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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2008

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________
to________________

Commission file number 000-29895

SMART-TEK SOLUTIONS INC.(Name of small business issuer in its charter)

|Nevada                                                               | 98-0206542                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|3702 South Virginia Street, Suite G12-401                            |                                     
|Reno, NV                                                             | 89502                               
|(Address of principal executive offices)                             | (Zip Code)                          

Issuers telephone number 604.628.8161

Securities registered under Section 12(b) of the Exchange Act:

|None                | N/A                                      
|------------------- | -----------------------------------------
|Title of each class | Name of each exchange on which registered

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value(Title
of class)

Check whether the issuer is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act. [   ]

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X]    No [   ]

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no disclosure will
be contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [   ]

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). 
  Yes [   ]    No [X]

State issuers revenues for its most recent fiscal year.
$3,765,247

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State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at
which the common equity was sold, or the average bid and asked price of such
common equity, as of a specified date within the past 60 days: $3,292,654
based on a price of $0.05 per share, being the average of the bid and ask
prices of the issuer on the Over-the-Counter Bulletin Board on June 30,
2008.

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE
YEARS)

Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after
the distribution of securities under a plan confirmed by a court. Yes
[   ]     No [   ] N/A

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuers
classes of common equity, as of the latest practicable date. 111,812,971
shares of common stock as of October 10, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference,
briefly describe them and identify the part of the Form 10-KSB (e.g., Part
I, Part II, etc.) into which the document is incorporated: (1) any annual report
to security holders; (2) any proxy or information statement; and (3) any
prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933
(Securities Act). The listed documents should be clearly described for
identification purposes (e.g., annual report to security holders for fiscal
year ended December 24, 1990). N/A

Transitional Small Business Disclosure Format (Check one): Yes
[   ]    No [X]

-2-

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ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED FEBRUARY
29, 2008

TABLE OF CONTENTS

|                        |                                                                                                                                                        | Page
|----------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------ | ----
|                        |                                                                                                                                                        |     
|PART I                  |                                                                                                                                                        |     
|                        |                                                                                                                                                        |     
|ITEM 1.                 | DESCRIPTION OF BUSINESS                                                                                                                                | 1   
|ITEM 2.                 | DESCRIPTION OF PROPERTY.                                                                                                                               | 4   
|ITEM 3.                 | LEGAL PROCEEDINGS.                                                                                                                                     | 4   
|ITEM 4.                 | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                                                                                                   | 4   
|                        |                                                                                                                                                        |     
|PART II                 |                                                                                                                                                        |     
|                        |                                                                                                                                                        |     
|ITEM 5.                 | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
      AND **SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.**                           | 5   
|ITEM 6.                 | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION.                                                                                       | 7   
|RISKS AND UNCERTAINTIES | 12                                                                                                                                                    
|ITEM 7.                 | **FINANCIAL STATEMENTS.**                                                                                                                              | 16  
|ITEM 8.                 | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
      AND **FINANCIAL DISCLOSURE.**                                                        | 17  
|ITEM 8A.                | **CONTROLS AND PROCEDURES.**                                                                                                                           | 17  
|ITEM 8B.                | **OTHER INFORMATION.**                                                                                                                                 | 17  
|                        |                                                                                                                                                        |     
|PART III                |                                                                                                                                                        | 19  
|                        |                                                                                                                                                        |     
|ITEM 9.                 | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS
      AND **CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE
      EXCHANGE ACT.** | 19  
|ITEM 10.                | EXECUTIVE COMPENSATION.                                                                                                                                | 20  
|ITEM 11.                | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
      AND **RELATED STOCKHOLDER MATTERS.**                                              | 24  
|ITEM 12.                | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      **INDEPENDENCE.**                                                                   | 25  
|ITEM 13.                | **EXHIBITS**                                                                                                                                           | 26  
|ITEM 14.                | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                                                                 | 27  
|                        |                                                                                                                                                        |     
|SIGNATURES              | 28                                                                                                                                                    

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PART I

Forward Looking Statements.

This annual report contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as may, should,
expects, plans, anticipates, believes, estimates, predicts,
potential or continue or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled Risk Factors and the risks set out below, any of which may cause our
or our industrys actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. These risks include, by way of example and not in
limitation:

- risks related to the potential of delays in customer orders or the failure
  to retain customers;
- the uncertainty of profitability based upon our history of losses;
- risks related to failure to obtain adequate financing on a timely basis
  and on acceptable terms for our planned exploration and development projects;
- risks related to competition;
- risks related to tax attributes; and
- other risks and uncertainties related to our business strategy.

This list is not an exhaustive list of the factors that may
affect any of our forward-looking statements. These and other factors should be
considered carefully and readers should not place undue reliance on our
forward-looking statements.

Forward looking statements are made based on managements
beliefs, estimates and opinions on the date the statements are made and we
undertake no obligation to update forward-looking statements if these beliefs,
estimates and opinions or other circumstances should change. Although we believe
that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.

Our financial statements are stated in United States dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles. In this annual report, unless otherwise specified, all
dollar amounts are expressed in United States dollars and all references to
common stock refer to the common shares in our capital stock.

As used in this annual report, the terms we, us, our, the
Company and Smart-Tek mean Smart-Tek Solutions Inc. and its subsidiaries,
unless the context clearly requires otherwise.

ITEM 1. DESCRIPTION OF BUSINESS

Background

Smart-tek Solutions Inc. specializes in the design and
development of Radio Frequency Identification (RFID) integration, monitoring and
tracking solutions to meet industry demands. Through our wholly owned subsidiary
Smart-Tek Communications Inc. we operate in the business of design, sale,
installation and service of security technology with electronic hardware and
software products. Our projects range from residential and commercial
developments to system upgrades and monitoring contracts. Customers include
major developers, general and electrical contractors, hospitals, Crown
Corporations, law enforcement agencies and retail facilities. Currently, 100% of
the Companys operations are in Canada. We have a sales and technical
installation team with over 50 years of experience specializing in the design,
sales, installation and service of CCTV, access control, intercom,

-1-

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security, structured cabling and wireless communication
systems. While the operations of our wholly-owned subsidiary are profitable, we
still do not operate profitably as a consolidated entity. Managements plans to
improve our financial condition are as follows:

- Continued growth of Smart-tek Communications Inc. business activities in
  the security technology industry in the Greater Vancouver Area;
- We believe that our RFID tracking and monitoring software developed for
  the agriculture industry will be rolled out into the United States during the
  next 12 months;
- We believe the beta test for the software and hardware will be successful
  on a start-up cattle farm in New Mexico; and
- We will continue to look for opportunities to grow organically where
  feasible as well as evaluate potential acquisition opportunities that may
  present themselves in the next 12 months.

There can be no assurance that our planned activities will be
successful or that we will ultimately attain profitability. Our long term
viability depends on our ability to grow our subsidiarys business to fund the
continuation of our consolidated business operations. We intend to use our
common stock as payment for services of various consultants in order to help
advance our business plan.

Corporate History

Our company was incorporated in the State of Nevada on March
22, 1995 under the name Royce Biomedical Inc.. In July, 2005, we changed our
name from Royce Biomedical Inc. to Smart-Tek Solutions Inc. The address of
our principal executive office is 3702 South Virginia Street, Suite G12-401,
Reno, NV 89502. Our common stock is quoted on the OTC Bulletin Board under the
symbol STTK.

Products and Services

Through our wholly-owned subsidiary, Smart-tek Communication
(SCI), we specialize in the design, sale, installation and service of the
latest and most sophisticated security technology available. SCI is a market
leader in the provision and installation of security technology in the Greater
Vancouver Area. Valued customers for SCIs products and services include major
land developers, general and electrical contractors, hospitals, Crown
Corporations, law enforcement agencies and retail facilities.

Our integrated systems project is typically done in the
following stages:

|1. | Initial consultation to gain an understanding of the
      project needs and the general scope of work;                                                                          
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                  
|2. | The design of the integrated system is the second phase
      of our process. During this stage, the appropriate hardware and software
      is selected;                        
|   |                                                                                                                                                                                  
|3. | Once the equipment has been selected and the contractors
      are ready to accommodate our installations experts, our highly qualified
      team installs the security systems;
|   |                                                                                                                                                                                  
|4. | Once the integrated system is installed, our team of
      experts trains our customers on the systems and how to use it effectively;
      and                                  
|   |                                                                                                                                                                                  
|5. | Before we walk away from a job site, a vigorous quality
      assurance process is undertaken to make sure the systems are functioning
      as designed.                        

We provide a wide variety of systems: access control, alarm
systems, closed circuit TV systems (CCTV), intercom and data communication
systems. Our sales and installation team have over 50 years of experience in
dealing with security system design and installation.

-2-

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Since 2005, STS has been working on developing and perfecting a
RFID based monitoring and tracking system to be used in the agriculture
industry. The system was designed to be scaleable and versatile in order to be
customized to fit any animal producing farms. The design concept stemmed from
our exposure to RFID equipment that we have installed as part of integrated
security systems in the Security industry, and the outbreaks of the H5N1 (Bird
Flu) virus.

The system is designed to track and record the movement of
animals using passive and active RFID tags and readers. The data is then
captured into a database allowing the farmer or government officials to track
the movement of a herd should a disease outbreak occur, thereby allowing
officials to track the movement of a herd to trace the source of the outbreak.

The next phase for the RFID product development phase will be
to have it installed on a farm for testing. The Company is currently in
negotiations with a start-up cattle farm in the United States to have the system
installed on their site for full evaluation of the functionality of the system.

Marketing Strategy

The Company relies on current relationships as their primary
means of marketing their security technology products and services in the
Greater Vancouver Area. Since 1997, the Company has been successful in
developing its security business in this market and nurturing its relationships
with Real Estate Developers and contractors. We hope to leverage our
relationships as well as our reputation to be able to provide some of the
security solutions that are required to make the project a safe one for all.

The Company has adopted a different marketing strategy for
marketing its RFID system. We began by arranging for meetings in third world
countries that were affected by the H5N1 virus. After many visits and meetings
with various levels of governments and businesses wanting to act as agents and
distributors for our products, it became apparent that while there was a
tremendous need for a tracking and monitoring system such as ours to help in the
fight against the Bird Flu, there was a lack of financial resources and
financial aid for these countries to implement a system such as ours.

We are now looking to implement the RFID system in the United
States and are in advanced negotiations with a start-up cattle farmer located in
New Mexico. The farm will be used as the Companys beta site to perfect its
software and hardware. It is believed that with the input from the cattle
farmer, we will be able to leverage our relationship to further market our
product with other farmers in the southwestern United States. Our system is
designed to be adapted by other types of animal producing farms, such as poultry
or pork.

The Company has engaged an agent in this area to attend trade
shows, gather market intelligence and market the Company and its RFID solutions
to the farming community.

Market

The commercial and residential industry in the Greater
Vancouver Area has enjoyed tremendous growth over the past decade. Along with
this construction growth, is the need for sophisticated security systems to keep
occupants safe. With the tremendous security requirements as a host of the 2010
Winter Olympics, the growth of the local security industry is expected to remain
strong as the city prepares to be host to delegates, athletes volunteers and
visitors from around the world.

We expect to be able to leverage our reputations and
relationships to enable us to continue to grow our security business. We
currently supply a substantial portion of the security technology needs of new
residential and commercial real estate developments in the Greater Vancouver
Area and anticipate this trend to continue.

The safety of the worlds food chain supply is gaining
increased exposure with the outbreaks of the H5N1 (Bird Flu) virus and Hoof and
Mouth Disease. There is an increase in demand for systems that provide data to
officials on the potential sources of these outbreaks to limit the devastating
impact viruses such as these can have on economies as well as the health of
humans who are exposed to these potentially deadly diseases.

-3-

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The US livestock market is extremely important to the North
American food chain. The protection of it has created a niche market for
technology solutions to provide more sophisticated tracking capabilities along
with data that is important in containing communicable diseases that can spread
rapidly and result in widespread economic losses.

Backlog

The following schedule shows a reconciliation of backlog
representing the amount of revenue the Company expects to realize from work to
be performed on uncompleted contracts in progress at June 30, 2008 and from
contractual agreements on which work has not yet begun.

Balance at June
      30, 2007
    $7,111,213New Contracts
    $4,221,073Less: Contract
      revenue earned from July 1, 2007 to June 30, 2008
    $3,648,349Balance at June
      30, 2008
    $7,683,937


We face significant competition from four or five competitors
in our target market in the security and surveillance technology industry. In
general, we believe that our current primary competitive advantages include
product and service quality at competitive pricing and our long-standing
relationships with our customers as evidenced by its stellar customer retention.

We face competition in our RFID solutions for the agriculture
industry from various sources. While we are not aware of any companies that have
a containment/monitoring solution such as ours, we do have competition from the
various pharmaceutical companies who are aggressively working on developing
vaccines to eradicate the various diseases that affect livestock.

Personnel

We currently have over 30 employees to carry out our security
technology business. We rely on external consultants to perform various
professional services in regards to the development of the RFID technology
solution geared towards the agriculture industry.

ITEM 2. DESCRIPTION OF PROPERTY.

Executive Offices

We do not maintain an executive office but rather utilize the
facilities, when required, of our operating subsidiary located at #10-11720
Voyageur Way, Richmond, BC, Canada, V6X 3G9. The office leased by our subsidiary
is approximately 2,000 square feet and is on a two year term with a payment of
approximately $1,800 per month. We utilize a mail service for our corporate
correspondence at 3702 South Virginia Street, Unit G12-401, Reno, Nevada, 89502.

ITEM 3. LEGAL PROCEEDINGS.

The Company is presently in arbitration with its former legal
counsel with respect to an outstanding legal bill in the amount of approximately
$263,000 respecting certain small claims matters handled by the former
counsel.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

-4-

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

Market for Securities

Our common shares are quoted on the Over-The-Counter Bulletin
Board under the trading symbol STTK.OB. Our shares have been quoted on the
Over-The-Counter Bulletin Board since May 15, 1998. The following quotations
obtained from the Over-The-Counter Bulletin Board reflect the high and low bids
for our common stock based on inter-dealer prices, without retail mark-up,
mark-down or commission an may not represent actual transactions.

The high and low bid prices of our common stock for the periods
indicated below are as follows:

OTC Bulletin Board(1)Fiscal Quarter Ended
      High
      Low20084th Quarter April
        1, 2008  June 30, 2008
      $0.095
      $0.0163rd Quarter January
        1, 2008  March 31, 2008
      $0.1
      $0.0152nd Quarter October
        1, 2007  December 31, 2007
      $0.19
      $0.071st Quarter July
        1, 2007  September 30, 2007
      $0.195
      $0.1520074th Quarter April
        1, 2007  June 30, 2007
      $0.21
      $0.153rd Quarter January
        1, 2007  March 31, 2007
      $0.23
      $0.182nd Quarter October
        1, 2006  December 31, 2006
      $0.299
      $0.1861st Quarter July
        1, 2006  September 30, 2006
      $0.247
      $0.165


(1)Over-the-counter market quotations reflect
inter-dealer prices without retail mark-up, mark-down or commission, and may not
represent actual transactions.

Our transfer agent is Corporate Stock Transfer Inc., 3200
Cherry Creek Drive South, Suite 4300, Denver, CO 80209 USA; telephone number
303.282.4800; facsimile: 303.777.3094.

Holders of our Common Stock

As of October 10, 2008, there were 385 total registered
shareholders holding 111,812,971 shares of our issued and outstanding common
stock.

Dividend Policy

There are no restrictions in our articles of incorporation or
bylaws that prevent us from declaring dividends. The Nevada Revised Statutes,
however, do prohibit us from declaring dividends where, after giving effect to
the distribution of the dividend:

| | 1. | We would not be able to pay our debts as they become due
      in the usual course of business; or
| | -- | --------------------------------------------------------------------------------------------------

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| | 2. | Our total assets would be less than the sum of our total
      liabilities plus the amount that would be needed to satisfy the rights of
      shareholders who have preferential rights superior to those receiving the
      distribution.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have not declared any dividends and we do not plan to
declare any dividends in the foreseeable future.

Recent Sales of Unregistered Securities

Other than as reported in our quarterly reports on Form 10-QSB
and current reports on Form 8-K, we have not sold any equity securities that
were not registered under the Securities Act during the fiscal year ended June
30, 2008.

Securities Authorized for Issuance Under Equity Compensation
Plans

EQUITY COMPENSATION PLANS

The following table sets forth certain information concerning
all equity compensation plans previously approved by stockholders and all
previous equity compensation plans not previously approved by stockholders, as
of the most recently completed fiscal year.

Equity Compensation Plan Information

Plan Category
    Number of Securities to be Issued
      Upon Exercise of Outstanding Options, Warrants and Rights
      (a)
    Weighted-Average Exercise Price
      of Outstanding Options, Warrants and Rights (b)
    Number of Securities Remaining Available
      for Future Issuance Under Equity Compensation Plans (Excluding
      Securities Reflected in column (a)) (c)Equity Compensation Plans Approved By Security
      Holders
    None
    Not Applicable
    NoneEquity Compensation Plans Not Approved By Security
      Holders
    1,300,000
    $0.15
    23,700,000


2005 Stock Incentive Plan

The following description applies to the stock incentive plan
that was adopted on May 27, 2005. 1,300,000 options have been granted under this
plan as of the date of this Annual Report.

We have reserved for issuance an aggregate of 25,000,000 shares
of common stock under the 2005 Stock Incentive Plan. This plan is intended to
encourage directors, officers, employees and consultants to acquire ownership of
common stock. The opportunity so provided is intended to foster in participants
a strong incentive to put forth maximum effort for our continued success and
growth, to aid in retaining individuals who put forth such efforts, and to
assist in attracting the best available individuals to the Company in the
future.

Officers (including officers who are members of the board of
directors), directors and other employees and consultants of the Company and its
subsidiaries will be eligible to receive options under the stock incentive plan.
The committee will administer the stock incentive plan and will determine those
persons to whom options will be granted, the number of options to be granted,
the provisions applicable to each grant and the time periods during

-6-

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which the options may be exercised. No options may be granted
more than ten years after the date of the adoption of the stock incentive plan.

Non-qualified stock options will be granted by the committee
with an option price equal to the fair market value of the shares of common
stock to which the non-qualified stock option relates on the date of the grant.
The committee may, in its discretion, determine to price the non-qualified
option at a different price. In no event may the option price with respect to an
incentive stock option granted under the stock option plan be less than the fair
market value of such common stock to which the incentive stock option relates on
the date the incentive stock option is granted.

Each option granted under the stock incentive plan will be
exercisable for a term of not more than ten years after the date of grant.
Certain other restrictions will apply in connection with this plan when some
awards may be exercised. In the event of a change of control (as defined in the
stock incentive plan); the date on which all options outstanding under the stock
incentive plan may first be exercised will be accelerated. Generally, all
options terminate 90 days after a change in control.

The Company had two partially vested stock options outstanding
at December 31, 2005 pursuant to employment agreements entered into between the
Company's and its president and vice-president. Under these agreements, the
Company issued options to purchase up to 650,000 shares of its common stock at a
purchase price of $0.15 per share that vest in equal quarterly installments over
a three (3) year period. The Company calculated the fair value of the options to
be $195,000 using an option pricing model, of which $65,000 was recognized as
expense during the year ended June 30, 2008.

ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.

The following discussion should be read in conjunction with our
financial statements and the related notes that appear elsewhere in this annual
report. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward looking statements. Factors that
could cause or contribute to such differences include those discussed below and
elsewhere in this annual report.

Our audited financial statements are stated in United States
Dollars and are prepared in accordance with United States Generally Accepted
Accounting Principles.

Year Ended June 30, 2008 Summary

The following summary of our results of operations should be
read in conjunction with our audited financial statements for the year ended
June 30, 2008 which are included herein. The results of operations reflected in
this discussion include the operations of Smart-Tek Communications, Inc., our
wholly owned subsidiary.

| |                  |   | June 30, 2008 |   |   | June 30, 2007 |   |  | Percentage | 
| | ---------------- | - | ------------- | - | - | ------------- | - |  | ---------- | 
| |                  |   |               |   |   |               |   |  | Increase/  | 
| |                  |   |               |   |   |               |   |  | (Decrease) | 
| | Revenue          | $ | 3,765,247     |   | $ | 2,595,357     |   |  | 45.1%      | 
| | Expenses         |   | 3,833,493     |   |   | 1,051,183     |   |  | 264.7%     | 
| | Interest Expense |   | (62,272       | ) |   | (23,042       | ) |  | 170.3%     | 
| | Net Loss         | $ | 3,059,628     |   | $ | 381,409       |   |  | 702.2%     | 

Revenue

As at June 30, 2008, we generated $3,765,247 in revenue. The
increase in revenues for the year ended June 30, 2008 is primarily attributable
to an increase in our subsidiaries security and technology business. For the
year ended June 30, 2008, two significant customers accounted for 30% of revenue
and the customers individually accounted for more than 10% of revenue, also 100%
of the Companys sales and accounts receivable arose from sales to Canadian
customers during the year. For the year ended June 30, 2008, three significant
suppliers accounted for 41% of purchases.

-7-

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Expenses

Our expenses for the years ended June 30, 2008 and June 30,
2007 are outlined in the table below:

| |                                                    |   | Year Ended    |   |   | Year Ended    |   |  | Percentage | 
| | -------------------------------------------------- | - | ------------- | - | - | ------------- | - |  | ---------- | 
| |                                                    |   | June 30, 2008 |   |   | June 30, 2007 |   |  | Increase/  | 
| |                                                    |   |               |   |   |               |   |  | (Decrease) | 
| | Selling, general and administrative
      expenses | $ | 3,833,493     |   | $ | 1,051,183     |   |  | 264.7%     | 
| | Cost of revenues and service delivery              |   | 2,929,110     |   |   | 1,902,541     |   |  | 53.9%      | 
| | Interest expense                                   |   | (62,272       | ) |   | (23,042       | ) |  | 170.3%     | 
| | Total expenses                                     | $ | 6,700,331     |   | $ | 2,930,682     |   |  | 128.6%     | 

General and Administrative Expenses

The increase in our general and administrative expenses for the
year ended June 30, 2008 from the comparative period in 2007 was primarily due
to: (i) increased software development expenses and associated consulting costs
relating to the development of RFID software; (ii) increased professional fees
associated with preparing and filing our periodic reports under the Securities
Exchange Act of 1934 and litigation costs; and (iii) increased consulting
expenses associated with the development of our subsidiaries business.

Line of Credit

At June 30, 2008, bank overdrafts covered by a revolving line
of credit were $122,588. The revolving line of credit agreement is between the
Companys wholly owned subsidiary, and HSBC Bank of Canada. The revolving line
of credit facility bears interest at the rate of prime plus 4.50% per annum,
allows authorized bank overdrafts of up to $122,588 ($125,000 CDN) and is
secured by a shareholder guarantee and $51,245 ($52,253 CDN) in the form of a
term deposit. As of June 30, 2008, the Company had written checks of $34,604 in
excess of the operating line of credit.

Liquidity and Financial Condition

Working Capital

| |                              |   | At June 30, 2008 |   |   | At June 30, 2007 |   |  | Percentage | 
| | ---------------------------- | - | ---------------- | - | - | ---------------- | - |  | ---------- | 
| |                              |   |                  |   |   |                  |   |  | Increase/  | 
| |                              |   |                  |   |   |                  |   |  | (Decrease) | 
| | Current assets               | $ | 928,662          |   | $ | 1,001,840        |   |  | (7.3)%     | 
| | Current liabilities          |   | 2,174,968        |   |   | 2,775,315        |   |  | (21.6)%    | 
| | Working capital (deficiency) | $ | (1,246,306       | ) | $ | (1,773,475       | ) |  | (29.7)%    | 

Cash Flows

| |                                             |   | Year Ended |   |   |          |  
| | ------------------------------------------- | - | ---------- | - | - | -------- | -
| |                                             |   | June 30,   |   |   | June 30, |  
| |                                             |   | 2008       |   |   | 2007     |  
| |                                             |   |            |   |   |          |  
| | Cash flows used in operating activities     | $ | (173,564   | ) | $ | (325,111 | )
| | Cash flows used in investing activities     |   | (17,859    | ) |   | 670      |  
| | Cash flows provided by financing activities |   | 195,649    |   |   | 321,991  |  
| | Increase (decrease) in cash during period   | $ | 4,226      |   | $ | (2,450   | )

-8-

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We had cash on hand of $51,245 and a working capital deficit of
$(1,246,306) as of June 30, 2008 compared to cash on hand of $47,019 and working
capital of $(1,773,475) for the year ended June 30, 2007. We anticipate that we
will incur approximately $250,000 for operating expenses, including
professional, legal and accounting expenses associated with our reporting
requirements under the Exchange Act during the next twelve months.

Cash Used In Operating Activities

We used cash in operating activities in the amount of
$(173,564) during the year ended June 30, 2008. Cash used in operating
activities was funded by cash from financing activities.

Cash From Investing Activities

No cash was used or provided by investing activities during the
year ended June 30, 2008.

Cash from Financing Activities

We generated cash of $195,649 from financing activities during
the year ended June 30, 2008.

Shareholder Loans/Debt Settlement

In December 2005, the Company borrowed $49,985 from a
shareholder on an unsecured basis. The loan is non-interest bearing and payable
on demand. In January 2006, the Company borrowed $150,000 from the same
shareholder, also on an unsecured basis as well as non-interest bearing with no
fixed repayment terms. During the year ended June 30, 2008, the Company issued
stock in a shares for debt transaction. At June 30, 2008 there is $Nil
outstanding to this shareholder.

At June 23, 2008, the Company had borrowed $271,512 from a
company controlled by the Companys president. The loan is unsecured and bears
7.5% interest commencing in January 2008. The loan has no fixed terms of
repayment. During the year ended June 30, 2008, the Company issued an aggregate
of 7,746,032 shares to this creditor in consideration of the settlement of
unsecured loans in the amount of $271,111. At June 30, 2008 the balance of the
unsecured loan was $401. At June 30, 2008, the above shareholder loans
aggregated to $81,477.On June 23, 2008 the Company entered into Debt Settlement
Agreements with five creditors. Pursuant to the terms of the Debt Settlement
Agreements, the Company issued an aggregate of 19,559,955 shares to the
creditors in consideration of the settlement of unsecured loans in the amount of
$684,598.

Going Concern

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. The Company
incurred a net loss of $3,059,625 and cash flow from operations of $(173,564)
during the year ended June 30, 2008, and had a working capital deficiency of
$1,246,306 and a shareholders deficiency of $(792,248). These matters raise
substantial doubt about its ability to continue as a going concern. Management
believes that actions are presently being taken to revise the Companys
operating results. Management believes that the Company will have adequate cash
to fund anticipated needs through June 30, 2009 and beyond primarily as a result
of our contract backlog. The accompanying consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

There are no assurances that we will be able to obtain further
funds required for our continued operations. We are pursuing various financing
alternatives to meet our immediate and long-term financial requirements. There
can be no assurance that additional financing will be available to us when
needed or, if available, that it can be obtained on commercially reasonable
terms. If we are not able to obtain the additional financing on a timely basis,
we will be forced to scale down or perhaps even cease the operation of our
business.

-9-

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Future Financings

The Company does not have any significant available credit,
bank financing or other external sources of liquidity. Due to historical
operating losses and other issues as described in the Companys going concern
footnote included in its audited condensed consolidated financial statements as
at and for the period ended June 30, 2008, the Companys operations have not
been a source of liquidity and the Company had satisfied its cash requirements
through shareholder loans and deferral of salary payments to its officers. In
order to obtain necessary capital, the Company may need to sell additional
shares of its common stock or borrow funds from private lenders. There is no
assurance that the Company will be able to secure additional financing or that
it can be secured at rates acceptable to the Company. In addition, should the
Company be required to either issue stock for services or to secure equity
funding, due to the lack of liquidity in the market for the Companys stock such
financing would result in significant dilution to its existing shareholders.

The Companys short term plan is to continue to ask its
officers to defer payment of salaries, utilize its common stock where possible
to pay for services and to seek further shareholder loans. In the longer term,
the Company is actively seeking additional merger, acquisition or venture
relationships with operating enterprises in order to generate long-term growth
opportunities for the Company, permit the Company to meet its financial
obligations and to provide increased value to the Companys shareholders. We
have obtained our required cash resources principally through loans from
shareholders and our sole executive officer. While the operations of our
wholly-owned subsidiary are profitable, we still do not operate profitably as a
consolidated entity.

Managements plans to improve our financial condition are as
follows:

- Continued growth of Smart-tek Communications business activities in the
  security technology industry in the Greater Vancouver Area;
- We believe that our RFID tracking and monitoring software developed for
  the agriculture industry will be rolled out into the United States during the
  next 12 months, subject to additional financing;
- We believe the beta test for the software and hardware will be successful
  on a start-up cattle farm in New Mexico; and
- We will continue to look for opportunities to grow organically where
  feasible as well as evaluate potential acquisition opportunities that may
  present themselves in the next 12 months.

There can be no assurance that our planned activities will be
successful or that we will ultimately attain profitability. Our long term
viability depends on our ability to grow the SCI business to fund the
continuation of our consolidated business operations. We intend to use our
common stock as payment for services of various consultants in order to help
advance our business plan.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to stockholders.

Critical Accounting Policies

The preparation of financial statements in conformity with
generally accepted accounting principles requires our management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Our management routinely makes judgments and estimates about the effects of
matters that are inherently uncertain.

We have identified certain accounting policies, described
below, that are most important to the portrayal of our current financial
condition and results of operations.

-10-

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Revenue Recognition

The Company accounts for its construction projects using the
percentage of completion method, measured using the cost-to-cost method. This
method of accounting requires a calculation of job profit to be recognized in
each reporting period for each contract abased upon estimates of future
outcomes, which include:

- Estimates of total cost to complete the contract;
- Estimates of contract schedule and completion date;
- Estimates of the percentage the contract is complete; and
- Amounts of any probable unapproved claims and change orders included in
  revenue.

At the outset of each contract, a detailed analysis of
estimated cost to complete the contract is prepared. Periodically, evaluation of
the estimated cost, claims, change orders and percentage of completion at the
project level will be performed. The recording of profits and losses on
long-term contracts requires an estimate of the total profit and loss over the
life of each contract. This estimate requires consideration of contract
revenues, change orders and claims, less cost incurred and estimated costs to
complete. Anticipated losses on contracts are recorded in full in the period in
which they become evident. Profits are recorded based upon the total estimated
contract profit times the current percentage of completion for the contract.

When calculating the amount of total profit or loss on a
long-term contract, unapproved claims are recorded as revenue when collection is
deemed probable based upon the four criteria for recognizing unapproved claims
under the AICPA Statement of Position 81-1 (SOP 81-1) Accounting for
Performance of Construction Type and Certain Production Type Contracts. The
Company is actively engaged in claims negotiations with customers and the
success of the claims negotiations have a direct impact on the profit or loss
recorded for any long-term contract. On a quarterly basis, significant contracts
are reviewed. However, there are many factors that impact future costs,
including but not limited to, weather, inflation, labor and community
disruptions, timely availability of materials, productivity and other factors.
These factors can affect the accuracy of our estimates and materially impact our
future earnings. The Company also provides various other services to customers
not covered under construction contracts such as equipment repairs. The revenue
from the provision of these types of services is recorded once the specific job
is complete.

Goodwill and Intangible Assets

The Company accounts for goodwill and intangible assets
pursuant to SFAS No. 142, Goodwill and Other Intangible Assets. Under SFAS
142, intangibles with definite lives continue to be amortized on a straight-line
basis over the lesser of their estimated useful lives or contractual terms.
Goodwill and intangibles with indefinite lives are evaluated at least annually
for impairment by comparing the assets estimated fair values with its carrying
value, based on cash flow methodology.

Stock-based Compensation

Through December 31, 2005, the Company accounted for
stock-based employee compensation in accordance with the provisions of
Accounting Principles Board (APB) Opinion No. 25 and FASB Interpretation No.
44 Accounting for Certain Transactions Involving Stock Compensation and
complied with the disclosure requirements of SFAS No. 123 (as modified by SFAS
No.48), Accounting for Stock-Based Compensation, Under APB No.25 compensation
expense was recorded based on difference, if any, between the fair value of the
Companys stock and the exercise price on the measurement date. The Company
accounted for stock issued to non-employees in accordance with SFAS No.123,
which required entities to recognize as expense over the service period the fair
value of all stock based awards on the date of grant and EITF No. 96-18
Accounting for Equity Investments that are issued to Other Than Employees for
Acquiring, or in conjunction with Selling, Goods or Services, which addressed
the measurement date and recognition approach for such transactions.

On January 1, 2006, the Company adopted SFAS No. 123 (revised
2004), Share-based Payment (SFAS No.123R) a revision of SFAS No. 123,
Accounting for Stock Based Compensation, SFAS No.123R superseded

-11-

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APB Opinion No.25 Accounting for Stock Issued to Employees
and amended SFAS 95 Statement of Cash Flows SFAS No 123R requires that the
Company measure the cost of employee services received in exchange for equity
awards based on the grant date fair-value of the awards. The cost will be
recognized as compensation expense over the vesting period of the awards.

Under this method, the Company began recognizing compensation
cost for equity-based compensation for all new or modified grants after the date
of adoption. The pro-forma disclosures previously permitted under SFAS No. 123
are no longer an alternative to financial statement recognition. In addition,
the Company now recognizes the unvested portion of the grant date fair value of
awards issued prior to adoption based on the fair values previously calculated
for disclosure purposes over the remaining vesting period of the outstanding
options and warrants. Accordingly, the Company recognizes compensation cost for
equity-based compensation for all new or modified grants issued after December
31, 2005.

The Company had two partially vested stock options outstanding
at December 31, 2005 pursuant to employment agreements entered into between the
Company and its president and vice-president. Under these agreements, the
Company issued options to purchase up to 650,000 shares of its common stock at a
purchase price of $0.15 per share that vest in equal quarterly installments over
a three (3) year period. The Company calculated the fair value of the options to
be 195,000 using our option pricing model, of which $65,000 was recognized as
expense during the year ended June 30, 2008. In addition, commencing January 1,
2006, the Company is required to recognize the unvested portion of the grant
date fair value of awards issued prior to the adoption of SFAS No. 123R based on
the fair values previously calculated for disclosure purposes over the remaining
vesting period of the outstanding stock options and warrants. At June 30, 2008,
the value of the unvested options was $32,500 which will be amortized in future
periods as the options vest.

RISKS AND UNCERTAINTIES

We have a general history of losses and may not operate
profitability in the future.

We have incurred losses for the last four fiscal years. Our net
losses and negative cash flow may continue for the foreseeable future. As of
June 30, 2008, our accumulated deficit was $(7,205,092). We believe that our
planned growth and profitability will depend in large part on our ability to
market our businesses and gain clients and to expand our relationships with
existing clients. Accordingly, we intend to invest heavily in marketing,
strategic partnerships and development of our client base. If we are not
successful in expanding our client base, it will have a material adverse effect
on our financial condition and our ability to continue to operate our business.
Furthermore, we will continue to market our RFID based system developed for the
Agriculture Industry. We believe that at the conclusion of the beta site testing
phase of development, that we will be able to successful obtain customers for
the system. However, there is no guarantee that the system will be able to
successfully exit from its beta stage.

We may make acquisitions, which if proven unsuccessful,
could negatively affect our future profitability and growth.

We believe the security landscape and the animal agricultural
tracking and monitoring market has created opportunities for us to invest in, or
acquire boutique businesses in this industry. We may not be able to identify,
acquire or profitably manage additional businesses that we may invest in or
acquire without substantial costs, delays or other problems. In addition,
acquisitions may involve a number of special risks, including:

- Diversion of managements attention;
- Failure to retain key acquired personnel; and
- Risks associated with unanticipated events, circumstances or legal
  liabilities.

In addition, if the acquired businesses have operating losses
or negative operating cash flow, our ability to achieve positive cash flow and
profitability, as well as our liquidity, could be adversely affected. Some or
all of these risks could adversely affect our operations and financial
performance. For example, client satisfaction or performance problems at a
single acquired business could adversely affect our reputation and financial
results. Further, any

-12-

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businesses acquired in the future may not achieve anticipated
revenues and earnings and therefore negatively impact our consolidated financial
position, results of operations and cash flows.

If we are unsuccessful in raising additional capital in the
future, we may be unable to continue to operate.

The Company does not have any significant available credit,
bank financing or other external sources of liquidity. Due to historical
operating losses and other issues as described in the Companys going concern
footnote included in its audited condensed consolidated financial statements as
at and for the period ended June 30, 2008, the Companys operations have not
been a source of liquidity and the Company had satisfied its cash requirements
through shareholder loans and deferral of salary payments to its officers. In
order to obtain necessary capital, the Company may need to sell additional
shares of its common stock or borrow funds from private lenders. Any equity
financing may be dilutive to shareholders, and debt financing, if available,
will increase expenses and may involve restrictive covenants. We may be required
to raise additional capital, at times and amounts which are uncertain,
especially under the current capital market conditions. Under these
circumstances, if we are unable to obtain capital or are required to raise it on
undesirable terms, it may have a material adverse effect on our financial
condition, which could require us to:

- Curtail our operations significantly
- Sell significant assets
- Seek arrangements with strategic partners or other parties that may
  require us to relinquish rights to products, technologies or market, or
- Explore other strategic alternatives, including a merger or sale.

Our operating results are subject to fluctuations caused by
many factors that could cause us to fail to achieve our revenue or profitably
expectations, which in turn could cause our stock price to decline.

Our operating results can vary significantly depending upon a
number of factors, many of which are outside our control. Factors that may
affect our operating results include:

- Market acceptance of and changes in demand for our products and services;
- Gain or loss of clients or strategic relationships;
- Announcement or introduction of new services and products by us or by our
  customers;
- Our ability to build brand recognition;
- Timing of customer sales;
- Price competition;
- Our ability to upgrade and develop systems and infrastructure to
  accommodate growth;
- Our ability to attract and integrate new personnel in a timely and
  effective manner;
- General economic conditions, including economic conditions specific to the
  construction security services industries;
- Real estate development market in the Greater Vancouver Area; and
- The market for RFID tracking systems within the animal agriculture
  industry.

Most of our operating expenses are relatively fixed in the
short-term. We may be unable to adjust spending rapidly to compensate for any
unexpected sales shortfalls, which could harm our operating results. Because we
only compete in the Greater Vancouver Area, we do not have the ability to
predict future backlog with any certainty. Because of the above factors, you
should not rely on period to period comparisons of results of operation as an
indication of future performances.

Because our security and surveillance technology business
only operates in the Greater Vancouver Area, those customers who have
historically accounted for and may in future periods account for substantial
portions of our revenue, our revenue could decline because of delays of customer
orders or the failure to retain customers.

-13-

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We have a limited geographic area where our customers account
for a significant portion of our revenue. Our revenue could decline because of a
delay in signing agreements with a single customer or the failure to retain an
existing customer. We may not obtain additional customers. The failure to obtain
additional customers and the failure to retain existing customers will harm our
operating results. If general economic and business conditions do not continue
to expand, we may experience decreased revenue or lower growth rates.

We may face intense competition that could adversely affect
our ability to generate revenues and profitability.

The demand for our services is expected to reflect dynamic
growth over the next several years. We expect the demand will result in intense
competition to provide these services. If we are not able to successfully
execute our strategy, our business may be materially and adversely affected.

We may have difficulty managing growth.

Our development has required and is expected to continue to
require, the full utilization of our management, financial and other resources,
which to date has had limited working capital. Managing our growth will depend
upon our ability to improve and expand our operations, including our financial
and management information systems, and to recruit, train and manage eSection
16(a)xecutive staff and employees. We may not be able to efficiently scale our
operations, and this failure to effectively manage growth may have a materially
adverse effect on our operating results and financial condition.

We may not be able to attract, retain or integrate key
personnel which may prevent us from successfully operating our business.

We may not be able to retain our key personnel or attract other
qualified personnel in the future. Our success will depend upon the continued
service of key management personnel. The loss of services of any of the key
members of our management team or our failure to attract and retain other key
personnel could disrupt operations and have a negative effect on employee
productivity and morale and harm our financial results. We operate in a market
that is intensely and increasingly competitive, and if we are unable to compete
successfully, our revenue could decline and we may be unable to gain market
share.

We may lose certain tax attributes as a result of our
acquisition program.

At June 30, 2008, we had available federal net operating loss
(NOL) carry-forwards of approximately $3,639,480. Under Section 382 of the
Internal Revenue Code of 1986, as amended, the use of prior losses, including
NOLs is limited if a corporation undergoes an ownership change. Future
issuances of equity interests by us for acquisitions or the exercise of
outstanding options to purchase our capital stock may result in an ownership
change that is large enough for this limitation to apply. If the limitation
applies, we may be unable to use a material portion of our available NOL
carry-forwards to reduce future taxable income.

Our stock is a penny stock. Trading of our stock may be
restricted by the SECs penny stock regulations and the FINRAs sales practice
requirements, which may limit a stockholders ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines penny stock to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and accredited investors. The term
accredited investor refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements

-14-

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showing the market value of each penny stock held in the
customers account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customers confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchasers written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.

In addition to the penny stock rules promulgated by the
Securities and Exchange Commission, the Financial Industry Regulatory Authority
has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customers financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the Financial Industry Regulatory Authority believes that there
is a high probability that speculative low-priced securities will not be
suitable for at least some customers. The National Association of Securities
Dealers requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your ability to buy
and sell our stock.

-15-

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ITEM 7. FINANCIAL STATEMENTS.







-16-

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FINANCIAL STATEMENTSREPORT OF INDEPENDENT REGISTERED
      PUBLIC ACCOUNTING FIRM

To: The Board of Directors and
  Shareholders
         Smart-Tek Solutions, Inc.
  (formerly Royce Biomedical Inc.)

I have audited the accompanying consolidated balance sheet of
  Smart-tek Solutions, Inc. and subsidiary (the Company) as of June 30, 2008 and
  2007 and the related consolidated statements of operations and cash flows for
  the year then ended. These consolidated financial statements are the
  responsibility of the Companys management. My responsibility is to express an
  opinion on these consolidated financial statements based on my audit.

I conducted my audits in accordance with the standards of the
  Public Company Accounting Oversight Board (United States). Those standards
  require that I plan and perform the audit to obtain reasonable assurance about
  whether the financial statements are free of material misstatement. The Company
  is not required to have, nor was I engaged to perform, an audit of its internal
  control over financial reporting. My audit included consideration of internal
  control over financial reporting as a basis for designing audit procedures that
  are appropriate in the circumstances, but do not for the purpose of expressing
  an opinion on the effectiveness of the Companys internal control over financial
  reporting. Accordingly, I express no such opinion. An audit includes examining,
  on a test basis, evidence supporting the amounts and disclosures in the
  financial statements. An audit also includes assessing the accounting principles
  used and significant estimates made by management, as well as evaluating the
  overall financial statement presentation. I believe that my audit provides a
  reasonable basis for my opinion.

In my opinion the consolidated financial statements referred to
  above present fairly, in all material respects, the financial position of
  Smart-tek Solutions, Inc. and its subsidiaries as of June 30, 2008 and 2007, and
  the results of their operations and cash flows for years then ended, in
  conformity with accounting principles generally accepted in the United
  States.

The accompanying financial statements have been prepared
  assuming that the Company will continue as a going concern. The Company has
  suffered recurring losses. As discussed in Note 1 to the financial statements,
  the Company incurred a net loss of $3,059,625 and a negative cash flow from
  operations of $173,564 during the year ended June 30, 2008. and a working
  capital deficiency of $1,246,306 and a stockholders deficiency of $792,248 at
  June 30, 2008. This raises substantive doubt about the Companys ability to
  continue as a going concern. Managements plans in regard to these matters are
  also described in Note 1. The financial statements do not include any
  adjustments that might result from the outcome of this uncertainty.

/s/ John Kinross Kennedy

John Kinross-Kennedy 
  Certified Public Accountant 
  Irvine, California 
  October 10, 2008

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Smart-tek Solutions Inc. 
  Consolidated Balance SheetsAs of June 30, 2008 and 2007

|                                                                      |   | June 30,   |   |   | June 30,   |  
|--------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                                      |   | 2008       |   |   | 2007       |  
|                                                                      |   |            |   |   |            |  
|Assets                                                                |   |            |   |   |            |  
|Current assets                                                        |   |            |   |   |            |  
|Cash and cash
      equivalents                                       | $ | 51,245     |   | $ | 47,019     |  
|Accounts receivable                                                   |   | 597,539    |   |   | 716,853    |  
|Contract retention
      receivable                                   |   | 226,722    |   |   | 186,096    |  
|Cost of uncompleted contracts in excess
      of billings             |   | 51,587     |   |   | 49,920     |  
|Prepaid expenses and
      deposits                                   |   | 1,569      |   |   | 1,952      |  
|Total current assets                                                  |   | 928,662    |   |   | 1,001,840  |  
|                                                                      |   |            |   |   |            |  
|Equipment, net of accumulated depreciation                            |   | 2,747      |   |   | 7,805      |  
|                                                                      |   |            |   |   |            |  
|Goodwill                                                              |   | 451,311    |   |   | 451,311    |  
|                                                                      |   |            |   |   |            |  
|                                                                      | $ | 1,382,720  |   | $ | 1,460,956  |  
|                                                                      |   |            |   |   |            |  
|                                                                      |   |            |   |   |            |  
|                                                                      |   |            |   |   |            |  
|Liabilities                                                           |   |            |   |   |            |  
|Current liabilities                                                   |   |            |   |   |            |  
|Bank overdraft                                                        | $ | 87,984     |   | $ | 148,175    |  
|Accounts payable and
      accrued liabilities                        |   | 979,694    |   |   | 967,465    |  
|Bonus payable                                                         |   | 253,021    |   |   | 169,268    |  
|Billings on uncompleted
      contracts                               |   |            |   |   |            |  
|in
      excess of costs and estimated revenues                       |   | 254,254    |   |   | 485,089    |  
|Deferred revenue                                                      |   | 13,667     |   |   | 13,003     |  
|Shareholder loans                                                     |   | 81,477     |   |   | 383,518    |  
|Amounts due to officers
      and directors                           |   | 504,871    |   |   | 411,851    |  
|Related party debt                                                    |   | -          |   |   | 196,946    |  
|                                                                      |   |            |   |   |            |  
|Total current liabilities                                             |   | 2,174,968  |   |   | 2,775,315  |  
|                                                                      |   |            |   |   |            |  
|                                                                      |   |            |   |   |            |  
|Stockholders Deficiency                                              |   |            |   |   |            |  
|Preferred stock, $0.001 par value, 5,000,000 shares                   |   |            |   |   |            |  
|authorized, one (1)
      shares of Class A preferred                 |   |            |   |   |            |  
|issued and outstanding at June 30, 2008
      and June 30, 2007       |   | -          |   |   | -          |  
|Common stock: $0.001 par value,
      500,000,000, shares             |   |            |   |   |            |  
|authorized,                                                           |   |            |   |   |            |  
|111,812,971 issued and
      outstanding at June 30, 2008 and         |   |            |   |   |            |  
|73,253,016 issued and outstanding at
      June 30, 2007 respectively |   | 111,813    |   |   | 73,253     |  
|Additional paid in capital                                            |   | 6,422,599  |   |   | 2,861,561  |  
|Accumulated other comprehensive loss                                  |   | (121,568   | ) |   | (103,709   | )
|Accumulated deficit                                                   |   | (7,205,092 | ) |   | (4,145,464 | )
|Total stockholders deficiency                                        |   | (792,248   | ) |   | (1,314,359 | )
|                                                                      |   |            |   |   |            |  
|                                                                      | $ | 1,382,720  |   | $ | 1,460,956  |  
|                                                                      |   |            |   |   |            |  

See accompanying notes to the consolidated financial statements.

F-1

---

Smart-tek Solutions Inc.Consolidated Statements
    of Operations and Comprehensive LossFor the years ended June 30,
    2008 and 2007

|                                                   |   | 2008       |   |   | 2007       |  
|-------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                   |   |            |   |   |            |  
|Revenue                                            |   |            |   |   |            |  
|Contract revenue                                   | $ | 3,610,980  |   | $ | 2,466,122  |  
|Services revenue                                   |   | 147,624    |   |   | 125,717    |  
|Other revenue                                      |   | 6,643      |   |   | 3,518      |  
|Total revenue                                      |   | 3,765,247  |   |   | 2,595,357  |  
|                                                   |   |            |   |   |            |  
|Cost of revenue and service delivery               |   | 2,929,110  |   |   | 1,902,541  |  
|                                                   |   |            |   |   |            |  
|Gross profit                                       |   | 836,137    |   |   | 692,816    |  
|                                                   |   |            |   |   |            |  
|Selling, general and administrative
      expenses |   | 3,833,493  |   |   | 1,051,183  |  
|                                                   |   |            |   |   |            |  
|Operating loss                                     |   | (2,997,356 | ) |   | (358,367   | )
|                                                   |   |            |   |   |            |  
|Other expense                                      |   |            |   |   |            |  
|Interest                                           |   | (62,272    | ) |   | (23,042    | )
|                                                   |   |            |   |   |            |  
|Net loss                                           |   | (3,059,628 | ) |   | (381,409   | )
|                                                   |   |            |   |   |            |  
|Currency translation adjustment                    |   | (17,859    | ) |   | (38,279    | )
|                                                   |   |            |   |   |            |  
|Comprehensive loss                                 | $ | (3,077,487 | ) | $ | (419,688   | )
|                                                   |   |            |   |   |            |  
|Loss per share, basic and diluted                  | $ | (0.04      | ) | $ | (0.01      | )
|                                                   |   |            |   |   |            |  
|Weighted average shares outstanding,               |   |            |   |   |            |  
|basic and diluted                                  |   | 87,333,561 |   |   | 73,253,016 |  

See accompanying notes to the consolidated financial statements.

F-2

---

|Smart-tek Solutions Inc.                                           
|-------------------------------------------------------------------
|Consolidated Statement of Changes in Stockholders
      Deficiency
|For the years ended June 30, 2008 and 2007                         
|                                                                   

|                             | Common Stock |  |   |         |  |   |            |  |   |               |   |   |             |  
|---------------------------- | ------------ |  | - | ------- |  | - | ---------- |  | - | ------------- | - | - | ----------- | -
|                             |              |  |   |         |  |   |            |  |   | Accumulated   |   |   |             |  
|                             |              |  |   |         |  |   | Additional |  |   | Other         |   |   |             |  
|                             |              |  |   |         |  |   | paid in    |  |   | Comprehensive |   |   | Accumulated |  
|                             | Shares       |  |   | Amount  |  |   | Capital    |  |   | Income        |   |   | Deficit     |  
|                             |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|Balance  June 30, 2006      | 73,253,016   |  | $ | 73,253  |  | $ | 2,796,561  |  | $ | (65,430       | ) | $ | (3,764,055  | )
|                             |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|Fair value of options issued |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|to employees                 | -            |  |   | -       |  |   | 65,000     |  |   | -             |   |   | -           |  
|                             |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|Net loss                     | -            |  |   | -       |  |   | -          |  |   | -             |   |   | (381,409    | )
|                             |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|Currency translation         |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|adjustment                   | -            |  |   | -       |  |   | -          |  |   | (38,279       | ) |   | -           |  
|                             |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|Balance  June 30, 2007      | 73,253,016   |  | $ | 73,253  |  | $ | 2,861,561  |  | $ | (103,709      | ) | $ | (4,145,464  | )
|                             |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|Fair Value Options issued to |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|employees                    | -            |  |   | -       |  |   | 65,000     |  |   | -             |   |   | -           |  
|                             |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|Shares issued for consulting |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|services                     | 19,000,000   |  |   | 19,000  |  |   | 2,831,000  |  |   | -             |   |   | -           |  
|                             |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|Shares issued for settlement |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|of debt                      | 19,559,955   |  |   | 19,560  |  |   | 665,038    |  |   | -             |   |   | -           |  
|                             |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|Net Loss                     | -            |  |   | -       |  |   | -          |  |   | -             |   |   | (3,059,628  | )
|                             |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|Currency translation         |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|adjustment                   | -            |  |   | -       |  |   | -          |  |   | (17,859       | ) |   | -           |  
|                             |              |  |   |         |  |   |            |  |   |               |   |   |             |  
|Balance  June 30, 2008      | 111,812,971  |  | $ | 111,813 |  | $ | 6,422,599  |  | $ | (121,568      | ) | $ | (7,205,092  | )

See accompanying notes to the consolidated financial
  statements.

F-3

---

Smart-tek Solutions Inc. 
  Consolidated Statements of Cash
  FlowsFor the years ended June 30, 2008 and 2007

|                                                      |   | 2008       |   |   | 2007     |  
|----------------------------------------------------- | - | ---------- | - | - | -------- | -
|                                                      |   |            |   |   |          |  
|                                                      |   |            |   |   |          |  
|Operating activities                                  |   |            |   |   |          |  
|                                                      |   |            |   |   |          |  
|Net loss                                              | $ | (3,059,628 | ) | $ | (381,409 | )
|Adjustments to reconcile net loss to net cash used in |   |            |   |   |          |  
|operating activities                                  |   |            |   |   |          |  
|                                                      |   |            |   |   |          |  
|Depreciation and amortization                         |   | 5,058      |   |   | 8,037    |  
|Amortization of deferred compensation                 |   | 65,000     |   |   | 65,000   |  
|Common stock issued for consulting fees               |   | 2,850,000  |   |   | -        |  
|                                                      |   |            |   |   |          |  
|Changes in operating assets and liabilities           |   |            |   |   |          |  
|Accounts receivable                                   |   | 119,314    |   |   | (21,843  | )
|Contract retention receivable                         |   | (40,626    | ) |   | (80,094  | )
|Costs of uncompleted contracts in excess of billings  |   | (1,667     | ) |   | (42,671  | )
|Prepaid expenses and deposits                         |   | 383        |   |   | 3,049    |  
|Accounts payable and accrued liabilities              |   | 35,020     |   |   | 97,979   |  
|Bonus payable                                         |   | 83,753     |   |   | -        |  
|Billings on uncompleted contracts in excess of costs  |   |            |   |   |          |  
|and
      estimated revenues                          |   | (230,835   | ) |   | 31,054   |  
|Deferred revenue                                      |   | 664        |   |   | (4,213   | )
|Net cash used in operating activities                 |   | (173,564   | ) |   | (325,111 | )
|                                                      |   |            |   |   |          |  
|Financing activities                                  |   |            |   |   |          |  
|(Decrease)
      Increase in bank overdraft, net      |   | (60,191    | ) |   | (66,906  | )
|Proceeds from shareholders loan                       |   | 140,722    |   |   | 231,756  |  
|Proceeds
      from officer and directors             |   | 121,353    |   |   | 3,526    |  
|Proceeds from (repayment) of related party debt       |   | (6,235     | ) |   | 153,615  |  
|Net cash provided by financing activities             |   | 195,649    |   |   | 321,991  |  
|                                                      |   |            |   |   |          |  
|                                                      |   |            |   |   |          |  
|Effects of exchange rates on cash                     |   | (17,859    | ) |   | 670      |  
|                                                      |   |            |   |   |          |  
|                                                      |   |            |   |   |          |  
|Net increase (decrease) in cash                       |   | 4,226      |   |   | (2,450   | )
|                                                      |   |            |   |   |          |  
|Cash, beginning of period                             |   | 47,019     |   |   | 49,469   |  
|                                                      |   |            |   |   |          |  
|Cash, end of period                                   | $ | 51,245     |   | $ | 47,019   |  
|                                                      |   |            |   |   |          |  
|                                                      |   |            |   |   |          |  
|Supplemental cash flow information                    |   |            |   |   |          |  
|                                                      |   |            |   |   |          |  
|Interest paid                                         | $ | 62,272     |   | $ | 23,042   |  
|                                                      |   |            |   |   |          |  

See accompanying notes to the consolidated financial
  statements.

F-4

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

1.         
  Summary of significant accounting policies

Nature of operations, basis of financial statement
  presentation

In August 2005, the Company changed its name from Royce
  Biomedical Inc. to Smart-tek Solutions Inc. (STS or the Company) to better
  reflect its new business activities.

STS was incorporated in Nevada on March 22, 1995.

Between August 1995 and June 1998, the Company manufactured and
  sold diagnostic test kits used to detect pregnancy, thyroid disorders and other
  medical conditions. The Company assembled its diagnostic testing kits at its
  laboratory in Irvine, California. The Company closed this facility in April
  1998. In order to penetrate the Chinese Immunodiagnostic market quickly, the
  Company signed an agreement in April 1999 with Xili Pharmaceutical Group, Inc.
  (Xili) of the Peoples Republic of China, to market and distribute H. Pylori
  Diagnostic test kits supplied by the Company. In addition to supplying H. Pylori
  diagnostic test kits supplied by the Company. In addition to supplying H. Pylori
  test kits to Xili, the Company had provided clinical data and training to Xili
  personnel.

Xili Pharmaceutical Group, Inc. through its subsidiary, Xili
  USA, Inc. owned approximately 44% of the outstanding common shares of the
  Company through December 5, 2004 and is controlled by Dr. Yan Xiao Wen, who is
  also the former Chairman of the Companys Board of Directors. At December 31,
  2007, Xili USA, Inc., owns approximately 2.1% of the outstanding common shares
  of the Company.

In March 2005, the Company entered into a Letter of Intent to
  acquire Smart-tek Communications, Inc. (SCI) a British Columbia based security
  design and installation contractor. Pursuant to a Share Exchange Agreement
  executed in April 2005. SCI became a wholly-owned subsidiary of the Company. As
  a result of this acquisition, the Company has ceased all ongoing business
  relationships with Xili and will direct its efforts to effectively operate and
  expand in the security sector.

Pursuant to the share exchange agreement, the Company issued
  1,000 shares of its common stock and 1 share of Class A preferred stock in
  return for all outstanding shares of SCI. The acquisition has been accounted for
  as a purchase (see Note 2).

Smart-tek Communications Inc. (SCI) was incorporated on
  October 29, 1996 in the Province of British Columbia, Canada. The Company
  specializes in the design, sale, installation and service of security technology
  with electronic hardware and software products. Projects range from residential
  and commercial developments to system upgrades and monitoring contracts.
  Customers include major developers, general and electrical contractors,
  hospitals, Crown Corporations, law enforcement agencies and retail facilities.
  Currently, 100% of the Companys operations are in Canada.

The consolidated financial statements have been prepared in
  accordance with accounting principles generally accepted in the United States of
  America and include the following significant accounting policies:

Principles of consolidation

The consolidated financial statements include the accounts of
  Smart-tek Solutions Inc., and its wholly-owned subsidiary. Smart-tek
  Communications Inc. Significant inter-company transactions have been eliminated
  in consolidation.

Accounts Receivable

The Company reports accounts receivable at net realizable
  value. The Companys term of sale provide the basis for when accounts become
  delinquent or past due. The Company provides an allowance for doubtful accounts,
  when necessary, equal to the estimated uncollectible amounts. There is an
  allowance for doubtful accounts as of June 30, 2008 of $8,890 (2007  Nil).

F-5

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

Equipment

Equipment, including computer equipment under capital lease
  agreements, is recorded at cost and depreciated using accelerated methods over
  the estimated useful lives of the related assets ranging from 3 to 5 years. The
  Company reviews the carrying value of long-term assets to be held and used when
  events and circumstances warrant such a review. If the carrying value of a
  long-lived asset is considered impaired, a loss is recognized based on the
  amount by which the carrying value exceeds the fair market value. Fair market
  value is determined primarily using the anticipated cash flows discounted at a
  rate commensurate with the risk involved. The cost of normal maintenance and
  repairs is charged to operations as incurred. Major overhaul that extends the
  useful life of existing assets is capitalized. When equipment is retired or
  disposed, the costs and related accumulated depreciation are eliminated and the
  resulting profit or loss is recognized in income.

Financial instruments

The Companys financial instruments consist of cash and cash
  equivalents, accounts receivables, contract retention receivable, bank
  overdraft, accounts payable and accrued liabilities, amounts due to officers and
  directors, shareholder loans and related party loans. The fair value of these
  financial instruments approximate their carrying value due to the short
  maturities of these instruments, unless otherwise noted.

Interest rate risk arises on the various rates at which the
  Company has obtained certain long-term debt and related party loans. However,
  the Company expects to repay these obligations in full either at maturity or at
  terms set out in the specific agreements. Consequently, risk related to
  fluctuations on the bank prime is minimal. The remaining balance of long-term
  debt, obligations under capital lease and amount due to related parties are
  based on fixed terms of interest. The Company expects to repay these amounts in
  full, thereby minimizing interest rate risk.

Cash and equivalents

Cash and equivalents include investments with initial
  maturities of three months or less.

Income taxes

In accordance with SFAS No. 109, Accounting for Income Taxes,
  the Company uses the asset and liability method to account for income taxes,
  including recognition of deferred tax assets for the anticipated future tax
  consequences attributable to differences between financial statement amounts and
  their respective tax bases. The Company reviews its deferred tax asset for
  recovery and a valuation allowance is established when the Company believes that
  it is more likely than not that some portion of its deferred tax asset will not
  be realized. Changes in valuation allowances from period to period are included
  in the Companys tax provision in the period of change.

Goodwill and intangible assets

The Company accounts for goodwill and intangible assets
  pursuant to SFAS No. 142, Goodwill and Other Intangible Assets. Under SFAS
  142, intangibles with definite lives continue to be amortized on a straight-line
  basis over the lesser of their estimated useful lives or contractual terms.
  Goodwill and intangibles with indefinite lives are evaluated at least annually
  for impairment by comparing the assets estimated fair values with its carrying
  value, based on cash flow methodology.

Use of estimates

The preparation of these financial statements in conformity
  with accounting principles generally accepted in the United States of America
  requires management to make estimates and assumptions that affect reported
  amounts and related disclosures. Specific areas, among others, requiring the
  application of managements estimates and judgment includes assumptions
  pertaining to credit. Worthiness of customers, percentage of completion and
  related costs for contracts in progress, interest rates, useful lives of assets,
  future cost trends, tax strategies, and other external market and economic
  conditions. Actual results could differ from estimates and assumptions made.

F-6

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

Revenue recognition

The Company accounts for its construction projects using the
  percentage of completion method, measured using the cost-to-cost method. This
  method of accounting requires a calculation of job profit to be recognized in
  each reporting period for each contract abased upon estimates of future
  outcomes, which include:

- Estimates of total cost to complete the contract;
- Estimates of contract schedule and completion date;
- Estimates of the percentage the contract is complete; and
- Amounts of any probable unapproved claims and change orders included in
    revenue.

At the outset of each contract, a detailed analysis of
  estimated cost to complete the contract is prepared. Periodically, evaluation of
  the estimated cost, claims, change orders and percentage of completion at the
  project level will be performed. The recording of profits and losses on
  long-term contracts requires an estimate of the total profit and loss over the
  life of each contract. This estimate requires consideration of contract
  revenues, change orders and claims, less cost incurred and estimated costs to
  complete. Anticipated losses on contracts are recorded in full in the period in
  which they become evident. Profits are recorded based upon the total estimated
  contract profit times the current percentage of completion for the contract.

When calculating the amount of total profit or loss on a
  long-term contract, unapproved claims are recorded as revenue when collection is
  deemed probable based upon the four criteria for recognizing unapproved claims
  under the AICPA Statement of Position 81-1 (SOP 81-1) Accounting for
  Performance of Construction Type and Certain Production Type Contracts. The
  Company is actively engaged in claims negotiations with customers and the
  success of the claims negotiations have a direct impact on the profit or loss
  recorded for any long-term contract. On a quarterly basis, significant contracts
  are reviewed. However, there are many factors that impact future costs,
  including but not limited to, weather, inflation, labor and community
  disruptions, timely availability of materials, productivity and other factors.
  These factors can affect the accuracy of our estimates and materially impact our
  future earnings.

The company also provides various other services to customers
  not covered under construction contracts such as equipment repairs. The revenue
  from the provision of these types of services is recorded once the specific job
  is complete.

Concentration of credit risk

Credit risk arises from the potential that a counterpart will
  fail to perform its obligations. The Company is exposed to credit risk related
  to its account receivable and contract retention receivable. The Companys
  receivables are comprised of a number of debtors which minimizes the
  concentration of credit risk. It is managements opinion that the Company is not
  exposed to significant credit risk associated with its accounts receivable and
  contract retention receivable.

Foreign currency translation

The functional currency of the Company is the United States
  dollar. The Companys Canadian subsidiarys financial statements are translated
  into United States dollars at the exchange rates in effect at the balance sheet
  date for assets and liabilities and at average rates for the period for revenues
  and expenses. Resulting exchange differences are accumulated as a component of
  accumulated other comprehensive loss.

Comprehensive (loss) income

Comprehensive income or loss encompasses net income or loss and
  other comprehensive income or loss, which includes all other non-owner
  transactions and events that change shareholders deficiency. The Companys
  other comprehensive loss reflects the effect of foreign currency translation
  adjustments on the translation of the financial statements from the functional
  currency of Canadian dollars into the reporting currency of U.S. dollars.

F-7

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

Stock-based compensation

Through December 31, 2005, the Company accounted for
  stock-based employee compensation in accordance with the provisions of
  Accounting Principles Board (APB) Opinion No. 25 and FASB Interpretation No.
  44 Accounting for Certain Transactions Involving Stock Compensation and
  complied with the disclosure requirements of SFAS No. 123 (as modified by SFAS
  No.48), Accounting for Stock-Based Compensation, Under APB No.25 compensation
  expense was recorded based on difference, if any, between the fair value of the
  Companys stock and the exercise price on the measurement date. The Company
  accounted for stock issued to non-employees in accordance with SFAS No.123,
  which required entities to recognize as expense over the service period the fair
  value of all stock based awards on the date of grant and EITF No. 96-18
  Accounting for Equity Investments that are issued to Other Than Employees for
  Acquiring, or in conjunction with Selling, Goods or Services, which addressed
  the measurement date and recognition approach for such transactions.

On January 1, 2006, the Company adopted SFAS No. 123 (revised
  2004), Share-based Payment (SFAS No.123R) a revision of SFAS No. 123,
  Accounting for Stock Based Compensation, SFAS No.123R superseded APB Opinion
  No.25 Accounting for Stock Issued to Employees and amended SFAS 95 Statement
  of Cash Flows SFAS No 123R requires that the Company measure the cost of
  employee services received in exchange for equity awards based on the grant date
  fair-value of the awards. The cost will be recognized as compensation expense
  over the vesting period of the awards.

Under this method, the Company began recognizing compensation
  cost for equity-based compensation for all new or modified grants after the date
  of adoption. The pro-forma disclosures previously permitted under SFAS No. 123
  are no longer an alternative to financial statement recognition.

In addition, the Company now recognizes the unvested portion of
  the grant date fair value of awards issued prior to adoption based on the fair
  values previously calculated for disclosure purposes over the remaining vesting
  period of the outstanding options and warrants. Accordingly, the Company
  recognizes compensation cost for equity-based compensation for all new or
  modified grants issued after December 31, 2005.

The Company had two partially vested stock options outstanding
  at December 31, 2005 pursuant to employment agreements entered into between the
  Companys and its president and vice-president. Under these agreements, the
  Company issued options to purchase up to 650,000 shares of its common stock at a
  purchase price of $0.15 per share that vest in equal quarterly installments over
  a three (3) year period. The Company calculated the fair value of the options to
  be 195,000 using our option pricing model, of which $65,000 was recognized as
  expense during the year ended June 30, 2008.

In addition, commencing January 1, 2006, the Company is
  required to recognize the unvested portion of the grant date fair value of
  awards issued prior to the adoption of SFAS No. 123R based on the fair values
  previously calculated for disclosure purposes over the remaining vesting period
  of the outstanding stock options and warrants. At June 30, 2008, the value of
  the unvested options was $32,500 which will be amortized in future periods as
  the options vest.

Recovery of long-lived assets

The Company adopted SFAS Statement 144, Accounting for the
  Impairment and Disposal of Long-Lived Assets (SFAS 144). SFAS 144 requires
  recognition of impairment losses on long-lived assets when indicators of
  impairment are present and the undiscounted cash flows estimated to be generated
  by those assets are less than the assets carrying amounts.

Advertising expenses

The Company expenses advertising costs as incurred which was
  $9,095 for the year ended June 30, 2008.

F-8

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

Loss per share

The Company computes net earnings (loss) per common share in
  accordance with SFAS No. 128 Earnings per Share (SFAS 128) and SAB No. 98
  (SAB 98). Under the provisions of SFAS 128 and SAB 98, the basic net earnings
  (loss) per common share is computed by dividing the net earnings (loss)
  available to common stock outstanding during the period. Net earnings (loss) per
  share on a diluted basis is computed by dividing the net earnings (loss) for the
  period by the weighted average number of common and dilutive common stock
  equivalent shares outstanding during the period.

Recent accounting pronouncements

In December 2007, the FASB issued SFAS No. 160 Non-controlling
  Interests in Consolidated Financial Statements-an amendment of ARB No. 51. SFAS
  160 establishes accounting and reporting standards for the non-controlling
  interest in a subsidiary and for the deconsolidation of a subsidiary. The
  guidance will become effective for the fiscal year beginning after December 15,
  2008. The adoption of this statement is not expected to have a material effect
  on the Companys consolidated financial statements.

In January 2008, Staff Accounting Bulletin (SAB) 110,
  Share-Based Payment was issued. Registrants may continue, under certain
  circumstances, to use the simplified method in developing estimates of the
  expected term of share options as initially allowed by SAB 107, Share-Based
  Payment. The adoption of SAB 110 should have no effect on the financial
  position and results of operations of the Company.

In May 2008, the Financial Accounting Standards Board (FASB)
  issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts 
  An interpretation of FASB Statement No. 60. SFAS No. 163 requires that an
  insurance enterprise recognize a claim liability prior to an event of default
  when there is evidence that credit deterioration has occurred in an insured
  financial obligation. It also clarifies how Statement 60 applies to financial
  guarantee insurance contracts, including the recognition and measurement to be
  used to account for premium revenue and claim liabilities, and requires expanded
  disclosures about financial guarantee insurance contracts. It is effective for
  financial statements issued for fiscal years beginning after December 15, 2008,
  except for some disclosures about the insurance enterprises risk- management
  activities. SFAS No. 163 requires that disclosures about the risk-management
  activities of the insurance enterprise be effective for the first period
  beginning after issuance. Except for those disclosures, earlier application is
  not permitted. The adoption of this statement is not expected to have a material
  effect on the Companys financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of
  Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources
  of accounting principles and the framework for selecting the principles to be
  used in the preparation of financial statements of nongovernmental entities that
  are presented in conformity with generally accepted accounting principles in the
  United States. It is effective 60 days following the SECs approval of the
  Public Company Accounting Oversight Board amendments to AU Section 411, The
  Meaning of Present Fairly in Conformity With Generally Accepted Accounting
  Principles. The adoption of this statement is not expected to have a material
  effect on the Companys financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about
  Derivative Instruments and Hedging Activities  an amendment to FASB Statement
  No. 133. SFAS No. 161 is intended to improve financial standards for derivative
  instruments and hedging activities by requiring enhanced disclosures to enable
  investors to better understand their effects on an entity's financial position,
  financial performance, and cash flows. Entities are required to provide enhanced
  disclosures about: (a) how and why an entity uses derivative instruments; (b)
  how derivative instruments and related hedged items are accounted for under SFAS
  No. 133 and its related interpretations; and (c) how derivative instruments and
  related hedged items affect an entitys financial position, financial
  performance, and cash flows. SFAS No. 161 is effective for financial statements
  issued for fiscal years beginning after November 15, 2008, with early adoption
  encouraged. The adoption of this statement is not expected to have a material
  effect on the Company's financial statements.

F-9

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

Recent accounting pronouncementscontinued

In December 2007, the FASB issued SFAS No. 141 (revised 2007),
  Business Combinations. SFAS No. 141 (revised 2007) establishes principles and
  requirements for how the acquirer of a business recognizes and measures in its
  financial statements the identifiable assets acquired, the liabilities assumed,
  and any non-controlling interest in the acquiree. The statement also provides
  guidance for recognizing and measuring the goodwill acquired in the business
  combination and determines what information to disclose to enable users of the
  financial statements to evaluate the nature and financial effects of the
  business combination. SFAS No. 141 (revised 2007) applies prospectively to
  business combinations for which the acquisition date is on or after the
  beginning of the first annual reporting period beginning on or after December
  15, 2008. The adoption of this statement is not expected to have a material
  effect on the Company's financial statements.

In February 2007, the Financial Accounting Standards Board
  (FASB) issued SFAS Statement No. 159, The Fair Value Option for Financial
  Assets and Financial Liabilities - Including an amendment of FASB Statement No.
  115 (SFAS 159). SFAS 159, which becomes effective for the Company on January 1,
  2008, permits companies to choose to measure many financial instruments and
  certain other items at fair value and report unrealized gains and losses in
  earnings. Such accounting is optional and is generally to be applied instrument
  by instrument.

FASB Statement of Financial Accounting Standards (SFAS) No. 157
  Fair Value Measurements establishes a formal framework for measuring fair
  value under GAAP. It defines and codifies the many definitions of fair value
  included among various other authoritative literature, clarifies and, in some
  instances, expands on the guidance for implementing fair value measurements, and
  increases the level of disclosure required for fair value measurements. Although
  SFAS No. 157 applies to and amends the provisions of existing FASB and AICPA
  pronouncements, it does not, of itself, require any new fair value measurements,
  nor does it establish valuation standards. SFAS No. 157 applies to all other
  accounting pronouncements requiring or permitting fair value measurements,
  except for SFAS 123(r)Share-Based payment and related pronouncements, the
  practicability exceptions to fair value determination allowed by various other
  authoritative pronouncements, and AICPA Statements of Position 97-2 and 98.9
  that deal with software revenue recognition. This statement is effective for
  financial statements issued for fiscal years beginning after November 15, 2007,
  and interim periods within those fiscal years.

Going Concern

The accompanying consolidated financial statements have been
  prepared assuming that the Company will continue as a going concern. The Company
  incurred a net loss of $3,059,625 and cash flow from operations of $(173,564)
  during the year ended June 30, 2008, and had a working capital deficiency of
  $1,246,306 and a stockholders deficiency of $792,248. These matters raise
  substantial doubt about its ability to continue as a going concern. Management
  believes that actions are presently being taken to revise the Companys
  operating results. Management believes that the Company will have adequate cash
  to fund anticipated needs through September 30, 2008 and beyond primarily as a
  result of our contract backlog. The accompanying consolidated financial
  statements do not include any adjustments that might result from the outcome of
  this uncertainty.

The Company does not have any significant available credit,
  bank financing or other external sources of liquidity. Due to historical
  operating losses, the Companys operations have not been a source of liquidity
  and the Company has satisfied its cash requirements through shareholder loans
  and deferral of salary payments to its officers. In order to obtain necessary
  capital, the Company may need to sell additional shares of its common stock or
  borrow funds from private lenders. There is no assurance that the Company will
  be able to secure additional financing or that it can be secured at rates
  acceptable to the Company. In addition, should the Company be required to either
  issue stock for services or to secure equity funding, due to the lack of
  liquidity in the market for the Companys stock such financing would result in
  significant dilution to its existing shareholders.

F-10

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

2.         
  Acquisitions

On April 15, 2005, the Company entered into a Share Exchange
  Agreement with Smart-tek Communications, Inc. (SCI) and with the sole
  shareholder of SCI to acquire all of the outstanding shares of SCI.

In exchange for the SCI shares, the Company issued to SCIs
  shareholder, 1,000 common shares and 1 Class A Preferred Share of the Company.
  The preferred share will enable the holder to exercise the voting control over
  40% of the Company upon issuance. The remaining 60% voting control is to be
  assigned to the outstanding common shares of the Company. Such preferred shares
  shall not be convertible, exchangeable, transferable or otherwise purchased,
  conveyed or redeemed at any time while outstanding during a two-year period. In
  addition, the voting power of such preferred share shall decrease over a two
  year period so as to have 20% voting control 12 months after issuance, 10%
  voting control over 18 months after issuance and zero voting control 24 months
  after issuance at which time the preferred shares will be redeemed for no
  consideration.

The acquisition was accounted for as a purchase and the results
  of SCIs operations beginning April 16, 2005 are included in the accompanying
  consolidated statement of operations. The acquisition of assets and liabilities
  has been recorded at their fair market value at the date of purchase. The
  Company determined that the historical cost of the assets and liabilities
  acquired approximated their fair market values given the nature of the assets
  and liabilities acquired. Purchase price allocation was as follows:

| | Valuation of shares of common stock and
      preferred stock | $ | 1        |  
| | ------------------------------------------------------------- | - | -------- | -
| |                                                               |   |          |  
| | Assets acquired                                               |   | 276,012  |  
| | Liabilities assumed                                           |   | (727,324 | )
| |                                                               |   | 451,312  |  
| |                                                               |   |          |  
| | Goodwill                                                      | $ | 451,311  |  

3.         
  Contract Retention Receivable

Under the Builders Lien Act (British Columbia), under which
  the subsidiary SCI operates, for each contract or subcontract a holdback amount
  is retained by the customer equal to 10% of the greater of:

| | (a) | The value of the work or materials as they are actually
      provided under contract or subcontract, and
| | --- | ---------------------------------------------------------------------------------------------------------
| | (b) | The amount of any payment made on account of the contract
      or subcontract price.                    

On the request of a contractor or subcontractor, the payment
  certifier must, within 10 days after the date of the request, determine whether
  the contract or subcontract has been completed and, if the payment certifier
  determines that it has been completed, the payment certifier must issue a
  certificate of completion.

If a certificate of completion is issued with respect to a
  contract or subcontract, the holdback period expires at the end of 55 days after
  the certificate of completion is issued.

As of June 30, 2008 and June 30 2007, contract retention
  receivables were $226,722 and $186,096 respectively.

F-11

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

4.         
  Equipment

June 30
      
      
      
      
      
      
      
      
      June 30Accumulated
      
      
      2008
      
      
      
      
      
      Accumulated
      
      
      2007Cost
      
      
      Depreciation
      
      
      Net Book
      
      
      Cost
      
      
      Depreciation
      
      
      Net BookValue
      
      
      
      
      
      
      
      
      ValueComputer equipment & software
      $
      899
      
      $
      706
      
      $
      193
      
      $
      899
      
      $
      608
      
      $
      291Office furniture & equipment
      
      4,727
      
      
      2,657
      
      
      2,070
      
      
      4,727
      
      
      2,105
      
      
      2,622Leasehold improvements
      
      15,617
      
      
      15,617
      
      
      -
      
      
      15,617
      
      
      11,432
      
      
      4,185Computer equipment undercapital lease
      
      2,140
      
      
      1,656
      
      
      484
      
      
      2,140
      
      
      1,433
      
      
      707$
      23,383
      
      $
      20,636
      
      $
      2,747
      
      $
      23,383
      
      $
      15,578
      
      $
      7,805


5.         
  Bank Overdraft

At June 30, 2008, bank overdrafts covered by a revolving line
  of credit were $122,588. The revolving line of credit agreement is between SCI,
  the Companys wholly owned subsidiary, and HSBC Bank of Canada. The revolving
  line of credit facility bears interest at the rate of prime plus 4.50% per
  annum, allows authorized bank overdrafts of up to $122,588 ($125,000 CDN) and is
  secured by a shareholder guarantee and $51,245 ($52,253 CDN) in the form of a
  term deposit. As of June 30, 2008, the Company had written checks of $34,604 in
  excess of the operating line of credit.

6.         
  Related Party Debt

|                                                           |   | June 30, 2008 |  |   | June
      30, 2007 | 
|---------------------------------------------------------- | - | ------------- |  | - | ------------------- | 
|Unsecured loan from related party, (father
      of        |   |               |  |   |                     | 
|Company President). Non-interest bearing, with             |   |               |  |   |                     | 
|No fixed repayment terms                                   | $ | -             |  | $ | 190,711             | 
|                                                           |   |               |  |   |                     | 
|Various related party loans, unsecured,
      non-interest |   |               |  |   |                     | 
|Bearing advances with no fixed terms of repayment          |   |               |  |   |                     | 
|Due on demand                                              |   | -             |  |   | 8,254               | 
|                                                           |   |               |  |   |                     | 
|                                                           |   |               |  |   |                     | 
|                                                           | $ | -             |  | $ | 198,965             | 

7.         
  Shareholder loans

Commencing in the second quarter of 2003, the Company borrowed
  funds from Xili USA, a shareholder, on an unsecured basis. The loans are
  non-interest bearing and are payable on demand. The total due to Xili USA under
  these borrowings aggregated $81,076 as at March 31, 2008 and June 30, 2007.

In December 2005, the Company borrowed $49,985 from a
  shareholder on an unsecured basis. The loan is non-interest bearing and payable
  on demand. In January 2006, the Company borrowed $150,000 from the same
  shareholder, also on an unsecured basis as well as non-interest bearing with no
  fixed repayment terms. During the year ended June 30, 2008, the Company issued
  stock in a shares for debt transaction (Note 9). At June 30, 2008 there is $Nil
  outstanding to this shareholder.

At June 23, 2008, the Company had borrowed $271,512 from a
  company controlled by the Companys president. The loan is unsecured and bears
  7.5% interest commencing in January 2008. The loan has no fixed terms of
  repayment. During the year ended June 30, 2008, the Company issued an aggregate
  of 7,746,032 shares to this creditor in consideration of the settlement of
  unsecured loans in the amount of $271,111. At June 30, 2008 the balance of the
  unsecured loan was $401

At June 30, 2008, the above shareholder loans aggregated to
  $81,477.

F-12

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

8.Income taxes

As of June 30, 2008, for Federal income tax purposes, the
  Company has approximately $3,639,480 in net operating loss carry forwards
  expiring through 2021. The Company has provided a 100% valuation as it cannot
  determine that it is more likely than not that will realize the deferred tax
  assets.

At June 30, 2008, STS had available federal net operating loss
  (NOL)carry forwards of approximately $3,639,480. Under Section 382 of
  the internal Revenue Code of 1986, as amended, the use of prior losses including
  NOLs is limited if a corporation undergoes an ownership change. Future
  issuances of equity interests by us for acquisitions or the exercise of
  outstanding options to purchase our capital stock may result in an ownership
  change that is large enough for this limitation to apply. If the limitation
  applies, we may be unable to use a material portion of its available NOL carry
  forwards to reduce future taxable income. The income tax effect of temporary
  differences between financial and tax reporting gives rise to the deferred tax
  asset at June 30, 2008 and June 30, 2007 as follows:

|                                                       |   | June 30,   |   |   | June 30,   |  
|------------------------------------------------------ | - | ---------- | - | - | ---------- | -
|                                                       |   | 2008       |   |   | 2007       |  
|                                                       |   |            |   |   |            |  
|Deferred tax asset, beginning                          | $ | 1,338,862  |   | $ | 1,205,369  |  
|Benefit of current years operating loss carry forward |   | 1,070,870  |   |   | 133,493    |  
|Deferred tax asset, ending                             | $ | 2,409,732  |   | $ | 1,338,862  |  
|                                                       |   |            |   |   |            |  
|Valuation allowance, beginning                         | $ | (1,338,862 | ) | $ | (1,205,369 | )
|Current years provision                               |   | (1,070,870 | ) |   | (133,493   | )
|Valuation allowance, ending                            | $ | (2,409,732 | ) | $ | (1,338,862 | )
|                                                       |   |            |   |   |            |  
|Deferred tax asset, net                                | $ | -          |   | $ | -          |  
|                                                       |   |            |   |   |            |  
|Tax at blended U.S./Canadian statutory
      rates     |   | (35%       | ) |   | (35%       | )
|Loss carryover                                         |   | 35%        |   |   | 35%        |  
|                                                       |   |            |   |   |            |  
|Tax expense                                            | $ | -          |   | $ | -          |  

9.         
  Common Stock

At June 30, 2008, the Company is authorized to issue:

| | 1. | 5,000,000 shares of preferred stock, par value $0.001 per
      share
| | -- | ---------------------------------------------------------------------
| | 2. | 500,000,000 shares of common stock, par value $0.001 per
      share 

At June 30, 2008, there are 111,812,971 shares of common stock
  outstanding.

In September 2007, the Company entered into a consulting
  agreement with an unaffiliated third party to provide the company with software
  development services. Under terms of the agreement, the Company issued 6,500,000
  restricted shares of its common stock as payment for the services.

In September 2007, the Company entered into a consulting
  agreement with an unaffiliated third party to provide the company with
  international business strategy development to market its Radio Frequency
  Identification (RFID) based agricultural products. Under the terms of the
  agreement, the Company issued 7,000,000 restricted shares of its common stock as
  payment for the services.

In September 2007, the Company entered into a consulting
  agreement with an unaffiliated third party to provide the company with marketing
  services. As per the terms of the agreement, the Company issued to the
  Consultant 5,500,000 restricted shares of its common stock as payment for
  services.

F-13

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

9.         
  Common Stockcontinued

On June 23, 2008 the Company entered into Debt Settlement
  Agreements with five creditors. Pursuant to the terms of the Debt Settlement
  Agreements, the Company issued an aggregate of 19,559,955 shares to the
  creditors in consideration of the settlement of unsecured loans in the amount of
  $684,598.

Preferred Stock

Pursuant to the share exchange agreement dated April 15, 2005,
  the Company agreed to issue one share of Class A preferred stock to the sole
  shareholder of SCI, Perry Law. The preferred share will enable the holder to
  exercise the voting control of 40% of the Company upon issuance. The remaining
  60% voting control is to be assigned to the outstanding common shares of the
  Company. Such preferred shares shall not be convertible, exchangeable,
  transferable or otherwise purchased, conveyed or redeemed at any time while
  outstanding during a two-year period. In addition, the voting power of such
  preferred share shall decrease over such two-year period so as to have 20%
  voting control 12 months after issuance, 10% voting control 18 months after
  issuance and zero voting control 24 months after issuance, at which time the
  preferred share will be redeemed by the Company for no consideration.

2005 Stock Incentive Plan

During fiscal 2005, pursuant to provisions under the plans, the
  Companys Board of Directors cancelled all existing stock option and incentive
  plans.

The following description applies to the stock incentive plan
  that was subsequently adopted on May 27, 2005; 1,300,000 options have been
  granted under this plan as of the date of this filing.

We have reserved for issuance an aggregate of 25,000,000 shares
  of common stock under the 2005 Stock Incentive Plan. This plan is intended to
  encourage directors, officers, employees and consultants to acquire ownership of
  common stock. The opportunity so provided is intended to foster in participants
  a strong incentive to put forth maximum effort for our continued success and
  growth, to aid in retaining individuals who put forth such efforts, and to
  assist in attracting the best available individuals to the Company in the
  future.

Officers (including officers who are members of the board of
  directors), directors and other employees and consultants of STS and its
  subsidiaries will be eligible to receive options under the stock incentive plan.
  The committee will administer the stock incentive plan and will determine those
  persons to whom options will be granted, the number of options to be granted,
  the provisions applicable to each grant and the time periods during which the
  options may be exercised. No options may be granted more than ten years after
  the date of the adoption of the stock incentive plan.

Non-qualified stock options will be granted by the committee
  with an option price equal to the fair market value of the shares of common
  stock to which the non-qualified stock option relates on the date of grant. The
  committee may, in its discretion, determine to price the non-qualified option at
  a different price. In no event may the option price with respect to an incentive
  stock option granted under the stock option plan be less than the fair market
  value of such common stock to which the incentive stock option relates on the
  date the incentive stock option is granted.

F-14

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

9.         
  Common Stockcontinued

2005 Stock Incentive Plancontinued

Each option granted under the stock incentive plan will be
  exercisable for a term of not more than ten years after the date of grant.
  Certain other restrictions will apply in connection with this plan when some
  awards may be exercised. In the event of a change of control (as defined in the
  stock incentive plan); the date on which all options outstanding under the stock
  incentive plan may first be exercised will be accelerated. Generally, all
  options terminate 90 days after a change of control.

At June 30, 2008, options outstanding are as follows:

|                         |  |           |  |   | Average        | 
|------------------------ |  | --------- |  | - | -------------- | 
|                         |  | Shares    |  |   | Exercise Price | 
|Balance at July 1, 2007  |  | 1,300,000 |  | $ | 0.15           | 
|Granted                  |  | -         |  |   | -              | 
|Exercised                |  | -         |  |   | -              | 
|Cancelled                |  | -         |  |   | -              | 
|                         |  |           |  |   |                | 
|Balance at June 30, 2008 |  | 1,300,000 |  | $ | 0.15           | 

Additional information regarding options outstanding as of June
  30, 2008 is as follows:

Options outstanding
      
      Options exercisableWeighted average
      Weighted
      
      Weightedremaining
      average
      
      averageExercise
      Number
      contractual life
      exercise
      
      exerciseprice
      outstanding
      (years)
      price
      Number
      price$ 0.15
      1,300,000
      8.75
      $ 0.15
      523,611
      $ 0.15


The Company had two partially vested stock options outstanding
  at December 31, 2005 pursuant to employment agreements entered into between the
  Company's and its president and vice-president. Under these agreements, the
  Company issued options to purchase up to 650,000 shares of its common stock at a
  purchase price of $0.15 per share that vest in equal quarterly installments over
  a three (3) year period. The Company calculated the fair value of the options to
  be $195,000 using an option pricing model, of which $65,000 was recognized as
  expense during the year ended June 30, 2008.

In addition, commencing January 1, 2006, the Company is
  required to recognize the unvested portion of the grant date fair value of
  awards issued prior to the adoption of SFAS No. 123R based on the fair values
  previously calculated for disclosure purposes over the remaining vesting period
  of the outstanding stock options and warrants. At June 30, 2008, the value of
  the unvested options was $32,500 which will be amortized in future periods as
  the options vest.

F-15

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

10.        Costs and
  Estimated Earnings on Uncompleted Contracts

|                                                                            |   | June 30,   |   |   | June 30,          |  
|--------------------------------------------------------------------------- | - | ---------- | - | - | ----------------- | -
|                                                                            |   | 2008       |   |   | 2007              |  
|                                                                            |   |            |   |   |                   |  
|Costs incurred on uncompleted contracts                                     | $ | 1,520,914  |   | $ | 735,430           |  
|                                                                            |   |            |   |   |                   |  
|Estimated earnings                                                          |   | 1,013,756  |   |   | 390,444           |  
|                                                                            |   | 2,534,670  |   |   | 1,125,874         |  
|                                                                            |   |            |   |   |                   |  
|Less: Billings to Date                                                      |   | (2,737,337 | ) |   | (
      1,561,043 | )
|                                                                            |   |            |   |   |                   |  
|                                                                            | $ | (202,667   | ) | $ | (435,169          | )
|                                                                            |   |            |   |   |                   |  
|Included in accompanying balance sheets under the following
      captions: |   |            |   |   |                   |  
|Costs of uncompleted contracts in excess of
      billings                  |   | 51,587     |   |   | 49,920            |  
|Billings on uncompleted contracts in excess of costs and                    | $ | (254,254   | ) | $ | (485,089          | )
|estimated revenues                                                          |   |            |   |   |                   |  
|                                                                            | $ | (202,667   | ) | $ | (435,169          | )

11.        Related
  Party Transactions

During the year ended June 30, 2008, the Companys wholly owned
  subsidiary paid $470,978 in management salaries to its President and Vice
  president which included bonuses of $253,021. Such costs have been reflected in
  the accompanying statement of operations.

Amounts due to officers and directors were $504,871 as of June
  30, 2008.

F-16

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

12.        Commitments

Operating leases

The Companys wholly owned subsidiary entered into a
  non-cancellable operating lease for office space on March 1, 2005. Furthermore,
  the Companys wholly-owned subsidiary is committed to operating leases for five
  company vehicles. The minimum payments required under these operating leases for
  each of the five years subsequent to June 30, 2008 are approximately as follows:

Year endingJune 302009
      $27,3482010
      8,6722011
      6,1582012
      1,539


13.        Legal
  Proceedings

On April 28, 2006, the Company has filed a complaint in the
  Superior Court for the State of California, against RFID, Ltd., a publicly
  traded company on the Pink Sheets. The Complaint alleges causes of action
  against RFID, Ltd., for 1) Defamation Per Se; 2) Intentional Interference with
  Contractual Relations; 3) Intentional Interference with Prospective Economic
  Advantage and 4) Unfair Competition (Violation of the California Business &
  Professions Code section 17200). The Complaint alleges that RFID, Ltd., who
  described itself as a competitor of Smart-tek Solutions, Inc., made a series of
  false and misleading representations about Smart-tek Solutions, Inc. and its
  development of its RTAC-PM system. The Complaint filed by Smart-tek Solutions,
  Inc. seeks monetary damages in excess of $10 million and equitable relief as a
  result of RFID, Ltd.s conduct.

On May 9, 2006, the Company filed a Complaint in the District
  Court of Clark County, Nevada against the owners and operators of Stocklemon.com
  (Stocklemon). The Complaint alleges causes of action for (1) Defamation; (2)
  Intentional Interference with Contractual Relations; (3) Intentional
  Interference with Prospective Economic Advantage and (4) Violation of State
  Securities Laws. The Complaint alleges that Stocklemon made a series of provably
  false assertions of fact and other misleading statements concerning Smart-tek
  Solutions, Inc.s financial affairs and business activities. The Complaint
  further alleges that Stocklemon intentionally sought to damage Plaintiffs
  value, contractual relationships and expectancies via the misrepresentations and
  misleading statements contained in a Stocklemon report issued on or about April
  4, 2006. The Complaint further alleges that Stocklemon utilized the Report and
  the untrue statements of material fact contained therein to deliberately
  manipulate the market for personal gain.

The Complaint filed by Smart-tek Solutions, Inc. seeks
  compensatory and punitive damages in excess of $100 million and equitable relief
  against Stocklemon. While the Company remains adamant that it was wronged and
  damaged by the Stocklemon report, the Company was not able to continue to afford
  the cost of legal actions and has temporarily suspended their legal efforts and
  its attorneys have filed a petition to be removed as legal representatives of
  the Company in this complaint.

F-17

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|June 30, 2008                                 
|                                              

14.        Concentrations
  of risk

At June 30, 2008, two customers accounted for 30% of trade
  accounts receivable.

For the year ended June 30, 2008, two significant customers
  accounted for 30% of revenue and the customers individually accounted for more
  than 10% of revenue.

For the year ended June 30, 2008, 100% of the Companys sales
  and accounts receivable arose from sales to Canadian customers.

For the year ended June 30, 2008, three significant suppliers
  accounted for 41% of purchases.

F-18

---

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 8A. CONTROLS AND PROCEDURES.

A.          
Disclosure Controls and Procedures

As required by paragraph (b) of Rules 13a-15 or 15d-15 under
the Securities Exchange Act of 1934, the Companys principal executive officer
and principal financial officer evaluated the Companys disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as
of the end of the period covered by this Annual Report on Form 10-KSB. Based on
this evaluation, these officers concluded that as of the end of the period
covered by this Annual Report on Form 10-KSB, these disclosure controls and
procedures were adequate to ensure that the information required to be disclosed
by the Company in reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission and include
controls and procedures designed to ensure that such information is accumulated
and communicated to the Companys management, including the Companys principal
executive officer and principal financial officer, to allow timely decisions
regarding required disclosure. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty and that breakdowns can occur because of simple error or mistake.

B.           
Managements Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining
adequate internal control over our financial reporting. In order to evaluate the
effectiveness of internal control over financial reporting, as required by
Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment,
including testing, using the criteria in Internal Control  Integrated
Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Our system of internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements.

Based on our evaluation under the framework in Internal
Control-Integrated Framework, our Chief Executive Officer and Chief Financial
Officer concluded that our internal control over financial reporting were
effective as of June 30, 2008.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. In addition,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions
and that the degree of compliance with the policies or procedures may
deteriorate.

This Annual Report does not include an attestation report of
our independent registered public accounting firm regarding internal control
over financial reporting. Our internal control over financial reporting was not
subject to attestation by our independent registered public accounting firm
pursuant to temporary rules of the SEC that permit us to provide only
managements report in this Annual Report.

-17-

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C.           
Changes in Internal Control Over Financial Reporting.

There were no changes in the Companys internal control over
financial reporting during the quarter ended June 30, 2008 that have materially
affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.

ITEM 8B. OTHER INFORMATION.

None.

-18-

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PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL
PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT.

Directors and Executive Officers, Promoters and Control
Persons

As at October 10, 2008, our directors and executive officers,
their ages, positions held, and duration of such, are as follows:

Name
    Position Held with our Company
    Age
    Date First Elected or
      AppointedPerry Law
    President, Secretary, Treasurer
      and a Director Chief Executive Officer and Chief Financial Officer
    46
    September 30, 2006


Business Experience

The following is a brief account of the education and business
experience of each director and executive officer during at least the past five
years, indicating each persons principal occupation during the period, and the
name and principal business of the organization by which he was employed.

Perry Law is the founder of our subsidiary, Smart-Tek
Communications Inc. and has been its Chief Executive officer since 1997. Mr. Law
has over sixteen years experience in the security/surveillance systems industry
and has played a central role in introducing and implementing technological
changes in the local/regional security industry. Mr. Law has held numerous
executive management positions in both private and public companies and is very
active in charitable causes.

Term of Office

Our directors are appointed for a one-year term to hold office
until the next annual general meeting of our shareholders or until removed from
office in accordance with our bylaws. Our officers are appointed by our board of
directors and hold office until removed by the board.

Committees of the Board Of Directors

At present, we do not have an audit committee, compensation
committee, nominating committee, an executive committee of our board of
directors, stock plan committee or any other committee.

Family Relationships

There are no family relationships among our directors or
officers.

Involvement in Certain Legal Proceedings

Our directors, executive officers and control persons have not
been involved in any of the following events during the past five years:

| | 1. | any bankruptcy petition filed by or against any business
      of which such person was a general partner or executive officer either at
      the time of the bankruptcy or within two years prior to that
  time;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | any conviction in a criminal proceeding or being subject
      to a pending criminal proceeding (excluding traffic violations and other
      minor offenses);                                                     

-19-

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| | 3. | being subject to any order, judgment, or decree, not
      subsequently reversed, suspended or vacated, of any court of competent
      jurisdiction, permanently or temporarily enjoining, barring, suspending or
      otherwise limiting his involvement in any type of business, securities or
      banking activities; or
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4. | being found by a court of competent jurisdiction (in a
      civil action), the Securities and Exchange Commission or the Commodity
      Futures Trading Commission to have violated a federal or state securities
      or commodities law, and the judgment has not been reversed, suspended, or
      vacated.             

Audit Committee and Audit Committee Financial Expert

We have no audit committee financial expert. We believe that
the cost related to retaining a financial expert at this time is prohibitive.
Further, because of our stage of development, we believe the services of a
financial expert are not warranted.

Code Of Ethics

On October 14, 2008 we adopted an amended and restated code of
ethics applicable to all of our directors, officers, employees and consultants,
which is a code of ethics as defined by applicable rules of the SEC. Our Code
of Ethics is attached as an exhibit to this annual report. If we make any
amendments to our Code of Ethics other than technical, administrative, or other
non-substantive amendments, or grant any waivers, including implicit waivers,
from a provision of our Code of Ethics to our chief executive officer, chief
financial officer, or certain other finance executives, we will disclose the
nature of the amendment or waiver, its effective date and to whom it applies in
a Current Report on Form 8-K filed with the SEC.

Compliance with Section 16(a) of the Securities Exchange Act
of 1934

Section 16(a) of the Exchange Act requires our executive
officers and directors and persons who own more than 10% of a registered class
of our equity securities to file with the SEC initial statements of beneficial
ownership, reports of changes in ownership and annual reports concerning their
ownership of our common stock and other equity securities, on Forms 3, 4 and 5
respectively. Executive officers, directors and greater than 10% shareholders
are required by the SEC regulations to furnish us with copies of all Section
16(a) reports that they file.

Based solely on our review of the copies of such forms received
by us, or written representations from certain reporting persons, we believe
that all Section 16(a) filing requirements applicable to our officers, directors
and greater than ten percent beneficial owners were complied with the exception
that Perry Law, our sole executive officer and director was two days late on
filing a Form 4 for a transaction during the year.

ITEM 10. EXECUTIVE COMPENSATION.

The following table sets forth all compensation received during
the two years ended June 30, 2008 by our Chief Executive Officer, Chief
Financial Officer and each of the other most highly compensated executive
officers whose total compensation exceeded $100,000 in such fiscal year. These
officers are referred to as the Named Executive Officers in this Report.

SUMMARY COMPENSATION TABLEName and Principal
        Position
      Year
      Salary
        ($)
      Bonus
        ($)
      Stock Awards ($)
      Option Awards ($)
      Non-Equity Incentive
        Plan Compensa- tion ($)
      Change
        in Pension Value and Nonqualified
        Deferred Compensation Earnings ($)
      All Other
        Compensa -tion ($)
      Total
        ($)Perry Law(1)
        President, 
        Secretary, 
        Treasurer, Chief Executive 
Officer and 
Chief Financial 
Officer
      2008 
        2007
      147,000 
        141,057
      136,378 
        87,546
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      283,378 
        228,603


-20-

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SUMMARY COMPENSATION TABLEName and Principal Position
      Year
      Salary ($)
      Bonus ($)
      Stock Awards ($)
      Option Awards ($)
      Non-Equity Incentive Plan Compensa- tion ($)
      Change
        in Pension Value and Nonqualified Deferred Compensation Earnings ($)
      All Other Compensa -tion ($)
      Total ($)Stephen Platt(2)
        Vice President 
        of Smart-Tek 
        Communication 
        s Inc.
      2008 
        2007
      147,000 
        141,057
      111,581 
        71,629
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      258,581 
        212,686


|(1) | Mr. Perry Law has been the President and CEO of Smart-tek
      Communications Inc. since its inception. Smart-tek Communications is the
      wholly-owned subsidiary of Smart-tek Solutions. Mr. Law was appointed
      President and CEO of Smart-tek Solutions on September 14, 2006 effective
      September 30, 2006.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                              
|(2) | Stephen Platt is the Vice-President of Smart-tek
      Communications Inc., our wholly owned subsidiary.                                                                                                                                                                                                                     

There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. Our
directors and executive officers may receive stock options at the discretion of
our board of directors in the future. We do not have any material bonus or
profit sharing plans pursuant to which cash or non-cash compensation is or may
be paid to our directors or executive officers, except that stock options may be
granted at the discretion of our board of directors from time to time. We have
no plans or arrangements in respect of remuneration received or that may be
received by our executive officers to compensate such officers in the event of
termination of employment (as a result of resignation, retirement, change of
control) or a change of responsibilities following a change of control.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth certain information as to our
equity compensation plan

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table provides information concerning unexercised
options for each our named executive officers, as that term is defined in Item
402(m)(2) of Regulation S-K as of our fiscal year end of June 30, 2008:

Name and Principal
      Position
    Number of
      Securities Underlying Unexercised
      Options (#) Exercisable
    Number of
      Securities Underlying Unexercised
      Options (#) Unexercisable
    Equity Incentive
      Plan Awards: Number of Securities
      Underlying Unexercised Unearned
      Options
    Option
      Exercise Price
    Option
      Expiration DatePerry Law President, Secretary, Treasurer, Chief
      Executive Officer and Chief Financial Officer
    650,000
    --
    650,000
    $0.15
    April 30, 2010


-21-

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Name and Principal
      Position
    Number of
      Securities Underlying Unexercised
      Options (#) Exercisable
    Number of
      Securities Underlying Unexercised
      Options (#) Unexercisable
    Equity Incentive
      Plan Awards: Number of Securities
      Underlying Unexercised Unearned
      Options
    Option
      Exercise Price
    Option
      Expiration DateStephen Platt Vice President of Smart-Tek
      Communications Inc.
    650,000
    --
    650,000
    $0.15
    April 30, 2010


The Company had two partially vested stock options outstanding
at December 31, 2005 pursuant to employment agreements entered into between the
Companys and its president and vice-president. Under these agreements, the
Company issued options to purchase up to 650,000 shares of its common stock at a
purchase price of $0.15 per share that vest in equal quarterly installments over
a three (3) year period.

Aggregated Options Exercised in the Year Ended June 30, 2008
and Year End Option Values

There were no stock options exercised during the year ended
June 30, 2008.

Repricing of Options/SARS

We did not reprice any options previously granted during the
year ended June 30, 2008.

Director Compensation

The following table summarizes the compensation paid to our
directors for the fiscal year ended June 30, 2008:

Name
    
    Fees Earned or Paid in
      Cash ($)
    
    Stock Awards
      ($)(1)
    
    Option Awards
      ($)(1)
    
    Non-Equity Incentive Plan
      Compensation($)
    
    All Other **Compensation**
      ($)
    
    Total ($)Perry Law(2)
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -


Notes:

|(1) | The dollar value of stock awards and options awards are
      calculated in accordance with Statement of Financial Accounts (SFAS)
      123R, Share Based Payments.                                                    
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Perry Law, our President and CEO, did not receive
      compensation in his capacity as a member of the Board of Directors. His
      executive compensation is described in the Executive Compensation table
      above.

We do not pay our directors any fees or other compensation for
acting as directors. We have not paid any fees or other compensation to any of
our directors for acting as directors to date.

Employment Contracts

Other than as described below, we presently do not have any
employment or compensation arrangements with our officers and directors.

-22-

---

On April 23, 2005, we entered into an employment agreement with
Perry Law, pursuant to which Mr. Law agreed to serve as President of the
Companys wholly-owned subsidiary, Smart-Tek Communications, Inc, effective
April 23, 2005. The Employment Agreement has an initial term of five (5) years
but provides for automatic extensions for additional one (1) year terms. The
agreement provides for a minimum base salary of CDN$150,000, plus such other
amounts, if any, as the Board of Directors of the Company may from time to time
determine. In addition, Mr. Law is eligible for an annual incentive bonus at the
discretion of the board. Pursuant to the terms of the employment agreement, Mr.
Law also received options to purchase 650,000 shares of the Company's common
stock (vesting in equal quarterly amounts over a three year term) at an exercise
price of $0.15 as well as certain severance benefits.

On April 23, 2005, we entered into an employment agreement with
Stephen Platt, pursuant to which Mr. Platt agreed to serve as Vice-President of
the Companys wholly-owned subsidiary, Smart-Tek Communications, Inc, effective
April 23, 2005. The Employment Agreement has an initial term of five (5) years
but provides for automatic extensions for additional one (1) year terms. The
agreement provides for a minimum base salary of CDN$150,000, plus such other
amounts, if any, as the Board of Directors of the Company may from time to time
determine. In addition, Mr. Platt is eligible for an annual incentive bonus in
the discretion of the board. Pursuant to the terms of the employment agreement,
Mr. Platt also received options to purchase 650,000 shares of the Company's
common stock (vesting in equal quarterly amounts over a three year term) an
exercise price of $0.15 as well as certain severance benefits.

During the year ended June 30, 2008, the Companys wholly owned
subsidiary paid $470,978 in management salaries to its President and Vice
president which included bonuses of $253,021. Such costs have been reflected in
the accompanying statement of operations. Amounts due to officers and directors
were $504,871 as of June 30, 2008.

-23-

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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

As of October 10, 2008, there were 111,812,971 shares of our
common stock outstanding. The following table sets forth certain information
known to us with respect to the beneficial ownership of our common stock as of
that date by (i) each of our directors, (ii) each of our executive officers, and
(iii) all of our directors and executive officers as a group. Except as set
forth in the table below, there is no person known to us who beneficially owns
more than 5% of our common stock.

Title of Class Directors and Officers:
      Name and Address of Beneficial
        Owner
      Number of Shares Beneficially
        Owned(1)
      Percentage of Class(1)Common Stock
      Perry Law 
        Unit 10  11720 Voyageur Way 
        Richmond, BC V6X 3G9
      8,204,241
      7.3%Common Stock
      Directors and Officers as 
        a group (1)
      8,204,241
      7.3%5% StockholdersCommon Stock
      Global Software Consulting 
        Unit 10  11720 Voyageur Way 
        Richmond, BC V6X 3G9
      6,500,000
      5.8%Common Stock
      Perry Law(2)
        Unit 10  11720 Voyageur Way 
        Richmond, BC V6X 3G9
      8,204,241
      7.3%Common Stock
      Essex Property Management Ltd. 
        Unit 10  11720 Voyageur Way 
        Richmond, BC V6X 3G9
      9,000,000
      8%Common Stock
      P5 Holdings Ltd.(2)
        Unit 10  11720 Voyageur Way 
        Richmond, BC V6X 3G9
      8,203,241
      7.3%Common Stock
      Donald Gee 
        Unit 10  11720 Voyageur Way 
        Richmond, BC V6X 3G9
      10,000,000
      8.9%Common Stock
      GEV 2000 KFT 
        Unit 10  11720 Voyageur Way 
        Richmond, BC V6X 3G9
      5,713,857
      5.1%Common Stock
      International Business Strategy 
        Unit 10  11720 Voyageur Way 
        Richmond, BC V6X 3G9
      7,000,000
      6.3%


Notes

|(1) | Under Rule 13d-3, a beneficial owner of a security
      includes any person who, directly or indirectly, through any contract,
      arrangement, understanding, relationship, or otherwise has or shares: (i)
      voting power, which includes the power to vote, or to direct the voting of
      shares; and (ii) investment power, which includes the power to dispose or
      direct the disposition of shares. Certain shares may be deemed to be
      beneficially owned by more than one person (if, for example, persons share
      the power to vote or the power to dispose of the shares). In addition,
      shares are deemed to be beneficially owned by a person if the person has
      the right to acquire the shares (for example, upon exercise of an option)
      within 60 days of the date as of which the information is provided. In
      computing the percentage ownership of any person, the amount of shares
      outstanding is deemed to include the amount of shares beneficially owned
      by such person (and only such person) by reason of these acquisition
      rights. The percentage of class is based on 111,812,971 shares of common
      stock issued and outstanding as of October 10,
2008.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-24-

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|(2) | On June 23, 2008, the Company entered into Debt
      Settlement Agreements with Perry Law and P5 Holdings Ltd. Perry Law holds
      all of the voting securities of P5 Holdings Ltd. Pursuant to the terms of
      the Debt Settlement Agreements, the Company issued an aggregate of
      8,203,241 shares to Mr. Law and P5 Holdings Ltd. The shares were issued as
      consideration of the settlement of unsecured loans in the amount of
      $287,113.45 owed to Mr. Law and P5 Holdings Ltd. by the
  Company.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Changes in Control

We are unaware of any contract or other arrangement the
operation of which may at a subsequent date result in a change of control of our
company.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.

Except as set forth below, none of the following parties has,
since commencement of our fiscal year ended June 30, 2008, had any material
interest, direct or indirect, in any transaction with us or in any presently
proposed transaction that has or will materially affect us, in which our company
is a participant and the amount involved exceeds the lesser of $120,000 or 1% of
the average of our companys total assets for the last three completed financial
years:

| | (i)   | Any of our directors or officers;                                                                                                                                          
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | Any person proposed as a nominee for election as a
      director;                                                                                                         
| | (iii) | Any person who beneficially owns, directly or indirectly,
      shares carrying more than 5% of the voting rights attached to our
      outstanding shares of common stock;
| | (iv)  | Any of our promoters; and                                                                                                                                                  
| | (v)   | Any member of the immediate family (including spouse,
      parents, children, siblings and in- laws) of any of the foregoing
      persons.                               

During the year ended June 30, 2008, the Companys wholly owned
subsidiary paid $470,978 in management salaries to its President and Vice
president which included bonuses of $253,021. Such costs have been reflected in
the accompanying statement of operations. Amounts due to officers and directors
were $504,871 as of June 30, 2008.

Corporate Governance

We do not have a standing audit committee at the present time.
Our board of directors has determined that we do not have a board member that
qualifies as an audit committee financial expert as defined in Item 401(e) of
Regulation S-B. We have determined that Mr. Perry Law is not an independent
director as defined in Nasdaq Marketplace Rule 4200(a)(15).

We believe that our members of our board of directors are
capable of analyzing and evaluating our financial statements and understanding
internal controls and procedures for financial reporting. The board of directors
of our company does not believe that it is necessary to have an audit committee
because we believe that the functions of an audit committee can be adequately
performed by the board of directors. In addition, we believe that retaining an
independent director who would qualify as an audit committee financial expert
would be overly costly and burdensome and is not warranted in our circumstances
given the early stages of our development and the fact that we have not
generated any revenues from operations to date.

Transactions with Independent Directors

Not Applicable.

-25-

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ITEM 13. EXHIBITS

Exhibit Number
      Description3.1
      Articles of Incorporation as amended(1)3.2
      Bylaws(1)3.3
      Certificate of Amendment to Certificate of Incorporation
          (2)4.1
      Incentive Stock Option Plan (1)4.2
      Non-Qualified Incentive Stock Option Plan (1)4.3
      Stock Bonus Plan (1)4.4
      2005 Incentive Stock Plan (2)10.1
      Letter of Intent between Smart-Tek Communications and Smart-Tek
          (3)10.2
      Share Exchange Agreement between
          Registrant and Smart-Tek Communication, Inc dated April 15, 2005 (4)10.3
      Employment Agreement with Perry Law dated April 23, 2005
          (5)10.4
      Employment Agreement with Stephen Platt dated April 23,
          2005 (5)10.5
      Stock Option Grant to Perry Law dated April 23, 2005 (6)10.6
      Stock Option Grant to Stephen Platt dated April 23, 2005
          (6)14.1*
      Amended and Restated Code of
          Ethics21.1
      Sole Subsidiary of Smart-Tek
          Solutions Inc. - Smart-Tek Communications Inc., a British Columbia Corporation31.1*
      CEO and CFO Section 302 Certification
          under Sarbanes-Oxley Act of 200232.1*
      CEO and CFO Section 906 Certifications
          under Sarbanes-Oxley Act of 2002


*Filed herewith

|(1) | Incorporated by reference to our Registration Statement
      on Form 10-SB, filed September 28, 1995.
|--- | ------------------------------------------------------------------------------------------------------
|(2) | Incorporated by reference to our Annual Report on Form
      10-KSB, filed October 26, 1995.          
|(3) | Incorporated by reference to our Current Report on Form
      8-K, filed March 8, 2005.               
|(4) | Incorporated by reference to our Current Report on Form
      8-K, filed April 19, 2005.              
|(5) | Incorporated by reference to our Current Report on
      Form8-K, filed April 27, 2005.               
|(6) | Incorporated by reference to our Current Report on Form
      8-K, filed on August 22, 2005.          

-26-

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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed for the most recently completed
fiscal year ended June 30, 2008 and for fiscal year ended June 30, 2007 for
professional services rendered by the principal accountant for the audit of our
annual financial statements and review of the financial statements included in
our quarterly reports on Form 10-QSB and services that are normally provided by
the accountant in connection with statutory and regulatory filings or
engagements for these fiscal periods were as follows:

Year
        EndedJune 30, 2008
      June 30, 2007Audit Fees
      $8,800
      $59,000Audit Related Fees
      $-
      $-Tax Fees
      $-
      $-All Other Fees
      $-
      $-Total
      $8,800
      $59,000


Policy on Pre-Approval by Audit Committee of Services
Performed by Independent Auditors

The board of directors pre-approves all services provided by
our independent auditors. All of the above services and fees were reviewed and
approved by the board of directors either before or after the respective
services were rendered.

The board of directors has considered the nature and amount of
  fees billed by Weinberg & Company and believes that the provision of services
  for activities unrelated to the audit is compatible with maintaining Weinberg
  & Company.

-27-

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

SMART-TEK SOLUTIONS INC.

By         /s/ Perry
Law
            
_______________________________________            
Perry
Law             
President

Date:    October 15, 2008

In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

By         /s/ Perry
Law
            
_______________________________________            
Perry
Law             
President, Chief Executive Officer, Chief Financial
Officer             
and sole
director             
(Principal Executive Officer, Principal Accounting
Officer             
and Principal Financial Officer)

Date:    October 15, 2008

-28-

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