---

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
  Washington, 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, 2010

[ ] 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)

|Nevada                                                               | 98-0206542                          
|-------------------------------------------------------------------- | ------------------------------------
|(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)

3702 South Virginia Street, Suite G12-401, Reno, NV
89502(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]

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2

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 April 16,
2010, there were 69,314,124 shares of common stock, par value $0.001,
outstanding.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

|Smart-tek Solutions Inc.
|------------------------
|March 31, 2010 and 2009 
|                        

PART I -- FINANCIAL INFORMATION

|CONTENTS                                                                      | PAGES
|----------------------------------------------------------------------------- | -----
|                                                                              |      
|UNAUDITED
      FINANCIAL STATEMENTS                                          |      
|                                                                              |      
|Consolidated
      Balance Sheets                                             | 4    
|                                                                              |      
|Consolidated
      Statements of Operations and Comprehensive Income (Loss)   | 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
SheetsAs at March 31, 2010 (Unaudited) and June 30, 2009

|                                                                                                                                                                                                                             |   | March 31,   |   |   | June 30,   |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ---------- | -
|                                                                                                                                                                                                                             |   | 2010        |   |   | 2009       |  
|                                                                                                                                                                                                                             |   | (unaudited) |   |   |            |  
|                                                                                                                                                                                                                             |   |             |   |   |            |  
|Assets                                                                                                                                                                                                                       |   |             |   |   |            |  
|Current assets                                                                                                                                                                                                               |   |             |   |   |            |  
|Cash and cash
      equivalents                                                                                                                                                                                              | $ | 706,496     |   | $ | 73,272     |  
|Accounts receivable                                                                                                                                                                                                          |   | 1,107,855   |   |   | 639,284    |  
|Contract retention
      receivable                                                                                                                                                                                          |   | 278,909     |   |   | 235,196    |  
|Cost of uncompleted
      contracts in excess of billings                                                                                                                                                                    |   | 189,865     |   |   | 37,097     |  
|Prepaid expenses and
      deposits                                                                                                                                                                                          |   | 2,342,555   |   |   | 1,376      |  
|Total current assets                                                                                                                                                                                                         |   | 4,625,680   |   |   | 986,225    |  
|                                                                                                                                                                                                                             |   |             |   |   |            |  
|Equipment, net of accumulated depreciation                                                                                                                                                                                   |   | 106,335     |   |   | 15,122     |  
|                                                                                                                                                                                                                             |   |             |   |   |            |  
|Goodwill                                                                                                                                                                                                                     |   | 451,311     |   |   | 451,311    |  
|                                                                                                                                                                                                                             |   |             |   |   |            |  
|                                                                                                                                                                                                                             | $ | 5,183,326   |   | $ | 1,452,658  |  
|                                                                                                                                                                                                                             |   |             |   |   |            |  
|                                                                                                                                                                                                                             |   |             |   |   |            |  
|Liabilities                                                                                                                                                                                                                  |   |             |   |   |            |  
|Current liabilities                                                                                                                                                                                                          |   |             |   |   |            |  
|Accounts payable and
      accrued liabilities                                                                                                                                                                               | $ | 2,626,366   |   | $ | 408,365    |  
|Bonus payable                                                                                                                                                                                                                |   | 748,144     |   |   | 240,744    |  
|Billings on
      uncompleted
      contracts           in
      excess of costs and estimated revenues                                                                                                                      |   | 142,246     |   |   | 297,600    |  
|Deferred revenue                                                                                                                                                                                                             |   | 15,259      |   |   | 12,389     |  
|Loans payable                                                                                                                                                                                                                |   | -           |   |   | 310,265    |  
|Shareholder loans                                                                                                                                                                                                            |   | 821,756     |   |   | 625,392    |  
|Amounts due to officers
      and directors                                                                                                                                                                                  |   | 685,641     |   |   | 400,172    |  
|                                                                                                                                                                                                                             |   |             |   |   |            |  
|Total current liabilities                                                                                                                                                                                                    |   | 5,039,412   |   |   | 2,294,927  |  
|                                                                                                                                                                                                                             |   |             |   |   |            |  
|Stockholders Equity (Deficiency)                                                                                                                                                                                            |   |             |   |   |            |  
|Preferred stock, $0.001 par value,
      5,000,000 shares      authorized, one
      (1) shares of Class A
      preferred      issued and outstanding at
      March 31, 2010 and June 30, 2009                             |   | -           |   |   | -          |  
|Common stock: $0.001 par value,
      500,000,000, shares
      authorized,      69,314,124 issued and
      outstanding at March 31, 2010
      and      447,589 issued and outstanding
      at June 30, 2009 respectively |   | 69,314      |   |   | 448        |  
|Additional paid in capital                                                                                                                                                                                                   |   | 6,852,863   |   |   | 6,566,464  |  
|Accumulated other comprehensive loss                                                                                                                                                                                         |   | (113,666    | ) |   | (67,722    | )
|Accumulated deficit                                                                                                                                                                                                          |   | (6,664,597  | ) |   | (7,341,459 | )
|Total stockholders equity (deficiency)                                                                                                                                                                                      |   | 143,914     |   |   | (842,269   | )
|                                                                                                                                                                                                                             |   |             |   |   |            |  
|                                                                                                                                                                                                                             | $ | 5,183,326   |   | $ | 1,452,658  |  
|                                                                                                                                                                                                                             |   |             |   |   |            |  

See accompanying notes to the consolidated financial statements.

4

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

|                                                             |   | Three Months |   |   | Three Months |   |   | Nine Months |   |   | Nine
      Months |  
|------------------------------------------------------------ | - | ------------ | - | - | ------------ | - | - | ----------- | - | - | ----------------- | -
|                                                             |   | Ended        |   |   | Ended        |   |   | Ended       |   |   | Ended             |  
|                                                             |   | March 31,    |   |   | March 31,    |   |   | March 31,   |   |   | March 31,         |  
|                                                             |   | 2010         |   |   | 2009         |   |   | 2010        |   |   | 2009              |  
|                                                             |   |              |   |   |              |   |   |             |   |   |                   |  
|Revenue                                                      |   |              |   |   |              |   |   |             |   |   |                   |  
|                                                             |   |              |   |   |              |   |   |             |   |   |                   |  
|Contract revenue                                             | $ | 3,288,324    |   | $ | 698,615      |   | $ | 8,283,106   |   | $ | 2,409,465         |  
|Services revenue                                             |   | 50,971       |   |   | 10,321       |   |   | 62,677      |   |   | 43,512            |  
|Other revenue                                                |   | 637          |   |   | 115          |   |   | 977         |   |   | 625               |  
|Total revenue                                                |   | 3,339,932    |   |   | 709,051      |   |   | 8,346,760   |   |   | 2,453,602         |  
|                                                             |   |              |   |   |              |   |   |             |   |   |                   |  
|Cost of revenue and service delivery                         |   | 2,219,070    |   |   | 597,347      |   |   | 5,736,401   |   |   | 1,839,254         |  
|                                                             |   |              |   |   |              |   |   |             |   |   |                   |  
|Gross profit                                                 |   | 1,120,862    |   |   | 111,704      |   |   | 2,610,359   |   |   | 614,348           |  
|                                                             |   |              |   |   |              |   |   |             |   |   |                   |  
|Selling, general and administrative expenses                 |   | 825,836      |   |   | 169,884      |   |   | 1,927,580   |   |   | 710,305           |  
|                                                             |   |              |   |   |              |   |   |             |   |   |                   |  
|Operating income (loss)                                      |   | 295,026      |   |   | (58,180      | ) |   | 682,779     |   |   | (95,957           | )
|                                                             |   |              |   |   |              |   |   |             |   |   |                   |  
|Other expense                                                |   |              |   |   |              |   |   |             |   |   |                   |  
|Interest                                                     |   | (2,249       | ) |   | (1,057       | ) |   | (5,917      | ) |   | (3,892            | )
|                                                             |   |              |   |   |              |   |   |             |   |   |                   |  
|Net income (loss)                                            |   | 292,777      |   |   | (59,237      | ) |   | 676,862     |   |   | (99,849           | )
|                                                             |   |              |   |   |              |   |   |             |   |   |                   |  
|Currency translation adjustment                              |   | (17,270      | ) |   | 11,577       |   |   | (45,944     | ) |   | 82,448            |  
|                                                             |   |              |   |   |              |   |   |             |   |   |                   |  
|Comprehensive income                                         | $ | 275,507      |   | $ | (47,660      | ) |   | 630,918     |   |   | (17,401           | )
|                                                             |   |              |   |   |              |   |   |             |   |   |                   |  
|Earnings per share, basic and diluted                        | $ | 0.01         |   | $ | 0.11         |   |   | 0.02        |   |   | (0.04             | )
|                                                             |   |              |   |   |              |   |   |             |   |   |                   |  
|Weighted average shares outstanding,
      basic and diluted |   | 36,693,734   |   |   | 447,589      |   |   | 36,693,734  |   |   | 447,589           |  

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)
|Nine months
      ended March 31, 2010                                      
|(Unaudited)                                                                 
|                                                                            

|                                             |  | Common
      Stock |  |   |        |  |   |            |  |   |               |   |   |             |  
|-------------------------------------------- |  | ------------------ |  | - | ------ |  | - | ---------- |  | - | ------------- | - | - | ----------- | -
|                                             |  |                    |  |   |        |  |   |            |  |   | Accumulated   |   |   |             |  
|                                             |  |                    |  |   |        |  |   | Additional |  |   | Other         |   |   |             |  
|                                             |  |                    |  |   |        |  |   | Paid in    |  |   | Comprehensive |   |   | Accumulated |  
|                                             |  | Shares             |  |   | Amount |  |   | Capital    |  |   | Income        |   |   | Deficit     |  
|                                             |  |                    |  |   |        |  |   |            |  |   |               |   |   |             |  
|Balance  June 30, 2008                      |  | 447,589            |  | $ | 448    |  | $ | 6,533,964  |  | $ | (121,568      | ) | $ | (7,205,092  | )
|                                             |  |                    |  |   |        |  |   |            |  |   |               |   |   |             |  
|Fair Value Options issued
      to employees |  | -                  |  |   | -      |  |   | 32,500     |  |   | -             |   |   | -           |  
|                                             |  |                    |  |   |        |  |   |            |  |   |               |   |   |             |  
|Net Loss                                     |  | -                  |  |   | -      |  |   | -          |  |   | -             |   |   | (136,367    | )
|                                             |  |                    |  |   |        |  |   |            |  |   |               |   |   |             |  
|Currency translation
      adjustment        |  | -                  |  |   | -      |  |   | -          |  |   | 53,846        |   |   | -           |  
|                                             |  |                    |  |   |        |  |   |            |  |   |               |   |   |             |  
|Balance  June 30, 2009                      |  | 447,589            |  | $ | 448    |  | $ | 6,566,464  |  | $ | (67,722       | ) | $ | (7,341,459  | )
|                                             |  |                    |  |   |        |  |   |            |  |   |               |   |   |             |  
|Shares issued for Marketing                  |  |                    |  |   |        |  |   |            |  |   |               |   |   |             |  
|Partner Agreement                            |  | 45,000,000         |  |   | 45,000 |  |   | -          |  |   | -             |   |   | -           |  
|Shares issued for debt                       |  | 23,866,535         |  |   | 23,866 |  |   | 286,399    |  |   | -             |   |   | -           |  
|                                             |  |                    |  |   |        |  |   |            |  |   |               |   |   |             |  
|Net Income                                   |  | -                  |  |   | -      |  |   | -          |  |   | -             |   |   | 676,862     |  
|                                             |  |                    |  |   |        |  |   |            |  |   |               |   |   |             |  
|Currency translation
      adjustment        |  | -                  |  |   | -      |  |   | -          |  |   | (45,944       | ) |   | -           |  
|                                             |  |                    |  |   |        |  |   |            |  |   |               |   |   |             |  
|Balance  March 31, 2010                     |  | 69,314,124         |  | $ | 69,314 |  | $ | 6,852,863  |  | $ | (113,666      | ) | $ | (6,664,597  | )

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   |   |   | Nine Months    |   |   | Nine
      Months |  
|-------------------------------------------------------------------------------------------- | - | -------------- | - | - | -------------- | - | - | -------------- | - | - | ----------------- | -
|                                                                                             |   | Ended          |   |   | Ended          |   |   | Ended          |   |   | Ended             |  
|                                                                                             |   | March 31, 2010 |   |   | March 31, 2009 |   |   | March 31, 2010 |   |   | March 31, 2009    |  
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Operating Activities                                                                         |   |                |   |   |                |   |   |                |   |   |                   |  
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Net income (loss)                                                                            | $ | 292,777        |   | $ | (59,237        | ) | $ | 676,862        |   | $ | (99,849           | )
|Adjustments to reconcile net income (loss) to cash
             used in operating activities |   |                |   |   |                |   |   |                |   |   |                   |  
|Depreciation and amortization                                                                |   | 6,419          |   |   | 324            |   |   | 14,361         |   |   | 1,061             |  
|Amortization of deferred compensation                                                        |   | -              |   |   | -              |   |   | -              |   |   | 32,500            |  
|Marketing Partner Agreement                                                                  |   | -              |   |   | -              |   |   | 45,000         |   |   | -                 |  
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Changes in operating assets and liabilities                                                  |   |                |   |   |                |   |   |                |   |   |                   |  
|Accounts receivable                                                                          |   | (129,826       | ) |   | (62,483        | ) |   | (468,571       | ) |   | 112,756           |  
|Contract retention receivable                                                                |   | 65,347         |   |   | 14,564         |   |   | (43,713        | ) |   | 48,511            |  
|Costs of uncompleted contracts in excess of
         billings                                |   | 20,342         |   |   | (15,055        | ) |   | (152,768       | ) |   | (267,352          | )
|Prepaid expenses and deposits                                                                |   | (711,293       | ) |   | 46             |   |   | (2,341,179     | ) |   | 301               |  
|Accounts payable and accrued liabilities                                                     |   | 374,581        |   |   | (73,158        | ) |   | 2,218,001      |   |   | (200,251          | )
|Bonus payable                                                                                |   | 291,424        |   |   | (7,276         | ) |   | 507,400        |   |   | (48,479           | )
|Billings on uncompleted contracts in excess of
         costs and estimated revenues         |   | 54,079         |   |   | 17,248         |   |   | (155,354       | ) |   | 45,876            |  
|Deferred revenue                                                                             |   | 3,216          |   |   | 317            |   |   | 2,870          |   |   | (34               | )
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Net cash used in operating
      activities                                                  |   | 267,066        |   |   | (184,710       | ) |   | 302,909        |   |   | (374,960          | )
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Investing activities                                                                         |   |                |   |   |                |   |   |                |   |   |                   |  
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Purchase of equipment                                                                        |   | (28,317        | ) |   | -              |   |   | (105,574       | ) |   | (6,158            | )
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Net cash used in investing activities                                                        |   | (28,317        | ) |   | -              |   |   | (105,574       | ) |   | (6,158            | )
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Financing activities                                                                         |   |                |   |   |                |   |   |                |   |   |                   |  
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|(Decrease) Increase in bank overdraft                                                        |   | -              |   |   | 24,795         |   |   | -              |   |   | (8,676            | )
|Proceeds from shareholder loan                                                               |   | -              |   |   | 202,245        |   |   | 196,364        |   |   | 208,082           |  
|Proceeds from officers and directors                                                         |   | (26,979        | ) |   | (55,361        | ) |   | 285,469        |   |   | 89,445            |  
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Net cash provided by financing activities                                                    |   | (26,979        | ) |   | 171,679        |   |   | 481,833        |   |   | 288,851           |  
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Effects of exchange rates on cash                                                            |   | (17,270        | ) |   | 11,557         |   |   | (45,944        | ) |   | 82,448            |  
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Net increase (decrease) in cash                                                              |   | 194,500        |   |   | (1,474         | ) |   | 633,224        |   |   | (9,819            | )
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Cash and cash equivalents, beginning of
      period                                         |   | 511,996        |   |   | 42,900         |   |   | 73,272         |   |   | 51,245            |  
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Cash and cash equivalents, end of period                                                     | $ | 706,496        |   | $ | 41,426         |   | $ | 706,496        |   |   | 41,426            |  
|                                                                                             |   |                |   |   |                |   |   |                |   |   |                   |  
|Supplemental cash flow information                                                           |   |                |   |   |                |   |   |                |   |   |                   |  
|Interest paid                                                                                | $ | 2,249          |   | $ | 1,057          |   | $ | 5,917          |   | $ | -                 |  

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, 2010                                
|                                              

**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.

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.

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.

On February 11, 2009, Smart-tek Automated Services Inc., a
wholly owned subsidiary of the Company was incorporated in the State of Nevada.
Smart-tek Automated Services Inc. will provide integrated and cost-effective
management solutions in the area of human resources for public and private
companies.

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 subsidiaries Smart-tek
Communications Inc. and Smart-tek Automated Services Inc. Significant
inter-company transactions have been eliminated in consolidation.

Accounts Receivable

The Company reports accounts receivable at net realizable
value. The Companys term of sale provide the basis for when accounts become
delinquent or past due. The Company provides an allowance for doubtful accounts,
when necessary, equal to the estimated uncollectible amounts. There is an
allowance for doubtful accounts as of March 31, 2010 of $4,432 (2009  $7,986).

8

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2010                                
|                                              

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, accounts
payable and accrued liabilities, bonus payable, shareholder loans and amounts
due to officers and directors. 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 debts. 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 is 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 (see Note 8).

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.

9

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2010                                
|                                              

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.

The Company recognizes professional employment organizations
(PEO) revenues when each periodic payroll is delivered to the client. Revenues
are reported in accordance with the requirements of Financial Accounting
Standards Board (FASB) Emerging Issues Task Force Issue No. 99-19,
Reporting Revenues Gross as a Principal Versus Net as an Agent. (EITF
99-19). 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.

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.

10

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2010                                
|                                              

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.

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.

11

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2010                                
|                                              

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
$1,851 for the period ended March 31, 2010.

Earnings per share

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

Recent accounting pronouncements

In February 2008, the FASB issued FSP FAS 157-2, Effective Date
of FASB Statement No. 157, which delays the effective date of SFAS No. 157 to
July 1, 2009, for all nonfinancial assets and nonfinancial liabilities, except
for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). The Company believes the
adoption of the delayed items of SFAS No. 157 will not have a material impact on
our financial statements.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events,
which established general accounting standards and disclosure for subsequent
events. In accordance with SFAS No. 165, the Company has evaluated subsequent
events through the date the financial statements were filed.

In June 2009, the FASB issued SFAS No. 168 -- The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles-a replacement of FASB Statement No. 162. SFAS 168
establishes the FASB Accounting Standards Codification as the single source of
authoritative US generally accepted accounting principles recognized by the FASB
to be applied to nongovernmental entities. SFAS 168 is effective for financial
statements issued for interim and annual periods ending after September 15,
2009. The adoption of SFAS 168 will not have an impact on the Company's
financial position, results of operations or cash flows.

12

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2010                                
|                                              

**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. Subsequently, the preferred share was redeemed.

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

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

**3.** **Contract
Retention Receivable**

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

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

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

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

As of March 31, 2010 and June 30 2009, contract retention
receivables were $278,909 and $235,196 respectively.

13

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2010                                
|                                              

**4.** **Equipment**

|                                       |   |         |  |   |              |  |   | December 31 |  |   |        |  |   |              |  |   | June 30  | 
|-------------------------------------- | - | ------- |  | - | ------------ |  | - | ----------- |  | - | ------ |  | - | ------------ |  | - | -------- | 
|                                       |   |         |  |   | Accumulated  |  |   | 2009        |  |   |        |  |   | Accumulated  |  |   | 2009     | 
|                                       |   | Cost    |  |   | Depreciation |  |   | Net Book    |  |   | Cost   |  |   | Depreciation |  |   | Net Book | 
|                                       |   |         |  |   |              |  |   | Value       |  |   |        |  |   |              |  |   | Value    | 
|                                       |   |         |  |   |              |  |   |             |  |   |        |  |   |              |  |   |          | 
|Computer equipment &
      software    | $ | 27,170  |  | $ | 5,737        |  | $ | 21,433      |  | $ | 899    |  | $ | 762          |  | $ | 137      | 
|Office furniture & equipment           |   | 26,194  |  |   | 6,526        |  |   | 19,668      |  |   | 13,202 |  |   | 3,885        |  |   | 9,317    | 
|Leasehold improvements                 |   | 15,617  |  |   | 15,617       |  |   | -           |  |   | 15,617 |  |   | 15,617       |  |   | -        | 
|Computer equipment under capital lease |   | 2,140   |  |   | 1,869        |  |   | 271         |  |   | 2,140  |  |   | 1,791        |  |   | 349      | 
|Automobile                             |   | 72,468  |  |   | 7,505        |  |   | 64,963      |  |   | 6,158  |  |   | 839          |  |   | 5,319    | 
|                                       |   |         |  |   |              |  |   |             |  |   |        |  |   |              |  |   |          | 
|                                       | $ | 143,589 |  | $ | 37,254       |  | $ | 106,335     |  | $ | 38,016 |  | $ | 22,894       |  | $ | 15,122   | 

**5.** **Bank
Overdraft**

At March 31, 2010, 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 $123,050 ($125,000 CDN) and is
secured by a shareholder guarantee and $51,959 ($52,783 CDN) in the form of a
term deposit. As of March 31, 2010, the Company had written checks of $Nil in
excess of the operating line of credit.

Pursuant to the banking facility, the Companys wholly owned
subsidiary is required to maintain minimum equity of $95,150 (CDN$100,000).

**6.** **Shareholder
loans**

At March 31, 2010 the Company is indebted to a company
controlled by the Companys president in the amount of $821,756. The loan is
unsecured, bears 7.5% interest and has no fixed terms of repayment.

**7.** **Loans
payable**

At March 31, 2010, the Companys loans payable balance was $Nil
(June 30, 2009  $310,265).

**8.** **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.

14

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2010                                
|                                              

**8.** **Income
taxes, continued**

The Company generated a deferred tax credit through net
operating loss carry forwards. As of June 30, 2009 the company had federal and
state net operating loss carry forwards of approximately $6,981,146 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 June 30, 2009, STS had available federal net operating loss
(NOL)carry forwards of approximately $6,992,146. 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, 2010 and June 30, 2009 as follows:

|                                                                                |   | March 31,  |   |   | June 30,   |  
|------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                                                |   | 2010       |   |   | 2009       |  
|                                                                                |   |            |   |   |            |  
|Deferred tax asset, beginning                                                   | $ | 2,402,420  |   | $ | 2,409,732  |  
|Benefit (provision )of current years operating loss carry
      forward (gain) |   | (236,902   | ) |   | (7,312     | )
|Deferred tax asset, ending                                                      | $ | 2,165,518  |   | $ | 2,402,420  |  
|                                                                                |   |            |   |   |            |  
|Valuation allowance, beginning                                                  | $ | (2,402,420 | ) | $ | (2,409,732 | )
|Current years loss carry forward (provision)                                   |   | 236,902    |   |   | (7,312     | )
|Valuation allowance, ending                                                     | $ | (2,165,518 | ) | $ | (2,402,420 | )
|                                                                                |   |            |   |   |            |  
|Deferred tax asset, net                                                         | $ | -          |   | $ | -          |  
|                                                                                |   |            |   |   |            |  
|Tax at blended U.S./Canadian statutory
      rates                              |   | (35%       | ) |   | (35%       | )
|Loss carryover                                                                  |   | 35%        |   |   | 35%        |  
|                                                                                |   |            |   |   |            |  
|Tax expense                                                                     | $ | -          |   | $ | -          |  

15

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|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2010                                
|                                              

9.        Capital Stock

At March 31, 2010, 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 

Common Stock

At March 31, 2010, there are 69,314,124 shares of common stock
outstanding.

During the nine month period, the Company issued 45,000,000
common stock of the Company to Brian Bonar, a director of the Company based on
the achievement certain milestone targets for annualized sales as set out in the
Marketing Partner Agreement dated June 17, 2009.

During the nine month period, the Company issued 23,866,535
common stock of the Company for the settlement of debt.

Preferred Shares

At March 31, 2010, there are no preferred shares outstanding.

10.      Costs and Estimated
Earnings on Uncompleted Contracts

|                                        |   | March 31,  |   |   | June 30,   |  
|--------------------------------------- | - | ---------- | - | - | ---------- | -
|                                        |   | 2010       |   |   | 2009       |  
|                                        |   |            |   |   |            |  
|Costs incurred on uncompleted contracts | $ | 2,851,299  |   | $ | 1,225,215  |  
|Estimated earnings                      |   | 2,310,429  |   |   | 746,096    |  
|                                        |   | 5,161,728  |   |   | 1,971,311  |  
|                                        |   |            |   |   |            |  
|Less: Billings to Date                  |   | (5,114,109 | ) |   | (2,231,814 | )
|                                        |   |            |   |   |            |  
|                                        | $ | 47,619     |   | $ | (260,503   | )

Included in accompanying balance sheets under the following
captions:

|Costs of uncompleted contracts in excess of
      billings                  | $ | 189,865  |   | $ | 37,097   |  
|--------------------------------------------------------------------------- | - | -------- | - | - | -------- | -
|Billings on uncompleted contracts in excess of costs and estimated revenues |   | (142,246 | ) |   | (297,600 | )
|                                                                            | $ | 47,619   |   | $ | (260,503 | )

16

---

- 17 -

|Smart-tek Solutions Inc.                      
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|March 31, 2010                                
|                                              

11.      Related Party Transactions

During the nine month period ended March 31, 2010, the
Companys wholly owned subsidiary paid $839,841 in management salaries to its
President and Vice president which included bonuses of $713,488. Consulting fees
of $68,641 were also incurred during the period. Such costs have been reflected
in the accompanying statement of operations.

Amounts due to officers and directors were $821,756 as of March
31, 2010.

12.      Commitments

Operating leases

The Companys wholly owned subsidiary Smart-tek Communications
Inc. entered into a non-cancellable operating lease for office space on March 1,
2008. Furthermore, the Companys wholly-owned subsidiary is committed to
operating leases for four company vehicles up to April 2014. The minimum
payments required under these operating leases for each of the five years
subsequent to March 31, 2010 are approximately as follows:

|     |  | Year ending | 
|---- |  | ----------- | 
|     |  | June 30     | 
|     |  |             | 
|2010 |  | 6,121       | 
|     |  |             | 
|2011 |  | 24,484      | 
|2012 |  | 19,281      | 
|2013 |  | 9,212       | 
|2014 |  | 7,293       | 

Employment agreements

The Companys wholly owned subsidiary Smart-tek Communications
Inc. has annual employment agreements with the president and vice-president and
is committed to pay each of them annual salaries of $140,820 (CDN$150,000) along
with annual car allowances of $14,082 (CDN$15,000).

Marketing partner agreement

By agreement dated June 30, 2009, the Company entered into a
Marketing Partner Agreement with its wholly owned subsidiary, Smart-tek
Automated Services, Inc. (SASI), and Brian Bonar (Bonar), a director of the
Company.

Pursuant to the terms of the marketing agreement, Bonar agreed
to provide certain services to SASI to promote and market the business of SASI
to prospective clients, in consideration of which SASI agreed to pay Bonar a
commission consisting of the following: (i) for every US$1,000,000 in annualized
gross sales of SASI up to the first US$25,000,000 in annualized sales introduced
by Bonar, Bonar will receive 1,800,000 shares of common stock of the Company up
to a maximum of 45,000,000 shares of Companys common stock; and (ii) after an
aggregated US$25,000,000 in annualized gross sales by SASI resulting from sales
introduced by Bonar, Bonar will receive one percent of annualized gross revenues
of SASI for the amounts in excess of US$5,000,000 of annualized gross sales in
any given fiscal year payable in cash. The agreement is for an indefinite term
and may be terminated by either party without cause on 30 days written notice.

---

- 18 -

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.

---

- 19 -

Our Current Business

We currently operate two distinct lines of business. Through
our wholly owned subsidiary Smart-Tek Communications Inc. we operate in the
business of design, sale, installation and service of security technology with
electronic hardware and software products. Our projects range from residential
and commercial developments to system upgrades and monitoring contracts.
Customers include major developers, general and electrical contractors,
hospitals, Crown Corporations, law enforcement agencies and retail facilities.
Currently, 100% of the Companys operations are in Canada. We have a sales and
technical installation team with over 50 years of experience specializing in the
design, sales, installation and service of CCTV, access control, intercom,
security, structured cabling and wireless communication systems.

On June 17, 2009, we determined to add a new line of business
providing integrated and cost-effective management solutions in the area of
human resources for public and private companies. In connection with the
expansion of business operations, we incorporated a subsidiary, Smart-Tek
Automated Services, Inc. (Smart-Tek Automated), a private Nevada corporation
through which we operate our new line of business. Since its inception,
Smart-Tek Automated Services Inc. has provided services to small and medium-size
businesses, relieving its 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. We intend to continue to expand this new business in the next
twelve months.

Recent Corporate Developments

Since the commencement of our third quarter ended March 30,
2010, we experienced the following significant corporate developments:

| | 1. | On March 12, 2010, Perry Law resigned his officer
      positions with the Company upon which Brian Bonar was appointed as Chief
      Executive Officer, Chief Financial Officer, Secretary, Treasurer of the
      issuer and Chairman of the Board. Mr. Law will continue as a Director of
      the Company and as President Smart-Tek Communication, a wholly owned
      subsidiary of the issuer.                                                                                                                                                                                                                                                                                                                          
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 2. | During the quarter, the Companys wholly owned
      subsidiary, Smart-Tek Automated Services Inc., opened offices in Los
      Angeles, Marlton, New Jersey and Colorado. The Colorado office is intended
      to provide sales and client service support for customers in Colorado, New
      Mexico, Kansas, Oklahoma and Missouri. The decision to open a new sales
      office was due to the sales growth Smart-Tek Automated experienced in
      these geographical areas.                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 3. | During the quarter Smart-Tek Automated experienced an
      increase in the number of clients engaging the Company for staffing and
      payroll services, bringing the total number of clients to 38.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 4. | In January, 2010 Smart-Tek Automated signed a leasing
      agreement with F.W. Davison to use a high performance PEO software that
      integrates payroll, human resources, benefits administration, billing and
      accounts receivable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 5. | In January, 2010 Smart-Tek Automated appointed Kelly
      Mowrey as COO. Kelly Mowrey received a BA from Stephens College, Magna Cum
      Laude and has over nine years experience in the PEO and Staffing Industry.
      Mowrey, most recently served as the Vice President of Corporate Sales for
      Allegiant Professional Business Services, Inc. In this role, Mowrey
      significantly increased by targeting large staffing firms and developing
      relationships with large brokers within the PEO industry. Mowrey has had
      over nine years of executive sales experience with public companies in our
      industry and provides a track record of developing a sales strategy to
      increase sales.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 6. | In May, 2009 Brian Bonar was appointed as Chief Executive
      Officer of Smart-Tek Automated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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- 20 -

Marketing Partner Agreements

In August, 2009 Smart-Tek Automated entered into a strategic
marketing partner agreement with ACEO Inc. Pursuant to the terms of the
marketing agreement ACEO agreed to promote the business and services of the
Company through various means including, among other things, providing for the
assignment of payroll processing contracts of its existing clients to Smart-Tek
Automated, developing qualified client leads for Smart-Tek Automated, collecting
information concerning workers compensation from prospect to facilitate price
quotations and perform such other marketing and support services for Smart-Tek
Automated as it may from time to time require.

In consideration of these services Smart-Tek Automated agreed
to: (i) pay for all employee wages, payroll taxes, state and federal
unemployment insurance, claims and workers compensation premiums of all clients
referred; and (ii) provide recruitment, reference checks, initial interviews,
pre-employment and random drug testing services. Under the terms of the
agreement ACEO agreed to wire monies to the Company on a weekly basis in an
amount equal to the gross wages plus applicable taxes, workers compensation and
the administrative fees set out in the schedules to the agreement, which fees
include a fee of 1% of gross payroll, deductible workers compensation expenses
of $1,000 per occurrence and workers compensation fees at a rate of 75% of GIC
manual rate for the clients listed in the schedules to the agreement. The
agreement may be terminated by either party without cause. If the agreement is
terminated without cause the parties agree to enter into a client transition
agreement to allow for the transition of clients back to ACEO.

Since the Companys entry into ACEO Inc. agreement, the Company
has entered into agreements with 28 of the companies listed in the schedules to
the marketing agreement. ACEO is a sales brokerage and payroll outsourcing firm
that brokers submissions to numerous professional employment organizations
(PEO). Smart-Tek Automated is in the process of having each client sign a new
contract directly with Smart-Tek Automated. We hope to have this completed by
the end of our next quarter.

RESULTS OF OPERATIONS

Nine Month Summary

|                                             |                   |            | Percentage
|-------------------------------------------- | ----------------- | ---------- | ----------
|                                             | Nine Months Ended | Increase/ 
|                                             | March
      31,   | (Decrease)
|                                             | 2010              | 2009       |           
|Revenue                                      | $8,346,760        | 2,453,602  | 240.2%    
|Selling, General and Administrative Expenses | 1,927,580         | 710,305    | 171.4%    
|Interest expense                             | (5,917)           | (3,892)    | 52.0%     
|Net Income (Loss)                            | $676,862          | ($99,849)  | 789%      

Revenue

The 240.2% increase in revenues for the nine months ended March
31, 2010 as compared to the comparative period in 2009 is primarily attributable
to: (i) the continued development of our payroll and staffing business through
Smart-Tek Automated; and (ii) an increase in business during the period for our
security business through Smart-Tek Communications Inc. During the period ended
March 31, 2010 we had a gross profit of $2,610,359 as compared to a gross profit
of $614,348 during the comparative period in 2009. The business of our
subsidiary Smart-Tek Automated accounted for 51.2% of our gross profit and 53.6%
of our total revenues during the period.

Expenses

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

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- 21 -

|                                             |                   |            | Percentage
|-------------------------------------------- | ----------------- | ---------- | ----------
|                                             | Nine Months Ended | Increase/ 
|                                             | March 31,         | (Decrease)
|                                             | 2010              | 2009       |           
|Cost of revenue and service delivery         | 5,736,401         | 1,839,254  | 211.9%    
|Selling, General and Administrative Expenses | $1,927,580        | $710,305   | 171.4%    
|Interest expense                             | 5,917             | 3,892      | 52.0%     
|Total Expenses                               | $7,669,898        | $2,553,451 | 200.4%    

Cost of revenue and service delivery

The Cost of revenue and service delivery for the nine month
period ended March 31, 2010 was $5,736,401 compared to $1,839,254 for the same
period prior year for an increase of $3,897,147 or 211.9% . The increase was
primarily due to the business of our subsidiary Smart-tek Automated Services,
which accounts for $3,139,881 of the increase with the balance of $757,266
relating to the core business.

Selling, General and Administrative

The 171.4% increase in our selling, general and administrative
expenses of $1,217,275 for the nine month period ended March 31, 2010 from the
comparative period in 2009 was primarily due to: (i) increase of $603,135 due to
the business of our subsidiary Smart-tek Automated Services, (ii) increase of
$525,971 (167.6%) in management fees, (iii) increase of $109,931 (113.5%) in
entertainment, offset by decreases in other items of $21,762 (7.3%) .

During the nine month period ended March 31, 2010, the
Companys wholly owned subsidiary (SCI) paid $976,597 in salaries and wages of
which included management salaries of $829,841 to its President and Vice
president (which included bonuses of $713,488).

Net Income

Net Income for the nine months ending March 31, 2010 is
$676,862 compared to a loss of $99,849 for the same period prior year. The net
income of $676,862 consists of $730,625 in income from the new Smart-Tek
Automated Services subsidiary, offset by a loss of $1,243 from the Smart-Tek
Communications Inc. subsidiary plus corporate charges of $52,520.

Liquidity and Capital Resources

Working Capital

|                           | Nine Months |               | Percentage
|-------------------------- | ----------- | ------------- | ----------
|                           | Ended March | Year Ended    | Increase/ 
|                           | 31, 2010    | June 30, 2009 | (Decrease)
|Current Assets             | $4,625,680  | $986,225      | 369.0%    
|Current Liabilities        | 5,039,412   | 2,294,927     | 119.6%    
|Working Capital Deficiency | ($413,732)  | ($1,308,702)  | (68.4%)   

Cash Flows

|                                         | Nine Months    | Nine Months    | Percentage
|---------------------------------------- | -------------- | -------------- | ----------
|                                         | Ended          | Ended          | Increase/ 
|                                         | March 31, 2010 | March 31, 2009 | (Decrease)
|Cash from (used in) Operating Activities | $302,909       | ($374,960)     | 180.8%    
|Cash (used in) Investing Activities      | ($105,574)     | ($6,158)       | 1,614.4%  
|Cash provided by Financing Activities    | $481,833       | $288,851       | 334.2%    
|Net Increase (Decrease) in Cash          | $633,224       | ($9,819)       | 6549.0%   

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- 22 -

We had cash on hand of $706,496 and a working capital deficit
of $(413,732) as of March 31, 2010 compared to cash on hand of $73,272 and a
working capital deficit of $(1,308,702) for the year ended June 30, 2009. We
anticipate that we will incur approximately $300,000 for operating expenses,
including professional, legal and accounting expenses associated with our
reporting requirements under the Exchange Act during the next twelve months.

Cash Used In Operating Activities

We had cash from operating activities in the amount of $302,909
during the nine months ended March 31, 2010 as compared to cash used in
operating activities of $374,960 in the comparative period in 2009. 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 $105,574
during the nine months ended March 31, 2010. Cash used in investing activities
was funded by cash from financing activities. At March 31, 2010 the Company is
indebted to a company controlled by the Companys president in the amount of
$821,756. The loan is unsecured, bears 7.5% interest and has no fixed terms of
repayment.

Cash from Financing Activities

We had cash of $481,833 from financing activities during the
nine months ended March 31, 2010, an increase of 66.8% from the comparative
period in 2008. Cash provided by financing activities during the period
increased primarily due to an increase in proceeds from officers and
directors.

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.

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.

Subsequent Event

On April 19, 2010, the Company filed a preliminary proxy
seeking the shareholders of the Company to vote on the following proposals:

| | 1. | Approve the vend-out of our wholly owned subsidiary
      Smart-Tek Communications Inc. to its president and founder Perry
    Law.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                    
| | 2. | Approve the Smart-Tek Solutions 2010 Stock Compensation
      Plan.                                                                
| |    |                                                                                                                                    
| | 3. | Change from a fiscal June year-end to a calendar December
      year end.                                                          

The main terms of the vend-out (sale) are s follows: The
Company is selling its wholly owned subsidiary Smart-Tek Communications Inc. to
its president and founder Perry Law for $1,021,757 which consists of the
following -

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- 23 -

| | (a) | $821,756of the Purchase Price shall be paid and
      satisfied by setting-off the Vendor's indebtedness to the Purchaser
      pursuant to a Loan, including all accrued and unpaid interest there under
      up to the Closing Date, against the Purchase Price;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                    
| | (b) | $1.00of the Purchase Price shall be paid by the
      Purchaser transferring the Smart-Tek Shares to the Vendor as provided for
      in Section 6.3 hereof; and                                                                                                   
| |     |                                                                                                                                                                                                                                                                    
| | (c) | $200,000of the Purchase Price shall be paid and
      satisfied by the Purchaser for all amounts owed to Richardson Patel LLP
      pursuant to the Richardson Patel Litigation within ninety (90) days the
      signing of this document.                        
| |     |                                                                                                                                                                                                                                                                    
| | (d) | Purchaser consents to the cancellation of any outstanding
      options beneficially owned by him.                                                                                                                                                                 

The Company feels it can best benefit the shareholders by
concentrating its resources and efforts on the new business of Smart-tek
Automated Services, Inc.

The Smart-Tek Solutions 2010 Stock Compensation Plan authorizes
the company to sell or award up to 3,000,000 shares and/or options of the
Company's Common Stock, $.001 par value per share, at current market price. The
purpose of this plan is provide the Company with a means of compensating
selected key employees (including officers) and directors of and consultants to
the Company and its subsidiaries for their services rendered in connection with
the development of Smart-Tek Solutions Inc. with shares of Common Stock of the
Company.

The change from a June year-end to a December year-end to
harmonize the Companys year-rend with its business cycle.

On May 13, 2010 the Company received comments from the
Securities and Exchange Commission to be cleared before a definitive proxy can
be distributed.

Critical Accounting Policies

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

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

Revenue Recognition  contract business

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 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.

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- 24 -

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.

Revenue Recognition  PEO business

Revenues are comprised of the Companys charges to clients for
workers compensation insurance, administrative, and service fees based on
periodic payrolls processed. The Company recognizes revenues when each periodic
payroll is delivered to the client. Revenues are reported in accordance with
authoritative guidance issued by the Financial Accounting Standards Board
(FASB) for reporting revenues gross when acting as a principal versus net as
an agent. The Company records revenue on a net basis and does not include the
gross payroll of its client company employees in its revenues.

Insurance Reserves

We maintain reserves for workers' compensation claims which are
made up of estimated claims and estimated expenses related to settle the claims.
These estimates are impacted by claims that have been reported but not settled
and claims that have been incurred but not reported. We 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. Since there are many estimates and
assumptions involved in recording insurance reserves, differences between actual
future events and prior estimates and assumptions could result in adjustments to
these reserves.

Goodwill and Intangible Assets

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

Stock-based Compensation

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

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- 25 -

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 $195,000 was recognized as
expense during the nine months ended March 31, 2010. 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
March 31, 2010, the value of the unvested options was $Nil.

Risks and Uncertainties

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

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

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

In addition, if the acquired businesses have operating losses
or negative operating cash flow, our ability to achieve positive cash flow and
profitability, as well as our liquidity, could be adversely affected. Some or
all of these risks could adversely affect our operations and financial
performance. For example, client satisfaction or performance problems at a
single acquired business could adversely affect our reputation and financial
results. Further, any businesses acquired in the future may not achieve
anticipated revenues and earnings and therefore negatively impact our
consolidated financial position, results of operations and cash flows.

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

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

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- 26 -

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

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

We may have difficulty managing growth.

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

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

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

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

At March 31, 2010, we had available federal net operating loss
(NOL) carry-forwards of approximately $6,992,146. Under Section 382 of the
Internal Revenue Code of 1986, as amended, the use of prior losses, including
NOLs is limited if a corporation undergoes an ownership change. Future
issuances of equity interests by us for acquisitions or the exercise of
outstanding options to purchase our capital stock may result in an ownership
change that is large enough for this limitation to apply. If the limitation
applies, the Company may be unable to use a material portion of its available
NOL carry-forwards to reduce future taxable income.

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

Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines penny stock to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and accredited investors. The term
accredited investor refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customers account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customers
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchasers written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for the stock that is subject to these penny
stock rules. Consequently, these penny stock rules may affect the ability of
broker-dealers to trade our securities. We believe that the penny stock rules
discourage investor interest in, and limit the marketability of, our common
stock.

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- 27 -

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

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, 2010, 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.

There were no changes in our internal control over financial
reporting during the fiscal quarter ended March 31, 2010 that have materially
affected or are reasonably likely to materially affect, our internal control
over financial reporting.

Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to be disclosed
by our company in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the SECs rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by our company in the reports that we file or submit
under the Exchange Act is accumulated and communicated to our management,
including our principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure.

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- 28 -

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On July 10, 2009 Smart-Tek entered into a settlement agreement
with Richardson Patel pursuant to which it agreed to pay Richardson Patel
$200,000 in full and final settlement of all claims that the firm had or may
have had against Smart-Tek with respect to certain outstanding accounts owed by
Smart-Tek to the firm. In connection with our entry into the settlement
agreement with Richardson Patel, we entered into a stock pledge agreement among
Richardson Patel, Perry Law, and four of our stockholders pursuant to which the
stockholders pledged an aggregate of 29,152,127 shares of our common stock as
security for repayment of the amounts owed to Richardson Patel.

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.

None.

ITEM 6. EXHIBITS

|Exhibit | Description                                                                                                                                                                               
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                                           
|        |                                                                                                                                                                                           
|3.1     | Articles of Incorporation as amended(1)                                                                                                                                                   
|3.2     | Bylaws(1)                                                                                                                                                                                 
|3.3     | Certificate of Amendment to Articles (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 Solutions Inc. dated March 8, 2005 (3)                                                                              
|10.2    | Share Exchange Agreement between Royce Biomedical Inc.
      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    | Form of Debt Settlement and Subscription Agreement dated
      June 23, 2008 among Smart-Tek Solutions Inc., Perry Law, P5 Holdings Ltd.,
      Joe Law, Denis Gallant and Gev 2000 KFT(7)
|10.8    | Lease Agreement between Smart-Tek Communications, Inc.
      and Protec Installations Group dated March 1, 2008(8)                                                                        

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- 29 -

|Exhibit | Description                                                                                                                                         
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                     
|10.9    | Marketing Partner
        Agreement dated June 17, 2009 among Smart-Tek Solutions Inc., Smart-Tek
        Automated Systems Inc. and Brian Bonar.(9)
|10.10   | Settlement Agreement and General
        Release made as of July 10, 2009 between Smart-Tek Solutions Inc. and
        Richardson Patel LLP (11)    
|10.11   | Amendment to
        Employment Agreement between Smart-Tek Communications Inc. and Perry Law
        dated July 31, 2009 (11)                      
|10.12   | Strategic Marketing Partner
        Agreement between Smart-Tek Automated Services Inc. and ACEO Inc. dated
        August 1, 2009 (11)             
|10.13   | Form of Debt
        Settlement and Subscription Agreement dated September 30, 2009 (11)                                                            
|14.1    | Amended and Restated Code of
        Ethics(10)                                                                                                     
|21.1    | Subsidiaries(11)                                                                                                                                    
|31.1*   | CEO
        and CFO Section 302 Certifications under Sarbanes-Oxley Act of 2002                                                                     
|32.1*   | 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.                         

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- 30 -

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                                                         | 
|      | Chief Executive Officer, Chief Financial
      Officer and director | 
|      | (Principal Executive Officer, Principal
      Accounting Officer    | 
|      | and Principal Financial Officer)                                    | 
|      |                                                                     | 
|Date: | May 14, 2010                                                        | 

---