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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-Q

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

For the quarterly period ended June 30, 2012

[  ] 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                                                               | **90-0749326**                      
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)

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

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

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

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]          No
[  ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).

Yes [ 
]          No [  ]

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

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

Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ]        
 No [X]

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

Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after
distribution of securities under a plan confirmed by a court.

Yes [ 
]          No [  ]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuers
classes of common equity as of the latest practicable date: As of August 7,
2012, there were 49,212,123 shares of common stock, par value $0.001,
outstanding.

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|Smart-Tek Solutions Inc.                 
|-----------------------------------------
|Period Ended
      June 30, 2012 and 2011

PART I -- FINANCIAL INFORMATION

|CONTENTS                                                                       | PAGES
|------------------------------------------------------------------------------ | -----
|                                                                               |      
|FINANCIAL STATEMENTS                                                           |      
|                                                                               |      
|Condensed
      Consolidated Balance Sheets                                    | 2    
|                                                                               |      
|Condensed
      Consolidated Statements of Operations and Comprehensive Income | 3    
|                                                                               |      
|Condensed
      Consolidated Statements of Cash Flows                          | 4    
|                                                                               |      
|Notes to
      the Condensed Consolidated Financial Statements                 | 5-14 

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Smart-Tek Solutions Inc.Condensed Consolidated
Balance SheetsAs of June 30, 2012 and December 31, 2011(Unaudited)

|                                                                                                                                                                          |   | June 30,    |   |   | December 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ------------ | -
|                                                                                                                                                                          |   | 2012        |   |   | 2011         |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Assets                                                                                                                                                                    |   |             |   |   |              |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Current assets                                                                                                                                                            |   |             |   |   |              |  
|Cash and cash equivalents                                                                                                                                                 | $ | -           |   | $ | 132,492      |  
|Accounts
      receivable, net                                                                                                                                            |   | 1,309,170   |   |   | 1,626,583    |  
|Due from related parties                                                                                                                                                  |   | 2,228,103   |   |   | 2,739,220    |  
|Prepaid
      expenses and deposits                                                                                                                                       |   | 5,346       |   |   | 52,152       |  
|Total current assets                                                                                                                                                      |   | 3,542,619   |   |   | 4,550,447    |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Equipment, net of accumulated depreciation                                                                                                                                |   | 43,851      |   |   | 55,007       |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Prepaid workers compensation                                                                                                                                              |   | 4,527,058   |   |   | 3,440,000    |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Goodwill                                                                                                                                                                  |   | 476,356     |   |   | 476,356      |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Total Assets                                                                                                                                                              | $ | 8,589,884   |   | $ | 8,521,810    |  
|                                                                                                                                                                          |   |             |   |   |              |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Liabilities                                                                                                                                                               |   |             |   |   |              |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Current liabilities                                                                                                                                                       |   |             |   |   |              |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Bank
      overdraft                                                                                                                                                      | $ | 17,525      |   | $ | -            |  
|Accounts
      payable and accrued liabilities                                                                                                                            |   | 446,354     |   |   | 441,435      |  
|Assigned receivables
      liability                                                                                                                                      |   | 801,043     |   |   | 826,943      |  
|Accrued payroll
      taxes                                                                                                                                               |   | 15,727,778  |   |   | 11,958,012   |  
|Accrued workers compensation                                                                                                                                              |   | 1,095,131   |   |   | 1,055,980    |  
|Payable to related
      parties                                                                                                                                          |   | 516,691     |   |   | 609,022      |  
|Note
      payable to related party                                                                                                                                       |   | 500,000     |   |   | 500,000      |  
|Total current liability                                                                                                                                                   |   | 19,104,522  |   |   | 15,391,392   |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Other long-term
      liabilities                                                                                                                                         |   | -           |   |   | 35,000       |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Total liabilities                                                                                                                                                         |   | 19,104,522  |   |   | 15,426,392   |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Commitments and
      contingencies                                                                                                                                       |   | -           |   |   | -            |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Stockholders (Deficit)                                                                                                                                                   |   |             |   |   |              |  
|                                                                                                                                                                          |   |             |   |   |              |  
|Preferred stock: $0.001 par value, 5,000,000
      shares authorized, zero shares of Class A preferred issued and
      outstanding at June 30, 2012 and December 31,2011 |   | -           |   |   | -            |  
|Common stock: $0.001 par
      value, 500,000,000 shares authorized, 49,212,123 issued and
      outstanding at June 30, 2012 and December 31, 2011                       |   | 49,212      |   |   | 49,212       |  
|Additional paid in capital                                                                                                                                                |   | 7,271,945   |   |   | 7,271,945    |  
|Accumulated deficit                                                                                                                                                       |   | (17,835,795 | ) |   | (14,225,739  | )
|                                                                                                                                                                          |   |             |   |   |              |  
|Total stockholders (deficit)                                                                                                                                             |   | (10,514,638 | ) |   | (6,904,582   | )
|                                                                                                                                                                          |   |             |   |   |              |  
|                                                                                                                                                                          | $ | 8,589,884   |   | $ | 8,521,810    |  

See accompanying notes to the consolidated financial
statements.

2

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Smart-Tek Solutions Inc.Condensed Consolidated
Statements of Operations and Comprehensive IncomeFor the Three and
Six Months ended June 30, 2012 and 2011(Unaudited)

|                                                                                                                                                                                                                     |   | Three Months |   |   | Three Months |   |   | Six Months  |   |   | Six Months |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ----------- | - | - | ---------- | -
|                                                                                                                                                                                                                     |   | Ended        |   |   | Ended        |   |   | Ended       |   |   | Ended      |  
|                                                                                                                                                                                                                     |   | June 30,     |   |   | June 30,     |   |   | June 30,    |   |   | June 30,   |  
|                                                                                                                                                                                                                     |   | 2012         |   |   | 2011         |   |   | 2012        |   |   | 2011       |  
|                                                                                                                                                                                                                     |   |              |   |   |              |   |   |             |   |   |            |  
|Revenue:                                                                                                                                                                                                             |   |              |   |   |              |   |   |             |   |   |            |  
|(For the three months ending June 30, 2012
      and June 30, 2011 gross billings of $24,586 and $20,876 million, less
      worksite employee payroll cost of $18,452 and $14,475 million respectively)             | $ | 6,133,600    |   | $ | 6,401,186    |   | $ | 12,614,594  |   | $ | 10,622,992 |  
|(For the six months ending
      June 30, 2012 and June 30, 2011 gross billings of $50,349 and $36,537
      million, less worksite employee payroll cost of $37,734 million and
      $25,914 million respectively) |   |              |   |   |              |   |   |             |   |   |            |  
|                                                                                                                                                                                                                     |   |              |   |   |              |   |   |             |   |   |            |  
|Cost of revenue and service
      delivery                                                                                                                                                                           |   | (5,758,400   | ) |   | (4,716,003   | ) |   | (11,306,885 | ) |   | (7,665,294 | )
|Gross profit                                                                                                                                                                                                         |   | 375,200      |   |   | 1,685,183    |   |   | 1,307,709   |   |   | 2,957,698  |  
|                                                                                                                                                                                                                     |   |              |   |   |              |   |   |             |   |   |            |  
|Selling, general and
      administrative expenses                                                                                                                                                                   |   | (1,906,817   | ) |   | (2,270,792   | ) |   | (4,459,736  | ) |   | (3,169,625 | )
|Operating income (loss)                                                                                                                                                                                              |   | (1,531,617   | ) |   | (585,609     | ) |   | (3,152,027  | ) |   | (211,927   | )
|Other Income (Expense)                                                                                                                                                                                               |   |              |   |   |              |   |   |             |   |   |            |  
|Other Income                                                                                                                                                                                                         |   | 12           |   |   | -            |   |   | 27          |   |   | -          |  
|Interest                                                                                                                                                                                                             |   | (7,994       | ) |   | (13,552      | ) |   | (16,314     | ) |   | (23,881    | )
|Tax Penalties                                                                                                                                                                                                        |   | (385,209     | ) |   | -            |   |   | (441,742    | ) |   | -          |  
|                                                                                                                                                                                                                     |   |              |   |   |              |   |   |             |   |   |            |  
|Net income (loss) from continuing operations                                                                                                                                                                         |   | (1,924,808   | ) |   | (599,161     | ) |   | (3,610,056  | ) |   | (235,808   | )
|                                                                                                                                                                                                                     |   |              |   |   |              |   |   |             |   |   |            |  
|Comprehensive (loss) for the period                                                                                                                                                                                  |   | ($1,924,808  | ) |   | ($599,161    | ) |   | ($3,610,056 | ) |   | ($235,808  | )
|                                                                                                                                                                                                                     |   |              |   |   |              |   |   |             |   |   |            |  
|Loss per share, basic and diluted                                                                                                                                                                                    |   | ($0.04       | ) |   | ($0.02       | ) |   | ($0.07      | ) |   | ($0.01     | )
|                                                                                                                                                                                                                     |   |              |   |   |              |   |   |             |   |   |            |  
|Weighted average shares outstanding basic and
      diluted                                                                                                                                                          |   | 49,212,123   |   |   | 29,796,080   |   |   | 49,212,123  |   |   | 27,070,245 |  

See accompanying notes to the consolidated financial
statements.

3

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Smart-Tek Solutions Inc.Condensed Consolidated
Statements of Cash FlowsFor the Six Months Ended June 30, 2012 and
2011

|                                                                                          |   | 2012       |   |   | 2011      |  
|----------------------------------------------------------------------------------------- | - | ---------- | - | - | --------- | -
|                                                                                          |   |            |   |   |           |  
|Operating Activities                                                                      |   |            |   |   |           |  
|                                                                                          |   |            |   |   |           |  
|Net (loss)                                                                                | $ | (3,610,056 | ) | $ | (235,808  | )
|Adjustments to reconcile net (loss) to cash
      provided (used) by operating activities |   |            |   |   |           |  
|Depreciation and
      amortization                                                       |   | 11,156     |   |   | 12,308    |  
|Changes in operating assets and liabilities                                               |   |            |   |   |           |  
|Accounts
      receivable                                                                 |   | 317,413    |   |   | 1,321,861 |  
|Due from related party                                                                    |   | 511,117    |   |   | (275,000  | )
|Prepaid expenses
      and deposits                                                       |   | 46,806     |   |   | (424,010  | )
|Prepaid worker compensation
      expense                                                 |   | (1,087,058 | ) |   | -         |  
|Bank overdraft                                                                            |   | 17,525     |   |   | -         |  
|Accrued workers compensation
      expense                                                |   | 39,151     |   |   | -         |  
|Payroll taxes
      payable                                                               |   | 3,769,766  |   |   | -         |  
|Accounts payable and accrued
      liabilities                                            |   | 4,919      |   |   | (696,856  | )
|                                                                                          |   |            |   |   |           |  
|Net cash provided (used) by operating
      activities                                    |   | 20,739     |   |   | (297,505  | )
|                                                                                          |   |            |   |   |           |  
|Investing activities                                                                      |   |            |   |   |           |  
|                                                                                          |   |            |   |   |           |  
|Purchase of equipment                                                                     |   | -          |   |   | (46,125   | )
|                                                                                          |   |            |   |   |           |  
|Net cash used in investing activities                                                     |   | -          |   |   | (46,125   | )
|                                                                                          |   |            |   |   |           |  
|Financing activities                                                                      |   |            |   |   |           |  
|                                                                                          |   |            |   |   |           |  
|Assignment of accounts
      receivable                                                   |   | (25,900    | ) |   |           |  
|Payments to
      related party                                                           |   | (92,331    | ) |   | -         |  
|Payments of long-term
      payable                                                       |   | (35,000    | ) |   | -         |  
|Issuance of
      shares                                                                  |   | -          |   |   | 443,979   |  
|                                                                                          |   |            |   |   |           |  
|Net cash provided by (used
      in) financing activities                                 |   | (153,231   | ) |   | 443,979   |  
|                                                                                          |   |            |   |   |           |  
|Net increase (decrease) in
      cash from continuing operations                          |   | (132,492   | ) |   | 100,349   |  
|                                                                                          |   |            |   |   |           |  
|Cash and cash equivalents,
      beginning of period                                      |   | 132,492    |   |   | 781,720   |  
|                                                                                          |   |            |   |   |           |  
|Cash and cash equivalents,
      end of period                                            | $ | 0          |   | $ | 882,069   |  
|                                                                                          |   |            |   |   |           |  
|Supplemental cash flow
      information                                                  |   |            |   |   |           |  
|                                                                                          |   |            |   |   |           |  
|Interest paid                                                                             | $ | 16,314     |   | $ | 23,881    |  
|Income taxes payable                                                                      | $ | -          |   | $ | -         |  

See accompanying notes to the consolidated financial
statements.

4

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INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

These interim condensed consolidated financial statements are unaudited but reflect, in the opinion of management, all normal  recurring adjustments necessary to present fairly the financial position of Smart-Tek Solutions, Inc. and its subsidiaries
(“STS” or the “Company”) as of June 30, 2012, its consolidated results of operations for the three and six month period ended June 30, 2012 and June 30, 2011, and the consolidated cash flows for the six month period ended
June 30, 2012 and June 30, 2011. All intercompany balances and transactions have been eliminated in consolidation. The Company owns 100% of the outstanding stock in its subsidiaries. Certain information and footnote disclosures normally included in
the audited consolidated financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Because all the disclosures required by accounting principles generally accepted in the
United States are not included, these interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto in the Company’s Annual Report on Form 10-K as of and for the year
ended December 31, 2011. The results for the three and six month period ended June 30, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2012, or any other period. The year-end condensed
consolidated balance sheet data as of December 31, 2011 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States.

Business Condition – The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has generated insufficient revenues from operations and
has incurred substantial and recurring losses to date. Additionally, the Company has minimal to no cash, negative working capital, and a stockholders’ deficit as of June 30, 2012. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty (See Note 1).

|1. | Summary of significant accounting policies
|-- | ------------------------------------------

Nature of operations, basis of financial statement presentation

Smart-Tek Solutions Inc. (“the Company”) was incorporated in the State of Nevada on March 22, 1995.

In July 2005, the Company changed its name from Royce Biomedical Inc. to Smart-Tek Solutions Inc. (“STS” or the “Company”) to better reflect its new business activities.

In March 2005, the Company entered into a Letter of Intent to acquire Smart-Tek Communications, Inc. (“SCI”) a British Columbia based security design and installation contractor. Pursuant to a Share Exchange Agreement executed in April
2005, SCI became a wholly-owned subsidiary of the Company.

5

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On July 1, 2010, the Company completed the disposition of the Company’s wholly-owned subsidiary SCI to its president and founder Perry Law.

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

On October 1, 2011 Smart-Tek Solutions, Inc. purchased the assets and brand name of Solvis Medical from American Marine LLC dba AMS Outsourcing a Montana limited liability corporation. Solvis Medicalprovides medical staffing services to
hospitals, medical clinics, surgical centers, skilled nursing facilities, and nursing care to patients in their homes.

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:

Liquidity and Management Plans

At June 30, 2012, the Company had cash and cash equivalents of $0, a working capital deficit of approximately $15.6 million and an accumulated deficit of $17.8 million. The Company also has substantial unpaid tax liabilities as of June
30, 2012.  Due to these circumstances, the Company’s management monitors and attempts to minimize, to the extent possible, all cash expenditures. The Company plans to seek additional funds, equity or debt, to support its operations. The
Company’s management believes it will generate sufficient additional revenues to meet its working capital needs in future periods.

Going Concern

The Company incurred a net operating loss of $1.9 million and $3.6 million respectively for the three and six month period ended June 30, 2012 and a net operating loss of approximately $8.1 million for the year ended December 31, 2011,
and has incurred accumulated losses totalling approximately $17.8 million through June 30, 2012. Because of these conditions, the Company will require additional working capital to continue operations and develop its business. The Company
intends to raise additional working capital either through private placements, public offerings and/or bank financing, and continues to strive to increase its revenues each year.

There are no assurances that the Company will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or obtain additional financing through private
placements, public offerings and/or bank financing necessary to support the Company’s working capital requirements. To the extent that funds generated from any private placements, public offerings and/or bank financing are insufficient the
Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available, the Company may
not continue its operations or execute its business plan.

6

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These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Principles of consolidation

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

Use of estimates

The preparation of these consolidated 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, 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.

Accounts Receivable

Accounts receivables are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as needed. The Company uses the allowance method to account for uncollectible accounts receivable balances.
Under the allowance method, if needed, an estimate of uncollectible customer balances is made based upon specific account balances that are considered uncollectible. Factors used to establish an allowance include the credit quality and payment
history of the customer. The allowance for doubtful accounts was $150,000 and zero as of June 30, 2012 and 2011, respectively.

The Company regularly discounts selected trade accounts receivable from clients to a commercial factoring company. Under the terms of the factoring agreement, the factor remits the invoiced amounts to the Company less a portion for reserves. When
paid in full, the factor remits the reserve amount less a portion for processing fees and interest. Accounts are factored with recourse as to credit losses. The Company reflects a liability
to the factoring company in its Balance Sheet for the amounts that remains
uncollected until the factored invoices have been paid in full. At June 30, 2012
the company had $801,043 in assigned accounts receivable.

7

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Workers compensation insurance

The Company maintains reserves in the form of prepaid cash
deposits for known workers' compensation claims which are made up of estimated
collateral required to pay claims and estimated expenses to settle the claims.
The collateral amounts are determined by the insurance carrier and are not
recoverable by the Company until all claims related to a policy period are
settled.

The prepaid cash deposits will not be recoverable in the near
term and accordingly, they are classified as a long term asset. The Company
reserves prepaid cash deposits for case reserves at a rate of 150%. Case
reserves, included in accrued workers compensation, are an estimate for the
costs of claims, administrative costs as well as legal costs. These estimates
are continually reviewed and adjustments to liabilities are reflected in current
operating results as they become known.

Concentration of credit risk

Credit risk arises from the potential that a counterpart will
fail to perform its obligations. The Company is exposed to credit risk related
to its accounts receivable. The Companys receivables are comprised of a number
of debtors which minimizes the concentration of credit risk.

Revenue recognition

The Company recognizes professional employment organizations
(PEO) revenues when each periodic payroll is delivered. 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.
Revenues related to the Solvis Medical business are recognized when the services
are invoiced to the client.

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.

8

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Goodwill

The Companys goodwill was derived from the acquisition of
Solvis Medical assets. Goodwill is the excess of cost over the fair market value
of net tangible assets acquired. Goodwill is not amortized but tested for
impairment on an annual basis or if certain circumstances indicate a possible
impairment may exist.

Share-based compensation

The Company measures the cost of employee services received in
exchange for equity awards based on the grant date fair-value of the awards.
Fair value is typically the market price of the shares on the date of issuance.
Costs are 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.

Earnings (loss) per share

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. Due the Company incurring a loss for the three and six months ending
June 30, 2012 and 2011, all potential dilutive securities were considered to be
anti-dilutive.

Fair Value of Financial Instruments

Fair value is determined to be the price that would be received
to sell an asset or paid to transfer a liability in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants at the measurement date. The Company follows a fair value
hierarchy that prioritizes the inputs used in measuring fair value into three
broad levels as follows:

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

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

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

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

9

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At June 30, 2012 and 2011, the carrying amounts of financial
instruments, including cash, accounts and other receivables, accounts payable
and accrued liabilities, and accounts payable to related parties approximate
fair value because of their short maturity.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

The Company has reviewed accounting pronouncements and
interpretations thereof that have effective dates during the periods reported
and in future periods. The Company believes that the following impending
standards may have an impact on its future filings. The applicability of any
standard will be evaluated by the Company and is still subject to review by the
Company.

The Company has adopted FASB ASC 220 Comprehensive Income,
which establishes standards for reporting and display of comprehensive income
(loss), its components and accumulated balances. The Company had no no
components of comprehensive income (loss) for the periods presented.

In July 2012, the FASB issued ASU No. 2012-02,
IntangiblesGoodwill and Other (Topic 350) Testing Indefinite-Lived
Intangible Assets for Impairment (ASU 2012-02). ASU 2012-02 is intended to
reduce the cost and complexity of the annual indefinite-lived intangible assets
impairment testing by providing entities an option to perform a qualitative
assessment to determine whether further impairment testing is necessary. As
such, there is the possibility that quantitative assessments would not need to
be performed if it is more likely than not that no impairment exists. This new
update is effective for annual and interim impairment tests performed for fiscal
years beginning after September 15, 2012. Early adoption is permitted. The
Company will adopt ASU 2012-02 as of December 31, 2012 for its annual impairment
testing. The Company does not expect it to significantly affect its testing.

We do not believe any other recent accounting pronouncements
issued by the FASB, the AICPA, or the SEC have a material impact on the
Company's present or future consolidated financial statements.

|2. | Equipment
|-- | ---------

|                                    |   | June 30, 2012 |  |   | December 31, 2011 | 
|----------------------------------- | - | ------------- |  | - | ----------------- | 
|                                    |   |               |  |   | Accumulated       | 
|                                    |   | Cost          |  |   | Depreciation      | 
|                                    |   |               |  |   |                   | 
|Computer equipment &
      software | $ | 55,008        |  | $ | 24,952            | 
|Office furniture & equipment        |   | 19,334        |  |   | 10,301            | 
|Automobile                          |   | 23,242        |  |   | 18,480            | 
|                                    |   |               |  |   |                   | 
|                                    | $ | 97,584        |  | $ | 53,733            | 

Depreciation and amortization of property and equipment was
$5,578 and $7,606 for the three month period ended June 30, 2012 and 2011
respectively and $11,156 and $12,308 for the six month period ended June 30,
2012 and 2011 respectively.

10

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|3. | Equity
|-- | ------

At June 30, 2012, the Company is authorized to issue shares as
follows:

| | 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 June 30, 2012, there are 49,212,123 shares of common stock
outstanding.

On June 16, 2011 the Board of Directors approved the Smart-Tek
Solutions 2011 Stock Compensation Plan (2011 Plan) authorizing the sale or
award of up to an additional 10,000,000 shares and/or options of the Company's
Common Stock. The Stock Option Plan expires in August 20, 2013. On June 13,
2011, the company issued 21,897,999 shares to the Companys CEO pursuant to a
Strategic Marketing Agreement. The cost of these shares was measured at the
market value of $.01 per share or $218,980 and expensed at the time of issuance.
On June 16, 2011 3,000,000 shares were issued to a consultant as compensation
for services rendered. The cost of these shares was measured at the market value
of $.075 per share or $225,000 and expensed at the time of issuance. The value
in excess of Par Value was recognized as Additional Paid In Capital. 7,000,000
shares and/or options of the Companys common stock are available for issuance
under the 2011 Plan as of June 30, 2012.

Preferred Shares

There are no preferred shares issued or outstanding.

|4. | Earnings (loss) per
share
|-- | -------------------------

|                                            |   | Three      |   |   | Three      |  
|------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                            |   | Months     |   |   | Months     |  
|                                            |   | June 30,   |   |   | June 30,   |  
|                                            |   | 2012       |   |   | 2011       |  
|                                            |   |            |   |   |            |  
|Net income (loss)                           | $ | (1,924,808 | ) | $ | (599,161   | )
|                                            |   |            |   |   |            |  
|Weighted number of shares
      outstanding |   | 49,212,123 |   |   | 29,796,080 |  
|                                            |   |            |   |   |            |  
|Income(loss) per share                      | $ | (0.04      | ) | $ | (0.02      | )

11

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Earnings (loss) per share (continued)

|                                            |   | Six Months |   |   | Six Months |  
|------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                            |   | June 30,   |   |   | June 30,   |  
|                                            |   | 2012       |   |   | 2011       |  
|                                            |   |            |   |   |            |  
|Net income (loss)                           | $ | (3,610,056 | ) | $ | (235,808   | )
|                                            |   |            |   |   |            |  
|Weighted number of shares
      outstanding |   | 49,212,123 |   |   | 27,070,245 |  
|                                            |   |            |   |   |            |  
|Income(loss) per share                      | $ | (0.07      | ) | $ | (0.01      | )

|5. | Acquisitions
|-- | ------------

On October 1, 2011, Smart-Tek Solutions, Inc. acquired the
assets and the brand name of Solvis Medical from American Marine LLC dba AMS
Outsourcing, a Montana limited liability corporation.

The purchase price was $535,000 consisting of a $35,000 cash
payment at closing plus a $500,000 promissory note that matures on September 31,
2012 and bears a 6% simple interest rate. The purchase price will be revalued at
the one and two year time periods based on performance as follows:

- Year 2012  At December 31,
2012, the acquired net assets will be revalued at four (4) times pretax
earnings. A one year promissory note at 6% interest will be issued for the net
change between the original value and the 2012 revalue.
- Year 2013  At December 31,
2013, the acquired net assets will be revalued at four (4) times pretax
earnings. A one year promissory note at 6% interest will be issued for the net
change between the revalue as of December 31, 2012 and the revalue at December
31, 2013

The Company recorded the purchase price as follows:

Prepaid expenses
    $
    52,303Furniture & fixtures
    $
    6,341Goodwill
    $
    476,536Total
    $
    535,000


Management does not believe that the calculation of 4 times
earnings will exceed the purchase price of $535,000.

12

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|6. | Short Term Note
Payable
|-- | -----------------------

At June 30, 2012, the Company has an outstanding note payable
in the amount of $500,000 payable to an affiliated company relating to the
acquisition of Solvis Medical assets. The loan is unsecured, bears a simple 6%
interest and matures at September 30, 2012.

|7. | Related Party Transactions
|-- | --------------------------

During the three month period ended June 30, 2012, Smart-Tek
Automated Services Inc. (a wholly-owned subsidiary) paid $358,054 in management
salaries to its Chief Executive Officer and Chief Operating Officer which
included commissions of $102,832 and benefits of $74,069. Such Costs have been
reflected in the accompanying statement of operations

During the six month period ended June 30, 2012, Smart-Tek
Automated Services Inc. (a wholly-owned subsidiary) paid $658,090 in management
salaries to its Chief Executive Officer and Chief Operating Officer which
included commissions of $209,078 and benefits of $79,397. Such Costs have been
reflected in the accompanying statement of operations.

From time to time, Smart-Tek Automated Services Inc. purchases
additional services from related parties to take advantage of economies of scale
as opposed to maintaining full time staff and resources within its own
operations. Likewise, Smart-Tek Automated services shares its own resources with
these same related parties again to leverage economies of scale.

During the three and six month period ended June 30, 2012,
Smart-Tek Automated Services Inc. (a wholly-owned subsidiary) paid consulting
fees of $135,000 and $322,500 respectively to a company controlled by an officer
of the Company for Financial, HR and Legal Services. Such costs have been
reflected in the accompanying statement of operations.

Smart-Tek additionally pays certain fees to another related
party for the sharing of office space and utilities. These expenses are included
in the accompanying statement of operations and were based upon actual usage or
allocations agreed to by management personnel.

Amounts due from/to related companies

Mr. Brian Bonar, the Companys Chief Executive Officer and
Chairman, has a 40% direct and a 50% indirect ownership interest in American
Marine LLC (AMS), American Transportation Administrative Services, Corp is
owned by AMS. Mr. Bonar is the CEO and director of Dalrada Management, and is a
minority shareholder. The amounts due from or to related companies are
interest-free, unsecured and payable on demand.

Following is a summary of the balances both Due To and From
these related parties as of June 30, 2012 which in some cases is an accumulation
over several years of activity:

|                                                            |   | Due From  |  |   | Due To  | 
|----------------------------------------------------------- | - | --------- |  | - | ------- | 
|Allegiant Professional
      Business Services Inc.         | $ | 1,266,570 |  | $ | 293,348 | 
|American Marine LLC                                         |   | 585,550   |  |   | 158,076 | 
|Dalrada Management Consulting
      Corp.                   |   | 355,485   |  |   | 25,484  | 
|American Transportation Administrative
      Services Corp. |   | 20,498    |  |   | -       | 
|Other                                                       |   | -         |  |   | 39,783  | 
|Total Due from Related Parties                              | $ | 2,228,103 |  | $ | 516,691 | 

13

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|8. | Subsequent events
|-- | -----------------

In July 2012, the Internal Revenue Service (IRS) requested the Company for a substantial amount of payroll records through a document request. The Company is and will continue to submit the documentation requested by the IRS. As noted in the Balance
Sheet, the Company has a payroll tax withholding liability of approximately $15.7 million. The IRS staff is in process of reconciling the total amount of the payroll tax liability. After the conclusion of the reconciliation process by the IRS
staff, the Company’s legal tax counsel will handle a negotiated repayment plan that is acceptable to the IRS and the Company.

14

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

Certain statements in this quarterly report on Form 10-Q that are not historical in fact constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). The PSLRA provides
certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this annual report on Form 10-Q are made pursuant to the PSLRA. Words such as, but not limited to, “believe,”
“expect,” “anticipate,” “estimate,” “intend,” “plan,” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors based on the Company’s estimates and expectations concerning future events that may cause the actual results of the Company to be materially different from historical results or from any results expressed
or implied by such forward-looking statements. These risks and uncertainties, as well as the Company’s critical accounting policies, are discussed in more detail under “Management’s Discussion and Analysis—Critical Accounting
Policies” and in periodic filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

You should read the following discussion of our financial condition and results of operations together with the audited financial statements and the notes to the audited financial statements included in this annual report. This discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.

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

Overview

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

Through our Solvis Medical business line weprovides medical staffing services to hospitals, medical clinics, surgical centers, skilled nursing facilities, and nursing care to patients in their homes.

Plan of Operation

Short Term

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

Long Term

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

15

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PLAN OF OPERATION AND FUNDING

Our cash reserves are not sufficient to meet our obligations for the next twelve month period. As a result, we will need to seek additional funding in the near future. We currently do not have a specific plan of how we will obtain such funding;
however, we anticipate that additional funding will be in the form of equity financing from the sale of shares of our common stock or issuance of convertible debentures. We may also seek to obtain short-term loans from our directors or unrelated
parties, although no such arrangements have been made. We do not have any arrangements in place for any future equity financing.

PEO Business Environment

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

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

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

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

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

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

PEO Market Overview

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

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

16

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Medical Staffing

Provides medical staffing services to hospitals, medical
clinics, surgical centers, skilled nursing facilities, and nursing care to
patients in their homes.

RESULTS OF OPERATIONS

Three and six months ending June 30, 2012 and
2011

Revenue

For the three months ending June 30, 2012 and 2011, revenues
were $6,133,600 and $6,401,186 respectively, for a decrease of $267,586 (4.2%)
over the same period in 2011. The decrease was attributable to the loss of a
large client. The Solvis Medical nurse staffing business line contributed
$986,307 during the quarter.

For the six months ending June 30, 2012 and 2011, revenues were
$12,614,594 and $10,622,992 respectively, for an increase of $1,991,602 (18.8%)
over the same period in 2011. The increase was attributable to a net increase in
our payroll and staffing business through Smart-Tek Automated Services. The
Solvis Medical nurse staffing business line contributed $2,074,825 in 2012.

Gross Profit

Gross profit for the three months ending June 30, 2012 and 2011
were $375,200 and $1,685,183 respectively, for a decrease of $1,309,983 (77.7%)
over the same period in 2011. The decrease in gross profit was directly a result
of increased workers compensation expense. Solvis Medical nurse staffing
business line contributed $84,651 to the decrease during the quarter.

Gross profit for the six months ending June 30, 2012 and 2011
were $1,307,709 and $2,957,698 respectively, for a decrease of $1,649,989
(55.8%) over the same period in 2011. The decrease in gross profit was directly
as result of increased workers compensation expense. Solvis Medical nurse
staffing business line contributed $232,595 to the decrease in 2012.

Expenses

Our expenses for the six months ended June 30, 2012 and 2011
are outlined in the table below:

|                                             |   |                        |  |   |            |  |  | Percentage | 
|-------------------------------------------- | - | ---------------------- |  | - | ---------- |  |  | ---------- | 
|                                             |   | Six months
      ended |  |   | Increase/  | 
|                                             |   | June 30, 2012          |  |   | (Decrease) | 
|                                             |   | 2012                   |  |   | 2011       |  |  |            | 
|Cost of Revenue                              | $ | 11,306,885             |  | $ | 7,665,294  |  |  | 47.5%      | 
|Selling, General and Administrative expenses |   | 4,459,736              |  |   | 3,169,625  |  |  | 40.7%      | 
|Interest Expense and Tax
      Penalties     |   | 458,056                |  |   | 23,881     |  |  | 1,818.1%   | 
|Total Expenses                               | $ | 16,224,677             |  | $ | 10,858,800 |  |  | 49.4%      | 

Cost of revenue

Cost of revenue of $5,758,400 for the three months ended June
30, 2012 increased by $1,042,397 or 22.1% over the same period prior year amount
of $4,716,003. The increase was attributable to an increase in workers
compensation claims and premium expense. Solvis Medical contributed 901,656 to
the cost of revenue during the quarter.

17

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Cost of revenue of $11,306,885 for the six months ended June
30, 2012 increased by $3,641,591 or 47.5% over the same period prior year amount
of $7,665,294. The increase was attributable to an increase in workers
compensation claims and premium expense. Solvis Medical contributed 1,842,232 to
the cost of revenue in 2012.

Administrative

Selling, general and administrative expenses of $1,906,817 for
the three months ended June 30, 2012 decreased by $363,975 or 16% over the same
period prior year amount of $2,270,792. The decrease was mainly attributable to
reduced legal fees in the second quarter .

Selling, general and administrative expenses of $4,459,736 for
the six months ended June 30, 2012 increased by $1,290,111 or 40.7% over the
same period prior year amount of $3,169,625. The increase was mainly
attributable to legal fees in 2012.

Interest and tax penalties

Interest expense and tax penalties for the three months ended
June 30, 2012 was $393,203, an increase of $379,651 or 2,801.4% over the same
period prior year amount of $13,552.

Interest expense and tax penalties for the six months ended
June 30, 2012 was $458,056, an increase of $434,175 or 1,818.1% over the same
period prior year amount of $23,881.

Liquidity and Capital Resources

|Working Capital              |   |             |   |   |              |   |  | Percentage |  
|---------------------------- | - | ----------- | - | - | ------------ | - |  | ---------- | -
|                             |   | June 30,    |   |   | December 31, |   |  | Increase/  |  
|                             |   | 2012        |   |   | 2011         |   |  | (Decrease) |  
|Current Assets               | $ | 3,542,619   |   | $ | 4,550,447    |   |  | (22.1%     | )
|Current Liabilities          |   | 19,104,522  |   |   | 15,391,392   |   |  | 24.1%      |  
|Working Capital (Deficiency) | $ | (15,561,903 | ) | $ | (10,840,945  | ) |  | (43.6%     | )

|Cash Flows                                     |  | Six Months |   |  | Six Months |   |  |                |  
|---------------------------------------------- |  | ---------- | - |  | ---------- | - |  | -------------- | -
|                                               |  | Ended      |   |  | Ended      |   |  | **Percentage** |  
|                                               |  | June 30,   |   |  | June 30,   |   |  | Increase/      |  
|                                               |  | 2012       |   |  | 2011       |   |  | **(Decrease)** |  
|Cash from (used in) Operating
      Activities |  | 20,740     |   |  | (297,505   | ) |  | 107.0%         |  
|Cash from (used in) Investing Activities       |  | -          |   |  | (46,125    | ) |  | 100%           |  
|Cash from (used in) Financing
      Activities |  | (153,232   | ) |  | 443,979    |   |  | (134.5%        | )
|Net Increase (Decrease) in Cash                |  | (132,492   | ) |  | 100,349    |   |  | (232.0%        | )

We had cash on hand of $0 and working capital deficit of
$15,561,903 as of June 30, 2012 compared to cash on hand of $132,492 and working
capital deficit of $10,840,945 for the year ended December 31, 2011. We
anticipate that we will incur approximately $730,000 a month for operating
expenses, including professional, legal and accounting expenses associated with
our reporting requirements under the Exchange Act during the next twelve
months.

18

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Cash Used In Operating Activities

Cash flow provided in operations for the six months ending June 30, 2012 amounted to $20,739 which mainly consisted the following: 1) the net loss for the period of $3,610,056 and 2) increase in prepaid workers compensation of
$1,087,058, offset by 1) depreciation expense of $11,156, 2) due form related party of $511,117; 3) accounts receivable of 317,413; 4) workers compensation expense of $39,151; 5) bank overdraft of $17,525; 6) increase in payroll
taxes payable of $3,769,766; 7) prepaid expenses of $46,806 and increase in accounts payable of $4,919.

Cash Used In Financing Activities

We used cash in financing activities that amounted to $152,231, consisting of 1) assigned accounts receivable of $25,900, 2) decrease in proceeds from related party of $92,331, and 3) payment of long-term payable of $35,000.

Future Cash Flows

STTN’s future capital requirements will depend on numerous factors, including the control of workers compensation claims, the establishment of reasonable workers compensation premiums, and growing the business with business that employee more
favorable worker compensation class types.  We cannot for certain claim that our current operations along with financing from outside will be sufficient to meet our ongoing operating needs. We will need to seek outside capital in order to continue
as a going concern. In addition, we cannot predict when and if any additional capital contributions may be needed and we may need to seek one or more substantial new investors. New investors could cause substantial dilution to existing stockholders

Going Concern

As shown in the accompanying financial statements, the Company has incurred a large loss from operations, and as of June 30, 2012, its total liabilities exceeded its total assets by $10,514,638. These factors raise substantial doubt about the
Company’s ability to continue as a going concern. Management has hired a consultant to put controls in the cash management area and will institute more efficient management techniques in the finance department. All areas of operations will be
reviewed to look for savings. However, the Company has a need for additional capital investment. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Recent Accounting Pronouncements

In December 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). The amendments in this ASU
require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity is required to apply the amendments
for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The
Company does not expect that the adoption of ASU 2011-11 will have a significant, if any, impact on the Company’s financial statements.

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU No. 2011-04”), which amends current guidance
to result in common fair value measurements and disclosures between accounting principles generally accepted in the United States and International Financial Reporting Standards. The amendments explain how to measure fair value. They do not require
additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting. ASU No. 2011-04 clarifies the application of certain existing fair value measurement guidance and
expands the disclosures for fair value measurements that are estimated using significant unobservable inputs (Level 3 inputs, as defined in Note 7). The amendments in ASU No. 2011-04 are effective for interim and annual periods beginning after
December 15, 2011. The adoption of the provisions of ASU No. 2011-04 did not have a material impact on the Company’s financial statements.

19

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In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Presentation of Comprehensive Income” (“ASU No. 2011-05”), which improves the comparability, consistency, and transparency of financial reporting and
increases the prominence of items reported in other comprehensive income (“OCI”) by eliminating the option to present components of OCI as part of the statement of changes in stockholders’ equity. The amendments in this standard
require that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Subsequently in December 2011, the FASB issued Accounting
Standards Update No. 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income” (“ASU No. 2011-12”), which indefinitely defers the
requirement in ASU No. 2011-05 to present on the face of the financial statements reclassification adjustments for items that are reclassified from OCI to net income (loss) in the statement(s) where the components of net income (loss) and the
components of OCI are presented. The amendments in these standards do not change the items that must be reported in OCI, when an item of OCI must be reclassified to net income (loss), or change the option for an entity to present components of OCI
gross or net of the effect of income taxes. The amendments in ASU No. 2011-05 and ASU No. 2011-12 are effective for interim and annual periods beginning after December 15, 2011 and are to be applied retrospectively. The adoption of the provisions of
ASU No. 2011-05 and ASU No. 2011-12 did not have a material impact on the Company’s financial statements.

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

Item 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures. The term “disclosure controls and
procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this
report, that it files or submits 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 a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal
executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our principal executive officer and our principal
financial officer concluded that as of June 30, 2012, our disclosure controls and procedures were not effective due to a material weakness related to a lack of accounting personnel with sufficient experience in maintaining books and records and
preparing financial statements in accordance with U.S. GAAP. We identified and disclosed this material weakness in our 2011annual report filed on Form 10-K with the SEC.

IDENTIFIED MATERIAL WEAKNESS

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.

20

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Management identified the following material weakness in
internal control during its assessment of internal controls over financial
reporting as of June 30, 2012:

- Our organization structure is not properly set up to manage the flow of
  cash and the efficient payment of taxes.
- We lack the expertise to properly manage the finance and treasury
  function.

MANAGEMENT'S REMEDIATION INITIATIVES

We are undertaking the remedial measures to establish an
effective disclosure controls and procedures and internal control over the cash
management / treasury functions, including consolidating finance and treasury
into one department reporting to one manager and improving the supervision and
training of our accounting staff to understand and implement accounting
requirements, policies and procedures for the Treasury department. We have hired
a qualified consultant who can work with the Companys Chief Financial Officer
to indentify cash issues and help evaluate and address such issues to prevent
and fix any present problems in managing cash as well as establishing a
procedure to prevent future failures to manage cash properly.

In light of the identified material weaknesses, management,
performed (1) significant additional substantive review of those areas described
above, and (2) performed additional analyses, including but not limited to a
detailed balance sheet and statement of operations analytical review that
compared changes from the prior period's financial statements and analyzed all
significant differences. These procedures were completed so management could
gain assurance that the financial statements and schedules included in this Form
10-Q fairly present in all material respects the Company's financial position,
results of operations and cash flows for the periods presented.

Changes in Internal Controls

There has been no additional change except for what is
discussed above in our internal control over financial reporting during this
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A. RISK FACTORS.

Not Applicable.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

ITEM 5. OTHER INFORMATION.

None.

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Exhibit Number
    Description3.1
    Articles of Incorporation as
      amended(1)3.2
    Bylaws(1)3.3
    Certificate of Amendment to
      Certificate of Incorporation (2)4.1
    Incentive Stock Option Plan
      (1)4.2
    Non-Qualified Incentive Stock Option
      Plan (1)4.3
    Stock Bonus Plan (1)4.4
    2005 Incentive Stock Plan
      (2)10.1
    Letter of Intent between Smart-Tek
      Communications and Smart-Tek (3)10.2
    Share Exchange Agreement between
      Registrant and Smart-Tek Communication, Inc dated April 15, 2005
      (4)10.3
    Employment Agreement with Perry Law
      dated April 23, 2005 (5)10.4
    Employment Agreement with Stephen
      Platt dated April 23, 2005 (5)10.5
    Stock Option Grant to Perry Law
      dated April 23, 2005 (6)10.6
    Stock Option Grant to Stephen Platt
      dated April 23, 2005 (6)10.7
    Amendment to Employment Agreement
      between Smart-Tek Communications Inc. and Perry Law dated July 31, 200910.8
    Form of Debt Settlement and
      Subscription Agreement dated September 30, 200910.9
    Strategic Marketing Partner
      Agreement between Smart-Tek Automated Services Inc. and ACEO Inc. dated
      August 1, 200910.10
    Marketing Partner Agreement dated
      June 17, 200910.11
    Amended Marketing Partner Agreement
      dated December 9, 2010 with Smart-Tek Automated Services, Inc. and Brian
      Bonar10.12
    General Release of Claims Agreement
      Entered into between Richardson Patel LLC and Smart-Tek Solutions, Inc.14.1
    Amended and Restated Code of Ethics21.1
    Subsidiaries31.1*
    CEO and CFO Section 302
      Certification under Sarbanes-Oxley Act of 200232.1*
    CEO and CFO Section 906
      Certifications under Sarbanes-Oxley Act of 2002


*Filed herewith

|(1)  | Incorporated by reference to our Registration Statement
      on Form 10-SB, filed September 28, 1995.              
|---- | --------------------------------------------------------------------------------------------------------------------
|(2)  | Incorporated by reference to our Annual Report on Form
      10-KSB, filed October 26, 1995.                        
|(3)  | Incorporated by reference to our Current Report on Form
      8-K, filed March 8, 2005.                             
|(4)  | Incorporated by reference to our Current Report on Form
      8-K, filed April 19, 2005.                            
|(5)  | Incorporated by reference to our Current Report on
      Form8-K, filed April 27, 2005.                             
|(6)  | Incorporated by reference to our Current Report on Form
      8-K, filed on August 22, 2005.                        
|(7)  | Incorporated by reference to our Current Report on Form
      8-K, filed on June 27, 2008.                          
|(8)  | Incorporated by reference to our Form 10-Q for the period
      ended December 31, 2008, filed on February 23, 2009.
|(9)  | Incorporated by reference to our Current Report on Form
      8-K, filed on June 24, 2009.                          
|(10) | Incorporated by reference to our Annual Report on Form
      10-K, filed October 15, 2008.                          
|(11) | Incorporated by reference to our Annual Report on Form
      10-K, filed October 13, 2009.                          
|(12) | Incorporated by reference to our Current Report on Form
      8-K, filed on March 17, 2010.                         
|(13) | Incorporated by reference to our Current Report on Form
      8-K, filed on December 10, 2010                       

22

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|By    | /s/ Brian
      Bonar
|----- | ---------------------
|      | Brian Bonar          
|      | President            
|      |                      
|      | /s/ Brian
      Bonar
|Date: | August 15, 2012      

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

|      | /s/ Brian
      Bonar                                                        
|----- | -----------------------------------------------------------------------------
|      | Brian Bonar                                                                  
|      | Chief Executive Officer, Chief Financial
      Officer                       
|      | and Director (Principal Executive Officer,
      Principal Accounting Officer
|      | and Principal Financial Officer)                                             
|Date: | August 20, 2012                                                              
|      |                                                                              
|      | /s/ Owen
      Naccarato                                                     
|      | Owen Naccarato                                                               
|      | Director                                                                     
|Date: | August 20, 2012                                                              

23

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