cash equivalents.
ACCOUNTS RECEIVABLE
Resolve's trade accounts receivable result from the sale of its services in West
Central Florida, and consist primarily of private companies. Resolve uses the
allowance method to account for uncollectible accounts. Bad debt expense for
year ended December 31, 2002 and 2001 was $2,700 and $-0- respectively
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially expose Resolve to concentrations of
credit risk, as defined by FASB Statement No. 105, Disclosure of Information
about Financial Instruments with Off-Balance Sheet Risk and Financial
Instruments with Concentration of Credit Risk, consist principally of trade
receivables.
Resolve's trade accounts receivable result from the sale of its services with
customers based in West Central Florida, and 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.
Allowances for potential credit losses are maintained, when realized, have been
within management's expectations.
The Company is obligated to pay the salaries, wages and 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.
Financial Instruments .
Resolve estimates that the fair value of all financial instruments at December
31, 2002 and 2001 do not differ materially from the aggregate carrying value of
its financial instruments recorded in the accompanying balance sheets.
Read independent auditor's report
F-7
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at historical cost and include expenditures,
which substantially increase the useful lives of existing property, plant and
equipment. Maintenance and repairs are charged to operations when incurred.
Depreciation of property and equipment is computed primarily using the
straight-line method based on estimated useful lives (furniture and fixtures, 6
to 7 years, office equipment 5 to 7 years, and computers and software, 3 to 5
years). Depreciation for income tax purposes is computed principally using
straight line method and lives.
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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued Statement of Financial Accounting Standards No.
No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142, which includes
the requirements to test for impairment goodwill and intangible assets of
indefinite life, rather than amortize them, is effective for fiscal years
beginning after December 31, 2001. Adoption of this pronouncement is not
anticipated to have a significant impact on the Company. Intangible assets
consist of patents' rights. These costs are amortized over a 17-year period,
their estimated economic life.
In August 2001, the FASB issued SFAS No.144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS No. 144 replaces SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of". SFAS No. 144 retains the fundamental provisions of SFAS 121 for the
recognition and measurement of the impairment of long-lived assets to be held
and used and the measurement of long-lived assets to be disposed of by sale.
Under SFAS No.144, long-lived assets are measured at the lower of carrying
amount or fair value less cost to sell. The standard became effective on January
1, 2002. Management does not believe adoption of this standard has a significant
impact on the results of operations, financial position and cash flows of the
Company.
Read independent auditor's report.
F-8
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 does not have direct-response
advertising during the years ended December 31, 2002 and 2001.
INCOME TAXES
Resolve records its federal and state income tax liability in accordance with
Financial Accounting Standards Board Statement No. 109 "Accounting for Income
Taxes". Deferred taxes payable are provided for differences between the basis of
assets and liabilities for financial statements and income tax purposes, using
current tax rates. Deferred tax asset is the expected benefit of a net operating
loss carryover and general business credits that are available to offset future
income taxes.
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. For purposes of computation of loss per share, the number of shares
outstanding have been retroactively adjusted to reflect Resolve's one-for-thirty
reverse stock split.
DIVIDEND POLICY
Resolve has not yet adopted a policy regarding payment of dividends.
FISCAL YEAR
Resolve has elected December 31 as its fiscal year end.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year
presentation.
Read independent auditor's report.
F-9
RESOLVE STAFFING, INC.
NOTES TO CONSOLDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE B - PREPAID EXPENSES & OTHER ASSETS
At December 31, 2002 and 2001, the components of Prepaid Expenses & Other Assets
are summarized as follows:
2002 2001
------------------ ------------------
Prepaid insurance $ 78,275 $ 7,750
Prepaid interest - -
Trademark 2,325 -
Deposits 2,190 567
------------------ ------------------
Total $ 82,790 $ 8,317
================== ==================
Resolve financed its insurance premiums, 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 in March 2003, after the
completion of the insurance carrier's audit of the payroll for the policy
period.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2002 and 2001 is summarized as
follows:
2002 2001
----------------- -----------------
Computer software $ 5,590 $ 5,590
Computers 6,187 6,187
Furniture and fixtures 5,079 5,079
Office equipment 11,576 11,576
----------------- -----------------
28,382 28,382
Less accumulated depreciation (14,015) (8,203)
----------------- -----------------
Net property and equipment $ 14,367 $ 20,179
================= =================
Depreciation expense for the years ended December 31, 2002 and 2001 was $5,813
and $4,473, respectively.
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 $0.0001 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.
Read independent auditor's report.
F-10
RESOLVE STAFFING, INC.
NOTES TO CONSOLDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE D - CONVERTIBLE DEBENTURES AND NOTE PAYABLE (CONTINUED)
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.
Resolve secured another extension of the note's maturity date until June 3,
2003. On June 3, 2003, Resolve secured another extension of the note's maturity
date until October 3, 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 were
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
$637,615, from its inception through December 31, 2002, which can be used to
offset future income through 2017.
For income tax purposes Resolve has a net operating loss carryover of $311,725
which can be used to offset future Federal and state taxable income through 2017
as indicated below
YEAR ENDED DECEMBER 31, LOSSES
------------------
2014 $ 1,820
2015 3,305
2016 53,817
2017 252,783
------------------
Total $ 311,725
==================
Read independent auditor's report.
F-11
RESOLVE STAFFING, INC.
NOTES TO CONSOLDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE E - INCOME TAXES (CONTINUED)
The potential tax benefit of these losses and credits is estimated as follows:
Future tax benefit $ 87,280
Valuation allowance (87,280)
----------------
Future tax benefit $ -
================
At December 31, 2002 and 2001, 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 period, and has reported fully diluted loss per
share including the effect of 4,256,600 shares reserved for the exercise of
warrants, and the 111,500 reserved for the conversion of the 6% convertible
debentures dated December 6, 2001.
Based on an estimated current value of Resolve's stock being equal to the
conversion price of the warrants, none of the shares assumed issued upon
conversion of the warrants are included in the computation of fully diluted
earnings (loss) per share. Additionally, since Resolve will not receive any
proceeds from the conversion of the 6% convertible debenture, their effect on
loss per share would be anti-dilutive, and therefore, their effect has not been
included in the computation of fully diluted earnings (loss) per share.
On May 28, 2002, Resolve approved a 1 for 30 reverse split of its outstanding
$.0001 par value common stock. The number of shares outstanding and the earnings
per share calculations have been retroactively restated for the 1 for 30 reverse
stock split for all periods presented.
NOTE G - CASH FLOW SUPPLEMENTAL INFORMATION
Cash paid for interest during the years ended December 31, 2002 and 2001
amounted to $9,991 and $21,598 respectively.
NOTE H - NON-CASH TRANSACTIONS
In connection with the acquisition of Integra Staffing, Inc. in September 2001,
Resolve issued 50,000 shares of its $0.0001 par value common stock in exchange
for 100% of the outstanding common stock of that company. Also, a shareholder of
Resolve contributed property and equipment with an adjusted basis of $7,825 as
paid-in capital.
During year ended December 31, 2002, the following non-cash transactions:
1. Resolve's officers provided services to Resolve valued at $82,550, which
were donated to the Company. 2. Resolve issued 100 shares of common stock
in exchange for services of an unrelated entity. 3. Resolve issued 248,334
shares of common stock in exchange for the cancellation of 5% debentures in
the amount of $7,300 plus accrued interest of $151.
4. Resolve agreed to immediately register 300,000 shares of common owned by R.
Gale Porter, former president of Resolve in exchange for which Mr. Porter
agreed to cancel 513,965 shares of common stock and 943,400 warrants.
Read independent auditor's report.
F-12
RESOLVE STAFFING, INC.
NOTES TO CONSOLDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
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.
During the year ended December 31, 2002, Resolve borrowed $26,287 from its
president, R. Gale Porter, former president of Resolve, of which $7,476 remains
outstanding at December 31, 2002. The debt is not evidenced by promissory note,
and no interest is being paid by the Company.
During the year ended December 31, 2002, Resolve borrowed $67,000 from William
A. Brown, executive vice-president and major shareholder of Resolve, of which
$67,000 remains outstanding at December 31, 2002. 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 starting March 31, 2003.
During year ended December 31, 2002, the Company's officers provided services to
Resolve valued at $82,250, which were donated to the Company.
NOTE J - MERGER AND CHANGE OF MANAGEMENT
On September 27, 2001, the shareholders of Resolve entered into a Securities
Exchange Agreement, as amended, to exchange 100% of the issued and outstanding
common stock of Integra Staffing, Inc., ("Integra") for an aggregate of 50,000
shares of Resolve's $0.0001 par value common stock.
The effective date of the transaction was December 10, 2001. On the effective
date of the transaction, the former shareholders of Integra owned approximately
60% of the outstanding stock of Resolve. The transaction was recorded as a
reverse merger. In connection with the transaction, a related party contributed
$6,400 due to him by Resolve to paid-in capital.
On the effective date of the transaction, Rene Morissette, the former President,
Treasurer, Secretary and sole Director of Resolve resigned, and Charles Lincoln,
CEO and Director of Integra became CEO and Chairman of Resolve. Additionally, R.
Gale Porter, former President and Director of Integra became President of
Resolve, and Cristino L. Perez, former Secretary, Treasurer and Director of
Integra became Secretary and Treasurer of Resolve.
NOTE K - AMENDMENT OF ARTICLES OF INCORPORATION
During the year ended December 31, 2001, the Company approved an amendment its
articles of incorporation to (a) change the name of the company from
Columbialum, Ltd. to Columbialum Staffing, Inc.; (b) reduce the par value of its
common stock and preferred stock from $0.01 to $0.0001; (d) increase the number
of common shares Resolve is authorized to issue from 20,000,000 to 50,000,000;
and (e) increase the number of preferred shares Resolve is authorized to issue
from 2,000,000 to 10,000,000 shares.
Read independent auditor's report.
F-13
RESOLVE STAFFING, INC.
NOTES TO CONSOLDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE K - AMENDMENT OF ARTICLES OF INCORPORATION (CONTINUED)
On May 28, 2002, Resolve approved an amendment its articles of incorporation to
(a) change the name of the company from Columbialum Staffing, Inc. to Resolve
Staffing, Inc.; (b) reverse split the outstanding shares of common stock
one-for-thirty; (c) maintain the par value of Resolve's common stock at $0.0001;
(d) restore the number of common shares Resolve is authorized to issue to
50,000,000.
NOTE L - STOCK AND WARRANTS ISSUANCES
SALE OF COMMON STOCK AND WARRANTS
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 June 24, 2002, Resolve sold 5,000,000 units, each consisting of one share of
common stock and one five-year $.15 common stock purchase warrant for $200,000
as follows:
1. 2,500,000 units were issued in exchange for the cancellation of the 18%
Subordinated Convertible Notes due October 1, 2002. 2. 1,000,000 units were
issued in exchange for $40,000 in cash. 3. During the current period, also
approximately $75,000 from officers, directors and shareholders without evidence
of promissory notes or interest, of which $60,000 was cancelled in exchange for
the issuance of 1,500,000 units.
Subsequent to the cancellation of warrants described below, 4,256,600 warrants
remained outstanding.
STOCK AND WARRANTS CANCELLATION
In consideration for the immediate registration of 300,000 shares of the
Company's restricted common shares owned by R. Gale Porter, former president of
Resolve, Mr. Porter agreed to contribute back to the Company 513,965 common
shares and 743,400 common shares issuable upon conversion of warrants.
Additionally, Mr. Porter agreed to subject the 300,000 shares to a lock-up
agreement, whereby a maximum of 10,000 shares can be sold per month after 60
days from the time the Company's shares first are listed on an exchange or on an
electronic medium that provides real-time trade reporting or 180 days from the
time the Company's registration statement is declared effective.
OTHER TRANSACTIONS
On November 22, 2002, Mr. Porter, former president of Resolve, sold 750,000
units of the Company's securities to the William A. Brown Family Trust. Each
unit consists of one share of the Company's common stock and one common stock
purchase warrant. The consideration for the purchase and sale was a promissory
note due June 30, 2003 for $30,000, secured by a pledge of the shares and
warrants.
Read independent auditor's report.
F-14
RESOLVE STAFFING, INC.
NOTES TO CONSOLDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE M - CHANGE OF OFFICERS AND DIRECTORS
Mr. Charles Lincoln resigned as an officer and director of Resolve by letter
dated March 18, 2002, citing disagreements with matters relating to the
Resolve's operations, policies, practices, and lack of confidence in the
management of the Resolve and that he resigned solely to comply with the terms
of a funding offer approved by the Board of Directors. Management believed that
Mr. Lincoln's assertions were without merit and responded to Mr. Lincoln's
assertions in an information statement filed with the Securities and Exchange
Commission on Form 8-K.
Effective October 23, 2002, Mr. R. Gale Porter resigned as president and
director of the Resolve. There were no disputes between Mr. Porter and Resolve.
On December 4, 2002, the remaining member of the board of directors, Cristino L.
Perez, appointed Donald E. Quarterman, Jr., as President, Chief Operating
Officer and a director, and William A. Brown as Executive Vice-President and
director of Resolve.
NOTE N - SHAREHOLDERS' ACTIONS
On May 28, 2002, by written consent, the majority of shareholders voted to (1)
elect two directors, (2) amend the Articles of Incorporation to (a) change the
name of the company to Resolve Staffing, Inc., (b) reverse split the outstanding
common stock one-for-thirty, (c) maintain the par value of the Resolve's common
stock at $.0001 per share, (d) restore the number of shares of common stock
Resolve is authorized to issue at 50,000,000, and (3) amend Resolve's 2001 Stock
Incentive Plan to restore the number of shares which may be issued under the
plan to 3,000,000. All shares disclosures have been retroactively adjusted to
reflect the one-for-thirty reversed split.
Additionally, the Board of Directors agreed to waive the anti-dilution
provisions of Resolve's 6% convertible debentures due June 30, 2003 and to fix
the conversion price of such debentures at $.10 per share.
NOTE O - 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 3,000,000 and to permit
the issuance of unrestricted shares.
Read independent auditor's report.
F-15
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE P - COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
On June 14, 2002, Resolve entered into a lease agreement, effective July 8,
2002, for approximately 1,056 square feet of office space, housing its operating
offices, pursuant to a three-year lease with an unrelated landlord, expiring
June 30, 2005 at $1,106 per month, plus applicable Florida sales tax. Resolve
has the option to renew the lease for two successive terms under the same terms
and conditions as the original lease.
Resolve previously occupied a 1,540 square feet office space, housing its
operating offices, pursuant to a three-year lease expiring October 30, 2002 at a
monthly rental of $1,618 per month, and included an escalation clause and
allocation of common area maintenance costs. The space was leased to another
tenant, therefore, Resolve was relieved of any liability on the remainder of the
lease after August 31, 2002.
As a result of Mr. R. Gale Porter, the Company's president, the arrangement for
the use of executive offices at no cost to the Company was terminated. The
Company's operations were consolidated at the new leased premises.
The future maturities of minimum lease payments under these leases are as
follows:
YEAR ENDED DECEMBER 31, AMOUNT
----------------
2003 $ 13,272
2004 13,272
Thereafter 6,636
----------------
Total $ 33,180
================
NOTE Q - 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 R - SUBSEQUENT EVENTS
APPOINTMENT OF CHIEF EXECUTIVE OFFICER
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.
Read independent auditor's report.
F-16
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE R - SUBSEQUENT EVENTS (CONTINUED)
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.
AGREEMENT WITH PINNACLE CORPORATE SERVICES, LLC
On February 7, 2003, the Board of Directors approved a one-year agreement with
Pinnacle Corporate Services, LLC ("Pinnacle") to provide Resolve with the
following services: 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 restricted 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 December 31, 2003 and register the shares issued to Pinnacle. The
agreement was approved by Cristino L. Perez. The other Board members, Don
Quarterman and William A. Brown, abstained from the vote, due to a conflict of
interest.
According to the agreement, Resolve will issue Pinnacle 100,000 shares of common
stock upon signing of the agreement, with the remaining 850,000 shares being
held in escrow and will vest over the term of the agreement as follows: 150,000
shares on March 31, 2003; 50,000 shares at the end of each subsequent month
though December 31, 2003, and 250,000 shares on February 7, 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.
Read independent auditor's report.
F-17
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 $241,203 $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
========= =========
F-18
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
=========== ===========
F-19
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS 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
========= =========
F-20
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)
========== ========== ========== ========== ==========
F-21
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.
F-22
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, 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.
F-23
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.
F-24
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.
F-25
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.
F-26
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 December 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.
F-27
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 July 24, 2003, Resolve has drawn down $21,000 on the line
of credit, therefore, an additional $29,000 remains available.
F-28
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3,656,760 Shares
Resolve Staffing, Inc.
Common Stock
------------------------
P R O S P E C T U S
_________, 2003
------------------------
===========================================================================
36
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Certificate of Incorporation and By-laws of the Company provide that
the Company shall indemnify to the fullest permitted by Nevada law any person
whom it may indemnify thereunder, including directors, officers, employees and
agents of the Company. Such indemnification (other than as ordered by a court)
shall be made by the Company only upon a determination that indemnification is
proper in the circumstances because the individual met the applicable standard
of conduct i.e., such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the Company. Advances
for such indemnification may be made pending such determination. Such
determination shall be made by a majority vote of a quorum consisting of
disinterested directors, or by independent legal counsel or by the stockholders.
In addition, the Certificate of Incorporation provides for the elimination, to
the extent permitted by Nevada law, of personal liability of directors to the
Company and its stockholders for monetary damages for breach of fiduciary duty
as directors.
The Company has also agreed to indemnify each director and executive
officer pursuant to an Indemnification Agreement with each such director and
executive officer from and against any and all expenses, losses, claims, damages
and liability incurred by such director or executive officer for or as a result
of action taken or not taken while such director or executive officer was acting
in his capacity as a director, officer, employee or agent of the Company. The
obligations of the Company for indemnification is limited to the extent provided
in the Nevada Corporation Act and is also limited in situations where, among
others, the indemnitee is deliberately dishonest, gains any profit or advantage
to which he is not legally entitled or is otherwise indemnified.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
37
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses payable by the
Company in connection with the sale and distribution of the securities being
registered.
SEC Registration Fee $ 74.55
Printing and Duplicating Expenses $ 5,000.00
Legal Fees and Expenses $ 24,000.00
Accounting Fees and Expenses $ 5,000.00
Transfer Agent and Registrar Fees $ 2,500.00
Miscellaneous $ 3,425.45
Total............................ $40,000.00*
- -------
*Estimated
Item 26. Recent Sales of Unregistered Securities
Please see pages 10 to 11 of the Prospectus under the caption "Recent Sales
of Unregistered Securities."
Item 27. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Exhibits
2.1 Stock Purchase Agreement between M. Richard Cutler, Vi Bui and
Premier Ventures, Inc. dated as of September 24, 2001 (1)
2.2 Stock Purchase Agreement between Premier Ventures, Inc. and
Work Holdings, LLC dated as of September 27, 2001 (1)
2.3 Securities Exchange Agreement dated November 23, 2001 between
Columbialum, Ltd. and the shareholders of Integra Staffing, Inc. (2)
3.1 Articles of Incorporation of the Company (3)
3.2 Bylaws of the Company (3)
3.3 Amendment to Articles of Incorporation dated January 15, 2002, filed
January 22, 2002 (4)
3.4 Amendment to Articles of Incorporation filed May 29, 2002 (5)
4.1 Form of 5% Convertible Subordinated Debenture due December 31, 2002 (5)
4.2 Form of 6% Convertible Subordinated Debenture due June 30, 2003 (5)
4.3 Form of 18% Convertible Note due October 1, 2002 (5)
4.4 Form of $.15 warrant expiring June 30, 2007(6)
5 Opinion of Sichenzia Ross Friedman Ference LLP
10.1 Lease dated August 23, 1999 between Fletcher Associates, Inc. and
Integra Staffing, Inc. (5)
10.2 Consulting Agreement dated October 1, 2001 between the Company and
Apogee Business Consultants, Inc. (5)
10.3 The Company's 2001 Equity Incentive Plan (5)
10.4 Amendment to the 2001 Equity Incentive Plan (6)
10.5 Form of Registration Rights Agreement (6)
10.6 Lease dated June 19, 2002 between the Company and Tampa Associates (6)
10.7 Lock-up and Registration Agreement with R. Gale Porter, dated November 22, 2002 (7)
10.8 Note Extension of Barbara Green dated February 3, 2003 (8)
10.9 Employment Agreement Letter between the Company and Wanda Dearth dated February 7, 2003. (8)
10.10 Promissory Note with William A. Brown (8)
10.11 Revolving line of credit agreement between the Company and Mercantile Bank (9)
10.12 Note Extension of Barbara Green dated May 3, 2003 (9)
10.13 Consulting Agreement between the Company and Pinnacle (10)
10.14 Note Extension of Barbara Green, dated June 3, 2003 (10)
10.15 Amended Consulting Agreement between the Company and Pinnacle
16.1 Letter dated March 5, 2002, from Haskell & White LLP,
Certified Public Accountants to the Registrant
regarding change of certifying accountant.
(4)
38
16.2 Letter dated March 5, 2002, from Haskell & White LLP,
Certified Public Accountants regarding agreement with
comments in Form 8-K (4)
21 List of Subsidiaries - Integra Staffing, Inc. (Florida) 100% (7)
23.1 Opinion of Sichenzia Ross Friedman Ference LLP (to be included as part of Exhibit 5)
23.2 Consent of independent Certified Public Accountant
24 Power of Attorney (included in the signature page)
- -----
(1) Incorporated by reference to the exhibits filed with the Company's Current
Report on Form 8-K dated September 27, 2001.
(2) Incorporated by reference to the exhibits filed with the Company's Current
Report on Form 8-K dated December 12, 2001.
(3) Incorporated by reference to the exhibits filed with the corresponding
exhibits numbers filed with the Company's Form 10-SB Registration
Statement field February 14, 2000.
(4) Incorporated by reference to the exhibits filed with the Company's Current
Report on Form 8-K dated March 1, 2002.
(5) Incorporated by reference to the exhibits filed with the Company's Report
on Form 10-KSB for year ended December 31, 2001.
(6) Filed with the initial filing of the Registration Statement on Form SB-2
on July 29, 2002.
(7) Filed with Amendment No. 1 to this Registration Statement on December 23,
2002.
(8) Filed as an exhibit to the Company's Form 10-KSB for the year ended
December 31, 2002 and filed with the Commission
(9) Filed as an exhibit to the Company's Form 10-KSB/A for the year ended
December 31, 2002 and filed with the Commission
(10) Filed with Amendment No. 4 to this Registration Statement on June 30, 2003.
Item 28. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement (Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) any deviation from the low or
high end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement); and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
39
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
(5) In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer of controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
40
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tampa, State of Florida.
RESOLVE STAFFING, INC.
/s/ Wanda D. Dearth July 24, 2003
- -------------------------------
Wanda D. Dearth, (Principal
Executive Officer)
/s/ Cristino L. Perez July 24, 2003
- ---------------------------------
Cristino L. Perez, Treasurer, Secretary,
Chief Financial Officer (Principal
Financial and Accounting Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Donald E. Quarterman, Jr., his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
from such person and in each person's name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement or any Registration Statement relating to this
Registration Statement under Rule 462 and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or any of them, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on July 24, 2003.
Signatures Date
/s/ Wanda D. Dearth July 24, 2003
- -----------------------------------------
Wanda D. Dearth, CEO and Director
/s/ Cristino L. Perez July 24, 2003
- -----------------------------------------
Cristino L. Perez, Treasurer, Secretary,
Chief Financial Officer (Principal
Financial and Accounting Officer)
/s/ Donald E. Quarterman, Jr. July 24, 2003
- -----------------------------------------
Donald E. Quarterman, Jr., President,
and Director
/s/ William A. Brown July 24, 2003
- -----------------------------------------
William A. Brown, Director
41