UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission File Number 0-29485
RESOLVE STAFFING, INC.
--------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
NEVADA 33-0850639
------------------------------- --------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
105 NORTH FALKENBURG ROAD, SUITE B
TAMPA, FLORIDA 33619
---------------------------------------
(Address of Principal Executive Offices)
(813) 662-0074
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
N/A
--------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
If changed since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of August 18, 2003 there
were outstanding 6,080,069 shares of common stock, par value $0.0001, and no
shares of preferred stock.
1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements of Resolve Staffing, Inc. have
been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. All adjustments,
which, in the opinion of management, are necessary for a fair presentation of
the financial condition and results of operations, have been included. Operating
results for the three months and six months ended June 30, 2003 and are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2003.
Index to Financial Statements
Consolidated balance sheets as of June 30, 2003 (unaudited) and
December 31, 2002 3
Consolidated statements of operations for the three months and six months
ended June 30, 2003 and 2002 4
Consolidated statements of cash flows for the three months and six months
ended June 30, 2003 and 2002 5
Consolidated statements of stockholders' equity for the three months and six ended
June 30, 2003 (unaudited) and for the year ended December 31, 2002 6
Notes to consolidated financial statements 7
2
RESOLVE STAFFING, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 (UNAUDITED) AND DECEMBER 31, 2002
ASSETS 2003 2002
-------- --------
Current Assets
Cash and cash equivalents $ -- $ --
Accounts receivable, net of allowance for bad
debts of $4,500 for 2003 and $4,500 for 2002 102,609 89,674
Prepaid and other assets 110,069 82,790
-------- --------
Total current assets 212,678 172,464
-------- --------
Property and Equipment
Property and equipment 40,627 28,382
Less: Accumulated depreciation 16,346 14,015
-------- --------
Net property and equipment 24,281 14,367
-------- --------
Total Assets $236,959 $186,831
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current Liabilities
Accounts payable $ 41,687 $ 43,386
Bank overdraft 24,592 9,712
Accrued salaries 23,187 --
Accrued payroll taxes 5,216 10,803
Notes payable 83,291 40,000
Debentures payable -- 11,150
Note payable - related party 67,000 --
Loan payable - related parties 22,761 7,760
Other current liabilities 12,278 7,935
-------- --------
Total current liabilities 280,012 127,746
-------- --------
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 - 6,080,069
shares; 2002 - 4,821,069 shares 608 482
Paid-in capital 917,964 737,190
Less: Stock compensation (100,042) --
Retained earnings (deficit) (861,583) (745,587)
-------- --------
Total stockholders' equity (deficit) (43,053) (7,915)
-------- --------
Total Liabilities and Stockholders'
Equity (Deficit) $236,959 $186,831
======== ========
3
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
--------- --------- --------- ---------
SERVICE REVENUES $ 276,920 $ 99,564 $ 539,166 $ 185,104
DIRECT COST OF SERVICES 205,511 77,066 404,422 132,524
--------- --------- --------- ---------
GROSS MARGIN 71,409 22,498 134,744 52,580
OPERATING EXPENSES
Legal & professional fees 62,933 48,971 91,892 102,356
Advertising/Promotion 3,025 1,841 4,836 4,489
Salaries and benefits 62,027 55,315 103,743 104,440
Payroll taxes 3,864 3,526 5,693 6,663
Rent & leases 2,958 7,024 7,835 16,351
Travel & entertainment 5,528 -- 6,953 607
Administrative expenses 13,677 12,644 26,536 29,184
--------- --------- --------- ---------
Total operating expenses 154,012 129,321 247,488 264,290
--------- --------- --------- ---------
LOSS FROM OPERATIONS (82,603) (106,823) (112,743) (211,710)
OTHER INCOME (EXPENSES)
Interest and other income -- 240 -- 240
Interest expense (
(963) (5,696) (3,252) 7,498)
--------- --------- --------- ---------
Net other income (expenses) (963) (5,456) (3,252) (7,258)
--------- --------- --------- ---------
NET INCOME (LOSS) $ (83,567) $(112,279) $(115,995) $(218,968)
========= ========= ========= =========
LOSS PER SHARE
Basic $ (.02) $ (.35) $ (.05) $ (.61)
========= ========= ========= =========
Fully diluted $ (.02) $ (.35) $ (.05) $ (.61)
========= ========= ========= =========
AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 5,820,379 630,817 5,597,781 359,722
========= ========= ========= =========
Fully diluted 5,820,379 630,817 5,599,781 359,722
========= ========= ========= =========
4
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONHTS ENDED JUNE 30, 2003 AND 2002
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
--------- --------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (83,566) $(112,279) $(115,995) $(218,967)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation 1,207 -- 2,331 1,480
Interest converted to capital stock -- -- -- 251
Contributed services 3,000 21,400 6,000 41,200
Common stock issued for services 171,500 -- 171,500 --
Less: Unearned stock compensation (142,916) -- (100,042) --
Decrease (increase) in current assets:
Accounts receivable 19,744 (2,424) (12,935) (23,942)
Prepaid and other assets (15,258) 2,033 (27,279) (86,471)
Increase (decrease) in current liabilities 14,875
Accounts payable (2,318) 28,770 (1,699)
Bank overdraft 24,592 -- 14,880 --
Salary accrual -- -- 23,187 --
Payroll taxes accrual (7,926) (4,869) (5,587) (15,249)
Other current liabilities 2,839 766 7,342 1,952
--------- --------- --------- ---------
Total adjustments 68,754 45,688 77,698 (65,904)
--------- --------- --------- ---------
Net cash (used) by operating activities (14,812) (66,591) (38,297) (284,871)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property and equipment (7,845) -- (12,245) --
--------- --------- --------- ---------
Net cash (used) by investing activities (7,845) -- (12,245) --
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from insurance financing 25,000 -- 48,594 93,061
Repayments of insurance financing (12,890) (24,263) (19,303) (55,120)
Proceeds from line of credit 14,000 -- 14,000 --
Loan from stockholders, net -- 163,996
(2,099) 15,001
Repayments of debenture payable (7,750) -- (7,750) 22,096
--------- --------- --------- ---------
Net cash provided by financing activities 16,261 61,333 50,542 304,033
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH (6,396) (5,258) -- 19,162
CASH, BEGINNING OF THE PERIOD $ 6,396 43,887 -- 19,467
--------- --------- --------- ---------
CASH, END OF THE PERIOD $ -- $ 38,629 $ -- $ 38,629
========= ========= ========= =========
5
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2002 AND
FOR THE THREE MONTHS ENDED MARCH 31, 2003 (UNAUDITED)
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 CEO 275,000 28 38,472 -- 38,500
Donated services - Officers -- -- 3,000 -- 3,000
Net loss during the period -- -- -- (32,429) (32,429)
---------- ----- -------- --------- ---------
Balance, March 31, 2003 (Unaudited) 6,046,069 605 911,567 (778,016) 134,156
Conversion of debentures to common stock 34,000 3 3,397 -- 3,400
Donated services - Officers -- -- 3,000 -- 3,000
Less: Stock compensation -- -- -- -- (100,042)
Net loss during period -- -- -- (83,567) (83,567)
---------- ----- -------- --------- ---------
Balance, June 30, 2003 (Unaudited) 6,080,069 $ 608 $917,964 $(861,583) $ (43,053)
========== ===== ======== ========= =========
6
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
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 six
months ended June 30, 2003 have been included.
These statements are not necessarily indicative of the results to be expected
for the full fiscal year. These statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Form 10-KSB
for the year ended December 31, 2002 as filed with the Securities and Exchange
Commission
Nature of Operations
Resolve Staffing, Inc., formerly Columbialum Staffing, Inc., was organized under
the laws of the State of Nevada on April 9, 1998. Integra Staffing, Inc., was
organized under the laws of the State of Florida corporation on August 16, 1999
(collectively referred to as "Resolve").
Since its inception, Integra Staffing, Inc. ("Integra") was a temporary staffing
company. Integra's strategy has been to provide efficient and affordable
solutions to its customers' employment and labor force needs.
On December 10, 2001, Resolve Staffing, Inc. acquired 100% of the outstanding
common stock of Integra Staffing, Inc. The acquisition of Integra was accounted
for as a reverse merger. As a result, Integra was treated as the acquiring
entity and Resolve Staffing was treated as the acquired entity for accounting
purposes.
Principles of Consolidation
The consolidated financial statements include the accounts of Resolve Staffing,
Inc. and its wholly owned subsidiary Integra Staffing, Inc. All significant
intercompany accounts and transactions have been eliminated.
Basis of Accounting
Resolve maintains its financial records and financial statements on the accrual
basis of accounting. The accrual basis of accounting provides for matching of
revenues and expenses.
Loss per Share
Resolve records basic and fully diluted loss per share in accordance with
Financial Accounting Standards Board Statement No. 128, "Earnings per Share".
Basic earnings (loss) per share includes no dilution and is computed by dividing
income (loss) available to common stockholders by the weighted average number of
shares outstanding for the period. Diluted earnings (loss) per share reflect the
potential dilution of securities that could share in the earnings (loss) of the
entity.
7
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
NOTE B - PREPAID EXPENSES & OTHER ASSETS
At June 30, 2003 and December 31, 2002, the components of Prepaid Expenses &
Other Assets are summarized as follows:
2003 2002
------------------------
Prepaid insurance $101,392 $78,275
Prepaid interest 1,162 --
Legal retainer 3,000 --
Trademark 2,325 2,325
Deposits 2,190 2,190
------------------------
Total $110,069 $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 includes an estimated $55,000
overpayment on its workers compensation premiums, which the Company expects to
receive in September 2003.
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, including interest at 9.5%
per annum.
In June 2003, Resolve financed its officers and directors liability insurance
premiums of $20,000, after a down payment of $5,000 with interest at 7.5% per
annual, in monthly installments of $2,300 through April 2004.
In February 2003, the Resolve issued stock in exchange for one-year consulting
services to a company partially owned by Don Quarterman, its president and
William A. Brown, its executive vice-president valued at $133,000. Resolve also
issued stock to Wanda D. Dearth, its Chief Executive Officer valued at $38,500
in connection with her compensation agreement. These amounts are being charge to
expense pro-rata over 12 months. The remaining outstanding amount of $100,042
was recorded as a contra account to equity in the accompanying financial
statements.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment as of June 30, 2003 and December 31, 2002 is summarized
as follows:
2003 2002
-------- --------
Computer software $ 11,240 $ 5,590
Computers 11,766 6,187
Furniture and fixtures 5,079 5,079
Office equipment 12,542 11,576
-------- --------
40,627 28,382
Less accumulated depreciation (16,346) (14,015)
-------- --------
Net property and equipment $ 24,281 $ 14,367
======== ========
Depreciation expense for the six months ended June 30, 2003 and the year ended
December 31, 2002 was $2,331 and $5,813, respectively.
8
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
NOTE D - LINE OF CREDIT
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 Mercantile Bank's prime
rate (their current prime rate is 4.25%) per annum, payable monthly. The line of
credit is secured by Resolve's general credit and is personally guaranteed by
William A. Brown, the Company's executive vice-president. As of June 30, 2003,
Resolve has drawn down $21,000 on the line of credit, therefore, $29,000 remains
available.
NOTE E - CONVERTIBLE DEBENTURES AND NOTES PAYABLE
Convertible Debentures Due June 30, 2003
On December 6, 2001, Resolve borrowed $11,150 from related 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. By June 25, 2003, the last day prior to its maturity
that the debenture holders could give notice of conversion, debenture holders
representing 34,000 shares provided notice of conversion to Resolve. The Company
issued 34,000 shares of its common stock in exchange for the debentures
converted. On June 25, 2003, the remaining debentures were re-purchased by
Resolve for $8,575, including accrued interest of $825.
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 includes interest at
12% per annum payable quarterly in arrears, and is secured by the accounts
receivable of the Company. The Company is current in its interest payments. The
note's maturity has been extended to October 3, 2003.
Insurance Financing
In June 2003, Resolve financed its directors and officers' liability insurance
premiums of $20,000, net of a $5,000 down payment, with interest at the rate of
7.5% per annum, payable in monthly to payments of $2,300 per month through April
2004.
NOTE G - CASH FLOW SUPPLEMENTAL INFORMATION
Cash paid for interest during the three months ended June 30, 2003 and 2002
amounted to $5,790 and $447 respectively.
NOTE H - NON-CASH TRANSACTIONS
During three months ended June 30, 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 34,000 shares of common stock to debenture holders in
exchange for $3,400 in principal amount of debentures at $.10 per share.
9
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
NOTE I - RELATED PARTY TRANSACTIONS
During the three months ended June 30, 2003, the Company's officers provided
services to Resolve valued at $3,000, which were donated to Resolve.
NOTE K - REGISTRATION STATEMENT
On July 27, 2002, Resolve filed a preliminary registration statement on Form
SB-2 with the Securities and Exchange Commission, under the Securities Act of
1933. The Company went through the review process of revising the registration
statement, including the number of shares and warrants being registered, and
responding to the SEC's comments. The registration statement was declared
effective August 6, 2003, registering 3,254,131 shares of our common stock,
including 1,592,500 shares underlying warrants.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Information
This report and other reports, as well as other written and oral statements
made or released by us, may contain forward looking statements. Forward-looking
statements are statements that describe, or that are based on, our current
expectations, estimates, projections and beliefs. Forward-looking statements are
based on assumptions made by us, and on information currently available to us.
Forward-looking statements describe our expectations today of what we believe is
most likely to occur or may be reasonably achievable in the future, but such
statements do not predict or assure any future occurrence and may turn out to be
wrong. You can identify forward-looking statements by the fact that they do not
relate strictly to historical or current facts. The words "believe,"
"anticipate," "intend," "expect," "estimate," "project", "predict", "hope",
"should", and "may", other words and expressions that have similar meanings, and
variations of such words and expressions, among others, usually are intended to
help identify forward-looking statements.
Forward-looking statements are subject to both known and unknown risks and
uncertainties and can be affected by inaccurate assumptions we might make.
Risks, uncertainties and inaccurate assumptions could cause actual results to
differ materially from historical results or those currently anticipated.
Consequently, no forward-looking statement can be guaranteed. The potential
risks and uncertainties that could affect forward looking statements include,
but are not limited to the ability to raise needed financing, increased
competition, extent of the market demand for and supply of goods and services of
the types provided by the Company, governmental regulation, performance of
information systems, and the ability of the Company to hire, train and retain
qualified employees. In addition, other risks, uncertainties, assumptions, and
factors that could affect the Company's results and prospects have been and may
further be described in the Company's prior and future filings with the
Securities and Exchange Commission and other written and oral statements made or
released by the Company.
We caution you not to place undue reliance on any forward-looking
statements, which speak only as of the date of this document. The information
contained in this report is current only as of its date, and we assume no
obligation to update any forward-looking statements.
The financial information set forth in the following discussion should be
read in conjunction with, and qualified in its entirety by, the Company's
unaudited consolidated financial statements and notes included herein. The
results described below are not necessarily indicative of the results to be
expected in any future period. Certain statements in this discussion and
analysis, including statements regarding our strategy, financial performance and
revenue sources, are forward-looking information based on current expectations
and entail various risks and uncertainties that could cause actual results to
differ materially from those expressed in the forward-looking statements.
Readers are referred to our Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2002.
GENERAL
Resolve Staffing, Inc., formerly Columbialum Staffing, Inc. was organized
as a Nevada corporation on April 9, 1998 and since its inception until its
acquisition of Integra Staffing, Inc. on December 10, 2001, had been devoting
most of its efforts developing its business plan, raising capital, obtaining
financing, establishing its accounting systems, and other administrative
functions.
Integra Staffing, Inc., ("Integra") was organized under the laws of the
State of Florida, on August 16, 1999. Integra is a temporary staffing company.
Integra's strategy has been to provide efficient and affordable solutions to its
customers' employment and labor force needs.
11
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our significant accounting policies are more fully described in Note A to the
financial statements. However, certain accounting policies are particularly
important to the portrayal of the Company's financial position and results of
operations and require the application of significant judgment by our
management; as a result they are subject to an inherent degree of uncertainty.
In applying these policies, Resolve's management uses their judgment to
determine the appropriate assumptions to be used in the determination of certain
estimates. Those estimates are based on our historical operations, terms of
existing contracts, our observance of trends in the industry, information
provided by our customers and information available from other outside sources,
as appropriate. Our significant accounting policies include:
o REVENUE COST RECOGNITION. We record our service revenues from our
customers at the time our temporary employees perform services on
customer assignments. We record revenues from permanent placement at
the time the customer agrees to hire a candidate we supply to them.
Consistent with industry practice, we are at risk for all employee
salaries and wages, employment-related taxes, workers compensation
insurance and other benefits we provide to the employee, whether or
not we are able to collect our accounts receivable from our customers.
o ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS RECEIVABLE. We estimate and
provide an allowance for uncollectible accounts based on analysis and
age of our open accounts, our experience with the particular customer,
our own historical experience with bad debts, as well as other
information obtained from outside sources.
o WORKERS COMPENSATION INSURANCE. The cost of our workers compensation
insurance is based on premiums determined by our insurance carrier for
the particular type of service our employees provide to our customers,
modified by a factor computed based on our claims history. A
deterioration in our claims experience would result in increased
insurance costs for future salary and wages base. Although we attempt
to estimate our future liability, often it is the result of
unanticipated claims for work related injuries.
o LONG-LIVED ASSETS. We depreciate property and equipment and amortize
patents over the respective asset's estimated useful life. We
determine the useful lives of each asset based of how long we
determine the asset will generate revenue or has a useful economic
life. We review the remaining useful life of our assets annually to
ascertain that our estimate is still valid. If we determine the useful
lives have materially changed, we either change the useful life of the
assets or we may write the asset off completely if we determine the
asset has exhausted its useful life.
o INCOME TAXES. As part of the process of preparing our financial
statements, we are required to estimate our income taxes. This process
involves estimating our actual current tax exposure together with
assessing temporary differences resulting from differing treatment of
specific items, such as depreciation, allowance for uncollectible
accounts receivable and others. These differences result in deferred
tax assets and liabilities. We then assess the likelihood that our
deferred tax assets will be recovered from future taxable income, and
to the extent we believe that recovery is not likely, we must
establish a valuation allowance. To the extent we establish a
valuation allowance or increase the allowance in a period, we must
include an expense within the tax provision in the statement of
operations. To date, we have recorded a valuation allowance for the
entire amount of our deferred tax assets due to the uncertainty of our
ability to utilize them. In the event that actual results differ from
these estimates or we adjust these estimates in future periods, we may
need to establish or adjust an additional valuation allowance, which
could materially impact our financial position and results of
operations.
12
RESULTS OF OPERATIONS
COMPARISON OF CONSOLIDATED OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 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 $218,968 for six months ended June 30, 2002 to
$115,995 or a 47% decrease for six months ended June 30, 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 $11,000.
Revenues for six months ended June 30, 2002 compared to 2003 increased from
$185,104 to $539,166 or a 191% increase, reflecting an increase in business
recovery and our aggressive marketing efforts. All of our revenues for the six
months ended June 30, 2003 and 2002 were generated entirely from providing
workers to our customers.
For the six months ended June 30, 2003 and 2002 the major categories of
expenses, as a percent of revenue were as follows:
2003 2002
---------- ----------
Legal & professional 17% 55%
Advertising & promotion 1% 2%
Salaries & benefits 19% 56%
Taxes & licenses 1% 0%
Rent & leases 1% 9%
Travel & entertainment 1% 4%
Administrative expenses 5% 16%
Legal & professional expense decreased from $102,356 in 2002 to $91,892 in
2003 or a 10% decrease, reflecting principally (1) a increase in consulting
expenses of $10,800, associated with a one-year agreement with Pinnacle
Corporate Service, LLC engaged to assist our management with (a) assistance
and/or preparation of financial, strategic and business plan, (b) assist on
recruiting key management and members of the board of directors, (c) assist in
the implementation of short and long-term strategic planning and business
development initiatives, and (d) other general business matters, and a decrease
of $21,256 in legal and accounting expenses associated with compliance with SEC
matters and principally due to the completion of our registration statement,
which was declared effective August 6, 2003.
Advertising and promotion expense increased slightly from $4,489 in 2002 to
$4,836 in 2003, 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 $104,440 in 2002 to $103,743 in 2003,
or a 1% decrease, reflecting the constant level of total administrative
compensation, including donated services our CFO and by our president. General
office salaries decreased by $6955 due to employing one less a part time office
clerk. Officers' salaries increased by $6,258 resulting to the increased
compensation level of our CEO according to our agreement with her.
Rent & leases expense decreased from $16,351 in 2002 to $7,835 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 substantially increased from $607 in 2002 to $6,953
in 2003, reflecting the increased effort by our staff to market our services and
principally by our CEO attending a staffing industry convention and seminars.
13
Taxes & licenses decreased slightly from $6,863 in 2002 to $5,693 in 2003,
reflecting a reduction of costs previously associated with licensing our company
in Nevada as well as Florida.
General and administrative expenses decreased from $29,184 in 2002 to
$26,536 in 2003 or a 9% decrease. Changes in the major components of general and
administrative expenses for the six months ended June 30, 2002 to June 30, 2003
were as follows: a decease in insurance expenses of $1,227; a increase in public
company expenses of $488; an increase in convention expense of $1,159; an
decrease in printing costs of $1,195; a decrease in office expenses of $630; a
increase in depreciation of $851; and a decrease in miscellaneous expenses of
$4,737.
COMPARISON OF CONSOLIDATED OPERATIONS FOR THEE THREE MONTHS ENDED JUNE 30, 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 $112,279 for three months ended June 30, 2002
to $83,567 or a 25% decrease for three months ended June 30, 2003. The major
factors contributing to this decrease are the general business recovery and our
aggressive marketing efforts, although operating costs increased 24,691, due
primarily to legal and professional fees ($13,962) and administrative salaries
and benefits $6,712) as described below.
Revenues for three months ended June 30, 2002 compared to 2003 increased
from $99,564 to $276,920 or a 178% increase, reflecting an increase in business
recovery and our aggressive marketing efforts. All of our revenues for the three
months ended June 30, 2003 and 2002 were generated entirely from providing
workers to our customers.
For the three months ended June 30, 2003 and 2002 the major categories of
expenses, as a percent of revenue were as follows:
2003 2002
---------- ----------
Legal & professional 23% 49%
Advertising & promotion 1% 2%
Salaries & benefits 22% 56%
Taxes & licenses 1% 4%
Rent & leases 1% 7%
Travel & entertainment 2% 0%
Administrative expenses 5% 13%
Legal & professional expense increased from $48,971 in 2002 to $62,027 in
2003 or a 29% increase, reflecting principally a decrease in consulting expenses
of $33,976, associated with a six-month agreement with Apogee Business
Consultants engaged to assist our management with services associated with the
structure and the requirements of a public company. 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 increased from $55,315 in 2002 to $62,027 in 2003, or
a 12% increase, reflecting an increase in officers' compensation of $12,475,
including donated services our CFO and our president, reflecting the higher
compensation being paid to our CEO starting February 2003. During the same
period, other administrative salaries decreased by $3,176 due to the termination
of the employment of a part time office clerk.
Rent & leases expense decreased from $9,327 in 2002 to $4,877 in 2003,
reflecting a lower rental cost of our new facilities as well as a reduction of
common area maintenance costs associated with the previous leased offices.
Travel & entertainment decreased from $2,035 in 2002 to $1,425 in 2003,
reflecting the concentrated effort of our management to control costs and
expenses.
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Taxes & licenses increased slightly from $3,337 in 2002 to $1,829 in 2003,
reflecting additional costs of licensing in Nevada as well as Florida paid
during the quarter ended June 30, 2003.
General and administrative expenses increased from $12,645 in 2002 to
$13,678 in 2003 or a 8% increase. Changes in the major components of general and
administrative expenses from the three months ended June 30, 2002 to June 30,
2003 were as follows: a increase in insurance expenses of $1,919; a decrease in
public company expenses of $1,828; an increase in computer support of $2,103; a
increase in depreciation of $1,125; and a decrease in miscellaneous expenses of
$5,051.
COMMITMENTS
During May and June 2002, we obtained loans from Barbara Green, an
unrelated individual, in the aggregate amount of $40,000 under a promissory note
extended to October 3, 2003, with interest at the rate of 12% per annum, secured
with our accounts receivable. We are current with the payment of interest of Mr.
Green's promissory note. We intend to pay the Barbara Green note with the
estimated $55,000 premium refund due from our insurance carrier for policy year
ended February 2003. We expect to receive this refund in September 2003.
On December 31, 2002 we converted $67,000 in loans obtained from William A.
Brown, our executive vice-president into an unsecured promissory note due March
31, 2004, with interest at the rate of 5% per annum, payable quarterly. No
interest has been paid to date to Mr. Brown.
In February 2003, we financed our current liability and workers
compensation insurance premiums of $23,594, payable in monthly installment of
$2,148 through November 2003, with interest at the rate of 9.5% per annum.
In June 2003, we financed our current officers' and directors' liability
insurance premiums of $20,000, after a down payment of $5,000, payable in
monthly installment of $2,300 through March 2004, with interest at the rate of
7.5% per annum.
In December 2001 we borrowed $11,150 from related individuals secured by a
6% convertible debenture due June 30, 2003. The debentures are convertible into
shares of our common at $.10 per share through June 30, 2003. On June 25, 2003,
we repaid $7,750 of these debentures plus accrued interest of $825. The
remaining debentures were converted into 34,000 shares of our common stock.
LIQUIDITY AND CAPITAL RESOURCES
FOR THE SIX MONTHS ENDED JUNE 30, 2003
For the six months ended June 30, 2003 we incurred a net loss of $115,995.
Of this loss, $79,789, consisting of depreciation ($2,331) and services donated
by our officers ($6,000), as well as expensing of prepaid consulting expenses
($55,416) and prepaid salary for our CEO ($16,042), 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 $2,091. Additionally we
used $12,245 to purchase computer equipment and software during this period.
Our average monthly revenue for each of the four quarters of 2002 was
$28,500, $33,200, $39,500, and $54,500, respectively, and has increased to a
monthly average of $87,400 and $92,300 for the first and second quarter of 2003,
respectively. Although we have seen our average monthly revenues and business
activity increase in recent months, evidenced by our flexible staffing employees
increasing from 42 during the three months ended September 2002 to 108 during
the three months ended March 2003, we expect to continue to incur losses for the
foreseeable future.
We expect our operating expenses to increase significantly in the near
future as we attempt to build our brand and expand our customer base. We hope
our expenses will be funded from operations and short-term loans from officer,
shareholders or others; however, our operations may not provide such funds and
we may
15
not be able obtain short-term loans from officers, shareholders or others. Our
officers and shareholders are under no obligation to provide additional loans to
the company,
FOR THE THREE MONTHS ENDED JUNE 30, 2003
For the three months ended June 30, 2003 we incurred a net loss of $83,567.
Of this loss, $47,081, consisting of depreciation ($1,206) and services donated
by our officers ($3,000), as well as expensing of prepaid consulting expenses
($33,250) and prepaid salary for our CEO ($9,625), 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 $21,673.
During the three months ended June 30, 2003, we borrowed $21,000 on our
$50,000 line of credit from Mercantile Bank. The line of credit is payable on
demand, with interest at the rate of 3% above Mercantile Bank's prime rate
(their current prime rate is 4.25%) per annum, payable monthly. The line of
credit is secured by Resolve's general credit and is personally guaranteed by
William A. Brown, the Company's executive vice-president.
PROSPECTIVELY
We decided to upgrade our computer system at a cost of $12,018, which was
completed during early June 2003. We paid 25% down for the upgrade, with the
remainder payable at $350 per month without interest. We intend to fund the
remaining costs from operations.
The liquidity needs of the Company for the remainder of 2003 are expected
to increase mostly from the Company's operating activities and in part from
capital expenditures for computer equipment. As of June 30, 2003, we did not
have any cash with which to satisfy our future cash requirements.
We anticipate a refund of overpaid workers insurance of approximately
$55,000 for the policy period ended February 22, 2003. We have provided the
required documentation to our insurance carrier, who have now completed
insurance policy audit, and are awaiting receipt of our refund. We were told we
should be receiving the refund in September 2003
Additionally, on May 14, 2003, we secured a $50,000 line of credit from
Mercantile Bank, payable on demand, with interest at the rate of 3% above
Mercantile Bank's prime rate (their current prime rate is 4.25%) per annum,
payable monthly. The line of credit is secured by security interest in all of
the assets of the Company and is personally guaranteed by William A. Brown, our
executive vice-president. As of August 18, 2003 we have drawn down $21,000 on
the line of credit, therefore, $29,000 remains available to us.
At August 18, 2003, we did not have any other material commitments for
capital expenditures.
ITEM 3. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, an evaluation was carried
out under the supervision and with the participation of the Resolve's
management, including its Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information relating to the Company (including its consolidated
subsidiaries) required to be included in the Company's periodic SEC filings.
There were no significant changes in our internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation.
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PART II - OTHER INFORMATION
Item 2. Changes in Securities
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 30, 2003, we issued 34,000 shares of our common stock to debenture
holders in exchange for their 6% convertible debenture due June 30, 2003. The
shares underlying these debentures were included in the registration statement
filed with SEC, and which was declared effective August 6, 2003.
On August 1, 2003, we issued 100,000 shares of our restricted common stock
to Pinnacle Corporate Services, LLC pursuant to our consulting agreement with
them. The shares were issued pursuant to Section 4(2) of the Securities Act.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 31.1 Certification by Wanda D. Dearth, Chief
Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002.
Exhibit 31.2 Certification by Cristino L. Perez, Chief
Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002.
Exhibit 32.1 Certification by Wanda D. Dearth, Chief
Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
Exhibit 32.2 Certification by Cristino L. Perez, Chief
Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RESOLVE STAFFING, INC.
Dated: August 19, 2003 /s/ Wanda D. Dearth
------------------------------
By: Wanda D. Dearth Chief
Executive Officer (principal
executive officer, director)
Dated: August 19, 2003 /s/ Donald E. Quarterman, Jr.
------------------------------
By: Donald E. Quarterman, Jr.
President, Director
Dated: August 19, 2003 /s/ Cristino L. Perez
------------------------------
By: Cristino L. Perez Chief
Financial Officer (principal
financial & accounting
officer, director)
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