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 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.
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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 JUNE 30, 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 and
six months ended June 30, 2004 and 2003 (unaudited) 4
Consolidated statements of cash flows for the six months
ended June 30, 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 14
PART II - OTHER INFORMATION
ITEM 4. CHANGES IN SECURITIES 15
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
2
RESOLVE STAFFING, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003
2004 2003
(UNAUDITED)
----------- -----------
ASSETS
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' 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 769 661
Paid-in capital 1,160,771 998,729
Less: Deferred stock compensation (38,200) (33,483)
Accumulated deficit (1,378,152) (1,132,160)
----------- -----------
Total stockholders' deficit (254,812) (166,253)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' 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
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- -----------
SERVICE REVENUES $ 410,178 $ 276,920 $ 698,405 $ 539,166
COST OF SERVICES 336,099 205,511 549,512 404,422
----------- ----------- ----------- -----------
GROSS MARGIN 74,079 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 31,329 15,809 58,597 28,666
----------- ----------- ----------- -----------
Total operating expenses 217,643 157,013 387,611 250,487
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (143,564) (85,604) (238,718) (115,743)
OTHER EXPENSES
Interest expense (2,520) (963) (7,274) (3,252)
----------- ----------- ----------- -----------
Net other expenses (2,520) (963) (7,274) (3,252)
----------- ----------- ----------- -----------
NET LOSS $ (146,084) $ (86,567) $ (245,992) $ (118,995)
=========== =========== =========== ===========
LOSS PER SHARE
Basic and diluted $ (.02) $ (.01) $ (.03) $ (.02)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING USED TO CALCULATE LOSS
PER SHARE
Basic and diluted 7,445,351 6,046,069 7,118,780 5,605,029
=========== =========== =========== ===========
See accompanying notes to these financial statements.
4
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
2004 2003
(UNAUDITED) (UNAUDITED)
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(245,992) $(118,995)
Adjustments to reconcile net loss to cash provided by
(used in) operating activities:
Depreciation 3,940 2,331
Contributed services -- 6,000
Common stock issued for services and interest charges 162,150 174,500
Amortization of stock compensation (4,717) (100,042)
Decrease (increase) in current assets:
Accounts receivable (3,624) (12,935)
Prepaid and other assets (20,518) (27,279)
Increase (decrease) in current liabilities:
Accounts payable 60,407 6,482
Bank overdraft (6,180) 1,942
Accrued salaries (13,233) 23,187
Accrued payroll taxes (76,453) (5,587)
Other current liabilities (32,307) 7,342
--------- ---------
Total adjustments 69,465 75,941
--------- ---------
Net cash used in operating activities (176,527) (43,054)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,784) (14,488)
--------- ---------
Net cash used in investing activities (1,784) (14,488)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from insurance financing -- 48,594
Repayments of insurance financing -- (19,303)
Proceeds from notes payable 48,100 21,000
Borrowings from (repayments to) stockholders (40,000) 15,001
Repayments of debentures payable -- (7,750)
Proceeds from loans payable - related party 170,245 --
--------- ---------
Net cash provided by financing activities 178,345 57,542
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 34 --
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD -- --
--------- ---------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 34 --
--------- ---------
See accompanying notes to these financial statements.
5
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 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.
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 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
6
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 (UNAUDITED)
NOTE A - ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
(CONTINUED)
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 $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 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.
7
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 (UNAUDITED)
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 was 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 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 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.
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.
8
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 (UNAUDITED)
NOTE F - STOCKHOLDERS' EQUITY (CONTINUED)
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.
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.
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 $38,200 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.
9
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 (UNAUDITED)
NOTE G - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest during the six months ended June 30, 2004 and 2003
amounted to $7,124 and 3,252 respectively.
During the six months ended June 30, 2004, Resolve issued 1,000 shares of common
stock, valued at $150, to an unrelated individual as compensation for an
extension on the Company's notes payable.
During the six months ended June 30, 2004, Resolve issued 1,080,000 shares of
common stock, valued at $162,000, to officers for compensation.
NOTE H - NET LOSS PER SHARE
Net loss per share is computed based upon the weighted average number of
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 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, Resolve Staffing, Inc.'s auditors (Aidman, Piser and
Company) resigned as the Company's auditors. The Company is not aware of any
disagreement with its previous auditor regarding the contents of the Company'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 Company'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 Audit committee of the Board of Directors for the Company set
about the process of engaging new registered public accountants. On September
21, 2004, the Company engaged PKF, Certified Public Accountants, a Professional
Corporation,("PKF"), as its independent public accountants. For additional
information refer to our Form 8-K filed on September 23, 2004.
As disclosed in our Form 10-QSB filed August 19, 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.
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 borrowing.
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 JUNE 30, 2004
AND 2003.
Our net loss increased from $86,567 for the three months ended June 30, 2003 to
$146,084 or a 69% increase for the three months ended June 30, 2004. A
line-by-line discussion of our results of operations is as follows:
Revenues for the three months ended June 30, 2003 compared to 2004 increased
from $276,920 to $410,178 or a 48% increase, reflecting our continued marketing
efforts.
Our cost of services increased from $205,511 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.
11
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% 8%
Legal & professional expense decreased from $66,333 in 2003 to $61,293 in 2004
or an 8% decrease, reflecting management's ability to reduce expenses.
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,
reflecting the higher rental cost of our new facilities.
Travel & entertainment decreased from $2,747 in 2003 to $65 in 2004, reflecting
a decrease in the number of staffing industry conventions and seminars attended.
Administrative expenses increased from $15,809 in 2003 to $31,329 in 2004 or a
98% increase. Changes in the major components of administrative expenses for the
three months ended June 30, 2003 to June 30, 2004 were primarily due to an
increase in penalties of $8,911.
Interest expense increased from $963 in 2003 to $2,520 in 2004 or a $1,557
increase. The change was due to additional borrowings 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 the six months ended June 30, 2003 to
$245,992 or a 107% increase for the six months ended June 30, 2004. A
line-by-line discussion of our results of operations is as follows:
Revenues for the 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 -% 2%
Rent & leases 1% 1%
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's ability to reduce expenses.
Advertising and promotion expense increased slightly from $5,086 in 2003 to
$5,192 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 due to a
decrease in the number of staffing industry conventions and seminars attended.
Administrative expenses increased from $28,666 in 2003 to $58,597 in 2004 or a
104% increase. Changes in the major components of administrative expenses for
the six months ended June 30, 2003 and June 30, 2004 were primarily due to an
increase in 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 $7,274 in 2004 or a $4,022
increase. The change was due to additional borrowings 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 $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.
Management is currently engaged in accessing additional financial resources to
support the Company's operations until profitability can be achieved. In
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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
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 SIX MONTHS ENDED JUNE 30, 2004
For the six months ended June 30, 2004 we incurred a net loss of $245,992. Of
this loss, $161,373 did not represent the use of cash. These consist of
depreciation ($3,940), the expensing of prepaid consulting expenses and interest
expenses ($157,433) 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 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 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 Company's financial statements for such year.
On September 21, 2004, the Company engaged PKF, Certified Public Accountants, a
Professional Corporation ("PKF"), as its independent 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)
/s/ Michael A. Knox
Dated: November 10, 2004 -------------------------------
By: Michael A. Knox
Chief Financial Officer (principal
financial & accounting officer, director)
17