Exhibit 9.2
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
On February 7, 2005, Resolve Staffing, Inc., entered into an equity purchase
agreement ("Agreement"), to purchase ELS Personnel Services ("ELS") (the
"Combination") from Employee Leasing Services, Inc., ("ELS Inc."), 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 the ownership
interest in the group of companies which comprised ELS, (Employee Leasing
Services, LLC, Five Star Staffing, Inc., Five Star Staffing (NY), Inc., and
American Staffing Resources, Ltd.) comprising a total of 10 temporary employee
staffing locations.
The aggregate purchase price was $1,630,000, including 13,000,000 shares of
Resolve'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.
Because the owners of ELS held approximately 90% of Resolve's outstanding common
stock after the Combination, as well as the Company's analysis of the other
criteria used for determining which entity is the accounting acquirer under SFAS
No. 141, ELS is deemed to be the acquiring company for accounting purposes and
the Combination has been accounted for as a reverse acquisition under the
purchase method of accounting for business combinations in accordance with
accounting principles generally accepted in the United States. The audited
financial statements of Resolve for each of the two years ended December 31,
2004 and 2003 are included in the Resolve Staffing, Inc. Annual Report on Form
10-KSB, filed with the Securities and Exchange Commission (the "SEC"). The
audited financial statements of the entities which comprised the temporary
staffing division of ELS, Inc. for the two years ended December 31, 2004 and
2003, or such time as the entity was under the control of ELS, Inc. through
December 31, 2004 are attached as an exhibit to this Form 8-K/A.
Under this method of accounting, the combined company will allocate the purchase
price to the fair value of assets of Resolve deemed to be acquired, including
identifiable intangible assets and goodwill. The purchase price allocation is
subject to revision when the combined company obtains additional information
regarding asset valuation. The unaudited pro forma condensed combined financial
statements are based on respective historical consolidated financial statements
included in this Form 8-K/A and the audited financial statements of Resolve for
each of the two years ended December 31, 2004 and 2003 which are included in the
Resolve Staffing, Inc. Annual Report on Form 10-KSB, filed with the Securities
and Exchange Commission.
The unaudited pro forma condensed combined statement of operations for the year
ended December 31, 2004 assumes the merger took place on January 1, 2004. The
unaudited pro forma condensed combined balance sheet assumes the merger took
place on December 31, 2004. The unaudited pro forma condensed combined statement
of operations for the year ended December 31, 2004 combines Resolve's historical
statement of operations for the year ended December 31, 2004 with the historical
financial statements of the ELS entities for the year ended December 31, 2004 or
such time as the entity was under the control of ELS, Inc. through December 31,
2004. The unaudited pro forma condensed combined balance sheet combines
Resolve's historical balance sheet as of December 31. 2004 with historical
balance sheets of the ELS entities as of December 31, 2004.
The unaudited pro forma condensed combined financial statements data is based on
estimates and assumptions described in the notes to them. This data is presented
for information purposes only and is not intended to represent or be indicative
of the consolidated results of operations or financial condition of Resolve that
would have been reported had the merger been completed as of the dates
presented, and should not be taken as representative of future consolidated
results of operations or financial condition of Resolve.
The unaudited pro forma condensed combined financial statements should be read
in conjunction with the related notes included in this Form 8-K/A and the
audited financial statements of Resolve which are are included in the Resolve
Staffing, Inc. Annual Report on Form 10-KSB, filed with the Securities and
Exchange Commission and the audited financial statements of the ELS entities
which are attached as exhibits to this Form 8-K/A. The unaudited pro forma
condensed combined financial statements are not necessarily indicative of what
the actual results of operations and financial position would have been had the
merger taken place on January 1, 2004 or December 31, 2004, and do not indicate
future results of operations or financial position.
Resolve Staffing, Inc.
Pro Forma Balance Sheet as of December 31, 2004
Historical
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Employee American
Leasing Five Star Five Star Staffing Resolve Pro Forma
Services, LLC Staffing, Inc. Staffing (NY), InResources, Ltd. Staffing, Inc. Adjustments Total
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ASSETS
Cash and cash equivalents $ 46,996 $ - $ 20,171 $ 8,189 $ 6,108 $ - $ 81,464
Accounts receivable, net 459,020 401,063 131,663 47,441 165,925 - 1,205,112
Accounts Receivable, other - - 7,945 - - - 7,945
Advances to employees 5,373 2,083 100 - - - 7,556
Prepaid Expenses 15,429 398,637 27,979 3,285 11,675 - 457,005
Note receivable related party - 560,193 - - (560,193) b -
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Total Current Assets 526,818 1,361,976 187,858 58,915 183,708 (560,193) 1,759,082
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Property and Equipment 19,268 252,797 40,232 - 44,652 - 356,949
less accumulated depreciation (10,994) (132,726) (18,622) - (28,838) - (191,180)
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Net Property & Equipment 8,274 120,071 21,610 - 15,814 - 165,769
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Other Assets
Deposits 3,049 8,943 9,485 - - - 21,477
Goodwill - - 640,000 - - 1,909,556 a 2,549,556
Non Compete - - - - - -
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-
Total Other Assets 3,049 8,943 649,485 - - 1,909,556 2,571,033
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Total Assets $ 538,141 $ 1,490,990 $ 858,953 $ 58,915 $ 199,522 $ 1,349,363 $ 4,495,884
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Resolve Staffing, Inc.
Pro Forma Balance Sheet as of December 31, 2004
Historical
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Employee American
Leasing Five Star Five Star Staffing Resolve Pro Forma
Services, LLC Staffing, Inc. Staffing (NY), InResources, Ltd. Staffing, Inc. Adjustments Total
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LIABILITIES AND STOCKHOLDERS'
(DEFICIT)/EQUITY
Accounts Payable $ 820 $ 18,271 $ 12,191 $ 6,463 $ 87,120 $ - $ 124,865
Bank Overdraft - 37,871 - - - - 37,871
Accrued salaries and payroll
taxes 33,547 71,704 17,512 10,009 21,217 - 153,989
Accrued other expenses 81,446 170,232 8,210 2,608 - - 262,496
Note Payable - 125,621 - - 89,100 - 214,721
Lines of credit - 400,000 - - - - 400,000
Note payable related party 1,291,062 - 149,227 43,937 281,641 1,089,808 a,b,c 2,855,675
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Total Current Liabilities 1,406,875 823,699 187,140 63,017 479,078 1,089,808 4,049,617
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Long Term Liabilities
Note Payable - 393,556 - - - - 393,556
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Total Long Term Liabilities - 393,556 - - - - 393,556
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Stockholders' (Deficit) Equity
Common stock - 100 10 - 154 1,190 a 1,454
Paid in capital - 937 989,951 - 1,161,387 (1,032,732) a 1,119,543
Members' capital / Retained
earnings (868,734) 272,698 (318,148) (4,102) (1,441,097) 1,291,097 a,c (1,068,286)
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Total Stockholders' (Deficit)
Equity (868,734) 273,735 671,813 (4,102) (279,556) 259,555 52,711
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Total Liabilities and
Stockholders' (Deficit) Equity $ 538,141 $ 1,490,990 $ 858,953 $ 58,915 $ 199,522 $ 1,349,363 $4,495,884
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Resolve Staffing, Inc.
Pro Forma Statement of Operations for the Year Ended December 31, 2004
Historical
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Employee American
Leasing Five Star Five Star Staffing Resolve Pro Forma
Services, LLC Staffing, Inc. Staffing (NY), InResources, Ltd. Staffing, Inc. Adjustments Total
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Service Revenue $ 2,955,831 $ 1,042,340 $ 231,737 $ 54,098 $ 1,666,897 $ - $ 5,950,903
Cost of Services 2,576,012 772,827 177,188 41,137 1,277,507 - 4,844,671
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Gross Margin 379,819 269,513 54,549 12,961 389,390 - 1,106,232
Operating Expenses
Legal and professional 29 30,631 3,744 - 159,707 - 194,111
Salaries and benefits 243,520 135,613 40,912 7,907 341,130 - 769,082
Admininstrative expenses 93,529 60,625 56,274 3,456 138,580 - 352,464
Taxes and licenses - 2,752 - - 14,655 - 17,407
Rent and leases 20,268 23,944 3,766 1,822 15,846 - 65,646
Advertising and promotion 8,610 9,049 2,996 3,878 10,319 - 34,852
Travel and entertainment 4,552 63 1,646 - 2,684 - 8,945
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Total Operating Expenses 370,508 262,677 109,338 17,063 682,921 - 1,442,507
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Income (Loss) from Operations 9,311 6,836 (54,789) (4,102) (293,531) - (336,275)
Other Expenses
Interest expense 299 12,861 - - 15,406 150,000 c 178,566
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Total other expenses 299 12,861 - - 15,406 150,000 178,566
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Net Loss $ 9,012 $ (6,025) $ (54,789) $ (4,102) $ (308,937) $ (150,000) $ (514,841)
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Loss Per Share
Basic and Diluted $ (0.21) $ (0.17) $ (0.04)
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Weighted Average
Number of Shares
Outstanding used to
Calculate Loss Per Share
Basic and Diluted 1,493,901 13,000,000 14,493,901
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States after eliminating all material intercompany accounts and
transactions. The acquisition is being accounted for under the purchase method
of accounting.
The purchase price of Resolve is approximately $1,630,000 and is proposed to be
allocated as follows:
Tangible assets $ 199,522
Liabilities assumed 479,078
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Net liabilities (279,556)
Goodwill 1,909,556
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Total purchase consideration $ 1,630,000
===============
Comprised of:
Note payable $ 1,500,000
Stock consideration 130,000
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Total purchase consideration $ 1,630,000
===============
Common stock $ (154)
Additional paid-in capital (1,161,387)
Accumulated deficit 1,291,097
---------------
$ 129,556
---------------
Under the terms of the agreement and in accordance with SFAS No. 141, for
accounting purposes, ELS has been deemed to be the acquirer. The stock and note
consideration results in a purchase consideration greater than the net book
value of Resolve as of December 31, 2004. This difference has been reflected as
an increase in the carrying value of the acquired intangible assets. At this
time, the combined Company has not completed an independent valuation and the
allocation of the purchase price has not been completed. Thus, these numbers do
not include the effects, if any; of adjustments that might result from the
amortization of any potential identifiable intangible assets (separate from
goodwill) or impairment of the goodwill recognized. In addition, the purchase
price excludes any reorganization costs.
The following pro forma adjustments have been recorded to reflect the
acquisition:
Condensed Combined Balance Sheet--adjustments to reflect the acquisition as if
it had occurred on December 31, 2004:
(a) The issuance of 13.0 million Resolve common shares, at a total value
of $130,000 and the issuance of a note payable in the amount of
$1,500,000. Excess of the fair value of purchase consideration over
the fair value of the net tangible assets and identifiable
intangible assets acquired. This excess has been recorded in the pro
forma statements as an increase in the carrying value of the
acquired intangible assets of Resolve. The final figure for
intangibles and/or goodwill will be increased by any reduction in
net assets at the date of closure of the acquisition. Elimination of
Resolve pre-acquisition shareholders' equity, as follows:
(b) Elimination of $560,193 of related party debt of Five Star Staffing,
Inc.
Condensed Combined Statement of Operations--adjustment to reflect the
acquisition as if it had occurred on January 1, 2004:
(c) Accrual of interest on note payable for Combination, amounting to
$150,000
The unaudited pro forma condensed combined information reflects our best
estimates; however the actual financial position and results of operations may
differ from the pro forma amounts reflected herein because of various factors,
including, without limitation, access to additional information, changes in
value and changes in operating results between the date of preparation of the
unaudited pro forma condensed combined financial information and the date on
which the acquisition closed. However, in the opinion of management any final
adjustments will not be material to the future financial position and/or results
of operations of Resolve.