UNITED
      STATES


SECURITIES
      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, 2007





or





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






Commission
      File Number 000-29485




**RESOLVE
      STAFFING, INC.**




(Exact
      name of registrant as specified in its charter)





Nevada
            
            33-0850639(State
                or other jurisdiction of incorporation or organization)
            
            (IRS
                Employer Identification No.)3235
                Omni Drive
              Cincinnati,
                OH 45245
              www.resolvestaffing.com(Address
                of principal executive offices and internet site)(800)
                894-4250(Registrant’s
                telephone number, including area code)





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 is a large accelerated filer, accelerated
      filer, or non-accelerated filer (as defined in Rule 12b-2 of the Exchange
      Act).




Large
                accelerated filer [ ]
            Accelerated
                filer [ ]
            Non-accelerated
                filer [X]




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




Yes
                [ ]
            
            No
                [X]




Number
      of
      shares outstanding of each of the issuer’s classes of common stock, as of the
      latest practicable date: As of April 25, 2007, 19,428,511 shares of commons
      tock, par value $.0001 were outstanding.


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          -
          1


**RESOLVE
      STAFFING, INC.**




**TABLE
      OF CONTENTS**




PagePart
                I - Financial InformationItem
                1. Unaudited Consolidated financial StatementsConsolidated
                Balance Sheets - March 31, 2007 and December 31, 2006
            3Consolidated
                Statements of Operations - Three Months Ended March 31, 2007 and
                2006
            4Consolidated
                Statements of Cash Flows - Three Months Ended March 31, 2007 and
                2006
            5Notes
                to Unaudited Interim Consolidated Financial Statements
            6Item
                2. Management's Discussion and Analysis of Financial Condition and
                Results
                of Operations
            21Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            26Item
                4. Controls and Procedures
            26Part
                II - Other InformationItem
                1. Legal Proceedings
            27Item
                1A. Risk Factors
            27Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            27Item
                3. Default Upon Senior Securities
            27Item
                4. Submission of Matters to a Vote of Security Holders
            27Item
                5. Other Information
            27Item
                6. Exhibits
            27Signatures
            28Exhibit
                Index
            29






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          -
          2


**ITEM
      1. FINANCIAL STATEMENTS**




**RESOLVE
                STAFFING, INC.****CONSOLIDATED
                BALANCE SHEETS****MARCH
                31, 2007 AND DECEMBER 31, 2006****ASSETS**
            **2007**
            **2006****Current
                assets:**Cash
            $
                -
            $
                -Accounts
                receivable - trade, net
            15,249,258
            18,155,656Prepaid
                expenses
            782,242
            1,158,640Worker’s
                compensation insurance refunds receivable
            -
            147,350Total
                current assets
            16,031,500
            19,461,646**Property
                and equipment, net**
            1,457,595
            1,343,773**Advances
                and notes receivable - related parties**
            450,850
            681,237**Other
                assets:**Worker’s
                compensation insurance deposits
            1,449,536
            1,319,931Other
                assets
            554,556
            393,456Goodwill
            36,186,106
            34,179,094Covenants
                not to compete
            260,053
            432,632Total
                other assets
            38,450,251
            36,325,113Total
                assets
            $
                56,390,196
            $
                57,811,769**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****Current
                liabilities:**Bank
                overdraft
            $
                3,325,656
            $
                1,255,404Accounts
                payable and customer deposits
            2,844,816
            7,253,883Accrued
                salaries and payroll taxes
            7,796,960
            6,323,926Accrued
                workers' compensation insurance
            1,827,647
            2,239,400Lines
                of credit
            16,314,817
            15,702,621Current
                portion of long-term debt
            4,789,401
            6,604,003Notes
                payable - related party
            91,500
            91,500Workers'
                compensation insurance policy reserves
            1,938,449
            1,636,313Total
                current liabilities
            38,929,156
            41,107,050**Long
                term liabilities:**Long
                term debt, less current portion
            17,071,656
            16,324,567**Stockholders’
                equity:**Common
                stock, $0.0001 par value; 50,000,000 shares authorized, issued and
                outstanding March 31, 2007: 19,408,150 shares; December 31, 2006:
                18,642,740 shares
            7,201
            6,526Paid-in
                capital
            4,561,905
            4,282,579Accumulated
                deficit
            (4,179,722)
            (3,908,953)Total
                stockholders’ equity
            389,384
            380,152Total
                liabilities and stockholders’ equity
            $56,390,196
            $57,811,769See
                accompanying notes to consolidated financial
                statements.







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          3







**RESOLVE
                STAFFING, INC.****CONSOLIDATED
                STATEMENTS OF OPERATIONS****THREE
                MONTHS ENDED MARCH 31, 2007 AND 2006****2007**
            **2006**Revenues
            $
                61,861,760
            $
                12,624,972Cost
                of revenues
            54,418,623
            9,803,836Gross
                profit
            7,443,137
            2,821,136Operating
                expenses
            7,113,666
            1,824,157Income
                from operations
            329,471
            996,979Other
                income (expense):Interest
                expense
            (600,240)
            (14,456)Other
                income (expense), net
            (600,240)
            (14,456)Net
                income (loss)
            $
                (270,769)
            $
                982,523Net
                income (loss) per share basic and diluted
            $
                (0.01)
            $
                0.66Weighted
                average number of shares used in loss per share
                Computation:Basic
                and diluted
            19,352,594
            1,486,685See
                accompanying notes to consolidated financial
                statements.












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          -
          4







**RESOLVE
                STAFFING, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****FOR
                THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006****2007**
            **2006****Cash
                Flows From Operating Activities:**Net
                income (loss)
            $
                (270,769)
            $1,004,635Adjustments
                to reconcile net income (loss) to net cash flows provided by (used
                in)
                from operating activities:Depreciation
            106,743
            -Change
                in allowance for doubtful accounts
            56,908
            -Amortization
                of non-compete agreements
            172,579
            -Changes
                in operating assets and liabilities:Accounts
                receivable-trade
            2,849,490
            364,271Workers’
                compensation insurance policy refunds
            147,350
            407,961Prepaid
                and other assets
            215,298
            211,814Accounts
                payable and accrued liabilities
            (4,409,067)
            (408,497)Accounts
                payable to related parties
            1,473,034
            1,295,562Accrued
                salaries and payroll taxes
            (411,753)
            (1,269,604)Capital
                leases
            -
            11,362Workers’
                compensation insurance
            (129,605)
            864,688Workers’
                compensation insurance policy reserves
            302,136
            (1,473,062)Total
                adjustments
            373,113
            4,495Net
                cash flows provided by (used in) operating activities
            102,344
            1,009,130**Cash
                Flows From Investing Activities:**Purchases
                of property and equipment
            (195,564)
            (207,136)Goodwill
                and non-compete agreements
            (69,862)
            (250,000)Acquisition
                of net assets of subsidiaries
            (25,000)
            -Collections
                from (loans to) related parties
            230,387
            1,512,333Net
                cash flows used in investing activities
            (60,039)
            1,055,197**Cash
                Flows From Financing Activities:**Bank
                overdraft****
            2,070,161
            -Net
                borrowings on lines of credit
            612,196
            -Paydowns
                on notes payable
            (2,724,662)
            -Shareholders’
                distributions
            -
            (138,965)Net
                cash used in financing activities
            (42,305)
            (138,965)**Net
                Increase in Cash**
            -
            1,925,362**Cash,
                Beginning of the Period**
            -
            1,740,481**Cash,
                End of the Period**
            $
                -
            $3,665,843See
                accompanying notes to consolidated financial
                statements.












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          5


**RESOLVE
      STAFFING, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2007**





**NOTE
      A -** **NATURE
      OF OPERATIONS, LIQUIDITY AND MANAGEMENT’S PLANS, AND SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES**




Resolve
      Staffing, Inc., (“Resolve” or the “Company”) was organized under the laws of the
      State of Nevada on April 9, 1998. The Company is a national provider of
      outsourced human resource services with over 78 offices reaching from California
      to New York. The Company provides a full range of supplemental staffing and
      outsourced solutions, including solutions for temporary, temporary-to-hire,
      or
      direct hire staffing in the clerical, office administration, customer service,
      professional and light industrial categories.





Through
      the merger with Employee Leasing Services, Inc. (“ELS”), the Company is also a
      professional employer organization (“PEO”) providing a variety of personnel
      management services, including human resources, payroll, employer payroll taxes
      and benefits administration as well as health and workers’ compensation
      insurance programs. Services are provided to a diversified group of customers
      throughout the United States. As of March 31, 2007, the Company served
      approximately 560 clients located in 43 states with approximately 10,000 active
      PEO client employees and approximately 4,000 temporary staffing employees.





Approximately
      55% of PEO revenues are derived from clients within the state of Ohio. The
      Company’s PEO operations are headquartered in Cincinnati, Ohio with its main
      processing center located in Shelby Township, Michigan.




On
      October 1, 2006, Resolve Staffing, Inc., entered into an equity purchase
      agreement (“Agreement”), to purchase Employee Leasing Services, Inc. (“ELS”)
      (the “Combination”), a privately-held company located in Cincinnati, Ohio. The
      Company’s Chief Executive Officer and Director, Ronald Heineman, is a principal
      shareholder, officer and director of ELS. Pursuant to the equity purchase
      agreement, Resolve acquired the ownership interest in the group of companies
      which comprised ELS.




In
      connection with the Combination on October 1, 2006, ELS was deemed to be the
      acquiring company for accounting purposes and the Combination was accounted
      for
      as a reverse acquisition under the purchase method of accounting for business
      combinations in accordance with accounting principles generally accepted in
      the
      United States of America. The acquisition of the ELS entities was treated as
      a
      reverse acquisition for financial accounting purposes and therefore the
      accompanying comparative financial information is that of ELS rather than the
      historical financial statements of Resolve Staffing, Inc. The financial
      information for the three months ended March 31, 2006 includes the consolidated
      balances and consolidated results of operations of ELS.





Organization,
      Basis of Presentation and Principles of Consolidation





The
      combined financial statements for the period ended March 31, 2007 include the
      financial statements of ELS and its subsidiaries in addition to the financial
      statements of the following entities (which have been combined because the
      entities are under common control): Employee Leasing Services, Inc., ELS
      Personnel Services, Inc., Premier HR Services, Inc., Integrated Payroll
      Solutions, Inc., Foxstar, Inc., Luxor Solutions, Inc., Streamline Management,
      Inc., Mandalay Services, Inc., Rio Services, Inc., Imperial Human Resources,
      Inc., ELS Outsource, Inc., ELS Advantage, Inc., ELS Employer Services, Inc.,
      ELS
      Administrative Services, LLC, ELS Human Resources, Inc., ELS, Inc., ELS of
      Dayton Premier Business Solutions, LLC, Diversified Support Systems, LLC and
      ELS
      HR Solutions, Inc. Collectively, these entities are referred to as “the
      Company.” All inter-company and inter-affiliate balances and transactions have
      been eliminated.





The
      financial statements of Resolve for the three months ended March 31, 2006 are
      included in the Resolve Staffing, Inc. Quarterly Report on Form 10-QSB, filed
      with the Securities and Exchange Commission (the “SEC”) on May 15, 2006. In
      accordance with the accounting treatment described above, the historical
      financial statements prior to the Combination reflect those of ELS. In
      conjunction with this transaction, the group of companies known as Employee
      Leasing Services, Inc., which were legally acquired by Resolve Staffing, Inc.,
      changed its name to Resolve Staffing, Inc. The financial information for 2006
      includes the combined balances and combined results of operations of the
      individual entities which comprise ELS.





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**NOTE
      A -** **NATURE
      OF OPERATIONS, LIQUIDITY AND MANAGEMENT’S PLANS, AND SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES (CONTINUED)**





Nature
      of Business





The
      Company provides its PEO services by entering into a co-employment relationship
      with its clients, under which the Company and its clients each take
      responsibility for certain portions of the employer-employee relationship.
      The
      Company and its clients designate each party’s responsibilities through its
      client services agreements, under which the Company becomes the employer of
      its
      worksite employees for most administrative and regulatory purposes. As a
      co-employer of its worksite employees, the Company assumes most of the rights
      and obligations associated with being an employer. The Company enters into
      an
      employment agreement with each worksite employee, thereby maintaining a variety
      of employer rights, including the right to hire or terminate employees, the
      right to evaluate employee qualifications or performance and the right to
      establish employee compensation levels. Typically, the Company only exercises
      these rights in consultation with its clients or when necessary to ensure
      regulatory compliance. The responsibilities associated with the Company’s role
      as employer include the following obligations with regard to its worksite
      employees: (1) to compensate its worksite employees through wages and salaries,
      (2) to pay the employer portion of payroll-related taxes, (3) to withhold and
      remit (where applicable) the employee portion of payroll-related taxes, (4)
      to
      provide employee benefit programs, and (5) to provide workers’ compensation
      insurance coverage.





In
      addition to its assumption of employer status for its worksite employees, the
      Company’s services also include other human resource functions for its
      clients.





The
      Company plans to continue to grow the business through the acquisition of
      private companies in the staffing industry that would provide types of staffing
      and/or related services with which we are familiar. The Company may seek private
      staffing companies for acquisitions or strategic alliances both in and out
      of
      its current markets. By acquiring existing staffing companies the Company
      believes it will enable it to:





·
            recruit
                well-trained, high-quality professionals;·
            expand
                our service offerings;·
            gain
                additional industry expertise;·
            broaden
                our client base; and·
            expand
                our geographic presence.




During
      the three months ended March 31, 2007, Resolve Staffing, Inc., entered into
      purchase agreements (“Agreements”), to acquire all of the assets and/or
      ownership of two separate privately-held entities owned and operated by
      unrelated parties located in Ohio and California. Pursuant to the acquisition
      agreements, Resolve acquired a total of 4 temporary employee staffing locations
      from the newly acquired entities.





Acquisition
      of Entity from Related Party





In
      connection with the Combination on October 1, 2006, described above, ELS was
      deemed to be the acquiring company for accounting purposes and the Combination
      was accounted for as a reverse acquisition under the purchase method of
      accounting for business combinations in accordance with accounting principles
      generally accepted in the United States of America. In conjunction with this
      transaction, Resolve issued 1,486,525 shares of restricted common stock valued
      at $2,601,699 (See Note O) and a note payable in the amount of $18,641,498
      in
      exchange for 100% of the ownership of ELS. In accordance with the accounting
      for
      a reverse acquisition the fair value of the assets and liabilities assumed,
      on
      the date of acquisition were deemed to be those of Resolve (the accounting
      acquiree) and were as follows:





Accounts
                Receivable
            $
                16,191,543Prepaid
                and Other Assets
            306,767Property
                and Equipment
            796,413Goodwill
            29,892,935Non-Compete
                Agreements
            613,547Accounts
                Payable and Accrued Liabilities
            (7,113,114)Bank
                overdraft
            (1,285,746)Related
                party payable
            (6,689,139)Notes
                Payable
            (11,470,009)Total
            $
                21,243,197





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**NOTE
      A -** **NATURE
      OF OPERATIONS, LIQUIDITY AND MANAGEMENT’S PLANS, AND SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES (CONTINUED)**





Acquisition
      of Entities from Unrelated Parties





During
      the three months ended March 31, 2007, Resolve Staffing, Inc., entered into
      purchase agreements (“Agreements”), to acquire all of the assets and/or
      ownership of two privately-held entities owned and operated by unrelated
      parties. Pursuant to the acquisition agreements, Resolve acquired the temporary
      employee staffing locations from the newly acquired entities.





Resolve
      issued notes payable, issued common stock and accrued contingent expenses in
      the
      amount of $1,595,000 in exchange for the assets and liabilities of the above
      staffing entities as described below. The following table summarizes the
      estimated fair value, of the assets acquired and liabilities assumed, on the
      date of acquisition:








Choice
                Staff
            Velocity
            TotalProperty
                and Equipment
            $15,000
            $10,000
            $25,000Goodwill
            
            740,000
            830,000
            1,570,000Net
                Assets Acquired:
            $755,000
            $840,000
            $1,595,000





The
      financial results of these acquired entities are included in the consolidated
      financial statements from the date of acquisition.





In
      conjunction with the previous purchase agreements described in Note K, the
      Company capitalized approximately $437,000 in goodwill during the three months
      ended March 31, 2007.





In
      conjunction with the acquisitions from the unrelated parties during the three
      months ended March 31, 2007, approximately $1,570,000 has been assigned to
      goodwill. All of the goodwill is expected to be deductible for tax
      purposes.





Use
      of
      Estimates





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts 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.





The
      Company provides for workers' compensation, health care insurance and
      unemployment taxes related to its employees. A deterioration in claims
      experience could result in increased costs to the Company in the future. The
      Company records an estimate of any existing liabilities under these programs
      at
      each balance sheet date. The Company's future costs could also increase if
      there
      are any material changes in government regulations related to employment law
      or
      employee benefits.





Principles
      of Consolidation





The
      consolidated financial statements for the three months ended March 31, 2007
      include the accounts of the Company and its subsidiaries. All significant
      inter-company accounts and transactions have been eliminated in preparing the
      accompanying consolidated financial statements.





Revenue
      Recognition





The
      Company recognizes PEO revenues when each periodic payroll is delivered to
      the
      client. Revenues are reported in accordance with the requirements of 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. Payroll
      taxes consist of the employer’s portion of Social Security and Medicare taxes,
      federal unemployment taxes and state unemployment taxes. PEO revenues also
      include professional service fees, which are primarily computed as a percentage
      of client payroll or on a per check basis.





Staffing
      and managed service revenue and the related labor costs and payroll are recorded
      in the period in which services are performed. The Company follows EITF 99-19,
      in the presentation of staffing and managed service revenues and expenses.
      This
      guidance requires Resolve to assess whether it acts as a principal in the
      transaction or as an agent acting on behalf of others. In situations where
      Resolve is the principal in the transaction and has the risks and rewards of
      ownership, the transactions are recorded gross in the consolidated statements
      of
      operations.


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**NOTE
      A -** **NATURE
      OF OPERATIONS, LIQUIDITY AND MANAGEMENT’S PLANS, AND SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES (CONTINUED)**





Stock
      Based Employee Compensation





The
      Company adopted SFAS 123(R) to account for its stock-based compensation
      beginning January 1, 2006. Previously, the Company elected to account for its
      stock-based compensation plans under Accounting Principles Board Opinion No.
      25,
      Accounting for Stock Issued to Employees (“APB 25”), Financial Accounting
      Standards Board Interpretation No, 44, Accounting for Certain Transactions
      Involving Stock Compensation (“FIN 44”), and Statement of Financial Accounting
      Standards No. 148, Accounting for Stock-Based Compensation - Transition and
      Disclosure (“SFAS 148”). During the three months ended March 31, 2007, the
      Company did not grant any stock options which would require a calculation as
      prescribed by SFAS 123(R).





There
      are
      no differences between the historical and pro-forma stock based compensation
      value.





Accounts
      Receivable





The
      PEO
      segment does not typically extend credit to its customers. In certain
      situations, however, credit is extended on a secured basis. Accounts receivable
      are carried at original invoice amount less an estimate made for doubtful
      receivables. Management determines the allowance for doubtful accounts by
      regularly evaluating individual customer receivables and considering a
      customer’s financial condition, credit history, and current economic conditions.
      Accounts receivable are written off when deemed uncollectible. Recoveries of
      accounts receivable previously written off are recorded when
      received.





Resolve's
      trade accounts receivable result from the sale of its services to customers,
      and
      customers consist primarily of private companies. Resolve uses the allowance
      method to account for uncollectible accounts. Bad debt expense for the three
      months ended March 31, 2007 and 2006 was $56,908 and $4,226 respectively. The
      Company’s policy for determining when receivables are past due is 31 days after
      original invoice date. The
      Company’s policy for charging off uncollectible accounts receivable requires
      approval of the Chief Financial Officer, after reviewing Corporate Credit
      recommendation in consultation with the specific branch involved, determining
      that the debt has little, if any chance, of being collected. An allowance for
      doubtful accounts in the amounts of $529,336 and $3,000 was recorded at March
      31, 2007 and 2006, respectively.





Concentration
      of Credit Risk





Financial
      instruments, which potentially expose Resolve to concentrations of credit risk
      consist principally of trade accounts receivable.





Resolve's
      trade accounts receivable result from the sale of its services to customers,
      and
      customers consist primarily of private companies. In order to minimize the
      risk
      of loss from these private companies, credit limits, ongoing credit evaluation
      of its customers, and account monitoring procedures are utilized. Collateral
      is
      not generally required. Management analyzes historical bad debt, customer
      concentrations, customer credit-worthiness, current economic trends, and changes
      in customer payment tendencies, when evaluating the allowance for doubtful
      accounts. As of March 31, 2007, no customer accounted for 10% or more of gross
      accounts receivable and no customer accounted for 10% or more of the net
      revenues for the three months ended March 31, 2007.





The
      Company is obligated to pay the salaries, wages, related benefit costs, and
      payroll taxes of worksite employees. Accordingly, the Company's ability to
      collect amounts due from customers could be affected by economic fluctuations
      in
      its markets or these industries.





Financial
      Instruments





Resolve
      estimates that the fair value of all financial instruments at March 31, 2007
      and
      2006 do not differ materially from the aggregate carrying value of its financial
      instruments recorded in the accompanying consolidated balance
      sheets.





Liquidity
      and Management’s Plans





As
      reflected in the accompanying consolidated financial statements, the Company
      has
      a net working capital deficit of $22,897,656 and stockholder’s equity of
      $389,384, as of March 31, 2007. During 2007, the Company incurred losses and
      has
      been dependent upon the financial support of stockholders, management and other
      related parties.





For
      the
      three months ended March 31, 2007 the Company incurred a net loss of $270,769.
      Of this loss, $336,230 did not represent the use of cash. Non-cash expenditures
      consisted of depreciation of $106,743, increase in allowance for doubtful
      accounts of $56,908, and amortization of non-compete agreements of $172,579.
      Changes in accounts receivable, prepaid and other assets, along with increases
      in accounts payable, payroll, salary, and other accruals brought the total
      cash
      provided by operations to $102,344. Additionally the Company used $195,564
      to
      purchase computer equipment, software and office equipment during the three
      months ended March 31, 2007.


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**NOTE
      A -** **NATURE
      OF OPERATIONS, LIQUIDITY AND MANAGEMENT’S PLANS, AND SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES (CONTINUED)**





Management
      has successfully obtained additional financial resources, which the Company
      believes will support operations. These financial resources include financing
      from both related and non-related third parties, are discussed in the
      accompanying footnotes to the financial statements. There can be no assurance
      that management will be successful in continuing operations without additional
      financing efforts. The financial statements do not reflect any adjustments
      that
      may arise as a result of this uncertainty.





Property
      and Equipment





Property
      and equipment are stated at cost. The cost of significant additions and
      betterments is capitalized; maintenance and repairs are charged to expense
      as
      incurred. Depreciation is provided on property and equipment using both
      straight-line and accelerated methods over the estimated useful lives of the
      respective assets as follows:




Office
      equipment 5 - 7  years


Computer
      hardware and software 3 - 5  years


Leasehold
      improvements 15 - 39  years


Vehicles
      3  years





When
      property and equipment are retired or otherwise disposed, the cost and related
      accumulated depreciation are removed and any resulting gain or loss is reflected
      in the statement of income for the period.





Sales
      and Marketing Commissions and Client Referral Fees





Sales
      and
      marketing commissions and client referral fees of approximately $557,000 and
      $317,000 for the three months ended March 31, 2007 and 2006, respectively,
      are
      charged to operations as incurred.





Advertising
      Costs





Advertising
      costs, except for costs associated with direct-response advertising, are charged
      to operations when incurred. The costs of direct-response advertising are
      capitalized and amortized over the period during which future benefits are
      expected to be received. Resolve did not have direct-response advertising costs
      during the three months ended March 31, 2007 and 2006. Total advertising costs
      for the three months ended March 31, 2007 and 2006 were $197,981 and $3,180,
      respectively.





Income
      Tax





The
      Company determines an estimated annual effective income tax rate and this rate
      is updated at the end of each interim period. This rate is used to calculate
      the
      provision for income taxes on income from normal, recurring operations on a
      year-to-date basis. The tax effect of certain significant, unusual or
      extraordinary items is not taken into account in calculating the estimated
      annual effective income tax rate, but is taken into account entirely in the
      interim period when such items occur.





In
      June 2006, the FASB issued Interpretation No. 48, or FIN 48,
“Accounting for Uncertainty in Income Taxes”. The Company adopted the provisions
      of FIN 48 on January 1, 2007. Under FIN 48, the Company recognizes the tax
      benefit from an uncertain tax position only if it is more likely than not that
      the tax position will be sustained on examination by the taxing authorities,
      based on the technical merits of the position. For additional information
      regarding the adoption of FIN 48, see Note M, Income Taxes.





Income
      (Loss) Per Share





Net
      income (loss) per share is computed based upon the weighted average number
      of
      outstanding shares of the Company’s common stock for each period presented. The
      weighted average number of shares for 2007 excludes 2,000,000 common stock
      equivalents, representing warrants and stock options, since the effect of
      including them would be anti-dilutive. For 2006 these warrants were not
      outstanding until the date of the combination.





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          -
          10


**NOTE
      A -** **NATURE
      OF OPERATIONS, LIQUIDITY AND MANAGEMENT’S PLANS, AND SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES (CONTINEUD)**





Recent
      Accounting Pronouncements





In
      February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
      Financial Instruments" ("SFAS 155"), which amends SFAS No. 133, "Accounting
      for
      Derivative Instruments and Hedging Activities" ("SFAS 133") and SFAS No. 140,
      "Accounting for Transfers and Servicing of Financial Assets and Extinguishments
      of Liabilities" ("SFAS 140"). SFAS 155 simplifies the accounting for certain
      derivatives embedded in other financial instruments by allowing them to be
      accounted for as a whole if the holder elects to account for the whole
      instrument on a fair value basis. SFAS 155 also clarifies and amends certain
      other provisions of SFAS 133 and SFAS 140. SFAS 155 is effective for all
      financial instruments acquired, issued or subject to a remeasurement event
      occurring in fiscal years beginning after September 15, 2006. The Company
      adopted SFAS 155 on January 1, 2007 which does not have a material effect on
      our
      consolidated financial statements.




In
      June
      2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty
      in
      Income Taxes" ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in
      income taxes recognized in our financial statements in accordance with FASB
      Statement No. 109, "Accounting for Income Taxes". The provisions of FIN 48
      are
      effective for our fiscal year beginning January 1, 2007. We believe that
      the adoption will not have a material effect on our consolidated financial
      statements.




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      157”). SFAS 157 defines fair value, establishes a framework for measuring fair
      value in GAAP, and expands disclosures about fair value measurements. SFAS
      157
      is effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years. We will
      be required to adopt SFAS 157 in the first quarter of 2008. Our management
      is
      currently evaluating the requirements of SFAS 157 and has not yet determined
      the
      impact on our consolidated financial statements.




In
      September 2006, the Securities and Exchange Commission Staff issued Staff
      Accounting Bulletin No. 108, “Considering the Effects of Prior Year
      Misstatements when Quantifying Misstatements in the Current Year Financial
      Statements” (“SAB No. 108”). SAB No. 108 requires the use of two alternative
      approaches in quantitatively evaluating materiality of misstatements. If the
      misstatement as quantified under either approach is material to the current
      year
      financial statements, the misstatement must be corrected. If the effect of
      correcting the prior year misstatements, if any, in the current year income
      statement is material, the prior year financial statements should be corrected.
      In the year of adoption (fiscal years ending after November 15, 2006, or
      calendar year 2006 for us), the misstatements may be corrected as an accounting
      change by adjusting opening retained earnings rather than including the
      adjustment in the current year income statement. Upon completing our evaluation
      of the requirements of SAB No. 108, we determined it did not affect our
      consolidated financial statements.





Reportable
      Segments





As
      of the
      date of Combination, the Company operates in two reportable segments under
      Statement of Financial Accounting Standards Board (FASB) Statement No. 131,
      “ *Disclosure
      about Segments of Enterprise and Related Information* .”





Presented
      below is the reconciliation of segment information to the consolidated statement
      of operations for the three months ended March 31, 2007:





Total
            Staffing
            PEORevenue
            $61,861,760
            $47,876,859
            $13,984,901Cost
                of Sales
            54,418,623
            42,258,209
            12,160,414Gross
                Profit
            7,443,137
            5,618,650
            1,824,487Operating
                expenses
            7,113,666
            5,215,067
            1,898,599Income
                (loss) from operations
            329,471
            403,583
            (74,112)Interest
                Expense
            (600,240)
            (538,077)
            (62,163)Net
                loss
            $(270,769)
            $(134,494)
            $(136,275)





Workers’
      Compensation Insurance





Worksite
      employees in the state of Ohio are part of the state sponsored workers’
compensation insurance program. Accruals for Ohio workers’ compensation expense
      are recorded based on actual rates provided by the state.




Page
          -
          11


**NOTE
      A -** **NATURE
      OF OPERATIONS, LIQUIDITY AND MANAGEMENT’S PLANS, AND SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES (CONTINUED)**





The
      Company maintains high deductible workers’ compensation coverage for most other
      work site employees in states other than Ohio. Accruals for high deductible
      workers’ compensation expense are made based upon the Company’s claims
      experience and analysis by the Company’s third party administrator, utilizing
      the Company’s historic loss information. As such, a majority of the Company’s
      recorded expense for workers’ compensation is management’s best estimate.
      Management believes that the amount accrued is adequate to cover all known
      and
      unreported claims at each balance sheet date. However, if the actual costs
      of
      such claims and related expenses exceed the amount estimated, additional
      reserves may be required, which could have a material negative effect on
      operating results.





Goodwill





As
      discussed in Note E, ELS purchased the ownership interests of Five Star
      Staffing, Inc., Five Star Staffing (New York), Inc. and American Staffing
      Resources, LTD. during 2004. The acquisitions were accounted for using the
      purchase method of accounting in accordance with FASB Statement No. 141, *Business
      Combinations* .
      The
      cost in excess of net assets purchased was recorded as an asset (entitled
“Goodwill”). The Company does not amortize the goodwill balance, but reviews
      annually (or more frequently if impairment indicators arise) for impairment
      under a two-step impairment test in accordance with FASB Statement No. 142, *Accounting
      for Goodwill and Other Intangible Assets* .
      The
      first step is to compare the carrying amount of the reporting unit’s assets to
      the fair value of the reporting unit. If the carrying amount exceeds the fair
      value, then the second step is required to be completed, which involves the
      fair
      value of the reporting unit being allocated to each asset and liability with
      the
      excess being implied goodwill. The impairment loss is the amount by which the
      recorded goodwill exceeds the implied goodwill. No impairment loss was
      recognized for the three months ended March 31, 2007 and 2006.





Health
      Benefits





Claims
      incurred under health benefit plans are expensed as incurred according to the
      terms of the contract. Liability reserves are established for the benefit claims
      reported but not yet paid and claims that have been incurred but not yet
      reported.





**NOTE
      B - PROPERTY AND EQUIPMENT, NET**





Property
      and equipment as of March 31, 2007 and December 31, 2006 is summarized as
      follows:





2007
            
            2006Office
                equipment
            $1,018,944
            
            $746,832Computer
                hardware and software
            1,221,086
            
            872,230Leasehold
                improvements
            343,200
            
            260,307Vehicles
            24,618
            
            8,139Total
                property and equipment
            2,607,848
            
            1,887,508Less,
                accumulated depreciation
            (1,150,253)
            
            (543,735)Net
                property and equipment
            $1,457,595
            
            $1,343,773





Depreciation
      expense for the three months ended March 31, 2007 and 2006 was $106,743 and
      $0,
      respectively.





**NOTE
      C - RELATED PARTY TRANSACTIONS**




Note
      Receivable





On
      December 8, 2003, ELS entered into a non-interest bearing short-term credit
      agreement with Resolve Staffing, Inc. that provides for borrowings up to
      $200,000. At that time Ronald Heineman was the Chief Executive Officer and
      Director of both companies. The underlying promissory note is secured by 400,000
      shares of common stock that were released to an escrow agent, but not issued
      for
      accounting or reporting purposes. Balances due under the credit agreement were
      originally due May 8, 2004.





During
      March 2006, the agreement was amended to allow unlimited maximum borrowings
      with
      a maturity date of March 31, 2007. The note bears interest at 3 percent per
      annum and is payable monthly. As of March 31, 2006 $6,698,740 was outstanding
      under this note. As of March 31, 2007 amounts owed were eliminated on
      consolidation.





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          -
          12


**NOTE
      C - RELATED PARTY TRANSACTIONS (CONTINUED)**





Note
      Payable





Note
      payable to related party relates to borrowings of $91,500 from William Brown,
      a
      Director and Shareholder. The underlying note bears interest at 5% and was
      due
      on March 31, 2004. The Company has a verbal agreement to extend the maturity
      date on a month-to-month basis.





Notes
      payable to related parties of $15,857,197 related to the combination were
      outstanding at March 31, 2007. See Notes A and G.





Loan
      Guarantees





The
      lines
      of credit described in Note G below are secured by substantially all assets
      of
      the Company and guaranteed by Ron Heineman, William Walton and Restaurant
      Management Group. Prior to the Combination, the line of credit with ELS was
      also
      guaranteed by Resolve. Resolve had a line of credit providing for maximum
      borrowings of $7,000,000 and various term notes with a bank that were guaranteed
      by ELS.





Related
      Party Lease





The
      Company leases its Cincinnati facility from W.H. 2, LLC (WH2), a limited
      liability company owned by stockholders of the company under an operating lease
      expiring during September 30, 2011. Rent expense under this lease was $32,400
      and $12,282 for the three months ended March 31, 2007 and 2006, respectively.
      Future minimum annual rentals under this operating lease are presented in Note
      H.




Management
      Fees





Company
      personnel perform various management functions on behalf of the above mentioned
      related parties and other limited liability companies either wholly or partially
      owned by certain stockholders of the Company. Certain administrative costs
      are
      allocated to related parties under common management at the discretion of
      management. ELS allocated $150,000 of administrative costs to Resolve Staffing,
      Inc. for the three months ended March 31, 2007. Fees are no longer allocated
      due
      to the Combination that took place on October 1, 2006.




Advances
      Receivable





Advances
      receivable from related parties at March 31, 2007 and December 31, 2006 were
      $450,850 and $681,237, respectively.




**NOTE
      D - WORKERS’ COMPENSATION INSURANCE**




The
      Company maintains a high deductible insurance policy with respect to workers’
compensation coverage for its worksite employees who are not employed in the
      State of Ohio. The Company had provided a total of $1,938,449 and $826,838
      at
      March 31, 2007 and 2006, respectively, as the estimated liability for unsettled
      workers’ compensation claims. The estimated liability for unsettled workers’
compensation claims represents management’s best estimate, which includes, in
      part, an evaluation of information provided by the Company’s third-party
      administrators for workers’ compensation claims to estimate the total future
      costs of all claims, including potential future adverse loss development.
      Included in this claim liability are case reserve estimates for reported losses,
      plus additional amounts based on projections for incurred but not reported
      claims, anticipated increases in case reserve estimates and additional claim
      related administration expenses. These estimates are continually reviewed and
      adjustments to liabilities are reflected in current operating results as they
      become known. The Company believes that the difference between amounts recorded
      for its estimated liabilities and the possible range of costs to settle related
      claims is not material to results of operations; nevertheless, it is reasonably
      possible that adjustments required in future periods may be material to the
      results of operations.





During
      2007 and 2006, the Company’s primary high deductible workers’ compensation
      insurance policy was provided by Providence Property and Casualty Insurance
      Company of Frisco, Texas. Under this policy, the Company’s deductible in most
      cases equals $500,000 per occurrence and covers most of its worksite employees
      who are not employed in the state of Ohio (except California which are not
      covered under the policy.) The Company regularly evaluates the financial
      capacity of its insurers to assess the recoverability of any potential insurance
      receivables.





Page
          -
          13


**NOTE
      E - INTANGIBLE ASSETS**





The
      Company’s intangible assets are comprised of goodwill and covenants not to
      compete arising from acquisitions. Goodwill will be assessed for impairment
      annually by management. The Company’s covenants not to compete have contractual
      lives principally ranging from one to two years and are being amortized over
      the
      period of benefit.





Intangibles
      consist of the following at:





March
                31,
              2007
            December
                31,
              2006Covenants
                not to compete
            
            $
                613,547
            $
                613,547Less
                amortization
            
            (353,494)
            (180,915)$
                260,053
            432,632Goodwill
            
            $36,186,106
            $34,179,094





**NOTE
      F - EMPLOYEE BENEFIT PLAN**





The
      Company and many of its clients’ employees participate in a multi-employer
      401(k) retirement savings and plan covering substantially all employees who
      have
      completed one year of service and are at least 21 years of age. Participants
      may
      defer up to 50% of their annual base compensation up to the limits prescribed
      by
      the Internal Revenue Code (IRC).




The
      Company and its clients are required to match employee contributions at the
      rate
      of $1.00 for every $1.00 contributed by the employee, up to a maximum of 3%
      and
      $.50 for every $1.00 contributed for the next 2% of the employee’s base
      compensation in accordance with the IRC safe harbor rules. The Company and
      its
      clients may also make discretionary matching and profit sharing contributions
      to
      the plan.




Total
      Company contributions and plan expenses paid by the Company were $23,608 and
      $22,396 for the three months ended march 31, 2007 and 2006, respectively.





Page
          -
          14


**NOTE
      G - LONG TERM DEBT AND LINES OF CREDIT**





Notes
      payable and lines of credit as of March 31, 2007 and December 31, 2006 are
      as
      follows:





2007
            
            2006Lines
                of credit to one bank, interest payable monthly at rates ranging
                from
                prime to 8.75% per annum originally, maturing January 2007, maximum
                of
                $15,500,000 in borrowings. Borrowings are not to exceed 85% of accounts
                receivable. During the first quarter the Company increased these
                lines of
                credit to $31,500,000 with maturity dates of September 30, 2007 and
                January 31, 2008.
            
            $15,485,319
            
            $
                4,641,500Revolving
                line of credit with a financial institution that provides for maximum
                borrowings of $1,700,000 through November 2007. Borrowings are not
                to
                exceed 85% of accounts receivable. Interest accrues at 9.25% per
                annum.
            
            759,695
            
            986,956Line
                of credit with a bank that provides for maximum borrowings of $100,000.
                Interest accrues at the bank's prime rate of 9.25% per annum. Maturity
                date is on demand.
            
            69,804
            
            74,165Note
                payable to a bank, interest payable monthly at a rate of 6.6% per
                annum,
                maturing September 1, 2009.
            
            270,836
            
            303,746Note
                payable to a financial institution, interest payable at annual percentage
                rate of 8.25% per annum. Monthly payments of $47,049 through July
                2007.
            
            196,930
            
            351,910Notes
                payable to two individuals for the Combination, interest at prime
                which
                was 8.25% per annum at March 31, 2007. Note principal and interest
                payments are due the first day of each month through September
                2021.
            
            15,857,197
            
            16,944,200Note
                payable to individual for the stock purchase of Power Personnel.
                The note
                will be paid in monthly installments of $125,637 through October
                2008.
                Interest is payable at 5.3% per annum.
            
            2,242,184
            
            2,555,931Two
                notes payable to financial institutions due June 2007 and November
                2007.
                Interest accruing between 3.5% and 9.25% per annum.
            
            37,002
            
            37,866Notes
                payable to various individuals for the acquisition of various staffing
                entities during 2005, 2006 and 2007. Notes are due at varying dates
                through December 2009 with monthly payment amounts ranging from $5,833
                to
                $34,891. These notes bear no interest and accordingly management
                has
                imputed interest at 7.25% per annum. Shown net of discount of
                $148,333.
            
            3,256,907
            
            2,734,917Term
                loan payable to a bank, due in monthly installments of $9,845 including
                interest at 6.6% per annum through September 1, 2009, secured by
                substantially all Company assets.
            
            
            
            -Note
                payable to an individual accruing interest at 5% to 12% per annum,
                maturity date is being extended verbally on a month to month basis.
            
            91,500
            
            91,500Total
                long term debt and lines of credit
            
            38,267,374
            
            38,722,691Current
                portion of long term debt and lines of credit
            
            (21,195,718)
            
            (22,398,124)Long
                term portion of long term debt and lines of credit
            
            $17,071,656
            
            $
                16,324,567





Page
          -
          15





**NOTE
      G - LONG TERM DEBT AND LINES OF CREDIT (CONTINUED)**





See
      Note
      C—Related Party Balances and Transactions, for information about the Credit
      Agreement with Ron Heineman.





See
      Note
      C - Related Party Balances and Transactions, for information about the Note
      Payable to William Brown.





Maturities
      of long term debt and lines of credit are as follows:





Year
                ending December 31,2007
            
            $21,195,7182008
            
            3,185,2292009
            
            1,378,3382010
            
            1,183,7822011
            
            1,183,782Thereafter
            
            10,140,525$38,267,374




The
        lines
        of credit referred to above that mature September 30, 2007 and January 31,
        2008
        provide for terms and conditions of a working capital line of credit made
        available to the Company. As of May 16, 2007, the Company under the Credit
        Agreement were in technical default under certain terms of the Credit Agreement,
        as there remains outstanding an Over advance, as defined, which is due and
        owing
        to the Bank in the amount of $2,255,267. The Registrant is undertaking a
        plan to
        cure this event of default within a reasonable time and has been in
        communications with the Bank in order to accomplish that, with management
        anticipating the cure of any further event of default under the Credit
        Agreement. The outstanding balance of these lines of credit are included
        in
        current liabilities in the accompanying consolidated at March 31,
        2007.


**NOTE
      H - OPERATING LEASES**




The
      Company rents various office space for each of its locations across the United
      States, under lease terms ranging from month-to-month to expiring September,
      2011. Monthly payments due under these leases range from $210 to $4,970. The
      Company has the option to renew various leases under the same terms and
      conditions as the original leases and anticipates exercising certain of these
      options.  The
      Company also leases various office and computer equipment under operating leases
      that require quarterly payments between $3,641 and $4,988 through March 2007.
      The Company also leases office space from a related party at $4,100 a month
      through July 2009. This lease was amended and renewed on October 1, 2006 to
      $10,800 a month through September 30, 2011.




Future
      minimum annual rentals under all operating lease agreements are as
      follows:





Year
                Ended December 31,
            Total
            Related
                Party
            Other2007
            $
                964,382
            $
                129,600
            $
                834,7822008
            725,854
            129,600
            596,2542009
            476,270
            129,600
            346,6702010
            257,724
            129,600
            128,1242011
            118,969
            108,000
            10,969$
                2,543,199
            $
                626,400
            $
                1,916,799





Total
      rent expense for all operating leases was $420,476 and $83,547 for the three
      months ended March 31, 2007 and 2006 respectively.





**NOTE
      I - DEFERRED GAIN ON SALE OF STAFFING COMPANIES**





On February
      7, 2005, ELS
      sold the common stock and membership units of Five Star Staffing, Inc., Five
      Star Staffing (New York), Inc., American Staffing Services, Ltd. and E.L.S.
      Personnel Services, LLC to Resolve in exchange for 13,000,000 restricted shares
      of Resolve common stock and a note receivable in the amount of $1,500,000.
      Since
      the transaction was between related parties, the gain resulting from the sale
      in
      the amount of $1,051,235 had been recorded as a deferred gain on the combined
      balance sheet at December 31, 2005. This gain was eliminated in conjunction
      with
      the recording of the Combination.





Page
          -
          16


**NOTE
      J - MAJOR VENDOR**





Workers’
      compensation paid to the State of Ohio Bureau of Workers’ Compensation
      constitute approximate 60% of workers’ compensation insurance cost of revenues
      for the PEO segment. This is considered a major vendor relationship. Because
      the
      State of Ohio is a monopolistic state with regard to workers’ compensation
      insurance, there are no alternative sources for workers’ compensation insurance
      within the state. The Company believes that, by nature of rules afforded PEOs
      within the state, the risk from this relationship is primarily related to rates.
      The standard client agreement provides that the Company may, at its discretion,
      adjust the amount billed to clients to reflect changes in the Company’s direct
      costs. Also, the Company maintains the ability to remove clients from their
      policy and, due to having PEO status, the removal of the client from the policy
      will remove that client’s claims history from the Company policy. Any such rate
      changes or removals require a 30 day notice to the client. Regardless of the
      Company’s assertion, there is no assurance that the Company will be able to
      successfully pass through rate increases or successfully manage claims in the
      future.





**NOTE
      K - COMMITMENTS AND CONTINGENCIES**





The
      Company is a defendant in various lawsuits and claims arising in the normal
      course of business. Management believes it has valid defenses in these cases
      and
      is defending them vigorously. While the results of litigation cannot be
      predicted with certainty, management believes the final outcome of such
      litigation will not have a material adverse effect on the Company’s financial
      position or results of operations.





The
      Company maintains letters of credit of approximately $4,374,944 at March 31,
      2007 to secure workers’ compensation policies in lieu of providing deposits.
      There were no draws on the letters of credit for the three months ended March
      31, 2007.




In
      accordance with the high deductible workers’ compensation policy, the Company is
      required to purchase $490,000 of the insurance company’s non-voting stock during
      the year ended December 31, 2007. There are no additional deposits to be made
      during the year ending December 31, 2007 as all deposits were made in
      2006.





The
      Company is in receipt of a Determination and Assessment from the State of
      Michigan, Department of Labor & Economic Growth, Unemployment Insurance
      Agency seeking payment of amounts totaling $9,505,212. The Company and legal
      counsel believe that this assessment is baseless and without merit and intends
      to contest this assessment vigorously. As of March 31, 2007, no amount is
      accrued in the Company’s financial statements as the matter is deemed groundless
      and outside the authority of the Agency.





The
      Company is in receipt of assessments totaling $
      19,834,370 from the State of Ohio sales tax auditors on employee leasing or
      co-employment sales. The Company conducts its business through written contracts
      of at least one year, and claims exemption from the sales tax auditor's
      position. We continue to work with the sales tax auditors to have this matter
      dismissed. As of March 31, 2007, no amount is accrued in the Company's financial
      statements as the Company and legal counsel believe this assessment is
      groundless.





As
      of
      March 31, 2007 the Company is in receipt of a notice from the United States
      Department of Labor asserting various violations of ERISA relating to the ELS
      group health plan. The Company is attempting to address the alleged violations
      and does not believe this matter will have a material impact on the accompanying
      financial statements.





Depending
      on certain goals and performances being met, Resolve has the following off
      balance sheet arrangements in which Resolve is obligated to pay the previous
      owners of the following entities certain contingent amounts, which are the
      result of the various acquisitions. If additional amounts are paid these amounts
      will be recorded as additional goodwill when paid.





·
            The
                Arnold Group - Based on sales targets, the prior owners may receive
                contingent performance payments not to exceed $125,000 through May
                31,
                2007.


·
            Taylor
                Personnel Services, Inc. - Based on sales targets, the prior owners
                may
                receive contingent performance payments not to exceed $80,000 through
                May
                31, 2007.


·
            QRD
                International, Inc. dba Delta Staffing - Based on gross profit targets,
                the prior owners may receive contingent performance payments of up
                to
                approximately $75,000 through September 11,
                2007.


·
            Midwest
                Staffing, Inc. - Based on pre-tax profit targets, the prior owners
                may
                receive contingent performance payments not to exceed $75,000 through
                September 27, 2007.


·
            Project
                Solvers, Inc. - Based on pre-tax profit targets, the prior owners
                may
                receive contingent performance payments not to exceed $200,000 through
                October 25, 2008.


·
            Pro
                Care Medical Staffing, LLC. - Based on pre-tax targets the prior
                owners
                may receive contingent performance payments not to exceed $ 650,000
                in
                total through November 9, 2007.


·
            Big
                Sky Travel Nurses, Inc. - Based on pre- tax profit targets, the prior
                owners may receive contingent performance payments of up to approximately
                $15,000 through November 27,
                2007.


Page
          -
          17


**NOTE
      K - COMMITMENTS AND CONTINGENCIES (CONTINUED)**





·
            Assisted
                Staffing, Inc. - Based on pre- tax profit targets, the prior owners
                may
                receive contingent performance payments of up to approximately $25,000
                through December 10, 2007.


·
            Driver’s
                Plus, Inc. - Based on pre- tax profit targets, the prior owners may
                receive contingent performance payments of up to approximately $10,000
                through December 26, 2007.


·
            Ready
                Nurse, LLC. - Based on pre- tax profit targets, the prior owners
                may
                receive contingent performance payments of up to approximately $10,000
                through March 5, 2008.


·
            KFT,
                Inc. dba Power Personnel - Based on pre- tax profit targets the prior
                owners may receive contingent performance payments of up to approximately
                $ 50,000 through October 10, 2008 and October, 10
                2009.


·
            Steadystaff,
                LLC - January 1, 2007 to December 31, 2007 and January 1, 2008 to
                December
                31, 2008, based on pre-tax profit targets the prior owners may receive
                contingent performance payouts up to approximately $10,000 per
                year.


·
            Choice
                Staff Personnel Services, Inc. - the prior owners may receive a contingent
                payment up to 150,000 shares of resovle Staffing, Inc. common stock.





Employee
      Agreements





The
      employment agreement with Mr. Heineman dated October 1, 2006, (for a 5 year
      term) sets forth the terms of his continued employment with the Company as
      chief
      executive officer and provides for, among other matters: a base salary, bonuses
      based on the achievement of specific goals as determined by the agreement and
      a
      severance package as specified in the agreement.





The
      employment agreement with Mr. Horne dated October 1, 2006, (for a 3 year term)
      sets forth the terms of his continued employment with the Company as executive
      vice president and chief financial officer and provides for, among other
      matters: a base salary, bonuses based on the achievement of specific goals
      as
      determined by the agreement and a severance package as specified in the
      agreement.





The
      employment agreement with Mr. Roux dated October 1, 2006, (for a 3 year term)
      sets forth the terms of his continued employment with the Company and provides
      for, among other matters: a base salary, bonuses based on the achievement of
      specific goals as determined by the agreement and a severance package as
      specified in the agreement.





**NOTE
      L - VARIABLE INTEREST ENTITY**





As
      described in Note B, during 2005 and 2004 ELS loaned substantial amounts to
      Resolve Staffing, Inc., a company with common ownership and management. Because
      of the common ownership between ELS and Resolve, the amounts loaned to Resolve
      by ELS, and the guarantee of Resolve’s debt by the stockholders of ELS, ELS was
      exposed to the risk that it may have been required to subsidize the losses
      of
      Resolve.




While
      Resolve was considered a variable interest entity, Employee Leasing Services,
      Inc. was not considered the primary beneficiary. Therefore, the financial
      statements of Resolve have not been consolidated with Employee Leasing Services,
      Inc. for 2005 and 2004. At December 31, 2005, the assets of Resolve totaled
      approximately $15,200,000 (including goodwill of approximately $6,700,000)
      and
      liabilities totaled approximately $15,400,000 (including bank debt of
      approximately $6,200,000 and advances and notes payable to ELS of approximately
      $6,700,000.) The maximum exposure for ELS would be the carrying amount of the
      bank debt and the advances and notes payable of Resolve. See Note A for
      discussion of the combination between ELS and Resolve during 2006.





**NOTE
      M - INCOME TAXES**





The
      Company’s current estimated annual effective income tax rate that has been
      applied to normal, recurring operations for the three-months ended
      March 31, 2007 is 0%.





As
      a
      result of the adoption of FIN 48, the company has not recorded any change to
      retained earnings. At January 1, 2007 the Company had no unrecognized tax
      benefits that, if recognized, would favorably affect the Company's effective
      income tax rate in future periods. At March 31, 2007, the Company had no
      unrecognized tax benefits. The Company's practice is to recognize interest
      and/or penalties related to income tax matters in income tax expense. The
      Company had no accrued interest or penalties at January 1, 2007 and no accrued
      interest or penalties at March 31, 2007.





The
      tax
      years 2003 through 2006 remain open to examination by some or all of the major
      taxing jurisdictions to which we are subject.





The
      company expects no material changes in its unrecognized tax benefits for tax
      positions taken within the next twelve months.





Page
          -
          18


**NOTE
      N - CASH FLOW SUPPLEMENTAL INFORMATION**





Cash
      paid
      for interest during the three months ended March 31, 2007 and 2006 amounted
      to
      $521,601 and $0, respectively.





Non-cash
      investing and financing activities:





During
      the three months period ended March 31, 2007, the following non-cash
      transactions were recorded:





Acquisition
      of Entities from Unrelated Parties





During
      the three months period ended March 31, 2007, Resolve Staffing, Inc., entered
      into purchase agreements (“Agreements”), to acquire all of the assets and/or
      ownership of two privately-held entities owned and operated by unrelated
      parties. Pursuant to the acquisition agreements, Resolve acquired the temporary
      employee staffing locations from the newly acquired entities.





Resolve
      issued notes payable, issued common stock and accrued contingent expenses in
      the
      amount of $1,595,000 in exchange for the assets and liabilities of the above
      staffing entities as described below. The following table summarizes the
      estimated fair value, of the assets acquired and liabilities assumed, on the
      date of acquisition:





Choice
                Staff
            Velocity
            TotalProperty
                and Equipment
            $15,000
            $10,000
            $25,000Goodwill
            
            740,000
            830,000
            1,570,000Net
                Assets Acquired:
            $755,000
            $840,000
            $1,595,000





**NOTE
      O - STOCKHOLDERS’ EQUITY**





Issuance
      of Common Stock





During
      the three months ended March 31, 2007 the Company issued 100,000 shares of
      common stock for acquisitions. The shares issued for acquisitions have been
      valued at approximately $280,000 and have been recorded as an increase in paid
      in capital in the accompanying consolidated statement of stockholders’
equity.




On
      January 20, 2007 certain individuals converted outstanding warrants into shares
      of common stock. A total of 714,360 warrants were converted into 535,770 shares
      of common stock. The conversion was a cashless conversion.





On
      January 26, 2007 the Board of Directors elected to purchase 129,460 warrants
      (with a strike price of $.75) for an aggregate of $6,473 pursuant to the warrant
      agreement.





Common
      Stock Warrants





As
      of
      March 31, 2007 there were 2,000,000 warrants outstanding. The warrants were
      issued on October 1, 2006 and have a strike price of $2.00 (1 million warrants)
      and $3.00 (1 million warrants). All stock warrants are exercisable at March
      31,
      2007.





Equity
      Incentive Plan





During
      the year ended December 31, 2001, Resolve adopted a 2001 Equity Incentive Plan
      ("Incentive Plan") for the benefit of key employees (including officers and
      employee directors) and consultants of Resolve and its affiliates. The Incentive
      Plan is intended to provide those persons who have substantial responsibility
      for the management and growth of Resolve with additional incentives and an
      opportunity to obtain or increase their proprietary interest in Resolve,
      encouraging them to continue in the employ of Resolve.





On
      May
      28, 2002, Resolve's 2001 Stock Incentive Plan was amended to restore the number
      of shares which may be issued under the plan to 600,000 and to permit the
      issuance of unrestricted shares. No shares have been issued under this
      plan.





**NOTE
      P - SUBSEQUENT EVENTS**





Mr.
      Scott
      Horne resigned as chief financial officer of Resolve Staffing, Inc. by letter
      dated May 17, 2007. Mr. Horne will remain with the Company as VP of Franchise
      Development. There were no disputes between the Company and Mr. Horne. The
      Company intends to appoint another individual as chief financial officer in
      the
      near future.





Page
          -
          19


**NOTE
      Q - PROFORMA INFORMATION**





The
      consolidated financial statements as of and for the three months ended March
      31,
      2007 are presented in accordance with accounting principles generally accepted
      in the United States of America (GAAP), which requires that the financial
      results of acquired entities are included in the consolidated financial
      statements from the date of acquisition. As a result, the consolidated statement
      of operations does not include the activity of the acquired companies for the
      period from January 1 to the date of acquisition. Below is the pro forma
      information for the significant acquisitions entered into during 2006 for the
      acquisition of Resolve Staffing, on October 1, 2006, and the acquisition of
      Power KFT, on October 11, 2006.





Presented
      below is the unaudited pro forma condensed combined consolidated statement
      of
      operations for the three months ended March 31, 2006 as if the acquisition
      of
      Resolve Staffing and Power KTF had been completed January 1, 2006.





**Actual**
            **Resolve
                Staffing**
            **Power
                KTF**
            **Pro-forma
                adjustments**
            **Pro-forma**Revenues
            $
                12,624,972
            $
                17,404,578
            $
                2,098,227
            
            $ 
                32,127,777Cost
                of revenues
            9,803,836
            14,184,002
            1,708,259
            
            25,696,097Gross
                profit
            2,821,136
            3,220,576
            389,968
            
            6,431,680Operating
                expenses
            1,824,157
            3,564,928
            448,495
            
            5,837,580Income
                (Loss) From Operations
            996,979
            (344,352)
            (58,527)
            
            594,100Interest
                expense
            14,456
            151,838
            36,414
            (a)358,094
            560,802Net
                (Loss) Income
            $982,523
            $(496,190)
            $(94,941)
            $(358,094)
            $33,298





Pro-forma
                earnings per share information for the three months ended March 31,
                2006:Basic
                weighted average shares outstanding:
            
            
            18,642,740Pro
                forma basic net loss per common share:
            
            
            $(0.00)




**NOTES
      TO THE UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF
      OPERATIONS**





a)
            Interest
                expense related to Bill Walton and Ron Heineman notes payable issued
                for
                the ELS/Resolve combination. Interest computed as if the notes were
                issued
                January 1, 2006.








Page
          -
          20


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





The
      financial information set forth in the following discussion should be read
      in
      conjunction with the Company's audited financial statements and notes included
      herein. The results described below are not necessarily indicative of the
      results to be expected in any future period. Certain statements in this
      discussion and analysis, including statements regarding our strategy, financial
      performance and revenue sources, are forward-looking information based on
      current expectations and entail various risks and uncertainties that could
      cause
      actual results to differ materially from those expressed in the forward-looking
      statements.





*Overview*





Resolve
      Staffing focuses on meeting our clients' flexible human resource outsourcing
      needs, targeting opportunities in a fragmented; growing market that we believe
      has been under-served by large, full-service staffing and PEO companies.
      Significant benefits to clients include providing the ability to outsource
      the
      recruiting and many logistical aspects of their human resource needs, as well
      as
      converting the fixed cost of employees to the variable cost of outsourced
      services. A summary of our Payroll Administration Services and Aggregation
      of
      Statutory and Non-Statutory Employee Benefits Services are as
      follows:





·
            Professional
                Employer Organization - In a PEO arrangement, we enter into a contract
                to
                become a co-employer of the client's existing workforce and assume
                responsibility for some or all of the client's human resource management
                responsibilities.·
            Payroll
                Administration Services - We assume responsibility for our employees
                for
                payroll and attendant record-keeping, payroll tax deposits, payroll
                tax
                reporting, and all federal, state, payroll tax reports (including
                941s,
                940s, W-2s, W-3s, W-4s and W-5s), state unemployment taxes, employee
                file
                maintenance, unemployment claims and monitoring and responding to
                changing
                regulatory requirements.·
            Aggregation
                of Statutory and Non-Statutory Employee Benefits Services - We provide
                workers' compensation and unemployment insurance to our service employees.
                Workers' compensation is a state-mandated comprehensive insurance
                program
                that requires employers to fund medical expenses, lost wages, and
                other
                costs that result from work related injuries and illnesses, regardless
                of
                fault and without any co-payment by the employee. Unemployment insurance
                is an insurance tax imposed by both federal and state governments.
                Our
                human resources and claims administration departments monitor and
                review
                workers' compensation for loss control
                purposes.





We
      are
      the employer of record with respect to flexible staffing services and assume
      responsibility for most employment regulations, including compliance with
      workers' compensation and state unemployment laws. As part of our basic services
      in the flexible staffing market, we conduct a human resources needs analysis
      for
      clients and client employees. Such analysis includes reviewing work schedules
      and productivity data, in addition to recruiting, interviewing, and qualifying
      candidates for available positions. Based on the results of that review, we
      recommend basic and additional services that the client should
      implement.





We
      provide certain other services to our flexible industrial staffing clients
      on a
      fee-for-service basis. These services include screening, recruiting, training,
      workforce deployment, loss prevention and safety training, pre-employment
      testing and assessment, background searches, compensation program design,
      customized personnel management reports, job profiling, description,
      application, turnover tracking and analysis, drug testing policy administration,
      affirmative action plans, opinion surveys and follow-up analysis, exit
      interviews and follow-up analysis, and management development skills
      workshops.





The
      focus
      of our temporary staffing service is to provide short and long term employees
      as
      well as temp to hire employees to financially secured employers. The average
      employee will work a 40 hour work week for a client and will work for an average
      of 2 employers per month. It is estimated an employee will work an average
      of 14
      days per month. Our service specializes in a variety of staffing fields
      including medical, truck driver, clerical, and light industrial staffing with
      the largest percentage in the clerical and light industrial fields. Each
      applicant is thoroughly interviewed tested and screened to meet the requirements
      of our customers. For long term and temp to hire positions a large percentage
      of
      our customers will interview our candidates and then select the one they believe
      to be best suited for the position.





We
      provide Human Resource Outsourcing (HRO) services, comprised of staffing
      services and PEO services. We generate staffing services revenues primarily
      from
      short-term staffing, contract staffing, on-site management and direct placement
      services. Our PEO service fees are generated from contractual agreements with
      our PEO clients under which we become a co-employer of our client’s workforce
      with responsibility for some or all of the client’s human resource functions. We
      recognize revenues from our staffing services for all amounts invoiced,
      including direct payroll, employer payroll-related taxes, workers’ compensation
      coverage and a service fee (equivalent to a mark-up percentage). PEO service
      fee
      revenues are recognized on a net basis in accordance with Emerging Issues Task
      Force No. 99-19, “ *Reporting
      Revenues Gross as a Principal Versus Net as an Agent* ”
(“EITF
      No. 99-19”). As such, our PEO service fee revenues represent the gross
      margin generated from our PEO services after deducting the amounts invoiced
      to
      PEO customers for direct payroll expenses such as salaries, wages, health
      insurance and employee out-of-pocket expenses incurred incidental to employment.
      These amounts are also excluded from cost of revenues. PEO service fees also
      include amounts invoiced to our clients for employer payroll-related taxes
      and
      workers’ compensation coverage.


Page
          -
          21





Our
      cost
      of revenues is comprised of direct payroll costs for staffing services, employer
      payroll-related taxes and employee benefits and workers’ compensation. Direct
      payroll costs represent the gross payroll earned by staffing services employees
      based on salary or hourly wages. Payroll taxes and employee benefits consist
      of
      the employer’s portion of Social Security and Medicare taxes, federal
      unemployment taxes, state unemployment taxes and staffing services employee
      reimbursements for materials, supplies and other expenses, which are paid by
      the
      customer. Workers’ compensation expense consists primarily of the costs
      associated with our self-insured workers’ compensation program, such as claims
      reserves, claims administration fees, legal fees, state administrative agency
      fees and excess insurance costs for catastrophic injuries. We also maintain
      separate workers’ compensation insurance policies for employees working in
      states where we are not self-insured.





The
      largest portion of workers’ compensation expense is the cost of workplace injury
      claims. When an injury occurs and is reported to us, our respective independent
      insurer analyzes the details of the injury and develops a case reserve, which
      is
      the insurer’s estimate of the cost of the claim based on similar injuries and
      their professional judgment. We then record or accrue an expense and a
      corresponding liability based upon our estimate of the ultimate claim cost.
      As
      cash payments are made by our insurer against specific case reserves, the
      accrued liability is reduced by the corresponding payment amount. The insurer
      also reviews existing injury claims on an on-going basis and adjusts the case
      reserves as new or additional information for each claim becomes available.
      We
      have established an additional reserve for both future unanticipated increases
      in costs (“adverse loss development”) of the claims reserves for open claims and
      for claims incurred but not reported related to prior and current periods.
      We
      believe our operational policies and internal claims reporting system help
      to
      limit the occurrence of unreported incurred claims.





Selling,
      general and administrative expenses represent both branch office and
      corporate-level operating expenses. Branch operating expenses consist primarily
      of branch office staff payroll and personnel related costs, advertising, rent,
      office supplies, depreciation and branch incentive compensation. Corporate-level
      operating expenses consist primarily of executive and office staff payroll
      and
      personnel related costs, professional and legal fees, travel, depreciation,
      occupancy costs, information systems costs and executive and corporate staff
      incentive compensation.





Amortization
      of intangible assets consists of the amortization of software costs, and
      covenants not to compete, which are amortized using the straight-line method
      over their estimated useful lives, which range from two to ten years.





*Critical
      accounting policies*





For
      a
      discussion of recent accounting pronouncements and their potential effect on
      the
      Company’s results of operations and financial condition, refer to the Notes to
      the Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
      Note that the preparation of this Quarterly Report on Form 10-Q requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities at the date of the financial statements, and the reported
      amounts of revenue and expenses during the reporting period. Management bases
      its estimates on historical experience and on various other assumptions that
      are
      believed to be reasonable under the circumstances, the results of which form
      the
      basis for making judgments about the carrying values of assets and liabilities
      that are not readily apparent from other sources. Actual results may differ
      from
      these estimates under different assumptions or conditions.


Allowance
      for Doubtful Accounts - We
      are
      required to make estimates of the collectibility of accounts receivables.
      Management analyzes historical bad debts, customer concentrations, customer
      creditworthiness, current economic trends and changes in the customers' payment
      tendencies when evaluating the adequacy of the allowance for doubtful accounts.
      If the financial condition of our customers deteriorates, resulting in an
      impairment of their ability to make payments, additional allowances may be
      required.





Workers'
      Compensation Reserves - We
      are
      high deductible for workers' compensation coverage in certain states. The
      estimated liability for unsettled workers' compensation claims represents our
      best estimate, which includes an evaluation of information provided by our
      third-party administrators for workers' compensation claims and, in part, an
      annual actuarial analysis from an independent actuary. Included in the claims
      liabilities are case reserve estimates for reported losses, plus additional
      amounts based on projections for incurred but not reported claims, anticipated
      increases in case reserve estimates and additional claims administration
      expenses. These estimates are continually reviewed and adjustments to
      liabilities are reflected in current operating results as they become known.
      We
      believe that the difference between amounts recorded for our estimated
      liabilities and the possible range of costs to settle related claims is not
      material to results of operations; nevertheless, it is reasonably possible
      that
      adjustments required in future periods may be material to results of
      operations.





Intangible
      Assets and Goodwill - We
      assess
      the recoverability of intangible assets and goodwill annually and whenever
      events or changes in circumstances indicate that the carrying value might be
      impaired. Factors that are considered include significant underperformance
      relative to expected historical or projected future operating results,
      significant negative industry trends and significant change in the manner of
      use
      of the acquired assets. Management's current assessment of the carrying value
      of
      intangible assets and goodwill indicates there was no impairment as of March
      31,
      2007. If these estimates or their related assumptions change in the future,
      we
      may be required to record impairment charges for these assets, as of the date
      of
      our annual assessment during the third quarter of our fiscal
      year.


Page
          -
          22





*Forward-looking
      information*





Statements
      in this Item or in other sections of this report which are not historical in
      nature, including discussion of economic conditions in the Company’s market
      areas and effect on revenue growth, the potential for and effect of past and
      future acquisitions, the effect of changes in the Company’s mix of services on
      gross margin, the adequacy of the Company’s workers’ compensation reserves and
      allowance for doubtful accounts, the effectiveness of the Company’s management
      information systems, and the availability of financing and working capital
      to
      meet the Company’s funding requirements, are forward-looking statements within
      the meaning of the Private Securities Litigation Reform Act of 1995.





Such
      forward-looking statements involve known and unknown risks, uncertainties and
      other factors that may cause the actual results, performance or achievements
      of
      the Company or industry to be materially different from any future results,
      performance or achievements expressed or implied by such forward-looking
      statements.





Such
      factors with respect to the Company include difficulties associated with
      integrating acquired businesses and clients into the Company’s operations,
      economic trends in the Company’s service areas, material deviations from
      expected future workers’ compensation claims experience, the effect of changes
      in the workers’ compensation regulatory environment in one or more of the
      Company’s primary markets, collectibility of accounts receivable, the carrying
      values of deferred income tax assets and goodwill, which may be affected by
      the
      Company’s future operating results, and the availability of capital or letters
      of credit necessary to meet state-mandated surety deposit requirements for
      maintaining the Company’s status as a qualified self-insured employer for
      workers’ compensation coverage, among others.





The
      Company disclaims any obligation to update any such factors or to publicly
      announce the result of any revisions to any of the forward-looking statements
      contained herein to reflect future events or developments.





*Fluctuations
      in Quarterly Operating Results*





We
      have
      historically experienced significant fluctuations in our quarterly operating
      results and expect such fluctuations to continue in the future. Our operating
      results may fluctuate due to a number of factors such as wage limits on
      statutory payroll taxes, claims experience for workers’ compensation, demand for
      our services and competition. Payroll taxes, as a component of cost of revenues,
      generally decline throughout a calendar year as the applicable statutory wage
      bases for federal and state unemployment taxes and Social Security taxes are
      exceeded on a per employee basis. Our revenue levels in the fourth quarter
      may
      be affected by many customers’ practice of operating on holiday-shortened
      schedules. Workers’ compensation expense varies with both the frequency and
      severity of workplace injury claims reported during a quarter and the estimated
      future costs of such claims. In addition, adverse loss development of prior
      period claims during a subsequent quarter may also contribute to the volatility
      in the Company’s estimated workers’ compensation expense.





*Results
      of Operations*





We
      report
      PEO revenues in accordance with the requirements of EITF No. 99-19 which
      requires us to report such revenues on a net basis because we are not the
      primary obligor for the services provided by our PEO clients to their customers
      pursuant to our PEO contracts. We present for comparison purposes the gross
      revenues and cost of revenues information for the three months ended March
      31,
      2007 and 2006 set forth in the table below. Although not in accordance with
      generally accepted accounting principles in the United States (“GAAP”),
      management believes this information is more informative as to the level of
      our
      business activity and more illustrative of how we manage our operations,
      including the preparation of our internal operating forecasts, because it
      presents our PEO services on a basis comparable to our staffing
      services.





**Three
                Months Ended March 31,****2007**
            **2006**Revenues:Staffing
                services
            $
                47,876,859
            $               
                 -Professional
                employer services
            74,062,511
            67,677,772Total
                revenues
            121,939,370
            67,677,772Total
                cost of revenues
            114,496,233
            64,856,636Gross
                margin
            $  
                7,443,137
            $  
                2,821,136




Page
          -
          23


A
      reconciliation of non-GAAP gross revenues to net revenues is as follows for
      the
      three months ended March 31, 2007 and 2006:





**Gross
                Revenue**
              **Reporting
                Method**
            **Reclassification**
            **Net
                Revenue**
              **Reporting
                Method****2007**
            **2006**
            **2007**
            **2006**
            **2007**
            **2006**Revenues:Staffing
                services
            $
                47,876,859
            $
                -
            $
                -
            $
                -
            $
                47,876,859
            $
                -Professional
                employer services
            74,062,511
            67,677,772
            60,077,610
            55,052,800
            13,984,901
            12,624,972Total
                revenues
            121,939,370
            67,677,772
            60,077,610
            55,052,800
            61,861,760
            12,624,972Total
                cost of revenues
            114,496,233
            64,856,636
            60,077,610
            55,052,800
            54,418,623
            9,803,836Gross
                margin
            $
                7,443,137
            $
                2,821,136
            $
                -
            $
                -
            $
                7,443,137
            $2,821,136





*Comparison
      of consolidated operations for the three months ended March 31, 2007 to the
      three months ended March 31, 2006*





Revenues
      for the three months ended March 31, 2007 compared to 2006 increased from
      $12,624,972 to $61,861,760, a 390% increase, reflecting an increase in organic
      growth and our aggressive acquisition and marketing efforts. This growth is
      also
      attributable to both growth through acquisition, including the merger with
      ELS,
      and growth with our existing clients as well as expanding our customer base.
      As
      described in the footnotes to the financial statements, this increase is also
      a
      result of the merger between Resolve Staffing and ELS, which resulted in
      expanded services including both staffing and PEO services.





Cost
      of
      services increased from $9,803,836 in 2006 to $54,418,623 in 2007, an increase
      of 455% from the prior year. This increase is attributable to our aggressive
      sales growth, diversified service offering, and acquisitions. Our gross profit
      decreased, as a percent of sales, from approximately 22% to approximately 12%.
      This decrease is attributable to a number of factors including a change in
      our
      service mix as a result of our aggressive acquisition efforts (we now offer
      a
      variety of HRO Services including Staffing, PEO, Payroll Services, Benefits
      Administration, etc.). The results for the first quarter of 2006 reflect only
      revenues from PEO services, while 2007 results include staffing and payroll
      services as well. Revenue from payroll services, approximately $22 million,
      generate a gross margin of 3.4%, thus resulting in a decrease, as a percent
      of
      sales, of our gross margins for 2007.





We
      expect
      our gross profit margins to increase, as a percent of sales, in the future
      as we
      continue to grow our business in higher margin areas and as one time adjustments
      (attributable to merger and acquisitions) decrease.





Operating
      expenses have increased from $1,824,137 in 2006 to $7,113,666 in 2007. This
      increase is attributable to our aggressive growth through acquisitions and
      our
      organic growth. Resolve has grown into a national provider of HRO services
      with
      78 offices. This increase in operating expenses includes marketing, salaries,
      rents, and various other expenses associated with these locations. These costs
      have decreased from approximately 14.4% to 11.5% as a percent of
      sales.




Other
      expenses increased from $14,456 in 2006 to $600,232 in 2007. The increase is
      attributable to increase debt obligations related to our increased credit lines,
      aggressive acquisition strategy and the recent merger with ELS. A major portion
      of our debt is through affiliated parties, including Ron Heineman. This is
      discussed in detail in the footnotes to our financial statements.





No
      provision for income taxes have been reflected or recorded on these financial
      statements. We incurred a net loss of $270,769 for the three months ended March
      31, 2007 as a result of the matters discussed above. Losses to date may be
      used
      to offset future taxable income, assuming the Company becomes
      profitable.





*Liquidity
      and Capital Resources*





As
      reflected in the accompanying financial statements, the Company has a net
      working capital deficit of $22,897,656 and a stockholder’s equity of $389,384,
      as of March 31, 2007.





For
      the
      three months ended March 31, 2007 the Company incurred a net loss of $270,769.
      Of this loss, $336,230 did not represent the use of cash. Non-cash expenditures
      consisted of depreciation of $106,743, increase in allowance for doubtful
      accounts of $56,908, and amortization of non-compete agreements of $172,579.
      Changes in accounts receivable, prepaid and other assets, along with increases
      in accounts payable, payroll, salary, and other accruals brought the total
      cash
      provided by operations to $102,344. Additionally the Company used $195,564
      to
      purchase computer equipment, software and office equipment during the three
      months ended March 31, 2007.





Page
          -
          24


Management
      has successfully obtained additional financial resources, which the Company
      believes will support operations. These financial resources include financing
      from both related and non-related third parties, are discussed in the
      accompanying footnotes to the financial statements. There can be no assurance
      that management will be successful in continuing operations without additional
      financing efforts. The financial statements do not reflect any adjustments
      that
      may arise as a result of this uncertainty.





The
      Company expects its operating expenses to increase significantly in the near
      future as the Company attempts to build its brand and expand its customer base.
      The Company hopes its expenses will be funded from operations and short-term
      loans from officers, shareholders or others; however, the Company’s operations
      may not provide such funds and the Company may not be able to obtain short-term
      loans from officers, shareholders or others. The Company’s officers and
      shareholders are under no obligation to provide additional loans to the
      Company.





Net
      cash
      used in investing activities totaled $60,039 for the three months ended March
      31, 2007, compared to net cash provided by investing activities of $1,055,197
      for 2006. For 2007, the principal uses of cash for investing activities were
      for
      acquisitions totaling an aggregate value of $69,862 and the acquisition of
      property and equipment totaling $195,564.




Net
      cash
      used in financing activities for the three months ended March 31, 2007 was
      $42,305 compared to net cash used in financing activities of $138,965 for 2006.
      For 2007, the principal source of cash from financing activities was from lines
      of credit and a capital raise.




The
      Company’s business strategy continues to focus on growth through the expansion
      of operations at existing offices, together with the selective acquisition
      of
      additional personnel-related business, both in its existing markets and other
      strategic geographic markets. The Company periodically evaluates proposals
      for
      various acquisition opportunities, but there can be no assurance that any
      additional transactions will be consummated.





The
      Company entered into a new Credit Agreement (the “Credit Agreement”) with its
      principal bank effective March 31, 2007. The Credit Agreement provides for
      an
      unsecured revolving credit facility of up to $31,500,000, which includes a
      sub
      feature under the line of credit for standby letters of credit up to
      $31,500,000. The unsecured revolving credit facility consists of three credit
      agreements. The $14,000,000 Revolving Credit Promissory Note is subject to
      interest equal to Prime Rate. The $5,000,000 Revolving Credit Promissory Note
      is
      subject to interest equal to Prime Rate plus 2%. The $12,500,000 Revolving
      Credit Promissory Note is subject to interest equal to Prime Rate plus the
      Applicable Prime Rate Margin as defined in the Credit Agreement. The Credit
      Agreement expires January 31, 2008. Management anticipates that if it chooses
      to
      renew the Credit Agreement, such terms and conditions for a new agreement will
      not be less favorable than the current agreement. This line of credit is
      guaranteed by certain shareholders and affiliated entities. See Note
      G.





Pursuant
      to the Credit Agreement, the Company is required to maintain compliance with
      certain financial covenants as defined in the Credit Agreement. The Company
      was
      in compliance with all covenants at March 31, 2007.





*Off
      Balance Sheet Arrangements*





Depending
      on certain goals and performances being met, Resolve has the following off
      balance sheet arrangements which are the result of the various acquisitions
      described previously.





·
            The
                Arnold Group - Based on sales targets, the prior owners may receive
                contingent performance payments not to exceed $125,000 through May
                31,
                2007.


·
            Taylor
                Personnel Services, Inc. - Based on sales targets, the prior owners
                may
                receive contingent performance payments not to exceed $80,000 through
                May
                31, 2007.


·
            QRD
                International, Inc. dba Delta Staffing - Based on gross profit targets,
                the prior owners may receive contingent performance payments of up
                to
                approximately $75,000 through September 11,
                2007.


·
            Midwest
                Staffing, Inc. - Based on pre-tax profit targets, the prior owners
                may
                receive contingent performance payments not to exceed $75,000 through
                September 27, 2007.


·
            Project
                Solvers, Inc. - Based on pre-tax profit targets, the prior owners
                may
                receive contingent performance payments not to exceed $200,000 through
                October 25, 2008.


·
            Pro
                Care Medical Staffing, LLC. - Based on pre-tax targets the prior
                owners
                may receive contingent performance payments not to exceed $650,000
                in
                total through November 9, 2007.


·
            Big
                Sky Travel Nurses, Inc. - Based on pre- tax profit targets, the prior
                owners may receive contingent performance payments of up to approximately
                $15,000 through November 27, 2007.


·
            Assisted
                Staffing, Inc. - Based on pre- tax profit targets, the prior owners
                may
                receive contingent performance payments of up to approximately $25,000
                through December 10, 2007.


·
            Driver’s
                Plus, Inc. - Based on pre- tax profit targets, the prior owners may
                receive contingent performance payments of up to approximately $10,000
                through December 26, 2007.


Page
          -
          25





·
            Ready
                Nurse, LLC. - Based on pre- tax profit targets, the prior owners
                may
                receive contingent performance payments of up to approximately $10,000
                through March 5, 2008.


·
            KFT,
                Inc. dba Power Personnel - Based on pre- tax profit targets the prior
                owners may receive contingent performance payments of up to approximately
                $50,000 through October 10, 2008 and October, 10
                2009.


·
            Steadystaff,
                LLC - January 1, 2007 to December 31, 2007 and January 1, 2008 to
                December
                31, 2008, based on pre-tax profit targets the prior owners may receive
                contingent performance payouts up to approximately $10,000 per
                year.


·
            Choice
                Staff Personnel Services, Inc. - the prior owners may receive contingent
                payment up to 150,000 shares of Resovle Staffing, Inc. common stock.





*Contractual
      Obligations*





The
      Company’s contractual obligations as of March 31, 2007, including long-term debt
      and commitments for future payments under non-cancelable lease arrangements,
      are
      summarized below:





Payments
                Due by PeriodContractual
                Obligations
            Total
            Less
                than 1 year
            1-3
                years
            4-5
                years
            After
                5 yearsOperating
                leases
            $
                2,543,199
            $
                964,382
            $
                1,459,848
            $
                118,969
            $
                -Long-term
                debt
            38,267,374
            21,195,718
            5,747,349
            2,367,564
            8,956,743Total
                contractual obligations
            $40,810,573
            $
                22,160,100
            $
                7,207,197
            $2,486,533
            $
                8,956,743





*Inflation*





Inflation
      generally has not been a significant factor in the Company’s operations during
      the periods discussed above. The Company has taken into account the impact
      of
      escalating medical and other costs in establishing reserves for future expenses
      for self-insured workers’ compensation claims.





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





We
      are
      primarily exposed to market risks from fluctuations in interest rates and the
      effects of those fluctuations on the market values of our cash and cash
      equivalents, and our long-term debt. The cash and cash equivalents consist
      primarily of tax-exempt money market funds and overnight investments which
      are
      not significantly exposed to interest rate risk, except to the extent that
      changes in interest rates will ultimately affect the amount of interest income
      earned on these investments.





**ITEM
      4. CONTROLS AND PROCEDURES**





Evaluation
      of disclosure controls and procedures





The
      Company’s disclosure controls and procedures are designed to ensure that
      information the Company must disclose in its reports filed or submitted under
      the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is
      recorded, processed, summarized, and reported on a timely basis. The Company’s
      management has evaluated, with the participation and under the supervision
      of
      our chief executive officer (“CEO”) and chief financial officer (“CFO”), the
      effectiveness of our disclosure controls and procedures (as defined in Rules
      13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered
      by this report. Based on this evaluation, our CEO and CFO have concluded that,
      as of such date, the Company’s disclosure controls and procedures are effective
      in ensuring that information relating to the Company required to be disclosed
      in
      reports that it files under the Exchange Act is recorded, processed, summarized
      and reported within the time periods specified in the SEC’s rules and forms, and
      is communicated to our management, including our CEO and CFO, as appropriate
      to
      allow timely decisions regarding required disclosures.





Changes
      in internal controls





There
      were no changes in our internal controls or in other factors that could
      significantly affect those controls since the most recent evaluation of such
      controls.




Page
          -
          26





**PART
      II - OTHER INFORMATION**




**ITEM
      1. LEGAL PROCEEDINGS**





The
      Company is subject to legal proceedings and claims, which arise in the ordinary
      course of its business. In the opinion of management, with the exception of
      the
      items listed below, the amount of ultimate liability with respect to currently
      pending or threatened actions is not expected to materially affect the financial
      position or results of operations of the Company. Litigation is subject to
      inherent uncertainties and an adverse result may arise that may harm our
      business.





The
      Company is in receipt of a Determination and Assessment from the State of
      Michigan, Department of Labor & Economic Growth, Unemployment Insurance
      Agency seeking payment of amounts totaling $9,505,212. The Company and legal
      counsel believe that this assessment is baseless and without merit and intends
      to contest this assessment vigorously. As of March 31, 2007, no amount is
      accrued in the Company’s financial statements as the matter is deemed groundless
      and outside the authority of the Agency.





The
      Company is in receipt of assessments totaling $ 19,834,370 from the State of
      Ohio sales tax auditors on employee leasing or co-employment sales. The Company
      conducts its business through written contracts of at least one year, and claims
      exemption from the sales tax auditor's position. We continue to work with the
      sales tax auditors to have this matter dismissed. As of March 31, 2007, no
      amount is accrued in the Company's financial statements as the Company and
      legal
      counsel believe this assessment is groundless.





As
      of
      March 31, 2007 the Company is in receipt of a notice from the United States
      Department of Labor asserting various violations of ERISA relating to the ELS
      group health plan. The Company is attempting to address the alleged violations
      and does not believe this matter will have a material impact on the accompanying
      financial statements.





**ITEM
      1A. RISK FACTORS**





There
      have been no material changes in our risk factors from those disclosed in our
      2006 Annual Report on Form 10-K.





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





There
      were no unregistered sales of securities for the three months ended March 31,
      2007.





On
      January 26, 2007, the Board of Directors approved the repurchase of 150,000
      warrants to purchase common stock at $0.75 per share. Per the Warrant Agreement,
      the Company exercised its option to purchase the warrants for $.05 each, for
      an
      aggregate total of $7,500. There were no other purchases of the Company’s common
      stock, and the Company did not declare a stock repurchase program, during the
      first quarter of 2007.





**ITEM
      3. DEFAULT UPON SENIOR SECURITIES**





On
        March
        30, 2007, the Registrant entered into a Credit Agreement among its various
        subsidiaries, as Borrowers and Fifth Third Bank, an Ohio banking company
        (“Bank”), as Lender. The Credit Agreement provides for terms and conditions of a
        working capital line of credit made available to the Registrant, based upon
        a
        number of variables set forth in the Credit Agreement. Under Section 6.1(b)
        of
        the Credit Agreement, an event of default occurs when "(i) Any Borrower defaults
        in the payment of any of the Obligations when due and payable or (ii) Borrowers
        fail to cure any Over advance in accordance with the terms of this
        Agreement."
  As
        of May
        16, 2007, the Borrowers under the Credit Agreement were in technical default
        under Section 6.1(b), as there remains outstanding an Over advance which
        is due
        and owing to the Bank in the amount of $2,255,267. The Registrant is undertaking
        a plan to cure this event of default within a reasonable time and has been
        in
        communications with the Bank in order to accomplish that, with management
        anticipating the cure of any further event of default under the Credit
        Agreement.


**ITEM
      4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITIES HOLDERS**





There
      were no submissions of matters to a vote of shareholders for the three months
      ended March 31, 2007.





**ITEM
      5. OTHER INFORMATION**





There
      is
      no other information to report for the period ended March 31, 2007.





(a)
      The
      registrant must disclose under this item any information required to be
      disclosed in a report on Form 8-K during the period covered by this Form 10-Q,
      but not reported, whether or not otherwise required by this Form 10-Q. If
      disclosure of such information is made under this item, it need not be repeated
      in a report on Form 8-K which would otherwise be required to be filed with
      respect to such information or in a subsequent report on Form 10-Q;
      and


(b)
      Furnish the information required by Item 407(c)(3) of Regulation S-K (§229.407
      of this chapter).





**ITEM
      6. EXHIBITS**





The
      exhibits filed with this report are listed in the Exhibit Index following the
      signature page of this Report.





Page
          -
          27


**SIGNATURES**




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








RESOLVE
                STAFFING, INC.Dated:
                May 20, 2006
            */s/
                Ronald Heineman*By:
                Ronald Heineman, Chief Executive Officer, Principal
                Financial Officer








Page
          -
          28


**EXHIBIT
      INDEX**










**Exhibit
                No.**
            **Description**31.1
            Certification
                of Chief Executive and Principal Financial Officer pursuant to Rule
                13a-14(a).32.1
            Certification
                pursuant to 18 U.S.C. Section 1350.