**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**





**FORM
      10-QSB**





[X]
      Quarterly report under Section 13 or 15(d) of the


Securities
      Exchange Act of 1934





**FOR
      THE QUARTERLY PERIOD ENDED SEPTMEBER 30, 2006**





[
      ]
      Transition report under Section 13 or 15(d) of the Exchange Act





For
      the
      transition period from __________ to __________





Commission
      File Number 0-29485




**RESOLVE
                  STAFFING, INC.**(Exact
                  Name of Small Business Issuer 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**(Address
                  of Principal Executive Offices)
  **(800)
                  894-4250**(Issuer's
                  Telephone Number, Including Area
                  Code)
 
 **N/A**(Former
                  Name, Former Address and Former Fiscal Year, If changed since Last
                  Report)
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 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 shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes [ ] No [X]
  State
        the
        number of shares outstanding of each of the issuer's classes of common equity,
        as of the latest practicable date: As of October 31, 2006, there were
        outstanding 18,342,741 shares of common stock, par value $0.0001, and no
        shares
        of preferred stock.
 
 Transitional
        Small Business Disclosure Format (Check one): Yes [ ]  No
        [X]
 
 
  Page
            1
  **RESOLVE
        STAFFING, INC.**
 **FORM
        10-QSB FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006**
 
 **TABLE
        OF CONTENTS**
 
 **PART
                  I - FINANCIAL INFORMATION**Item
                  1. Financial StatementsConsolidated
                  balance sheets as of September 30, 2006 and December 31,
                  2005
              3Consolidated
                  statements of operations for the three and nine months ended September
                  30,
                  2006 and 2005
              4Consolidated
                  statements of cash flows for the nine months ended September 30,
                  2006 and
                  2005
              5Notes
                  to consolidated financial statements
              7Item
                  2. Management’s discussion and analysis or plan of
                  operation
              21Item
                  3. Controls and procedures
              23**PART
                  II OTHER INFORMATION**Item
                  1. Legal proceedings
              25Item
                  2. Unregistered sale of equity securities and use of
                  proceeds
              25Item
                  3. Default upon senior securities
              25Item
                  4. Submission of matters to a vote of security holders
              25Item
                  5. Other information
              25Item
                  6. Exhibits and reports on form 8-K
              26
 
 
 
 
 
 
  Page
            2
  **RESOLVE
        STAFFING, INC.**
 **CONSOLIDATED
        BALANCE SHEETS**
 **SEPTEMBER
        30, 2006 AND DECEMBER 31, 2005**
 
 
 **ASSETS****2006**
              **2005****Current
                  Assets:**Cash
              $
                  -
              $
                  -Accounts
                  receivable, net of allowance for bad debts of $235,330 for 2006
                  and
                  $96,986 for 2005
              16,191,543
              6,638,782Prepaid
                  and other assets
              306,767
              330,368Total
                  current assets
              16,498,310
              6,969,150**Property
                  and Equipment:**Property
                  and equipment
              1,225,751
              866,196Less:
                  Accumulated depreciation
              (429,338)
              (264,935)Net
                  property and equipment
              796,413
              601,261**Other
                  Assets:**Goodwill
              10,059,829
              6,695,579Non
                  competes, net of accumulated amortization of $504,199 for 2006
                  and
                  $106,917 for 2005
              613,546
              231,083Total
                  other assets
              10,673,375
              6,926,662**Total
                  Assets**
              **$27,968,098**
              **$14,497,073****LIABILITIES
                  AND STOCKHOLDERS’ EQUITY (DEFICIT)****Current
                  Liabilities:**Bank
                  overdraft
              $1,285,746
              $205,551Accounts
                  payable and accrued liabilities
              4,718,945
              1,011,903Accounts
                  payable related party
              **-**
              825,921Accrued
                  salaries and payroll taxes
              2,394,169
              639,474Notes
                  payable and lines of credit
              10,810,205
              1,849,246Notes
                  payable - related parties
              91,500
              91,500Total
                  current liabilities
              19,300,565
              4,623,595**Long
                  Term Liabilities**Notes
                  payable
              568,304
              4,209,762Notes
                  payable - related parties
              6,689,139
              5,873,936Total
                  long term debt
              7,257,443
              10,083,698Total
                  Liabilities
              26,558,008
              14,707,293**Stockholders’
                  Equity (Deficit):**Common
                  stock, $.0001 par value, 50,000,000 shares authorized, issued and
                  outstanding: September 30, 2006 - 15,856,055 shares; December 31,
                  2005 -
                  15,219,101 shares
              1,585
              1,522Paid-in
                  capital
              2,307,161
              1,187,475Accumulated
                  deficit
              (898,656)
              (1,399,217)Total
                  stockholders’ equity (deficit)
              1,410,090
              (210,220)**Total
                  Liabilities and Stockholders’ Equity (Deficit)**
              **$27,968,098**
              **$14,497,073**
 
 See
        accompanying notes to these financial statements.
  Page
            3
  **RESOLVE
        STAFFING, INC.**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **FOR
        THE THREE** **AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**
 
 
 **Three
                  Months Ended**
                **September
                  30,**
              **Nine
                  Months Ended**
                **September
                  30,****2006**
              **2005**
              **2006**
              **2005****Staffing
                  Services Revenue**
              $43,703,819
              $8,913,453
              $88,778,862
              $17,013,714**Cost
                  of Staffing Services Revenue**
              38,268,759
              7,373,319
              75,718,957
              13,883,111**Gross
                  Profit**
              5,435,060
              1,540,134
              13,059,905
              3,130,603**Operating
                  Expenses**
              4,252,762
              1,437,002
              11,962,626
              3,266,987**Income**(**Loss)
                  From Operations**
              1,182,298
              103,132
              1,097,279
              (136,384)**Other
                  Income (Expense):**Interest
                  expense
              (278,457)
              (33,758)
              (596,718)
              (137,017)Other
                  expenses, net
              (278,457)
              (33,758)
              (596,718)
              (137,017)**Net
                  Income (Loss)**
              $903,841
              $69,374
              $500,561
              $(273,401)**Net
                  Income (Loss) Per Share**Basic
              $0.06
              $0.00
              $0.03
              ($0.02)Diluted
              $0.06
              $0.00
              $0.03
              ($0.02)**Weighted
                  Average Number of Shares Used in Income (Loss) Per Share
                  Computation:**Basic
              15,780,425
              14,709,210
              16,669,315
              14,401,018Diluted
              16,202,305
              15,560,530
              17,183,363
              14,401,018
 
 See
        accompanying notes to these financial statements.
 
 
  Page
            4
  **RESOLVE
        STAFFING, INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE** **NINE
        MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**
 
 **2006**
              **2005****Cash
                  Flows From Operating Activities**Net
                  income (loss)
              $500,561
              $(273,401)*Adjustments
                  to reconcile net income ( loss) to cash used in operating
                  activities:*Depreciation
                  and amortization
              164,400
              106,896Stock
                  based compensation
              119,749
              15,000Change
                  in allowance for doubtful accounts
              138,344
              17,042Amortization
                  of intangibles
              -
              44,340Amortization
                  of non compete
              362,991
              -*Decrease
                  (increase) in current assets:*Accounts
                  receivable
              (9,691,105)
              (2,583,823)Prepaid
                  and other assets
              23,601
              (255,864)*Increase
                  (decrease) in current liabilities:*Accounts
                  payable
              3,625,259
              (290,054)Account
                  payable - related party
              (825,921)Accrued
                  salaries and payroll taxes
              1,754,695
              203,382Total
                  adjustments
              (4,327,987)
              (2,743,081)Net
                  cash used in operating activities
              (3,827,426)
              (3,016,482)**Cash
                  Flows From Investing Activities**Acquisition
                  of net assets of subsidiaries, net of cash
              (2,261,298)
              -Goodwill
                  and non-compete agreements
              (50,353)
              (680,000)Purchase
                  of property and equipment
              (179,552)
              (286,272)Net
                  cash used in investing activities
              (2,491,203)
              (966,272)**Cash
                  Flows From Financing Activities**Increase
                  in bank overdraft
              1,080,195
              144,067Stock
                  purchase
              800,000
              -Proceeds
                  from line of credit
              5,594,573
              (400,000)Borrowings
                  from (repayment of) notes payable
              (1,971,342)
              2,809,879Proceeds
                  from loans payable - related party
              815,203
              1,353,452Net
                  cash provided by financing activities
              6,318,629
              3,907,398**Net
                  Increase in Cash**
              -
              (75,356)**Cash,
                  Beginning of the Period**
              -
              75,356**Cash,
                  End of the Period**
              $-
              $-
 
  Page
            5
  **RESOLVE
        STAFFING, INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS (CONTINUED)**
 **FOR
        THE** **NINE
        MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**
 
 **NON-CASH
        INVESTING AND FINANCING ACTIVITIES**
 
 During
        the quarter ended March 31, 2006, Resolve Staffing, Inc. issued a note
        receivable to a consultant in the amount of $6,000,000 for the purchase of
        4,000,000 shares of the Company’s common stock. As of June 30, 2006, $800,000
        (533,334 shares purchased) was paid towards the note. On June 30, 2006, the
        agreement was terminated and the note receivable was canceled and the remaining
        balance of common stock issued (3,566,666 shares) was canceled.
 
 During
        the nine months ended September 30, 2006, Resolve Staffing, Inc. acquired
        all of
        the assets and ownership of 4 unrelated entities. In conjunction with these
        transactions Resolve issued notes payable in the amount of $1,696,270 and
        accrued $49,460 of contingent expenses and 100,000 contingent shares valued
        at
        $200,000 in exchange for 100% of the ownership interest in 4 entities with
        11
        staffing locations. The fair value of the assets and liabilities assumed,
        on the
        date of acquisition were as follows:
 
 Property
                  and equipment
              $10,000Goodwill
              1,935,730Total
              $1,945,730
 
 On
        February 7, 2005, Resolve Staffing purchased the staffing division of ELS
        Personnel Services (ELS). In connection with the Combination on February
        7,
        2005, described below in the Basis of Presentation section of the notes to
        consolidated financial statements, 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.
        In conjunction with this transaction, Resolve issued 13,000,000 shares of
        restricted common stock valued at $130,000 and a note payable in the amount
        of
        $1,500,000 in exchange for 100% of the ownership interest in 3 entities with
        10
        staffing locations. The fair value of the assets and liabilities assumed,
        on the
        date of acquisition were as follows:
 
 Accounts
                  receivable
              $30,457Prepaid
                  and other assets
              48,483Property
                  and equipment
              15,280Goodwill
              2,026,496Accounts
                  payable and accrued liabilities
              (71,472)Notes
                  payable
              (419,244)Total
              $1,630,000
 
 See
        accompanying notes to these financial statements.
 
 
  Page
            6
   
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **NOTE
        A - ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF
        PRESENTATION**
 
 Organization
        and Nature of Operations
 
 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 approximatel y
        74
        offices, as of October 31, 2006, reaching from California to New York. Resolve
        provides a full range of supplemental staffing and outsourced solutions,
        including solutions for temporary, temporary-to-hire, or direct hire staffing
        in
        the medical, truck driver, clerical, office administration, customer service,
        professional and light industrial categories.
 
 On
        February 7, 2005, Resolve Staffing, Inc., entered into an equity purchase
        agreement (“Agreement”), to purchase ELS Personnel Services (“ELS”) (the
“Combination”) from Employee Leasing Services, Inc., (“ELS Inc.”), 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
        Personnel Services, (ELS Personnel Services, LLC, Five Star Staffing, Inc.,
        Five
        Star Staffing (NY), Inc., and American Staffing Resources, Ltd.) comprising
        a
        total of 10 temporary employee staffing locations. See Basis of Presentation
        section in the notes to the financial statements for discussion of accounting
        treatment of the acquisition of ELS.
 
 Employee
        Leasing Services, Inc., operated 3 locations and acquired the 7 temporary
        employee staffing locations throughout fiscal 2004. ELS Inc. acquired Five
        Star
        Staffing, Inc. which consisted of 3 locations, in August 2004, Five Star
        Staffing (NY), Inc., which consisted of 3 locations, in November 2004 and
        American Staffing Resources, Ltd which consisted of 1 location , in November
        2004. Prior to ELS Inc.’s acquisition of these entities, these entities were
        owned and operated by unrelated third parties in various locations throughout
        Florida, New York and Ohio.
 
 On
        various dates during 2005, Resolve Staffing, Inc., entered into purchase
        agreements (“Agreements”), to acquire all of the assets and/or ownership of
        various separate privately-held entities owned and operated by unrelated
        parties
        located throughout the United States. Pursuant to the acquisition agreements,
        Resolve acquired a total of 31 temporary employee staffing locations from
        the
        newly acquired entities. Additional information pertaining to these acquisitions
        is included in Resolve Staffing, Inc.’s Form 10-KSB for the year ended December
        31, 2005 as filed with the Securities and Exchange Commission.
 
 On
        January 3, 2006, Resolve Staffing elected three new officers. Steve Ludders
        has
        been promoted to Executive VP, Chief Operating Officer of the Company. Scott
        Horne has been promoted to Executive VP, Chief Financial Officer of the Company.
        Tom Lawry has been promoted to Controller, Treasurer of the Company.
 
 On
        January 24, 2006, Resolve Staffing acquired R & R Staffing Services, Inc.,
        located in Syracuse, New York. With $3 million in annual revenue, this
        acquisition gave Resolve its 13th office in various Northeast
        markets.
 
 On
        February 22, 2006, Resolve Staffing announced that it has reached an agreement
        in principle to merge with Employee Leasing Services, Inc. (ELS Inc.), and
        certain related affiliates. Headquartered in Cincinnati, Ohio. ELS Inc.,
        a
        professional employer organization (PEO), manages a payroll of over 10,000
        worksite employees in over 40 states and has operation and service centers
        throughout the country. ELS Inc.’s 2005 gross (non-GAAP) revenues were over $200
        million, which equates to approximately $50 million in net (GAAP) revenues
        and
        $3.5 million in Pretax Profit. On July 5, 2006, Resolve Staffing announced
        the
        merger had been delayed until further notice. The transaction with ELS,
        Inc. was subsequently closed on October1, 2006.
 
 On
        March
        27, 2006, Resolve Staffing acquired Ready Nurses LLC, a Fulton, Missouri
        based
        medical staffing firm. Ready Nurses provides a variety of medical staffing
        services including travel nurses and other healthcare related professionals.
        With $800,000 in annual sales, this acquisition was Resolve’s fourth in the
        burgeoning medical staffing industry.
  Page
            7
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2006**
  
 **NOTE
        A - ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
        (CONTINUED)**
 
 On
        April
        18, 2006, the Board of Directors of Resolve Staffing, Inc. declared a dividend
        distribution of one right for each outstanding share of the Company's Common
        Stock, $.0001 par value per share (“Common Stock”), to stockholders of record at
        the close of business on May 26, 2006 (the “Record Date”). The Board of
        Directors of the Company also authorized the issuance of one Right for each
        share of Common Stock issued after the Record Date. Additional details are
        provided on an 8-K filed on April 21, 2006.
  On
        May 5,
        2006, Resolve Staffing acquired Steadystaff, a Baltimore/Washington D. C.
        based
        staffing firm. Steadystaff provides a variety of staffing services including
        temporary staffing, temp-to-perm, and permanent placement services. Steadystaff
        provides staffing services to a rapidly expanding client base. The company
        provides qualified employees in a variety of fields including accounting,
        administrative, light industrial, and other difficult-to-find professions.
        With
        $3 million in annual sales, this acquisition is Resolve's first in the
        burgeoning Baltimore/Washington D. C. market.
  On
        June
        1, 2006, Resolve Staffing announced that it has completed the acquisition
        of
        Star Personnel. Star Personnel (www.starpersonnel.com), headquartered in
        Cincinnati, Ohio, is a provider of diversified staffing services with eight
        offices in the Cincinnati/tri-state market. With approximately $20 million
        in
        annual sales (unaudited), Star Personnel offers a variety of staffing services
        including light industrial and office/clerical support.
 
 On
        September 13, 2006, Resolve Staffing announced that a closing date had been
        set
        for the proposed merger with ELS, Inc. The merger closed on October 1, 2006.
        ELS, Inc. (www.elshr.com), which is owned by Ron Heineman, Resolve's CEO
        and
        largest shareholder, manages a payroll of over 10,000 worksite employees
        in over
        40 states with operations and service centers throughout the country. ELS
        Inc.’s
        2005 gross (non-GAAP) revenues were over $200 million. Moreover, ELS, Inc.
        is
        currently on a run rate for approximately $300 million gross (non-GAAP)
        annualized revenue, which equates to approximately $60 million net (GAAP)
        revenue.
 
 We
        plan
        to continue to grow our 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. We may seek private staffing companies
        for
        acquisitions or strategic alliances both in and out of our current markets.
        We
        believe that by acquiring existing staffing companies it will enable us
        to:
 
 ·
              recruit
                  well-trained, high-quality
                  professionals;
 ·
              expand
                  our service offerings;
 ·
              gain
                  additional industry expertise;
 ·
              broaden
                  our client base; and
 ·
              expand
                  our geographic presence.
 
 Acquisition
        of Entities from Related Parties
 
 On
        February 7, 2005, Resolve Staffing, Inc., entered into an equity purchase
        agreement (“Agreement”), to purchase ELS Personnel Services (“ELS”) (the
“Combination”) from Employee Leasing Services, Inc., (“ELS Inc.”), 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
        Personnel Services, (ELS Personnel Services, LLC, Five Star Staffing, Inc.,
        Five
        Star Staffing (NY), Inc., and American Staffing Resources, Ltd.) comprising
        a
        total of 10 temporary employee staffing locations. See Basis of Presentation
        section for discussion of accounting treatment of the acquisition of
        ELS.
 
 Employee
        Leasing Services, Inc., operated 3 locations and acquired the 7 temporary
        employee staffing locations throughout fiscal 2004. ELS Inc. acquired 3
        locations from Five Star Staffing, Inc., in August 2004, 3 locations from
        Five
        Star Staffing (NY), Inc., in November 2004 and 1 location from American Staffing
        Resources, Ltd., in November 2004. Prior to ELS Inc.’s acquisition of these
        entities, these entities were owned and operated by unrelated third parties
        in
        various locations throughout Florida, New York and Ohio.
 
 In
        connection with the Combination on February 7, 2005, described below in the
        Basis of Presentation section of these notes to consolidated financial
        statements, 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.
  Page
            8
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2006**
  
 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.
 
 In
        connection with the Combination on February 7, 2005, described below in the
        Basis of Presentation section of the notes to consolidated financial statements,
        ELS, Inc. 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. In conjunction with this transaction,
        Resolve Staffing, Inc. issued 13,000,000 shares of restricted common stock
        valued at $130,000, a note payable in the amount of $1,500,000, and paid
        cash of
        $17,125, in exchange for 100% of the ownership interest in 4 entities with
        10
        staffing locations. The fair value of the assets and liabilities assumed,
        on the
        date of acquisition were as follows:
 
 Accounts
                  receivable
              $
                  30,457Prepaid
                  and other assets
              56,378Property
                  and equipment
              15,280Goodwill
              2,035,679Accounts
                  payable and accrued liabilities
              (71,425)Notes
                  payable
              (419,244)Total
              $
                  1,647,125
 
 Acquisition
        of Entities from Unrelated Parties
 
 During
        the nine months ended September 30, 2006, Resolve Staffing, Inc., entered
        into
        purchase agreements (“Agreements”), to acquire all of the assets and/or
        ownership of multiple 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 and accrued contingent expenses 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:
 
 Property
                  and equipment
              $180,000Noncompete
              650,000Goodwill
              3,364,251Total
              $4,194,251
 
 To
        date
        the books and records of the locations acquired from unrelated parties during
        2006 have not been audited, and therefore the allocation of the purchase
        price
        is subject to refinement.
 
 In
        conjunction with the acquisitions from all parties during the nine months
        ended
        September 30, 2006, approximately $3,364,251 has been assigned to goodwill.
        All
        of the goodwill is expected to be deductible for tax purposes.
 
 The
        financial results of these acquired entities are included in the consolidated
        financial statements from the date of acquisition.
 
 Basis
        of Presentation
 
 The
        accompanying unaudited financial statements have been prepared in accordance
        with accounting principles generally accepted in the United States for interim
        financial information and with the instructions incorporated in Regulation
        S-B,
        Item 310(b) of the Securities and Exchange Commission. Accordingly, they
        do not
        include all the information and footnotes required by accounting principles
        generally accepted in the United States for complete financial statements.
        The
        financial statements are unaudited, but in the opinion of management, all
        adjustments (consisting of normal recurring adjustments and accruals) considered
        necessary for a fair presentation of the Company's financial position, results
        of operations and cash flows for the nine months ended September 30, 2006
        and
        2005 have been included.
 
 These
        statements are not necessarily indicative of the results to be expected for
        the
        full fiscal year. These statements should be read in conjunction with the
        financial statements and notes thereto included in the Company's Form 10-KSB
        for
        the year ended December 31, 2005 as filed with the Securities and Exchange
        Commission.
  Page
            9
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2006**
  
 **NOTE
        A - ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
        (CONTINUED)**
 
 Because
        the owners of ELS held approximately 90% of the Company’s outstanding common
        stock after the Combination, as well as the Company’s analysis of the other
        criteria used for determining which entity is the accounting acquirer under
        SFAS
        No. 141, ELS is deemed to be the acquiring company for accounting purposes
        and
        the Combination has been 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. The audited
        financial statements of Resolve for each of the two years ended
        December 31, 2003 and 2004 are included in the Resolve Staffing, Inc.
        Annual Report on Form 10-KSB, filed with the Securities and Exchange Commission
        (the “SEC”) on April 15, 2005. The audited financial statements of ELS for the
        two years ended December 31, 2003 and 2004 or such time as the entity was
        under
        the control of ELS, Inc. through December 31, 2004 have been included in
        the
        Resolve Staffing, Inc. amended report on Form 8-K pertaining to this acquisition
        which was filed in December, 2005. 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 ELS Personnel Services, which were legally acquired by
        Resolve Staffing, Inc., changed its name to Resolve Staffing, Inc.
 
 Principles
        of Consolidation
 
 The
        consolidated financial statements at September
        30, 2006 include the accounts of the Company and its subsidiaries. All
        significant inter-company accounts and transactions have been eliminated
        in
        preparing the accompanying financial statements.
 
 Revenue
        Recognition
 
 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 Emerging
        Issues Task Force (“EITF”) 99-19, “Reporting Revenue Gross as a Principal versus
        Net as an Agent,” in the presentation of 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.
 
 Stock
        Based Employee Compensation
 
 Resolve
        accounts for and reports its stock-based employee compensation arrangements
        using the intrinsic value method as prescribed in 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”). Accordingly, compensation cost for stock
        options and warrants are measured as the excess, if any, of the fair value
        of
        the Company’s stock at the date of grant over the stock option exercise price.
        Resolve accounts for stock issued to non-employees in accordance with the
        provisions of Statement of Financial Accounting Standards No. 123, Accounting
        for Stock-Based Compensation (“SFAS 123”). Under SFAS 123, stock option awards
        issued to non-employees are accounted for at their fair value on the date
        issued, where fair value is determined using the Black-Scholes option pricing
        method. In December 2004, The Financial Accounting Standards Board (FASB)
        issued
        Statement on Financial Accounting Standards No. 123 (Revised), "Shared-Based
        Payment" (SFAS 123R). This standard revises SFAS No. 123, Accounting Principles
        Board Option 25 and related interpretations, and eliminates use of the intrinsic
        value method of accounting for stock options. The Company currently uses
        the
        intrinsic value method to value stock options, and, accordingly, no compensation
        expense has been recognized for stock options. SFAS 123R requires that all
        employee share-based payments to employees, including stock options, be valued
        using a fair-value-based method and recorded as expense in the statement
        of
        operations. For the Company, SFAS 123R will first be effective for its December
        31, 2006 financial statements. This new Statement will not affect accounting
        for
        the Company's stock options currently outstanding, but it will affect financial
        statement disclosures about those stock options, and it will change the
        accounting for stock options issued subsequent to January 1, 2006.
 
 Furthermore,
        public entities are required to measure liabilities incurred to employees
        in
        share-based payment transactions at fair value as well as estimate the number
        of
        instruments for which the requisite service is expected to be rendered. Any
        incremental compensation cost for a modification of the terms or conditions
        of
        an award is measured by comparing the fair values before and after the
        modification. The Company has recognized approximately $120,000 as a result
        of
        SFAS No. 123R as of September 30, 2006.
 
 
  Page
            10
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2006**
  
 **NOTE
        A - ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
        (CONTINUED)**
 
 Recent
        Accounting Principles
 
 In
        February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid
        Financial Instruments-an amendment of FASB Statements No. 133 and 140. This
        statement resolves issues addressed in SFAS No. 133 Implementation Issue
        No. D1,
        Application of Statement 133 to Beneficial Interest in Securitized Financial
        Assets. SFAS No. 155: (a) permits fair value remeasurement for any hybrid
        financial instrument that contains an embedded derivative that otherwise
        would
        require bifurcation; (b) clarifies which interest-only strips and principal-only
        strips are not subject to the requirements of SFAS No. 133; (c) establishes
        a
        requirement to evaluate beneficial interests in securitized financial assets
        to
        identify interests that are freestanding derivatives or that are hybrid
        financial instruments that contain an embedded derivative requiring bifurcation;
        (d) clarifies that concentrations of credit risk in the form of subordination
        are not embedded derivatives; and, (e) eliminates restrictions on a qualifying
        special-purpose entity's ability to hold passive derivative financial
        instruments that pertain to beneficial interests that are or contain a
        derivative financial instrument. SFAS No. 155 also requires presentation
        within
        the financial statements that identifies those hybrid financial instruments
        for
        which the fair value election has been applied and information on the income
        statement impact of the changes in fair value of those instruments. The Company
        is required to apply SFAS No. 155 to all financial instruments acquired,
        issued
        or subject to a remeasurement event beginning January 1, 2007. The Company
        does
        not expect the adoption of SFAS No. 155 to have a material impact on the
        Company's financial statements.
 
 **NOTE
        B - LIQUIDITY AND MANAGEMENT’S PLANS**
 
 As
        reflected in the accompanying financial statements, the Company has a net
        working capital deficit and stockholders’ equity of $2,802,255 and $1,410,090,
        respectively, as of September 30, 2006. To date, The Company has incurred
        substantial losses and has been dependent upon the financial support of
        stockholders, management and other related parties.
 
 Management
        has successfully obtained additional financial resources, which the Company
        believes will support operations until profitability can be sustained. These
        financial resources include financing from both related and non-related third
        parties, as discussed in the accompanying footnotes to the financial statements.
        There can be no assurance that management will be successful in these efforts.
        The financial statements do not reflect any adjustments that may arise as
        a
        result of this uncertainty.
 
  Page
            11
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2006**
  
 **NOTE
        C - NOTES PAYABLE AND LINES OF CREDIT**
 
 Notes
        payable and lines of credit as of September 30, 2006 and December 31, 2005
        are
        as follows:
 
 2006
              
              2005Lines
                  of credit to two banks totaling $9,500,000, interest payable monthly
                  at
                  rates ranging from prime to 8.50%, maturing September 2006 and
                  February
                  2007.Borrowings under these notes are limited to 80% of the Company’s accounts
                  receivable balance which have been outstanding for less than 90
                  days.
              $8,936,500
              
              $3,341,927Note
                  payable to a bank, principal and interest payable monthly of $9,845,
                  maturing September 2009.Interest is payable on the principal balance outstanding at a rate
                  of 6.6%
                  per annum.
              327,942
              
              398,100Notes
                  payable to ELS Inc., accruing interest at 3% per annum, due September
                  2007.
              6,689,139
              
              5,873,936Notes
                  payable to various individuals for the acquisition of various staffing
                  entities during 2005 and 2006. Notes are due at varying dates through
                  June
                  2008 with monthly payment amounts ranging from $5,833 to $41,664.
                  One note
                  bears interest at 2.875% per annum. The other notes bear no interest
                  and
                  accordingly management has imputed interest at 7.25% per annum.
                  Balance is
                  shown net of unamortized loan discount of $98,472 and $140,106
                  at
                  September 30, 2006 and December 31, 2005, respectively.
              2,074,067
              
              2,278,981Demand
                  notes payable to two individuals accruing interest at 5% to 12%
                  per annum,
                  maturity dates are being extended verbally on a month to month
                  basis.
              131,500
              
              131,500Total
                  notes payable and lines of credit
              18,159,148
              
              12,024,444Current
                  portion of notes payable and lines of credit
              (10,901,705)
              
              (1,940,746)Long
                  term portion of notes payable and lines of credit
              $7,257,443
              
              $10,083,698
 
 See
        Note
        D - Note Payable Related Party, for information about the Credit Agreement
        with
        ELS, Inc.
 
 See
        Note
        D - Note Payable Related Party, for information about the Note Payable to
        William Brown.
 
 **NOTE
        D - NOTE PAYABLE - RELATED PARTY**
 
 Notes
        payable - related party includes 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.
 
 On
        December 8, 2003, the Company entered into a non-interest bearing short-term
        credit agreement with ELS, Inc., that provides for borrowings of up to $200,000.
        ELS, Inc. is a company owned by Ronald Heineman, the Company’s Chief Executive
        Officer. 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. As of September 30, 2006, Resolve had a balance of
        $6,689,139 outstanding, which includes the note payable for the purchase
        of ELS
        of $1,500,000. Balances due under the credit agreement were originally due
        May
        8, 2004, but the agreement was extended on a month-to-month basis, and provided
        for an additional $100,000 in borrowings. On June 1, 2004, the agreement
        was
        amended to extend the line to a maximum of $500,000. During 2005, the agreement
        was extended for an additional 18 months, becoming due March 31, 2007 with
        interest due at 3% per annum, and the maximum amount was increased on a case
        by
        case basis upon review. In October, 2006 the note was consolidated as part
        of
        the merger with ELS.
 
  Page
            12
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2006**
  
 **NOTE
        E - STOCKHOLDERS’ EQUITY**
 
 Issuance
        of Common Stock
 
 On
        January 9, 2006, Resolve Staffing entered into a consulting agreement with
        Dan
        Seifer. Under the term of the agreement, Mr. Seifer will be paid in options
        to
        acquire up to 4,000,000 shares of common stock of the Company and is to provide
        the following services in a timely manner:
 
 ·
              Business
                  Plan Development - Become familiar with the business and operations
                  of the
                  Company and review and analyze the Company’s formal and informal
                  financial, strategic, and business plans. In conjunction with the
                  Company,
                  prepare and update a formal strategic business plan along with
                  a detailed
                  financial model/projection, and update the business plan and financial
                  model as needed during the term of this
                  Agreement;
 ·
              Strategic
                  Consulting - Assist the Company in sourcing and locating joint-venture
                  partners. Advise
                  the Company in strategic planning matters and assist in the implementation
                  of short- and long-term strategic planning initiatives to fully
                  develop
                  and enhance the Company’s assets, resources, products, and technologies.
                  Provide
                  advice to and consult with the Company concerning management, product
                  marketing, strategic planning, and corporate organization in connection
                  with the Company’s business and advise the Company regarding its overall
                  development, progress, needs, and condition. If requested by the
                  Company,
                  assist in the due diligence of prospective strategic
                  partners.
 ·
              Other
                  Services - Perform
                  other services as may be reasonably requested by the Company that
                  are
                  within the normal scope of operations of Dan
                  Seifer.
 
 On
        March
        31, 2006, Resolve agreed to issue a Note Receivable to Mr. Seifer, and related
        parties, for the purchase of shares underlying the options mentioned above.
        A
        note was issued in the aggregate amount of $6 million. Prior to June 30,
        2006
        $800,000 was paid on this note. The agreement was terminated on June 30,
        2006
        and the remaining balance of 3,466,666 shares was canceled.
 
 Common
        Stock Warrants
 
 As
        of
        September 30, 2006, there were 843,820 stock warrants outstanding which are
        due
        to expire on June 30, 2007. Each warrant has an exercise price of $.75 per
        share
        price. All stock warrants are exercisable.
 
 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
        F - SUPPLEMENTAL CASH FLOW INFORMATION**
 
 Cash
        paid
        for interest during the nine months ended September 30, 2006 and 2005 amounted
        to $596,718 and $137,015 respectively.
 
 **NOTE
        G - NET LOSS PER SHARE**
 
 Net
        loss
        per share is computed based upon the weighted outstanding shares of the
        Company’s common stock for each period presented. The weighted average number of
        shares for the nine months ended September 30, 2005 excludes 843,820 common
        stock equivalents, representing principally warrants and stock options, since
        the effect of including them would be anti-dilutive.
 
  Page
            13
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2006**
  
 **NOTE
        H - SUBSEQUENT EVENTS**
 
 On
        September 13, 2006, Resolve Staffing announced that a closing date had been
        set
        for the proposed merger with ELS, Inc. The transaction was closed on October
        1,
        2006. As part of the consideration, Resolve Staffing issued 1,486,685 shares
        of
        its common stock to the selling shareholders of ELS, Inc. Additionally, Resolve
        agreed to issue notes payable totaling approximately $16.6 million and pay
        certain other settlement amounts described in the ELS, Inc. purchase agreement.
        Moreover, Resolve Staffing issued 1,000,000 shares of its common stock to
        investors for an aggregate of $1.5 million.
  On
        October 16, 2006, Resolve Staffing announced the acquisition of Power Personnel,
        a New York based staffing firm with annual sales of approximately $12 million.
        With seven offices in the upstate New York market, Power Personnel provides
        a
        variety of temporary staffing, permanent placement and payroll management
        services. Resolve acquired all of the stock of Power Personnel for cash and
        the
        issuance of notes payable. Total to be paid for Power is anticipated to be
        $3,420,000.
 
 Because
        the owners of ELS, Inc. held the majority of the Company’s outstanding common
        stock after the merger of ELS, Inc. and Resolve, as well as the Company’s
        analysis of the other criteria used for determining which entity is the
        accounting acquirer under SFAS No. 141, ELS, Inc. is deemed to be the acquiring
        company for accounting purposes and the merger of ELS, Inc. and Resolve has
        been
        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. The audited financial statements of Resolve
        for
        each of the two years ended December 31, 2004 and 2005 are included in the
        Resolve Staffing, Inc. Annual Report on Form 10-KSB, filed with the Securities
        and Exchange Commission (the “SEC”) on April 15, 2005. The audited financial
        statements of ELS, Inc. for the three years ended December 31, 2005 are expected
        to be included in the Resolve Staffing, Inc. amended report on Form 8-K
        pertaining to this acquisition which is expected to be filed prior to December
        14, 2006.
 
 **NOTE
        I - SEGMENT INFORMATION**
 
 As
        a
        result of the merger with ELS, Inc. the Company will be operating in two
        segments which are temporary staffing and professional employer organization.
        The Company’s operations for both of these segments are conducted throughout the
        United States.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Page
            14
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2006**
  
 **NOTE
        J - PROFORMA INFORMATION**
 
 The
        interim financial statements for the nine months ended September 30, 2006
        and
        2005 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 do not include the activity of the acquired companies, including
        the acquisition of Star Personnel (and Direct Staffing) and the acquisition
        of
        Resolve by ELS, Inc. on October 1, 2006, which has been recorded as a reverse
        acquisition, and the acquisition of Power Personnel, Inc. on October 11,
        2006,
        for the period from January 1, of each period to the respective dates of
        acquisition.
 
 Presented
        below is the unaudited pro forma condensed combined consolidated balance
        sheet
        at September 30, 2006.
 
 **Resolve
                  Staffing, Inc.**
              **Power
                  Personnel, Inc.**
              **ELS,
                  Inc.**
              **Power
                  Consolidation**
              
              **ELS
                  Consolidation**
              
              **Total****Current
                  Assets:**Cash
              $
                  -
              $
                  322,681
              $
                  -
              $
                  -
              
              $
                  -
              
              $
                  322,681Accounts
                  receivable, net of allowance
              16,191,543
              1,437,310
              469,486
              -
              
              -
              
              18,098,339Notes
                  receivable
              -
              -
              6,689,139
              -
              
              (6,689,139)
              c)
              -Prepaid
                  and other assets
              306,767
              43,353
              182,436
              -
              
              -
              
              532,556Total
                  current assets
              16,498,310
              1,803,344
              7,341,061
              -
              
              (6,689,139)
              c)
              18,953,576**Property
                  and Equipment:**Property
                  and equipment
              1,225,751
              115,787
              984,232
              -
              
              -
              
              2,325,770Less:
                  Accumulated depreciation
              (429,338)
              (69,964)
              (527,721)
              -
              
              -
              
              (1,027,023)796,413
              45,823
              456,511
              -
              
              -
              
              1,298,747**Other
                  assets:**Other
                  assets
              -
              -
              389,996
              -
              
              -
              
              389,996Goodwill
              10,059,829
              -
              545,079
              (10,346)
              a)
              1,070,137
              c)
              34,305,7873,542,000
              b)
              (1,051,235)
              d)389,996
              e)2,447,246
              c)16,663,857
              c)486,411
              e)8,360
              e)154,453
              c)Non
                  competes, net of accumulated amortization
              613,546
              -
              -
              -
              
              -
              
              613,546Total
                  other assets
              10,673,375
              -
              935,075
              3,531,654
              
              20,169,225
              
              35,309,329**Total
                  assets**
              $27,968,098
              $1,849,167
              $8,732,647
              $3,531,654
              
              $13,480,086
              
              $55,561,652
 
 
 
 
 
 
 
 
 
  Page
            15
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2006**
  
 
 
 **Resolve
                  Staffing, Inc.**
              **Power
                  Personnel, Inc.**
              **ELS,
                  Inc.**
              **Power
                  Consolidation**
              
              **ELS
                  Consolidation**
              
              **Total****Current
                  Liabilities:**Bank
                  overdraft
              $1,285,746
              $
                  -
              $1,888,032
              $
                  -
              
              $
                  -
              
              $3,173,778Accounts
                  payable and accrued liabilities
              4,718,945
              197,123
              3,491,751
              -
              
              -
              
              8,407,819Accrued
                  salaries and payroll taxes
              2,394,169
              388,229
              2,221,766
              -
              
              -
              
              5,004,164Notes
                  payable and lines of credit
              10,810,205
              78,799
              1,150,000
              2,108,500
              b)
              -
              
              14,147,504Notes
                  payable - related party
              91,500
              -
              -
              -
              
              -
              
              91,500Total
                  current
              19,300,565
              664,151
              8,751,549
              2,108,500
              
              -
              
              30,824,765**Long
                  term liabilities:**Notes
                  payable
              568,304
              1,174,670
              -
              1,433,500
              b)
              -
              
              3,176,474Notes
                  payable - related parties
              6,689,139
              -
              -
              -
              
              389,996
              e)
              16,048,62416,663,857
              c)(6,689,139)
              c)486,411
              e)8,360
              e)(1,500,000)
              f)Unrealized
                  gain on sale
              -
              -
              1,051,235
              -
              
              (1,051,235)
              d)
              -Total
                  long term debt
              7,257,443
              1,174,670
              1,051,235
              1,433,500
              
              8,308,250
              
              19,225,098Total
                  liabilities
              26,558,008
              1,838,821
              9,802,784
              3,542,000
              
              8,308,250
              
              50,049,863**Stockholders’
                  Equity (Deficit)**Common
                  stock
              1,585
              500
              5,810
              (500)
              a)
              (5,810)
              c)
              1,834140
              c)100
              f)9
              c)Paid-in
                  capital
              2,307,161
              -
              192,496
              -
              
              (192,496)
              c)
              6,408,6112,447,106
              c)1,499,900
              f)154,444
              c)Accumulated
                  equity (deficit)
              (898,656)
              9,846
              (1,268,443)
              (9,846)
              a)
              1,268,443
              c)
              (898,656)Total
                  stockholders’ equity/ (deficit)
              1,410,090
              10,346
              (1,070,137)
              (10,346)
              
              5,171,836
              
              5,511,789Total
                  Liabilities and Stockholders’ Equity (deficit)
              $27,968,098
              $1,849,167
              $8,732,647
              $3,531,654
              
              $13,480,086
              
              $55,561,652
 
 See
        accompanying notes to the unaudited pro forma condensed combined consolidated
        financial statements
 
  Page
            16
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2006**
  
 Presented
        below is the unaudited pro forma condensed combined consolidated statement
        of
        operations for the nine months ended September 30, 2006 as if the acquisition
        of
        Star Personnel, Power Personnel, and ELS, Inc. had been completed January
        1,
        2006.
 
 **Resolve
                  Actual**
              **Star
                  Personnel, Inc.**
              **Power
                  Personnel, Inc.**
              **ELS,
                  Inc.**
              **Pro-forma
                  September 30, 2006**Service
                  Revenues
              $88,778,862
              $6,665,403
              $7,679,844
              $38,199,540
              $141,323,649Cost
                  of Services
              75,718,957
              4,614,832
              6,190,000
              32,426,391
              118,950,180Gross
                  Margin
              13,059,905
              2,050,571
              1,489,844
              5,773,149
              22,373,469Operating
                  Expenses
              11,962,626
              2,073,399
              1,414,420
              5,595,527
              21,045,972Profit
                  (Loss) From Operations
              1,097,279
              (22,828)
              75,424
              177,622
              1,327,497Other
                  Income (Expense):Interest
                  expense
              (596,718)
              (93)
              (107,848)
              -
              (704,659)Net
                  other expenses
              (596,718)
              (93)
              (107,848)
              -
              (704,659)Net
                  (Loss) Income
              $500,561
              $(22,921)
              $(32,424)
              $177,622
              $622,838Pro-forma
                  earnings per share information for the nine months ended September
                  30,
                  2006:Basic
                  weighted average shares outstanding:
              
              
              19,158,613Pro
                  forma basic net income per common share:
              
              
              0.03Pro
                  forma fully diluted weighted average shares outstanding:
              
              
              19,672,661Pro
                  forma fully diluted net income per common share:
              
              
              0.03
 
  Page
            17
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2006**
  
 Presented
        below is the unaudited pro forma condensed combined consolidated statement
        of
        operations, using non-GAAP results with gross PEO revenue, for the nine months
        ended September 30, 2006 as if the acquisition of Star Personnel, Power
        Personnel, and ELS, Inc. had been completed January 1, 2006.
 
 **Resolve
                  Actual**
              **Star
                  Personnel, Inc.**
              **Power
                  Personnel, Inc.**
              **NON-GAAP**
                
                **ELS,
                  Inc.**
              **NON-GAAP**
                
                **Pro-forma
                  September 30, 2006**Service
                  Revenues
              $88,778,862
              $6,665,403
              $7,679,844
              $218,411,872
              $321,535,981Cost
                  of Services
              75,718,957
              4,614,832
              6,190,000
              212,638,723
              299,162,512Gross
                  Margin
              13,059,905
              2,050,571
              1,489,844
              5,773,149
              22,373,469Operating
                  Expenses
              11,962,626
              2,073,399
              1,414,420
              5,595,527
              21,045,972Profit
                  (Loss) From Operations
              1,097,279
              (22,828)
              75,424
              177,622
              1,327,497Other
                  Income (Expense):Interest
                  expense
              (596,718)
              (93)
              (107,848)
              -
              (704,659)Net
                  other expenses
              (596,718)
              (93)
              (107,848)
              -
              (704,659)Net
                  (Loss) Income
              $500,561
              $(22,921)
              $(32,424)
              $177,622
              $622,838Pro-forma
                  earnings per share information for the nine months ended September
                  30,
                  2006:Basic
                  weighted average shares outstanding:
              
              
              19,158,613Pro
                  forma basic net income per common share:
              
              
              0.03Pro
                  forma fully diluted weighted average shares outstanding:
              
              
              19,672,661Pro
                  forma fully diluted net income per common share:
              
              
              0.03
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Page
            18
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2006**
  
 **NOTES
        TO THE UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
        STATEMENTS**
 
 a)
              Reflects
                  the acquisition of Power Personnel, Inc. which will be accounted
                  for under
                  the purchase method of accounting. Accordingly, the purchase price
                  will be
                  allocated to the assets acquired and liabilities assumed based
                  upon their
                  respective estimated fair values. A preliminary allocation of the
                  purchase
                  price has been made to major categories of assets and liabilities
                  in the
                  unaudited pro forma condensed combined consolidated balance sheet
                  based on
                  our preliminary assessment. The final allocation of the purchase
                  price may
                  result in differences from the pro forma amounts included
                  herein.
 b)
              Reflects
                  the payment of $675,000 at closing and the issuance of short term
                  and long
                  term notes payable in the amount of $2,867,000 for the acquisition
                  of
                  Power Personnel, Inc. described
                  above.
 c)
              Reflects
                  the acquisition of ELS, Inc. which will be accounted for as a reverse
                  acquisition under the purchase method of accounting for business
                  combinations. Accordingly, the purchase price will be allocated
                  to the
                  assets acquired and liabilities assumed based upon their respective
                  estimated fair values. A preliminary allocation of the purchase
                  price has
                  been made to major categories of assets and liabilities in the
                  unaudited
                  pro forma condensed combined consolidated balance sheet based on
                  our
                  preliminary assessment. The final allocation of the purchase price
                  may
                  result in differences from the pro forma amounts included herein.
                  Also
                  reflects the reclassification of the note receivable from Resolve
                  Staffing
                  which is included in the purchase price of approximately $16.6
                  million in
                  the form of Notes payable to the former shareholders of ELS, Inc.
                  and the
                  issuance of 1,398,426 shares of common stock for the purchase of
                  ELS, Inc.
                  In addition, 88,259 shares are being held in escrow pending the
                  approval
                  by the state of Florida for the purchase of ELS Florida.
 d)
              Reflects
                  the elimination of the unrealized gain recorded by ELS, Inc. on
                  the sale
                  of ELS to Resolve Staffing, Inc. during 2005 which remained on
                  the balance
                  sheet of ELS, Inc. as of September 30,
                  2006.
 e)
              Reflects
                  the adjustment to the purchase price for the investment in the
                  common
                  stock of the workers’ compensation provider due to the former shareholders
                  of ELS, Inc., the adjustment for the excess workers’ compensation policy
                  paid which is due to the former shareholders of ELS, Inc., and
                  the
                  adjustment for the payment of deposits recorded by ELS, Inc. as
                  of
                  September 30, 2006.
 f)
              Reflects
                  the sale of 1.0 million shares of Resolve Staffing, Inc. common
                  stock and
                  the repayment of related party notes payable to the former shareholders
                  of
                  ELS, Inc.
 
 
 
 
  Page
            19
 **RESOLVE
              STAFFING, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
              30, 2006**
   
 **ITEM
        2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF
        OPERATIONS**
 
 Cautionary
        Statement Regarding Forward-looking Information
 
 This
        report and other reports, as well as other written and oral statements made
        or
        released by us, may contain forward-looking statements. Forward-looking
        statements are statements that describe, or that are based on, our current
        expectations, estimates, projections and beliefs. Forward-looking statements
        are
        based on assumptions made by us, and on information currently available to
        us.
        Forward-looking statements describe our expectations today of what we believe
        is
        most likely to occur or may be reasonably achievable in the future, but such
        statements do not predict or assure any future occurrence and may turn out
        to be
        wrong. You can identify forward-looking statements by the fact that they
        do not
        relate strictly to historical or current facts. The words "believe,"
        "anticipate," "intend," "expect," "estimate," "project", "predict", "hope",
        "should", and "may", other words and expressions that have similar meanings,
        and
        variations of such words and expressions, among others, usually are intended
        to
        help identify forward-looking statements.
 
 Forward-looking
        statements are subject to both known and unknown risks and uncertainties
        and can
        be affected by inaccurate assumptions we might make. Risks, uncertainties
        and
        inaccurate assumptions could cause actual results to differ materially from
        historical results or those currently anticipated. Consequently, no
        forward-looking statement can be guaranteed. The potential risks and
        uncertainties that could affect forward looking statements include, but are
        not
        limited to the ability to raise needed financing, increased competition,
        extent
        of the market demand for and supply of goods and services of the types provided
        by the Company, governmental regulation, performance of information systems,
        and
        the ability of the Company to hire, train and retain qualified employees.
        In
        addition, other risks, uncertainties, assumptions, and factors that could
        affect
        the Company's results and prospects have been and may further be described
        in
        the Company's prior and future filings with the Securities and Exchange
        Commission and other written and oral statements made or released by the
        Company.
 
 We
        caution you not to place undue reliance on any forward-looking statements,
        which
        speak only as of the date of this document. The information contained in
        this
        report is current only as of its date, and we assume no obligation to update
        any
        forward-looking statements.
 
 The
        financial information set forth in the following discussion should be read
        in
        conjunction with, and qualified in its entirety by, the Company's unaudited
        consolidated 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. Readers are referred
        to
        our Annual Report on Form 10-KSB for the fiscal year ended December 31,
        2005.
 
 ** Results
        of Operations
 
 As
        discussed above, the Company entered into a reverse acquisition transaction
        between ELS and Resolve on February 7, 2005. Prior period amounts presented
        in
        the consolidated balance sheets, statements of operations and cash flows
        reflect
        the balances of ELS only as ELS is deemed to be the acquirer for accounting
        purposes.
 
 *COMPARISON
        OF CONSOLIDATED OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006
        AND
        2005.*
 
 Our
        net
        income increased from $69,374 for the three months ended September 30, 2005
        to
        $903,841, an $834,467 increase for three months ended September 30, 2006.
        A
        discussion of our results of operations is as follows:
 
 Revenues
        for three months ended September 30, 2005 compared to 2006 increased from
        $8,913,453 to $43,703,819 or a 390% increase. This increase is attributable
        to
        several acquisitions Resolve has completed. In addition, Resolve has opened
        several new locations and created additional organic growth. As of September
        30,
        2006, Resolve operated approximately 67 staffing locations throughout the
        United
        States.
 
  Page
            20
 **RESOLVE
            STAFFING, INC.**
  
 **ITEM
        2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF
        OPERATIONS (CONTINUED)**
 
 Our
        cost
        of services increased from $7,373,319 for the three months ended September
        30,
        2005 to $38,268,759 for the three months ended September 30, 2006. This increase
        was largely due to the increased revenues as noted above. However, as a
        percentage of revenue, our cost of services increased from 82.7% in 2005
        to
        87.6% in 2006. This increase in our cost of sales is attributable to changes
        in
        our sales mix. In addition to standard staffing services, Resolve also offers
        human resource outsourcing services, such as payroll processing. While our
        staffing margins continue to remain constant, the increase in revenues
        attributable to payroll processing, which has lower margins, causes our costs
        of
        sales to increase, as a percent of sales. We expect our gross profit margins
        for
        staffing services to increase, as a percent of sales, in the future as we
        continue to grow our business in higher margin areas such as the truck driver
        and medical staffing market niches. However, as we continue to increase revenues
        from other services, such as payroll processing, we expect overall gross
        margins
        to continue to fluctuate.
 
 Resolve
        expects to see continuing improvement in operating results as both existing
        acquisitions and organic growth are integrated over the remainder of the
        year.
        We expect to have a competitive advantage by offering a turnkey Human Resource
        Outsourcing (HRO) product line. This competitive advantage should enable
        Resolve
        to significantly increase its business opportunities with both existing
        customers and in new markets. Resolve expects this favorable trend to be
        realized in the later part of 2006 as the acquisitions are consolidated and
        synergies are realized.
 
 Selling,
        General and Administrative expenses (“SG&A”) have increased from $1,437,002
        for the three months ended September 30, 2005 to $4,252,762 for the three
        months
        ended September 30, 2006. This increase is attributable to our aggressive
        growth
        through acquisitions and opening of new locations. Resolve has grown into
        a
        national provider of staffing services with approximately 67 offices from
        coast
        to coast. This increase in SG&A expenses includes marketing, salaries,
        rents, and various other expenses associated with these locations, as well
        as
        corporate overhead and infrastructure to support the locations. These costs
        have
        decreased from approximately 16.1% to 9.7% as a percent of Sales. This decrease
        is attributable to the relatively fixed nature of some of the expenses. SG&A
        also includes non cash related items such as amortization of noncompete
        agreements and depreciation.
 
 Interest
        expense increased from $33,758 for the three months ended September 30, 2005
        to
        $278,457 for the three months ended September 30, 2006. The increase is
        attributable to increase debt obligations related to our aggressive acquisition
        strategy. A majority of our debt is through affiliated parties, including
        Ron
        Heineman and ELS, Inc. 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 income of $903,841 for the three months ended
        September 30, 2006 as a result of the matters discussed above. This represents
        an $834,467 increase in operating profit from the three months ended September
        30, 2005. Losses to date may be used to offset future taxable income, assuming
        the Company becomes profitable.
 
 Resolve
        has historically experienced fluctuations in its quarterly operating results
        and
        expects such fluctuations to continue in the future. The Company's operating
        results may fluctuate due to a number of factors such as seasonality, wage
        limits on statutory payroll taxes, workers' compensation, demand and competition
        for the Company's services and the effect of acquisitions. The Company's
        revenue
        levels may fluctuate from quarter to quarter primarily due to the impact
        of
        seasonality in the staffing industry. As a result, the Company may have greater
        revenues and net income in the third and fourth quarters of its fiscal year.
        Payroll taxes and benefits fluctuate with the level of direct payroll costs,
        but
        tend to represent a smaller percentage of revenues and direct payroll later
        in
        the Company's fiscal year as federal and state statutory wage limits for
        unemployment and social security taxes are exceeded by some employees. 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. 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.
 
 Liquidity
        and Capital Resources
 
 As
        reflected in the accompanying financial statements, the Company has a net
        working capital deficit and a stockholders’ equity of $2,802,255 and $1,410,090,
        respectively, as of September 30, 2006. While the Company has achieved
        profitability, we have incurred substantial losses and have been dependent
        upon
        the financial support of stockholders, management, other related parties
        and
        banks.
 
  Page
            21
 **RESOLVE
            STAFFING, INC.**
  
 **ITEM
        2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF
        OPERATIONS (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, as discussed in the footnotes
        to the financial statements. There can be no assurance that management will
        be
        successful in these efforts. The financial statements do not reflect any
        adjustments that may arise as a result of this uncertainty.
 
 Our
        average monthly revenue for the third quarter of 2005 was $2,971,151, and
        has
        increased to a monthly average of $14,567,940 for the third quarter of 2006.
 
 We
        expect
        our operating expenses to continue to increase as we attempt to build our
        brand
        and expand our customer base. We hope our expenses will be funded from
        operations and short-term loans from officers, shareholders or others; however,
        our operations may not provide such funds and we may not be able obtain
        short-term loans from officers, shareholders or others. Our officers and
        shareholders are under no obligation to provide additional loans to the
        company.
 
 *COMPARISON
        OF CONSOLIDATED OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND
        2005.*
 
 Our
        net
        income increased from a loss of $273,401 for the nine months ended September
        30,
        2005 to a net income of $500,561 or a $773,962 increase for the nine months
        ended September 30, 2006. A discussion of our results of operations is as
        follows:
 
 Revenues
        for nine months ended September 30, 2005 compared to 2006 increased from
        $17,013,714 to $88,778,862 or a 422% increase. This increase is attributable
        to
        several acquisitions Resolve has completed. In addition, Resolve has opened
        several new locations and created additional organic growth. As of September
        30,
        2006, Resolve operated approximately 67 staffing locations throughout the
        United
        States.
 
 Our
        cost
        of services increased from $13,883,111 for the nine months ended September
        30,
        2005 to $75,718,957 for the nine months ended September 30, 2006. This increase
        was largely due to the increased revenues as noted above. However, as a
        percentage of revenue, our cost of services increased from 81.6% in 2005
        to
        85.3% in 2006. This increase in our cost of sales is attributable to changes
        in
        our sales mix. In addition to standard staffing services, Resolve also offers
        human resource outsourcing services, such as payroll processing. While our
        staffing margins continue to remain constant, the increase in revenues
        attributable to payroll processing, which has lower margins, causes our costs
        of
        sales to increase, as a percent of sales. We expect our gross profit margins
        for
        staffing services to increase, as a percent of sales, in the future as we
        continue to grow our business in higher margin areas such as the truck driver
        and medical staffing market niches. However, as we continue to increase revenues
        from other services, such as payroll processing, we expect overall gross
        margins
        to continue to fluctuate.
 
 Resolve
        expects to see continuing improvement in operating results as both existing
        acquisitions and organic growth are integrated over the remainder of the
        year.
        We expect to have a competitive advantage by offering a turnkey Human Resource
        Outsourcing (HRO) product line. This competitive advantage should enable
        Resolve
        to significantly increase its business opportunities with both existing
        customers and in new markets. Resolve expects this favorable trend to be
        realized in the later part of 2006 as the acquisitions are consolidated and
        synergies are realized.
 
 Selling,
        General and Administrative expenses (“SG&A” or “Operating expenses”) have
        increased from $3,266,987 for the nine months ended September 30, 2005 to
        $11,962,626 for the nine months ended September 30, 2006. This increase is
        attributable to our aggressive growth through acquisitions and opening of
        new
        locations. Resolve has grown into a national provider of staffing services
        with
        approximately 67 offices from coast to coast as of September, 30, 2005. This
        increase in SG&A expenses includes marketing, salaries, rents, and various
        other expenses associated with these locations, as well as corporate overhead
        and infrastructure to support the locations. These costs have decreased from
        approximately 19% to 13% as a percent of Sales. This decrease is attributable
        to
        the relatively fixed nature of some of the expenses. SG&A also includes non
        cash related items such as amortization of noncompete agreements and
        depreciation.
 
 Interest
        expense increased from $137,017 for the nine months ended September 30, 2005
        to
        $596,718 for the nine months ended September 30, 2006. The increase is
        attributable to increase debt obligations related to our aggressive acquisition
        strategy. A majority of our debt is through affiliated parties, including
        Ron
        Heineman and ELS, Inc. This is discussed in detail in the footnotes to our
        consolidated financial statements.
 
  Page
            22
 **RESOLVE
            STAFFING, INC.**
  
 **ITEM
        2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF
        OPERATIONS (CONTINUED)**
 
 No
        provision for income taxes have been reflected or recorded on these financial
        statements. We recognized a net income of $500,561 for the nine months ended
        September 30, 2006 as a result of the matters discussed above. This represents
        a
        $773,962 increase in net income from the nine months ended September 30,
        2005.
        Losses to date may be used to offset future taxable income, assuming the
        Company
        becomes profitable.
 
 Resolve
        has historically experienced fluctuations in its quarterly operating results
        and
        expects such fluctuations to continue in the future. The Company's operating
        results may fluctuate due to a number of factors such as seasonality, wage
        limits on statutory payroll taxes, workers' compensation, demand and competition
        for the Company's services and the effect of acquisitions. The Company's
        revenue
        levels may fluctuate from quarter to quarter primarily due to the impact
        of
        seasonality in the staffing industry. As a result, the Company may have greater
        revenues and net income in the third and fourth quarters of its fiscal year.
        Payroll taxes and benefits fluctuate with the level of direct payroll costs,
        but
        tend to represent a smaller percentage of revenues and direct payroll later
        in
        the Company's fiscal year as federal and state statutory wage limits for
        unemployment and social security taxes are exceeded by some employees. 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. 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.
 
 Liquidity
        and Capital Resources
 
 As
        reflected in the accompanying financial statements, the Company has a net
        working deficit and a stockholders’ equity of $2,802,255 and $1,410,090,
        respectively, as of September 30, 2006. While the Company has achieved
        profitability, we have incurred substantial losses and have been dependent
        upon
        the financial support of stockholders, management, other related parties
        and
        banks.
 
 Management
        has successfully obtained additional financial resources, which the Company
        believes will support operations until profitability can be achieved. These
        financial resources include financing from both related and non-related third
        parties, as discussed in the footnotes to the financial statements. There
        can be
        no assurance that management will be successful in these efforts. The financial
        statements do not reflect any adjustments that may arise as a result of this
        uncertainty.
 
 For
        the
        nine months ended September 30, 2006 we recognized a net income of $500,561.
        Our
        expenses include $665,735 for depreciation, amortization, and a change in
        allowance for doubtful accounts and did not represent the use of cash. The
        expenses also include $119,749 for stock-based compensation and did not
        represent the use of cash. Changes in accounts receivable, prepaid and other
        expenses, offset by increases in accounts payable, payroll, salary, and other
        accruals brought the total cash used by operations to $3,877,779.
 
 Our
        average monthly revenue for the first nine months of 2005 was $1,890,413,
        and
        has increased to a monthly average of $9,864,318 for the first nine months
        of
        2006.
 
 We
        expect
        our operating expenses to continue to increase as we attempt to build our
        brand
        and expand our customer base. We hope our expenses will be funded from
        operations and short-term loans from officers, shareholders or others; however,
        our operations may not provide such funds and we may not be able obtain
        short-term loans from officers, shareholders or others. Our officers and
        shareholders are under no obligation to provide additional loans to the
        company.
  **ITEM
        3. CONTROLS AND PROCEDURES**
 
 Evaluation
        of disclosure controls and procedures
 
 As
        of
        September 30, 2006, we carried out an evaluation of the effectiveness of
        the
        design and operation of our disclosure controls and procedures pursuant to
        Exchange Act Rule 13a-14. This evaluation was done under the supervision
        and
        with the participation of our Principal Executive Officer and Principal
        Financial Officer. Based upon that evaluation, they concluded that our
        disclosure controls and procedures are effective in gathering, analyzing
        and
        disclosing information needed to satisfy our disclosure obligations under
        the
        Exchange Act.
 
  Page
            23
 **RESOLVE
            STAFFING, INC.**
  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
            24
 **RESOLVE
            STAFFING, INC.**
  **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, 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.
  **ITEM
        2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS**
 
 There
        were no unregistered sales of securities for the nine months ended September
        30,
        2006.
 
 **ITEM
        3. DEFAULT UPON SENIOR SECURITIES**
 
 There
        were no defaults on senior securities for the nine months ended September
        30,
        2006.
 
 **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS**
 
 There
        were no submissions of matters to a vote of shareholders in the nine months
        ended September 30, 2006.
 
 **ITEM
        5. OTHER INFORMATION**
 
 On
        January 4, 2006, the board of directors of Resolve Staffing elected Steve
        Ludders to Executive VP, Chief operating Officer of the Company. Mr. Ludders
        was
        Regional Director and in charge of business development since joining Resolve
        Staffing, Inc. Mr. Ludders' experience includes a former VP of Strategic
        Planning with Interim Personnel, a $2 billion public staffing firm. Mr. Ludders
        is an MBA Thunderbird Graduate.
 
 On
        January 4, 2006, the board of directors of Resolve Staffing elected Scott
        Horne
        to Executive VP, Chief Financial Officer of the Company. Mr. Horne was in
        charge
        of accounting since joining Resolve. Mr. Horne has extensive experience in
        finance and accounting for Human Resource Outsourcing companies, including
        being
        CFO of a national PEO. Mr. Horne graduated from Xavier University with an
        MBA in
        Finance.
 
 On
        January 4, 2006, the board of directors of Resolve Staffing elected Tom Lawry
        Controller, Treasurer of the Company. Mr. Lawry has extensive accounting
        experience in the staffing and PEO markets.
 
 On
        January 9, 2006, Resolve Staffing entered into a consulting agreement with
        Dan
        Seifer. Under the term of the agreement, Mr. Seifer will be paid in options
        to
        acquire up to 4,000,000 shares of common stock of the Company and is to provide
        the following services in a timely manner:
 
 ·
              Business
                  Plan Development - Become familiar with the business and operations
                  of the
                  Company and review and analyze the Company’s formal and informal
                  financial, strategic, and business plans. In conjunction with the
                  Company,
                  prepare and update a formal strategic business plan along with
                  a detailed
                  financial model/projection, and update the business plan and financial
                  model as needed during the term of this
                  Agreement;
 ·
              Strategic
                  Consulting - Assist the Company in sourcing and locating joint-venture
                  partners. Advise
                  the Company in strategic planning matters and assist in the implementation
                  of short- and long-term strategic planning initiatives to fully
                  develop
                  and enhance the Company’s assets, resources, products, and technologies.
                  Provide
                  advice to and consult with the Company concerning management, product
                  marketing, strategic planning, and corporate organization in connection
                  with the Company’s business and advise the Company regarding its overall
                  development, progress, needs, and condition. If requested by the
                  Company,
                  assist in the due diligence of prospective strategic
                  partners.
 ·
              Other
                  Services - Perform
                  other services as may be reasonably requested by the Company that
                  are
                  within the normal scope of operations of Dan
                  Seifer.
 
 On
        January 19, 2006, Resolve Staffing filed a Form S-8 Registration Statement
        for
        the options issued pursuant to the consulting agreement.
 
 
  Page
            25
 **RESOLVE
            STAFFING, INC.**
  **ITEM
        5. OTHER INFORMATION (CONTINUED)**
 
 On
        February 22, 2006, Resolve Staffing, Inc. announced that it has reached an
        agreement in principle to merge with Employee Leasing Services, Inc. (ELS,
        Inc.), and certain related affiliates. Headquartered in Cincinnati, Ohio,
        ELS,
        Inc. (www.elshr.com), a professional employer organization (PEO), manages
        a
        payroll of over 10,000 worksite employees in over 40 states and has operation
        and service centers throughout the country. ELS, Inc.’ 2005 gross (non-GAAP)
        revenues were over $200 million, which equates to approximately $50 million
        in
        net (GAAP) revenues and $3.5 million in Pretax Profit.
 
 On
        March
        31, 2006, Resolve agreed to issue a Note Receivable to Mr. Seifer, and related
        parties, for the purchase of shares underlying the options granted on January
        9,
        2006. A note was issued in the aggregate amount of $6 million. The agreement
        was
        terminated on June 30, 2006 and the remaining balance of 3,566,666 shares
        and
        the note balance of $5,200,000 were canceled.
 
 On
        April
        18, 2006, the Board of Directors of Resolve Staffing, Inc. declared a dividend
        distribution of one right for each outstanding share of the Company's Common
        Stock, $.0001 par value per share (“Common Stock”), to stockholders of record at
        the close of business on May 26, 2006 (the “Record Date”). The Board of
        Directors of the Company also authorized the issuance of one Right for each
        share of Common Stock issued after the Record Date and prior to the earliest
        of
        the Distribution Date (as defined below), the redemption of the Rights and
        the
        expiration of the Rights and, in certain circumstances, after the Distribution
        Date. Additional details are provided on an 8-K filed on April 21,
        2006.
 
 During
        July 2006, an individual received 3,621 common shares in a cashless conversion
        of 7,500 exercisable warrants.
  On
        October 1, 2006, the Board of Directors of Resolve Staffing, Inc. approved
        the
        sale of 1.0 million units to a group of accredited investors, each unit
        consiting of one share of common stock, one warrant for the purchase of one
        share of common stock for $2.00, one warrant for teh purchase of one share
        of
        common stock for $3.00. The purchase of each unit was $1.50 per
        unit.
 
 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 September 30, 2006, 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 letters from the State of Ohio sales tax auditors
        indicating their intention to make an assessment 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 September 30, 2006, no amount is accrued in the Company’s
        financial statements as the Company and legal counsel believe this assessment
        is
        groundless.
 
 **ITEM
        6. EXHIBITS AND REPORTS ON FORM 8-K**
 
 (a)
        Exhibits
 
 Exhibit31.1
              Certification
                  of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as
                  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.31.2
              Certification
                  of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                  as
                  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.32
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002.
 
 (b)
        Reports of Form 8-K
 
 We
        filed
        the following reports on Form 8-K during the first, second, and third quarter
        of
        2006:
 
 Form
        8-K,
        January 4, 2006, Item 5 - Change in Registrants Officers; Reporting the election
        of Steve Ludders, Scott Horne, and Tom Lawry as Officers.
  Page
            26
 **RESOLVE
            STAFFING, INC.**
  
 Form
        8-K,
        February 24, 2006, Item 8 - Other Events; Reporting an agreement to merge
        with
        Employee Leasing Services, Inc. and certain affiliates.
 
 Form
        8-K,
        April 18, 2006, Item 8 - Other Events; Reporting a Letter of Intent to purchase
        Star Personnel, Inc.
 
 Form
        8-K,
        April 21, 2006, Item 2 - Results of Operations and Financial Conditions;
        Reporting the Company’s results for the year ended December 31, 2005, and Item 5
        - Amendment to Articles of Incorporation or Bylaws; Reporting the adoption
        of an
        amendment to the Bylaws of the Company by the Board of Directors.
 
 Form
        8-K,
        May 17, 2006, Item 2 - Results of Operations and Financial Conditions; Reporting
        the Company’s results for the quarter ended March 31, 2006.
 
 Form
        8-K,
        August 11, 2006, Item 2 - Results of Operations and Financial Conditions;
        Reporting the Company’s results for the quarter ended June 30,
        2006.
 
 
   Page
            27
 **RESOLVE
            STAFFING, INC.**
  **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 
 RESOLVE
                  STAFFING, INC.Dated:
                  November 13, 2006
              */s/
                  Ronald Heineman*By:
                  Ronald Heineman, Chief Executive OfficerDated:
                  November 13, 2006
              */s/
                  Scott Horne*By:
                  Scott Horne, Chief Financial
                  Officer