**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 JUNE 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 July 31, 2006, there were outstanding
        15,752,435 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 JUNE 30, 2006**
 
 **TABLE
        OF CONTENTS**
 
 **PART
                  I - FINANCIAL INFORMATION**Item
                  1. Financial StatementsConsolidated
                  balance sheets as of June 30, 2006 and December
                  31, 2005
              3Consolidated
                  statements of operations for the three and six
                  months ended June 30, 2006 and 2005
              4Consolidated
                  statements of cash flows for the six months ended
                  June 30, 2006 and 2005
              5Notes
                  to consolidated financial
                  statements
              7Item
                  2. Management’s discussion and analysis or plan of
                  operation
              17Item
                  3. Controls and procedures
              21**PART
                  II OTHER INFORMATION**Item
                  1. Legal proceedings
              22Item
                  2. Unregistered sale of equity securities and use of
                  proceeds
              22Item
                  3. Default upon senior securities
              22Item
                  4. Submission of matters to a vote of security
                  holders
              22Item
                  5. Other information
              22Item
                  6. Exhibits and reports on form
                  8-K
              23
 
 
 
 
 
 
  Page
            2
  **RESOLVE
        STAFFING, INC.**
 **CONSOLIDATED
        BALANCE SHEETS**
 **JUNE
        30, 2006 AND DECEMBER 31, 2005**
 
 
 **ASSETS****2006**
              **2005****Current
                  Assets:**Cash
              $
                  -
              $
                  -Accounts
                  receivable, net of allowance for bad debts of $173,614 for 2006
                  and
                  $96,986 for 2005
              13,644,036
              6,638,782Prepaid
                  and other assets
              403,106
              330,368Total
                  current assets
              14,047,142
              6,969,150**Property
                  and Equipment:**Property
                  and equipment
              1,203,744
              866,196Less:
                  Accumulated depreciation
              (370,307)
              (264,935)Net
                  property and equipment
              833,437
              601,261**Other
                  Assets:**Goodwill
              9,750,454
              6,695,579Non
                  competes, net of accumulated amortization of $326,498 for 2006
                  and
                  $106,917 for 2005
              696,393
              231,083Total
                  other assets
              10,446,847
              6,926,662**Total
                  Assets**
              **$25,327,426**
              **$14,497,073****LIABILITIES
                  AND STOCKHOLDERS’ EQUITY (DEFICIT)****Current
                  Liabilities:**Bank
                  overdraft
              $730,660
              $205,551Accounts
                  payable and accrued liabilities
              3,024,107
              1,011,903Accounts
                  payable related party
              -
              825,921Accrued
                  salaries and payroll taxes
              1,722,439
              639,474Notes
                  payable and lines of credit
              11,192,720
              1,849,246Notes
                  payable - related parties
              91,500
              91,500Total
                  current liabilities
              16,761,426
              4,623,595**Long
                  Term Liabilities**Notes
                  payable
              890,663
              4,209,762Notes
                  payable - related parties
              7,369,094
              5,873,936Total
                  long term debt
              8,259,757
              10,083,698Total
                  Liabilities
              25,021,182
              14,707,293**Stockholders’
                  Equity (Deficit):**Common
                  stock, $.0001 par value, 50,000,000 shares authorized, issued and
                  outstanding: June 30, 2006 - 15,752,435 shares; December 31, 2005
                  -
                  15,219,101 shares
              1,575
              1,522Paid-in
                  capital
              2,107,171
              1,187,475Accumulated
                  deficit
              (1,802,502)
              (1,399,217)Total
                  stockholders’ equity (deficit)
              306,244
              (210,220)**Total
                  Liabilities and Stockholders’ Equity (Deficit)**
              **$25,327,426**
              **$14,497,073**
 
 See
        accompanying notes to these financial statements.
  Page
            3
  **RESOLVE
        STAFFING, INC.**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **FOR
        THE THREE** **AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005**
 
 
 **Three
                  Months Ended**
                **June
                  30,**
              **Six
                  Months Ended**
                **June
                  30,****2006**
              **2005**
              **2006**
              **2005****Staffing
                  Services Revenue**
              $27,670,465
              $5,421,811
              $45,075,043
              $8,100,261**Cost
                  of Staffing Services Revenue**
              23,266,196
              4,337,104
              37,450,198
              6,509,793**Gross
                  Profit**
              4,404,269
              1,084,707
              7,624,845
              1,590,468**Operating
                  Expenses**
              4,144,946
              1,197,841
              7,709,869
              1,829,985Income
                  (**Loss)
                  From Operations**
              259,323
              (113,134)
              (85,024)
              (239,517)**Other
                  Income (Expense):**Interest
                  expense
              (166,423)
              (72,731)
              (318,261)
              (103,257)Other
                  income (expenses), net
              (166,423)
              (72,731)
              (318,261)
              (103,257)**Net
                  Income (Loss)**
              $92,900
              $(185,865)
              $(403,285)
              $(342,774)**Net
                  Income (Loss) Per Share**Basic
              $.00
              $(.01)
              $(.02)
              $(.02)Diluted
              $.00
              $(.01)
              $(.02)
              $(.02)**Weighted
                  Average Number of Shares Used in Loss Per Share
                  Computation:**Basic
              19,181,006
              14,578,661
              17,233,097
              14,244,368Diluted
              19,693,564
              14,578,661
              17,233,097
              14,244,368
 
 See
        accompanying notes to these financial statements.
 
 
  Page
            4
  **RESOLVE
        STAFFING, INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE** **SIX
        MONTHS ENDED JUNE 30, 2006 AND 2005**
 
 **2006**
              **2005****Cash
                  Flows From Operating Activities**Net
                  loss
              $(403,285)
              $(342,774)*Adjustments
                  to reconcile net loss to cash used in operating
                  activities:*Depreciation
                  and amortization
              105,370
              50,639Stock
                  based compensation
              119,749
              10,000Change
                  in allowance for doubtful accounts
              76,628
              5,340Amortization
                  of intangibles
              
              2,091Amortization
                  of non compete
              184,690
              -*Decrease
                  (increase) in current assets:*Accounts
                  receivable
              (7,081,882)
              (913,510)Prepaid
                  and other assets
              (72,738)
              7,941*Increase
                  (decrease) in current liabilities:*Accounts
                  payable
              1,962,744
              281,879Account
                  payable - related party
              (825,921)
              -Accrued
                  salaries and payroll taxes
              1,082,965
              200,881Total
                  adjustments
              (4,448,395)
              (354,739)Net
                  cash used in operating activities
              (4,851,680)
              (697,513)**Cash
                  Flows From Investing Activities**Acquisition
                  of net assets of subsidiaries, net of cash
              2,072,415
              (346,000)Purchase
                  of property and equipment
              (157,546)
              (118,706)Net
                  cash used in investing activities
              (2,229,961)
              (464,706)**Cash
                  Flows From Financing Activities**Increase
                  in**(**Repayment
                  of) bank overdraft
              525,109
              (37,871)Stock
                  purchase
              800,000
              -Proceeds
                  from line of credit
              5.695,573
              1,710,071Repayment
                  of notes payable
              (1,434,199)
              (53,179)Proceeds
                  from (repayment of) loans payable - related party
              1,495,158
              (400,873)Net
                  cash provided by financing activities
              7,081,641
              1,218,148**Net
                  Increase in Cash**
              -
              55,929**Cash,
                  Beginning of the Period**
              -
              75,356**Cash,
                  End of the Period**
              $-
              $131,285
 
  Page
            5
  **RESOLVE
        STAFFING, INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS (CONTINUED)**
 **FOR
        THE THREE MONTHS ENDED** **JUNE
        30, 2006 AND 2005**
 
 **NON-CASH
        INVESTING AND FINANCING ACTIVITIES**
 
 During
        the quarter ended March 31, 2006, Resolve 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 six months ended June 30, 2006, Resolve acquired all of the assets and
        ownership of 4 unrelated entities. In conjunction with these transactions
        Resolve issued notes payable in the amount of $1,763,000 and accrued $49,460
        of
        contingent expenses 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
              1,802,460Total
              $1,812,460
 
 On
        February 7, 2005, Resolve Staffing purchased the staffing division of 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 U.S. generally
        accepted 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 approximately 63
        offices 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. Under the terms of the agreement, Resolve
        will
        acquire all outstanding shares of ELS Inc. for approximately $3 million in
        cash,
        a $7 million note and 1.4 million shares of Resolve common stock. On July
        5,
        2006, Resolve Staffing announced the merger had been delayed until further
        notice. While the companies will continue to move forward with the proposed
        merger, a new closing date has yet to be set. There is no certainty that
        Resolve
        will be able to consummate a transaction with ELS. In any event, Resolve
        will
        immediately announce a new closing date, or if merger discussion have been
        terminated, as soon as any revised dates or discussions have been
        set.
 
 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**
 **JUNE
            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.
 
 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.
 
 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.
 
  Page
            8
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2006**
  
 **NOTE
        A - ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
        (CONTINUED)**
 
 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 of America. In conjunction with this
        transaction, Resolve 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 six months ended June 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
              3,054,876Total
              $3,884,876
 
 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 six months
        ended
        June 30, 2006, approximately $3,054,876 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 of America
        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 of America
        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
        six
        months ended June 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**
 **JUNE
            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 of America.
        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 June
        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 June 30, 2006.
 
 
  Page
            10
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            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 $2,714,284 and $306,244,
        respectively, as of June 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**
 **JUNE
            30, 2006**
  
 **NOTE
        C - NOTES PAYABLE AND LINES OF CREDIT**
 
 Notes
        payable and lines of credit as of June 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 this note are limited to 80% of the Company’s accounts
                  receivable balance which have been outstanding for less than 90
                  days.
              $9,037,500
              
              $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.
              351,677
              
              398,100Notes
                  payable to ELS Inc., accruing interest at 3% per annum, due September
                  2007
              7,369,094
              
              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 $91,702 and $140,106
                  at June 30,
                  2006 and December 31, 2005, respectively.
              2,654,206
              
              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
              19,543,977
              
              12,024,444Current
                  portion of notes payable and lines of credit
              (11,284,220)
              
              (1,940,746)Long
                  term portion of notes payable and lines of credit
              $8,259,757
              
              $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 June 30, 2006, Resolve had a balance of $7,369,094
        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. Management extended this note during 2006 to become due
        September 2007.
 
  Page
            12
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            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. As of June 30, 2006,
        the
        balance of the note was $5,200,000. The agreement was terminated on June
        30,
        2006 and the remaining balance of 3,566,666 shares was canceled.
 
 Common
        Stock Warrants
 
 As
        of
        June 30, 2006, there were 851,320 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.
  Page
            13
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2006**
  
 **NOTE
        F - SUPPLEMENTAL CASH FLOW INFORMATION**
 
 Cash
        paid
        for interest during the six months ended June 30, 2006 and 2005 amounted
        to
        $318,261 and $103,257 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 excludes 851,320 common stock equivalents, representing principally
        warrants and stock options, since the effect of including them would be
        anti-dilutive.
 
 **NOTE
        H - SUBSEQUENT EVENTS**
 
 On
        July
        5, 2006 Resolve Staffing, Inc. announced that the proposed merger with ELS
        has
        been delayed until further notice. On February 22, 2006, Resolve Staffing,
        Inc.
        and Employee Leasing Services, Inc. entered into a merger agreement. Resolve
        and
        ELS contemplated that the merger would be completed by June 30, 2006. Subsequent
        to the February 22, 2006 announcement, Resolve has acquired two additional
        staffing firms with annual sales totaling over $20 million. Because of these
        acquisitions, and unexpected filing and accounting issues, the merger with
        ELS
        was delayed until further notice. While the companies will continue to move
        forward with the proposed merger, a new closing date has yet to be set. There
        is
        no certainty that Resolve will be able to consummate a transaction with ELS.
        In
        any event, Resolve will immediately announce a new closing date, or if merger
        discussions have been terminated, as soon as any revised dates or discussions
        have been set.
  **NOTE
        I - PROFORMA INFORMATION**
 
 The
        interim financial statements for the six months ended June 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 statements 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, which
        has
        been recorded as a reverse acquisition, for the period from January 1, of
        each
        period to the respective dates of acquisition.
 
 Presented
        below is the unaudited pro forma statement of operations for the three months
        ended June 30, 2006 as if the acquisition of Star Personnel had been completed
        April 1, 2006.
 
 **Actual
                  three**
                **months
                  ended**
                **June
                  30, 2006**
              **Pro
                  forma**
                **adjustments
                  for**
                **Star
                  Personnel, Inc.**
              **Adjusted**
                **June
                  30, 2006**Service
                  Revenues
              $27,670,465
              $2,725,520
              $30,395,985Cost
                  of Services
              23,266,196
              1,699,552
              24,965,748Gross
                  Margin
              4,404,269
              1,025,968
              5,430,237Operating
                  Expenses
              4,144,946
              757,911
              4,902,857Profit
                  (Loss) From Operations
              259,323
              268,057
              527,380Other
                  Income (Expense):Interest
                  expense
              (166,423)
              -
              (166,423)Net
                  other expenses
              (166,423)
              -
              (166,423)Net
                  Income
              $92,900
              $268,057
              $360,957Pro-forma
                  earnings per share information for thesix
                  months ended June 30, 2006:Basic
                  weighted average shares outstanding:
                Diluted
                  weighted average shares
                  outstanding
              19,181,006
                19,693,564Pro
                  forma basic net income per common share:
                Pro
                  forma diluted net income per common
                  share
              $.02
                $.02
 
 
  Page
            14
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2006**
  
 **NOTE
        I - PROFORMA INFORMATION (CONTINUED)**
 
 Presented
        below is the unaudited pro forma statement of operations for the six months
        ended June 30, 2006 as if the acquisition of Star Personnel had been completed
        January 1, 2006.
 
 **Actual
                  six**
                **months
                  ended**
                **June
                  30, 2006**
              **Pro
                  forma**
                **adjustments
                  for**
                **Star
                  Personnel, Inc.**
              **Adjusted**
                **June
                  30, 2006**Service
                  Revenues
              $45,075,043
              $6,665,403
              $51,740,446Cost
                  of Services
              37,450,198
              4,614,832
              42,065,030Gross
                  Margin
              7,624,845
              2,050,571
              9,675,416Operating
                  Expenses
              7,709,869
              2,073,399
              9,783,268Profit
                  (Loss) From Operations
              (85,024)
              (22,828)
              (107,852)Other
                  Income (Expense):Interest
                  expense
              (318,261)
              (93)
              (318,354)Net
                  other expenses
              (318,261)
              (93)
              (318,354)Net
                  Loss
              $(403,285)
              $(22,921)
              $(426,206)Pro-forma
                  earnings per share information for thesix
                  months ended June 30, 2006:Basic
                  weighted average shares outstanding:
              17,233,097Pro
                  forma basic net loss per common share:
              $(.02)
 
 Presented
        below is the unaudited pro forma statement of operations for the three months
        ended June 30, 2005 as if the acquisition of Star Personnel had been completed
        April 1, 2005.
 
 **Actual
                  three**
                **months
                  ended**
                **June
                  30, 2005**
              **Pro
                  forma**
                **adjustments
                  for**
                **Star
                  Personnel, Inc.**
              **Adjusted**
                **June
                  30, 2005**Service
                  Revenues
              $5,421,811
              $3,716,267
              $9,138,078Cost
                  of Services
              4,337,104
              2,528,976
              6,866,080Gross
                  Margin
              1,084,707
              1,187,291
              2,271,998Operating
                  Expenses
              1,197,841
              998,116
              2,195,957Profit
                  (Loss) From Operations
              (113,134)
              189,175
              76,041Other
                  Income (Expense):Interest
                  expense
              (72,731)
              (11,411)
              (84,142)Net
                  other expenses
              (72,731)
              (11,411)
              (84,142)Net
                  Loss
              $(185,865)
              $177,764
              $(8,101)Pro-forma
                  earnings per share information for thethree
                  months ended June 30, 2006:Basic
                  weighted average shares outstanding:
              14,578,661Pro
                  forma basic net loss per common share:
              $.00
 
  Page
            15
 **RESOLVE
            STAFFING, INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2006**
  
 **NOTE
        I - PROFORMA INFORMATION (CONTINUED)**
 
 Presented
        below is the unaudited pro forma statement of operations for the six months
        ended June 30, 2005 as if the acquisition of Resolve, from related parties
        (Note
        A), and Star Personnel had been completed January 1, 2005.
 
 **Actual
                  six months ended June 30, 2005**
              **Pro
                  forma**
                **Adjustments
                  for**
                **Resolve
                  Staffing, Inc.**
              **Pro
                  forma**
                **Adjustment
                  for**
                **Star
                  Personnel, Inc.**
              **Adjusted**
                **June
                  30, 2005**Service
                  Revenues
              $8,100,261
              $45,069
              $7,664,985
              $15,810,315Cost
                  of Services
              6,509,793
              -
              5,400,029
              11,909,822Gross
                  Margin
              1,590,468
              45,069
              2,264,956
              3,900,493Operating
                  Expenses
              1,829,985
              63,667
              2,099,640
              3,993,292Profit
                  (Loss) From Operations
              (239,517)
              (18,598)
              165,316
              (92,799)Other
                  Income (Expense):Interest
                  expense
              (103,257)
              (400)
              (18,686)
              (122,343)Net
                  other expenses
              (103,257)
              (400)
              (18,686)
              (122,343)Net
                  Loss
              $(342,774)
              $(18,998)
              $146,630
              $(215,142)Pro-forma
                  earnings per share information for thesix
                  months ended June 30, 2005:Basic
                  weighted average shares outstanding:
              
              14,244,368Pro
                  forma basic net loss per common share:
              
              $(.02)
 
 The
        Company has been unable to obtain the necessary information to present pro-forma
        financial information reflecting the combined operations of Resolve Staffing,
        Inc, and certain of the various acquired staffing locations from unrelated
        parties, for the period ended June 30, 2006 and 2005. This current Report
        on
        Form 10-QSB/A will be supplemented by amendment to provide the necessary
        comparative pro-forma information as soon as the information becomes
        available.
 
 
 
  Page
            16
 **RESOLVE
              STAFFING, INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
              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 JUNE 30, 2006 AND
        2005.*
 
 Our
        net
        income increased from a loss of $185,865 for three months ended June 30,
        2005 to
        a profit of $92,900 or a $278,765 increase for three months ended June 30,
        2006.
        A discussion of our results of operations is as follows:
 
 Revenues
        for three months ended June 30, 2005 compared to 2006 increased from $5,421,811
        to $27,670,465 or a 410% 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 June 30, 2006, Resolve
        operated approximately 63 staffing locations throughout the United
        States.
 
  Page
            17
 **RESOLVE
            STAFFING, INC.**
  
 **ITEM
        2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF
        OPERATIONS (CONTINUED)**
 
 Our
        cost
        of services increased from $4,337,104 for the three months ended June 30,
        2005
        to $23,266,196 for the three months ended June 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 80% in 2005 to 84% 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 $1,197,841
        for the three months ended June 30, 2005 to $4,144,946 for the three months
        ended June 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 63 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 22% to 15% 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. Moreover, operating expenses include an
        approximately $200,000 bad-debt write-off that occurred in the second quarter
        of
        2006.
 
 Interest
        expense increased from $72,731 for the three months ended June 30, 2005 to
        $166,423 for the three months ended June 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 $92,900 for the three months ended
        June
        30, 2006 as a result of the matters discussed above. This represents a $278,765
        increase in operating profit from the three months ended June 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 $2,714,284 and $306,244,
        respectively, as of June 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
            18
 **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 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.
 
 Our
        average monthly revenue for the second quarter of 2005 was $1,807,270, and
        has
        increased to a monthly average of $9,223,488 for the second 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 SIX MONTHS ENDED JUNE 30, 2006 AND
        2005.*
 
 Our
        net
        loss increased from a loss of $342,774 for six months ended June 30, 2005
        to a
        net loss of $403,285 or a $60,511 increase for six months ended June 30,
        2006. A
        discussion of our results of operations is as follows:
 
 Revenues
        for six months ended June 30, 2005 compared to 2006 increased from $8,100,261
        to
        $45,075,043 or a 456% 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 June 30, 2006, Resolve
        operated approximately 63 staffing locations throughout the United
        States.
 
 Our
        cost
        of services increased from $6,509,793 for the six months ended June 30, 2005
        to
        $37,450,198 for the six months ended June 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 80% in 2005 to 83% 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 $1,829,985 for the six months ended June 30, 2005 to $7,709,869
        for the six months ended June 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 63
        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 23% to 17% 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. Moreover, operating
        expenses include an approximate $200,000 bad-debt write-off that occurred
        in the
        second quarter of 2006.
 
 Interest
        expense increased from $103,257 for the six months ended June 30, 2005 to
        $318,261 for the six months ended June 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.
 
  Page
            19
 **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 incurred a net loss of $403,285 for the six months ended June
        30,
        2006 as a result of the matters discussed above. This represents a $60,511
        increase in net loss from the six months ended June 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 $2,714,284 and $306,244,
        respectively, as of June 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
        six months ended June 30, 2006 we incurred a net loss of $403,285. Our expenses
        include $366,688 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 $4,851,680.
 
 Our
        average monthly revenue for the first six months of 2005 was $1,350,044,
        and has
        increased to a monthly average of $7,512,507 for the first six 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.
 
  Page
            20
 **RESOLVE
            STAFFING, INC.**
  
 **ITEM
        3. CONTROLS AND PROCEDURES**
 
 Evaluation
        of disclosure controls and procedures
 
 As
        of
        June 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.
 
 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
            21
 **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 six months ended June 30,
        2006.
 
 **ITEM
        3. DEFAULT UPON SENIOR SECURITIES**
 
 There
        were no defaults on senior securities for the six months ended June 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 six months
        ended
        June 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.
        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
            22
 **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),
        and
        certain related affiliates. Headquartered in Cincinnati, Ohio, ELS
        (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’ 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.
 
 Under
        the
        terms of the agreement, Resolve will acquire all outstanding shares of ELS
        for
        approximately $3 million in cash, a $7 million note and 1.4 million shares
        of
        Resolve common stock. Closing of the transaction is subject to certain
        customary closing conditions and is expected to occur in the second quarter
        of
        2006.
 
 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.
 
 **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 and second 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.
 
 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.
 
   Page
            23
 **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:
                  August 11, 2006
              */s/
                  Ronald Heineman*By:
                  Ronald Heineman, Chief Executive OfficerDated:
                  August 11, 2006
              */s/
                  Scott Horne*By:
                  Scott Horne, Chief Financial
                  Officer