UNITED STATES

Securities and Exchange Commission

Washington, D.C. 20549



Form 10-QSB

(Mark One)

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



For the quarterly period ended December 31, 2007



OR



(  )  TRANSITION  REPORT PURSUANT TO 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.

Nevada                                   
             98-0206542

--------------------------                   
           ------------------------

State or other jurisdiction                 (I.R.S.) Employer Identification No.

of incorporation



Smart-tek Solutions, Inc.

3702 South Virginia St.

Suite G12-401

Reno, NV 89502

Address of principal executive offices



(604) 628-8161

-----------------------

Registrant's telephone number, including area code





Indicate by check mark whether the Registrant (1) has files 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) had been  subject to such  filing requirements for the past 90 days.



Yes   X                  No    _____



As of February 11, 2008 the Company had 92,253,016 shares of common stock outstanding.



Transitional Small Business Disclosure Format (Check one)    Yes ____   No  X



1



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Smart-tek Solutions Inc.

Six Months Ended December 31, 2007 and 2006





PART I -- FINANCIAL INFORMATION



CONTENTS

PAGES



UNAUDIATED FINANCIAL STATEMENTS



Consolidated Balance Sheets

3

Consolidated Statements of Operations and Comprehensive Loss

4

Consolidated Statements of Changes in Shareholders Deficiency

5

Consolidated Statements of Cash Flows

6

Notes to the Consolidated Financial Statements

7-19







2



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Smart-tek Solutions Inc.

Consolidated Balance Sheets

As at December 31, 2007 (Unaudited) and June 30, 2006



December 31,
	
	
	June 30,2007
	
	
	2007(unaudited)AssetsCurrent assetsCash
	$
	50,440
	
	$
	47,019Accounts receivable
	
	533,267
	
	
	716,853Contract retention receivable
	
	248,164
	
	
	186,096Cost of uncompleted contracts in excess of billings
	
	54,863
	
	
	49,920Prepaid expenses and deposits
	
	3,444
	
	
	1,952Total current assets
	
	890,178
	
	
	1,001,840Equipment, net of accumulated depreciation
	
	5,155
	
	
	7,805Goodwill
	
	451,311
	
	
	451,311$
	1,346,644
	
	$
	1,460,956LiabilitiesCurrent liabilitiesBank overdraft
	$
	32,843
	
	$
	148,175Accounts payable and accrued liabilities
	
	811,186
	
	
	967,465Bonus payable
	
	181,584
	
	
	169,268Billings on uncompleted contractsin excess of costs and estimated revenues
	
	381,366
	
	
	485,089Deferred revenue
	
	13,189
	
	
	13,003Shareholder loans
	
	547,146
	
	
	383,518Amounts due to officers and directors
	
	388,467
	
	
	411,851Related party debt
	
	190,710
	
	
	196,946Total current liabilities
	
	2,546,491
	
	
	2,775,315Shareholders DeficiencyPreferred stock, $0.001 par value, 5,000,000 sharesauthorized, one (1) shares of Class A preferredissued and outstanding at December 31, 2007 and June 30, 2007
	
	-
	
	
	-Common stock: $0.001 par value, 500,000,000, sharesauthorized, 92,253,016 issuedand outstanding at December 31, 2007 and June 30, 2007respectively
	
	2,923,253
	
	
	73,253Additional paid in capital
	
	2,877,811
	
	
	2,861,561Accumulated other comprehensive loss
	
	(129,713
	)
	
	(103,709
	)Accumulated deficit
	
	(6,871,198
	)
	
	(4,145,464
	)Total shareholders deficiency
	
	(1,199,847
	)
	
	(1,314,359
	)$
	1,346,644
	
	$
	1,460,956












See accompanying notes to the consolidated financial statements.



3



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Smart-tek Solutions Inc.

Consolidated Statements of Operations and Comprehensive Loss

Six months ended December 31, 2007 and 2006

(Unaudited)



2007
	
	
	2006RevenueContract revenue
	$
	1,659,203
	
	$
	1,238,736Services revenue
	
	45,057
	
	
	66,359Other revenue
	
	2,639
	
	
	720Total revenue
	
	1,706,899
	
	
	1,305,815Cost of revenue and service delivery
	
	1,348,296
	
	
	1,063,273Gross profit
	
	358,603
	
	
	242,542Selling, general and administrative expenses
	
	3,076,222
	
	
	414,504Operating loss
	
	(2,717,619
	)
	
	(171,962
	)Other expenseInterest
	
	(8,115
	)
	
	(13,056
	)Net loss
	
	(2,725,734
	)
	
	(185,018
	)Currency translation adjustment
	
	(26,004
	)
	
	29,907Comprehensive loss
	$
	(2,751,738
	)
	$
	(155,111
	)Loss per share, basic and diluted
	$
	(0.03
	)
	$
	(0.00
	)Weighted average shares outstanding,basic and diluted
	
	81,617,146
	
	
	73,253,016




See accompanying notes to the consolidated financial statements.



4



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Smart-tek Solutions Inc.

Consolidated Statement of Changes in Shareholders Deficiency

Six months ended December 31, 2007

(Unaudited)







Common StockSharesAmountAdditional paid in CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotalBalance  July 1, 200773,253,016$       73,253$ 2,861,561$ (103,709)$ (4,145,464)$ (1,314,359)Fair Value Options issued to employees--16,250--16,250Shares issued for consulting19,000,0002,850,000---2,850,000Net Loss----(2,725,734)(2,725,734)Currency translation adjustment---(26,004)-(26,004)Balance  December 31, 200792,253,016$ 2,923,253$ 2,877,811$ (129,713)$(6,871,198)$ (1,199,847)






See accompanying notes to the consolidated financial statements.



5





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Smart-tek Solutions Inc.

Consolidated Statements of Cash Flows

Six months ended December 31, 2007 and 2006

(Unaudited)



2007
	
	
	2006Operating activitiesNet loss
	$
	(2,725,734
	)
	$
	(185,018
	)Adjustments to reconcile net loss to net cash used inoperating activitiesDepreciation and amortization
	
	2,650
	
	
	4,038Amortization of deferred compensation
	
	16,250
	
	
	32,500Shares
issued for consulting fees
	
	2,850,000
	
	
	-Changes in operating assets and liabilitiesAccounts receivable
	
	183,586
	
	
	108,706Contract retention receivable
	
	(62,068
	)
	
	(37,433
	)Costs
of uncompleted contracts in excess of billings
	
	(4,943
	)
	
	(1,133
	)Prepaid
expenses and deposits
	
	(1,492
	)
	
	-Accounts payable and accrued liabilities
	
	(156,280
	)
	
	13,908Bonus
payable
	
	12,316
	
	
	-Billings on uncompleted contracts in excess of costsand estimated revenues
	
	(103,723
	)
	
	(19,931
	)Deferred revenue
	
	186
	
	
	3,167Net cash used in operating activities
	
	10,748
	
	
	(81,196
	)Financing activitiesProceeds from shareholders loan
	
	135,295
	
	
	55,469Proceeds from officer and directors
	
	4,949
	
	
	30,000Proceeds from (repayment) of related party debt
	
	(6,235
	)
	
	90,339Net cash provided by financing activities
	
	134,009
	
	
	175,808Effects of exchange rates on cash
	
	(26,004
	)
	
	(6,026
	)Net increase (decrease) in cash
	
	118,753
	
	
	88,586Cash (bank overdraft), beginning of period
	
	(101,156
	)
	
	(163,114
	)Cash (bank overdraft), end of period
	$
	17,597
	
	$
	(74,528
	)Supplemental cash flow informationInterest paid
	$
	8,115
	
	$
	13,056






See accompanying notes to the consolidated financial statements.



6



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)





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 no allowance for doubtful accounts as of December 31, 2007 and June 30, 2007.



7



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)





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.



8



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)





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.





9



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)





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 $16,250 was recognized as expense during the six months ended December 31, 2007.



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 December 31, 2007, the value of the unvested options was $33,750 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 $7,951 for the six months ended December 31, 2007.





10



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)





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



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 $2,725,734 and cash flow from operations of $118,753 during the six months ended December 31, 2007, and had a working capital deficiency of $1,656,313 and a shareholders deficiency of $1,199,847. 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.







11



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)





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$                    1Assets acquired276,012Liabilities assumed(727,324)451,312Goodwill$         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 December 31, 2007 and  June 30 2006, contract retention receivables were $248,164 and $186,096 respectively.





12



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)





4.

Equipment



|                                       |        |        |                          |                                 |        |                          |                             |        |   |        |   |       |  | 
|-------------------------------------- | ------ | ------ | ------------------------ | ------------------------------- | ------ | ------------------------ | --------------------------- | ------ | - | ------ | - | ----- |  | 
|                                       |        | Cost   | Accumulated
Depreciation | December 31
2007
Net Book
Value | Cost   | Accumulated
Depreciation | June 30
2007
Net Book
Value
|                                       |        |        |                          |                                 |        |                          |                            
|Computer equipment & software          | $      | 899    | $                        | 654                             | $      | 245                      | $                           | 899    | $ | 608    | $ | 291  
|Office furniture & equipment           | 4,727  | 2,383  | 2,344                    | 4,727                           | 2,105  | 2,622                   
|Leasehold improvements                 | 15,617 | 13,646 | 1,971                    | 15,617                          | 11,432 | 4,185                   
|Computer equipment under
capital lease | 2,140  | 1,545  | 595                      | 2,140                           | 1,433  | 707                     
|                                       |        |        |                          |                                 |        |                         
|                                       | $      | 23,383 | $                        | 18,228                          | $      | 5,155                    | $                           | 23,383 | $ | 15,578 | $ | 7,805



5.

Bank Overdraft



At December 31, 2007, bank overdrafts covered by a revolving line of credit were $Nil.  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 $126,100 ($125,000 CDN) and is secured by a shareholder guarantee and $50,440 ($50,000 CDN) in the form of a term deposit.  As of December 31, 2007, the Company had not written checks in excess of the operating line of credit.



6.

Related Party Debt



|                                                     |   | 2007    |   | 2006   
|---------------------------------------------------- | - | ------- | - | -------
|Unsecured loan from related party, (father of        |   |         |   |        
|Company President). Non-interest bearing, with       |   |         |   |        
|No fixed repayment terms                             | $ | 190,710 | $ | 174,034
|                                                     |   |         |   |        
|Various related party loans, unsecured, non-interest |   |         |   |        
|Bearing advances with no fixed terms of repayment    |   |         |   |        
|Due on demand                                        |   | -       |   | 21,989 
|                                                     | $ | 190,710 | $ | 196,023



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 December 31, 2007 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.



At December 31, 2007, the Company borrowed $266,085 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.



At December 31, 2007, the above shareholder loans aggregated to $547,146.



13



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)





8.

Income taxes



As of June 30, 2007, 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 December 31, 2007, STS had available federal net operating loss (NOL)carry forwards of approximately $6,536,115.  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 limitations 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 December 31, 2007 and June 30, 2007 as follows:



|                                                       |         |                      |                       |              
|------------------------------------------------------ | ------- | -------------------- | --------------------- | -------------
|                                                       |         |                      | December 31,
2007     | June 30,
2006
|                                                       |         |                      |                       |              
|Deferred tax asset, beginning                          |         | $   1,338,862        | $ 1,205,369          
|Benefit of current years operating loss carry forward | 951,167 | 133,493             
|Deferred tax asset, ending                             |         | $   2,290,029        | $ 1,338,862          
|                                                       |         |                      |                       |              
|Valuation allowance, beginning                         |         | $ (1,338,862)        | $(1,205,369)         
|Current years provision                               |         | (951,167)            | (133,493)            
|Valuation allowance, ending                            |         | $ (2,290,029)        | $(1,338,862)         
|                                                       |         |                      |                       |              
|Deferred tax asset, net                                |         | $                  - | $                   -
|                                                       |         |                      |                       |              
|Tax at blended U.S./Canadian statutory rates           | (35%)   | (35%)               
|Loss carryover                                         |         | 35%                  | 35%                  
|                                                       |         |                      |                       |              
|Tax expense                                            |         | $                  - | $                 -  





14



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)



9.

Common Stock



At December 31, 2007, 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 December 31, 2007, there are 92,253,016 shares of Common Stock outstanding.



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.



15



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)



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 December 31, 2007, options outstanding are as follows:



|                             |           |   | Average       
|---------------------------- | --------- | - | --------------
|                             | Shares    |   | Exercise Price
|Balance at July 1, 2007      | 1,300,000 | $ | 0.15          
|Granted                      | -         |   | -             
|Exercised                    | -         |   | -             
|Cancelled                    | -         |   | -             
|Balance at December 31, 2007 | 1,300,000 | $ | 0.15          



Additional information regarding options outstanding as of December 31, 2007 is as follows:



|          |  |             |  |                     |  |                     |  |         |             
|--------- |  | ----------- |  | ------------------- |  | ------------------- |  | ------- | ------------
|          |  |             |  | Options outstanding |  | Options exercisable
|          |  |             |  | Weighted average    |  | Weighted            |  |         | Weighted    
|          |  |             |  | remaining           |  | average             |  |         | average     
|Exercise  |  | Number      |  | contractual life    |  | exercise            |  |         | exercise    
|price     |  | 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 $16,250 was recognized as expense during the six months ended December 31, 2007.



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 December 31, 2007, the value of the unvested options was $33,750 which will be amortized in future periods as the options vest.





16



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)



10.

Costs and Estimated Earnings on Uncompleted Contracts



|                                                                            |               |                |                   |              
|--------------------------------------------------------------------------- | ------------- | -------------- | ----------------- | -------------
|                                                                            |               |                | December 31,
2007 | June 30,
2007
|                                                                            |               |                |                   |              
|Costs incurred on uncompleted contracts                                     | $   1,068,433 | $  735,430    
|Estimated earnings                                                          |               | 850,672        | 390,444          
|                                                                            |               |                | 1,919,105         | 1,125,874    
|                                                                            |               |                |                   |              
|Less: Billings to Date                                                      |               | 2,245,608      | 1,561,043        
|                                                                            |               |                |                  
|                                                                            |               | $    (326,503) | $ (435,169)      
|Included in accompanying balance sheets under the following captions:       |              
|Costs of uncompleted contracts in excess of billings                        | 54,863        | 49,920        
|Billings on uncompleted contracts in excess of costs and estimated revenues | $   (381,366) | $ (485,089)   
|                                                                            | $   (362,503) | $ (435,169)   



11.

Related Party Transactions



During the six months ended December 31, 2007, the Companys wholly owned subsidiary paid $71,047 in management salaries to its president and vice president.



Amounts due to officers and directors were $388,467 as of December 31, 2007.



At December 31, 2007, the Company had borrowed $266,085 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.



17



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)



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 six company vehicles.  The minimum payments required under these operating leases for each of the five years subsequent to December 31, 2007 are approximately as follows:



Year ending

June 30

2008

$    27,986

2009

41,834

2010

8,920

2011

6,334

2012

1,584



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.



18



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Smart-tek Solutions Inc.

Notes to the Consolidated Financial Statements

December 31, 2007

(unaudited)



14.

Concentrations of risk



At December 31, 2007, three customers accounted for 45% of trade accounts receivable and each of these customers individually accounted for more than 10% of trade accounts receivable.



For the six months ended December 31, 2007, one significant customer accounted for 24% of revenue and the customer individually accounted for more than 10% of revenue.



For the six months ended December 31, 2007, 100% of the Companys sales and accounts receivable arose from sales to Canadian customers.



For the six months ended December 31, 2007, three significant suppliers accounted for 44% of purchases.





19



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ITEM 2                    MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION





Special Note Regarding Forward-Looking Statements



The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company.  The Company and its representatives may, from time to time, make written or verbal forward-looking statements, including statements contained in the Company's filings with the United States Securities and Exchange Commission, its press releases and in its reports to shareholders. Generally, the inclusion of the words "believe", "expect", "intend", "estimate", "anticipate", "will", and similar expressions or the converse thereof, identify statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements include, without limitation, our expectations regarding sales, earnings or other future financial performance and liquidity, entry into new geographic regions, and future operations or operating results. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, actual results may differ materially from our expectations. Factors that could cause actual results to differ from expectations include, without limitation:



These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements as a result of a number of risks and uncertainties including: (a) those risks and uncertainties related to general economic conditions, (b) whether we are able to manage our planned growth efficiently and operate profitable operations, (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations, (d) whether we are able to successfully fulfill our primary requirements for cash which are explained below under Liquidity and Capital Resources.





OVERVIEW



Smart-tek Solutions, Inc. (STS or the Company) formerly known as Royce Biomedical Inc., 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 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 test kits to Xili, the Company had provided clinical data and training to Xili personnel.



In December 2004, the Company replaced all of its Directors and Officers and embarked on a transition of the companys business activities from the biomedical industry to the security services industry.  Through various consulting agreements with outside professionals, the Company was able to identify an acquisition target in the security market.



Pursuant to a Share Exchange Agreement In April 2005, Smart-tek Communications, Inc., a British Columbia, Canada based security contractor (SCI) became a wholly-owned subsidiary of the Company.  As a result of this acquisition, the Company ceased all ongoing business relationships with Xili and commenced efforts to effectively operate and expand in the security sector.



In July 2005, the Company filed with the State of Nevada to change its name to Smart-tek Solutions, Inc., pursuant to the Schedule 14C filed on June 13, 2005.



Along with operating, through its wholly-owned subsidiary, in the approximately $100M security sector of the Greater Vancouver Area, the company embarked in 2005 in the development of a Radio Frequency Identification (RFID) based device geared towards the agricultural industry.  With the increased importance of food chain safety, the Company entered into the Animal Agriculture Security and Monitoring industry with its RFID based product.







20



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Critical Accounting Policies



We believe that of the significant accounting policies used in the preparation of our financial statements (See Note 1 to the Financial Statements), the following are critical accounting policies, which may involve a higher degree of judgment, complexity and estimates.



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 based upon the predictions 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 revenues.



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.



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.



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-lined 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 which includes analyzing at least annually the companys subsidiarys backlog of contracts, estimated income to be provided from these contracts over the next 12 months and cash flows to be generated by these contracts.







21



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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 the 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).  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.



Significant Customers



For the three months ended December 31, 2007, we received 24% of our revenues from one significant customer and the customer represented more than 10% of revenues.  We believe we have a good relationship with this customer.



Principal Suppliers



The principal suppliers for the security equipment installed by SCI is Burtek Systems Inc. a Canada wide distributor and importer specializing in audio, video, security access control and structured wiring products and Nedco Division of Westburne Industries Enterprises Ltd..  These suppliers represent 44% of all purchases and each of these suppliers represents more than 10% of total purchases.



RESULTS OF OPERATIONS



Six months ended December 31, 2007 and 2006

The results of operations reflected in this discussion include the operations of Smart-tek Communications, Inc., our subsidiary.

For the three months ended December 31, 2007, revenues increased to $1,706,899 from $1,305,815 for the same period ended in 2006, an increase of $116,615 or 17%.

Cost of revenue and services delivery increased by $285,023 for the six months ended December 31, 2007 as compared with the same period ending in 2006.  Cost of revenue and services delivery for the six months ended December 31, 2007 was $1,348,296 as compared to $1,063,273 for the same period ended in 2006, an increase of 21%.

Total operating expenses increased by $2,661,717 from $414,505 for the six months ended December 31, 2006 to $3,076,222 for the same period ending in 2007.  The increase in operating expenses was principally attributable consulting fees totaling $2,850,000 accrued to consultants.



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 in October 2007 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 RFID based agricultural products.  Under the terms of the agreement, the Company issued in October 2007 7,000,000 restricted shares of its common stock as payment for the services.





22



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In September 2007, the Company also 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 in October 2007 5,500,000 restricted shares of its common stock as payment for services.

Net loss increased from a net loss of $185,018 for the six months ended December 31, 2006 to a net loss of $2,725,734 for the six months ended December 31, 2007.



The Company has fully reserved its potential deferred tax asset in each period presented by the recording of a valuation reserve in that period.  Therefore, the Company has not reported an income tax benefit during the six months ended December 31, 2007 and 2006, respectively.



LIQUIDITY AND CAPITAL RESOURCES



For the six months ended December 31, 2007, net cash used in operating activities was $10,748 and net cash provided by financing activities was $134,009. There was no cash provided by or used in investing activities.



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 unaudited condensed consolidated financial statements as at and for the period ended December 31, 2007, 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.







23



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Recent Accounting Pronouncements



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.



ITEM 3 - CONTROLS AND PROCEDURES



(a) Evaluation of Disclosure Controls and Procedures



Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission. Our Chief Executive Officer and the Chief Financial Officer have reviewed the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) within the last ninety days and have concluded that the disclosure controls and procedures are effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the last day they were evaluated by our Chief Executive Officer and Chief Financial Officer.



b) Changes in Internal Controls over Financial Reporting



There have been no changes in the Company's internal control over financial reporting during the last quarterly period covered by this Quarterly Report on Form 10-QSB that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.





PART II.      OTHER INFORMATION



Item 1. 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.



In November, 2006, the Company dismissed its lawsuit against RFID, Ltd in order to continue its focus on its operations.  In November 2006, RFID issued a press release to redact its statements against Smart-tek Solutions, Inc.





24



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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.



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.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



Recent Sales of Unregistered Securities



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 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.



Item 3. Defaults upon Senior Securities



None



Item 4. Submission of Matters to a Vote of Security Holders



None



Item 5. Other Information



None







25



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Item 6. Exhibits and Reports on Form 8-K



(a)   Exhibits



31.1   Certification of Chief Executive Officer of Periodic Report
Pursuant to Rule 13a-14(a) and Rule 15d-14(a).



31.2   Certification of Chief Financial Officer of Periodic Report
Pursuant to Rule 13a-14(a) and Rule 15d-14(a).



32.1   Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350.



32.2   Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350.







(b)   Reports on Form 8-K/A



Registrant filed the following reports on Form 8-K during the quarter covered by this Report:



Date of Report

Item Number                   Events Reported

--------------------

-----------------

------------------------------------













SIGNATURES



Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.









SMART-TEK SOLUTIONS INC.







Date:  February 14, 2008

By: /s/ Perry Law



-----------------------------------



Perry Law



Chief Executive Officer





26