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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE EXCHANGE ACT

For the transition period from _________ to _________

Commission File No. 000-29895

SMART-TEK SOLUTIONS INC.(Exact name of registrant as specified in its charter)

|                                                                     | 98-0206542                          
|-------------------------------------------------------------------- | ------------------------------------
|Nevada                                                               |                                     
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)

1100 Quail Street, Newport Beach, CA 92660(Address of principal executive offices) (zip code)

(858) 798-1644(Registrants telephone
number, including area code)

Not Applicable(Former name, former
address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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
[   ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).Yes [   ]     No [   ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of large accelerated filer," "accelerated
filer, and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
(Check one):

|Large accelerated filer [   ]                 | Accelerated
      filer                 
       [   ]
|--------------------------------------------- | -----------------------------------------------------
|Non-accelerated filer   [   ]                 | Smaller reporting company [X]                        
|(Do not check if a smaller reporting company) |                                                      

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

1

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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS

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

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuers
classes of common equity as of the latest practicable date: As of March 31,
2011, there were 24,314,124 shares of common stock, par value $0.001,
outstanding.

2

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|Smart-tek Solutions Inc.                  
|------------------------------------------
|Three Months Ended March 31, 2011 and 2010
|(Unaudited)                               
|                                          

PART I -- FINANCIAL INFORMATION

|CONTENTS                                                                      | PAGES
|----------------------------------------------------------------------------- | -----
|                                                                              |      
|UNAUDITED FINANCIAL STATEMENTS                                                |      
|                                                                              |      
|Consolidated
      Balance Sheets                                             | 4    
|                                                                              |      
|Consolidated
      Statements of Operations and Comprehensive Income          | 5    
|                                                                              |      
|Consolidated
      Statements of Changes in Stockholders Equity (Deficiency) | 6    
|                                                                              |      
|Consolidated
      Statements of Cash Flows                                   | 7    
|                                                                              |      
|Notes
      to the Consolidated Financial Statements                          | 8-18 

3

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Smart-tek Solutions Inc.Consolidated Balance Sheets

|                                                                                                                                                                                                 |   | March
      31, |   |   | December
      31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | - | --------------- | - | - | ------------------ | -
|                                                                                                                                                                                                 |   | 2011            |   |   | 2010               |  
|                                                                                                                                                                                                 |   | (Unaudited)     |   |   |                    |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|Assets                                                                                                                                                                                           |   |                 |   |   |                    |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|Current assets                                                                                                                                                                                   |   |                 |   |   |                    |  
|Cash and cash equivalents                                                                                                                                                                        | $ | 728,576         |   | $ | 781,720            |  
|Accounts receivable                                                                                                                                                                              |   | 604,406         |   |   | 1,689,986          |  
|Receivable from related parties                                                                                                                                                                  |   | 653,915         |   |   | -                  |  
|Prepaid expenses and
      deposits                                                                                                                                                              |   | 2,243,981       |   |   | 2,414,971          |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|Total current assets                                                                                                                                                                             |   | 4,230,878       |   |   | 4,886,677          |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|Equipment, net of accumulated depreciation                                                                                                                                                       |   | 81,680          |   |   | 47,501             |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|                                                                                                                                                                                                 | $ | 4,312,558       |   | $ | 4,934,178          |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|Liabilities                                                                                                                                                                                      |   |                 |   |   |                    |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|Current liabilities                                                                                                                                                                              |   |                 |   |   |                    |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|Accounts payable and accrued
      liabilities                                                                                                                                                   | $ | 3,174,212       |   | $ | 3,770,771          |  
|Accounts payable to
      related parties                                                                                                                                                        |   | -               |   |   | 388,415            |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|Total current liabilities                                                                                                                                                                        |   | 3,174,212       |   |   | 4,159,186          |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|Stockholders Equity                                                                                                                                                                             |   |                 |   |   |                    |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|Preferred stock: $0.001 par value, 5,000,000 shares
           authorized, zero shares of Class A
      preferred      issued and outstanding at
      March 31, 2011      and December 31, 2010 |   | -               |   |   | -                  |  
|Common stock: $0.001 par value, 500,000,000
      shares      authorized, 24,314,124 issued and
      outstanding at March 31, 2011      and
      December 31, 2010                             |   | 24,315          |   |   | 24,315             |  
|Additional paid in capital                                                                                                                                                                       |   | 6,852,863       |   |   | 6,852,863          |  
|Accumulated other comprehensive loss                                                                                                                                                             |   | -               |   |   | -                  |  
|Accumulated deficit                                                                                                                                                                              |   | (5,738,832      | ) |   | (6,102,186         | )
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|Total stockholders equity                                                                                                                                                                       |   | 1,138,346       |   |   | 774,992            |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  
|                                                                                                                                                                                                 | $ | 4,312,558       |   | $ | 4,934,178          |  
|                                                                                                                                                                                                 |   |                 |   |   |                    |  

See accompanying notes to the consolidated financial statements.

4

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Smart-tek Solutions Inc.Consolidated Statements
of Operations and Comprehensive Income
  (Unaudited)

|                                                             |   | Three Months |   |   | Three Months |  
|------------------------------------------------------------ | - | ------------ | - | - | ------------ | -
|                                                             |   | Ended        |   |   | Ended        |  
|                                                             |   | March 31,    |   |   | March 31,    |  
|                                                             |   | 2011         |   |   | 2010         |  
|                                                             |   |              |   |   |              |  
|Revenue                                                      | $ | 4,221,806    |   | $ | 2,504,307    |  
|                                                             |   |              |   |   |              |  
|Cost of revenue and service delivery                         |   | 2,949,291    |   |   | 1,582,417    |  
|                                                             |   |              |   |   |              |  
|Gross profit                                                 |   | 1,272,515    |   |   | 921,890      |  
|                                                             |   |              |   |   |              |  
|Selling, general and administrative
      expenses           |   | 898,831      |   |   | 351,431      |  
|                                                             |   |              |   |   |              |  
|Operating income                                             |   | 373,684      |   |   | 570,459      |  
|                                                             |   |              |   |   |              |  
|Other expense                                                |   |              |   |   |              |  
|                                                             |   |              |   |   |              |  
|Interest                                                     |   | (10,330      | ) |   | (1,500       | )
|                                                             |   |              |   |   |              |  
|Net income from continuing operations                        |   | 363,354      |   |   | 568,959      |  
|                                                             |   |              |   |   |              |  
|Net loss from discontinued operations                        |   | -            |   |   | (276,182     | )
|                                                             |   |              |   |   |              |  
|Comprehensive income for the period                          | $ | 363,354      |   | $ | 292,777      |  
|                                                             |   |              |   |   |              |  
|Earnings per share, basic and diluted                        | $ | 0.01         |   | $ | 0.01         |  
|                                                             |   |              |   |   |              |  
|Weighted average shares outstanding, basic
      and diluted |   | 24,314,124   |   |   | 36,693,734   |  

See accompanying notes to the consolidated financial statements.

5

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|Smart-tek Solutions Inc.                                                    
|----------------------------------------------------------------------------
|Consolidated Statement of Changes in Stockholders
      Equity (Deficiency)
|                                                                            

|                                                               |  | Common
      Stock |   |   |         |   |   |            |  |   |               |   |   |             |  
|-------------------------------------------------------------- |  | ------------------ | - | - | ------- | - | - | ---------- |  | - | ------------- | - | - | ----------- | -
|                                                               |  |                    |   |   |         |   |   |            |  |   | Accumulated   |   |   |             |  
|                                                               |  |                    |   |   |         |   |   | Additional |  |   | Other         |   |   |             |  
|                                                               |  |                    |   |   |         |   |   | Paid in    |  |   | Comprehensive |   |   | Accumulated |  
|                                                               |  | Shares             |   |   | Amount  |   |   | Capital    |  |   | Income        |   |   | Deficit     |  
|                                                               |  |                    |   |   |         |   |   |            |  |   |               |   |   |             |  
|Balance  June 30, 2010                                        |  | 69,314,124         |   |   | 69,315  |   |   | 6,852,863  |  |   | (221,963      | ) |   | (7,138,379  | )
|                                                               |  |                    |   |   |         |   |   |            |  |   |               |   |   |             |  
|Shares cancelled for amended Marketing Partner
      Agreement |  | (45,000,000        | ) |   | (45,000 | ) |   | -          |  |   | -             |   |   | -           |  
|                                                               |  |                    |   |   |         |   |   |            |  |   |               |   |   |             |  
|Net Income                                                     |  | -                  |   |   | -       |   |   | -          |  |   | 221,963       |   |   | 1,036,193   |  
|                                                               |  |                    |   |   |         |   |   |            |  |   |               |   |   |             |  
|Balance  December 31, 2010                                    |  | 24,314,124         |   | $ | 24,315  |   | $ | 6,852,863  |  | $ | -             |   | $ | (6,102,186  | )
|                                                               |  |                    |   |   |         |   |   |            |  |   |               |   |   |             |  
|Net Income for the period (Unaudited)                          |  | -                  |   |   | -       |   |   | -          |  |   | -             |   |   | 363,354     |  
|                                                               |  |                    |   |   |         |   |   |            |  |   |               |   |   |             |  
|Balance  March 31, 2011 (Unaudited)                           |  | 24,314,124         |   | $ | 24,315  |   | $ | 6,852,863  |  | $ | -             |   | $ | (5,738,832  | )

See accompanying notes to the consolidated financial statements.

6

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Smart-tek Solutions Inc.Consolidated Statements of
Cash Flows
  (Unaudited)

|                                                                               |   | Three Months |   |   | Three Months |  
|------------------------------------------------------------------------------ | - | ------------ | - | - | ------------ | -
|                                                                               |   | Ended        |   |   | Ended        |  
|                                                                               |   | Mach 31,     |   |   | March 31,    |  
|                                                                               |   | 2011         |   |   | 2010         |  
|                                                                               |   |              |   |   |              |  
|Operating Activities                                                           |   |              |   |   |              |  
|                                                                               |   |              |   |   |              |  
|Net income from continuing operations for
      the period                     | $ | 363,354      |   | $ | 568,959      |  
|Adjustments to reconcile net income to cash used in
      operating activities |   |              |   |   |              |  
|Depreciation and amortization                                                  |   | 4,703        |   |   | 3,845        |  
|                                                                               |   |              |   |   |              |  
|Changes in operating assets and liabilities                                    |   |              |   |   |              |  
|Accounts receivable                                                            |   | 1,085,580    |   |   | (198,633     | )
|Prepaid expenses and deposits                                                  |   | 170,990      |   |   | (711,238     | )
|Accounts payable and accrued liabilities                                       |   | (596,560     | ) |   | 477,677      |  
|                                                                               |   |              |   |   |              |  
|Net cash provided by operating activities                                      |   | 1,028,067    |   |   | 140,610      |  
|                                                                               |   |              |   |   |              |  
|Investing activities                                                           |   |              |   |   |              |  
|                                                                               |   |              |   |   |              |  
|Purchase of equipment                                                          |   | (38,882      | ) |   | (28,317      | )
|                                                                               |   |              |   |   |              |  
|Net cash used in investing activities                                          |   | (38,882      | ) |   | (28,317      | )
|                                                                               |   |              |   |   |              |  
|Financing activities                                                           |   |              |   |   |              |  
|                                                                               |   |              |   |   |              |  
|Due from related parties                                                       |   | (1,042,329   | ) |   | -            |  
|                                                                               |   |              |   |   |              |  
|Net cash used in financing activities                                          |   | (1,042,329   | ) |   | -            |  
|                                                                               |   |              |   |   |              |  
|Net increase (decrease) in cash from continuing operations                     |   | (53,144      | ) |   | 112,293      |  
|                                                                               |   |              |   |   |              |  
|Cash and cash equivalents, beginning of period                                 |   | 781,720      |   |   | 234,552      |  
|                                                                               |   |              |   |   |              |  
|Cash and cash equivalents, end of period                                       | $ | 728,576      |   | $ | 346,845      |  
|                                                                               |   |              |   |   |              |  
|Supplemental cash flow information                                             |   |              |   |   |              |  
|Interest paid                                                                  | $ | 10,330       |   | $ | 1,500        |  

See accompanying notes to the consolidated financial statements.

7

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Unaudited)                                   
|                                              

1.          
Summary of significant accounting policies

Nature of operations, basis of financial statement
presentation

Smart-tek Solutions Inc. (the Company) was incorporated in
the State of Nevada on March 22, 1995.

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

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.

Smart-tek Communications Inc. (SCI) was incorporated on
October 29, 1996 in the Province of British Columbia, Canada. The Company
specialized 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 included major developers, general and electrical contractors,
hospitals, Crown Corporations, law enforcement agencies and retail facilities.
100% of the SCIs operations are in Canada.

On July 1, 2010, the Company completed the disposition of the
Companys wholly owned subsidiary Smart-Tek Communications Inc. to its president
and founder Perry Law.

On February 11, 2009, Smart-tek Automated Services Inc., a
wholly owned subsidiary of the Company was incorporated in the State of Nevada
for the purpose of adding a yet to be determined new business line. On June 17,
2009, Brian Bonar was contracted to use his expertise and contacts in the PEO
area for the benefit of Smart-tek Automated Services, Inc. Smart-tek Automated
Services Inc. provides integrated and cost-effective management solutions in the
area of human resources for public and private companies. Though Smart-tek
Automated Services Inc., provides mainly professional employer organization
(PEO) services, it is equipped to provide temporary staffing services as well.
In a PEO co-employment contract, the Company becomes the employer of record for
client company employees for tax and insurance purposes. The client company
continues to direct the employees day-to-day activities, and Allegiant charges
a service fee for providing services. 100% of Smart-tek Automated Services
Inc.s operations are in the United States.

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 Automated
Services Inc. Significant inter-company transactions have been eliminated in
consolidation.

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.

8

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Unaudited)                                   
|                                              

1.          
Summary of significant accounting policies, continued

Cash and equivalents

Cash and cash equivalents consist of cash on hand and bank
deposits. For financial reporting purposes, the Company considers all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents. The Company maintains its cash in bank deposit accounts, which
at times, may exceed federally insured limits. The Company has not experienced
any losses related to this concentration of risk. At March 31, 2011 and December
31, 2010, the Company did not have any deposits in excess of federally insured
limits.

Accounts Receivable

Accounts receivables are recorded at net realizable value
consisting of the carrying amount less an allowance for uncollectible accounts,
as needed. The Company uses the allowance method to account for uncollectible
accounts receivable balances. Under the allowance method, if needed, an estimate
of uncollectible customer balances is made based upon specific account balances
that are considered uncollectible. Factors used to establish an allowance
include the credit quality and payment history of the customer. There is an no
allowance for doubtful accounts as of March 31, 2011 (December 31, 2010  $Nil).

Workers compensation claims reserve

The Company maintains reserves for workers' compensation claims
which are made up of estimated collateral required to pay claims and estimated
expenses to settle the claims. The collateral amounts are determined by the
insurance carrier and are not recoverable by the Company until all claims
related to a policy period are settled. Accordingly, the Company accrues
workers compensation losses, as provided by the Insurance Carriers Third Party
Administrator and charges expense. As such, the claim reserve will not be
recoverable in the near term and accordingly, they are classified as a long term
asset. The Company as well as the Insurance Carriers evaluate the reserves
regularly throughout the year and make adjustments accordingly. If the actual
cost of such claims and related expenses exceeds the amounts estimated,
additional reserves may be required.

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 accounts 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.

Equipment

Equipment, including computer equipment under capital lease
agreements, is accounted for in accordance with Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC) topic 360: Property Plant
and Equipment. It 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.

9

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Unaudited)                                   
|                                              

1.          
Summary of significant accounting policies, continued

Income taxes

In accordance with FASB ASC 740 (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.

Revenue recognition

The Company recognizes professional employment organizations
(PEO) revenues when each periodic payroll is delivered to the ASC 605-45:
Principal Agent Consideration. Consistent with its revenue recognition policy,
the Companys net PEO revenues and cost of PEO revenues do not include the
payroll cost of its worksite employees. Instead, PEO revenues and cost of PEO
revenues are comprised of all other costs related to its worksite employees,
such as payroll taxes, employee benefit plan premiums and workers compensation
insurance. PEO revenues also include professional service fees, which are
primarily computed as a percentage of client payroll or on a per check basis.

In determining the pricing of the markup component of its
billings, the Company takes into consideration its estimates of the costs
directly associated with its worksite employees, including payroll taxes,
benefits and workers compensation costs, plus an acceptable gross profit
margin. As a result, the Companys operating results are significantly impacted
by the Companys ability to accurately estimate, control and manage its direct
costs relative to the revenues derived from the markup component of the
Companys gross billings.

Comprehensive (loss) income

Comprehensive income is presented in accordance with FASB ASC
220. 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.

10

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Unaudited)                                   
|                                              

1.          
Summary of significant accounting policies, continued

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 FASB ASC 718:
Compensation-Stock Compensation (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 ASC 718
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.

11

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Unaudited)                                   
|                                              

1.          
Summary of significant accounting policies, continued

Recovery of long-lived assets

The Company adopted FASB ASC Topic 360: Property Plant and
Equipment, sub topic 360-10-35-15: Impairment or Disposal of Long Lived Assets
(SFAs 144). ASC 360-10-35-15 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.

Earnings (loss) per share

The Company computes net earnings (loss) per common share in
accordance with FASB ASC 260 (SFAS No. 128 Earnings per Share and SAB No. 98).
Under the provisions of ASC 260, 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.

Fair Value of Financial Instruments

Effective January 1, 2008, fair value measurements are
determined by the Company's adoption of authoritative guidance issued by the
under FASB ASC 870-10: Fair Value Measurements and Disclosures (FASB 157), with
the exception of the application of the statement to non-recurring,
non-financial assets and liabilities as permitted. The adoption of the
authoritative guidance did not have a material impact on the Company's fair
value measurements. Fair value is defined in the authoritative guidance as the
price that would be received to sell an asset or paid to transfer a liability in
the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants at the measurement date. A fair
value hierarchy was established, which prioritizes the inputs used in measuring
fair value into three broad levels as follows:

****Level 1Quoted prices in active markets for identical assets or
liabilities.

****Level 2Inputs, other than the quoted prices in active markets, are
observable either directly or indirectly.

****Level 3Unobservable inputs based on the Company's assumptions.

The Company is required to use of observable market data if
such data is available without undue cost and effort.

At March 31, 2011 and December 31, 2010, the carrying amounts
of financial instruments, including cash, accounts receivable, receivable from
related parties, accounts payable and accrued liabilities, and accounts payable
to related parties approximate fair value because of their short maturity.

Recent Accounting Pronouncements

In October 2009, the FASB issued authoritative guidance on
revenue recognition that will become effective in fiscal years beginning on or
after June 15, 2010, with earlier adoption permitted. Under the new guidance on
arrangements that include software elements, tangible products that have
software components that are essential to the functionality of the tangible
product will no longer be within the scope of the software revenue recognition
guidance, and software-enabled products will now be subject to other relevant
revenue recognition guidance. Additionally, the FASB issued authoritative
guidance on revenue arrangements with multiple deliverables that are outside the
scope of the software revenue recognition guidance. Under the new guidance, when
vendor specific objective evidence or third party evidence for deliverables in
an arrangement cannot be determined, a best estimate of the selling price is
required to separate deliverables and allocate arrangement consideration using
the relative selling price method. The new guidance includes new disclosure
requirements on how the application of the relative selling price method affects
the timing and amount of revenue recognition. We believe the adoption of this
new guidance will not have a material impact on our financial statements.

12

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Unaudited)                                   
|                                              

1.          
Summary of significant accounting policies, continued

Recent Accounting Pronouncements, continued

In January 2010, the FASB issued guidance under FASB ASU No.
2010-08, Technical Corrections to various Topics related to ASC Topic 820-10
on improving disclosures about fair value measurements to add new disclosure
requirements for significant transfers in and out of Level 1 and 2 measurements
and to provide a gross presentation of the activities within the Level 3
rollforward. The guidance also clarifies existing fair value disclosures about
the level of disaggregation and about inputs and valuation techniques used to
measure fair value. The disclosure requirements are effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
requirement to present the Level 3 rollforward on a gross basis, which is
effective for fiscal years beginning after December 15, 2010. The adoption of
this guidance was limited to the form and content of disclosures, and will not
have a material impact on our consolidated results of operations and financial
condition.

Other recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force), the AICPA, and the SEC did not or
are not believed by management to have a material impact on the Company's
present or future consolidated financial statements.

In May 2009, the FASB issued new guidance for accounting for
subsequent events. The new guidance, which is now part of ASC 855-10, Subsequent
Events (formerly, SFAS No. 165, Subsequent Events) is consistent with existing
auditing standards in defining subsequent events as events or transactions that
occur after the balance sheet date but before the financial statements are
issued or are available to be issued, but it also requires the disclosure of the
date through which an entity has evaluated subsequent events and the basis for
that date. The new guidance defines two types of subsequent events: recognized
subsequent events and non-recognized subsequent events. Recognized subsequent
events provide additional evidence about conditions that existed at the balance
sheet date and must be reflected in the companys financial statements.
Non-recognized subsequent events provide evidence about conditions that arose
after the balance sheet date and are not reflected in the financial statements
of a company. Certain non-recognized subsequent events may require disclosure to
prevent the financial statements from being misleading. The new guidance was
effective on a prospective basis for interim or annual periods ending after June
15, 2009. The Company adopted the provisions of ASC 855-10 as required.

In June 2009, the FASB issued new guidance which is now part of
ASC 105-10 (formerly Statement of Financial Accounting Standards No. 168, The
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles). ASC 105-10 replaces FASB Statement No. 162, "The
Hierarchy of Generally Accepted Accounting Principles", and establishes the FASB
Accounting Standards Codification as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with generally accepted
accounting principles. ASC 105-10 is effective for interim and annual periods
ending after September 15, 2009. The adoption of ASC 105-10 did not have a
material impact on the Companys financial statements.

In January 2010, the FASB issued ASU No. 2010-01, amending SFAS
No. 168, The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles. This Standard codified in ASC 105 is
being modified to include the authoritative and non-authoritative levels of
GAAP. This amendment is effective for financial statements issued for interim
and annual periods ending after September 15, 2009. ASU No. 2010-01 has no
effect on the Companys financial position, statements of operations, or cash
flows at this time.

13

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Unaudited)                                   
|                                              

1.          
Summary of significant accounting policies, continued

Recent Accounting Pronouncements, continued

In February 2010, the FASB issued ASU No. 2010-09, Subsequent
Events ( ASC Topic 855), Amendments to Certain Recognition and Disclosure
Requirements. This Standard update requires a SEC Filer to (1) evaluate
subsequent events through the date that the financial statements are issued or
available to be issued, (2) defines SEC Filer as an entity that is required to
file or furnish its financial statements with either the SEC or, with respect to
an entity subject to Section 12(i) of the Securities Exchange Act of 1934, as
amended, the appropriate agency under that Section, (3) not be bound to
disclosing the date through which subsequent events have been evaluated, (4)
note the definition of public entity is not longer defined nor necessary
for Topic 855, (5) note the scope of the reissuance disclosure requirements is
refined to include revised financial statements only. These Updates are
effective for interim or annual periods ending after June 15, 2010. ASU No.
2010-09 has no effect on the Companys financial position, statements of
operations, or cash flows at this time.

2.          
Discontinued operations

Smart-Tek Communications Inc.

On July 1, 2010, the Company completed the sale of the
Companys wholly owned subsidiary Smart-Tek Communications Inc. to its president
and founder Perry Law.

The aggregate purchase price of Smart-Tek Communications, Inc.
is $821,757 allocated as follows:

| | (a) | $821,756 of the purchase price shall be paid and
      satisfied by setting-off the Companys indebtedness to Perry Law;
    and
| | --- | --------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                 
| | (b) | $1.00 of the purchase price shall be paid by Perry Law
      for transferring 32,817 shares owned by him to the
  Company.      

Results of operations and cash flows are classified as
pertaining to discontinued operations if those operations and cash flows are
attributable to a distinguishable component of the Company that will be
eliminated from the ongoing operations of the Company as a result of the
disposition.

The results of discontinued operations are classified
separately in both the current period and prior years. The results of
discontinued operations are presented net of applicable income taxes.

If certain long-term assets and liabilities of the Company can
be distinguished as being directly related to the discontinued operations, and
if those assets and liabilities are disposed of pursuant to the disposition of
the discontinued business component, then those assets and liabilities are
classified on the balance sheet in both the current and prior periods as current
or non-current assets of discontinued operations and liabilities of discontinued
operations, respectively.

Current and non-current assets and liabilities of discontinued
operations are re-measured at the time of discontinuation at the lower of their
carrying amount or their fair value less cost to sell. Any resultant unrealized
gains or losses are recognized in net income in the period when the Company
disposes the related operations.

14

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Unaudited)                                   
|                                              

2.          
Discontinued operations, continued

Smart-Tek Communications Inc., continued

The following table presents the effect of the discontinued
operations in the Consolidated Statements of Operations and Comprehensive
Income:

|                                                   |   | Three Months |  |   | Three Months |  
|-------------------------------------------------- | - | ------------ |  | - | ------------ | -
|                                                   |   | Ended        |  |   | Ended        |  
|                                                   |   | March 31,    |  |   | March 31,    |  
|                                                   |   | 2011         |  |   | 2010         |  
|                                                   |   |              |  |   |              |  
|Revenue                                            | $ | -            |  | $ | 835,625      |  
|                                                   |   |              |  |   |              |  
|Cost of revenue and service
      delivery         |   | -            |  |   | 636,652      |  
|                                                   |   |              |  |   |              |  
|Gross profit                                       |   | -            |  |   | 198,973      |  
|                                                   |   |              |  |   |              |  
|Selling, general and
      administrative expenses |   | -            |  |   | 474,406      |  
|                                                   |   |              |  |   |              |  
|Operating loss                                     |   | -            |  |   | (275,433     | )
|                                                   |   |              |  |   |              |  
|Other expense                                      |   |              |  |   |              |  
|Interest                                           |   | -            |  |   | (749         | )
|                                                   |   |              |  |   |              |  
|Net income from discontinued operations            | $ | -            |  | $ | (276,182     | )

15

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Unaudited)                                   
|                                              

3.          
Equipment

|                                    |   | Cost    |  |   | Accumulated Depreciation |  |   | March 31, 2011 Net Book Value |  |   | Cost   |  |   | Accumulated Depreciation |  |   | December 31, 2010 Net Book Value | 
|----------------------------------- | - | ------- |  | - | ------------------------ |  | - | ----------------------------- |  | - | ------ |  | - | ------------------------ |  | - | -------------------------------- | 
|                                    |   |         |  |   |                          |  |   |                               |  |   |        |  |   |                          |  |   |                                  | 
|Computer equipment &
      software | $ | 67,764  |  | $ | 11,818                   |  | $ | 55,946                        |  | $ | 28,882 |  | $ | 9,628                    |  | $ | 19,254                           | 
|Office furniture & equipment        |   | 12,993  |  |   | 8,667                    |  |   | 4,326                         |  |   | 12,993 |  |   | 8,008                    |  |   | 4,985                            | 
|Automobile                          |   | 27,989  |  |   | 6,581                    |  |   | 21,408                        |  |   | 27,989 |  |   | 4,727                    |  |   | 23,262                           | 
|                                    |   |         |  |   |                          |  |   |                               |  |   |        |  |   |                          |  |   |                                  | 
|                                    | $ | 108,746 |  | $ | 27,066                   |  | $ | 81,680                        |  | $ | 69,864 |  | $ | 22,363                   |  | $ | 47,501                           | 

4.Income taxes

The Company utilizes SFAS No. 109, Accounting for Income
Taxes, which requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the difference between the tax basis of
assets and liabilities and their financial reporting amounts based on enacted
tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Deferred income taxes are
reported using the liabilities method.

Deferred tax assets are recognized for deductible temporary
differences and for carry forwards. Deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized.

16

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Unaudited)                                   
|                                              

4.          
Income taxes, continued

The Company generated a deferred tax credit through net
operating loss carry forwards. As of March 31, 2011 the company had federal and
state net operating loss carry forwards of approximately $5,324,048 that can be
used to offset future federal income tax. The federal and state net operating
losses are reduced by a valuation allowance, when, in the opinion of management,
utilization is not reasonably assured. A valuation allowance of 100% has been
established; based on it is more likely than not that some portion or all of the
deferred tax credit will not be realized.

At March 31, 2011, STS had available federal net operating loss
(NOL) carry forwards of approximately $5,324,048. Under Section 382 of the
internal Revenue Code of 1986, as amended, the use of prior losses including
NOLs is subject to rules 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 a limitation on the use of NOLs 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 March 31, 2011 and December 31, 2010 as follows:

|                                                   |   | March 31,  |   |   | December 31, |  
|-------------------------------------------------- | - | ---------- | - | - | ------------ | -
|                                                   |   | 2011       |   |   | 2010         |  
|                                                   |   |            |   |   |              |  
|Deferred tax asset, beginning                      | $ | 1,946,027  |   | $ | 2,386,382    |  
|Provision of current years operating gain         |   |            |   |   |              |  
|                                                   |   | (127,174   | ) |   | (440,355     | )
|Deferred tax asset, ending                         | $ | 1,818,853  |   | $ | 1,946,027    |  
|                                                   |   |            |   |   |              |  
|Valuation allowance, beginning                     | $ | (1,946,027 | ) | $ | (2,386,382   | )
|Current years gain provision                      |   | 127,174    |   |   | 440,355      |  
|                                                   |   |            |   |   |              |  
|Valuation allowance, ending                        | $ | (1,818,853 | ) | $ | (1,946,027   | )
|                                                   |   |            |   |   |              |  
|Deferred tax asset, net                            | $ | -          |   | $ | -            |  
|                                                   |   |            |   |   |              |  
|Tax at blended U.S./Canadian
      statutory rates |   | (35%       | ) |   | (35%         | )
|Loss carryover                                     |   | 35%        |   |   | 35%          |  
|                                                   |   |            |   |   |              |  
|Tax expense                                        | $ | -          |   | $ | -            |  

17

---

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Unaudited)                                   
|                                              

5.          
Common Stock

At March 31, 2011, 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 March 31, 2011, there are 24,314,124 shares of common stock
outstanding.

There were no share transactions during the three months period
ended March 31, 2011.

Year ended December 31, 2010

During the year a certificate for 45,000,000 shares was
cancelled and returned to treasury pursuant to an Amended Marketing Agreement
dated December 9, 2010, by and between Smart-Tek Solutions Inc., its wholly
owned subsidiary Smart-Tek Automated Services, Inc., and its affiliated
businesses (hereinafter collectively referred to as the Company) and, Brian
Bonar.

Preferred Stock

There are no preferred shares issued or outstanding.

6.          
Related Party Transactions

Amounts due from officers and directors were $653,915 (December
31, 2010  $ (388,415)) as of March 31, 2011.

18

---

- 19 -

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

This quarterly report contains forward-looking statements.
Forward-looking statements are projections in respect of 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 Risks and
Uncertainties 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:

- 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 quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars.

As used in this quarterly 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.

Overview

Through our wholly owned subsidiary Smart-Tek Automated
Services, Inc. (Smart-Tek Automated), we provide integrated and cost-effective
management solutions in the area of human resources services to small and
medium-size businesses, relieving our clients from many of the day-to-day tasks
that negatively impact their core business operations, such as payroll
processing, human resources support, workers' compensation insurance, safety
programs, employee benefits, and other administrative and aftermarket services
predominantly related to staffing - staff leasing, temporary staffing and
co-employment.

---

- 20 -

Plan of Operation

Short Term

Smart-Tek Automated Services Inc.: Continue to concentrate of
signing up new brokers who have a large book of business that we can service.

Long Term

Smart-Tek Automated Services Inc.: Our current strategy is to
expand our service business, including staff leasing, PEO services, and value
added products and services to small and medium-size businesses.

PEO Business Environment

We provide professional employer organization outsourcing (PEO)
and human resources services to small and medium-size businesses. These services
allow our customers to outsource many human resources tasks, including payroll
processing, workers' compensation insurance, employee benefits administration,
risk management and human resource administration. These services relieve
existing and potential customers of the burdens associated with personnel
management and control.

As a human resource department and strategic business partner
for our clients, our service offerings allow our clients to:

- comply with ever evolving complex employment related regulatory and tax
  issues;
- increase productivity by improving employee satisfaction and retention;
- reduce payroll expenses with lower workers' compensation costs; and
- focus on core business activities instead of human resource matters.

Our main business, a co-employment or PEO contract arrangement,
we become a co-employer of the client's existing workforce and assume some or
all of the client's human resource management responsibilities.

Our business continues to experience some liquidity problems.
Accordingly, year-to-year comparisons may be of limited usefulness as our
business continues to seek growth.

Our current strategy is to expand our service business,
including staff leasing, PEO services, and value added products and services to
small and medium-size businesses.

PEO Market Overview

The burdens placed on small and medium-sized employers by the
complex legal and regulatory issues related to human resources management caused
our industry segment to grow beginning in the 1980's. While various service
providers have been available to assist these businesses with specific tasks,
companies like ours emerged as providers of a more comprehensive range of
services relating to the employer/employee relationship. We assume broad aspects
of the employer/employee relationship for our clients. Because we provide
employee-related services to a large number of employees, we provide economies
of scale that provide our clients employment-related functions more efficiently,
provide a greater variety of employee benefits, and devote more attention to
human resources management.

We believe that the demand for our services is driven by (1)
the trend by small and medium-sized businesses toward outsourcing management
tasks outside of core competencies; (2) the difficulty of providing competitive
health care and related benefits to attract and retain employees; (3) the
increasing costs of health and workers' compensation insurance coverage and
workplace safety programs; and (4) complex regulation of labor and employment
issues and the related costs of compliance.

---

- 21 -

RESULTS OF OPERATIONS

Three Month Summary

|                                             |                    |            | Percentage
|-------------------------------------------- | ------------------ | ---------- | ----------
|                                             | Three Months Ended | Increase/ 
|                                             | March
      31,    | (Decrease)
|                                             | 2011               | 2010       |           
|Revenue                                      | $4,221,806         | $2,504,307 | 69%       
|Selling, General and Administrative Expenses | 898,831            | 351,431    | 156%      
|Interest expense                             | (10,330)           | (1,500)    | 589%      
|Net Income (Loss)                            | $363,354           | $292,777   | 24%       

Revenue

The 69% increase in revenues of $1,717,499 for the three months
ended March 31, 2011 as compared to the comparative period in 2010 is primarily
attributable to an increase in our payroll and staffing business through
Smart-Tek Automated Services. The increase in our payroll and staffing revenue
through Smart-Tek Automated is a result of the continued integration of our
current contracts.

Gross Profit

During the period ended March 31, 2011 we had a gross profit of
$1,272,515 as compared to a gross profit of $921,890 during the comparative
period in 2010 for an increase of $350,625 or 38%.

Expenses

The major components of our expenses for the quarter are
outlined in the table below:

|                                             |                    |            | Percentage
|-------------------------------------------- | ------------------ | ---------- | ----------
|                                             | Three Months Ended | Increase/ 
|                                             | March
      31,    | (Decrease)
|                                             | 2011               | 2010       |           
|Selling, General and Administrative Expenses | $898,831           | $351,431   | 156%      
|Cost of revenue and service delivery         | 2,949,291          | 1,582,417  | 86%       
|Interest expense                             | 10,330             | 1,500      | 589%      
|Total Expenses                               | $3,858,452         | $1,935,348 | 99%       

---

- 22 -

Selling, General and Administrative

Selling, general and administrative expenses of $898,831for the
three month period ended March 31, 2011 increased by $547,400 or 156% over the
same three month period prior year.

|Three months ending:       |   | 3/31/2010 |  |   | 3/31/2011 |  | $ | VAR     |  |  | % VAR    |  |                                                     
|-------------------------- | - | --------- |  | - | --------- |  | - | ------- |  |  | -------- |  | ----------------------------------------------------
|Salaries & Related Expense | $ | 138,290   |  | $ | 311,430   |  | $ | 173,140 |  |  | 125.2%   |  | Added approximately eight employees                 
|Consulting                 | $ | 97,190    |  | $ | 220,366   |  | $ | 123,176 |  |  | 126.7%   |  | Increase in auditor fees                            
|Commissions                |   | 40,805    |  |   | 177,223   |  |   | 136,418 |  |  | 334.3%   |  | Related to increase in revenue                      
|Outside Services           |   | 64        |  |   | 31,688    |  |   | 31,624  |  |  | 49412.5% |  | Added a third party unemployment
      administrator
|Travel                     |   | 1,899     |  |   | 24,590    |  |   | 22,691  |  |  | 1194.9%  |  | Increased travel - related to increase in revenue   
|Meal & Entertainment       |   | 1,548     |  |   | 32,545    |  |   | 30,997  |  |  | 2002.4%  |  | Increase related to increase in
      revenue       
|Office Expense             |   | 11,933    |  |   | 30,627    |  |   | 18,694  |  |  | 156.7%   |  | new equipment for
      new employees               
|Telephone & Internet       |   | 3,037     |  |   | 12,985    |  |   | 9,948   |  |  | 327.6%   |  | Additional phone lines for new employees            
|Postage                    |   | 6,635     |  |   | 22,406    |  |   | 15,771  |  |  | 237.7%   |  | Related to increase in revenue                      
|Miscellaneous              |   | 50,030    |  |   | 34,971    |  |   | -15,059 |  |  | -30.1%   |  |                                                     
|Total Expenses             | $ | 351,431   |  | $ | 898,831   |  | $ | 547,400 |  |  | 155.8%   |  |                                                     

Cost of revenue and service delivery

Cost of revenue and service delivery expenses of $2,949,291 for
the three month period ended March 31, 2011 increased by $1,366,874 or 86% over
the same three month period prior year. The increase was mainly attributable to
the increase in the payroll business resulting in increased payroll costs of
$717,060 (49%) plus and increase in workers compensation costs of $424,814
(330%) and workers compensation claim costs of $225,000.

Liquidity and Capital Resources

|Working Capital              |   |              |  |   |              |  |  |            |  
|---------------------------- | - | ------------ |  | - | ------------ |  |  | ---------- | -
|                             |   | Three Months |  |   | Year         |  |  | Percentage |  
|                             |   | Ended        |  |   | Ended        |  |  | Increase/  |  
|                             |   | March 31,    |  |   | December 31, |  |  | (Decrease) |  
|                             |   | 2011         |  |   | 2010         |  |  |            |  
|Current Assets               | $ | 4,230,878    |  | $ | 4,886,677    |  |  | (13%       | )
|Current Liabilities          |   | 3,174,212    |  |   | 4,159,186    |  |  | (24%       | )
|Working Capital (Deficiency) | $ | 1,056,666    |  | $ | 727,491      |  |  | 45%        |  

|Cash Flows                               |   |              |   |   |              |   |  |            |  
|---------------------------------------- | - | ------------ | - | - | ------------ | - |  | ---------- | -
|                                         |   | Three Months |   |   | Three Months |   |  |            |  
|                                         |   | Ended        |   |   | Ended        |   |  | Percentage |  
|                                         |   | December 31, |   |   | March 31,    |   |  | Increase/  |  
|                                         |   | 2010         |   |   | 2010         |   |  | (Decrease) |  
|Cash from (used in) Operating Activities | $ | 1,028,067    |   | $ | 140,610      |   |  | 631%       |  
|Cash (used in) Investing Activities      |   | ($38,882     | ) |   | ($28,317     | ) |  | 37%        |  
|Cash provided by Financing Activities    |   | ($1,042,329  | ) |   | -            |   |  | 100%       |  
|Net Increase (Decrease) in Cash          |   | ($53,144     | ) | $ | 112,293      |   |  | (149%      | )

We had cash on hand of $728,576 and working capital of
$1,056,666 as of March 31, 2011 compared to cash on hand of $781,720 and working
capital of $727,491 for the year ended December 31, 2010. We anticipate that we
will incur approximately $300,000 a month for operating
expenses, including professional, legal and accounting expenses associated with
our reporting requirements under the Exchange Act during the next twelve
months.

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- 23 -

Cash Provided In Operating Activities

We had cash from operating activities in the amount of
$1,028,067 during the three months ended March 31, 2011 as compared to cash used
in operating activities of $140,610 in the comparative period in 2010. Cash from
operating activities resulted from the increased revenues from the business of
our subsidiaries.

Cash Used In Investing Activities

We used cash in investing activities in the amount of $38,882
during the three months ended March 31, 2011 as opposed to $28,317 cash used in
investing activities during the three months ended March 31, 2010.

Cash from Financing Activities

We used cash of $1,042,329 in financing activities during the
three months ended March 31, 2011 and as compared to none in financing
activities from the comparative period in 2010. Cash used in financing
activities during the period increased primarily due to a loan of $275,000 to
AMS Inc. to cover an insurance payment and $607,330 to Allegiant Professional
Services Inc., to cover for workmans compensation loses.

Financing

During the quarter ended March 31, 2010, Smart-tek Automated
Services secured a line of credit for $1,000,000 USD from J.P. Chase Manhattan
Bank to facilitate its automatic withdrawals from client accounts as well as for
the provision of direct deposit services to its clients.

Subsequent Events:

Events subsequent to March 31, 2011 have been evaluated through
May 20, 2011, the date these statements were available to be issued, to
determine whether they should be disclosed. Management found no subsequent
events to be disclosed.

Off-Balance Sheet Arrangements

We have no 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.

buy our common stock, which may limit your ability to buy and
sell our stock.

Item 3. Quantitative and Qualitative Disclosures About
Market Risk.

Not Applicable.

Item 4T. Controls and Procedures.

As required by Rule 13a-15 under the Exchange Act, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures at March 31, 2011, which is the end of the period
covered by this report. This evaluation was carried out by our principal
executive officer and our principal financial officer. Based on this evaluation,
our principal executive officer and our principal financial officer have
concluded that the design and operation of our disclosure controls and
procedures are effective as at the end of the period covered by this report.

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- 24 -

There were no changes in our internal control over financial
reporting during the fiscal quarter ended March 31, 2011 that have materially
affected or are reasonably likely to materially affect, our internal control
over financial reporting.

Limitations on the Effectiveness of Internal Controls

Disclosure controls and procedures, no matter how well designed
and implemented, can provide only reasonable assurance of achieving an entity's
disclosure objectives. The likelihood of achieving such objectives is affected
by limitations inherent in disclosure controls and procedures. These include the
fact that human judgment in decision-making can be faulty and that breakdowns in
internal control can occur because of human failures such as simple errors or
mistakes or intentional circumvention of the established process.

Disclosure Controls and Procedures

As of March 31, 2011, under the supervision and with the
participation of the Company's Chief Executive Officer and the Chief Financial
Officer, management has evaluated the effectiveness of the design and operation
of the Company's disclosure controls and procedures. Based on that evaluation,
the Chief Executive Officer and the Chief Financial Officer have concluded that
the Company's disclosure controls and procedures were not effective as of March
31, 2011.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial
reporting that occurred during the last fiscal quarter covered by this report
that have materially affected, or are reasonably likely to affect, the Company's
internal control over financial reporting.

Management's Report on Internal Control over Financial
Reporting

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
the Securities Exchange Act of 1934 Rule 13a-15(f). Our Chief Executive Officer
and Chief Financial Officer conducted an evaluation of the effectiveness of our
internal control over financial reporting based on the framework in Internal
Control - Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO Framework").

Based on this evaluation, management has concluded that our
internal control over financial reporting was not as effective as of March 31,
2011 due to the relatively small staff size of its financial group. As such, our
principal Chief Executive Officer and Chief Financial Officer concluded that we
could have a material weakness due to lack of segregation of duties. The volume
of administrative work peaks at the end of each quarter requiring additional
resources to process the workload. We have hired an additional administrative
person to assist in that additional workload

This annual report does not include an attestation report of
the Company's independent registered public accounting firm regarding internal
control over financial reporting. Management's report was not subject to
attestation by the Company's independent registered public accounting firm
pursuant to temporary rules of the SEC that permit the company to provide only
management's report on internal control in this annual report.

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- 25 -

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A. RISK FACTORS.

Not Applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

ITEM 5. OTHER INFORMATION.

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- 26 -

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)10.7
      Amendment to Employment Agreement
          between Smart-Tek Communications Inc. and Perry Law dated July 31, 200910.8
      Form of Debt Settlement and
          Subscription Agreement dated September 30, 200910.9
      Strategic Marketing Partner
          Agreement between Smart-Tek Automated Services Inc. and ACEO Inc. dated
          August 1, 200910.10
      Marketing Partner Agreement
          dated June 17, 200910.11
      Amended Marketing Partner
          Agreement dated December 9, 2010 with Smart-Tek Automated Services,
          Inc. and Brian Bonar10.12
      General Release of Claims
          Agreement Entered into between Richardson Patel LLC and Smart-Tek Solutions,
          Inc.14.1
      Amended and Restated Code
          of Ethics21.1
      Subsidiaries31.1*
      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.                        
|(7)  | Incorporated by reference to our Current Report on Form
      8-K, filed on June 27, 2008.                          
|(8)  | Incorporated by reference to our Form 10-Q for the period
      ended December 31, 2008, filed on February 23, 2009.
|(9)  | Incorporated by reference to our Current Report on Form
      8-K, filed on June 24, 2009.                          
|(10) | Incorporated by reference to our Annual Report on Form
      10-K, filed October 15, 2008.                          
|(11) | Incorporated by reference to our Annual Report on Form
      10-K, filed October 13, 2009.                          
|(12) | Incorporated by reference to our Current Report on Form
      8-K, filed on March 17, 2010.                         
|(13) | Incorporated by reference to our Current Report on Form
      8-K, filed on December 10, 2010                       

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- 27 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

|By    | /s/ Brian Bonar | 
|----- | --------------- | 
|      | Brian Bonar     | 
|      | President       | 
|      |                 | 
|Date: | May 20, 2011    | 

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                                                        | 
|      | Director                                                         | 
|      |                                                                  | 
|Date: | May 20, 2011                                                     | 
|      |                                                                  | 
|      | /s/ Brian Bonar                                                  | 
|      | Brian Bonar                                                      | 
|      | Chief Executive Officer, Chief Financial Officer                 | 
|      | and Director                                                     | 
|      | (Principal Executive Officer, Principal Accounting
      Officer | 
|      | and Principal Financial Officer)                                 | 
|      |                                                                  | 
|Date: | May 20, 2011                                                     | 
|      |                                                                  | 
|      | /s/ Owen Naccarato                                               | 
|      | Owen Naccarato                                                   | 
|      | Director                                                         | 
|      |                                                                  | 
|Date: | May 20, 2011                                                     | 

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