UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
[X] Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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.
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(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
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(Address of Principal Executive Offices)
(813) 662-0074
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(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 November 5, 2004, there
were outstanding 7,695,582 shares of common stock, par value $0.0001, and no
shares of preferred stock.
1
RESOLVE STAFFING, INC.
FORM 10-QSB/A FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated balance sheets as of March 31, 2004 (unaudited) and
December 31, 2003 3
Consolidated statements of operations for the three months
ended March 31, 2004 and 2003 (unaudited) 4
Consolidated statements of cash flows for the three months ended
March 31, 2004 and 2003 (unaudited) 5
Notes to consolidated financial statements (unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 11
ITEM 3. CONTROLS AND PROCEDURES 13
PART II OTHER INFORMATION
ITEM 4. CHANGES IN SECURITIES 14
ITEM 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
2
RESOLVE STAFFING, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2004 (UNAUDITED) AND DECEMBER 31, 2003
2004
(UNAUDITED) 2003
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 13,217 $ --
Accounts receivable, net of allowance for bad
debts of $4,500 for 2004 and 2003 94,633 116,723
Prepaid and other assets 43,781 20,982
----------- -----------
Total current assets 151,631 137,705
PROPERTY AND EQUIPMENT
Property and equipment 46,547 44,763
Less: Accumulated depreciation 22,425 20,470
----------- -----------
Net property and equipment 24,122 24,293
TOTAL ASSETS $ 175,753 $ 161,998
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 49,753 $ 62,987
Accrued salaries and payroll taxes 3,965 92,764
Notes payable 88,823 81,000
Note payable - related party 91,500 91,500
----------- -----------
Total current liabilities 234,041 328,251
----------- -----------
LONG-TERM LIABILITIES
Loans payable - related party 137,190 --
----------- -----------
Total long-term liabilities 137,190 --
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.0001 par value, 50,000,000 shares
authorized, issued and outstanding: March 31, 2004 -
6,974,582 shares; December 31, 2003 - 6,614,582 shares 697 661
Paid-in capital 1,052,693 998,729
Less: Deferred stock compensation (16,800) (33,483)
Accumulated deficit (1,232,068) (1,132,160)
----------- -----------
Total stockholders' deficit (195,478) (166,253)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 175,753 $ 161,998
=========== ===========
See accompanying notes to these financial statements.
3
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
2004 2003
(UNAUDITED) (UNAUDITED)
----------- -----------
SERVICE REVENUES $ 288,227 $ 262,246
COST OF SERVICES 213,413 198,911
----------- -----------
GROSS MARGIN 74,814 63,335
OPERATING EXPENSES
Legal & professional fees 23,495 28,960
Advertising/Promotion 2,291 1,810
Salaries and benefits 113,140 41,716
Taxes & licenses 45 1,829
Rent & leases 3,644 4,877
Travel & entertainment 85 1,425
Administrative expenses 27,268 12,859
----------- -----------
Total operating expenses 169,968 93,476
LOSS FROM OPERATIONS (95,154) (30,141)
OTHER EXPENSES
Interest expense (4,754) (2,288)
----------- -----------
Net other expenses (4,754) (2,288)
NET LOSS $ (99,908) $ (32,429)
=========== ===========
LOSS PER SHARE
Basic and diluted $ (.01) $ (.01)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
USED TO CALCULATE LOSS PER SHARE
Basic and diluted 6,788,582 5,592,180
=========== ===========
See accompanying notes to these financial statements.
4
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
2004 2003
(UNAUDITED) (UNAUDITED)
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (99,908) $ (32,429)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation 1,955 1,124
Contributed services -- 3,000
Common stock issued for services 54,000 171,500
Amortization of stock compensation 16,683 --
Decrease (increase) in current assets:
Accounts receivable 22,090 (32,679)
Prepaid and other assets (22,799) (154,937)
Increase (decrease) in current liabilities:
Accounts payable (13,234) 619
Bank overdraft -- (9,712)
Accrued salaries and payroll taxes (88,799) 25,526
Other current liabilities -- 4,503
--------- ---------
Total adjustments (30,104) 8,944
--------- ---------
Net cash used in operating activities (130,012) (23,485)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,784) (4,400)
--------- ---------
Net cash used in investing activities (1,784) (4,400)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from insurance financing -- 23,594
Repayments of insurance financing -- (6,413)
Proceeds from notes payable 47,823 --
Borrrowings from (repayments to) stockholders (40,000) 17,100
Proceeds from loans payable - related party 137,190 --
--------- ---------
Net cash provided by financing activities 145,013 34,281
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 13,217 6,396
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD -- --
--------- ---------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 13,217 $ 6,396
========= =========
See accompanying notes to these financial statements.
5
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 (UNAUDITED)
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 ended March 31, 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.
Revenue Recognition
Staffing and managed service revenue and the related labor costs and payroll are
recorded in the period in which services are performed. Permanent placement
revenues are recognized when services provided are substantially completed.
Allowances are established to estimate losses due to placed candidates not
remaining employed for our guaranteed period. The Company follows Emerging
Issues Task Force ("EITF") 99-19, "Reporting Revenue Gross as a Principal versus
Net as an Agent," in the presentation of revenues and expenses. This guidance
requires Resolve to assess whether it acts as a principal in the transaction or
as an agent acting on behalf of others. In situations where Resolve is the
principal in the transaction and has the risks and rewards of ownership, the
transactions are recorded gross in the consolidated statements of operations.
Stock Based Employee Compensation:
Resolve accounts for and reports its stock-based employee compensation
arrangements using the intrinsic value method as prescribed in Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB
25"), Financial Accounting Standards Board Interpretation No, 44, Accounting for
Certain Transactions Involving Stock Compensation ("FIN 44"), and Statement of
Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation
- - Transition and Disclosure ("SFAS 148"). Accordingly, compensation cost for
stock options and warrants are measured as the excess, if any, of the fair value
of the Company's stock at the date
6
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 (UNAUDITED)
NOTE A - ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
(CONTINUED)
of grant over the stock option exercise price. Resolve accounts for stock issued
to non-employees in accordance with the provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS
123"). Under SFAS 123, stock option awards issued to non-employees are accounted
for at their fair value on the date issued, where fair value is determined using
the Black-Scholes option pricing method.
There are no differences between the historical and pro-forma stock based
compensation value.
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.
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 deficit of $82,410 and $195,478, respectively, as of March 31,
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.
7
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 (UNAUDITED)
NOTE B - LIQUIDITY AND MANAGEMENT'S PLANS (CONTINUED)
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 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
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 July 3, 2004, and
have subsequently been extended to be due on demand.
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 March 31, 2004, Resolve has drawn $48,823 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.
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 March 31, 2004, there was $137,190 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 and provided
for an additional $100,000 in borrowings. Also see Note F as it relates to
common stock issued to Ronald Heineman under an employment and consulting
agreement.
8
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 (UNAUDITED)
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 advice 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.
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 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., which 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 Heineman 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 Heineman 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 Heineman 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 $16,800 is
carried as a contra account to equity in the accompanying financial statements.
9
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 (UNAUDITED)
NOTE F - STOCKHOLDERS' EQUITY (CONTINUED)
Common Stock Warrants:
As of March 31, 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 March 31, 2004 and 2003
amounted to $4,754 and $2,288 respectively.
Resolve issued 360,000 shares of common stock, valued at $54,000, to officers
for compensation.
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 4,256,600 common stock equivalents, representing principally
warrants and stock options, since the effect of including them would be
anti-dilutive.
NOTE I - SUBSEQUENT EVENTS
On April 1, 2004, Resolve issued 360,000 shares (April and May) of common stock,
valued at $54,000, representing the market value of such shares based upon
recent sales, to Ronald Heineman the Company's Chief Executive Officer as part
of his employment contract.
On June 1, 2004, Resolve issued 360,000 shares (June and July) of common stock,
valued at $54,000, representing the market value of such shares based upon
recent sales, to Ronald Heineman the Company's Chief Executive Officer as part
of his employment contract.
On June 30, 2004 Resolve issued 1,000 shares of common stock, valued at $150,
representing the market value of such shares based upon recent sales, to Barbara
Green, an unrelated individual, as consideration for the extension of the
Company's note payable.
On July 9, 2004, Resolve Staffing, Inc. and Wanda Dearth entered into a
Settlement Agreement pertaining to a lawsuit (Case No. 0401248) filed in
Hillsborough County, Florida.
On September 22, 2004, Don Quarterman resigned as an Officer of Resolve
Staffing, Inc. There were no disputes between the Company and Mr. Quarterman.
Mr. Quarterman will remain as a Director of Resolve Staffing, Inc.
On September 22, 2004, Bill Brown resigned as an Officer of Resolve Staffing,
Inc. There were no disputes between the Company and Mr. Brown. Mr. Brown will
remain as a Director of Resolve Staffing, Inc.
As of September 30, 2004, there was $256,897 outstanding under the credit
agreement with ELS, Inc., which was originally due to expire on May 8, 2004, but
was extended on a month-to-month basis and provided for an additional $100,000
in borrowings.
As disclosed in our Form 10-QSB filed June 28, 2004 the Company's prior auditor
resigned on August 16, 2004. As disclosed in our Form 8-K filing dated September
22, 2004, the Company engaged new auditors on September 21, 2004. The Company is
filing this Form 10-QSB/A in order to comply with regulatory requirements for
filing interim financial statements.
After the filing of the Registrant's Form 8-K on August 25, 2004, disclosing the
resignation of our former auditors, the Registrant received notice from the
Nasdaq Listing Qualifications Department that our eligibility to continue price
quotations on the Bulletin Board would be suspended due to our failure to comply
with the financial statement requirements of Item 310(b) of Regulation S-B. The
Registrant requested a eligibility hearing with the Listing Qualifications
Department, which was held telephonically on October 28, 2004, during which time
the Registrant disclosed that it had retained new auditors as of September 21,
2004 and that amended Forms 10-QSB for the first and second quarters of the
current year would be filed no later than November 10, 2004. As of the date of
this report, the Registrant has not received any ruling as a result of the
eligibility hearing.
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, 2003.
RESULTS OF OPERATIONS
COMPARISON OF CONSOLIDATED OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2004
AND 2003.
Our net loss increased from $32,429 for three months ended March 31, 2003 to
$99,908 or a 208% increase for three months ended March 31, 2004. A line-by-line
discussion of our results of operations is as follows:
Revenues for three months ended March 31, 2003 compared to 2004 increased from
$262,246 to $288,227 or a 9.9% increase, reflecting our continued marketing
efforts.
Our cost of services increased from $198,911 for the three months ended March
31, 2003 to $213,413 for the three months ended March 31, 2004. This increase
was largely due to the increased revenues as noted above. However, as a
percentage of revenue our cost of services decreased slightly from 76% to 74%,
which is attributable to management's continued efforts to control costs.
11
For the three months ended March 31, 2004 and 2003 the major categories of
expenses, as a percent of revenue were as follows:
2004 2003
----------------------------------
Legal & professional 8% 11%
Advertising & promotion 1% 1%
Salaries & benefits 39% 16%
Taxes & licenses --% 1%
Rent & leases 1% 2%
Travel & entertainment --% 1%
Administrative expenses 9% 5%
Legal & professional expense decreased from $28,960 in 2003 to $23,495 in 2004
or a 19% decrease, reflecting management's ability to reduce expenses.
Advertising and promotion expense increased slightly from $1,810 in 2003 to
$2,291 in 2004, reflecting an increased level of outside advertising and
promotion.
Salaries and benefits increased from $41,716 in 2003 to $113,140 in 2004, or a
171% increase, reflecting the constant level of total administrative
compensation, including stock for services by our CFO and by our president.
Taxes & licenses decreased from $1,829 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 from $4,877 in 2003 to $3,644 in 2004,
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 $1,425 in 2003 to $85 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 $12,859 in 2003 to $27,268 in 2004,or a
112% increase. Changes in the major components of administrative expenses from
the three months ended March 31, 2003 to March 31, 2004 were as follows: an
increase in printing costs of $4,821; an increase in postage and shipping
expenses of $5,179; an increase in computer support of $2,103; and an increase
in public company expenses of $6,565 (primarily due to filing various amendments
to our registration statement).
Interest expense increased from $2,288 in 2003 to $4,754 in 2004 or a $2,466
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 deficit of $82,410 and $195,478 as of March 31, 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.
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 Company's 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
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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 MARCH 31, 2004
For the three months ended March 31, 2004 we incurred a net loss of $99,908. Of
this loss, $72,638 did not represent the use of cash. These consist of
depreciation ($1,955), the expensing of prepaid consulting expenses ($16,683),
which resulted from the issuance of our common stock and common stock issued for
services ($54,000). 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 used by operations to $130,012.
Additionally we used $1,784 to purchase a computer during this period.
Our average monthly revenue for each of the four quarters of 2003 was $87,986,
$92,306, $73,654, and $115,224, respectively, and has increased to a monthly
average of $96,076 for the first 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.
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 the
company.
ITEM 3. CONTROLS AND PROCEDURES
As required by Rule 13a-14 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 4. 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 advice 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.
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 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., which 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 Heineman 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 Heineman 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 Heineman the Company's Chief Executive Officer as part of his
employment contract listed previously.
On April 1, 2004, Resolve issued 360,000 shares (April and May) of common stock,
valued at $54,000, representing the market value of such shares based upon
recent sales, to Ronald Heineman the Company's Chief Executive Officer as part
of his employment contract listed previously.
On June 1, 2004, Resolve issued 360,000 shares (June and July) of common stock,
valued at $54,000, representing the market value of such shares based upon
recent sales, to Ronald Heineman the Company's Chief Executive Officer as part
of his employment contract listed previously.
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On June 30, 2004 Resolve issued 1,000 shares of common stock, valued at $150,
representing the market value of such shares based upon recent sales, to Barbara
Green, an unrelated individual, as consideration for the extension of the
Company's note payable.
ITEM 5. OTHER INFORMATION
On July 9, 2004, Resolve Staffing, Inc. and Wanda Dearth entered into a
Settlement Agreement pertaining to a lawsuit (Case No. 0401248) filed in
Hillsborough County, Florida.
On August 16, 2004, Aidman, Piser and Company ("APC"), the Company's independent
auditors, notified the Company that they were resigning from the client-auditor
relationship with the Company effective as of that date.
APC was engaged by the Company to serve as the Company's independent auditors
for the fiscal year ended December 31, 2003. The report of APC with respect to
the Company's financial statements for the fiscal year ended December 31, 2003
was modified for the uncertainty surrounding our ability to continue as a going
concern. 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 Company 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.
On September 21, 2004, the Company engaged PKF, Certified Public Accountants, a
Professional Corporation ("PKF"), as its independent registered public
accountants. For additional information refer to our Form 8-K filed on September
23, 2004.
On September 22, 2004, Don Quarterman resigned as an Officer of Resolve
Staffing, Inc. There were no disputes between the Company and Mr. Quarterman.
Mr. Quarterman will remain as a Director of Resolve Staffing, Inc.
On September 22, 2004, Bill Brown resigned as an Officer of Resolve Staffing,
Inc. There were no disputes between the Company and Mr. Brown. Mr. Brown will
remain as a Director of Resolve Staffing, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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: November 10, 2004 /s/ Ronald Heineman
----------------------------------
By: Ronald Heineman
Chief Executive Officer (principal
executive officer, director)
Dated: November 10, 2004 /s/ Michael A. Knox
----------------------------------
By: MIchael A. Knox
Chief Financial Officer (principal
financial & accounting officer, director)
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