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, 2004
[ ] 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
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(State or Other Jurisdiction of
Incorporation or Organization)
33-0850639
(IRS Employer 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
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(Former Name, Former Address and Former Fiscal Year,
If changed since Last Report)
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 9, 2004, there
were outstanding 9,695,582 shares of common stock, par value $0.0001, and no
shares of preferred stock.
RESOLVE STAFFING, INC.
FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated balance sheets as of June 30, 2004 (unaudited) and
December 31, 2003 3
Consolidated statements of operations for the three months and six months
ended June 30, 2004 and 2003 (unaudited) 4
Consolidated statements of cash flows for the three months and six months
ended June 30, 2004 and 2003 (unaudited) 5
Consolidated statement of stockholders' equity (deficit) for the six months
ended June 30, 2004 (unaudited) and the year ended December 31, 2003 6
Notes to consolidated financial statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 11
ITEM 3. CONTROLS AND PROCEDURES 13
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES 14
2
RESOLVE STAFFING, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003
ASSETS 2004 2003
(Not Reviewed)
----------- -----------
Current Assets
Cash and cash equivalents $ 34 $ --
Accounts receivable, net of allowance for bad
debts of $4,500 for 2004 and 2003 120,347 116,723
Prepaid and other assets 41,500 20,982
----------- -----------
Total current assets 161,881 137,705
Property and Equipment
Property and equipment 46,547 44,763
Less: Accumulated depreciation 24,410 20,470
----------- -----------
Net property and equipment 22,137 24,293
Total Assets $ 184,018 $ 161,998
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued expenses $ 84,907 $ 62,987
Accrued salaries and payroll taxes 3,078 92,764
Notes payable 89,100 81,000
Note payable - related party 91,500 91,500
----------- -----------
Total current liabilities 268,585 328,251
----------- -----------
Long-Term Liabilities
Loans payable - related party 170,245 --
----------- -----------
Total long-term liabilities 170,245 --
----------- -----------
Stockholders' Equity (Deficit)
Common stock, $.0001 par value, 50,000,000 shares
authorized, issued and outstanding: June 30, 2004
- 7,695,582 shares; December 31, 2003 - 6,614,582 shares 751 661
Paid-in capital 998,729 1,133,639
Less: Deferred stock compensation (11,200) (33,483)
Accumulated (deficit) (1,378,002) (1,132,160)
----------- -----------
Total stockholders' equity (deficit) (254,812) (166,253)
----------- -----------
Total Liabilities and Stockholders'
Equity (Deficit) $ 184,018 $ 161,998
=========== ===========
See accompanying notes to these financial statements.
3
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
(Not Reviewed) (Not Reviewed)
----------- ----------- ----------- -----------
Service Revenues $ 410,178 $ 276,920 $ 698,405 $ 539,166
Cost of Services 336,099 205,511 549,512 404,422
----------- ----------- ----------- -----------
Gross Margin 74,078 71,409 148,893 134,744
Operating Expenses
Legal & professional fees 61,293 66,333 84,788 95,292
Advertising/Promotion 2,902 3,275 5,192 5,086
Salaries and benefits 118,420 62,027 231,561 103,743
Taxes and Licenses -- 3,864 45 5,693
Rent & leases 3,634 2,958 7,279 7,835
Travel & entertainment 65 2,747 149 4,172
Administrative expenses 31,328 15,809 58,596 28,666
Total operating expenses 217,642 157,013 387,610 250,487
----------- ----------- ----------- -----------
Loss From Operations (143,564) (85,604) (238,717) (115,743)
Other Income (Expenses)
Interest expense (2,370) (963) (7,124) (3,252)
----------- ----------- ----------- -----------
Net other income (expenses) (2,370) (963) (7,124) (3,252)
----------- ----------- ----------- -----------
Net Loss $ ( 145,934) $ (,86,567) $ (245,841) $ (118,995)
=========== =========== =========== ===========
Loss Per Share
Basic and diluted $ (.02) $ (.01) $ (.04) $ (.02)
=========== =========== =========== ===========
Weighted Average Number of Shares
Outstanding used to Calculate
Loss Per Share
Basic and diluted 7,695,582 6,046,069 6,915,338 5,605,029
=========== =========== =========== ===========
See accompanying notes to these financial statements.
4
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
(Not Reviewed) (Not Reviewed)
--------- --------- --------- ---------
Cash Flows From Operating Activities
Net (loss) $ ( 145,934) $ ( 86,567) $ ( 245,842) $ ( 118,995)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation 1,985 1,207 3,940 2,331
Contributed services -- 3,000 -- 6,000
Common stock issued for services 81,000 3,000 135,000 174,500
Amortization of stock compensation 5,600 42,874 22,283 (100,042)
Decrease (increase) in current assets:
Accounts receivable (25,714) 19,744 (3,624) (12,935)
Prepaid and other assets 2,281 (15,258) (20,518) (27,279)
Increase (decrease) in current liabilities:
Accounts payable 35,154 5,863 60,407 6,482
Bank overdraft -- 11,654 (6,180) 1,942
Accrued salaries -- -- (13,233) 23,187
Accrued payroll taxes (887) (7,926) (76,453) (5,587)
Other current liabilities -- 2,840 (32,307) 7,342
--------- --------- --------- ---------
Total adjustments 99,419 66,998 69,315 75,941
--------- --------- --------- ---------
Net cash provided by (used in) operating activities (46,515) (19,569) (176,527) (43,054)
--------- --------- --------- ---------
Cash Flows From Investing Activities
Purchase of property and equipment -- (10,088) (1,784) (14,488)
--------- --------- --------- ---------
Net cash (used) in investing activities -- (10,088) (1,784) (14,488)
--------- --------- --------- ---------
Cash Flows From Financing Activities
Proceeds from insurance financing -- 25,000 -- 48,594
Repayments of insurance financing -- (12,890) -- (19,303)
Proceeds from line of credit 277 21,000 48,100 21,000
Loan from stockholders, net -- (2,090) (40,000) 15,001
Repayments of debentures payable -- (7,750) -- (7,750)
Proceeds from loans payable -
related party 33,055 -- 170,245 --
--------- --------- --------- ---------
Net cash provided by financing activities 33,332 23,261 178,345 57,542
--------- --------- --------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents (13,183) (6,396) 34 --
Cash and Cash Equivalents, Beginning of the Period 13,217 6,396 -- --
--------- --------- --------- ---------
Cash and Cash Equivalents, End of the Period $ 34 $ -- $ 34 --
========= ========= ========= =========
See accompanying notes to these financial statements.
5
RESOLVE STAFFING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICET
FOR THE YEARS ENDED DECEMBER 31, 2003 AND
FOR THE SIX MONTHS ENDED JUNE 30, 2004 (Not Reviewed)
Common Stock Paid-in Unearned Stock Accumulated
Shares Amount Capital Compensation Deficit Total
---------- ---------- ---------- ---------- ---------- ----------
Balance, January 1, 2003 4,821,082 $ 482 $ 737,190 $ -- $ ( 745,587) $ (7,915)
Issuance of common stock for
services--Consultants 950,000 95 132,905 (133,000) -- 133,000
Issuance of common stock for
services--Employees 755,000 76 105,624 (105,700) -- 105,700
Issuance of common
stock for services 63,500 6 8,513 (8,519) -- 8,519
Conversion of debentures
to common stock 25,000 2 2,497 -- -- 2,499
Donated services -- -- 12,000 -- -- 12,000
Amortization of deferred
stock compensation -- -- -- 213,736 -- (33,483)
Net loss -- -- -- -- (386,573) (386,573)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 2003 6,614,582 661 998,729 (33,483) (1,132,160) (166,253)
Issuance of common stock
for services--Employees 360,000 36 53,964 (54,000) -- 54,000
Amortization of deferred
stock compensation -- -- -- 70,683 -- 16,683
Net loss -- -- -- -- (99,908) (99,908)
---------- ---------- ---------- ---------- ---------- ----------
Balance, March 31, 2004* 6,974,582 697 1,052,693 (16,800) (1,232,068) (195,478)
Issuance of common stock
for services--Employees 721,000 54 80,946 (81,000) -- 81,000
Amortization of deferred
stock compensation -- -- -- 86,600 -- 5,599
Net loss -- -- -- -- (145,934) (145,934)
---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 2004* 7,695,582 $ 751 $1,133,639 $ (11,200) $ ( 1,378,002) $ (254,813)
========== ========== ========== ========== ========== ==========
* The March 31, 2004 and June 30, 2004 figures have not been reviewed by
an Independent Auditor.
See accompanying notes to these financial statements.
6
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 (Note Reviewed)
NOTE A - ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Organization and Nature of Operations
Resolve Staffing, Inc., ("Resolve" or the "Company") was organized under the
laws of the State of Nevada on April 9, 1998. Integra Staffing, Inc.,
("Integra") is a wholly owned subsidiary that was organized under the laws of
the State of Florida on August 16, 1999 (collectively referred to as "Resolve")
and acquired in 2001. The Company is engaged in providing human resource
services (which include recruiting, training, and placement of temporary
personnel) focusing on the professional, clerical, administrative and light
industrial staffing market 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
months and six months ended June 30, 2004 and 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, 2003 as filed with the Securities and Exchange
Commission
Principles of Consolidation
The consolidated financial statements include the accounts of Resolve Staffing,
Inc. and its wholly owned subsidiary Integra. All significant intercompany
accounts and transactions have been eliminated in preparing the accompanying
financial statements.
Recent Accounting Principles
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.
7
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 (Note Reviewed)
NOTE A - ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
(CONTINUED)
In December 2003, the FASB issued FASB Interpretation No. 46, "Amended
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.
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 $106,704 and $254,812, respectively, as of June 30,
2004. In addition, the Company has incurred substantial losses 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 as a going concern.
Management is engaged in accessing additional financial resources to support the
Company's operations until profitability can be achieved. In addition,
management is reviewing a number of strategic alliances and acquisitions that
may advance the Companies 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
Note 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 maturities were extended to September 3, 2004.
Line of Credit
On May 14, 2003, the Company entered into a $50,000 demand credit facility with
Mercantile Bank. Interest is payable at 3% above Mercantile Bank's prime rate
(currently 7.25%) per annum. The line of credit is personally guaranteed by
William A. Brown, the Company's executive vice-president and majority
shareholder. As of June 30, 2004, Resolve has drawn $49,100 on the line of
credit.
NOTE D--NOTE PAYABLE--RELATED PARTY
Notes payable--related party represents aggregate borrowings totaling $91,500 to
William Brown, the company's executive vice president, and majority shareholder.
The underlying note bears interest at 5% and is due on March 31, 2004. The
Company has a verbal agreement to extend the maturity to March 31, 2005.
8
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 (Note Reviewed)
NOTE E--LOANS PAYABLE - RELATED PARTY
On December 8, 2003, the Company entered into a non-interest bearing short-term
credit agreement with ELS, Inc that provides for borrowings of up to $200,000.
ELS, Inc. is a company owned by Ronald Heineman, the Company's Chief Executive
Officer. The underlying promissory note is secured by 2,000,000 shares of common
stock that were released to an escrow agent, but not issued for accounting or
reporting purposes. As of June 30, 2004, there was $170,245 outstanding under
this agreement. Balances due under the credit agreement were originally due May
8, 2004, but the agreement was extended on a month-to-month basis. Also see Note
F as it relates to common stock issued to Ronald Heineman under an employment
and consulting agreement.
NOTE F - STOCKHOLDERS' EQUITY
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 May 31, 2003 and register the shares issued to Pinnacle. Resolve issued
the 950,000 shares of its common stock to Pinnacle Corporate Services, LLC as
partial compensation for a the one-year agreement to provide consulting services
and valued the shares at $133,000 representing the market value of such shares
based upon recent sales.
On February 7, 2003, Resolve issued 275,000 shares of its common stock valued at
$38,500, representing the market value of such shares based upon recent sales,
to Wanda D. Dearth, its former Chief Executive Officer in connection with a
compensation agreement for her services.
During 2003, Resolve issued 63,500 shares, valued at $8,519, representing the
market value of such shares based upon recent sales, of its restricted common
stock to unrelated individuals for services with investor relations matters.
As more fully discussed above, on June 25, 2003, the Company issued 25,000
shares of its common stock in exchange for the debentures converted.
On December 29, 2003, Resolve issued 200,000 shares of its restricted common
stock to stock to Michael Knox, as partial compensation for a one-year agreement
to serve as the Company's Chief Financial Officer valued at $28,000,
representing the market value of such shares based upon recent sales, through
December 31, 2004.
On December 29, 2003, Resolve pledged 2,000,000 shares of common stock as
collateral for a Line of Credit to ELS, Inc. ELS, Inc. is a company owned by
Ronald Heineman.
On December 29, 2003, Resolve issued 280,000 shares of common stock, valued at
$39,200, representing the market value of such shares based upon recent sales,
to Ronald Heinemen the Company's Chief Executive Officer under an employment
contract that also provides for future stock issuances. The stock was and will
be issued as follows: 100,000 shares upon execution of the Agreement, plus the
first month's compensation of 180,000 shares, and 180,000 shares at each monthly
anniversary beginning February 2004.
On February 2, 2004, Resolve issued 180,000 shares of common stock, valued at
$27,000, representing the market value of such shares based upon recent sales,
to Ronald Heinemen the Company's Chief Executive Officer as part of his
employment contract listed previously.
9
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 (Note Reviewed)
NOTE F - STOCKHOLDERS' EQUITY (CONTINUED)
On March 1, 2004, Resolve issued 180,000 shares of common stock, valued at
$27,000, representing the market value of such shares based upon recent sales,
to Ronald Heinemen the Company's Chief Executive Officer as part of his
employment contract listed previously.
On April,1, 2004, Resolve issued 180,000 shares (April) of common stock, valued
at $27,000, representing the market value of such shares based upon recent
sales, to Ronald Heinemen the Company's Chief Executive Officer as part of his
employment contract listed previously.
On May,1, 2004, Resolve issued 180,000 shares (May) of common stock, valued at
$27,000, representing the market value of such shares based upon recent sales,
to Ronald Heinemen the Company's Chief Executive Officer as part of his
employment contract listed previously.
On June,1, 2004, Resolve issued 180,000 shares (June) of common stock, valued at
$27,000, representing the market value of such shares based upon recent sales,
to Ronald Heinemen the Company's Chief Executive Officer as part of his
employment contract listed previously.
On July,1, 2004, Resolve issued 180,000 shares (July) of common stock, valued at
$27,000, representing the market value of such shares based upon recent sales,
to Ronald Heinemen the Company's Chief Executive Officer as part of his
employment contract listed previously.
Deferred Stock Compensation:
Compensation and consulting expense related to the two common stock issuances
February 2003, and December 2003 noted above, are being amortized over the
benefited periods of 12 months. The remaining outstanding amount of $11,200 is
carried as a contra account to equity in the accompanying financial statements.
COMMON STOCK WARRANTS
As of June 30, 2004 there were 4,256,600 stock warrants outstanding which are
due to expire on June 30, 2007. Each warrant has an exercise price of $.15 per
share price. All stock warrants are exercisable.
NOTE G - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest during the three months ended June 30, 2004 and 2003
amounted to $2,370 and $963 respectively.
Cash paid for interest during the six months ended June 30, 2004 and 2003
amounted to $7,124 and 3,252 respectively.
Resolve issued 360,000 shares of common stock during the three months ended
March 31, 2004, valued at $54,000, to officers for compensation. During the
three months ended June 30, 2004, Resolve issued 540,000 shares of common stock,
valued at $81,000, to officers for compensation.
10
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 (Note Reviewed)
NOTE H - NET 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 7,694,582 common stock equivalents, representing principally
warrants and stock options, since the effect of including them would be
anti-dilutive.
NOTE I - SUBSEQUENT EVENTS
On August 16, 2004, Resolve Staffing, Inc.'s auditors (Aidman, Piser and
Company) resigned as the Company's auditors. The registrant is not aware of any
disagreement with its previous auditor regarding the contents of the
registrant's financial statements or the presentation thereof, rather the basis
for the auditors' resignation was premised upon the auditor's belief that they
were not given sufficient advance time to review this quarterly report filed on
Form 10-QSB and the auditor's opinion that they were not given sufficient time
to review the registrant's previously filed quarterly report filed with the
Commission on or about June 28, 2004. Given the sudden and unexpected nature of
the resignation, The Board of Directors for the registrant is conducting
interviews for the auditor's replacement. Upon hiring a replacement, the
quarterly financials will be reviewed accordingly and it is the registrant's
intention to amend this quarterly report after the review is completed by our
new auditing firm. See Part II, Item 5 of this quarterly report.
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 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, 2003.
RESULTS OF OPERATIONS
COMPARISON OF CONSOLIDATED OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2004
AND 2003.
Our net loss increased from $86,567 for three months ended June 30, 2003
to $145,934 or a 59% increase for three months ended June 30, 2004. A
line-by-line discussion of our results of operations is as follows:
Revenues for three months ended June 30, 2003 compared to 2004 increased
from $276,920 to $410,178 or a 68% increase, reflecting our continued marketing
efforts.
Our cost of services increased from $205,501 for the three months ended
June 30, 2003 to $336,099 for the three months ended June 30, 2004. This
increase was largely due to the increased revenues as noted above. However, as a
percentage of revenue our cost of services increased from 74% to 82%, which is
attributable to an overall increase in costs.
12
For the three months ended June 30, 2004 and 2003 the major categories of
expenses, as a percent of revenue were as follows:
2004 2003
---------------------------------
Legal & professional 15% 24%
Advertising & promotion 1% 1%
Salaries & benefits 29% 22%
Taxes & licenses -% 1%
Rent & leases 1% 1%
Travel & entertainment -% 1%
Administrative expenses 8% 18%
Legal & professional expense decreased from $66,333 in 2003 to $61,293 in
2004 or an 8% decrease, reflecting management ability to reduce expenses and
revenues increase.
Advertising and promotion expense decreased slightly from $3,275 in 2003
to $2,902 in 2004, reflecting a decreased level of outside advertising and
promotion, while relying more on direct customer sales contacts by our sales
staff.
Salaries and benefits increased from $62,027 in 2003 to $118,420 in 2004,
or a 91% increase, reflecting the constant level of total administrative
compensation, including stock for services by our CFO and by our president.
Taxes & licenses decreased from $3,864 in 2003 to zero in 2004, reflecting
a decrease of costs previously associated with licensing our company in Nevada
as well as Florida.
Rent & leases expense increased slightly from $2,958 in 2003 to $3,634 in
2004, higher rental cost of our new facilities.
Travel & entertainment decreased from $2,747 in 2003 to $65 in 2004,
reflecting the increased effort by our staff to market our services and
principally by our CEO attending a staffing industry convention and seminars.
Administrative expenses increased from $15,809 in 2003 to $31,328 in
2004.or a 98% increase. Changes in the major components of administrative
expenses from the three months ended June 30, 2003 and June 30, 2004 were as
follows Changes in the major components of administrative expenses were
primarily an increase in penalties of $8,911.
Interest expense increased from $963 in 2003 to $2,370 in 2004 or a $1,407
increase. The change was do to additional borrowing on the credit line and other
notes payable.
COMPARISON OF CONSOLIDATED OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND
2003.
Our net loss increased from $118,995 for six months ended June 30, 2003 to
$245,841 or a 107% increase for six months ended June 30, 2004. A line-by-line
discussion of our results of operations is as follows:
Revenues for six months ended June 30, 2003 compared to 2004 increased
from $539,166 to $698,405 or a 30% increase, reflecting our continued marketing
efforts.
Our cost of services increased from $404,422 for the six months ended June
30, 2003 to $549,512 for the six months ended June 30, 2004. This increase was
largely due to the increased revenues as noted above. However, as a percentage
of revenue our cost of services increased from 75% to 79%, which is attributable
to an overall increase in costs.
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For the six months ended June 30, 2004 and 2003 the major categories of
expenses, as a percent of revenue were as follows:
2004 2003
---------------------------------
Legal & professional 12% 18%
Advertising & promotion 1% 1%
Salaries & benefits 33% 19%
Taxes & licenses -% 1%
Rent & leases 1% 2%
Travel & entertainment -% 1%
Administrative expenses 8% 5%
Legal & professional expense decreased from $95,292 in 2003 to $84,788 in
2004 or an 11% decrease, reflecting management ability to reduce expenses and
revenues increase.
Advertising and promotion expense increased slightly from $5,086 in 2003
to $5192 in 2004, reflecting a decreased level of outside advertising and
promotion, while relying more on direct customer sales contacts by our sales
staff.
Salaries and benefits increased from $103,743 in 2003 to $231,561 in 2004,
or a 123% increase, reflecting the constant level of total administrative
compensation, including stock for services by our CFO and by our president.
Taxes & licenses decreased from $5,693 in 2003 to $45 in 2004, reflecting
a decrease of costs previously associated with licensing our company in Nevada
as well as Florida.
Rent & leases expense decreased slightly from $7,835 in 2003 to $7,279 in
2004, reflecting a change in the 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 $4,172 in 2003 to $149 in 2004,
reflecting the increased effort by our staff to market our services and
principally by our CEO attending a staffing industry convention and seminars.
Administrative expenses increased from $28,666 in 2003 to $58,596 in
2004.or a 104% increase. Changes in the major components of administrative
expenses from the three months ended June 30, 2003 and June 30, 2004 were as
follows Changes in the major components of administrative expenses were
primarily an increase penalties of $9,060; an increase in printing costs of
$6,684; an increase in postage and shipping expenses of $1,761; an increase in
computer support of $2,117; and an increase in public company expenses of $7,291
(primarily due to filing various amendments to our registration statement)..
Interest expense increased from $3,252 in 2003 to $7,124 in 2004 or a
$3,872 increase. The change was do to additional borrowing on the credit line
and other notes payable.
LIQUIDITY AND CAPITAL RESOURCES
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 an
accumulated deficiency of $106,704 and $254,813 as of June 30, 2004,
respectively. 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.
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Management is currently engaged in accessing additional financial resources to
support the Company's operations until profitability can be achieved. In
addition, management is reviewing a number of strategic alliances and
acquisitions that may advance the Companies operations into a profitable state.
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.
FOR THE THREE MONTHS ENDED JUNE 30, 2004
For the three months ended June 30, 2004 we incurred a net loss of
$145,934. Of this loss, $88,585 did not represent the use of cash. These consist
of depreciation ($1,985), as well as expensing of prepaid consulting expenses
($86,600), of which resulted from the issuance of our common stock. Changes in
accounts receivable, prepaid and other expenses were offset by changes in
accounts payable, payroll, salary, and other accruals brought the total cash
used by operations to $46,515.
Our average monthly revenue for each of the four quarters of 2003 was
$87,986, $92,306, $73,654, and $115,224, respectively, and $96,092 for the first
quarter of 2004, has increased to a monthly average of $136,726 for the second
quarter of 2004. Although we have seen our average monthly revenues and business
activity increase, we expect to continue to incur losses for the foreseeable
future.
FOR THE SIX MONTHS ENDED JUNE 30, 2004
For the six months ended June 30, 2004 we incurred a net loss of $245,841.
Of this loss, $161,223 did not represent the use of cash. These consist of
depreciation ($3,940), as well as expensing of prepaid consulting expenses
($157,283), of which resulted from the issuance of our common stock. Changes in
accounts receivable, prepaid and other expenses were offset by changes in
accounts payable, payroll, salary, and other accruals brought the total cash
used by operations to $176,527. Additionally we used $1,784 to purchase a
computer during this period.
We expect our operating expenses to increase significantly in the near
future as we attempt to build our brand and expand our customer base. We hope
our expenses will be funded from operations and short-term loans from officer,
shareholders or others; however, our operations may not provide such funds and
we may not be able obtain short-term loans from officers, shareholders or
others. Our officers and shareholders are under no obligation to provide
additional loans to the company,
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
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 May 31, 2003 and register the shares issued to Pinnacle. Resolve issued
the 950,000 shares of its common stock to Pinnacle Corporate Services, LLC as
partial compensation for a the one-year agreement to provide consulting services
and valued the shares at $133,000 representing the market value of such shares
based upon recent sales.
On February 7, 2003, Resolve issued 275,000 shares of its common stock valued at
$38,500, representing the market value of such shares based upon recent sales,
to Wanda D. Dearth, its former Chief Executive Officer in connection with a
compensation agreement for her services.
During 2003, Resolve issued 63,500 shares, valued at $8,519, representing the
market value of such shares based upon recent sales, of its restricted common
stock to unrelated individuals for services with investor relations matters.
As more fully discussed above, on June 25, 2003, the Company issued 25,000
shares of its common stock in exchange for the debentures converted.
On December 29, 2003, Resolve issued 200,000 shares of its restricted common
stock to stock to Michael Knox, as partial compensation for a one-year agreement
to serve as the Company's Chief Financial Officer valued at $28,000,
representing the market value of such shares based upon recent sales, through
December 31, 2004.
On December 29, 2003, Resolve pledged 2,000,000 shares of common stock as
collateral for a Line of Credit to ELS, Inc. ELS, Inc. is a company owned by
Ronald Heineman.
On December 29, 2003, Resolve issued 280,000 shares of common stock, valued at
$39,200, representing the market value of such shares based upon recent sales,
to Ronald Heinemen the Company's Chief Executive Officer under an employment
contract that also provides for future stock issuances. The stock was and will
be issued as follows: 100,000 shares upon execution of the Agreement, plus the
first month's compensation of 180,000 shares, and 180,000 shares at each monthly
anniversary beginning February 2004.
On February 2, 2004, Resolve issued 180,000 shares of common stock, valued at
$27,000, representing the market value of such shares based upon recent sales,
to Ronald Heinemen the Company's Chief Executive Officer as part of his
employment contract listed previously.
On March 1, 2004, Resolve issued 180,000 shares of common stock, valued at
$27,000, representing the market value of such shares based upon recent sales,
to Ronald Heinemen the Company's Chief Executive Officer as part of his
employment contract listed previously.
On April,1, 2004, Resolve issued 180,000 shares (April) of common stock, valued
at $27,000, representing the market value of such shares based upon recent
sales, to Ronald Heinemen the Company's Chief Executive Officer as part of his
employment contract listed previously.
On May,1, 2004, Resolve issued 180,000 shares (May) of common stock, valued at
$27,000, representing the market value of such shares based upon recent sales,
to Ronald Heinemen the Company's Chief Executive Officer as part of his
employment contract listed previously.
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On June,1, 2004, Resolve issued 180,000 shares (June) of common stock, valued at
$27,000, representing the market value of such shares based upon recent sales,
to Ronald Heinemen the Company's Chief Executive Officer as part of his
employment contract listed previously.
On July,1, 2004, Resolve issued 180,000 share9s (July) of common stock, valued
at $27,000, representing the market value of such shares based upon recent
sales, to Ronald Heinemen the Company's Chief Executive Officer as part of his
employment contract listed previously.
Item 5. Other Information
On August 16, 2004, Aidman, Piser and Company ("APC"), the Registrant's
independent auditors, notified the Registrant that they were resigning from the
client-auditor relationship with the Registrant effective as of that date.
APC was engaged by Registrant to serve as the Registrant's independent auditors
for the fiscal year ended December 31, 2003. The report of APC with respect to
the Registrant's financial statements for the fiscal year ended December 31,
2003 contained no adverse opinion or disclaimer of opinion. During the fiscal
year ended December 31, 2003 and the period from December 31, 2003 through the
date of APC's resignation, there were no disagreements between the Registrant
and APC on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of APC, would have caused APC to make reference to the
subject matter of the disagreements in connection with its report on the
Registrant's financial statements for such year.
As stated in APC's resignation letter dated August 16, 2004, a review of the
Registrant's First and Second Quarter Financials for 2004 has not been
completed. As a result, the Registrant's previously issued financial statements
for the first quarter of 2004 and the financial statements to be issued for the
second quarter of 2004 may need to be restated upon review of the new auditors.
The Registrant's Audit Committee has begun the process of selecting new
independent certified public accountants and will file a Form 8-K upon the
engagement of a new auditing firm. Upon hiring a replacement, the quarterly
financials will be reviewed accordingly. Aidman, Piser and Company has indicated
a willingness to work with Resolve's new auditors upon their engagement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 15.1 Auditor Resignation Letter dated
August 16, 2004
Exhibit 31.1 Certification by Ronald Heineman, 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 A. 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 Ronald Heineman, 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 A. 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
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 16, 2004 /s/ Ronald Heineman
----------------------------------------
By: Ronald Heineman
Chief Executive Officer (principal
executive officer, director)
/s/ Michael A. Knox
Dated: August 16, 2004 ----------------------------------------
By: Michael A. Knox
Chief Financial Officer (principal
financial & accounting officer, director)
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