UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2011

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT

For the transition period from _________to ________

Commission File No. 000-29895

SMART-TEK SOLUTIONS INC.
(Exact name of registrant as specified in its charter)

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes[ x ] No[ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes[ ] No[ ]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes[ ] No[ x ]

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

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of securities under a plan confirmed by a court.
Yes[ ] No[ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date:
As of June 30, 2011, there were 49,212,123 shares of common stock, par value $0.001, outstanding.

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3

See accompanying notes to the consolidated financial statements.

4

See accompanying notes to the consolidated financial statements.

5

See accompanying notes to the consolidated financial statements.

6

See accompanying notes to the consolidated financial statements.

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Nature of operations, basis of financial statement presentation

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

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

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

Smart-tek Communications Inc. (“SCI”) was incorporated on October 29, 1996 in the Province of British Columbia, Canada. The Company specialized in the design, sale, installation and service of security technology with electronic hardware and software products. Projects range from residential and commercial developments to system upgrades and monitoring contracts. Customers included major developers, general and electrical contractors, hospitals, Crown Corporations, law enforcement agencies and retail facilities. 100% of the SCI’s operations are in Canada.

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

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

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the following significant accounting policies:

Principles of consolidation

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

Use of estimates

The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and related disclosures. Specific areas, among others, requiring the application of management’s estimates and judgment includes assumptions pertaining to credit. Worthiness of customers, percentage of completion and related costs for contracts in progress, interest rates, useful lives of assets, future cost trends, tax strategies, and other external market and economic conditions. Actual results could differ from estimates and assumptions made.

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Cash and equivalents

Cash and cash equivalents consist of cash on hand and bank deposits. For financial reporting purposes, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced any losses related to this concentration of risk. At June 30, 2011 and December 31, 2010, the Company did not have any deposits in excess of federally insured limits.

Accounts Receivable

Accounts receivables are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as needed. The Company uses the allowance method to account for uncollectible accounts receivable balances. Under the allowance method, if needed, an estimate of uncollectible customer balances is made based upon specific account balances that are considered uncollectible. Factors used to establish an allowance include the credit quality and payment history of the customer. There is an no allowance for doubtful accounts as of June 30, 2011 (December 31, 2010 – $Nil).

Workers compensation claims reserve

The Company maintains reserves for workers' compensation claims which are made up of estimated collateral required to pay claims and estimated expenses to settle the claims. The collateral amounts are determined by the insurance carrier and are not recoverable by the Company until all claims related to a policy period are settled. Accordingly, the Company accrues workers’ compensation losses, as provided by the Insurance Carrier’s Third Party Administrator and charges expense. As such, the claim reserve will not be recoverable in the near term and accordingly, they are classified as a long term asset. The Company as well as the Insurance Carriers evaluate the reserves regularly throughout the year and make adjustments accordingly. If the actual cost of such claims and related expenses exceeds the amounts estimated, additional reserves may be required.

Concentration of credit risk

Credit risk arises from the potential that a counterpart will fail to perform its obligations. The Company is exposed to credit risk related to its accounts receivable and contract retention receivable. The Company’s receivables are comprised of a number of debtors which minimizes the concentration of credit risk. It is management’s opinion that the Company is not exposed to significant credit risk associated with its accounts receivable and contract retention receivable.

Equipment

Equipment, including computer equipment under capital lease agreements, is accounted for in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) topic 360: Property Plant and Equipment. It is recorded at cost and depreciated using accelerated methods over the estimated useful lives of the related assets ranging from 3 to 5 years. The Company reviews the carrying value of long-term assets to be held and used when events and circumstances warrant such a review. If the carrying value of a long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. The cost of normal maintenance and repairs is charged to operations as incurred. Major overhaul that extends the useful life of existing assets is capitalized. When equipment is retired or disposed, the costs and related accumulated depreciation are eliminated and the resulting profit or loss is recognized in income.

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Income taxes

In accordance with FASB ASC 740 (SFAS No. 109), “Accounting for Income Taxes”, the Company uses the asset and liability method to account for income taxes, including recognition of deferred tax assets for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax bases. The Company reviews its deferred tax asset for recovery and a valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the Company’s tax provision in the period of change.

Interest and penalties on tax deficiencies recognized in accordance with ACS accounting standards are classified as income taxes in accordance with ASC Topic 740-10-50-19.

Revenue recognition

The Company recognizes professional employment organizations (PEO) revenues when each periodic payroll is delivered to the ASC 605-45: Principal Agent Consideration. Consistent with its revenue recognition policy, the Company’s net PEO revenues and cost of PEO revenues do not include the payroll cost of its worksite employees. Instead, PEO revenues and cost of PEO revenues are comprised of all other costs related to its worksite employees, such as payroll taxes, employee benefit plan premiums and workers’ compensation insurance. PEO revenues also include professional service fees, which are primarily computed as a percentage of client payroll or on a per check basis.

In determining the pricing of the markup component of its billings, the Company takes into consideration its estimates of the costs directly associated with its worksite employees, including payroll taxes, benefits and workers’ compensation costs, plus an acceptable gross profit margin. As a result, the Company’s operating results are significantly impacted by the Company’s ability to accurately estimate, control and manage its direct costs relative to the revenues derived from the markup component of the Company’s gross billings.

Comprehensive (loss) income

Comprehensive income is presented in accordance with FASB ASC 220. Comprehensive income or loss encompasses net income or loss and “other comprehensive income or loss”, which includes all other non-owner transactions and events that change shareholder’s deficiency. The Company’s other comprehensive loss reflects the effect of foreign currency translation adjustments on the translation of the financial statements from the functional currency of Canadian dollars into the reporting currency of U.S. dollars.

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Stock-based compensation

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

On January 1, 2006, the Company adopted FASB ASC 718: Compensation-Stock Compensation (SFAS No. 123 - revised 2004), “Share-based Payment (“SFAS No.123R”) a revision of SFAS No. 123, “Accounting for Stock Based Compensation”, SFAS No.123R superseded APB Opinion No.25 “Accounting for Stock Issued to Employees” and amended SFAS 95 “Statement of Cash Flows” ASC 718 requires that the Company measure the cost of employee services received in exchange for equity awards based on the grant date fair-value of the awards. The cost will be recognized as compensation expense over the vesting period of the awards.

Under this method, the Company began recognizing compensation cost for equity-based compensation for all new or modified grants after the date of adoption. The pro-forma disclosures previously permitted under SFAS No. 123 are no longer an alternative to financial statement recognition.

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Recovery of long-lived assets

The Company adopted FASB ASC Topic 360: Property Plant and Equipment, sub topic 360-10-35-15: Impairment or Disposal of Long Lived Assets (SFAs 144). ASC 360-10-35-15 requires recognition of impairment losses on long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts.

Earnings (loss) per share

The Company computes net earnings (loss) per common share in accordance with FASB ASC 260 (SFAS No. 128 “Earnings per Share” and SAB No. 98). Under the provisions of ASC 260, the basic net earnings (loss) per common share is computed by dividing the net earnings (loss) available to common stock outstanding during the period. Net earnings (loss) per share on a diluted basis is computed by dividing the net earnings (loss) for the period by the weighted average number of common and dilutive common stock equivalent shares outstanding during the period.

Fair Value of Financial Instruments

Effective January 1, 2008, fair value measurements are determined by the Company's adoption of authoritative guidance issued by the under FASB ASC 870-10: Fair Value Measurements and Disclosures (FASB 157), with the exception of the application of the statement to non-recurring, non-financial assets and liabilities as permitted. The adoption of the authoritative guidance did not have a material impact on the Company's fair value measurements. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

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

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

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

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

At June 30, 2011 and December 31, 2010, the carrying amounts of financial instruments, including cash, accounts receivable, receivable from related parties, accounts payable and accrued liabilities, and accounts payable to related parties approximate fair value because of their short maturity.

Recent Accounting Pronouncements

In October 2009, the FASB issued authoritative guidance on revenue recognition that will become effective in fiscal years beginning on or after June 15, 2010, with earlier adoption permitted. Under the new guidance on arrangements that include software elements, tangible products that have software components that are essential to the functionality of the tangible product will no longer be within the scope of the software revenue recognition guidance, and software-enabled products will now be subject to other relevant revenue recognition guidance. Additionally, the FASB issued authoritative guidance on revenue arrangements with multiple deliverables that are outside the scope of the software revenue recognition guidance. Under the new guidance, when vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition. We believe the adoption of this new guidance will not have a material impact on our financial statements.

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Recent Accounting Pronouncements, continued

In January 2010, the FASB issued guidance under FASB ASU No. 2010-08, “Technical Corrections to various Topics’ related to ASC Topic 820-10 on improving disclosures about fair value measurements to add new disclosure requirements for significant transfers in and out of Level 1 and 2 measurements and to provide a gross presentation of the activities within the Level 3 rollforward. The guidance also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The disclosure requirements are effective for interim and annual reporting periods beginning after December 15, 2009, except for the requirement to present the Level 3 rollforward on a gross basis, which is effective for fiscal years beginning after December 15, 2010. The adoption of this guidance was limited to the form and content of disclosures, and will not have a material impact on our consolidated results of operations and financial condition.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

In May 2009, the FASB issued new guidance for accounting for subsequent events. The new guidance, which is now part of ASC 855-10, Subsequent Events (formerly, SFAS No. 165, Subsequent Events) is consistent with existing auditing standards in defining subsequent events as events or transactions that occur after the balance sheet date but before the financial statements are issued or are available to be issued, but it also requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. The new guidance defines two types of subsequent events: “recognized subsequent events” and “non-recognized subsequent events.” Recognized subsequent events provide additional evidence about conditions that existed at the balance sheet date and must be reflected in the company’s financial statements. Non-recognized subsequent events provide evidence about conditions that arose after the balance sheet date and are not reflected in the financial statements of a company. Certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. The new guidance was effective on a prospective basis for interim or annual periods ending after June 15, 2009. The Company adopted the provisions of ASC 855-10 as required.

In June 2009, the FASB issued new guidance which is now part of ASC 105-10 (formerly Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles). ASC 105-10 replaces FASB Statement No. 162, "The Hierarchy of Generally Accepted Accounting Principles", and establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles. ASC 105-10 is effective for interim and annual periods ending after September 15, 2009. The adoption of ASC 105-10 did not have a material impact on the Company’s financial statements.

In January 2010, the FASB issued ASU No. 2010-01, amending SFAS No. 168, “The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles.” This Standard codified in ASC 105 is being modified to include the authoritative and non-authoritative levels of GAAP. This amendment is effective for financial statements issued for interim and annual periods ending after September 15, 2009. ASU No. 2010-01 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

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Recent Accounting Pronouncements, continued

In February 2010, the FASB issued ASU No. 2010-09, “Subsequent Events ( ASC Topic 855), Amendments to Certain Recognition and Disclosure Requirements.” This Standard update requires a SEC Filer to (1) evaluate subsequent events through the date that the financial statements are issued or available to be issued, (2) defines “SEC Filer” as an entity that is required to file or furnish its financial statements with either the SEC or, with respect to an entity subject to Section 12(i) of the Securities Exchange Act of 1934, as amended, the appropriate agency under that Section, (3) not be bound to disclosing the date through which subsequent events have been evaluated, (4) note the definition of public entity is not longer defined nor necessary for Topic 855, (5) note the scope of the reissuance disclosure requirements is refined to include revised financial statements only. These Updates are effective for interim or annual periods ending after June 15, 2010. ASU No. 2010-09 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

Smart-Tek Communications Inc.

On July 1, 2010, the Company completed the sale of the Company’s wholly owned subsidiary Smart-Tek Communications Inc. to its president and founder Perry Law.

The aggregate purchase price of Smart-Tek Communications, Inc. is $821,757 allocated as follows:

Results of operations and cash flows are classified as pertaining to “discontinued operations” if those operations and cash flows are attributable to a distinguishable component of the Company that will be eliminated from the ongoing operations of the Company as a result of the disposition.

The results of discontinued operations are classified separately in both the current period and prior years. The results of discontinued operations are presented net of applicable income taxes.

If certain long-term assets and liabilities of the Company can be distinguished as being directly related to the discontinued operations, and if those assets and liabilities are disposed of pursuant to the disposition of the discontinued business component, then those assets and liabilities are classified on the balance sheet in both the current and prior periods as current or non-current assets of discontinued operations and liabilities of discontinued operations, respectively.

Current and non-current assets and liabilities of discontinued operations are re-measured at the time of discontinuation at the lower of their carrying amount or their fair value less cost to sell. Any resultant unrealized gains or losses are recognized in net income in the period when the Company disposes the related operations.

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Smart-Tek Communications Inc., continued

The following table presents the effect of the discontinued operations in the Consolidated Statements of Operations and Comprehensive Income:

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The Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Deferred income taxes are reported using the liabilities method.

Deferred tax assets are recognized for deductible temporary differences and for carry forwards. Deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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The Company generated a deferred tax credit through net operating loss carry forwards. As of June 30, 2011 the company had federal and state net operating loss carry forwards of approximately $5,923,210 that can be used to offset future federal income tax. The federal and state net operating losses are reduced by a valuation allowance, when, in the opinion of management, utilization is not reasonably assured. A valuation allowance of 100% has been established; based on it is more likely than not that some portion or all of the deferred tax credit will not be realized.

At June 30, 2011, STS had available federal net operating loss (NOL) carry forwards of approximately $5,923,210. Under Section 382 of the internal Revenue Code of 1986, as amended, the use of prior losses including NOLs is subject to rules if a corporation undergoes an “ownership change”. Future issuances of equity interests by us for acquisitions or the exercise of outstanding options to purchase our capital stock may result in an ownership change that is large enough for a limitation on the use of NOLs to apply. If the limitation applies, we may be unable to use a material portion of its available NOL carry forwards to reduce future taxable income. The income tax effect of temporary differences between financial and tax reporting gives rise to the deferred tax asset at June 30, 2011 and December 31, 2010 as follows:

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At June 30, 2011, the Company is authorized to issue:

At June 30, 2011, there are 49,212,123 shares of common stock outstanding.

During the period ended June 30, 2011, the Company issued 21,897,999 common shares totaling $218,979 as compensation to a marketing partner. $197,082 was allocated to additional paid in capital for amount in addition to par value of the shares.

During the period ended June 30, 2011, the Company issued 3,000,000 common shares totaling $225,000 as compensation to a director. $222,000 was allocated to additional paid in capital for amount in addition to par value of the shares.

Year ended December 31, 2010

During the year a certificate for 45,000,000 shares was cancelled and returned to treasury pursuant to an Amended Marketing Agreement dated December 9, 2010, by and between Smart-Tek Solutions Inc., its wholly owned subsidiary Smart-Tek Automated Services, Inc., and its affiliated businesses (hereinafter collectively referred to as the “Company”) and, Brian Bonar.

Preferred Stock

There are no preferred shares issued or outstanding.

Amounts due from officers and directors for management salaries payable were $205,641 (December 31, 2010 –$(388,415)) as of June 30, 2011.

Receivable from related companies were $275,000 (December 31, 2010 – $Nil) as of June 30, 2011.

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

Forward Looking Statements

This quarterly report contains forward-looking statements. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risks and Uncertainties” and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include:

• risks related to the potential of delays in customer orders or the failure to retain customers;

• the uncertainty of profitability based upon our history of losses;

• risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned exploration and development projects;

• risks related to competition;

• risks related to tax attributes; and

• other risks and uncertainties related to our business strategy.

This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.

Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars.

As used in this quarterly report, the terms “we”, “us”, “our”, the “Company” and “Smart-Tek” mean Smart-Tek Solutions Inc. and its subsidiaries, unless the context clearly requires otherwise.

Overview

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

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Plan of Operation

Short Term

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

Long Term

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

PEO Business Environment

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

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

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

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

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

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

PEO Market Overview

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

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

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RESULTS OF OPERATIONS

Revenue

The 94.0% increase in revenues of $5,145,942 for the six months ended June 30, 2011 as compared to the comparative period in 2010 is primarily attributable to an increase in our payroll and staffing business through Smart-Tek Automated Services. The increase in our payroll and staffing revenue through Smart-Tek Automated is a result of the continued integration of our current contracts.

Cost of Goods Sold

During the six month period ended June 30, 2011 we had a cost of goods sold of $7,665,294as compared to $3,792,065during the comparative period in 2010 for an increase of $3,873,229 or 102.1% . The increase consists of $872,004 (2268%) increase in worker compensation claim cost, $1,036,158 increase in workers compensation premium expense (215.5%), with the remaining increase in client payroll costs.

Gross Profit

During the six month period ended June 30, 2011 we had a gross profit of $2,957,698 as compared to a gross profit of $1,721,652 during the comparative period in 2010 for an increase of $1,236,046 or 71.8% .

Expenses

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

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Selling, General and Administrative

Selling, general and administrative expenses of $3,169,625 for the six month period ended June 30, 2011 increased by $1,703,553 or 119.2% over the same six month period prior year.

Operating Expense Analysis

Liquidity and Capital Resources

We had cash on hand of $882,069 and working capital of $901,845 as of June 30, 2011 compared to cash on hand of $781,720 and working capital of $727,491 for the year ended December 31, 2010. We anticipate that we will incur approximately $350,000 a month for operating expenses, including professional, legal and accounting expenses associated with our reporting requirements under the Exchange Act during the next twelve months.

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Cash Provided In Operating Activities

We used cash from operating activities in the amount of $22,505 during the six months ended June 30, 2011 as compared to cash provided in operating activities of $3,861 in the comparative period in 2010. Cash used from operating activities resulted from the net loss from continuing operating.

Cash Used In Investing Activities

We used cash in investing activities in the amount of $46,125 during the six months ended June 30, 2011 as opposed to $74,759 cash provided in investing activities during the six months ended June 30, 2010.

Cash from Financing Activities

We provided cash of $168,979 in financing activities during the six months ended June 30, 2011 and as compared to $388,416 in financing activities from the comparative period in 2010. Cash used in financing activities during the period increased primarily due to a loan of $275,000 to AMS Inc. to cover an insurance payment.

Subsequent Events:

Events subsequent to June 30, 2011 have been evaluated through August 16, 2011, the date these statements were available to be issued, to determine whether they should be disclosed. Management found no subsequent events to be disclosed.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

Item 4T. Controls and Procedures.

As required by Rule 13a-15 under the Exchange Act, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures at June 30, 2011, which is the end of the period covered by this report. This evaluation was carried out by our principal executive officer and our principal financial officer. Based on this evaluation, our principal executive officer and our principal financial officer have concluded that the design and operation of our disclosure controls and procedures are effective as at the end of the period covered by this report.

There were no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2011 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity's disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors or mistakes or intentional circumvention of the established process.

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Disclosure Controls and Procedures

As of June 30, 2011, under the supervision and with the participation of the Company's Chief Executive Officer and the Chief Financial Officer, management has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2011.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting that occurred during the last fiscal quarter covered by this report that have materially affected, or are reasonably likely to affect, the Company's internal control over financial reporting.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO Framework").

Based on this evaluation, management has concluded that our internal control over financial reporting was not as effective as of June 30, 2011 due to the relatively small staff size of its financial group. As such, our principal Chief Executive Officer and Chief Financial Officer concluded that we could have a material weakness due to lack of segregation of duties. The volume of administrative work peaks at the end of each quarter requiring additional resources to process the workload. We have hired an additional administrative person to assist in that additional workload

This annual report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to temporary rules of the SEC that permit the company to provide only management's report on internal control in this annual report.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A. RISK FACTORS.

Not Applicable.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

ITEM 5. OTHER INFORMATION.

None.

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*Filed herewith

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

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