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, 2005
|_| 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
-------------------------------
(State or Other Jurisdiction of
Incorporation or Organization)
33-0850639
(IRS Employer Identification No.)
3235 OMNI DRIVE
CINCINNATI, OH 45245
---------------------------------------
(Address of Principal Executive Offices)
(800) 894-4250
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
N/A
--------------------------------------------------
(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 May 20, 2005, there were
outstanding 14,539,101 shares of common stock, par value $0.0001, and no shares
of preferred stock.
1
RESOLVE STAFFING, INC.
FORM 10-QSB/ FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated balance sheets as of March 31, 2005 and
December 31, 2004 3
Consolidated statements of operations for the three months
ended March 31, 2005 and 2004 4
Consolidated statements of cash flows for the three months
ended March 31, 2005 and 2004 5
Notes to consolidated financial statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 14
ITEM 3. CONTROLS AND PROCEDURES 16
PART II OTHER INFORMATION
ITEM 4. CHANGES IN SECURITIES 17
ITEM 5. OTHER INFORMATION 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
2
RESOLVE STAFFING, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2005 AND DECEMBER 31, 2004
ASSETS 2005 2004
----------- -----------
Current Assets
Cash and cash equivalents $ 34,359 $ 6,108
Accounts receivable, net of allowance for bad
debts of $8,264 for 2005 and $4,500 for 2004 883,262 165,925
Prepaid and other assets 524,869 11,675
----------- -----------
Total current assets 1,442,490 183,708
Property and Equipment
Property and equipment 426,144 44,652
Less: Accumulated depreciation 202,300 (28,838)
----------- -----------
Net property and equipment 223,844 15,814
Other Assets
Goodwill 2,370,616 --
----------- -----------
Total other assets 2,370,616 --
----------- -----------
Total Assets $ 4,036,950 $ 199,522
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 118,015 $ 87,120
Accrued salaries and payroll taxes 201,384 21,217
Notes payable 1,526,304 89,100
Notes payable - related party 317,155 281,641
----------- -----------
Total current liabilities 2,162,858 479,078
----------- -----------
Long Term Liabilities
Notes payable - related party 2,143,380 --
----------- -----------
Total long term liabilities 2,143,380 --
----------- -----------
Stockholders' Equity (Deficit)
Common stock, $.0001 par value, 50,000,000 shares
authorized, issued and outstanding: March 31, 2005 -
14,539,101 shares; December 31, 2004 - 1,539,101 shares 1,453 154
Paid-in capital 1,290,087 1,161,387
Accumulated deficit (1,560,828) (1,441,097)
----------- -----------
Total stockholders' deficit (269,288) (279,556)
----------- -----------
Total Liabilities and Stockholders'
Deficit $ 4,036,950 $ 199,522
=========== ===========
See accompanying notes to these financial statements.
3
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
2005 2004
------------ ------------
Service Revenues $ 1,711,776 $ 288,227
Cost of Services 1,287,524 213,413
------------ ------------
Gross Margin 424,252 74,814
Operating Expenses
Legal & professional fees 56,409 23,495
Advertising/Promotion 21,243 2,291
Salaries and benefits 201,893 113,140
Taxes & licenses 58 45
Rent & leases 34,344 3,644
Travel & entertainment 2,538 85
Administrative expenses 204,675 27,268
------------ ------------
Total operating expenses 521,160 169,968
Loss From Operations (96,908) (95,154)
Other Expenses
Interest expense (22,822) (4,754)
------------ ------------
Net other expenses (22,822) (4,754)
Net Loss $ (119,730) $ (99,908)
============ ============
Loss Per Share
Basic and diluted $ (.01) $ (.07)
============ ============
Weighted Average Number of Shares Outstanding
used to Calculate Loss Per Share
Basic and diluted 10,205,768 1,357,716
============ ============
See accompanying notes to these financial statements.
4
RESOLVE STAFFING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
2005 2004
----------- -----------
Cash Flows From Operating Activities
Net loss $ (119,730) $ (99,908)
Adjustments to reconcile net loss to cash provided by (used in) operating
activities:
Depreciation 10,190 1,955
Common stock issued for services -- 54,000
Accrual of interest on note payable 22,403 --
Amortization of stock compensation -- 16,683
Decrease (increase) in current assets:
Accounts receivable (634,592) 22,090
Prepaid and other assets (13,412) (22,799)
Increase (decrease) in current liabilities:
Accounts payable (91,411) (13,234)
Accrued salaries and payroll taxes (34,847) (88,799)
Total adjustments (741,669) (30,104)
Net cash used in operating activities (861,399) (130,012)
----------- -----------
Cash Flows From Investing Activities
Purchase of property and equipment (56,245) (1,784)
Goodwill (154,145) --
----------- -----------
Net cash used in investing activities (210,390) (1,784)
----------- -----------
Cash Flows From Financing Activities
Proceeds from line of credit 467,000 --
Proceeds from notes payable 35,769 47,823
Repayment of note payable (68,439)
Borrowings from (repayments to) stockholders -- (40,000)
Proceeds from note payable for subsidiary acquisition 44,733 --
Proceeds from loans payable - related party 620,977 137,190
----------- -----------
Net cash provided by financing activities 1,100,040 145,013
----------- -----------
Net Increase in Cash and Cash Equivalents 28,251 13,217
Cash and Cash Equivalents, Beginning of the Period 6,108 --
----------- -----------
Cash and Cash Equivalents, End of the Period $ 34,359 $ 13,217
=========== ===========
5
Non-cash investing and financing activities:
On February 7, 2005, Resolve issued 13,000,000 shares of restricted common stock
valued at $130,000 and a note payable in the amount of $1,500,000 in exchange
for 100% of the ownership interest in 3 entities with 10 staffing locations. The
fair value of the assets and liabilities acquired, net of cash, on the date of
acquisition were as follows:
Accounts receivable $ 82,745
Prepaid and other assets 499,782
Property and equipment 161,974
Goodwill 2,216,471
Accounts payable and accrued liabilities (122,306)
Accrued salaries and payroll taxes (215,014)
Line of credit (400,000)
Note payable--workers compensation insurance (180,581)
Notes payable (457,805)
-----------
$ 1,585,266
===========
See accompanying notes to these financial statements.
6
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
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 the eastern United States.
On January 24, 2005, Resolve acquired certain assets from Solaris Staffing, Inc.
These assets included the operations of certain temporary staffing offices
located in upstate New York. The aggregate purchase price was $125,000, of which
$90,000 has been paid to date.
On February 20, 2005, Resolve acquired SupportStaff Employment Services, a
full-service staffing firm located in Sebring, FL. The aggregate purchase price
was $75,000, which has been paid in full.
Acquisition of Entities from Related Parties
On February 7, 2005, Resolve Staffing, Inc., entered into an equity purchase
agreement ("Agreement"), to purchase ELS Personnel Services from Employee
Leasing Services, Inc., ("ELS"), a privately-held company located in Cincinnati,
Ohio. The Company's Chief Executive Officer and director, Ronald Heineman, is a
principal shareholder, officer and director of ELS. Pursuant to the equity
purchase agreement, Resolve acquired a total of 10 temporary employee staffing
locations from ELS.
Employee Leasing Services, Inc., acquired the 10 temporary employee staffing
locations throughout fiscal 2004. ELS acquired 3 locations from Five Star
Staffing, Inc., in August 2004, 3 locations from Five Star Staffing (NY), Inc.,
in November 2004 and 4 location from American Staffing Resources, Ltd., in
November 2004. Prior to ELS's acquisition of these entities, these entities were
owned and operated by unrelated third parties in various locations throughout
Florida, New York and Ohio. The financial results of these acquired entities are
included in the consolidated financial statements from the date of acquisition.
Resolve issued 13,000,000 shares of restricted common stock valued at $130,000
and a note payable in the amount of $1,500,000 in exchange for 100% of the
ownership interest in 3 entities with 10 staffing locations. The following table
summarizes the estimated fair value of the assets acquired and liabilities
assumed, net of cash, on the date of acquisition:
Accounts receivable $ 82,745
Prepaid and other assets 499,782
Property and equipment 161,974
Goodwill 2,216,471
Accounts payable and accrued liabilities (122,306)
Accrued salaries and payroll taxes (215,014)
Line of credit (400,000)
Note payable--workers compensation insurance (180,581)
Notes payable (457,805)
-----------
$ 1,585,266
===========
7
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
NOTE A - ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
(CONTINUED)
In conjunction with the purchase, $2,216,471 was assigned to goodwill. All of
the goodwill is expected to be deductible for tax purposes.
To date the books and records of the locations acquired have not been audited,
and therefore the allocation of the purchase price is subject to refinement.
This amended 10QSB/A is being filed as the original filing included certain
accounts receivable that were not acquired as part of the acquisition completed
on February 7, 2005. As such, this amended filing does not include those
accounts receivable as part of the consolidated balance sheet.
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, 2005 and 2004 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, 2004 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 subsidiaries Integra, Five Star New York, Five Star
Florida, American Staffing Services, and ELS Personnel Services. All significant
inter-company accounts and transactions have been eliminated in preparing the
accompanying financial statements.
8
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
NOTE A - ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
(CONTINUED)
Revenue Recognition
Staffing and managed service revenue and the related labor costs and payroll are
recorded in the period in which services are performed. 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
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.
9
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
NOTE A - ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
(CONTINUED)
Effective as of December 31, 2004, the Company adopted the revised
interpretation of Financial Accounting Standards Board (FASB) Interpretation No.
46 (FIN 46), "Consolidation of Variable Interest Entities," (FIN 46-R). FIN 46-R
requires that certain variable interest entities be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The Company does not have any
investments in entities it believes are variable interest entities for which the
Company is the primary beneficiary.
In December 2004, FASB issued SFAS No. 123 (revised 2004) "Share Based Payment"
(SFAS No. 123R), a revision to Statement No. 123, Accounting for Stock-Based
Compensation which supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees. The revised SFAS 123 eliminates the alternative to use Opinion 25's
intrinsic value method of accounting and, instead, requires entities to
recognize the cost of employee services received in exchange for awards of
equity instruments based on the grant-date fair value of those awards.
Furthermore, public entities are required to measure liabilities incurred to
employees in share-based payment transactions at fair value as well as estimate
the number of instruments for which the requisite service is expected to be
rendered. Any incremental compensation cost for a modification of the terms or
conditions of an award is measured by comparing the fair values before and after
the modification. The Company has yet to determine the effect SFAS No. 123R may
have on its financial statements, if any.
In December 2004, the FASB issued SFAS No. 153 "Exchanges of Non-Monetary Assets
- - an amendment of APB Opinion No. 29". This statement amends Opinion No. 29, to
eliminate the exception for non-monetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of non-monetary assets
that do not have commercial substance. A non-monetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. The Company believes that the
adoption of SFAS 153 will not have a material impact on the Company's financial
statements.
NOTE B - LIQUIDITY AND MANAGEMENT'S PLANS
As reflected in the accompanying financial statements, the Company has a working
capital deficiency and a stockholder's deficit of $720,368 and $269,288,
respectively, as of March 31, 2005. In addition, the Company has incurred
substantial losses and has been dependent upon the financial support of
stockholders, management and other related parties.
Management has successfully obtained additional financial resources, which the
Company believes will support operations until profitability can be achieved.
These financial resources include financing from both related and non-related
third parties, as discussed in the accompanying footnotes to the financial
statements. 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.
10
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
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.
Revolving Note
On March 3, 2005, Resolve Staffing, Inc., secured a revolving note from Fifth
Third Bank for an amount of $1,900,000 with a maturity date of June 1, 2006.
Interest is payable on the principal balance outstanding on a monthly basis, at
the bank's prime rate. Borrowings under this note are limited to 80% of the
Company's accounts receivable balance which have been outstanding for less than
90 days.
Term Note
On March 3, 2005, Resolve Staffing, Inc., secured a term note ("note") from
Fifth Third Bank for an amount of $465,000 with a maturity date of September 1,
2009. The outstanding balance of the Note is to be paid in 53 installments of
principal and interest, each in the amount of $9,845, commencing April 1, 2005.
Interest is payable on the principal balance outstanding at a rate of 6.6% per
annum.
NOTE D - NOTE PAYABLE - RELATED PARTY
Notes payable-related party represents aggregate borrowings totaling $91,500 to
William Brown, a director and shareholder of the Company. The underlying note
bears interest at 5% and is due on March 31, 2004. The Company has a verbal
agreement to extend the maturity on a month to month basis.
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 400,000 shares of common
stock that were released to an escrow agent, but not issued for accounting or
reporting purposes. As of March 31, 2005, there was $225,655 outstanding under
this agreement. Balances due under the credit agreement were originally due May
8, 2004. On June 1, 2004, the agreement was amended to extend the line to a
maximum of $500,000.
On February 7, 2005 Resolve entered into a loan agreement with ELS, a company
owned by Resolve's Chief Executive Officer, Ron Heineman, for the principal sum
of $1,500,000. The note bears interest at 10% and is payable upon demand.
As of March 31, 2005 Resolve Staffing had collected a total of $620,977 in
accounts receivable that are due to ELS as per the acquisition agreement dated
February 7, 2005.
NOTE E - STOCKHOLDERS' EQUITY
On February 7, 2005, Resolve Staffing, Inc., entered into an equity purchase
agreement ("Agreement"), to purchase ELS Personnel Services from Employee
Leasing Services, Inc., ("ELS"), a privately-held company located in Cincinnati,
Ohio. The Company's Chief Executive Officer and director, Ronald Heineman, is a
principal shareholder, officer and director of ELS. Pursuant to the equity
purchase agreement, Resolve acquired a total of 10 temporary employee staffing
locations from ELS.
The aggregate purchase price was $1,630,000, including 13,000,000 shares of the
Company's restricted common stock valued at $130,000 based on management's
11
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
estimate of the fair value of the restricted common stock, and a demand
promissory note in the principal amount of $1,500,000, which accrues interest at
the rate of 10% per annum. The agreement does not specify any contingent
payments, options or other commitments.
NOTE E - STOCKHOLDERS' EQUITY (CONTINUED)
Common Stock Warrants
As of March 31, 2005 there were 851,320 stock warrants outstanding which are due
to expire on June 30, 2007. Each warrant has an exercise price of $.75 per share
price. All stock warrants are exercisable.
NOTE F - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest during the three months ended March 31, 2005 and 2004
amounted to $22,822 and $4,754 respectively.
On February 7, 2005 Resolve issued 13,000,000 shares of restricted common stock
valued at $130,000 and a note payable in the amount of $1,500,000 in exchange
for 100% of the ownership interest in 3 entities with 10 staffing locations. The
fair value of the assets and liabilities acquired, net of cash, on the date of
acquisition are detailed in Footnote A.
NOTE G - 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 851,320 common stock equivalents, representing principally
warrants and stock options, since the effect of including them would be
anti-dilutive.
NOTE H - SUBSEQUENT EVENTS
On April 1, 2005 Resolve opened a new temporary staffing location in Salisbury,
North Carolina.
On April 21, 2005, the board of directors of Resolve Staffing appointed William
Walton as a director of the Company. Mr. Walton was not appointed to serve on
any committees of Resolve's Board of Directors, however Mr. Walton may be
appointed to one or more committees of Resolve's Board of Directors in the
future.
On May 9, 2005, Resolve acquired certain assets from Pride Staffing, Inc. These
assets include a temporary staffing office located in Erie, PA.
NOTE I - PROFORMA INFORMATION
The interim financial statements for the three months ended March 31, 2005 are
presented in accordance with accounting principles generally accepted in the
United States (GAAP), which requires that the financial results of these
acquired entities (as detailed in Footnote A) are included in the consolidated
financial statements from the date of acquisition. As a result, the consolidated
statement of operations does not include the activity of the acquired companies
for the period from January 1, 2005 to February 7, 2005.
12
RESOLVE STAFFING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
NOTE I - PROFORMA INFORMATION (CONTINUED)
Presented below is the unaudited pro forma statement of operations for the three
months ended March 31, 2005 as if the acquired companies had been acquired
January 1, 2005.
Pro-forma adjustments for
--------------------------------------------------------------
Actual Five Star American Staffing Five Star Adjusted
March 31, 2005 Staffing, Inc. Resources, Ltd. Staffing (NY), Inc. March 31, 2005
------------------ ------------------- ------------------- ---------------------- --------------------
Service Revenues $1,711,776 $716,615 $146,217 $148,910 $2,723,518
Cost of Services 1,287,524 645,854 116,847 121,350 2,171,575
------------------ ------------------- ------------------- ---------------------- --------------------
Gross Margin 424,252 70,761 29,370 27,560 551,943
------------------ ------------------- ------------------- ---------------------- --------------------
Operating Expenses
Legal and professional fees 56,409 - 2,458 1,394 60,261
Advertising/Promotion 21,243 3,068 (556) 1,640 25,395
Salaries and benefits 201,893 30,817 60,170 36,117 328,997
Taxes & licences 58 62 - - 120
Rent & leases 34,344 8,458 3,262 5,720 51,784
Travel & entertainment 2,538 99 50 1,617 4,304
Administrative expenses 204,675 (4,264) 14,606 10,810 225,827
------------------ ------------------- ------------------- ---------------------- --------------------
Total operating expenses 521,160 38,240 79,990 57,298 696,688
Profit (Loss) From Operation (96,908) 32,521 (50,620) (29,738) (144,745)
Other (Income) Expenses
Interest (income) expense 22,822 8,584 (240) - 31,166
------------------ ------------------- ------------------- ---------------------- --------------------
Net other (income) expenses 22,822 8,584 (240) - 31,166
Net Loss $(119,730) $23,937 $(50,380) $(29,738) $(175,911)
------------------ ------------------- ------------------- ---------------------- --------------------
Pro-forma earnings per share information for the three months ended March 31,
2005: Basic weighted average shares outstanding:
14,539,101
Pro forma basic net loss per common share: $(.01)
The Company has been unable to obtain the necessary information to present
pro-forma financial information reflecting the combined operations of Resolve
Staffing, Inc, and its acquired staffing locations, for the period ended March
31, 2004. This current Report on Form 10-QSB/A will be supplemented by amendment
to provide the necessary comparative pro-form information as soon as the
information becomes available.
13
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, 2004.
RESULTS OF OPERATIONS
COMPARISON OF CONSOLIDATED OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2005
AND 2004.
Our net loss increased from $99,908 for three months ended March 31, 2004 to
$119,730 or a 20% increase for three months ended March 31, 2005, as a result of
the acquisitions described in Note A. A line-by-line discussion of our results
of operations is as follows:
Revenues for three months ended March 31, 2004 compared to 2005 increased from
$288,227 to $1,711,776 or a 494% increase. This increase is attributable to the
acquisition of 10 new locations from ELS on February 7, 2005. The locations
acquired from ELS were not being operated by ELS in the first quarter of 2004.
These locations, which were acquired February 7, 2005, were owned and operated
by ELS beginning in August, 2004.
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Our cost of services increased from $213,413 for the three months ended March
31, 2004 to $1,287,524 for the three months ended March 31, 2005. This increase
was largely due to the increased revenues as noted above. However, as a
percentage of revenue our cost of services increased slightly from 74% to 75%,
which is attributable to an increase in lower margin staffing opportunities in
new markets and increased worker's comp and insurance costs.
For the three months ended March 31, 2005 and 2004 the major categories of
expenses, as a percent of revenue were as follows:
2005 2004
-----------------------------------
Legal & professional 3% 8%
Advertising & promotion 1% 1%
Salaries & benefits 12% 39%
Taxes & licenses 0% 0%
Rent & leases 2% 1%
Travel & entertainment 0% 0%
Administrative expenses 12% 9%
Legal & professional expense increased from $23,495 in 2004 to $56,409 in 2005
or a 140% increase, reflecting an increase in accounting and legal costs
associated with audits and the acquisition of new locations.
Advertising and promotion expense increased from $2,291 in 2004 to $21,243 in
2005, reflecting an increased level of outside advertising and promotion. This
increase is attributable to the additional locations. Advertising and promotion
expense was relatively unchanged, as a percent of total sales.
Salaries and benefits increased from $113,140 in 2004 to $201,893 in 2005, or a
78% increase, reflecting an increase in administrative and management
compensation required to operate the increased number of locations.
Taxes & licenses increased slightly from $45 in 2004 to $58 in 2005, reflecting
an increase of costs associated with licensing our company in multiple states.
Rent & leases expense increased from $3,644 in 2004 to $34,344 in 2005,
reflecting an increase in the total locations being operated as a result of the
recent acquisition. Resolve has increased from one location in 2004 to a total
of 11 locations as a result of the first quarter acquisition on February 7,
2005.
Travel & entertainment increased from $85 in 2004 to $2,538 in 2005, reflecting
the increased effort by our staff to market our services on a national basis.
Administrative expenses increased from $27,268 in 2004 to $204,675 in 2005. This
increase reflects increased expenses associated with operating multiple staffing
locations. These changes include increased cost of various administrative
expenses, which include, but are not limited to printing, postage, shipping,
computer support, and other various public company expenses.
Interest expense increased from $4,754 in 2004 to $22,822 in 2005. The change
was due to additional borrowing on the credit line and other notes payable
associated with our recent acquisition.
LIQUIDITY AND CAPITAL RESOURCES
As reflected in the accompanying financial statements, the Company has a working
capital deficiency and a stockholder's deficit of $720,368 and $269,288,
respectively, as of March 31, 2005. In addition, the Company has incurred
substantial losses and has been dependent upon the financial support of
stockholders, management and other related parties.
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Management has successfully obtained additional financial resources, which the
Company believes will support operations until profitability can be achieved.
These financial resources include financing from both related and non-related
third parties, as discussed in the footnotes to the financial statements. 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, 2005
For the three months ended March 31, 2005 we incurred a net loss of $119,730. Of
this loss, $10,190 was for depreciation and did not represent the use of cash.
Changes in accounts receivable, prepaid and other expenses, offset by increases
in accounts payable, payroll, salary, and other accruals brought the total cash
used by operations to $861,399.
Our average monthly revenue for the first quarter of 2004 was $96,076, and has
increased to a monthly average of $561,828 for the first quarter of 2005.
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 August 20, 2004, the Board of Directors, with a written consent of
shareholders, approved a one for five reverse split of the Company's common
stock. An Information Statement was mailed on or about November 30, 2004 to the
holders of record at the close of business on November 25, 2004, of the common
stock, $.0001 par value per share (the "Common Stock") of Resolve Staffing, Inc.
(the "Company"), in connection with action by written consent to authorize and
approve the filing of an amendment to the Company's Articles of Incorporation
for the purpose of effecting:(i) a reverse stock split of the outstanding shares
of the Company's Common Stock on a one-for-five basis, with no fractional shares
to issue for any uneven or odd number of shares. The Reverse Split shall be
accomplished by using rounding up principals rather than issuing any fractional
shares of common stock or cash in lieu of fractional shares; (ii) maintaining
the par value of the Company's Common Stock at $.0001; and (iii) maintaining the
current number of shares of Common Stock the Company is authorized to issue at
50,000,000. Members of the Board of Directors and three shareholders owned or
had voting authority represents approximately 73% of the total outstanding votes
of all issued and outstanding shares of Common Stock of the Company and such
votes were sufficient to approve the action on the record date of November 25,
2004. The reverse split took place on December 28, 2004.
On February 7, 2005, Resolve Staffing, Inc., entered into an equity purchase
agreement ("Agreement"), to purchase ELS Personnel Services from Employee
Leasing Services, Inc., ("ELS"), a privately-held company located in Cincinnati,
Ohio. Resolve issued a total of 13,000,000 shares of common stock as part of the
payment for the acquisition. See Item 5. Other Information for additional
information.
ITEM 5. OTHER INFORMATION
On January 10, 2005, Mr. Michael Knox resigned as an officer of Resolve
Staffing, Inc. There were no disputes between the Company and Mr. Knox. The
Company intends to appoint another individual as chief financial officer in the
near future.
On February 7, 2005, Resolve Staffing, Inc., entered into an equity purchase
agreement ("Agreement"), to purchase ELS Personnel Services from Employee
Leasing Services, Inc., ("ELS"), a privately-held company located in Cincinnati,
Ohio. The Company's Chief Executive Officer and director, Ronald Heineman, is a
principal shareholder, officer and director of ELS. Pursuant to the equity
purchase agreement, Resolve acquired a total of 10 temporary employee staffing
locations from ELS.
The acquisition of these new locations is anticipated to significantly expand
the geographic scope of the Company's operations. The effects of this agreement
have not been incorporated into the financial statements as of, and for the year
ended December 31, 2004.
The aggregate purchase price was $1,630,000, including 13,000,000 shares of the
Company's restricted common stock valued at $130,000 based on management's
estimate of the fair value of the restricted common stock, and a demand
promissory note in the principal amount of $1,500,000, which accrues interest at
the rate of 10% per annum. The agreement does not specify any contingent
payments, options or other commitments.
The financial results of these acquired entities are included in the
consolidated financial statements from the date of acquisition. To date the
books and records of the locations acquired have not been audited, and therefore
the allocation of the purchase price is subject to refinement. Refer to Note I
for discussion of pro forma financial information.
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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 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.
(b) Reports on Form 8-K
We filed the following reports on Form 8-K during the first quarter of
2005:
Form 8-K, January 13, 2005, Item 5 - Change in Registrants Officers;
Reporting the Resignation of Michael Knox as an Officer.
Form 8-K, February 9, 2005, Item 1 - Entry into a Material Definitive
Agreement; Reporting the acquisition of ELS' Staffing Division.
Form 8-K, April 21, 2005, Item 5- Change in Registrants Directors;
Reporting the addition of William Walton to the Board of Directors.
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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: June 28, 2005 /s/ Ronald Heineman
-----------------------
By: Ronald Heineman
Chief Executive Officer
(principal executive
officer, director)
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