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 SEPTEMBER 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 November13, 2003, there
were outstanding 6,138,582 shares of common stock, par value $0.0001, and no
shares of preferred stock.
1
RESOLVE STAFFING, INC.
FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance sheets as of September 30, 2003 (unaudited) and
December 31, 2002 3
Statements of operations for the three months and nine months
ended September 30, 2003 and 2002 (unaudited) 4
Statements of cash flows for the nine months ended September 30, 2003
and 2002 (unaudited) 5
Statements of stockholders' equity (deficit) for the nine months ended
September 30, 2003 (unaudited) 6
Notes to financial statements (unaudited) 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 12
ITEM 3. CONTROLS AND PROCEDURES 16
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
2
RESOLVE STAFFING, INC.
BALANCE SHEETS
SEPTEMBER 30, 2003 (UNAUDITED) AND DECEMBER 31, 2002
ASSETS 2003 2002
----------- -----------
CURRENT ASSETS
Cash $ 22,311 $ -
Accounts receivable, net of allowance for bad
debts of $4,500 for 2003 for 2002 75,373 89,674
Prepaid and other assets 35,114 82,790
----------- -----------
Total current assets 132,798 172,464
----------- -----------
PROPERTY AND EQUIPMENT
Property and equipment 42,870 28,382
Less: Accumulated depreciation 18,671 14,015
----------- -----------
Net property and equipment 24,199 14,367
----------- -----------
TOTAL ASSETS $ 156,997 $ 186,831
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 16,423 $ 43,386
Bank overdraft - 9,712
Accrued salaries 30,059 -
Accrued payroll taxes 58,949 10,803
Notes payable and line of credit 66,000 40,000
Debentures payable - 11,150
Note payable - related party 87,500 -
Loan payable - related parties - 7,760
Other current liabilities 63,343 4,935
----------- -----------
Total current liabilities 322,274 127,746
----------- -----------
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 - 6,100,082
shares; 2002 - 4,821,082 shares 610 482
Paid-in capital 923,962 737,190
Less: Stock compensation (57,167) -
Retained earnings (deficit) (1,032,682) (745,587)
----------- -----------
Total stockholders' equity (deficit) (165,277) (7,915)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 156,997 $ 186,831
=========== ===========
See accompanying notes to these financial statements.
3
RESOLVE STAFFING, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002 2003 2002
----------- ----------- ----------- -----------
SERVICE REVENUES $ 220,961 $ 118,427 $ 760,127 $ 303,531
COST OF SERVICES 174,068 79,002 578,491 211,526
----------- ----------- ----------- -----------
GROSS MARGIN 46,893 39,425 181,636 92,005
OPERATING EXPENSES
Legal & professional fees 71,878 5,964 170,218 108,321
Advertising/Promotion 3,433 3,441 8,519 7,929
Salaries and benefits 67,694 48,765 171,437 153,204
Payroll taxes 8,485 2,521 14,178 9,384
Rent & leases 7,101 - 11,386 16,351
Travel & entertainment 2,399 1,243 5,887 1,850
Administrative expenses 47,490 13,872 73,920 43,057
----------- ----------- ----------- -----------
Total operating expenses 208,480 75,806 455,545 340,096
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (161,587) (36,381) (273,909) (248,091)
OTHER INCOME (EXPENSES)
Interest and other income - 476 - 716
Interest expense (6,513) (3,139) (13,186) (10,637)
----------- ----------- ----------- -----------
Net other income (expenses) (6,513) (2,663) (13,186) (9,921)
----------- ----------- ----------- -----------
NET (LOSS) $ (168,100) $ (39,044) $ (287,095) $ (258,012)
=========== =========== =========== ===========
LOSS PER SHARE
Basic $ (.03) $ (.01) $ (.05) $ (.13)
=========== =========== =========== ===========
Diluted $ (.03) $ (.01) $ (.05) $ (.13)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic and diluted 6,100,082 5,335,034 5,655,736 2,028,254
=========== =========== =========== ===========
See accompanying notes to these financial statements.
4
RESOLVE STAFFING, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (UNAUDITED)
2003 2002
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $(287,095) $(258,012)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation 4,656 1,813
Interest converted to capital stock - 251
Contributed services 9,000 64,600
Amortization of stock compensation 120,333 -
Decrease (increase) in current assets:
Accounts receivable 14,301 (22,796)
Prepaid and other assets 47,676 (81,497)
Increase (decrease) in current liabilities: (4,190)
Accounts payable (26,963)
Bank overdraft (9,712) -
Salary accrual 30,059 -
Payroll taxes accrual 48,146 -
Other current liabilities 58,408 (13,319)
--------- ---------
Total adjustments 295,904 (55,138)
--------- ---------
Net cash (used) by operating activities 8,809 (313,150)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (14,488) -
--------- ---------
Net cash (used) by investing activities (14,488) -
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from insurance financing - 93,061
Repayments of insurance financing - (71,295)
Proceeds from line of credit 26,000 -
Loan from stockholders, net 12,740 183,263
Proceeds from sale of common stock - 40,000
Proceeds from note payable 40,000
Repayments of debenture payable (10,750) 22,096
--------- ---------
Net cash provided by financing activities 27,990 307,125
--------- ---------
NET INCREASE (DECREASE) IN CASH 22,311 (6,025)
CASH, BEGINNING OF THE PERIOD - 19,467
--------- ---------
CASH, END OF THE PERIOD $ 22,311 $ 13,442
========= =========
See accompanying notes to these financial statements.
5
RESOLVE STAFFING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED)
COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------------- -------------- -------------- --------------- ---------------
BALANCE, DECEMBER 31, 2002 4,821,082 482 737,190 (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
Issuance of common stock for
services 20,000 2 2,998 - 3,000
Conversion of debentures to common stock 34,000 3 3,397 - 3,400
Donated services - Officers - - 9,000 - 9,000
(57,167)
Less, Deferred stock compensation - - - -
Net loss during period - - - (287,095) (287,095)
---------------- -------------- -------------- --------------- ---------------
BALANCE, SEPTEMBER 30, 2003 (UNAUDITED) 6,100,082 $ 610 $923,962 $(1,032,682) $ (165,277)
================ ============== ============== =============== ===============
See accompanying notes to these financial statements.
6
RESOLVE STAFFING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE A - ORGANIZATION, NATURE OF OPERATIONS, BASIS OF PRESENTATION AND
ACCOUNTING PRINCIPLES
Organization and Nature of Operations
- -------------------------------------
Resolve Staffing, Inc., (the "Company") was organized under the laws of the
State of Nevada on April 9, 1998. Integra Staffing, Inc., ("Integra") was
organized under the laws of the State of Florida corporation on August 16, 1999
(collectively referred to as "Resolve"). On December 10, 2001, the Company
acquired 100% of the outstanding common stock of Integra. Integra was
subsequently dissolved. The Company is engaged in providing human resource
services focusing on the professional, clerical, administrative and light
industrial staffing market in West Central Florida. The Company is also engaged
in recruiting, training, temporary personnel and payroll administration services
to the manufacturing, distribution, hospitality, and construction industries in
West Central Florida.
Basis of Presentation
- ---------------------
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
and nine months ended September 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
Recent Accounting Principles
- ----------------------------
During December 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 148, "Accounting for Stock-Based Compensation -- Transition and
Disclosure". Statement No. 148 establishes standards for two alternative methods
of transition to the fair value method of accounting for stock-based employee
compensation of SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS
No. 148 also amends and augments the disclosure provisions of SFAS No. 123 and
APB No. 28, "Interim Financial Reporting", to require disclosure in the summary
of significant accounting policies for all companies of the effects of an
entity's accounting policy with respect to stock based employee compensation on
reported net income and earnings per share in annual and interim financial
statements. The transition standards and disclosure requirements of SFAS No. 148
are effective for fiscal years and interim periods ending after December 15,
2002. As of September 30, 2003, the Company had no employee stock option plans.
SFAS No. 148 does not require the Company to transition from the intrinsic value
approach provided in APB Opinion No. 25, "Accounting for Employee Stock Based
Compensation". In addition, the Company does not currently plan to transition to
the fair value approach in SFAS No. 123. However, the Company has adopted the
additional disclosure requirements of SFAS No. 148.
7
RESOLVE STAFFING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE A - ORGANIZATION, NATURE OF OPERATIONS, BASIS OF PRESENTATION AND
ACCOUNTING PRINCIPLES (CONTINUED)
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN No. 45"). Under FIN No. 45, guarantees, contracts
and indemnification agreements are required to be initially recorded at fair
value. Current practice provides for the recognition of a liability only when a
loss is probable and reasonably estimable, as those terms are defined under SFAS
No. 5, "Accounting for Contingencies". In addition, FIN No. 45 requires
significant new disclosures for all guarantees even if the likelihood of the
guarantor's having to make payments under the guarantee is remote. The
disclosure requirements are effective for financial statements of interim and
annual periods ending after December 15, 2002. The initial recognition and
measurement provisions of FIN No. 45 are applicable on a prospective basis to
guarantees, contracts or indemnification agreements issued or modified after
December 31, 2002.
The Company currently has no guarantees, contracts or indemnification agreements
that would require fair value treatment under the new standard. The Company's
current policy is to disclose all material guarantees and contingent
arrangements, similar to the disclosure requirements of Fin No. 45, which
provide for disclosure of the approximate term, nature of guarantee, maximum
potential amount of exposure, and the nature of recourse provisions and
collateral.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". The statement amends and
clarifies accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging activities. This
statement is designed to improve financial reporting such that contracts with
comparable characteristics are accounted for similarly. The statement is
generally effective for contracts entered into or modified after June 30, 2003.
The Company currently has no such financial instruments outstanding or under
consideration and does not expect the adoption of this standard to effect the
Company's financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity". This statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. This
statement is effective for financial instruments entered into or modified after
May 31, 2003, and is otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. The Company currently has no such
financial instruments outstanding or under consideration and therefore adoption
of this standard currently has no financial reporting implications.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN No. 46"). This interpretation clarifies rules
relating to consolidation where entities are controlled by means other than a
majority voting interest and instances in which equity investors do not bear the
residual economic risks. This interpretation is effective immediately for
variable interest entities created after January 31, 2003 and, for interim
periods beginning after December 15, 2003, for interests acquired prior to
February 1, 2003. The Company does not currently have relationships with
entities meeting the criteria set forth in FIN No. 46 and is not required to
include any such entities in its financial statements pursuant to the provisions
of FIN No. 46.
8
RESOLVE STAFFING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE A - ORGANIZATION, NATURE OF OPERATIONS, BASIS OF PRESENTATION AND
ACCOUNTING PRINCIPLES (CONTINUED)
Loss per Share
- --------------
Resolve records basic and 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.
NOTE B - LIQUIDITY AND MANAGEMENT'S PLANS
The accompanying financial statements have been prepared on a going-concern
basis, which contemplates the realization of assets and the discharge of
liabilities in the normal course of business. As reflected in the accompanying
financial statements, the Company has a working capital deficiency and a
stockholder's deficiency of $189,476 and $165,277 respectively, as of September
30, 2003. In addition, the Company is in the formative period and has not yet
achieved profitable operations, and has been dependent upon the financial
support of stockholders, management and other related parties. These conditions
raise substantial doubt as to the ability of the Company to continue its
business operations as a going concern.
Management is currently looking to secure additional financial resources to
support the Company's operations. In addition, management is reviewing a number
of strategic alliances and acquisitions that may advance the Company's
operations. However, while these strategies are under development, costs and
expenses have been substantially curtailed. Ultimately, the Company's ability to
continue as a going concern is dependent upon the access of additional capital
to support operations and strategic growth strategies. There can be no assurance
that management will be successful in these efforts. The financial statements do
not reflect any adjustments that may arise as a result of this uncertainty.
NOTE C - NOTES PAYABLE AND LINE OF CREDIT
Notes Payable
- -------------
During May and June 2002, the Company obtained loans from an unrelated
individual for a total of $40,000. The underlying notes payable bear interest at
12% per annum, payable quarterly in arrears and are secured by the accounts
receivable of the Company. The maturity of the Notes was extended to April 3,
2004.
Notes Payable - Related Party
- -----------------------------
The Company has obtained loans from William A. Brown, the Company's executive
vice president, and majority shareholder in the aggregate totaling $87,500. The
underlying notes bear interest at 5% and are due on March 31, 2004.
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%) 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 and majority
shareholder. As of September 30, 2003, Resolve has drawn down $26,000 on the
line of credit, therefore $24,000 remains available.
9
RESOLVE STAFFING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE D--OTHER CURRENT LIABILITIES
Other current liabilities include the following components as of September 30,
2003 and December 31, 2002:
2003 2002
------- -------
Other accrued liabilities $25,244 $ 4,935
Accrued workers' compensation 16,042 -
Insurance financing and interest (1) 15,707 -
Other insurance liabilities 6,350 -
------- -------
$63,343 $ 4,935
======= =======
(1) 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 E - STOCKHOLDERS' EQUITY
Issuances of Common Stock:
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.
On April 15, 2003, Resolve issued 20,000 shares of its restricted common stock
to an unrelated individual for services with investor relations matters.
On June 30, 2003, the Company issued 34,000 shares of its common stock to
debenture holders in exchange for their 6% convertible debenture due June 30,
2003.
In October, 2003, we issued 21,000 shares of our common stock to three employees
of our Company.
In October, 2003, we issued 15,000 shares of our common stock to a director of
our Company.
In October, 2003, we issued 2,500 shares of our common stock to an unrelated
individual, for her agreement in extending the maturity date of a promissory
note we own to her.
Deferred Stock Compensation:
- ----------------------------
Compensation and consulting expense related to the two common stock issuances in
February 2003, noted above, are being amortized over the benefited periods of 12
months. The remaining outstanding amount of $57,167 is carried as a contra
account to equity in the accompanying financial statements.
Information with Respect to Warrants:
- -------------------------------------
As of September 30, 2003 there were 4,256,600 stock warrants outstanding which
are due to expire during on June 30, 2007. Each warrant has an exercise price of
$.15 per share price.
10
RESOLVE STAFFING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
NOTE F - CASH FLOW SUPPLEMENTAL INFORMATION
Cash paid for interest during the nine months ended September 30, 2003 and 2002
amounted to $13,186 and $447 respectively.
During nine months ended September 30, 2003, the following non-cash transactions
were recorded:
1. Resolve's officers provided services to the Company valued at $9,000 and
donated to the Company.
2. Resolve issued 20,000 shares of common stock to an unrelated individual in
exchange for investor relations services.
3. Resolve issued 950,000 shares of common stock to a company controlled by
executive officers of the Company in exchange for consulting services
valued at $133,000.
4. 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.
5. Resolve issued 275,000 shares of restricted common stock, valued at
$38,500, to an officer of the Company for compensation.
NOTE G - LOSS PER SHARE
Net loss per share is computed based upon the weighted outstanding shares of the
Company's common stock for each period presented. The weighted average number of
shares excludes 4,256,600 common stock equivalents, representing principally
warrants and stock options, since the effect of including them would be
anti-dilutive.
NOTE H - 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.
11
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 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. On December 10, 2001, Resolve
Staffing acquired 100% of the outstanding common stock of Integra. Integra was
subsequently dissolved.
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 over 100 companies
in the Tampa, Florida area and currently provide technical, clerical,
administrative, accounting, sales, human resources and light industrial staff to
over 20 companies.
12
RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002.
Comparison of operations of our Company is as follows:
The net loss increased from $258,012 for nine months ended September 30,
2002 to $287,095 or a 11% increase for nine months ended September 30, 2003. The
major factors contributing to this increase loss is the increase in legal and
professional fees associated with the completion of our registration statement.
Revenues for nine months ended September 30, 2002 compared to 2003
increased from $303,531 to $760,127 or a 150% increase, reflecting an increase
in business recovery and our aggressive marketing efforts.
For the nine months ended September 30, 2003 and 2002 the major categories
of expenses, as a percent of revenue were as follows:
2003 2002
------ ------
Legal & professional 22% 35%
Advertising & promotion 1% 3%
Salaries & benefits 23% 50%
Taxes & licenses 2% 3%
Rent & leases 2% 5%
Travel & entertainment 1% 1%
Administrative expenses 10% 15%
Legal & professional expense increased from $108,321 in 2002 to
$170,218 in 2003 or a 57% increase, reflecting principally (1) a increase in
consulting expenses, 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, (2) $3,000 in
consulting fees for investor relations services we paid with 20,000 shares of
common stock, and (3) an increase in legal and accounting expenses associated
with compliance with SEC matters and the completion of our registration
statement, which was declared effective August 6, 2003.
Advertising and promotion expense increased slightly from $7,929 in
2002 to $8,519 in 2003, or a 7% increase, 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 $153,204 in 2002 to $171,437 in
2003, or a 12% increase, reflecting the constant level of total administrative
compensation, including donated services by our CFO and President.
Rent & leases expense decreased from $16,351 in 2002 to $11,386 in
2003, or a 30% decrease, reflecting a lower rental cost of our new facilities as
well as a reduction of common area maintenance costs compared to the previous
leased offices.
Travel & entertainment substantially increased from $1,850 in 2002 to
$5,887 in 2003, or a 218% increase, reflecting the increased effort by our staff
to market our services and our CEO attending staffing industry conventions and
seminars.
13
Taxes & licenses increased from $9,384 in 2002 to $14,178 in 2003, or a
51% increase, reflecting an increase of costs previously associated with
licensing our company in Nevada as well as Florida.
General and administrative expenses increased from $43,057 in 2002 to
$73,921 in 2003 or a 72% increase. Changes in the major components of general
and administrative expenses for the nine months ended September 30, 2002 to
September 30, 2003 were from expenses incurred for the change in our
infrastructure to assist in our growth for the third and fourth quarters. These
changes allowed for additional client customer service and market penetration
for our existing clients.
COMPARISON OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002.
Comparison of operations of our Company is as follows:
The net loss increased from $39,044 for three months ended September
30, 2002 to $168,100 or a 331% increase for three months ended September 30,
2003. The major factors contributing to this increase are legal and professional
expenses associated with compliance with SEC matters and the completion of our
registration statement.
Revenues for three months ended September 30, 2002 compared to 2003
increased from $118,427 to $220,961, or an 87% increase, reflecting an increase
in business recovery and our aggressive marketing efforts.
For the three months ended September 30, 2003 and 2002 the major
categories of expenses, as a percent of revenue were as follows:
2003 2002
------ ------
Legal & professional 33% 5%
Advertising & promotion 2% 3%
Salaries & benefits 31% 41%
Taxes & licenses 4% 2%
Rent & leases 3% 0%
Travel & entertainment 1% 1%
Administrative expenses 21% 12%
Legal & professional expense increased from $5,964 in 2002 to $71,878
in 2003 or a 946% increase, reflecting principally (1) a increase in consulting
expenses, 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, (2) $3,000 in consulting fees for investor
relations services we paid with 20,000 shares of common stock, and (3) an
increase 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 increase was nominal from $3,441 in
2002 to $3,433 in 2003, or a .2% increase, reflecting the concentrated effort of
our management to control costs and expenses.
Salaries and benefits increased from $48,765 in 2002 to $67,694 in
2003, or a 39% increase, reflecting an increase in officers' compensation,
including donated services by our CFO and President and reflecting the higher
compensation being paid to our CEO starting February 2003.
Taxes & licenses increased from $2,521in 2002 to $8,485 in 2003, or a
237% increase, reflecting additional costs of licensing in Nevada as well as
Florida paid during the quarter ended September 30, 2003.
Rent & leases expense increased from $0 in 2002 to $7,101 in 2003,
reflecting the new lease and the cost of our new facilities.
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Travel & entertainment increased from $1,243 in 2002 to $2,399 in 2003,
or a 93% increase, reflecting the concentrated effort of our management to
market our services while controlling costs and expenses.
General and administrative expenses increased from $13,872 in 2002 to
$47,490 in 2003 or a 242% increase. Changes in the major components of general
and administrative expenses from the three months ended September 30, 2002 and
September 30, 2003 were from expenses incurred for the change in our
infrastructure to assist in our growth for the third and fourth quarters. These
changes allowed for additional client customer service and market penetration
for our existing clients.
LIQUIDITY AND CAPITAL RESOURCES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
For the nine months ended September 30, 2003 we incurred a net loss of
$287,095. Of this loss, $127,989 did not represent the use of cash. These
consist of depreciation ($4,656) and services donated by our officers ($9,000),
as well as expensing of prepaid consulting expenses ($88,666) and prepaid salary
for our CEO ($25,667), the last two of which resulted from the issuance of our
common stock. Changes 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 provided by operations to $8,809.
Additionally we used $14,488 to purchase computer equipment, software and office
equipment 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 $87,986, $92,306 and $73,654 for the first, second and third
quarters of 2003, respectively. This increase in our average monthly revenues
and business activity increase in recent months is a result of our flexible
staffing employees increasing from 42 during the three months ended September
2002 to 149 for the nine months ended September 30, 2003.
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 officers,
shareholders or others; however, our operations may not provide such funds and
we may not be able obtain short-term loans from officers, shareholders or
others. Our officers and shareholders are under no obligation to provide
additional loans to us.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003
For the three months ended September 30, 2003 we incurred a net loss of
$168,195. Of this loss, $48,200 did not represent the use of cash. These consist
of depreciation ($2,325) 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), the last two of which resulted from the issuance of our common
stock. Changes 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 provided by operations to $17,311.
During the three months ended September 30, 2003, we borrowed an
additional $5,000 on our $50,000 line of credit from Mercantile Bank, bringing
to the amount we have drawn down to $26,000, therefore, we $24,000 remaining
available to us. 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 4.0%)
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.
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ITEM 3. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the
end of the period covered by this report, Resolve carried out an evaluation of
the effectiveness of the design and operation of Resolve's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of Resolve's management, including Resolve's Chief Financial
Officer, who concluded that Resolve's disclosure controls and procedures are
effective. There have been no significant changes in Resolve's internal controls
or in other factors, which could significantly affect internal controls
subsequent to the date RESOLVE carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Resolve's
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in Resolve's reports filed under the
Exchange Act is accumulated and communicated to management, including Resolve's
Chief Financial Officer, to allow timely decisions regarding required
disclosure.
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PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In October, 2003, we issued 21,000 shares of our common stock to three
employees of our Company. The shares were issued pursuant to Section 4(2) of the
Securities Act.
In October, 2003, we issued 15,000 shares of our common stock to a
director of our Company. The shares were issued pursuant to Section 4(2) of the
Securities Act.
In October, 2003, we issued 2,500 shares of our common stock to an
unrelated individual, for her agreement in extending the maturity date of a
promissory note we own to her. 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 Michael Knox, 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 Michael Knox, 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
DATE EVENT(S) REPORTED
September 26, 2003 Change in registrant's certifying accountant.
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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: November 19, 2003 /s/ Wanda D. Dearth
------------------------------------
By: Wanda D. Dearth
Chief Executive Officer (principal
executive officer), director
/s/ Donald E. Quarterman, Jr.
Dated: November 19, 2003 ------------------------------------
By: Donald E. Quarterman, Jr.
President, Director
Dated: November 19, 2003 /s/ Michael Knox
------------------------------------
By: Michael Knox
Chief Financial Officer (principal
accounting officer)
18